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25 June 2015

Annual Results FY14/15 For the year ended 31 March 2015

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Agenda

• Group Financial Performance

• Business Review by Market

• Outlook And The Way Forward

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Group Financial Performance

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Year ended 31 Mar(HK$M)

2014/15 2013/14 YoY % Change

Turnover 8,992.8 8,756.1 +2.7%

Gross profit 4,039.2 4,073.0 -0.8%

EBITDA 1,172.5 1,314.2 -10.8%

Profit for the year 838.8 935.2 -10.3%

EPS – basic 29.5 cents 33.0 cents -10.6%

Return on equity 33.9% 40.2% -6.3 p.p.

Gross profit margin 44.9% 46.5% -1.6 p.p.

Net profit margin 9.3% 10.7% -1.4 p.p.

Final dividend per share 9.0 cents 9.0 cents --

Final special dividend per share 5.5 cents 5.5 cents --

Total annual dividend per share 23.5 cents 23.5 cents --

Dividend payout ratio ~ 80% ~ 71% +9.0 p.p.

Group

Performance for the Year

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Turnover

(HK$M)

% to Group

Turnover

HK & Macau 7,356.7 81.8% (LY: 81.4%)

Mainland China 347.0 3.9% (LY:4.2%)

Singapore 243.6 2.7% (LY:2.9%)

Malaysia 340.3 3.8% (LY:3.8%)

Taiwan 289.2 3.2% (LY:3.2%)

sasa.com 416.0 4.6% (LY:4.5%)

Total 8,992.8 100%

Year ended 31 Mar 2015

Total Turnover : HK$8,992.8M (+2.7%)

Group Geographical Sales Mix

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Year ended 31 Mar

(HK$M)2014/15 2013/14 +/- Change

CAPEX 149.9 267.8 -117.9

Net cash generated from

operating activities1,069.6 1,021.1 +48.5

Dividend for the year 668.5 668.0 +0.5

Net cash and bank balance

(As of 31 Mar)1,163.7 909.3 +254.4

Group

Sound Financial Position

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Business Review by Market

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FY2014/15 Q1 Q2 1H Q3 Q4 2H FY

YoY retail sales growth 6.7% 13.4% 10.2% 0.2% -4.3% -2.0% 3.3%

YoY same store growth 2.7% 10.7% 6.9% -1.4% -1.6% -1.5% 2.2%

Total no. of transactions (M)4.3

(+9.6%)

4.8

(+10.7%)

9.1

(+10.1%)

5.1

(+5.6%)

4.6

(+2.1%)

9.7

(+3.9%)

18.8

(+6.8%)

Avg sales/ transaction (HK$)370

(-2.6%)

376

(+2.5%)

373

(-0.0%)

402

(-5.1%)

396

(-6.3%)

399

(-5.7%)

386

(-3.3%)

Note: The above data includes the impact of deferred income adjustment on VIP bonus points scheme.

• Sales was significantly weaker in the second half, local consumption was badly affected by

local social environment in Q3 while tourist spending dropped in Q4 due to protests

• Ticket size held up for locals throughout the year while Mainland shoppers ticket size

weakened through the year

• Strength of the US Dollar make shopping in non US Dollar markets more attractive

HK & Macau Market

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Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points

*Source: Hong Kong Tourism Board

36.6%

23.3% 23.5%26.6%

15.6%

22.1%20.4%

12.0%21.2%

15.8%

11.1%

20.1%

11.8%13.8%

18.2%

7.7%3.2%

-3.2% -1.9%

-6.9%-8.6% -5.0%

-14.6% -15.1%

FY13/14 Q1 FY13/14 Q2 FY13/14 Q3 FY13/14 Q4 FY14/15 Q1 FY14/15 Q2 FY14/15 Q3 FY14/15 Q4

FY13/14 to FY14/15 Volume and ASP Changes of PRC Customers

Growth in no. of transactions

Growth of PRC tourist arrivals*

Change in avg sales/transaction

• Lower ticket size reflects changes in consumption behaviour

• Faster decline of ticket size in 2H due to our own drive to focus more on lower priced products to draw traffic

• Future sales growth driven by more traffic and quantity sold

0%

HK & Macau Market:

We Aim To Be The Driver of Lower Ticket Size

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• Focused on boutique stores roll out

• Sales decline due to product weaknesses: insufficient new product offerings and owned label importation issues

• Boutique stores increased contribution, narrowing operating losses

Year ended 31 Mar (RMB 000’)2014/15 2013/14

Sales 276,660 289,999

YoY sales growth -4.6% -0.02%

Total loss 24,474 53,723

China Market:

Focused on boutique stores roll out

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Retail (in local currencies)

Year ended 31 Mar

FY2014/15 2013/14

Singapore

YoY sales growth -2.6% +2.3%

Malaysia

YoY sales growth +6.2% +9.7%

Taiwan

YoY sales growth +3.8% +10.0%

Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points.

Weak performance due to

• Changes in management in the regional and local office

• The missing Malaysian Aircraft affecting Singapore and Malaysia

• Weak product offering

Other Markets Performance

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Year ended 31 Mar2014/15 2013/14

YoY sales growth +5.6% +2.6%

Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points.

• More focus on the China market which grew by 39%.

More weighting on flash and linked sales

Enhancing marketing capability & optimizing channel advertisements

Localized payment gateway

• Enhancing brand awareness e.g. Weibo fans grew from 1.4M to 2.1M

• Profitability affected by increased investments and A&P expenses

E-commerce

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12*House brands = Own brands + Sole-agent brands

Year ended 31 Mar 2015

• House Brand products sales mix declined from LY: 44.2% to CY: 43.3%

• Affected by sea-change in consumption pattern

• Average selling price of House Brand Products sold decreased by 12.1%

• Quantity of House Brand products sold increased by 14.3%

• Increased focus on local sources and PI products which are faster to market

• Personnel changes of Owned Label team affected the timeliness of our response to

fast changing market

• Changes resulted in weaker GP% and sales growth

Brand Management

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Outlook And The Way Forward

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• Moderating growth in Mainland tourist arrivals and weaker spending

• Sea Change in Mainland shoppers’ consumption preferences

• Anti-graft campaign in the PRC curtails demand towards high-priced items

• New Shenzhen residents Multi-Entry Visas limits visits to once a week

• USD/ HKD strength drives local customers and Mainland tourists to shop in

markets with weaker currencies

• Intensifying competition within the cosmetic industry, incl. price competition

• Political situation in HK and the anti- Mainland tourist sentiment

HK & Macau Market: Challenges

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Store portfolio

• Rationalize stores in tourist locations, build stores in residential locations, and modify size of specific stores to enhance productivity and profitability

• Try trendy boutique store format to attract new brands and customers to cater to new demand

Commence O2O business model and digitize personal service of our beauty consultants

• Cross border sales to Mainland customers after their return to the Mainland

Other initiatives to cope with new market circumstances

• Introduce more good value products to cater for the change of customer needs

• Strengthen the portfolio of Korean products and their visual merchandizing

• Attract and build local customer base

Strategy for Hong Kong And Macau Markets

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• Boutique store format bearing fruit

• Improve management structure and systems

• Improve operational efficiency and execution

• Improve product offerings and optimize commission scheme

Strategies for Mainland China Market

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New Senior VP in place: drive overall strategic development and execution

Strategies

• Build management resource, competence and team building

• Enhance product portfolio by introducing new brands and products

• Improve Visual Merchandising

• Intensive training programs, better incentive programs, and closer store

management monitoring

Cost initiative

• Reduce renovation cost

• Reduce inventory carrying cost

Strategies for

Singapore, Malaysia and Taiwan Markets

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Challenges

• Cross-border and online/offline competition

• Intensifying product and price competition from other shopping websites

and mobile apps

Initiatives

• Commence O2O operation and improve Cross Border fulfillment

• Launch new mobile app

• Synchronize platforms: cater for consumers’ cross platform behaviour

• Quick new product launches to adapt to fast changing market trends

• Adopt new marketing channels and optimization of old

• Build partnerships and alliances

Strategies for E-commerce

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Cross-border O2O Initiative drives future growth

Digitize the personal service of our beauty consultants

Drive sales and enhance online GP%

HK & Macauapproximately 1,200

well trained Beauty Consultants

provide exceptional service

Generated over HK$7 billion revenue (over 80% of Group’s total

turnover)

China

Online Shopping(Collect products in

stores or by post)

莎莎公眾號

Offline Shopping(Store)

Beauty Consultants

Moments(朋友圈) - Customers

Send standardized content Commission Commission

Advantage

• A more comprehensive online/offline shopping

experience for customers

• Contents delivered are standardized by the company

• Centralized customer data base for customer retention

• Can be replicated to other markets

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• New dedicated team to source new and trendy products

• Fast new product launches and re-order process to adapt to fast changing

market trends

• Supported by business and commercial intelligence

• Storyline and marketing improvements for Owned Label

• Build strategic relationships with major beauty brands

Category Management &

Product Development Strategies

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No. of Retail Outlets

As of 31 Mar 14

Opened ClosedAs of

31 Mar15

As of

31 Mar16

(estimated)

HK & Macau 106 9* 8** 107 112

Mainland China 61 15 14 62 62

Singapore 22 1 2 21 22

Malaysia 53 11 5 59 65

Taiwan 29 6 3 32 36

Total 271 42 32 281 297

Multi-brand “Sasa” Stores

* Opened: Tourist stores: 4; Non-tourist stores: 5

** Closed: Tourist stores: 3; Non-tourist stores: 5

Remarks: “Tourist stores” are defined as the traditional tourist area stores, which are different from the Group’s internal definition

There were three single-branded stores/counters in each of the HK & Macau and China markets as at 31 March 2015

• Expansion mode (increase penetration) – HK & Macau, Malaysia and Taiwan

• Optimization mode (enhance store contribution) – Mainland China and Singapore

Store Network Strategy Varies Between Markets

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Q&A