HONG KONG, Nov. 19, 2013 /PRNewswire/ --
Results Highlights:
For the six months ended 30 September
2013:
- Affected by lacklustre macro-economic and IT market conditions,
the Group recorded turnover of approximately HK$33,629 million, decreased 10.09% year-on-year.
Overall gross profit margin was 6.16%. Profit attributable to
equity holders of the parent amounted to approximately HK$633 million. Basic earnings per share were
59.24 HK cents.
- Expenditure and operating expense ratio kept decreasing on the
back of ongoing cost structure optimisation. Total operating
expense decreased 9.15% year-on-year.
- Thanks to stringent risk control policies, net cash inflow from
operating activities for the second quarter of the current
financial year amounted to approximately HK$150 million, ensuring stable operation of the
Group's business.
Digital China (the "Group";
Stock Code: 00861.HK; 910861.TW), the largest integrated IT
services provider in China, today
announced its consolidated interim results for the six months ended
30 September 2013 (the "Period").
The continuous slowdown in China's macro-economic growth since the
2012/13 financial year has resulted in unprecedented challenges for
each IT sub-segment market and exerted obvious impacts on the
Group's operations. The Group's management has devised an operating
strategy focused on "Stabilizing Fundamentals, Adjusting Structures
and Controlling Risks". While seeking to reinforcing leadership in
our traditional strongholds, we also made proactive moves to adjust
our business structure, strengthen the operation of high-value
businesses and step up efforts to foster new niches for business
growth in the emerging sectors. Meanwhile, the Group continued to
enhance its Sm@rt City servicing capabilities to drive
implementation at cities which had signed up for Sm@rt City. During
the Period, the final inspection of the Wujiang Meat and Vegetable
Circulation Tracking System was completed, while the Foshan
integrated citizen services platform has become a major channel of
citizen services for the Municipal Party Committee and Municipal
Government of Foshan. Also, the Group continued to enrich the
contents of Sm@rt City business through cooperation at capital
level and setting up a joint venture in Nanjing to operate the citizen card business.
These developments have further reinforced the Group's leadership
in Sm@rt City expertise. During the second quarter of the current
financial year, the Group invested HK$170
million to increase in the shareholding of HC International,
Inc. (Stock Code: 08292.HK) and became the latter's single largest
shareholder. This investment will allow the Group to accumulate
experience for the expansion of its Internet business, while
facilitating future business cooperation between the two
companies.
Financial Review
From the beginning of this financial year, competition was
intensifying in an increasingly complicated IT market, where the
profiles of products and competition were rapidly changing amid
continued doldrums. Affected by such factors, the Group reported
revenue of approximately HK$33,629
million for the six months ended 30
September 2013, a decrease of 10.09% as compared to the
corresponding period of last financial year. Overall gross profit
margin for the first six months of the current financial year was
6.16%. For the six months ended 30 September
2013, profit attributable to equity holders of the parent
amounted to approximately HK$633
million, a decrease of 14.58% as compared to the
corresponding period of last financial year. Basic earnings per
share amounted to 59.24 HK cents. Excluding one-off gain arising
from the disposal of a subsidiary, profit attributable to equity
holders of the parent for the second quarter of the current
financial year actually increased by 22.20% as compared to the
corresponding period of last financial year.
The Group reported consistent reductions in expenditure
following proactive measures in cost structure adjustment,
stringent expenditure control and organisational optimisation. For
the six months ended 30 September
2013, the Group's total operating expense was 9.15% lower
than that for the corresponding period of last financial year.
During the second quarter of the current financial year, selling
and distribution expenses and administrative expenses decreased by
20.91% and 39.23%, respectively, as compared to the corresponding
period of last financial year. During the Period, the Group's trade
receivables turnover days was 58.74 days, being 2.46 days longer as
compared to the corresponding period of last financial year. The
longer turnover period was attributable to the adjustments of the
Group's business structure and the increase of businesses that have
longer credit term. The progress of collecting receivables was also
affected by complicated inspection and acceptance procedures owing
to the diverse nature of certain projects. Taking into full account
risks associated with market volatility, the Group implemented its
risk management policy in a persistent manner. Net cash inflow from
operating activities for the second quarter of the financial year
amounted to approximately HK$150
million, providing an effective protection for the stable
operation of the Group's business.
Segment Results
|
Six months
ended 30 September
|
|
(HK$
million)
|
FY2013/2014
|
FY2012/2013
|
Change (%)
YoY
|
Distribution
|
|
|
|
Segment
revenue
|
17,218
|
19,547
|
-11.91%
|
Segment gross
profit
|
350
|
619
|
-43.49%
|
Segment
results
|
65
|
145
|
-55.42%
|
Systems
|
|
|
|
Segment
revenue
|
12,015
|
13,350
|
-10.00%
|
Segment gross
profit
|
1,007
|
1,203
|
-16.31%
|
Segment
results
|
485
|
621
|
-21.86%
|
Supply Chain
Services
|
|
|
|
Segment
revenue
|
659
|
550
|
+19.85%
|
Segment gross
profit
|
125
|
117
|
+7.30%
|
Segment
results
|
42
|
27
|
+58.83%
|
Services
|
|
|
|
Segment
revenue
|
3,738
|
3,958
|
-5.56%
|
Segment gross
profit
|
589
|
630
|
-6.49%
|
Segment
results
|
133
|
311
|
-57.11%
|
Business Review
Services Business (primary focus on the Industry Market,
offering products and services in IT planning and IT
systems consultation, design and implementation of industry
application software and solutions, outsourcing of IT system
operation and maintenance, as well as systems integration and
maintenance)
During the current financial year, there was a trend of
postponing IT procurement among industry customers amidst a
macro-economic downturn. The Services Business reported stable
growth with the effective support of the Group's persistent drive
of customer plans and ongoing market development efforts in the
financial and government & corporations sub-sectors, for which
notable results have been achieved. During the Period, the Services
Business of the Group reported revenue of approximately
HK$3,738 million, a decline of 5.56%
compared to the same period of last financial year. Revenue for the
second quarter of the current financial year increased by 5.53%
compared to the corresponding period of last financial year.
Revenue generated from the financial sector increased by 5.11%, as
we continued to roll out core system projects with large banks such
as China Development Bank and signed up regional banks such as
Jilin Bank, Anhui Rural Credit Union
and Shaanxi Rural Credit Union as new customers. Revenue from the
government & corporations sector grew by 39.33% as we
strengthened relationships with strategic customers such as the
State Grid Corporation of China
and made progress in the expansion of businesses with the local tax
bureaus of Ningbo, Qingdao and Tianjin.
During the Period, in persistent efforts to advance business
transformation, the Group's Services Business continued to expand
into businesses commanding high values and a high degree of
stickiness, such as IT consultancy, industry application software
and warranty services, and achieved steady growth in the proportion
of pure Software and pure Services businesses. Meanwhile, the Group
kept fostering project management capabilities in response to
market volatility and changes in customers' requirements to enhance
the controllability of project delivery. The Services Business
reported gross profit margin of 15.77% for the first two quarters
of the current financial year, which was stable as compared to the
same period last year.
Distribution Business (primary focus on the SMB
& Consumer Markets, engaging in the distribution of general IT
products such as notebook computers, desktop computers,
peripherals, accessories and consumer IT products)
The IT Consumer Market remained in doldrums in the second
quarter, marked by a further dwindled market for PC notebooks amid
the accelerated transformation in the product profile. Affected by
this development, revenue from the Distribution Business of the
Group for the first half of the financial year amounted to
approximately HK$17,218 million,
representing a decrease by 11.91% as compared to the corresponding
period of last financial year. Revenue from the notebook business
(excluding CES channel) decreased by 19.31% as compared to the
corresponding period of last financial year. Overall gross profit
margin of the Distribution Business was lower as compared to the
corresponding period of last financial year following proactive
adjustment of the CES business. Gross profit margin declined to
2.03% in aggregate for the first half of the current financial
year.
During the Period, the Group proactively reinforced its business
structure adjustments. While securing our existing market shares in
traditional products, we increased our efforts in the development
of mobile device business and achieved breakthroughs in such
emerging business sectors. Significant growth was reported for the
sales of Microsoft's Surface Tablet and Apple products,
contributing to an 85% year-on-year growth in the sales of our
mobile device business (excluding CES sales) in the second quarter.
Meanwhile, the Group was also identifying opportunities in the
market of Taobao e-commerce customers, in addition to ongoing
progress in e-commerce coverage and continuous enhancement in
strategic cooperation with core e-commerce customers.
Systems Business (primary focus on the
Enterprise Market, offering value-added distribution of systems
products such as servers, networking products, storage products and
packaged software)
With the beginning of the 2013/14 financial year, the domestic
Enterprise Market for IT infrastructure facilities continued to
decline. The rise of domestic brands threatened the existing market
profile, for which major international vendors reported slower or
even negative growth. Affected by such factors, the Group's Systems
Business reported revenue of approximately HK$12,015 million for the six months ended
30 September 2013, a 10.00% decline
as compared to the corresponding period of last financial year.
Gross profit margin of the Systems Business was lower owing to
escalating market competition, decreasing to 8.07% for the second
quarter.
In response to complicated market conditions, the Group's
Systems Business assured its leadership in market shares for core
product lines thanks to persistent efforts in market-share
management. In the meantime, the Group continued to enhance its
expansion into the package software and domestic brands. In the
second quarter, revenue from package software recorded a growth of
18% as compared to the corresponding period of last financial year.
Rapid growth was also reported for our business in domestic brands,
as represented by Huawei. Sales of Huawei products have increased
by 33% in the second quarter as compared to the corresponding
period of last financial year.
Supply Chain Services Business (primary focus
on the markets of Hi-tech Industries, Branded e-Commerce Platform
Operators and Branded Services Providers, providing "one-stop"
consultancy and execution in logistics, business flow, capital flow
and information flow)
During the Period, the Group's Supply Chain Services Business
seized opportunities arising from the rapid growth of the market
for third-party logistics and made major moves to expand its
logistics services business. Breakthroughs were achieved in the
communications, automobile accessories and apparels sub-sectors,
providing effective support for the substantial revenue growth of
the Supply Chain Services Business. During the Period, the Supply
Chain Services Business of the Group reported overall revenue of
approximately HK$659 million, an
increase by 19.85% compared to the same period of last financial
year.
Our Supply Chain Services Business reported improvements in
operating efficiency and business deployment as it continued to
enhance its capabilities in warehousing, transportation, delivery
and maintenance services. In the logistics business, we won the
centralised logistics procurement bid from China Mobile's terminal
company, securing business in 14 provinces including Guangdong and Zhejiang. Our outsourcing business with BYD
increased to 60,000 square metres in terms of storage gross floor
area and shifts in cities like Shenzhen, Shanghai and Beijing have been completed. In the
maintenance business, we started Microsoft Surface tablet
maintenance services during the second quarter, while signing up
Xiaomi as customer. The maintenance cooperation with Yixun was also
established. Meanwhile, our per-store profitability continued to
improve with the number of profitable stores growing by 31% as
compared to the same period of last financial year.
Market Outlook
Mr. Lin Yang, CEO of Digital
China, said, "Given the enormous impact on the IT market of
worsening macro-economic conditions in 2013, the Group's operations
will continue to be adversely affected as a result. Against such
complicated market conditions, we will review market developments
and make necessary structural adjustments in line with new market
trends and changes to accord with the long-term interests of the
Company. At the same time, we will step up with the implementation
of Sm@rt City in signed-up cities, while closely monitoring
industry developments under the "Guidance for Facilitating the
Healthy Development of Smart Cities" jointly prepared by 8
ministries and commissions to seize any opportunities for enriching
its service contents that will benefit its overall objective of
business transformation. We will also expedite the deployment of
its Mobile Internet business and develop businesses with domestic
brands in tandem with the changing profiles of the IT market, with
the aim of mitigating the impact of market factors in order to
assure sound business development and striving to enhance
shareholders' value."
- End -
About Digital China
Digital China (Stock Code:
00861.HK) is the largest integrated IT services provider in
China. Digital China provides end-to-end integrated IT
services for customers on the back of a complete IT services value
chain that covers IT planning and consultation, IT infrastructure
system integration, design and implementation of solutions, design
and development of application software, outsourcing of IT system
operations and maintenance, IT distribution and maintenance,
etc.
Digital China is driving the
Sm@rt City initiative in tandem with China's 12th Five-Year Plan. By facilitating
consolidation and innovation through IT advances such as cloud
computing, mobile internet and the internet of things, the Group
seeks to advance China's new
urbanization progress. As the largest integrated IT services
provider in China, Digital China
has comprehensive service capabilities and business coverage that
ranges from Sm@rt City framework design and planning, Sm@rt City IT
infrastructure implementation to Sm@rt City operational services.
Leveraging on its extensive expertise and experience in
informatization, Digital China has become China's leading Sm@rt City expert that boasts
a forward-looking theoretical structure and has the largest stock
of successful cases.
For additional information about Digital China, please visit the
Group's website at www.digitalchina.com.hk.
For investor
inquiries:
|
Neal He
Digital China
Holdings Limited
Tel:
852-3416-8133
Email:
heyongc@digitalchina.com
|
Alex Tso
Digital China
Holdings Limited
Tel:
852-3416-8077
Email:
alextso@digitalchina.com
|
For media
inquiries:
|
Selena Li
Digital China
Holdings Limited
Tel:86-10-8270-7192
Email:
lislc@digitalchina.com
|
Henry Chik
PRChina
Limited
Tel:
852-2522-1368
Email:
hchik@prchina.com.hk
|
Ivy Lu
PRChina
Limited
Tel:
852-2522-1838
Email:
ilu@prchina.com.hk
|
David Shiu
PRChina
Limited
Tel:
852-2521-2823
Email:
dshiu@prchina.com.hk
|
CONDENSED
CONSOLIDATED INCOME STATEMENT
|
|
Three months
ended
30 September
2013
|
Six months
ended
30 September
2013
|
Three months
ended
30 September
2012
|
Six months
ended
30 September
2012
|
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
|
|
|
|
|
REVENUE
|
17,615,696
|
33,628,895
|
19,626,814
|
37,403,597
|
|
|
|
|
|
Cost of
sales
|
(16,635,107)
|
(31,557,634)
|
(18,398,345)
|
(34,834,401)
|
|
|
|
|
|
Gross
profit
|
980,589
|
2,071,261
|
1,228,469
|
2,569,196
|
|
|
|
|
|
Other income and
gains
|
257,319
|
509,486
|
316,806
|
418,039
|
Selling and
distribution expenses
|
(562,853)
|
(1,182,627)
|
(711,626)
|
(1,419,679)
|
Administrative
expenses
|
(94,822)
|
(213,973)
|
(156,042)
|
(287,647)
|
Other operating
expenses, net
|
(227,317)
|
(308,421)
|
(137,600)
|
(169,489)
|
Finance
costs
|
(53,718)
|
(120,369)
|
(79,883)
|
(156,856)
|
Share of profits and
losses of:
|
|
|
|
|
Jointly-controlled
entities
|
(7,025)
|
(8,121)
|
2,133
|
1,179
|
Associates
|
11,279
|
42,464
|
(14,263)
|
(10,274)
|
|
|
|
|
|
PROFIT BEFORE
TAX
|
303,452
|
789,700
|
447,994
|
944,469
|
|
|
|
|
|
Income tax
expense
|
(31,885)
|
(109,096)
|
(30,672)
|
(99,340)
|
|
|
|
|
|
PROFIT FOR THE
PERIOD
|
271,567
|
680,604
|
417,322
|
845,129
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
Equity holders
of the parent
|
272,122
|
633,016
|
340,461
|
741,072
|
Non-controlling interests
|
(555)
|
47,588
|
76,861
|
104,057
|
|
|
|
|
|
|
271,567
|
680,604
|
417,322
|
845,129
|
|
|
|
|
|
EARNINGS PER SHARE
ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE
PARENT
|
|
|
|
|
Basic
|
|
59.24 HK
cents
|
|
69.39 HK
cents
|
|
|
|
|
|
Diluted
|
|
58.49 HK
cents
|
|
68.57 HK
cents
|
CONDENSED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
|
|
|
At
30 September
2013
|
|
At
31 March
2013
|
|
|
(Unaudited)
|
|
(Audited)
|
|
|
HK$'000
|
|
HK$'000
|
NON-CURRENT
ASSETS
|
|
|
|
|
Property, plant and
equipment
|
|
1,509,647
|
|
1,515,037
|
Investment
properties
|
|
592,984
|
|
335,197
|
Prepaid land
premiums
|
|
197,375
|
|
503,849
|
Goodwill
|
|
242,881
|
|
239,012
|
Intangible
assets
|
|
33,337
|
|
10,079
|
Investments in
jointly-controlled entities
|
|
129,384
|
|
126,601
|
Investments in
associates
|
|
945,835
|
|
681,976
|
Available-for-sale
investments
|
|
440,805
|
|
473,952
|
Deferred tax
assets
|
|
138,558
|
|
78,567
|
Total non-current
assets
|
|
4,230,806
|
|
3,964,270
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
Inventories
|
|
5,529,023
|
|
5,793,742
|
Trade and bills
receivables
|
|
11,622,301
|
|
10,324,760
|
Prepayments, deposits
and other receivables
|
|
3,647,268
|
|
4,082,068
|
Derivative financial
instruments
|
|
75,965
|
|
53,511
|
Cash and cash
equivalents
|
|
3,901,247
|
|
4,189,519
|
Total current
assets
|
|
24,775,804
|
|
24,443,600
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
Trade and bills
payables
|
|
11,166,824
|
|
10,873,485
|
Other payables and
accruals
|
|
2,811,120
|
|
3,041,381
|
Tax
payable
|
|
309,572
|
|
306,462
|
Interest-bearing bank
borrowings
|
|
3,052,628
|
|
2,765,891
|
Bond
payable
|
|
-
|
|
37,023
|
Total current
liabilities
|
|
17,340,144
|
|
17,024,242
|
|
|
|
|
|
NET CURRENT
ASSETS
|
|
7,435,660
|
|
7,419,358
|
|
|
|
|
|
TOTAL ASSETS LESS
CURRENT LIABILITIES
|
|
11,666,466
|
|
11,383,628
|
|
|
|
|
|
NON-CURRENT
LIABILITIES
|
|
|
|
|
Interest-bearing bank
borrowings
|
|
2,712,507
|
|
2,712,494
|
Total non-current
liabilities
|
|
2,712,507
|
|
2,712,494
|
|
|
|
|
|
NET
ASSETS
|
|
8,953,959
|
|
8,671,134
|
|
EQUITY
|
|
|
|
|
Equity
attributable to equity holders of the parent
|
|
|
|
|
Issued
capital
|
|
109,373
|
|
109,346
|
Reserves
|
|
7,932,337
|
|
7,302,560
|
Proposed
final dividend
|
|
-
|
|
414,592
|
|
|
8,041,710
|
|
7,826,498
|
Non-controlling
interests
|
|
912,249
|
|
844,636
|
|
|
|
|
|
TOTAL
EQUITY
|
|
8,953,959
|
|
8,671,134
|
SOURCE Digital China Holdings Limited