Convenience Retail Asia Limited

Convenience Retail Asia continues to achieve strong growth in turnover and net profit for 2004

Favourable market environment provides momentum for strategic expansion in Hong Kong and on the Chinese Mainland

Hong Kong, 3 March 2005 - Convenience Retail Asia Limited ("CRA" or "the Group"; HKEx: 8052), operator of Circle K convenience stores in Hong Kong and on the Chinese Mainland, announced another year of encouraging growth in turnover and net profit for 2004.

The Group's turnover for the year and the fourth quarter ended 31 December 2004 grew 15.2% and 14% to HK$1,757.6 million and HK$449 million respectively compared to same periods in 2003.

Net profit attributable to shareholders rose by 10.3% to HK$67 million for the year and by 5.4% to HK$19.6 million for the fourth quarter. Basic earnings per share increased by 9.9% from 9.1 HK cents to 10 HK cents for the year. The Board of Directors has resolved to recommend a final dividend of 3.75 HK cents per share (2003: 3 HK cents). Together with the interim dividend of 1.25 HK cents per share, total dividend for 2004 would be 5 HK cents per share (2003: 4 HK cents).

Dr. Victor K Fung, Chairman of CRA, commented, "On the back of a strong rebound in the economy in 2004, heightened consumer confidence and greater propensity to spend presented a more favourable market environment for the Group's business operations. We are delighted to continue to report encouraging results for the financial year."

Mr. Richard Yeung, Chief Executive Officer of CRA, said, "The Group's unrelenting pursuit of building Circle K as the most preferred convenience store chain in the market through a series of marketing and servicing initiatives was vindicated in the Group's growing sale figures for 2004. These efforts included store network expansion to provide more location convenience, regular and specific thematic promotions, setting a new benchmark for quality customer service, and providing a highly efficient and satisfactory shopping experience."

Business Review

Sales in comparable stores (stores that were in existence in 2003 and 2004) showed an increase of 4.2% for the full year and 3.1% for the fourth quarter in Hong Kong. The strong comparable store sales growth was driven by the Group's aggressive marketing and promotion programmes, category management initiatives as well as the improvement of the economy of Hong Kong. The year-on-year total chain sales growth was achieved through the increase in new stores in both Hong Kong and Guangzhou.

The year 2004 in Hong Kong was filled with non-stop advertising and promotion activities to maximize consumers' high propensity to spend and to build the image of Circle K as one of the leading convenience store chains, offering value, fun and innovation. The Group's persistence in quality category management also attributed to sales growth in all major categories.

A notable development in the market penetration of Circle K stores is the increased presence in mass transportation networks, including the MTR and KCRC stations. These stores provide extra location convenience for Circle K shoppers and excellent exposure for the brand.

Highlight of the year was the opening of the Ocean Shore store in Tseung Kwan O, Circle K's 200th store in the territory. The event was celebrated with a well-attended ceremony and a consumer promotion which received overwhelming responses from customers. During the year, the Group opened 21 new stores and closed 2 stores in Hong Kong.

In Guangzhou, the Group's unique store model and exclusive product offerings in food service offered a sustainable competitive edge. Whilst the first batch of stores opened during the initial phase of market entry has been maturing notably with a steady increase of repeat purchases and an expanding customer base, the flagship store opened in a company-owned premise located next to an MTR station is also ideally positioned to attract high-income office workers in the neighbourhood.

A successful experiment of a housing estate store site also took place during the year, which reported sales results exceeding original expectations. This opens up a whole new direction in the search for potential new store sites targeting households in the middle to high disposable income brackets.

By the end of December 2004, the Group had a total of 205 stores in Hong Kong and 20 stores in Guangzhou compared to 186 stores in Hong Kong and seven in Guangzhou as at end-2003.

Business Outlook

Looking ahead, Mr. Yeung said, "Consumer confidence is expected to remain optimistic in the foreseeable future with economic indicators in both Hong Kong and the Chinese Mainland continuing to trend upward. The Group intends to accelerate store-opening plans in the secondary cities of the Pearl River Delta region. Dongguan will be the next target given the high disposable income of the local residents and its well-developed local economy."

"Key initiatives for the Circle K operation in Guangzhou are to experiment with alternative store models facilitating wider range of store sizes, develop new markets, refine the site selection process, reduce capital expenditure per store, control operation expenses and enhance food service offerings to cater to local customer tastes."

"For Hong Kong, the basic strategy of quality growth will still be maintained to ensure consistent improvement in profitability. The Group will invest considerable resources in brand building in the next three years to ensure that Circle K will continue to become the most preferred convenience store chain, to improve the top-of-mind awareness and, most importantly, to serve as a showcase for visitors from the Chinese Mainland."

- ENDS -

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 205 company-owned-and-managed stores as of 31 December 2004.

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. As at the end of December 2004, 20 Circle K stores were in operation in Guangzhou.

CRA corporate website: www.cr-asia.com

About Li & Fung

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. Under the retailing group, there are two chains in Hong Kong: Circle K and Toys "R" Us; fashion retailing business Branded Lifestyle which manages retail sales of Ferragamo, Country Road, Mango and Calvin Klein Jeans in key markets in Asia; and also a brand licensing unit that specialises in licensed products. 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

Results for 2004

  Increase 2004 2003
Turnover 15.2% HK$1,757,581,000 HK$1,526,099,000
Profit attributable to shareholders 10.3% HK$66,959,000 HK$60,707,000
Basic earnings per share 9.9% 10 HK cents 9.1 HK cents
Final dividend per share 25% 3.75 HK cents 3 HK cents

HIGHLIGHTS

  • Satisfactory growth in turnover and profit supported by positive consumer sentiment and increase in new stores in Hong Kong and Guangzhou.

  • Turnover increased by 15.2% over the previous year to HK$1.8 billion.

  • Profit attributable to shareholders increased by 10.3% to HK$67 million.

  • Basic earnings per share increased by 9.9% to 10 HK cents.

  • Number of stores in Hong Kong increased by 19 to 205, while those in Guangzhou increased by 13 to 20 as of 31 December 2004.

  • Strong cash position with HK$531.4 million cash on hand and free of bank borrowings as of 31 December 2004.

  • Encouraged by the favourable market environment, the pace of store openings will be accelerated in Hong Kong and the Pearl River Delta markets in 2005.

  • The Board of Directors has recommended a final dividend of 3.75 HK cents per share.


 

Convenience Retail Asia Limited

Consolidated Profit & Loss Account
Year ended 31 December
 
2004
HK$'000
2003
HK$'000
Turnover 1,757,581 1,526,099
Cost of sales (1,312,920) (1,141,575)
 

Gross profit 444,661 384,524
Other revenues 146,084 120,111
Store expenses (422,848) (354,832)
Distribution costs (29,092) (24,548)
Administrative expenses (63,204) (56,409)
 

Profit before taxation 75,601 68,846
Taxation (13,673) (12,769)


Profit after taxation 61,928 56,077
Minority interests
5,031
4,630
 

Profit attributable to shareholders
66,959
60,707


Dividends
33,590
26,772
 

Basic earnings per share 10.0 cents 9.1 cents


Final dividend per share
3.75 cents
3.0 cents