Digital China Holdings, a spin-off of China's top PC maker Legend Group, yesterday (Nov. 23) announced its interim net profit had soared by 205.5 per cent.

The company posted a net profit of HK$95.52 million (US$12.2 million) for the six months ended September 30, compared to a net loss of HK$90.96 million (US$11.7 million) for the previous corresponding period.

Digital China's turnover was HK$7.6 billion (US$973.8 million) in the first half of the fiscal year, a 8.2 per cent jump year-on-year.

"We are satisfied with the interim result, but we are aware that we still face fierce competition in China's IT service market," said Li Qin, chairman of Digital China.

According to the group, 56 per cent of its turnover came from its general IT product distribution business, which recorded HK$4.3 billion (US$547.2 million), up 6.38 per cent year-on-year.

The key growth drivers are consumer IT products, data projectors, desktop computers and accessories.

Lin Yang, executive vice-president of the group, said it was trying to expand its laptop retail brands to HP, IBM, ASUS, and NEC from current sole brand of Toshiba, because those new brands have occupied 40 per cent of total sales at present, contributing HK$246 million (US$31.5 million) to the turnover.

Looking ahead, Lin said the distribution business will further sharpen its low-cost competitive edge and expand its distribution channels, while bolstering micro and macro operating risk controls to enhance its asset liquidity and increase the company's value.

In addition, its systems business saw a turnover of HK$2.3 billion (US$290.9 million), up 9.93 per cent year-on-year and the gross margin increased to 9.96 per cent from 9.72 per cent.

Since 30 per cent of the group's turnover comes from the systems business, Lin said the core capabilities of the business were shifting from being product-oriented to service-oriented in order to enhance the company's competitiveness.

Lin noted that the group would increase investment to enhance its customer services while focusing on expanding sales channels and product development.

Meanwhile, turnover in Digital China's services business was HK$1.1 billion (US$135.8 million) in the first half of this year, up 12.15 per cent from the previous year mainly due to China Netcom's vast purchases of the group's hardware products.

"Despite the hardware products, our group also sees great development potential in software products," said Lin.

Lin noted that hardware, software and services occupied one-third each in the international matured IT market.

But China's market is special, with hardware already accounting for 72 per cent, and the remaining two sectors sharing 28 per cent.

"We are sure that there is plenty of room for the software and service sectors to develop in the future (in the China market)," Lin added.

Lin also emphasized his group had just strengthened its accounts management system in order to concentrate on 135 valued clients who might bring high returns to the company's business.

Digital China shares closed at HK$2.375 yesterday, down 1.04 per cent.

Earnings per share were HK$0.111, and no interim dividend was declared by the company's board.

Editor: Olivia