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51Job.com: Chinese Internet Recruitment Weakens Pace

Chinese online recruitment website 51job.com (JOBS) says its total revenues for the second quarter ended June 30, 2008 increased by only 4.5% from the beginning of this year.

The human resource company made the announcement of its unaudited financial results and said those total revenues for the second quarter hit CNY218.7 million. In particular, online revenues increased 17.0% over the second quarter of 2007 to CNY83.3 million and gross margin was 54.9% compared with 57.8% from that quarter one year ago. Net income for the second quarter of 2008 decreased 37.8% to CNY19.3 million from CNY31.0 million for the same quarter in 2007.

President and CEO of 51job Rick Yan issued a statement on the poor results and said, "Revenues for the second quarter were below expectations as we were impacted by the combination of the devastating Sichuan earthquake, the loss of the seasonal recruitment peak following the elimination of the May weeklong holiday and reduced demand for recruitment services. During the quarter, we began to see sluggish hiring by our corporate customers amid higher labor costs, challenging conditions for certain industries including exporters and slower economic growth in China. We expect recruitment activity in the third quarter will further moderate as we believe regulations instituted by the government for the Olympic Games will restrict normal business practices for companies in Beijing and indirectly affect businesses nationwide. In addition, we expect individuals will focus more on these once- in-a-lifetime Games in China and less on job searches during this period."

Print advertising revenues for the second quarter of 2008 decreased 12.7% to CNY93.9 million compared with CNY107.6 million for the same quarter in 2007. The decrease was primarily the result of general business disruptions and reduced customer activity resulting from the Sichuan earthquake in May, the loss of the post-holiday seasonal peak following the government's elimination of the weeklong May holiday this year, a decline in customer demand and lower average revenue per page.

Gross profit for the second quarter of 2008 was CNY114.4 million compared with CNY115.1 million for the same quarter of the prior year. Operating expenses for the second quarter of 2008 increased 16.8% to CNY84.1 million from CNY72.0 million for the same quarter of 2007 due primarily to higher sales and marketing expenses. Operating expenses as a percentage of net revenues was 40.4% for the second quarter of 2008 compared with 36.2% for the second quarter of 2007. Excluding share-based compensation expense, operating expenses as a percentage of net revenues was 37.5% in the second quarter of 2008 compared with 33.3% in the second quarter of 2007.

Sales and marketing expenses for the second quarter of 2008 increased 23.6% to CNY52.2 million from CNY42.2 million for the same quarter of the prior year due to higher labor costs resulting from staff additions and rising wage levels as well as greater advertising and promotion expenses.

Fully diluted earnings per common share for the second quarter of 2008 were CNY0.34 compared with CNY0.55 for the same quarter in 2007. Fully diluted earnings per ADS for the second quarter of 2008 were CNY0.68 compared with CNY1.10 in the second quarter of 2007.

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