New Business Direction Beginning to Bear Fruit
Focusing on Creating Brand Portfolio and Expanding Sales Network
HONG KONG, Sept. 9 /PRNewswire-Asia/ --
Results Summary Six months ended June 30th (unaudited)
HK$ 000' 2008 2009
Revenue 426,596 437,358
Gross Profit 76,096 173,833
Profit for the year 45,869 306,936
EPS-Continuing Operation
(Basic) HK 3.27 cents HK 2.13 cents
EPS-Discontinuing Operation
(Basic) HK (0.71) cents HK 6.54 cents
EPS-Continuing Operation
(Diluted) N/A HK 2.11 cents
EPS-Discontinuing Operation
(Diluted) N/A HK 6.48 cents
China Haidian Holdings Limited (HKEx: 256, or the "Group") announced today its unaudited results for the six months ended June 30 2009.
For the six months ended 30 June 2009, the Group recorded an unaudited revenue (including continuing and discontinued operations) of approximately HK$441,894,000 (Six months ended 30 June 2008: HK$446,921,000), representing a decrease of HK$5,027,000 compared with the corresponding period last year. Net Profit attributable to equity holders for the period was approximately HK$306,926,000, representing an increase of HK$261,057,000 compared with the corresponding period last year. Having set apart the financial impact of the discontinued operations for the period of HK$231,494,000, the Group should have an increase of net profit of HK$16,814,000 from its continuing operations compared with the net profit last period.
Watches and timepieces business
EBOHR Luxuries International Company Limited ("EBOHR", a wholly-owned subsidiary of the Group) achieved satisfactory results in the first half of 2009. Interim revenue from this company increased by 31% to HK$119,502,000 (2008: HK$91,047,000), largely attributable to a sustained momentum in revenue growth and successful strategy to develop existing and new proprietary brands, with unique strategies and positions for individual brand names.
The successful introduction of "PAMA," a new line of product introduced in 2008 focusing on top tier customers, and "KANA," introduced in 2009 targeting white collar female clientele, has contributed to the further increase in revenue and post-tax net profit. In addition to existing marketing initiatives, special promotional efforts have been deployed to further enhance brand awareness across the PRC but especially amongst second and third tier cities. The Group will continue to revise its strategy of recruiting authorized dealers to increase the number of distribution outlets while ongoing training of sales professionals is expected to improve the overall effectiveness of distribution outlets.
The Group is planning to set up ten boutiques in the next two years under the EBOHR brand for retail distribution of its proprietary brand watches (under the brand names of PAMA, KANA, and others). Investment into each boutique is estimated to be approximately RMB1 million, with a total investment of approximately RMB10 million for all ten boutiques. The Group has also recently established a wholly-owned subsidiary through EBOHR in Switzerland, and shall soon commence marketing Swiss-made watches under EBOHR's designated brand names as well as PRC-made watches with sophisticated mechanical movement. At the same time, Swiss-made watches under EBOHR's designated brand names would also be sold through local distribution channels.
Zhuhai Rossini Watch Industry Ltd. ("Rossini") also achieved satisfactory result in the first half of 2009. Revenue reached HK$124,051,000. Net profit after tax for the first half of 2009 was HK$29,408,000.
During the review period, the Group has focused on expanding the distribution network for Rossini through department stores. Working closely with its regional sale managers, Rossini has consolidated the distribution outlets in first tier cities and increased the number of distribution outlets in second and third tier cities. Fifty more outlets have been added in the PRC in the first half of 2009. While firmly established in the market segment for watches approximately RMB3,000, the Group is delighted to report that Rossini has expanded its presence into other areas such as the luxury segment and the specialist segment, which includes the tourbillion watches. The objective is to strengthen recurring income generated by the Group's established position in the market for products of approximately RMB3,000, while developing additional income streams from targeted new segments, leveraging on the comprehensive distribution network and wide range of quality products.
Having made significant restructuring, Rossini has improved it manufacturing, operation, sales and marketing processes since integrating with the Group. Amongst these improvements, Rossini has recruited watch designers from leading schools in Mainland China and watch designers from Hong Kong to develop new product lines. These new lines reflect the current international trends yet also take into account the unique preferences of the local PRC market. With a growing economy, improving standard of living, expanding targeted markets coupled with a comprehensive distribution network and high quality products, demand for Rossini's watches is expected to be substantial and sustainable.
Copper Wire Business
Both Fuzhou Dartong and Jiangsu Dartong showed satisfactory performance in spite of the global financial crisis during the review period. Fuzhou Dartong Mechanic and Electronic Company Ltd. ("Fuzhou Dartong") contributed revenue and net profit after tax of approximately HK$191,061,000 and HK$ 6,664,000 respectively. On the other hand, Jiangsu Dartong Mechanic and Electronic Company Ltd. ("Jiangsu Dartong"), incurred approximately HK$2,586,000 in losses to the Group in the first half of 2009.
Income from Other Investments
As of 30 June 2009, the Group owned 90,619,301 shares, or 14.78% of the total capital of Citychamp Dartong. The Group's interest in Citychamp Dartong contributed a cash dividend income of HK$8,238,000 during the interim period. The recurring annual dividends from Citychamp Dartong will provide a recurring source of profit contribution to the Group.
The Group's portfolio of properties has been leased out. These properties in Guangdong Province and Hong Kong contribute a stable rental income to the Group for the period under review.
Discontinued Operation -- Timber Plant in Shenzhen
The Group received from the Shenzhen Government the compensation of RMB716 million, being 89.5% of the proceeds from the sale of the land. While approximately 50% of the gain from the land auction and resumption has been accounted for in 2008, the remaining 50% was fully reflected in the first half of 2009. The Group recognised gains on disposal before tax of HK$317,227,000 in 2008 and HK$309,799,000 in the first half of 2009; gains on disposal after tax was HK$278,006,000 and HK$248,131,000 respectively.
A joint venture that is 70% owned by Citychamp Dartong Company Limited and 30% owned by the Group acquired the land and will develop the land into a residential, commercial, office and hotel complex with total gross floor area of 205,693 sq.m. The Group's share of registered capital of the joint venture and the consideration of the land will be RMB270 million in aggregate and there was no other funding requirement from the Group for the development.
In view of the stable land and property market in Shenzhen, the outlook for the real estate development and for the resale value of the land is considered satisfactory.
Outlook
The Group aspires to be one of the leading watch manufacturers and distributors in Mainland China, and is committed to building a portfolio of extensive products and markets through various watch-related companies.
Since the reporting period, the Group has successfully acquired Shenzhen Permanence Commerce Co., Ltd ("Permanence"), a company focusing on distribution of leading Japanese watches such as Citizen and Casio and other foreign brands, on 16 July, 2009. Permanence currently owns distribution rights to 30 outlets with over 40 wholesalers. Permanence has secured the exclusive distribution rights for Citizen in Sichuan, Fujian, and Shanxi Provinces as well as Chongqing City, and the right to distribute the Casio brand name all over Mainland China. It can also can source for all its own distribution outlets all over the Mainland China from Casio. While providing an additional distribution network for the Group's own watch brands, Permanence will also generate revenue through the distribution of other well-known foreign brands. Given the good relationship with well-known foreign brands and the outlet providers, revenue from Permanence and its outlets is expected to increase rapidly in the next two years, as a significant revenue and profit driver for the Group from the second half of 2009 and onwards.
Mr. Hon Kwok Lung, Chairman of the Group, commented, "The Group intends to achieve organic growth both internally and externally. While there are tremendous initiatives for internal growth of EBOHR and Rossini, the Group also intends to grow through acquisitions. The growth strategy of acquiring Permanence, as an example, is paying off. Through Permanence, the Group has quickly increased the number of its distribution outlets, and, more importantly, gained access to more proprietary and non-proprietary brands for distribution, hence generating an increasingly strong revenue. The acquisition is only the beginning of a series of intended acquisitions for local watch companies and watch mechanical movement manufacturing companies. The Group has in-depth discussions with local watch companies and watch mechanical movement manufacturing companies."
Mr. Hon continued, "Looking ahead, the Group will continue to focus on an organic growth strategy through the existing watch entities. Given the relatively stable economic growth of the Mainland China, the core business segment of watches and timepieces, and a relatively stable income stream from other non-core business in enameled copper wires and real estate investment, we shall remain open to acquisition opportunities both in Mainland China and overseas, at a fair value and in line with the Group's strategy. The ultimate goal is to build a comprehensive portfolio of companies specializing in manufacturing watches and mechanical movement and distribution of the proprietary brands and non-proprietary brands in Mainland China and overseas."
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About China Haidian Holdings:
China Haidian has focused on developing its watch business in China into a sizable enterprise, with large-scale manufacturing facilities and a portfolio of notable brands with an extensive network of retail points in China.
The two leading watch brands of Group's high-growth business, "EBOHR" and "Rossini," are amongst the top four Chinese brands and have been recognized as two of "China's 500 Most Valuable Brands 2008" and "Asia's 500 Most Influential Brands 2008" by the World Brand Laboratory. The two brands are valued at RMB 1.6 billion and 1.6 million, and are catalytic to the Group's rapid growth, ahead of industry peers.
As of end of October 2008, EBOHR and Rossini's sales volumes have taken the top and second spots in China with market shares of 10.36% and 12.19% respectively. Sales revenues are also ranked well within the top ten, accounting for 46% of China's watch-manufacturing market. The Group's goal is to establish a leading market position through broadening its product mix and market through acquisition of other brands and distribution channels.
