Chinasoft International Shows Gratifying Interim Results, Profit Attributable to the Shareholders Increased by 69% YoY

BEIJING and HONG KONG, Aug. 23, 2016 /PRNewswire/ -- Chinasoft international (hereinafter referred to as "Chinasoft" or "the Group") (SEHK: 354) announced its unaudited financial results for the first half of 2016.

During the first half of 2016, the Group's businesses achieved high growth. The Group's revenue, service revenue, EBIT, net profit attributable to the shareholders of the Group, and EPS increased by 21%, 29%, 57%, 69%, and 53% respectively. The Group's revenue, service revenue, EBIT, net profit attributable to the shareholders of the Group, and EPS were RMB 2.88 billion, 2.83 billion, 310 million, 240 million, and 11.04 cents respectively.

I. Internal Restructure Proven Effective, Two-Wheel Strategy Taking Off

After the efforts over the past 18 months, Chinasoft's new corporate structure is now in place. As the "two-wheel" strategy is implemented, the difference between the two business models of the two segments is becoming apparent, and the characteristics contrast is also becoming more clear and pronounced. We are now well on our way to what Gartner suggested as the Bimodal framework for IT Services: Mode 1 for traditional IT service model which has clear requirements and targets that can be organized with industrial IT methodologies, and Mode 2 for innovative service models that utilizes efficiencies in digital technology, agile payment and revenue models and crowd sourcing for resource management. TPG and IIG also have distinctive characteristics for business positioning, customers, markets and competitive environments, services, models, processes, core technologies, and talent requirements.

II. The Spinoff of TPG to A-Shares to Benefit the Group's "Two-Wheel" Strategy and Match the Interests of Long-Term Investors

Recently the Group announced the proposal to Spin-Off and to relist of our TPG business on mainland's A-share market. This is a fitting strategic arrangement of our "two-wheel" strategy. In the past two annual reports we have conveyed that the Group will work to utilize various capital platforms, and this transaction is the result of our decision to make such a move. We believe this is in the best long term interest of our shareholders.

1. First, the Group will utilize the two capital market platforms to "leap frog", using the more favorable capital market to support different businesses and construct a next generation IT services company. If we successfully realize the spin-off and relisting, we will have both Hong Kong and also A-share market as capital platforms, which will allow us to better organize our on-line and off-line "two-wheel" growth strategy. This is completely in line with Chinasoft's overall strategic plan, with bimodal double model driving simultaneously to propel us towards the goal of becoming a world-class IT services enterprise.
2. The success of this plan will allow both TPG and IIG to each utilize a more fitting capital platform that is appropriate for its business and growth maturity, and pursue its own core business expansion. TPG's future direction is mainly in mergers and acquisitions, financial services and overseas market, pushing to build a Chinese Bangalore in China's Xi' An. This ambitious plan needs a very robust capital platform. Even after TPG's relisting on the A-share market, Chinasoft will remain its overwhelming majority shareholder, with the share dilution in the parent company more than offset up by the expected rapid growth. We always believed that our strategic cooperation with industry giants will give us three dividends (domestication of information technology, globalization of IT services and management, and cultural enhancement from Huawei engagements). With the support of a new capital platform, the new TPG will become our main force in the re-emergence of a new Chinasoft.
3. IIG's business will use Jointforce as its core, concentrate favorable resources and focus on developing internet IT services. The goal is that by 2020, IIG will achieve revenue level of the comparable US company Upwork's 2015 revenue level. IIG is Chinasoft's driving force in the Group's digital transformation.
4. To become a global scale IT enterprise, we need a large home base. Our software research and development center in Xi' An is already being put to use. There are now over 8000 professionals in the center. Within a year we will be able to fulfill our promise made to the local government three year ago (to have over 10000 people working in the center). We are very pleased to fulfil this promise, and we are doing our part for the economic development and transformation for the local region. For this we expect continued strong support from the local government in Xi' An. In fact, the proposed spin-off and relisting transaction is connected with a local company. The future that we see is a "software defined everything" future. The most basic and fundamental environment that is supportive for digital transformation is one which has a large and highly skilled and talented workforce. To create such an environment there must be economic mobility, allowing talent movement and finally attract many more transformative enterprises to relocate to Xi' An. As software technology has spread all over the world, the Group will continue to innovate and provide SMAC (social, mobile, analysis and cloud) technical services, and contribute to local economic development. This will allow software services business to be one of the large, expandable supporting pillars to the community, and bring opportunities for the local and regional transformation. All of this is paving a strong foundation for us to start from Xi' An but reaching beyond to the world. 

In short, the two business groups will be more focused and grow at a faster rate. Then the shareholders will reap the benefits of a higher EPS growth!

III. Jointforce's One Year Anniversary

Jointforce is the core of the IIG. One year later, our Jointforce crowd sourcing operating platform has achieved tremendous progress in both large scale operation capability and efficiency. During the reporting period, Joinforce continued to aggregate IT resources from all industries, technical categories and regions, and now has over 100000 registered and experienced software engineers (bidding parties). It also has over 2000 enterprise customers and over 800 IT project teams. Of these registered engineers, over 60% has more than 3 years of experience, and 19% has over 8 years of experience. Through efficient use of the resources, Jointforce is effectively solving the problem of how to "re-use code" by "re-using" the programmer who has done this code before. The system also provides detailed descriptions of the professional experiences of the resources, thereby allow easy identification and selection for the contract awarding party.

Since Jointforce commercialized one year ago, more and more customers use the platform to satisfy their IT needs. Large IT companies like Founders Electronics, Yongyou Financials, Lanxum, and Huayu Software have developed their own software through resources found on the Jointforce platform. The platform provided them with a coordinated cloud environment that enabled the development and the delivery of projects to be transparent.

Jointfoce also satisfied the needs of China Shipping, China Nuclear, and other central IT services departments, along with the IT demands of traditional markets such as entertainment, media, education, healthcare, logistics, retail, tourism, and etc. By working with Jointforce, these traditional industry customers are able to exploit the platform's attributes such as low cost delivery, large resource available area, flexible timing, vast selection of mature solutions and project cases. This greatly helps these customers with additional development resources and customization of mature solutions, including smaller modules such as order management, inventory management, e-commerce, remote diagnostics, and online tourism.

Jointforce was able to make significant contribution to Internet finance companies, enterprise SaaS companies, Internet gaming and e-commerce and other innovative startups and entrepreneurs, including North Ming Yi, Kanxindai, to name just a few. To the innovative startups, Jointforce allows them to find mature and experienced software developer talents, ensuring internet platform to quickly achieve operations. Jointforce is also actively responding actively to the national Innovation-Entrepreneurship movement, collaborating with many Innovation-Entrepreneur leagues and associations, such as Zhong Guan Cun Internet Finance Service Center, Dalian IT Services Association, Xi' An Software Industry Association, University of Tianjin Software Club and etc. Jointforce provides services related to software development, help these organizations to monitor key market innovations and quickly capture market opportunities.    

2016 is the first year for our Jointforce, and it is also the most critical year for our "Starting Again" phase. For the first half of the year we have seen satisfactory progress, so let us anticipate the second half, anticipate a great harvest and an all moving forward 2016.

SOURCE ChinaSoft International Ltd.