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2 nd Quarter 2003 Results Presentation

2 nd Quarter 2003 Results Presentation. A member of the Li & Fung (Retailing) Group. 28 July 2003. Hong Kong Total Retail Sales Value Year-on-year % Change. Jan-May 2003 : - 7% 2002 Total : - 4%. * Source: HKSAR, Census and Statistics Department.

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2 nd Quarter 2003 Results Presentation

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  1. 2nd Quarter 2003 Results Presentation A member of the Li & Fung (Retailing) Group 28 July 2003

  2. Hong Kong Total Retail Sales ValueYear-on-year % Change Jan-May 2003 : - 7% 2002 Total : - 4% * Source: HKSAR, Census and Statistics Department

  3. 2nd Quarter 2003 Result Presentation Agenda • 2nd Quarter 2003 Financial Results Highlights • 2003 Update & Outlook • Questions & Answers

  4. 2nd Quarter 2003 Financial Results HighlightsGroup Turnover – 2nd Quarter + 10% No. of Stores : 146 166 151 172 (HK) - 2 - 4 (China)

  5. 2nd Quarter 2003 Financial Results Highlights144 Comparable Stores Sales - 1%

  6. 144 Comparable Stores Sales2nd Quarter 2003 vs. 2nd Quarter 2002

  7. 2nd Quarter 2003 Financial Results HighlightsGroup Turnover – June YTD + 9% 727.2 666.0 No. of Stores : 146 166 151 172 (HK) - 2 - 4 (China)

  8. 2nd Quarter 2003 Financial Results HighlightsGroup Net Profit – 2nd Quarter * * + 2% * * Restated for Income Tax Effect Per SSAP No.12

  9. 2nd Quarter 2003 Financial Results HighlightsGroup Net Profit – June YTD * * - 9% * 26.2 23.8 * Restated for Income Tax Effect Per SSAP No.12

  10. 2nd Quarter 2003 Financial Results HighlightsNet Profit as % of Sales – 2nd Quarter - 0.3% * * * * Restated for Income Tax Effect Per SSAP No.12

  11. 2nd Quarter 2003 Financial Results HighlightsNet Profit as % of Sales – June YTD - 0.6% * * * * Restated for Income Tax Effect Per SSAP No.12

  12. 2nd Quarter 2003 Financial Results HighlightsBasic Earnings Per Share – 2nd Quarter * * * * Restated for Income Tax Effect Per SSAP No.12

  13. 2nd Quarter 2003 Financial Results HighlightsBasic Earnings Per Share – June YTD * * - 0.4 Cent * 4.0 3.6 * Restated for Income Tax Effect Per SSAP No.12

  14. 2nd Quarter 2003 Financial Results Highlights * Restated for Income Tax Effect Per SSAP No.12

  15. Why 2nd Quarter 2003 Results?Lower Gross Margin/Other Income - 1%

  16. Why 2nd Quarter 2003 Results?Lower Expenses as % of Sales

  17. Why 2nd Quarter 2003 Results?Net Profit By Market

  18. 2003 Update & Outlook

  19. 2003 Update & OutlookCircle K Hong Kong • SARS Impact Minor • Higher Unemployment & Deflation • Hong Kong Retail Sales Improving But Lower Than 2002’s • Growing Pressure on Comparable Store Sales & Gross Margin • Rental & Labour Cost to Decrease

  20. 2003 Update & OutlookCircle K Hong Kong Tactics Defensive Tactics • Lower Product Costs & Pricing • Maintain Gross Margin • Reduce Operating Expenses • New Store Opening Only with Right Economics

  21. 2003 Update & OutlookCircle K Hong Kong Tactics Offensive Tactics • More Aggressive Promotions: • Micro-wave Lunch Boxes • Tie-in Promotions with Coca-Cola • Increase STF (Speed, Tidiness & Friendliness) Gap Versus Competition • Localization of Stores • “Hot & In” Counters in Commercial Areas

  22. 2003 Update & OutlookCircle K Store Growth

  23. 2003 Update & OutlookCircle K China • Strategies of Differentiation and Hard to Copy Very Important • “Hot & In” Right Strategy • Increasing Customer Preference & Weekly Sales • Need Improvement in Category Management & Marketing/Promotion • Harder to Find Good Sites with Right Size & Right Rental

  24. 2003 Update & OutlookCircle K China Benefits of CEPA 1. Wholly-owned Enterprise 2. Prefectural & County Cities 3. Lower Qualifying Requirements 4. Flexibility & Efficiency

  25. 2003 Update & OutlookCircle K China • Add Resources and Expedite Store Development • Review & Refine Business Model to Cut Down on Investment & Sizing • 10 – 15 Stores by Year End • Developing A Smaller Store Model • Uphold Strategies • Available for Franchising • Quickly Build No. of Outlets • Add Expertise in Category Management

  26. 2003 Update & Outlook • Tough Hong Kong Market Conditions • Profitability and Cash Flow from Operations Still Healthy • China Strategies on Track But Need to Refine Model & Speed Up Expansion • Uncertain Profitability Outlook for 2nd Half 2003

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