23 November 2016

Interim Results FY16/17 For the 6 months ended 30 September 2016

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Agenda

• Group’s Financial Performance

• Business Review by Market

• Outlook And The Way Forward

Group’s Financial

Performance

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Six months ended 30 Sep

(HK$M)2016/17 2015/16 YoY % Change

Turnover 3,628.0 3,777.9 -4.0%

Gross profit 1,494.2 1,621.7 -7.9%

EBITDA 181.5 256.4 -29.2%

Profit for the period 96.0 153.0 -37.3%

EPS – basic 3.3 cents 5.4 cents -38.9%

Return on equity 4.0 % 7.0 % -3.0 p.p.

Gross profit margin 41.2 % 42.9 % -1.7 p.p.

Net profit margin 2.6 % 4.1 % -1.5 p.p.

Group Performance in 1H

Interim dividend* 9.0 cents 9.0 cents --

-Basic 5.0 cents 5.0 cents --

-Special 4.0 cents 4.0 cents --

Dividend payout ratio ~ 278% ~ 167% +111 p.p.

* The interim and special dividends will be payable in cash, with a scrip dividend alternative. A 5% discount is offered on the subscription price for

eligible shareholders who elect to receive the dividends in scrip.

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Turnover

(HK$M)

% to Group

Turnover

HK & Macau 2,937.0 81.0%(LY:80.8%)

Mainland China 135.0 3.7% (LY:3.9%)

Singapore 101.3 2.8% (LY:3.0%)

Malaysia 163.4 4.5% (LY:3.8%)

Taiwan 98.3 2.7% (LY:3.4%)

sasa.com 193.0 5.3% (LY:5.1%)

Total 3,628.0 100%

Six months ended 30 Sep 2016

Total Turnover : HK$3,628.0 M (-4.0%)

Group Geographical Sales Mix

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Six months ended 30 Sep

(HK$M) 2016/17 2015/16 +/- Change

CAPEX 37.4 50.5 -13.1

Net cash generated from

operating activities238.8 84.6 +154.2

Dividend for the period 266.5 256.0 +10.5

Net cash and bank balance

(As of 30 Sep)

1,276.2

(*note 1)

783.5

(*note 2)+492.7

Group: Sound Financial PositionGroup

*note 1: Before payment of HK$220 million of final dividend in cash for FY15/16

*note 2: After payment of HK$410 million of final dividend in cash for FY14/15

Business Review

by Market

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Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points

*Source: Hong Kong Tourism Board

HK & Macau : Transactions Starting to Increase

• PRC tourist arrivals still falling but signs of decline tapering off

• Store transactions picking up due to improving product offerings and display

• Lower basket size reflects product offerings adapting to changing visitor

demographics and consumption behaviour

15.6%

22.1%20.4%

12.0%

3.7%

-4.1%

-11.2%

-14.4%

2.7%5.9%11.8%

13.8%

18.2%

7.7%

1.4%

-7.3%

-11.9%-15.1%

-5.4%

-5.1%-8.6%

-5.0%

-14.6% -15.1% -15.3%

-12.5%

-8.0%-9.8%

-6.4% -6.9%

Q114/15

Q214/15

Q314/15

Q414/15

Q115/16

Q215/16

Q315/16

Q415/16

Q116/17

Q216/17

FY14/15 to FY16/17 Volume and ASP Changes of PRC Customers

YoY Change in no. of transactions

YoY Change in PRC tourist arrivals*

YoY Change in basket size

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FY2016/171H

YOY retail sales changes -3.6%

YOY same store changes -3.6%

Total no. of transactions (Million / YoY change%)

- Mainland customers (YoY change%)

- Local customers (YoY change%)

9.1 / +2.3%

+4.4%

+0.2%

Avg. ticket size (HK$ / YoY change%)

- Mainland customers (YoY change%)

- Local customers (YoY change%)

321 / -5.7%

-6.6%

-6.3%

Customer Mix (by sales value / volume)

- Mainland customers

- Local customers68.9% / 49.1%

28.3% / 47.2%

HK & Macau: Sales Decline is Narrowing

• The improvements in Q2 are apparent and is due to increasing transactions with both

Mainland and local customers

• Sales decline purely due to lower ticket size:

Reflecting changes in consumption pattern and weaker spending power

Affected by strength of HK$ and depreciating RMB

Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points

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China: Sales Declined but Store

Contribution Continued to Improve

* Remarks: As at 31 Mar 2015, there were 62 multi-brand “Sasa “ stores and 3 single-brand counters in PRC ; as at 30 Sep 2015, there were 55 multi-brand “Sasa “ stores in PRC

As at 31 Mar 2016, there were 57 multi-brand “Sasa “ stores in PRC ; as at 30 Sep 2016 , there were 53 multi-brand “Sasa “ stores in PRC

Six months ended 30 Sep 2016/17 2015/16

(RMB 000’)

Avg number of multi-brand “Sasa” stores* 55 59

Retail Sales 115,231 119,883

YoY sales change -3.90% -8.60%

Total operating loss -12,236 -20,115

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Retail (in local currencies)

FY2016/17

1H

Singapore

YoY sales changes -11.0%

Malaysia

YoY sales changes 19.3%

Taiwan

YoY sales changes -22.8%

Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points.

Other Markets Performance

• Operation performances diverged - affected by management changes

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Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points.

• Fulfillment was seriously affected by changing logistics providers (sales affected & incurred

$5.6m one off costs)

• Lower GP% and increase in A&P

• China market initiatives

Commenced Zheng Zhou Free Trade Zone warehouse deliveries in August 2016

Launched a new App and cooperation with Netease - Kaola in September 2016

Driving flash sale and increasing marketing capability to drive traffic

E-commerce: Sales Flat due to Logistic Issues

FY16/17

(HK$M)

16/17

1HYoY Change

Total sales 193.0 -0.1%

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Brand Management: Adaptation to Market

*House brands = Own brands + Sole-agent brands Six months ended 30 Sep 16

• Adaptation of product offerings to market has improved sales performance

• Gross profit margin affected in the process

• House brands mix declined to 38.8% (LY: 41.3%)

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Outlook And

The Way Forward

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Challenges Remain but Opportunities Abound Challenges

• Cyclical economic weaknesses and currency weakness of RMB & strength of HK dollar,

changes in tourist flow, increasing local and global competition and evolution of shopping

behaviour

Opportunities

• Operating costs are adjusting downward, including rental and others; and there are rooms for

further reduction

• Consumer behaviour adaptation offers vast potential to acquire new customers, retain

existing ones and drive new sales

• Continuously improve product offering, particularly house brand

Fast-changing market require focus and fast adaptation

• Market focus - Hong Kong, Macau & Mainland China; Online and offline

• Embrace O2O- Digital media engagement, in store inter-activity and logistics upgrade

• Backend- Upgrade online Order Management System, CRM and content

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HK & Macau: Store Network Strategy

• Target aggressive rental cut (minimum 40- 50% reduction) in tourist locations

• Improve store locations to enhance brand image in tourist locations when

opportunities arise;

• Add stores in residential areas to capture market share of local consumers and also

stores near the Mainland border

• Close down big stores that are unproductive to enhance overall profitability

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• New store formats and products will attract new customers, enhance productivity and cost

efficiency

• Offer new concept and diverse product range from Korea, Japan and Taiwan

• Increase mid to high price product offerings to improve ticket size

• Improve house brand offerings to improve margin

HK & Macau: New Store Formats and Products

Attract New Customers

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HK & Macau: Consumer Behaviour Adaptation

Provides Opportunities for Growth

• Adapt marketing approach and customer experience to match customer journey changes

Increase online exposure and interactivity

Improve in-store interactivity and O2O integration

Improve visual merchandising with new store formats and streamlined SKUs

Improve CRM to retain customers, build customer loyalty and facilitate targeted marketing

• Faster new product launches to satisfy the latest demand trend

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China : Improve Management and Operations

• Have enhanced management team and structure

• Introduce fast moving and trendy products to boost sales

• Accelerate O2O business development

Introduce O2O experience zone in mainland physical stores to broaden product

selections through online offerings

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Malaysia Market

• Achieve better market performance amid weak local market in recent years

• Leading beauty specialty store in the market but competition heating up

• Strengthen makeup offerings to broaden customer base (Malay segment)

• Strengthen marketing resources including digital media

Singapore and Taiwan Markets

• Markets not attractive and conditions not favourable

• In consolidation mode

• Rebuild team, stabilise operations and reduce losses

• Aim for a smaller presence but with more effective operations

Singapore, Malaysia and Taiwan Markets

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Online Operations Part of O2O Strategy

• O2O will be main focus for future development

• Online operations require major improvements in systems development and

fulfillment capabilities

• Drive scalability and cost effectiveness to support growth

• Increase usage of Zhengzhou Free Trade Zone warehouse

• Increase number of PRC stores with O2O zone

• Coordinate online and offline operations for O2O shopping experience

• Explore strategic alliances with external parties to improve capabilities, increase

exposure and distribution channels

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• Using business and market intelligence improve product offerings

• Next step to improve house brand offerings to enhance margin

• Streamlining of product offering underway

Category Management &

Product Development Strategies

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No. of Retail Outlets

As of 31 Mar 16 Opened Closed

As of

30 Sep 16

HK & Macau 111 6* 5** 112

Mainland China 57 2 6 53

Singapore 23 0 0 23

Malaysia 65 2 0 67

Taiwan 31 1 6 26

Total 287 11 17 281

Multi-brand “Sasa” Stores

Store Network Strategy Varies Between Markets

• HK & Macau: Rationalise stores in tourist locations, build stores in residential locations, and modify size of specific stores to enhance productivity and profitability

• Malaysia: Expansion mode (increase penetration)

• Mainland China, Singapore and Taiwan: Optimisation mode (enhance store contribution)

* Opened: Tourist stores: 2; Non-tourist stores: 4

** Closed: Tourist stores: 1; Non-tourist stores: 4

Remarks: “Tourist stores” are defined as the traditional tourist area stores, which are different from the Group’s internal definition

As at 30 September 2016, there were 2 single-branded stores/ counters (1 in HK & Macau and 1 in Malaysia), totaling 283 retail outlets for the Group.

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Q&A