DC Holdings Announces FY2018 Interim Results Revenue and profit growth with multiple breakthroughs in Big Data-enabled applications

Press Release (For Immediate Release)

DC Holdings Announces FY2018 Interim Results

Revenue and profit growth with multiple breakthroughs in Big Data-enabled applications

(29 August, 2018, Hong Kong) Digital China Holdings Limited ("DC Holdings" or the "Group"; Stock Codes: 00861.HK; 910861.TW) today announced its interim results for the six months ended 30 June 2018 (the "Period").

During the first half of 2018, DC Holdings adheres to the mission and prospects of "Digital China" and continues to transform itself from an integrated Information Technology services provider to a Data Technology services provider. Based on our extensive data resources and industrial experience in the area of industry informatization, DC Holdings starts with capital and technologies, relies on core capabilities such as Artificial Intelligence Technology and Big Data, and achieves several breakthroughs in key application scenarios of core industries such as Smart logistics, Sm@rt city, Smart finance and Smart health.

Financial Technology and Smart Logistics led to a substantial increase in revenue while operating income and gross profit grew year-on-year For the first half of 2018, revenue amounted to approximately HK$6,986 million, representing an increase of HK$1,253 million, and a year-on-year growth of 21.86% compared to the corresponding period of last financial year (six months ended 30 June 2017). The increase in turnover was mainly driven by the continued growth of financial IT services and Smart Logistics during the period. Gross profit increased by 11.26% to HK$1,283 million compared to last financial year, and the gross profit margin was 18.37%. During the reporting period, the profit attributable to shareholders of the parent company was approximately HK$137 million.

Smart Logistics Business (Instant Technology Logistics) achieved remarkable achievements: Enpowering logistic industry with "Warehouse+Big Data+AI Technology" model

As a leading supply chain management brand in China, the Group's Instant Technology Logistics is practicing its core strategy of "Warehouse+Big Data+AI Technology". Based on a network of 231 nationwide warehouse facilities, and reliance on logistics management system of its own intellectual property right and supply chain Big Data application platform X-DATA, we can provide customized one-stop supply chain services for our customers and hence the Company can enjoy a leading position in IT, communication and e-commerce logistics industries.

During the reporting period, the Smart Logistics business continued to focus on developing businesses with key customers in various sectors in order to swiftly expand its market shares. For the first half of 2018, the Smart Logistics business recorded overall turnover of HK$1,719 million, an increase of 48.48% over the same period last year. The overall gross profit margin was 14.69%.

Within this sector, the turnover of e-commerce supply chain business continued to maintain a high growth rate of 41.55%, and gross profit increased by 50.71%. The middle office support business of e-commerce supply chain is highly recognized by customers, with its business operation expanding rapidly. The turnover of the logistics business increased significantly by 62% and the gross profit increased by 83.69% compared to the corresponding period of last financial year. Both turnover and gross profit have been significantly improved. In the B2B logistics segment, we have deepened the cooperation with key corporate clients such as Xiaomi, Schneider, China Mobile and Geely. In the B2C logistics segment, the businesses coverage has been expanding from the brand flagship stores to international businesses, as well as TMall businesses, and the order per day increased by 206%. Logistics software has become a new source of profit for the Smart Logistics business. Digital China Gold Storage logistics software set, composed of WMS\TMS\OMS\BMS (warehousing, transportation, order and accounting management), has comprehensive functions and complete proprietary intellectual property rights.

As a leading brand in supply chain management, Instant Technology Logistics has a comprehensive set of knowledge in managing and controlling transportation resources, with an in-depth coverage in 3300 cities and towns, 231 storage centers in China, and a warehouse portfolio with area of over 1 million square meters. It is one of the few service providers in China which can provide both B2B and B2C integrated services in warehousing at the same time.

Smart Logistics and Smart Warehouse based on "Human + Robot" business model Instant Technology Logistics under DC Holdings has utilized AI Technology, and further promoted and upgraded the automatic sorting system of our self-developed business application model "Human + Robot". Being the first "goods-to-person" logistic sorting model in China, it has passed the elasticity test for the maximum order in the industry. The "Human + Robot" business model has adopted a sorting method by smart robotic operations together with a programmed manual work process, in order to satisfy the demand in high-volume operating environment with zero tolerance to errors. Under this new business model, about 40% of labor resources can be saved and selection handling efficiency per staff has been increased by 2 to 3 times. Several patents have been already applied.

With the technology upgrade, the application of"Human + Robot 2.0"has been recently commenced in Pinggu warehouse, Beijing. Being the first 3D high-density robotic Smart Warehouse in China, Instant Technology Logistics has applied the AI-driven orbital robot technology, of which the robot can operate at an elevated platform, as opposed to traditional robotic operation on the ground. Being able to fully utilize all three dimensions in the warehouse area is a very substantial breakthrough, leading to maximizing the efficiency of the warehouse. This is the first 3D high-density robotic Smart Warehouse in China, and has become the milestone in the history of smart automation in e-commerce and logistics.

X-DATA Smart Logistics Big Data platform empowers logistic industry X-DATA System is a Big Data application platform self-developed by Instant Technology Logistics under DC Holdings based on its years of experiences. It is used for collection, supervision and in-depth data mining in aspect of procurement in supply chain, inventories, operation within warehouse, transportation and after-sale services, and enjoys a leading position in accumulation of Big Data in B2B logistic industry. Throughout the data mining process, the precise analysis on customers has greatly improved the service quality on upstream and downstream customers in the supply chain and enhanced customer retention. In the future, the Company will actively consider re-organizing the logistic Big Data operation as an independent business in the commercial market and launch the cloud service based on X-DATA. With the increasing number of users, continuous expansion in logistic Big Data and extensive data dimension, it has provided highly valued information resources and business foundation for application scenarios such as industrial market analysis and financial risk control in supply chain.

Sm@rt City Business: Sm@rt City solution based on in-depth application of city Big Data has been launched and executed nationwide in China Sm@rt City business has currently covered more than 100 million population, and our Sm@rt City solutions have been operated in 116 cities and more than 50 provinces and municipals in China. After the issuance of Notice of the General office of the State Council on Implementation Plan of Integration and Sharing of Publication Government Information System, DC Holdings is promoting the Sm@rt City 3.0 model based on in-depth application of city Big Data and integration among city management and industries. Yanyun DaaS, our proprietary deep-web data extraction technology could break down more than 5,000 government isolated information islands and has connected databases previously stored in fragmented and regionalized formats, which greatly promote the information sharing and exchange, as well as further integrate the Big Data with all aspects of production to solve a series of issues such as healthcare, transportation, energy supply, emergency rescue and social security to support the economy. Yanyun DaaS has so far been the only product which has won the Special Invention Award by the China Electronics Society. It has been rated by professional experts as a "major disruptive inventions and innovations" in the field of information system interoperability technology.

During the reporting period, Sm@rt City 3.0 model has been applied nationwide. Meanwhile, the construction of city Big Data platform has been further promoted, including the city Big Data platform in Tongren city, Guizhou Province, the construction of internet cluster area"New Smart CBD"in Pazhou, Guangzhou, and smart water foundation system in Guangzhou, Big Data platform project in Cangzhou, Hebei Province, the development of comprehensive citizen service platform"eLongyan"in Longyan city, Fujian Province, the launch of comprehensive citizen service platform"In Yantian"in Yantian District, Shenzhen, and the launch of online comprehensive lease service operation platform"C1YJ"in Guangzhou. These projects provide practical benefits and effective support for local governments in government affairs management and citizen services.

In April 2018, DC Holdings successfully acquired Wai On Services Limited (hereinafter "Wai On"), an IT service provider with experiences in providing solutions for large scale projects of the Hong Kong government and multinational enterprises. It has provided a new impetus to promote Sm@rt City in Hong Kong, Macau and "The Belt & Road" countries and achieved resources integration and optimized distribution.

In June 2018, the Scity under DC Holdings served as a core member of national standard setting body of Sm@rt City and participated in the formation of:"GB/T 36333-2018 Sm@rt City Top-level Design Guideline"(GB/T 36333-2018 智慧城市頂層設計指南) and"Sm@rt City Domain Knowledge Model Core Concept Model"(智慧城市領域知識模型核心概念模型) (GB/T 36332-2018), which have been published by the Standardization Administration of the PRC and will be officially implemented on 1 January 2019. Those two standards have set the best practices for Sm@rt City 3.0, and indicate that DC Holdings has become the standard setter and leader of China's Sm@rt City top-level designs.

Focus on financial technology sector as a key growth driver In the first half of 2018, based on its Big Data strategy, DCITS (IT Services Business) continued to make progress in strategic businesses such as Big Data, quantum communication, financial technology and smart maintenance. During the reporting period, DCITS reported turnover of HK$4,998 million, an increase of 20.09% over the same period last year. The business gross profit margin reached 18.61%, a slight decrease of 0.15 percentage points compared with the same period of last year. The profit attributable to shareholders of the parent company was HK$332 million, an increase of HK$225 million compared with the previous year's HK$107 million.

Business expansion by leveraging existing advantages in financial technology During the reporting period, DCITS further expanded its key businesses, with its software and services business growing rapidly. Its core software products includes Core Banking System, Enterprise Service Bus, Internet Solutions, Intelligent Bank Solutions, etc. During the period, the Company has signed up four financial institutions such as the Export-Import Bank of China and Ping An One Account Management Services for its core banking system and distributed platform, with a market share of 50%. Three among those financial institutions use the new generation of distributed system. The Company has signed up nine customers such as ChinaBond and Industrial Bank for its Enterprise Service Bus ("ESB"), which continues to maintain the leading position in the market and becomes the sole player in state-owned and joint-stock bank markets, serving more than 70 customers. Meanwhile, the Company also promotes distributed ESB products such as Enterprise Service Cloud ("ESC") in order to reinforce its leading position.

Leading FinTech development by applying technology into practical scenarios

During the reporting period, Digital China Financial Cloud Service (融信雲) entered into strategic and capital partnership with JD Finance (京東金融). Using the financial cloud of the Company as a platform, we provide FinTech services to small and medium banks, leveraging not only the advantages of financial cloud in system building and operation services, but also the leading position of JD Finance in risk management, internet business platform and financial products, so as to assist small and medium banks to kickstart their internet finance business. We also make use of this opportunity to explore a new business model which connects our customers and expands our platform, making the financial technology business enter into a new stage, leveraging on the customers, application scenarios, data and human resources accumulated by the Company in the financial industry over the past 30 years, as well as combining the Company's data, industry know-how and algorithm capability in agricultural, industrial, supply-chain, taxation, and commercial sectors.

Strategic Investment Business: Breakthrough in the applying Big Data technology to health and manufacturing industry DC Health under DC Holdings and Phillips jointly promoted SHINEFLY (神飛雲) , a leading cloud-based precision healthcare platform driven by computer-aided diagnoses and AI Technology, it provides a safe and reliable big data application platform with customized and extendable cloud solutions for medical institutions. DC Health has provided 'Shenbeikang' (神貝康) gene sequencing analysis platform for molecular diagnostic center at Children's Hospital of Fudan University. Leveraging the knowledge gained from the research on children's rare diseases in the past decade, it can empower the medical industry by combining the powerful Cloud computing capability and medical Big Data.

During the reporting period, DC Health has already established cooperation in respect of clinical applications with three national medical institutions, including the Cancer Hospital, Chinese Academy of Medical Sciences, Peking Union Medical College Hospital and Children's Hospital of Fudan University and started research and information exchange with China National Cancer Centre and National Cancer Registration and Analysis Service in the United Kingdom in respect of jointly advancing the establishment of oncology big data platform by China and the United Kingdom. DC Health established in-depth cooperation with Congenica, a leading developer of genome analytics, in respect of the effective and precise analysis of clinical data and genome data. In the fourth session of Intel Life Science Information Technology Forum, DC Health was awarded the "Best Application Award", an endorsement to DC Health's track record in Precision Healthcare based on Big Data technology.

During the reporting period, the service of iSESOL industrial internet platform has covered 26 provinces and 161 cities, and has served over 3,000 corporate customers, connected more than 10,700 smart devices and with accumulated service hours of over 3,400 thousand hours. In February 2018, the iSESOL industrial internet platform passed the "First batch of Industrial Internet Platform Reliable Service Assessment Certification" of the Ministry of Industry and Information Technology, and became one of the first five platforms providing reliable industrial internet cloud services, being the only industrial internet platform among them that focuses on the area of machining.

Adherence to the mission of "Digital China" and empowering different industries Mr. Guo Wei, the chairman and CEO of DC Holdings, said, ''In the digital era with Big Data Technology as the key element of success, DC Holdings, as a leading Big Data technology service provider, will continue to adhere to 'Digital China' as our mission, and proactively prepare ourselves for various core industries such as Sm@rt City, Smart Health, Smart Logistics, Smart Manufacturing and Financial Technology relying on Big Data and Artificial Intelligence (AI). We are seeking a type of ecosystem with high level of crossover between technology and finance, city infrastructure, culture and commerce, which helps realize the sustainable development of the harmony between the industry and resident, enterprises and people. Looking forward, DC Holdings will adhere to the original aspiration of 'Digital China', strive to promote the opening up and integration of the industry, empower the digitalization of corporations through Big Data and AI technology. While we strive for continuous growth of our business result, our profitability will further improve, enhancing the returns to our shareholders.''

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About Digital China Holdings Limited

Digital China Holdings Limited ("DC Holdings", Stock Code: 0861.HK) was listed on the Main Board of The Stock Exchange of Hong Kong in 2001 following a successful spin-off from the then Legend Group in 2000. It has developed its capital platforms across Mainland China, Hong Kong and Taiwan through the following four listed companies- DC Holdings, Digital China Information Technology Service Company Ltd., Digiwin Software Company Ltd., and HC International, Inc. Their combined market capitalization reaches nearly HK$50 billion. Since its listing 16 years ago, DC Holdings has adhered to the mission of driving the "Digitalizing China". With the corporate value of "commitment, passion and innovation", the Company evolved from China's largest integrated IT services provider into an innovative Big Data technology service provider. According to its latest development strategy, DC Holdings will capture the opportunities arising from the "Artificial Intelligence (AI) + Big Data" strategy and leverage on its technological strengths and capital resources to drive breakthroughs in core industries, such as Smart Logistics, Sm@rt City, Smart Finance, Smart Healthcare based on Big Data technology.

For additional information about DC Holdings, please visit the Group's website at www.dcholdings.com.hkFor media inquiries: