HKRH six months profit up 144% to HK$22mn

The company's turnover soared by 78% to HK$2.1bn.

Hong Kong Resources Holdings Company Limited (“HKRH” or the “Group”;) on Monday announced its unaudited interim results for the six months ended 31 December 2011 (“the period under review”), subsequent to its announcement of changing the end date for its financial year from 31 March to 30 June earlier in 2011.

During the period under review, the Group’s turnover surged by 78% to approximately HK$2,076 million (six months ended 31 December 2010: HK$1,166 million), mainly driven by the expansion of its point-of-sale network with a total of 76 new shops and counters opened in Mainland China and its success in brand development and promotion. The Group’s operations in Hong Kong and Macau have recorded same-store-growth of 29% whereas that in Mainland China was 25%.

Profit from operations soared by 114% to HK$79 million (six months ended 31 December 2010: HK37 million). Profit for the period under review attributable to owners of the Company surged by about 144% to HK$22 million (six months ended 31 December 2010: HK$9 million), after deducting finance costs, fair value changes in financial instruments, gold loans and financial assets at fair value through profit or loss, as well as shares of results of associates and jointly controlled entities. The surge was mainly due to the satisfactory store performance and effective cost control measures, particularly the reduction in administrative expenses.

Dr Kennedy Wong, Chairman of HKRH and 3D-GOLD, said, “We are pleased that through our continuous efforts, 3D-GOLD has successfully become both a preferred and renowned brand in the retail market, achieving significant and sustained business growth. Our five-year strategy has advanced in step with our plans for expansion in Mainland China. During the period under review, we’ve tapped into the fast developing second-tier and third-tier cities in Mainland China, which will remain as our key growth drivers in the future.”

During the period under review, turnover from the Hong Kong and Macau retail operations and Mainland China operations reached HK$189 million and HK$1,887 million respectively. As at 31 December 2011, the Group had 399 3D-GOLD and La Milky Way points-of-sale in Hong Kong, Macau and China. Of the 386 points-of-sale in Mainland China, 153 are self-operated shops and 233 are franchisee-operated. A total of 76 new shops and counters were opened during the period under review.

The Group will continue to expand the reach of its jewellery points-of-sale within Mainland China, by expanding its franchise network. Although the overall gross profit margin decreased to 19% (six months ended 31 December 2010: 23%), the expansion of its franchises will enable the Group to leverage local market knowledge and capital as well as choice of premises to implement a rollout strategy more quickly, which would be most efficient for the capital commitment of the Group.

The Group continued its efforts in brand building and promotion through a number of events and activities, for example, it was the Crown Sponsor of the Miss Chinese Cosmo Beauty Pageant 2011 and the Diamond Sponsor of Alan Tam’s Concert 2011 in Beijing, as well as organising a Grand Opening of its 50th Shop in Shandong Province. The Group’s progress in brand promotion was again recognised by the World Brand Lab with a ranking of 177th among China’s Top 500 Most Valuable Brands 2011 and second in the category of jewellery brands with a brand value of RMB7.6 billion.

Underscoring its commitment to creating jewellery designs with elegant style for distinctive taste, in February 2012, 3D-GOLD won one of the Best of Show awards at the 13th Hong Kong Jewellery Design Competition organised by the Hong Kong Trade Development Council and industry associations.

Looking ahead, the rising disposable income of Mainland Chinese and the growing consumption preference for luxury products indicates the continued growth of China’s prosperous retail sector. As more than 80% of its turnover is from Mainland China, the Group remains confident about the gold and jewellery retail market in the years ahead.

To further broaden its sales channels, the Group has launched an e-commerce platform to capture the quickly emerging online consumer shopping market in Greater China and elsewhere. The Group has also entered the corporate gift and premium sector to capture the promising market potential driven by the rapid growth of China’s enterprises.

Besides, the Group has organised “2012 Brand Promotional Event” in Shenzhen on 25 February 2012 to further promote its brand and expand its retail network. During the last weekend, approximately 57% of the potential franchisees subsequently joined the programme, demonstrating the brand’s strong market appeal. The Group plans to roll out “2012 Brand Promotional Event” to other major cities in the PRC including Xi’an, Shenyang, Chengdu, Shijiazhuang, and Hangzhou.

Dr Wong concluded, “To accelerate business growth, we will enlarge our retail network in Mainland China while continuing to promote our brand to secure even greater recognition and trust, as well as spread our good reputation for excellence in product design, quality value and authenticity. We will strengthen our customer loyalty programme to more effectively promote our high-value products and widen our products range, from classic to contemporary, as well as from luxury items targeted at mass market segments to elegantly crafted luxury artifacts for the most distinguished tastes. Our management strategy and activities are ultimately aimed at creating greater value for our shareholders and investors.”