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2004 Operating Results Presentation 23 March 2005
2004Operating 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 in-house 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 Elite Model Look, 1998 & 2004
International television coverage30 million viewers
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
• 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
Industry recognition
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
(in RMB 000’s) 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
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 (in RMB millions)
48 59
93108
137
0
50
100
150
2000 2001 2002 2003 2004
Company Turnover(in RMB millions)
340415 470
585714
0
200
400
600
800
2000 2001 2002 2003 2004
Growth drivers of profit
12
-
2
4
6
8
10
2003 2004
(in R
MB
mill
io
12
36
-5
10152025303540
2003 2004
(in R
MB
mill
ions
)
331410
100150200250300350400450
2003 2004
(in R
MB
mill
ions
)
7
19
-3
69
1215
18
2003 2004
(in R
MB
mill
ions
)
PORTS retail sales
23.9% 171.4%
100.0%200.0%
BMW Lifestyle export
BMW retail sales
Royalty Income
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) 2004 2003 % Change
Net Cash inflow from operating activities 150,262 82,667 81.8
Dividend paid 56,817 31,149 82.4
Cash and time deposits at end of year 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
Inventory
(in RMB 000’s) 2004 2003
Raw materials 52,183 43,684
Work in progress 14,772 10,301
Finished goods 143,464 129,008
212,950 184,816
Goods in transit 2,531 1,823
2004 2003
Based on finished goods inventory 188 days 190 days
Based on total inventory 279 days 272 days
Inventory Turnover
Inventory turnover
Source: BNP Paribas Peregrine Research Report, 21 Feb 05
Inventory Turnover Days
55105
160210
240272
298300
0 60 120 180 240 300
EspiritPolo Ralph Lauren
Hugo BossGUCCI
HERMESPorts
ChanelLVMH
days
PORTSBased on total inventory = 272 daysBased on finished goods inventory = 190 days
• Amongst peers, PORTS’ inventory turnover dayscompare 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
2004 2003
Account receivables under 30 days 86.7% 82.4%
Account receivables 30-90 days 12.7% 15.8%
Total 99.4% 98.2%
• The quality of PORTS’ account receivables is excellent as shown below:
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
2004 2003
Gross margin 61.1% 57.6%
Tax rate 8.3% 7.2%
Net margin 19.2% 18.4%
