Reports 12 Percent Year-on-Year Profit Growth in Q3

On-going trust & safety initiatives leading the way to future growth


  • Revenue in Q3 2011 up 11 percent year-on-year (y-o-y) to RMB1,602 million (US$250.4 million)
  • Value-added services continue to improve revenue mix for a more balanced business model
  • Profit attributable to equity owners grew 12 percent y-o-y to RMB410 million (US$64.0 million); diluted EPS grew 18 percent y-o-y
  • User experience improvements and trust & safety measures continue on the platform
  • Recent repurchase of company shares demonstrates confidence in the fundamentals of the business as well as efforts to enhance shareholder returns

HONG KONG--()--Amidst a depressed global economy and the decline in manufacturing, Limited (HKSE:1688) (1688.HK), the world’s leading small business e-commerce company, today announced unaudited financial results for the quarter ended September 30, 2011. With weaknesses in the US economy and debt troubles in the Eurozone threatening to spin out of control, remains cautious of the global economic outlook, which may have a prolonged impact on China’s export sector. Despite these challenges, announced a revenue increase of 10.6 percent year-on-year (y-o-y), driving y-o-y diluted EPS growth by 18.1 percent. Revenue from’s international marketplace also increased by 11.8 percent y-o-y, attributable primarily to the increase in revenue from Value-Added Service (VAS) and contributions from new businesses, including Vendio, Auctiva and One-Touch. In addition, revenue from the China marketplace increased 13.9 percent y-o-y, attributable to the increase in revenue from VAS.’s quarterly results reflect the Company’s on-going platform enhancement activities, announced earlier this year, which have not yielded immediate meaningful financial contributions. The continuous platform enhancements are set to improve the user experience, supplier quality and trust and safety measures.

Q3 2011 Financial and Operational Highlights



  Q3 2010
RMB million

Q3 2011
RMB million



  Q2 2011
RMB million


Revenue 1,449.3 1,602.4 +10.6% 1,623.8 -1.3%
Earnings before interest, taxes and amortization (“EBITA”)


410.4 +0.1% 486.3 -15.6%
Profit attributable to equity owners 366.1 409.7 +11.9% 464.5 -11.8%
Share-based compensation expense 108.9 93.2 -14.5% 90.7 +2.8%

Deferred revenue and customer advances


4,141.7 +7.0% 4,059.7 +2.0%
Recurring free cash flow 731.9 413.4 -43.5% 451.4 -8.4%
Pre-share-based compensation expense EBITA margin (%) 35.8% 31.4%


35.5% -4.1%pts
Earnings per share, basic (HK$) 8.3 cents 9.8 cents +18.1% 11.0 cents -10.9%
Earnings per share, diluted (HK$) 8.3 cents 9.8 cents +18.1% 11.0 cents -10.9%



September 30,


September 30,




June 30,




Q3 2011
Net change

Registered users 56,722,482 72,777,255 +28.3% 68,900,278 +5.6% +3,876,977
International marketplace 14,921,668 23,751,148 +59.2% 21,625,081 +9.8% +2,126,067
China marketplace 41,800,814 49,026,107 +17.3% 47,275,197 +3.7% +1,750,910
Storefronts 8,199,384 9,557,596 +16.6% 9,195,763 +3.9% +361,833
International marketplace 1,622,597 1,973,129 +21.6% 1,867,452 +5.7% +105,677
China marketplace 6,576,787 7,584,467 +15.3% 7,328,311 +3.5% +256,156
Paying members 750,937 787,653 +4.9% 815,378 -3.4% -27,725
China Gold Supplier 108,572 107,177 -1.3% 112,191 -4.5% -5,014
Global Gold Supplier 11,017 8,285 -24.8% 9,245 -10.4% -960
China TrustPass   631,348   672,191   +6.5%   693,942   -3.1%   -21,751

"With our strong brand and innovative team, we remain very confident in the long-term future of,” said Jonathan Lu, CEO of “Despite the stress posed by the external environment, we will stay focused on upgrading our business model and building quality, trustworthy e-commerce platforms. We remain committed to our world’s largest B2B customer base and will continue to evolve our business to better serve them with a number of initiatives designed to improve supplier quality and the buyer experience. We expect these initiatives will positively enhance our financial health, providing additional performance-based revenue streams, which will take time to fully implement. While the investments associated with these upgrades to our business will have an impact on near-term financials, we are confident we are doing what is right for our customers, both sellers and buyers, for years to come.”

Business highlights and review

The latest export data shows that China’s export growth has begun to decline. Under current complex macro conditions, China’s domestic consumption will take a considerable amount of time before again achieving strong growth. As expected, the number of paying members declined in the third quarter due to the execution of long-term plans set out earlier this year to enhance the user experience as well as trust and safety measures. As of September 30, 2011, registered a total of 787,653 paying members.

During the third quarter, attracted approximately 3.9 million new users for a total of 72.8 million registered users and now hosts more than 360,000 new storefronts for a total of 9.6 million.’s business fundamentals remain solid with the implementation of initiatives that provide significant value for new and existing customers. Confidence in the organization is reflected in the decision to launch a share buy-back program enabled by the Company’s ample cash balance in September, with a purchase of 67.8 million shares amounting to HKD509 million (USD65.3 million) in September and October of 2011.

International marketplace:

  • Registered users: In the third quarter, the number of registered users on increased by 2.1 million for a total of 23.8 million.
  • Storefronts: The number of storefronts on totaled 2.0 million as of September 30, 2011, signifying a growth of 5.7 percent over last quarter.
  • Trust & Safety: During the third quarter, developed services to enhance the level of trust between buyers and suppliers on the marketplace. These initiatives to enhance a quality e-commerce platform are paying off. The Company has continued to execute plans announced earlier this year that centered around (1) enhancing user quality and user experience, as well as strengthening the depth and the breadth of user information captured on the platform; and (2) evolving the business model by developing the performance-based and transaction-based services. For example, in September 2011, announced its “on-site inspection” program which represents a second level of verification that members are legitimate business. A platform-wide escrow service (beta) and a paid order-inspection service are also giving buyers extra protection when sourcing online. The number of complaints on frauds committed by paying members received in September has decreased by 75 percent, y-o-y.
  • Traffic: Traffic growth on the e-commerce platform remains buoyant. The platform’s higher quality supplier base has attracted more buyers and generated more activities. In September, overseas daily average traffic in terms of unique visitors saw a y-o-y growth of 65 percent. is also developing a multi-lingual system to present product information in multiple languages to enable buyers around the world to source more easily, and has brought more overseas traffic to the international marketplace.
  • Gold Supplier: As of September 30, 2011, recorded 107,000 China Gold Supplier members, representing a decline of 5,000 members quarter-over-quarter (q-o-q). recorded a total of more than 8,200 Global Gold Supplier members in the third quarter. The sequential decline in China Gold Supplier memberships was expected, mainly due to the ongoing tightening of quality control of suppliers that sets the bar higher for customer acquisition. The price hikes for membership, effective January 2011, also partly slowed the pace of new member acquisition. The renewal rate of CGS members, however, has been relatively stable throughout the year.
  • VAS: Overall, the progress of VAS development has been on track. Ali-ADvance has seen adoption increase in the third quarter. Based on’s experience in the China marketplace, usage and penetration of Ali-ADvance will likely require several more quarters to gain awareness and momentum. VAS revenue contribution has crept up over the first three quarters of 2011 and approached 30 percent of China Gold Supplier revenue in the third quarter.
  • AliExpress: AliExpress continued to grow. Gross merchandize value (GMV) in the third quarter reduced slightly due to the termination of PayPal as a payment option on AliExpress in August 2011. This impact was much milder than expected and the average daily GMV is again trending upward. AliExpress is still undergoing investment and refinement to focus on platform development, trust and safety measures and product delivery systems. In particular, during the third quarter, buyer protection enhancements provided a payment protection and refund program. The recently-launched “Assurance Plus” program not only makes the buyer experience on AliExpress safer and easier, but also serves to raise sellers’ trustworthiness. The “Assurance Plus” status is available only to qualified suppliers able to meet necessary requirements and will have the “Assurance Plus” logo clearly shown on their storefronts.

China marketplace:

  • Registered users: As of September 30, 2011,’s Chinese platform,, recorded 49.0 million users marking an increase of 1.8 million users q-o-q.
  • Storefronts: The third quarter registered an increase in storefronts by 256,000, or 3.5 percent.
  • China TrustPass: By the end of third quarter, saw a decrease of 21,751 China TrustPass members (total of 672,000) mainly due to the slowing of member acquisition since discontinuing the individual China TrustPass edition in the second quarter of 2011. Focus shifted to more user authenticity and, buyer traffic and experience. The membership renewal rate, however, has remained steady.
  • Trust & Safety: The Company’s drive to improve the quality of suppliers on the platform is paying off.’s Chinese platform has moved further into capturing more comprehensive user information on the platform. Since September, all suppliers on the China marketplace have had to register their real name. This requirement not only enhances the credibility of information posted by suppliers on but also creates a more extensive user database. As for user experience enhancement, the platform was overhauled to make it more buyer-oriented and user-friendly. The GMV of online transactions on continue to grow healthily. With improvements made to suit wholesale buying behavior, wholesale activities are again beginning to gain traction. will continue efforts in driving more transactions from offline to online and provide a trusted environment for buyers and suppliers to safely trade on the platform.
  • VAS: has seen a gradual but modest growth in VAS revenue over the past few quarters. VAS revenue contributed to nearly 25 percent of China TrustPass revenue in the third quarter.
  • Liang Wu Xian (previously Wu Ming Liang Pin): Since launching Liang Wu Xian in the first quarter of 2011 as a B2C transaction platform, it has undergone continuous refinement. In August, it was renamed which clearly positioned Liang Wu Xian as a supply chain management service for Chinese manufacturers that involves manufacturing control, product quality control, dedicated logistics and distribution. To ensure buyers can source high quality products from Liang Wu Xian suppliers, they and their products are required to be vetted by third-party verification service providers. The value proposition of Liang Wu Xian is now far beyond that of a pure transaction platform. The initial focus has been on refining the business model rather than driving monetization; once quality service and value are well established, revenue will follow.

Financial results continues to report solid financial performance in the third quarter of 2011. continues to play an important role in heading off challenges and uncertainties in the macro environment by creating value for users in China and around the world, cementing its position as the world’s leading small business e-commerce service provider.


  • Total GAAP revenue: Total GAAP revenue in the third quarter grew 10.6 percent y-o-y to RMB1.6 billion (USD250.4 million).
  • International marketplace: Revenue from’s international marketplace increased to RMB947.5 million (USD148.0 million) in the period, an 11.8 percent increase y-o-y and remained flat q-o-q. The y-o-y growth was primarily due to the increase in VAS revenue as well as the contributions from new businesses, including Vendio, Auctiva and One-Touch, acquired in the latter half of 2010 and the first half of 2011, and from an increase in transaction-based revenue from AliExpress. Despite the q-o-q decline in paying members, an increased contribution from non-membership revenue has offset the reduction in revenue from subscription fees.
  • China marketplace: Revenue from’s China marketplace ( increased to RMB560.7 million (USD87.6 million) in the period, representing a 13.9 percent increase y-o-y and a 1.5 percent increase q-o-q. The growth in revenue for both y-o-y and q-o-q was mainly attributable to the increase in revenue from Ali-ADvance and premium placements.
  • Other revenue: Other revenue was RMB94.2 million (USD14.7 million) in third quarter, representing a 14.3 percent decrease y-o-y and a 23.0 percent decrease from last quarter. The decrease both y-o-y and q-o-q was mainly due to non-cash accounting adjustments made by HiChina in connection with preparatory work relating to its proposed spin-off.

Gross profit: Gross profit increased to RMB1,297.8 million (USD202.8 million) in the period, up 7.5 percent y-o-y from RMB1,207.2 million (USD188.6 million) and flat from RMB1,308.7 million (USD204.5 million) in the second quarter of 2011.

Gross profit margin: Gross profit margin declined to 81.0 percent compared with 83.3 percent in the same period last year and was flat from 80.6 percent in the second quarter of 2011. The decline y-o-y was primarily due to a higher cost of revenue stemming from the consolidation of financial results from Vendio, Auctiva and AliExpress, which have relatively lower gross profit margins.

Total operating expenses: Total operating expenses were RMB936.5 million (USD146.3 million) in the period, representing a 12.6 percent increase y-o-y from RMB831.9 million (USD130.0 million) and a 9.4 percent increase q-o-q from RMB856.1 million (USD133.8 million). The increase in operating expenses, for both y-o-y and q-o-q, was mainly due to increases in staff costs and the consolidation of expenses incurred by One-Touch. continues to manage total headcount numbers with a focus on investing in product development to enhance the user experience. As a percentage of revenue, total operating expenses were 58.4 percent for the period, compared with 57.4 percent in the same period last year and 52.7 percent for the second quarter of 2011. The sequential increase was mainly due to the increase in staff costs for salary adjustments and various employee subsidy programs introduced in the third quarter of 2011 for general staff in China (PRC), such as living allowances and child education allowances.

EBITA:’s profit margin before interest, taxes and amortization (EBITA margin, non-GAAP) was 25.6 percent for the period, a decrease from 28.3 percent in the same period of 2010 and 29.9 percent in the second quarter of 2011. EBITA margin (non-GAAP) before share-based compensation expense was 31.4 percent for the period, a decrease from 35.8 percent in the same period last year and 35.5 percent in the second quarter of 2011. The decrease in EBITA margin before share-based compensation expense y-o-y was mainly due to the decrease in gross profit margin while the q-o-q decrease was due to an increase in total operating expenses, mentioned above.

Profit attributable to equity owners: Profit attributable to equity owners was RMB409.7 million (USD64.0 million) in the period, an increase of 11.9 percent from the same period in 2010 but a decrease of 11.8 percent from the second quarter of 2011. The y-o-y increase was largely contributed by the increase in VAS revenue, while the q-o-q decrease was mainly due to the increase in operating expenses.

Deferred revenue and customer advances: Deferred revenue and customer advances were RMB4,141.7 million (USD647.1 million) as of September 30, 2011, representing a 7.0 percent increase from RMB3,868.9 million (USD604.5 million) as of September 30, 2010 and a 2.0 percent increase from RMB4,059.7 million (USD634.3 million) as of June 30, 2011. Excluding the effect of the adjustments made by HiChina, deferred revenue and customer advances were flat from September 30, 2010 and slightly decreased from that as of June 30, 2011 as a result of a lower paying customer base.

Recurring free cash flow (non-GAAP): Recurring free cash flow (non-GAAP) in the period was RMB413.4 million (USD64.6 million), representing a 43.5 percent decrease y-o-y and an 8.4 percent decrease q-o-q. The decrease y-o-y was mainly attributable to the decrease in cash revenue as a result of the tightening of customer acquisition, increase in income tax paid and the increase in staff cost. The sequential decline was mainly due to increases in staff costs.

Cash and bank balances: Cash and bank balances as of September 30, 2011 was RMB10,514.0 million (USD1,642.8 million), representing a 25.7 percent increase y-o-y and a 4.0 percent increase q-o-q.

Note: All U.S. dollar conversions are based on an exchange rate of US$1.00=HK$7.80 and US$1.00=RMB6.40.

About Limited (HKSE: 1688) (1688.HK) is the global leader in e-commerce for small businesses and the flagship company of Alibaba Group. Founded in 1999 in Hangzhou, China, makes it easy for millions of buyers and suppliers around the world to do business online through three marketplaces: a global trade platform ( for importers and exporters; a Chinese platform ( for domestic trade in China; and, through an associated company, a Japanese platform ( facilitating trade to and from Japan. In addition, offers a transaction-based wholesale platform on the global site ( geared for smaller buyers seeking fast shipment of small quantities of goods. Together, these marketplaces form a community of more than 72.8 million registered users in more than 240 countries and regions. As part of its strategy to transition into a holistic platform where small companies can build and manage their online business more easily, also offers Chinese traders a wide array of business management software, Internet infrastructure services and export-related services directly or through companies it has acquired including HiChina and One-Touch, as well as educational services to incubate enterprise management and e-commerce professionals. also owns Vendio and Auctiva, leading providers of third-party e-commerce solutions for online merchants. has offices in more than 70 cities across Greater China, India, Japan, Korea, Europe and the United States.

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Q3 2010 Q3 2011 Q2 2011   Q3 2011
RMB’000 RMB’000 RMB’000


International marketplace 847,153 947,470 948,973 947,470
China marketplace 492,177 560,741 552,361 560,741
Others 109,945     94,227   122,430     94,227  
Total revenue 1,449,275 1,602,438 1,623,764 1,602,438
Cost of revenue (242,050 )   (304,652 ) (315,028 )   (304,652 )
Gross profit 1,207,225 1,297,786 1,308,736 1,297,786
Sales and marketing expenses (526,212 ) (529,780 ) (512,075 ) (529,780 )
Product development expenses (160,258 ) (208,246 ) (186,238 ) (208,246 )
General and administrative expenses (145,437 ) (198,453 ) (157,741 ) (198,453 )
Other operating income, net 20,783     8,700   7,478     8,700  
Profit from operations 396,101 370,007 460,160 370,007
Finance income, net 48,392 94,044 84,323 94,044
Share of profits/(losses) of associated companies and a jointly controlled entity, net of tax:










Profit before income taxes 442,753 464,300 544,065 464,300
Income tax charges (77,036 )   (58,915 ) (79,446 )   (58,915 )
Profit for the period 365,717 405,385 464,619 405,385
Other comprehensive income/(expense)
Net fair value gains/(losses) on available-for-sale investments








Currency translation differences (8,894 )   (14,810 ) (7,595 )   (14,810 )
Total comprehensive income for the period 357,043     389,635   449,666     389,635  
Profit/(loss) for the period attributable to
Equity owners of our Company 366,066 409,680 464,545 409,680
Non-controlling interests (349 )   (4,295 ) 74     (4,295 )
Profit for the period 365,717     405,385   464,619     405,385  
Total comprehensive income/(expense) for the period attributable to
Equity owners of our Company 357,392 393,930 449,592 393,930
Non-controlling interests (349 )   (4,295 ) 74     (4,295 )
Total comprehensive income for the period 357,043     389,635   449,666     389,635  
Earnings per share, basic (RMB) 7.3 cents     8.1 cents   9.2 cents     8.1 cents  
Earnings per share, diluted (RMB) 7.2 cents     8.1 cents   9.2 cents     8.1 cents  
Earnings per share, basic (HK$) (Note 1) 8.3 cents     9.8 cents   11.0 cents     9.8 cents  
Earnings per share, diluted (HK$) (Note 1) 8.3 cents     9.8 cents   11.0 cents     9.8 cents  

Note 1:
The translation of Renminbi amounts into Hong Kong dollars has been made at the rate of RMB0.8235 to HK$1.0000 for the third quarter of 2011 (second quarter of 2011: RMB0.8359 to HK$1.0000 and third quarter of 2010: RMB0.8713 to HK$1.0000). No representation is made that the Renminbi amounts have been, could have been or could be converted into Hong Kong dollars or vice versa, at that rate, or at any rate or at all.

Contacts Limited
Investor inquiries:
Lindy Lau, +852 2215 5215
Media inquiries:
Julie Huang-Tsang, +852 2215 5206
Pamela Muñoz, +852 6018 7817

Release Summary

Q3 Financial Results for

Contacts Limited
Investor inquiries:
Lindy Lau, +852 2215 5215
Media inquiries:
Julie Huang-Tsang, +852 2215 5206
Pamela Muñoz, +852 6018 7817