33rdrd Quarter 2003 Quarter 2003 Results PresentationResults Presentation
A member of the Li & Fung (Retailing) GroupA member of the Li & Fung (Retailing) Group 4 November 20034 November 2003
Hong Kong Total Retail Sales ValueHong Kong Total Retail Sales ValueYear-on-year % ChangeYear-on-year % Change
-20%
-15%
-10%
-5%
0%
5%
10%
01
/02
03
/02
05
/02
07
/02
09
/02
11
/02
01
/03
03
/03
05
/03
07
/03
* Source: HKSAR, Census and Statistics Department* Source: HKSAR, Census and Statistics Department
Jan-Aug 2003 :Jan-Aug 2003 : - 5%- 5%
2002 Total :2002 Total : - 4%- 4%
33rdrd Quarter 2003 Result Presentation Quarter 2003 Result Presentation AgendaAgenda
33rdrd Quarter 2003 Financial Results Highlights Quarter 2003 Financial Results Highlights
2003 Update & Outlook2003 Update & Outlook
Questions & AnswersQuestions & Answers
33rdrd Quarter 2003 Financial Results Highlights Quarter 2003 Financial Results HighlightsGroup Turnover – 3Group Turnover – 3rdrd Quarter Quarter
1,305.11,393.5
366.8 404.9
0
200
400
600
800
1,000
1,200
1,400
1,600
HK
$ M
illio
n
2001 Total 2002 Total 3rd Qtr 2002 3rd Qtr 2003
No. of Stores :No. of Stores : 146146 166 166 157 157 180 (HK) 180 (HK) -- 2 2 - - 5 (Chin 5 (Chin
a)a)
+ 10%+ 10%
33rdrd Quarter 2003 Financial Results Highlights Quarter 2003 Financial Results Highlights144 Comparable Stores Sales144 Comparable Stores Sales
344.5340.7
300
310
320
330
340
350
360
HK
$ M
illio
n
3rd Qtr 2002 3rd Qtr 2003
- 1%- 1%
33rdrd Quarter 2003 Financial Results Highlights Quarter 2003 Financial Results HighlightsGroup Turnover – September YTDGroup Turnover – September YTD
1,305.11,393.5
322.6
343.4
366.8
349.6
377.6
404.9
0
200
400
600
800
1,000
1,200
1,400
1,600
HK
$ M
illio
n
2001 Total 2002 Total Sep YTD 2002 Sep YTD 2003
No. of Stores :No. of Stores : 146146 166 166 157 180 (HK) 157 180 (HK) -- 2 2 - - 5 (Chin 5 (Chin
a)a)
+ 10%+ 10%
1,032.81,132.1
55.060.5
17.1 18.2
0
10
20
30
40
50
60
70
HK
$ M
illio
n
2001 Total 2002 Total 3rd Qtr 2002 3rd Qtr 2003
33rdrd Quarter 2003 Financial Results Highlights Quarter 2003 Financial Results HighlightsGroup Net Profit – 3Group Net Profit – 3rdrd Quarter Quarter
+ 6%+ 6%
* Restated for Income Tax Effect Per SSAP No.12* Restated for Income Tax Effect Per SSAP No.12
****
**
4.2% 4.3%4.7% 4.5%
0%
1%
2%
3%
4%
5%
6%
7%
2001 Total 2002 Total 3rd Qtr 2002 3rd Qtr 2003
33rdrd Quarter 2003 Financial Results Highlights Quarter 2003 Financial Results HighlightsNet Profit as % of Sales – 3Net Profit as % of Sales – 3rdrd Quarter Quarter
- 0.2%- 0.2%
* Restated for Income Tax Effect Per SSAP No.12* Restated for Income Tax Effect Per SSAP No.12
****
**
31.6%
32.8%
32.3%
32.9%
30%
31%
32%
33%
34%
2001 Total 2002 Total 3rd Qtr 2002 3rd Qtr 2003
Gross Margin/Other Income as % of Sales(Excluding Interest)
Why 3Why 3rdrd Quarter 2003 Results? Quarter 2003 Results?Higher Gross Margin/Other IncomeHigher Gross Margin/Other Income
+ 0.6%+ 0.6%
Why 3Why 3rdrd Quarter 2003 Results? Quarter 2003 Results?Higher Expenses as % of SalesHigher Expenses as % of Sales
Expenses as % of SalesExpenses as % of Sales 20032003 2003 vs. 20022003 vs. 2002
Store Operating Expenses - HKStore Operating Expenses - HK 22.3%22.3% + 0.3%+ 0.3%
- China- China 0.3%0.3% + 0.3%+ 0.3%
DistributionDistribution 1.7%1.7% + 0.2%+ 0.2%
Administrative ExpensesAdministrative Expenses 3.7%3.7% + 0.5%+ 0.5%
China Start-up ExpensesChina Start-up Expenses -- - 0.4%- 0.4%
+ 0.9 %+ 0.9 %
Why 3Why 3rdrd Quarter 2003 Results? Quarter 2003 Results?Net Profit By MarketNet Profit By Market
33rdrd Qtr 2002 Qtr 2002 33rdrd Qtr 2003 Qtr 2003 ChangesChanges
(HK$ M)(HK$ M) (HK$ M)(HK$ M) (HK$ M)(HK$ M)
Hong Kong MarketHong Kong Market 18.718.7 20.420.4 1.71.7
China MarketChina Market (1.6)(1.6) (2.2)(2.2) (0.6)(0.6)
TotalTotal 17.117.1 18.218.2 1.11.1
55.060.5
9.9
16.3
17.1
7.3
16.6
18.2
0
10
20
30
40
50
60
70
HK
$ M
illio
n
2001 Total 2002 Total Sep YTD 2002 Sep YTD 2003
33rdrd Quarter 2003 Financial Results Highlights Quarter 2003 Financial Results HighlightsGroup Net Profit – September YTDGroup Net Profit – September YTD
- 3%- 3%
* Restated for Income Tax Effect Per SSAP No.12* Restated for Income Tax Effect Per SSAP No.12
****
43.3 42.1**
4.2% 4.3% 4.2%3.7%
0%
1%
2%
3%
4%
5%
6%
7%
2001 Total 2002 Total Sep YTD 2002 Sep YTD 2003
33rdrd Quarter 2003 Financial Results Highlights Quarter 2003 Financial Results HighlightsNet Profit as % of Sales – September YTDNet Profit as % of Sales – September YTD
- 0.5%- 0.5%
* Restated for Income Tax Effect Per SSAP No.12* Restated for Income Tax Effect Per SSAP No.12
** ****
8.59.1
2.6 2.7
0
1
2
3
4
5
6
7
8
9
10
HK
Cen
ts
2001 Total 2002 Total 3rd Qtr 2002 3rd Qtr 2003
33rdrd Quarter 2003 Financial Results Highlights Quarter 2003 Financial Results HighlightsBasic Earnings Per Share – 3Basic Earnings Per Share – 3rdrd Quarter Quarter
* Restated for Income Tax Effect Per SSAP No.12* Restated for Income Tax Effect Per SSAP No.12
****
**
+ 0.1 Cent+ 0.1 Cent
8.59.1
6.5 6.3
0
1
2
3
4
5
6
7
8
9
10
HK
Cen
ts
2001 Total 2002 Total Sep YTD 2002 Sep YTD 2003
33rdrd Quarter 2003 Financial Results Highlights Quarter 2003 Financial Results HighlightsBasic Earnings Per Share – September YTDBasic Earnings Per Share – September YTD
- 0.2 Cent- 0.2 Cent
* Restated for Income Tax Effect Per SSAP No.12* Restated for Income Tax Effect Per SSAP No.12
** **
**
33rdrd Quarter 2003 Financial Results Highlights Quarter 2003 Financial Results Highlights
33rdrd Qtr 2002 Qtr 2002 33rdrd Qtr 2003 Qtr 2003 ChangesChanges
Group Turnover (HK$ Group Turnover (HK$
Million)Million)366.8366.8 404.9404.9 + 10%+ 10%
Group Net Profit (HK$ Group Net Profit (HK$
Million)Million)17.1 *17.1 * 18.218.2 + 6%+ 6%
Net Profit as % of SalesNet Profit as % of Sales 4.7% *4.7% * 4.5%4.5% - 0.2%- 0.2%
Basic Earnings Per ShareBasic Earnings Per Share 2.6 Cents *2.6 Cents * 2.7 Cents2.7 Cents + 0.1 Cent+ 0.1 Cent
* Restated for Income Tax Effect Per SSAP No.12* Restated for Income Tax Effect Per SSAP No.12
2003 Update & Outlook2003 Update & Outlook
2003 Update & Outlook2003 Update & Outlook
Hong KongHong Kong
Deflation and relatively high Deflation and relatively high
unemployment to continueunemployment to continue
Threat of SARS re-occurringThreat of SARS re-occurring
Consumer sentiment improving Consumer sentiment improving
but consumers still cautious on but consumers still cautious on
spendingspending
Chinese tourist sector to growChinese tourist sector to grow
Top line sales and net margin to Top line sales and net margin to
improveimprove
2003 Update & Outlook2003 Update & Outlook
ChinaChina
Growth in retail continues due to Growth in retail continues due to
economic growth and increase in economic growth and increase in
disposable incomedisposable income
Consumer habit of using CVS more Consumer habit of using CVS more
important than competition factorimportant than competition factor
Escalating social insurance costEscalating social insurance cost
Expediting new store openingExpediting new store opening
Financial result close to expectationFinancial result close to expectation
2003 Update & Outlook 2003 Update & Outlook Our China StrategiesOur China Strategies
Benefits of CEPABenefits of CEPA
1.1. Lower qualifying requirementsLower qualifying requirements
2.2. Wholly-owned enterpriseWholly-owned enterprise
3.3. Access to over 230 Prefectural & Access to over 230 Prefectural &
County CitiesCounty Cities
4.4. Easier for acquisitionEasier for acquisition
2003 Update & Outlook2003 Update & OutlookProjected Number of Circle K StoresProjected Number of Circle K Stores
2002 2002
ActualActual2003 2003
ForecastForecast2004 2004
ForecastForecast
Hong KongHong Kong 166166 191191 220220
Southern ChinaSouthern China 22 1010 4040
Eastern or Northern ChinaEastern or Northern China -- -- 1010
Acquisition / J.V.Acquisition / J.V. -- -- ++
TotalTotal 168168 201201 270+270+
2003 Update & Outlook2003 Update & Outlook
Improving Hong Kong market conditionsImproving Hong Kong market conditions
Healthy growth in profitability and cash Healthy growth in profitability and cash
flow from operations since 2flow from operations since 2ndnd quarter quarter
China strategies on track but need to China strategies on track but need to
speed up expansionspeed up expansion
Better 2003 profitability outlook versus Better 2003 profitability outlook versus
2002’s2002’s
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