Convenience Retail Asia Limited

Convenience Retail Asia maintains satisfactory turnover and
profit growth for 2002

First Circle K stores in Guangzhou draw favourable responses

Hong Kong, 14 March 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 profit for 2002 despite a very difficult economic environment in Hong Kong. The Group achieved a continuous record of growth quarter on quarter since the Group's GEM listing in January 2001.

The Group's turnover for the year and the fourth quarter ended 31 December 2002 rose 6.8% and 10.6% to HK$1.4 billion and HK$360.8 million respectively, compared to corresponding periods in 2001.

Net profit attributable to shareholders increased by 10.2% to HK$72.1 million for the year and by 23% to HK$19.6 million for the fourth quarter. Basic earnings per share increased by 7.9% to 10.9 cents for the year.

Dr. Victor K. Fung, Chairman of CRA, commented on the Group's performance, "2002 was an eventful year for the Group. It was by no means an easy task to achieve the growth last year, in the face of continued deflationary pressure and weak consumer sentiment. In fact, it was further testimony to our robust business model, which seems able to weather market turmoil."

Mr. Richard Yeung, Chief Executive Officer of CRA, added, "Our success in 2002 was largely due to continual improvements in the Group's core competencies and the building of a strong brand image. We will persist with this strategy in order to sustain profitability and achieve volume growth in an uncertain market environment."

Business Review

For the year under review, the increase in turnover came primarily from sales of new stores. 22 new stores were opened during the year, giving a total of 166 outlets by year-end and missing the Group's target of 170 by four stores. A 4.3% decline in sales of comparable stores (stores that are in existence in 2001 and 2002) was recorded.

Continual improvements in category management and income from new categories such as phone cards resulted in increase in gross margin and other income (excluding interest income) from 31.6% to 32.8% of sales for the year when compared to 2001. The Group was also very intent on controlling expenses. As a result, an increase in net margin from 5% to 5.2% of sales was recorded for the year.

Update on the Guangzhou Operation

In November 2002, the first Circle K store in Guangzhou was opened marking the launch of "the new generation of convenience store". The new store model is specially designed for the Guangzhou market featuring an innovative range of products. Customer response so far has been favourable and sales figure is in line with expectation.

Following the success of the first store, the Group opened the second Circle K store in Guangzhou in end December. The Group will monitor the performance of each store and fine-tune the business model before embarking on an aggressive expansion plan.

Business Outlook

The outlook for 2003 is not a particularly optimistic one for Hong Kong as deflation and high unemployment continue to deter economic recovery.

Looking ahead, Mr. Yeung said, "We anticipate a slight decrease in the dollar value of the overall retail market sales in Hong Kong compared with 2002, which will be more or less in line with the continual deflation trend. Our key objectives for 2003 will be to maintain comparable store sales, to reduce the cost of goods sold, to generate new source of income with the introduction of new growth categories and to exercise strict cost control."

"It will be important for the Group to adhere to the quality growth strategy with tactics to add value to the Circle K shopping experience. The ultimate goal is to achieve and exceed our target volume and profitability growth for both Hong Kong and Guangzhou operations," 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 166 company-owned-and-managed stores as of 31 December 2002.

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 2002, two 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 Mainland of China 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 2002

Increase 2002 2001
 
Turnover 7 % HK$1,393,542,000 HK$1,305,124,000
Profit attributable to shareholders 10 % HK$72,117,000 HK$65,457,000
Basic earnings per share 8 % 10.9 HK cents 10.1 HK cents

  • Satisfactory growth in turnover and profit despite the difficult economic environment in Hong Kong.

  • Turnover increased by approximately 7% over the previous year to approximately HK$1.4 billion.

  • Profit attributable to shareholders increased by approximately 10% to HK$72.1 million.

  • Basic earnings per share increased by approximately 8% to 10.9 cents.

  • Number of stores in Hong Kong increased by 20 to 166 as at 31 December 2002.

  • First Circle K store in Guangzhou opened in November 2002. By end- 2002, two stores were in operation in Guang zhou.

  • Strong cash position with HK$407.5 million cash on hand and free of bank borrowings as at 31 December 2002

  • Outlook of the Hong Kong retail market in 2003 expected to be uncertain which may adversely impact the GroupíŽs profitability growth.


Convenience Retail Asia Limited

Consolidated Profit & Loss Account
Year ended 31 December
2002
HK$'000
2001
HK$'000
Turnover 1,393,542 1,305,124
Cost of sales (1,044,124) (981,395)


Gross profit 349,418 323,729
Other revenues 114,575 98,200
Store expenses (316,550) (288,602)
Distribution costs (21,509) (18,037)
Administrative expenses (48,237) (46,878)
Start-up costs for China operations (8,339) (3,367)


Profit for the year 69,358 65,045
Minority interests 2,759 412


Profit attributable to shareholders 72,117 65,457


Basic earnings per share 10.9 cents 10.1 cents