Pacific Online Limited Announces Interim Results For The Six Months Ended 30 June 2012

HONG KONG, Aug.27, 2012 /PRNewswire/ -- Pacific Online Ltd. (HKSE: 543) ("Pacific Online," or the "Company"), a leading internet content provider in China, today announced its financial results for the six months ended June 30, 2012.  The Company will host a conference call to discuss these results at 9:00AM Hong Kong time on Tuesday, August 28, 2012.  Dial-in details are provided at the bottom of this release. 

Six Months Ended June 30, 2012 Financial Highlights

• Total revenues increased 14.0% year-over-year to RMB 298.2million
• Gross profit increased 14.9 % year-over-year to RMB 200.5 million
• Operating profit increased 3.8 % year-over-year to RMB 104.8 million
• Net profit increased 1.7 % year-over-year to RMB 85.0 million
• Basic and diluted earnings per share were RMB 7.83 cents and RMB 7.63 cents, respectively, as compared with RMB 7.79 cents and RMB 7.55 cents year-over-year, respectively

"We are pleased to announce the results of another strong interim period," said Mr. Waiyan Lam, Chairman and CEO of Pacific Online Limited. "Our revenues rose 14% from the previous year to RMB 298.2 million, driven by increased advertising spending on our portals. PCauto, our auto market-focused portal, continues to be our strongest performing portal.  Revenues increased 23% compared with the same period in 2011, despite the deceleration of automobile sales growth in China during the first half of the year. While a number of policy changes have affected demand for new car purchases in China, manufactures have stepped up their advertising to try to differentiate themselves in such a highly competitive market, and they also appear to be directing more of their advertising spending to important online outlets.  We believe our high-quality content and rising brand recognition in this market are helping to draw important advertisers to our platform. We also continued to see strong performance from PClady, which focuses on the fashion and luxury goods markets and is targeted towards female consumers. We expect PClady to continue to perform well as Chinese demand for luxury and brand-name goods rises."

"Our original consumer electronics and IT portal, PConline, experienced a mild decline in revenues of 0.8% from the previous year. While the decline was expected, we believe it mainly reflects a drop in advertising spending among consumer electronic companies in the face of the economic slowdown in China.  We have also been pleased with our other portals, PCgames, PChouse, and PCbaby, each of which continues to see steady advances in terms of user growth and interaction."

"Meanwhile we continue to develop useful new features and content for our users. During the first half of 2012, we worked on optimizing our portals for mobile devices, giving users greater freedom to research their favorite brands and the latest products on the go. In addition, our two leading iPad magazines, PCauto and PChouse have already seen a pickup in new subscribers and they gained significant popularity. While we do not expect significant revenue contribution from this segment in the near future, we will continue to invest in mobile technology to better position ourselves as mobile internet expands.  This year we are ramping up our R&D in preparation for further content and product launches."

"We are cautiously optimistic for the rest of the year. As China's middle class grows and increasingly turns to the Internet for information, shopping, and entertainment. According to data published earlier this year by the China Internet Network Information Center, internet users in China numbered over half a billion. This number is projected to grow over the coming years, and with it, the number of consumers reachable via traditional computer and mobile devices. Having established our brand early on, we not only retain a larger user base compared with some of our competitors, we are also better-positioned to capture new users. However, we are not immune to the general slowing of the Chinese economy, and at the same time we face upward pressure in terms of retaining personnel. We will continue to invest in areas of opportunity and at the same time improve efficiency and manage cost. By staying current with the latest trends in consumer goods, and consistently catering to the changing needs and tastes of our user base, we believe we are well-prepared to lead our business forward and create long-term value for our shareholders."

Six Months Ended June 30, 2012 Financial Results

Revenue

Revenue increased by 14.0% from RMB261.5 million for the six months ended 30 June 2011 to RMB298.2 million for the six months ended 30 June 2012. The increase was mainly due to organic growth across the Company's different portals, with notably strong performance from PCauto and PClady. 

Revenue for PConline decreased by 0.8% from RMB113.8 million for the six months ended 30 June 2011 to RMB112.9 million for the six months ended 30 June 2012. The slight decrease in revenue from PConline resulted from a slowdown in advertising spending from consumer electronics clients, especially large, multinational companies.

Revenue for PCauto increased by 23.2% from RMB118.1 million for the six months ended 30 June 2011 to RMB145.5 million for the six months ended 30 June 2012. During the first six months of 2012, passenger car sales in China increased by only 5.6% to seven million vehicles, according to statistics from the China Association of Automobile Manufacturers. Despite recent modest growth in China's auto industry, PCauto revenues continued to show strong growth as advertisers allocate increasingly greater portions of their marketing budgets to digital media.

Revenue for PClady increased by 42.5% from RMB17.1 million of the six months ended 30 June 2011 to RMB24.3 million for the six months ended 30 June 2012. The increase was mainly the result of continued strong interest and demand for luxury and fashion goods among female consumers in China.

Revenue from the Company's other portals, PCgames, PCbaby, and PChouse, increased by 23.6% from RMB12.5 million for the six months ended 30 June 2011 to RMB15.4 million for the six months ended 30 June 2012. Revenue from this segment increased significantly due to both higher consumer spending in Mainland China, as well as consumer goods companies allotting larger percentages of their advertising budgets to digital media.

As a percentage of total revenue, for the six month period ended 30 June 2011 compared with the six month period ended 30 June 2012, PCauto accounted for 45.2% versus 48.8%, respectively; PConline accounted for 43.5% versus 37.8%, respectively; PClady accounted for 6.5%  versus 8.2%, respectively; and other operations accounted for 4.8% versus 5.2%, respectively. The shift in revenue contributions from each business resulted from the Company's continued efforts to diversify its revenue base and scale up operations for its smaller portals.

Cost of Revenue

Cost of revenue increased by 12.1% from RMB87.1 million for the six months ended 30 June 2011 to RMB97.7 million for the six months ended 30 June 2012. Gross profit margin was 67.2% for the six months ended 30 June 2012 and 66.7% for the six months ended 30 June 2011. The increase in cost of revenue was mainly due to an increase in the number of new employees to support the Company's expansion plans.

Operating Expenses

Selling and Marketing Costs

Selling and marketing costs increased 12.9% from RMB39.9 million for the six months ended 30 June 2011 to RMB45.1 million for the six months ended 30 June 2012. The increase was primarily due to an increase in staff cost and marketing expenses.

Administrative Expenses

Administrative expenses increased by 73.4% from RMB20.4 million for the six months ended 30 June 2011 to RMB35.3 million for the six months ended 30 June 2012. The increase was primarily due to an increase in staff cost, estate management fees, traveling expenses, and provision for impairment of receivables during the period.

Product Development Expenses

Product development expenses increased by 31.2% from RMB13.1 million for the six months ended 30 June 2011 to RMB17.2 million for the six months ended 30 June 2012. 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 RMB 108.2 million in the first half of 2012, representing a 3.5% increase from RMB104.5 million over the same period in 2011.

Finance Income and Cost

Net finance income was RMB2.7 million for the six months ended on 30 June 2012, compared with RMB4.2 million for the six months ended on 30 June 2011. Net finance income largely came from interest income on short-term bank deposits.

Income Tax Expense

Income tax expense increased by 4.6% from RMB21.5 million for the six months ended 30 June 2011 to RMB22.5 million for the six months ended 30 June 2012.

Net Profit

Net profit increased by 1.7% from RMB83.6 million for the six months ended 30 June 2011, to RMB85.0 million for the six months ended 30 June 2012.

Liquidity, Financial Resources and Dividend

As of 30 June 2012, the Company had short-term bank deposits and cash totaling RMB243.4 million, compared with RMB432.2 million as of 31 December 2011.

A cash dividend totaling RMB160.6 million was paid out during the six months ended 30 June 2012.

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

Conference Call

Management will host a conference call to discuss the results at 9:00AM Hong Kong time on Tuesday, August 28, 2012 (which is also 9:00PM EDT on Monday, August 27, 2012).  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 27, 2012. 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: +852-9212-0684
Email: [email protected]

Teal Willingham
Tel: +86 131 2179 3446
Email: [email protected]

SOURCE Pacific Online Ltd.