Final Results

RNS Number:0339S
EBT Mobile China PLC
10 April 2008



10 April 2008

                              EBT Mobile China plc
                            ("EBT" or the "Company")
             Financial Results for the Year Ended 31 December 2007

EBT Mobile China plc (AIM: EBT), a leading China-based retailer of mobile phone
products and services, is pleased to announce its preliminary results for the
year ended 31 December 2007.

Key Highlights

  * Number of stores up by 35% to 257 at the end of 2007 (2006: 190);
  * National footprint increased to 31 cities (2006: 18), including expansion
    into Central Region;
  * Operating 68 stores in China Mobile's service halls in Shanghai (2006:49);
  * Signed agreement with Wal-Mart and strengthened strategic relationships
    with leading hypermarkets, including Carrefour, Metro, Auchan, RT-mart,
    Lotus and Trust-mart (part of Wal-Mart);
  * Revenue increased by 27% to RMB628.1m (£43.1m) (2006: RMB495.1m (£34.0m));
  * Gross margin increased to 11.8% in 2007 (2006:11.1%);
  * Loss after tax reduced to RMB12.6m (£0.9m) (2006: RMB19.2m(£1.3m));
  * Successful placing to raise £7.4m before expenses to fund additional
    strategic initiatives in January 2007; and
  * Received a preliminary approach in late December 2007 which may or may
    not lead to an offer for the entire issued share capital of the Company.
    Discussions are ongoing and further announcements will be made as required.

For the year ended 31 December 2007
                           2007*        2007      2006*        2006            %
                           (£'m)      (RMB'm)     (£'m)       (RMB'm)     change
Revenue                    43.1        628.1      34.0        495.1         +27%
Gross profit                5.1         74.0       3.8         54.8         +35%
Gross margin               11.8%        11.8%     11.1%        11.1%
Adjusted operating loss**  (1.0)       (13.9)     (0.3)        (2.2)
Operating loss             (1.4)       (20.1)     (1.4)       (20.5)
Adjusted loss after tax**  (0.4)        (6.4)     (0.1)        (0.8)
Loss after tax             (0.9)       (12.6)     (1.3)       (19.2)
EPS                           0p          (6)fen  (0.01)p       (11)fen
Cash ***                    9.1        132.4        3.6        53.0

* figures in £ are for illustrative purposes only, all translated using the RMB:
£ 2007 year end exchange rate of 14.5807.
** figures before adjusted items, include share-based payments, exchange
difference, financial guarantee, contingent liabilities, investment loss in a
joint venture and acquisition costs. The total figures of adjusted items are RMB
6.2m in 2007 (2006: RMB16.2m).
*** cash figures excludes a restricted deposit of RMB32.1m in 2007 (2006: RMB
18.3mfor standby letter of credit, which was disclosed as deposits and
prepayments.
**** The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2007 or 2006, but is derived
from those accounts. Statutory accounts for 2006 have been delivered to the
Registrar of Companies and those for 2007 will be delivered following the
company's annual general meeting. The auditors have reported on those accounts;
their reports were unqualified, did not draw attention any matters by way of
emphasis without qualifying their reports and did not contain statements under
s237(2) or (3) Companies Act 1985.


Zhang Ge, CEO of EBT said, "2007 was the year during which EBT achieved a
balance between infrastructure investment and network size. As a result the
Company's performance improved during the second half, culminating in the
Company making a profit at the operating level during the fourth quarter.

"The combination of skillful management of EBT's cash and the controlled
expansion of its network, has positioned EBT to exploit opportunities, gain
market share and enhance margins as the macro environment improves. As a result
EBT is today stronger than it has ever been.

"We believe that we are well placed to benefit from the introduction of 3G
services in China which is anticipated in 2008. Our strong relationship with
China Mobile combined with the quality of our retail locations, the improving
PRC market and the partnerships we have with the leading industry handset
manufacturers all point towards an exciting 2008.

"We look forward to demonstrating continuing growth and building shareholder
value in 2008."

For more information contact:
Terry Garrett / Stephanie Badjonat / John Moriarty
Weber Shandwick Financial                                          020 7067 0700

Aubrey Powell / Giles Stewart /Mark Lander
Panmure Gordon (UK) Limited                                        020 7459 3600


PRELIMINARY RESULTS STATEMENT

Business Overview

EBT is one of the leading mobile phone specialist retailers in China. Our prime
focus has been on building our retail network and by the end of 2007, EBT had
257 stores nationwide with a strong presence in East China. To support EBT's
rapid growth, we have built strong relationships with key industry leaders
across the value chain in terms of phone suppliers, network operators and major
retail groups.

2007 Financial Performance
For the year to 31 December 2007, revenue increased by 27%, from RMB495.1m in
2006 (£34.0m note 1) to RMB628.1m (£43.1m note 1). Gross margins improved from
11.1% in 2006 to 11.8% in 2007 reflecting EBT's successful category management
and effective staff sales bonus scheme, as well as our drive to sell
higher-margin products in what we believe is a higher quality retail environment
than offered by the competition. Nevertheless, price cutting promotions and
counterfeit products are still very popular in the market, which result in lower
average retail prices for major mobile brands such as Nokia and Motorola.

The loss after tax decreased by 34%, from RMB19.2m (£1.3m note 1) in 2006 to RMB
12.6m (£0.9m note 1) in 2007. The loss after tax but before accounting for other
items including share-based payments, exchange differences, financial guarantee,
contingent liabilities, investment loss in a joint venture and acquisition
costs, was RMB6.4m (£0.4m note 1) in 2007, compared to RMB0.8m (£0.1m note 1) in
2006.

note 1 using year end exchange rate of 14.5807

Strategy and Objectives
EBT aims to become China's leading end-to-end provider of mobile products and
services through both organic and acquisition growth.

Our objectives are to:

   * achieve profitable growth; and
   * create shareholder value.

There are four key elements to our strategy for achieving our objectives:

   * achievement of leading market positions in a sector capable of long-term
     growth;
   * continuous improvement in efficient and scalable infrastructure
     supported by proprietary management information systems and inventory
     control systems, as well as standardised training and personnel quality
     control/management systems to support strong organic growth and
     profitability;
   * focused acquisitions which meet strict return criteria; and
   * continuous launch and sale of new and high margin value-added service
     (VAS) as and when the market is ready.

We have made significant progress in the year on the four key elements of our
strategy.

  Strengthened Regional Position
  In 2007, we expanded the Group's retail footprint from 190 stores at the start
  of the year to 257 stores by 31 December 2007, an increase of 35%. In December
  2004, before joining AIM, EBT had just 61 stores. Additionally, EBT expanded its
  geographic coverage from 18 to 31 cities during 2007 as it accelerated the
  development of its proven and successful business model.

  EBT made substantial progress in strengthening its position in its traditional
  market of Shanghai. By the end of 2007, we had 138 stores in Shanghai. As part
  of the expansion, EBT developed further into Jiangsu, Zhejiang, Anhui and Wuhan
  and moved into two new regions, Hunan and Chongqing. The majority of stores in
  these new regions are "stores within stores", where EBT operates mobile phone
  retail outlets within leading hypermarkets. This strategy has enabled us to
  enter new cities with a strong local partner and with limited cost. Once these
  stores are established, we then leverage the regional infrastructure platform
  and market knowledge to expand further within the particular city and area.
  Meanwhile, we are aggressively expanding our free-standing store network. We
  expect to continue expanding our network during 2008 in both existing and new
  markets.

  Roll-out with Wal-Mart
  EBT formed a number of new important relationships with leading Chinese
  hypermarket chains during 2007. Significantly, EBT signed an agreement with
  Wal-Mart, the biggest retailer in the world, with approximately 97 large
  hypermarkets in China. To date, EBT has successfully entered 12 locations in 6
  cities. Most of Wal-Mart's stores are located in tier 2 and 3 cities in China,
  which may need more time to become fully established but we believe that
  Wal-Mart's development policy will accelerate its growth in China, from which
  EBT will benefit.

  In 2008, we plan to continue rolling out our network with existing and
  prospective retail partners such as Carrefour, Metro, Lotus, RT-Mart, Auchan,
  Trust-Mart and Wal-Mart.

  Improving the Retail Experience with Better Supply Chain Management
  In 2007, we focused on further improving our management of the procurement and
  supply chain process. From order requests, order analysis, inquiry/negotiation,
  order placement and distribution, we strove to make the procedure as quick as
  possible since efficiency is the key to success in this industry. We also
  continued to upgrade our proprietary IT system which is tailor-made for mobile
  phone retailing. With the support of this system, our in-house distribution team
  handles 85% of the goods delivered to our stores with the rest outsourced to a
  3rd party logistics company.

  We also made substantial efforts to improve product availability and enhance our
  product lines, especially through cooperating with some fast growing domestic
  manufacturers. Our ERP (Enterprise Resource Planning) system has been
  continuously upgraded and directly linked with all stores in order to enhance
  our supply chain management and to allow increased flexibility to modify orders
  and inventory as dictated by market demand.

  Acquisition
  EBT carefully examined a number of acquisition opportunities in 2007 and
  announced its first acquisition in February 2007. The acquisition of 8 stores
  from Shanghai Jingxin Jialing Telecommunication Co., Ltd ("JXJL") included the
  largest co-branded China Mobile service hall in Shanghai and Motorola's first
  flagship store which was opened in July 2006.
  The transaction with JXJL has strengthened EBT's relationship with China Mobile,
  the leading mobile operator in China. It also creates an improved platform from
  which EBT can offer additional mobile services to its customers and to display
  more integrated products and value added services from one of Shanghai's
  foremost service halls.

  The integration of acquired business has been quickly and successfully
  implemented and we will continue to seek additional acquisition candidates in
  2008.

Subsidising Programmes Supported by China Mobile
In 2006, China Mobile selected EBT to open stores in its service halls, and in
2007 we successfully launched the "Subsidising Programme" together with Shanghai
China Mobile. Over 50 different mobile phones were selected to be given a price
subsidy in our stores inside the China Mobile service halls. Customers signed
1-2 year contracts to get their selected mobile phones free of charge. We view
this programme as a strong competitive advantage in the market since EBT is the
only authorised specialist retailer offering this highly attractive "give-away"
promotion in the area allocated by Shanghai China Mobile. In other words, EBT is
well positioned not only by having income generated from traditional retailing
within China Mobile's service halls, but also by benefiting from the subsidising
programme which is funded by China Mobile.

Launched More Value-Added Services
In 2007, we introduced a wide range of mobile related value-added services in
cooperation with 3rd party suppliers, such as a maintenance service offered in
the stores, an extended warranty programme to handset customers and mobile game
downloading. Those stores authorised by China Mobile also provide customers with
further value-added services including collecting monthly payments for mobile
bills, replacing SIM cards, applying for new service functions and changing
pre-paid SIM cards to contract cards. All these services have greatly improved
customer convenience and loyalty, as well as differentiating EBT from its
competitors.

Performance Appraisal Linked with Key Performance Indicators We implement and
monitor our performance with reference to targets set for key performance
indicators ("KPIs", such as revenue, gross margin, gross profit, expenses,
number of new stores and inventory turnover days), which are applied on a Group-
wide basis. The same indicators are used for the appraisal of executive
management. Similarly, the store staff bonus scheme with an effective profit-
driven basis was implemented in August 2007. As a result, our gross margin has
been improved materially in the last quarter of 2007.

Successful Fund Raising
In early January 2007, we raised £7.4 million before expenses through a placing 
of 33,566,300 new ordinary shares with new and existing investors.  The net 
proceeds from the placing are being used by the Company to finance an accelerated 
roll out of the Group's business expansion.

Our People
We consistently seek to recruit and retain the best employees in our market. To
achieve our long-term strategies, we need to continue to implement this 
recruitment policy.

In addition to using conventional recruitment channels such as the press and
search agencies, in 2007, management established a broad platform for employees'
career development. We have adopted a policy whereby all new management
positions and promotional opportunities are awarded on strict criteria and
through a transparent selection process. Through this process we have found and
encouraged many talented employees who demonstrate great potential and employee
loyalty has been substantially improved. We will continue to improve our human
resource and training systems as we recognise that our business is built upon
the strength of its people and teamwork.

Outlook for 2008
We are highly confident that China's economy and the opportunities within the
Chinese mobile phone retail and services markets offer significant growth
prospects for EBT. We are blending eastern and western business practices, and
successfully differentiating ourselves within the industry.
We are making strong and steady progress in achieving our mission - to become
China's leading end-to-end provider of mobile products and services through our
3W strategy ("Win with Winners"). In 2008, we plan to focus our efforts on
geographic expansion, enhancing the mix of store formats and enriching product
lines with greater numbers of higher margin products. With regard to
acquisitions, we will actively seek opportunities to build our scale but will
apply strict criteria in assessing their potential benefit.

EBT is firmly committed to continuing its long-term strategy of expanding its
existing wireless retail platform by both entrenching our existing position in
current markets and expanding into new ones. Our goal is to leverage our
existing and growing retail distribution platform to enhance not only our
ability to serve the needs of our customers and wireless industry partners and
thereby improve our profitability, but also to enhance the strategic value of
our network and strengthen our competitive advantages.

We look forward to demonstrating continuing growth and building shareholder
value in 2008.


CONSOLIDATED INCOME STATEMENT
                                                            2007          2006
                                                         RMB'000       RMB'000
CONTINUING OPERATIONS
Revenue                                                  628,084       495,107
Cost of sales                                           (554,038)     (440,332)
                                                         -------       -------
Gross profit                                              74,046        54,775

Other operating income                                     4,077           918
Distribution costs                                       (66,465)      (39,499)
Administrative expenses                                  (32,399)      (34,407)
Share of losses of a joint venture                          (500)            -
                                                          -------       -------
Operating loss before financial guarantee                (21,241)      (18,213)

Financial guarantee                                        1,204        (2,268)
                                                          -------       -------
Operating loss                                           (20,037)      (20,481)

Financial costs                                              (23)
Investment revenues                                        7,454         1,775
                                                         -------      --------
Loss before tax                                          (12,606)      (18,706)

Taxation                                                       -          (470)
                                                         -------      --------
Loss for the year                                        (12,606)      (19,176)
                                                         =======      ========

Attributable to equity holders of the parent             (12,606)      (19,176)
                                                         =======      ========

                                                             RMB           RMB
Loss per share
Basic and diluted                                          (0.06)        (0.11)
                                                         =======      ========



CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSES
                                                         2007          2006
                                                      RMB'000       RMB'000
Exchange differences 
on translation of
foreign operations and
net gain/(loss)
recognised directly in equity                         (7,713)        7,446

Loss for the year                                    (12,606)      (19,176)
                                                     -------      --------
Total recognised income
and expense for the year                             (20,319)      (11,730)
                                                     =======      ========

Attributable to equity holders of the parent         (20,319)      (11,730)
                                                     =======      ========



CONSOLIDATED BALANCE SHEET
FOR THE YEAR ENDED 31 DECEMBER 2007
                                                    2007                  2006
                                                 RMB'000               RMB'000
Non-current assets

Other intangible assets                            2,111                    60
Property, plant and equipment                      3,924                 2,561
                                                 -------               -------
                                                   6,035                 2,621
                                                 -------               -------

Current assets

Inventories                                       52,339                58,743
Trade receivables                                 48,332                52,184
Other receivables                                  6,326                 3,525
Cash and cash equivalents                        132,415                52,959
Deposits and prepayments                          56,878                37,605
Prepaid taxes                                         32                 1,787
Amounts due from related parties                   2,800                     -
                                                 -------               -------
                                                 299,122               206,803
                                                 -------               -------
TOTAL ASSETS                                     305,157               209,424
                                                 =======               =======

Current liabilities

Trade payables                                    19,673                24,807
Notes payables                                    14,839                19,459
Accruals and other payables                        6,905                 4,857
Provisions                                           969                 2,268
Other tax liabilities                              1,745                 2,689
                                                 -------               -------
                                                  44,131                54,080
                                                 -------               -------
Net current assets                               254,991               152,723
Total liabilities                                 44,131                54,080
                                                 -------               -------
NET ASSETS                                       261,026               155,344
                                                 =======               =======

EQUITY

Share capital                                     53,609                52,958
Share premium account                            288,170               173,169
Other reserves                                    89,534                86,898
Retained losses                                 (170,287)             (157,681)
                                                 -------
TOTAL EQUITY                                     261,026               155,344
                                                 =======               =======



CONSOLIATED CASHFLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
                                                        2007           2006
                                                     RMB'000        RMB'000
CASH FLOWS FROM OPERATING ACTIVITIES

Loss before tax from continuing operations           (12,606)       (18,706)

Adjustments for:
    Share of losses of a joint venture                   500              -
    Depreciation of property, 
     plant and equipment                                 778            621
    Amortisation of intangible assets                  5,536             23
    Impairment of intangible assets                      789              -
    Share-based payments expense                       2,872         12,258
    Loss/(gain) on disposals of 
     property, plant and equipment                        16            (47)
    Allowances for doubtful debts                     (3,747)           327
    Finance costs                                         23              -
    Investment revenues                               (7,454)        (1,775)
    Net foreign exchange (gain)/loss                  (2,481)         3,741
                                                  ----------       --------

Operating cash flows before movements in
 working capital                                     (15,774)        (3,558)

    Decrease/(increase) in inventory                   6,404        (29,544)
    Decrease in notes receivable                           -            626
    Decrease/(increase) in trade receivables           4,155        (29,815)
    (Increase) in other receivables                   (2,102)          (810)
    (Increase) in deposits and prepayments           (19,273)       (28,237)
    Decrease in amounts due from a related party           -             50
    Increase in prepaid taxes                          1,755          1,924
    (Decrease)/increase in trade payables             (5,134)         6,265
    (Decrease)/increase in notes payables             (4,620)        13,167
    Increase/(decrease) in accruals and other
     payables                                          2,048        (13,745)
    (Decrease)/increase in provisions                 (1,299)         2,268
    (Decrease)/increase in other tax liabilities        (474)         1,290
    (Decrease) in amounts due to related parties           -         (1,070)
                                                      -------      --------
Cash from operating activities                       (34,314)       (81,189)

Interest paid                                            (23)             -
Income tax paid                                         (470)          (335)
                                                      ------         ------
Net cash from operating activities                   (34,807)       (81,524)
                                                     -------        -------

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received                                      7,454          1,775
Proceeds on disposal of property, plant and
equipment                                                 84             57
Purchase of property, plant and equipment             (2,241)          (889)
Business combination                                    (900)           (20)

Acquisition of investment in a joint venture          (2,500)             -
Proceeds on disposal of investment in a
joint venture                                          2,000              -
                                                       -----          -----
Net cash generated from/(used in) investing
activities                                             3,897            923
                                                       -----          -----

CASH FLOWS FROM FINANCING ACTIVITIES

New bank loans raised                                  9,000                -
Repayments of borrowings                              (9,000)               -
Proceeds on issue of shares                          115,652           75,625
                                                     -------           ------
Net cash from financing activities                   115,652           75,625
                                                     ------            ------

NET INCREASE IN CASH AND CASH EQUIVALENTS             84,742           (4,976)

CASH AND CASH EQUIVALENTS AT BEGINNING OF             52,959           54,230
YEAR
Effect of foreign exchange rate change                (5,286)           3,705
                                                      ------           ----- 
CASH AND CASH EQUIVALENTS AT END OF YEAR             132,415           52,959
                                                 ======== ====   ======= ======



NOTES TO FINANCIAL STATEMENTS

The main accounting policies that were adopted by EBT for the year ended 31
December 2007 were as follows.

Basis of Accounting
The financial information set out in the Preliminary Announcement does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985, but is derived from those accounts. While the financial information in
this Preliminary Announcement has been prepared in accordance with International
Financial Reporting Standards (IFRS), this announcement does not itself contain
sufficient information to comply with IFRS. Statutory accounts for the year
ended 31 December 2006 have been delivered to the Registrar of Companies and the
audit report in respect of the statutory accounts for the year ended 31 December
2007 has yet to be signed. The Company expects to publish those accounts in
April 2008.

Business Combinations
The acquisition of subsidiaries is accounted for using the Purchase Method.
Where an entity whose shares have been acquired (the legal subsidiary) is deemed
to be the acquirer and the entity issuing shares (the legal parent) is deemed to
be the acquiree, the transaction is termed a reverse acquisition under the
requirements of IFRS3 Business Combinations.

Revenue Recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discounts and other sales-related tax.
Sales of mobile phone handsets and phone cards are recognised when goods are
delivered and title has passed. Where the Group recognises revenue through the
sale of goods out of retail stores within department stores and hypermarkets,
the revenue is recognised at the gross value billed to the customer rather than
the net value retained after costs incurred with the department stores and
hypermarkets. Where the Group recognises revenue through the sale of goods out
of stores within the China Mobile service halls, the revenue is recognised at
the gross value billed to China Mobile rather than the net value retained after
costs incurred with China Mobile.

Share-Based Payments
The Group has applied the requirements of IFRS 2 Share-based Payments. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested at 1
January 2005. The Group issues equity-settled payments to certain employees.
Equity-settled share-based payments are measured at fair value (excluding the
effect of non market-based vesting conditions) at the date of grant. The fair
value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the Group's
estimate of shares that will eventually vest and adjusted for the effect of non
market-based vesting conditions.

Interest in a Joint Venture

A joint venture is a contractual arrangement whereby the Group and other parties
undertake an economic activity that is subject to joint control that is when the
strategic financial and operating policy decisions relating to the activities of
the joint venture require the unanimous consent of the parties sharing control.

Joint venture arrangements that involve the establishment of a separate entity
in which each venture has an interest are referred to as jointly controlled
entities. The results and assets and liabilities of a joint venture are
incorporated in these financial statements using the equity method of
accounting. Investments in a joint venture are carried in the balance sheet at
cost as adjusted by post-acquisition changes in the Group's share of the net
assets of a joint venture, less any impairment in the value of individual
investments. Losses of a joint venture in excess of the Group's interest in that
a joint venture (which includes any long-term interest that, in substance, form
part of the Group's net investment in the a joint venture) are recognised only
to the extent that the Group has incurred legal or constructive obligations or
made payments on behalf of the a joint venture.

Where a group company transacts with a joint venture of the Group, profits and
losses are eliminated to the extent of the Group's interest in a joint venture.
Losses may provide evidence of an impairment of the asset transferred in which
case appropriate provision is made for impairment.




                      This information is provided by RNS
            The company news service from the London Stock Exchange

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