Digital China Announces 1Q FY2010/11 Results
Steady Growth Overall
Operating Income Surged 1.4 times
HONG KONG, Aug. 24 /PRNewswire-Asia/ --
Highlights:
For the three months ended 30 June 2010:
-- Turnover was HK$13,010 million, up 22.04% over the corresponding period
of last financial year
-- Operating profit was HK$287 million, an increase of 139.58% over the
corresponding period of last financial year
-- Profit attributable to the equity holders of the parent was HK$290
million, a 10.80% growth as compared to corresponding period in FY09/10
Digital China Holdings Limited ("Digital China" or the "Group"; HongKong: 0861), China's leading integrated IT service provider, today announced its results for the three months ended 30 June 2010.
For the three months ended 30 June 2010, the Group sustained growth in its businesses overall, highlighted by substantial growth in operating profit and ongoing improvements in the profitability of its principal businesses. Meanwhile, we reported sound operating cash flow coupled with trimmed expense ratios, underpinning our success in steering a balanced course between business growth and risk control. All in all, we have made a positive start to the financial year and are well on course to fulfilling our business and management objectives for the year.
Mr. Guo Wei, Chairman and CEO of Digital China, commented, "Digital China has listed in Hong Kong for almost 10 years. Since the company was set up, the management team has been adjusting our strategy in response to changes in the IT market. At the same time, our service-driven transformation since 2007 has achieved a certain degree of success. For the three months ended 30 June 2010, the Group reported significant growth in contract values of software and services as the Services Business sector capitalized on the market rebound, while the Distribution Business sustained rapid growth after seizing market share. However, uncertainties remain in the economic recovery and customers are cautious on IT spending. In order to deal with such situation, the Group will continue to implement the transformation strategy of being "customer-focused and service-oriented". We will uncover opportunities in sub-segment markets and take marketing campaigns to new frontiers with an ongoing effort to forge an excellent marketing regime."
Financial Review
The Group recorded turnover of HK$13,010 million for the three months ended 30 June 2010, an increase of 22.04% compared to HK$10,660 million for the corresponding period last financial year. Our growth surpassed growth in China's IT market in general. During the period under review, the Group reported ongoing improvements as highlighted by a 139.58% growth in operating profit to HK$287 million from HK$120 million for the corresponding period last financial year. Profit attributable to shareholders of the parent amounted to HK$290 million, representing 10.80% growth as compared to HK$262 million for the corresponding period last financial year. Basic earnings per share grew 4.44% to 28.45 HK cents year-on-year.
Due to the consistent and continuing implementation of stringent risk control measures and cash flow management, the Group was able to secure stable and healthy business growth. For the period under review, net cash inflow from operating activities was HK$20 million. The overall cash turnover cycle was 15.39 days, which was significantly 7.01 days less than the corresponding period last financial year. The overall operating expense ratio of the Group for the three months ended 30 June 2010 decreased to 4.58% compared to 5.30% reported for the corresponding period last financial year.
Segment Results
For the three months ended
30 June Change
(HK$ million) 2010 2009 (%) YoY
Distribution Business
Turnover 6,171 4,854 27.14%
Gross profit 254 233 9.33%
Segment Results 103 68 50.93%
Systems Business*
Turnover 3,128 2,727 14.69%
Gross profit 301 228 31.74%
Segment Results 152 64 136.89%
Supply Chain Services Business
Turnover 2,325 1,843 26.10%
Gross profit 97 67 44.13%
Segment Results 23 23 -0.21%
Services Business*
Turnover 1,386 1,236 12.16%
Gross profit 177 156 13.47%
Segment Results 26 23 15.05%
* Restated(2009): During the current year, the Group carried out an
organisational restructuring by incorporating the Teleco Accounts Team
of the Systems Business into the Information Technology Services Group
with an aim of strengthening the service transformation and centralising
the management of businesses, and targeting at the telecommunications
industry's customers. Moreover, during the current year, upon the
consideration of the more well-prepared transformation, the Group
reclassified the results of this business unit from the "Systems"
segment into the "Services" segment and restated the related results of
the previous financial year in order to provide a more appropriate
presentation for the operating segment information.
Business Review
Services Business (with a primary focus on Industry Market)
During the period under review, turnover of the Group's Services Business amounted to HK$1,386 million, representing a year-on-year increase of 12.16% as compared to HK$1,236 million reported for the corresponding period last financial year. Profitability improved in this segment 15.05% to HK$26 million. As we focus on the development of industry market, the Group sustained growth in contract values of software and services. Moreover, the Group's position as a service provider has been further strengthened.
In the financial sector, the Group maintained leadership in domestic core banking system construction and made a good start for the new financial year. The Group won the tender for the core banking system project for a new city commercial bank. Progress was made in its attempt to sign up certain joint- stock banks and rural banks as customers. In the government sector, we are looking forward to sustainable, in-depth development of taxation systems after the successful tap of local tax administrations on the back of our vast experience with the national taxation system. Meanwhile, the Group continued to make progress in the Sm@rt City Project by winning the tender for the citizen card project of Zhenjiang, which will be the fourth city to launch the citizen card after Yangzhou, Wuxi and Zhangjiagang.
The Service Business division walked away with two major awards, the "Premium Brand Name for Customer Satisfaction in China's IT Maintenance Service Market" and the "Best National Exemplary Brand Name for Customer Satisfaction in IT Maintenance Services", in a campaign known as the "National Public Poll on Public Satisfaction with Service Businesses". These awards reflect the industry's overwhelming recognition of Digital China's service capabilities.
Supply Chain Services Business (with a primary focus on the High-tech Industries Market)
For the three months ended 30 June 2010, turnover of the Group's Supply Chain Services business amounted to HK$2,325 million, representing a growth of 26.10% year-on-year. This segment's gross profit margin increased 0.52 basis points to 4.16%. Revenue from mega Chain Electronic Stores (CES) business recorded a year-on-year growth of 115.22% to become the most important supplier of China's chain stores. Meanwhile, the Group continued to foster the long-term competitiveness of its third-party logistics business within the Supply Chain Services Business by enhancing the development of internal capabilities and process streamlining. New customers were secured during the first quarter of the financial year, contributing to steady turnover growth.
Systems Business (with a primary focus on Enterprise Market)
The Group's Systems Business is near the end of a low-growth period. It is focused on identifying new key customers' demands as well as developing new accounts. It strived to secure more favorable products and policies at the beginning of the current financial year. Turnover of the Group's Systems Business for the three months ended 30 June 2010 amounted to HK$ 3,128 million, representing 14.69% growth year-on-year. Segment results of the business were up 136.89% to HK$152 million. Gross profit margin significantly widened to 9.61% from 8.37% for the corresponding period last financial year. By adopting customer-focused strategy, the Group continued to strengthen and expand its regional markets as well as to improve its capabilities in providing solutions. For the period under review, the Group's regional customer business reported year-year growth of 45.83%, laying a solid revenue growth of the Systems Business.
Distribution Business (with a primary focus on SMB & Consumer Markets)
Turnover and segment results of the Group's Distribution Business for the three months ended 30 June 2010 amounted to HK$6,171 million and HK$103 million respectively, representing 27.14% and 50.93% growth year-on-year, respectively. This beat the market's overall growth rate. The Group's Distribution Business reported year-on-year turnover growth of 65.61% and 54.30%, respectively, in the major business sectors of PC servers and consumer IT products. Due to advanced business planning that commenced in the previous financial year, we also secured distribution rights for a range of intelligent products, such as the Apple iPhone/iPad, panel computers, smart phones and e- books, etc to address robust demand for products with 3G applications. We were also appointed as an authorised national service provider for China's big- three carriers, namely China Mobile, China Unicom and China Telecom, after successfully obtaining nine qualifications from them. The appointments should pave the way to future business growth and further market share capture. For the three months ended 30 June 2010, turnover from 4th to 6th tier cities grew 45.30% compared to the corresponding period last financial year. The Group's competitive edge in 4th to 6th tier cities has also been further enhanced with the presence of 503 Digital China "@PORT" franchise retail outlets in China.
Outlook
Mr. Guo Wei, Chairman and CEO of Digital China, said, "The Group grew even stronger after gaining experience from the financial crisis in 2008, the weak market in 2009, as well as the European debt crisis in the first half of this year. While we are aware that FY2010/11 will be full of challenges, management is determined to add value for shareholders by fulfilling the performance benchmarks set for the financial year."
After attaining all benchmark indicators for business performance and risk management set for the first quarter ended 30 June 2010, the management team will continue to implement the transformation strategy and seeks to consolidate or even extend its market share by seizing opportunities in the market. Meanwhile, the Group will make further improvements in fundamental management, with a view to enhancing its overall competitiveness and operating profit as well as lowering its costs.
About Digital China
Digital China Holdings Limited ("Digital China" or the "Group"; Stock Code: 00861.HK) is the largest IT services provider in China. Digital China has regional centers in 19 major cities nationwide with 9,400 employees. The Group provides customers with comprehensive IT products and services, driving technological innovations for work and life and enhancing the digitalization process in China with four core businesses: IT Services, Enterprise Systems, IT Products Distribution and Supply Chain Services. The Group has maintained its No.1 position in IT product distribution while it has increasingly focused on expanding into IT services. Digital China remained as one of the top 5 IT services providers across various sectors in China including telecommunications, finance and government by providing self-developed and proprietary products that are customised for specific industry needs. For additional information about Digital China, please visit the Company's website at http://www.digitalchina.com.hk .
For investor and media inquiries:
Wycee Liu
Digital China Holdings Limited
Tel: +852-3416-8089
Email: [email protected]
Judie Zhu
Digital China Holdings Limited
Tel: +852-3416-8090
Email: [email protected]
Lily Lai
Digital China Holdings Limited
Tel: +852-3416-8133
Email: [email protected]
Henry Chik
PRChina
Tel: +852-2522-1368
Email: [email protected]
Eric Song
PRChina
Tel: +852-2522-1838
Email: [email protected]
Ada Tsang
PRChina
Tel: +852-2522-2823
Email: [email protected]
CONDENSED CONSOLIDATED INCOME STATEMENT
Three months ended 30 June 2010
2010 2009
(Unaudited) (Unaudited)
HK$'000 HK$'000
REVENUE 13,009,504 10,660,012
Cost of sales (12,180,318) (9,975,643)
Gross profit 829,186 684,369
Other income and gains 118,702 193,907
Selling and distribution costs (407,386) (415,531)
Administrative expenses (78,997) (88,928)
Other operating expenses, net (109,902) (60,639)
Total operating expenses (596,285) (565,098)
Finance costs (35,076) (25,646)
Share of profits and losses of:
Jointly-controlled entities 744 3,278
Associates 292 (1,729)
PROFIT BEFORE TAX 317,593 289,081
Tax (26,557) (17,893)
PROFIT FOR THE PERIOD 291,006 271,188
Attributable to:
Equity holders of the parent 290,428 262,124
Non-controlling interests 578 9,064
291,006 271,188
EARNINGS PER SHARE ATTRIBUTABLE
TO ORDINARY EQUITY HOLDERS OF
THE PARENT
Basic 28.45 HK cents 27.24 HK cents
Diluted 28.34 HK cents N/A
CONDENSED CONSOLIDATED BALANCE SHEET
At 30 June At 31 March
2010 2010
(Unaudited) (Audited)
HK$'000 HK$'000
NON-CURRENT ASSETS
Property, plant and equipment 407,624 374,260
Investment properties 239,090 285,472
Prepaid land premiums 60,800 53,072
Intangible assets 2,486 2,822
Interests in jointly-controlled entities 2,017 3,785
Interests in associates 514,026 265,173
Available-for-sale investments 31,612 101,496
Other receivables 340,108 332,849
Deferred tax assets 44,673 49,118
Total non-current assets 1,642,436 1,468,047
CURRENT ASSETS
Inventories 3,146,862 3,368,487
Trade and bills receivables 6,792,021 6,411,961
Prepayments, deposits and other receivables 1,834,994 1,633,760
Available-for-sale investments 158,798 --
Derivative financial instruments 42,363 15,508
Cash and cash equivalents 2,811,573 2,772,026
Total current assets 14,786,611 14,201,742
CURRENT LIABILITIES
Trade and bills payables 7,235,087 7,209,673
Other payables and accruals 1,884,815 1,850,178
Derivative financial instruments 4,266 6,456
Tax payable 99,182 207,492
Interest-bearing bank borrowings 1,007,314 455,711
Bond payable 227,868 226,296
Total current liabilities 10,458,532 9,955,806
NET CURRENT ASSETS 4,328,079 4,245,936
TOTAL ASSETS LESS CURRENT LIABILITIES 5,970,515 5,713,983
NON-CURRENT LIABILITIES
Interest-bearing bank borrowings 993,851 1,040,600
Total non-current liabilities 993,851 1,040,600
NET ASSETS 4,976,664 4,673,383
EQUITY
Equity attributable to equity holders
of the parent
Issued capital 102,091 102,077
Reserves 4,110,727 3,810,246
Proposed final dividend 288,505 288,505
4,501,323 4,200,828
Non-controlling interests 475,341 472,555
TOTAL EQUITY 4,976,664 4,673,383
SOURCE Digital China Holdings Limited
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