A8 Digital Music Announces 2008 Interim Results

Revenue and Gross Profit Up 201% and 180% Respectively

    HONG KONG, Sept. 18 /Xinhua-PRNewswire-FirstCall/ --


    Financial Highlights:


                                For the six months ended 30 June

                                                2008        2007
                                             RMB'000     RMB'000     Change
    Revenue                                  329,404     109,468      +201%
    Gross profit                             135,785      48,419      +180%
    Profit attributable to equity
     holders of the Company
     (Excluding one-off items*)               46,026      15,660      +193%
    Profit attributable to equity
     holders of the Company                   37,026      21,360       +73%
    Earnings per share (RMB) -- basic           0.11         N/A        N/A

    Note:* listing expenses incurred in 2008 1H amounted to approximately
           RMB9,000,000 and one-off disposal gain arising in 2007 1H
           amounted to approximately RMB 5,700,000



    -- Revenue surged by 3 times to RMB329 million
    -- Gross profit almost doubled to RMB136 million
    -- Profit attributable to equity holders of the Company amounted to
       RMB37 million, increased by 73%
    -- Excluding one-off items (2008 1H: listing expenses ; 2007 1H:
       disposal gain), profit attributable to equity holders of the Company
       would have increased by 193%
    -- Successfully listed on Main Board of SEHK on 12 June 2008
    -- Out of the total music and music related revenue of the Group, the
       share of the revenue generated from UGC (User Generated Content)
       songs increased to 35% and is expected to further increase
    -- Continues to develop A8 Box to be 3G compatible and also support the
       most popular music phone platform Nokia S60

Leading integrated digital music company in China A8 Digital Music Holdings Limited ("A8 Digital Music" or the "Group") today announced its unaudited interim results for the six months ended 30 June 2008.

During the period under review, the Group made revenue amounting to RMB329.4 million (2007 interim: RMB109.5 million), representing a surge of 201% as compared with the same period last year. Gross profit amounted to RMB135.8 million (2007 interim: RMB48.4 million), representing a jump of 180% against the same period last year. Overall gross profit margin decreased slightly to 41% from approximately 44% in the same period last year. Such decrease was the result of the Group increasing the share of revenue to business alliances in the bid of expanding market share. Profit attributable to equity holders of the Company was RMB37.0 million (2007 interim: RMB21.4 million), representing an increase of 73% as compared with the same period last year. Excluding one-off listing expenses of RMB9.0 million in the first half of 2008 and an one-off disposal gain of RMB5.7 million during the first half of 2007, profit attributable to equity holders of the Company would have increased by 193% to approximately RMB46.0 million. Basic earnings per share were RMB0.11 (2007 interim: N/A). The Board of Directors did not recommend payment of interim dividend for the six months ended 30 June 2008.

Mr. Liu Xiaosong, Chairman and Chief Executive Director of A8 Digital Music, said, "2008 is a major milestone in the development of the Group. Apart from the successful listing of A8 Digital Music on Main Board of the Stock Exchange of Hong Kong, the Group also reported a substantial growth of its music business for the first half of 2008. Being a public company, A8 Digital Music is more transparent both financially and operationally. It has thus boosted the A8 brand not only in the domestic market, but also in overseas and capital markets, and paved the way for our future business expansion. Our UGC platform collected markedly higher volume of original music and supported increasing download demand also, thus fortified the leadership of the Group in the original music industry."

Revenue and net profit of the Group rocketed mainly because the mobile music market in China has been growing strongly. According to China Mobile's 2008 interim results, the ring back tone subscription increased substantially by 99.8% to 600 million times while the PRC mobile subscribers increased by 24.7% to 414.6 million. These results demonstrated a favorable outlook for the mobile music industry, hence providing a promising business growth for A8 Digital Music.

In addition, the Group has also been able to implement integrated promotional strategies riding on new media such as the Internet and mobile handsets as well as traditional platforms such as television and radio to extend the reach of original music to every aspect of daily life.

In the first half of 2008, the revenue generated from UGC songs made up approximately 35% of the total music and music related revenue of the Group, and is expected to climb to 45% for the full year of 2008. The most popular UGC song "Ji Mo Cai Shuo Ai" had been downloaded around 11.7 million times, which was nearly 50% more than the most downloaded song in 2007. In addition, the "2007 Annual Original Music Competition", an annual mega event organized by the Group, ended with big success in June. The event was very well received and attracted a record high of 4,000 entries. The Group has a series of plans to promote the 20 songs on the list of finalists on its UGC platform ( http://www.a8.com ).

In the second half of 2008, the Group will enhance the user interface of its UGC platform so as to improve user experience. It will also develop more advanced functions for A8 Box which is 3G compatible, including the Humming Song Recognition technology, music video and music related news support and expand A8 Box to support the most popular music phone platform Nokia S60. It will also launch the A8 Box PC version with auto synchronization and Symbian touch screen version. The Group targets to have three to five million new handsets embedded with A8 Box in the market in the second half of 2008.

Mr. Liu concluded, "Looking ahead, digital music (especially mobile music) craze will continue and grow into a phenomenon. While enjoying our strong and solid organic growth, we are also looking for potential merger and acquisition targets whom we can create synergies with. We are thrived to create additional profit growth drivers and in turn maximize the returns for shareholders."



                       A8  Digital  Music  Holdings  Limited
                                                    Combined  Income  Statement

        (Unaudited)                                                    For  the  six  months  ended  30  June
                                                                                                      2008                          2007
                                                                                                RMB'000                    RMB'000
        Revenue                                                                          329,404                    109,468
        Business  tax                                                                  (5,659)                    (3,168)
        Net  revenue                                                                  323,745                    106,300
        Cost  of  services  provided                                    (187,960)                  (57,881)
        Gross  profit                                                                135,785                      48,419
        Other  income  and  gains,  net                                      1,697                      11,537
        Gain  arising  from  disposal  of  an
          equity  interest  in  a  jointly-controlled
          entity                                                                                    --                        5,694
        Selling  and  marketing  expanses                            (61,832)                  (28,901)
        Administrative  expenses                                          (16,320)                  (10,103)
        Other  expenses                                                            (11,773)                        (414)
        Finance  costs                                                                (1,883)                    (2,588)
        Share  of  profits  and  losses  of
          jointly-controlled  entities                                          --                            162
        Profit  before  tax                                                        45,674                      23,806
        Tax                                                                                    (7,713)                    (2,501)
        Profit  for  the  period                                                37,961                      21,305

        Attributable  to:
        --  Equity  holders  of  the  Company                          37,026                      21,360
        --  Minority  interests                                                      935                            (55)
                                                                                                  37,961                      21,305

        Earnings  per  share  attributable  to
          equity  holders  of  the  Company
        --  Basic      (RMB  per  share)                                          0.11                            N/A
        --  Diluted  (RMB  per  share)                                          0.11                            N/A


 


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