A8 Digital Music Announces a Record High Revenue and Profit of RMB706 Million and RMB80 Million in 2008, Increased by 147% and 45% Respectively

A8 Digital Music Announces a Record High Revenue and Profit of RMB706 Million and RMB80 Million in 2008, Increased by 147% and 45% Respectively

Gearing up for the advent of 3G mobile music in China

HONG KONG, March 25 /PRNewswire-Asia/ --
Financial Highlights:

For the year ended 31 December

(RMB million) 2008 2007 Growth

Revenue 706.1 286.0 +147%
Gross profit 266.1 128.7 +107%
Profit attributable to equity
holders of the Company (Excluding
one-off and non-operating items*) 97.5 49.6 +97%
Profit attributable to equity
holders of the Company 80.2 55.3 +45%
Earnings per share (RMB) -- basic 0.20 N/A N/A
-- diluted 0.19 N/A N/A

Note: * One-off and non-operating items included listing expenses of
approximately RMB10.2 million and non-operating related share
option expenses of approximately RMB 7.1 million in 2008, and the
one-off disposal gain of approximately RMB5.7million in 2007.

Leading integrated digital music company in China, A8 Digital Music Holdings Limited ("A8 Digital Music" or the "Group") (HKEx: 00800) today announced its audited annual results for the year ended 31 December 2008.

(Photo: http://www.prnasia.com/hkinfo/A8/090325/HK090301_E.htm )

During the review year, the Group had a record high revenue of RMB706.1 million with a year-on-year growth of 147% (2007: RMB286.0 million). Gross profit doubled to RMB266.1 million (2007: RMB128.7 million). Profit attributable to equity holders of the Company was RMB80.2 million (2007: RMB55.3 million). Excluding one-off listing expenses of RMB10.2 million and non-operating share option expenses of RMB7.1 million in 2008 and an one-off disposal gain of RMB5.7 million in 2007, profit attributable to equity holders of the Company for the year would have doubled to approximately RMB97.5 million. Basic earnings per share were RMB0.20 (2007: N/A). The Board of Directors did not recommend payment of final dividend for the year ended 31 December 2008.

The Group had a strong balance sheet with no debt and a cash balance of RMB315.6 million as at the end of 2008.

Mr. Liu Xiaosong, Chairman and Chief Executive Officer of A8 Digital Music, said, "We are pleased to report strong financial performance for 2008 in this first annual results of the Group since listing in June 2008 amid the global economic downturn. We achieved encouraging development in music contents, technical software upgrade, and marketing and distribution channels. With the 3G telecom operation licenses finally settled, we expect to see a significant surge in demand for more sophisticated music and music related services very soon. We are well prepared to seize business opportunities in the area backed by our innovative business model and effective marketing strategy, thereby achieve the ultimate goal of strengthening our leadership in the digital music industry in China."

Revenue of the Group rocketed thanks to the booming mobile music market in China and its effective execution of integrated marketing strategies on new media and traditional media. China Mobile mentioned in its 2008 annual results that ringback tone revenue and subscription increased by a tremendous 22% and 73% to RMB14.4 billion and 1.35 billion times respectively. It sets a promising future for the growth of A8 Digital Music's business under this favourable macro environment.

The overall gross profit margin of the Group for the year decreased to 38% from approximately 45% last year. The decrease was mainly attributable to the increase in share of revenue share with business alliances and the shift of weight of ringtones to ringback tones in the product mix which had a higher revenue share to mobile operators.

Last year, the "2008 Annual Original Music Competition", a major mega music event organized by the Group, was a big success attracting a record high of 4,000 entries. The most popular UGC song "Ji Mo Cai Shuo Ai" was downloaded over 18 million times, which was nearly three times more than the most downloaded song in 2007. The Group also made great efforts into promoting songs with potential in concerts it organized in the mainland China and Hong Kong. Original artists including singers of "Ji Mo Cai Shuo Ai" and "Qian Wan Bie Shuo" had performed in 20 concerts across China in 2008. The music revenue generated from UGC increased 270% to approximately RMB182.8 million.

A8 Digital Music's innovative UGC platform ( http://www.a8.com/ ) collects original independently produced songs, currently it owns a repertoire of more than 60,000 original works of music. To strengthen the song collection capability of the platform and the bonds among users, A8 Digital Music also cooperated with Hong Kong original song writers group like Green Coffee to diversify and strengthen its content base and the brand's international presence, a growth tactic it intends to continue in the future.

At its continuous effort, the 3G-compatible A8 Box of the Group has been empowered by the latest "shake control" technology. It enables the user to choose the next song by "shaking" the handset. The Group also expanded A8 Box to support the most popular music phone platform Nokia S60 5.0, a touch screen version. In 2008, approximately six million A8 Box-enabled handsets were launched. A8 Digital Music is currently in cooperation with over 90 chipset suppliers, design houses and handset manufactures. More personalized services and 3G compatible applications will be launched during this year.

Mr. Liu concluded, "Looking ahead, we expect the digital music (especially mobile music) craze to continue albeit the challenging global economy. Riding on our proven track record in digital music services and our unmatched strength in music content and technology, we are confident of tapping the opportunities presented by the restructured telecom sector and development of 3G in the PRC market to create new profit growth drivers, and in turn maximizing returns to shareholders."

About A8 Digital Music Holdings Limited

A8 Digital Music is a leading integrated digital music company that sells music content through mobile phones, sourced from its highly successful interactive UGC platformwww.a8.com, as well as from international and domestic record labels, and promote through traditional and new media such as internet and wireless network. Led by a team of experienced top executives with foresight and vision, the Group is able to capitalise on its integrated marketing and sales multi-channel network to acquire insights into consumer preferences in different regions and thus customise its marketing strategies.

-- Tables to Follow --

Appendix I

Revenue Breakdown
For the year ended 31 December
2008 2007 Growth
(RMB mil) % (RMB mil) % %
Ringtone 86.9 12% 72.2 25% +20%
Ringback tone 273.0 39% 89.5 32% +205%
IVR music 119.4 17% 20.8 7% +474%
Other
music-related 16.0 2% 15.0 5% +7%
Non music-related 210.8 30% 88.5 31% +138%
Total 706.1 100% 286.0 100% +147%

Appendix II

Strong Balance Sheet -- No Debt

As at 31 December
2008 2007
Cash RMB315.6 mil RMB131.3 mil
Total Assets RMB479.3 mil RMB291.2 mil
Net Assets RMB365.8 mil RMB181.5 mil
Account Receivable Turnover 52 days 82 days

Appendix III

Consolidated Income Statement

(Audited) For the year ended 31 December
2008 2007
RMB'000 RMB'000

Revenue 706,079 285,964
Business tax (14,196) (7,860)
Net revenue 691,883 278,104
Cost of services provided (425,806) (149,375)
Gross profit 266,077 128,729
Other income and gains, net 7,624 20,180
Gain arising from disposal of an
equity interest in a
jointly-controlled entity -- 5,694
Selling and marketing expanses (115,281) (67,073)
Administrative expenses (44,180) (21,715)
Other expenses (17,257) (70)
Finance costs (2,015) (4,913)
Share of profits and losses of
jointly-controlled entities -- (347)
Profit before tax 94,968 60,485
Tax (14,168) (5,248)
Profit for the period 80,800 55,237

Attributable to:
-- Equity holders of the Company 80,170 55,274
-- Minority interests 630 (37)
80,800 55,237

Dividend Nil N/A

Earnings per share attributable to
equity holders of the Company
-- Basic (RMB per share) 0.20 N/A
-- Diluted (RMB per share) 0.19 N/A

Appendix IV

Consolidated Balance Sheet

(Audited) As at 31 December
2008 2007
RMB'000 RMB'000
Non Current Assets
Property, plant and equipment 6,328 6,832
Prepaid land lease payments 28,583 --
Intangible assets 703 360
Deferred tax assets 4,899 --
Total non-current assets 40,513 7,192

Current Assets
Accounts receivable 101,657 64,809
Accounts due from related parties -- 59,708
Prepayments, deposits and other
receivables 19,572 21,552
Equity investments at fair value
through profit or loss 1,949 5,711
Tax recoverable -- 900
Cash and cash equivalents 315,643 131,315
Total current assets 438,821 283,995

Current Liabilities
Accounts payable 58,617 18,049
Other payables and accruals 39,121 18,753
Amount due to a related party -- 3,558
Tax payable 10,997 --
Deferred income 4,000 --
Total Current liabilities 112,735 40,360

Net Current Assets 326,086 243,635

Total Assets less Current
Liabilities 366,599 250,827
Non Current Liabilities
Deferred tax liabilities 813 813
Convertible redeemable preferred
shares -- 68,510
Total non-current liabilities 813 69,323
Net assets 365,786 181,504

Equity
Equity attributable to equity
holders of the Company
Issued capital 3,944 512
Reserves 361,192 180,972
365,136 181,484
Minority interests 650 20
Total equity 365,786 181,504

For press enquiries:

Strategic Financial Relations (China) Limited

Ms. Esther Lau
Tel: +852-2864-4845
Email: esther.lau@sprg.com.hk

Mr. Marcus Keung
Tel: +852-2114-4967
Email: marcus.keung@sprg.com.hk

Ms. Janice Au
Tel: +852-2864-4874
Email: janice.au@sprg.com.hk

Ms. Annie Choi
Tel: +852-2864-4837
Email: annie.choi@sprg.com.hk

Source: A8 Digital Music Holdings Limited

CONTACT: Ms. Esther Lau, +852-2864-4845, esther.lau@sprg.com.hk ; Mr.
Marcus Keung, +852-2114-4967, marcus.keung@sprg.com.hk ; Ms. Janice Au, +852-
2864-4874, janice.au@sprg.com.hk ; Ms. Annie Choi, +852-2864-4837,
annie.choi@sprg.com.hk , all of Strategic Financial Relations (China) Limited
for A8 Digital Music Holdings Limited

Web site: http://www.a8.com/

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