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2003 Annual Results Presentation

This presentation highlights the 2003 financial results of Li & Fung Group, a member of the Li & Fung (Retailing) Group. It includes information on sales value, net profit, gross margin, and store operating expenses. The presentation also discusses achievements in customer service, store customization, and category management in Hong Kong and China. The outlook for 2004 focuses on quality and aggressive growth strategies in both markets.

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2003 Annual Results Presentation

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  1. 2003 Annual Results Presentation A member of the Li & Fung (Retailing) Group 3 March 2004

  2. 2003 Hong Kong Retail Sales ValueYear-on-Year % Change Total: $173 Billion - 2.3% Source: HKSAR, Census and Statistics Department

  3. 2003 Annual Results PresentationAgenda • 2003 Financial Results Highlights • 2004 Outlook & Update • Questions & Answers

  4. 2003 Financial Results HighlightsGroup Turnover + 9.5%

  5. 2003 Financial Results HighlightsGroup Net Profit + 0.5% * * * * Restated for income tax effect per SSAP No.12 (revised) and long service payment costs per SSAP No.34 (revised)

  6. Net Profit By Market

  7. 2003 Financial Results HighlightsNet Profit as % of Sales - 0.3% * * * * Restated for income tax effect per SSAP No.12 (revised) and long service payment costs per SSAP No.34 (revised)

  8. Total 2003 Sales Increased Yet Comparable Stores Sales Dropped Total 2003 + 9.5% Total 2003 - 1.1%

  9. Slight Decline in Gross Margin / Other Income - 0.2%

  10. Tight Control of Store Operating Expenses 23.3 22.7 22.0 22.2

  11. 2003 Financial Results HighlightsBasic Earnings Per Share * * * * Restated for income tax effect per SSAP No.12 (revised) and long service payment costs per SSAP No.34 (revised)

  12. 2003 Financial Results Highlights * Restated for income tax effect per SSAP No.12 (revised) and long service payment costs per SSAP No.34 (revised)

  13. 4th Quarter 2003 Financial Results Highlights * Restated for income tax effect per SSAP No.12 (revised) and long service payment costs per SSAP No.34 (revised)

  14. Year-On-Year Quarterly Profitability Growth * * * * * Restated for income tax effect per SSAP No.12 (revised) and long service payment costs per SSAP No.34 (revised)

  15. 2003 Achievements – Hong Kong • Excellence in Customer STF Services (Speed, Tidiness and Friendliness)

  16. 2003 Achievements – Hong Kong 2. Customization of Store Types • Mega store with “Hot & In” counter • Mini store

  17. Weekend Specials Microwave Lunch Boxes Premiums Redemption 2003 Achievements – Hong Kong 3. Great Category Management Initiatives

  18. 2003 Achievements Winner of “Award for Excellence in Training 2003” organized by The Hong Kong Management Association – Silver Award Selected as a Case Study for the Citigroup International Case Competition 2003 jointly organized with the HKUST Caring Company Award 2003/2004

  19. 2003 AchievementsRefining Store Model in China • Fresh and hot bakery and gourmet hot drinks • STF&F (Speed, Tidiness, Friendliness & Fun) • 76% preferred Circle K • 60 m2 small store model • Reduced CAPEX per store by RMB200K • Positive store contribution in November and December 2003

  20. 2004 Update & Outlook

  21. 2004 Update & OutlookCircle K Hong Kong – Quality Growth • Overall consumer sentiment improving • Deflation and high unemployment will continue • Expect improvement in comparable store sales • Our quality strategies • Great customer experience • Efficiency and cost control • New product categories • Creative promotions • Quality and profitable new outlet growth • 210 stores by year-end

  22. 2004 Update & OutlookCircle K China – Aggressive Growth • Differentiation and customer preference strategies • Year of aggressive growth • 40 stores by end of the year in Southern China • Evaluate option of acquisition • Expansion to Northern or Eastern China market

  23. 2004 Update & OutlookTo Summarize • Quality growth in Hong Kong • Aggressive growth in China • Building customer preference is the key • Good balance between top line and profitability

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