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Ports Design to drive long-term sustainable growth
31
Mar '11
The Board of Directors of PORTS DESIGN LIMITED is pleased to announce the audited consolidated results of the Company and its subsidiaries for the financial year ended 31 December 2010.

Against the backdrop of gradual macro economic recovery and strategic transition under the Retail Network Repositioning Program which was started in late 2007 (the “Program”), the Group began the financial year by staying firmly on course with the roadmap to ensure long term success of our core PORTS brand. The balancing of short-term financial gains with the strategic goal of moving our core brand further upmarket was achieved. The management believe this will help to ensure the Group to be able to deliver sustainable growth and profitability over the long run.

During the three and a half years taken to conclude the Program, the management's roadmap has been executed well and had proven effective at delivering its objective to consolidate the high-end positioning of our PORTS and BMW Lifestyle brands. In FY2010, the Group completed for the most part of the upgrade of our retail distribution network in China. As China has become one of the most important markets for luxury brands in the global market, the management believes it is imperative to showcase stores that are only in line with the brand position of PORTS or BMW Lifestyle. The Group can then resume the growth of store counts from 2011 onwards.

In this context, the management's consistency in the execution of the Program has ensured that the Group's strategic direction and operational performance was maintained at levels which is in line with the goal set up by the Board. Turnover of the Group increased from RMB1.54 billion in FY2009 to RMB1.72 billion in FY2010, representing an increase of 11.7%. The Group's retail segment continued to maintain its strong contribution to the Group's overall turnover.

The Group's gross profit increased 8.4%, from RMB1.25 billion in FY2009 to RMB1.36 billion in FY2010. Operating profit declined by 2.6% to RMB510.1 million in FY2010 mainly due to the increase in the non-cash charge of employees share option expense and significant increases in the cost of raw materials during 2010. The Group's profit attributable to shareholders increased from RMB468.3 million in FY2009 to RMB473.1 million in FY2010, representing an increase of 1.0%.

The Group posted retail turnover of RMB1.57 billion for FY2010, a 10.1% increase compared with the same period in 2009. This sales increase was supported by a higher average selling price (“ASP”) for the Fall 2010 collection and a strong double digit same store sales growth, despite a slight decline in the overall retail distribution network. The Group posted retail gross profit margin at 85.3% in FY2010.

The ability to command higher ASP has enable the Group to maintain the retail gross profit margin at over 85%, despite significant increases in the cost of raw materials and labour during 2010. This show that as long as the Group remains successful and committed to manage the strong attributes of our core PORTS brand, the Group will continue to command the loyalty of the consumers and enjoy an above average return on equity.

Under the Program, the Group opened 65 new stores during 2010 and simultaneously it closed 68 stores that management considered as inconsistent with the positioning of either PORTS or BMW Lifestyle brands. That resulted in an increase of 24 stores in total store count from 30 June 2010 to 31 December 2010. The management is pleased to report that the Program is largely completed and anticipates total store count to resume growth in 2011.

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PORTS DESIGN LIMITED

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