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Pacific Internet Reports 16th Consecutive Quarter of Net Income16 February 2006
Pacific Internet Limited (Nasdaq: PCNTF), the largest telco-independent Internet communications service provider by geographic reach in the Asia-Pacific, today reported its 16th consecutive quarter of net income for the period ended December 31, 2005.
Fourth quarter net income was US$2.6 million (or 19 cents per diluted share) while revenues were US$27.3 million. Net income for the full year was US$6.5 million (or 49 cents per diluted share) on revenues of US$102.5 million. The Group also continued its growth in the corporate business with a 32.1% year-on-year revenue growth in the fourth quarter and 15.5% for the full year.
Table I: Summary of Quarterly Financial Results
Group Financials Quarter Ended
(in US$ 000s) 4Q 2005 4Q 2004 3Q 2005
Revenues 27,349 25,605 24,943
Operating Costs & Expenses 25,678 23,265 23,605
Operating Income 1,671 2,340 1,338
Net Income 2,579 2,091 1,265
Table II: Summary of Year-to-Date Financial Results
Group Financials Full Year Ended
(in US$ 000s) December 31, 2005
2005 2004
Revenues 102,488 102,092
Operating Costs & Expenses 96,336 94,808
Operating Income 6,152 7,284
Net Income 6,507 6,091
Table III: Customer Base (In Nos.)
Country Operation Corporate Base
Value
Leased Added
Broadband Lines Dial Up Services
Singapore 8,239 556 6,595 740
Australia 12,526 195 289 20,303
Hong Kong 12,800 200 48,175 2,625
Philippines 182 183 291 30
Malaysia 3 48 4 24
Thailand 444 491 177 128
India 0 116 80 106
Group's Customer Base !V Total (As at December 2005)
Grand Total 34,194 1,789 55,611 23,956
Group's Customer Base - Total (As at December 2004)
Grand Total 26,010 1,600 59,620 13,430
Y-O-Y% Growth 31.5% 11.8% -6.7% 78.4%
Country Operation Corporate Consumer
Total
Business (Broadband & Grand
Total Dial Up) Total
Singapore 16,130 115,354 131,484
Australia 33,313 39,380 72,693
Hong Kong 63,800 21,201 85,001
Philippines 686 76,199 76,885
Malaysia 79 0 79
Thailand 1,240 8,272 9,512
India 302 760 1,062
Group's Customer Base - Total (As at December 2005)
Grand Total 115,550 261,166 376,716
Group's Customer Base - Total (As at December 2004)
Grand Total 100,660 370,160 470,820
Y-O-Y% Growth 14.8% -29.4% -20.0%
Note: Total customer base reduction of 20% was due mainly to consumer
subscriber decline. Corporate subscriber base continues to grow in
line with the Group's focus in the corporate business segment.
Revenues
Revenues for the fourth quarter increased 6.8% to US$27.3 million, compared to US$25.6 million a year ago. Quarter-on-quarter, revenues grew by 9.6%. Full year revenues improved 0.4% to US$102.5 million.
This improvement was achieved on the back of the Group's continued focus on the higher-margin corporate business, stronger take-up of its value-added services (VAS), and continuing growth in the broadband segment.
The Group's corporate business revenue grew to US$69.5 million in 2005, up 15.5% from 2004. This contributed 67.8% of total annual revenues, compared to 59.0% in 2004.
In terms of products, broadband access remained the key revenue driver for the Group in 2005, accounting for 49.7% of its total revenues.
Fourth quarter broadband revenues grew by 5.0% year-on-year and 2.3% over the last quarter, to reach US$13.1 million. Full year broadband access revenue improved 5.7% to US$50.9 million. Corporate broadband access revenue grew 16.7% year-on-year, contributing 69.5% to total broadband access revenue.
VAS revenues more than doubled to US$5.9 million in the fourth quarter compared to the same quarter last year. Compared to the previous quarter, VAS revenue grew by 81.5%. The highest revenue growth for the Group in 2005 was VAS, which recorded a 38.1% growth to reach US$15.3 million for the full year. VAS revenue from the corporate business segment grew 49.8% year-on-year to constitute 90% of total VAS revenue.
Fourth quarter leased line revenues were US$3.6 million, a 14.6% growth year-on-year, and an improvement of 8.9% when compared to the previous quarter. Leased line revenue increased by 4.5% to US$13.2 million for the full year.
Operating Costs and Expenses
Gross margin for 2005 dropped from 55.1% to 52.9% primarily due to lower average revenue per user (ARPU) arising from competitive pricing pressure, and the lower-margin voice revenue from T3 Communications in Australia. The Group will continue to enhance operational efficiencies as part of its cost management measures.
Cost of sales for the year was US$48.3 million, a 5.3% increase over the previous year. However, total operating expenses (excluding cost of sales) were contained at US$48.1 million, reflecting a decrease of 1.8% year-on-year. Sales and marketing expenses, which comprised largely of advertising and promotion expenses, were lower by 11.2% at US$2.9 million. Other general and administrative expenses were reduced by 1.3% to US$9.2 million for the year. Allowance for doubtful accounts receivable for the year was lowered by 1.2% to US$0.9 million.
Strong cash position
The Group's cash position remained strong with cash and bank balances of US$35.8 million. Cash generated by operating activities for 2005 was US$10.5 million, of which US$9.6 million was used in investing activities, primarily for the acquisition of fixed assets and intangible assets. Another US$53,000 was generated from financing activities. Net cash surplus as at December 31,2005, was US$1.0 million.
Consistent performance
"Despite pricing pressures and intense industry competition, the Group has consistently delivered revenue and net income growth in the past 16 quarters. We have maintained a strong cash position, which gives us the financial flexibility to capitalize on opportunities in today's fast-changing world of technology convergence. In 2006, we will identify and make strategic investments in acquisitions, partnerships, new disruptive technologies and people to increase market share and extend our footprint in the region," said Mr. Bien Kiat Tan, Chairman, Pacific Internet.
Fourth Quarter Investment & Strategic Alliances:
-- Entered the China market through a joint venture with China-based
Internet services provider, Zhong Ren Telecom. The joint venture will
broaden the Group's geographical coverage and tap the market potential
in China by offering connectivity solutions to China-based and
multinational enterprises operating in the region;
-- Acquired T3 Communications, a voice-focused communications company in
Australia. This will provide the Group with added capabilities to
strengthen its voice business and add value to its SMB business in
Australia.
-- Established partnership with Skype, a pioneer in global Internet
communications, in Singapore to offer co-branded low-cost voice
services. This is part of the Group's plans to offer more value-added
services centered on applications and content. There are options for
the Group to explore similar partnership in other countries.
-- Launched one of Hong Kong's first integrated business connectivity and
security solutions through a strategic partnership with Cisco Systems.
"Through these and other growth initiatives in 2005, we're laying the groundwork to seize opportunities offered by IP convergence and other technological developments this year. There are some opportunities in expanding our geographic coverage and in exciting spaces created by disruptive technologies. We will be moving into these areas quickly. I am completing the review of the operations and plan to identify spaces together with the management, to steer the company to a stronger growth path," said Mr. Teck Moh Phey, President and Chief Executive Officer, Pacific Internet.
Conference Call and Web Cast
The Management will host a conference call to discuss the results:
US Eastern Time: February 14, 2006 @ 8.30 a.m.
Singapore Time: February 14, 2006 @ 9.30 p.m.
Dial-in numbers: US: 800-289-0494 (toll-free)
International: +1-913-981-5520
Replay telephone nos. are: US & Canada 888-203-1112 (toll-free)
International 719-457-0820
(The pass code for the "live" call and the replay is 1148790.)
The call will also be webcast "live" at: http://www.pacnet.com/investor/
Detailed financial statements together with management's discussion and analysis are available on the Investor Relations website at http://www.pacnet.com/investor/ .
The financial statement amounts in this report are in conformity with US GAAP. For convenience, the company's functional currency, the Singapore dollar, has been translated into US dollar amounts at the exchange rate of S$1.6628 to US$1.00. (Conversion rate as at December 31, 2005 from the Federal Reserve Bank of New York)
About Pacific Internet Limited
Pacific Internet Limited or PacNet (Nasdaq: PCNTF) is the largest telco-independent Internet Communications Service Provider by geographic reach in the Asia Pacific region. The Company has direct presence in Singapore, Hong Kong, China, the Philippines, Australia, India, Thailand and Malaysia. PacNet delivers a comprehensive suite of data, voice and video services to both corporate business and consumer customers. For more information, visit http://www.pacnet.com .
Caution Concerning Forward-Looking Statements
Included in this report are various forward-looking statements which are made pursuant to the safe harbor provisions of the "Private Securities Litigation Reform Act of 1995," some of these may be identified by the use of words such as "seek," "expect," "anticipate," "estimate," "believe," "intend," "project," "plan," "strategy," "forecast" and similar expressions or future or conditional verbs such as "will," "would," "should," "could," "may" and "might." The Group has made forward-looking statements with respect to the following, among others:
-- Projected capital expenditures, expansion plans and liquidity;
-- Development and growth of additional revenue sources;
-- Development and maintenance of profitable pricing programs; and
-- Outcome of potential litigation.
These statements are forward-looking which reflect the Group's current expectations and assumptions in light of currently available information. They are subject to a number of risks and uncertainties, including but not limited to, (1) continued decline in economic conditions; (2) increasing maturity of the market for Internet access and fluctuations in the use of the Internet that may adversely impact the Group's subscriber growth rates and revenues; (3) changes in technology and the Internet marketplace; (4) the Group's continued ability to develop and win acceptance of its products and services, which are offered in highly competitive markets, more particularly, changes in the assumptions of the effectiveness of business strategies or initiatives carried out or to be carried out by the Group; (5) the success of its business partnerships and alliances; (6) exchange rates, particularly between the Singapore dollar, the US dollar and other currencies in which the Group makes significant sales or in which its assets and liabilities are denominated; (7) deterioration of the financial position of debtors; (8) changes in estimates of network service costs accruals due to delayed or late billing by telecommunication companies; (9) changes in economic environment, churn rate of subscribers or assessment of future operations resulting in an impairment in goodwill and other intangible assets; (10) changes in assumptions of the effectiveness of strategies related to legal proceedings generally and more particularly changes in assumptions of costs of maintaining such proceedings; (11) changes in assumptions of the effectiveness of tax planning strategies generally and more particularly (i) changes in operations that may affect the assumptions relating to deferred tax assets; and (ii) changes in factors affecting the interpretation of certain withholding tax laws which may significantly impact the Group's cash resources; (12) obtaining the requisite funding support and the challenge of keeping expense growth at manageable levels while increasing revenues; (13) changes in the economic, regulatory and political environment in the countries where the Group operates, or may in the future operate, including but not limited to (i) changes in tax, telecommunications, licensing and other relevant laws and regulations; (ii) changes in political stability; and (14) the outcome of contingencies. In addition to the foregoing factors, a description of certain other risks and uncertainties which could cause actual results to differ materially can be found in the section captioned "Risk Factors" in our latest Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission. In light of the many risks and uncertainties surrounding the Group and the Internet marketplace, actual results could differ materially from those discussed in this report. Given these concerns, undue reliance should not be placed on these statements. The Group assumes no obligation to update any such statements.
Pacific Internet Limited
Unaudited Consolidated Statement of Operations
(In US Dollars)
Quarter ended
Sep 30, 2005 Dec 31, 2004 Dec 31, 2005
US$'000 US$'000 US$'000
Revenues
Dial up access 4,294 5,128 3,777
Broadband access 12,759 12,438 13,054
Leased line access 3,267 3,103 3,557
Value added services 3,252 2,804 5,902
Commission revenues 1,022 1,043 741
Other revenues 349 1,089 318
Total net revenues 24,943 25,605 27,349
Operating costs and expenses
Cost of sales 11,636 11,742 13,641
Staff costs 7,531 7,152 8,183
Sales & marketing 488 665 325
Other general & administrative 2,536 2,295 2,029
Depreciation & amortization 1,173 1,273 1,304
Allowance for doubtful accounts
receivable 241 138 196
Total operating expenses 23,605 23,265 25,678
Operating income 1,338 2,340 1,671
Other income (expenses)
Net interest income 149 85 226
Net gain (loss) on foreign
currency 20 (87) (173)
Loss on disposal of fixed assets (5) (5) 7
Equity in gain of unconsolidated
affiliates 60 101 239
Others 92 100 739
Total other income 316 194 1,038
Income before income taxes and
minority interest 1,654 2,534 2,709
Provision for income taxes (327) (420) (2)
1,327 2,114 2,707
Minority interest in gain of
consolidated subsidiaries (62) (23) (126)
Income before extraordinary item 1,265 2,091 2,581
Cumulative effect adj - net of tax -- -- (2)
Extraordinary item -- -- --
Net income 1,265 2,091 2,579
Net income from continuing operations
per share - basic $0.0948 $0.1574 $0.1922
Net income per share - basic $0.0948 $0.1574 $0.1922
Net income from continuing operations
per share - diluted(1) $0.0944 $0.1574 $0.1919
Net income per share - diluted (1) $0.0944 $0.1574 $0.1919
Weighted average number of shares
outstanding - basic 13,358,486 13,285,453 13,406,065
Weighted average number of shares
outstanding - diluted (1) 13,406,045 13,285,453 13,425,525
Pacific Internet Limited
Unaudited Consolidated Statement of Operations
(In US Dollars)
Year Ended Dec, 31
2004 2005
US$'000 US$'000
Revenues
Dial up access 23,279 17,589
Broadband access 48,174 50,906
Leased line access 12,652 13,217
Value added services 11,044 15,252
Commission revenues 3,931 3,682
Other revenues 3,012 1,842
Total net revenues 102,092 102,488
Operating costs and expenses
Cost of sales 45,852 48,270
Staff costs 30,079 30,172
Sales & marketing 3,288 2,920
Other general & administrative 9,331 9,208
Depreciation & amortization 5,352 4,871
Allowance for doubtful accounts
receivable 906 895
Total operating expenses 94,808 96,336
Operating income 7,284 6,152
Other income (expenses)
Net interest income 172 609
Net gain (loss) on foreign
currency (256) (40)
Loss on disposal of fixed
assets (16) (32)
Equity in gain of
unconsolidated affiliates 184 402
Others 224 876
Total other income 308 1,815
Income before income taxes and
minority interest 7,592 7,967
Provision for income taxes (1,890) (1,253)
5,702 6,714
Minority interest in gain of
consolidated subsidiaries (58) (206)
Income before extraordinary item 5,644 6,508
Cumulative effect adj - net of tax -- (2)
Extraordinary item 447 --
Net income 6,091 6,506
Net income from continuing operations
per share - basic $0.4264 $0.4878
Net income per share - basic $0.4602 $0.4878
Net income from continuing operations
per share - diluted(1) $0.4204 $0.4861
Net income per share - diluted (1) $0.4536 $0.4861
Weighted average number of shares
outstanding - basic 13,238,793 13,339,896
Weighted average number of shares
outstanding - diluted (1) 13,429,615 13,384,706
(1)Includes all outstanding options under the Company's Share Option
Plans to the extent the outstanding options are dilutive.
(2)For convenience, Singapore dollar amounts have been translated
into U.S dollar amounts at the exchange rate as of Dec 31, 2005, which
was S$1.6628 to US$1.00.
Pacific Internet Limited
Unaudited Consolidated Balance Sheets as of December 31, 2005
With Comparative Amounts from December 31, 2004
31-Dec-04 31-Dec-05 31-Dec-05
S$'000 S$'000 US$'000
Cash and bank balances 57,964 59,572 35,826
Accounts receivable - net 25,174 28,119 16,910
Other receivables 8,532 9,067 5,453
Inventories 341 377 227
Total current assets 92,011 97,135 58,416
Investments 34 392 236
Fixed assets and website development
costs- net 17,860 18,040 10,849
Goodwill and intangible assets - net 28,767 36,402 21,892
Other non-current assets 5,752 9,772 5,877
Total non-current assets 52,413 64,606 38,854
TOTAL ASSETS 144,424 161,741 97,270
Bank borrowings 2,526 2,460 1,479
Accounts payable 9,858 11,226 6,751
Other payables 37,393 42,184 25,369
Current portion of capital lease
obligations 470 317 191
Total current liabilities 50,247 56,187 33,790
Capital lease obligations, less
current portion 524 297 179
Other non-current and deferred
liabilities 1,554 1,765 1,061
Total non-current liabilities 2,078 2,062 1,240
Minority interest 1,480 1,820 1,095
Shareholders' equity
Ordinary shares, S$2 par value 26,588 26,824 16,132
Additional paid-in capital and
deferred compensation 97,566 97,939 58,900
Accumulated deficit and other
comprehensive income (33,535) (23,091) (13,887)
Total shareholders' equity 90,619 101,672 61,145
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 144,424 161,741 97,270
Pacific Internet Limited
Unaudited Consolidated Statement of Cash Flows for Year Ended December 31,
2005
With Comparative Amounts from December 31, 2004
Year ended December 31
2004 2005 2005
S$'000 S$'000 US$'000
OPERATING ACTIVITIES
Net income for the period 10,130 10,820 6,506
Items not involving cash and other
adjustments to reconcile net
income to cash from operating
activities:
Depreciation and amortization 8,899 8,100 4,871
Loss on disposal of fixed assets 26 53 32
Fixed assets written off 21 4 2
Allowance for doubtful accounts
receivable 1,506 1,488 895
Minority interest 97 342 206
Deferred income tax (benefit)
provision (123) (292) (176)
Amortization of deferred
compensation 842 (46) (28)
Equity in Gain of unconsolidated
affiliates (306) (669) (402)
Extraordinary item (743) -- --
Changes in non-cash working capital
items:
Accounts receivable 189 (4,434) (2,666)
Prepaid expenses and other assets 820 (4,123) (2,479)
Inventories (1) (36) (21)
Accounts payable (3,642) 1,368 823
Other payables / receivables 5,695 4,906 2,950
Cash provided by operating activities 23,410 17,481 10,513
INVESTING ACTIVITIES
Acquisition of fixed assets (8,031) (7,674) (4,615)
Proceeds from sale of fixed
assets 282 12 7
Purchase of intangible assets (156) (4,240) (2,550)
Purchase of subsidiary -- (4,063) (2,443)
Investment in affiliates -- -- --
Acquisition of minority interests (300) -- --
Loan to affiliates -- -- --
Cash used in investing activities (8,205) (15,965) (9,601)
FINANCING ACTIVITIES
Bank repayments (118) (66) (40)
Capital lease obligations (465) (502) (302)
Proceeds from issuance of
ordinary shares 1,618 656 395
Cash provided by financing activities 1,035 88 53
Increase in cash and bank balances 16,240 1,604 965
Cash and bank balances at beginning
of period 41,905 57,964 34,859
Effect of exchange rate changes on
cash and bank balances (181) 4 2
Cash and bank balances at end of
period 57,964 59,572 35,826
Note:
Cash and Bank balances comprise of:
Cash and cash equivalents 57,964 58,421 35,134
Fixed deposit with maturity more than
90days -- 1,151 692
57,964 59,572 35,826
Investor/Analyst Contact US Media/Analyst Contact
Manisha Singh Alan Katz
Investor Relations Cubitt Jacobs & Prosek
Pacific Internet Limited Office: +1-212-279-3115 (ext 211)
Mobile: +65-9362-9044 Email: alan@cjpcom.com
Email: investor@pacific.net.sg
Media Contact
Adeline Tan / Mervin Wang
Corporate Communications
Pacific Internet Limited
Mobile: +65-9745-6345 / +65-9798-6077
Email: tan.adeline@pacific.net.sg / mervin.wang@pacific.net.sg
Source: prnewswire
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