Convenience Retail Asia maintains growth momentum in turnover and profit for Q1 2005
Favourable market environment provides impetus for business expansion plans in Hong Kong and the Pearl River Delta
Hong Kong, 25 April 2005 - Convenience Retail Asia Limited ("CRA" or "the Group"; SEHK: 8052), operator of Circle K convenience stores in Hong Kong and on the Chinese Mainland, announced satisfactory growth in turnover and profit for the first quarter of 2005, maintaining momentum from the previous quarter.
For the three months ended 31 March 2005, the Group's turnover increased by 14% to HK$454.2 million from HK$398.3 million when compared to the same period last year. Profit attributable to shareholders also registered an increase of 5% to HK$8.9 million from HK$8.5 million. Basic earnings per share were 1.3 HK cents.
Mr Richard Yeung, Chief Executive Officer of CRA, said, "Thanks to increased consumer confidence and upbeat market sentiment, overall retail sales in both Hong Kong and on the Chinese Mainland maintained brisk growth in the first quarter. The Group also rode on the positive trends and posted healthy comparable stores sales growth in the two markets."
Business Review
In Hong Kong, the Group reported a double-digit growth in turnover of 12.7% for the first quarter of the year. Comparable store sales increased by 3.8% over the first quarter of 2004, reflecting positive market trends.
The highlight of the quarter was the grand opening of the first Circle K Store in Macau on 15 March 2005 to take advantage of Macau's flourishing economy and rising consumer spending. Circle K Convenience Stores (Macau) Limited, which oversees Circle K operations in Macau, is a joint venture between the Group and Macau Industrial Limitada. The launch of the new store was a landmark as it represented the first international convenience store chain to open in Macau and the beginning of the Group's aggressive expansion into the western part of the Pearl River Delta region. The Group plans to open about 10 stores in Macau by the end of 2005 and these Circle K stores are expected to serve as a showcase for visitors from the Chinese Mainland.
In Guangzhou, the Group recorded a healthy 125.7% increase in turnover for the said quarter. Comparable store sales grew by 14% over the first quarter of 2004.
The Group also signed an agreement to acquire a 60% equity stake in DG Sun-High, operator of a franchised convenience store chain in Dongguan with about 90 stores. This agreement, which serves to build a second tier store brand and to achieve critical mass in sourcing and supply chain management in the Pearl River Delta area, is still subject to Government approval.
At the end of the first quarter of 2005, there were a total of 212 stores in Hong Kong and 22 stores in Guangzhou compared to 190 stores in Hong Kong and 10 stores in Guangzhou as at the end of the first quarter of 2004.
Outlook
Looking ahead, Mr Yeung said, "The first-quarter performance so far indicates that 2005 will be favourable for the Group's business growth in Hong Kong and expansion plans on the Chinese Mainland. It is also the Group's intention to step up promotional efforts in the second quarter in order to build traffic and generate further publicity for the Circle K brand."
"The upward trend in Hong Kong's retail market has triggered an increase in rental levels across the board, which prompts the Group to exercise caution and negotiate effectively with landlords to ensure that the impact on our store operations is minimised. Meanwhile, we are on the threshold of increased momentum in new store openings in Guangzhou in the second quarter with about 10 new store leases being committed and store renovations well underway."
Mr Yeung concluded, "The Group is launching an alternative store model in April with the inclusion of a steam station offering a unique range of steamed buns, hot meals and hot snacks. This initiative will provide important learning opportunities regarding the feasibility of a low-capital-investment store model designed to meet consumer demand for quality fast food customised to local tastes."
About CRA
Convenience Retail Asia Limited (CRA, SEHK 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 212 company-owned-and-managed stores as of 31 March 2005.
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 March 2005, 22 Circle K stores were in operation in Guangzhou.
CRA corporate Website: 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. Under the retailing group, there are 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 more information, please contact: Convenience Retail Asia Limited Telephone: 2991 6000 Mrs. Louisa Kwan Direct line: 2991 6229 CRA corporate Web site: www.cr-asia.com
Convenience Retail Asia Limited
First Quarterly Results For the Three Months Ended 31 March 2005
Change
2005
2004
(Restated)Group Turnover +14% HK$454,202,000 HK$398,323,000 Group Profit +5% HK$8,914,000 HK$8,460,000 Earnings per Share (Basic) 1.3 HK cents 1.3 HK cents
The robust economic outlook contributed to a further improvement in consumer sentiment in Hong Kong.
Number of stores in Hong Kong increased by 7 to 212 during the quarter.
Number of stores in Guangzhou increased by 2 to 22 during the quarter.
Increased margin pressure from escalating retail rental levels in Hong Kong due to unrealistic expectations among landlords.
Grand opening of first Circle K store in Macau poised to take advantage of the strong economy there.
- Agreement signed to acquire a 60% equity stake in DG Sun-High, operator of a franchised convenience store chain in Dongguan with about 90 stores (completion of which is subject to approval by the Government).
Strong cash position with HK$526.4 million and no bank borrowings as at 31 March 2005.
Convenience Retail Asia Limited
Unaudited Consolidated Profit & Loss Account
Turnover Cost of sales
Gross profit Other revenues Store expenses Distribution costs Administrative expenses
Profit before taxation Taxation
Profit after taxation Minority interests
Profit attributable to shareholders Basic earnings per share
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