DC Holdings Achieves Remarkable Improvement in FY2016 Annual Results; Driving Innovation to Transform the Group into a Big Data Service Provider

HONG KONG, March 29, 2017 /PRNewswire/ -- Digital China Holdings Limited ("DC Holdings" or the "Group"; Stock Codes: 00861.HK; 910861.TW) today announced its annual results for the twelve months ended 31 December 2016 (the "Period").

Disposal transaction completed while new strategy delivered initial success

In 2016, While China went into a critical year for its supply-side structural reforms, Digital China Holdings also went into a crucial year for its transformation to an all-rounded innovative company. During the period, Digital China Holdings received the full consideration for the transaction of disposing its traditional consumer and corporate distribution business amounting to HK$4.43 billion(After deducting the relevant taxes and fees). The Company paid a special cash dividend of HK$3.2 per share to shareholders and the exceptional gain of approximately HK$498 million arising from the disposal was booked in the financial year under review. During the period, the revenue from the Continuing Operations amounted to HK$ 12,251 million, representing year-on-year growth of 15.25%; Gross profit increased by 2.98%, as compared to HK$2,216 million for the corresponding period of last year with gross profit margin was largely unchanged at 20.44%.

The management of Digital China Holdings commented, the successful completion of the disposal has not only delivered lucrative returns to shareholders, but also enabled the Company to focus its resources on its strategic businesses with bolstered determination for the transformation into an innovative company. Ongoing developments in information technology have presented us with novelties such as Cloud Computing, Big Data, Virtual Reality and Artificial Intelligence. Among these, Cloud Computing, in particular, will become the mainstream model for IT operation in future, while Big Data will provide the most important core resources in this model. We aspire to become an innovative Internet company. Such innovation calls for the provision of Internet-based Cloud Computing and Big Data services through the Sm@rt City to sectors which we have strengths on, such as precision medicine, agricultural informatisation, sm@rt manufacturing, finance and taxation. Such innovation of business model will enable us to achieve the transformation from an IT service provider to the industry-based operator. The improvement on the results of Continuing Operations, indicating our strategy of transformation has implemented step by step and recognized by the market.

IT Service Business (DCITS): Specialized in proprietary software, services, Cloud Computing and Big Data analysis, with emphasis on cloud platform services

During the period, benefitting from the upgrade of IT infrastructures and services of various sectors to cloud-based structures and the faster pace of informatisation for the agricultural sector, DCITS reported rapid growth for its major business segments, as revenue increased 12.90%, year-on-year, to HK$9,209 million. Among these, Technical Services and Application Software Development (including Cloud services) reported revenue of HK$2,574 million and HK$1,038 million, representing remarkable year-on-year growth of 22.06% and 50.15%, respectively. In 2016, DCITS continued to implement its strategy of driving business development through external acquisitions, as it completed the acquisition of Nanjing Howso Technology Co., Ltd., a leader in mobile network optimization and Big Data for the communication industry. The acquisition will not only bring substantial profits to DCITS, but will also provide it with an access to the Communication Technology service sector.

During the financial year under review, agricultural informatisation business reported revenue of HK$324 million. Gross profit margin increased by 5.16 percentage points to 56.76%, indicating the strong competitive edge of our business model built around software and data services. Since the acquisition of Zhongnong Xinda in late 2014, we have become No.1 in China's agricultural informatisation industry, ranking first in market shares for software services in farmland rights registration and land trading & exchange.

The Company's systems integration business reported revenue of HK$4,826 million for the financial year under review, representing a year-on-year growth of 6.72%, as the previously subdued systems integration sector welcomed a prominent rebound following advances of the national information security strategy, especially the upgrade of IT infrastructures to cloud systems across industries. Closely collaborating with the team of Prof. Pan Jianwei, an academician of Chinese Academy of Sciences, from the University of Science and Technology of China, DCITS has completed the construction of"Beijing-Shanghai Telecommunication Main Line", the first thousands-mile level quantum encrypted communication network in the world. In future, the Company will continue to make strong efforts to drive the development of quantum communication and other businesses in information security.

Supply Chain Management Business: leading supply chain management brand in China with extensive logistic network and comprehensive after-sale maintenance capability

Thanks to our strategy of developing core benchmark customers on a continuous basis, our Supply Chain Management Business recorded overall turnover of approximately HK$2,252 million for financial year under review, an increased by 8.26% year-on-year. The turnaround in revenue was notable during the peak season for e-commerce and logistics during the second half of the year. The gross profit margin is approximately 15.93% for the period, almost unchanged from the corresponding period of last financial year.

Regarding to e-Commerce Supply Chain Business, the "intermediary platform" business model, built through persistent efforts over years, has now formed one of our unique, core competitive strengths. Our marketing efforts yielded positive results as we signed up Panasonic and a variety of other e-commerce clients during the year, apart from sustaining strong growth in businesses with existing customers such as Huawei, Dell and HP. We continued to be engaged in solid cooperation with China Mobile, China Unicom and China Telecom – in B2B logistics business. In B2C logistics business, we entered into contracts for FMCG (fast moving consumer goods) warehouses with Cainiao Network of Alibaba Group. Instant Logistics, our logistics services brand, made a name for itself during the November 11th marketing campaign (China's Black Friday) in the debut with Cainiao, ranking 1st and 5th through its Langfang Warehouse in North China and Fengxian Warehouse in Shanghai, respectively, in terms of the order volume processed among the Cainiao Union.

New Business: Exploring opportunities in "Internet+" sectors such as Sm@rt City, Precision Medicine, Agricultural Informatisation and Sm@rt Manufacturing on the basis of Cloud Computing and Big Data technologies

For the financial year under review, the New Business comprised Sm@rt City and Financial Services. Turnover amounted to HK$791 million, representing year-on-year growth of 100.67%, while gross profit amounted to HK$386 million, increased by 72.18% as compared to the corresponding period of last year. The rapid growth in revenue and gross profit underpins the enormous market potential of Sm@rt City under the new model of "Internet+".

As the Company continued to invest in the construction of Sm@rt City platforms and corresponding services, our Internet-based Sm@rt City service business sustained rapid development: turnover for 2016 amounted to approximately HK$145 million, representing year-on-year growth of 120.25%. As at the end of the financial year under review, we had 30 Internet service platforms in operation, close to doubling what we had at the end of 2015. As a forerunner in China's Sm@rt City sector, Digital China Holdings has extended the reach of its Sm@rt City platforms to more than 100 cities over the years. Our application solutions and IT platforms are operating in more than one third of the cities in China. The massive footprint has generated stable service revenue and growing usage volume for us, while providing a sound opportunity for commercialization.

As an important support of Digital China Holdings' strategy, our Financial Service Business seeks to generate stable income and profit for the Company by providing flexible financing and lending services in diversified sales to customers of various business platforms, with a primary focus on risk control. During the period, we made sustained efforts in the agricultural finance sector and developed a wide range of financial loan products, including agricultural machinery leasing and supply-chain financing with our subsidiary DCITS, to numerous sub-sectors such as plantation and livestock. As at the end of the financial year under review, the outstanding loan balance of our financial service business had amounted to over RMB900 million, representing a 68% growth year-on-year.

Meanwhile, we made active efforts to realize the value of our existing property assets through disposal, leasing and commercial development which contributed revenue of HK$280 million for the financial year under review, which represented year-on-year growth of 16.52%. Chongqing Digital China HC Microcredit Finance Co., Ltd. ("HC Microcredit"), a joint venture formed by the Company and HC International, continued to report growth in business scale since its incorporation in the second half of 2014, leveraging the membership of HC International and information on transactions on the platform. Loan balance as at the end of the financial year under review exceeded RMB1.60 billion and net profit amounted to approximately RMB69 million.

Regarding to the Self-incubating Business, under the new innovation and incentive regime, our "Internet +Corporate Service" business team finished equity injection and transformed from a department of Sm@rt City Service to an incubation project of the innovative centre of Digital China Holdings known as "Qi Cheng". Currently, our business covers 11 cities, including Beijing, Shanghai, Xi'an and Harbin, and 40 specialized industrial parks, serving close to 3,000 start-ups and small-medium enterprises with an aggregated contract worth of close to RMB14 million. Durig the period, Digital China Health business has been officially launched. We are collaborating with the China National Cancer Center to build China's largest oncologic data centre and oncology Big Data platform. Digital China Health is committed to becoming No.1 brand in Big Data service of healthcare in China.

Looking ahead: Continue to progress with determination towards transformation into a Big Data and Cloud Computing service 

Mr. Guo Wei, Chairman of the Board said, "With the rapid changes characterizing the era of information, we clearly understand that a trillion-worth Big Data revolution is looming as the Internet continues to be bolstered by ongoing technological innovations. Digital China Holdings will follow the rapidly changing environment and concentrate our efforts to gain the first-mover advantage in core sectors such as Sm@rt City, Precision Medicine, Agricultural Informatisation and Sm@rt Manufacturing. Success is achieved through none other than determination, and business expansion is possible only through hard work and dedication. Guided by the vision of a "Digitalizing China", the people of Digital China Holdings will continue to progress with determination towards transformation into a Big Data and Cloud Computing service provider on the back of its solid strengths in the IT industry built over the years.''

~The End~

About Digital China Holdings Limited

Digital China Holdings Limited ("DC Holdings", Stock Code: 0861.HK) was listed on the Main Board of The Stock Exchange of Hong Kong in 2001 following a successful spin-off from the then Legend Group in 2000. It has developed its capital platforms across Mainland China, Hong Kong and Taiwan through the following four listed companies – DC Holdings, Digital China Information Service Company Ltd., Digiwin Software Company Ltd., and HC International, Inc. Their combined market capitalization reaches nearly HK$50 billion.

Since its listing 16 years ago, DC Holdings has adhered to the mission of driving the "Digitalization in China". With the corporate value of "commitment, passion and innovation", the Company evolved from China's largest IT product distributor into the largest integrated IT services provider and then the most influential Sm@rt City solutions provider in China. According to its latest development strategy, DC Holdings will capture the opportunities arising from the "Internet +" strategy and leverage on its technological strengths and capital resources to drive breakthroughs in Sm@rt City, precision healthcare, agricultural informatization and intelligent manufacturing based on the Cloud computing and Big Data technology. With comprehensive innovation mechanism and multi-layer incubation system, the Company is determined to become a genuine innovative enterprise.

For additional information about DC Holdings, please visit the Group's website at www.dcholdings.com .

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