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ANTA Sports Announces 2012 Annual Results Committed to Achieving Sustainability in the Long Run

Striving Towards Brand Development, Distribution Channel Optimisation and Product Differentiation

(25 February 2013, Hong Kong) ANTA Sports Products Limited (“ANTA Sports” or the “Company”, stock code: 2020) is pleased to announce the annual results of the Company and its subsidiaries (the “Group”) for the year ended 31 December 2012 (the “year”).

Results Highlights

  Year ended 31 December  
  2012 2011 Change
  RMB
million
RMB million  
Turnover 7,622.8 8,904.8 - 14.4%
Gross profit 2,893.2 3,762.4 - 23.1%
Profit from operations 1,563.3 2,011.5 - 22.3%
Profit attributable to equity shareholders 1,358.7 1,730.1 - 21.5%
Free cash inflow 1,610.0 1,219.5 + 32.0%
       
  RMB cents RMB cents  
Basic earnings per share 54.48 69.37 - 21.5%
       
Dividend per share HK cents HK cents  
-Interim 23 26  
-Final 17 26  
-Special 8 -  
  48
 
52
 
- 7.7%
 
Gross profit margin 38.0% 42.3% - 4.3%points
Operating profit margin 20.5% 22.6% - 2.1%points
Margin of profit attributable to
equity shareholders
17.8% 19.4% - 1.6%points
Dividend payout ratio 71.7% 61.1% + 10.6%points

 

Financial Summary & Operational Performance

  • Achieved stable operation amid challenging conditions in sportswear industry in China
    ‧Further reinforced brand leadership with effective marketing strategies riding on sponsorships and endorsements, including the Chinese Olympic Committee (“COC”) and NBA superstars
    ‧Continued to optimise retail channels to improve store efficiency and profitability
    ‧Further enhanced supply chain; strengthened the value-for-money in ANTA products
    ‧Strong cash position and adequate capital for future business development
     
  • Maintained stable dividend policy
    ‧The Board proposed a final dividend of HK17 cents per ordinary share (2011: HK26 cents) and a special dividend of HK8 cents per ordinary share (2011: Nil) together with the interim dividend of HK23 cents per ordinary share (2011: HK26 cents), represent a payout ratio of 71.7% of profit attributable to equity shareholders for the year
    ‧Provided better returns to shareholders despite the weak market condition in the industry and demonstrated Company’s confidence in future prospects
     
  • Took prudent approach to reduce risks
    ‧Decline in orders resulted in negative sell-in revenue growth, turnover dropped by 14.4% to RMB7.62 billion (2011: 8.90 billion)
    ‧Profit attributable to equity shareholders also decreased by 21.5% to RMB1.36 billion (2011: 1.73 billion)
    ‧Free cash inflow increased 32.0% to reach RMB1.61 billion (2011: 1.22 billion), equipped with healthy financial position for future development


Business Review

Strengthened Brand Equity with Effective Marketing Strategies

Despite the uncertainties and keen competition in the domestic sportswear market in the short term, the Group remains optimistic about the long-term development of the domestic sportswear sector, especially the market for functional and value-for-money sportswear products in the future. Thus, ANTA Sports utilised its solid and focused brand image to achieve sustainable growth. ANTA Sports cooperates with the COC to solidify ANTA’s brand positioning as a representative of China’s sports industry. During the 2012 London Olympics, the Chinese Sports Delegation (“CSD”) wore the “Champion Dragon Outfit”, the winning outfit tailor-made by ANTA Sports, and graced the podium 88 times, providing ANTA with extensive exposure and a platform to raise ANTA’s brand profile and to differentiate ANTA from its peers. ANTA Sports also launched a comprehensive set of marketing programmes with the COC, including cross-border Olympics marketing, the launch of IOC products, Olympics-themed TVCs and support for the “Home of China”, which has consolidated ANTA’s symbolic role of representing the sports industry in China.

At the same time, the Company focused on strengthening its marketing resources and the professional image in sports with high levels of participation in China, including basketball, running and women sports. During the year, ANTA Sports organised “Outdoor Street Basketball Leagues” to promote its basketball shoes, attracting over 20,000 players from 87 high schools in 20 cities, thereby successfully extending the reach to the general public. ANTA Sports also collaborated with pop singer Jane Zhang and utilised digital social media to promote the healthy and energetic image of the women’s sportswear series. Meanwhile, the Company diversified existing footwear technology with 4 running series to fit different types of runners. ANTA Sports also sponsored the Zhuhai International Half Marathon 2012 and Olympic Day Run, events that attracted over 35,000 enthusiasts to share the joy of running. It also integrated TVCs, in-store promotions and online platforms to highlight the functionality and comfort of the ANTA running products.

Reinforced Retail Channels and Streamlined Distribution Structure to Reduce Risks and Stay Competitive

In order to sustain the leading position in the ever-changing market, the Group placed greater importance on enhancing store efficiency over the expansion of the store network. During the year, ANTA Sports strategically consolidated stores in less optimal locations or with expiring leases, and strategically integrated the Sports Lifestyle series stores into performance-based sportswear stores to optimise the overall store efficiency. As at 31 December 2012, the number of ANTA performance-based sportswear stores and Sports Lifestyle series stores stood at 8,075 (2011: 8,665). Meanwhile, the Group expanded the network of Kids sportswear series stores to capture the demand in the mass market for kids products with number of stores increased to 833 (2011: 632). Furthermore, there were over 300 FILA stores operated in China, Hong Kong and Macao, further extending FILA’s reputation and desirability in the PRC market at the end of 2012.

The Group is committed to maintaining stable inventory levels and the sustainability of network. Since trade fair, ANTA Sports shared analysis and insights on future trends with distributors and franchisees so as to allow greater accuracy in orders and to minimise the inventory risk of each store. Apart from regular training on inventory management and product knowledge, ANTA Sports strictly examine the store optimisation plans and retail discount policies of retailers to improve their store efficiency. ANTA Sports also launched a full range of incentive measures to encourage retailers achieving key performance targets on inventory level and retail discount. ANTA Sports closely monitored and controlled retail performance through a comprehensive monitoring system. It also optimised the clearance channels, including factory outlets and discount stores, so as to improve the inventory management capabilities of the retailers.

ANTA Sports continued to encourage retailers to adopt the 6th generation store image for better store layout. Furthermore, the Company integrated marketing campaigns in e-commerce channels and expanded presence in Southeast Asia, Eastern Europe and the Middle East in a prudent approach.

Captured Market Potential through Innovation and Better Product Offerings

Despite the uncertainty in the domestic sportswear market, the Group continued to strengthen R&D and quality control capability to further differentiate its products. Advanced technologies from 3M™, Teflon® and INVISTA were applied to ANTA's products to enhance functionality in all weather conditions. Besides cooperating with renowned institutions, ANTA Sports also strengthened internal R&D team to optimise product value. Following the successful launch of the A-Silo, which provides better comfort and shock absorption to runners, ANTA Sports further enhanced the sole technology and launched Reflective A-Silo in the second half of 2012 to improve the visibility of runners at dawn, dusk or night, enabling joggers to enjoy safety besides flexibility. Nano-silver was also introduced in footwear products that create a coat of sterilising antibacterial protection of up to 90% efficiency for up to 30 times washes, preventing odor in footwear products. During the year, ANTA Sports introduced over 2,000, 3,000 and 1,400 new styles to the footwear, apparel and accessories portfolios, respectively, to cater to both professional and casual users.

ANTA Sports further optimised the cooperation with high quality supply chain partners to improve the workflow efficiency so as to offer the Company greater flexibility in the terms of trade. ANTA Sports also enhanced in-house production to better respond to unforeseeable demand. During the year, approximately 16.1 million pairs of ANTA footwear and 7.4 million pieces of ANTA apparel were produced in-house. The respective proportions of self-produced and procured footwear and apparel were 46.0% and 15.5% respectively (2011: 36.9% and 14.4%).

Prospects

Looking forward, inventory and intense competition due to deep discounting will remain the major problems faced by the sportswear industry. The Group remains cautious in the outlook on China’s sportswear industry in the short-term. Nevertheless, the Group will be more responsive to the market changes, and will engage in resolute actions so as to remain competitive and to achieve a promising future.

In addition to maximising the effectiveness of the diverse marketing resources, the Group also focuses on the synergy between these resources and branding and sales-driving strategies. Renewing the exclusive sportswear partnership with the COC for the next four years, starting in 2013, ANTA Sports will make every effort to provide to the CSD high-quality winning outfits and to kick off a series of marketing campaigns for the upcoming East Asian Games, to reinforce brand leadership. ANTA Sports will also further strengthen competitiveness in the basketball segment by leveraging the strong influence of ANTA-endorsed NBA superstars and the popular “Outdoor Street Basketball League” across China.

The Group will remain cautious in processing future orders and implementing store opening plans of retailers. By end of 2013, the total number of ANTA stores (including Sports Lifestyle) and Kids series stores are estimated to be between 7,500 to 7,600 and 950 to 1,000, respectively, while FILA stores in China, Hong Kong and Macao to reach 350 to 400. Moreover, more supportive measures will be adopted to help retailers overcome the current challenges, and motivate them to achieve better profitability and sustainability in the long run.

In view of the ever-growing demand for outdoor basketball gear, ANTA will expand the use of lightweight materials and highly durable rubber in its basketball products. To better cater to the increasing demand for stylish sportswear, the Group will stay abreast of fashion trends, optimise design capabilities, and integrate advanced fabrics into the diverse range of products. More importantly, the eye-catching FILA 2013 Spring/Summer collections endorsed by famous movie star Shu Qi will be launched soon and will showcase FILA’s unique style to high-end consumers.

The ongoing upgrade of effective management and IT systems will allow greater precision in processing orders and better control over inventory levels. The Group will not only respond to changes in consumer demand in a swift manner, but will also optimise product life cycle so as to shorten the production lead time. Moreover, the Group will further strengthen the cost-leadership and execution capabilities of supply chain to enhance efficiency in terms of production and replenishing of best-selling items.

Mr. Ding Shizhong, Chairman and CEO of ANTA Sports, said, “Looking ahead, China’s GDP will continue to grow steadily while inflation will remain stable. However, the volatile global economy will continue to affect China’s exports. The Chinese government is widely expected to reinforce its economic restructuring policies to expand domestic demand. Meanwhile, competition in the sportswear industry will remain intense. To cope with the uncertain market conditions, we will strive to take effective actions and measures to ensure the steady development of our business, supply chain partners, distributors and franchisees, as well as to create value for our stakeholders over 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 sports footwear, apparel and accessories. The Group has an 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 consistent store image to enhance brand and product differentiation. For the past 11 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.co