1
FY2011 Annual Results
Presentation March 2012
2
Disclaimer
This document has been prepared by Hosa International Limited (the “Company” or “Hosa”) and comprises the written materials for a presentation concerning, among other matters, the Company‟s background information and financial performance for the year ended 31 December 2011. For the purposes of this document, the presentation that follows (the “Presentation”) shall mean and include the slides that follow, the oral briefing provided by the Company on the slides and the question and answer session that follows the oral briefing. This document has been prepared by the Company solely for use at the Presentation and is strictly confidential. This Presentation may not be taken away, reproduced, redistributed, disclosed or passed on, directly or indirectly, to any other person, or published, in whole or in part, in any manner, at anytime or for any purpose. In particular, neither this Presentation nor the information contained herein may be distributed, taken or transmitted in or into the PRC, the United States, Australia, Canada or Japan, in whole or in part. The distribution of this document in other jurisdictions may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Failure to comply with this restriction may constitute a violation of applicable securities laws. This Presentation shall not constitute, and should not be construed as, an offer or form part of any offer to sell or a solicitation of an offer or form part of any offer to buy or subscribe for the Company's securities nor shall there be any sale of such securities in any state or country in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or country. 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This Presentation contains certain forward-looking statements that reflect the Company‟s current beliefs and expectations about the future. These forward-looking statements involve known and unknown risks, uncertainties and are based on a number of assumptions about the Company‟s operations and other factors, many of which are beyond the Company‟s control, and accordingly, actual results may differ materially from those expressed or implied by such forward-looking statements. You should not take any forward-looking statements contained in this Presentation regarding past trends or activities as a representation that such trends or activities will continue in the future. The information and opinions in this Presentation are provided as at the date of this Presentation and are subject to change without notice and accuracy is not guaranteed. The Company do not guarantee that the assumptions underlying forward-looking statements, opinions or views are free from errors nor do they accept any responsibility for the future accuracy of the assumptions, opinions and views expressed in this Presentation or the actual occurrence of the forecasted developments. The Company accept no obligation to update any forward-looking statements set forth herein or to adjust them to future events and/or developments. You should not place undue reliance on forward-looking statements, which speak only as of the date of this document. The information contained in this Presentation has not been independently verified. This Presentation does not purport to provide a complete description of the matters to which it relates and it is not the intention to provide, and you may not rely on this Presentation as providing, a complete or comprehensive analysis of the Company‟s financial or trading position or prospects. This Presentation contains information and data relating to the industry in which the Company operates, which the Company has derived from third party sources without independent verification. The Company cannot ensure that these sources have compiled such information and data on the same basis or with the same degree of accuracy or completeness as are found in other industries, and you are cautioned not to place undue reliance on such information and data. The information and opinions in this Presentation are given in summary form and do not purport to be complete. No representation, warranty or undertaking, express or implied, is or will be made in, or in relation to, and no responsibility or liability (including, without limitation, any liability in negligence) is or will be accepted by the Company or any of their respective subsidiaries, subsidiary undertakings or holding companies (where appropriate), or any of their respective affiliates, and their respective directors, officers, employees, agents and advisers as to, or in relation to, this Presentation or the fairness, accuracy, correctness or completeness of the information or opinions contained herein or any other information, whether written or oral, made available to any interested party or its advisers, and any liability therefore (in negligence or otherwise) for any loss or damage whatsoever arising from the use of the information contained in this Presentation or otherwise arising in connection therewith is hereby expressly disclaimed. By attending the Presentation to which this document relates or by accepting this document, you agree to be bound by the foregoing provisions, restrictions, limitations and conditions and, in particular, you have represented, warranted and undertaken that you have read and agreed to comply with the contents of this notice.
3
Presentation Team
Mr. Zhao Yan
Executive Director
Mr. Dickson Lai
Chief Financial Officer
Mr. Shi Hongliu
Founder, Chairman and Executive Director
4
Result Highlights
Gross margin expanded to 62.2%, up 13.5 bps
Operating margin reached 45.6%, up 12.5 bps
Net margin reached 39.4%, up 12.3 bps
Revenue reached RMB695.2 million, up 99.9% y-o-y
Profit from continuing operations rose significantly by 190.0% to RMB273.7 million
The number of Hosa retail outlets in China has reached 1,212 by the end of
year 2011, operated by 29 distributors along with their sub-distributors
Successfully listed on HKEx on December 16, 2011, and raised fund at a net of
RMB488.6 mm
Basic earnings per share increased by 120.0% to RMB0.22 and the Board proposed
to declare a final dividend of HKD8.4 cents per share for the year
5
Company Strengths
Effective brand
promotion through
professional and
targeted marketing
channels
Capabilities to swiftly
respond to market trends
using streamlined design
and production workflow
Experienced and
committed
management team
A leading indoor
sportswear enterprise
in China
Efficiently managed
nationwide sales and
distribution network
Comprehensive
portfolio of high-quality
indoor sportswear
products
1
2
3
4
5
6
6
I. Company Overview
II. Financial Review
III. Future Strategy
IV. Appendix
7
(1) In terms of 2010 ex-factory domestic sales according to Frost & Sullivan
(2) As of December 31, 2011
(3) FY2011 revenue breakdown by product
Focused and Specialized Indoor Sportswear
Product Portfolio(3) Extensive Recognitions
1,212 Retail Outlets
covering 28
Provinces,
Autonomous Regions
and Municipalities (2)
Strategically Deployed and Efficiently Managed
Distribution Network
Unique Mid-high End Brand Positioning - the
Largest Indoor Sportswear Brand in China(1)
A symbol for ACTIVE, FASHIONABLE and HEALTHY lifestyles
More than 60 retail outlets
40-60 retail outlets
20-39 retail outlets
Less than 20 retail outlets
Accessories Sports Underwear
Fitness Wear Swimwear
Company Overview
- Pioneer in China Indoor Sportswear
34.1%
38.9%
4.7%
22.3%
Yunnan
(3)
Guangxi
(14)
Guizhou
(16)
Zhejiang
(71) (31)
Shaanxi
(36)
Shanxi
(32)
Jilin
(13)
Heilongjiang
(15)
Sichuan
(69)
Hubei
(50)
Fujian
(46)
(66)
Henan
(69)
Hebei (39)
Liaoning
(51)
Tianjin (26)
Jiangsu
(66)
Hainan
(2)
Guangdong
(99)
Inner Mongolia
(14)
Hunan
(26)
Jiangxi
(21)
Anhui
(34)
Beijing
(178)
Chongqing
Shandong
Shanghai
(114)
Ningxia (6)
Qinghai (2)
2011 – Nominated for the “Jack 7th China Apparel Brands Annual Award''
2010 – „„China‟s Top Ten Innovative Sports Products‟‟ for the Company‟s
tight-fitting fitness wear
2006 – 2010 „„Special Contribution Award for China‟s Knitting Industry‟‟
2009 – „„Top Ten Swimwear Brands‟‟
2008 – 2010 „„China‟s 500 Most Valuable Brands‟‟
2008 – „„Exemplary Brand in China‟s Swimwear Industry‟‟
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Strategically Deployed Distribution Coverage (1)
Hosa’s efficiently managed distribution network and strong presence in 1st tier cities in China well
positions Hosa to further expand its sales coverage in growing markets
(1) As of December 31, 2011
(2) Hosa products are currently sold by a distributor on taobao.com and paipai.com which are subsidiaries of Alibaba and
Tencent, respectively
Diversified and Innovative Retail Channels
Pro
fessio
nal R
eta
il
Ch
an
nels
Dep
artm
en
t
Sto
res
Specialty Stores
Online Stores (2)
More than 60 retail outlets
40-60 retail outlets
20-39 retail outlets
Less than 20 retail outlets
Efficiently Managed Nationwide Sales and
Distribution Network
Yunnan (3)
Guangxi (14)
Guizhou
(16)
Zhejiang
(71) (35)
Shaanxi (36)
Shanxi
(32)
Jilin
(13)
Heilongjiang (15)
Sichuan
(69)
Hubei
(50)
Fujian
(46)
(66)
Henan
(69)
Hebei
(39)
Liaoning (51)
Tianjin (26)
Jiangsu
(65)
Hainan (2)
Guangdong
(99)
Inner Mongolia
(14)
Hunan
(22) Jiangxi
(21)
Anhui
(34)
Beijing
(178)
Chongqing
Shandong
Shanghai (114)
Ningxia
(6) Qinghai
(2)
9
Distributor /
Inventory
Management &
Control
Distributor
Selection
Criteria
Expansion
Planning
Distributor Network Management
Distributors are required to
strictly follow and to manage
and make sure sub-distributors
follow Hosa’s standard sales
management manual and
contract terms on:
Pricing policies
Retail outlet design and
promotional materials
Providing business reports
for Hosa’s review
Work closely with distributors in jointly developing a structured
expansion plan
All new retail outlet openings need to be pre-approved
Hosa implements a strong distribution network management system that enables effective regulation
of the expansion, distribution and image of its network and products
Sub-
Distributors
Retail Outlets
Distributors
Dir
ec
tly M
on
ito
r
Directly manage
and monitor
Sales Channel Local Recognition and
Business Network
Managerial
Capabilities
Capital Resources Industry and Retail
Experience
Ability to Secure
Appropriate Retail
Locations
Only allow return
of products in the
case of quality
defects
Bu
sin
ess r
ep
ort
ing
B
us
iness r
ep
ort
ing
Perform frequent
and random store
visits
Provide guidance
and sales support
Provide regular
training to ensure
uniform store
image and service
Manage and monitor
Manage and
monitor
Manage and monitor
Efficiently Managed Nationwide Sales and
Distribution Network (Cont’d)
10
Hosa fitness gyms, professional
stadiums, recreational facilities
Show case own products via fitness
trainer demonstration
Build professional brand image of Hosa
Hosa actively promotes its brand as the premier brand for indoor sportswear products
via creative and diverse marketing channels
Creative and targeted advertising
efforts enables Hosa to effectively
further extend market reach to a
broader target consumer base
Event
Sponsorship
International, national and regional
Pageants, sports aerobics contest, five-
minute fitness program
Promotes brand name and exhibits
products
Media
Advertising
Onsite
Marketing
Effective Brand Promotion Through
Professional and Targeted Marketing
Channels
11
Latest Fabric Technologies Special Design, Cutting and Sewing Process
Nylon and Lycra
combination fabrics
Capabilities to Swiftly Respond to Market Trends
Using Streamlined Design and Production
Workflow
Warp-knitted
Stretch Fabrics Coolmax
Bamboo
Charcoal
Modal
Real-time Market
Data from Multiple
Channels
Leveraging of
External Expertise
Accumulated
Proprietary
Expertise and
Know-how
Long-term
Cooperation with
Fabric Suppliers
Concerted In-house
R&D Teams
General design
Technology R&D
Swimwear
Fitness wear
Sports underwear
One Stop Shop Experience for FUNCTIONAL, COMFORTABLE and FASHIONABLE Main Products
Complemented by a Wide Range of Accessories
12
I. Company Overview
II. Financial Review
III. Future Strategy
IV. Appendix
13
505 522
666
1,212
FY2008 FY2009 FY2010 FY2011
(RMB mm)
204.6
159.2
347.8
695.2
34.1%
41.3%
29.2% 44.4%
22.3%
21.2%
42.7%19.7%
38.9%
32.1%
26.7%
33.2%
4.7%
5.4%
2.7%
1.4%
FY2008 FY2009 FY2010 FY2011
(1) From continuing operations
Number of Retail Outlets Net Profit (1) Revenue (1)
28.2 28.6
94.4
273.7
FY2008 FY2009 FY2010 FY2011
(1)(1)(RMB mm)
Swimwear Fitness Wear
Sports Underwear Accessories
Due to decrease in
overseas sales as
well as adjustment
of product mix
Accelerated Growth Backed by Maturing
Business Model
14
Solid Margin Expansion and Significant
Profitability Growth
54.6 53.5
14.6
154.9
429.7
9.47.7
41.4% 42.7%
62.2%
30.4%
52.2% 60.2%
28.5%27.8%
10.6%
62.2%
39.5%
48.7%
FY2008 FY2009 FY2010 FY2011
GP (Domestic) GP (Overseas)
GP Margin (Domestic) GP Margin (Overseas)
GP Margin (Group)
2.9
115.1
29.927.6
317.2
33.1%
18.8%
13.5%
53.4%
FY2008 FY2009 FY2010 FY2011
Operating Profit Operating Margin
Operating Profit and
Operating Margin (1)
(RMB mm)
Gross Profit and Gross Margin (1) Net Profit and Net Margin (1)
(RMB mm)
94.4
28.628.2
273.7
27.1%18.0%
13.8%
39.4%
FY2008 FY2009 FY2010 FY2011
Net Profit Net Margin
(RMB mm)
(1) From continuing operations; Gross margin, operating margin and net margin are calculated by gross profit, operating profit
and net profit divided by revenue respectively
Decreasing
proportion of
oversea sales
drives margin
expansion
15
106.8
61.6
128.3
183.4
17.4
14.0
20.6
32.5
16.7
8.8
262.6
19.4
12.1
37.9
1.5
10.1
8.5
178.4
96.3
142.4
51.3%
37.8%
60.5%
69.6%
FY2008 FY2009 FY2010 FY2011
24.4 23.7 29.1
65.310.7 10.0
120.4
55.1
26.7
55.8
33.835.1
17.1%
21.2%
16.1%
17.3%
FY2008 FY2009 FY2010 FY2011
Administrative ExpensesSelling & Distribution ExpensesAs % of Revenue
Competitive Cost Structure
(RMB mm) Due to greater economics of
scale and transformation to
distributorship model;
increase in 2011 due to one-off
IPO expenses
SG&A (1) COGS (1)
(RMB mm) Due to increased sales
of higher margin
products and
greater economies of
scale
(1) For continuing business
Procurement cost of finished products Manufacturing overhead Labor Raw material As % of Revenue
16
Sports Underwear (1)
Swimwear Fitness Wear
32.7 41.7
97.9
232.9
28.9
45.5
27.1
4.4
41.8%46.3%
58.8%64.8%
28.4%
25.8%
16.5%
59.4%
FY2008 FY2009 FY2010 FY2011
Revenue (Domestic) Revenue (Overseas)
GP Margin (Domestic) GP Margin (Overseas)
(RMB mm)
Accessories (2)
(RMB mm)
(RMB mm)
(RMB mm)
Note: Gross margin is calculated by gross profit divided by revenue
(1) Hosa did not have any overseas sports underwear sales
(2) Hosa did not have any overseas accessories sales in 2011
26.568.4
154.8
4.8
5.4
41.8
45.6
45.5%50.0%
66.9%
45.2%
67.7%
7.0%
35.9% 29.0%
FY2008 FY2009 FY2010 FY2011
Revenue (Domestic) Revenue (Overseas)
GP Margin (Domestic) GP Margin (Overseas)
0.50
2.9 4.0
18.9
32.417.1%
65.4%
55.4%59.3%
FY2008 FY2009 FY2010 FY2011
Revenue (Domestic) GP Margin (Domestic)
54.5 52.9111.6
270.3
37.2%40.4%
57.0%
47.1%
FY2008 FY2009 FY2010 FY2011
Revenue (Domestic) GP Margin (Domestic)
Improving Profitability Across All Segments
Driven by Wholesale Discount Decrease, Product
Mix Adjustment and Decrease in Oversea Sales
17
140250
703
946
21.117.4
34.226.9
FY2008 FY2009 FY2010 FY2011
Volume ('000) ASP (RMB)
1,440 1,357
2,016
3,342
37.9 39.055.3
80.9
FY2008 FY2009 FY2010 FY2011
Volume ('000) ASP (RMB)
3,444
613
1,428
2,104
51.1 51.7
73.8
25.4
FY2008 FY2009 FY2010 FY2011
Volume ('000) ASP (RMB)
Sports Underwear
Swimwear Fitness Wear
2,1712,574
4,0023,686
64.435.8
27.427.6
FY2008 FY2009 FY2010 FY2011
Volume ('000) ASP (RMB)
Accessories
Increasing pricing power due to the change of product mix
and positioning towards premium products
Sales Volume and ASP by Operating
Segments
Due to decrease
in oversea sales
18
Debt Profile
39.0
126.9
98.8
0.0
FY2008 FY2009 FY2010 FY2011
(RMB mm)
(1) Calculated using total bank borrowings and bills payables divided by total assets
(2) Net debt is defined as the interest bearing debt, less cash and equivalents
(3) Excludes pledged bank deposits of RMB10.3mm, RMB13.2mm, RMB37.9 mm for FY2008, FY2009 and FY2010 respectively
(4) EBITDA is adjusted for other revenue and other net income/loss
Improving Credit Profile Interest Bearing Debt
(RMB mm)
Cash and Cash Equivalents(3)
48.8%
33.0%
6.0%
38.2%
FY2008 FY2009 FY2010 FY2011
92.2%
5.0%23.2%
FY2008 FY2009 FY2010 FY2011
3.60x
0.13x
0.76x
FY2008 FY2009 FY2010 FY2011
Gearing Ratio(1)
Net Debt to Equity Ratio(2)
Net Debt to EBITDA Ratio(2)(4)
17.6 15.683.8
635.6
FY2008 FY2009 FY2010 FY2011
Due to purchases
of more raw materials
at relatively lower
prices
All interest bearing debt of the company were short-term and
due within one year for FY08- FY10
Due to purchases
of more raw materials
at relatively lower
prices
Net Cash
Net Cash
19
87
253
123105
FY2008 FY2009 FY2010 FY2011
50
9499
104
FY2008 FY2009 FY2010 FY2011
88
180
113 120
FY2008 FY2009 FY2010 FY2011
(1) Calculated as the average inventory balances at the starting and ending divided by cost of sales from both continuing and discontinued operations and multiplied by 365 days (2) Calculated as the average trade
receivables balances at the starting and ending divided by revenue from both continuing and discontinued operations and multiplied by 365 days (3) Calculated as the average trade and bills payables balances at the
starting and ending divided by cost of sales from both continuing and discontinued operations and multiplied by 365 days (4) Before late 2007, Haosha Garments operated the Hosa indoor sportswear business and it
transferred relevant production facilities to Haosha Industry in October 2007. Haosha Industry, the Company’s core operating subsidiary, began to operate the indoor sportswear business afterwards and, therefore,
the starting balance of trade and bills receivables in 2008 was relatively low
Average Trade and Bill Receivables
Turnover Days(2)
Average Trade and Bills Payables
Turnover Days(3)
Average Inventory
Turnover Days(1)
(No. of days)
Due to the
expansion of
business operations
and the increased
purchases of raw
materials in 2009
(No. of days) (No. of days)
Due to purchases
of more raw materials
at relatively lower prices
in the year of 2009
Due to the low
starting balance
in 2008 (4)
Hosa generally grants a payment term of
60 to 90 days to its distributors for credit
sales. For customers with good credit
history and larger operation scale, we
may grant a longer payment period of up
to 180 days
Hosa has been granted a credit period
from 30 days to 180 days by its suppliers
Working Capital Cycle
20
I. Company Overview
II. Financial Review
III. Business Strategies
IV. Appendix
21
Hosa’s goal is to solidify its leading position in the PRC indoor sportswear market
Business Strategies
Strengthen Hosa’s research, design and
development capabilities and optimize product mix
1
R&D
Solidify leading position by expanding Hosa’s
sales and distribution network
3
Channel
Further strengthen marketing activities to promote
Hosa’s products and enhance Hosa brand culture
2 Branding
Enhance Hosa’s operating and cost efficiencies by
implementing integrated supply chain and
information management systems
4
Operations
22
I. Company Overview
II. Financial Review
III. Future Strategy
IV. Appendix
23
(RMB ’000) Years ended December 31,
2008 2009 2010 2011
Continuing operations
Turnover 204,643 159,169 347,787 695,168
Cost of sales (142,383) (96,253) (178,382) (262,552)
Gross profit 62,260 62,916 169,405 432,616
Other revenue 240 664 1,928 4,673
Other net income/(loss) 142 64 (379) 340
Selling and distribution expenses (24,431) (23,737) (29,122) (65,331)
Administrative and other operating expenses (10,655) (10,041) (26,695) (55,086)
Profit from operations 27,556 29,866 115,137 317,212
Finance costs (921) (2,640) (6,382) (1,544)
Profit before taxation 26,635 27,226 108,755 315,668
Income tax benefit/(expense) 1,596 1,382 (14,380) (41,937)
Profit from continuing operations 28,231 28,608 94,375 273,731
Discontinued operations
Profit from discontinued operations 734 79 4,135 -
Other net income - - 17,596 -
Other comprehensive income for the year - - - (638)
Profit and total comprehensive income 28,965 28,687 116,106 273,093
Summary Income Statement
24
Liabilities and Equity Assets
(RMB ’000) As at December 31,
2008 2009 2010 2011
Assets
Inventories 68,972 131,017 51,376 100,061
Trade prepayments and other receivables 96,818 170,060 290,925 226,657
Pledged deposits 10,290 13,240 37,920 13,171
Cash at bank and in hand 17,637 15,645 83,827 635,617
Total current assets 193,717 329,962 464,048 975,506
Property, plant and equipment 15,257 15,839 51,868 48,413
Construction in progress - 10,953 - -
Intangible assets 50 231 151 178
Lease prepayments - - 12,104 11,862
Deferred tax assets 1,723 3,279 5,277 7,857
Total non-current assets 17,030 30,302 69,400 68,310
Total assets 210,747 360,264 533,448 1,043,816
(RMB ’000) As at December 31,
2008 2009 2010 2011
Liabilities
Bank loans 39,000 126,880 98,800 –
Trade and other payables 79,819 112,769 128,966 149,777
Current taxation – – 8,291 16,808
Total current liabilities 118,819 239,649 236,057 166,585
Total liabilities 118,819 239,649 236,057 166,585
Equity
Paid in capital 60,839 60,839 121,500 13,027
Reserves 31,089 59,776 175,891 864,204
Total equity 91,928 120,615 297,391 877,231
Summary Balance Sheet
25
(RMB ‘000) Years ended December 31,
2008 2009 2010 2011
Net cash (used in) /
generated from operating activities (35,105) (68,445) 107,366 309,318
Net cash(used in)/generated from investing activities (14,965) (17,960) (66,787) 36,321
Net cash generated from / (used in) financing activities 59,594 84,413 27,603 206,151
Net increase / (decrease) in cash and cash equivalents 9,524 (1,992) 68,182 551,790
Summary Cashflow Statement
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