Convenience Retail Asia Limited

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.


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:

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


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 -

  • 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
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.