Computer product distributor Digital China Holdings, which yesterday posted its first interim loss despite a profitable second quarter, said it expects higher full-year profits this year than last.

Digital China, which had warned its first-half results would be hurt by SARS, reported a HK$91 million (US$11.7 million) loss for the six months ended September because of a HK$95 million (US$12.2 million) provision on unsold mobile handsets it had already announced for the June quarter.

That compared with a restated profit of HK$88.84 million (US$11.4 million) for the same six-month period the previous year.

Following the restructuring of its handset business, the PC and network equipment distributor said it expected its full-year results to be better than the previous year partly on the strength of its other core system integration service business.

"I can say with confidence that our full-year results this year are unlikely to be worse than last year," Digital China President Guo Wei told a news briefing on the firm's results.

In June, the company reported a 5.7 per cent rise in profits to HK$181.16 million (US$23 million) for the fiscal year ended March 31.

Shares in Digital China, a spin-off of China's largest PC maker Legend Group, fell 1.9 per cent to close at HK$2.58 yesterday after the results were released.

They have gained almost 30 per cent for last three months as some brokerage firms, including UBS, share Digital China's upbeat view.

Digital China made a HK$57.7 million (US$7.4 million) profit for the September quarter, in line with the average profit estimate of three analysts surveyed by Reuters, as its network equipment and system integration units returned to a growth path.

The firm earlier announced a HK$148.64 million (US$19 million) loss for the June quarter, including the hefty provision on the stockpile of outdated handsets that had been left unsold as a result of the SARS outbreak this year.

"Once bitten, twice shy," Guo said. "We won't be in a hurry to run a large scale handset business for a long time."

Guo said the firm currently has about HK$150 million (US$19 million) worth of software business contracts in hand that it had yet to book.

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