Artini China Co. Ltd. (Stock Code: 789) 2008/2009 Interim Results Corporate Presentation December 2008
Disclaimer Disclaimer This document does not constitute, or form part of any offer for subscription or sale of, or solicitation of any offer to subscribe for or buy of any securities of Artini China Co. Ltd. ("the Company"), nor shall it be construed as calculated to invite any such offer, nor shall this document or any part of it form the basis of, nor can it be relied upon in connection with, or act as an inducement to enter into any contract or commitment whatsoever. Accordingly, any decision in connection with the subscription or acquisition of securities of the Company pursuant to or in connection with any offering must be made solely on the basis of the information to be contained in the prospectus or other offering circular that may be issued by the Company in connection with such offering. The information of the documents should not be relied upon as representation of the Company. FORWARD-LOOKING STATEMENTS This presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Company in the PRC, Hong Kong and Macao and certain of the plans and objectives of the management of the Company. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such forward-looking statements were based on assumptions regarding the Company's present and future business strategies and the political and economic environment in which the Company and its subsidiaries will operate in the future. Reliance should not be placed on these forward-looking statements, which reflect the view of the Company's management as of the date of this presentation only. There can be no assurance that future results or events will be consistent with any such forward-looking statements. CONFIDENTIALITY This document is given to you on a confidential basis and must not be passed to or transmitted to, or their contents be disclosed to, any other person and no copy shall be taken hereof. 1
Content Content Page Financial Highlights Financial Highlights 3 Business Review Business Review 10 Future Strategies Future Strategies 15 Open Forum Open Forum 20 2
Financial Financial Highlights Highlights 3 3
Financial Summary For the six months ended 30 Sept 2008 2007 Change (HK$ ’000) Turnover 313,766 263,693 + 18.9% Gross profit 160,157 155,703 + 2.9% Gross profit margin (%) 44.8 59.0 - 14.2% pts (Loss)/Profit from operations (10,237) 53,400 N/A (Loss)/Profit for the period N/A (19,442) 51,652 Basic (loss)/earnings per share (HK$) N/A (0.021) 0.061 Major challenges in 1H2008/09 : Weakened consumer sentiment due to inflation, Sichuan earthquake and 2008 Beijing Olympic Game Global financial turmoil and credit crunch Rising labor and raw material costs Appreciation in RMB 4
Turnover Analysis Analysis Turnover Turnover Breakdown Turnover Analysis by Geographical Segments As a % of turnover HK$ mn 100% 400 Growth: 18.9% 15.7% 20.0% 80% 11.0% 300 15.7% 163.7 60% +41.4% 115.8 200 39.5% 58.0% 40% 100 +4.0% 170.3 163.7 20% 17.3% 11.3% 1.8% 0.8% 5.7% 3.2% 0 0% 09/2007 09/2008 09/2007 01/2007 09/2008 01/2008 For the six months ended 30 Sept For the six months ended 30 Sept CDM Turnover Europe America China Retail Turnover Hong Kong Africa Other Asia-Pacific regions and Macao 5
Expenses Breakdown and Analysis Expenses Analysis Selling and Distribution Costs Breakdown HK$ mn 09/2008 200.0 Operating Other Expenses Lease Charges 12.3 (Rent & Rate) 21.6% 20.0 150.0 35.8% 100.0 0.3 17.4 142.2 31.8% 50.0 10.8% 82.2 Wage and Salaries Advertising and Relevant Staff Costs 0.0 09/2007 09/2008 Administrative Expenses Selling and Distribution Costs Other Operating Expenses 6
Operational Data Operational Data Network expansion As at As at Change 31 March 2008 30 Sep 2008 93 106 +13 45 75 +30 Total 138 181 +43 Same-store sales growth Mar – Sept 2007 vs Mar – Sept 2008 PRC Hong Kong and Macao - 25.6% - 5.6% - 7.1% - Rental analysis As at 30 Sept 2008 Retail Stores Concessions Average rent (HK$) 766,000 294,000 Percentage of turnover (average) 27.8% 28.6% 7
Key Financial Data Key Financial Data As at As at 30 Sept 2008 31 Mar 2008 Inventories (HK$ ’000) - Raw material 30,859 13,758 - Work in Progress 16,985 14,416 - Finished Goods 41,580 28,317 Trade receivables turnover (Days) 45 30 Trade payables turnover (Days) 19 19 Cash in hand (HK$ ’000) 314,316 59,356 Current ratio (x) 7.50 1.4 Debt to equity (x) 0.007 1.1 8
Capital Expenditure Capital Expenditures For the six months ended 30 Sept HK$ ’000 2007 2008 Leasehold land and building plant and 1,140 14,402 machinery Leasehold renovation – 16,494 3,880 Retail and concession stores, fixtures and fittings Head offices and regional offices 7,770 8,004 TOTAL 24,404 26,286 9
10 10 Business Business Review Review
Retail Business: Retail Business: Marketing Initiatives Marketing Initiatives Form strategic alliances with renowned corporations Launch Bundle up new limited rental agreement packaged with favourable accessory sets advertising packages 11
Retail Business: Brand Building Strategies Organized the “Express Care and Confronting the Disaster Hand-in-Hand” fund raising event after the Sichuan earthquake disaster Strengthening Strengthening Awarded as the “Best Brand Enterprise Award Corporate I mage Corporate I mage 2008” by Hong Kong Productivity Council Organize singing contest from Nov 2008 to Feb 2009 in 9 major cities in the PRC to Brand Promotional Brand Promotional promote brand to the younger Campaign Campaign generation Promote the Group’s brands through fashion shows, sponsorships of entertainment events and TV drama series Enhancing Visibility Enhancing Visibility Place advertisement in leading fashion magazines 12
Retail Business: Retail Business: Further Enhance Customer Loyalty Further Enhance Customer Loyalty 31 Mar 2007 31 Mar 2008 30 Sep 2008 31 Mar 2007 31 Mar 2008 3/2008 30 Sep 2008 No. of 681 3,691 10,586 28,108 56,286 62,936 VIPs Number of VIPs increased rapidly to 73,522 as at 30 September 2008 � An increase of 155% from 28,789 during 31 March 2007 to 30 September 2008 13
CDM Business Continued to collaborate closely with branded customers to develop and design products concurrently Expanded customer base to include corporate clients for gifts and premium items Became the Licensed Enterprise of 2010 Guangzhou Asian Games, making and distributing licensed souvenir products Diversified portfolio of customers: � Victoria + Co., Ltd � Lucas Design International Inc. � Philippines Import/Export Ltd � Connexions (Asia) Limited 14
15 Future Future Strategies Strategies
Corporate Mission Corporate Mission Implement stringent Broaden Expand revenue base customer base cost control Enhance brand awareness and promote customer loyalty To become one of the largest fashion accessories retail brand operators in the PRC 16
Retail Business: Broaden Revenue Base Increase brand Expand product range Adjust network through obtaining expansion plan awareness through the exclusive distribution launch of concept stores Adjust the pace of network rights of famous brands expansion base on market The first flagship store will be conditions Obtained the exclusive opened in Beijing Sanlitun distribution right of NBA Expect to reach 200 retail Village in Jan 2009 points in the PRC by March timepiece products 2009 Products were launched in Expand presence in 2 nd tier Dec 2008 and sold in Q’ggle cities with high growth stores potential Further develop online Expand retail network Form strategic alliance through distributors shopping system with renowned corporations Design and develop Plan to have shops Further enhance the online accessories with renowned launched by distributors platform and provide greater corporations which are mainly located in online-shopping experience 2 nd and 3 rd tier cities Provide customers with to customers wider range of products Reduce operating cost Leverage on the client base through authorizing of renowned corporations distributors 17
CDM Business: Expand Customer Base Become the licensed Obtain new licenses enterprise of of international 2010 Guangzhou brands Asian Games CDM Business Develop new Seek new global corporate clients for CDM customers gift & premium esp. PRC and Russia items 18
Implement Stringent Cost Control Streamline corporate structure to reduce office expenditures Adopt tighter budget control for the forthcoming promotional expenses Evaluate the profitability of all retail points to adjust retail expansion plan 19
Open Forum Open Forum IR Contact: Artini China Co. Ltd. Email: jerry.lau@artini.com.hk/ bennieip@artini.com.cn Tel: + 86 755 2583 8888 Media Relations Contact: Porda International (Finance) PR Group Email: harriet.lau@pordafinance.com.hk/ kylie.yeung@pordafinance.com.hk/ kate.lam@pordafinance.com.hk/ fiona.ko@pordafinance.com.hk Tel: + 852 3150 6788 20 20
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