Lianhua Supermarket Announces 2009 Annual Results

HONG KONG, March 31 /PRNewswire/ -- Lianhua Supermarket Holdings Co., Ltd. ("Lianhua Supermarket" or the "Company", together with its subsidiaries, collectively the "Group"; HKEx stock code: 980) today announced its annual results for the 12 months ended 31 December 2009 (the "Review Period" or the "Period").

Financial and Business Highlights

• Remarkable performance is achieved through acquisition and consolidation as well as improvement in operation. Turnover rose 16.0% to RMB 24.02 billion with flat same store sales growth. Operating profit increased 46% to RMB 648 million. Profit attributable to shareholders rose 30.7% to RMB 507 million. Basic earning per share was RMB 0.81.
• Gross profit and consolidated revenue grew steadily by 11.8% and 15.2%, respectively. During the period under review, the Group actively optimized merchandizing by increasing the scale of centralized purchasing, differentiating fresh produce and sourcing imports directly. Transformation of all three segments of retail formats further extended while overall profitability was improved.
• The Group pursued development through focused expansion, acquisition and rationalization of sales outlets. As at 31 December 2009, the total number of outlets of the Group achieved 4030, representing an increase of 1058 outlets. In 2009, the Group added 558 sales outlets, including 11 hypermarkets together with 3 supermarkets transformed to hypermarkets, 314 supermarkets (including 183 new outlets of Lianhua and 131 new outlet of Hualian) as well as 230 convenience stores.
• With the acquisition of Hualian Supermarket, the Group increased its influence in Shanghai and the Yangtze River Delta region and became the unique brand for franchising operation in the region. Consolidation of Hualian supermarket initiated during the year effectively enhanced its resource consolidation and led to a decrease in cost ratio. Operating profit margin increased by 1.01 percentage points in 2009.
• The Group was granted a franchise six outlets in Shanghai Expo Park. The Group started the "Welcome to Expo" campaign through staff  training and by strengthening key outlets with an aim to capitalize on the business opportunities in the World Expo 2010 Shanghai.

Mr. Ma Xinsheng, the chairman of Lianhua Supermarket said: "Noticeable progresses were seen in healthy market expansion, outlet layout optimization, merchandise mix improvement and internal management enhancement in 2009. Despite being pressured by slightly increasing turnover with continuous cost hikes, a desirable growth was recorded in gross merchandise profit that securing a further substantial growth in profitability.

In 2009, the Group's turnover grew by 16% to RMB 24.02 billion. Gross profit margin and consolidated revenue margin amounted to 13.1% and 24.1%, respectively. Operating profit rose by 46% to RMB 648 million. Profit attributable to shareholders was increased by 30.7% to RMB 507 million. Basic earning per share was RMB 0.81.

During the Review Period, impacted by the financial crisis and negative consumer price index, the full-year same store sales grew flat. It improved significantly with a recovery to 3% in the fourth quarter, showing consumer confidence has been picking up since September 2009.

The Group maintained its prudent management style while improving its performance. As of 31 December 2009, The Group had no bank borrowings, and the Group's cash and bank balances were RMB 7 billion, which strongly supports for the Group's development and sales outlet expansion.

Continuous growth in all business segments

Hypermarkets

During the period under review, the turnover of the Group's hypermarkets increased by approximately 9.48% to RMB 13.04 billion, which accounted for approximately 54.29% of the Group's turnover. The gross profit margin increased by 0.45 percentage points to 12.29%. The same store sales increased by 0.44%. The segment's operating profit was RMB 243.86 million, representing an increase of RMB 118.71 million over 2008. The operating profit margin increased by 0.82 percentage points when compared with that of 2008. As hypermarkets are concerned, the Group will continue to implement the strategy of procurement from places of origin to reduce purchase cost, optimize the composition of suppliers and enhance the performance of its commodities with an aim to achieve a significant growth in consolidated revenues margin and operating profit margin.

Supermarkets

During the period under review, the turnover of the Group's supermarkets increased by 32.25% to RMB 9.32 billion, which accounted for approximately 38.80% of the Group's turnover. Gross profit margin and consolidated revenue margin was 13.61% and 22.67%, respectively. The same store sales declined by 1.02%. The business segment's consolidated revenue continues to grow on the back of the deepening transformation and optimization of suppliers . The segment's operating profit was RMB 327.89 million.

Convenience Stores

During the period under review, the Group's convenience stores recorded a turnover of RMB 1.55 billion, which accounted for approximately 6.47% of the Group's turnover, and the same store sales decreased by 2.08%. Decrease in same store sales of the Group's convenience stores was due to 1) abnormality in major sales seasons during the year under review, which affected full-year sales performance; and 2) shut-down of a number of well established stores to make way for frequent reconstructions in major cities. During the year, 121 convenience stores were transformed. The merchandise mix of the transformed stores was further optimized while the value-added services effectively expanded the income sources. During the period, consolidated revenue margin increased by 0.89 percentage point.

Developing new markets with enhanced strengths

During the period under review, the group sized up every opportunity in the market according to the situation to enhance our capability for sustainable development.  

During the year, the Group opened 558 new outlets including 14 hypermarkets, 314 supermarkets and 230 convenience stores. As at 31 December 2009, the Group had a total of 4930 retail outlets, covering 22 provinces and municipalities across the country, strengthening its market coverage.  

To enhance advantage of economy of scale in the regions existing operations and potential growth, the Group capitalized on its hypermarket and supermarket operations, its two major business segments to expand scale. During the year under review, the Group further expanded its hypermarket segment in existing markets to consolidate its foothold there, and at the same time entered new markets. Moreover, the Group opened its first hypermarket in Ningbo, Zhejiang province. Its good results laid a solid foundation for further development in that region.  

Keeping an eye open for merger and acquisition opportunities

As the platform for development of supermarket business of Bailian Group, the Group acquired the entire equity interest in Hualian Supermarket in June 2009. The acquisition allowed the Group to further increase its supermarket segment market share in Shanghai and Yangtze River Delta, enhancing the advantage of its economy of scale.

Mr. Ma said: "Following the acquisition of the Hualian Supermarket from the parent company Bailian Group in 2009, the Group has consolidated its internal resources and enhanced its bargaining power and the economy of scale of its sales network. Therefore, 2010 will be a critical year for Lianhua Supermarket to consolidate its businesses and reform the flows of its merchandise and information and logistics. The Group will take initiatives to seek organic growth and opportunities for merger and acquisition in different regions."

Continuously seeking for new growth drivers

In 2010, following the economic recovery and the Chinese government's move to extend the implementation period of its economic stimulation policies, we believe that retail enterprises will enjoy a better environment for growth. The Group will proactively capitalize on opportunities in the economic recovery and the World Expo2010 Shanghai in order to achieve better results.

The Group will further strengthen its overall development, complete the full integration of Lianhua and Hualian and capture the opportunities for merger and acquisition. It will also consolidate its internal resources to improve bargaining power, optimize its internal workflow to enhance the competitive strength of our outlets, as well as to lift its brand and imag`es in both the consumer market and capital market.  

At the same time, the Group will continue to implement the strong outlet strategy and optimize its product mix to enhance the overall performance of its outlets. The Group will strengthen the franchisee management to improve franchise income. It will also fully utilize the e-commerce platform to seek new growth drivers.

In order to enhance its core competitiveness, the Group will optimize the composition of suppliers by increasing procurement from places of origin and buying up to increase the proportion of merchandise sourced from direct suppliers.  The Group will satisfy the needs of each business segment in the future by carrying out the preliminary preparation for the establishment of logistics facilities in Jiangqiao.

Of the prospects, Mr. Ma said: "In the coming decades, the urbanization and fast improvement of the living standards will create favourable market conditions for the development of all types of Lianhua's retail businesses. As the platform for development of supermarket business of Bailian Group, the Group will further expand its scale of operation, and enhance its efficiency and bargaining power. We will also keep an eye open for opportunities in new markets. With the strong support from the parent company, Lianhua Supermarket will make more progress in the favourable business environment. The Group will keep exploring the Chinese market and looking for new room for growth in order to bring a better return to our shareholders and staff."

About Lianhua Supermarket

Lianhua Supermarket Holdings Co., Ltd. ("Lianhua Supermarket" or the "Company") is China's leading supermarket chain. Established in Shanghai in 1991, it is now a retail chain operator with a nationwide retail network. It has grown organically as well as through franchise arrangements and acquisitions. As of December 31, 2009, Lianhua Supermarket operated 4930 stores in 22 provinces and municipalities. It operates the "Century Mart" chain of hypermarkets, "Lianhua" supermarkets, "Hualian" supermarkets and "Lianhua Quik" convenience stores. The Franchise Committee of the PRC Retail Chain Operators Association has recognized "Lianhua Supermarket" , "Hualian" supermarkets and "Lianhua Quik" through its awards for supermarket and convenience store excellence. Lianhua Supermarket was listed on the Hong Kong Stock Exchange on June 27, 2003.

SOURCE Lianhua Supermarket