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ChinaCast Education
Corporation (OTCBB:CEUC) ("ChinaCast" or "the
Company"), one of the leading e-learning and
training services providers to educational
institutions, government agencies and corporate
enterprises in China, today announced second quarter
results for the period ending June 30, 2007.
Highlights for the Second
Quarter Ended June 30, 2007(1)
-- Revenue for the second quarter of 2007 came to RMB42.3 million
(US$5.6 million), up 7% over the corresponding period in 2006.
-- Net income was up 85% to RMB14.1 million (US$1.9 million) for the
second quarter this year compared to RMB 7.6 million (US$1.0
million) for 2006.
-- Gross margin improved from 46% in Q2 2006 to 56% in Q2 2007. Net
margin increased from 19% in Q2 2006 to 33% in Q2 2007.
-- Basic and diluted earnings per share for the second quarter were
RMB0.52 (US$0.07) and RMB0.49 (US$0.06) respectively.
-- The number of students enrolled in post-secondary courses using
the Company's distance learning platform increased by 15% to
116,000 as of June 30, 2007 from 101,000 at the end of June 30,
2006.
-- Filed formal request for NASDAQ listing at end of July
(1) Dollar values are calculated at the exchange rate of US$1=RMB7.6
for the second quarter and first half of 2007 and US$1=RMB8.0 for
the same periods in 2006.
Commenting on the results,
Ron Chan, Chairman and Chief Executive Officer,
said, "Our solid second quarter performance was
highlighted by strong profit and student enrollment
growth. We saw meaningful gross and net margin
improvement during the quarter, as our equipment
sales from previous quarters resulted in strong
growth in our service revenues the first half of
this year.
"In the coming quarters, we
are committed to expanding the company into more
traditional education services and are actively
seeking additional growth opportunities,
particularly in the post-secondary and
career/vocational training sectors."
Financial Results for the
Second Quarter Ended June 30, 2007
ChinaCast Education
Corporation reports revenues in two ways: service
revenue versus equipment revenue and revenue broken
out according to the three different education
sectors we serve: post-secondary, K-12 and
vocational/career training.
Overall total revenues were
up by 7% for the second quarter of the year mostly
attributed to stronger service income, of a
recurring nature, which was up 22% to RMB34.5
million for the second quarter compared with RMB28.2
million last year. Equipment sales, which are mainly
project based, declined 32% from RMB11.4 million
last year to RMB7.8 million for the second quarter
of this year.
Turning to the revenue
breakout among educational sectors, the University
Distance Learning sector showed the strongest growth
for the second quarter with revenues up 18% from
last year. Continued strong demand for degrees in
higher education has bolstered enrollment in
distance learning degree courses with the
universities. The number of students enrolled in
courses using our distance learning platforms is up
15% with 116,000 students enrolled at the end of
June 2007.
Revenue from the K-12 and
content delivery business was relatively flat, up
only by RMB0.1 million to RMB17.8 million for the
second quarter compared with last year, since the
number of schools that subscribe for these services
has stabilized at 6,500.
Revenue from vocational and
career training services and enterprise government
training and networking services increased 3% from
RMB8.8 million (US$1.1 million) in the second
quarter last year to RMB9.1 million for 2007. This
modest increase was mainly due to slightly higher
service income from a government project.
Cost of sales of the Group
decreased by 14% from RMB21.5 million (US$2.7
million) during the second quarter of 2006 to
RMB18.5 million (US$2.4 million) during the second
quarter of 2007. The considerable reduction was due
to lower equipment sales which has lower margins as
compared to service revenue.
Gross profit margin
increased from 46% in the second quarter of 2006 to
56% in the second quarter of 2007. This increase was
a result of the lower proportion of equipment sales,
which carry lower margins relative to sales of
services.
Selling and marketing
expenses increased from RMB0.4 million (US$0.05
million) in the second quarter of 2006 to RMB2.1
million (US$0.3 million) in the second quarter of
2007. The Group was establishing the English
training business line in the second quarter of
2007, which resulted in the increase in selling and
marketing expenses.
General and administrative
expenses increased by 17% to RMB10.9 million (US$1.4
million) in the three months ended June 30, 2007
from RMB9.3 million (US$1.2 million) during the
three months ended June 30, 2006. The increase was
due to the Group's expansion and the establishment
of the English training business line.
The Group recorded a
foreign exchange loss of RMB2.3 million (US$0.3
million) for the second quarter of 2007 compared to
a gain of RMB0.2 million (US$25,000) during the
second quarter of 2006. This foreign exchange loss
results from the continuous appreciation of the RMB
against the US dollar, of which the Group has
significant holdings, and is unable to convert to
RMB due to the exchange control regulations in
China.
For the three months ended
June 30, 2007, the Group received a management
service fee of RMB7.1 million (US$0.9 million), as
compared to RMB3.7 million (US$0.5 million) during
the three months ended June 30, 2006. The management
service fee arose from various agreements with CCL
that entitled the Group to the economic benefits of
its Beijing Branch - CCLBJ. CCLBJ is in the process
of transferring all its outstanding businesses,
mainly in post secondary education distance
learning, to the Group.
The increase in interest
income from RMB2.0 million (US$0.2 million) in the
second quarter of 2006 to RMB3.9 million (US$0.5
million) in the second quarter of 2007 was mainly
due to the increase in the Group's cash and term
deposits and higher interests rate in China.
Overall, profit before
income tax increased from RMB14.3 million (US$1.8
million) in the three months ended June 30, 2006 to
RMB19.5 million (US$2.6 million) in the three months
ended June 30, 2007, an increase of 37%. The
increase was mainly due to a higher proportion of
service revenue, which carries higher margins,
relative to equipment revenue.
The Group's share of net
investment losses from various joint ventures
amounted to RMB0.2 million (US$0.03 million) in the
second quarter of 2007 compared to RMB0.2 million
(US$0.03 million) in the second quarter of 2006.
Income taxes increased by
86% from RMB2.4 million (US$0.3 million) in the
second quarter of 2006 to RMB4.5 million (US$0.6
million) in the second quarter of 2007 as a result
of higher profits.
Minority interest of RMB0.6
million (US$0.09 million) for Q2 2007 arose mainly
as a result from the 1.94% of CCH shareholders who
had not made the exchange for CEC shares by the end
of the second quarter of 2007. By 11 July 2007, the
Group had acquired those remaining shares,
effectively holding 100% of CCH.
Income from continuing
operations amounted to RMB14.1 million (US$1.9
million) in the three months ended June 30, 2007
compared to RMB9.7 million (US$1.2 million) in the
three months ended June 30, 2006.
In Feb. 2007, the Group
streamlined its beneficial holding in Tongfang
Chuangxin by disposing of its entire stake in
Tongfang Education in exchange for a direct 17.85%
stake in Tongfang Chuangxin and RMB6.3 million. As a
result, the Group cannot consolidate the results of
Tongfang Education and Tongfang Chuangxin. The
consolidated result of Tongfang Education was shown
as income from discontinued operations for the 3
months and 6 months ended June 30 2006 and 2007
respectively. Net loss on discontinued operations
amounted to RMB2.1 million (US$0.2 million) and
RMBnil (US$nil) for the 3 months ended June 30 2006
and 2007 respectively.
Net income increased
significantly by 85% to RMB14.1 million (US$1.9
million) in Q2 2007 from RMB7.6 million (US$0.9
million) in Q2 2006. The increase is mainly due to
the increase in service revenue, the improved
margin, as well as the drop in loss attributable to
discontinued operations.
Highlighted below are the
earnings per share and share counts for the second
quarter and first half of this year and
corresponding periods of 2006.
Per Share Data Second Quarter
---------------------------- -------------------------------------
2007 2007 2006
USD RMB RMB
---------------------------- ----------- ---------- ----------
Earnings per share (Basic) 0.07 0.52 0.46
---------------------------- ----------- ---------- ----------
Share count (Basic) 26,954,945 26,954,945 16,657,872
---------------------------- ----------- ---------- ----------
Earnings per share (Diluted) 0.07 0.49 0.44
---------------------------- ----------- ---------- ----------
Share count (Diluted) 28,463,653 28,463,653 17,416,220
---------------------------- ----------- ---------- ----------
-------------------------------------
Per Share Data First Half
---------------------------- -------------------------------------
2007 2007 2006
USD RMB RMB
---------------------------- ----------- ---------- ----------
Earnings per share (Basic) 0.14 1.05 1.01
---------------------------- ----------- ---------- ----------
Share count (Basic) 25,840,030 25,840,030 16,657,872
---------------------------- ----------- ---------- ----------
Earnings per share (Diluted) 0.13 0.99 0.96
---------------------------- ----------- ---------- ----------
Share count (Diluted) 27,313,016 27,313,016 17,381,014
---------------------------- ----------- ---------- ----------
Financial Results for the
Six Months Ended June 30, 2007
The revenue for the six
months ended June 30 2007 amounted to RMB82.1
million (US$10.8 million) compared to RMB82.0
(US$10.3 million) of revenue for the corresponding
period in 2006.
Profit before income tax
for the six months ended June 30, 2007, was RMB38.3
million (US$5.0 million), compared to RMB29.1
million (US$3.6 million) for the corresponding
period in 2006, an increase of 32%.
Net income for the six
months ended June 30, 2007, increased by 61% to
RMB27.0 million (US$3.6 million), compared to
RMB16.8 million (US$2.1 million) for the six months
ended June 20, 2006.
Basic earnings per share
for six months ended June 30, 2007, amounted to
RMB1.05 (US$0.14) compared to RMB1.01 (US$0.13) in
the same period in FY2006. Diluted earnings per
share for six months ended June 30, 2007, amounted
to RMB0.99 (US$0.13) compared to RMB0.96 (US$0.12)
in the same period in FY2006.
Cash and bank balances
together with term deposits decreased from RMB721.0
million (US$92.3 million) as at December 31, 2006,
to RMB690.1 (US$90.8) million as at June 30, 2007.
The decrease of approximately 4.3% was because of
the settlement of the accrued professional fees
after the consummation of the acquisition exercise.
Outlook for the Third
Quarter of Fiscal Year 2007
ChinaCast expects its net
revenue in the third quarter of fiscal year 2007
(July 1, 2007, to September 30, 2007) to be in the
range of US$5.6 million to US$6.0 million. This
forecast reflects ChinaCast's current and
preliminary view, which is subject to change.
Conference Call Information
A conference call to
discuss the second quarter financial results,
operating performance and business outlook will be
held on Wednesday, August 15, 2007, at 8:30 am ET.
The discussion will feature remarks by Ron Chan,
Chairman and CEO, Tony Sena, CFO and Michael Santos,
Chief Marketing and IR Officer.
Conference Call Information
Date: Wednesday, August 15, 2007
Time: 8:30 am ET*
Conference Dial In Numbers:
US/Canada Toll Free: 1 800 310 6649
International: +1 719 457 2693
Live Webcast:
http://ir.chinacast.com.cn/events.cfm
Replay Details
The replay will be available from 11:00 pm ET* Wednesday August 15,
2007 until midnight ET* August 29, 2007
Conference Replay Dial In Numbers:
US/Canada Toll Free: 1 888 203 1112
International: +1 719 457 0820
Pass Code: 8437326
Web Replay: http://ir.chinacast.com.cn/events.cfm
*ET=US Eastern Daylight Savings Time
Please access the website
approximately 10 minutes prior to the start time in
order to download a copy of the company's second
quarter results presentation and to install any
necessary software.
About ChinaCast Education
Corporation
Established in 1999 with
offices in Beijing, Shanghai and Hong Kong,
ChinaCast (OTCBB:CEUC) provides e-learning and
training services in three main education segments:
post-secondary, K-12 and vocational/career. These
services include interactive distance learning
applications, multimedia education content
distribution, educational portals, language courses
and vocational/career training.
ChinaCast Education
Corporation seeks to eventually be listed on the
NASDAQ exchange. The Company has taken formal steps
to do so by filing a request on July 26, 2007,
however, the Company has no assurance of the outcome
or timing of the approval process.
Cautionary Statement for
Purposes of the "Safe Harbour" Provisions of the
Private Securities Litigation Reform Act of 1995
This press release may
contain statements that are forward-looking, as that
term is defined by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements
express our current expectations or forecasts of
possible future results or events, including
projections of future performance, statements of
management's plans and objectives, future contracts,
and forecasts of trends and other matters. These
projections, expectations and trends are dependent
on certain risks and uncertainties including such
factors, among others, as growth in demand for
education services, smooth and timely implementation
of new training centers and other risk factors
listed in the company's Form 10K for the fiscal year
ended December 31, 2006. Forward-looking statements
speak only as of the date of this filing, and we
undertake no obligation to update or revise such
statements to reflect new circumstances or
unanticipated events as they occur. You can identify
these statements by the fact that they do not relate
strictly to historic or current facts and often use
words such as "anticipate," "estimate," "expect,"
"believe," "will likely result," "outlook,"
"project" and other words and expressions of similar
meaning. No assurance can be given that the results
in any forward-looking statements will be achieved
and actual results could be affected by one or more
factors, which could cause them to differ
materially. For these statements, we claim the
protection of the safe harbour for forward-looking
statements contained in the Private Securities
Litigation Reform Act.
CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share-related data)
As of
As of December 31,
June 30, 2007 2006
----------------- -------
US$ RMB RMB
Assets
Current assets:
Cash and cash equivalents 37,988 288,707 278,067
Term deposits 52,820 401,434 442,921
Accounts receivable, net of
allowance of RMB148 for both
2007 and 2006, respectively 6,103 46,382 41,692
Inventory -- satellite communication
related equipment and equipment
accessories 423 3,212 3,067
Prepaid expenses and other
current assets 916 6,971 5,199
Amounts due from related parties 197 1,496 2,583
------- ------- -------
Total current assets 98,594 748,202 773,529
Non-current deposits 146 1,106 --
Property and equipment, net 1,480 11,245 14,332
Acquired intangible assets, net -- -- 14,028
Long-term investments 1,786 13,571 5,114
Deferred tax assets 11 86 172
Non-current advances to a
related party 17,039 129,498 129,866
Goodwill 256 1,943 3,538
------- ------- -------
Total assets 119,165 905,651 940,579
======= ======= =======
Liabilities, minority interest,
and shareholders' equity
Current liabilities:
Accounts payable 2,601 19,765 16,403
Accrued expenses and other
current liabilities 4,904 37,273 96,204
Amounts due to related parties -- -- 4,469
Income taxes payable 3,402 25,850 42,769
Current portion of capital lease
obligation 14 107 146
------- ------- -------
Total current liabilities 10,921 82,995 159,991
------- ------- -------
Non-current liabilities:
Capital lease obligation, net
of current portion -- -- 37
Unrecognized tax benefits 3,310 25,155 --
------- ------- -------
Total non-current liabilities 3,310 25,155 37
------- ------- -------
Total liabilities 14,231 108,150 160,028
------- ------- -------
Minority interest 4,220 32,078 145,501
------- ------- -------
Contingencies (Note 7)
Shareholders' equity:
Ordinary shares (US$0.0001 par value;
100,000,000 shares authorized in 2007
and 2006; 27,050,128 and 23,140,702
shares issued and outstanding in 2007
and 2006, respectively) 3 21 18
Additional paid-in capital 100,226 761,725 653,000
Statutory reserve 1,141 8,670 9,721
Accumulated other comprehensive loss (746) (5,677) (2,762)
Accumulated deficit 90 685 (24,927)
------- ------- -------
Total shareholders' equity 100,714 765,423 635,050
------- ------- -------
Total liabilities, minority interest,
and shareholders' equity 119,165 905,651 940,579
======= ======= =======
CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except share-related data)
For the three months ended June 30,
------------------------------------
2007 2007 2006
---------- ---------- ----------
US$ RMB RMB
Revenues:
Service 4,538 34,487 28,215
Equipment 1,024 7,786 11,385
---------- ---------- ----------
5,562 42,273 39,600
---------- ---------- ----------
Cost of revenues:
Service (1,359) (10,333) (10,586)
Equipment (1,075) (8,168) (10,893)
---------- ---------- ----------
(2,434) (18,501) (21,479)
---------- ---------- ----------
Gross profit 3,128 23,772 18,121
---------- ---------- ----------
Operating (expenses) income:
Selling and marketing
expenses (274) (2,086) (385)
General and administrative
expenses (including
share-based compensation
of RMBnil and RMB873
for the six months
ended June 30 for 2007
and 2006, respectively,
share-based compensation
of RMBnil and RMB431
for the 3 months ended
June 30 for 2007 and
2006, respectively) (1,438) (10,930) (9,308)
Foreign exchange loss (303) (2,299) 162
Management service fee 938 7,128 3,721
---------- ---------- ----------
Total operating expenses,
net (1,077) (8,187) (5,810)
---------- ---------- ----------
Income from operations 2,051 15,585 12,311
Interest income 515 3,917 1,952
Interest expense -- (2) (4)
Other income -- -- (40)
---------- ---------- ----------
Income before provision
for income taxes,
earnings in equity
investments minority
interest and discontinued
operations 2,566 19,500 14,259
Provision for income taxes (597) (4,540) (2,440)
---------- ---------- ----------
Net income before
earnings in equity
investments, minority
interest, and
discontinued operations 1,969 14,960 11,819
Earnings in equity
investments (32) (240) (224)
Minority interest (85) (649) (1,932)
---------- ---------- ----------
Income from continuing
operations 1,852 14,071 9,663
---------- ---------- ----------
Discontinued operations:
Loss from discontinued
operations, net of tax
RMBnil for both 2007
and 2006 -- -- (72)
Minority interest in
discontinued operations,
net of tax RMBnil for
both 2007 and 2006 -- -- (2,006)
---------- ---------- ----------
Loss on discontinued
operations -- -- (2,078)
---------- ---------- ----------
Net income 1,852 14,071 7,585
========== ========== ==========
Net income per share
Basic 0.07 0.52 0.46
========== ========== ==========
Diluted 0.07 0.49 0.44
========== ========== ==========
Weighted average shares
used in computation:
Basic 26,954,945 26,954,945 16,657,872
========== ========== ==========
Diluted 28,463,653 28,463,653 17,416,220
========== ========== ==========
For the six months ended June 30,
------------------------------------
2007 2007 2006
---------- ---------- ----------
US$ RMB RMB
Revenues:
Service 8,950 68,022 58,812
Equipment 1,856 14,106 23,229
---------- ---------- ----------
10,806 82,128 82,041
---------- ---------- ----------
Cost of revenues:
Service (2,775) (21,089) (21,594)
Equipment (1,896) (14,411) (22,594)
---------- ---------- ----------
(4,671) (35,500) (44,188)
---------- ---------- ----------
Gross profit 6,135 46,628 37,853
---------- ---------- ----------
Operating (expenses) income:
Selling and marketing
expenses (364) (2,765) (1,059)
General and administrative
expenses (including
share-based compensation
of RMBnil and RMB873
for the six months
ended June 30 for 2007
and 2006, respectively,
share-based compensation
of RMBnil and RMB431
for the 3 months ended
June 30 for 2007 and
2006, respectively) (2,762) (20,998) (16,916)
Foreign exchange loss (414) (3,143) (251)
Management service fee 1,556 11,829 6,831
---------- ---------- ----------
Total operating expenses,
net (1,984) (15,077) (11,395)
---------- ---------- ----------
Income from operations 4,151 31,551 26,458
Interest income 898 6,822 2,600
Interest expense (4) (30) (10)
Other income -- -- --
---------- ---------- ----------
Income before provision
for income taxes,
earnings in equity
investments minority
interest and discontinued
operations 5,045 38,343 29,048
Provision for income taxes (1,057) (8,032) (5,261)
---------- ---------- ----------
Net income before
earnings in equity
investments, minority
interest, and
discontinued operations 3,988 30,311 23,787
Earnings in equity
investments (63) (479) (386)
Minority interest (319) (2,424) (4,261)
---------- ---------- ----------
Income from continuing
operations 3,606 27,408 19,140
---------- ---------- ----------
Discontinued operations:
Loss from discontinued
operations, net of tax
RMBnil for both 2007
and 2006 (18) (139) (1,440)
Minority interest in
discontinued operations,
net of tax RMBnil for
both 2007 and 2006 (30) (230) (915)
---------- ---------- ----------
Loss on discontinued
operations (48) (369) (2,355)
---------- ---------- ----------
Net income 3,558 27,039 16,785
========== ========== ==========
Net income per share
Basic 0.14 1.05 1.01
========== ========== ==========
Diluted 0.13 0.99 0.96
========== ========== ==========
Weighted average shares
used in computation:
Basic 25,840,030 25,840,030 16,657,872
========== ========== ==========
Diluted 27,313,061 27,313,061 17,381,019
========== ========== ==========
CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
For the six months ended
June 30,
----------------------------
2007 2007 2006
------- ------- -------
US$ RMB RMB
Cash flows from operating
activities:
Net income 3,558 27,039 16,785
Adjustments to reconcile net
income to net cash provided
by operating activities:
Minority interest in
continuing operations 319 2,424 4,261
Minority interest in
discontinued operations 30 230 915
Depreciation and
amortization 384 2,921 6,159
Amortization of deferred
share-based compensation -- -- 874
Loss on disposal of
property, plant and
equipment -- -- 7
Earnings in equity
investments 63 479 386
Changes in assets and
liabilities:
Accounts receivable (1,013) (7,698) (4,446)
Inventory (19) (145) (1,447)
Prepaid expenses and other
current assets (273) (2,076) (589)
Amounts due from related
parties 143 1,087 6,976
Accounts payable 621 4,717 6,282
Accrued expenses and other
current liabilities (6,173) (46,918) (2,915)
Amount due to related parties (38) (292) (87)
Income taxes payable 345 2,623 5,095
Deferred tax assets 11 86 86
Unrecognised tax benefits 24 750 --
------- ------- -------
Net cash (used in) provided
by operating activities (1,943) (14,773) 38,342
------- ------- -------
Cash flows from investing
activities:
Repayment from advance to
related parties 238 1,811 16,425
Advance to related parties (191) (1,443) --
Return of deposit for the
purchase of equipment -- -- 3,800
Deposits for business
acquisition -- -- (10,000)
Purchase of property and
equipment (171) (1,298) (224)
Term deposits 5,459 41,487 (143,081)
Proceeds from disposal of
discounted operations, net
of cash disposed of (1,199) (9,113) --
------- ------- -------
Net cash provided by (used in)
investing activities 4,136 31,444 (133,080)
------- ------- -------
Cash flows from financing
activities:
Repayment of capital lease
obligation (10) (76) (75)
Repayment of advances from
related parities (559) (4,251) --
------- ------- -------
Cash used in financing
activities (569) (4,327) (75)
------- ------- -------
Effect of foreign exchange
rate changes (224) (1,704) (3)
Net decrease in cash and
cash equivalents 1,400 10,640 (94,816)
Cash and cash equivalents at
beginning of the period 36,588 278,067 120,368
------- ------- -------
Cash and cash equivalents
at end of the period 37,988 288,707 25,552
======= ======= =======
CONTACT: ChinaCast Education Corporation
Michael J. Santos, Chief Marketing Officer &
Investor Relations Officer
(86-10) 6566-7788 ext 1007
mjsantos@chinacast.com.cn,
IR Home Page: http://ir.chinacast.com.cn
15/F Ruoy Chai Building
No. 8 Yong An-Dongli, Jianguomenwai Avenue
Beijing 100022, PRC
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