BEIJING, April 17, 2007 (PRIME NEWSWIRE) -- ChinaCast Education Corporation (OTCBB:CEUC) ("ChinaCast" or "the Company"), one of the leading e-learning services providers to educational institutions, government agencies and corporate enterprises in China, today announced financial results for the year ended December 31, 2006.
2006 HIGHLIGHTS
-- Strong growth in revenues, up 25% overall, with especially
strong contribution from equipment sales.
-- Net income, before non-recurring charges, up 5% year over year.
-- Successful acquisition of ChinaCast Communication Holdings by
ChinaCast Education Corporation (formerly Great Wall Acquisition
Corporation Corporation).
Financial Highlights (1)
---------------------------------------------------------------------
In millions RMB USD
---------------------------------------------------------------------
FY 2006 FY 2005 FY2006 FY2005
------------------ ---------- ---------- ---------- ----------
Total Revenue 189.7 152.3 $24.3 $19.0
------------------ ---------- ---------- ---------- ----------
University
Distance
Learning 71.6 51.2 $9.1 $6.4
------------------ ---------- ---------- ---------- ----------
K-12
Educational
Content 78.5 71.6 $10.1 $8.9
------------------ ---------- ---------- ---------- ----------
Vocational/Career
Training 39.6 29.5 $5.1 $3.7
------------------ ---------- ---------- ---------- ----------
Gross Profit 86.6 78.6 $11.1 $9.8
------------------ ---------- ---------- ---------- ----------
Profit from
Operations 46.0 50.9 $5.9 $6.4
------------------ ---------- ---------- ---------- ----------
Profit Before
Income Tax 41.1 56.1 $5.3 $7.0
------------------ ---------- ---------- ---------- ----------
Net Profit 19.7 34.9 $2.5 $4.4
------------------ ---------- ---------- ---------- ----------
Net Profit before
non-recurring 36.8 34.9 $4.7 $4.4
charges of
RMB17.1 Mn at end
2006
------------------ ---------- ---------- ---------- ----------
Per Share Data RMB USD
------------------ ---------- ---------- ---------- ----------
FY 2006 FY 2005 FY2006 FY2005
------------------ ---------- ---------- ---------- ----------
Earnings per share
(Basic) 1.17 2.09 $0.15 $0.26
------------------ ---------- ---------- ---------- ----------
Share count
(Basic) 16,872,309 16,657,872 16,872,309 16,657,872
------------------ ---------- ---------- ---------- ----------
Earnings per
share (Diluted) 1.00 2.02 $0.13 $0.25
------------------ ---------- ---------- ---------- ----------
Share count
(Diluted) 19,731,999 17,292,280 19,731,999 17,292,280
------------------ ---------- ---------- ---------- ----------
(1) Dollar values calculated at the exchange rate of US$1 = RMB 7.81
for 2006, and US$1 = RMB 8.0 for 2005
Chairman and Chief Executive, Ron Chan, commented: "We remain very positive on our prospects in the China education market, which is one of the largest and fastest growing in the world. We have a strong e-learning business that provides our core revenue characterized by long term contracts with our educational institution partners. Our growth is being fueled by the further expansion of course offerings by our university distance learning partners, the increased number of vocational/career training programs for our government and enterprise customers and the increase in distribution channels for our K-12 educational content.
"The acquisition of ChinaCast Communication Holdings (CCH) by the Company has resulted in an increase in our net cash position which we intend to utilize to accelerate the expansion of our education business. In 2007, we plan to enter into the private education market and to make additional acquisitions in the post-secondary and vocational/career training markets. We believe our strong strategic and financial position will enable the company the company to reap the benefits of the fast growth in the PRC education market in 2007 and beyond."
In December 2006, ChinaCast Education Corporation (formerly Great Wall Acquisition Corporation) successfully acquired CCH, a company listed on the Singapore Stock Exchange ("SGX") (Reuters: CCCH.SI). As of April 13, 2007, ChinaCast Education Corporation had acquired approximately 98% of CCH and intends to de-list CCH from the SGX and apply for listing on the NASDAQ Stock Market.
Revenues for ChinaCast Education Corporation reached RMB 189.7 million in 2006, up 25% over the previous year reflecting the solid growth in services, which were up 15%, and strong performance in equipment sales, which were up 63%. All three major business lines, namely, university distance learning, K-12 educational content and vocational/career training, reported revenue growth in FY 2006.
Net revenue from post secondary education distance learning services increased from RMB 51.2 million in 2005 to RMB 71.6 million in 2006, a 40% increase. The total number of post-secondary students enrolled in courses using the Company's distance learning platforms increased to 128,000 from 113,000 at end 2005.
Revenue from the K-12 and content delivery business increased by 10% to RMB 78.5 million and the number of subscribing schools for K-12 distance learning services has stabilized at 6,500.
Net revenue from vocational and career training services and government/enterprise training and networking services increased 34% from RMB 29.5 million to RMB 39.6 million. This increase was mainly due to equipment sales for projects.
Cost of sales of the Group increased by 40% from RMB 73.8 million in 2005 to RMB 103.0 million in 2006. The increase was due to higher equipment sales which have lower margins and the amortization of intangibles arising from the acquisition of Tongfang Education in 2005. Amortization of intangibles amounted to RMB 5.4 million in 2006 compared to RMB 1.4 million in 2005. The intangible asset is amortized over 46 months from the time of the acquisition of Tongfang Education.
In 2006, the Group received a service fee of RMB 11.6 million, as compared to RMB 14.3 million in 2005. The service 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.
Selling expenses increased slightly by 4% to RMB 3.7 million in 2006 from RMB 3.5 million in 2005 primarily due to the additional expenses from consolidating the results of Tongfang Education for the full year as well as increased marketing activities in 2006.
General and administrative expenses increased by 29% to RMB 46.5 million in 2006 from RMB 36.1 million in 2005 due to the increase in professional fees and other expenses related to the acquisition exercise. These expenses included the additional work related to filing of documents in the U.S. as well as the additional compliance costs in Singapore where CCH is listed.
The investment impairment loss of RMB 13.3 million arose from the re-evaluation of the Group's 20% stake in Teacher.com.cn, a subscription based internet portal providing distance learning courses to China's teachers and school principals. It has over 300,000 paying subscribers and the business turned profitable in 2006.
The Group has foreign exchange losses of RMB 2.1 million in 2006 compared to RMB 2.4 million in 2005 because of the continuous appreciation of the RMB against the U.S. dollar which the Group has significant holdings and is unable to convert to RMB due to the exchange control regulations in China.
The increase in interest income from RMB 4.6 million in 2005 to RMB 8.3 million in 2006 was mainly due to the increase in the Group's cash and term deposits as well as the higher interest rates enjoyed during the year.
Overall, profit before income tax decreased from RMB 56.1 million in 2005 to RMB 41.1 million in 2006. Profit before income tax was affected by the higher professional and expenses related to the acquisition of CCH as well as the impairment loss in relation to Teacher.com.cn.
The Group's share of net investment losses from various joint ventures amounted to RMB 0.9 million in 2006 compared to RMB 0.4 million in 2005.
Income taxes increased by 17% from RMB 10.5 million in 2005 to RMB 12.3 million in 2006 despite lower profits. The higher income tax was due to additional tax provisions of approximately RMB 1.8 million for a PRC national tax that has been in effect for a few years but had not been levied by the district tax offices. With the increasing attention of the PRC tax offices in this area and in view of the likely impact of this in 2007 under FIN48, the Group made an additional provision for the potential tax liabilities for the period 2004-2006 during the year.
Minority interest of RMB 8.1 million arose mainly as a result from the 19.73% of CCH shareholders who did not exchange for CEC shares at the end of the offer period on January 18, 2007.
Net income of the Group amounted to RMB 19.7 million in 2006 compared to RMB 34.9 million in 2005. The decrease was a result of taking a one-time investment impairment charge of RMB 13.3 million and higher professional fees and compliance costs incurred as a direct result of ChinaCast's takeover of CCH, which caused administration expenses to jump by over 29% to RMB 46.5 million.
CCH generated over RMB 99.9 million of cash from operations in 2006 and its cash, bank balances and term deposits amounted to RMB 721 million, an increase of over 83% since the end of 2005 while remaining virtually debt free.
About ChinaCast Communication Holdings Limited ("CCH"), ChinaCast Co., Ltd. ("CCL Beijing") and ChinaCast Li Xiang Col, Ltd. ("CCLX")
Established in 1999 and headquartered in Beijing, CCH (SGX, Reuters: CCCH.SI) provides e-learning services and content to educational institutions, government agencies and Fortune 500 enterprises. These services include broadband network services, interactive distance learning applications, multimedia education content, educational portals, as well as IT certification and management training courses. CCH has entered into technical service agreements with each of CCL Beijing and CCLX (collectively, the "Satellite Operating Entities" or "SOE"), pursuant to which CCH provides the SOE with certain technical services and ancillary equipment in connection with their satellite communication businesses. As compensation, CCH receives a service fee that equals the difference between the SOE's total monthly revenues net of respective operating expenses. CCH went public on the SGX on May 14, 2004.
About ChinaCast Education Corporation ("ChinaCast") (OTCBB:CEUC)
In December 2006, ChinaCast (formerly known as Great Wall Acquisition Corporation, OTCBB: GWAQ) made a successful general offer to acquire CCH. As of April 13, 2007, ChinaCast holds approximately 98% of CCH and intends to de-list CCH from the SGX and to eventually seek a listing on the NASDAQ.
Cautionary Statement for Purposes of the "Safe Harbor" 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. 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 harbor for forward-looking statements contained in the Private Securities Litigation Reform Act.
For more information, please contact:
Michael J. Santos, Chief Marketing Officer & Investor
Relations Officer
ChinaCast Education Corporation
15/F Ruoy Chai Building
No. 8 Yong An-Dongli, Jianguomenwai Avenue, Chaoyang District
Beijing 100022, PRC
Tel: (86-10) 6566-7788
Email: mjsantos@chinacast.com.cn
Web: www.chinacastcomm.com
U.S. Investor Relations Contact:
Miranda Weeks
Advanced Investor Relations, L.L.C.
Tel: (703) 485-6067
Email: Miranda@advancedinvestorrelations.com
Conference Call Information
Date: Wednesday April 18, 2007
Time: 10 am EST*
Conference Dial In Numbers:
U.S./Canada Toll Free: 1 800 310 6649
International: +1 719 457 2693
Live Webcast:
http://investor.shareholder.com/media/chinacast/
Replay Details
The replay will be available from 1:00 pm EST* Wednesday
April 18, 2007 until midnight EST* April 25, 2007
Conference Replay Dial In Numbers:
U.S./Canada Toll Free: 1 888 203 1112
International: +1 719 457 0820
Pass Code: 6824749
Web Replay:
http://investor.shareholder.com/media/chinacast/
* EST=Eastern Standard Time
A copy of the company's latest investor presentation will also be available at the above web link no later than 10 am EST on 18 April 2007.
CHINACAST EDUCATION CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share-related data)
As of December 31,
-----------------------------
2005 2006 2006
---- ---- ----
RMB RMB US$
Assets
Current assets:
Cash and cash equivalents 120,368 278,067 35,650
Term deposits 273,798 442,921 56,785
Accounts receivable, net of
allowance of RMB37 and RMB148
for 2005 and 2006, respectively 39,277 41,692 5,345
Inventory 3,276 3,067 393
Prepaid expenses and other current
assets 16,489 5,199 667
Amounts due from related parties 8,605 2,583 331
------- ------- -------
Total current assets 461,813 773,529 99,171
Property and equipment, net 20,264 14,332 1,837
Acquired intangible assets, net 19,378 14,028 1,798
Refundable deposit for the purchase
of equipment 3,800 -- --
Long-term investments 19,298 5,114 656
Deferred tax assets 345 172 22
Non-current advances to a related
party 148,477 129,866 16,649
Goodwill 3,538 3,538 454
------- ------- -------
Total assets 676,913 940,579 120,587
======= ======= =======
Liabilities, minority interest, and
shareholders' equity
Current liabilities:
Accounts payable 10,627 16,403 2,103
Accrued expenses and other current
liabilities 44,847 96,204 12,334
Amounts due to related parties 87 4,469 573
Income taxes payable 28,280 43,497 5,576
Current portion of capital lease
obligation 152 146 19
------- ------- -------
Total current liabilities 83,993 159,991 20,512
------- ------- -------
Capital lease obligation, net of
current portion 190 37 5
------- ------- -------
Total liabilities 84,183 160,028 20,517
------- ------- -------
Minority interest 135,580 145,501 18,654
------- ------- -------
Commitments
Shareholders' equity:
Ordinary shares (US$0.0001 par
value; 20,000,000 and 100,000,000
shares authorized in 2005 and 2006,
respectively; 16,657,872 and
23,140,702 shares issued and
outstanding in 2005 and 2006,
respectively) 13 18 2
Additional paid-in capital 493,306 653,000 83,718
Statutory reserve 6,533 9,721 1,246
Accumulated other comprehensive
loss (1,259) (2,762) (354)
Accumulated deficit (41,443) (24,927) (3,196)
------- ------- -------
Total shareholders' equity 457,150 635,050 81,416
------- ------- -------
Total liabilities, minority interest,
and shareholders' equity 676,913 940,579 120,587
------- ------- -------
CHINACAST EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share-related data)
For the years ended December 31,
----------------------------------------------
2004 2005 2006 2006
---- ---- ---- ----
RMB RMB RMB US$
Revenues:
Service 79,408 122,550 141,126 18,093
Equipment 1,163 29,797 48,563 6,226
---------- ---------- ---------- ----------
80,571 152,347 189,689 24,319
---------- ---------- ---------- ----------
Cost of revenues:
Service (38,979) (44,703) (54,914) (7,040)
Equipment (734) (29,054) (48,139) (6,172)
---------- ---------- ---------- ----------
(39,713) (73,757) (103,053) (13,212)
---------- ---------- ---------- ----------
Gross profit 40,858 78,590 86,636 11,107
---------- ---------- ---------- ----------
Operating (expenses)
income:
Selling and marketing
expenses (including
share-based
compensation of
RMB1,623, RMB148 and
RMBnil for 2004, 2005
and 2006,
respectively) (3,613) (3,543) (3,679) (472)
General and administrative
expenses (including
share-based
compensation of
RMB21,699, RMB1,770
and RMB1,181 for
2004, 2005 and
2006, respectively) (49,893) (36,065) (46,459) (5,956)
Foreign exchange loss (78) (2,361) (2,118) (272)
Management service fee 34,451 14,286 11,623 1,490
---------- ---------- ---------- ----------
Total operating
expenses, net (19,133) (27,683) (40,633) (5,210)
---------- ---------- ---------- ----------
Income from operations 21,725 50,907 46,003 5,897
Impairment loss on
cost method
investment -- -- (13,270) (1,701)
Interest income 2,648 4,604 8,345 1,070
Interest expense (391) (19) (18) (2)
Other income 144 581 -- --
---------- ---------- ---------- ----------
Income before
provision for income
taxes, earnings in
equity investments,
and minority interest 24,126 56,073 41,060 5,264
Provision for income
taxes (8,689) (10,540) (12,299) (1,577)
Net income before
earnings in equity
investments and
minority interest 15,437 45,533 28,761 3,687
Earnings in equity
investments -- (402) (914) (117)
Minority interest (3,045) (10,243) (8,143) (1,044)
---------- ---------- ---------- ----------
Net income 12,392 34,888 19,704 2,526
Deemed dividend on
redeemable
convertible
preference shares (8,490) -- -- --
---------- ---------- ---------- ----------
Net income
attributable to
holders of ordinary
shares 3,902 34,888 19,704 2,526
========== ========== ========== ==========
Net income per share
Basic 0.29 2.09 1.17 0.15
========== ========== ========== ==========
Diluted 0.28 2.02 1.00 0.13
========== ========== ========== ==========
Weighted average
shares used in
computation:
Basic 13,435,378 16,657,872 16,872,309 16,872,309
========== ========== ========== ==========
Diluted 13,903,398 17,292,280 19,731,999 19,731,999
========== ========== ========== ==========
CHINACAST EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the years ended December 31,
------------------------------------------
2004 2005 2006 2006
---- ---- ---- ----
RMB RMB RMB US$
Cash flows from
operating activities:
Net income 12,392 34,888 19,704 2,526
Adjustments to
reconcile net
income to net cash
provided by
operating activities:
Minority interest 3,045 10,243 8,143 1,044
Depreciation and
amortization 5,740 8,745 12,336 1,582
Amortization of
deferred
share-based
compensation 23,322 1,918 1,181 151
Provision for bad
debts -- 37 111 14
Loss on disposal
of property and
equipment 229 3 7 1
Earnings in equity
investments -- 402 914 117
Impairment loss on
cost method
investment -- -- 13,270 1,701
Changes in assets
and liabilities:
Accounts receivable 10,055 (22,713) (3,212) (412)
Inventory (338) (508) 352 45
Prepaid expenses and
other current
assets (1,037) (5,345) 9,524 1,221
Amounts due from
related parties 4,937 (1,694) 821 105
Accounts payable 1,493 7,418 5,776 740
Accrued expenses and
other current
liabilities 6,025 16,941 13,961 1,792
Amount due to
related parties -- 87 243 31
Income taxes payable 8,296 7,335 11,639 1,492
Deferred tax assets 173 172 173 22
-------- -------- -------- --------
Net cash provided by
operating
activities 74,332 57,929 94,943 12,172
-------- -------- -------- --------
Cash flows from
investing
activities:
Purchase of equity
investment (400) (4,300) -- --
Purchase of cost
investment -- (15,000) -- --
Repayment from
amount due from a
related party -- -- 5,000 641
Advances to related
parties (11,336) (15,182) -- --
Repayment from
advance to related
parties -- -- 18,611 2,386
Refundable deposit
for the purchase
of equipment (20,556) (3,800) -- --
Return of deposit
for the purchase
of equipment -- 9,004 3,800 487
Deposits for
business
acquisition -- -- (10,000) (1,282)
Return of deposit
for business
acquisition -- -- 10,000 1,282
Purchase of property
and equipment (306) (297) (1,301) (167)
Purchase of
subsidiaries, net
of cash acquired -- (12,195) -- --
Term deposits (259,588) 50,103 (169,123) (21,682)
-------- -------- -------- --------
Net cash (used in)
provided by
investing
activities (292,186) 8,333 (143,013) (18,335)
-------- -------- -------- --------
Cash flows from
financing
activities:
Cash paid for
acquiring ordinary
shares from
minority
shareholders (455) -- -- --
Net cash proceeds
from the Share
Exchange
Transaction (Note 1) -- -- 196,247 25,160
Proceeds from
issuance of
ordinary shares,
net of issuance
cost 239,661 -- -- --
Repayment of capital
lease obligation (154) (151) (160) (21)
Repayment of bank
loan (60) (140) -- --
Repayment of
advances from
related parities (13,402) -- -- --
Exercise of share
options -- -- 9,699 1,244
-------- -------- -------- --------
Net cash provided by
(used in) financing
activities 225,590 (291) 205,786 26,383
-------- -------- -------- --------
Effect of foreign
exchange rate
changes 7 (28) (17) (2)
Net increase in
cash and cash
equivalents 7,743 65,943 157,699 20,218
Cash and cash
equivalents at
beginning of the
year 46,682 54,425 120,368 15,432
-------- -------- -------- --------
Cash and cash
equivalents at end
of the year 54,425 120,368 278,067 35,650
======== ======== ======== ========
Non-cash investing
and financing
activities:
Conversion of
Series A
redeemable
convertible
preference shares
and Series B
redeemable
convertible
preference shares
into ordinary
shares 310,106 -- -- --
Acquisition of
property and
equipment in
exchange for
payable -- 392 144 18
Supplemental cash
flow information:
Interest paid 391 19 18 2
======== ======== ======== ========
Income taxes paid 220 3,270 1,314 168
======== ======== ======== ========
Acquisition of
subsidiaries:
Cash consideration 21,000 -- --
======== ======== ========
Assets acquired
(including cash
and cash
equivalent of
RMB 2,505,
intangible assets
of RMB 20,736 and
goodwill of
RMB 1,595) 27,597 -- --
Liabilities assumed (4,113) -- --
Minority interest (2,484) -- --
-------- -------- --------
21,000 -- --
======== ======== ========