(ETC.L) Et-china.com International Holdings Ltd Buy/Sell

* Net revenues up 8.2% to RMB 840 million (2008: RMB 776.7 million) * Gross profit up 14.1% to RMB 97.2 million (2008: 85.2 million) * Gross margin 11.6% (2008: 10.9%) * Loss after tax reduced by 79% to RMB 4.9 million (2008 Loss: RMB 22.7)

Matthew Ng, President and Chief Executive Officer, commented:

"The Board is optimistic that the Group will see an improved performance in the second half and has great confidence that the outlook for the Chinese travel sector remains highly attractive. Looking to 2010 we expect to benefit from increased volumes of travel surrounding the Shanghai World Expo, which runs from May to October and the Guangzhou Asian Games in November 2010.

The relative stability of the domestic economy is helping to rebuild consumer confidence in China which will benefit the travel market significantly. The Group is committed to growing the business and driving improved revenue growth and profitability.

We are also very pleased to welcome Maria Ng to the Board. Maria has a wealth of experience in the Asia Pacific travel industry through her time with Kouni and we look forward to cultivating closer links with Kuoni in the coming period."

Contact details for enquiries

Et-china.com International Holdings Limited 020 7067 0700 Matthew Ng, Chief Executive Officer

Seymour Pierce, Nomad and Broker 020 7107 8000

Mark Percy Catherine Leftley

Weber Shandwick Financial 020 7067 0700

Terry Garrett Stephanie Badjonat John Moriarty

Chairman's Statement

Results

I am pleased to report that the Group has continued to make good progress in developing its business during the six months to 30 June 2009. We have consolidated our position as the travel services market leader in Southern China in terms of revenue and we have made great strides in increasing our national presence. Recent government figures from CNTA (China National Tourism Administration) confirm this with the Group's tour operator business, GZL, ranked as the 5th largest travel operator in the whole of China, 4th for outbound and 6th for domestic travel.

The first half of 2009 began strongly with a substantial increase in trading over the 'Chinese New Year' 7 day holiday period. Both GZL, the Group's package tour provider and ETC, the FIT (Frequent Independent Traveler) business, saw steady progress in sales. The second quarter of the period saw a considerable reduction in the number of outbound trips sold, mainly due concerns over H1N1 (swine flu) and uncertainty over the pace of the recovery of the Chinese economy.

The acquisition of Yoee.com during the period has transformed Et-china's FIT business into a national operator and propelled the Group into the top 3 online travel providers in China. Yoee.com has now become an integral part of Et-china and the combined business has increased FIT revenues while margins have improved due to the ongoing integration. Management aims to improve margins as it implements further reductions to the cost base in the second half.

Most significantly the Group achieved continuing revenue growth of around 8% and substantially reduced its reporting loss during the period. This reflected continued profits from both GZL and the e-JV with China Southern Airlines, as well as a 31% reduction in the losses attributable to the Group's Frequent Independent Traveler business.

Stated revenue for the six months to 30 June 2009 rose over 8% to RMB 840.3 million (£74.1 million) from RMB 776.7 million in the same period of 2008. Gross operating profit was RMB 97.2 million (£8.6 million) (2008: RMB 85.2 million), up by 14.1%. The Group reduced losses by 78.6%, recording a loss after tax and minority interest of RMB 4.8m (£0.4 million) (2008: Loss RMB 22.7 million).

Within GZL, the strongest growth in revenue came from e-commerce activities which achieved a 25% rise in revenue to RMB 51.6 million (2008: RMB 41.5 million). Domestic travel sales increased by 10% to RMB 271.2 million (2008: RMB 246.9 million) and Outbound travel saw growth of just over 8% to RMB 447.5 million (2008: 414.3 million). These figures reflect the continuing appetite for travel amongst Chinese nationals as the economy stabilizes. A further example of this is the enormous increase in the volume of travelers to Taiwan where numbers of mainland tourists for the first half of 2009 are nearly triple that of the whole of 2008.

Turning to our FIT division, Et-china saw a 31% reduction in revenues to RMB 15.1 million, which was mainly due to the discontinuation of group tours within ETC FIT. However, the division showed continued margin improvement to around 45% as management closely controlled costs over the period.

The Group's e-ticketing joint-venture grew revenues to RMB 21.3 million (2008: RMB 14.9 million) an increase of 43% as the division saw a 55% rise in B2B customers.

In June we announced that Kuoni Travel Holding Limited ('Kuoni'), one of the largest global leisure travel companies had acquired a 31.8% stake in the Group. Consequently we have appointed Yuk-Yin Maria Ng (Maria) as a Non-Executive Director. Maria is currently Managing Director of Kuoni Travel (China) Limited and brings with her a wealth of experience in the Asia Pacific travel industry which will help Et-china develop and grow. Management intends to cultivate closer links with Kuoni and has arranged for senior management to visit Kuoni's headquarters in Zurich to establish a collaborative marketing strategy for the region.

Outlook

We have seen an improved performance from our Domestic travel operations with revenues growing by 29% in July of 2009 and we look forward to 'Golden Week' (1 - 8 October) which is expected to continue to show an increase in the number of people travelling. We also expect to see a recovery in Outbound travel, following a perceived reduction in the threat from H1NI, in the fourth quarter and anticipate a resumption in growth from Et-china FIT as marketing spend is increased and the benefits of a significant system integration and upgrade bear fruit.

The Board is optimistic that the Group will see an improved performance in the second half and has great confidence that the outlook for the Chinese travel sector remains highly attractive. Looking to 2010 we expect to benefit from increased volumes of travel surrounding the Shanghai World Expo, which runs from May to October and the Guangzhou Asian Games in November 2010.

The relative stability of the domestic economy is helping to rebuild consumer confidence in China which will benefit the travel market significantly The Group is committed to growing the business and driving improved revenue growth and reducing losses.

Matthew Ng

Chairman

28 August 2009

Consolidated income statement

for the half year ended 30 June 2009

Six months ended 30 June Six months ended 30 June 2008

RMB'000 RMB'000

Revenue 840,253 776,703

Direct operating costs (743,076) (691,509)

Gross profit 97,177 85,194

Other operating income (948) 2,681
Selling, general and (105,374) (108,585)

administrative expenses Net change in fair value of redemption
option of convertible loan - -

notes
Result from operating (9,144) (20,710)

activities
Finance income 23,850 1,948
Finance expense (3,771) (1,124)

Net finance income/ (expense) 20,079 824

Share of profit of associates,
net of income tax expense - -

Profit/(loss) before income 10,935 (19,886)

tax expense
Income tax expense (6,005) (369)

Profit/(loss) for the year 4,929 (20,255)

Minority interests 9,788 2,436

Net loss for the year (4,859) (22,691)

(Loss) per share (RMB) (0.14) (0.69)

Consolidated balance sheet

As at 30 June 2009

As at 30 June 2009 As at 30 June 2008
RMB'000 RMB'000

Assets
Property, plant and equipment 50,513 58,768
Intangible assets 46,966 46,472
Investment properties 7,256 7,973
Investment in associates 4,046 12,280
Other investment 70,029 59,712
Lease prepayments 27,433 28,207

Total non-current assets 206,243 213,412

Inventories 19,488 20,152
Trade receivables 86,320 77,955
Deposits, prepayments
and other receivables 89,295 90,266
Fair value of foreign
exchange forward contracts - -
Tax recoverable 187 1,711
Amounts due from a director 294 840
Pledged deposits 21,882 57,010
Cash and cash equivalents 305,717 233,869

Total current assets 523,183 481,803

Total assets 729,426 695,215

Equity
Share capital - -
Share premium 192,508 192,508
Other reserves 139,533 104,945
Accumulated losses (247,055) (201,398)

Total equity attributable
to equity holders of the 84,985 96,056
Company

Minority interests 74,831 75,421

Total equity 159,816 171,477

Liabilities
Deferred income - -
Deferred tax liabilities 27,755 26,980

Total non-current liabilities 27,755 26,980

Trade payables 110,682 102,256
Accrued expenses and other 186,740 250,640
payables
Fair value of foreign
exchange forward contracts - -
Amounts due to directors - 2,776
Loans and borrowings 244,433 141,086

Total current liabilities 541,855 496,758

Total liabilities 569,610 523,738

Total equity and liabilities 729,426 695,215

Consolidated cash flow statement

for the half year ended 30 June 2009

Six months ended 30 Six months ended 30
June 2009 June 2008
RMB'000 RMB'000

Cash flows from operating activities
Net loss for the (4,859) (22,691)
year
Depreciation 3,518 4,753
Amortisation of 101 (3,648)
Intangible assets
Increase / 75,072 (11,697)
(decrease) in net
working capital

Net cash generated
from/(used in)
operating 73,832 (33,283)
activities

Cash flows from investing activities
Acqusition of fixed 2,863 (754)
assets and
intangible assets
Investment (27,781) 19,667

Cash flows from (24,918) 18,913
investing activities

Cash flows from financing activities
Short term loan 12,692 7,201
Long-term loan 67,389 70,121
Capital Contribution (8,631) (16,725)

Total current 71,450 60,597
liabilities

Net Increase in cash 120,364 46,227

Cash at start of period 185,353 187,642

Cash at end of the period 305,717 233,869

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

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