Digital China Announces FY2012/13 Annual Results

               Digital China Announces FY2012/13 Annual Results

Achieves Trend-bucking Growth in Overall Turnover and Profit and Makes
Breakthroughs in the Sm@rt City Business

PR Newswire

HONG KONG, June 18, 2013

HONG KONG, June 18, 2013 /PRNewswire/ --

Results Highlights:

For the 12 months ended 31 March 2013:

  oThe Group achieved a trend-bucking growth in revenue, which amounted to
    approximately HK$73,499 million, up 4.52% year-on-year.
  oGross profit margin for the financial year stabilised at 7.31%.
  oProfit attributable to equity holders of the parent amounted to
    approximately HK$1,367 million, up 9.85% year-on-year.
  oBasic earnings per share were HK$1.28, up 10.05% from HK$1.16 for the
    corresponding period of last financial year.
  oThanks to stringent cost control policies and ongoing optimization of
    business mix, operating expense ratio of the Group dropped remarkably to
    5.55% from 5.85% for the corresponding period of last financial year

Digital China (the "Group"; Stock Code: 00861.HK; 910861.TW), the largest
integrated IT services provider in China, today announced its consolidated
annual results for the 12 months ended 31 March 2013 (the "Period").

Since the beginning of 2012/13 financial year, the Group has been facing
unprecedented challenges in various market sub-segments amid severe economic
conditions. Nevertheless, it completed business focusing and organisational
adjustments in line with the "Sm@rt City" strategic deployment. The coverage
of CES and e-commerce channels in the Distribution Business was expedited to
partially offset the decline in the traditional market segments. For the
Systems Business, market shares were enlarged in close tandem with the
construction of data centres and Cloud Computing centres. Benefitted from the
Sm@rt City strategy, both the Services Business and the Supply Chain Services
Business reported continuous value enhancements. With a comprehensive and
balanced business layout, the Group achieved healthy and stable growth in
business results despite generally lacklustre macro-economic conditions. We
achieved further breakthroughs in the development of Sm@rt Cities during the
financial year, as the launch of the nation's first integrated citizen
services platforms underscored our active exploration of transition from
solution business to operating services in connection with the "Sm@rt City"
and further reinforced Digital China's leading position in the "Sm@rt City"
business sector. The Group was included in "Forbes Asia Fab 50" for the fourth
year in a row in the 2012/13 financial year, reflecting ongoing recognition of
the Group's business endeavours by the capital market.

Financial Review

During the Period, the Group reported revenue of approximately HK$73,499
million, with an increase of 4.52% as compared to the corresponding period of
last financial year. Against grim market conditions, all business units
strictly adhered the principle of "Prudent Progress" and sought to reinforce
our existing business foundation and identify new business opportunities.
Cooperation with strategic vendors and core customers was enhanced on an
ongoing basis and thus the Group reported stable growth in revenue and profit.
In response to intense market competition, the Group sought to stabilise and
improve its gross profit margin by engaging in continuous efforts to optimise
its business mix. Gross profit margin for the financial year stabilised at
7.31%. For the year ended 31 March 2013, the Group reported profit
attributable to equity holders of the parent of approximately HK$1,367
million, sustaining growth of 9.85% as compared to the corresponding period of
last financial year. Basic earnings per share amounted to HK$1.28, a 10.05%
growth compared to HK$1.16 for the corresponding period of last financial

The Group persistently adopted stringent risk management and control policies
to streamline its business flows and implement key tasks in risk management
and cash flow management. The Group's net cash inflow from operating
activities amounted to approximately HK$469 million for the year ended 31
March 2013, ensuring healthy and stable development for the Group's business.
Meanwhile, against the backdrop of escalating market risks and the slowdown in
revenue growth, the Group formulated stringent cost management and control
policies in persistent adherence to the principle of "streamlined
establishment with enhanced efficiency" and secured more efficient resource
utilisation by forming business focuses through organisational optimisation.
The Group's operating expense ratio for the year ended 31 March 2013 was
obviously lower at 5.55% as compared to 5.85% reported for the corresponding
period of last financial year, underpinning negative growth in the aggregate
amount of operating expenses.

Segment Results

                       Twelve months ended 31 March
(HK$ million)          FY2012/2013    FY2011/2012   Change (%) YoY
Segment revenue        37,657         38,032        -0.99%
Segment gross profit   1,239          1,717         -27.84%
Segment results        414            639           -35.24%
Segment revenue        25,618         23,248        +10.20%
Segment gross profit   2,445          2,078         +17.63%
Segment results        1,199          1,067         +12.37%
Supply Chain Services*
Segment revenue        1,211          1,147         +5.56%
Segment gross profit   246            217           +13.02%
Segment results        48             25            +87.72%
Segment revenue        9,013          7,892         +14.20%
Segment gross profit   1,441          1,293         +11.46%
Segment results        468            260           +79.89%


*Restate: The Group started to make adjustments to business segments in the
          current fiscal year:
          A sub-segment of the "Supply Chain Services Segment" will be
          devoted to the provision of professional supply chain management
          services including one-stop logistics and maintenance services, to
          hi-tech corporate customers and industry customers; another
          sub-segment will provide purchasing services to chain electronic
          stores (CES) for terminal products such as PC, notebook, smart
          devices, digital products, where CES is deemed as a retail format
1.        and an effective complement to the Distribution Segment which aims
          at a comprehensive coverage of all business formats. Therefore, this
          sub-segment has been reallocated to the Distribution Segment. In
          order to provide a more appropriate presentation for the Group's
          operating segment information, the Group reallocated this
          sub-segment from the "Supply Chain Services Segment" to the
          "Distribution Segment" at the start of this financial year and the
          relevant results for the corresponding period of last financial year
          have been restated accordingly;
          A sub-segment of the "Distribution Segment" will continue to focus
          on full channel coverage for all retail formats for IT products and
          devices, developing and supplying IT products and solutions of
          broader variety and higher value to consumer and SMB customers.
          Another sub-segment in the original Distribution Segment, covering
          products such as PC, servers, will become an important part of IT
          infrastructure building in line with the development of Cloud
2.        Computing, which will be more compatible with the business
          positioning of the Systems Segment, which aims to become a supplier
          of IT infrastructure products and solutions. Therefore, this
          sub-segment has been reallocated to the Systems Segment. In order to
          provide a more appropriate presentation for the Group's operating
          segment information, the Group reallocated this sub-segment from the
          "Distribution Segment" to the "Systems Segment" at the start of this
          financial year and the relevant results for the corresponding period
          of last financial year have been restated accordingly.

Business Review

Services Business (primary focus on the Industry Market, offering 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 products and services in systems integration and maintenance)

During the Period, Services Business reported revenue of approximately
HK$9,013 million, representing an increase of 14.20% as compared to the
corresponding period of last financial year. Substantial growth in our
Services Business was driven by diligent efforts on the part of our Group
management to drive customer plans, build services support regimes with
integrated resources and secure notable progress for business development in
the government & corporation industry and the financial industry. The
government & corporation and financial sectors achieved fast growth of 48.62%
and 58.28% year-on-year, respectively, driving a significant progress of
overall Service Business.

During the Period, the Group's Services Business reported consecutive rapid
growth in proprietary services and ongoing optimisation of its business mix,
as we pursued strategic transformation in persistent efforts. In the financial
sector, our financial SaaS business has become a pioneering force in the Cloud
Computing sector, registering fast expansion with 51 township banks signed up
for the provision of operational services such as core banking systems, credit
systems and Internet banking systems. Moreover, our taxation business
continued to sign up new customers including the Hainan Local Taxation Bureau,
Liaoning Local Taxation Bureau and Shenzhen Local Taxation Bureau.

The Group stepped up with its work to expand the geographic coverage of its
"Sm@rt City" business, leveraging its leadership in this sector. During the
Period, the Sm@rt City business was strategically deployed in 69 cities across
the nation, while 14 cities had signed strategic cooperation framework
agreements. Following the implementation in various cities of the meat and
vegetable source tracking system and citizen card project, data application
solutions and Cloud Computing solutions have also been commercialised with
significant growth in contract amounts as compared to the same period of last
financial year, effectively driving transformation of this business segment.
The exponential growth in signed-up contract amounts was underpinned by
solution projects signed up for Xi'an, Shunde and Xinjiang etc. during the
fourth quarter.

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 Distribution Business was subject to increasing market risks in 2012 as
the businesses of our principal products of notebook computers and peripherals
were negatively affected by the notable decline in IT consumer market demands
amidst a grim macro-economic landscape, while the effect of new products and
technologies as a market stimulant had yet to be realised. Under such
circumstances, the Group managed to sustain stability in business results
transition by diligently adjusting business mix, pro-actively streamlining and
cutting back product lines with low output and enhancing efficiency in
resource application. The Group's Distribution Business reported revenue of
approximately HK$37,657 million during the Period, a decrease by 1% compared
to the corresponding period of last financial year. Gross profit margin for
the latter half of the year had improved notably subsequent to a temporary
decline in the first half of the year owing to stock clearance measures to
avert potential business risks.

While revenue of the Distribution Business was considerably affected by the
decline in market demands for IT consumer products, the Group maintained its
leadership in various sub-segments through persistent efforts in market share
management during the Period. Meanwhile, the Group made diligent efforts to
develop businesses in accessories and secure opportunities in high-end product
lines. We have also strengthened our cooperation with Apple in the Mobile
Internet sector to tap new business opportunities.

During the Period, the Group made diligent efforts to drive the full coverage
of CES and e-commerce channels, leveraging opportunities arising from changes
in retail business formats. In the CES business, we continued to enhance
cooperation with large-scale retail hypermarkets, underpinned by increasing
collaboration with Gome and Walmart for the development of service regimes in
connection with Apple products. During the Period, our CES business reported
rapid growth of 59.60% as compared to the corresponding period of last
financial year. In connection with e-commerce, the Group strengthened
strategic cooperation with core customers such as Jingdong, 51buy and Suning,
etc and expanded its coverage of e-commerce channels, leveraging opportunities
presented by the rapid growth of the sector. Currently, CES and e-commerce
channels have become the largest source of revenue besides our traditional IT
product channels.

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)

In 2012, the Systems Business of the Group reported outperforming growth as it
closely tracked Enterprise Market trends and capitalised on growth
opportunities for new businesses. During the Period, revenue amounted to
approximately HK$25,618 million, an increase of 10.20% as compared to the
corresponding period of last financial year, while gross profit margin also
increased by 60 basis points to 9.54%, effectively supporting the achievement
of the Group's overall results.

Amidst changing demands in the Enterprise Market, the Group's Systems Business
sustained stable growth in key product areas such as networking, servers and
storage, as it continued to upgrade its capabilities in specialised services
for various sub-segments, leveraging opportunities in the construction of data
centres and Cloud-computing facilities. During the Period, revenues from
servers, storage products and networking products increased significantly by
15.30%, 24.42% and 14.46% year-on-year, respectively. The Group's Systems
Business continued to enhance strategic cooperation with key vendors, as
business cooperation plans were drawn up in collaboration with Cisco, IBM,
Oracle and Microsoft and product layout was improved to assure stable growth
for its existing business. Moreover, we also worked with key vendors to
develop novel sector markets, such as Cloud Computing and Big Data, in close
tandem with market trends.

Supply Chain Services Business (primary focus on the markets of Hi-tech
Industries, Branded e-Commerce Platform Operators and Branded Service
Providers, providing "one-stop" supply chain consultancy and execution in
logistics, business flow, capital flow and information flow)

During the Period, the Group's Supply Chain Services Business optimised its
business mix by adjusting businesses that commanded lower value as part of its
ongoing efforts to improve business layout in tandem with market development
trends. In logistics business, the scale of cooperation was increased in IT,
communications and apparel sectors, while in service station business, the
weighting of the services business was increased. Such efforts have driven
substantial growth in the overall profitability of the Supply Chain Services
Business. Our Supply Chain Services Business reported overall revenue of
approximately HK$1,211 million during the Period. Gross profit margin was
20.28%, an increased by 134 basis points year-on-year. On the back of ongoing
implementation of industry development plans leveraging opportunities brought
by the growth of emerging markets, the logistics business reported overall
revenue of approximately HK$440 million, sustaining rapid growth with a 54.74%
increase year-on-year. Service station business continued to improve its
capabilities in maintenance and services and optimize store layout, thereby
significantly improving its profitability.

Market Outlook

The negative impact of the notable pressure for a slowdown in macro-economic
growth and an increasingly complicated external market landscape will become
more evident for the IT market in 2013. Demands in the Consumer Market will
remain weak, while structural changes in products and channels will become
more apparent, and we also feel pronounced pressure in the Enterprise Market.
As the Consumer and Enterprise Market accounted for a rather large portion of
the Group's results, the Group is facing an unprecedented declining pressure
for the 2013/14 financial year results. Against such a grim market condition,
the Group will resolutely adhere to its strategic option of Sm@rt City, grasp
any opportunities for Sm@rt City developments and actively explore operational
models for Sm@rt City to expedite the transformation of our business. At the
same time, the Group will also continue to improve its cost structure by
stringently implementing its cost control policies, and optimise its business
mix to improve the efficiency of resource utilisation and enhance
organisational efficiency. Leveraging extensive experience in the business,
the management should be able to deal with any impact of potential market
upheavals in 2013 calmly, with an unwavering commitment to delivering value to
shareholders as always.

- End -

About Digital China

Digital China (Stock Code: 00861.HK; 910861. TW) is the largest integrated IT
services provider in the Greater China area. 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's Sm@rt City business
has comprehensive service capability 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

For investor inquiries:         


Neal He                         Alex Tso

Digital China Holdings Limited  Digital China Holdings Limited

Tel: 852-3416-8133              Tel: 852-3416-8077

Email: Email:

For  media inquiries:

                                Henry Chik
Selena Li
                                PRChina Limited
Digital China Holdings Limited
                                Tel: 852-2522-1368

Camille Xiong                   David Shiu

PRChina Limited                 PRChina Limited

Tel: 852-2522-1838              Tel: 852-2521-2823

Email:    Email:


                                      Twelve months ended  Twelve months ended

                                      31 March             31 March

                                      2013                 2012
                                      HK$'000              HK$'000
REVENUE                               73,498,913           70,319,367
Cost of sales                         (68,128,346)         (65,013,476)
Gross profit                          5,370,567            5,305,891
Other income and gains                822,607              755,170
Selling and distribution expenses     (2,939,133)          (3,046,983)
Administrative expenses               (647,570)            (668,029)
Other expenses, net                   (492,463)            (400,910)
Total operating expenses              (4,079,166)          (4,115,922)
Finance costs                         (293,205)            (335,388)
Share of profits and losses of:
Jointly-controlled entities           6,997                (3,590)
Associates                            23,474               47,005
PROFIT BEFORE TAX                     1,851,274            1,653,166
Income tax expense                    (332,122)            (314,478)
PROFIT FOR THE YEAR                   1,519,152            1,338,688
Attributable to:
 Equity holders of the parent        1,367,369            1,244,813
 Non-controlling interests           151,783              93,875
                                      1,519,152            1,338,688
Basic                                 HK$ 1.28             HK$ 1.16
Diluted                               HK$ 1.26             HK$ 1.16


                                                     At          At

                                                     31 March    31 March 2012
                                                     HK$'000     HK$'000
Property, plant and equipment                        1,515,037   1,236,475
Investment properties                                335,197     305,005
Prepaid land premiums                                503,849     163,215
Goodwill                                             239,012     236,377
Other intangible assets                              10,079      4,591
Investments in jointly-controlled entities           126,601     33,224
Investments in associates                            681,976     780,739
Available-for-sale investments                       473,952     214,321
Deferred tax assets                                  78,567      32,135
Total non-current assets                             3,964,270   3,006,082
Inventories                                          5,793,742   5,154,490
Trade and bills receivables                          10,324,760  10,787,427
Prepayments, deposits and other receivables          4,082,068   3,527,378
Derivative financial instruments                     53,511      92,440
Cash and cash equivalents                            4,189,519   4,253,966
Total current assets                                 24,443,600  23,815,701
Trade and bills payables                             10,873,485  12,315,472
Other payables and accruals                          3,041,381   2,728,849
Tax payable                                          306,462     201,525
Interest-bearing bank borrowings                     2,765,891   2,323,895
Bond payable                                         37,023      -
Total current liabilities                            17,024,242  17,569,741
NET CURRENT ASSETS                                   7,419,358   6,245,960
TOTAL ASSETS LESS CURRENT LIABILITIES                11,383,628  9,252,042
Interest-bearing bank borrowings                     2,712,494   1,692,000
Bond payable                                         -           36,615
Total non-current liabilities                        2,712,494   1,728,615
NET ASSETS                                           8,671,134   7,523,427
Equity attributable to equity holders of the parent
Issued capital                                       109,346     109,273
Reserves                                             7,302,560   6,286,928
Proposed final dividend                            414,592     424,986
                                                     7,826,498   6,821,187
Non-controlling interests                            844,636     702,240
TOTAL EQUITY                                         8,671,134   7,523,427

SOURCE Digital China Holdings Limited
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