Interim Report 2018 Chinasoft International Limited 2 HIGHLIGHTS
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CONTENTS 1 PAGE Highlights ........................................................... 2 Chairman’s Report ..................................................... 3 Recent Business Development ........................................... 6 Management Discussion and Analysis ..................................... 18 Interim Results – Consolidated Statement of Comprehensive Income (Unaudited) .............. 28 – Consolidated Statement of Financial Position (Unaudited) ................... 29 – Consolidated Statement of Changes in Equity (Unaudited) ................... 31 – Consolidated Statement of Cash Flows (Unaudited) ........................ 32 – Notes to the Unaudited Consolidated Financial Statements .................. 33 Other Information ..................................................... 44 Interim Report 2018 Chinasoft International Limited 2 HIGHLIGHTS Results for the first half of 2018 For the six months ended 30 June 2018 2017 Income statement highlights (unaudited) (unaudited) % Change RMB’000 RMB’000 Revenue 4,813,853 4,145,060 16.1% Revenue from service 4,770,267 4,047,248 17.9% Profit for the period 355,805 240,445 48.0% Profit attributable to Owners of the Company 358,759 245,470 46.2% Basic EPS (RMB cents) 14.87 10.26 44.9% (unaudited) (audited) Statement of financial 30 June 31 December position highlights 2018 2017 % Change RMB’000 RMB’000 Total assets 8,948,585 8,751,533 2.3% Total liabilities (3,308,763) (3,521,567) (6.0%) Total equity 5,639,822 5,229,966 7.8% • The Directors do not recommend the payment of an interim dividend for the six months ended 30 June 2018. • No closure for the Register of Members of the Company. Chinasoft International Limited Interim Report 2018 CHAIRMAN’S REPORT 3 Dear Investors: During the first half of 2018, I believe that everyone underwent a unique moment of their investment career (some may even say it’s the dark era). When the ZTE incident happened, the share price of the company took a hit, and even until now, it is still haunted by the “US- China Trade wars”. Here is our interpretation, “If this is a hurdle that the whole country has to go through, we are even more responsible”. We must remain patient, stick to our blueprint, and continue to carry out our vision and goal! During the reporting period, the Group continued to develop in the strategic direction that we believed in: 1. FULL ON STRATEGIC COOPERATION In terms of large customers: During the reporting period, the Company and Huawei Cloud’s partnership strengthened. We were awarded “Huawei’s Best Cloud Partner”. The partnership achieved breakthrough in Malaysia, Myanmar, India and other regions. As Huawei’s premier service provider, the Company was successfully selected into the “Huawei Supplier Development (SD) Plan”. The plan was initiated by Huawei. Its goal was to replicate how British Telecom (BT) helped Huawei to become a strategic partner during the last decade. Through this initiative, our goal is not only to become Huawei’s strategic supplier, but furthermore, to become Huawei’s future core strategic partner. The two parties will together explore, solve problems, and share the business opportunities. Lastly, we can systematically learn this process, and use it to help service providers grow in JointForce. During the reporting period, the HSBC business realized growth steadily. The Hang Seng bank business grew rapidly. The Group has become Hang Seng Bank’s largest outsourcing service provider. The big data business grew rapidly especially in the securities industry. The accumulation of experiences and innovation contributed to the Company’s leading position in the industry. During the reporting period, the Company and Baidu realized a strategic cooperation in the field of artificial intelligence, industry expansion, innovation, opened ecosystem, and other areas. The Company’s business with Tencent grew rapidly, and its cloud services continued to expand. Lastly, the Ants Financial payment was implemented in Indonesia as it started to take shape. In terms of smart manufacturing: During the reporting period, the Group formed strategic cooperation with ESI from France, Haier, Phoenix Contacts from Germany, Fast, Nari Information and Telecommunication and other well-known domestic and international enterprises. In the field of industrial simulation, we were able to integrate ESI’s virtual simulation solution onto the cloud, and distributed to many Chinese manufacturers. We were able to use JointForce platform to establish an ecosystem for virtual simulation. We are going to combine the JointForce platform with Haier’s COSMOPlat platform to realize traffic flow. We will also open up JointForce’s product services, and help COSMOPlat platform to realize crowd purchasing of tailored Industrial software, full lifecycle management and platform access integration. Interim Report 2018 Chinasoft International Limited 4 CHAIRMAN’S REPORT In terms of artificial intelligence: During the reporting period, the Company and Mr. Yao Qizhi initiated cooperation with the Nanjing Turning Artificial Intelligence Research Institute to establish the JointForce Turning Research Institute. Together, we will build the digital twins city and increase the rate of AI product development. Furthermore, we plan to participate and invest in the Turning Technological Fund to incubate AI projects and enterprises. They will integrate real estate’s growth model and further establish its presences in the AI field. II. JOINTFORCE TO LAUNCH THE “CLOUD INTEGRATIVE SERVICE” During the reporting period, JointForce continued to roll out the “Cloud Software Parks” in the Jiangsu, Shandong, Hubei, Anhui, Chongqing, Zhejiang, Fujian, and etc., and continued to establish the JointForce ecosystem. Facing the government’s software demand, JointForce launched the “Cloud Integrative Service”, which includes internet + software transaction services, full-life application development management ADM butler service, enterprise big data-based software vendor digital due diligence DD service, and etc.. It was successfully implemented in Nanjing city and district. Through the Cloud Integrative Service’s internet + software transaction model, Nanjing Government was able to shorten its purchasing period by 30%. Furthermore, online asset management is more standardized, and the overall management efficiency is significantly improved, achieving an end-to-end service model from procurement to delivery. We have established the Cloud Integrative Service with the Zheng Jiang Government, and are working with Xi’an Government to test out the pilot. This new business model is getting recognized, approved, applied, and promoted. We are very confident in the JointForce, its memberships and contractor fronts. III. STRENGTHEN CLOUD SERVICE CAPABILITIES Strengthening the cloud servicing capabilities has always been a key to the Company’s strategic transformation. During the reporting period, building on the Huawei Cloud, the Company successfully introduced Microsoft Azure’s mature service capabilities and developed a Microsoft enterprise solution, built on the Huawei cloud. The result was positive. During the last few years, Microsoft’s “cloud first, mobile first” transformation strategy was very successfully, and won the approval from the market and capital market. Microsoft has always been the Group’s long term large customer, it has a leading position in the cloud, AI, IoT, and other technological fields. Recently, Microsoft is promoting the “Partner-led” strategy, welcoming partners to create a more vibrant ecosystem. Leveraging on our observation with Microsoft’s strategy and the important strategic position of Microsoft in the Company’s business, we plan to either through cooperation, acquisition, or other forms to strengthen our global Microsoft business. We will strengthen our cooperation with Microsoft and fully advocate the Company’s cloud service capability upgrade. Chinasoft International Limited Interim Report 2018 CHAIRMAN’S REPORT 5 Dear Investors: Being the first ITS enterprise to reach RMB10 billion in sales, we see the increase of higher demands because of the emerging trends. We will not shy away from promoting high-tech software development or supporting national technological innovation. Together with the China Electronic Information Industry Association, we plan to build an “Industrial Software International Cooperation Industrial Base” to carry out international cooperation in the industrial software industry for the pain points of design and simulation, production control, process control, intelligent physical and other manufacturing links, and enablement of the manufacturing industry. We will promote the development and application of core technologies. We are eager to dedicate ourselves into the second “Global Programmer’s Festival”. It will ignite the engineer’s (digital army!) passion for innovation, We will call out to six million engineers nationwide and thirty thousand key software enterprises to come together and realize the digital spirit. Special times calls for special means! Looking back at the Company’s core talents meeting held at the beginning of the year, we asked for “thought alignment, language unification, and action consistency”. We are resolute towards the “create and share, to become a global ITS leader” vision. No matter what difficulties we face, we will continue forward, firmly. We believe that after the dark era, a new sun that will shine out in a new day, we enjoy the wonderful journey. Chairman Chen Yuhong Summer 2018 Interim