BEIJING, Aug. 14, 2007 (PRIME NEWSWIRE) -- 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
======= ======= =======