33rdrd Quarter 2004 Quarter 2004 Results PresentationResults Presentation

A member of the Li & Fung (Retailing) GroupA member of the Li & Fung (Retailing) Group 28 October 200428 October 2004

2

Hong Kong Total Retail Sales ValueHong Kong Total Retail Sales ValueYear-on-year % ChangeYear-on-year % Change

-20

-15

-10

-5

0

5

10

15

20

25

% C

ha

ng

e

01

/03

02

/03

03

/03

04

/03

05

/03

06

/03

07

/03

08

/03

09

/03

10

/03

11

/03

12

/03

01

/04

02

/04

03

/04

04

/04

05

/04

06

/04

07

/04

08

/04

Source: Census and Statistics Department, HKSAR

Overall Jan - Aug 2004: +12.1%Supermarket: + 0.8%

3

Guangzhou Total Retail Sales Value Guangzhou Total Retail Sales Value Year-on-year % ChangeYear-on-year % Change

0

2

4

6

8

10

12

14

16

% C

ha

ng

e

01

/03

02

/03

03

/03

04

/03

05

/03

06

/03

07

/03

08

/03

09

/03

10

/03

11

/03

12

/03

01

/04

02

/04

03

/04

04

/04

05

/04

06

/04

07

/04

08

/04

Source: Bureau of Statistics, Guangzhou

Overall Jan – Aug 2004: +12.3%

4

33rdrd Quarter 2004 Results Presentation Quarter 2004 Results PresentationAgendaAgenda

33rdrd Quarter 2004 Financial Results Highlights Quarter 2004 Financial Results Highlights

2004 Outlook & Update2004 Outlook & Update

Questions & AnswersQuestions & Answers

5

2004 Financial Results Highlights2004 Financial Results HighlightsGroup Turnover – 3Group Turnover – 3rdrd Quarter Quarter

1,393.51,526.1

404.9 472.1

0

500

1,000

1,500

2,000

HK

$ M

illio

n

2002 2003 3rd Qtr 2003 3rd Qtr 2004

+ 16.6%+ 16.6%

No. of store – HKNo. of store – HK 166166 186186 180180 197197

No. of store - ChinaNo. of store - China 22 77 55 1515

6

2004 Financial Results Highlights2004 Financial Results Highlights165 Comparable Stores Sales – 3165 Comparable Stores Sales – 3rdrd Quarter Quarter

385.4

405.5

300

350

400

450

HK

$ M

illio

n

3rd Qtr 2003 3rd Qtr 2004

+ 5.2%+ 5.2%

7

Strong PromotionsStrong Promotions

Student LoyaltyFood Services Media

8

2004 Financial Results Highlights2004 Financial Results HighlightsGroup Turnover – September YTDGroup Turnover – September YTD

1,393.51,526.1

349.6

377.6

404.9

403.6

432.8

472.1

0

500

1,000

1,500

2,000

HK

$ M

illio

n

2002 2003 Sep YTD 2003

Sep YTD 2004

+ 15.6%+ 15.6%

No. of store – HKNo. of store – HK 166166 186186 180180 197197

No. of store - ChinaNo. of store - China 22 77 55 1515

1,132.11,308.5

9

Gross Margin / Other IncomeGross Margin / Other Income– 3– 3rdrd Quarter Quarter (excluding interest)(excluding interest)

32.8%32.6%

32.9% 32.8%

30%

31%

32%

33%

34%

35%

% o

f S

ales

2002 2003 3rd Qtr 2003 3rd Qtr 2004

- 0.1%- 0.1%

10

Upward Pressure on Store Operating Upward Pressure on Store Operating Expenses – 3Expenses – 3rdrd Quarter Quarter

8.9%

6.9%

6.9%

9.1%

7.0%

7.2%

8.9%

6.6%

7.1%

8.9%

6.8%

7.6%

0%

5%

10%

15%

20%

25%

30%

% o

f S

ales

2002 2003 3rd Qtr 2003 3rd Qtr 2004

Labour Cost Rental Cost Other Expenses

22.7% 23.3% 22.6% 23.3%

11

2004 Financial Results Highlights2004 Financial Results HighlightsGroup Net Profit – 3Group Net Profit – 3rdrd Quarter Quarter

60.4 60.7

18.2 20.5

0

10

20

30

40

50

60

70

HK

$ M

illio

n

2002 2003 3rd Qtr 2003 3rd Qtr 2004

+ 12%+ 12%

12

2004 Financial Results Highlights2004 Financial Results HighlightsGroup Net Profit – September YTDGroup Net Profit – September YTD

60.4 60.7

7.2

16.6

18.2

8.5

18.4

20.5

0

10

20

30

40

50

60

70

HK

$ M

illio

n

2002 2003 Sep YTD 2003

Sep YTD 2004

+ 12%+ 12%

4247

13

2004 Financial Results Highlights2004 Financial Results HighlightsNet Profit as % of Sales – 3Net Profit as % of Sales – 3rdrd Quarter Quarter

4.3%4.0%

4.5% 4.3%

0%

1%

2%

3%

4%

5%

6%

% o

f Sal

es

2002 2003 3rd Qtr 2003 3rd Qtr 2004

14

2004 Financial Results Highlights2004 Financial Results HighlightsNet Profit as % of Sales – Sep YTDNet Profit as % of Sales – Sep YTD

4.3%4.0%

3.7% 3.6%

0%

1%

2%

3%

4%

5%

6%

% o

f Sal

es

2002 2003 Sep YTD 2003

Sep YTD 2004

15

2004 Financial Results Highlights2004 Financial Results HighlightsBasic Earnings Per Share – 3Basic Earnings Per Share – 3rdrd Quarter Quarter

9.1 9.1

2.7 3.1

0

2

4

6

8

10

HK

Cen

ts

2002 2003 3rd Qtr 2003 3rd Qtr 2004

+ 0.4 Cent+ 0.4 Cent

16

2004 Financial Results Highlights2004 Financial Results HighlightsBasic Earnings Per Share – Sep YTDBasic Earnings Per Share – Sep YTD

9.1 9.1

1.1

2.5

2.7

1.3

2.7

3.1

0

2

4

6

8

10

HK

Cen

ts

2002 2003 Sep YTD 2003 Sep YTD 2004

+ 0.8 Cent+ 0.8 Cent

6.37.1

17

33rdrd Quarter 2004 Financial Results Quarter 2004 Financial Results HighlightsHighlights

33rdrd Qtr 2003 Qtr 2003 33rdrd Qtr 2004 Qtr 2004 % Change% Change

Group Turnover (HK$ Group Turnover (HK$

Million)Million)404.9404.9 472.1472.1 + 17%+ 17%

Group Net Profit (HK$ Group Net Profit (HK$

Million)Million)18.218.2 20.520.5 + 12%+ 12%

Net Profit as % of SalesNet Profit as % of Sales 4.5%4.5% 4.3%4.3% - 0.2%- 0.2%

Basic Earnings Per ShareBasic Earnings Per Share 2.7 cents2.7 cents 3.1 cents3.1 cents + 0.4 cents+ 0.4 cents

18

Year-On-Year Quarterly Profitability Year-On-Year Quarterly Profitability GrowthGrowth

49

2

28

-27

27

9

17

11 12

-30

-20

-10

0

10

20

30

% C

ha

ng

e

Q12002

Q22002

Q32002

Q42002

Q12003

Q22003

Q32003

Q42003

Q12004

Q22004

Q32004

**

*

*

* Restated for income tax effect per SSAP No.12 (revised) and long service payment costs per SSAP No.34 (revised)

19

2004 Update & Outlook2004 Update & Outlook

20

2004 Update & Outlook2004 Update & OutlookCircle K Hong Kong – Quality GrowthCircle K Hong Kong – Quality Growth

Consumer sentiment continues to Consumer sentiment continues to

improve graduallyimprove gradually

High unemployment & mild inflationHigh unemployment & mild inflation

Upward pressure on rental and Upward pressure on rental and

utility costsutility costs

Maintain quality growth strategyMaintain quality growth strategy

Existing number of stores:Existing number of stores: 200 200

Committed / In progress: Committed / In progress: 5 5

Forecast – end of 2004:Forecast – end of 2004: 205 205

21

2004 Update & Outlook2004 Update & OutlookCircle K ChinaCircle K China

Stores sales and P&L continue to improveStores sales and P&L continue to improve

Existing number of stores:Existing number of stores: 1515

Committed / In progress:Committed / In progress: 7 7

Forecast – End of 2004:Forecast – End of 2004: 2222

Speed up growth:Speed up growth:

Organic growth – Doing it rightOrganic growth – Doing it right

Entry into other citiesEntry into other cities

Small store model trialSmall store model trial

Aggressive growth strategies to comeAggressive growth strategies to come

22

2004 Update & Outlook2004 Update & OutlookTo SummarizeTo Summarize

Hong Kong market improving graduallyHong Kong market improving gradually

Rental cost is a concernRental cost is a concern

China market – expansion strategy China market – expansion strategy instead of P&L issueinstead of P&L issue

Ready for aggressive growthReady for aggressive growth

Customer brand preference, Customer brand preference, comparable store sales and profitability comparable store sales and profitability expected to continue trends of first 9 expected to continue trends of first 9 months of 2004months of 2004

33rdrd Quarter 2004 Quarter 2004 Results PresentationResults Presentation

A member of the Li & Fung (Retailing) GroupA member of the Li & Fung (Retailing) Group 28 October 200428 October 2004