2006 Interim Results Corporate Presentation - Li Ning

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2006 Interim Results Corporate Presentation - Li Ning

Stock Code: 23312006 INTERIM RESULTSCorporate PresentationAugust 20060


2Financial Highlights


Financial HighlightsFor the six months ended 30 June1H2006(RMB Mn)1H2005(RMB Mn)ChangeTurnover *1,371.91,104.324.2%Gross profit683.6530.628.8%Operating profit172.5113.252.4%Profit attributable to equity holders129.978.365.9%Basic EPS (RMB cents)12.667.6565.3%Interim DPS (RMB cents)3.802.3065.2%* Turnover of the LI-NING brand which represented 99.4% of total turnover, rose by 32.8%to RMB1,363.7 million.3


Strong Turnover GrowthBoosted by strong product sales, in particular LI-NING brand footwear whichsurged by over 49.9%Rapid network expansion propelled product penetration and drove sales growthStore Expansion1H2006 Sales Breakdown1H 20061H 2005ChangeLI-NING Brand Apparel53.2%LI-NING StoresAIGLE Stores3,630213,058-18.7%N.A.LI-NING BrandFootwear38.4%LI-NING BrandAccessories7.8%AIGLE0.6%For the six months ended 30 JuneRMB millionLI-NING ApparelLI-NING FootwearLI-NINGAccessoriesOther brands*TotalSales Composition1H 2006728.9527.2107.68.21,371.91H2005591.0351.683.977.81,104.3Change23.3%49.9%28.3%N.A.24.2%* Other brands in 2005 related to the KAPPA brand(disposed of in August2005), and in 2006 it related to the AIGLE brand4


Margin Overview60%Margin OverviewGross profit margin20%Margin expansion attributable to:40%45.8%48.1%49.8%15%Continual enhancement in productdesign contributed to maintaininghigh gross margin20%Net profit margin7.0% 7.1%9.5%10%5%Efficient supply chain and logisticsmanagementContinual improvements ininventory managementEfficient EPOS system0%1H2004 1H2005 1H20060%5


Key Financial IndicatorsAs at 30 June1H20061H2005ChangeInventory Turnover (days)7797-20.6%Avg. A/R Turnover (days)583948.7%Avg. Trade PayablesTurnover (days)66651.5%R&D Expenses(as % to cost of sales)3.0%3.8%-0.8%A&P Expenses(as % to turnover)17.5%15.7%1.8%6


Strong Balance Sheet(RMB Mn)1H2006FY2005ChangeCash and Cash Equivalents *781.6731.56.8%Current Ratio (times)3.23.6-0.4Short-term LiabilitiesNilNilN/ALong-term LiabilitiesNilNilN/ANet Cash**781.6731.56.8%Total Liabilities toTotal Assets Ratio29.5%25.6%3.9%* Including fixed deposits** Net Cash = Cash and Cash Equivalents – Bank Borrowings7


Sustainable and Remarkable Growth1,6001,200800400Turnover (RMB Mn)519.4CAGR: 38.2%788.71,104.31,371.91601208040Profit attributable to equity holders (RMB Mn)CAGR: 51.2%54.937.6129.978.301H2003 1H2004 1H2005 1H200601H2003 1H2004 1H2005 1H2006161284Basic EPS chart (RMB cents)5.01CAGR: 36.2%7.28 7.6512.6601H2003 1H2004 1H2005 1H2006For the six months ended 30 June8


9Review of Operations


A Multi-brand OperatorLi-Ning SHAQPrincipal BrandStrategicCooperationCo-branding10


Product Strategy Supported byCost-effective MarketingRunningBasketballSoccerTennisFitness11


Cooperation with Shaquille O’NealStrengthened the competitiveness of the LI-NING brand in themiddle- to high-end market while enhancing its influence in theinternational arena5-year cooperation agreement with Shaquille O’Neal in thegreater China market (Hong Kong, Macau and Taiwan inclusive)12


BasketballStrategic Alliances with NBAEnhanced international profile and professional image of the LI-NING brandJoint marketing campaigns with NBA Jam Van tour in ChinaEntered into agreement with two NBA stars to become the firsteverChinese sports brand featured in NBA league games13


SoccerSponsorship for CUFL10-year cooperation with the Federation of University Sports ofChinaJointly launched the new LI-NING China University FootballLeague (“CUFL”), which involves the largest number ofuniversities with the highest level of skills and exerts the mostextensive influence in the PRCPromoted brand positionamong university students inthe PRC through eventnaming, event promotion,brand promotion andprovision of apparel andsports gears for footballmatches14


Cooperation with ATPStrengthened promotion of products with professional features7-year cooperation agreement with Associate TennisProfessional (“ATP”) as an Official partner of ATP in the greaterChina market (Hong Kong, Macau and Taiwan inclusive)Exclusive franchise rights toLi NingJoin hands in organizingpromotional campaignsATP will assist in signing playersendorsement15


RunningSponsorship for Professional Athletic TeamsEnhanced professional image for the running seriesSponsorship for the domestic and overseas professional athleticteamsNational Athletic Team of the Republic of SudanRunning teams of Shandong and Gansu provinces16


Product Design and DevelopmentRemarkable improvements in design capabilities throughrecruiting new designers with international exposureSteffen AasChief Designerof ApparelFunctionAlan YipAccessoriesDesignerRuby LiSports FashionCreativeSupervisor &Chief DesignerSilvio ChanExecutiveCreativeSupervisorZhang MeiyiSports LifeApparelConsultant17


4 th Generation Stores18


JV withDeveloped a multi-brand business and enhanced overallcompetenceEstablished a long-term alliance via the formation of a jointventure with exclusive rights to manufacture, market, distributeand sell AIGLE products for 50 yearsOpened a total of 21 AIGLE stores (as at 30 June 2006)19


Supply Chain ManagementOrganized 2 large-scale trade fairs for distributors to shorten thelapse between product development and order placementsReformed the traditional supply chain model with advancedinformation technology systemsE-POS system to exercise stringent inventory control andaccelerate time-to-marketSales management systemimplemented to offer a realtime platform to monitor salesperformance and datacollection20


21Future Plans and Strategies


Multi-brand OperatorSeek opportunities for long-term cooperation with reputableinternational brandsFacilitate the entry of international brands into the PRC marketDevelop into a multi-brand operator with a portfolio of reputablesports brands23


Product R&DContinue to focus on footwear and apparel productsEnrich product portfolio, focusing on the five target productseries: running, basketball, soccer, tennis and fitnessImprove product quality and technologyLaunch the newly patented “LN ARCH” series in Fall 200624


Network ExpansionIncrease the number of LI-NING retail outlets to 5,100 outlets bythe end of 2008Launch flagship stores at prime locations in metropolitan and1 st tier citiesIncrease penetration in 2 nd and 3 rd tier citiesLi Ning Retail OutletExpansion PlanAs at year end dateTotal2006 4,1002007 4,6002008 5,10025


Vision, Mission & Core ValuesVisionA world’s leading brandin the sports goodsindustryMissionThrough sports,we inspire in peoplethe desire and power tomake breakthroughsCoreValuesIntegrity,professionalism,passion,breakthroughs,and trust26


Open Forum27


IR ContactTo know more about Li Ning Company Limited, please visithttp://www.lining.comhttp://www.irasia.com/listco/hk/lining/http://www.hkex.com.hkFor enquiries, please contact:WANG YongInvestor Relations ManagerTel: +86 21 5879 7298Email: yong.wang@lining.com28

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