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Digital China Announces Results for its First Quarter Ended June 30, 2006
added: 2006-08-31

Digital China Holdings Limited,
a leading information technology services company in the People's Republic of China, today announced its results for the first fiscal quarter ended June 30, 2006.


"The Group has achieved outstanding performance in terms of both market development and profitability in the first quarter with increases in turnover as well as profit attributable to shareholders," commented Mr. Guo Wei, President and Chief Executive Officer of Digital China. "The overall turnover of the Group for the first quarter of this financial year has sustained its remarkable Y-O-Y growth rate of 42.9%, which was well above the average growth rate of the PRC IT market. Total turnover was HK$5,612 million compared to HK$3,928 million in 1Q FY05/06."

The Group's profit attributable to equity holders of the parent continued to grow, reaching HK$54,890,000, an increase of 87.3%. Basic earnings per share and diluted earnings per share were 6.32 HK cents and 6.29 HK cents respectively, representing significant growth of 85.9% and 85.6% compared to the same period last year.

Business Highlights

All three business units of the Group have achieved significant growth in turnover, as the Distribution Business (low-end IT product distribution) and the Systems Business (enterprise-level IT systems distribution) have also maintained a forward momentum in gross profit. Furthermore, the Service Business (software and system integration services) has won major contracts from leading industrial customers in the first quarter.

The Group's Distribution Business sustained significant revenue growth during the reporting period with total turnover reaching HK$3,331 million, a Y-O-Y increase of 38.5%. Revenue growth accelerated mainly in the desktop computer, notebook computer and consumer IT product sectors which recorded Y-O-Y increases of 144%, 54% and 57% respectively.

The Systems Business continued its robust and profitable growth during the first quarter. Turnover reached HK$1,660 million, representing a Y-O-Y growth rate of 38.1%. The gross profit margin improved to 9.3% from 8.8% during the corresponding period last year. This progress was mainly attributable to the improvement in the gross profit margin of the UNIX server and storage product sectors. The turnover of four major product segments, namely networking products, packaged software, storage products and UNIX servers increased 13%, 27%, 29% and 59% respectively Y-O-Y.

The Services business also sustained rapid growth during the first quarter of this financial year, increasing 93.6% to HK$620 million compared to the same period last year. However, large-scale projects in the telecom sector normally command lower margins in view of the better payment terms and low credit risks. As a result, gross profit margin of the division declined to 10.1% for the reporting quarter from 12.9% during the same period last year.

Outlook

For the rest of this fiscal year, the Group will continue to drive growth across all business divisions whilst enforcing performance measurement on return on equity.


Source: Business Wire

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