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The TOM Group

The TOM Group. Y200 2 Third Quarterly Results Review. 6 th November 2002. Review of the Quarter. Close to tripling of EBITDA q-o-q 9% q-o-q growth in total revenue in line with market expectation 13% offline revenue growth, 8% narrowband revenue growth

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The TOM Group

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  1. The TOM Group Y2002Third Quarterly Results Review 6th November 2002

  2. Review of the Quarter • Close to tripling of EBITDA q-o-q • 9% q-o-q growth in total revenue in line with market expectation • 13% offline revenue growth, 8% narrowband revenue growth • 24% growth in gross profit, with gross margin increasing from 39% to 44% • Achieved free cash flow after interest and taxes • Secured positive cash flow for the full year • Strengthened senior and divisional management teams

  3. Part I Financial Analysis

  4. Q-o-Q Review: 9% Revenue Growth with Significant Margin Increases

  5. Y-o-Y Review: 2x Revenue Growth, HK$68M EBITDA Improvement Group Revenue Group EBITDA HK$’million HK$’million 452 Offline 2.4x revenue increase HK$68M improvement 159 Online 36% increase # Q3 2001 EBITDA loss before restructuring costs

  6. Q3 2002 Revenue In Line With Market Estimates HK$’million 452 Offline 13% revenue growth 415 Online Emphasis on gross profit growth

  7. 8% Increase in Online Gross Profit with 8% Point Gross Margin Improvement Online Revenue Online Gross Profit & Margin HK$’million HK$’million 42% 34% 27 Broadband Re-organised to focus on high margin businesses 25 Narrowband Steady growth of high margin businesses

  8. Q3 2002 EBITDA Almost Tripled HK$’million Positive EBITDA for first 9 months of 2002: HK$11M

  9. Segmental Review Q3 2002 Revenue by Sector Sports & Entertainment 26% Online 14% Outdoor 17% Publishing 43% Q3 2002 Revenue by Region Q3 2002 Revenue by Type Mainland China 47% Taiwan 40% Non-Advertising 51% Advertising 49% HK 13%

  10. Analysis of Net Loss Q-o-Q: Q3 net loss entirely generated by D&A – Net profitability if D&A were stripped out + Y-o-Y: D&A increased by HK$36M – Net loss would be dramatically reduced without D&A

  11. Part II Operations Review

  12. PUBLISHING: Continued Expansion into Mainland China Cross-fertilisation of Content among Group Publications • Business Weekly provides content to Sanlian’s flagship business monthly Advantage《競爭力》 Content Licensing to Mainland Publishers • 《向左走向右走》by Grimm’s best-selling author (幾米) recorded sales of 140,000 within 6 months • A series by Red Ink’s best-selling author (痞子蔡) sold over 680,000 copies • Licensed Red Ink’s The First Intimate Contact《第一次親密接觸》 publishing and film rights • Licensed PC Home and Mom Baby simplified Chinese publishing rights – expected circulation of 150,000+ per issue Import • Business Weekly cultivated 1,000 Mainland-based subscribers since Q2 2002 Total Content Licensing Arrangements: 135 book titles 7 magazine titles

  13. OUTDOOR: Adding Value Through Integration • Integration of sales operations to drive revenue synergies • TOM Outdoor Media Group secured HK$11.5Mnew sales, HK$26.5M year-to-date • Conducted a quarterly TOM outdoor sales conference • Aligned sales targets, strategies and service standards • Centralised some inventory with the Group’s sales team to maximise productivity • Differentiation through value-added services Case Study: Fench Media VAS Teams under Hold Co Client: Hong Ta Group Campaign: New product launch Value-Added Services: • Market, consumer, product & competitive analysis • Comprehensive promotional strategy • Outdoor Media Creative Team • R&D Team (to innovate new outdoor assets & technology) • Market Intelligence Team Won a RMB10M nationwide contract

  14. SPORTS & ENTERTAINMENT: High Margins Achieved Contribution from Salem Open & Serena Williams Live • 60+ sponsors • 80+ hospitality box members • Syndicated to CCTV, Eurosport, TVB, etc. New TV Programme: Omega Golf Magazine • Major sponsors: Omega, Farmer’s Spring Water & Vinda • Syndicated weekly to 15 TV Channels in China New Sporting Right: • Marketing agent for Chinese Football Association (CFA) women’s soccer team • Preparing for women’s World Cup next year

  15. ONLINE: Focus on Growing High Margin Businesses SMS User & Volume Growth No. of SMS Users Daily No. of SMS Messages 4.7M 1.2M GP Margin: 85%+ 600K 2.1M 1.2M 200K 350K 50K Mobile / Pay E-Mail Subscriber Growth MMS (Multimedia Messaging Service) 400K • First portal to be China Mobile’s MMS content provider • http://mms.tom.com GP Margin: 85%+ 280K 170K 68K 6K this image moves !

  16. Building A Strong Management Team: Publishing Publishing Division Management Team CEO Jan Hung Tze SDX Joint Publishing Wang Jixian Senior Advisor James Yang Finance Director Quincy Tang • Senior management positions at HK-listed Leefung-Asco Printers Holdings for 10 years • Former President & Chief Editor of China Map Publication House • “China’s Top 100 Publisher” award* • Published over 10 books & 100 papers • 26 years of ad sales, circulation, editorial, BD, strategic planning & management experience with Taiwan’s United Daily News Group • Former CEO & Publisher of CUP Magazine & Managing Editor of Next Magazine Corporate – Publishing Team Consulting Chief Editor (HK) Lau Sai Leung GM – Corp Dev Anthony Tse DGM – BD Jason Wong * Awarded by the CPC Ministry of Propaganda, General Administration of Press & Publications, & Chinese Publishing Association Business Weekly James Jin Cite Ho Fei Peng PC Home Leon Tung Sharp Point Michael Huang Yazhou Zhoukan Francis Tiong CNPIEC JV Wen Xiao-fan Popular Computer Group Chen Zong-zhou

  17. Building A Strong Management Team: Outdoor Outdoor Division Management Team President Robert Xie Senior Advisor Xu Zhiming VP – Media Services Sam Lam VP – Finance Alex Chu VP – BD Christopher Tan • Held senior finance positions with Coca-Cola (China); a HK-based group with Mainland operations; & a listed Australian company • Held senior positions at China Resources Group • Experienced in management & operational restructuring, turnaround management, BD & strategic planning • 10+ years with media agencies, including Zenith Media & Leo Burnett • Headed key outdoor media BD projects in Asia Corporate – Outdoor Team GM – Corp Dev Steven Wu GM – Finance Terence Hon China Operation Center Senior Advisor Tan Zhi • Each of the 12 subsidiaries • General Manager • TOM appointed Financial Controller

  18. Business Outlook: High Organic Growth on a Controlled Operating Infrastructure & Steady Cost Base HK$’million Critical mass achieved

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