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ANTA Sports Announces 2013 Interim Results

Business optimisation strategy achieves initial success, Pursuing excellence and overcoming adversity to progress

(6 August 2013, Hong Kong) ANTA Sports Products Limited ("ANTA Sports" or the "Company", stock code: 2020) is pleased to announce the unaudited interim results of the Company and its subsidiaries (the "Group") for the six months ended 30 June 2013 (the "period").

Results Highlights

  Six months ended 30 June  
  2013 2012 Change
  RMB million RMB million  
Turnover 3,366.5 3,934.1 -14.4%
Gross profit 1,384.1 1,643.7 -15.8%
Profit from operations 736.3 899.7 -18.2%
Profit attributable to equity shareholders 625.7 769.6 -18.7%
Free cash inflow 540.6 827.1 -34.6%
       
  RMB cents RMB cents  
Basic earnings per share 25.09 30.86 -18.7%
       
  HK cents HK cents  
Interim dividend per share 19 23 -17.4%
       
Dividend payout ratio 60.2% 60.9% -0.7% pt
Gross profit margin 41.1% 41.8% -0.7% pt
Operating profit margin 21.9% 22.9% -1.0% pt
Margin of profit attributable to equity shareholders 18.6% 19.6% -1.0% pt

Financial Summary & Operational Performance

  • Maintained Solid Performance despite Industry Headwinds
    Due to the impact from keen competition and destocking activities in the market, the Group adopted a prudent control over orders placed by retailers, resulting a 14.4% decrease in turnover to RMB3.37 billion (2012 1H: RMB3.93 billion) during the period
    Despite the keen market competition, gross margin slightly dropped 0.7% point to 41.1% (2012 1H: 41.8%) duo to the improved production efficiency of the Group
    Profit attributable to equity shareholders declined by 18.7% to RMB625.7 million (2012 1H: RMB769.6 million); basic earnings per share amounted to RMB25.09 cents (2012 1H: RMB30.86 cents), reflecting the Group’s continued efforts to enhance cost effectiveness
    The Board has proposed an interim dividend of HK19 cents per ordinary share, which represents 60.2% of the profit attributable to equity shareholders
     
  • Took Proactive Actions to Minimise Industry Impacts on Our Retailers
    Exercised prudent control over amount of orders and provided more precise guidelines to retailers when placing orders
    Leveraged e-commerce channels, factory outlets and discount stores to clear out past season inventory
    Enhanced overall efficiency by closing less efficient stores and improving store image
     
  • Adopted Highly-effective Marketing Strategy to Capture Market Opportunities
    Successfully extended partnership with the Chinese Olympic Committee ("COC") for the 2013-2016 Olympic cycle, making ANTA Sports the "Sportswear Partner of the COC" for eight years in a row since 2009
    Provided stylish high-quality sportswear outfits to 16 Chinese national teams, including the Group's newly sponsored national teams: boxing, taekwondo and karate
    Enlisted two-times Olympic boxing gold medallist Mr. Zou Shiming to ANTA Sports’ line-up of endorsers and continued to demonstrate ANTA's "Keep Moving" brand spirit by helping him pursue his dream in professional boxing
    Multi-channels, including social media, broadcast media and company website to enhance the Group’s reach in the mass market and to interact with target customers in a cost-effective manner

Business Review

Adopted effective brand management strategy to reinforce leading market position and enhance differentiation

ANTA Sports has adopted an effective brand management strategy that integrates influential sponsorship resources with innovative promotional channels to reinforce ANTA's differentiated and functional brand image as well as the level of brand association. ANTA Sports has successfully extended partnership with the COC for the 2013 to 2016 Olympic cycle, making it the "Sportswear Partner of the COC" for eight consecutive years. This not only proves that the ANTA brand and products are well recognised by the Chinese government and China's top-tier athletes, but also solidifies its image as the "representative of China's sports essence".

Apart from its strategic partnership with the General Administration of Sport of China's Water Sports Management Centre and Winter Sports Management Centre, ANTA Sports also became the first domestic sportswear brand to provide professional sportswear to the national boxing team, taekwondo team and karate team under the Boxing and Taekwondo Sports Management Centre. For the 2013 to 2016 Olympic cycle, ANTA Sports will not only provide winning outfits for the Chinese Sports Delegation ("CSD"), but will also provide professional sportswear outfits for 16 China national teams for competitions, awards ceremonies, training and daily usage. Meanwhile, the Group has been focusing on the R&D work for the high-quality winning outfit for the Tianjin East Asian Games to be held in October. In addition, ANTA has signed an endorsement contract with two-times Olympic boxing gold medallist Mr. Zou Shiming, and launched a brand new boxing training product series endorsed by Mr. Zou Shiming under the cross training portfolio.

During the period, ANTA Sports leveraged other sports sponsorships to promote its professional image, particularly in the basketball, running and cross-training segments. Endorsed NBA players Kevin Garnett and Luis Scola, and ANTA Sports’ sponsorship of the Outdoor Street Basketball League, have strengthened ANTA Sports' leading position in the professional basketball segment. Furthermore, ANTA Sports sponsored the Olympic Day Run for the five consecutive years to promote the "Sports for All" spirit and the joyfulness of running. This year's Olympic Day Run, the largest in history, was held in 23 cities in China and attracted nearly 100,000 long-distance running enthusiasts throughout the country.

Strengthened retail channel management to overcome market challenges and achieve long-term sustainability

With the aim of building a lean and effective network structure, ANTA Sports has strategically optimised all forms of its retailers’ stores to enhance its leading position in the mass market. As at 30 June 2013, the number of ANTA performance-based sportswear stores and Sports Lifestyle series stores stood at 7,834 (end of 2012: 8,075). Meanwhile, the Group has optimised its network of Kids sportswear series stores to capture the mass market demand for kids products. As at 30 June 2013, the number of Kids sportswear series stores stood at 811 (end of 2012: 833). Furthermore, there were 332 FILA stores operating in China, Hong Kong and Macao (end of 2012: over 300).

In view of uncertainty in the market, ANTA Sports proactively examined and adjusted future orders from retailers so as to reduce their potential risks in over-destocking and deep discounting. The well-managed clearance channels – including factory outlets, discount stores and e-commerce channels – have enabled ANTA Sports to reduce inventory pressure at a faster pace. Through the real-time ERP system, weekly reports submitted by POS and frequent channel checks by sales people, the Group can monitor its retailers' performance so as to provide guidance to retailers to react to market changes. Meanwhile, all forms of supportive measures have been optimised to help retailers overcome the current challenges in the market and to achieve long-term sustainability.

During the period, ANTA Sports continued to encourage retailers to upgrade their store layout by adopting the sixth generation store image. The Group further optimised the "COC Corners" and "Grand Basketball Corners" at key stores to put special product series in the spotlight. Meanwhile, the Group has strategically expanded presence and visibility on popular e-commerce platforms, while it has also tailor-made a number of designated products for its e-commerce channels so as to prevent product cannibalisation and channel conflict between online and offline stores. The high quality, functional products offering good value-for-money have received favourable response from online consumers. Leveraging its partnership with the COC, the Group cooperated with overseas distributors to expand the presence in Southeast Asia, Eastern Europe and the Middle East markets, which will help ANTA Sports raise its international profile and to fuel its long-term growth.

Continued to enhance product functionality and supply chain management

Despite the uncertainty in the domestic sportswear market, ANTA Sports continued to see increasing demand for its products during the period. The Group has strategically optimised the execution capabilities of its supply chain in order to enhance efficiency in replenishing the supply of ANTA's best-selling items. The Group's cohesive relationships with quality OEM and ODM, as well as in-house production capabilities, provide flexibility to adjust production schedules to meet unforeseeable demand as necessary. Furthermore, the Group always supports its supply chain partners in enhancing workflow efficiency so as to improve their responsiveness to market changes. In order to enhance flexibility to fulfill replenishment orders, ANTA Sports further enhanced production efficiency while maintaining cost-leadership. The Group also adopts a strategic mix of in-house and outsourced production to better respond to market conditions. During the period, the respective proportions of self-produced footwear and apparel and procured footwear and apparel were 52.4% and 16.1%, respectively (2012 1H: 38.9% and 13.2%).

Facing difficulties in the current market environment, ANTA Sports continues to strengthen its internal R&D team and collaborates with external professionals to optimise its core technologies. During the period, ANTA Sports upgraded its A-Silo technology and launched the A-Silo 3.0 running shoes, which provide better fit, better support and cushioning, and a greater degree of comfort to runners by keeping their feet dry. During the period, ANTA Sports also introduced over 1,100, 800 and 650 new styles to the footwear, apparel and accessories portfolios, respectively, to cater for both professional and casual users. 

Prospects

Looking ahead, ANTA Sports will continue to focus on the cost-effectiveness and the synergy between its diverse sports resources and branding strategies in order to further differentiate the ANTA brand among its peers. ANTA Sports will make every effort to provide to the CSD and its sponsored China national teams' high-quality sportswear at major international sporting events during the 2013-2016 Olympic cycle. Furthermore, the Group is dedicated to strengthening its leadership in high-potential market segments by leveraging the strong influence of its endorsed sports stars and eye-catching advertising and marketing campaigns across China.

In order to maintain a sustainable distribution network to stay competitive, the Group will continue to consolidate stores in less optimal locations or with expiring leases. There will be total of between 7,600 to 7,700 ANTA stores (including Sports Lifestyle), 800 to 850 Kids sportswear series stores, and 350 to 400 FILA stores in the PRC by the end of 2013. Moreover, the Group will further optimise all forms of its retailers’ stores to improve store image and operating efficiency.

ANTA Sports will continue to provide consumers comfort, foot protection and hygiene by integrating its advanced technologies such as A-Jelly, A-Silo and A-Web into ANTA athletic footwear. Moreover, high performance fabrics for different sports and weather conditions will be applied to the Group's diverse range of apparel products. The Group will also stay abreast of fashion trends so as to better cater for the growing consumer demand on stylish sportswear. In addition, more eye-catching FILA collections will be launched through highly-effective publicity campaigns and POP featuring FILA's brand ambassadress Ms. Shu Qi to showcase FILA's unique brand image and trendy lifestyle to high-end consumers.

The Group will enhance efficiency in processing replenishment orders and will further shorten the lead time involved. The execution capabilities of the supply chain will also be strengthened, allowing ANTA Sports to maintain cost-leadership.

Mr. Ding Shizhong, Chairman and CEO of ANTA Sports, said, "China's sportswear industry still faces uncertainty associated with the unresolved excess inventory problem in the near-term. However, its mid-to long- term outlook will be promising as the Chinese government is generally believed to put more efforts in expanding domestic demand, boosting urbanisation and increasing participation in sports. Meanwhile, we have seen sequential improvements in our operational performance and the confidence of our retailers. We believe our strong execution and proper management of our distribution network enable us to bottom out at a faster pace than our peers. We will leverage our core strengths to maintain our leading position and to the meet the growing demand for sportswear in the long run."

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About ANTA Sports Products Limited
As one of the leading branded sportswear enterprises in China, ANTA Sports Products Limited primarily designs, develops, manufactures and markets sportswear, including footwear, apparel and accessories. The Group has established an extensive distribution network with a leading presence in second and third tier cities in China under the management of regional distributors. The Group places great emphasis on branding by integrating sports resources and sponsorship, advertising and promotional activities and a consistent store image to enhance brand and product differentiation. For the past 12 years, its footwear has been enjoying a leading position in China’s composed index on market share.

For further information, please contact:
ANTA Sports Products Limited

Investor Relations Department
Tel:    (852) 2116-1660
Fax:    (852) 2116-1590
E-mail:    ir@anta.com / ir@anta.com.hk

Hill+Knowlton Strategies Asia
Linda Pui / Erica Liu
Tel:    (852) 2894-6252 / (852) 2894-6378
E-mail:    anta@hkstrategies.com