HONG KONG, Nov 25, 2010 - (ACN Newswire) - Kingsoft Corporation Limited ("Kingsoft" or the "Company"; SEHK:3888), a leading developer, distributor and service provider of application and entertainment software in China, announced its unaudited third quarter results for the three months ended September 30, 2010.
During the period under review, Kingsoft recorded a significant year-over-year increase in profit attributable to the owners of 23% to approximately RMB85 million. Revenue decreased by 7% year-over-year to RMB229 million. Gross profit decreased by 6% year-over-year to RMB197 million.
Other income and gains increased by 17715% quarter-over-quarter and 10% year-over-year to RMB26.7 million. The quarter-over-quarter increase mainly reflected the local government's financial incentives to our subsidiaries in China.
The stringent cost control measures of the Company achieved remarkable results. Selling and distribution expenses decreased by about 44.6% year-over-year to RMB34.7 million during the period under review. As at September 30, 2010, cash and cash equivalent amounted to RMB1.43 billion, and gearing ratio was 21%, which held flat compared to that as at December 31, 2009.
BUSINESS REVIEW
Revenue from the entertainment software and the application software businesses represented about 68% and 31% of total revenue in the third quarter, respectively.
Entertainment Software Business
Revenue from the entertainment software business decreased slightly by 2% quarter-over-quarter to RMB155 million mainly due to the adverse seasonality of school summer vacation for our JX games in China. Daily average peak concurrent users decreased slightly by 5% quarter-over-quarter to 0.77 million. The decrease was largely attributable to the adverse impact of summer vacation. Monthly average paying users increased by 4% quarter-over-quarter to 1.33 million. The increase primarily reflected the recovery of the base of paying players overseas. The monthly average revenue per paying user ("monthly ARPU") for the Company's online games in the third quarter of 2010 decreased by 5% quarter-over-quarter and increased by 11% year-over-year to RMB39.
Moving forward, the progress of our entertainment software business in the fourth quarter of 2010 and the coming year is expected to be satisfactory. The unlimited closed beta testing of FS 3 has been launched in November 2010. The Company is also targeting to complete the last round of limited closed beta testing of the Legend of Moon by the end of the year, and to start unlimited closed beta testing in March 2011. Apart from game development, Kingsoft has established a strategic partnership with Vina Group Corporation ("Vina Game") through a strategic Ordinary Shares Subscription Option agreement in the third quarter of 2010.
Application Software Business
Revenue from the application software business decreased by 16% quarter-over-quarter to RMB 71.9 million. The decrease was mainly due to the increasing competition in the Internet security market in China and the release of a new edition of Microsoft Office in Japan market. The monthly ARPU of Kingsoft Internet Security products held flat quarter-over-quarter and increased by about 5% year-over-year to RMB2.2.
WPS Office, Kingsoft's office software is widely recognised and favoured by Chinese enterprises for its high degree of compatibility and ease of operation, as well as being cost effective. In view of the increasing trend of using genuine software in China, it was announced in the State Council executive meeting in October 2010 that special actions would be taken to combat the infringement and step up efforts in the protection of intellectual property rights. It is believed that such steps would have a positive impact on the development of the Company's application software business.
The number of online service subscribers for Kingsoft Internet Security decreased by 14% quarter-over-quarter to 6.60 million. This was largely due to a quantity of free versions of Kingsoft Internet Security products released in the OEM channel, which resulted in a decline in the number of paying users.
Kingsoft Internet Security Software Holdings Limited ("KIS") also announced the cooperation with Keniu Network Technology (Beijing) Co., Ltd. ("Keniu Network") to establish Kingsoft Network Technology Limited ("Kingsoft Network") in November 2010. Kingsoft Network will provide users with extended professional Internet security services free of charge. At the same time, Kingsoft Internet Security Simplified Chinese Personal Edition was made available free of charge. The free model aims to offer Kingsoft's rapid growing user base free Internet security service. Meanwhile, the Company will speed up the launch of various value-added services and create a new business model.
OUTLOOK
Looking ahead, Kingsoft has adopted a brand new attitude towards future business development. Mr Pak Kwan Kau, Chairman and Chief Executive Officer of Kingsoft, said, "In the third quarter of 2010, we have benefited from Government subsidies and achieved a strong sequential growth of 26% in net profit. In the entertainment software business, we have been consistently dedicated to the testing and fine-tuning of new game products. There are several tests in the pipeline for the fourth quarter and the upcoming year. Meanwhile, we have also been pro-actively looking for business opportunities overseas. We have entered into an Ordinary Shares Subscription Option agreement with Vina Game to establish a more solid strategic alliance. Through this strategic partnership, we can benefit from the growth of the Vietnam online game market in the long run, which would become one of the growth drivers for our gaming business. Regarding our application software business, the acquisition of Keniu Network is an integral part of Kingsoft's strategic adjustment towards Internet specialisation. The establishment of Kingsoft Network demonstrates proactive initiative anticipating the market development trend through innovative concepts for the Internet and passion for the business. We intend to diligently explore new profit models, providing better products and services to users, and accelerating the Internet specialisation of our business."
FINANCIAL HIGHLIGHTS
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RMB'000 For the 3 mo ended September 30 Change
(Unaudited) 2010 2009 (%)
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Revenue 229,237 246,099 (7)
- Entertainment Software 155,203 162,786 (5)
- Application Software 71,880 81,464 (12)
- Others 2,154 1,849
Gross Profit 197,075 210,730 (6)
Profit Attributable to
Owners of the Parent* 84,990 69,064 23
Basic Earnings/Share (RMB cent) 7.76 6.48 20
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*Profit attributable to owners of the parent excluding the
effect of share-based compensation cost is RMB98.0 million
and RMB79.6 million for the three months ended September 30,
2010 and 2009 respectively. This represents a year-over-year
increase of 23%.
OPERATIONAL HIGHLIGHTS
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Sept 30 June 30 Sept 30
2010 2010 2009
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Online Games
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- Daily Ave Peak Concurrent Users 773,349 817,835 1,061,250
- Monthly Ave Paying Users 1,325,056 1,276,351 1,543,946
- Monthly Ave Revenue per Paying
User (RMB) 39 41 35
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Online Services of Internet Securities
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- Daily Ave Paying Users 6,598,690 7,648,623 8,269,916
- Monthly Ave Revenue per Paying
User (RMB) 2.2 2.2 2.1
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Investor Teleconference
Kingsoft Corporation Limited (SEHK: 03888) will announce its 2010 Third Quarter Results and hold its results teleconference on 25 November 2010 (Thur) at 07:00PM Hong Kong Time (06:00AM East State Time). Speakers:
Mr. Pak Kwan KAU, Chairman & Chief Executive Officer
Mr. Kevin WANG, Executive Director & Chief Financial Officer
A replay of the conference call can be accessed by dialing US Toll Free Dial In +1-888-286-8010, US (Int.) Toll Dial In +1-617-801-6888, passcode is 62399835. The replay will be available from 25 November 2010 09:00 AM EST (25 November 2010 10:00PM HKT), and will be available until 2 December 2010.
Contact:
Kingsoft Corporation Limited
Ms. Michelle Feng Harnett
Tel: +86 10 82325515
Email: ir@kingsoft.com
Ms. Claire Lee
Tel: +86 10 82334488 - 5850
Email: limiao@kingsoft.com
Topic: Earnings
Source: Kingsoft Corporation Limited
Sectors: IT Individual, eSports, Gaming
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