Yue Yuen Industrial

F2017 9M Results

November 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

2017 Interim Dividend: HK$ 0.4/share and one-time Special Dividend: HK$ 3.5/share

Vietnam Indonesia PRC Others*

Company Profile

9M17 Revenue by Product Category Production Volume by Location

9M16

9M17

43%

45%

34%

35%

22% 17%

1% 3%

4%

7%

Others*: Bangladesh, Cambodia, Myanmar, and Mexico

9M17: 238.7 mn vs. 9M16: 236.1 mn pairs 7%

OEM/ODM

67%

Casual/Outdoor

Soles, Components & Others

Athletic

Sandals

33%

13 %

1%

46%

9M17 Total Revenue US$ 6,718.0 million

Retail*: incl. Pou Sheng Revenue US$ 2,031.5 million

Retail*

48%

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

9M F2017

Financial Highlights

5

Key Financial Highlights for 9M 2017

Revenue

US$ 6.7 bn

+ 6.8%

GP Margin

21.4% US$ 1,003 mn

+ 11.3%

Production Volume

239 mn pairs

ASP

US$ 16.94

Revenue

RMB 13.9 bn

+ 14.1%

Profit Attrib. to Owners

US$ 396 mn

+4.5%

OP Margin

4.6% RMB 632 mn

Group

OEM/ODM PS Retails

6

3,011.3

917.3

66.8

1,843.6

454.4

3,101.9

885.2 57.7

2,201.5

471.7

Athletic Casual/Outdoor Sandals Retails* Others**

9M16 9M17

19.4%

3.8%

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

9M17 Shoes Only

Casual/Outdoor

Sandals

Athletic

77%

22%

1%

3.0%

3.5%

13.6%

Shoe Production

Rev: US$ 4,044.8 mn

Volume 1.1%

ASP 0.2% * Pou Sheng 9M17 Rev.: US$ 2,031.5 mn

** Soles, Components & Others

7

Revenue and Profit Attributable to Owners

Revenue

In US$’mn

1,845

4,448

+7%

9M 16 9M 17

2,032

4,687

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)

83

328

49

365

+5%

YY Group

2,300

6,135

+1%

2015 2016

2,444

6,037

65

351

88

480

+37%

2015 2016

9M 16 9M 17

8

Source: Company accounts

Please refer to the announcement on the HKEx website for the unaudited consolidated income statements of 9M F2017 & 9M F2016

YY Group Financial Highlights

9M F2017 9M F2016 Y-o-Y

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

Revenue 6,718,014 100.00 6,293,301 100.00 6.75%

Cost of Sales (5,012,730) -74.62 (4,731,134) -75.18 5.95%

Gross Profit 1,705,284 25.38 1,562,167 24.82 9.16%

SG&A* (1,183,002) -17.61 (1,045,130) -16.61 13.19%

Other Income & Expenses, net* (84,473) -1.26 (92,781) -1.47 -8.95%

Operating Profit 437,809 6.52 424,256 6.74 3.19%

Share of Results of A&JV 50,606 0.75 47,228 0.75 7.15%

Finance Cost & Other Gains/(Losses) (7,727) -0.12 2,728 0.04 N / A

Income Tax (59,127) -0.88 (57,925) -0.92 2.07%

Profit for the Period 421,561 6.28 416,287 6.61 1.27%

Profit attrib. to Owners 395,857 5.89 378,771 6.02 4.51%

* 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) 9M F2017 9M F2016

Depreciation & Amortization 223.6 198.9

EBITDA 654.5 616.7

Capital Expenditure 411.9 305.6

Product Development* 159.2 148.7**

30 September 2017 31 December 2016

Total Borrowings 1,971.9 960.1

Net Total Borrowings 162.3 Net Cash: 82.8

Total Debt to Equity (%) 43.4% 18.8%

Net Debt to Equity (%) 3.6% N / A

9M F2017 9M F2016

Total Debt to EBITDA (X) annualized 2.3 X 1.2 X

Net Debt to EBITDA (X) annualized 0.2 X N / A

Return on Equity (%) LTM 13.3% 10.9%

Return on Asset (%) annualized 6.2% 7.2%

Source: Company accounts (figures rounded)

Please refer to the announcement on the HKEx website for the unaudited consolidated income statements of 9M F2017 & 9M F2016

* Includes US$7.1 mn for 9M 2017 and US$12.9 mn for 9M 2016 sample sales revenue, which reduces Product Development Expense

** Reclassified 2016 figures

10

YY Group ROE Trend Based on US$

8.0

7.5

9.9

8.7

9.4

11.3 11.3

6M14 FY14 6M15 FY15 6M16 FY16 6M17

ROE

(%)

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

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)

12

OEM/ODM Financial Highlights

9M F2017 9M F2016 Y-o-Y

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

Revenue 4,686,507 100.00 4,448,302 100.00 5.35%

Cost of Sales (3,683,095) -78.59 (3,546,464) -79.73 3.85%

Gross Profit 1,003,412 21.41 901,838 20.27 11.26%

SG&A* (548,265) -11.70 (487,278) -10.95 12.52%

Other Income & Expenses, net* (110,444) -2.36 (113,883) -2.56 -3.02%

Operating Profit 344,703 7.36 300,677 6.76 14.64%

Share of Results of A&JV 50,878 1.09 48,775 1.10 4.31%

Finance Cost & Other Gains/(Losses) 5,184 0.11 6,272 0.14 -17.35%

Income Tax (31,147) -0.66 (23,906) -0.54 30.29%

Profit for the Period 369,618 7.89 331,818 7.46 11.39%

Profit Attrib. to Owners 365,086 7.79 327,592 7.36 11.45%

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

13

OEM/ODM Financial Ratios

(US$’mn) 9M F2017 9M F2016

Depreciation & Amortization 178.5 171.2

EBITDA 517.0 467.0

Capital Expenditure 348.8 261.5

30 September 2017 31 December 2016

Total Borrowings 1,616.3 762.3

Net Total Borrowings Net Cash: 168.0 Net Cash: 209.8

Total Debt to Equity (%) 41.8% 17.0%

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

9M F2017 9M F2016

Total Debt to EBITDA (X) annualized 2.3 X 1.3 X

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

Return on Equity (%) annualized 12.7% 10.1%

Return on Asset (%) annualized 6.5% 6.9%

Source: Company management accounts (figures rounded)

14

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 21.6

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

Gross Profit Margin

OEM/ODM GP Margin Trend

(%)

Based on US$

15

OEM/ODM OP Margin Trend

(%)

Based on US$

1.5

5.2

6.5

5.3

6.1

3.7

6.8

5.9

7.5

6.7

9.8

6.9

7.1

8.0

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

Operating Profit Margin

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

17

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

18

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

19

Operation Efficiency

Receivable Days

28 28

Inventory Days

145

Payable Days 2016 9M17

Based on RMB

22 18

150

20

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) (47) (143)

As at September 30, 2017 5,464 3,152 8,616

2017 1Q 2Q 3Q 4Q

Directly Operated Stores 1.9% 5.6% 1.5%

Same Store Sales Growth (SSSg)

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

21

Distinguished Partners and Events

22

Pou Sheng Financial Highlights (in RMB)

9M F2017 9M F2016* Y-o-Y

RMB’mn % RMB’mn % + / -

Revenue 13,883 100.00 12,165 100.00 14.12%

Cost of Sales (9,086) -65.45 (7,811) -64.21 16.32%

Gross Profit 4,797 34.55 4,354 35.79 10.17%

SG&A (4,358) -31.39 (3,724) -30.61 17.02%

Other Income & Expenses, net 193 1.39 153 1.26 26.14%

Operating Profit 632 4.55 783 6.44 -19.28%

Share of Results of A&JV (2) -0.01 (10) -0.08 -80.00%

Finance Cost & Other Gains/(Losses) (84) -0.60 (15) -0.12 460.00%

Income Tax (191) -1.38 (224) -1.84 -14.73%

Profit for the Period 355 2.56 533 4.38 -33.40%

Profit Attrib. to Owners 337 2.43 522 4.29 -35.44%

Source: Based on Pou Sheng’s Results Announcement

* The figures for the nine months ended September 30, 2016 have been restated due to the application of merger accounting

23

Pou Sheng Financial Highlights (in USD)

9M F2017 9M F2016 Y-o-Y

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

Revenue 2,031,507 100.00 1,844,999 100.00 10.11%

Cost of Sales (1,329,635) -65.45 (1,184,670) -64.21 12.24%

Gross Profit 701,872 34.55 660,329 35.79 6.29%

SG&A (634,737) -31.24 (557,852) -30.24 13.78%

Other Income & Expenses, net 25,342 1.25 19,790 1.07 28.05%

Operating Profit 92,477 4.55 122,267 6.63 -24.36%

Share of Results of A&JV (272) -0.01 (1,547) -0.08 -82.42%

Finance Cost & Other Gains/(Losses) (12,283) -0.60 (2,232) -0.12 450.31%

Income Tax (27,980) -1.38 (34,019) -1.84 -17.75%

Profit for the Period 51,942 2.56 84,469 4.58 -38.51%

Profit Attrib. to Owners 49,305 2.43 82,774 4.49 -40.43%

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

24

Pou Sheng Financial Ratios (in RMB)

(RMB’mn) 9M F2017 9M F2016

Depreciation & Amortization 305.4 179.2

EBITDA* 931.0 979.4

Capital Expenditure 430.7 290.9

30 September 2017 31 December 2016

Total Borrowings 2,575 1,666

Net Total Borrowings 2,197 1,183

Total Debt to Equity (%) 40.4% 27.2%

Net Debt to Equity (%) 34.5% 19.3%

9M F2017 9M F2016

Total Debt to EBITDA (X) annualized* 2.1 X 1.2 X

Net Debt to EBITDA (X) annualized* 1.8 X 0.9 X

Return on Equity (%) annualized* 7.4% 11.6%

Return on Asset (%) annualized* 4.2% 6.8%

Source: Internal analysis report (figures rounded)

* the figures for the nine months ended September 30, 2106 have been restated due to the application of merger accounting

25

29.7

28.3

29.4

30.9

33.4

33.2

35.8

34.9

36.3

36.2

34.8

33.6

35.6

34.5

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

Gross Profit Margin

Pou Sheng GP Margin Trend

(%)

26

1.5 1.9

1.6

3.5

5.8

4.3

2.9

6.6

7.2

5.5

3.5

4.5

6.1

2.9

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

Operating Profit Margin

Pou Sheng OP Margin Trend

(%)

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

27

2017 Sports Event Timeline

Physical Fitness Basketball Running Event

7,

9-12

4-7,

9-12

9,10

7,8,

11,12

7,

9-12

▼ Student League Competitions

▼ Star Competitions (CPBL)

▼ YY Camp (U22)

▼ Mini baseball roadshow (U10)

▼ NBA Star China Tour – D.Rose

▼ NBA / CBA Live Party

▼ Sports Meeting

▼ Family Picnic Day

▼ University Relay

▼ running clinics & lectures

▼ Shenyang Marathon clinics

▼ group training classes

▼ PT Training programs

▼ Fitness Playground Development

Baseball

▼ YY Camp

▼ YY Night（3V3）

▼ College bb League

▼ “Play like Elite” clinics

▼ Harden / Wiggins /

Lillard / Rose

▼ Races

▼ Taicang Marathon

▼ College RUN League

▼ Hood To Coast

▼ Terrex Trail Running

▼ YY Running Club

▼ College Running League

▼ Fight NOW - 2V2

▼ collegial / teens /

youths / couples /

female / families

▼ Lucky Ball

▼ Marathon Training

▼ HTC

▼ Terrex

▼ BJ Marathon

▼ Running Lecture

▼ Running clinics

▼ YaoPao 24hr

Appendix

29

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 September 30, 2017

30

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$ 6.3 bn (As at Sep 30)

31

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

32

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

33

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