Silver Base Group Announces FY2010/11 Interim Results

Profit up 26% to HK$215 Million

Enhancing both Product Portfolio and Sales Channels to Strengthen the Group's Leading Position

HONG KONG, Nov. 29, 2010 /PRNewswire-Asia/ --

Results Highlights

Silver Base Group Holdings Limited (Stock Code: 00886), a leading premium alcohol operator, announced its interim results for the six months ended 30 September 2010.

Revenue of the Group rose by 76.2% to HK$887.4 million during the period, as a result of both rising demand and liquor prices, better product mix and enhanced cost efficiencies. Gross profit and profit for the year attributable to shareholders of the company was HK$379.1 million and HK$215.1 million respectively, up by 47.5% and 26.1% year-on-year. The Group's basic earnings per share were HK cents 18.08 (corresponding period in 2009: HK cents14.36). The board has recommended the payment of an interim dividend of HK cents 16.9 (corresponding period in 2009: HK cents 14.2) with a dividend payout ratio of 93.5%.

During the period under review, 96.2% (corresponding period in 2009: 93.5%) of the Group's total revenue came from the sales of liquors, including one of the most popular high-end traditional Chinese baijiu - the Wuliangye Liquor Series, Yongfu Jiangjiu, Guojiao 1573 series baijiu with 43% alcohol content, Dimple brand whisky, and a total of about 90 foreign brands of red wines. The sales of cigarettes accounted for 3.8% of total revenue (corresponding period in 2009: 6.5%). PRC sales contributed a bigger proportion of total revenue for the Group, accounting for 46.3% (corresponding period in 2009: 28.3%), while overseas sales made up the rest.

Sustained by rising national consumer spending and coupled with a thriving business sector, there was significant growth in the PRC liquor market and price hike of baijiu in the first half of this year. Under the circumstances, the Group achieved satisfactory sales during the period, and as of 30 September 2010, the Group's PRC sales rose 188% while overseas sales was up 32%.

The Group launched in September the top-end product of Yongfu Jiangjiu Series "Laojiang" and Guojiao 1573 baijiu with 43% alcohol content, which have earned high acclaim in the market. To further enhance the Group's leading position and product mix, the Group successfully entered into a sales agreement with Guizhou Yaxi baijiu liquors with 38% and 52% alcohol content in September, approved by the Company's shareholders. We swiftly put the marketing and promotions of this over-200-year-old baijiu brand into full swing. Yaxi baijiu products are strong-flavor baijiu with soy-flavor after-taste, which serves to complement the high-end Chinese baijiu products sold by the Group. The Yaxi deal not only enriched the Group's product mix, but also broadened and diversified its income source.

Apart from baijiu products, the Group's imported foreign liquor business saw steady development in the period under review. In addition to the Dimple Scotch Whisky Series, the Group currently sold foreign wines from nine countries including France, Portugal, Italy, Australia, New Zealand, Argentina, Chile, Greece and Spain, including sparkling wine, white wine, red wine, port wine and dessert wine from around 90 brands. With the effort of the professional wine business team, the Group established a stable customer base.

During the period under review, the Group continued to deepen and widen its sales channels and worked towards the objective of establishing a sales network that covers tier-one and tier-two cities and even rural area markets throughout the country. In order to improve and diversify the sales network, the Group strategically divided the Sales and Image Store networks into three major regions, namely Southern China, Central China and Northern China. The retail network and sales centres are centralised in each region. By the end of September this year, the Group has opened 63 Image Stores, and will further increase the number of Image Stores ("Wine Kingdom" Image Stores and Wuliangye Specialty Stores) to 300 by the end of March next year, to cover all major provinces and cities. At present, the Image Stores are all located at first-class office buildings in first or second tier cities; there are plans to open new image stores at shopping malls and shops.  Flagship Image Stores will be established in major cities to reach different types of customers (the first Hong Kong Wuliangye Flagship Specialty Store will be opened in Gloucester Road, Wan Chai on 6 December 2010).

In light of rapid growth of the online consumer platform in the PRC, the Group has stepped up development of its e-commerce platform -- to complement its "Wine Kingdom" Image Store network and reinforce the competitive advantage of the Group's sales network and supply-chain management. The result will be a sales network of extensive coverage of provinces, cities, counties and townships, with efficient logistics support, boosting the economies of scale and cost efficiency of the Group.

During the period under review, the Group optimised its corporate structure, and recruited talents to assist in the expansion of its regional business.  We will establish warehousing and logistics facilities in key provinces, staffed with dedicated professionals, to strengthen the Group's leading position in sales channels and product marketing, and drive profit growth.

Mr. Liang Guoxing, Chairman of Silver Base, said, "During the period, we have strengthened our product mix, and developed new products to reinforce the Group's leading position. At the same time, we have established a sales network with wide coverage, and deepened sales channels, laying a solid foundation for future growth.  We have proven to be able to achieve outstanding results as a leading PRC liquor operator."

"Looking ahead, the Group has laid down a long-term development strategy and business goal. The Group will continue to expand and deepen its sales network, and set up more self-operated sales channels, in order to expand the Group's business coverage nationwide from first and second tier cities to townships and villages. Meantime, it will develop an e-commerce platform to facilitate customers buying its products via the online channel."

"In respect of expanding and improving product mix, the Group will continue to identify baijiu brands with huge potential to cater to demand of a wide customer base. Ability to achieve this will secure steady growth of the Group's business in the long term. The Group is also actively identifying merger and acquisition opportunities and will seek to acquire reputable baijiu manufacturing enterprises. We are also keen to expand into non-alcoholic business. We want our business to scale new heights as our multi-platform national network is taking shape."