Pacific Online Limited Announces Interim Results for the Six Months Ended 30 June 2011

SHENZHEN, China, Aug. 29, 2011 /PRNewswire-FirstCall/ -- Pacific Online Ltd. (HKSe: 543) ("Pacific Online," the "Company" or the "Group"), a leading Internet content provider in China, today announced its financial results for the six months ended June 30, 2011.  The Company will host a conference call to discuss these results at 9:00AM Hong Kong time on Tuesday, August 30, 2011.  Dial-in details are provided at the bottom of this release.  

Six Months Ended June 30, 2011 Financial Highlights

• Total revenues increased 29.1% year-over-year to RMB261.5 million
• Gross profit increased 23.7% year-over-year to RMB174.4 million
• Operating profit increased 28.6% year-over-year to RMB100.9 million
• Net profit increased 14.7% year-over-year to RMB83.6 million
• Basic and diluted earnings per share were RMB7.79 cents and RMB7.55 cents, respectively, as compared with RMB6.82 cents and RMB6.73 cents year-over-year, respectively
• Net cash flow from operations increased 20.7% to RMB21.3 million

Mr. Waiyan Lam, Chairman and CEO of Pacific Online Limited, commented, "We are pleased to announce yet another period of strong results.  Our revenues for the first half of 2011 were nearly 30% higher than for the six months ended June 30th of last year, largely due to organic growth across all of our portals."

"We continued to make good progress across our lineup of Internet portals, including PConline, PCauto and our female segments.  We have added significant content and functionality to our sites, which is attracting higher user traffic, and many multinational and local Chinese brands are increasingly viewing our sites as a highly effective channel to reach middle class consumers in China.

"Last year, PCauto took over PConline as our leading portal in terms of advertising revenues, which partly reflects China's rapidly growing automobile industry. According to a report issued by the China Association of Automobile Manufacturers (CAAM), in the first six months of 2011, automobile sales in China reached nearly 9.4 million vehicles, a 3.4% increase from the same period last year.  PConline, our IT and electronics-focused portal also continued to grow, although moderately.  Being our first portal, the rates of growth we see from this segment are more modest than prior years, however it remains a significant contributor to revenues.  We strongly believe we will continue to prosper in this segment given the continuously rising advertising spending from IT companies, and new innovations and product introductions from consumer electronics companies.

"We were pleased with the growth of our portals. The disposable income of households in China grows with each year, and we are benefitting from increased use by the country's growing middle-class to research new consumer goods and services. We are expecting this trend to continue throughout the rest of 2011.

"As first movers in China's internet portal space, we have built a strong reputation with users, who return to our portals on a regular basis for search, information, product reviews and entertainment. Our high-quality content keeps up our user 'stickiness' and continues to be one of our hallmark advantages.

"We expect to benefit from trends in China's Internet usage, including greater Internet penetration rates and broadband roll-out.  We have also optimized out portals to keep pace with the uptake of new mobile devices, including smartphones and tablets.  With a firm understanding of our industry and the needs and wants of today's consumers in China, we are confident that our business will continue to create value for shareholders over time."

Six Months Ended June 30, 2011 Financial Results

Revenue

Revenue increased by 29.1% from RMB202.6 million for the six months ended 30 June 2010 to RMB261.5 million for the six months ended 30 June 2011. The increase was mainly due to organic growth across the Group's different portals, with notably strong performance from PConline, PCauto and our female segments. Profit before tax rose by 31.6%, which was in line with the growth in the Group's revenue.

Revenue for PConline, the Group's IT and consumer electronics portal, increased by 26.4% from RMB90.0 million for the six months ended 30 June 2010 to RMB113.8 million for the six months ended 30 June 2011. The increase in revenue from PConline was mainly due to an overall increase in advertising spending from consumer electronic customers, especially from large multinationals.

Revenue for PCauto, the Group's automobile portal, increased by 26.9% from RMB93.1 million for the six months ended 30 June 2010 to RMB118.1 million for the six months ended 30 June 2011. According to a report issued by the China Association of Automobile Manufacturers (CAAM), in the first six months of 2011, automobile sales in Mainland China reached nearly 9.4 million vehicles, a 3.4% increase from the same period in 2010. Even with this modest growth backdrop, PCauto was able to increase its revenue as advertisers continue to allocate more marketing budget toward digital media.

Revenue for other operations, including the Group's other portals, PCgames, PClady, PCbaby, and PChouse increased by 51.8% from RMB19.5 million for the six months ended 30 June 2010 to RMB29.6 million for the six months ended 30 June 2011. Revenue from this segment increased significantly as a result of higher consumer spending in Mainland China and as consumer goods companies allotted a larger percentage of their advertising budgets to internet advertising.

As a percentage of total revenue, PCauto accounted  for 46.0% for the six months ended 30 June 2010 and 45.2% for the six months ended 30 June 2011. PConline accounted for 44.4% for the six months ended 30 June 2010 and 43.5% for the six months ended 30 June 2011. Other operations accounted for 9.6% for the six months ended 30 June 2010 and 11.3% for the six months ended 30 June 2011. The Group continued to diversify its revenue base as the other portals significantly scaled up their operations.

Cost of Revenue

Cost of revenue increased by 41.4% from RMB61.6 million for the six months ended 30 June 2010 to RMB87.1 million for the six months ended 30 June 2011. Gross profit margin was 66.7% for the six months ended 30 June 2011 and 69.6% for the six months ended 30 June 2010. The increase in cost of revenue was mainly due to an increase in number of employees to support  the Group's expansion plans.

Operating Expenses

Selling and Marketing Costs

Selling and marketing costs increased by 28.7% from RMB31.0 million for the six months ended 30 June 2010 to RMB39.9 million for the six months ended 30 June 2011. The rise was primarily due to increase in staff cost and increased promotional activities for existing products and brand building for the whole Group.

Administrative Expenses

Administrative expenses decreased by 4.2% from RMB21.3 million for the six months ended 30 June 2010 to RMB20.4 million for the six months ended 30 June 2011. The decrease was mainly due to less provision for impairment of receivables during the period.

Product Development Expenses

Product development expenses increased by 28.4% from RMB10.2 million for the six months ended 30 June 2010 to RMB13.1 million for the six months ended 30 June 2011. The increase was primarily due to greater staff recruitment in research and development during the period.

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

Operating profit before share-based compensation expenses (non-GAAP) was RMB104.5 million in the first half of 2011, representing a 26.0% increase from RMB83.0 million over the period in 2010.

Finance Income and Cost

Net finance income was RMB1.3 million for the six months ended on 30 June 2010 and RMB4.2 million for the six months ended on 30 June 2011. Net finance income came mainly from interest income on short-term bank deposits.

Income Tax Expense

Income tax expense increased by 211.6% from RMB6.9 million for the six months ended 30 June 2010 to RMB21.5 million for the six months ended 30 June 2011. For the six months ended 30 June 2010, there was a reversal of the over-provided dividend withholding tax from different tax rates in 2008 and 2009, and there was no tax adjustment for the six months ended 30 June 2011.

Net Profit

Net profit increased by 14.7% from RMB72.9 million for the six months ended 30 June 2010, to RMB83.6 million for the six months ended 30 June 2011.

Liquidity and Financial Resources

As of 30 June 2011, the Group had short-term bank deposits and cash totalling RMB254.6 million, compared with RMB444.5 million as of 31 December 2010. Cash dividend amounting to RMB140.8 million was paid out during the six months ended 30 June 2011.

The Group had no external debt as of 31 December 2010 and 30 June 2011.

Conference Call

Management will host a conference call to discuss the results at 9:00 AM Hong Kong time on Tuesday, August 30, 2011 (9:00 PM EDT on Monday, August 29, 2011). Mr. Lam Wai Yan, Chairman and CEO, and Mr. Jeff Wang, Chief Financial Officer, will discuss the results and take questions following the prepared remarks.  

The dial-in details for the live conference call are as follows:

A live and archived webcast of the conference call will be available on the investor relations section of the Company's website at: http://corp.pconline.com.cn.  

A telephone replay of the call will be available for 7 days after the conclusion of the conference call.  The dial-in details for the replay are as follows:

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 Company operates six vertically-integrated portals, which, according to industry practice, are portals that focus on specific content.  Among the Company's portals are PConline, the largest portal in the PRC specializing in IT product-related content, in terms of advertising revenue, and PCauto, the largest portal in the PRC specializing in automobile-related content, in terms of advertising revenue.

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.

For further information, please contact:

Pacific Online Ltd.

Hudson Wong
Company Secretary
Tel: +852 2121 0634  
Email: [email protected]

Christensen Investor Relations

Tip Fleming
Tel: +852-2117-0861
Fax: +852-2117-0869
Email: [email protected]

Teal Willingham
Tel: +86 10 5826 4939
Email: [email protected]

SOURCE Pacific Online Ltd.