Pacific Internet Reports Record Revenues for Fourth-Quarter and Full-Year 2006
13 February 2007
-- Fourth-quarter revenues grew 8% to S$49.2 million (US$32.1 million);
full-year revenues up 11% to record high of S$188.8 million (US$123.1
million).
-- Corporate Business segment contributes 76% of full-year revenues; grew
24% full-year and 11% in fourth-quarter.
-- Top revenue contributors - Broadband, Leased Line and IP Services -
continued growth in fourth-quarter (1%, 53% and 10% respectively) and
for full-year (1%, 34% and 63% respectively). IP Services now
contributes 22% of full-year revenues.
-- Operational efficiency drove revenue per employee up 13.8% in fourth-
quarter.
Pacific Internet Limited (Nasdaq: PCNTF) ("PacNet" or the "Company"), the largest telco-independent Internet communications service provider by geographic reach in the Asia-Pacific, concluded 2006 with record high revenues for the year ended 31 December 2006, increasing 11% to S$188.8 million (US$123.1 million). This full-year growth of 11% is a significant improvement from the Company's 0.4% growth from 2004 to 2005. For fourth-quarter 2006, revenues also grew by 8% to reach a new high of S$49.2 million (US$32.0 million) when compared to the same period in 2005.
The three major business contributors -- Broadband, Leased Line and IP Services -- continued to registered growth in the fourth-quarter of 2006 (by 1%, 53% and 10% respectively) and also for full year 2006 (by 1%, 34% and 63% respectively). The growth was a result of the Company's focus on providing IP based communications and solutions.
Corporate Business grew revenue by 24% and 11% for full-year and fourth- quarter 2006 respectively. Corporate Business subscriber base also grew 9% to 125,200 customers during the quarter.
"It is clear that we are reaping positive returns from our success in the Corporate Business accounts and IP Services. We saw more small-and-medium businesses or SMBs leveraging technology to regionalize their domestic operations or increase their productivity. This is in line with the findings in our PacNet IP Index on changing usage patterns among SMBs on Internet access and business applications. For 2007, one of our key focus will be to further expand the corporate business in both the domestic and regional markets," said Mr. Phey Teck-Moh, President and CEO of Pacific Internet Limited.
Summary of Results
Table 1: Selected Financial Data
Three Months Ended Year Ended
31 December 31 December
2006 2005 Variance 2006 2005 Variance
(US$'000)(US$'000) (US$'000) (US$'000)
Revenue:
Access
Services: 23,053 22,103 4% 88,373 88,584 0%
- Broadband 14,322 14,152 1% 55,966 55,187 1%
- Leased
Line 5,889 3,856 53% 19,172 14,329 34%
- Dial-Up 2,842 4,095 (31%) 13,235 19,068 (31%)
IP Services: 7,013 6,398 10% 26,971 16,535 63%
Travel 1,988 1,147 73% 7,758 5,988 30%
(Commission)
and Others:
Total Revenues 32,054 29,648 8% 123,102 111,107 11%
Corporate
Business
Revenue 24,893 22,504 11% 93,274 75,379 24%
Consumer
Business
Revenue 7,161 7,144 0% 29,828 35,728 (17%)
Cost of Sales 16,616 14,788 12% 62,395 52,330 19%
Operating
Expenses 14,630 13,050 12% 57,081 52,108 10%
Net Income 817 2,791 (71%) 3,752 7,053 (47%)
Table 2: Customer Base (In Numbers)
Corporate Business Base Corporate Consumer
Country Broadband Leased Dial-Up IP Business Total Grand
Operations Lines Services Total (Broadband, Total
Dial-Up &
IP
Services)
Singapore 7,866 590 6,890 897 16,243 88,591 104,834
Australia 11,662 284 208 32,831 44,985 37,139 82,124
Hong Kong 13,001 191 42,611 3,884 59,687 24,209 83,896
Philippin
es 173 189 207 2,071 2,640 59,975 62,615
Malaysia 2 56 4 25 87 -- 87
Thailand 462 522 157 161 1,302 2,520 3,822
India -- 129 -- 132 261 67 328
Group's Customer Base (As at 31 December 2006)
Grand
Total 33,166 1,961 50,077 40,001 125,205 212,501 337,706
Group's Customer Base (As at 31 December 2005)
Grand
Total 33,076 1,789 55,611 23,956 114,432 262,284 376,716
Variance 0% 10% (10%) 67% 9% (19%) --
Notes:
-- Corporate Business subscriber base continues to grow in line with the
Group's focus in this segment. In Q4 2006, Corporate Business
subscriber base grew 9% over the same quarter in the previous year.
Total subscriber base reduction was primarily due to decline in the
Dial-Up segment, which is in line with Consumer market trend.
-- Corporate customers with multi-site access deployment are counted as
one single subscriber.
For the fourth-quarter, the Company's net income was S$1.3 million (US$0.8 million), its 20th consecutive quarter of profitability. Net income for the same quarter in 2005 was S$4.3 million (US$2.8 million).
For the full year 2006, net income was S$5.8 million (US$3.8 million) compared to S$10.8 million (US$7.0 million) in 2005.
Included in the net income are:
In 2006
1. Professional fees related to the MediaRing S$2.0M or US$1.3M
Takeover Offer in Q1, Q2 and Q3
2. Stock based compensation cost. For stock based S$1.4M or US$0.9M
compensation, the cost included incremental
charges on adoption of SFAS No. 123R and also
cost from the accelerated vested stock options
on commencement of the MediaRing Takeover
Offer in Q2
3. Cost related to the mandatory compliance of the S$0.8M or US$0.5M
Sarbanes Oxley Act (SOX Compliance) during the
year
4. Cost related to the Extraordinary General S$0.4M or US$0.2M
Meeting requested by certain shareholders in Q4
5. Cost related to the restructuring of the S$0.3M or US$0.2M
Singapore operations to enhance customer
service in Q1
In 2005
1. Write-backs in Q4 2005 primarily due to reversal S$2.5M or US$1.6M
of various accruals on expiry of limitation
period, and reversal of valuation allowances for
deferred tax assets for two of our significant
subsidiaries due to improved profit outlook in 2005
Business Highlights for Fourth-Quarter 2006
* Corporate segment driving business growth -- The Corporate Business
customer base expanded by 9% compared to 2005. Corporate Business
revenues grew 11% during the quarter to reach S$38.2 million (US$24.9
million).
* Increased Corporate sale of high bandwidth access and IP services -- The
expanding Corporate Business customer base drove higher take-up of
Broadband (74% of revenue was from Corporate Business), Leased Line and
IP services (94% of revenue was from Corporate Business).
* IP Services business continues growth -- IP Services grew 10% compared
to the same period last year. Within this product line, Voice services
revenue was top at 41% of IP Services revenues followed by Hosting
services (27%), Security services (7%) and Roaming service (5%).
* Cash position is strong -- As at 31 December 2006, the Group held cash
and cash equivalents and fixed deposits of S$60.2 million (US$39.3
million).
* Continuing emphasis on operational efficiency -- Operational efficiency
continues to improve, as the Company stays focused in improving
productivity and efficiency. Operational efficiency drove revenue per
employee up by 13.8% to S$53,909 (US$35,147) from S$47,372 (US$30,885).
* Wireless Broadband in Philippines -- Following the launch of its
corporate wireless broadband service in Singapore, the Company also
initiated a fixed wireless trial service for the corporate segment
during the fourth-quarter in the Philippines. This follows the award of
a set of wireless trial frequencies by the country's National
Telecommunications Commission (NTC). The Company will provide details of
this trial and ongoing efforts in the wireless space across the region
progressively.
* Launch of Voice Service, PacNet Vocal -- PacNet marked its entry into
the voice carrier market with the launch of PacNet Vocal, a new IP
telephony solution targeted at Asia Pacific's growing SMBs. PacNet Vocal
is a quality-assured, enterprise-grade IP-based telephone service that
offers a suite of value-added services tailored for a broad range of
business customers. The service is now available in India and Singapore,
will be launched in other countries.
* Data Center Services in China -- During the quarter, PacNet launched a
Data Centre Service in China. It is specifically tailored to serve Hong
Kong enterprises with cross-border communications needs across the
Chinese mainland, Hong Kong and the Asia Pacific region. The launch of
Pacific Internet's Data Centre Service has helped to bridge Internet
interoperability between the Southern and Northern parts of China,
facilitating data transfer and secure connections within the Chinese
mainland and the rest of the world.
* Partnerships with industry leaders -- In line with its strategy to
establish partnerships to enhance its services to customers, the Company
extended existing partnership with Cisco in Australia, Hong Kong and
Singapore to Thailand to offer the country's first total managed
services security solution to corporate customers.
Conference Call and Web Cast
PacNet will host a conference call to discuss the results:
-- US Eastern Time: 12 February 2007 @ 6.00 p.m.
-- Singapore Time: 13 February 2007 @ 7.00 a.m.
Dial-in numbers:
-- US: (800) 811-8845 (US Toll Free)
-- International: +1-913-981-4905 (International)
Replay telephone nos.:
-- US: 888-203-1112
-- International: +1-719-457-0820
The pass code is 9735414
The call will also be webcast "live" at: http://www.pacnet.com/investor/
This press release should be read in conjunction with the Company's Management Discussion & Analysis and 6-K financial documents.
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$1.5338 to US$1.00. (Conversion rate as at 31 December 2006 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, the Philippines, Australia, India, Thailand and Malaysia. PacNet delivers a comprehensive suite of data and voice 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.
Cautionary Statement
PacNet notes that no offer has been made by Connect Holdings Limited. If and when an offer is made, a circular ("Circular") containing, inter alia, the recommendation of the independent directors of the PacNet in relation to the Offer will be dispatched to Shareholders in due course. Shareholders are advised to read the Circular, PacNet's Recommendation Statement and related materials when they become available because they will contain important information. Shareholders may download a free copy of the Circular, PacNet's Recommendation Statement and other documents that PacNet intends to file with the U.S. Securities and Exchange Commission ("SEC") at the SEC's website at http://www.sec.gov if an offer is made.
Responsibility Statement
The Directors of PacNet have taken all reasonable care to ensure that the facts stated and opinions express in this press release are fair and accurate, and that no material facts have been omitted and they jointly and severally accept responsibility accordingly. Where any information has been extracted from published or otherwise publicly available sources, the sole responsibility of the Directors of PacNet has been to ensure through reasonably enquiries that such information is accurately and correctly extracted from such sources or, as the case may be, accurately reflected or reproduced in this press release.
Pacific Internet Limited
Unaudited Consolidated Balance Sheets as of December 31, 2006
With Comparative Amounts from December 31, 2005
31-Dec-05 31-Dec-06 31-Dec-06
S$'000 S$'000 US$'000
Cash and cash equivalents 58,421 57,786 37,675
Fixed deposit with financial
institution 1,151 2,447 1,595
Accounts receivable - net 28,119 38,333 24,992
Other receivables 9,067 7,330 4,779
Inventories 377 503 328
Total current assets 97,135 106,399 69,369
Investments 392 38 25
Fixed assets and website development
costs- net 18,040 19,007 12,392
Goodwill and intangible assets - net 36,402 36,671 23,909
Other non-current assets 9,772 4,477 2,919
Total non-current assets 64,606 60,193 39,245
TOTAL ASSETS 161,741 166,592 108,614
Bank borrowings 2,460 20 13
Accounts payable 11,226 16,279 10,614
Other payables 42,184 38,051 24,808
Current portion of capital lease
obligations 317 59 38
Total current liabilities 56,187 54,409 35,473
Capital lease obligations, less
current portion 297 239 156
Other non-current and deferred
liabilities 1,765 2,035 1,327
Total non-current liabilities 2,062 2,274 1,483
Minority interest 1,820 1,141 744
Shareholders' equity
Ordinary shares 26,824 27,591 17,989
Additional paid-in capital and
deferred compensation 97,939 102,645 66,922
Accumulated deficit and other
comprehensive income (23,091) (21,468) (13,997)
Total shareholders' equity 101,672 108,768 70,914
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 161,741 166,592 108,614
Pacific Internet Limited
Unaudited Consolidated Statement of Operations
(In US Dollars)
Quarter ended Year To Date Dec. 31
Sep 30, Dec 31, Dec 31,
2006 2005 2006 2005 2006
US$'000 US$'000 US$'000 US$'000 US$'000
Revenues
Dial up access 3,185 4,095 2,842 19,068 13,235
Broadband access 14,122 14,152 14,322 55,187 55,966
Leased line access 5,466 3,856 5,889 14,329 19,172
IP services/Value
added services 7,002 6,398 7,013 16,535 26,971
Commission revenues 1,307 803 1,524 3,991 5,826
Other revenues 605 344 464 1,997 1,932
Total net revenues 31,687 29,648 32,054 111,107 123,102
Cost of sales 16,440 14,788 16,616 52,330 62,395
Gross profit 15,247 14,860 15,438 58,777 60,707
Other operating costs
and expenses
Staff costs 8,642 8,871 8,767 32,710 34,497
Sales & marketing 870 353 1,157 3,165 3,339
Other general &
administrative 3,519 2,199 3,210 9,982 13,445
Depreciation &
amortization 1,383 1,414 1,416 5,281 5,372
Allowance for
doubtful
accounts receivable 71 213 80 970 428
Total other
operating
costs and expenses 14,485 13,050 14,630 52,108 57,081
Operating income 762 1,810 808 6,669 3,626
Other income (expenses)
Net interest income 310 244 292 660 1,142
Net gain (loss) on
foreign currency 136 (188) 190 (43) 25
Loss on disposal of
fixed assets (74) 7 (160) (35) (243)
Gain (loss) on
settlement of ARO
liability (64) -- 29 -- (35)
Equity in gain of
unconsolidated
affiliates 183 259 35 436 646
Others 52 801 246 950 501
Total other income 543 1,123 632 1,968 2,036
Income before income
taxes and minority
interest 1,305 2,933 1,440 8,637 5,662
Provision for income
taxes (450) (3) (634) (1,358) (1,809)
855 2,930 806 7,279 3,853
Minority interest in
gain of consolidated
subsidiaries (76) (136) 11 (223) (114)
Income before
extraordinary item 779 2,794 817 7,056 3,739
Cumulative effect
adj - net of tax -- (3) -- (3) --
Extraordinary
item -- -- -- -- 13
Net income 779 2,791 817 7,053 3,752
Net income from
continuing
operations
per share - basic $0.0567 $0.2084 $0.0593 $0.5288 $0.2757
Net income per
share - basic $0.0567 $0.2084 $0.0593 $0.5288 $0.2757
Net income from
continuing
operations
per share -
diluted(1) $0.0548 $0.2081 $0.0575 $0.5270 $0.2667
Net income per
share - diluted(1) $0.0548 $0.2081 $0.0575 $0.5270 $0.2667
Weighted average
number of shares
outstanding -
basic 13,669,629 13,406,065 13,778,864 13,339,896 13,607,184
Weighted average
number of shares
outstanding -
diluted (1) 14,147,653 13,425,525 14,212,389 13,384,706 14,070,055
(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, 2006,
which was S$1.5338 to US$1.00.
Pacific Internet Limited
Unaudited Consolidated Statement of Cash Flows for Year Ended December 31,
2006
With Comparative Amounts from December 31, 2005
Year ended Dec 31,
2005 2006 2006
S$'000 S$'000 US$'000
OPERATING ACTIVITIES
Net income for the period 10,820 5,754 3,752
Items not involving cash and other
adjustments to reconcile net
income to cash from operating
activities:
Equity in gain of unconsolidated
subsidiaries and affiliated (669) (991) (646)
Depreciation and amortization 8,100 8,240 5,372
Loss on disposal of fixed assets 53 373 243
Gain on disposal of intangible
assets -- (108) (70)
Loss on settlement of ARO
liability -- 54 35
Fixed assets written off 4 14 9
Allowance for doubtful accounts
receivable 1,488 345 225
Bad Debts written off -- 312 203
Minority interest 342 175 114
Deferred income tax (benefit)
provision (292) 805 525
Amortization of deferred
compensation (46) 1,384 902
Extraordinary item -- (20) (13)
Changes in non-cash working capital
items:
Accounts receivable (4,434) (9,590) (6,252)
Prepaid expenses and other assets (4,123) 2,255 1,470
Inventories (36) (112) (73)
Accounts payable 1,368 4,392 2,863
Other payables / receivables 4,906 (4,152) (2,707)
Cash provided by operating activities 17,481 9,130 5,952
INVESTING ACTIVITIES
Acquisition of fixed assets (7,674) (9,240) (6,024)
Proceeds from sale of fixed assets 12 56 37
Proceeds from sale of intangible
assets -- 210 136
Purchase of intangible assets (4,240) -- --
Fixed deposit with maturity more
than 90 days (1,151) (1,296) (845)
Additional interest acquired in a
subsidiary (4,063) (621) (405)
Sale of quoted investment -- 5 3
Cash used in investing activities (17,116) (10,886) (7,098)
FINANCING ACTIVITIES
Bank repayments (66) (2,440) (1,591)
Capital lease obligations (502) (317) (207)
Proceeds from issuance of ordinary
shares 656 4,088 2,665
Cash provided by financing activities 88 1,331 867
Increase/(Decrease) in cash and cash
equivalents 453 (425) (279)
Cash and cash equivalents at
beginning of period 57,964 58,421 38,089
Effect of exchange rate changes on
cash and cash equivalents 4 (210) (135)
Cash and cash equivalents at end of
period 58,421 57,786 37,675
Investors/Analysts Contact
Mervin Wang
Investor Relations
Mobile: +65-9798-6077
Email: mervin.wang@pacific.net.sg
Media Contact
Bernard Ho
Corporate Communications
Mobile: +65-9782-3393
Email: bernard.ho@pacific.net.sg
Source: prnewswire
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