CORRECTION: Pacific Online Limited Announces Interim 2010 Unaudited Financial Results

HONG KONG, Aug. 24 /PRNewswire-FirstCall/ -- Pacific Online Ltd. (HKSe: 543) ("Pacific Online" or the "Company"), a leading internet content provider in China, is issuing this press release to correct a press release issued on August 23, 2010, under the same headline, to reflect a correction in the operating profit before share-based compensation expenses (non-GAAP).

First Half 2010 Highlights

• Total revenues were RMB202.6 million, an increase of 43% from RMB141.8 million for the six months ended 30 June 2009
• Gross profit was RMB141.0 million, an increase of 43% from RMB98.7 million for the six months ended 30 June 2009
• Operating profit before Share-Based Compensation Expenses (non-GAAP) was RMB83.0 million, representing a 53% increase from RMB54.3 million over the same period in 2009.  
• Net income attributable to the Company's shareholders was RMB72.9 million, an increase of 64% from RMB44.4 million for the six months ended 30 June 2009
• Basic and diluted earnings per share were RMB7.50 cents and RMB7.41 cents, respectively for six months ended 30 June 2010, as compared to RMB4.57 cents and RMB4.57 cents, respectively for the six months ended 30 June 2009  

"We are pleased to announce our first half results," commented Mr. Lam Wai Yan, Chairman and CEO.  "Our first half growth was driven primarily by higher spending from both new and existing clients."

"Our outlook for the second half of 2010 continues to be promising.  As the global economy continues to recover from the depths of the crisis, manufacturers of electronics and other related IT companies are steadily increasing their online marketing spending to support new applications and products. This, in particular, is helping drive growth of our core PConline portal."

"Car sales in China will have grown by 10 percent in volume this year, down from the 48 percent recorded in the first six months of the year and the 45 percent recorded for 2009, according to DongYang, the secretary general of the China Association of Automobile Manufacturers. However, this benefitted our industry leading automotive portal, PCauto, as greater competition among major auto brands and an increase in inventory pressures caused advertisers to increase spending to reach consumers. Our leading position in the automotive vertical will allow us to capture the strong demand from auto advertisers."

"With continued strong demand expected from the IT, auto, and gaming industries, we expect to increase advertising rates on our leading portals.  Looking forward, we intend to continue to enhance our research and development capabilities, invest in new technology and expand the content offering. Growth in the internet advertising industry remains robust, and our management team is fully committed to driving sustainable growth by effectively executing on our growth strategies."

First Half 2010 Financial Results

Total Revenues

Total revenues were RMB202.6 million for the six months ended 30 June 2010, an increase of 43% from RMB141.8 million for the six months ended 30 June 2009.

Revenue for PConline, the Group's information technology ("IT") and consumer electronics portal, was RMB90.0 million for the six months ended 30 June 2010, an increase of 20% from the same period one year ago. The increase in revenues from PConline was due to higher advertising spending from IT manufacturers.

Revenue for PCauto, the Group's automobile portal, was RMB93.1 million for the six months ended 30 June 2010, an increase of 63% from the same period one year ago. The increase in revenues from PCauto was due to the strong growth of the automobile industry in China.

Revenue for the Group's other operations, such as games, lady, baby portals and others, was RMB19.5 million for the six months ended 30 June 2010, an increase of 108% from the same period one year ago. Revenues from this segment are increasing significantly as consumer goods companies start to experiment with and direct a greater share of their advertising budgets to internet advertising.

PConline and PCauto accounted for about 90% of the Group's total revenue; however the Pacific Online's diversification strategy is proving beneficial as new revenue sources start to supplement and offset risk of the Group's main verticals.

Cost of Revenues

Cost of Revenue was RMB61.6 million for the six months ended 30 June 2010, an increase of 43% from the six months ended 30 June 2009. The increase in Cost of Revenues was proportional to the revenue growth.

Gross Profit and Gross Margin

Gross profit was RMB141.0 million for the six months ended 30 June 2010, an increase of 43% from the six months ended 30 June 2009. The gross profit margin was 70% for the first half of 2010 and was stable compared to the first half of 2009.  

Operating Expenses

Operating expenses were RMB62.5 million for the six months ended 30 June 2010, an increase of 32% from the six months ended 30 June 2009. The increase in operating expenses was primarily due to the following factors:

A 50% increase in selling and marketing costs from the same period last year.  The increase was primarily due to an increase of marketing expenses to strengthen brand awareness of the Group's portals.

A 15% increase in administrative expenses from the same period last year. The increase was mainly due to an increase in professional fees and share-based compensation expenses.

A 22% increase in product development expenses from the same period last year. The increase was primarily due to an increase in staff costs as the Group expanded its research and development team.

Operating Profit before Share-Based Compensation Expenses (non-GAAP)

Operating profit before Share-Based Compensation Expenses (non-GAAP) was RMB83.0 million in the first half of 2010, representing a 53% increase from RMB54.3 million over the same period in 2009.

Net Finance Income

The Group realized a net finance income of RMB1.3 million for the six months ended 30 June 2010, a decrease of 66% from the six months ended 30 June 2009. The net finance income was primarily attributed to interest income on short-term bank deposits.

Income Tax Expense

Income Tax Expense was RMB6.9 million for the six months ended 30 June 2010, a decrease of 35% from the six months ended 30 June 2009. The decrease was mainly due to a reversal of the over-provided withholding tax resulted from different tax rates.

Net Income Attributable to the Company's Shareholders

Net Profit was RMB72.9 million for the six months ended 30 June 2010, an increase of 64% from RMB44.4 million for the six months ended 30 June 2009.

Basic and diluted earnings per share were RMB7.50 cents and RMB7.41 cents, respectively for six months ended 30 June 2010, as compared to RMB4.57 cents and RMB4.57 cents, respectively for the six months ended 30 June 2009.  

Liquidity and Financial Resources

As at 30 June 2010, the Group had financial resources in the form of short-term bank deposits and cash totaling RMB372.1 million, compared to RMB444.0 million in short-term bank deposits and cash as at 31 December 2009.

Employee and Remuneration Information

As of 30 June 2010, the Group had 860 employees (31 December 2009: 754). The Group determines staff's remuneration based on factors such as qualifications and years of experience.

Recent Developments

Acquisition of Property

In light of the development plan of the Group, the Board decided to establish its headquarters, research and development center, e-business platform operation center, as well as software and services contracting center in Guangzhou. In order to meet such development needs of the Group, on 25 January 2010, GZP Computer (a subsidiary of the Company) acquired a property located at No. 115, Gaopu Road, Gaotang Software Station, Tianhe District, Guangzhou, the PRC at a total consideration of RMB148,650,000. Further details of the said acquisition are disclosed in the Company's announcement dated 28 January 2010.

About Pacific Online Ltd. (corp.pconline.com.cn)

Pacific Online is one of the leading Internet content providers in the PRC in terms of total advertising revenue. The Group operates five vertically-integrated portals, including PConline, which is the largest portal in the PRC specializing in IT product-related content, in terms of advertising revenue, and PCauto, which is the largest portal in the PRC specializing in automobile-related content, in terms of advertising revenue. According to industry practice, vertically-integrated portals are portals that focus on specific content.

Safe Harbor Statement

This press release contains forward-looking statements which are subject to risks and uncertainties. Actual results may differ from those discussed in the press release.  In addition, any projections about the company's future performance represent management's estimates as of today August 23, 2010. The Company assumes no obligation to update these projections in the future as business and market conditions change.

SOURCE Pacific Online Ltd.