Convenience Retail Asia reports growth in turnover and profit
despite unprecedented challenges in the second quarter
CEPA
will facilitate expansion of the Circle K chain
in the Chinese Mainland
Hong Kong,
28 July 2003 - Convenience Retail Asia Limited ("CRA"
or "the Group"; HKEx: 8052), operator of the Circle K convenience
store in Hong Kong and the Chinese Mainland, announced satisfactory
growth in turnover and a small growth in profit for the second quarter,
despite an extremely challenging retail market.
For the three-month
period ended 30 June 2003, the Group recorded a turnover increase
of 10% to HK$377.6 million when compared to the same period in 2002.
Net profit attributable to shareholders increased by 2% to HK$16.6
million. Earnings per share were 2.5 cents. The Board of Directors
has resolved to declare an interim dividend of 1 cent per share, the
first dividend to be paid since the Group was listed in 2001.
For the six months
ended 30 June 2003, the Group's turnover and profit were HK$727.2
million and HK$23.8 million respectively. Earnings per share were
3.6 cents.
Dr. Victor K.
Fung, Chairman of CRA, commented, "The Group went through a very
difficult period over the last quarter when it faced the dual challenges
of continual decline in the local economy, and the unprecedented SARS
outbreak in Hong Kong and the Chinese Mainland. However, we are glad
that we managed to steer through the challenging period and achieved
growth under an adverse environment. Special tribute goes to the frontline
staff of the Circle K stores located in severely SARS-infected areas
for their dedication and loyalty in ensuring normal operation at such
critical times."
Mr. Richard Yeung, Chief Executive Officer of CRA, said, "The
outbreak of SARS at the beginning of the second quarter dealt a heavy
blow to the retail industry in Hong Kong. Total retail value for the
market dropped 15% and 11% in April and May respectively. The Group
was able to minimize the negative impact on sales by responding quickly
to market needs and changing marketing tactics in a timely manner."
Business Review
Comparable stores
(stores in existence throughout the first and second quarters of 2002
and 2003) showed a decrease in turnover of 1%. Four new stores were
opened in Hong Kong during the second quarter of 2003. At the end
of the quarter, there were a total of 172 stores in Hong Kong and
four stores in the Chinese Mainland compared to 151 stores in Hong
Kong and none in the Chinese Mainland as at the end of the second
quarter of 2002.
In Hong Kong,
the Group's quick response to introduce face masks, antiseptic wet
tissues and instant hand sanitizers in all Circle K stores helped
generate incremental sales and compensate for the sales loss in core
categories such as cold drinks, beer and ice-cream. As a result, the
Group managed to contain the drop in sales to no more than 5% even
at the worst point of the outbreak. In addition, implementation of
cost saving initiatives and the successful launch of a private label
meal box at the end of May further boosted sales and profitability.
Sales performance was almost back on track by the end of the second
quarter.
The impact of
SARS in the Guangzhou market was relatively less severe compared to
Hong Kong. Sales performance of the Guangzhou stores for the second
quarter was only mildly affected. The store model continues to receive
favourable response in the market and all four stores recorded strong
transaction growth.
However, the complexity
of the real estate market in China, complications over ownership verification
for licensing procedures have slowed down the process of new store
opening. In view of the delay, the Group has stepped up its efforts
and added resources to store development. Four more store sites have
been committed and the new stores are scheduled to open in the third
quarter.
Outlook
According to "The
Shopometer Survey" conducted by Hong Kong Retail Management Association
and Asia Market Intelligence in May 2003, the consumer confidence
level in Hong Kong's overall economy has improved slightly compared
to February 2003. Mr. Yeung said, "With uncertainties in the
economic outlook for the rest of the year, a record high unemployment
rate of 8.6% and widening deflation, we will remain cautiously optimistic
about the business outlook for the next six months in Hong Kong.
"In Guangzhou,
our unique convenience store model with strong emphasis on food services
is well received by our customers. We believe that there are plenty
of room for further growth in sales by broadening our product range,
refining our product assortments and accelerating the expansion in
the store network, " Mr. Yeung added.
"The signing
of the Closer Economic Partnership Arrangement (CEPA) between the
Hong Kong Special Administrative Region Government and the Central
People's Government heralds a new era of market liberalization for
trading in the Chinese Mainland. It is definitely a positive development
as the Group will be able to expand faster with more flexibility.
It is the Group's intention to review and revisit our market entry
strategy as soon as details of the implementation are finalized in
order to capitalize on the new opportunities," Mr. Yeung concluded.
About CRA
Convenience Retail Asia Limited (CRA, HKEx stock code: 8052), a member
of Li & Fung Retailing Group, is engaged in the operation of one
of the leading convenience store chains in Hong Kong under the brand
name of Circle K. The Circle K store chain in Hong Kong comprises
172 company-owned-and-managed stores as of 30 June 2003.
In October 2002,
CRA established Convenience Retail Southern China Limited in joint
venture with Guangzhou Grain Group Limited and Shanghai Shenhong Corporation
to develop the South China market. By the end of June 2003, four Circle
K stores were in operation in Guangzhou.
CRA corporate
Web site: www.cr-asia.com
About Li
& Fung Retailing
Li & Fung (Retailing) Limited, the holding company of Convenience
Retail Asia, was formed in 1985 as a company wholly-owned by Li &
Fung (1937) Limited. There are two chains within the retailing group:
Circle K and Toys "R" Us. The retailing group's business
extends from Hong Kong to Taiwan, Singapore, and Malaysia, with plans
for expansion into the Chinese Mainland and other South East Asian
countries.
For media inquiry, please contact:
Convenience
Retail Asia Limited
|
Telephone:
|
2991 6000
|
Mrs. Louisa
Kwan
|
Direct line:
|
2991 6229
|
Convenience
Retail Asia Limited
Half
Year Results
For the Period Ended 30 June 2003
|
Three
Months Ended 30 June |
Change |
2003 |
2002 |
Group Turnover
|
10% |
HK$377,603,000 |
HK$343,435,000 |
Group Profit
|
2% |
HK$16,589,000 |
HK$16,312,000 * |
Earnings
Per Share (Basic) |
- |
2.5 cents |
2.5 cents * |
Interim
Dividend Per Share |
N/A |
1 cent |
- |
|
Six Months
Ended 30 June |
|
2003 |
2002 |
Group Turnover
|
9% |
HK$727,203,000 |
HK$666,020,000 |
Group Profit
|
-9% |
HK$23,845,000 |
HK$26,200,000 * |
Earnings Per Share (Basic) |
-10% |
3.6 cents |
4.0 cents * |
Interim
Dividend Per Share |
N/A |
1 cent |
- |
|
HIGHLIGHTS
-
Satisfactory
growth in turnover and slight increase in profitability despite
challenging market conditions caused by the SARS outbreak.
-
Number of
stores in Hong Kong increased by four to 172 during the quarter
and seven more stores are scheduled to open in the third quarter.
-
Four stores
are operating in Guangzhou and four more stores are scheduled
to open soon.
-
Retail market
in Hong Kong has been recovering since May, but overall retail
sales in the second half of 2003 are expected to remain in negative
territory when compared to the same period in 2002.
-
Strong cash
position with HK$433.7 million and no bank borrowings as at 30
June 2003.
*
Restated for income tax effect per Statement of Standard Accounting
Practice No.12 (revised) "Income Taxes" issued by the Hong Kong Society
of Accountants.
Convenience
Retail Asia Limited
Unaudited
Consolidated Profit & Loss Account
|
Six months ended 30 June |
|
|
2,003
HK$'000 |
2,002
HK$'000
(Restated) |
|
Turnover
|
727,203 |
666,020 |
|
Cost of
sales |
(549,218) |
(499,646) |
|
|
|
|
|
Gross profit
|
177,985 |
166,374 |
|
Other revenues
|
55,402 |
50,820 |
|
Store expenses
|
(167,981) |
(151,086) |
|
Distribution
costs |
(11,402) |
(9,024) |
|
Administrative
expenses |
(27,277) |
(23,143) |
|
Start-up
costs for China operations |
- |
(2,322) |
|
|
|
|
|
Profit before
taxation |
26,727 |
31,619 |
|
Taxation
|
(5,271) |
(5,571) |
|
|
|
|
|
Profit after
taxation |
21,456 |
26,048 |
|
Minority
interests |
2,389 |
152 |
|
|
|
|
|
Profit attributable
to shareholders |
23,845 |
26,200 |
* |
|
|
|
|
Dividend
|
6,685 |
- |
|
|
|
|
|
Basic earnings
per share |
3.6 cents |
4.0 cents |
* |
|
|
|
|
Dividend
Per Share |
1 cent |
- |
|
|
|
|
|
* Restated for
income tax effect per Statement of Standard Accounting Practice No.12
(revised) "Income Taxes" issued by the Hong Kong Society
of Accountants. |