2006 Annual Results Announcement 24 April 2007 Financial - PowerPoint PPT Presentation

2006 Annual Results Announcement 24 April 2007

Financial Highlights 1

Financial Highlights For the years ended 31 December (HK$ million) 2006 2005 Change Turnover 3,093.1 2,622.7 + 18% Gross Profit 1,395.2 1,143.9 + 22% Gross Profit Margin 45% 44% + 1% Profit Attributable to Shareholders 291.6 254.6 + 15% Net Profit Margin 9% 10% -1% Basic and diluted EPS HK17.80 cents HK15.72 cents + 13% Total Dividend per Share HK4.5 cents HK5.0 cents -HK0.5 cents • Final Dividend HK2.5 cents HK2.5 cents - 2

Brand Business Continuously Gaining Weight Brand Business OEM Business 25% 30% 40% 75% 70% 60% 2006 2005 2004 3

Five-year Summary: Continual Ascension of Turnover, Profit & EPS Turnover Profit Basic EPS HK$ million HK$ million HK cent 3,500 300 291.6 20 17.80 3,093.1 254.6 3,000 250 15.72 2,622.7 15 2,500 200 176.2 11.33 2,000 1,788.5 150 10 1,407.0 1,500 1,180.7 100 82.9 5.51 1,000 5 50 500 1.73 25.8 0 0 0 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 For the years ended 31 December For the years ended 31 December For the years ended 31 December 4

Gross Profit Margin Analysis by Business 60% 54% 52% OEM Business 50% 50% Brand Business 40% 30% 24% 22% 18% 20% 10% 0% 2004 2005 2006 For the years ended 31 December 5

Operating Profit Margin Analysis by Business 18% OEM Business 15% 15% 14% 14% Brand Business 12% 11% 9% 9% 9% 6% 3% 0% 2004 2005 2006 For the years ended 31 December 6

Key Financial Figures For the years ended 31 December (HK$ million) 2006 2005 Change Cash & Cash Equivalents 148.7 146.5 + 2% Shareholders’ Fund 981.3 744.2 + 32% Bank Borrowings 183.2 133.1 + 38% Debtors Turnover 13 days 17 days Decreased Creditors Turnover 64 days 71 days Decreased I nventory Turnover 147 days 156 days Decreased 7

Business Review 8

OEM Business Turnover and profit reported at HK$776,776,000 and HK$69,851,000 respectively (2005: HK$795,336,000 and HK$112,849,000) To encounter global pressure from volatile oil prices and rising production costs, the Group strategically directed resources into supporting selected higher margin orders By strengthening relationship with key customers, the Group secured orders with higher margin and of higher volume US remained as the major overseas export market, accounting for 93% of the segment turnover As at 31 December 2006, the value of the export orders on hand exceeded HK$200 million 9

Brand Business – Turnover Breakdown adidas Originals Business 8% 6% Shoebox Business Daphne Business 86% For the year ended 31 December 2006 10

Brand Business – Turnover and Profit / (Loss) Breakdown For the year ended 31 December 2006 (HK$ million) adidas Daphne Shoebox Total Originals Turnover 142.6 193.8 2,316.3 1,979.9 Gross Profit 73.1 76.8 1,255.5 1,105.6 Gross Profit Margin 51% 40% 54% 56% Operating Profit / (Loss) (4.6) 8.0 330.2 326.8 Operating Profit Margin (3% ) 4% 14% 17% 11

Brand Business – Turnover Breakdown by Channels For the year ended 31 December 2006 (HK$ ’000) adidas Daphne Shoebox Total Originals Stores 139,175 32,402 1,485,940 1,314,363 Counters - 160,914 633,973 473,059 Others 192,452 3,432 513 196,397 12

Brand Business – Ever-Expanding Sales Network For the year ended 31 December 2006 adidas Daphne Shoebox Total Originals D18: 398 D28: 1,049 Stores 164 10 1,621 1,447 D18: 119 D28: 372 Counters - 94 585 491 13

Brand Business – Distribution North Eastern China Extensive Sales & Distribution Store Counter Daphne 239 70 Network of the Group Shoebox 30 – adidas Originals 2 16 Northern China Store Counter Daphne 187 124 Shoebox 14 – adidas Originals – 21 Eastern China Store Counter Daphne 470 137 Shoebox 61 – adidas Originals 6 30 Southern China Store Counter Daphne 393 126 Shoebox 46 – adidas Originals – 10 West Central China Store Counter Taiwan Daphne 158 34 Shoebox 13 – Store Counter Daphne 34 – adidas Originals 2 17 14 14

Continuous Strong Growth Excellent growth in turnover and profit Shifting overhead costs surge as a result of the booming Chinese economy partially to customers by raising the ASP Keep pace of point-of-sale network expansion with an additional 242 new points-of-sale for “D18” and 253 new points-of-sale for “D28” commencing business during the year Target to boost the network to reach 5,000 points-of-sale by 2010 15

16 16 Handbags Diversified Portfolio as a Fashion Brand Watches Eyewears

17 17 Spokespersons

18 18 Compelling Promotional Events

Presence in Taiwan Market Established brand presence in Taiwan with first Daphne store commencing business in April 2006 Fast-growing point-of-sale network with over 30 stores opened in Taiwan as at 31 December 2006 With initial stage of investment coinciding with sluggish economy in Taiwan, the Group is working on reengineering the business there to boost its sales and profitability Ultimate goal – to convert “Daphne” into an international brand 19 19

An Emerging Star Segment turnover surged 90% to HK$142,607,000, in line with the points-of-sale network expansion from 75 shops to 164 The business is no longer making loss during the second half of the year. To even off the results for the whole year, slight operating loss was recorded at HK$4,590,000 (2005: loss of HK$2,751,000) Well-received by mass footwear market and poised to capture huge market potential The Group is confident that the business will be profitable in 2007, and had increased its stake by 36% to 95% to acquire bigger share of its future profit 20 20 20

Set to be Advantageous by Beijing 2008 Olympic Games Maintained steady network expansion, with total number of points-of-sale reaching 104 as at 31 December 2006 Product series of higher quality were introduced to China during the year with satisfactory market response Working closely with adidas in promoting the brand in China following the secure of the sponsorship contract for the Beijing 2008 Olympic Games Plan to accelerate point-of-sale network expansion to better capture opportunities brought by the approaching Beijing 2008 Olympic Games 21 21

I nfrastructure Development Logistics centres in Beijing and Shenyang have commenced initial operation Enhanced logistics management resulted in reduced inventory level in respective region, thus inventory turnover improved Plan to construct a logistics centre in Chengdu and expected to complete in 2007 To set up two new processing plants in Jiangxi and Taizhou to allow for taking on more processing tasks to lower manufacturing and operating costs, thereby improve profit margin 22

23 23 Prospects

Business Strategy Continue steady expansion of point-of-sale network Daphne Daphne Strive to promote brand awareness in Taiwan market Maintain marketing and promotion efforts to consolidate market leadership Diversify the product portfolio further when suitable opportunities arise Maintain fast expansion of point-of-sale network to maximize Shoebox Shoebox economies of scale and market coverage Expected to turn profitable in 2007 Accelerate expansion of the point-of-sale network adidas Originals Originals adidas Poised to capture opportunities brought by the Beijing 2008 Olympic Games Strengthen tie with key customers to secure orders with higher OEM OEM margin and of higher volume Take on more processing tasks to lower manufacturing and operating costs, thereby improve profit margin 24

25 25 Q&A Session