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August 2008
Annual Results Announcement
08Interim Results Announcement
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Agenda
Financial Highlights
Business Review
Strategies and Plans
Open Forum
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Financial Highlights
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Financial Highlights
(RMB '000) 2008 2007 Change (%)
Turnover 2,107,078 1,552,907 +35.7
Gross profit 514,862 385,049 +33.7
Profit attributable to equity holders 263,646 265,937 -0.9
Basic EPS (RMB cents) 21cents 21 cents -
Six months ended 30 June
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265.9 263.6
2007 20086 months ended 30 June
RMB Mn
Sustainable Turnover Growth
Profit Attributable to Equity HoldersProfit Attributable to Equity Holders
1,552.9
2,107.1
2007 20086 months ended 30 June
RMB Mn
TurnoverTurnover
+35.7%
+35.7%
Stable growth in sales was attributable to:– Continuous and rapid increase in sales of sports wear– Globalized expansion in sales market with Mainland China playing a promi
nent role
Profit attributable to equity holders remained stable
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6 months ended 30 June
Gross Profit MarginGross Profit Margin
Stability of Gross Profit
24.8%24.4%
2007 2008
Gross profit margin slightly decreased by 0.4 pct, due to– Continuous rapid appreciation of RMB– Reduction of export tariffs refund rate– Surge in the price of resources– Margin pressure was offset by improved internal efficiency and successful
adjustment of product mixNet profit margin decreased from 17.1% to 12.5% due to the increasing income tax expense and loss in transactions of derivatives instruments during the period
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Turnover Breakdown by Products
6 months ended 30 June
2008 2007 Change
RMB'000 % RMB'000 % RMB'000 %
By products
Casual wear 954,282 45.3% 1,082,993 69.7% (128,711) (11.9%)
Sports wear 952,731 45.2% 356,192 23.0% 596,539 167.5%
Lingerie 121,151 5.7% 71,298 4.6% 49,853 69.9%
Other knitting products 78,914 3.8% 42,424 2.7% 36,490 86.0%
Total 2,107,078 100% 1,552,907 100% 554,171 35.7%
Significant growth in sports wear contribution was attributable to substantial increase in OEM manufacturing for renowned sports brands (Adidas, Nike, Puma and Kappa) as a result of increasing proportion of high-end products.
Efficiently adjusted product portfolio and client base by reducing sales of lower profit margins products, leading to a decrease in casual wear sales
Lingerie business has delivered solid performance in response to the demand in Japan
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Contribution from Japan decreased by 5.9% owing to adjustment in product and client base in order to maintain the satisfactory profitability level
Continuous growth in the Europe and other markets, including Hong Kong, Korea and Australia, was attributable to the market diversification strategy and the global market demand from certain customers
Domestic sales reported robust growth attributable to the demand of high-end sports wear and favorable impact of 2008 Beijing Olympics Game, driving demand for sports apparel from renowned brand names etc
Turnover Breakdown by Regions
6 months ended 30 June
2008 2007 Change
RMB'000 % RMB'000 % RMB'000 %
Japan 1,016,746 48.3% 1,080,189 69.6% (63,443) (5.9)%
Europe 294,306 14.0% 183,439 11.8% 110,867 60.4%
United States 93,122 4.4% 74,655 4.8% 18,467 24.7%
Other countries 180,127 8.5% 94,167 6.1% 85,960 91.2%
Domestic market 522,777 24.8% 120,457 7.7% 402,320 334.0%
Total 2,107,078 100% 1,552,907 100% 554,171 35.7%
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Healthy Financial Position
2008 2007
Inventory turnover days 90 94
Debtor turnover days 29 26
Creditor turnover days 38 49
For the 6 months ended 30 June
2008 2007
Gearing ratio (debt to equity) (%) 41.4% 30.9%
Cash and Cash Equivalent (RMB Mn) 312.0 118.2
Net assets (RMB Mn) 2,529 2,281
Total assets (RMB Mn) 4,620 3,467
For the 6 months ended 30 June
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Business Review
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Robust Growth of the PRC Market
Benefited from:– 2008 Beijing Olympics Games– Increasing demand of high-ended sports wear in PRC market– Availability of more sports wear products manufactured by the Group for the
sales in domestic market for internationally renowned clients
Mitigated the impact on RMB appreciation & decrease of VAT refunds
475.9
87.128.7
2006 2007 2008
6 months ended 30 June
Garment sales contribution by domestic market Garment sales contribution by domestic market
CAGR: +407%RMB mn
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Sports wear customersSports wear customers
Casual wear customersCasual wear customers
Two renowned sports wear customers, ADIDAS and NIKE, accounted for 32.5% (1H2007: 15.6%) of Group’s total turnover, while PUMA and KAPPA also began to contribute significantly in terms of sales
Successfully established a more diversified and risk-resistant customer structure
Continue to strengthen strategic partnership with the international renowned brands including Marks & Spencer, the largest chain store in the UK, and SEPTWOLVES, a renowned causal wear brand in the PRC, during the period
Rationalization of Client Base
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Strategies and Plans
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Achieve industry integration and structural adjustment to counteract the pressure arising from RMB appreciation
and increasing production costs
Further adjust product portfolio, market layout and customer mix to enhance negotiating power in respect of orders received and improve profitability
Optimize manufacturing process through perfecting logistics, increasing fabric utilization rate and enhancing manufacturing efficiency of apparel production process in order to strengthen our overall competitiveness
Enhancement of Administrative Standards
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Lingerie wearLingerie wear
SportsSports wear wearCasualCasual wear wear
Flexible Deployment of Production Capacity
Intend to establish a woven garment processing factory in Zhejiang to diversify OEM services products apart from providing basic knitwear to customers, boosting the proportion of sports wear sales
Production capacity in the Cambodia manufacturing base will be adjusted in accordance with the demand of major customers to capture market trend
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Europe
Asia
US
Further Expansion in Domestic Market & Balanced Development in Non-quota Markets
The US is expected to remove its transitional garments quota restriction by 2009 followed by the withdrawal of garment quota in the EU this year. The Group will develop in the American and European markets to secure the demand of high-ended orders from major customers
Greater efforts in increasing sales contribution from domestic market to mitigate the impact on RMB appreciation
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Improvement of Integrated Competitiveness
The Most Competitive Textile & Garment
Manufacturer In the World
Enhancement of
administrative standards
Flexible deployment of
production capacity
Further expansion in domestic market & balanced development in
non-quota markets
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Open Forum
