Sun Art Retail Group, which runs hypermarkets in China, expects a “significant increase” in net profit for the six months to the end of June.

It has issued a profit warning based on a preliminary review of its unaudited consolidated
management accounts.

Sun Art says the increase is mainly attributable to unused balances on prepaid cards issued and sold by the group on or before June 30, 2012. For the year ended December 31, the company had about RMB9.7 billion (US$1.4 billion) of these “advance receipts from customers”.

An actuary firm was engaged this year to assess the portion of unused balance likely to be taken up, says the company. This amounted to about RMB460 million, which the board has deemed appropriate to be recognised as other income. After a deduction of 25 per cent tax liability, this will contribute about RMB345 million to the company’s consolidated net profit for the six months under review.

Detailed results for the period will be published in due course, says Sun Art, which has a 14.6 per cent market share by retail sales value.