Corporate Presentation

2004
Operating Results
Presentation
23 March 2005
Corporate Overview
PORTS 1961 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 inhouse 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 1961 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 worldwide - 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
Wide retail store network
• 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 Supermodel of the World, 1999
30 million viewers
Elite Model Look, 1998 & 2004
International television coverage
Metropolitan Top Model Competition, 2000 Charity concert for Kids with Leukemia
150 million viewers
Acclaimed Hong Kong Popstars
International 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
International sporting events
• Tiger Wood’s first golf tournament in Shenzhen, China
PORTS in 2004
PORTS in 2004
•
MISS UNIVERSE CHINA:
PORTS sponsored clothing from swimsuits to evening
wear in the Miss Universe China competition, broadcast
to over 350 million television viewers
PORTS was more active in 2004 than ever before, receiving
international acclaim for sponsorship of top fashion events
PORTS in 2004
• ELITE MODEL COMPETITION:
– 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 2004
• 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
Industry 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’ 2004 Financials
Segment analysis
• Retail sales growth 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
2004
2003
% 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
714,150
584,639
22.2
(in RMB 000’s)
Consistent revenue growth
• 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 millions)
(in RMB millions)
137
150
93
100
48
714
800
585
108
600
59
400
50
340
415
470
200
0
0
2000
2001
2002
2003
2004
2000
2001
2002
2003
2004
Growth drivers of profit
PORTS retail sales
331
300
23.9%
250
200
18
(in RMB millions)
(in RMB millions)
350
19
410
450
400
BMW retail sales
150
100
15
12
9
6
3
2004
2003
BMW Lifestyle export
36
12
200.0%
-
2004
Royalty Income
10
8
(in RMB millio
(in RMB millions)
171.4%
2003
40
35
30
25
20
15
10
5
7
6
4
2
1
100.0%
2
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 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
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
(in RMB 000’s)
Net Cash inflow from
operating activities
Dividend paid
Cash and time deposits
at end of year
2004
2003
% Change
150,262
82,667
81.8
56,817
31,149
82.4
375,064
315,057
19.0
Future Growth
• 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
[email protected]
Inventory
(in RMB 000’s)
2004
2003
Raw materials
52,183
43,684
Work in progress
14,772
10,301
143,464
129,008
2,531
1,823
212,950
184,816
Finished goods
Goods in transit
Inventory Turnover
2004
2003
Based on finished goods inventory
188 days
190 days
Based on total inventory
279 days
272 days
Inventory turnover
Inventory Turnover Days
LVMH
300
Chanel
298
Based
= 272
Based
= 190
272
Ports
240
HERMES
GUCCI
210
Hugo Boss
160
Polo Ralph Lauren
105
Espirit
PORTS
on total inventory
days
on finished goods inventory
days
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:
2004
2003
Account receivables under 30 days
86.7%
82.4%
Account receivables 30-90 days
12.7%
15.8%
99.4%
98.2%
Total
Net profit
(in RMB 000’s)
2004
2003
Gross profit
436,142
336,714
Net profit before tax
149,511
115,867
Income tax
(12,397)
(8,358)
Net profit
137,113
107,509
Net margin
Gross margin
Tax rate
Net margin
2004
2003
61.1%
57.6%
8.3%
7.2%
19.2%
18.4%