Digital China Announced FY2011/12 Annual Results

HONG KONG, June 12, 2012 /PRNewswire-Asia/ --

Highlights:

Digital China Holdings Limited ("Digital China"; Stock Code: 00861.HK), China's largest integrated IT services provider, today announced the consolidated annual results of the Company and its subsidiaries (collectively the "Group") for the 12 months ended 31 March 2012 (the "Period").

Owing to our mature software and servicing capabilities and implementation of the "Sm@rt City" strategy during the financial year under review, Services Business maintained solid turnover growth and ongoing improvements in gross profit margin. Supply Chain Business recorded strong growth underpinned by a dual approach of enhancing cooperation with core CES customers as well as expanding logistics business. Systems Business's undisputed leadership was maintained in terms of market share, underscoring our prestigious position in value-added distribution. In Distribution Business, we are able to adapt the market demand changes and capture the market favorable factors. Targets were accomplished on the back of the rapid growth in accessories, PC servers and consumer IT products, as we made strong efforts to capitalize on changes in market demands, which also supported the healthy growth of the overall income of the Group.

Financial Review

During the Period, the Group recorded turnover of approximately HK$70,319 million, representing a 23.79% growth as compared to approximately HK$56,804 million for the corresponding period of FY2010/11. The third quarter turnover reached a record high at approximately HK$18,913 million. The Group's gross profit margin for the annual period was 7.55%, which is 0.66 percentage point higher than 6.89% for the corresponding period of previous financial year. Total gross profit recorded a significant growth of 35.63% to HK$5,306 million. During the Period, profit attributable to equity holders of the parent of the Group was HK$1,245 million, a 23.81% growth as compared to approximately HK$1,005 million for the corresponding period of last financial year. Basic earnings per share amounted to 116.32 HK cents, which was 21% higher as compared to 96.13 HK cents for the corresponding period of last financial year. During the Period, all business segments have beaten expectation and attained their respective performance targets set at the beginning of the year and sustained sound growth momentum that outperformed the market.

A strong net cash inflow from the Group's operating activities for the year ended 31 March 2012 of approximately HK$473 million provided assurance for the Group's healthy and stable development. The growth in cash flow contributed by business operations is significant. The stability of the Group's operations was also underpinned by its cash turnover of 16.99 days for the year ended 31 March 2012, 1.43 days less compared to 18.42 days reported for last financial year.

Segment Results

Business Review

Services Business (primary focus on the provision of industry software, urban information infrastructure and "Sm@rt City" operation services to the Industry Market)

During the Period, the Group reported turnover of approximately HK$7,892 million for its Services Business, a growth of 30.62% as compared to approximately HK$6,042 million for the corresponding period of last financial year. As our software and servicing capabilities grew in sophistication, gross profit margin for the financial year under review reached 16.38%, representing an increase of 0.35 percentage point as compared to last financial year.

Government and banking sectors have a 78.16% and 30.51% growth year-over-year, respectively. These sectors continued to sustain positive growth momentum. In particular, we made solid breakthroughs in the insurance and power sectors, providing support to the overall rapid growth of Services Business. Our application software business has achieved notable results in the development of new customers among regional banks and local taxation authorities business. In the banking sector, business relationships have been established with 15 banks, including China Resources Zhuhai Commercial Bank, Jiangsu Changjiang Commercial Bank and Bank of Xi'an, through the provision of regional core banking solutions. We have also made inroads into the market of local taxation authorities with our third-generation golden tax collection and administration system, signing up the local tax bureaus of Shenzhen, Hainan and Shandong as new customers. Initial results have been achieved in the investigation of new models for the software business, including financial software operation service, with 26 township banks being signed up, and our taxpayer-end service business was established in Hainan. All these are making us the undisputed market leader in this sub-segment. We have devoted major efforts to the development of proprietary brands, while continuing to consolidate our leading edge in the telecommunications, banking and government enterprise sectors, as we secured several multi-million contracts from the State Administration for Industry and Commerce, China Unicom and China Telecom. We gained further inroads in our pursuit of refined management underpinned by the productization and standardization of services, with more specific business and profit models that provided a very solid foundation for massive growth.

During the financial year under review, the Group swiftly completed the tracking coverage of the Sm@rt City target cities, exceeding targets set at the beginning of the year for contract sign-ups and revenue by a significant margin, while overall sign-ups also substantially exceeded our annual targets. More specifically, mature core solutions were replicated in other cities, such as the Citizen Card project in Zhenjiang and Lanzhou, the Citizen Service project in Foshan, and the demonstration center project in Zhenjiang and Guangzhou, for which contracts have been signed for implementation. Meanwhile, significant progress has also been made in strategic solutions, such as the Yangzhou Healthcare Information Platform in the health sector, the Suzhou Meat and Vegetable Source Tracking System in the food and drug sector and relevant projects for Shunde, Zhuzhou, Wuhan and Shenyang in the data exchange sector. These projects signed up and started during the year have not only contributed to improvements in terms of the richness and sophistication of solutions, but also enhanced the overall strengths of the Group as China's leading solution provider in Sm@rt City.

Supply Chain Services Business (primary focus on the markets of Hi-tech Industries, Branded e-Commerce and Online Service Providers and Platform Operators)

For the year ended 31 March 2012, the Group's Supply Chain Services Business reported turnover of approximately HK$7,426 million, a growth of 58.48% as compared to the corresponding period of last financial year. The overall gross profit margin for the year for the Supply Chain Services Business was 6.80%, increasing significantly by 1.27 percentage points as compared to last financial year. Cooperation with CES customers underscored Digital China's effective coverage of multiple business formats. The management team of the Supply Chain Services Business sought to enlarge the scope of cooperation with retail malls, while actively expanded our product exposures by introducing items with strong market recognition and higher gross profit margin, such as the Apple products, as well as various accessories, in order to enhance our business value. During the financial year under review, CES business grew 56.75% as compared to last financial year. Gross profit margin increased significantly by 1.25 percentage points over last financial year.

Driven by the rapid growth in the demand of the logistics market, turnover from the logistics business of the Supply Chain Services Business for the year ended 31 March 2012 has grew 86.25%. In logistics services, we continued to enhance the streamlining and development of the core logistics capabilities of storage, transportation and dispatching. Breakthroughs were being made in third-party logistics in connection with both B2B and B2C e-commerce storage. We have become an important partner of Taobao. Our service station business benefitted from cooperation with key manufacturers of notebooks and desk-tops and the extensive coverage of our service outlets, as business expansion continued in a systematic manner. Thanks to the outstanding performance of our warranty services, gross profit margin of the service station business for the financial year under review increased by 7.19 percentage points over last financial year.

Systems Business (primary focus on the Industry and Enterprise Markets)

Turnover from the Systems Business for the year ended 31 March 2012 grew 26.50%, year-on-year, to approximately HK$17,487 million. The gross profit margin of the Systems Business was at par with last financial year to contribute significantly to the overall profit growth of the Group, notwithstanding the substantial increase in turnover. Gross profit margin for the financial year under review was 9.97%, indicating further consolidation and improvement as compared to 9.74% for last financial year. Driven by the data processing requirements of corporate customers, turnovers for packaged software and storage products for the financial year under review grew 45.34% and 27.42%, respectively, as compared to last financial year. Turnover of networking equipment for the financial year under review grew 31.79% over last financial year, reflecting the benefits of larger shares of the market comprising major vendors and additional business volumes channeled through new partners.

Our Systems Business has strengthened the marketing of compounded products. Rapid year-on-year growth of 42% in the total sales revenue from the three types of solution businesses, namely communications, video conference and data security, was reported. In view of the demand for cloud computing and virtualization technologies from the enterprise market, our Systems Business cooperated with vendors such as CISCO, VMware and NetApp, to roll out a separate "Planter Plan". Our market leadership has been reinforced and our market shares in businesses with vendors have been increased as a result.

Distribution Business (primary focus on the SMB & Consumer Markets)

Turnover from the Group's Distribution Business for the year ended 31 March 2012 grew 16.32%, as compared to the corresponding period of last financial year, to approximately HK$37,515 million. Gross profit margin for the financial year under review was 4.71%, a significant rise by 0.56 percentage point over last financial year. Driven by the higher market shares of CPU (chips) manufacturers and the new expansion of product lines (such as hard disk drives and monitors), the turnover for accessories for the financial year under review was 49.10% higher as compared to the corresponding period of last financial year. The 22.07% growth in turnover of PC servers for the financial year under review was mainly attributable fresh demand arising from the construction of cloud computing infrastructure and the ongoing replacement of some of low-end UNIX servers. As a core element of the Distribution Business, notebooks recorded near double-digit growth in turnover despite falling ASP (average sales price) due to the increasing market competition. Gross profit margin for notebooks improved 0.96 percentage point as compared to last financial year as a result of the shortage in HDD supply for notebooks in last financial year. Noting the change in market demand brought about by the Mobile Internet, Digital China also worked on its exposures to different products with a special emphasis on smartphones and tablets.

The Group highly values new channels as important alternate business channels to traditional IT products stores (IT Mall) and CES (large chain electronic stores). Through the provision of feature products and consulting services, Digital China delivered mutually beneficial relationships and established long-term cooperation with key customers, laying the foundation for investigating the e-commerce model while driving significant overall growth for the e-commerce sub-segment. Digital China also made steady progress in the development of the terminal chain retail store, as an important measure for retail end control. The Group opened 156 new Digital China "@PORT" franchise retail outlets and concession counters as at 31 March 2012 to bring the total number of "@PORT" outlets and counters owned to 790.

Market Outlook

Mr. Lin Yang, the CEO of Digital China said, "Amid the intricate and volatile times of 2011, our management team completed and exceeded all financial targets set for the financial year under review. As guided by the overall strategy of the Company, we have also conducted bold investigations regarding the probable directions of Sm@rt City and realigned our organizational structure in tandem with our Sm@rt City strategy.

Market conditions are set to remain challenging in 2012. Our management has formulated the principle of "prudent progress with a focus on Sm@rt City," whereby the Group will concentrate on customer marketing, process streamlining and optimization and technological innovation, with a view to bolstering its competitive strengths, enhancing its leadership and influence in the Sm@rt City sector and achieving various business targets for greater shareholders' value."

About Digital China

Digital China Holdings Limited ("Digital China" or the "Group"; Stock Code: 00861.HK) is the largest integrated IT services provider in the Greater China area. Digital China provides end-to-end integrated IT services to customers on the back of a complete IT service value chain that covers IT planning and consultation, design and implementation of software solutions, outsourcing of IT system operation and maintenance, systems integration, IT distribution and maintenance.

With persist effort in carrying out "customer-focused and service-oriented" transformation, Digital China advocates Sm@rt City strategy and drives business development in five areas, including industry application software and IT infrastructure, smart devices and mobile solutions, enterprise application and infrastructure, Sm@rt City operation services and Sm@rt City collaborative industries. Leveraging urbanization and city informatization in China, the Group becomes a Sm@rt City expert with a forward-looking theoretical structure and most successful cases in Sm@rt City development.

For additional information about Digital China, please visit the Company's website at www.digitalchina.com.hk.

SOURCE Digital China Holdings Limited

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

440k+
Newsrooms &
Influencers

9k+
Digital Media
Outlets

270k+
Journalists
Opted In

GET STARTED