Yue Yuen Industrial

F2017 Interim Results

August 2017

Yue Yuen Industrial (Holdings) Limited

(551.HK)

1

Disclaimer

While every care has been taken in preparing the information in this

presentation and the discussion following, such information is provided "as

is" without warranty of any kind, either expressed or implied. In particular, no

warranty regarding accuracy or fitness for a purpose is given in connection

with such information. The opinions expressed in this presentation and the

discussion following, do not constitute investment advice. Neither Yue Yuen

nor any of its officers will be liable for any direct or indirect or any other

damages of any kind arising from or in connection with any reliance placed

on any information in this presentation and the discussion following.

1

2

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

Core Business: Footwear OEM/ODM and Pou Sheng (3813.HK)

OEM/ODM – Footwear manufacturing, predominately athletic and casual / outdoor

Pou Sheng – Retail sales network & sports services in the Greater China Region

Interim Dividend: HK$ 0.4/share and one-time Special Dividend: HK$ 3.5/share

Vietnam Indonesia PRC Others*

Company Profile

6M17 Revenue by Product Category Production Volume by Location

6M16

6M17

43%

46%

34%

35%

22% 17%

1% 2%

5%

2%

Others*: Bangladesh, Cambodia, Myanmar, and Mexico

6M16: 165.7 mn vs. 6M17: 163.0 mn pairs 7%

OEM/ODM

67%

Casual/Outdoor

Soles, Components & Others

Athletic

Sandals

33%

13 %

1%

46%

6M17 Total Revenue US$ 4,448.2 million

Retail*: incl. Pou Sheng Revenue US$ 1,379.6 million

Retail*

3

2016 Financial Performance Overview

Source: Company audited financial statements and management accounts

435 331 390

535

7.6

8.0

8.4 8.5

2013 2014 2015 2016

Profit Attrib. to Owners

Revenue

Revenue

(USD’bn)

Profit ‘mn

535

8.5

54%

74% 65%

56%

1.1

1.15 1.2

1.4

2013 2014 2015 2016

Payout ratio

HK$ Per Share

Dividend

(HK$/Share)

Payout Ratio

56%

$1.4

16.77

17.53 17.25

16.88

313

307

318 322

2013 2014 2015 2016

Avg. Selling Price

Production volume

Prod. Vol.

(’mn Pairs)

ASP

$16.88

322

6M F2017

Financial Highlights

5

Key Financial Highlights for 6M 2017

Revenue

US$ 4.4 bn

+ 3.9%

GP Margin

21.3% US$ 654 mn

+ 7.6%

Production Volume

163 mn pairs

ASP

US$ 16.47

Revenue

RMB 9.5 bn

+ 14.5%

Profit Attrib. to Owners

US$ 259 mn

+4.0%

OP Margin

5.3% RMB 506 mn

Group

OEM/ODM PS Retails

6

2,064.8

610.5

54.4

1,267.8

283.2

2,071.5

569.0 44.7

1,458.1

304.9

Athletic Casual/Outdoor Sandals Retails* Others**

6M16 6M17

15.0%

7.6%

Y-o-Y Revenue by Product Category (US$’ mn)

6M17 Shoes Only

Casual/Outdoor

Sandals

Athletic

77%

21%

2%

0.3%

6.8%

18.0%

Shoe Production

Rev: US$ 2,685.2 mn

Volume 1.6%

ASP Flat * Pou Sheng 6M17 Rev.: US$ 1,379.6 mn

** Soles, Components & Others

7

Revenue and Profit Attributable to Owners

Revenue

In US$’mn

1,268

3,012

+4%

6M 16 6M 17

1,380

3,069

Profit Attrib. to Owners

In US$’mn

Pou Sheng

OEM/ODM

Pou Sheng

OEM/ODM

The above figures of Pou Sheng include profit attributable to “Non-YY”

shareholders (i.e. the 37.6% minority interests)

59

212

43

232

+4%

YY Group

2,300

6,135

+1%

2015 2016

2,444

6,037

65

351

88

480

+37%

2015 2016

6M 16 6M 17

8

Source: Company accounts

Please refer to the announcement on the HKEx website for the unaudited consolidated income statements of 6M F2017 & 6M F2016

YY Group Financial Highlights

6M F2017 6M F2016 Y-o-Y

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

Revenue 4,448,172 100.00 4,280,785 100.00 3.91%

Cost of Sales (3,316,793) -74.57 (3,221,375) -75.25 2.96%

Gross Profit 1,131,379 25.43 1,059,410 24.75 6.79%

SG&A* (771,851) -17.35 (700,783) -16.37 10.14%

Other Income & Expenses, net* (69,694) -1.57 (64,608) -1.51 7.87%

Operating Profit 289,834 6.52 294,019 6.87 -1.42%

Share of Results of A&JV 26,715 0.60 21,481 0.50 24.37%

Finance Cost & Other Gains/(Losses) (559) -0.01 5,057 0.12 N / A

Income Tax (36,440) -0.82 (45,248) -1.06 -19.47%

Profit for the Period 279,550 6.28 275,309 6.43 1.54%

Profit attrib. to Owners 258,525 5.81 248,711 5.81 3.95%

* The comparative figures of SG&A and Other Income & Expenses, net have been reclassified to conform to the presentation in the

current period

9

Financial Ratios

(US$’mn) 6M F2017 6M F2016

Depreciation & Amortization 145.3 133.0

EBITDA 430.5 422.7

Capital Expenditure 258.7 193.9

Product Development* 108.4 97.3

30 June 2017 31 December 2016

Total Borrowings 1,207.6 960.1

Net Total Borrowings 218.6 Net Cash: 82.2

Total Debt to Equity (%) 23.3% 18.8%

Net Debt to Equity (%) 4.2% N / A

6M F2017 6M F2016

Total Debt to EBITDA (X) annualized 1.4 X 1.1 X

Net Debt to EBITDA (X) annualized 0.3 X N / A

Return on Equity (%) annualized 10.7% 10.9%

Return on Asset (%) annualized 7.2% 7.6%

Source: Company accounts (figures rounded)

Please refer to the announcement on the HKEx website for the unaudited consolidated income statements of 6M F2017 & 6M F2016

* Includes US$ 4.7 mn for 6M 2017 and US$ 8.8 mn for 6M 2016 sample sales revenue, which reduces Product Development Expense

OEM/ODM

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)

11

OEM/ODM Financial Highlights

6M F2017 6M F2016 Y-o-Y

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

Revenue 3,068,573 100.00 3,012,397 100.00 1.86%

Cost of Sales (2,414,508) -78.69 (2,404,449) -79.82 0.42%

Gross Profit 654,065 21.31 607,948 20.18 7.59%

SG&A* (349,972) -11.40 (324,370) -10.77 7.89%

Other Income & Expenses, net* (87,999) -2.87 (79,589) -2.64 10.57%

Operating Profit 216,094 7.04 203,989 6.77 5.93%

Share of Results of A&JV 27,073 0.88 22,447 0.75 20.61%

Finance Cost & Other Gains/(Losses) 7,603 0.25 7,104 0.24 7.02%

Income Tax (16,390) -0.53 (18,685) -0.62 -12.28%

Profit for the Period 234,380 7.64 214,855 7.13 9.09%

Profit Attrib. to Owners 231,504 7.54 212,386 7.05 9.00%

Source: Company management accounts

* The comparative figures of SG&A and Other Income & Expenses, net have been reclassified to conform to the presentation in the

current period

12

OEM/ODM Financial Ratios

(US$’mn) 6M F2017 6M F2016

Depreciation & Amortization 117.1 114.8

EBITDA 328.9 315.5

Capital Expenditure 218.5 172.3

30 June 2017 31 December 2016

Total Borrowings 887.2 762.3

Net Total Borrowings Net Cash: 35.5 Net Cash: 209.8

Total Debt to Equity (%) 19.5% 17.0%

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

6M F2017 6M F2016

Total Debt to EBITDA (X) annualized 1.4 X 1.2 X

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

Return on Equity (%) annualized 10.3% 9.9%

Return on Asset (%) annualized 7.1% 6.9%

Source: Company management accounts (figures rounded)

13

20.5

19.6

18.7

20.3

18.7

19.1

18.9

21.9

19.8

20.5

20.5

22.8

21.0

21.6

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Gross Profit Margin

OEM/ODM GP Margin Trend

(%)

Based on US$

Pou Sheng International

Note: The figures in the following slides are based on Pou Sheng’s management accounts and announcements

15

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

16

Directly Operated Stores

Sub-Distributor Stores

Mono Brand Stores

Multi-Brand Stores

YY Sports, YY Kids, YY Life, etc.

Outlets: New shopping experience for fast growing brands

Omni-Channel Strategy Across China

Brick and Mortar Stores

Online Stores

Retail Network

YYsports.com

YYkids.com

Rockport.com.cn

3rd party: T-Mall, JD Mall, SuNing..etc.

B2B services

Covers 300 cities in the Greater China

B2B

B2C

17

Revenue (RMB’mn) 4,674 4,841 3.6% 9,515

Gross Profit Margin 33.6% 35.6% 2.0% 34.6%

Operating Profit Margin 4.5% 6.1% 1.6% 5.3%

SSSg 1.9% 5.6% 3.7% 3.7%

Direct Store Discount % 23.0% 22% 1.0% 22.0%

Inventory Days 137 131 6 days 131

Net Store Increase*:

- Directly Operated (15) 72 - 57

- Sub-Distributors 99 61 - 160

Total 84 133 - 217

CAPEX (RMB’mn) 104 173 - 277

Q-o-Q Improvement – 1Q vs 2Q 2017

1Q 17 2Q 17 + / (-) 1H 17

* Excluding disposal of certain subsidiaries in the current period : reduced directly operated 153 stores & sub-distributors 323 stores

18

Operation Efficiency

Receivable Days

28 28

Inventory Days

145

Payable Days 2016 6M17

Based on RMB

22 10

131

19

Pou Sheng Store Performance

Number of Stores

Directly Operated Sub-Distributors Total Stores

As at December 31, 2016 5,560 3,199 8,759

Net New Store + / (-) * (96) (163) (259)

As at June 30, 2017 5,464 3,036 8,500

2017 1Q 2Q 3Q 4Q

Directly Operated Stores 1.9% 5.6%

Same Store Sales Growth (SSSg)

* Disposal of certain subsidiaries in the current period: reduced directly operated 153 stores & sub-distributors 323 stores

20

Distinguished Partners and Events

21

Pou Sheng Financial Highlights (in RMB)

6M F2017 6M F2016 Y-o-Y

RMB’mn % RMB’mn % + / -

Revenue 9,515 100.00 8,313 100.00 14.46%

Cost of Sales (6,223) -65.40 (5,354) -64.41 16.23%

Gross Profit 3,292 34.60 2,959 35.59 11.25%

SG&A (2,920) -30.69 (2,496) -30.03 16.99%

Other Income & Expenses, net 134 1.41 108 1.30 24.07%

Operating Profit 506 5.32 571 6.87 -11.38%

Share of Results of A&JV (3) -0.03 (7) -0.08 -57.14%

Finance Cost & Other Gains/(Losses) (53) -0.56 (7) -0.08 657.14%

Income Tax (138) -1.45 (174) -2.09 -20.69%

Profit for the Period 312 3.28 383 4.61 -18.54%

Profit Attrib. to Owners 299 3.14 371 4.46 -19.41%

Source: Based on Pou Sheng’s Results Announcement

Pou Sheng has changed its presentation currency for the preparation of its consolidated financial statements from USD to RMB

starting from the 2016 interim results. The comparative figures for the 6M 2016 have been restated to RMB accordingly.

22

Pou Sheng Financial Highlights (in USD)

6M F2017 6M F2016 Y-o-Y

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

Revenue 1,379,599 100.00 1,268,388 100 8.77%

Cost of Sales (902,285) -65.40 (816,926) 64.41 10.45%

Gross Profit 477,314 34.60 451,462 35.59 5.73%

SG&A* (421,879) -30.58 (376,413) -29.68 12.08%

Other Income & Expenses, net* 17,894 1.30 14,053 1.11 27.33%

Operating Profit 73,329 5.32 89,102 7.02 17.70%

Share of Results of A&JV (358) -0.03 (966) -0.08 -62.94%

Finance Cost & Other Gains/(Losses) (7,751) -0.56 (1,119) -0.09 592.67%

Income Tax (20,050) -1.45 (26,563) -2.09 -24.52%

Profit for the Period 45,170 3.27 60,454 4.77 -25.28%

Profit attrib. to Owners 43,296 3.14 58,731 4.63 -26.28%

Source: Internal analysis report (figures rounded)

* Various accounting reclassification and adjustments are made to these figures when consolidating Pou Sheng numbers into the

Yue Yuen Group in order to comply with the requirements of accounting standards

23

Pou Sheng Financial Ratios (in RMB)

(RMB’mn) 6M F2017 6M F2016

Depreciation & Amortization 193 118

EBITDA 695 704

Capital Expenditure 277 144

30 June 2017 31 December 2016

Total Borrowings 2,172 1,666

Net Total Borrowings 1,723 1,183

Total Debt to Equity (%) 34.3% 27.2%

Net Debt to Equity (%) 27.2% 19.3%

6M F2017 6M F2016

Total Debt to EBITDA (X) annualized 1.6 X 0.8 X

Net Debt to EBITDA (X) annualized 1.2 X 0.6 X

Return on Equity (%) annualized 9.9% 12.6%

Return on Asset (%) annualized 6.1% 8.4%

Source: Internal analysis report (figures rounded)

24

29.8

29.7

28.3

29.4

30.9

33.4

33.2

35.8

34.9

36.3

36.2

34.7

33.6

35.6

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Gross Profit Margin

Pou Sheng GP Margin Trend

(%)

Based on US$

25

1.8

1.5

1.9

1.6

3.5

5.8

4.3

3.1

6.7

7.3

5.8

3.5

4.5

6.1

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Operating Profit Margin

Pou Sheng OP Margin Trend

(%)

Based on US$

26

Store Fronts and Shopping Experience

Partners with Top International Sports

and Iconic Leisure Brands

27

YY Sports Service Centers

New YY Sports Concept to Capture

Higher Sports & Leisure Consumption

28

Improve

Operational

Efficiency

Brand Partnership Model

Beijing WKS

adidas Mega Store

(Opened in July 2017)

X

Data

Tracking

Sports

Event

364+1

Services

In-Store

Training

YY Basketball

Night

Beijing

Marathon

Basketball

Court

Data

Tracking

adidas

Brand Sports

Services

364 Days

29

2017 Sports Event Timeline

Physical Fitness Basketball Running Event

7,

9-12

7,

9-12

9,10

7,8,

11,12

7,9,

10

▼ Student League Competitions

▼ Star Competitions (CPBL, MLB)

▼ Sports Meet

▼ Family Picnic Day

▼ University Relay

▼ NBA China Competition

▼ Coach Training

▼ YY Camp

▼ YaoPao 24hr

▼ Marathon

▼ Women’s Half-Marathon

▼ Coach Training

▼ Sport Management

▼ Fitness Playground Development

Baseball

Appendix

31

Shareholding Structure

Tsai Family

Pou Chen (9904.TT)

Others

Footwear

OEM/ODM

Pou Sheng (3813.HK)

Yue Yuen Industrial (Holdings) Ltd.

(551.HK) 62.4%

7% 43%

50%

100%

* As at June 30, 2017

32

Company Milestones

Production Established

1988 China

1992

Indonesia

1994 Vietnam

2000 Mexico

2010 Bangladesh

Cambodia

2015 Myanmar

1993

First brand licensee 1993

Started retail business

2008 Listed on HKEx (3813.HK)

2016

Acquired PCG Bros

Listed on HKEx (551.HK)

1988 Founded

1992

2012 New CEO on board

2017

OEM/ODM PS Retails Group

Market Cap: US$ 6.8 bn (As at Jun 30)

33

OEM/ODM Highlights for 12M 2016

12M F2016 12M F2015 Y-o-Y

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

Revenue 6,036,828 100.00 6,134,741 100.00 -1.60%

Cost of Sales (4,772,468) -79.06 (4,928,522) -80.34 -3.17%

Gross Profit 1,264,360 20.94 1,206,219 19.66 4.82%

SG&A (688,779) -11.41 (776,584) -12.66 -11.31%

Other Income & Expenses, net (119,270) -1.98 (90,905) -1.48 31.20%

Operating Profit 456,311 7.56 338,730 5.52 34.71%

Share of Results of A&JV 68,639 1.14 83,503 1.36 -17.80%

Finance Cost & Other Gains/(Losses) (2,026) -0.03 (24,132) -0.39 -91.60%

Income Tax (36,620) -0.61 (42,586) -0.69 -14.01%

Profit for the Year 486,304 8.06 355,515 5.80 36.79%

Profit Attrib. to Owners 479,839 7.95 350,665 5.72 36.84%

Source: Company management accounts

34

PS Highlights for 12M F2016 (in RMB)

12M F2016 12M F2015 Y-o-Y

RMB’mn % RMB’mn % + / -

Revenue 16,236 100.00 14,466 100.00 12.24%

Cost of Sales (10,468) -64.47 (9,648) -66.70 8.50%

Gross Profit 5,768 35.53 4,818 33.30 19.72%

SG&A (5,072) -31.24 (4,340) -30.00 16.87%

Other Income & Expenses, net 228 1.41 121 0.84 88.43%

Operating Profit 924 5.69 599 4.14 54.26%

Share of Results of A&JV (12) -0.07 (8) -0.06 50.00%

Finance Cost & Other Gains/(Losses) (80) -0.49 (59) -0.40 35.59%

Income Tax (262) -1.62 (149) -1.03 75.84%

Profit for the Year 570 3.51 383 2.65 48.83%

Profit Attrib. to Owners 561 3.46 397 2.74 41.31%

Source: Based on Pou Sheng’s Results Announcement

Pou Sheng has changed its presentation currency for the preparation of its consolidated financial statements from USD to RMB

starting from the 2016 interim results. The comparative figures for the year 2016 and 2015 have been restated to RMB accordingly

35

PS Highlights for 12M F2016 (in USD)

12M F2016 12M F2015 Y-o-Y

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

Revenue 2,443,730 100.00 2,300,174 100.00 6.24%

Cost of Sales (1,575,525) -64.47 (1,534,115) -66.70 2.70%

Gross Profit 868,205 35.53 766,059 33.30 13.33%

SG&A* (756,975) -30.97 (683,402) -29.71 10.77%

Other Income & Expenses, net* 31,860 1.30 14,014 0.61 127.34%

Operating Profit 143,090 5.86 96,671 4.20 48.02%

Share of Results of A&JV (1,793) -0.07 (1,332) -0.06 34.61%

Finance Cost & Other Gains/(Losses) (12,066) -0.49 (9,237) -0.40 30.63%

Income Tax (39,468) -1.62 (23,744) -1.03 66.22%

Profit for the Year 89,763 3.67 62,358 2.71 43.95%

Profit attrib. to Owners 88,403 3.62 64,498 2.80 37.06%

Source: Internal analysis report (figures rounded)

* Various accounting reclassification and adjustments are made to these figures when consolidating Pou Sheng numbers into the

Yue Yuen Group in order to comply with the requirements of accounting standards