Convenience Retail Asia Limited

Convenience Retail Asia Recorded Satisfactory Growth
Despite Declining Retail Spending in Third Quarter 2001

Hong Kong, 26 October 2001 - Convenience Retail Asia Limited ("CRA" or "the Group") [SEHK code: 8052], operator of Circle K convenience stores in Hong Kong and China, today announced healthy growth in both turnover and profit despite unusually wet summer months and conservative consumer spending during the third quarter ended 30 September 2001.

For the period under review, CRA reported a turnover of HK$350.4 million, which represents a 14% increase over the HK$308.6 million achieved in the same period last year. Of this increase, 2% was contributed by the sales growth in existing Circle K stores and 12% was generated by the addition of outlets. As of 30 September 2001, the Group owned and managed a total of 141 Circle K stores in Hong Kong, compared to 119 stores as at the end of the third quarter 2000.

Net profit rose by 36% from HK$14.9 million recorded for the third quarter of 2000 to HK$20.2 million in 2001. The growth was mainly driven by increase in store sales, and higher gross margin and other income. Earnings per share increased by a moderate 3%, from 3.0 HK cents reported last year to 3.1 HK cents this year.

For the nine months ended 30 September 2001, CRA recorded a turnover of HK$978.8 million and a net profit of HK$49.5 million, representing increases of 16% and 49% respectively when compared to the results for the same period in 2000. Earnings per share grew 13% from 6.8 HK cents in 2000 to 7.7 HK cents this year.

Dr. Victor K. Fung, Chairman of CRA, said, "We are naturally very pleased with the impressive results achieved in a weakening retail environment. The satisfactory performance validates our business model and strategies in confronting very conservative retail spending by consumers. We are confident that the Group will be able to end the year on a positive note."

Hong Kong Business Outlook

The immediate outlook for the sentiment of the retail market in Hong Kong is not very optimistic.The terrorist attacks in the US in September and rising unemployment locally has further eroded the deteriorating consumer spending.

Mr. Richard Yeung, Chief Executive Officer of CRA, said, "We expect a slightly adverse impact on our store sales in the coming few months. Nonetheless, with the addition of 18 new stores in the past three quarters and four new store openings in progress, the Group should be able to maintain a double digit year-on-year growth in turnover in the fourth quarter."

China Business Outlook

The forthcoming entry into the WTO and the rapidly growing retail market has rendered a favourable environment for the development of consumer retailing in the Mainland of China. CRA set up a joint venture responsible for leading the expansion of the Circle K network in the Southern part of China and submitted its application of a business licence for Guangzhou in April this year.

According to Mr. Yeung, a Guangzhou-based state-owned company will be introduced to the joint venture, which will be 65%-owned by CRA. The Guangzhou partner and Shanghai Shen Hong Corporation will hold 25% and 10% of the JV respectively. Upon finalization of agreement terms with the Guangzhou partner, the licence application will be forwarded to the relevant government departments for approval.

Mr. Yeung said, "The longer than expected application process will delay our China store opening programme by a few months. However, we have started planning our resources in the Mainland of China. We expect to commence store operations in Guangzhou once the licence is granted."

Looking ahead, Mr. Yeung commented, "We expect that the Group's profitability growth will moderate in the coming six months due to deteriorating retail environment in Hong Kong and increase in start-up cost of the China operation. The Group will continue to manage gross margin and control expenses cautiously. In addition, we have introduced new service programmes, such as the three-second Octopus Reloading Service and Breakfast Express programme, which are expected to further drive traffic into our outlets and thus support our continued growth in Hong Kong."

About CRA
Convenience Retail Asia 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 comprises 141 company owned-and-managed stores in Hong Kong as of 30 September 2001. Major initiatives are planned for expansion into the southern part of the Mainland of China.

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 Mainland of China 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:


Convenience Retail Asia Limited

Third Quarterly Results
For the Period Ended 30 September 2001

Three months ended 30 September
2001 2000
Group Turnover +14% HK$350.4 M HK$308.6 M
Group Profit +36% HK$20.2 M HK$14.9M
Earnings per Share +3% 3.1 HK cents 3.0 HK cents

Six months ended 30 September
2001 2000
Group Turnover +16% HK$978.8 M HK$845.0 M
Group Profit +49% HK$94.5 M HK$33.2 M
Earnings per Share +13% 7.7 HK cents 6.8 HK cents

  • Healthy growth in turnover and profitability despite unusually wet summer months and conservative consumer spending.

  • Number of stores in Hong Kong increased by nine stores to 141 during the quarter. This represents an increase of 22 stores when compared to 119 stores as at 30 September 2000.

  • With another four stores openings in progress, the company will be able to meet the target of 145 stores by end of year in Hong Kong.

  • Strong cash position with $335 million cash on hand and no bank borrowing as at 30 September 2001.

  • Just obtained approval in principle from Guangzhou Government on the final structure of the joint venture. Due to additional time required to add one Guangzhou based JV partner, the store opening in Southern China is expected to have a short delay.

  • Increase in unemployment and decline of Hong Kong retail sales started to accelerate in September and the retailing environment is expected to deteriorate in the coming six months.

  • Profitability growth rate in coming six months is expected to moderate due to the weaker retail spending in Hong Kong and increase in start-up cost from Southern China market.


Convenience Retail Asia Limited

Unaudited Profit & Loss Account

Six months ended 30 September
  2001 2000
HK$'000 HK$'000
Turnover 978,796 844,959
Cost of sales (736,715) (633,780)

Gross profit 242,081 211,179
Other revenues 71,107 47,544
Store expenses (213,374) (183,147)
Distribution costs (13,320) (11,509)
Administrative expenses (35,062) (27,230)
Start up costs for China operations (3,345) 0
Other operating income 0 480

Operating profit 48,087 37,317
Finance costs 0 (4,102)

Profit for the period 48,087 33,215
Minority interests 1,462 0

Profit attributable to shareholders 49,549 33,215

Basic earnings per share 7.7 cents 6.8 cents