3 rd Quarter 2003 Results Presentation A member of the Li & Fung (Retailing) Group 4 November 2003
Hong Kong Total Retail Sales Value Year-on-year % Change * Source: HKSAR, Census and Statistics Department Jan-Aug 2003 :- 5% 2002 Total :- 4%
3 rd Quarter 2003 Result Presentation Agenda 3 rd Quarter 2003 Financial Results Highlights 2003 Update & Outlook Questions & Answers
3 rd Quarter 2003 Financial Results Highlights Group Turnover – 3 rd Quarter No. of Stores : (HK) (China) (China) + 10%
3 rd Quarter 2003 Financial Results Highlights 144 Comparable Stores Sales - 1%
3 rd Quarter 2003 Financial Results Highlights Group Turnover – September YTD No. of Stores : (HK) (China) (China) + 10% 1, ,132.1
3 rd Quarter 2003 Financial Results Highlights Group Net Profit – 3 rd Quarter + 6% * Restated for Income Tax Effect Per SSAP No.12 * * *
3 rd Quarter 2003 Financial Results Highlights Net Profit as % of Sales – 3 rd Quarter - 0.2% * Restated for Income Tax Effect Per SSAP No.12 * * *
Why 3 rd Quarter 2003 Results? Higher Gross Margin/Other Income + 0.6%
Why 3 rd Quarter 2003 Results? Higher Expenses as % of Sales Expenses as % of Sales vs Store Operating Expenses - HK 22.3% + 0.3% - China - China0.3% + 0.3% Distribution 1.7% + 0.2% Administrative Expenses 3.7% + 0.5% China Start-up Expenses % %
Why 3 rd Quarter 2003 Results? Net Profit By Market 3 rd Qtr rd Qtr 2003 Changes (HK$ M) Hong Kong Market China Market (1.6)(2.2)(0.6) Total
3 rd Quarter 2003 Financial Results Highlights Group Net Profit – September YTD - 3% * Restated for Income Tax Effect Per SSAP No.12 * * *
3 rd Quarter 2003 Financial Results Highlights Net Profit as % of Sales – September YTD - 0.5% * Restated for Income Tax Effect Per SSAP No.12 * * *
3 rd Quarter 2003 Financial Results Highlights Basic Earnings Per Share – 3 rd Quarter * Restated for Income Tax Effect Per SSAP No.12 * * * Cent
3 rd Quarter 2003 Financial Results Highlights Basic Earnings Per Share – September YTD Cent * Restated for Income Tax Effect Per SSAP No.12 * * *
3 rd Quarter 2003 Financial Results Highlights 3 rd Qtr rd Qtr 2003 Changes Group Turnover (HK$ Million) % Group Net Profit (HK$ Million) 17.1 * % Net Profit as % of Sales 4.7% * 4.5% - 0.2% Basic Earnings Per Share 2.6 Cents * 2.7 Cents Cent * Restated for Income Tax Effect Per SSAP No.12
2003 Update & Outlook
Hong Kong Deflation and relatively high unemployment to continue Threat of SARS re-occurring Consumer sentiment improving but consumers still cautious on spending Chinese tourist sector to grow Top line sales and net margin to improve
2003 Update & Outlook China Growth in retail continues due to economic growth and increase in disposable income Consumer habit of using CVS more important than competition factor Escalating social insurance cost Expediting new store opening Financial result close to expectation
2003 Update & Outlook Our China Strategies Benefits of CEPA 1.Lower qualifying requirements 2.Wholly-owned enterprise 3.Access to over 230 Prefectural & County Cities 4.Easier for acquisition
2003 Update & Outlook Projected Number of Circle K Stores 2002 Actual 2003 Forecast 2004 Forecast Hong Kong Southern China Eastern or Northern China --10 Acquisition / J.V. --+ Total
2003 Update & Outlook Improving Hong Kong market conditions Healthy growth in profitability and cash flow from operations since 2 nd quarter China strategies on track but need to speed up expansion Better 2003 profitability outlook versus 2002’s