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Press Release      


2012.08.15 DCH 2012 Interim Results Announcement
Dah Chong Hong Holdings Limited



Dah Chong Hong Sustains

Growth Momentum in the First Half of 2012

with Turnover up 19.3%

***

Balanced Portfolio Drives Business Forward

BUSINESS HIGHLIGHTS:


  • Group turnover up 19.3% to HK$23,636 million
  • Profit from operations decreased by 3.8% to HK$955 million
  • Profit attributable to shareholders of the Company decreased by 18.9% to HK$650 million
  • Basic earnings per share were 35.64 HK cents
  • Declared interim dividend of 11.78 HK cents per share
  • Motor Business segment turnover grew by 21.3% to HK$19,322 million with PRC dealership revenue from new car sales grew by 16.9%, and after-sales service revenue surged by 33.4%
  • Food and Consumer Products Business segment turnover grew by 10.4% to HK$4,074 million, with turnover of FMCG in China recorded a robust growth of 17.8%

(Hong Kong, 15 August 2012) — Dah Chong Hong Holdings Limited ("DCH" or the "Group"; stock code: 01828) announced today its interim results for the 6 months ended 30 June 2012.

The Group's turnover has enjoyed an increase of 19.3% to HK$23,636 million, compared with HK$19,814 million in the same period last year. However, the keen competition in the motor dealership business reduced gross margins on new car sales in mainland China. As a result, profit from operations dropped by 3.8% to HK$955 million. Profit attributable to shareholders decreased by 18.9% to HK$650 million with the increase in finance charge and the decrease in net gain on remeasurement of investment properties.Basic earnings per share were down 19.1% to 35.64 HK cents.

The board of directors of DCH has declared an interim dividend for the first half of 2012 of 11.78 HK cents per share compared with 14.30 HK cents in 2011.

Mr. Clement Hui, Chairman of DCH, said, "Although the economic growth of the Greater China market was affected by the slowdown in the global economy in the first half of 2012, DCH remained on the right track and maintained our growth momentum through a balanced business portfolio and our sustainable business strategy. Looking into the second half, the global economy is expected to remain gloomy. Under this environment, a strong financial position and professional management is critical to the success of our operation. DCH's balance sheet remains sound, with a strong cash flow generated from operations fueling our future expansion."


Business Review & Prospects

MOMENTUM CONTINUES IN MOTOR BUSINESS

For the six months ended 30 June 2012, turnover of Motor Business surged 21.3% to HK$19,322 million from HK$15,929 million in the same period last year. However, segment result from operations dropped by 17.9% to HK$761 million mainly attributable to the reduced gross margin on new car sales in the PRC. The competition in the PRC car dealership market is still keen but there are signs that the situation has been stabilised.

DCH has outperformed the China market to achieve a solid unit sales growth of 13.9% to over 41,000 units, with most of the increment from the dealership business.The dealership revenue from new car sales was up by 16.9%, while revenue from after-sales service of 4S shops recorded a robust growth of 33.4% which represents 9.2% of the total dealership revenue.

In the first half of 2012, the number of 4S shops increased to 66 across 23 cities in mainland China. This included the newly added Ferrari and Maserati 4S shop. The Group expects to extend its network more aggressively as eleven 4S shops are to be opened, including Bentley, Chevrolet, FAW Audi, FAW Toyota, Lexus and SGM Buick in the second half. The Group will also extend its investment in dealership business to more locations and mid- to high-end brands.

In Hong Kong and Macao, DCH sold over 4,800 units of vehicles and the market share in Hong Kong stood at 18.8%.Bentley and Nissan maintained strong sales momentum in the first half, as sales volume rose by 51.4% and 11.4% respectively. Infiniti, a new luxury car brand, was soft launched in May. As the distributor of Isuzu vehicles in Taiwan, DCH started selling these commercial vehicles.

To enhance the Group's resilience in the turbulent market, DCH is keen to establish an integrated motor business platform that covers a full suite of motor related services such as motor leasing, independent service outlets, as well as sales of accessories and consumables to enhance profitability. The Group aims to expand the number of independent service outlets to seven in Guangdong province by end of 2012, while the motor leasing business will expand to cover 13 cities. Going forward, Motor Related Business, including after-sales service, will be one of the key drivers in DCH's growth strategy.

EXPANDED FOOD AND CONSUMER PRODUCTS BUSINESS

The segment turnover from the Food and Consumer Products Business recorded a 10.4% rise to HK$ 4,074 million compared to HK$3,691 million in the same period last year. The satisfactory results were mainly driven by the FMCG, electrical appliances and food processing businesses. Segment result from operations increased by 25.0% to HK$85 million, with segment margin improved to 2.2% and 4.2% in the PRC and Hong Kong markets respectively.

In the upstream front, the successful production launch of the Pocari Sweat Phase-2 manufacturing plant and the CJ frozen dumpling plant as well as the commencement of the JV with Brasil Foods S.A. ("BRF") this year adequately demonstrate the Total Food Supply Chain strategy in action. The mid-stream business in mainland China continues to offer strong growth in view of the rising income per capita and the increasing attention to food safety favouring high quality renowned FMCG as well as imported chilled and frozen meats. DCH intends to expand its distribution network to cover more second-and third-tier cities.

To expand its business further downstream, in anticipation of the increasing demand for imported mid-to up-market audio-visual products in mainland China, DCH targets to operate 60 DCH AV shops by the end of 2012. In Hong Kong, DCH plans to open five Food Mart and Food Mart Deluxe outlets in the second half, adding up to a total of 90 outlets to gain a larger downstream market share.


ENRICHED LOGISTICS FACILITIES CREATE SYNERGIES AND REVENUE

The segment turnover was HK$233 million in the first six months of 2012, representing a growth of 23.9% compared to the same period last year. Thanks to the Shanghai cold chain acquired end of last year and the organic growth of Xinhui logistics hub, revenue from mainland China surged 87.9% year-on-year. DCH's nationwide logistics network, spanning Shanghai, Xinhui, Xiamen, Guangzhou, Shenzhen, Hong Kong and Macao, creates synergies with the Group's Total Food Supply Chain strategy, driving down costs while bringing value-added services to the Group's business partners and its third-party customers.

Mr. Hui concluded, "We remain positive on the long term outlook of the automotive market in mainland China despite the current volatile global economic environment having an adverse impact on new car sales in the short term. We see increasing synergies among various business units in Food and Logistics in building up our Total Food Supply Chain hence uplifting the profit contribution to DCH. DCH is on the right track to sustain our business momentum via a balanced portfolio strategyand we are confident that we can deliver a solid performance for our shareholders in the future."

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