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ANTA Sports Announces 2010 Annual Results - Continued Improvement in Management and Operation Capabilities, Sustainable and Well-Balanced Growth

Keep Moving… to maintain our lead in mass market

(21 February 2011, 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 financial year ended 31 December 2010 ("the year" or "2010").
 
Results Highlights
 
  Year ended 31 December
  2010 2009 Change
  RMB million RMB million  
Turnover 7,408.3 5,874.6 +26.1%
Gross profit 3,170.6 2,472.9 +28.2%
Profit from operations 1,736.8 1,394.8 +24.5%
Profit attributable to equity shareholders 1,551.1 1,250.9 +24.0%
Free cash inflow 1,269.0 1,156.8 +9.7%
       
  RMB cents RMB cents  
Basic earnings per share 62.21 50.23 +23.9%
       
Dividend per share HK cents HK cents  
-Interim 20 12  
-Final 25 12  
-Special - 11  
  45 35 +28.6%
Payout ratio 62.1% 61.3% +0.8% pts
       
Gross profit margin 42.8% 42.1% +0.7% pts
Operating profit margin 23.4% 23.7% -0.3% pts
 Margin of profit attributable to equity shareholders 20.9% 21.3% -0.4% pts
 
Financial Summary & Operational Performance
 
•    Healthy Financial Performance
  • Turnover surged by 26.1% to RMB7,408.3 million (2009: RMB 5,874.6 million),attributable to the increase in average selling prices (“ASP”), additional product offerings and the expansion of distribution network
  • The Group’s gross profit margin increased 0.7 percentage points to 42.8% (2009: 42.1%) as a result of strong brand equity, enhanced product portfolio and effective cost control
  • In view of outstanding performance during the year, the Board of the Company
    proposed an final dividend of HK25 cents per share
  • Payout ratio of 62.1 % of the 2010 annual profit attributable to equity shareholders
•    Solid working capital management and strong cash flow
  • Average inventory turnover days: 36 days (2009: 38 days)
  • Average trade receivables turnover days: 19 days (2009: 16 days)
  • Average trade payable turnover days: 36 days (2009: 35 days)
  • Free cash inflow increased by 9.7% to RMB1,269.0 million (2009: 1,156.8 million)
    as a result of remarkable working capital management and outstanding operating performance
•    Significant volume and ASP growth
  • Footwear: ASP (wholesale) increased by 4.0% to RMB99.5 (2009: RMB95.7); volume increased by 10.9% to 38.43 million pairs (2009: 34.64 million pairs)
  • Apparel: ASP (wholesale) increased by 8.8% to RMB65.8 (2009: RMB 60.5); volume increased by 27.1% to 50.63 million pieces (2009: 39.83 million pieces)
•    Continued distribution network expansion and sales floor area optimisation
  • Number of ANTA stores across China increased to 7,549 compared to 6,591 at the end of 2009, representing a net increase of 958 stores
  • Total sales floor area increased to 872,000 sq. m. compared to 706,000 sq. m. at the end of 2009
  • Average sales floor area per store increased to 116 sq. m. compared to 107 sq. m. at the end of 2009
Business Review
 
Strong brand equity to a much wider coverage
 
Solid brand equity has always been, and will continue to be, our strongest competitive advantage. The Group has been focused on implementing effective branding strategy to enhance our nationwide brand recognition. During the year, we have been working closely with our exclusive sponsorship and endorsements resources as to enhance our brand desirability.
 
Our strategic partnership with the Chinese Olympic Committee (“COC”) and the Chinese Sports Delegation (“CSD”) provides an excellent platform for ANTA sportswear to appear on elite athletes in award ceremonies in major international competitions from 2009 to 2012. This not only raised our brand exposure but also differentiated ANTA from peers and helped ANTA stand out as the“representative of China’s sports industry”. During the year, our “Support China Altogether” marketing campaigns echoing ANTA’s support to the CSD’s participation in the most high-profile sporting events, Winter Olympics and Asian Games, have helped the Group capture the greatest market potential. Apart from the exclusive sportswear partnership with the COC, ANTA Sports has also made keen efforts in sponsoring elite athletes and top tier sports leagues to reinforce ANTA’s professional image and strengthen our association with major popular sports in China. The joining of NBA superstar Kevin Garnett to our ranks of endorsed athletes demonstrates our determination to raise ANTA Sports’ profile to the next level. ANTA’s endorsed sport stars, including Luis Scola, Zheng Jie, Jelena Jenkovic, Wang Hao, etc., and the top sports league players outfitted by ANTA sportswear are the best ambassadors of ANTA Sports’ world-class products. Our strong portfolio of sports resources has played an indispensable role in enhancing the desirability of the ANTA brand and in fuelling the sustainable growth of our business.
 
Strategically expanded distribution network in second and third tier cities
 
To match our mass market orientation, ANTA Sports continues to penetrate into high growth areas with a primary focus on second and third tier cities to capture opportunities brought by urbanisation and wage increases. As at 31 December 2010, the number of ANTA stores grew by 958 to 7,549 (2009: 6,591). We further optimised the store size and location to boost retail performance and brand image. Total sales floor area and average sales floor area per store were approximately 872,000 sq. metres and 116 sq. metres respectively. Taking advantage of popular e-commerce platforms such as taobao.com, letao.com and amazon.cn, the Group successfully captured the booming demand from online shoppers.
 
ANTA Sports believes our business’ sustainability is closely linked to the health and soundness of the distribution network. With this belief, we have built over years an extensive network and an effective management system which extend our surveillance down to the store level. Store performance data are collected through an ERP system and weekly reports submitted by POS. We share the insights we learn from historical trends to distributors and franchisees and guide their annual store expansion plans and trade fair order estimates, the accuracy of which will directly affect the stores profitability. We also provide training and support to enhance their management capabilities and ANTA store image.
 
  31 Dec 2010 31 Dec 2009 Net increase
ANTA stores      
     Eastern region 2,743 2,451 +292
     Southern region 2,268 1,991 +277
     Northern region 2,538 2,149 +389
Total number of ANTA stores 7,549 6,591 +958
       
Sports Lifestyle series stores 749 343 +406
Kids sportswear series stores 383 228 +155
 
Efficient supply chain to foster cost control 
 
The Group further improved our workflow and cost monitoring systems to remain effective amidst rising inflationary pressures. Leveraging our extensive supply chain network, our procurement team worked closely with suppliers, OEM and ODM to monitor and share information of the cost trends of key raw materials. Meanwhile, we also extended collaboration with high quality OEM and ODM. The Group also identified critical manufacturing processes to save costs and reduce wastage. Moreover, we ordered materials with OEM and ODM to enjoy mass-purchase discounts.
 
Product innovation and optimised product portfolio 
 
The recognition of 9-year top seller of travel and sports shoes in China illustrates our products are well-received by the mass market. ANTA Sports believes technological invention and cutting-edge design are essential to sustain our leadership in the mass market. We continue to strengthen our internal R&D and design capabilities and collaboration with external institutions to seek for breakthroughs. Furthermore, the Group spares no effort to offer consumers the best value for money. During the year, the Group has enhanced our product value and optmised the product mix by widening the apparel portfolio. In particular, the Group introduced approximately 2,100 new footwear products, 3,700 pieces of apparel and 2,000 accessory items, to ensure our portfolio of products meet the different tastes and needs of consumers.
 
Prospects
 
Looking ahead, the prospect of mass market remains promising amid the increases in purchasing power and sports participation, thanks to the Chinese government’s economic policies and its efforts to promote sports. Continued industry consolidation also enables the Group to expand market share by leveraging our competitive edge.
 
Our commitment to build ANTA into a strong brand is best demonstrated by our efforts to perfect the sponsorship and endorsement portfolio. We are devoted to unleashing the value of such powerful resources to the fullest degree. Marketing campaigns riding on NBA superstar Kevin Garnett’s popularity in China will give our brand value and desirability a strong boost in the basketball market. The Group is also committed to providing more innovative products to help increase the performance of our endorsed athletes and sponsored league players. In the spirit of “Reach Higher” marketing campaign, we hope Kevin Garnett will achieve greater achievements in the NBA as he competes in the “KG” shoes tailormade by ANTA. In addition, we will further strengthen our collaboration with the COC and the CSD by rolling out a series of Olympics themed marketing campaigns and products to better connect ANTA to our target customers leveraging the CSD’s participation in the upcoming London Olympics. Our effective use of top-tier sports resources will not only enhance brand equity but also fuel sales growth.
 
Rising affluence and a heightened awareness of health among the public have produced alarge number of sports enthusiasts. As more women take part in sports and fitness exercises, the Group is ready to capitalise this potential market. We will roll out TVC and POP to coincide with the launch of performance-based products injected with fashion and trendy elements to meet the demand of this growing female market. We will also expand our basketball product offerings to mark the joining of Kevin Garnett to the ANTA family. The Group also sees increasing demand for sports lifestyle products from style-conscious young people who seek individuality. We are therefore devoting efforts to further optimise and expand the product mix of our Sports Lifestyle series to satisfy that need. Furthermore, the Fila business in the PRC also represents a long term growth opportunity for the Group in the high-end market with its unique brand position and stylish products.
 
As second and third tier cities are expected to continue to be the engine for growth we will focus our store expansion efforts in these areas to solidify our leadership. At the same time, we will reinforce our brand image by establishing a stronger presence in big cities and by optimising the decoration and product display on the store level.
 
With the support of ANTA Technology Centre and external R&D partners, we are well-equipped to achieve breakthroughs in the technology, design and material of product innovation. More importantly, we will step up cost control measures and further enhance our operational systems to maintain our profitability and help our supply chain partners and retailers to sustain in spite of keen competition in an inflationary environment. The pilot run of the upgraded ERP system at selected ANTA stores will soon begin. The new system will have larger network coverage and we believe it will lift store efficiency with the provision of more timely and insightful information on consumer preferences and market trends.
 
Mr. Ding Shizhong, Chairman and CEO of ANTA Sports, said, “As the Chinese economy expands steadily and the trend of rising wage continues, the surge in disposable income and domestic consumption continued to fuel the growth and prospects of the sportswear industry. We believe the prospect of the mass market is still inspiring and we would strive on leveraging our competitive strengths to foster a more desirable market share. In order to sustain our profitability and that of retailers, we will implement more effective cost control measures and closely work with retailers to ensure their store efficiency and inventory levels healthy. We have also undertaken the ERP system optimisation program in order to monitor our retail performance and to gain more real-time market intelligence for long term growth in a bid to create higher value and return for our shareholders.”
 
~ End ~
 
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 established 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 nine years, its footwear has been enjoying a leading position in China’s composed index on market shares.
 
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 Asia Limited
Gary Li       
Tel:        (852) 2894 6239 / 9652 9002   
E-mail:    gary.li@hillandknowlton.com.hk
 
Carol Mak
Tel:        (852) 2894 6283 / 6126 5261
E-mail:    carol.mak@hillandknowlton.com.hk