Huiyin Announces its 2011 Interim Results

- Revenue surged 83.4% to RMB1,441.2 million
- Continues to Focus on Retail, Bulk Distribution and After-sales
  Services Businesses
- Further Consolidates its Leading Position in the Third and
  Fourth-Tier Markets

HONG KONG, Aug. 25, 2011 /PRNewswire-Asia/ -- Huiyin Household Appliances (Holdings) Co., Ltd. ("Huiyin" or the "Company", together with the subsidiaries, the "Group"; Stock Code: 1280), the retail chain operator and distributor of quality home appliances and consumer electronic products and the provider of after-sales services in the third and fourth-tier markets in eastern China, today announced its interim results for the six months ended 30 June 2011 (the "review period").

FINANCIAL HIGHLIGHTS

DEVELOPMENT OF RETAIL OUTLETS AND AFTER-SALES SERVICE CENTERS

Continually benefiting from government policies favorable to the home appliance industry and a stable increase in the income of urban and rural households, the Group recorded a steady growth with revenue increasing 83.4% to RMB1,441.2 million in the first half of 2011 from RMB785.8 million in the same period in 2010. Gross profit went up 52.3% year-on-year to RMB211.9 million from RMB139.1 million. Operating profit amounted to RMB79.4 million, representing an increase of 34.1% from RMB59.2 million in the same period last year. Net profit increased approximately 33.1% to RMB49.1 million from RMB36.9 million in the same period last year. Operating cash flows improved substantially in the first half of 2011. Net cash inflow from operating activities amounted to approximately RMB21.4 million while RMB151.4 million outflows was recorded in the same period last year. Basic earnings per share were RMB4.57 cents.

Commenting on the business performance under the review period, Mr. Cao Kuanping, Chairman, Executive Director and CEO of Huiyin, said, "In the first half of 2011, China has maintained its steady economic growth. Meanwhile, Chinese people have become eager to strive for a better standard of living as underpinned by the accelerated urbanization and the increase in the income of peasants as well as the rising disposable income per capita in the third and fourth-tier cities. The Group's sales volume has been boosted by the favorable policies, such as the Rural Appliance Rebate Program and the Change of the Old for New Program implemented by the Chinese government to further stimulate rural consumption market, further strengthening our leading position in the industry."

During the period under review, the Group continually focused on retail operation, bulk distribution (including sales to the Company's franchisees) and the provision of after-sales services in the third and fourth-tier markets. The establishment of self-operated stores in coordination with the extensive franchise network helped the Group quickly expand into surrounding areas. In addition, the Group proactively developed quality after-sales services and implemented a variety of sales and marketing strategies. Together with the supports of the favorable government polices, such as the Rural Appliance Rebate Program and the Change of the Old for New Program, the Group has achieved satisfying results with steady growth in all business segments recorded.

Retail business

As at 30 June 2011, Huiyin had an extensive retail network of 287 outlets across 31 cities or regions in Jiangsu and Anhui provinces.

In the self-operated stores segment, the Group opened 13 self-operated stores in Nanjing, Yangzhou, Huai'an, Nantong and Wuhu, representing a further step towards the strengthening and optimization of its retail sales network. As at 30 June 2011, the Group had a total of 63 self-operated stores, a net increase of 10 stores, or 18.9% from 53 stores by the end of 2010. Among which, together with its Yangzhou flagship store, the Group had a total of 45 general stores that offer a comprehensive range of products and brands to our customers, 4 of them were shop-in-shop in department stores offering mainly higher-end home appliances and consumer electronics, and 14 specialty air-conditioner or dedicated brand retail stores to satisfy the special market demand in different localities. During the period under review, revenue from the self-operated stores of the Group reached RMB533.1 million, up by approximately 57.4% from the corresponding period last year, accounting for 37.0% of the Group's total revenue.

During the period under review, the Group continued to optimize its franchised stores network and proactively implemented self-operation management with a key focus on the enhancement of store quality. By upgrading the store image as well as the services and products, the Group was able to increase the profitability and operating efficiency of franchised stores. For the six months ended 30 June 2011, the revenue of the Group derived from the sales to the franchised stores amounted to RMB370.4 million, up 87.0% from the corresponding period last year and accounting for approximately 25.7% of the total sales revenue of the Group. As at 30 June 2011, the Group had a total of 224 franchised stores.

Bulk distribution business

The Group's bulk distribution business complemented its retail segment and provides self-operated stores as well as franchised stores with stable and reliable supply. As an exclusive supplier for franchised stores, the Group secured its source of income in bulk distribution. At present, the Group distributes products for more than 20 internationally or domestically renowned brands.

Sales to franchisees was approximately RMB370.4 million, representing an increase of 87.0% from the same period in 2010 and accounting for approximately 25.7% of the total sales revenue of the Group. The increase in sales to franchisees is mainly attributable to the increase in sales per franchised store. The key of China's economic policies for 2011 lies in accelerating urbanization and raising the income and purchasing power of peasants, which creates ample market opportunities for the Group's franchisees. The franchisees were thus able to capture market opportunities through upgrading the franchised store image and services, strengthening promotional efforts as well as broadening the product offering. Meanwhile, sales to other retailers and distributors reached approximately RMB529.1million, representing a significant increase of 118.5% from RMB242.1 million in the same period in 2010 and accounting for approximately 36.7% of the total sales revenue of the Group. Sales to other retailers and distributors increased is mainly due to the continuously rising demand for home appliances driven by the rapid growing purchasing power of customers, as well as extended distribution rights for certain brands and products in certain areas.

After-sales services

After-sales services were important to the continued expansion of the Group's retail and bulk distribution businesses. The Group has an extensive network of service centers, offering a broad range of installation and maintenance services for products purchased from the Group or any other third party vendors. Operating through authorized arrangements with independent third party operators allowed the Group to extend the geographic coverage of our after-sales customer service with less capital requirements and operational risks. As at 30 June 2011, the Group operated and managed a total of 132 service centers, comprising 13 self-operated service centers and 119 authorized service centers, providing quality maintenance services for customers across a broad geographical area.

The Group has provided such authorized after-sales services to most of our branded electronics suppliers for more than three years. Its service quality is enhanced with the provision of a wide range of after-sales services, which in turn boosted customer loyalty and enhanced consumer confidence in and recognition of the Group. During the period under review, the Group launched an extended warranty plan, under which customers may choose to extend their warranty period by paying a minimal one-off extended warranty fee. The plan covers various home appliances and is well received by customers since its launch. During the period under review, the Group's revenue from after-sales services amounted to RMB8.58 million, representing an increase of 26.5% from the same period last year.

Sales and marketing strategies

The Group adopted diversified marketing and brand promotion strategies. It made use of Internet and mass media channels including TV, newspapers and magazines to launch promotional activities and post different types of advertisements. The Group also invited celebrities to give live performance in many large promotional campaigns, which successfully attracted the attention of the public and increased the brand reputation, thus stimulating sales. In addition, the Group launched promotional activities during major festivals, and conducted group purchase activities in agreement with several home appliance brands, under which different discounts were offered to customers based on the group purchase size, as a way to boost sales.

Looking forward, Mr. Cao concluded, "We believe the home appliance industry will continue its growth momentum in the second half of 2011. The favorable policies implemented by the Chinese government will support the booming development of the home appliance retail sector. Facing the trend of consolidation in the industry and the ever increasing competitive operating environment, the Group will continue to strengthen its competitive edges by upgrading its existing stores, expanding its product offerings and strengthening its operational infrastructure to improve the profitability of its stores. In addition, the Group will seek possible merger and acquisition opportunities in order to enlarge its business scale. The Group will also enhance its brand marketing activities, further strengthening relationships with its suppliers and improving its information technology system. We aim to become a leader in the third and fourth-tier home appliance markets, generating promising returns for shareholders."

About Huiyin Household Appliances (Holdings) Co., Ltd.

Huiyin is one of the leading household appliance enterprises in the third and fourth-tier markets in eastern China. It is a retail chain operator and distributor of quality home appliances and consumer electronic products as well as the provider of after-sales services. The Company's business focuses on retail, bulk distribution and after-sales services which are complementary to each other. With headquarters in Yangzhou, Jiangsu province, its sales and after-sales network presence in 31 cities/districts across Jiangsu province and Anhui province.

Issued by Porda Havas International Finance Communications Group for and on behalf of Huiyin Household Appliances (Holdings) Co., Ltd.. For further information, please contact: