HONG KONG, Feb. 9 /PRNewswire-Asia/ --

    Highlights:

    For the nine months ended 31 December 2009:
    -- Turnover was HK$37,826 million, an increase of 17.30% year-on-year, far
       higher than the growth rate of China's IT market. Turnover in December
       hit a monthly high of HK$5,000 million
    -- Gross profit margin was 6.44%
    -- Profit attributable to the equity holders of the parent was HK$677
       million, an increase of 33.75% year-on-year. Basic earnings per share
       was 68.89 HK cents, an increase of 31.14% year-on-year
    -- Net cash inflow from overall operating activities was HK$1,126 million

China's leading integrated IT service provider, Digital China Holdings Limited ("Digital China" or the "Group"; Stock Code: 00861.HK) announced its results for the nine months ended 31 December 2010 ("3Q FY09/10").

During the period under review, against a backdrop of gradual recovery in the PRC economy, the Group continued to enhance implementation of its customer-focused and service-oriented strategy. Turnover for nine month FY09/10 was approximately HK$37,826 million, an increase of 17.30% from HK$ 32,249 million last year, significantly higher than the average growth rate of China's IT market. In particular, the Group reported its highest-ever monthly turnover in December, hitting HK$5,000 million. Gross profit was HK$2,436 million, an increase of 8.96% year-on-year. The operating cost ratio continued to drop as overall operating expenses fell significantly. Profit attributable to the equity holders of the parent was approximately HK$677 million, an increase of 33.75% year-on-year. Basic earnings per share amounted to 68.89 HK cents, an increase of 31.14% year-on-year.

The Group was ranked by The Asset as one of China's Most Promising Companies of 2009 after being named by Forbes as one of the Asian Fab 50 companies, which demonstrates that both the Group's business transformation and leadership in China's IT industry are being widely acknowledged by the market.

In addition, The Group and SJI formed a strategic partnership to Jointly Develop Businesses in China and Japan. SJI Inc. is a company listed on the JASDAQ Securities Exchange, Inc. (Stock Code 2315). The Group and SJI agreed in principle to share specialties and intellectual property, technology, human resources and sales networks to jointly expand businesses in China and Japan.

"In the midst of an economic downturn last year, we adhered to our established strategies and formulated overall management and business plans accordingly," said Mr. Guo Wei, Chairman and CEO of Digital China. "By sticking to a 'customer-centered and service-oriented' approach, we have continuously made breakthroughs in our transition to an IT service company. The Group's achievements are being widely acknowledged by the market. Meanwhile, we successfully established a partnership with SJI, which will develop our IT operations in Japan and further enhance our outsourcing business and management capability."

    For the nine months ended 31 December 2009:

    -- Overall operating costs rose 2.04% year-on-year.
    -- Cash turnover fell from 22.89 days to 16.79 days, well below the
       average level of industry peers.

    The Group's overall operating expenses ratio for the nine months ended 31
December 2009 continued to drop at 5.06%, compared to 5.82% for the
corresponding period last year, as the Group continued to practice stringent
cost control policies. The overall cash turnover cycle was 16.79 days, 6.01
days less than a year ago.


    Segment Results

                                       For the nine months ended
                                              31 December

    (HK$ million)                          2009           2008  Change(%) YoY

    Distribution Business
      Turnover                           17,034         14,527         17.26
      Gross profit                          727            636         14.43
      Segment Results                       188            217        (13.50)

    Systems Business
      Turnover                           10,849         10,073          7.71
      Gross profit                          975            929          4.92
      Segment Results                       317            312          1.60

    Supply Chain Services
     Business
      Turnover                            6,650          3,545         87.58
      Gross profit                          225            147         53.43
      Segment Results                        62             45         35.67

    Services Business
      Turnover                            3,293          4,103        (19.75)
      Gross profit                          508            524         (2.95)
      Segment Results                       188             78        140.68


    Business Review
    Services Business (primary focus on IndustryMarket)

Turnover contribution from software and services rose steadily with a 16.09% gross profit margin, which was 29.67% higher than the 12.40% reported last year, even though turnover for the third quarter decreased by 23.38% year-on-year to approximately HK$ 1,183 million. The Services Business reported a significant enhancement in value and profitability as its business mix was adjusted to put stronger emphasis on software and services while downscaling hardware-related businesses.

The Group continued to launch industry-specific software solutions for major sectors during the period. In the financial sector, the core banking system for Jinshang Bank went live during the third quarter, following the successful launch of Qilu Bank's core system. A contract was also signed with Xuchang Commercial Bank earlier in the year with respect to core business system application software and related services. In the government sector, the Group started to implement two consultancy projects in connection with the Phase III financial and taxation system project of the State Administration of Taxation following a successful bid in August 2009. Meanwhile, contracts for the issuance of citizen cards were signed with cities such as Wuxi and Zhangjiagang, following the successful debut of this product in Yangzhou earlier in May. This represented another important milestone in the Group's business of developing digitalised cities. The Group's new positioning as a service provider was further established with contract amount for professional service and solutions for the nine months ended 31 December 2009 increasing by 51% from a year ago.

Supply Chain Services Business (primary focus on High-tech Industries Market)

Supply Chain Services, a new growth niche, reported turnover of approximately HK$1,964 million for the third quarter of the financial year, growing 75.81% year-on-year. For the nine months ended 31 December 2009, turnover amounted to approximately HK$6,650 million, an 87.58% growth year-on-year. Turnover from the Fulfillment business (FA business) reported growth of 52.01% year-on-year, while turnover from Chain Electronic Stores (CES) reported a substantial 208.16% growth over last year, as it continued to introduce new products, business model innovations and process re-engineering on the back of its existing strengths.

Systems Business (primary focus on Enterprise Market)

Turnover for the Group's Systems Business for Nine Month FY09/10 amounted to approximately HK$4,330 million, 18.14% growth year-on-year. In line with our customer-focused strategy, the Systems Business responded swiftly to market changes as it continued to expand its regional markets, while constantly upgrading its ability to provide solutions. For the nine months ended 31 December 2009, our regional customer business grew 52.99% over last year, providing a solid base for strong overall growth of the Systems Business. For the third quarter, contributions from storage products and Unix servers grew by 30.29% and 44.72%, respectively from a year ago.

Distribution Business (primary focus on SMB & Consumer Markets)

Third Quarter turnover for the Distribution Business was approximately HK$5,885 million, 22.07% growth year-on-year. The Distribution Business reported improvements in profitability as it capitalised on a recovering Chinese economy to expand swiftly and further reinforce market dominance. Notebooks, PC servers and consumer IT segments all sustained impressive growth. Management formulated effective sales strategies in response to growing demand for notebooks and consumer IT products, while enriching product lines by introducing over 10 new products, such as Fujitsu, AIGO and HANWANG.

As of 31 December 2009, Digital China "@PORT" franchise retail outlets numbered more than 415 in China and turnover contributions from tier-4 to 6 cities grew 70% year-on-year. Furthermore, turnover for notebooks, PC servers and consumer IT products grew by 52.43%, 48.54% and 25.29%, respectively.

Outlook

Looking to the fourth quarter, management will leverage on the favourable conditions fostered by the stable development of China's economy and continue with business expansion in all segments. The Group will endeavour to ensure stable business operations by maintaining positive operating cash flow, exercising stringent management of receivables and inventory, and reinforcing cost control. With the continued implementation of our strategy shift to services, management believes that the Company is well-positioned to attain our annual operating objectives and deliver greater value to shareholders.

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 centres 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 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 .

    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

     Vivian Shi
     Digital China Holdings Limited
     Tel:   +852-3416-8076
     Email: vivianshi@digitalchina.com

     Jane Liu
     PRChina
     Tel:   +852-2522-1838
     Email: jliu@prchina.com.hk

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

     Eric Song
     PRChina
     Tel:   +852-2522-1368
     Email: esong@prchina.com.hk




    CONDENSED CONSOLIDATED INCOME STATEMENT

                          Three          Nine          Three          Nine
                       months ended  months ended   months ended  months ended
                       31 December    31 December    31 December   31 December
                           2009          2009           2008           2008

                        (Unaudited)     (Unaudited)    (Unaudited) (Unaudited)

                           HK$'000         HK$'000        HK$'000    HK$'000

    REVENUE             13,362,388      37,826,336     11,147,245   32,248,550

    Cost of sales      (12,453,924)    (35,390,757)   (10,373,976) (30,013,324)


    Gross profit           908,464       2,435,579        773,269    2,235,226

    Other income
     and gains             226,915         468,755        138,788      329,307

    Selling and
     distribution
     costs                (455,433)     (1,327,519)      (492,314)  (1,348,020)
    Administrative
     expenses              (84,143)       (260,182)      (101,045)    (279,572)
    Other
     operating
     (expenses)/
     income, net          (153,369)       (326,169)        11,364     (248,009)
    Total
     operating
     expenses             (692,945)     (1,913,870)      (581,995)  (1,875,601)

    Finance costs          (36,821)        (92,556)       (47,446)    (134,957)
    Share of
     profits and
     losses of:
      Jointly-
       controlled
       entities                 26           2,076             78          525
      Associates               928            (313)         6,189       10,429

    PROFIT BEFORE TAX      406,567         899,671        288,883      564,929


    Tax                    (98,968)       (156,845)       (24,754)     (83,589)

    PROFIT FOR THE
     PERIOD                307,599         742,826        264,129      481,340

    Attributable
     to:
      Equity
      holders of
       the parent          264,973         676,687        262,458      505,936

      Minority
       interests            42,626          66,139          1,671      (24,596)

                           307,599         742,826        264,129      481,340

    EARNINGS PER
     SHARE
     ATTRIBUTABLE
     TO ORDINARY
     EQUITY HOLDERS
     OF THE PARENT

    Basic                                 68.89 HK                    52.53 HK
                                             cents                       cents

    Diluted                               68.82 HK                         N/A
                                             cents



    CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                   At                     At
                                     31 December 2009          31 March 2009
                                           (Unaudited)              (Audited)
                                              HK$'000                HK$'000
    NON-CURRENT ASSETS
      Property, plant and equipment           379,383                397,767
      Investment properties                   238,516                238,516
      Prepaid land premiums                    14,365                 14,671
      Intangible assets                         3,174                  4,233
      Interests in
       jointly-controlled entities              6,503                  6,201
      Interests in associates                  22,796                 23,409
      Available-for-sale
      investments                             101,496                101,496
      Other receivables                       327,938                     --
      Deferred tax assets                      45,773                 24,176
    Total non-current assets                1,139,944                810,469
    CURRENT ASSETS
      Inventories                           2,924,750              2,136,461
      Trade and bills receivables           7,104,117              5,471,493
      Prepayments, deposits and
       other receivables                    1,889,463              1,366,277
      Derivative financial
       instruments                             17,200                 27,097
      Cash and bank balances                3,318,950              1,734,428
    Total current assets                   15,254,480             10,735,756
    CURRENT LIABILITIES
      Trade and bills payables              8,006,336              4,697,703
      Other payables and accruals           1,795,942              1,681,331
      Tax payable                             236,066                133,010
      Interest-bearing bank
       borrowings                             935,321                875,449
      Bond payable                            226,296                    --
    Total current liabilities              11,199,961              7,387,493

    NET CURRENT ASSETS                      4,054,519              3,348,263

    TOTAL ASSETS LESS CURRENT
     LIABILITIES                            5,194,463              4,158,732
    NON-CURRENT LIABILITIES
    Interest-bearing bank
     borrowings                               650,600                701,516
    Bond payable                                   --                226,296
    Total non-current liabilities             650,600                927,812

    NET ASSETS                              4,543,863              3,230,920
    EQUITY
    Equity attributable to equity
     holders of the parent
      Issued capital                          102,025                 96,239
      Reserves                              3,946,649              2,903,667
      Proposed final dividend                      --                140,030
                                            4,048,674              3,139,936
    Minority interests                        495,189                 90,984

    TOTAL EQUITY                            4,543,863              3,230,920

SOURCE Digital China Holdings Limited