Prosten Technology Announces st Quarter Earnings -- Continuous Growth from Effective Business Model After Successful Business Transformation

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1 (For immediate release) Prosten Technology Announces st Quarter Earnings -- Continuous Growth from Effective Business Model After Successful Business Transformation Highlights: For the three months ended 30 June 2008: Revenue amounted to HK$40,327,000, representing a five-fold growth compared with the corresponding period in the previous financial year Profit attributable to equity holders of the Company amounted to HK$12,184,000, a 20-fold increase compared with the same period of 2007 Excluding the impact of fair value loss on convertible bonds, the profit attributable to equity holders of the Company would have been HK$17,489,000, an increase of HK$17,206,000 as compared with the profit excluding fair value gains and imputed interest on convertible bonds for the same period in last year Gross profit rose by 5 times over the corresponding period in 2007, to HK$35,477,000 Gross profit margin was 88%, similar to the same period of last year, which was 87% Overall operating expenses were HK$13,663,000, increasing by 119% year-on-year Basic earnings per share were HK2.04 cent (1Q07: HK0.10 cent) (7 August 2008, Hong Kong) China s leading wireless search services provider, Prosten Technology Holdings Limited ( Prosten ; Stock Code: 8026, and its subsidiaries, collectively the Group ) today announces the unaudited consolidated results for the three months ended 30 June Financial Results During the period under review, the Group launched new search services to enhance its users experience. A continuation of a developing trend from the previous quarter, the Group achieved a high gross profit margin through effective cost control measures. 1

2 For the three months ended 30 June 2008, profit attributable to equity holders amounted to HK$12,184,000, a 20-fold increase compared with the same period of Excluding the impact of fair value loss on convertible bonds, the profit attributable to equity holders of the Company would have been HK$17,489,000, an increase of HK$17,206,000 as compared with the profit excluding fair value gains and imputed interest on convertible bonds for the same period in last year. Basic earnings per share were HK2.04 cent (1Q07: HK0.10 cent). The Group s consolidated revenue for this quarter amounted to HK$40,327,000, representing a 5-fold increase as compared with the corresponding period in The revenue in this quarter decreased by HK$5,426,000 or 12% compared with the fourth quarter of the last fiscal year, as some promotion activities in Cheng Du, the base for China Mobile s mobile music business, were cancelled due to the May 2008 Sichuan earthquake disaster. The Group expects revenue to rebound after the recovery of the disaster areas. The cost of sales amounted to HK$4,850,000, an increase of HK$3,975,000 compared to the same period in last year, but a decrease of HK$701,000 or 13%, compared to the fourth quarter of last financial year. The gross profit for the current review period increased by 5 times to HK$35,477,000 compared with the same period of last year, but decreased by 12% compared with the fourth quarter of last year. On the other hand, the gross profit margin was 88%, the same as that of the previous quarter and similar to the 87% in the same period in last year. Through continuous implementation of budget and cost controls, overall operating expenses including selling expenses, administrative expenses and other expenses during the current period amounted to HK$13,663,000, an increase of 119% compared to the same period last year while revenue increased by 5 times. Due to expansion in sales and marketing teams and an increase of promotion activities, selling expenses rose by HK$3,021,000 compared to the first quarter of last year. Administrative expenses increased by HK$4,460,000 year-on-year, mainly due to higher staff costs. 2

3 Mr. Guan Mingjie, CEO of Prosten Technology, commented on the results, After the successful business transformation, our group experienced another profit making quarter. With growth in both revenue and net operating profit, our business model again proved to be unique and effective. Faced with the Sichuan earthquake, we adopted various corresponding measures, and effectively reduced the negative impact of this major disaster on the results of the Group, which promises continual earnings growth for our shareholders. Business Review The Group continued to improve its products. As an example, it recently launched new music information (such as album name, singer s pictures and lyrics) search services to enhance users experience. Meanwhile, progress has been made in areas such as games, lifestyle information and other vertical search business. The Group aimed at developing effective data collection and user behavior analysis and made an extensive effort to enhance the efficiency of digital marketing, thus further boosting the commercial value of heavy music users. The Group continued to focus on and follow up on cooperation opportunities with new operators after the reorganization of the China telecom industry. Immediately after the Sichuan earthquake, the Group sent disaster relief information by SMS to mobile music users nationwide. In addition, the Group has specifically launched Love and Care with SMS information services based on its unique natural language intelligent navigation technology. Outlook The Group plans the formal launch of new vertical search business such as games, lifestyle information, etc. In addition, based on user data collection and search services, a wireless advertising business has also been prepared for substantial promotion, in the hope of becoming the next revenue driver. Looking forward to the second quarter, Mr. Dennis Yip, Chairman of Prosten 3

4 said: We project that our business will be affected by the Beijing 2008 Olympic Games to a certain extent. As requested by the operator, all sales and marketing activities will have to be suspended during the Olympic Games. In addition, the operator has made Network Closure arrangements to ensure network safety. Nevertheless, we have conservative but optimistic views towards our revenue. The Group believes that the business will return to normal after the Olympic Games. For most Chinese companies, the year 2008 is full of challenges. However, we believe that the Group has a bright future as more and more young users that demand high-tech services are joining the China market. Meanwhile, aware of keen market competition, we are also actively seeking development strategies and objectives outside our usual course of business, including mergers and acquisitions, in order to create greater value for our shareholders. About Prosten Prosten s Group was established in 1989, and its holding company, Prosten Technology Holdings Limited, was listed on GEM (Stock Code: 8026) in March Through its wholly owned subsidiary, Unison Networking Services (Shanghai) Co., Ltd, Prosten became the sole provider of wireless music search services for China Mobile in January The search services are delivered through SMS and WAP, etc on portable devices and are available in all provinces and cities in China, with total users of more than 120 million. 4

5 For investor and media enquiries: Prosten Winsome Cheung Tel: Henry Chik Tel: Tracy Zhu Tel: