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FY2008/09 Annual Results Announcement
18 June 2009
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Disclaimer
This presentation may contain certain projection and forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Digital China may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statement, including but not limited to any projections of revenue, margins, expenses, charges, earnings or other financial items; any statements of the plans, strategies, and objectives of management for future operations, including execution of any restructuring plans; any statements concerning the expected development, performance or market share relating to products or services; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include macroeconomic and geopolitical trends and events; execution and performance of contracts by suppliers, customers and partners; employee management issues; the challenge of managing asset levels, including inventory; the difficulty of aligning expense levels with revenue changes; expectations and assumptions relating to the execution and timing of workforce restructuring programs. In addition, statistical and other information relating to the PRC and the technology industry contained in this presentation have been compiled from various publicly available official or unofficial sources generally believed to be reliable. However, the quality of such source materials cannot be guaranteed. Moreover, statistics derived from multiple sources may not be prepared on a comparable basis.
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AGENDA
Financial Review
Business Review by SegmentsIndustry Market (Services)
Enterprise Market (Systems)
SMB & Consumer Market (Distribution)
Company Outlook
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Financial Review
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Financial Highlights
Q4 FY08/09Turnover up 14.07% yoy to HK$10,078 millionGross profit margin decreased yoy to 7.18% Profit from operating activities grew 25.88% yoy to HK$195 millionNet profit up 105.86% yoy to HK$135 millionNet cash outflow from operating activities was HK$344 million
Annual FY08/09Turnover up 20.10% yoy to HK$42,326 millionGross profit margin decreased yoy to 6.99% Profit from operating activities grew 35.82% yoy to HK$884 millionNet profit up 59.84% yoy to HK$641 millionEPS reached 66.58 HK cents, up 52.29% from annual FY07/08.Net cash inflow from operating activities was HK$727 million
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Continuous Out-performance
6 – Year Turnover CAGR : 22.52%
Turnover
HK$
’Bi
llion
FY08/09
40
30
20
10
FY03/04 FY04/05 FY06/07FY05/06 FY07/08FY02/03
2002 2003 2004 2005 2006 2007 2008
Digital China 18.90% 14.12% 8.26% 28.52% 27.96% 38.65% 20.10%
China IT Spending* 2.20% 8.10% 11.00% 12.20% 15.70% 16.10% 8.50%
Growth Rate *IDC Data
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Income Statement Highlights
HK$ millionFY2008/09
AnnualFY2008/09
Q4FY2007/08
AnnualFY2007/08
Q4
Turnover 42,326 ↑20.10% 10,078 ↑14.07% 35,244 8,835
Gross profit margin (%) 6.99 --- 7.18 --- 7.12 8.18
Profit from operating activities 884 ↑35.82% 195 ↑25.88% 651 155
Net profit 641 ↑59.84% 135 ↑105.86% 401 66
Basic EPS (HK cents) 66.58 ↑52.29% --- --- 43.72 ---
Other income and gains include:
HK$ millionFY2008/09
AnnualFY2008/09
Q4FY2007/08
AnnualFY2007/08
Q4
Exchange gains/(losses), net 89 ↓69.55% (11) --- 294 105
Government grants 61 ↓5.59% 16 ↓8.40 % 64 17
Others 298 ↑398.12% 114 ↑634.41% 60 16
As of 31 March 2009
As of 31 March 2008
Current Ratio 1.45x 1.56x
Capital Expenditure (HK$ million) 77 98
ROE 20.42% 15.28%
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Segment Breakdown
HK$ millionDistribution Systems Services Consolidated
08/09Annual
07/08Annual
Y-o-Ychange
08/09Annual
07/08Annual
Y-o-YChange
08/09Annual
07/08Annual
Y-o-YChange
08/09Annual
07/08Annual
Y-o-Ychange
Revenue 24,087 20,889 15.3% 13,356 9,732 37.2% 4,883 4,623 5.6% 42,326 35,244 20.1%
Cost of Sales 23,051 19,922 15.7% 12,088 8,826 37.0% 4,229 3,985 6.1% 39,368 32,733 20.3%
Gross Profit 1,036 967 7.1% 1,268 906 39.9% 655 638 2.7% 2,959 2,511 17.8%08/09
Annual07/08
AnnualY-o-Y
Change08/09
Annual07/08
AnnualY-o-Y
Change08/09
Annual07/08
AnnualY-o-Y
ChangeOther income and gains 109 272 (59.9%) 40 82 (51.0%) 448 418 7.1%
SG&A (1,406) (1,251) 12.4% (459) (452) 1.4% (2,074) (1,943) 6.7%
Other (286) (138) 107.5% (157) (195) (19.6%) (449) (335) 33.9%
EBIT 718 750 (4.2%) 88 71 22.8% 884 651 35.8%
Finance costs (159) (208) (23.4%)
Tax (127) (52) 143.4%
Net profit 641 401 59.8%
FY07/08 Annual Gross Profit: HK$ 2,511 million
Distribution1,03635%
Systems1,26843%
FY08/09 Annual Gross Profit: HK$ 2,959 million
Distribution96739%
Systems90636%
Services63825%
HK$ million HK$ millionServices65522%
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Gross Profit Margin Trend
FY05/06 Annual FY06/07 Annual FY07/08 Annual FY08/09 Annual
Distribution 4.69% 4.79% 4.63% 4.30%
Systems 8.92% 9.51% 9.31% 9.49%
Services 13.77% 13.30% 13.79% 13.41%
0%
5%
10%
15%
20%
2005/06Q1
Q2 Q3 Q4 2006/07Q1
Q2 Q3 Q4 2007/08Q1
Q2 Q3 Q4 2008/09Q1
Q2 Q3 Q4
Distribution Systems Services
Distribution 5.36 4.61 4.30 4.65 5.05 4.91 4.45 4.81 4.32 4.56 4.68 4.95 4.30 4.54 4.11 4.21
Systems 8.81 10.06 7.89 9.23 9.30 9.24 8.51 11.20 8.26 9.68 9.39 9.87 8.27 10.24 9.21 10.32
Services 12.93 12.87 11.01 18.47 10.11 12.75 13.79 15.25 12.48 13.04 12.42 16.24 12.27 13.69 12.40 16.79
Note: Financial Statement Data
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Consolidated Balance Sheet
HK$ million 31 Mar 2009 31 Dec 2008 31 Mar 2008
Fixed assetsOther non-current assetsInventoriesTrade and bills receivablesPrepayments, deposits and other receivablesCash and cash equivalentsDerivative financial instruments
413398
2,1365,4721,3661,734
27
424351
2,5215,2201,3132,162
0
416334
2,5593,7731,234
9980
Total assets 11,546 11,991 9,314
Trade and bills payablesOther current liabilitiesInterest-bearing bank borrowings (current)Interest-bearing bank borrowings (non-current)Bond payable
4,6981,814
875702226
5,0152,027
917703227
3,3341,762
400953222
Total liabilities 8,315 8,889 6,671
Share capitalOther reservesRetained earningsProposed final dividendMinority interests
961,5831,321
14091
961,4731,436
097
961,443
94714018
Total equity 3,231 3,102 2,644
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A/R Turnover Days
Turnover Days for the Group
Cash Cycle DaysA/P Turnover Days
Inventory Turnover Days
0 2,000 4,000 6,000 8,000 10,000
Microsoft
Intel
AMD
Asus
Lenovo
Acer
Dell
IBM
Cisco
HP
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Group Level: Concentration Analysis
% of the Group’s total procurement
Purchase from Top 10 Suppliers accounted for 69% of the Group’s total procurement
20%
11%
8%
6%
6%
5%
4%
3%
2%
2% HK$ million
Business Development
Key Initiatives:- Streamline the organization to be more customer-focused
- Operation re-modeled to be more customer-centric- Market expansion (product & market share )
- Cash is the King- Extend A/P terms- Collection drive on A/R- Improvement on cash flow
- Speed up the Service-oriented Transformation
- Continuous enhancement on software and services capabilities
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Business Review:Industry Market
(Services)
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Services Segment: FY08/09 Annual
Revenue achieved HK$4,883 million
EBIT for annual achieved HK$88 million
Revenue from FSI & Telecom grew 30% and 29% yoy
Service contracts value of Telecom grow by nearly 114%
HK$ million
FY08/09 Annual Services Business:HK$4,883 million
Others13%
Finance19%
Telecom54%
Gov’t14%
BU Quarterly Revenue
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Digital China banking industry total solution ModelB@nk 2.0Digital China banking industry total solution ModelB@nk 2.0
Software Infrastructure(Middle Ware, Database, Operation System)Software Infrastructure(Middle Ware, Database, Operation System)
ESB & Financial Service DefinitionESB & Financial Service Definition
Data Integration Platform & Financial Data ModelData Integration Platform & Financial Data Model
MB Finteractive MB Finnovator MB FintelligenMB FusionG
L
Contribution
Managem
entA
ccounting
PB
OC
CBR
C
SA
FE
Risk Management
Finance & Performance
Regulatory
Core BankingTreasury
Trade Finance
Loan
Deposit
Payment
Financial Product & Service
Intermediate
Business
Card
Cash
Managem
ent
Loan
Wealth
Marketing & Sales
CRM
Loyalty
EC
IF
integration contract
Custom
er Service
Marketing
Sales
Channel Integration
Multi-Chanel Platform
Bank & Corp. Direct Link
VIP
E-Banking
Internet
Mobile
ATM
Branch
Teller
Payment Gateway
CNAPS CUP SWIFT
Telephone
Customer Value Case – Banking Solutions
Credit
ALM
Operation
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BOSS/BSS
Customer Value Case – Telecom Solution
B2B
Integration Portal
CorpServiceProducts
CorpCustomer
ISPCustomerService
Gateway / Integrated Business Portal / ISP Systems
3rd PartySolution
Unified Business Support Portal
Concerted Network
Data Integration Portal
BSS A
pplication Process Integration Portal
Operation Analysis System
Billing & Settlement
CRM
HR & KnowledgeManagement
Gateway & Monitoring
Man
agem
ent I
nfor
mat
ion
Syst
em
Quality Control
Complaints
Settlement
Channel Mgt
Product Mgt
Customer Service
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Services Segment: Customer Analysis
0 200 400 600 800
ZTE Kangxun
Zhongying
Taikang
China P&T
China Unicom
CCB
China Mobile
China Telecom
Zhongjie Guangdong
CNC
HK$ million1.44%
1.48%
1.58%
1.67%
2.54%
4.50%
5.60%
14.95%
10.49%
7.03%
Sales to Top 10 Customers accounted for 36.51% of Services Business’s revenue
% as of Services Business’s revenue
Sales to Top 10 Customers accounted for 51.28% of Services Business’s revenue
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Business Review:Enterprise Market
(Systems)
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Systems Segment: Annual FY08/09
Turnover increased by 37.24% yoy.
Revenue growth drivers:
Storage – up 101%
Networking product – up 25%
Unix server – up 25%
Effective business expansion into Key Regional Clients, rev up 85%
Others 15%
Packagedsoftware
17%
Storageproducts
12%
Networkingproducts
31%
Unix servers25%
Case Study: City Emergency System
Smart contingency plan management
Emergency forecasting and warning
Emergency forecasting and warning
Emergency store management
Contingence planstartup
Contingence planstartup
Emergency security training Emergency responseEmergency response
Emergency intendancemanagement
Disposal of aftermath and rebuilding
Disposal of aftermath and rebuilding
Peacetime WartimeWartime
Information release
Emergency linkage switch
Emergency control center
GIS & CADSGIS & CADS
FY08/09 Annual Systems Business: HK$13,356 million
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Business Review:SMB & Consumer Market
(Distribution)
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Distribution Segment: Annual FY08/09
NotebookComputers
38%
Others 8%Consumer IT
Products8%
Accessories10%
Peripherals13%
DataProjectors
3%
PC Servers9%
DesktopComputers
11%
Turnover grew 15.31% yoy, still growing business against a backdrop of slowing down consumer market
Aggressive expansion into 4th-6th tier cities, turnover grew 51.4% yoy
Revenue growth drivers:
Notebooks – up 35%Accessories – up 39%
FY08/09 Annual Distribution Business:HK$24,087 million
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Company Outlook
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Company Outlook
• Expansion in customer-base, market share and in product portfolio are the keys to ensure future market leadership
• As part of strategic transformation process, organization has been further streamlined to focus on customers in all market sectors
• Improvement over operation efficiency and enhanced controls over working capital and risks, will help to ensure a stable & healthy operation environment
• Strategic transformation into “service-oriented” organization will position the Group into a more-competitive stance for future development
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Services
Systems
Distribution
Customer-Oriented
TextIT Services Deployment
Text
MA
Enterprise
SMB
Consumer
1. Application Services of ITS
2. Infrastructure Services of ITS
3. Systems Technology
4. Business IT Solutions 5. Consumer & SMB
Solutions 6. Supply Chain Services
Customer-Oriented IT Services Deployment
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Thank You
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Questions & Answers