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Page 1: Disclaimer - webcast.live.wisdomir.comwebcast.live.wisdomir.com/anta_17ar/ppt.pdf · China’s economy in transition, moving from high-speed to high-quality growth China’s Economy
Page 2: Disclaimer - webcast.live.wisdomir.comwebcast.live.wisdomir.com/anta_17ar/ppt.pdf · China’s economy in transition, moving from high-speed to high-quality growth China’s Economy

Disclaimer

The presentation is prepared by ANTA Sports Products Limited (the “Company”) and its subsidiaries (the “Group”) and is solely for thepurpose of corporate communication and general reference only. The presentation is not intended as an offer to sell, or to solicit an offer tobuy or to form any basis of investment decision for any class of securities of the Company in any jurisdiction. All such information should notbe used or relied on without professional advice. The presentation is a brief summary in nature and does not purport to be a completedescription of the Company, its business, its current or historical operating results or its future business prospects.

This presentation is provided without any warranty or representation of any kind, either expressed or implied. The Company specificallydisclaims all responsibilities in respect of any use of or reliance on any information, whether financial or otherwise, contained in thispresentation.

This presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business ofthe Group. These forward-looking statements represent the Company’s expectations or beliefs concerning future events and involve knownand unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed orimplied in such statements. Certain statements, such as those that include the words “potential”, “estimated”, “expects”, “anticipates”,“objective”, “intends”, “plans”, “believes”, “estimates”, and similar expressions or variations on such expressions may be considered“forward-looking statements”.

Forward-looking statements involve inherent risks and uncertainties. Readers should be cautioned that a number of factors could causeactual results to differ in some instances materially, from those anticipated or implied in any forward-looking statement. Forward-lookingstatements speak only at the date they are made, and it should not be assumed that they have been reviewed or updated in the light ofnew information or future events. Trends and factors that are expected to affect the Group’s results of operations are described in thesections of “Financial Overview”, “Business Overview” and “Prospects”.

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FINANCIALOVERVIEW

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2017 2016 Changes

Revenue (RMB million) 16,692.5 13,345.8 25.1%

Gross profit (RMB million) 8,241.1 6,459.0 27.6%

Profit from operations (RMB million) 3,988.7 3,203.4 24.5%

Profit attributable to equity shareholders (RMB million) 3,087.8 2,385.5 29.4%

Basic earnings per share (RMB cents) 117.01 95.36 22.7%

Free cash inflow (RMB million) 2,662.2 1,897.0 40.3%

Gross profit margin 49.4% 48.4% 1.0p.p.

Operating profit margin 23.9% 24.0% 0.1p.p.

Margin of profit attributable to equity shareholders 18.5% 17.9% 0.6p.p.

Total dividends per share (HK cents) 98 76 28.9%

Interim dividend per share (HK cents) 41 34

Final dividend per share (HK cents) 41 34

Special dividend per share (HK cents) 16 8

Dividend payout ratio 70.5% 73.2% 2.7p.p.

Financial Highlights

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Revenue by product2017 2016 Changes

(RMB million) (% of revenue) (RMB million) (% of revenue) (%)

Footwear 7,048.8 42.2 6,000.8 45.0 17.5

Apparel 9,116.1 54.6 6,885.7 51.6 32.4

Accessories 527.6 3.2 459.3 3.4 14.9

Overall 16,692.5 100.0 13,345.8 100.0 25.1

% in revenue > % in order value of 2017 trade fairs for ANTA products as announced before mainly due to:

➢ Stronger pace of growth in other businesses

Revenue 25.1% to RMB16.69 billion

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Revenue

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GP margin 1.0p.p. to 49.4%

GP & GPM by product

2017 2016 Changes

GP (RMB million) GP margin (%) GP (RMB million) GP margin (%) (%) (p.p.)

Footwear 3,290.5 46.7 2,778.4 46.3 18.4 0.4

Apparel 4,742.5 52.0 3,509.7 51.0 35.1 1.0

Accessories 208.1 39.4 170.9 37.2 21.8 2.2

Overall 8,241.1 49.4 6,459.0 48.4 27.6 1.0

in GP margin due to:

➢ Expansion of retail operations and the effort of stringent cost control

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Gross Profit Margin

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A&P expenses %* 0.8p.p. to 10.6%, due to:

➢ Notable growth in revenue

Staff costs %* 0.7p.p. to 12.0%, due to:

➢ Headcounts and recruitment of experienced management talent amid the Group’s fast expansion

R&D costs %# 0.6p.p. to 5.7%, due to:

➢ Continuous enhancement of the Group’s overall R&D capability

* In terms of revenue # In terms of cost of sales

OP margin 0.1p.p. to 23.9%, due to:

➢ Selling and distribution expenses and administrative expenses as a result of the expansion of retail operations

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Operating Expenses and Operating Profit Margin

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Margin of profit attributable to equity shareholders 0.6p.p. to 18.5%, due to:

➢ Net finance income

Effective tax rate 0.5p.p. to 26.7%

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Effective Tax Rate and Margin of Profit Attributable to Equity Shareholders

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Average inventory turnover 14 days to 75 days, due to:

➢ Intentionally deferred product delivery to stores, to meet the sales of Chinese New Year in February 2018

Average trade receivables turnover 2 days to 41 days

Average trade payables turnover 7 days to 51 days

➢ The Group’s average trade receivables and payables turnover days remained at relatively normal levels

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Working Capital Management

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2017 2016

(RMB million) (RMB million)

Year ended 31 Dec

Net operating cash inflow 3,181.5 2,467.6

Capital expenditures (585.0) (627.6)

Others 65.7 57.0

Free cash inflow 2,662.2 1,897.0

As at 31 Dec

Cash and cash equivalents 6,967.6 5,830.0

Fixed deposits held at banks with maturity over three months 2,436.4 1,492.4

Pledged deposits 150.0 194.6

Bank loans (147.9) (937.7)

Bills payable - (600.0)

Net cash position 9,406.1 5,979.3

Net operating cash inflow 28.9% to RMB3.18 billion,

which represents strong cash generation capability of the Group

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Liquidity and Financial Resources

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Business Review

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Market Review

China’s economy in transition, moving from high-speed to high-quality growth

China’sEconomy in2017

According to the National Bureau of Statistics of China:

➢ GDP +6.9%, reaching RMB82.7 trillion

➢ The total retail sales of consumer goods +10.2%,reaching RMB36.6 trillion

➢ Excluding the price effect, the urban and rural per capita disposable income +6.5% and +7.3% respectively

China’sSports Industry

➢ The stable growth of the Chinese sportswear industry remained relatively solid, supported by a number of

factors, including a rise in disposable income, preparations for certain large sporting events, policy support, a

growing passion for sports amongst the general public, and the increasing trend among Chinese to pursue a

healthy lifestyle.

➢ According to the “Consumer Market Development Report 2018“ published by the China Council for the

Promotion of International Trade Academy, the total sales of domestic consumer products is expected to

exceed RMB40 trillion in China by 2018 with an annual nominal growth rate of 10%.

➢ As the China market is unique in its growing appetite for “athleisure” fashion, the demand for “functional”,

“differentiated” and “premium” sportswear products is becoming stronger.

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Unique Business Model and Key Strategies

Unique business model + “Single-Focus, Multi-Brand, and Omni-Channel” strategy

= Full coverage of consumer channels and retail channels

Full Coverage➢ Catering to consumers’ demands for sportswear from

different groups through multiple brands

Omni-Channels➢ ANTA stores are mainly street stores, but its retail network is

expanding its presence in shopping malls and department stores➢ FILA, DESCENTE and the newly added KOLON SPORT and

KINGKOW stores mainly located in high-end shopping malls anddepartment stores

➢ Leveraging online and offline retail channels to boost sales for allbrands

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ANTA Continues to Strengthen its Leading Position in China’s Mass Market

➢ We sponsored 24 Chinese national teams within the four major sporting management centers and the Chinese Rowing Association,including winter sports, boxing and taekwondo, gymnastics and weightlifting, and wrestling and judo.

➢ We once again started two Olympic cycles of partnership with the COC and CSD, and became the official sportswear partner for theBeijing 2022 Olympic and Paralympic Winter Games. ANTA will provide high quality sportswear products and will take the opportunity tohelp promote the positive image of China to the world.

➢ During the recent PyeongChang 2018 Olympic Winter Games, not only did ANTA’s sportswear shine alongside the Chinese nationalteams during the games, but ANTA also provided high-quality ANTA equipment to the International Olympic Committee.

ANTA’s brand equity and favorability experienced an uplift from its unconventional

marketing campaigns that utilized both online and offline channels

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ANTA is a Value-for-Money Functional Sportswear Brand

ANTA provides consumers with value-for-money and professional

sportswear across a diverse range of categories, from running, cross-

training, basketball and soccer to professional and niche sports

➢ We launched A-Livefoam technology running shoes, ANTAUNI,

and A-Flashfoam running shoes, as well as held the “Run For A

Life” campaign.

➢ Renowned boxers Zhou Shiming and Manny Pacquiao became

ANTA brand endorsers, while ANTA featured female actress

Zhang Li wearing its women’s cross-training series. These cases

exemplify ANTA’s ability to make every use of the impact

endorsers can have to improve our branding.

➢ We continued to work in partnership with NBA Championship

player Klay Thompson to develop the highly functional and well-

designed KT2 and KT3 basketball shoes, as well as launch the

“Shock The Game” marketing campaign in China.

➢ ANTA also launched its ANTA Lion II football shoes during the

year. ANTA brand ambassador Zheng Zhi, the current captain of

China’s national soccer team, unveiled this newly upgraded

product to the general public.

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ANTA KIDS

ANTA KIDS has chosen “Grow Up with Fun” as its slogan, which reflected the desire

for children to enjoy sports and to grow up healthily and happily. This helped to

establish its sporty, energetic, interesting and inspiring brand image

➢ Following the implementation of the two-child policy by the Chinese

government, it is widely expected that growth in the kids market

segment will accelerate.

➢ ANTA KIDS is committed to offering fashionable, protective and

comfortable products for children up to the age of 14.

➢ We launched a series of crossover collection products, featuring popular

characters from movie series such as Minions, Hello Kitty and

Despicable Me.

➢ We also launched a series of marketing campaigns across China,

including “Sports Day” and “McHappy Run”, with McDonald’s. We also

cooperated with Tuniu.com to launch a wonderful snow trip for families.

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FILA and FILA KIDS

FILA maintains its “Live Your Elegance” brand promise by

combining stylish and sporty fashion

➢ FILA has collaborated with famous Chinese actress Gao

Yuanyuan and actor Chen Kun on its advertisement

campaigns and promotional events.

➢ Targeting different customer segments, FILA has

successfully launched several series, including many

cross-over series with famous brands and designers, in

order to enhance awareness of FILA’s brand.

➢ Aside from first and second tier cities in China, FILA has

also expanded into other potential cities, opening fashion

shops to further enhance its brand differentiation.

➢ FILA opened its first store in Singapore at the ION

ORCHARD shopping mall, reaching yet another milestone

as it grows in the region.

➢ FILA KIDS was launched in China in 2015 and has gained

appeal among high-end consumers in the kids fashion

market.

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DESCENTE

Leveraging on its unique branding position as a functional sportswear, DESCENTE has quickly established itself as a high-end and professional sports brand in China

➢ In 2017, DESCENTE held its first fashion show in Shanghaiand launched its “AWAKEN!” campaign with the aim ofraising awareness of its sports and beauty brands among itstarget audiences in China.

➢ Since the formation of the joint venture in 2016, DESCENTEhas been active in expanding its retail footprint in the high-end segments of the Chinese sportswear market, becomingthe brand of choice for skiing, cross-training and runningenthusiasts.

➢ We are confident that DESCENTE can grasp businessopportunities arising from ANTA Sports becoming the officialpartner of the Beijing 2022 Winter Olympics and to becomeone of the most successful sportswear brands in China.

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SPRANDI

➢ Established in 1995, SPRANDI is a footwear and clothing brand that focus on city running.

➢ In 2017, we began to expand its business by opening more physical stores and e-commerceplatforms, targeting the middle-class smart-causal sportswear market.

➢ Renowned Chinese celebrity Olivia Wang became a SPRANDI endorser and was featured inadvertising campaigns in China, strengthening awareness of the brand among young consumers.

SPRANDI continues to enhance its core competencies by increasing design originality and innovation in product technology

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Distribution Network Management

Improved retailers’ competitiveness, store efficiency and responsiveness to the ever-changing market and optimized distribution networks including street stores, department stores, shopping malls, outlet

stores and e-commerce platforms

ANTA+ANTA KIDS

in China

FILA+FILA KIDS

in China, Hong Kong, Macao and Singapore

DESCENTE

in China

Key market tiers 2nd, 3rd and lower tier cities 1st and 2nd tier cities 1st and 2nd tier cities

Store formats* predominately

➢ Street stores*➢ Shop-in-shop➢ Outlet store➢ Online shop

➢ Shop-in-shop*➢ Street store➢ Outlet store➢ Online shop

➢ Shop-in-shop*➢ Online shop

Number of stores by 31 Dec 2017

9,467(End of 2016: 8,860)

1,086

(End of 2016: 802)

64

(End of 2016: 6)

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E-commerce Business

Our e-commerce business will support our omni-channel and multi-brand development

➢ We have delivered record-breaking results during the

‘‘Double 11’’ promotion period in 2017, showcasing our rapid

development in the e-commerce space.

➢ We launched special versions of our products online.

➢ We have collaborated with various renowned e-commerce

platforms, including Tmall, JD, Vipshop and others. The

business also made a breakthrough in the integration of

online and offline channels.

➢ We optimized our e-store interface, improved product

descriptions and presentations, and enhanced our product

search and cataloging functions.

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Product Innovation and Supply Chain Management

Technological innovation and effective supply chain management are keys for sustainable development

➢ We became the only local sportswear company in China that has received license to use Teflon EcoElite™ to promote our

products

➢ We formed a strategic alliance with Noble Biomaterials, Inc., which has provided us with XT2® Technology

➢ We implemented high-speed production lines, which have a daily shoe manufacturing capacity of 3,000 pairs with only 30

workers.

➢ We integrated self-production with outsourcing. The proportion of self-produced footwear and apparel of ANTA accounted for

37.8% and 15.5%, of the total sales quantities respectively in FY17 (FY16: 42.9% and 16.7%)

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Prospects

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Keep Moving and Build upon Our Phenomenal Growth over the Coming 10 Years

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