Final Results

Date : 04/11/2006 @ 8:01AM
Source : UK Regulatory (RNS & others)
Stock : Sinosoft (SFT)
Quote : 5.5  0.0 (0.00%) @ 1:00AM
Sinosoft Technology share price Chart

Final Results

RNS Number:3328B
Sinosoft Technology plc
11 April 2006



11 April 2006


                            SINOSOFT TECHNOLOGY PLC
            PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005


Sinosoft Technology plc ("Sinosoft" or the "Company"), the China based developer
and provider of e-Government software and services, which recently listed on
AIM, announces maiden preliminary results for the year ended 31 December 2005.

The Company (EPIC: SFT), has established itself as a market leader in the
provision of specialised export tax management software and e-Government
services in Jiangsu through its wholly owned subsidiaries Nanjing Skytech Co.
Ltd and Nanjing Skytech Software Co. Ltd (together referred to as "Skytech").
Skytech has contracts with a number of government bodies and has over 29,000
customers including subsidiaries of multinational companies like Hitachi and
Mitsubishi.

Highlights from the results include:

  * Turnover up 24% to US$6.16 million (2004: US$4.98 million)

  * Net profit up 34% to US$3.52 million (2004: US$2.63 million)

  * Net profit margin increased to 57% (2004: 53%)

  * Skytech awarded "Golden Tax Tender" by the Chinese State Administration of
    Taxation. Roll out of automated export tax process to thirty six provincial
    tax offices in China being finalized

  * Successfully raised US$17 million and admitted to AIM

Commenting on the results Miss Xin, CEO of Sinosoft said: "The Sinosoft group
continues to benefit from China's technological advancement and the upsurge in
Chinese export activity. The successful fundraising has enabled the Group to
develop its strategy to grow beyond Jiangsu and to further develop our expanding
product suite. The board is confident that 2006 will be a year of exciting
growth and we look forward to continuing our development and delivering value
for shareholders."


For further information please contact:

Sinosoft                      Ms. Helen Xin,                    +86 025 84815959
                              Chief Executive Officer

Westhouse Securities          Tim Metcalfe                         020 7601 6100


Tavistock Communications      Paul Dulieu                          020 7920 3150
                              Matt Ridsdale





                            SINOSOFT TECHNOLOGY PLC
                       OPERATING COMPANIES' FINAL RESULTS
                      FOR THE YEAR ENDED 31 DECEMBER 2005


CHAIRMAN'S STATEMENT

I am pleased to announce the audited results of Sinosoft's trading subsidiaries,
namely, Nanjing Skytech Co. Ltd and Nanjing Skytech Software Co. Ltd (together
referred to as "Skytech") for the year ended 31 December 2005. These are the
first trading results announced since the Company was admitted to AIM on 6 March
2006.

The financial results for Skytech set out below relate entirely to the
pre-flotation period and have been prepared on a combined basis for Nanjing Sk
ytech Co. Ltd and Nanjing Skytech Software Co. Ltd. The results for Skytech's
holding companies, namely Infotech Holdings Pte. Ltd and Sinosoft have seen no
material change from the information disclosed in the AIM Admission Document
published on 28 February 2006.


Financial highlights

I am pleased that Skytech's results for the year ended 31 December 2005 are
better than market expectations. Skytech achieved a year-on-year growth in
turnover of 24%. In addition to strong revenue growth Skytech achieved im
provements in its margins with the net profit margin increasing from 53% to 57%.

The Company continues to work on expanding Skytech's product range and improving
the quality of its software products and services. This includes investing in
additional research and development facilities and new software products which
were specifically developed for Skytech and this investment will allow it to
enhance its current software range.

The increasing move by the Chinese government towards digitisation at all levels
is driving demand for all the Company's products, in particular its e-government
and export tax software.

We are delighted with the progress Sinosoft is making. We have had a successful
debut on AIM which has raised the profile of the enlarged group (being Sinosoft
and its subsidiaries (the "Group")) and has provided the funds to expand our
activities and further develop the business.

May I take this opportunity to thank all the board members, and particularly our
employees who have worked extremely hard to bring the Group to its current
position.




Mao Ning
Chairman





CHIEF EXECUTIVE OFFICER'S STATEMENT


Operational update

It gives me great pleasure to release my first Chief Executive's statement. 2005
was a successful year for the Group at an operating level. During the year
Skytech focused on growing market share and this was achieved in all three of
the Group's principal revenue streams of e-government software, export tax
software and information integration. The awarding of the Golden Tax Tender by
the Chinese State Administration of Taxation ("SAT") will, in the opinion of the
board, enable Skytech to target exporting enterprises across China.

Since the publication of the AIM Admission Document on 28 February 2006 Sinosoft
and its subsidiaries have seen further developments in the business including:-

  * Securing a contract for the provision of existing e-government products to
    Yangzhou City for an initial value of $110,000. In addition to this one off
    revenue this new contract will provide Skytech with ongoing support income
    and enable Skytech to develop additional sales to agencies in Yangzhou.

  * Following the awarding to Skytech of the Golden Tax Tender by the SAT,
    Skytech has been working with the SAT to finalise the rollout across thirty
    six provincial bureaus. The receipt of the Golden Tax Tender is an important
    step in developing the Group's activities outside of Jiangsu province.

  * Sales of the Group's export tax software continue to grow in Jiangsu
    province. In the first three months of 2006 approximately 1,000 new
    exporting enterprises have begun to use Skytech's export tax products. These
    include subsidiaries of multinational companies including Hitachi, Atlas
    Copco and Mitsubishi.

Following Sinosoft's admission to AIM the Group has repaid its borrowings of
US$2.3 million, invested in increasing its research and development capabilities
and begun the process of setting up a new office in Shanghai. I am pleased to
announce that we have recruited a number of new technical staff with the Group's
employees now totalling 160.

The Sinosoft group continues to benefit from China's technological advancement
and the upsurge in Chinese export activity. The successful fundraising has
enabled the Group to develop its strategy to grow beyond Jiangsu and to further
develop our expanding product suite. The board is confident that 2006 will be a
year of exciting growth and we look forward to continuing our development and
delivering value for shareholders.




Helen Xin
Chief Executive Officer





COMBINED INCOME STATEMENT

                                                                                    Year ended 31     Year ended 31
                                                                                    December 2005     December 2004
                                                                          Notes           Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Revenue                                                                       6         6,155,852         4,979,029
Cost of sales                                                                          (1,673,880)       (1,458,877)
                                                                                 -----------------------------------
Gross profit                                                                            4,481,972         3,520,152
                                                                                                                   
Other operating income                                                        7           622,185           458,692
Research and development cost                                                            (519,462)         (483,460)
Selling and distribution expenses                                                        (421,417)         (315,378)
Administrative expenses                                                                  (605,549)         (434,866)
Other operating expenses                                                                   (1,173)           (3,226)
                                                                                 -----------------------------------
Profit from operations                                                        8         3,556,556         2,741,914
                                                                                                                   
Finance cost                                                                  9           (22,144)          (18,981)
Finance income                                                               10            26,348            10,687
Share of associates losses                                                                      -           (80,929)
Gain on disposal of subsidiary                                                                  -           104,384
Trading investment loss                                                                         -           (88,116)
                                                                                 -----------------------------------
Profit before income tax                                                                3,560,760         2,668,959
                                                                                 -----------------------------------
Taxation                                                                     11                                    
                                                                                 -----------------------------------
  Current tax                                                             11(a) |               -            (4,477)|
  Deferred tax                                                            11(b) |         (44,913)                - |
                                                                                 -----------------------------------
                                                                                          (44,913)           (4,477)
                                                                                 -----------------------------------
Net profit for the year                                                                 3,515,847         2,664,482
                                                                                                                   
Minority interest                                                                               -           (32,049)
                                                                                 -----------------------------------
Profit for the year                                                                     3,515,847         2,632,433
                                                                                 ===================================





COMBINED BALANCE SHEET

                                                                                      31 December       31 December
                                                                          Notes              2005              2004
                                                                                          Audited           Audited
                                                                                              US$               US$
ASSETS                                                                                                             
Current assets                                                                                                     
Cash and cash equivalents                                                               3,956,182         1,596,822
Trade receivables                                                            12         2,010,203         1,557,442
Other receivables                                                            13         1,238,253         1,059,600
Inventories                                                                  14           557,415           236,195
                                                                                 -----------------------------------
Total current assets                                                                    7,762,053         4,450,059
                                                                                 -----------------------------------
Non-current assets                                                                                                 
Property, plant and equipment                                                15           381,238           365,620
Intangible assets                                                            16         1,238,636           469,304
Investments                                                                  17           185,795           181,598
                                                                                 -----------------------------------
Total non-current assets                                                                1,805,669         1,016,522
                                                                                 -----------------------------------
                                                                                                                   
Total assets                                                                            9,567,722         5,466,581
                                                                                 -----------------------------------
LIABILITIES & EQUITY                                                                                               
Current liabilities                                                                                                
Trade payables                                                                            369,598           258,340
Other payables                                                               18           477,496           317,788
Bank loans                                                                   19           371,591           363,196
                                                                                 -----------------------------------
Total current liabilities                                                               1,218,685           939,324
                                                                                 -----------------------------------
Non-current liabilities                                                                                            
Deferred income                                                                           148,636            48,426
Deferred tax                                                              11(b)            45,636                 -
                                                                                 -----------------------------------
Total non-current liabilities                                                             194,272            48,426
                                                                                 -----------------------------------
                                                                                                                   
Total liabilities                                                                       1,412,957           987,750
                                                                                 -----------------------------------
Capital and reserves                                                                                               
Share capital                                                                20         1,452,785         1,452,785
General reserves                                                                          758,522           334,653
Retained earnings                                                                       5,783,371         2,691,393
Exchange reserve                                                                          160,087                 -
                                                                                 -----------------------------------
Total shareholders' equity                                                              8,154,765         4,478,831
                                                                                 -----------------------------------
                                                                                                                   
Total liabilities & equity                                                              9,567,722         5,466,581
                                                                                 -----------------------------------





COMBINED STATEMENT OF CASH FLOWS

                                                                                    Year ended 31     Year ended 31
                                                                                    December 2005     December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Income before taxation                                                                  3,560,760         2,668,959
Adjustments for:                                                                                                   
Depreciation of property, plant and equipment                                              36,065            18,133
Amortisation of intangible assets                                                         108,560            57,207
Provision for impairment on investment in associate                                             -            80,929
Provision for balance due from associate                                                        -           (35,522)
Loss on disposal of investment held for trading                                                 -            88,116
Provision for impairment for receivables                                                   20,381            66,886
Interest income                                                                           (26,348)          (10,687)
Interest expense                                                                           22,144            18,981
                                                                                 -----------------------------------
Operating cash flows before working capital changes                                     3,721,562         2,953,002
                                                                                                                   
Increase in trade and other receivables                                                  (582,268)       (1,939,519)
Increase in inventories                                                                  (310,761)         (141,358)
Increase/(decrease) in trade and other payables                                           351,092          (146,185)
                                                                                 -----------------------------------
Cash used in operations                                                                  (541,937)       (2,227,062)
                                                                                 -----------------------------------
                                                                                                                   
Income taxes paid                                                                               -            (4,477)
Interest paid                                                                             (22,144)          (18,981)
                                                                                 -----------------------------------
Net cash generated by operating activities                                              3,157,481           702,482
                                                                                                                   
Cash flows from investing activities                                                                               
Interest received                                                                          26,348            10,687
Cash held on deposit                                                                            -           152,692
Proceeds on disposal of trading investments                                                     -           554,517
Purchase of property, plant and equipment                                                 (43,234)         (175,952)
Purchase of intangible assets                                                            (867,045)         (435,835)
Purchase of investments for trading                                                             -          (193,705)
                                                                                 -----------------------------------
Net cash used in investing activities                                                    (883,931)          (87,596)
                                                                                 -----------------------------------
                                                                                                                   
Cash flows from financing activities                                                                               
Capital injections from investors                                                               -           217,918
Repayment of borrowings                                                                  (371,591)         (363,196)
New borrowings                                                                            371,591           363,196
                                                                                 -----------------------------------
Net cash generated from financing activities                                                    -           217,918
                                                                                 -----------------------------------
                                                                                                                   
Net increase in cash and cash equivalents                                               2,273,550           832,804
Cash and cash equivalent at the beginning of the financial year                         1,596,822           764,018
Effects of exchange rate changes                                                           85,810                 -
                                                                                 -----------------------------------
Cash and cash equivalent at the end of the financial year                               3,956,182         1,596,822
                                                                                 ===================================





STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

                                                      Share      Retained     Statutory      Exchange              
                                                    Capital      Earnings      Reserves       Reserve         Total
                                                        US$           US$           US$           US$           US$
                                                                                                                   
Balance at 1 January 2004                         1,210,654       358,274        35,339             -     1,604,267
Issue of share capital                              242,131             -             -             -       242,131
Net profit for the year                                   -     2,632,433             -             -     2,632,433
Transfer to statutory reserve                             -      (299,314)      299,314             -             -
                                          --------------------------------------------------------------------------
Balance at 31 December 2004                       1,452,785     2,691,393       334,653             -     4,478,831
                                          ==========================================================================
                                                                                                                   
Balance at 1 January 2005                         1,452,785     2,691,393       334,653             -     4,478,831
Net profit for the year                                   -     3,515,847             -             -     3,515,847
Transfer to statutory reserve                             -      (423,869)      423,869             -             -
Translation difference                                    -             -             -       160,087       160,087
                                          --------------------------------------------------------------------------
Balance at 31 December 2005                       1,452,785     5,783,371       758,522       160,087     8,154,765
                                          ==========================================================================





Notes to the financial information


1.  The companies and their operation/general

Nanjing Skytech Co. Ltd was incorporated on 14 December 1998 in the People's
Republic of China ("PRC"). Its principal activity is that of the development and
sale of computer software, computer and external equipment and related
accessories for communication products, digital products and other electrical
appliances.

Nanjing Skytech Co. Ltd became a 100% subsidiary of Infotech Holdings Pte Ltd on
31 July 2004. On 20 January 2006 Infotech Holdings Pte Ltd became a wholly owned
subsidiary of Sinosoft Technology plc.

Nanjing Skytech Software Co. Ltd was incorporated on 2 July 2003 in the People's
Republic of China. Its principal activity is that of the development, sales and
service of computer software and technology.

Nanjing Skytech Software Co. Ltd was a 90% subsidiary of Nanjing Skytech Co. Ltd
from incorporation until 31 July 2004, when Nanjing Skytech Co. Ltd's investment
was acquired by Nanjing Sky Investment Information Co. Ltd. In January 2005,
Infotech Holdings Pte Ltd acquired 100% of the issued share capital of Nanjing
Skytech Software Co. Ltd.

The registered offices of Nanjing Skytech Co. Ltd and Nanjing Skytech Software
Co. Ltd are 3rd Floor, No. 50 Building, Jiangsu Software Park, No. 168 Long Pan
Zhong Road, Nanjing, People's Republic of China.


2.  Basis of preparation of the financial information

This financial information has been prepared in accordance with International
Financial Reporting Standards ("IFRS"). The directors of Sinosoft Technology plc
are responsible for preparing the financial information.

The financial information represents the combination of the financial
information of Nanjing Skytech Co. Ltd and Nanjing Skytech Software Co. Ltd
("the combined entity"), which at 31 December 2005 are both 100% subsidiaries of
Infotech Holdings Pte Ltd. For the period during which Nanjing Skytech Software
Co. Ltd was a 90% subsidiary of Nanjing Skytech Co. Ltd the accounts have been
consolidated for the group.

For the subsequent period, the accounts of the two fellow subsidiary
undertakings have been combined but not consolidated. All transactions and
balances between the two companies have been eliminated in the preparation of
the financial information for the combined entities. The financial information
does not constitute a consolidation of the results of the two companies and does
not reflect the changes in the legal ownership and structure of the Infotech
'group' of companies during the year covered by the financial information.

The combined entity maintains its accounting records in Chinese Renminbi ("RMB")
and prepares its statutory financial statements in accordance with People's
Republic of China ("PRC") generally accepted accounting practices. The financial
information is based on the statutory records, with adjustments and
reclassifications recorded for the purpose of the fair presentation in
accordance with IFRS.

The financial information has been prepared under the historical cost convention
except as disclosed in the accounting policies below.

The financial information presented does not constitute statutory accounts for
the years under review.

Adoption of IFRS
The financial information has been prepared under IFRS standards currently in
issue as if they had been in issue for years covered by the financial
information.

The adoption of these standards did not result in substantial changes to the
combined entities accounting policies.

The principal accounting policies adopted by the combined entity are consistent
with those disclosed for the years in this financial information.

Management estimates
The presentation of financial information under IFRS requires management to make
prudent estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial information preparation and the
reported amounts of revenue and expenses during the reporting year. Estimates
have been made principally in respect of the amounts capitalised as, and the
useful economic life of, intangible assets, useful economic life of property,
plant and equipment, provisions for impairment of accounts receivable and
investments.


3.  Significant accounting policies

3.1.  Functional and presentation currency
The Chinese Renminbi (RMB) is the functional currency of the combined entity as
it is the currency of the primary economic environment in which it operates. The
United States Dollar ("US$") is the currency used to present the financial
information in order to improve the understanding of the results and the
financial position of the combined entity outside of the PRC.

The functional currency transactions are translated into the presentation
currency using the average exchange rate of US$1:RMB8.2033 during the financial
year (FY2004: fixed rate at US$1:RMB8.26). Functional currency assets and
liabilities are translated into the presentation currency at the rates of
exchange prevailing at the balance sheet date of US$1:RMB8.0734 (FY2004: fixed
rate at US$1:RMB8.26). All resulting exchange differences are taken to the
foreign currency translation reserve.

Fixed exchange rate of US$:RMB was used for FY2004 as the RMB held a fixed
exchange rate with the US$ during the previous financial year until July 2005
when the currency began to float against a 'basket of currencies'.

3.2.  Investments in associates
An associate is an entity over which the combined entity exercises significant
influence and is neither a subsidiary nor an interest in a joint venture.
Significant influence is the power to participate in the financial and operating
policy decisions of the investee but is not control or joint control over those
policies.

The results and assets and liabilities of associates are incorporated in this
financial information using the equity method of accounting, except when the
investment is classified as held for sale, in which case it is accounted for
under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under
the equity method, investments in associates are carried in the consolidated
balance sheet at cost as adjusted for post-acquisition changes in the combined
entity's share of the net assets of the associate, less any impairment in the
value of the individual investments. Losses of an associate in excess of the
combined entity's interest in that associate (which includes any long-term
interests that, in substance, form part of the combined entity's net investment
in the associate) are not recognised.

Any excess of the cost of acquisition over the net entity's share of the net
fair value of the identifiable assets, liabilities and contingent liabilities of
the associate recognised at the date of acquisition is recognised as goodwill.
The goodwill is included within the carrying amount of the investment and is
assessed for impairment as part of the investment. Any excess of the combined
entity's share of net fair value of the identifiable assets, liabilities and
contingent liabilities over the cost of acquisition, after reassessment, is
recognised immediately in profit or loss.

Where the combined entity transacts with an associate of the combined entity,
profits and losses are eliminated to the extent of the combined entity's
interest in the relevant associate.

3.3.  Revenue recognition
Revenue is measured at the fair value of consideration received or receivable
and represents amounts receivable for goods and services provided in the normal
course of business, net of discounts and sales related taxes.

Revenue from the sale of goods is recognised when the significant risks and
rewards of ownership are transferred to the buyer and the amount of revenue and
the costs of the transaction can be measured reliably.

Revenue from installation contracts is recognised in accordance with the
combined entities' accounting policy on installation contracts (see below).

Revenue from rendering of services that are of a short duration is recognised
when the services are completed.

Other income includes Value Added Tax (VAT) rebates, which are recognised on an
accruals basis.

Interest income is accrued on a time proportionate basis, by reference to the
principal outstanding and at the interest rate applicable, on an effective yield
basis.

3.4.  Installation contracts
When the outcome of a contract for the installation of network systems can be
estimated reliably, revenue and costs are recognised on the percentage of
completion method, measured by reference to the proportion that costs incurred
to date bear to estimated total costs for each contract, except where this would
not be representative of the stage of completion. Variations in contract work,
claims and incentive payments are included to the extent that they have been
agreed with the customer.

When the outcome of a contract cannot be estimated reliably, revenue is
recognised to the extent of contract costs incurred that it is probable that
they are recoverable. Contract costs are recognised as expenses in the period in
which they are incurred.

When it is probable that the total contract costs will exceed total contract
revenue, the expected loss is recognised as an expense immediately.

3.5.  Government grants
Government grants relating to expenditure that is not capitalised is credited to
the income statement to match the related expenditure when it is incurred.

Government grants relating to the purchase of property, plant and equipment are
included in the balance sheet by deducting the grant in arriving at the carrying
amount of the assets.

3.6.  Employee benefits
Post-employment benefit plans cost
Defined contribution plans are post-employment benefit plans under which Skytech
pays fixed contributions into separate entities such as the Mandatory Provident
Fund ("MPF") scheme, and will have no legal or constructive obligation to pay
further contributions if any of the funds do not hold sufficient assets to pay
all employee benefits relating to employee service in the current and preceding
financial years. Skytech's contribution to defined contribution plans are
recognised in the financial year to which they relate.

3.7.  Taxation
Income tax expense represents the sum of tax currently payable and deferred tax.

Current taxation
The tax currently payable is based on the taxable profit for the year. Taxable
profit differs from profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
combined entity's liability for current tax is calculated using tax rates that
have been enacted or substantially enacted by the relevant balance sheet date.

Deferred taxation
Deferred tax is determined on the basis of tax effect accounting, using the
liability method, and it is applied to all significant temporary differences
arising between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, except that the potential tax savings relating to a tax loss carry
forward is not recorded as an asset unless there is a reasonable expectation of
realisation in the foreseeable future.

Deferred tax assets and liabilities are measured using the tax rates that are
expected to apply to the period when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantially enacted by the balance sheet date. Deferred tax is charged or
credited to the profit or loss statement, except when it relates to items
charged or credited to equity, in which case the deferred tax is also dealt with
in equity. Deferred tax assets and liabilities are offset when they relate to
income taxes levied by the same tax authority.

3.8.  Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and cash held on demand with
banks, and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk
of changes in value.

3.9.  Inventories
Inventories are measured at the lower of cost and net realisable value. Cost
includes all costs of purchase, cost of conversion and other costs incurred in
bringing the inventories to their present location and condition. Cost is
calculated using the first in first out method. Net realisable value is the
estimated selling price less all estimated costs to completion and costs to be
incurred in marketing, selling and distribution.

3.10. Investments
Investments are recognised and derecognised on a trade-date basis and are
initially measured at cost, including transaction costs.

At subsequent reporting dates, debt securities that the combined entity has the
expressed intention and ability to hold to maturity (held-to-maturity debt
securities) are measured at amortised cost, less any impairment loss recognised
to reflect irrecoverable amounts. The annual amortisation of any discount or
premium on the acquisition of a held-to-maturity security is aggregated with
other investment income receivable over the term of the instrument so that the
revenue recognised in each period represents a constant yield on the investment.
An impairment loss is recognised in profit or loss when there is objective
evidence that the asset is impaired, and is measured as the difference between
the investment's carrying amount and the present value of estimated future cash
flows discounted at the effective interest rate computed at initial recognition.
Impairment losses are reversed in subsequent periods when an increase in the
investment's recoverable amount can be related objectively to an event occurring
after the impairment was recognised, subject to the restriction that the
carrying amount of the investment at the date of the impairment is reversed
shall not exceed what the amortised cost would have been had the impairment not
been recognised.

Investments other than held-to-maturity debt securities are classified as either
held-for-trading or available-for-sale, and are measured at subsequent reporting
dates at fair value. Where securities are held for trading purposes, gains and
losses arising from changes in fair value are included in profit and loss for
the period. For available-for-sale investments, gains and losses arising from
changes in fair value are recognised directly in equity, until the security is
disposed of or is determined to be impaired, at which time the cumulative gain
or loss previously recognised in equity is included in the net profit or loss
for the period. Impairment losses recognised in profit or loss for
debt-instruments classified as available-for sale are subsequently reversed if
an increase in the fair value of the instrument can objectively be related to an
event occurring after recognition of the impairment loss.

3.11. Property, plant and equipment
Property, plant and equipment are recorded at historic cost, less accumulated
depreciation and any impairment loss where the recoverable amount of the asset
is estimated to be lower than its carrying amount.

Property in the course of construction for production or administrative purposes
is carried at cost, less any recognised impairment loss. Cost includes
professional fees and, for qualifying assets, borrowing costs capitalised in
accordance with the combined entity's accounting policy. Depreciation of these
assets commences when the assets are ready for their intended use.

Depreciation is charged so as to write off the cost of the assets over their
estimated useful lives, using the straight-line method, as follows:

Property                                                 -         20 years
Electronic equipment, furniture and fixtures             -          5 years
Motor vehicles                                           -          8 years

The assets' residual values and useful lives are reviewed, and adjusted, if
appropriate, at each balance sheet date.

The gain or loss arising on the disposal or retirement of an item of property,
plant and equipment is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in profit or loss.

3.12. Internally generated intangible assets - research and development
expenditure
Research expenditure is recognised as an expense as incurred.

Costs incurred on development projects are recognised as internally generated
intangible assets only if all of the following conditions are met:

  * an asset is created that can be identified (such as software and new
    processes);

  * it is probable that the asset created will generate future economic
    benefits; and

  * the development cost of the asset can be measured reliably.

Internally generated intangible assets are amortised on a straight-line basis
over their estimated useful lives, from the commencement of commercial
production.

Development costs that have been capitalised as intangible assets are amortised
on a straight-line basis over the period of its expected benefits, which
normally does not exceed 3 years.

3.13. Patents and trademarks
Patents and trademarks are measured initially at purchase cost and are amortised
on a straight-line basis over their estimated useful economic lives.


Patents                                                  -             3 years
Trademarks                                               -             2 years

3.14. Impairment of tangible and intangible assets
At each balance sheet date, the combined entity reviews the carrying amounts of
its assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated to determine the extent of the impairment loss
(if any).

When it is not possible to estimate the recoverable amount of an individual
asset, the combined entity estimates the recoverable amount of the
cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in
use.

If the recoverable amount of an asset is estimated to be less than its carrying
amount, the carrying amount of the asset is reduced to its recoverable amount.
Impairment losses are recognised as an expense immediately.

When an impairment loss subsequently reverses, the carrying amount of the asset
is increased to the revised estimate of its recoverable amount, to the extent
that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset
in prior years. A reversal of an impairment loss is recognised as income
immediately.

3.15. Financial assets
The principal financial assets are cash, trade receivables, other receivables
and other investments. Trade and other receivables are stated at their nominal
value as reduced by appropriate allowances for estimated irrecoverable amounts.
The accounting policy of other investments is outlined above.

3.16. Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. Significant financial
liabilities include interest-bearing short-term bank loans, trade and other
payables.

Interest-bearing short-term bank loans are recorded at the proceeds received,
net of direct issue costs. Finance charges, including premiums payable on
settlement or redemption, are accounted for on an accrual basis and are added to
the carrying amount of the instrument to the extent that they are not settled in
the period in which they arise. Finance costs are accounted for on an accrual
basis (effective yield method) and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they
arise.

Trade and other payables are stated at their nominal value.

Equity instruments are recorded at the fair value of consideration received, net
of direct issue costs.

3.17. Borrowings and borrowing costs
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value is
taken to the profit and loss statement over the period of the borrowings using
the effective interest method.

All borrowing costs are taken to the profit and loss statement over the period
of borrowing using the effective interest method.

3.18. Foreign currency transactions
In preparing the financial statements of the individual entities, transactions
in currencies other than the entity's functional currency (RMB) are recorded at
rates of exchange prevailing on the dates of the transactions. At each balance
sheet date, monetary balances denominated in foreign currencies are retranslated
at the rates ruling at the balance sheet date.

Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in the income statement for the
year.

3.19. Provisions
Provisions are recognised when the combined entity has a present legal or
constructive obligation as a result of a past event where it is probable that
the obligation will result in an outflow of economic benefits that can be
reasonably estimated.

3.20. Leases
Leases where the lessor retains substantially all the risks and benefits of
ownership of the asset are classified as operating leases.  Initial direct costs
incurred in negotiating an operating lease are added to the carrying amount of
the leased asset and recognised over the lease term on the same bases as the
lease income.  Operating lease payments are recognised as an expense in the
income statement on a straight-line basis over the lease term.

3.21. Segment reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that are
subject to risks and returns that are different from those of segments operating
in other economic environments.

3.22. Statutory reserve
Statutory reserve is in respect of the PRC companies and has been set aside in
accordance with the legislation in the country.


4.  Financial risks and management

4.1.  Financial risk factors
The combined entity's activities expose it to a variety of financial risks. The
combined entity's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of the combined entity.

Risk management is carried out by Sinosoft's Board of Directors. The Board
identifies and evaluates financial risks in close co-ordination with the combin
ed entity's operating units. The Board provides principles for overall risk
management, as well as policies covering specific areas such as credit risk,
interest rate risk, foreign currency risk and liquidity risk.

  (i)   Credit risk
        The combined entity has no significant concentration of credit risk. The
        combined entity has policies in place to ensure that sales are made to
        customers with an appropriate credit history.

  (ii)  Interest rate risk
        The combined entity obtains additional financing through bank
        borrowings. The combined entity's policy is to obtain the most
        favourable interest rates available. The terms and interest rates
        payable are disclosed in Note 19 to the financial information.

        Surplus funds are placed with reputable banks.

  (iii) Foreign currency risk
        The combined entity's sales and purchases are mainly denominated in
        Chinese Renminbi. The residual risk after the natural hedging effects of
        any foreign currency denominated assets and liabilities are not expected
        to have a significant impact on the combined entity's financial position
        and future cash flows.

  (iv)  Liquidity risk
        The combined entity has sufficient cash and cash equivalents to meet its
        operational requirements.

  (v)   Fair values of financial assets and financial liabilities
        The carrying amounts of financial assets and financial liabilities
        reported in the balance sheet approximate their fair values.


5.  Segment information

The combined entity is principally engaged in the development and sales of
computer software, computer and external equipment, and related accessories for
communication products, digital products and other electrical appliances in the
PRC and all of its customers are based in the PRC. In addition, all identifiable
assets of the combined entity are located principally in the PRC. Accordingly,
no segmental analysis is presented.


6.  Revenue

                                                                                    Year ended 31     Year ended 31
                                                                                    December 2005     December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Software                                                                                4,338,422         3,345,002
System Integration                                                                      1,817,430         1,634,027
                                                                                 -----------------------------------
                                                                                        6,155,852         4,979,029
                                                                                 ===================================

For management purpose, the combined entity's operations are organised into one
operating division namely software development which includes sales of software
products and system integration.


7.  Other operating income

                                                                                    Year ended 31     Year ended 31
                                                                                    December 2005     December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
VAT refund                                                                                565,998           456,261
Government grants and rebates                                                              56,187             2,431
                                                                                 -----------------------------------
                                                                                          622,185           458,692
                                                                                 ===================================


8.  Profit from operations

The profit from operations is stated after charging/(crediting) the following:

                                                                                    Year ended 31     Year ended 31
                                                                                    December 2005     December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Staff costs (excluding directors' remuneration)                                           579,742           378,183
Less:                                                                                                              
Staff costs included in research and development costs                                   (359,632)         (200,418)
                                                                                 -----------------------------------
                                                                                          220,110           177,765
                                                                                 ===================================
                                                                                                                   
Directors' remuneration                                                                   149,696           107,506
Cost of defined contribution plans included in staff costs                                114,478            41,214
Provision against trade receivables                                                        20,381            66,886
Provision against receivables from associate                                                    -           (35,522)
Depreciation charge                                                                        36,065            18,133
Amortisation charge                                                                       108,560            57,207
Provision for impairment in investment                                                          -            80,929
                                                                                 ===================================
Number of employees - year end                                                                142               117
                                                                                 ===================================


9.  Finance cost

                                                                                    Year ended 31     Year ended 31
                                                                                    December 2005     December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Interest on bank loans                                                                     22,144            18,981
                                                                                 ===================================


10. Finance income

                                                                                    Year ended 31     Year ended 31
                                                                                    December 2005     December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Interest income                                                                            26,348            10,687
                                                                                 ===================================

Interest income is calculated at 2.07% per annum (2004: 2.07 %).


11. Taxation

(a) Current tax
                                                                                    Year ended 31     Year ended 31
                                                                                    December 2005     December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Current tax                                                                                     -             4,477
                                                                                 ===================================

The charge for the year can be reconciled to the results of the combined entity
as follows:

                                                                                              US$               US$
                                                                                                                   
Profit before tax                                                                       3,560,760         2,668,959
                                                                                 -----------------------------------
Tax at applicable income tax rate of 33%                                                1,175,051           880,756
Tax effect of non-deductible expenses                                                      34,857           414,269
Tax effect of exempt income                                                              (980,459)         (656,367)
Tax effect of income not taxable                                                         (229,449)         (634,181)
                                                                                 -----------------------------------
Tax expense for the year                                                                        -             4,477
                                                                                 ===================================

(b) Deferred tax


The following are the major deferred tax liabilities recognised by the combined
entity and the movements thereon during the current and prior reporting periods:

                                                     Accelerated depreciation &
                                                  amortisation for tax purposes
                                                                            US$
                                                                               
As at 1 January 2004 and 31 December 2004                                     -
                                             ===================================
                                                                               
At 1 January 2005                                                             -
Current year charge                                                      44,913
Translation difference                                                      723
                                             -----------------------------------
At 31 December 2005                                                      45,636
                                             ===================================


12. Trade receivables

                                                                                 31 December 2005  31 December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Trade receivables                                                                       2,118,782         1,640,546
Less: provision for doubtful debts                                                       (108,579)          (83,104)
                                                                                 -----------------------------------
                                                                                        2,010,203         1,557,442
                                                                                 ===================================


13. Other receivables

                                                                                 31 December 2005  31 December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Other receivables                                                                         162,009           196,370
Amount due from parent company                                                            435,231           142,254
VAT receivable                                                                             82,391            24,753
Prepayments                                                                               375,676           609,298
Deposits                                                                                  182,946            86,925
                                                                                 -----------------------------------
                                                                                        1,238,253         1,059,600
                                                                                 ===================================

Amount due from parent company is unsecured, interest free, and have no fixed
terms of repayment.


14. Inventories

                                                                                 31 December 2005  31 December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Goods for resale                                                                          536,031           230,322
Work in progress                                                                           21,384             5,873
                                                                                 -----------------------------------
                                                                                          557,415           236,195
                                                                                 ===================================


15. Property, plant and equipment

                                                   Land and    Properties     Plant and         Motor         Total
                                                  buildings         under     equipment      vehicles              
                                                             construction                                          
                                                        US$           US$           US$           US$           US$
Cost                                                                                                               
Balance at 1 January 2005                            48,382       206,402        42,660        93,298       390,742
Additions                                            36,812             -         6,422             -        43,234
Reclassification                                    211,173      (211,173)            -             -             -
Translation difference                                1,118         4,771           986         2,155         9,030
                                          --------------------------------------------------------------------------
Balance at 31 December 2005                         297,485             -        50,068        95,453       443,006
                                          --------------------------------------------------------------------------
                                                                                                                    
Accumulated depreciation                                                                                           
Balance at 1 January 2005                             3,132             -        11,008        10,982        25,122
Depreciation charge                                  12,176             -        12,554        11,335        36,065
Translation difference                                   72             -           255           254           581
                                          --------------------------------------------------------------------------
Balance at 31 December 2005                          15,380             -        23,817        22,571        61,768
                                          --------------------------------------------------------------------------
                                                                                                                   
Net book value                                                                                                     
Balance at 31 December 2005                         282,105             -        26,251        72,882       381,238
                                          ==========================================================================
Balance at 1 January 2005                            45,250       206,402        31,652        82,316       365,620
                                          ==========================================================================


16. Intangible assets

                                                                    Development       Patents and             Total
                                                                          costs        trademarks                  
                                                                            US$               US$               US$
                                                                                                                   
Cost                                                                                                               
At 1 January 2005                                                       631,962            12,205           644,167
Additions                                                               867,045                 -           867,045
Translation difference                                                   14,606               283            14,889
                                                                ----------------------------------------------------
At 31 December 2005                                                   1,513,613            12,488         1,526,101
                                                                ----------------------------------------------------
                                                                                                                   
Accumulated amortisation                                                                                           
At 1 January 2005                                                       162,698            12,165           174,863
Charge for the year                                                     108,518                42           108,560
Translation difference                                                    3,761               281             4,042
                                                                ----------------------------------------------------
At 31 December 2005                                                     274,977            12,488           287,465
                                                                ----------------------------------------------------
                                                                                                                   
Net book value                                                                                                     
Balance at 31 December 2005                                           1,238,636                 -         1,238,636
                                                                ====================================================
Balance at 1 January 2005                                               469,264                40           469,304
                                                                ====================================================


17. Investments

                                                                                 31 December 2005  31 December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Associate:                                                                                                         
Investment, at cost                                                                             -           242,131
Share of post acquisition results                                                               -          (161,202)
Provision for impairment                                                                        -           (80,929)
                                                                                 -----------------------------------
                                                                                                -                 -
                                                                                                                   
Other equity investments, at cost                                                         185,795           181,598
                                                                                 -----------------------------------
                                                                                          185,795           181,598
                                                                                 ===================================

The details of the associate are described below:

Name of associate      Country of    Principal activity      Effective equity
                     incorporation/                             held by the
                        business                              combined entity

Nanjing Nanhua          People's      Development and
Consulting Co.         Republic of   sales of hardware              33%
Ltd *                     China       and software and 
                                    systems integration
                                          services

* The associate had been placed under liquidation in 2005, which a provision for
  impairment has been made in respect of the combined entity's investment in
  FY2004.

Summarised financial information in respect of the combined entity's associates
is set out below:

                                                                                 31 December 2005  31 December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Total assets                                                                                    -           404,244
Total liabilities                                                                               -           248,974
                                                                                 -----------------------------------
Net assets                                                                                      -           155,270
                                                                                 -----------------------------------
                                                                                                                   
Combined entity's share of associate's net assets                                               -            51,757
                                                                                 ===================================
                                                                                                                   
Revenue                                                                                         -           461,733
                                                                                 -----------------------------------
Loss of the year                                                                                -           (87,516)
                                                                                 -----------------------------------
Combined entity's share of associate's loss for the period                                      -                 -
                                                                                 -----------------------------------


18. Other payables

                                                                                 31 December 2005  31 December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Deposits received                                                                          52,435            60,166
Other tax payable                                                                          72,066            33,265
Dividend payable                                                                           61,346            59,961
Other payables                                                                            291,649           164,396
                                                                                 -----------------------------------
Total                                                                                     477,496           317,788
                                                                                 ===================================


19. Bank loans

                                                                                 31 December 2005  31 December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Bank loans                                                                                371,591           363,196
                                                                                 ===================================

The bank loan is a revolving bank loan secured by corporate guarantee. The
guarantee for the loan was provided by Nanjing Nanhua Consulting Co. Ltd until
31 December 2004. From 1 January 2005 the guarantee was provided by Nanjing
Skytech Software Co. Ltd. The loan facility expired on 6 January 2006 and was
repaid accordingly.

The average interest rates paid were 6.26% (2004:5.54%) per annum as at 31
December 2005.


20. Share capital

                                                                                 31 December 2005  31 December 2004
                                                                                          Audited           Audited
                                                                                              US$               US$
                                                                                                                   
Registered capital:                                                                                                
Nanjing Skytech Co. Ltd                                                                 1,210,654         1,210,654
Nanjing Skytech Software Co. Ltd                                                          242,131           242,131
                                                                                 -----------------------------------
                                                                                        1,452,785         1,452,785
                                                                                 ===================================

The registered capital of Nanjing Skytech Co. Ltd increased as follows:
  - investment of US$ 242,131 on 8 November 2002;
  - investment of US$ 605,327 on 2 August 2003.

Nanjing Skytech Software Co. Ltd had registered capital of US$ 242,131 on
incorporation.


21. Operating lease arrangements

                                                                                 31 December 2005  31 December 2004
                                                                                              US$               US$
                                                                                                                   
Minimum lease payments under operating leases included in the income statement            111,650            78,639
                                                                                 ===================================

At the balance sheet date, the commitments in respect of non-cancellable
operating leases for office building, workshop and warehouses with a term of
more than one year were as follows:

                                                                                 31 December 2005  31 December 2004
                                                                                              US$               US$
                                                                                                                   
Future minimum lease payments payable:                                                                             
Within one year                                                                           118,511            83,274
In two to five years                                                                       12,551           191,012
                                                                                 -----------------------------------
                                                                                          131,062           274,286
                                                                                 ===================================


22. Related party transactions

From 31 July 2004, the immediate parent company of Nanjing Skytech Co. Ltd was
Infotech Holdings Pte Ltd.

From incorporation until 31 July 2004, the immediate parent company of Nanjing
Skytech Software Co. Ltd was Nanjing Skytech Co. Ltd. From 31 July 2004 until
January 2005 the immediate parent undertaking was Nanjing Sky Investment
Information Co. Ltd. From January 2005, the immediate parent undertaking was
Infotech Holdings Pte Ltd, a company incorporated in Singapore.

At the date of this report the immediate parent company of each of the companies
making up the combined entity was Infotech Holdings Pte Ltd, a company
incorporated in Singapore. The ultimate parent undertaking was Sinosoft
Technology plc, a company incorporated in England.

The ultimate controlling party throughout the year of this report was Ms Xin
Yingmei by virtue of her majority shareholding in the companies or their
immediate and ultimate parent undertakings.

Transactions between the companies that form the combined entity, which are
related parties, have been eliminated in the preparation of the financial
information set out in this report and are not disclosed in this note.

During the financial year ended 31 December 2004, Nanjing Skytech Co. Ltd made
working capital loans to Infotech Holdings Pte Ltd of US$142,254. This balance
was outstanding at that year end. During the financial year ended 31 December
2005, further working capital loans of US$292,976 were made to Infotech Holdings
Pte Ltd. The balance outstanding at the year end was US$435,231. This loan is
unsecured, interest free and has no fixed repayment terms.

Included within other payables at 31 December 2005 was a balance of US$61,346
(2004:US$59,961) in relation to dividends payable to a former minority
shareholder, Ning Yingmei, in Nanjing Skytech Software Co. Ltd.

Included within other receivables at 31 December 2005 was a balance of US$
40,875 (2004:nil) in relation to working capital loan to Nanjing Sky Investment
Information Co., Ltd, which was the immediate parent company of Nanjing Skytech
Software Co., Ltd from July 2004 until January 2005, and the majority sharehol
der of the company is Ms Xin Yingmei. This balance is unsecured, interest free
and has been repaid after year ended.


23. Comparative figures

Certain comparative figures have been reclassified to conform with the current
year's presentation.






                      This information is provided by RNS
            The company news service from the London Stock Exchange

END
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