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Digital China seeks to strengthen its core business by extending its nationwide distribution network further.

The executive vice-president of the mainland's largest IT product distributor, Lin Yang, said yesterday: "We will expand our regional platforms from 13 to 16 soon... Our regional centre in Anhui is already in operation...our new centre in Fuzhou (Fujian Province) will open tomorrow, followed by one in Hunan next month.

"We will also expand our distribution network gradually, from second- and third-tier cities to fourth- and fifth-tier ones."

The Beijing-based company accounts for 51 per cent of the total revenue and 80 per cent of the total profit generated by the mainland's four top IT product distributors. And its distribution arm brought in a revenue of HK$7.04 billion in the first half of the 2006-07 fiscal year, a 33.2 per cent rise year on year, or 59 per cent of the company's total revenue of HK$11.9 billion.

Earlier, Lin had told China Daily that Digital China would set up 30 to 50 distribution centres in medium and small mainland cities in late 2006 and 2007. The total number of its resellers rose to 8,225 in early 2006, an increase of 35 per cent year on year.

Company chairman Li Qin described the first half as "the best half ever" for Digital China. "All of our business sectors have done very well."

Apart from its main business of distribution, the company's system and service arms also reported robust revenue, reaching HK$3.47 billion and HK$1.35 billion, respectively, a year-on-year growth of 37.3 per cent and 36.7 per cent.

As such the company's total revenue grew 34.8 per cent year on year, 20.8 percentage point higher than the 14 per cent average growth rate of China's IT market.

Its net profit, however, decreased by 23 per cent, from HK$119 million last year to HK$91.5 million, largely because it had to spend about HK$29 million to acquire Si-Tech Information Technology. But it expects the appreciating yuan to generate more profit in future.

"In the first half we have got 47 million yuan (US$5.88 million) in exchange gain... if the yuan appreciation rate remains around 3 to 4 per cent, our exchange gain may exceed 60 million yuan (US$7.5 million) by the end of 2006-07," company vice-president He Jun said.

Import-oriented Digital China's gain from exchange bookings was 60 million yuan last year, thanks largely to the yuan's appreciation.

At the end of September, He said, the company had a net cash of HK$300 million (US$37.5 million), "80 per cent of which will be invested to expand our distribution network, and the rest to strengthen our service business arm".

Digital China's shares dropped 1.63 per cent to HK$3.01 yesterday.