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Annual Results 2006

Stock code: 8245 HK. Annual Results 2006. March 2007. Agenda. Major Accomplishments Financial Highlights Business Review Post Balance Sheet Events, Future Plans & Strategies Open Forum. Major Accomplishments . Major Accomplishments.

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Annual Results 2006

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  1. Stock code: 8245 HK Annual Results 2006 March 2007

  2. Agenda • Major Accomplishments • Financial Highlights • Business Review • Post Balance Sheet Events, Future Plans & Strategies • Open Forum

  3. Major Accomplishments

  4. Major Accomplishments • Successfully listed on the GEM Board of the HKEX on 25 Sept 2006 • Raised net proceeds excluding issuing expenses of over HK$584 million • Annual results recorded stable growth • Turnover and profit attributable to shareholders increased 9.9% and 32.6% respectively • Proposed final dividend of RMB15.0 cents (including tax) • Consolidate the leading position in Greater Beijing Region • Extend the coverage of retail network and number of retail outlets rose from 158 in 2005 to 171 in 2006 • Enhanced the distribution function of the live and fresh produce logistics center to further improve operating efficiency • Same store growth of 2006 increased to 6.6% (2005: 4.8%) • Recorded stable growth in wholesale business as the business in other location such as Tianjin, Shijiazhuang of Hebei Province, and Qingdao of Shandong Province are getting mature

  5. Financial Highlights

  6. Financial Summary For theyear ended 31December FY2006(audited) FY2005(audited) Change RMB ’000 Turnover Gross profit Profit attributable to shareholders Basic earnings per share (RMB) Final dividend per share (RMB) 4,121,748 500,081 75,098 30.5 cents 22.9 cents +9.9% +12.9% +32.6% N/A N/A 4,530,975 564,590 99,577 35.1 cents* 15.0 cents* * The Group was listed on 25 September 2006 and the calculation of earnings per share for the year is based on the weighted average number of 283,672,055 shares(2005: 246,620,000 shares).

  7. Retail Business - Revenue and Gross Profit • Retail business: • Revenue increased by approximately 11.5% as compared to last year • Gross profit rose by approximately 15.4 as compared to last year Revenue Gross Profit (RMB million) (RMB million) 11.5% 14.0% 2.5% 7.7% Year ended Dec 31 Year ended Dec 31

  8. 11 10 9 8 Wholesale Business - Revenue and Gross Profit • Wholesale business: • Revenue increased by approximately 8.3% as compared to 2005 • Gross profit rose approximately 11% as compared to 2005 • Gross profit margin increased from approximately 10% to 10.3% in 2006 Revenue Gross Profit and Margin (RMB million) (RMB million) (%) 10.3 10.0 11.2% 8.4 32.1% 8.3% 57.2% Year ended Dec 31 Year ended Dec 31

  9. Revenue and Profit Margin Breakdown by Retail Segments • Revenue from hypermarkets, supermarkets and convenience stores accounted for approximately 30.5%, 61.8% and 7.7% of total revenue from retail business respectively • Increase in profit margin of retail business: • Higher profit margin from live and fresh produce • Continue to adjust product mix • Bulk purchase lowered the merchandising cost Profit Margin Turnover Breakdown by Retail Segments (RMB million) Hypermarkets Supermarkets Convenience Stores (%) Hypermarkets Supermarkets Convenience Stores 8.7% 9.9% 14.8 14.8 0.2% 17.8% 14.6 14.7 13.9 14.5 6.2% 0.9% 13.6 13.3 13.0 Year ended Dec 31 Year ended Dec 31

  10. As at Dec 31 综合超市 Supermarkets 2005 2006 26 65.4 2.5 46.9 27.8 4.0 Number of stores Total operating area (’000 sq.m.) Average area per store (’000 sq.m.) Revenue/Operating area/day (RMB) Average value per transaction (RMB) Same store sales growth (%) 38 87.1 2.3 46.7 28.4 10.4 As at Dec 31 As at Dec 31 Hypermarkets Convenience Stores 2005 2006 2005 2006 39 8.8 0.23 57.5 9.2 7.0 Number of stores Total operating area (’000 sq.m.) Average area per store (’000 sq.m.) Revenue/Operating area/day (RMB) Average value per transaction (RMB) Same store sales growth (%) 4 38.6 9.7 49.2 48.4 6.2 5 44.9 9.0 49.9 50.2 0.7 35 8.1 0.23 55.3 9.0 5.6 Number of directly operated stores Total operating area (’000 sq.m.) Average area per store (’000 sq.m.) Revenue/Operating area/day (RMB) Average value per transaction (RMB) Same store sales growth (%) Business Statistics by Format • Improvement in business operations: • Improve the logistics and distribution function • Centralised distribution capability extended from pork, fruits and vegetables to beef and mutton to enhance food safety and increase gross profit margin • Enhance the classification management of operation area to increase storeroom capacity for further storing 50,000 cartons of goods • Enhancement of information management system • Placed more emphasis in analyzing operating statistics based on real-time data in order to formulate sales plans • Refurbished and upgraded 4 supermarkets • Enhance the formality of operation and standardisation of chain stores

  11. Operating Expenses • Stringent cost control Administrativeexpenses Selling &distribution costs Cost of Sales 9.3% 8.9% 9% 2004 2005 2006 88.7% 87.9% 87.5% 2.4% 2.5% 2.2% As a percentage of revenue For the year ended 31 Dec

  12. Key Financial Figures Key Financial Ratios As at Dec 31 2005 2006 12.1% 5.3% 4.0% 1.8% 32.4% 20.9% 0.82 128.6% 12.5% 6.1%(1) 4.7%(1) 2.0%(1) 36.1% 22.4%(2) 1.15 13.8% Gross profit margin EBITDA margin EBIT margin Net profit margin Effective tax rate Return on equity Current ratio Net gearing ratio • After adjustment for interest income of RMB 23.1 million (related tax of RMB 7.6 million) earned from over-subscription and foreign exchange loss of RMB 6.4 million • After adjustment for note (1) and increase in equity from listing proceeds

  13. Key Financial Figures (Cont’d) Key Financial Ratios As at Dec 31 2005 2006 Inventory turnover days Debtor turnover days Creditor turnover days Fixed assets turnover Operating lease / revenue Staffing expenses / revenue Finance costs / sales Retail: revenue / employee (RMB) 37 38 64 8.3x 1.0% 4.3% 0.5% 586,000 41 37 64 8.2x 1.1% 4.6% 0.6% 598,000

  14. Use of Proceeds Application of Proceeds IPO Proceeds Actual Application* HK$’000 Expansion of retail distribution network in the PRC Increase operating efficiency Brand building Total 356,600 175,400 52,600 584,600 82,704 26,145 43,508 152,357 * Period from 25 September 2006 (Date of listing) to 31 December 2006

  15. Business Review

  16. 5th Outer Ring Beijing Capital International Airport 4th Outer Ring 3rd Outer Ring Chaoyang Dongcheng Central Business District Chongwen • No. of Retail Outlets in Chaoyang District: • 2 Hypermarkets • 23 Supermarkets • 106 Convenience Stores Fengtai Expansion of Retail Network Number of Retail Outlets directly operated by the Group as at the date indicated: • Expansion of retail network in 2006: • 1 hypermarket • 14 supermarkets • 4 convenience stores As at 31 December 2005 2006 4 26 35 65 5 38 39 82 Hypermarket Supermarket Convenience Stores Number of franchised stores: As at 31 December 2005 2006 5 88 93 1 88 89 Supermarket Convenience Stores Net operating area (sq. m.) in 2006: As at 31 December 2006 Convenience Stores Hypermarkets Supermarkets 44,938 - 44,938 87,117 880 87,997 8,841 16,977 25,818 Directly-operated Franchise-operated

  17. Wholesale Business • Innovation to internal operation and management system • Restructuring in terms of classification and specialization of operating entities to type of merchandise or brands • Modification of staff remuneration based on performance and results • Continue to increase the numberof branded products under sole distributorship • Expansion of distribution network Shandong Hebei Greater Beijing Region Tianjin Network Strengthened the strategic relationship with over 80% of local customers And more

  18. Post Balance Sheet Events, Future Plans & Strategies

  19. Post Balance Sheet Events -Proposal of Main Board Migration • Proposed the migration of listing of H shares from GEM to the Main Board of Stock Exchange • Held an EGM on 20 March 2007 • Further expand shareholder base • Enhance the liquidity of H shares • Beneficial to the Group in terms of future growth, financing flexibility and business development

  20. Acquired 11.04% of the enlarged issued capital of Shou Lian Act as a trustee of 45.30% shares during delegation period, which altogether represents 56.34% pf the voting rights in total The Group has been granted the purchase right and right of first refusal during delegation period Shou Lian’s retail network will be operated under “Jingkelong” brand name through franchise agreement Synergy effects through integrated merchandizing, IT system, logistics and staff training Will significantly enhance the Group’s leading position in the Greater Beijing region Post Balance Sheet Events -Acquisition of Shou Lian

  21. 2007 China Industry Outlook • Continue to benefit from sustainable growth of PRC economy and the increasing domestic consumption demand • Consumer products markets will be boosted with the hosting of 2008 Beijing Olympic Games • Maintain an optimistic outlook despite keen competition amongforeign and local operators • Increasing M&A opportunities as market becomes more concentrated

  22. Future Plans and Strategies Our 5 key business objectives going forward are: Further expand our Distribution Network in Greater Beijing Region, Eastern and Northern China Upgrade Logistics and Distribution Centers to further improve distribution capability and strengthen the strategic co-operated relationship with suppliers Upgrade Retail Outlets to strengthen customers’ loyalty Continue to invest in management information systems Continue to reduce operating costs as a percentage of revenue

  23. Our Vision Become One of the Leading Integrated Retail and Wholesale Distribution Operators in the Greater Beijing Region

  24. Open Forum

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