SOURCE: China Cablecom Holdings, Ltd.
June 18, 2008 08:26 ET
China Cablecom Completes Phase One Acquisition of Hubei Chutian Network
Phase One of Hubei Acquisition Adds Over 800,000 Paying Subscribers; China Cablecom's Total Paying Subscribers After Acquisition Exceeds 1.2 Million
SHANGHAI, CHINA--(Marketwire - June 18, 2008) - China Cablecom Holdings, Ltd. ("China
Cablecom") (OTCBB: CCCHF) (OTCBB: CCCZF) (OTCBB: CCCWF), a joint-venture
provider of cable television services in the People's Republic of China
(PRC), today announced that it has completed the first phase of a
previously announced agreement to acquire a 60 percent economic interest in
Hubei Chutian Video & Information Network ("Hubei Broadcasting"), a joint
venture with Hubei Chutian Broadcasting and Television Network Co., Ltd.
("Hubei Chutian"), a local state-owned enterprise, owned by the Hubei
branches of China's State Administration of Radio Film and Television
("SARFT") and nine other municipal branches of China's SARFT in Hubei
province.
The consummation of phase one, representing 17 cities, of the Hubei
Broadcasting acquisition secures over 800,000 additional paying subscribers
for China Cablecom. Total consideration to be paid for phase one will be
approximately $55 million and will be payable in installments. China
Cablecom will be able to consolidate 60 percent of the financial results of
operations and cash flows of Hubei Broadcasting into its financial results
pursuant to US Generally Accepted Accounting Principles from the date of
closing. Phase two, which was previously announced, would represent an
additional 800,000 paying subscribers and is pending further due diligence
and execution of definitive agreements.
Located in the Hubei province in central China, Hubei Chutian controls over
30 cable network systems, which serve approximately 50 percent of a total
provincial population base of 60.3 million. The Hubei Chutian cable network
passes 4.5 million homes and has approximately 3.0 million paying
subscribers.
Summary financial information, reflecting 100 percent of Hubei Chutian on a
stand-alone basis, and non-financial operating metrics for the 17 cities
acquired is as follows:
Quarter ended
March 31,
2006 2007 % Increase 2008
------------ ------------ ------------ ------------
(revenues and EBITDA (audited) (unaudited)
in millions)
Revenues $ 14.3 $ 19.3 35% $ 6.1
EBITDA $ 6.2 $ 8.0 29% $ 2.5
Paying subscribers 664,601 784,642 18% 821,342
ARPU $ 1.79 $ 2.05 15% $ 2.05
Hubei Chutian's audited balance sheet at December 31, 2007 reported $44.5
million in property, plant and equipment, net of depreciation, and $7.1
million in equity.
Selected unaudited pro forma information, reflecting China Cablecom's 60
percent consolidation of the 17 cities acquired from Hubei Chutian, is as
follows:
Quarter ended
Consolidated pro forma China Cablecom (1) 2007 March 31, 2008
(revenues and EBITDA in millions) ------------- --------------
Revenues $ 26.3 $ 8.1
EBITDA $ 7.3 $ 2.3
Paying subscribers 1.1 million 1.2 million
(1) Assumes the following took place on January 1, 2007: (1) the business
combination between Jaguar Acquisition Corporation and China Cablecom and
(2) the consummation of the consolidation of 17 cities included in phase
one of the Hubei Broadcasting acquisition.
Selected statistical and demographic information relating to the 17 cities
acquired in phase one are as follows:
Total households 2.7 million
Homes passed 1.0 million
Cable TV penetration 38.5%
Population 9.2 million
GDP growth (Hubei province) 22.1%
According to analysis by Skillnet GmbH, Hubei Province has the 6th largest
cable broadcasting market in the PRC. Government directives mandate the
conversion of the entire country to digital cable TV by 2015, which allows
cable TV operators to drive significant revenue growth and enhance margins
which is complemented by selling higher priced value-added services and
content, such as broadband internet service. According to the
digitalization plan announced by SARFT, by 2010, 57 percent of cable
households in the Hubei province are expected to convert to digital, an
increase of approximately 110 percent, while ARPUs are expected to reach
approximately $3.45 per month, representing an approximate 72 percent
increase from current levels associated with existing subscribers of analog
service.
This is the second major acquisition by China Cablecom since the company
was founded in October of 2006. It follows the company's September 2007
acquisition of Binzhou Broadcasting and Television Information Network Co.,
Ltd. ("Binzhou Broadcasting"), an operating cable TV joint venture with a
local SOE owned by the Binzhou branches of SARFT in the Shandong province.
"I am very pleased to report our closure of phase one of the acquisition of
Hubei on schedule. With over 1.2 million current paying subscribers, China
Cablecom ranks as one of the largest cable operators in the world by
subscribers," says Clive Ng, founder and Executive Chairman of China
Cablecom. "Our team continues to successfully execute our expansion goals
and securing this joint venture has allowed us to create significant
organic growth opportunities through recurring subscription-based revenues
thereby strengthening our cash flow from operations."
Mr. Ng concluded, "With the nation-wide digital migration initiative
gaining momentum, China Cablecom is committed to its digitization strategy
as we move into the new era of digital TV broadcasting. We will continue to
look for profitable acquisition opportunities to diversify revenue and
enhance the long term value of China Cablecom Holdings for its
shareholders."
Outlook for the full year 2008 (1)
To enhance comparability, China Cablecom is providing its outlook for 2008
on a pro forma basis.
For full year 2008, China Cablecom anticipates pro forma EBITDA of $11
million as we continue to add analog and digital subscribers throughout
2008.
On a GAAP basis, China Cablecom anticipates the recognition of a net loss
of $10 million for full year 2008. The net loss for 2008 is primarily
attributable to (1) the non-cash amortization of intangible assets which
were acquired in connection with China Cablecom's acquisitions of Binzhou
Broadcasting and Hubei Broadcasting and (2) non-cash interest expense
associated with the original issue debt discount and deferred financing
costs relating to China Cablecom's September 2007 bridge financing and May
2008 convertible note financing.
2008 (1)
-----------
Homes passed 1.8 million
Paying subscribers 1.4 million
Digital subscribers 300,000
(1) The pro forma projections assume that the following took place on
January 1, 2008: (1) the business combination between Jaguar Acquisition
Corporation and China Cablecom and (2) the consummation of the
consolidation of 17 cities acquired in phase one of the Hubei Broadcasting
acquisition. Pro forma EBITDA is defined as net loss before interest,
taxes, depreciation, amortization and other non-recurring
acquisition-related charges.
About China Cablecom Holdings
China Cablecom Holdings is a joint-venture provider of cable television
services in the People's Republic of China, operating in partnership with a
local state-owned enterprise ("SOE") authorized by the PRC government to
control the distribution of cable TV services through the deployment of
analog & digital cable services. China Cablecom recently entered into an
agreement to acquire a 60 percent economic interest in a cable network in
Hubei province with paying subscribers exceeding 800,000. The Company
originally acquired operating rights of the Binzhou Broadcasting network in
Binzhou, Shandong Province in September 2007 by entering into a series of
asset purchase and services agreements with a company organized by SOEs
owned directly or indirectly by local branches of SARFT in five different
municipalities to serve as a holding company of the relevant businesses.
China Cablecom operates 22 cable networks with over 1.2 million paying
subscribers. China Cablecom Holdings' strategy is to replicate the
acquisitions by operating partnership models in other municipalities and
provinces in the PRC and then introducing operating efficiencies and
increasing service offerings in the networks it operates.
Non-GAAP Financial Measures
This release contains discussion of China Cablecom's revenues, and
projected and pro forma revenues, as well as earnings before interest,
taxes, depreciation and amortization (EBITDA) and projected/pro forma
EBITDA and EBITDA and projected/pro forma ARPU. Although EBITDA and
projected/pro forma EBITDA are not measures of financial condition or
performance determined in accordance with Generally Accepted Accounting
Principles, China Cablecom uses EBITDA to value businesses it acquires or
anticipates acquiring. EBITDA and projected/pro forma EBITDA are not
defined in the same manner by all companies and may not be comparable to
other similarly titled measures of other companies unless the definition is
the same.
Below is a table reconciling certain non-GAAP financial measures appearing
elsewhere herein relating to Hubei Chutian on a stand-alone basis to the
most closely analogous GAAP measures:
Year Ended December 31,
--------------------------------
Quarter Ended
2006 2007 March 31, 2008
--------------- --------------- ---------------
(unaudited)
Net income $ 2,485,968 $ 3,442,004 $ 1,080,721
Depreciation and
amortization 2,752,914 3,892,797 1,146,258
Interest income (9,145) (14,620) (3,715)
Interest & finance 49,111 109,793 19,146
Income tax 953,609 617,060 249,231
--------------- --------------- ---------------
Non-GAAP income (EBITDA) $ 6,232,457 $ 8,047,034 $ 2,491,641
=============== =============== ===============
Below is a table reconciling certain non-GAAP financial measures relating
to China Cablecom's consolidated pro forma net income, reflecting China
Cablecom's 60 percent consolidation of Binzhou Broadcasting and the 17
cities acquired from Hubei Chutian, to the most closely analogous GAAP
measures:
Quarter Ended
2007 March 31, 2008
--------------- ---------------
(Unaudited in USD)
Net income $ 276,970 (927,762)
Amortization 652,851 618,345
Depreciation 3,637,744 1,265,553
Interest income (107,333) (20,696)
Interest & finance 2,326,105 1,096,689
Income tax 513,005 226,227
--------------- ---------------
Non-GAAP income (EBITDA) $ 7,299,342 $ 2,258,356
=============== ===============
Safe Harbor Statement
The matters discussed in this press release contain "forward-looking
statements" as defined in the Private Securities Litigation Reform Act of
1995. Forward-looking statements contained in this presentation and in the
Company's other written and oral reports are based on current Company
expectations and are subject to risks and uncertainties, which could cause
actual results to differ materially. Any forward-looking statements are not
guarantees of future performance and actual results of operations,
financial condition and liquidity, and developments in the industry may
differ materially from those made in or suggested by the forward-looking
statements contained herein. These forward-looking statements are subject
to numerous risks, uncertainties and assumptions. The forward-looking
statements herein speak only as of the date stated herein and might not
occur in light of these risks, uncertainties, and assumptions. China
Cablecom Holdings undertakes no obligation and disclaims any obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise. You should
carefully consider these factors as well as the additional risk factors
outlined in the filings that China Cablecom Holdings makes with the U.S.
Securities and Exchange Commission, including the Registration Statement on
Form S-1 filed on April 18, 2008.
HUBEI CHUTIAN RADIO & TELEVISION INFORMATION NETWORK CO., LTD.
(17 BRANCHES - CARVE-OUT)
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
(Audited)
2007 2006
USD USD
------------ ------------
Revenues, net $ 19,294,877 $ 14,266,818
Cost of revenues (2,205,021) (1,805,627)
------------ ------------
Gross profit 17,089,856 12,461,191
General and administrative expenses (5,224,199) (3,812,870)
Sales and marketing expenses (8,169,038) (5,676,668)
Finance cost (109,793) (49,111)
------------ ------------
Operating income 3,586,826 2,922,542
Interest income 14,620 9,145
Other income 457,618 507,890
------------ ------------
Income before income taxes 4,059,064 3,439,577
Provision for income tax (617,060) (953,609)
------------ ------------
Net income $ 3,442,004 $ 2,485,968
============ ============
HUBEI CHUTIAN RADIO & TELEVISION INFORMATION NETWORK CO., LTD.
(17 BRANCHES - CARVE-OUT)
COMBINED BALANCE SHEETS
DECEMBER 31,
(Audited)
Assets 2007 2006
USD USD
------------ ------------
Current assets
Cash $ 1,933,257 $ 1,992,309
Accounts receivable, net 272,500 222,378
Prepayments and other receivables 1,239,969 1,579,312
Inventories 1,061,075 947,938
------------ ------------
Total current assets 4,506,801 4,741,937
------------ ------------
Non-current assets
Property, plant and equipment, net 44,471,683 39,472,481
Intangible assets, net 233,665 223,382
Construction in progress 345,020 500,638
Deferred tax assets 73,371 22,886
------------ ------------
Total non-current assets 45,123,739 40,219,387
------------ ------------
Total assets $ 49,630,540 $ 44,961,324
============ ============
Liabilities and equity
Current liabilities
Accounts payable $ 3,144,547 $ 2,725,914
Accrued expenses and other payables 4,822,359 5,957,103
Amounts due to Hubei Chutian 32,170,242 31,282,540
Tax payable 2,377,540 1,639,614
------------ ------------
Total current liabilities 42,514,688 41,605,171
------------ ------------
Equity
Retained earnings 6,716,275 3,274,271
Accumulated other comprehensive income
Foreign currency translation adjustment 399,577 81,882
------------ ------------
Total equity 7,115,852 3,356,153
------------ ------------
Total liabilities and equity $ 49,630,540 $ 44,961,324
============ ============
HUBEI CHUTIAN RADIO & TELEVISION INFORMATION NETWORK CO., LTD.
(17 BRANCHES - CARVE-OUT)
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Quarter
ended ended
March 31, March 31,
2008 2007
USD USD
----------- -----------
Revenues, net $ 6,075,086 $ 4,558,491
Cost of revenues (765,716) (467,852)
----------- -----------
Gross profit 5,309,370 4,090,639
General and administrative expenses (1,915,945) (1,278,424)
Sales and marketing expenses (2,351,604) (2,005,288)
Finance cost (19,146) (37,047)
----------- -----------
Operating income 1,022,675 769,880
Interest income 3,715 2,304
Other income 303,562 205,163
----------- -----------
Income before income taxes 1,329,952 977,347
Provision for income tax (249,231) (141,061)
----------- -----------
Net income $ 1,080,721 $ 836,286
=========== ===========
HUBEI CHUTIAN RADIO & TELEVISION INFORMATION NETWORK CO., LTD.
(17 BRANCHES - CARVE-OUT)
COMBINED BALANCE SHEETS
(Unaudited)
March 31, December 31,
Assets 2008 2007
USD USD
------------ ------------
Current assets
Cash $ 2,153,767 $ 1,933,257
Accounts receivable, net 225,728 272,500
Prepayments and other receivables 1,651,488 1,239,969
Inventories 1,467,114 1,061,075
------------ ------------
Total current assets 5,498,097 4,506,801
------------ ------------
Non-current assets
Property, plant and equipment, net 46,352,388 44,471,683
Intangible assets, net 242,540 233,665
Construction in progress 776,599 345,020
Deferred tax assets 81,931 73,371
------------ ------------
Total non-current assets 47,453,458 45,123,739
------------ ------------
Total assets $ 52,951,555 $ 49,630,540
============ ============
Liabilities and equity
Current liabilities
Accounts payable $ 3,151,358 $ 3,144,547
Accrued expenses and other payables 6,091,798 4,822,359
Amounts due to Hubei Chutian 32,471,396 32,170,242
Tax payable 2,729,339 2,377,540
------------ ------------
Total current liabilities 44,443,891 42,514,688
------------ ------------
Equity
Retained earnings 7,796,996 6,716,275
Accumulated other comprehensive income
Foreign currency translation adjustment 710,668 399,577
------------ ------------
Total equity 8,507,664 7,115,852
------------ ------------
Total liabilities and equity $ 52,951,555 $ 49,630,540
============ ============