Yue Yuen Industrial 2018 1Q Results

14 May 2018

Disclaimer

Yue Yuen and Pou Sheng have taken every reasonable care in preparing this presentation. However, please be

reminded that the information, materials, opinions and statements contained or referred to in this presentation are all

provided on an "as is" basis. None of the aforesaid information, materials, opinions and statements constitutes or will

be viewed as investment advice or an offer, or a solicitation, recommendation or suggestion by Yue Yuen or Pou Sheng

to deal in any investment products including securities, or other financial products and instruments.

If there is any forward-looking statements contained or referred to in this presentation, these forward-looking

statements are based on current expectations and assumptions, of which many are beyond our control. In addition,

these statements are subject to a number of risks, uncertainties and factors and if any of these risks or uncertainties

materialize, or if underlying expectations not occur or assumptions prove incorrect, actual results, performance or

achievements of Yue Yuen and/or Pou Sheng may vary materially from those described explicitly or implicitly in the

relevant forward-looking statement. Neither Yue Yuen nor Pou Sheng intends or assumes any obligation, to update or

revise these forward-looking statements in light of any difference from those anticipated.

Yue Yuen and Pou Sheng including their respective subsidiaries, associated or affiliated companies, or any of their

respective directors, employees, agents, representatives or associates accepts no liability for and shall not be

responsible or liable for any loss or damage of whatever kind or nature, directly or indirectly, arising from action taken,

or not taken, in reliance on, or resulting from access to or use of the aforesaid information, materials, opinions and

statements (including forward-looking statements, if any) contained or referred to in the presentation.

2

Vietnam Indonesia PRC Others*

Company Profile Founded in 1988, and listed on the HKEx in 1992 (551.HK)

Core Businesses: Footwear manufacturing and Retail Business Pou Sheng (3813.HK)

Manufacturing – Predominately athletic and casual / outdoor shoes

Pou Sheng – Sportswear retail & sports services in the Greater China Region

Manufacturing business core competences: responsiveness, flexibility, innovation, design and development capabilities, and superior quality

A yield play with solid performance – committed to driving return and value for shareholders

1Q18 Revenue by Business Segments Production Volume by Location

1Q17 1Q18

45.1%

7.4%

3.5%

* Bangladesh, Cambodia, Myanmar and Mexico

# YoY change in production volume

1Q18: 76.6 mn vs. 1Q17: 80.7 mn pairs

1Q18 Total Revenue US$ 2,287.4 million

*Revenue from Texas Clothing Group (“TCG”), a subsidiary of Yue Yuen since April 7, 2017

34.8%

13.3%

44.0% 35.7% 39.0%

16.7% 15.3%

2.5% 1.7%

5% (1Q17: 7%)

Casual/ Outdoor shoes

Soles, Components & Others

Athletic

Sports sandals

38% (1Q17: 32%)

11 % (1Q17: 12%)

1% (1Q17: 1%)

41% (1Q17: 48%) Retail

3

4% (1Q17: 0%)

Apparel Wholesale *

Source: Company audited financial statements and management accounts * FY17 Final Dividend: HK$ 1.1/share (Total dividend for FY17 was HK$5.0/share, including HK$0.4 interim dividend and HK$3.5 special dividend) ** Excluding special dividend

Revenue (USD ’mn)

Profit attrib. to owners (USD ’mn)

519.2

9,121.4

74%

65% 56%

61%

1.15 1.2

1.4 1.5

2014 2015 2016 2017

Payout ratio**

HK$ per share**

Dividend* (HK$/Share)

Payout Ratio**

61%

$1.5+$3.5*

Prod. Vol. (’mn Pairs)

ASP (USD)

$16.87

324.6

17.53 17.25 16.88 16.87

307

318

322 325

2014 2015 2016 2017

Avg. selling price

Production volume

331 390 535 519

8,013

8,435 8,481

9,121

2014 2015 2016 2017

Profit attrib. to owners

Revenue

2017 Financial Performance Overview

4

Our Growth Strategy

Speed

Sustainability

Flexibility

Innovation

Quality

Design

OEM / ODM

Material

Process

Equipment

Apparel

Accessories

Footwear

Retail

Values

5

Directions

4

Segments

3

End to End Platform

2

World’s Leading Sporting Goods

MFG Platform

1

Vertical Integration

Horizontal Integration

5

1Q 2018

Financial Highlights

Revenue

RMB 5.5 bn + 17.7%

OP Margin

4.6% RMB 252.2 mn

+ 19.3%

Pou Sheng

Revenue

US$ 2,287.4 mn + 8.9%

GP Margin

20.1% US$ 287.4 mn

- 3.9%

Production Volume

76.6 mn pairs

ASP

US$ 15.75

Profit Attrib. to Owners

US$ 95.4 mn - 23.3%

Group

Group excl. PS* * Group excl. PS used in this presentation, unless otherwise specified, includes manufacturing business and TCG

Operating Profit

US$ 125.5 mn - 3.1%

Key Financial Highlights for 1Q 2018

7

996.1

261.4 29.8

676.4

-

137.1

938.0

241.4 27.0

858.5

99.5 123.0

Athletic Casual/Outdoor

SportsSandals

Retail ApparelWholesale*

Others**

1Q17 1Q18

26.9%

10.3%

N/A

5.8%

(US$’ mn) 1Q18 Shoe Production Revenue by Product Categories

Casual/Outdoor

Sports sandals

Athletic

78%

20%

2%

7.7%

9.4%

Shoe Production

Rev: US$ 1,206.4 mn

Volume 5.1%

ASP 1.3% * TCG (since April 7, 2017)

** Soles, Components & Others

Y-o-Y Revenue by Product Category

8

Production Volume by Location for 1Q18

9

1Q FY18 Production Volume: 76.6 mn pairs

China

Indonesia Vietnam

39%

44%

15%

Operation Efficiency Indicator

2014 2015 2016 2017

307.1

317.5 322.0

324.6

386.1K

386.0K

326.4K

330.5K

315,000

355,000

395,000

435,000

2014 2015 2016 2017

280

290

300

310

320

330

Production Volume 'mn

MFG Employees

PPH Index

Productivity – Pairs of shoes produced vs MFG employees from 2014 to 2017

PPH Index – Pairs per person per hour from 2014 (index from 100) to 2017

100 105.4 113.5 123.0

10

Revenue

In US$’mn

Profit Attrib. to Owners

In US$’mn

Pou Sheng

Group excl. PS

The above figures of Pou Sheng exclude profit attributable to “Non-YY” shareholders (i.e. the 37.6% minority interests)

Pou Sheng

Group excl. PS

13.75

81.69

9.36

115.13

-23.3%

1Q17 1Q18

676.42

1,424.39

+8.9%

1Q17 1Q18

858.52

1,428.87

+26.9%

+0.3%

+46.9%

-29.0%

Revenue & Profit Attributable to Owners

11

Source: Company accounts Please refer to the announcement on the HKEx website for the unaudited consolidated income statements of 1Q2018 & 1Q2017

YY Group Financial Highlights

1Q 2018 1Q 2017 Y-o-Y

US$'000 % US$'000 % + / -

Revenue 2,287,391 100.00 2,100,810 100.00 8.88%

Cost of Sales (1,710,035) -74.76 (1,574,793) -74.96 8.59%

Gross Profit 577,356 25.24 526,017 25.04 9.76%

SG&A (432,288) -18.90 (364,735) -17.36 18.52%

Other Income & Expenses, net (19,542) -0.85 (31,791) -1.51 -38.53%

Operating Profit 125,526 5.49 129,491 6.16 -3.06%

Share of Results of A&JV 15,300 0.67 14,242 0.68 7.43%

Finance Cost & Other Gains/(Losses) (11,686) -0.51 11,488 0.55 N/A

Income Tax (23,853) -1.04 (22,764) -1.08 4.78%

Profit for the Period 105,287 4.60 132,457 6.31 -20.51%

Profit attrib. to Owners 95,441 4.17 124,491 5.93 -23.34%

12

(US$’mn) 1Q 2018 1Q 2017

Depreciation & Amortization 83.7 71.5

EBITDA 206.4 198.8

Capital Expenditure 156.5 117.6

Product Development 50.4 52.8

31 March 2018 31 March 2017

Total Borrowings 2,023.1 1,016.6

Net Borrowings 1,070.2 Net Cash: 163.2

Total Debt to Equity (%) 42.0% 19.4%

Net Debt to Equity (%) 22.2% N / A

1Q 2018 1Q 2017

Total Debt to EBITDA (X) annualized 2.5X 1.3X

Net Debt to EBITDA (X) annualized 1.3X N/A

Return on Owner’s Equity (%) annualized 8.7% 10.2%

Return on Asset (%) annualized 5.0% 6.7%

Source: Company accounts (figures rounded) Please refer to the announcement on the HKEx website for the unaudited consolidated income statements of 1Q2018 & 1Q2017

Financial Ratios

13

YY Group ROE Trend

8.0

7.5

9.9

8.7

9.4

11.3 11.3

12.1

6M14 FY14 6M15 FY15 6M16 FY16 6M17 FY17

ROE

(%)

Remark: ROE=Profit attributable to owners of the company/ (Total Equity - Minority Interests); half year data is on LTM basis

14

Group excl. PS Note: The figures in the following slides covers the core manufacturing and other operations of the consolidated entity of Yue Yuen Group, and

are for analytical purposes only (prepared using the management accounts)

Group excl. PS Financial Highlights

1Q 2018 1Q 2018 – MFG only 1Q 2017 Y-o-Y –

MFG only

US$'000 % US$'000 % US$'000 % + / -

Revenue 1,428,873 100.00 1,329,396 100.00 1,424,390 100.00 -6.67%

Cost of Sales (1,141,489) -79.89 (1,081,441) -81.35 (1,125,405) -79.01 -3.91%

Gross Profit 287,384 20.11 247,955 18.65 298,985 20.99 -17.07%

SG&A (168,085) -11.76 (138,919) -10.45 (159,075) -11.17 -12.67%

Other Income & Expenses, net (33,449) -2.34 (33,238) -2.50 (41,214) -2.89 -19.35%

Operating Profit 85,850 6.01 75,798 5.70 98,696 6.93 -23.20%

Share of Results of A&JV 15,634 1.09 15,634 1.18 15,119 1.06 3.41%

Finance Cost & Other Gains/(Losses) (6,293) -0.44 (5,430) -0.41 15,074 1.06 N/A

Income Tax (12,430) -0.87 (9,006) -0.68 (12,114) -0.85 -25.66%

Profit for the Period 82,761 5.79 76,996 5.79 116,775 8.20 -34.06%

Profit Attrib. to Owners 81,699 5.72 75,934 5.71 115,129 8.08 -34.04%

Source: Company management accounts

16

Group excl. PS Financial Ratios

(US$’mn) 1Q 2018 1Q 2018– MFG only 1Q 2017

Depreciation & Amortization 64.3 62.7 58.6

EBITDA 147.6 136.0 155.3

Capital Expenditure 144.3 142.3 102.6

31 March 2018 31 March 2018– MFG only 31 March 2017

Total Borrowings 1,550.7 1,452.5 813.9

Net Borrowings 631.8 536.9 Net Cash: 342.4

Total Debt to Equity (%) 38.3% 36.6% 17.6%

Net Debt to Equity (%) 15.6% 13.5% N / A

1Q 2018 1Q 2018– MFG only 1Q 2017

Total Debt to EBITDA (X) annualized 2.6 X 2.7 X 1.3 X

Net Debt to EBITDA (X) annualized 1.1 X 1.0 X N / A

Return on Owner’s Equity (%) annualized 8.1% 7.7% 10.0%

Return on Asset (%) annualized 4.9% 4.8% 7.1%

Source: Company management accounts (figures rounded)

17

18.7

19.1

18.9

21.9

19.8

20.5 20.5

22.8

21.0

21.6 21.6

22.7

20.1

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

Gross Profit Margin

Group excl. PS GP Margin Trend

(%)

GP Margin % - MFG only

2Q17 3Q17 4Q17 1Q18

20.7 20.4 21.8 18.7

18

Group excl. PS OP Margin Trend

(%)

5.3

6.1

3.7

6.8

5.9

7.5

6.7

9.8

6.9

7.1

8.0

8.4

6.0

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

Operating Profit Margin

OP Margin % - MFG only

2Q17 3Q17 4Q17 1Q18

7.2 7.8 8.6 5.7

19

Pou Sheng International Note: The figures in the following slides are based on Pou Sheng’s

management accounts and announcements, and Pou Sheng adopts RMB as its reporting currency

Pou Sheng Key Business Activities

Retail Business

Leading distributor of footwear, apparel & accessories for international brands in China

A key partner to Nike and adidas

Sells through directly operated stores, or on a wholesale basis to sub-distributors, online & offline

Store locations include department stores, shopping malls, sports cities, street level & outlets

Brand licensee Business

Sport Services Platform

Provides full range of sports services

Products + Services

364 + 1

Online & Offline

Mainland China & Taiwan

21

Directly Operated Stores

Sub-Distributor Stores Mono Brand Stores

Multi-Brand Stores

YY Sports Outlets: New shopping experience for fast growing

brands

Omni-Channel Strategy Across China

Brick and Mortar Stores

Online Stores

Retail Network

YYsports.com

Rockport.com.cn

3rd party: T-Mall, JD Mall..etc. B2B services

Covers 300 cities in the Greater China

B2B

B2C

22

Distinguished Partners and Events

23

Pou Sheng Financial Highlights (in RMB)

1Q 2018 1Q 2017 Y-o-Y

RMB’mn % RMB’mn % + / -

Revenue 5,503 100.00 4,674 100.00 17.74%

Cost of Sales (3,644) -66.22 (3,105) -66.43 17.36%

Gross Profit 1,859 33.78 1,569 33.57 18.48%

SG&A (1,699) -30.87 (1,427) -30.53 19.06%

Other Income & Expenses, net 92 1.67 69 1.48 33.33%

Operating Profit 252 4.58 211 4.51 19.43%

Share of Results of A&JV (2) -0.04 (6) -0.13 -66.67%

Finance Cost & Other Gains/(Losses) (33) -0.60 (23) -0.49 43.48%

Income Tax (73) -1.33 (74) -1.58 -1.35%

Profit for the Period 144 2.62 108 2.31 33.33%

Profit Attrib. to Owners 141 2.56 104 2.23 35.58%

Source: Based on Pou Sheng’s announcement on the HKEx website for the unaudited consolidated income statements of 1Q18 & 1Q17

24

Pou Sheng Financial Highlights (in USD)

1Q 2018 1Q 2017 Y-o-Y

US$'000 % US$'000 % + / -

Revenue 858,518 100.00 676,420 100.00 26.92%

Cost of Sales (568,546) -66.22 (449,388) -64.44 26.52%

Gross Profit 289,972 33.78 227,032 33.56 27.72%

SG&A (264,203) -30.77 (205,660) -30.40 28.47%

Other Income & Expenses, net 13,581 1.58 9,217 1.36 47.35%

Operating Profit 39,350 4.58 30,589 4.52 28.64%

Share of Results of A&JV (334) -0.04 (877) -0.13 -61.92%

Finance Cost & Other Gains/(Losses) (5,067) -0.59 (3,380) -0.50 49.91%

Income Tax (11,423) -1.33 (10,650) -1.57 7.26%

Profit for the Period 22,526 2.62 15,682 2.32 43.64%

Profit Attrib. to Owners 22,030 2.57 15,001 2.22 46.86%

Source : Internal analysis report (figures rounded); various accounting reclassification and adjustments are made to some of the figures when consolidating Pou Sheng numbers into the Yue Yuen Group in order to comply with the requirements of accounting standards

25

30.9

33.4

33.2

35.8

34.9

36.3

36.2

34.8

33.6

35.6

34.5

36.3

33.8

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

Gross Profit Margin

Pou Sheng GP Margin Trend

(%)

26

3.5

5.8

4.3

2.9

6.6 7.2

5.5

3.5

4.5

6.1

2.9 2.8

4.6

1Q15 2Q15 3Q15 4Q15* 1Q16* 2Q16* 3Q16* 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

Operating Profit Margin

Pou Sheng OP Margin Trend

(%)

* the figures have been restated due to the application of merger accounting

27

Pou Sheng Financial Ratios (in RMB)

(RMB’mn) 1Q 2018 1Q 2017

Depreciation & Amortization 124.5 88.7

EBITDA 376.6 295.1

Capital Expenditure 78.8 103.7

31 March 2018 31 March 2017

Total Borrowings 3,011.0 1,826.3

Net Total Borrowings 2,755.7 1,583.0

Total Debt to Equity (%) 45.7% 29.3%

Net Debt to Equity (%) 41.8% 25.4%

1Q 2018 1Q 2017

Total Debt to EBITDA (X) annualized 2.0 X 1.5 X

Net Debt to EBITDA (X) annualized 1.8 X 1.3 X

Return on Owner’s Equity (%) annualized 8.6% 6.7%

Return on Asset (%) annualized 4.7% 4.0%

Source: Internal analysis report (figures rounded)

28

Operation Efficiency

28

149

2017 1Q18

16

146

Receivable Days

Inventory Days

Payable Days

Based on RMB

29

19

29

Pou Sheng Store Performance

Number of Stores

Directly Operated Sub-Distributors Total Stores

As at December 31, 2017 5,465 3,313 8,778

Net New Store + / (-) * 52 6 58

As at March 31, 2018 5,517 3,319 8,836

2018 1Q 2Q 3Q 4Q

Directly Operated Stores 10.1%

Same Store Sales Growth (SSSg)

30

Appendix

Shareholding Structure

Tsai Family

Pou Chen (9904.TT)

Public Float

Manufacturing & Others

Pou Sheng (3813.HK)

Yue Yuen Industrial (Holdings) Ltd. (551.HK)

62.4%

7% 42.8%

50.2%

* As at May 14, 2018

32

100%

Company Milestones Sales channels reached 8,778

Started first overseas production in South China

Established production bases in Vietnam & Huangjiang, China

Established production bases in Mexico

Established production bases in eastern and inland China

Began operations at the new headquarters in Taichung, Taiwan

Established production bases in Bangladesh & Cambodia

Established production bases in Myanmar

1988

1992

1994

1998

2001

2002

2006

2008

2009

2014

2015

Expanded into retail business in China

Brand licensee for Hush Puppies in Taiwan

Pou Sheng International listed on HKEX (3813.hk)

Brand licensee for Pony in Taiwan & China

Yue Yuen

Pou Sheng

2012 New CEO on board

Yue Yuen Industrial listed on HKEX (551.hk)

Yue Yuen Industrial founded

2017 Revenue and DPS reached historical high of US$9.1bn and HK$5.0 per share (including special dividend: HK$3.5)

33

Group excl. PS Financial Highlights

FY2017 FY2017 – MFG only FY2016* Y-o-Y –

MFG only

US$'000 % US$'000 % US$'000 % + / -

Revenue 6,346,026 100.00 6,092,328 100.00 6,036,828 100.00 0.92%

Cost of Sales (4,966,554) -78.26 (4,814,517) -79.03 (4,772,468) -79.06 0.88%

Gross Profit 1,379,472 21.74 1,277,811 20.97 1,264,360 20.94 1.06%

SG&A (735,595) -11.59 (652,819) -10.72 (658,855) -10.91 -0.92%

Other Income & Expenses, net (159,578) -2.52 (157,951) -2.59 (149,193) -2.47 5.87%

Operating Profit 484,299 7.63 467,041 7.67 456,312 7.56 2.35%

Share of Results of A&JV 65,112 1.03 65,112 1.07 68,639 1.14 -5.14%

Finance Cost & Other Gains/(Losses) (10,963) -0.17 (7,786) -0.13 (2,026) -0.03 284.30%

Income Tax (50,277) -0.79 (52,158) -0.86 (36,621) -0.61 42.43%

Profit for the Period 488,171 7.69 472,209 7.75 486,304 8.06 -2.90%

Profit Attrib. to Owners 482,959 7.61 466,997 7.67 479,839 7.95 -2.68%

Source: Company management accounts

* The figure has been adjusted due to reclassification of selling and distribution expenses and other expenses in the consolidated income statement

34

Pou Sheng Financial Highlights (in RMB)

FY2017 FY2016 Y-o-Y

RMB’mn % RMB’mn % + / -

Revenue 18,833 100.00 16,236 100.00 16.00%

Cost of Sales (12,239) -64.99 (10,468) -64.47 16.92%

Gross Profit 6,594 35.01 5,768 35.53 14.32%

SG&A (6,052) -32.14 (5,072) -31.24 19.32%

Other Income & Expenses, net 228 1.21 228 1.40 -0.00%

Operating Profit 770 4.09 924 5.69 -16.67%

Share of Results of A&JV (4) -0.02 (12) -0.07 -66.67%

Finance Cost & Other Gains/(Losses) (109) -0.58 (80) -0.49 36.25%

Income Tax (242) -1.28 (262) -1.61 -7.63%

Profit for the Period 415 2.20 570 3.51 -27.19%

Profit Attrib. to Owners 394 2.09 561 3.46 -29.77%

Source: Based on Pou Sheng’s announcement on the HKEx website for the unaudited consolidated income statements of FY17 & FY16

35

Pou Sheng Financial Highlights (in USD)

FY2017 FY2016 Y-o-Y

US$'000 % US$'000 % + / -

Revenue 2,775,400 100.00 2,443,730 100.00 13.57%

Cost of Sales (1,803,726) -64.99 (1,575,525) -64.47 14.48%

Gross Profit 971,674 35.01 868,205 35.53 11.92%

SG&A (886,324) -31.94 (756,975) -30.98 17.09%

Other Income & Expenses, net 28,163 1.02 31,860 1.30 -11.60%

Operating Profit 113,513 4.09 143,090 5.86 -20.67%

Share of Results of A&JV (526) -0.02 (1,793) -0.07 -70.66%

Finance Cost & Other Gains/(Losses) (16,135) -0.58 (12,066) -0.50 33.72%

Income Tax (35,690) -1.29 (39,468) -1.62 -9.57%

Profit for the Period 61,162 2.20 89,763 3.67 -31.86%

Profit Attrib. to Owners 58,110 2.09 88,403 3.62 -34.27%

Source : Internal analysis report (figures rounded); various accounting reclassification and adjustments are made to some of the figures when consolidating Pou Sheng numbers into the Yue Yuen Group in order to comply with the requirements of accounting standards

36

Thank you

Q&A