yue yuen industrial 2019 9m resultsinvestor.yueyuen.com/20191113170147352573710_en.pdf ·...

13 November 2019

Yue Yuen Industrial 2019 9M Results

Disclaimer

Yue Yuen and Pou Sheng have taken every reasonable care in preparing this presentation. However, please be reminded that the

information, materials, opinions and statements contained or referred to in this presentation are all provided on an "as is" basis.

None of the aforesaid information, materials, opinions and statements constitutes or will be viewed as investment advice or an

offer, or a solicitation, recommendation or suggestion by Yue Yuen or Pou Sheng to deal in any investment products including

securities, or other financial products and instruments.

If there is any forward-looking statements contained or referred to in this presentation, these forward-looking statements are

based on current expectations and assumptions, of which many are beyond our control. In addition, these statements are subject

to a number of risks, uncertainties and factors and if any of these risks or uncertainties materialize, or if underlying expectations

not occur or assumptions prove incorrect, actual results, performance or achievements of Yue Yuen and/or Pou Sheng may vary

materially from those described explicitly or implicitly in the relevant forward-looking statement. Neither Yue Yuen nor Pou Sheng

intends or assumes any obligation, to update or revise these forward-looking statements in light of any difference from those

anticipated.

Yue Yuen and Pou Sheng including their respective subsidiaries, associated or affiliated companies, or any of their respective

directors, employees, agents, representatives or associates accepts no liability for and shall not be responsible or liable for any

loss or damage of whatever kind or nature, directly or indirectly, arising from action taken, or not taken, in reliance on, or

resulting from access to or use of the aforesaid information, materials, opinions and statements (including forward-looking

statements, if any) contained or referred to in the presentation.

2

Retail Sales – Shoes, Apparel & Leasing

38.7% (9M18: 35.6%)

Company Profile

Founded in 1988, and listed on the HKEX in 1992 (551.HK)

Core Businesses:

Footwear manufacturing – Predominately athletic and casual / outdoor shoes

Pou Sheng (3813.HK) – Sportswear retail & sports services in the Greater China Region

A yield play with solid performance – committed to driving return and value for shareholders

9M19 Revenue by Business Segments

9M19 Total Revenue US$ 7,519.6 million

*Revenue from Texas Clothing Holding Corp. (“TCHC”) Group, which became subsidiary of the Group on April 7, 2017 and was then disposed on May 31, 2019 3

Soles, Components & Others

4.7% (9M18: 5.4%)

Athletic Shoes

43.1% (9M18: 43.2%)

Casual / Outdoor Shoes

10.2% (9M18: 10.9%)

Sports Sandals

1.0% (9M18: 0.8%)

Apparel Wholesale*

2.3% (9M18: 4.1%)

2018 Financial Performance Overview

Source: Company audited financial statements and management accounts * FY18 Total Dividend: HK$1.50/share (Total ordinary dividend for FY17 was HK$1.50/share, including HK$1.10/share final dividend and HK$0.40/share interim dividend)

74%

65% 56%

61%

101%

1.15 1.20

1.40

1.50 1.50

2014 2015 2016 2017 2018

Payout ratio*

HK$ per share*

17.53 17.25 16.88 16.87 16.53

307

318

322 325

326

2014 2015 2016 2017 2018

Avg. selling price

Production volume

331 390 535 519

307

8,013 8,435 8,481

9,121

9,695

2014 2015 2016 2017 2018

Profit attrib. to owners

Revenue

4

USD 9,695.3 mn

Profit Attrib. to Owners

Revenue

USD 307.1 mn

326.0 mn pairs

ASP (USD)

Prod. Volume

$16.53

HK $1.50 per share

Dividend Payout Ratio

Dividend*

101%

Our Growth Strategy

5

Speed

Sustainability

Flexibility

Innovation

Quality

Design

OEM / ODM

Material

Process

Equipment

Apparel

Accessories

Footwear

Retail

Values

5

Directions

4

Segments

3

End to End Platform

2

World’s Leading Sporting Goods

MFG Platform

1

Growing Investment in ME & MM *

6

Around 60% of CAPEX in FY2018 was for ME & MM MFG Capex ME / MM & New Projects Capex

500

60% 45%

250

* ME & MM: Manufacturing Excellence and Manufacturing Modernization

45% 43%

57% 52% 59%

60%

2014 2015 2016 2017 2018 2019F

Corporate Social Responsibility

7

The social compliance program of Pou Chen Group (comprising Pou Chen Corporation and Yue Yuen) obtained accreditation from Fair Labor Association (FLA) in June, 2018, as a result of our efforts and commitments in promoting workplace standards, responsible production as well as factory condition improvement.

The Only FLA Accredited Footwear OEM/ODM Globally

A Top-ranking Responsible Investment Target

Pou Chen and Yue Yuen are constituents of world-famous Environmental, Social and Governance (ESG) indexes, including the FTSE4Good Emerging Index and the MSCI World ESG Leaders Index.

Our Focus on Sustainability

Employee Relations

Compliance

Education Implementation Communication Risk Control

ESH & ESG

9M 2019

Group and Operation Highlights

Key Financial Highlights for 9M 2019

9

Group

* Excludes TCHC Group

Revenue

US$ 7,519.6 mn + 5.1%

Operating Profit

US$ 345.6 mn

- 1.3%

MFG* GP Margin

18.2% -1.1pp

Shoe Volume

239.7 mn pairs

+1.4%

ASP

US$ 17.05 per pair

+2.6%

Retail Revenue

RMB 19,996 mn +20.2%

OP Margin

5.5%

+1.3pp

Same Store Sales Growth

6.2% -0.7pp


US$ 229.4 mn

+12.2%

Financial Implications of Disposal of TCHC

10

TCHC Group

(US$ million, audited) Jan – May 2019 Jan – Jun 2018 FY 2018

Revenue 171.85 191.50 395.02

Net profit after taxation 10.01 7.61 17.08

Net Asset Value 127.25 85.65 93.28

Disposal

Rationale

Consideration

TCHC Group Financials

* Purchase Price listed above has not yet taking into account the working capital adjustment, the indebtedness and other adjustments

Texas Clothing Holding Corp. (“TCHC”) was disposed on 31 May 2019, upon which it ceased to be a subsidiary of the Company.

The Group’s benefits from the disposal:

- Realizing investment in the TCHC

- Remaining focused on core business

- Releasing working capital and lowering debt levels

Consideration = Purchase Price* (US$230.0 mn) + Earnout Amount (max. US$24.15 mn)

Net proceeds at Closing after debt repayment: approx. US$97.7 mn, which was used to

pay down outstanding debt held by the Group

Gain on disposal is approx. US$19.1 mn, TCHC Group accounts for 3.4% of revenue and

5.1% of profit of the Group for initial six months of 2019

Financial Impact

3,242.4

766.1

78.2

2,910.5

171.8

350.6

3,089.0

782.3

58.6

2,547.4

292.2

382.4 9M19 9M18

Y-o-Y Revenue by Product Category

11

(US$’ mn)

9M19 Shoe Production Revenue by Product Categories

Casual/Outdoor Shoes

Sports Sandals

Athletic Shoes

79%

19%

2%

Shoe Rev: US$ 4,086.7 mn (+4.0% YoY)

* TCHC Group (disposed on May 31, 2019) ** Soles, Components & Others *** The decline is due to different comparative base: 5M sales in 9M19 vs. 9M sales in 9M18

9M19 Total Revenue US$7,519.6 mn 9M18 Total Revenue US$7,151.9 mn

***

Athletic Shoes

Casual/Outdoor Shoes

Sport Sandals

Retail

Apparel Wholesale*

Others**

5.0%

2.1%

33.4%

14.3%

41.2%

8.3%

9M19 Manufacturing Revenue by Destination

12

US 32.3% 9M18: 31.7% YoY: +5.0%#

Europe 28.1% 9M18: 30.0% YoY: -3.6%#

Mainland China 14.0%

9M18: 12.9% YoY: +11.3%#

Others* 25.6%

9M18: 25.4% YoY: +3.6%#

9M19 MFG Revenue: US$ 4,437.3 mn 9M18 MFG Revenue: US$ 4,312.2 mn

# YoY changes in revenue amount * Others include Rest of Asia, South America, Canada, Australia and Other Area

Shoe Volume by Region

13

34%

14% 15% 13%

34%

46% 46% 44%

31% 37% 36% 39%

1% 3% 3% 4%

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016 2017 2018 9M18 9M19

Others

Indonesia

Vietnam

China

# YoY changes in volume amount * Others include Bangladesh, Cambodia, Myanmar, etc.

Shoe Volume

9M19: 239.7 mn pairs 9M18: 236.5 mn pairs +1.4%#

38.1%#

7.6%#

2.5%#

8.9%#

9M18 9M19

Manufacturing Productivity via ME

14

795.3

822.5

986.5

982.1

1,031.6

2014 2015 2016 2017 2018

Pairs per person during the year / 9M

Pairs per Person during the year / 9M

PPH Index – Pairs per person per hour from 2014 (index from 100) to 9M19

100.0

104.4

115.6

122.2

133.3

131.1

2014

2015

2016

2017

2018

9M191,002.6

1,022.1

Base Year Annualized

1.9%

307.1

317.5

322.0 324.6

326.0

386.1K 386.0K

326.4K 330.5K 316.0K

2014 2015 2016 2017 2018

Production Volume 'mn MFG Employees

236.5

239.7

314.5K 312.7K

9M18 9M19

Manufacturing Productivity via ME

15

Pairs of shoes produced vs MFG employees from 2014 to 9M19

1.4%

0.6%

YY Group Financial Highlights

16

(US$’000)

9M 2019 9M 2018 Y-o-Y

Revenue 7,519,624 7,151,884 +5.14%

Gross Profit 1,866,976 1,787,083 +4.47%

Gross Profit Margin 24.83% 24.99% -0.16pp

Operating Profit 345,572 350,207 -1.32%

Operating Profit Margin 4.60% 4.90% -0.30pp

Profit attrib. to Owners 229,437 204,565 +12.16%

Profit attrib. to Owners Margin 3.05% 2.86% +0.19pp

Non-recurring Profit (Loss) attrib. to Owners 17,084 (31,642) N/A

Recurring Profit attrib. to Owners 212,353 236,207 -10.10%

Source: Company accounts Please refer to the announcement on the HKEX website for the unaudited consolidated income statements of 9M2019 & 9M2018 For more details, please refer to Appendix

YY Group Financial Ratios

17

Source: Company accounts (figures rounded) Please refer to the announcement on the HKEX website for the unaudited consolidated income statements of 9M2019 & 9M2018 *Total borrowings and net borrowings exclude lease liabilities. Lease liabilities was US$ 354.1mn as at 30 Sep 2019 # Total Debt to Equity and Net Debt to Equity (including lease liabilities) would be 52.1% and 33.2% as at 30 Sep 2019 respectively

(US$’mn) 9M 2019 9M 2018

Depreciation & Amortization 363.2 251.6

EBITDA 701.5 593.1

Capital Expenditure 281.6 379.4

Product Development 153.8 153.2

30 September 2019 30 September 2018

Total Borrowings* 1,964.9 2,142.5

Net Borrowings* 1,123.0 1,138.5

Total Borrowings to Equity # 44.1% 48.5%

Net Borrowings to Equity # 25.2% 25.8%

Quick Ratio (X) 1.1 X 1.2 X

Current Ratio (X) 1.8 X 2.0 X

9M 2019 9M 2018

Total Borrowings to EBITDA (X) annualized 2.1 X 2.7 X

Net Borrowings to EBITDA (X) annualized 1.2 X 1.4 X

YY Group Sources and Uses of Fund

18

851.4 841.9

Beginning Cash 1 Jan 19

Ending Cash 30 Sep 19

(US$’mn)

Cash

+599.1 -281.6

CAPEX

from Operations

Interest Borrowing

Others

US$238.9mn Return to Shareholders

Disposal of TCHC

Net Borrowings Repayment

+97.7

Lease Liabilities

Repayment and Interest

Share Buyback

Cash Dividend

-79.9 -12.2 -226.7

-56.9 -32.8 -16.2

Reduced Debt Level

4.8

6.4

5.8

6.5

7.6

7.4

6.6

5.3

4.1

4.4 4.5

7.5

9.9

8.7

9.4

11.3 11.3

12.1

10.0

7.4

8.0 8.3

FY14 1H15 FY15 1H16 FY16 1H17 FY17 1H18 FY18 1H19 9M19

ROA ROE

YY Group ROE & ROA Trend

19

Remark: ROE=Profit attributable to owners of the company/ (Total Equity - Minority Interests); half year & 9M data is on LTM basis ROA=Net Profit / Total Asset; half year & 9M data is on LTM basis

(%)

18.7 18.9 18.9 19.7 19.8 20.2 20.3

20.9 21.0 20.8 20.7 21.0

18.7 18.8 19.3 19.5 18.2 18.0 18.2

22.3 22.6 22.7 23.4

24.4 24.7 24.8 25.1 25.0 25.4 25.4 25.8 25.2 25.0 25.0 25.2 25.2 25.1 24.8

30.9 32.2 32.5

33.3

34.9 35.6 35.8 35.5

33.6 34.6 34.5 35.0

33.8 33.5 33.1 33.5 33.9 34.5 34.2

1Q 1H 9M 12M 1Q 1H 9M 12M 1Q 1H 9M 12M 1Q 1H 9M 12M 1Q 1H 9M

MFG Group PS

YY Group GPM Analysis

20

Remark: GPM information is YTD basis

(%)

FY 2015 FY 2016 FY 2017 FY 2018 9M 2019

Group excl. PS Note:

The figures in the following slides cover the core manufacturing and other operations of the consolidated entity of Yue Yuen Group, and are for analytical purposes only (prepared using the management accounts).

Group excl. PS Financial Highlights

22

(US$’000) MFG only

9M 2019 9M 2018 Y-o-Y 9M 2019 9M 2018 Y-o-Y

Revenue 4,609,130 4,604,438

+0.10% 4,437,281 4,312,200

+2.90%

Gross Profit 871,949 944,065 -7.64% 807,615 830,158 -2.72%

Gross Profit Margin 18.92% 20.50% -1.58pp 18.20% 19.25% -1.05pp

Operating Profit 184,285 243,107 -24.20% 172,317 218,806 -21.25%

Operating Profit Margin 4.00% 5.28% -1.28pp 3.88% 5.07% -1.19pp

Profit attrib. to Owners 174,679 167,381 +4.36% 164,667 152,645 +7.88%

Profit attrib. to Owners Margin 3.79% 3.64% +0.15pp 3.71% 3.54% +0.17pp

Source: Company management accounts For more details, please refer to Appendix

3.53 3.70

Manufacturing – Net Profit Margin

23

Material Product Mix

-0.57

-0.48

9M18 Net Profit Margin

-0.02

+0.84* -0.06

+0.28

-0.19*

+0.37

9M19 Net Profit Margin

Hedging Fair Value & Realized

Other Income & Expenses Reduction of FX Gains

Others

Finance Cost Rate Increase Offset by Repayment

(%)

Labor & Overhead

SG&A Capacity Adjustment

Gains from Disposal of Subsidiaries & Asso. Disposal of TCHC Group

* Adjusted

Gross Profit

14.33% 14.57%

29.86% 30.19%

36.56% 37.04%

Manufacturing – COGS Decomposition and Y-o-Y

Amount (Y-o-Y)

Labor

4.0%

4.3%

Overhead

9M19 9M18

% of Revenue % of Revenue

2.7%

9M19 GPM 18.2%

4.7%

Material

24

45%

37%

18%

45%

37%

18%

9M19 vs. 9M18 COGS Composition

Material Labor Overhead

18.7

19.1

18.9

21.9

19.8

20.5 20.5

22.8

21.0 20.7

20.4

21.8

18.7 18.9

20.2

20.3

18.2 17.9

18.5

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

Gross Profit Margin (MFG only)

Manufacturing - GP Margin Trend

25

GP Margin % - Group excl. PS (including MFG and TCHC)

2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19

21.6 21.6 22.7 20.1 19.9 21.4 21.3 19.6 18.7

(%)

FY 2015 FY 2016 FY 2017 FY 2018 9M 2019

19.7% 20.9% 21.0% 19.5% 18.2%

Remark: TCHC became subsidiary of the Group on April 7, 2017 and was then disposed on May 31, 2019

5.3

6.1

3.7

6.8

5.9

7.5

6.7

9.8

6.9

7.2 7.8

8.6

5.7

4.8

4.8

6.7

4.5 3.6 3.6


Operating Profit Margin (MFG Only)

Manufacturing - OP Margin Trend

26

OP Margin % - Group excl. PS (including MFG and TCHC)

2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19

7.1 8.0 8.4 6.0 4.7 5.2 6.5 4.7 3.7

(%)

FY 2015 FY 2016 FY 2017 FY 2018 9M 2019

5.5% 7.6% 7.7% 5.5% 3.9%

Remark: TCHC became subsidiary of the Group on April 7, 2017 and was then disposed on May 31, 2019

Group excl. PS Financial Ratios

27

MFG only

(US$’mn) 9M 2019 9M 2018 9M 2019 9M 2018

Depreciation & Amortization 211.6 193.4 204.9 188.4

EBITDA 389.9 428.6 371.2 399.3

Capital Expenditure 203.2 324.8 201.7 320.1

30 Sep 2019 30 Sep 2018 30 Sep 2019 30 Sep 2018

Total Borrowings* 1,498.9 1,774.5 1,498.9 1,673.4

Net Borrowings* 684.5 817.6 684.5 719.5

Total Borrowings to Equity # 41.0% 47.8% 41.0% 46.2%

Net Borrowings to Equity # 18.7% 22.0% 18.7% 19.9%

9M 2019 9M 2018 9M 2019 9M 2018

Total Borrowings to EBITDA (X) annualized 2.9 X 3.1 X 3.0 X 3.1 X

Net Borrowings to EBITDA (X) annualized 1.3 X 1.4 X 1.4 X 1.4 X

Return on Owner’s Equity LTM 7.2% 7.7% 6.9% 7.4%

Return on Asset LTM 4.1% 4.2% 3.9% 4.1%

Source: Company management accounts (figures rounded) *Total borrowings and net borrowings exclude lease liabilities. Lease liabilities was US$ 13.4 mn as at 30 Sep 2019 # Total Debt to Equity and Net Debt to Equity (including lease liabilities) would be 41.3% and 19.1% as at 30 Sep 2019 respectively

Working Capital Days

9M18

55

55

32

78

Manufacturing Operation Efficiency

Trade Receivable Days

Inventory Days

Trade Payable Days

52

60

30

82

FY18

28

9M19

51

54

31

74

Pou Sheng International

Note:

The figures in the following slides are based on Pou Sheng’s management accounts and announcements, and Pou Sheng adopts RMB as its

reporting currency

Pou Sheng Retail Strategy Across China

30

Directly Operated Stores

Sub-Distributor Stores Mono Brand Stores

Multi-Brand Stores

YY Sports Outlets: New shopping experience for fast growing

brands

Brick and Mortar Stores

Online Sales Channel / Omni-Channel

Retail Network

YYsports.com

Rockport.com

3rd party: T-Mall, JD, VIP, etc. B2B

Covers more than 300 cities in the Greater China

Online B2C

Online B2B

Distinguished Partners and Events

31

VISION Make sports your life!

MISSION Discover your persistent passion for sports by providing convenient and fun sports experiences via unique channels full of quality services and products you can access everyday.

Pou Sheng Financial Highlights

32

RMB'mn US$'000

9M 2019 9M 2018 Y-o-Y 9M 2019 9M 2018 Y-o-Y

Revenue 19,996 16,636 +20.20% 2,910,494 2,547,446

+14.25%

Gross Profit 6,836 5,505 +24.18% 995,027 843,018 +18.03%

Gross Profit Margin 34.19% 33.09% +1.10pp 34.19% 33.09% +1.10pp

Operating Profit 1,100 694 +58.50% 160,015 106,312 +50.51%

Operating Profit Margin 5.50% 4.17% +1.33pp 5.50% 4.17% +1.33pp

Profit attrib. to Owners of PS 606 389 +55.78% 88,035 59,618 +47.67%

Profit attrib. to Owners Margin 3.03% 2.34% +0.69pp 3.03% 2.34% +0.69pp

Source: Based on Pou Sheng’s announcement on the HKEX website for the unaudited consolidated income statements of 9M2019 & 9M2018 For more details, please refer to Appendix

For 9M 2019, the profit for the period decreased by RMB41.6 million due to the application of HKFRS16.

30.9

33.4

33.2

35.8

34.9

36.3

36.2

34.8

33.6

35.6

34.5

36.3

33.8 33.3

32.2

34.6

33.9

35.2

33.5


Gross Profit Margin

Pou Sheng GP Margin Trend

33

(%)

FY 2015 FY 2016 FY 2017 FY 2018 9M 2019

33.3% 35.5% 35.0% 33.5% 34.2%

3.5

5.8

4.3

2.9

6.6 7.2

5.5

3.5

4.5

6.1

2.9 2.8

4.6 4.9

3.0

4.5 5.4

6.2

4.9

1Q15*2Q15*3Q15*4Q15* 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

Operating Profit Margin

Pou Sheng OP Margin Trend

34

* The figures have been restated due to the application of merger accounting

(%)

FY 2015 FY 2016 FY 2017 FY 2018 9M 2019

4.1% 5.7% 4.1% 4.3% 5.5%

Pou Sheng Financial Ratios (in RMB)

35

(RMB’mn) 9M 2019 9M 2018

Depreciation & Amortization^ 1,041.5 380.1

EBITDA 2,141.5 1,079.8

Capital Expenditure 505.0 356.0

30 September 2019 30 September 2018

Total Borrowings* 3,491 3,368

Net Borrowings* 3,132 2,857

Total Borrowings to Equity # 45.5% 49.7%

Net Borrowings to Equity # 40.8% 42.1%

9M 2019 9M 2018

Total Borrowings to EBITDA (X) annualized 1.2 X 2.3 X

Net Borrowings to EBITDA (X) annualized 1.1 X 2.0 X

Return on Owner’s Equity LTM 10.3% 6.7%

Return on Asset LTM 4.8% 3.4%

Source: Internal analysis report (figures rounded) ^ Depreciation & Amortization would have been relatively stable if excluding HKFRS16 impact. * Total Borrowings and Net Borrowings exclude lease liabilities. Lease liabilities was RMB 2,433.6 mn as at Sep.30 2019 # Total Debt to Equity and Net Debt to Equity (including lease liabilities) would be 77.2% and 72.5% as at Sep.30 2019 respectively

Working Capital Days

9M18

154

27

22

159

Operation Efficiency

36

Trade Receivable Days

Inventory Days

Trade Payable Days

9M19

151

23

17

157

149

27

15

161

FY18

Based on RMB

Pou Sheng Store Performance

37

Sub-distributor

As at December 31, 2018

5,648 307

Add Text Add Text

Directly operated

Total store Net

New Store +/(-)

5,955

3,551 3,551 318 3,869

9,199 452 9,824

Number of Stores

625 9,199

As at September 30, 2019

1.9%

5.6%

1.5%

12.0%

10.1%

2.2%

8.9%

8.7%

8.4%

4.2%

6.0%

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

Same Store Sales Growth 指數(Same Store Sales Growth)

Pou Sheng Same Store Sales Growth (SSSg)

38

(%)

FY 2017 FY 2018 9M 2019

5.3% 7.4% 6.2%

SSSg Trend Line

Penetration into Omni-Channel

2016 2017 2018 2019E 2020E 2021E

Brick and Mortar Store Revenue Omni-Channel Revenue39

PS expanded into online business in 2013 Omni-channel business contributed 11% of total revenue in FY 2018

2021 Target for PS Omni-channel

More in-season sales and more effective off-season products through various 3rd party channels Product Sharing Platform between online and brick and mortar stores Enhancing e-commerce business via YYSports platform and cooperating with strategic partners Enhanced Operating Margin of Omni-channel

6% PS revenue

via Omni-channel

20% PS revenue

via Omni-channel

PS Product Sharing Platform (PSP)

Logistics of omni-channel will be facilitated through all-rounded channels: RDC, YYsports.com, 3rd party online platform, 26-Zone inventory sharing and Direct B&M

PSP

B&M1 ….. B&Mn

12.12

Moment 1 YY Sports

app YY Sports

app

6.18

YY Sports mini

program

11.11

365-day O2O, earlier sales, higher price, VIA PSP

Warehouse 1,2,3,4

Products

RDC: Regional Distribution Center Direct B&M : Directly operated Brick and Mortar Stores

40

PS Product Sharing Platform (PSP)

Participation rate: 60% Direct B&M stores participate PSP by the end of 2019

41

Kunshan

Taicang

Dongguan

Regional Warehouse

PSP Contribution - Top 6 Regions

Participating PSP Regions

New Service Hub to Enhance Omni-channel Capability

42

“Low Conversion Offline Network” +

“Discount Online Network”

M

Service Hub (Next Store) Series of 1-day event 364 days fun services Products with stories & outfit consultations

Mono Brand Stores Convert shoppers into loyal members

(Less stores more sales) Membership w/ privilege to Service Hub

(Higher sales conversion rate) Modularized services in mono brand stores (Uniqueness)

Service Hub

(Next Store)

M

M

M M

M

M

M

M

M

M

Online 24/7 Communication Platform Magazine-like contents to

“Make sports your life” Partnering with strategic resources to enact inactive target audiences

“Normal price + premium services” by omni- platform connecting to efficient retail network

Year 2021 Target: Profitable Growth

43

Retail Network

Omni-Channel

Next

Store

2021 Target

• Total revenue growth in mid-teens, with omni-channel contributing 20% of total revenue • Integrating the Service Hub model into our strong brick and mortar stores foundation • Turnaround of emerging brands and licensee brands • Better ROI of sports events platform (PCG Bros) • Operating margin improving by 2 percentage points

“Creating Value-added Services and Quality Experiences to Customers”

Appendix

Shareholding Structure

45

Pou Chen (9904.TT)

Yue Yuen Industrial (Holdings) Ltd. (551.HK)

62.19%

51.11%

* As at September 30, 2019

100%

Manufacturing and Others Pou Sheng (3813.HK)

Company Milestones

46

Started first overseas production in south China

Established production bases in Vietnam

Established production bases in Mexico

Established production bases in eastern and inland China

Began operations at the new headquarters in Taichung, Taiwan

Established production bases in Bangladesh & Cambodia

Established production bases in Myanmar

1988

1992

1994

1998

2001

2002

2006

2008

2009

2014

2015

Expanded into retail business in China

Became sole licensee for Hush Puppies in Taiwan

Pou Sheng International listed on HKEX (3813.HK)

Became sole licensee for Pony in Taiwan & China

Yue Yuen

Pou Sheng

2012 Ms. Tsai Pei Chun, Patty appointed as CEO of Pou Chen Group

Yue Yuen Industrial listed on HKEX (551.HK) Established production bases in Indonesia

Yue Yuen Industrial founded

2019

Parent Pou Chen Group is accredited by FLA 2018

Parent Pou Chen Group’s 50th Anniversary

Recorded RMB 22 bn revenue. Sales channels over 9,000

Omni-channel contributed ~12% of total sales in 9M19

Became sole licensee for Rockport footwear and GEOX in China

2016

9M18 9M19

2,547.45

4,604.44

2,910.49

4,609.13

7,151.89 7,519.62

9M18 9M19

Revenue & Profit Attributable to Owners

47

Revenue

In US$’mn


In US$’mn

Pou Sheng

Group excl. PS

The above figures of Pou Sheng exclude profit attributable to “Non-YY” shareholders (i.e. 9M19: 37.8% minority interests; 9M18: 37.6% minority interests)

Pou Sheng

Group excl. PS

+12.2% +5.1%

+14.3%

+0.1%

+47.3%

+4.4%

37.18

167.38

54.76

174.68

204.56

229.44

YY Group Financial Highlights

48

Source: Company accounts Please refer to the announcement on the HKEX website for the unaudited consolidated income statements of 9M2019 & 9M2018 *Finance Cost in 9M19 grew by 21.8% due largely to the US$10.8 mn effects of the application of HKFRS16

9M 2019 9M 2018 Y-o-Y

US$'000 % US$'000 % + / -

Revenue 7,519,624 100.00 7,151,884 100.00 +5.14%

Cost of Sales (5,652,648) -75.17 (5,364,801) -75.01 +5.37%

Gross Profit 1,866,976 24.83 1,787,083 24.99 +4.47%

SG&A (1,412,367) -18.78 (1,334,199) -18.65 +5.86%

Other Income & Expenses, net (109,037) -1.45 (102,677) -1.44 +6.19%

Operating Profit 345,572 4.60 350,207 4.90 -1.32%

Finance Cost* (70,386) -0.94 (57,809) -0.81 +21.76%

Share of Results of A&JV 37,635 0.50 33,203 0.46 +13.35%

Other Gains and Losses 16,534 0.22 (31,642) -0.44 N/A

Income Tax (60,054) -0.80 (65,035) -0.91 -7.66%

Profit for the Period 269,301 3.58 228,924 3.20 +17.64%

Profit attrib. to Owners 229,437 3.05 204,565 2.86 +12.16%

Group excl. PS Financial Highlights – MFG and TCHC

49

Source: Company management accounts

9M 2019 9M 2018 Y-o-Y

US$'000 % US$'000 % + / -

Revenue 4,609,130 100.00 4,604,438 100.00 +0.10%

Cost of Sales (3,737,181) -81.08 (3,660,373) -79.50 +2.10%

Gross Profit 871,949 18.92 944,065 20.50 -7.64%

SG&A (546,053) -11.85 (568,451) -12.34 -3.94%



Finance Cost (44,439) -0.96 (41,329) -0.90 +7.52%



Income Tax (21,086) -0.46 (36,276) -0.79 -41.87%



Group excl. PS Financial Highlights – MFG only

50


9M 2019 9M 2018 Y-o-Y

US$'000 % US$'000 % + / -

Revenue 4,437,281 100.00 4,312,200 100.00 +2.90%

Cost of Sales (3,629,666) -81.80 (3,482,042) -80.75 +4.24%

Gross Profit 807,615 18.20 830,158 19.25 -2.72%

SG&A (493,481) -11.12 (478,933) -11.11 +3.04%



Finance Cost (42,015) -0.95 (38,339) -0.89 +9.59%



Income Tax (21,554) -0.49 (29,701) -0.69 -27.43%



Group excl. PS Financial Highlights – MFG only

51

FY 2018 FY 2017 Y-o-Y

US$'000 % US$'000 % + / -

Revenue 5,881,494 100.00 6,092,328 100.00 -3.46%

Cost of Sales (4,732,467) -80.46 (4,814,517) -79.03 -1.70%

Gross Profit 1,149,027 19.54 1,277,811 20.97 -10.08%

SG&A (658,261) -11.19 (652,819) -10.71 +0.83%



Finance Cost (52,670) -0.89 (26,498) -0.43 +98.77%

Share of Results of A&JV 39,620 0.67 65,112 1.06 -39.15%

Other Gains and Losses (17,956) -0.31 18,712 0.31 N/A

Income Tax (51,866) -0.88 (52,158) -0.86 -0.56%

Profit for the Period 240,489 4.09 472,209 7.75 -49.07%

Profit attrib. to Owners 240,038 4.08 466,997 7.67 -48.60%


Pou Sheng Financial Highlights (in RMB)

52

9M 2019 9M 2018 Y-o-Y

RMB’mn % RMB’mn % + / -

Revenue 19,996 100.00 16,636 100.00 +20.20%

Cost of Sales (13,160) -65.81 (11,131) -66.91 +18.23%

Gross Profit 6,836 34.19 5,505 33.09 +24.18%

SG&A (5,989) -29.95 (5,019) -30.17 +19.33%

Other Income & Expenses, net 253 1.26 208 1.25 +21.63%

Operating Profit 1,100 5.50 694 4.17 +58.50%

Finance Cost, net* (169) -0.85 (102) -0.61 +65.69%

Share of Results of JV 1.1 0.01 0.3 0.00 +266.67%

Other Losses (10) -0.05 - N/A N/A

Income Tax (268) -1.34 (188) -1.13 +42.55%

Profit for the Period 654 3.27 404 2.43 +61.88%

Profit Attrib. to Owners of PS 606 3.03 389 2.34 +55.78%

Source: Based on Pou Sheng’s announcement on the HKEX website for the unaudited consolidated income statements of 9M2019 & 9M2018 *Finance Cost in 9M19 grew by 65.7% due largely to the RMB 69.1mn effects of the application of HKFRS16

Pou Sheng Financial Highlights (in USD)

53

9M 2019 9M 2018 Y-o-Y

US$’000 % US$’000 % + / -

Revenue 2,910,494 100.00 2,547,446 100.00 +14.25%

Cost of Sales (1,915,467) -65.81 (1,704,428) -66.91 +12.38%

Gross Profit 995,027 34.19 843,018 33.09 +18.03%

SG&A (866,314) -29.77 (765,748) -30.06 +13.13%

Other Income & Expenses, net 31,302 1.08 29,042 1.14 +7.78%

Operating Profit 160,015 5.50 106,312 4.17 +50.51%

Finance Cost, net* (24,675) -0.85 (15,692) -0.61 +57.25%

Share of Results of JV 156 0.01 46 0.00 +239.13%

Other Losses (1,454) -0.05 - N/A N/A

Income Tax (38,968) -1.34 (28,759) -1.13 +35.50%


Profit Attrib. to Owners of PS 88,035 3.03 59,618 2.34 +47.67%

Source: Internal analysis report (figures rounded); various accounting reclassification and adjustments are made to some of the figures when consolidating Pou Sheng numbers into the Yue Yuen Group in order to comply with the requirements of accounting standards *Finance Cost in 9M19 grew by 57.2% due largely to the US$10.1 mn effects of the application of HKFRS16

Pou Sheng Financial Highlights (in RMB)

54

FY 2018 FY 2017 Y-o-Y

RMB’mn % RMB’mn % + / -

Revenue 22,677 100.00 18,833 100.00 +20.41%

Cost of Sales (15,078) -66.49 (12,239) -64.99 +23.20%

Gross Profit 7,599 33.51 6,594 35.01 +15.24%

SG&A (6,913) -30.49 (6,052) -32.13 +14.23%

Other Income & Expenses, net 281 1.24 228 1.21 +23.25%

Operating Profit 967 4.26 770 4.09 +25.58%

Finance Cost, net* (144) -0.64 (100) -0.53 +44.00%

Share of Results of JV (1) -0.00 (4) -0.02 -75.00%

Other Losses - N/A (9) -0.05 N/A

Income Tax (261) -1.15 (242) -1.29 +7.85%

Profit for the Year 561 2.47 415 2.20 +35.18%

Profit Attrib. to Owners of PS 543 2.39 394 2.09 +37.82%

Source: Based on Pou Sheng’s announcement on the HKEX website for the audited consolidated income statements of FY2018 & FY2017

Pou Sheng Financial Highlights (in USD)

55

FY 2018 FY 2017 Y-o-Y

US$’000 % US$’000 % + / -

Revenue 3,421,657 100.00 2,775,400 100.00 +23.29%

Cost of Sales (2,275,156) -66.49 (1,803,726) -64.99 +26.14%

Gross Profit 1,146,501 33.51 971,674 35.01 +17.99%

SG&A (1,038,884) -30.37 (886,324) -31.93 +17.21%

Other Income & Expenses, net 38,270 1.12 28,163 1.01 +35.89%

Operating Profit 145,887 4.26 113,513 4.09 +28.52%

Finance Costs, net* (21,665) -0.64 (14,814) -0.53 +46.25%

Share of Results of JV (140) -0.00 (526) -0.02 -73.38%

Other Losses - N/A (1,321) -0.05 N/A

Income Tax (39,452) -1.15 (35,690) -1.29 +10.54%

Profit for the Year 84,630 2.47 61,162 2.20 +38.37%

Profit Attrib. to Owners of PS 81,913 2.39 58,110 2.09 +40.96%

Source: Internal analysis report (figures rounded); various accounting reclassification and adjustments are made to some of the figures when consolidating Pou Sheng numbers into the Yue Yuen Group in order to comply with the requirements of accounting standards

Thank you

Q&A

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