omniture

Digital China Announces 1Q FY2010/11 Results

Digital China Holdings Limited
2010-08-24 21:13 1585
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: liuyqa@digitalchina.com

     Judie Zhu
     Digital China Holdings Limited
     Tel:   +852-3416-8090
     Email: zhusja@digitalchina.com

     Lily Lai
     Digital China Holdings Limited
     Tel:   +852-3416-8133
     Email: lilylai@hk.digitalchina.com

     Henry Chik
     PRChina
     Tel:   +852-2522-1368
     Email: hchik@prchina.com.hk

     Eric Song
     PRChina
     Tel:   +852-2522-1838
     Email: esong@prchina.com.hk

     Ada Tsang
     PRChina
     Tel:   +852-2522-2823
     Email: atsang@prchina.com.hk

    

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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