Lianhua Supermarket Announces 2008 Interim Results

Outstanding Growth in Core Business and Earning Structure
Optimized

Turnover, Net Profit and Profit Attributable to Shareholders up
19.8%, 44.2% and 61.8% YOY Respectively
HONG KONG--(Business Wire)--
Lianhua Supermarket Holdings Co.,Ltd. ("Lianhua Supermarket" or
the "Company", together with its subsidiaries the "Group"; HKEx stock
code: 980) today announced its unaudited interim results for the six
months ended June 30, 2008 (the "Review Period" or the "Period").

Financial and Business Highlights

-- Turnover increased 19.8% YOY to approximately RMB 10.74
billion; The gross profit margin continued to maintain a
steady growth of 0.7 percentage point to 13.4%. Net profit was
RMB 262 million, increased 44.2% YOY. Net profit margin made a
record high. Profit attributable to shareholders increased
61.8% to RMB 227 million. Basic earnings per share was RMB
0.36.

-- Same store sales of the Group increased significantly, up 13%,
among which the growths of hypermarket, supermarket and
convenience stores were 12%, 15.2% and 11.4% respectively, a
new record high since our listing.

-- All the three retail formats achieved satisfactory results.
Operating profit of hypermarket segment increased
substantially, reaching RMB 80.73 million. Operating profit
margin of supermarket was 4.3%, the highest in recent years.
Convenience store also experienced stable growth.

-- Our retail network continued to expand, 256 newly opened
stores comprising 11 hypermarkets, 94 supermarkets and 151
convenience stores. Total numbers of outlets reached 3,848
with 84% of the outlets locate in Eastern China.

-- Strong growth in sales and stringent cost control effectively
mitigated the impact of the increase in operating costs.
During the Period, cost rate (distribution cost plus
administrative cost divided by turnover) down 0.4 percentage
point YOY.

-- The Board declared an interim dividend of RMB 0.1 per share,
up 66.7% YOY

Commenting on the financial results for the first half year, Mr.
Wang Zhigang, Chairman of Lianhua Supermarket, said, 'In the first
half of 2008, the Group actively promoted the "Strong Outlet" strategy
and outlets transformation while strived to improve our operation and
foster the building of supporting system at the meantime. These
measures not only mitigate the pressure of operating cost increase,
what's more, have helped the Group achieving stable sales growth and
substantial growth in the operating results in core business. We can
expect the Group's future development will be further improved with
the betterment of our earning structure".

Segment results

Hypermarket: During the period under review, the hypermarket
business of the Group recorded a turnover of RMB 6.14 billion,
representing approximately 57.2% of the Group's turnover and a growth
of 26.4% as compared to last year. Segment operating profit was
significantly increased to approximately RMB 80.73 million.

-0-
*T
2008 2007
Gross profit margin (%) 12.0 10.8
Consolidated income margin (%) 22.1 22.9
Operating profit margin (%) 1.3 -0.1
*T

Supermarket: During the period under review, the supermarket
business of the Group recorded a turnover of RMB 3.72 billion,
representing approximately 34.6% of the Group's turnover and a growth
of approximately 13.9% as compared to last year. The gross profit
margin amounted to 15%, while taking no account of the sales of
merchandise to franchised stores at cost, the gross profit margin
amounted to 16.2%. The operating profit of this segment was
approximately RMB161.39 million, representing a growth of 4.08%,. The
operating profit margin dropped slightly. While taking no account of a
one-off revenue in the corresponding period of last year, the
operating profit margin achieved a steady growth, up to a historical
high.

-0-
*T
2008 2007
Gross profit margin (%) 15.0 14.6
Consolidated income margin (%) 21.3 22.9
Operating profit margin (%) 4.3 4.8
*T

Convenience Store: During the period under review, the convenience
stores business of the Group recorded a turnover of RMB 788.6 million,
representing approximately 7.3% of the Group's turnover and an
increase of approximately 6.6% as compared to same period of last
year. The gross profit margin amount was 15.5%, while taking no
account of the sales of merchandise to franchised stores at cost, the
gross profit margin amounted to 21.2%. Segment operating profit was
approximately RMB 16.91 million. Taking no account of a one-off income
from the transfer of the convenience store in Guangzhou last year and
the amount of wholesaling to franchisees at cost, the operating profit
margin is at the similar level as last year and the consolidated
income margin slightly grows.

-0-
*T
2008 2007
Gross profit margin (%) 15.5 15.8
Consolidated income margin (%) 23.0 25.9
Operating profit margin (%) 2.1 4.9
*T

Business Review

"Strong Outlet" strategy effectively improved our operation and
led to a significant increase in sales

In the first half of 2008, the Group continued to promote the
"Strong Outlet" strategy as to enhance the basic operation
capabilities of the retail outlets. The Group identifies improvement
goals for the selected target outlets after a comprehensive
"examination" of their operations, and formulated a complete set of
measures for implementation. "Strong Outlet" strategy has driven an
overall enhancement in the service quality of the outlets, its
operational viabilities and supporting system, which was one of the
strong driving forces behind the robust increase in the overall
results of the Company in the first half of 2008. During the period
under review, the sales and traffic volume of the sample outlets,
being the first batch of "strong outlets" launched by the Group,
surpassed the average level of the group as compared to the
corresponding period of last year.

Developing with innovations and continuous transformation in
various formats

The Group continuously promoted the transformation of the
supermarket business, with 36 outlets transformed during the period.
The total number of transformed outlets reached 212. The average daily
sales of the transformed outlets increased by approximately 16.5% as
compared to the corresponding period of last year, and the average
daily traffic volume grew by approximately 2%.

As to the hypermarkets, the Group continuously continued exploring
the business model of "hypermarket combined with department store" in
some of our outlets in the first and second tier cities.

By leveraging on its strong network, the convenience store segment
further increased the value-added services of the pilot transforming
outlets, and will gradually extend the coverage of the new value-added
services with an aim to fully utilizing the value of the network
resources.

Proactively developing new retail network and showing further
advantage of strong regional presence

During the period under review, the Group opened 256 new outlets,
of which 11 were hypermarkets, 94 were supermarkets and 151 were
convenience stores, with a faster pace in store expansion as compared
to the corresponding period of last year. Among the new outlets, 215
outlets opened in the Eastern China region, further strengthened
regional presence in this area.

The rapid expansion of franchised stores was continuously
sustained by the renowned brand of Lianhua, its strong logistics and
merchandises resources and the extensive management experiences.
During the Period, total number of newly opened franchise outlets of
the Group was 228. As of 30 June 2008, franchise outlets accounted for
68% of the Group's supermarkets and 52% of the Group's convenience
stores.

As at 30 June 2008, the Group had a total of 3,848 directly
operated and franchising outlets (not including outlets operated by
associated companies). The Group continued to maintain its market
leading position in the PRC, details of which are as follows:

As at 30 June 2008

-0-
*T
Hypermarkets Supermarkets Convenience stores Total
----------------------------------------------------------------------
Direct operation 121 560 939 1,620
----------------------------------------------------------------------
Franchise operation - 1,208 1,020 2,228
----------------------------------------------------------------------
Total of the Group 121 1,768 1,959 3,848
----------------------------------------------------------------------
*T

Strengthening the supporting system of supply chain to advance the
operation efficiency

In the first half of 2008, the Group commenced the development of
automatic stock replenishment system, we expect to see a significant
improvement to be made to the optimization of supply chain and a
reduction of the inventories. During the period under review, the
Group actively endeavors to build closer relationship with the
franchisees. Besides the effective supervision in a timely manner, we
established a more effective supporting system for merchandise and
logistic distribution system meeting the needs of franchisees in order
to encourage the franchisees to place more orders on the Group. In the
first half of the 2008, the wholesales amount of the Group's
franchising stores increased substantially by 20.97%.

Stringent cost control by raising revenue and lowering expenditure

In coping with the mounting pressure of our main operating costs,
the Group continued to maintain its strategies in raising revenue and
lowering expenditure. In the first half of 2008, the strong sales
growth and stringent cost control measures effectively mitigate the
increase in operating costs. During the Period, cost rate
(distribution cost plus administrative cost divided by turnover) down
0.4 percentage point compared to last year.

Concerning food safety, committing to the corporate social
responsibility

As a main channel of food retail sales, the Group established a
strict food quality control process and standard in the outlets in
various business segments, in which stringent control was implemented.

Immediately after the Sichuan Wenchuan Earthquake on 12 May 2008,
the Group launched a donation activity among all staff. Our
hypermarkets in Sichuan actively made a quick response to the local
rescue arrangement by undertaking the allocation of necessities for
quake assistance. Our hypermarket in Deyang, the quake zone, was the
first food retail chain outlet re-opened after the tragedy and it
undertook the social responsibility of organizing merchandise sources
and satisfying the market demand in a timely manner.

Promoting labour competition to improve employees' calibre

During the period under review, the Group held the nationwide
competition of "Lianhua Cup" for the operational skills of workers in
order to enhance the comprehensive abilities of employees. These
competitions and the subsequent training helped to improve the overall
quality of the Group's employees, as well as the ability and the
skills of each individual.

Strategies and Plans

During the second half of 2008, the Group will continue to
implement the strategies and plans set for the year.

The Group will uphold the development strategy of regional
centralization with quality. We will continue to promote the dual
development of direct operation and franchising, and further promote
the implementation of synchronized development strategy of the three
business segments in hypermarkets, supermarkets and convenience
stores.

The Group will implement the transformation process in full gear
by improving the quality of development, operation and management. We
also aim at facilitating the further enhancement of the overall
operation efficiency of the Company in achieving sound and fast
development of our business. The Group will continue to maintain its
market segmentation and promote the "Strong Outlet" strategy. In
addition, the existing outlets will be incessantly adjusted,
consolidated and upgraded. We will also emphasize our experience in
successful operations and the application of such experience in order
to further secure the traffic volume and overcome the market
challenges.

The Group will improve its commodity strategy, strengthening the
operation capabilities for commodity as well as its merchandising
strategy. We will strive for establishing a commodity management model
with the ability to continue optimizing merchandise structure and to
meet the requirements of the transformation business model. The Group
will continue to devote itself to enhancing its basic management
capability, promoting the establishment of standardized operation and
management system and the improvement of workflow, setting up a
large-scale logistic hub in Shanghai as soon as possible and promoting
the application of automatic stock replenishment technology.

The Group pursues the principal of "Treating People as Valuable
Resources" and shall continue to maintain our "performance- and
efficiency-oriented" corporate culture.

Looking ahead, Mr. Wang Zhigang concludes, "Though the
macroeconomic environment still face uncertainties in the second half
of 2008, we believe that the business prospects of chained retailing
enterprises will remain stable. The Group will closely monitor the
changes of the external environment while pursue our strategy of
'Development, Transformation and Enhancement'. We will further explore
our potential and advantages so as to overcome every challenge by
adapting the right strategy at right timing".

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 June 30, 2008,
Lianhua Supermarket operated 3,848 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
Tel: (8621) 52629922 (ext: 1068)
Fax: (8621) 52797976
li_ting@chinalh.com
or
Christensen
Fung HON/ Joeling LAW
Tel: (852) 2117 0861
Fax: (852) 2117 0869
fhon@ChristensenIR.com
jlaw@ChristensenIR.com

Copyright Business Wire 2008