HONG KONG, Sept. 2 /Xinhua-PRNewswire/ -- Digital China Holdings Limited ("Digital China" or "the Company") (Stock code: 00861.HK), a leading IT distribution and services company in the PRC, is pleased to announce that the equity placement and capital injection into Digital China Information Technology Services Company Limited was approved by the Department of Foreign Trade & Economic Cooperations of Jiangsu Provincial Government today. This represents another key step, following the signing of a term sheet between Suzhou Ventures Group Co., Ltd. ("SVG") and the Company, in relation to the proposed investment of RMB500 million into Digital China IT Services Group. The establishment of the joint venture will also bring significant impact to the Company's IT business development. Furthermore, it demonstrates great confidence by both parties in China's IT industry potential.
Commenting on the joint venture, Mr. Guo Wei, Chairman and CEO of Digital China said, "The additional capital brought in by our new strategic investor may help us achieve further breakthroughs in our IT business. SVG's investment capability is one of the strongest in China. Their business partners can bring us abundant technical resources. As our strategic investor, I believe SVG will bring more advanced IT technologies, products and solutions to ITS and further enhance our services' competitiveness and capabilities."
Mr. Lin Xianghong, Chairman of SVG added, "As the largest IT services provider in China, Digital China's IT services are renowned for their leading positions in major industries, especially its top position in the financial industry and government sector. Given the promising prospects for IT services in China, we believe our partnership will become a milestone in the history of both SVG and Digital China."
On 20 May 2008, Digital China has entered into a term sheet with SVG in relation to the proposed investment of RMB500 million into Digital China IT Services Group. Further to the investment from SVG, the two parties will establish a joint venture (the "JV Co.") to develop IT business. The JV Co. will offer comprehensive IT services, including application development as well as IT outsourcing and IT consulting services for the financial and telecom industries and government and public service sectors, across China.
On 3 July 2008, further to the MOU and term sheet, Digital China announced the capital increase agreement and the cooperative joint venture contract ("CJV") relevant to this investment, which are subject to the approval by the Government. At the same time, Digital China Information Technology Services Co. Ltd. ("DCITS") was established for the proposed investment by SVG in the ITS Business. Before the completion of the investment, DCITS was a wholly-owned subsidiary of Digital China. According to the capital increase agreement, Digital China will invest net assets and transfer its ITS Business to DCITS. SVG and its subsidiary, Infinity Investments, will make a capital investment of RMB400 million in cash into DCITS. SVG has been granted the subscription option to increase their investment into DCITS to an amount not exceeding RMB100 million. Upon the exercise of the subscription option, the total capital investment of DCITS shall be RMB1 billion with the shareholding structure of 76.75% by Digital China, 18.60% by SVG, and 4.65% by Infinity Investments.
The compound annual growth rate of IT services in China is estimated at 22% in recent years, with a market size expected to reach USD 9.6 billion in 2010 (IDC estimation). As software and services are high-end businesses, Digital China will focus its strategic development on meeting users' demands, categorizing the market as well as providing more valuable services to its users.
As a leading IT services company in the PRC, Digital China has continued to increase its capability in IT services and market coverage. Since 2007, the Company has started shifting its strategic focus to IT services, with the philosophy of "Customers-Focused and Service-Oriented". The Company has been striving to achieve its mid-term target to become the top player by 2010 with the best market value, best brand and best talents. According to the IDC April 2008 report, Digital China was ranked first in the government and banking sectors, and high overall among its mainland peers in providing IT services.
Through successful transformation towards a service-oriented business model, Digital China recorded a turnover of HK$35.24 billion for the fiscal year 2007/08, with a y-o-y growth of 38.65%. Profit attributable to equity holders increased over 90%. Through effective business strategies deployed over the past few years, the Company's Services business turned itself into a profit of HK$47 million during the same period. Solid financial results, the turnaround in the profitability for the Services business, and the improvements in solution development capabilities in the Distribution and System businesses all demonstrated the initial success of Digital China's strategic shift. For the three months ended 30 June 2008, the Company recorded a turnover of HK$10.01 billion, another increase of 27.38% as compared to the same period last year. Profit attributable to equity shareholders amounted to approximately HK$114 million, representing a 74.70% growth compared to the first quarter last year. The Services business also recorded a profit of HK$27 million during the period.
"The nurturing of our core capabilities in three key areas, namely R&D development, software products standardization and commercialization, as well as IT outsourcing and maintenance services ("PSOM"), has played an extremely critical role in the turnaround of our Services business. After years of strategic investment and market development, our Services business continued its transformation into a profit contributor from an initial start-up. The strategic investment by SVG strongly indicates the market confidence in the business prospect of Digital China's IT services," concluded Mr. Guo.
About Digital China
Digital China was listed on the main board of The Stock Exchange of Hong Kong in 2001 under stock code "00861.HK" following a successful spin off from the Legend Group. In pursuit of its "Digitalized China" corporate strategy, Digital China is focused on providing its customers with pioneering electronic business platforms, solutions and services. A one-stop IT services concept, available to individual consumers and large enterprises alike, enables its client base to span across a wide range of different industries, from banking and telecommunications to government and public sectors. Leveraging on its strong partnership with over 100 top IT vendors worldwide, Digital China has become the largest integrated IT service provider in China.
Through effective guiding, Digital China provides fully integrated IT services to customers with different needs and at various stages of development to create value and success for them. For further information on its products and services, please visit http://www.digitalchina.com.hk .
About Suzhou Ventures Group
Suzhou Venture Group Co., Ltd. (SVG), founded on 28th September 2007, was reconstructed from the former local venture capital entity China-Singapore Suzhou Industrial Park Ventures Co., Ltd (CSVC). SVG is now a leading national investment corporation with registered Capital of three billion RMB and total assets under management of about eight billion RMB. SVG manages one of the largest PE Funds (Total size: RMB10 billion) in China, the SIP VC Fund of Funds (RMB1 billion), the Cowind Seed-Stage Fund (RMB 0.3 billion), as well as a Fund Guarantee Company and the Biobay which is a bio- & nano-science innovation center.
For investor and media inquiries:
Wycee Liu
Digital China Holdings Limited
Tel: +852-3416-8089
Email: liuyqa@digitalchina.com
Winnie Wang
Digital China Holdings Limited
Tel: +852-3416-8090
Email: wangminh@digitalchina.com
Jane Liu
PRChina
Tel: +852-2522-1838
Email: jliu@prchina.com.hk
Vivian Shi
Digital China Holdings Limited
Tel: +852-3416-8076
Email: vivianshi@digitalchina.com
Henry Chik
PRChina
Tel: +852-2522-1838
Email: hchik@prchina.com.hk
