Lianhua Supermarket Announces 2007 Annual Results

Further Solidify Leading Position by Promoting Transformation and
Substantial Development to Increase Improvement

Operational and Financial Highlights

-- The Group sustained the strategy of "Development,
Transformation And Enhancement" and continued to improve
operation capabilities. Benefit from substantial SSS growth
and the performance of newly operated outlets, the turnover of
the Group reached RMB 18.09 billion, an increase of 10% when
compared to previous year. Operating profit was RMB 417.29
million, a growth of 81.8%. Profit before tax was RMB 585
million, an increase of 58%. Profit attributable to
shareholders had reached RMB 268.3 million, a growth of 11.05%
when compared to previous year. Earnings per share was RMB
0.43.

-- Benefiting from the effectiveness of the "Strong Outlet"
strategy, the SSS had an increase of 10.45% compared to
previous year, of which, hypermarket business comprises of
10.6%, supermarket business 10.8% and convenience stores
business 7.1%. The new outlets had robust and better than
expected performances.

-- Steady expansion of retail network, the Group opened 497
outlets during the year and the network has a total of 3,722
outlets. 82% of the total outlets of the Group are located in
Yangtze River Delta, highlighting the advantage of regional
network concentration. With full support by the Group,
franchise outlets represent 56% of the total outlets of the
Group and it has contributed to the turnover of the Group.

-- The hypermarket business segment turns loss to profit, leading
to a great development. The transformation of supermarket
would continue to achieve satisfactory results in the business
industry. Convenience store business would have substantial
growth in the five cities, especially in Beijing and in
Dailian where the market image and the market share are well.

-- To thank the shareholders, the Board of Directors has
recommended the payment of a final dividend of RMB 0.12 per
share. Together with the interim dividend of RMB 0.06, the
total dividend for the year is RMB 0.18.
HONG KONG--(Business Wire)--
Lianhua Supermarket Holdings Co.,Ltd. ("Lianhua Supermarket" or
the "Company", together with its subsidiaries, collectively the
"Group"; HKEx stock code: 980) today announced its annual results for
the 12 months ended 31 December 2007 (the "Review Period" or the
"Period").

In 2007, the Group sustained the strategy of "Development,
Transformation And Enhancement" and continued to improve operation
capabilities. With the full and strong support from the shareholders,
customers, the community and over forty thousand dedicated staff, the
Group was able to sustain the implementation of strategies and steady
growth in all income indicators. Turnover of the Group reached RMB
18.09 billion, an increase of 10% when compared to previous year.
During the period, operating profit and profit before taxes enjoyed
considerable growth, reaching RMB 417million and RMB 585million, an
increase of 81% and 59%, respectively, over the same period last year.
Our profit attributable to shareholders was RMB 268million, up by
11.05%. Earnings per share reached RMB (0.43).

Gross profit also recorded a steady growth of RMB 2.35 billion, or
18.5% over previous year. Gross margin remained stable at 12.99%,
rising 0.94%; consolidated income margin had a sustained growth of
1.86% and reached 25.47%. Operating profit was RMB 417.29 million, a
growth of 81.8% when compared to previous year. Profit attributable to
shareholders had reached RMB 268.3 million, a growth of 11.05% when
compared to previous year. Earnings per share was RMB 0.43.

The Board recommended a final dividend of RMB 0.12 per share for
the year ended 31 December 2007, together with an interim dividend of
RMB 0.06, total dividend per share for the year was RMB 0.18.

By looking at the operating environment of the retail enterprises
in the PRC, the Group believes that the enhancement of the overall
management capabilities will become one of the driving forces in the
continuing performance growth of the Group. The Group is positioned in
a domestic demand market with strong growth, supported by continuous
rapid development of the macro economy, on-going growth of disposal
income of urban and rural residents, emergence of middle-class,
accelerated urbanization and clear government policy intending to
boost consumer spending.

The Chairman of Lianhua Supermarket,Wang Zhigang, said: "With
seventeen years of development in the PRC market, the Group had gained
valuable experience in operating and managing our business. We also
attained in-depth knowledge regarding the changing needs of retail
markets as well as the consumers. We have more than 3,000 outlets,
over 40,000 staff, including a massive consumption backup of over 6
million members, and a sophisticated logistic distribution system. The
Board believes, such an enormous wealth will continue to drive the
on-going development of the Group and lay a solid foundation in
creating unprecedented value for our shareholders."

Substantial increase in SSS growth, robust performance in new
outlets

Benefiting from the "Strong Outlet" strategy implemented by the
Group, i.e. re-structuring and adjustment to existing outlets,
optimizing merchandise structure and improving on-site operation
management standard, the SSS had recorded substantial increases during
the period under review,. The overall SSS growth of the Group was
10.45%, of which hypermarket business was 10.6%, supermarket business
was 10.84% and convenience stores business was 7.14%, reaching all
time high since our listing.

During the period under review, the new outlets showed outstanding
performance. By treasuring the past experience in opening new outlets,
we simplified the outlet opening process, imposed stringent control in
location selection, performed in-depth analysis and study in respect
of consumption standard and purchasing power of business segment in
determining the market position of our merchandise, fortify the
performance tracking analysis of operating outlets and carried out
adjustment and optimization measures according to operating
conditions. During the period under review, the daily sales of the 13
newly opened hypermarkets had attained a growth performance better
than expected and the Group anticipates some outlets can achieve
profitability in their first year of operation.

Accelerate the transformation momentum, expand our transformation
coverage

By referencing on the experience of outlet transformation in the
past years, using business positioning differentiation as the
guideline, meeting the needs of target customers as the objective, the
supermarkets business was developed actively in expanding its
transformation coverage and accelerating its transformation momentum.
During the period under review, our functional positioning in
transforming middle-end outlets to serve the community continued to
achieve fabulous results, daily sales of the 82 transformed outlets
had achieved a growth of approximately 27%. As at 31 December 2007,
176 outlets of our supermarkets business had already been transformed,
representing nearly 40% of the directly operated stores of that
business segment including the newly operated stores in 2006.

During the period under review, the Group used the transformed
outlets as testing grounds to promote our category management concept,
providing objective data analysis for transformed outlets. Category
management is a customer-oriented concept, the purpose of which is to
explore target customers using analyses in understanding the feedback
of target customers on outlet environment, attentiveness and
satisfaction level of our merchandise and service. The analysis will
direct the outlets to stock-up those merchandise category most
receptive to customers, positioning outlet display and to create
buying atmosphere. Of the category management of the Group's
ShiJiaqiao testing outlet, by understanding the proportions between
the number of male and female customers, their income level and
occupation, we are able to determine the important information
regarding the standards, habits and needs of target customers. We
utilize the information in stocking up certain categories of
merchandise and adjusting the outlet layout. Even for the design of DM
that are being distributed to customers, we also run into details in
selecting DM paper thickness, merchandise selection and typesetting.
With such transformation, the daily sales of the Shijiaqiao outlet was
increased by 62% when compared to previous year.

Steady expansion of retail network, increase market share in
Yangtze River Delta region

-0-
*T
As at 31 December 2007 Hypermarkets Supermarkets Convenience Total
stores
Direct operation 111 572 955 1,638
Franchise operation 1,159 925 2,084
Total for the Group 111 1,731 1,880 3,722
*T

During the period under review, the Group maintained a steady pace
in expanding its retail and commercial network. We clustered the
opening of new outlets in the Yangtze River Delta regions where the
market scale has already been established and are ready for business
operation. We opened 497 outlets during the year and reached a network
total of 3,722 outlets, of which, the new hypermarket outlets are all
located in Eastern China regions. As at 31 December 2007, 3,050
outlets of the Group are located in Yangtze River Delta regions,
representing 82% of the total outlets of the Group. Of which, 111
hypermarket outlets (about 59%), 1,731 supermarket outlets (about 88%)
and 1,880 convenience store outlets (about 78%) are located in this
important development region.

Network By Geographic Locations

-0-
*T
No. of Percentage
outlets
Yangtze River Delta region: Shanghai, Zhejiang,
Jiangsu 3,050 82%
Eastern China: Shanghai, Zhejiang, Jiangsu,
Shandong, Anhui, Jiangxi, Fujian 3,114 84%
Northern China: Beijing, Tianjin, Henan, Hebei,
Inner Mongolia 156 4%
North-eastern region: Liaoning, Heilongjiang 302 8%
Southern China: Guangdong, Guangxi 140 3.7%
Other regions: Sichuan, Chongxing, Xinjiang, Hunan 10 0.3%
*T

During the period under review, the Group opened 446 franchised
outlets. As at 31 December 2007, the number of franchise outlets had
reached 2,084, representing nearly 56% of the total outlets of the
Group. About 88% of the franchised outlets are located in Yangtze
River Delta region, closely sharing the operating, logistics and
distribution and information resources in this region.

During the period under review, as the tenancy of some outlets are
about to expire, urban redevelopment and relocation and expiry of
franchise contracts, the number of franchised outlets had reduced. In
order to enhance the competitiveness of existing outlets, the Group
had also carried out active realignments to minority outlets where
operating environment is weak.

Segment results

During the period under review, the hypermarket business of the
Group had recorded a turnover of RMB 98.46 billion, representing
approximately 54.44% of the Group's turnover, a growth of profit
turning from loss to approximately 14.91% when compared to last year
of approximately RMB 85.69 billion. Segment operating profit was
approximately RMB 5.21 million.

-0-
*T
2007 2006
Gross profit margin (%) 11.09 9.25
Consolidated income margin (%) 24.23 23.23
Operating profit margin (%) 0.05 -0.54
*T

During the period under review, the supermarket business of the
Group had recorded a turnover of RMB 65.60 billion, representing
approximately 36.27% of the Group's turnover, a growth of
approximately 5.15% when compared to last year of approximately RMB
62.39 billion. Segment operating profit was approximately RMB 228.19
million.

-0-
*T
2007 2006
Gross profit margin (%) 15.09 14.81
Consolidated income margin (%) 23.47 22.66
Operating profit margin (%) 3.48 3.43
*T

During the period under review, the convenience stores business of
the Group had recorded a turnover of RMB 15.24 billion, representing
approximately 8.43% of the Group's turnover, a growth of approximately
1.38% when compared to last year of approximately RMB 15.45. Segment
operating profit was approximately RMB 44.73 million. Year-on-year
growth was approximately 50%, which was mainly due to the disposition
of all the outlets in Guangzhou region, had recorded a one-time
income. Excluding such factor, the results of that business segment
were decreased and it was mainly due to an increase in staff costs.

-0-
*T
2007 2006
Gross profit margin (%) 15.47 16.32
Consolidated income margin (%) 24.84 25.06
Operating profit margin (%) 2.93 1.92
*T

Strategy and planning

In 2008, with opportunities and challenges, the Group will sustain
the planned development strategy to promote the transformation process
in full gear. By improving the quality in development, operation and
management, we also aim at facilitating the further improvement of the
overall operation efficiency of the Company in achieving sound and
fast development of our business.

The Group will endure the development strategy of regional
centralization with quality:

-- Continue focusing on the development of Yangtze River Delta
region

-- The Group will continue to promote the dual development of
direct operation and franchising, facilitating the
synchronized development strategy of the three business
segments in hypermarkets, supermarkets and convenience stores.

-- The Group will continue to maintain its direction of market
segmentation, promote the "Strong Outlet" strategy

-- The Group will continue to strengthen its merchandising
business capabilities as well as its merchandising strategy.
We will strive for establishing a merchandising management
model with the ability to continue optimizing merchandise
structure and to meet the requirements of business model
transformation.

The Group will continue to devote itself in enhancing its basic
management capabilities. We will promote the setting up of a regulated
operation management system and workflow improvement. We shall
accelerate our logistic network establishment in Yangtze River Delta
region according to the needs of the Group's strategy and begin to set
up a large-scale logistic hub in Shanghai as quickly as possible. We
shall also promote the application of automatic stock replenishment
technology, enhance the accuracy and satisfaction level of outlet
re-ordering, improve merchandise turnover, enhance operation quality,
strengthen our cash flow management, open up diversified investment
channels and to improve the added-value of our capital.

By looking at the operating environment of retail enterprises in
PRC, we are glad to realize that the Company is positioned in a
domestic demand market with strong growth, supported by continuous
rapid development of the macro economy, on-going growth of disposal
income of urban and rural residents, emergence of middle class group,
urbanization acceleration and clear government policy intending to
boost consumer spending. At the same time, with the intense
competition in the PRC retail industry, the escalating commercial real
estate prices nationwide, rising labour and energy costs have exerted
strong increase pressure in operating cost of retail enterprises.

"Looking ahead, Lianhua Supermarket will focus to be actively
innovative, customer-oriented and accelerate our business
transformation. Through strengthening our merchandise operation
capabilities, improving and optimizing our operating system, enhancing
our core capabilities, seizing business opportunities, we will prepare
ourselves for the challenges in achieving sound and rapid development
of our business. For the purpose of higher profitability, the Group
will strengthen its leading position in the PRC retail market and
maximize shareholders' value." concluded Mr. Liang.

About Lianhua Supermarket

Lianhua Supermarket Holdings Co., Ltd. ("Lianhua Supermarket" or
the "Company") is China's leading supermarket chain. Established in
Shanghai in 1991, it is now a retail chain operator with a nationwide
retail network for 17 years. It has grown organically as well as
through franchise arrangements and acquisitions. As of December 31,
2007, Lianhua Supermarket operated 3722 stores in 20 provinces and
municipalities. It operates the "Century Mart" chain of hypermarkets,
"Lianhua" supermarkets and "Lianhua Quik" convenience stores. The
Franchise Committee of the PRC Retail Chain Operators Association has
recognized "Lianhua Supermarket" and "Lianhua Quik" through its awards
for supermarket and convenience store excellence. Lianhua Supermarket
was listed on the Hong Kong Stock Exchange on June 27, 2003.

Investor & Media Relations:
Lianhua Supermarket
Ms. LI Ting, 86-21-52629922 (ext: 1068)
Fax: 86-21-52797976
li_ting@chinalh.com
or
Christensen
Fung HON/ Joeling LAW, 852-2117 0861
Fax: 852-2117 0869
fhon@ChristensenIR.com / jlaw@ChristensenIR.com

Copyright Business Wire 2008