2008 Sep 22
AEON Stores (Hong Kong)

AEON STORES ANNOUNCES 2008 INTERIM RESULTS　REVENUE INCREASES BY 10% TO HK$2,602.3 MILLION PRC SEGMENTAL PROFIT SURGES BY 10 TIMES

(HONG KONG, 22 September 2008) - AEON Stores (Hong Kong) Co., Limited ("AEON Stores" or the "Company") (Stock code: 984) and its subsidiaries (the "Group") announced its interim results for the six months ended 30 June 2008.

The Group's revenue grew by 10% to HK$2,602.3 million from HK$2,359.2 million in the last corresponding period. Although inflation pushed up overall cost during the review period, the Group managed to improve its gross profit margin slightly to 34.0% from 33.6% in the last corresponding period. Profit attributable to shareholders amounted to HK$111.6 million (2007: HK$128.4 million). Excluding the HK$64 million one-off write back of royalty savings in the same period last year, profit attributable to shareholders for the review period would have jumped by 73%. The key factors contributing to the increase were growth in revenue and improvement in gross profit margin.

Basic earnings per share were 42.91 HK cents (2007: 49.39 HK cents). The Board of Directors resolved to declare the payment of an interim dividend of 19.3 HK cents (2007: 8.0 HK cents and 20.0 HK cents special dividend) per share.

During the review period, staff cost and rental cost relative to revenue was up slightly from 10.9% to 11.0% and from 10.0% to 10.1% respectively. The Group maintained a stable net cash position with cash and bank balance of HK$1,329 million as at 30 June 2008 (31 December 2007: HK$1,651 million) and short-term bank borrowings of HK$122 million (31 December 2007: HK$100 million).

Mr. Lam Man Tin, Managing Director of AEON Stores, said, "We are pleased to announce that we have achieved steady growth in the first half of 2008. Although the unemployment rate improved, the Hong Kong economy was uncertain feeling the impact of the volatile stock market and climbing inflation. This in turn affected the consumer market. Riding on our well-established distribution network, enhanced shopping environment and improved variety of product, we were able to deliver satisfactory results against the less favourable market environment."

In the first half of 2008, the Group had one General Merchandise Stores ("GMS") less than the last corresponding period and the Kornhill Store partially closed for renovation. Taking into account of these factors, the Hong Kong operation had a 6% drop in revenue to HK$1,487.7 million (2007: HK$1,574.8 million). Profit of the Hong Kong segment for the period was HK$85.3 million (2007: HK$141.2 million). Excluding the write-back of royalty savings of HK$64 million in the last corresponding period, the segmental profit would have risen 11% this year owing to improved operational efficiency of the stores. During the review period, the Group opened three independent JUSCO $10 Plaza. These new stores and existing stores, including GMS, supermarkets and Bento Express, performed satisfactorily and contributed to the strong operational performance in Hong Kong.

As for the PRC operations, the Group continued to benefit from the sustained strong economic growth in south China and was not affected by the climbing inflation rate. Revenue of the segment soared 42% to HK$1,114.6 million (2007: HK$784.4 million), attributable to the full period contributions from the two new GMS in Shenzhen and better performance of existing stores during the period. Segmental profit for the period grew by a phenomenal about 10 times to HK$67.3 million (2007: HK$6.1 million), thanks to the exceptional performance of existing stores and the enhanced cost effectiveness enabled by economies of scale.

Looking forward, the Hong Kong economy may slow down, leading to more cautious consumer spending. Nevertheless, the Group completed renovation of the Kornhill Store in July 2008 and enhanced the store by adding a number of innovative Japanese eateries and desserts, some of which are first time arrivals in the city. The Group hopes to position the Store as a "Japanese dining centre" in the Eastern District on Hong Kong Island. The newly renovated Store carries more quality products imported from Japan and other countries.

Mr. Lam added, "To meet the ever-changing needs of customers, we have added a lot of new initiatives to the Store which we believe would attract younger generation consumers in Hong Kong who are fond of Japanese cultures. We intend to replicate the many special and new features of the Store in other appropriate stores so as to live up to our promise of unique shopping experiences to customers."

Furthermore, the Kornhill Store has an in-door amusement centre - MooRry Fantasy - featuring colourful decoration and an array of entertaining game machines. The innovative business model complements and brings synergies to the Group's GMS operation by giving parents and their children pleasant shopping and recreational experiences.

The economies in south China will continue to prosper in the second half year. To grasp emerging opportunities, the Group will open one shopping centre in Huizhou and one GMS in Foshan in late 2008. Also, another two GMS will be added in Shenzhen and Dongguan in 2009. The management believes that both the new and existing stores of the Group will do well with demand for quality merchandise and services rising among Chinese consumers.

In July 2008, the Group has completed the acquisition of an additional 35% interest in the registered capital of Shenzhen AEON Friendship Co., Ltd. ("AEON Shenzhen") at an aggregate consideration of RMB94.5 million. AEON Shenzhen operates five GMS in Shenzhen. The acquisition made AEON Shenzhen a wholly-owned subsidiary of the Group, giving the Group optimum flexibility in capturing opportunities in the booming retail market in Shenzhen and its vicinity areas.

"Embracing our commitment of 'everything we do, we do for our customers', we are devoted to improve both quality and variety of products and services we provide from time to time. In the coming days, we will continue to look for suitable locations to open more new stores to bring our excellent products and services and unique shopping experiences to more customers," concluded Mr. Lam.

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About AEON Stores
AEON Stores was established in Hong Kong in 1985 and listed on the Hong Kong Stock Exchange in 1994. The Group is mainly engaged in the operation of general merchandise stores (GMS). Currently, it operates 10 GMS, 2 independent supermarkets, 33 independent Living PLAZA by AEON, 30 independent Daiso Japan, 1 independent Bento Express by AEON and 4 Mono Mono and 3 KOMEDA'S Coffee in densely populated districts in Hong Kong. It also operates 21 GMS and 15 independent supermarkets in Guangdong Province, the PRC.

For more information：
AEON Stores (Hong Kong) Co., Limited
Corporate Communication Department
Tel.：（852）2165 0777
Email：aeonpr@aeonstores.com.hk