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 of 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
I ndustry recognition • 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
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 2 0 0 4 2 0 0 3 % Change (in RMB 000’s) 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 Company Turnover ( in RMB m illions) ( in RMB m illions) 137 714 150 800 585 108 93 600 470 415 100 340 59 400 48 50 200 0 0 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004
Grow th drivers of profit PORTS retail sales BMW retail sales 19 410 450 18 (in RMB millions) 400 (in RMB millions) 331 15 350 12 300 7 250 9 2 3 .9 % 1 7 1 .4 % 200 6 150 3 100 - 2003 2004 2003 2004 BMW Lifestyle export Royalty I ncom e 36 40 10 35 (in RMB millions) 8 (in RMB millio 30 25 6 20 12 4 15 2 1 0 0 .0 % 10 2 0 0 .0 % 1 2 5 - - 2003 2004 2003 2004
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 1 st 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 outlets. • 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 2 0 0 4 2 0 0 3 % Change (in RMB 000’s) Net Cash inflow from 150,262 82,667 81.8 operating activities Dividend paid 56,817 31,149 82.4 Cash and time deposits 375,064 315,057 19.0 at end of year
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 Goods in transit 2,531 1,823 2 1 2 ,9 5 0 1 8 4 ,8 1 6 I nventory Turnover 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 Inventory Turnover Days 300 LVMH PORTS 298 Chanel 272 Ports Based on total inventory 240 HERMES = 272 days GUCCI 210 Based on finished goods inventory Hugo Boss 160 = 190 days Polo Ralph Lauren 105 Espirit 55 days 0 60 120 180 240 300 Source: BNP Paribas Peregrine Research Report, 21 Feb 05 • 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 • The quality of PORTS’ account receivables is excellent as shown below: 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 %
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 3 57.6% 7.2% 18.4% 2 0 0 4 61.1% 8.3% 19.2% Gross margin Net margin Tax rate
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