Stable Business Operation with Solid Growth and a Focus on Strategic Transforming to Fully Service-oriented Business
HONG KONG, Aug. 27 /PRNewswire-Asia/ --
Highlights:
For the three months ended 30 June 2009:
-- Turnover was HK$10,660 million, up 6.49% from 1Q FY08/09
-- Operating income was HK$313 million, an increase of 84.66% over the
corresponding period of last financial year
-- Profit attributable to the equity holders of the parent was HK$262
million, a 129.86% growth as compared to corresponding period in
FY08/09
-- Net cash inflow from overall operating activities was HK$361 million, a
record improvement from the corresponding period of last financial year
China's leading integrated IT service provider, Digital China Holdings Limited ("Digital China" or the "Group"; Stock Code: 00861.HK) announced its results for three months ended 30 June 2009 ("1Q FY09/10").
For the three months ended 30 June 2009, the Group reported stable business operations with solid growth in both turnover and profit, substantial increase in net cash inflow from operating activities and a declining ratio of the overall operating expenses and smooth progress in all key operations, paving the way for the attainment of its operating and management targets for the financial year.
"The Group sustained a positive growth trend underpinned by enlarged market shares and re-assured market dominance, despite continued severity in the macro-economic landscape of year 2009 and other uncertainties in the market," said Mr. Guo Wei, Chairman and CEO of Digital China. "In tandem with the strategy of 'customer-focused and service-oriented', FY09/10 was designated as the 'Year of Strategic Marketing' and our organizational structure was adjusted accordingly."
Financial Review
During the period under review, turnover was HK$10,660 million, an increase of 6.49% as compared to HK$10,011 million for the corresponding period of last financial year. Gross margin was 6.42%, a slight decrease compared to 6.61% for the last fiscal year. Profit attributable to the equity holders of the parent (profit attributable to shareholders) surged 129.86% to HK$262 million as compared to HK$114 million for the corresponding period of last financial year. Basic earnings per share grew 130.26% to 27.24 HK cents compared with the same period of last financial year. Return on shareholders' equity was 7.70%, up from 4.15% for the corresponding period of last financial year.
The management is of the view that the Group has attained designated targets for management objectives, business performance and risk indicators for the three months ended 30 June 2009, against a range of uncertainties in the marketplace. During the period under review, overall operating expenses ratio was 5.30%, lowered from 6.22% for the corresponding period of last financial year. Besides cost management, the Group also made persistent efforts in risk management and process management, and as a result a stable overall operating cash flow was maintained during the period under review. Net cash inflow from overall operating activities of the Group was HK$361 million up from HK$868 million for the corresponding period of last financial year. Overall cash turnover cycle was 22.40 days, which was about 10 days less as compared to the corresponding period of last financial year.
Segment Results
For the three months ended 30 June 2009
(HK$ million) 2009 2008 Change (%) YoY
Distribution Business
Turnover 4,854 4,690 3.48
Gross profit 233 196 18.56
Segment Results 68 75 (8.68)
Systems Business
Turnover 3,110 3,278 (5.13)
Gross profit 255 271 (5.90)
Segment Results 82 82 (0.79)
Supply Chain Services Business
Turnover 1,843 770 139.26
Gross profit 67 39 73.17
Segment Results 23 17 38.68
Services Business
Turnover 853 1,272 32.93
Gross profit 129 156 17.07
Segment Results 5 27 (81.97)
Business Review
Services Business (with a primary focus on Industry Market)
During the period under review, the Service Business recorded 15.18% of gross profit margin, improving significantly as compared with 12.27% for the corresponding period of last year. It reported profitability for the seventh quarter in a row. Though turnover from the Services business reporting year-on-year decrease of 32.93% due to the front-loaded comparative base of FY2008/09 bolstered by the Olympic Games effect, as well as internal re-alignments of the Services business during the current financial year to more focus on software and services, the Business received steady improvements in application software solution execution and significant growth in contract value of service solutions. Meanwhile, our Infrastructure Services Strategic Business Unit ("SBU") was appointed as a deputy group leader of the task force team for IT services standards established by the Software Service Industry Division of China's Ministry of Industry and Information Technology.
Supply Chain Services Business (with a primary focus on the High-tech Industries Market)
Targeting IT corporations, major account customers in vertical market segments, and other high-value products manufacturers, the business sector was formed on the basis of the existing distribution business. It engages in the provision of one-stop supply chain consultancy and execution services to IT and other high-value density products manufacturers and major accounts. Supply Chain Services has reported year-on-year turnover growth of 139.26% at approximately HK$1,843 million for the three months ended 30 June 2009 as compared with HK$770 million for the corresponding period of last year. Turnover from the Fulfillment business (FA business) grew 160.57% year-on-year on the back of closer cooperation with partner manufacturers such as HP and Dell. Revenue from mega chain electronic stores (CES business) grew 99.06% year-on-year as turnover efficiency was significantly improved with the launch of new product and the benefits of business model innovations and process re-engineering.
Systems Business (with a primary focus on Enterprise Market)
Turnover and segment results for the Systems Business, decreased by 5.13% and 0.79% year on year to HK$3,110 million and HK$82 million respectively due to a stronger comparative base of FY2008/09 bolstered by the Olympic Games which had some front-loaded effects. Yet, rapid growth was still reported for the main stream product lines, among which turnover from UNIX servers and storage products grew 22.06% and 19.47%, respectively, as compared to the corresponding period of last financial year. Meanwhile, revenue from regional clients sustained a growth rate of 31.63% against a volatile market.
Distribution Business (with a primary focus on SMB & Consumer Markets)
Turnover and segment results for the Distribution Business, increased by 3.48% and 8.68% year on year to HK$4,854 million and HK$68 million, respectively. Sales of notebooks recorded impressive growth as the management employed relevant sales and marketing strategies in response to growing demand for notebooks from the retail market for personal IT products and enriched the Company's product offerings with new models. Growth in turnover of this Business also reflects the penetrative coverage of the regional network. As at 30 June 2009, number of cities with in-depth coverage reached 460. Turnover contributed by 4th- to 6th-tier cities increased by 44.38% as compared to the corresponding period last financial year.
Outlook
Given continuous signs of economic recovery in China, the management will closely monitor market changes and seek to enhance the Group's market leadership when the right opportunities arise. Meanwhile, Digital China will continue to focus on controlling operational risks, maintaining sound cash flow and exercising stringent cost management. The strategy of transforming to a fully service-oriented business continues to be a key focus. "FY2009/10 will remain a year of opportunities and challenges, the management is confident that the operating targets set for the financial year will be achieved in outperforming growth to create greater value for shareholders," said Mr. Guo Wei, Chairman and CEO of Digital China.
About Digital China
Digital China Holdings Limited ("Digital China" or the "Group"; Stock Code: 00861.HK) is the largest IT services provider in China. Headquartered in Beijing, Digital China has regional centres in 19 major cities nationwide with 8,300 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 telecommunication, 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 .
CONSOLIDATED INCOME STATEMENT
Three months ended 30 June 2009
2009 2008
(Unaudited) (Unaudited)
HK$'000 HK$'000
REVENUE 10,660,012 10,010,710
Cost of sales (9,975,643) (9,348,504)
Gross profit 684,369 662,206
Other income and gains 193,907 129,825
Selling and distribution costs (415,531) (397,424)
Administrative expenses (88,928) (83,774)
Other operating expenses, net (60,639) (141,236)
Total operating expenses (565,098) (622,434)
Finance costs (25,646) (40,818)
Share of profits and losses of:
Jointly-controlled entities 3,278 700
Associates (1,729) 2,446
PROFIT BEFORE TAX 289,081 131,925
Tax (17,893) (19,031)
PROFIT FOR THE PERIOD 271,188 112,894
Attributable to:
Equity holders of the parent 262,124 114,034
Minority interests 9,064 (1,140)
271,188 112,894
EARNINGS PER SHARE ATTRIBUTABLE TO
ORDINARY EQUITY HOLDERS OF THE PARENT
Basic 27.24 HK cents 11.83 HK cents
Diluted N/A N/A
CONSOLIDATED BALANCE SHEET At At
30 June 2009 31 March 2009
(Unaudited) (Audited)
HK$'000 HK$'000
NON-CURRENT ASSETS
Property, plant and equipment 384,110 397,767
Investment properties 238,516 238,516
Prepaid land premiums 14,569 14,671
Intangible assets 3,880 4,233
Interests in jointly-controlled
entities 9,479 6,201
Interests in associates 21,680 23,409
Available-for-sale investments 101,496 101,496
Deferred tax assets 26,562 24,176
Total non-current assets 800,292 810,469
CURRENT ASSETS
Inventories 2,311,890 2,136,461
Trade and bills receivables 5,920,946 5,471,493
Prepayments, deposits and other
receivables 1,263,591 1,366,277
Derivative financial instruments 25,864 27,097
Cash and bank balances 2,086,309 1,734,428
Total current assets 11,608,600 10,735,756
CURRENT LIABILITIES
Trade and bills payables 5,624,776 4,697,703
Other payables and accruals 1,500,666 1,681,331
Tax payable 98,857 133,010
Interest-bearing bank borrowings 679,093 875,449
Total current liabilities 7,903,392 7,387,493
NET CURRENT ASSETS 3,705,208 3,348,263
TOTAL ASSETS LESS CURRENT LIABILITIES 4,505,500 4,158,732
NON-CURRENT LIABILITIES
Interest-bearing bank borrowings 650,600 701,516
Bond payable 226,296 226,296
Total non-current liabilities 876,896 927,812
NET ASSETS 3,628,604 3,230,920
EQUITY
Equity attributable to equity holders
of the parent
Issued capital 96,239 96,239
Reserves 3,167,739 2,903,667
Proposed final dividend 140,030 140,030
3,404,008 3,139,936
Minority interests 224,596 90,984
TOTAL EQUITY 3,628,604 3,230,920
