08:59 ZZNODE HOLDINGS<02371> - Results Announcement (2) 3. BASIS OF CONSOLIDATION The financial statements have been prepared under the historical cost convention as modified for the revaluation of certain investments in securities and have been prepared in accordance with accounting principles generally accepted in Hong Kong. The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 December each year. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. All significant intercompany transactions and balances between group enterprises are eliminated on consolidation. 4. TURNOVER The Group is principally engaged in the development and provision of operational support system products and solutions in the People's Republic of China. Turnover, which is stated net of value-added tax and other sales tax and returns, represents amounts received and receivable for sale of hardware and software and service income from provision of system integration and maintenance, training and other services. The Group is currently organised into four revenue streams - sale of self -developed software, sale of third party software and hardware in relation to system integration, system integration and maintenance, training and other services. These revenue streams are the basis on which the Group reports its primary segment information. Turnover recognised during the year may be analyzed as follows: 2004 2003 RMB RMB Sale of self-developed software 38,634,766 32,476,513 Sale of third party software and hardware in relation to system integration 55,542,709 48,019,432 System integration 7,247,375 4,439,574 Maintenance, training and other services 6,801,226 7,261,755 _________ _________ Total 108,226,076 92,197,274 =========== =========== 5. PROFIT FROM OPERATIONS Profit from operations has been arrived at after charging or crediting: 2004 2003 RMB RMB Directors' emoluments 1,923,250 1,405,354 Other staff costs (Note) 16,335,988 12,514,142 Retirement benefits scheme contributions excluding directors 874,331 518,658 --------------------------- Total staff costs 19,133,569 14,438,154 ------------ ------------- Auditors' remuneration 583,000 100,000 Allowance for bad and doubtful debts 141,349 - Depreciation of property, plant and equipment 1,924,512 1,797,748 (Gain) loss on disposal of property, plant and equipment (223) 41,740 Operating lease rentals in respect of rented premises 3,426,605 3,171,667 Research and development expenditure 10,156,490 8,659,435 Add: amortisation of intangible assets 718,078 640,468 Less: amount capitalised (2,554,532) (1,077,195) _________ _________ 8,320,036 8,222,708 _________ _________ Write-off of inventories 162,393 56,536 _________ _________ Note: Amount included staff costs of RMB 8,320,036 (2003: RMB7,582,240) categorised as research and development expenditure for the year ended 31 December 2004. 6. EARNINGS PER SHARE (a) Basic earnings per share The calculation of basic earnings per share is based on the Group's net profit for the year of RMB28,523,663 (2003:RMB25,346,538) and on the weighted average number of ordinary shares of approximately 312,021,858 ( 2003: 300,000,000) in issue and issuable on the assumption that the capitalisation issue of 300,000,000 shares of the Company had been effective on 1 January 2003. (b) Diluted earnings per share The Company had no potential ordinary shares outstanding during the year ended 31 December 2003 and 2004 For more details, please refer to the press announcement today.