2004 Operating Results Presentation 23 March 2005 Corporate - - PowerPoint PPT Presentation

2004 Operating Results Presentation

23 March 2005

Corporate Overview

PORTS 1 9 6 1 story

• PORTS 1961 is a high-end fashion company established in

Canada in 1961

• Ports Design Limited (“PDL”)

has been operating the PORTS 1961 men's and ladies retail concept in China since 1993, and the BMW Lifestyle concept since 2002

* Ports 1961’s 5th generation store design. Winner of the 2002 VM+ SD International Store Interior Design Competition in New York

Corporate profile

• PDL is a vertically integrated fashion company with in-

house design, manufacturing, distribution, visual display, and merchandising

• Approximately 3,850 full and part-time employees, with

top-level management originating from North America and stationed in China

• Head office and main production facility located in Xiamen,

China, with distribution centres in Beijing, Shanghai and Xiamen

• Design studios located in New York and Xiamen

Ports 1 9 6 1 retail concept

• Classic business attire and elegant evening wear
• Target audience of men and women aged 25 to 45
• Complete product range including; apparel, fragrance, leather

goods including shoes and handbags, and accessories, including sunglasses and scarves

BMW Lifestyle retail concept

• Same target audience as PORTS
• Men’s and Ladies sports and casual wear, accessories, and

sports/ mobility products

• Business comprises of:

BMW Lifestyle retail stores - BMW Lifestyle retail stores increased from 11 in 2003 to 17 in 2004, with flagship store in Xintiandi, Shanghai Exports to BMW w orldw ide - Exported BMW Lifestyle products increased from RMB11.8 million in 2003 to RMB36.4 million in 2004

• BMW Lifestyle achieved breakeven status in 2004. The

concept is expected to start contributing to Company earnings in 2005

W ide retail store netw ork

• Network of 299 stores in

53 cities as at 2004 year end

• Ports 1961: 282 stores
• BMW Lifestyle: 17 stores
• Net new store increase of

10% per year

• Number of BMW Lifestyle

stores expected to double in 2005

PORTS in the spotlight

Magazine publications

• PORTS is one of the largest advertisers in the PRC,

representing over 20% of all fashion ads in top fashion magazines*

* Based on a 2000 Hachette Filipacchi Médias survey

Fashion and charity events

Ford Superm odel of the W orld, 1 9 9 9 Elite Model Look, 1 9 9 8 & 2 0 0 4

I nternational television coverage 3 0 m illion view ers

Metropolitan Top Model Com petition, 2 0 0 0 Charity concert for Kids w ith Leukem ia

1 5 0 m illion view ers Acclaim ed Hong Kong Popstars

I nternational cultural events

• PORTS sponsors world class cultural events including:

– The Royal Winnipeg Ballet tour in conjunction with the Canadian Government – Performances of Andrew Lloyd Webber’s classics

• This was Andrew Lloyd Webber’s first appearance in China

I nternational sporting events

• Tiger Wood’s first golf tournament in Shenzhen, China

PORTS in 2 0 0 4

PORTS in 2 0 0 4

• MI SS UNI VERSE CHI NA:

PORTS sponsored clothing from swimsuits to evening wear in the Miss Universe China competition, broadcast to over 350 million television viewers

PORTS w as m ore active in 2 0 0 4 than ever before, receiving international acclaim for sponsorship of top fashion events

PORTS in 2 0 0 4

• ELI TE MODEL COMPETI TI ON:

– PORTS designed a collection

• f special evening wear for

the Elite Model Look competition featuring dresses using our exclusive “Crystalize with Swarovski” licence – Covered by Shanghai Orient TV, and broadcast throughout China via satellite – Also broadcast worldwide by Fashion TV (France) – Generated wide-spread interest in PORTS designs throughout the fashion world

PORTS in 2 0 0 4

• PORTS continues to use top international supermodels

for its ad campaigns including: – Kate Moss, the face of Fall/ Winter 2004

• Other faces of PORTS

Claudia Schiffer Bridget Hall Maggie Rizer

• Luxury 2004 “The Lure of Asia”,

a conference organised by the International Herald Tribune and chaired by SUZY MENKES, was held in Hong Kong - the first time outside Europe

• PORTS was invited as a keynote

speaker with industry leaders such as LVMH, Versace, Hermes, Burberry, Tod’s, and more

• PORTS’ presentation generated

strong interest from major fashion brands seeking a partner to enter the Chinese market

I ndustry recognition

PORTS’ 2 0 0 4 Financials

Segm ent analysis

• Retail sales grow th trend continues:

– Total retail sales in Jan and Feb 2005 increased by approximately 46% over the same period last year – Same store sales increased by approximately 22% in 2004 – Other segment turnover grew by approximately 60% due to mainly an increase in BMW Lifestyle exports. Growth in BMW Lifestyle exports is expected to continue through 2005

(in RMB 000’s) 2 0 0 4 2 0 0 3 % Change Retail sales 491,639 379,251 29.6 OEM sales 157,235 168,233

• 6.5

Others 65,276 37,155 75.7 TOTAL 7 1 4 ,1 5 0 5 8 4 ,6 3 9 2 2 .2

Consistent revenue grow th

• PORTS increasingly benefits from economies of scale as

new stores are opened and manufacturing volumes increase

• PORTS is able to increase the average selling price of

goods at a rate higher than inflation. Average selling price in 2004 rose by 7.2% over 2003

Net Profit

( in RMB m illions)

48 59 93 108 137

50 100 150 2000 2001 2002 2003 2004

Company Turnover

( in RMB m illions)

340 415 470 585 714

200 400 600 800 2000 2001 2002 2003 2004

Grow th drivers of profit

1 2

• 2

4 6 8 10 2003 2004

(in RMB millio

12 36

• 5

10 15 20 25 30 35 40 2003 2004

(in RMB millions)

331 410

100 150 200 250 300 350 400 450 2003 2004

(in RMB millions)

7 19

• 3

6 9 12 15 18 2003 2004

(in RMB millions)

PORTS retail sales 2 3 .9 % 1 7 1 .4 % 1 0 0 .0 % 2 0 0 .0 % BMW Lifestyle export BMW retail sales Royalty I ncom e

Operational costs

• Operational costs in 2004 were in line with the growth of

the business except: – Administrative expenses increased by 42.1% , mainly as a result of our 1st full year as a public company. It is expected to remain at this level for future years – Depreciation charge increased due to investments in manufacturing, distribution facilities, and retail

• utlets.
• Advertising

and promotional expenditures increased slightly in 2004, amounting to approximately 4.5% of retail turnover.

Net cash position

• PORTS is in a net cash position with no bank borrowings
• Cash continues to accumulate after dividend payment and

investment into fixed assets (retail stores and additional manufacturing and distribution facilities) of approximately RMB36.1 million, up from RMB25.8 million in 2003

(in RMB 000’s) 2 0 0 4 2 0 0 3 % Change Net Cash inflow from

• perating activities

150,262 82,667 81.8 Dividend paid 56,817 31,149 82.4 Cash and time deposits at end of year 375,064 315,057 19.0

Future Grow th

• With its strong net cash position, PORTS plans to

develop its business through: – engaging in joint ventures and cooperation with other international brands – acquisitions consistent with our core competence: high-end retail in the PRC

investor@ports1 9 6 1 .com

I nventory

(in RMB 000’s) 2 0 0 4 2 0 0 3 Raw materials 52,183 43,684 Work in progress 14,772 10,301 Finished goods 143,464 129,008 2 1 2 ,9 5 0 1 8 4 ,8 1 6 Goods in transit 2,531 1,823 2 0 0 4 2 0 0 3 Based on finished goods inventory 188 days 190 days Based on total inventory 279 days 272 days

I nventory Turnover

I nventory turnover

Source: BNP Paribas Peregrine Research Report, 21 Feb 05

Inventory Turnover Days

55 105 160 210 240 272 298 300 60 120 180 240 300 Espirit Polo Ralph Lauren Hugo Boss GUCCI HERMES Ports Chanel LVMH days

PORTS

Based on total inventory = 272 days Based on finished goods inventory = 190 days

• Amongst

peers, PORTS’ inventory turnover days compare well with other high-end brands. The group’s vertically-integrated business model requires higher inventory turnover days as compared with wholesale businesses such as Polo Ralph Lauren and Hugo Boss

Account receivables

2 0 0 4 2 0 0 3 Account receivables under 30 days 86.7% 82.4% Account receivables 30-90 days 12.7% 15.8% Total 9 9 .4 % 9 8 .2 %

• The quality of PORTS’ account receivables is excellent as

shown below:

Net profit

(in RMB 000’s) 2 0 0 4 2 0 0 3 Gross profit 436,142 336,714 Net profit before tax 149,511 115,867 Income tax (12,397) (8,358) Net profit 1 3 7 ,1 1 3 1 0 7 ,5 0 9

Net m argin

2 0 0 4 2 0 0 3 Gross margin 61.1% 57.6% Tax rate 8.3% 7.2% Net margin 19.2% 18.4%