DC Holdings Announces FY2017 Interim Results

With Support of Cloud Computing and Big Data Technologies
Continuing Operations Business Achieves Double-digit Growth

HONG KONG, Sept. 1, 2017 /PRNewswire/ -- Digital China Holdings Limited ("DC Holdings" or the "Group"; Stock Codes: 00861.HK; 910861.TW) today announced its interim results for the six months ended 30 June 2017 (the "Period").

Core businesses returned to profit with turnover continues to increase driven by new businesses

DC Holdings continued the transition from a traditional IT service provider to an innovative Big Data service provider in full swing during the first half of 2017. During the Period, turnover from Continuing Operations amounted to approximately HK$5,733 million, representing a growth of 5.60% compared to the corresponding period of last financial year (the Company's revenue, which mainly derived from mainland China, grew by 10.53% in terms of RMB), mainly driven by the increase in turnover from new businesses. Gross profit amounted to HK$1,153 million, representing year-on-year growth of 18.15%(growth of 23.65% in terms of RMB). Gross profit margin improved by 2.14 percentage points year-on-year to 20.12%. Turnover and gross profit from continuing operations recorded double-digit growth while the turnover from New Business amounted to HK$414 million, representing year-on-year growth of 51.21%(growth of 58.41% in terms of RMB). Gross profit from New Business increased to HK$209 million with gross profit margin of 50.46%. As New Businesses with higher margins continued to account for an increasing share of total turnover, overall gross profit margin had risen accordingly since 2014. In the first half of 2017, Continuing Operations sustained growth in revenue and profit.

The management of DC Holdings commented, "With the advancement of our new strategy, DC Holdings has fulfilled the transition from an industry IT service provider to an industry operator through innovative business models developed on the back of Cloud Computing and Big Data technologies, in core industries where we claim advantages."

Strategic businesses progressing on all fronts: ongoing innovation in Sm@rt City and   Precision Medicine being the absolute vanguard

Turnover amounted to HK$414 million, representing year-on-year growth of 51.21%(growth of 58.41% in terms of RMB), while gross profit increased to HK$209 million or 50.75% as compared to the corresponding period of last year. Sm@rt City business was actively developing innovative business models based on Big Data services and API platforms, on top of the existing model of Internet-based operation, with a view to extending the business chain of the Sm@rt City. Meanwhile, the Company made further inroads in the precision medicine sector. With the guide and support by the National Health and Family Planning Commission, DC Holdings Group is planning to invest in the China Healthcare Big Data Technology Development Group Ltd. ("Technology Development Group").

Sm@rt City Service sustained rapid growth in the first half of 2017, the business reported service revenue of approximately HK$47.25 million, growing by 60.87% year-on-year. As of 30 June 2017, the Company's Sm@rt City solutions have covered more than 120 cities, and city service platforms have been procured by more than 40 cities / districts and in operation in over 30 cities covering over more than 100 million residents. New contracts with an aggregate amount of RMB114 million were signed during the reporting period including the operation of the Internet service platform of Guiyang City. Since this year, Sm@rt City business has started to develop the cloud-based open city data platform. In cooperation with Peking University, DC Holdings have developed and invested in Yanfeng DaaS and Yanyun IaaS, exclusive deep-web data extraction technologies by Beijing Internetware Limited Corporation. The application of the new technologies has significantly accelerated the progress of various data sharing processes, including those in relation to government data, effectively breaking the isolation of individual information systems and improving the Company's ability for data extraction and analysis.

On this basis, the Company have launched respective business models for the operation of resources, scenarios and platforms providing government and corporate clients with products for the integration and convergence of API government information resources, service solutions and platform construction and operation. Currently, data service products for industrial operation, economic operation, defined poverty aid, citizen credit, transportation and education have been developed commercializing the Company's technological achievements in multiple sectors.

DC Holdings made further inroads in the precision medicine, the Group's subsidiary, Digital China Health is currently engaged in a comprehensive cooperation with the National Cancer Center to construct the largest nationwide oncologic data centre and oncology Big Data platform in China. By end of June 2017, the oncologic data centre has connected to 17 provincial oncology hospitals collecting more than 4 million sets of clinical, imaging and genetic oncology data, while entering into comprehensive strategic cooperation agreements with a number of reputable pharmaceutical manufacturers, medical equipment suppliers and insurance companies. Furthermore, the Group is planning to invest in the China Healthcare Big Data Technology Development Group Ltd. ("Technology Development Group"). The Group is committed to building itself into the premier brand name in healthcare Big Data in China and even the world in the future through Digital China Health and Technology Development Group as two main platforms to provide comprehensive and precise cancer data services.

IT Service Business (DCITS): leading IT service provider in China's IT industry specialized in proprietary software, services, Cloud Computing and Big Data analysis, with emphasis on cloud platform services for the agricultural, financial and taxation sectors on the back of its strengths in these industries

During the period, DCITS announced its new strategy of "IT+" industrial integration under the framework of "Cloud Computing +Big Data" of DC Holdings. DCITS has made a major effort to drive the development of strategic businesses such as Cloud Computing, Big Data, and quantum communication, with a view to nurturing profitable niches for the healthy and sustainable development of the company. Turnover for the reporting period amounted to HK$ 4,162 million, a slight setback of 0.76% year-on-year(growth of 3.56% in terms of RMB). Gross profit margin for the business improved by 2.43 percentage points, year-on-year, to 18.76%. Net profit attributable to shareholders of the parent company amounted to HK$107 million, representing a 15.90% increase year-on-year.

In the aspect of Technical Services, Application Software Development (including Cloud services), the technical services business continued to consolidate its industrial strengths by bolstering the development of data analysis and intelligent operation and maintenance. For the reporting period, the Company's Technical Services reported turnover of HK$ 1,100 million, representing year-on-year growth of 7.61% compared to the corresponding period of last year. Gross profit margin for the business was 25.58%, an improvement by 4.11 percentage points year-on-year.

In application software development (including Cloud services), the rapid applications of new-generation technologies have significantly boosted demands from industrial clients in the financial, telecommunications and government and corporate service sectors. For the reporting period, turnover from the Company's application software development business amounted to HK$413 million, representing an 11.47% growth year-on-year. Gross profit margin for the business was 29.86%, a slight decrease by 0.77 percentage points compared to the corresponding period of last year. During the first half of the year, the application software development business reported strong sales to banks and financial institutions, while the Company's proprietary core banking systems were launched successfully for Zhongguancun Bank.

In the aspect of Agricultural Informatisation Business, the Company reported revenue of HK$109 million, a 2.86% growth compared to the corresponding period of last year. Gross profit margin for the business reached to 49.90%. As the flagship of the modern agricultural business segment of DC Holdings, Zhongnong Xinda has become China's premier brand in agricultural informatisation, ranking first in the farmland rights registration market for 4 consecutive years in terms of market shares and having charted land sites with an aggregate area of close to 50 million mu. In connection with agricultural Big Data, the "Big Data Command Module for Three Issues Concerning Agriculture, Rural Areas and Farmers" developed by the Company has commenced operation in Yangling Agricultural Hi-tech Industrial Demonstration Zone in Shaanxi, to the high acclaim of national leaders.

Regarding to the Systems Integration Business, following registration as one of the founding members of the National Quantum Communication Industry Union, the Company has been qualified to take part in the formulation of the national standards for the quantum encrypted communication industry, as well as the construction of the Tianjin Quantum Communication Industrial Park, in a further increase of the Company's strengths in services.

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

For the six months ended 30 June 2017, overall revenue from Supply Chain Business amounted to approximately HK$1,158 million, a 20.33% growth year-on-year(growth of 58.41% in terms of RMB), while overall gross profit margin was 14.14%. Meanwhile, revenue from e-Commerce Business sustained a rapid growth. In connection with strategic development in the industry, the Company continue to enhance cooperation with Cainiao Network of Alibaba Group and have signed up as one of the first batch of logistics service mega-market strategic partners in Cainiao Network. In the future, the Group's Logistics Business will be seamlessly connected to the Taobao and T-mall platforms to provide storage and logistics services for more branded customers.

Looking ahead: Determined to implement Big Data and Cloud Computing to drive the development of new business

Mr. Guo Wei, Chairman of the Board of DC Holdings said, "2017 is the year of full implementation of our strategies and new businesses. With the rapid penetration of mobile Internet, Big Data and Cloud computing into various industries, the economic models and social patterns are facing enormous changes which along with great challenges and opportunities. Digital China Holdings will seize the new opportunities of 'Internet+' era and firmly committed to transiting to industry operator through innovative business models, to act ahead of others and swiftly expand our new business, including Sm@rt City, precision medicine, agricultural informatization and intelligent manufacturing, by raising capital in the market. We believe that Digital China Holdings will continue to progress against all odds on the way of its transformation to a Cloud and Big Data service provider and deliver ample rewards to the shareholders, given the depth of its technological strengths, its extensive presence in different sectors and its solid network of Sm@rt City operations."

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.hk

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