海峰paipai

--HongKongExchangesandClearingLimitedandTheStockExchangeofHongKongLimitedtakenoresponsibilityforthecontentsofthisannouncement,makenorepresentationastoitsaccuracyorcompletenessandexpresslydisclaimanyliabilitywhatsoeverforanylosshowsoeverarisingfromorinrelianceuponthewholeoranypartofthecontentsofthisannouncement.
INTERIMRESULTSANNOUNCEMENTFORTHESIXMONTHSENDED30JUNE2012ANDTHEOUTLOOKFORTHEFULLYEAROF2012interimRESULTSHIGHLIGHTSRevenuewasRMB3,880million,decreasedby9.
5%Earningsbeforeinterest,tax,depreciationandamortisation(EBITDA)wasRMB305million,decreasedby46.
3%ProfitattributabletoequityholderswasRMB44million,decreasedby84.
9%NointerimdividendisdeclaredControlledthecostandefficiencyofnewlyopenedstoresandclosedupsomeinefficientstores.
NumberofLI-NINGbrandretailstoreswas7,303,anetdecreaseof952storesoutlookforTHEFULLyearof2012Anticipatesthatthefullyearrevenuefor2012willfurtherdeclineandthattheGroupmaypostlossattributabletoequityholdersfortheyearEndeavourtoenhanceoverallmanagementstrengthandoperationalcapabilities,setforththegoforwardplanandshort-terminitiativesFocusonthecoreLI-NINGbrandandtheChinesemarket,centreontheessenceofsports,togivefullplaytothebrandvalueINTERIMRESULTSTheboardofdirectors(the"Board")ofLiNingCompanyLimited(the"Company"or"LiNingCompany")herebyannouncestheunauditedcondensedconsolidatedinterimresultsoftheCompanyanditssubsidiaries(collectively,the"Group"or"LiNingGroup")forthesixmonthsended30June2012,togetherwithcomparativefigures,asfollows:--interimCONDENSEDCONSOLIDATEDBALANCESHEETUnauditedAuditedAsatAsat30June31DecemberNote20122011RMB'000RMB'000ASSETSNon-currentassetsProperty,plantandequipment830,434831,693Landuserights367,262371,696Intangibleassets377,555751,836Deferredincometaxassets494,919445,857Available-for-salefinancialassets46,93046,930Investmentinanassociate6,71111,303Otherreceivablesandprepayments74,08687,903Totalnon-currentassets2,197,8972,547,218CurrentassetsInventories1,138,4511,132,965Tradereceivables42,516,3722,094,440Otherreceivablesandprepayments–currentportion386,887344,527Currentincometaxrecoverable17,406–Restrictedbankdeposits18,32313,194Cashandcashequivalents1,326,8741,196,474Totalcurrentassets5,404,3134,781,600Totalassets7,602,2107,328,818--UnauditedAuditedAsatAsat30June31DecemberNote20122011RMB'000RMB'000EQUITYCapitalandreservesattributabletoequityholdersoftheCompanyOrdinaryshares111,622111,604Sharepremium314,996312,379SharesheldforRestrictedShareAwardScheme(52,415)(52,415)Otherreserves484,779370,106Retainedprofits2,774,4632,730,1693,633,4453,471,843Non-controllinginterestsinequity215,313192,816Totalequity3,848,7583,664,659LIABILITIESNon-currentliabilitiesLicensefeespayable157,073458,793Convertiblebonds641,085–Deferredincometaxliabilities80,41981,269Deferredincome60,38361,030Totalnon-currentliabilities938,960601,092CurrentliabilitiesTradepayables51,217,5631,462,398Otherpayablesandaccruals498,357662,480Licensefeespayable–currentportion62,03271,649Currentincometaxliabilities–28,481Borrowings1,024,040838,059Convertiblebonds–interestpayable12,500–Totalcurrentliabilities2,814,4923,063,067Totalliabilities3,753,4523,664,159Totalequityandliabilities7,602,2107,328,818Netcurrentassets2,589,8211,718,533Totalassetslesscurrentliabilities4,787,7184,265,751--interimCONDENSEDCONSOLIDATEDINCOMESTATEMENTUnauditedSixmonthsended30JuneNote20122011RMB'000RMB'000Revenue33,880,0974,289,303Costofsales6(2,164,614)(2,260,168)Grossprofit1,715,4832,029,135Distributioncosts6(1,152,921)(1,323,873)Administrativeexpenses6(503,934)(336,605)Otherincomeandothergains–net7125,01173,629Operatingprofit183,639442,286Financeincome83,5237,948Financecosts8(90,283)(38,371)Financecosts–net8(86,760)(30,423)Shareoflossofanassociate(3,540)–Profitbeforeincometax93,339411,863Incometaxexpense9(31,548)(102,183)Profitfortheperiod61,791309,680Attributableto:EquityholdersoftheCompany44,294293,740Non-controllinginterests17,49715,94061,791309,680EarningspershareforprofitattributabletoequityholdersoftheCompany(RMBcents)–basic104.
2127.
94–diluted104.
2027.
79Dividends11–117,496--InterimCONDENSEDCONSOLIDATEDSTATEMENTOFCOMPREHENSIVEINCOMEUnauditedSixmonthsended30June20122011RMB'000RMB'000Profitfortheperiod61,791309,680Othercomprehensiveincome:Currencytranslationdifferences(539)1,707Totalcomprehensiveincomefortheperiod61,252311,387Attributableto:EquityholdersoftheCompany43,755295,447Non-controllinginterests17,49715,94061,252311,387--Notes:1.
GeneralinformationLiNingCompanyLimited(the"Company")anditssubsidiaries(together,the"Group")areprincipallyengagedinbranddevelopment,design,manufacture,saleanddistributionofsport-relatedfootwear,apparel,equipmentandaccessoriesinthePeople'sRepublicofChina(the"PRC").
TheCompanywasincorporatedon26February2004intheCaymanIslandsasanexemptedcompanywithlimitedliabilityundertheCompaniesLaw,Cap.
22(Law3of1961,asconsolidatedandrevised)oftheCaymanIslands.
TheaddressofitsregisteredofficeisCricketSquare,HutchinsDrive,P.
O.
Box2681,GrandCaymanKY1-1111,CaymanIslands.
TheCompany'ssharesarelistedontheMainBoardofTheStockExchangeofHongKongLimited.
ThiscondensedconsolidatedinterimfinancialinformationispresentedinRenminbi("RMB"),unlessotherwisestated.
ThiscondensedconsolidatedinterimfinancialinformationwasapprovedforissuebytheBoardon22August2012.
Thiscondensedconsolidatedinterimfinancialinformationhasnotbeenaudited.
2.
BasisofpreparationandsignificantaccountingpoliciesThiscondensedconsolidatedinterimfinancialinformationforthesixmonthsended30June2012hasbeenpreparedinaccordancewithInternationalAccountingStandard("IAS")34,'InterimFinancialReporting'.
Thecondensedconsolidatedinterimfinancialinformationshouldbereadinconjunctionwiththeannualfinancialstatementsfortheyearended31December2011,whichhavebeenpreparedinaccordancewithInternationalFinancialReportingStandards("IFRS").
Exceptasdescribedbelow,theaccountingpoliciesappliedareconsistentwiththoseoftheannualfinancialstatementsfortheyearended31December2011,asdescribedinthoseannualfinancialstatements.
Duringtheperiod,theGrouphasissuedconvertiblebondsandtheaccountingpolicyadoptedbytheGrouponconvertiblebondsisasfollows:Convertiblebondsissuedaresplitintotheirliabilityandequitycomponentsatinitialrecognition.
Theliabilitycomponentatitsfairvalueisdeterminedusingamarketinterestrateforequivalentnon-convertiblebonds.
Thedifferencebetweenthenetproceedsfromtheissueandthefairvalueoftheliabilitycomponentistheequitycomponent.
Theliabilitycomponentissubsequentlycarriedatamortisedcost.
Theequitycomponentisrecognisedintheconvertiblebondsreserveuntilthebondiseitherconvertedorredeemed.
Interimperiodincometaxexpenseisrecognisedbasedontheestimatedaverageannualeffectivetaxrate.
TherearenoamendedstandardsorinterpretationsthatareeffectiveforthefirsttimeforthisinterimperiodthatcouldbeexpectedtohaveanyimpactonthisGroup.
Thefollowingnewstandardsandamendmentstostandardshavebeenissuedbutarenoteffectiveforthefinancialyearbeginning1January2012andhavenotbeenearlyadoptedbytheGroup:IFRS11isamorerealisticreflectionofjointarrangementsbyfocusingontherightsandobligationsofthearrangementratherthanitslegalform.
Therearetwotypesofjointarrangement:jointoperationsandjointventures.
Jointoperationsarisewhereajointoperatorhasrightstotheassetsandobligationsrelatingtothearrangementandhenceaccountsforitsinterestinassets,liabilities,revenueandexpenses.
Jointventuresarisewherethejointoperatorhasrightstothenetassetsofthearrangementandhenceequityaccountsforitsinterest.
Proportionalconsolidationofjointventuresisnolongerallowed.
TheGroupisintheprocessofassessingIFRS11'sfullimpactandintendstoadoptIFRS11uponitseffectivedate,whichisfortheaccountingperiodbeginningonorafter1January2013.
TherearenootherIFRSorIFRICinterpretationsthatarenotyeteffectivethatwouldbeexpectedtohaveanyimpactontheGroup.
--3.
RevenueandsegmentinformationThemanagementoftheCompany("Management")reviewstheGroup'sinternalreportsperiodicallyinordertoassessperformanceandallocateresources.
Managementhasdeterminedtheoperatingsegmentsbasedonthesereports.
Managementconsidersthebusinessfromabrandperspective.
TheGrouphasfourreportablesegmentsasfollows,LI-NINGbrand,DoubleHappinessbrand,Lottobrandandallotherbrandssegments.
Managementassessestheperformanceoftheoperatingsegmentsbasedonoperatingprofit.
Segmentinformationprovidedtomanagementfordecisionmakingismeasuredinamannerconsistentwiththatinthefinancialstatements.
RevenueconsistsofsalesfromLI-NINGbrand,DoubleHappinessbrand,Lottobrandandallotherbrands,whichareRMB3,432,658,000,RMB305,520,000,RMB51,081,000andRMB90,838,000forthesixmonthsended30June2012respectivelyandRMB3,895,453,000,RMB259,779,000,RMB53,995,000andRMB80,076,000forthesixmonthsended30June2011respectively.
Salesbetweensegmentsarecarriedoutontermsequivalenttothosethatprevailinarm'slengthtransactions.
Therevenuefromexternalpartiesreportedtomanagementismeasuredinamannerconsistentwiththatinthecondensedconsolidatedincomestatement.
Thesegmentinformationprovidedtothemanagementforthereportablesegmentsforthesixmonthsended30June2012and2011isasfollows:DoubleLI-NINGHappinessAllotherbrandbrandLottobrandbrandsTotalRMB'000RMB'000RMB'000RMB'000RMB'000Sixmonthsended30June2012Totalrevenue3,432,658308,40567,388106,8493,915,300Inter-segmentrevenue–(2,885)(16,307)(16,011)(35,203)Revenuefromexternalcustomers3,432,658305,52051,08190,8383,880,097Operatingprofit/(loss)237,80955,780(100,969)(8,981)183,639Distributioncostsandadministrativeexpenses1,368,86264,576189,11734,3001,656,855Depreciationandamortisation111,8988,7363873,838124,859Sixmonthsended30June2011Totalrevenue3,895,453262,19676,11297,1104,330,871Inter-segmentrevenue–(2,417)(22,117)(17,034)(41,568)Revenuefromexternalcustomers3,895,453259,77953,99580,0764,289,303Operatingprofit/(loss)470,28447,629(60,163)(15,464)442,286Distributioncostsandadministrativeexpenses1,468,97261,23577,33552,9361,660,478Depreciationandamortisation102,6308,88510,2353,977125,727--Areconciliationofoperatingprofittoprofitbeforeincometaxisprovidedasfollows:UnauditedSixmonthsended30June20122011RMB'000RMB'000Operatingprofit183,639442,286Financeincome3,5237,948Financecosts(90,283)(38,371)Shareoflossofanassociate(3,540)–Profitbeforeincometax93,339411,863GeographicalinformationofrevenueUnauditedSixmonthsended30June20122011RMB'000RMB'000ThePRC(includingtheHongKongSpecialAdministrativeRegion)3,776,3164,198,004Otherregions103,78191,299Total3,880,0974,289,303Revenuebygeographicallocationisdeterminedonthebasisofdestinationofshipment/delivery.
TheGrouphasalargenumberofcustomers.
Forthesixmonthsended30June2012and2011,norevenuederivedfromtransactionswithasingleexternalcustomerrepresented10%ormoreoftheGroup'stotalrevenue.
4.
TradereceivablesUnauditedAudited30June31December20122011RMB'000RMB'000Accountsreceivable–Relatedparties5,2971,734–Thirdparties2,559,2572,103,8562,564,5542,105,590Notesreceivable13,0412502,577,5952,105,840Less:provisionforimpairmentoftradereceivables(61,223)(11,400)2,516,3722,094,440Customersarenormallygrantedcredittermswithin90days.
Asat30June2012,tradereceivablesthatwereneitherpastduenorimpairedamountedtoRMB1,630,076,000(31December2011:RMB1,575,401,000).
TradereceivablesthatwerepastduebutnotimpairedamountedtoRMB886,296,000(31December2011:RMB519,039,000)whichrelatetoanumberofindependentcustomersforwhomthereisnorecenthistoryofdefaultandwithoutstandingreceivablesagedfrom91to180daysasat30June2012.
--Ageinganalysisoftradereceivablesattherespectivebalancesheetdatesisasfollows:UnauditedAudited30June31December20122011RMB'000RMB'0000–30days647,370728,96231–60days269,228386,43361–90days713,478460,00691–180days886,296519,039181–365days52,12710,496Over365days9,0969042,577,5952,105,840Asat30June2012,tradereceivablesofRMB61,223,000(31December2011:RMB11,400,000)wereimpairedonwhichfullprovisionofimpairmenthasbeenmade.
Theimpairmentwasfirstlyassessedindividuallyforsignificantorlongageingbalances,andtheremainingbalancesweregroupedforcollectiveassessmentaccordingtotheirageingandhistoricaldefaultratesasthesecustomerswereofsimilarcreditrisk.
5.
TradepayablesThenormalcreditperiodfortradepayablesgenerallyrangesfrom30to60days.
Ageinganalysisoftradepayablesattherespectivebalancesheetdatesisasfollows:UnauditedAudited30June31December20122011RMB'000RMB'0000–30days615,080750,53531–60days491,802456,95561–90days85,346128,99291–180days10,771116,675181–365days7,1131,742Over365days7,4517,4991,217,5631,462,3986.
ExpensesbynatureUnauditedSixmonthsended30June20122011RMB'000RMB'000Costofinventoriesrecognisedasexpensesincludedincostofsales2,052,2632,128,115Depreciationonproperty,plantandequipment(Notea)76,80476,064Amortisationoflanduserightsandintangibleassets48,05549,663Advertisingandmarketingexpenses503,788683,802Staffcosts,includingdirectors'emoluments370,659373,691Operatingleaserentalsinrespectoflandandbuildings290,644259,071Researchandproductdevelopmentexpenses(Notea)92,197112,609Transportationandlogisticsexpenses92,20879,495Provisionforimpairmentchargeoftradereceivables49,8233,227Write-downofinventoriestonetrealisablevalue35,33241,311Provisionforimpairmentchargeofintangibleassets127,838–Auditor'sremuneration2,2052,205Managementconsultingexpenses25,62226,925Travellingandentertainmentexpenses38,70962,102Note:(a)Researchandproductdevelopmentexpensesincludedepreciationonproperty,plantandequipmentintheResearch&DevelopmentDepartment,whicharealsoincludedindepreciationexpenseasdisclosedabove.
-10-7.
Otherincomeandothergains–netUnauditedSixmonthsended30June20122011RMB'000RMB'000Governmentgrants54,97177,984Licensefeesincome1,7382,013GainonderecognitionofintangibleassetsandlicensefeespayablerelatingtorevisionofthelicenseagreementofLottobrand68,302–Others–(6,368)125,01173,6298.
FinanceincomeandcostsUnauditedSixmonthsended30June20122011RMB'000RMB'000Interestincomeonbankbalancesanddeposits3,5232,678Netforeigncurrencyexchangegain–5,270Financeincome3,5237,948Amortisationofdiscount–licensefeespayable(9,072)(20,105)Interestexpenseonbankborrowings(46,874)(13,365)Interestexpenseonconvertiblebonds(21,289)–Netforeigncurrencyexchangeloss(2,243)–Others(10,805)(4,901)Financecosts(90,283)(38,371)Financecosts–net(86,760)(30,423)9.
IncometaxesUnauditedSixmonthsended30June20122011RMB'000RMB'000Currentincometax–HongKongprofitstax3,7282,309–PRCcorporateincometax77,732137,310–WithholdingincometaxondividendsdistributedfromsubsidiariesinPRC–9,10081,460148,719Deferredincometax(49,912)(46,536)31,548102,183-11-10.
EarningspershareBasicBasicearningspershareiscalculatedbydividingtheprofitattributabletoequityholdersoftheCompanybytheweightedaveragenumberofordinarysharesinissuelesssharesheldforRestrictedShareAwardSchemeduringtheperiod.
UnauditedSixmonthsended30June20122011RMB'000RMB'000ProfitattributabletoequityholdersoftheCompany44,294293,740WeightedaveragenumberofordinarysharesinissuelesssharesheldforRestrictedShareAwardScheme(inthousands)1,052,5231,051,224Basicearningspershare(RMBcents)4.
2127.
94DilutedDilutedearningspershareiscalculatedbyadjustingtheweightedaveragenumberofordinarysharesinissuetoassumeconversionofalldilutivepotentialordinaryshares.
TheCompany'sdilutivepotentialordinarysharescomprisesharestobeissuedunderconvertiblebonds,shareoptionschemesandsharesheldforRestrictedShareAwardScheme.
Acalculationisdonetodeterminethenumberofsharesthatcouldhavebeenacquiredatfairvalue(determinedastheaveragemarketsharepriceoftheCompany'ssharesduringtheperiod)basedonthemonetaryvalueofthesubscriptionrightsattachedtooutstandingshareoptionsandtheunvestedawardedshares.
Thenumberofsharescalculatedasaboveiscomparedwiththenumberofsharesthatwouldhavebeenissuedassumingtheexerciseoftheshareoptionsandthepayoutoftheawardedshares,withthedifferencebeingadjustedinarrivingattheweightedaveragenumberofsharesfordilutedearningspershares,ofwhichdetailsareasfollows:UnauditedSixmonthsended30June20122011RMB'000RMB'000ProfitattributabletoequityholdersoftheCompany,usedtodeterminedilutedearningspershare44,294293,740WeightedaveragenumberofordinarysharesinissuelesssharesheldforRestrictedShareAwardScheme(inthousands)1,052,5231,051,224Adjustmentforshareoptionsandawardedshares(inthousands)3,2735,791Weightedaveragenumberofordinarysharesfordilutedearningspershare(inthousands)1,055,7961,057,015Dilutedearningspershare(RMBcents)4.
2027.
79Duringtheperiod,theimpactofinterestexpenseonconvertiblebondsisanti-dilutiveandhasthereforebeenexcludedfromthecalculationofdilutedearningspershare.
11.
DividendsOn24August2011,theBoarddeclaredaninterimdividendofRMB11.
13centsperordinaryshareforthesixmonthsended30June2011.
On22August2012,theBoardresolvednottodeclareinterimdividendforthesixmonthsended30June2012.
12.
SubsequenteventOn4July2012,theBoardgrantedoptionstoadirectoroftheCompanytosubscribeforatotalof1,000,000ordinarysharesofHK$0.
10inthecapitaloftheCompanypursuanttotheCompany'sshareoptionschemeatanexercisepriceofHK$4.
690pershare.
Theoptionsaresubjecttoavestingscaleintranchesofone-thirdeachon4July2013,4July2014and4July2015,respectivelywiththeirrespectivefairvalueschargedtotheincomestatementovertheabovevestingperiods.
-12-INTERIMDIVIDENDInviewofthecurrentoperatingenvironment,theBoardconsidersitappropriatetoretaincashforthefuturedevelopmentoftheGroupandthereforeresolvednottodeclareinterimdividendforthesixmonthsended30June2012(2011:RMB11.
13centsperordinaryshare).
MANAGEMENTDISCUSSIONANDANALYSISOVERVIEWChina'seconomicgrowthshowedadownwardtrendinthefirsthalfof2012asaresultofweakeningdemandbothinternationallyanddomestically.
Theconsumerpriceindex(CPI)begantofallinthefirsthalfof2012,andyetretailsalesforconsumergoodsdeclinedascomparedto2011.
TheGroup'sanalysisshowsthatthegrowthrateofChina'ssportinggoodsindustrydeceleratedtoasingle-digitpaceinthefirsthalfof2012.
Meanwhile,criticalinventorypressurestillexistsattheretailendandindustrycompetitioncontinuestointensify.
Inaddition,asChina'spercapitaincomerisesandtheconceptofconsumptiongraduallymatures,consumerdemandtowardsbrandingandproductvaluehaselevatedmarkedly.
AlthoughtheGrouphasbeenimplementingaseriesofstrategicbusinessreformssince2011,theeffectsofthesehaveyettobecomeapparentduetotheunfavourablemarketenvironmentaswellasthechallengesbroughtaboutbythecurrentphaseoftheGroup'sdevelopment.
TheGroup'sbusinessperformanceandkeyfinancialindicatorshavebeenaffectedsignificantly;nonetheless,throughoutthereformprocess,theBoardandthemanagementhavebeenanalysingandreviewingthesituationonanongoingbasisandimplementingthereformsactively.
-13-FINANCIALREVIEWThekeyoperatingresultsandfinancialindicatorsoftheGroupforthesixmonthsended30June2012aresetoutbelow:UnauditedSixmonthsended30JuneChange20122011(%)Incomestatementitems(AllamountsinRMBthousandsunlessotherwisestated)Revenue3,880,0974,289,303(9.
5)Grossprofit1,715,4832,029,135(15.
5)Operatingprofit183,639442,286(58.
5)Earningsbeforeinterest,tax,depreciationandamortisation(EBITDA)(Note1)304,958568,013(46.
3)Profitattributabletoequityholders44,294293,740(84.
9)Basicearningspershare(RMBcents)(Note2)4.
2127.
94(84.
9)KeyfinancialratiosProfitabilityratiosGrossprofitmargin(%)44.
247.
3Operatingprofitmargin(%)4.
710.
3Effectivetaxrate(%)33.
824.
8Marginofprofitattributabletoequityholders(%)1.
16.
8Returnonequityholders'equity(%)1.
28.
6ExpensestorevenueratiosStaffcosts(%)9.
68.
7Advertisingandmarketingexpenses(%)13.
015.
9Researchandproductdevelopmentexpenses(%)2.
42.
6AssetefficiencyAverageinventoryturnover(days)(Note3)9572Averagetradereceivablesturnover(days)(Note4)10863Averagetradepayablesturnover(days)(Note5)11291UnauditedAudited30June31December20122011AssetratiosDebt-to-equityratio(%)(Note6)103.
3105.
5Interest-bearingdebt-to-equityratio(%)(Note7)46.
224.
1Netassetvaluepershare(RMBcents)365.
63348.
22-14-Notes:1.
Thecalculationofearningsbeforeinterest,tax,depreciationandamortisation(EBITDA)isbasedonthesumofprofitfortheperiod,incometaxexpense,financecosts-net,depreciationofproperty,plantandequipment,andamortisationoflanduserightsandintangibleassets.
2.
ThecalculationofbasicearningspershareisbasedontheprofitattributabletoequityholdersoftheCompanyfortheperioddividedbytheweightedaveragenumberofordinarysharesinissuelessordinarysharesheldfortheRestrictedShareAwardScheme.
3.
Thecalculationofaverageinventoryturnover(days)isbasedontheaverageofopeningandclosinginventorybalancesoftheperioddividedbycostofsalesandmultipliedbythenumberofdaysintheperiod.
4.
Thecalculationofaveragetradereceivablesturnover(days)isbasedontheaverageofopeningandclosingbalancesoftradereceivablesoftheperioddividedbyrevenueandmultipliedbythenumberofdaysintheperiod.
5.
Thecalculationofaveragetradepayablesturnover(days)isbasedontheaverageofopeningandclosingbalancesoftradepayablesoftheperioddividedbytotalpurchasesandmultipliedbythenumberofdaysintheperiod.
6.
Thecalculationofdebt-to-equityratioisbasedonthetotalliabilitiesdividedbyequityattributabletoequityholdersoftheCompanyattheendoftheperiod.
7.
Thecalculationofinterest-bearingdebt-to-equityratioisbasedonthetotalinterest-bearingborrowings(includingbankborrowingsandconvertiblebonds)dividedbythesharecapitalandreservesattributabletoequityholdersoftheCompanyattheendoftheperiod.
*TheaforesaidindicatorsprovidedbytheGroupmaynotnecessarilybethesameintermsofcalculationmethodsasthoseprovidedbyotherissuers.
RevenueTheGroup'srevenueforthesixmonthsended30June2012amountedtoRMB3,880,097,000,representingadecreaseof9.
5%ascomparedtothecorrespondingperiodlastyear.
RevenuebreakdownbybrandandproductcategorySixmonthsended30June20122011Revenue%oftotal%oftotalchangeRMB'000revenueRMB'000revenue(%)LI-NINGbrandFootwear1,601,60241.
31,648,97538.
4(2.
9)Apparel1,612,33541.
61,991,13046.
4(19.
0)Equipment/accessories218,7215.
6255,3486.
0(14.
3)Total3,432,65888.
53,895,45390.
8(11.
9)DoubleHappinessbrandTotal305,5207.
9259,7796.
017.
6LottobrandTotal51,0811.
353,9951.
3(5.
4)Otherbrands*Total90,8382.
380,0761.
913.
4OverallTotal3,880,097100.
04,289,303100.
0(9.
5)*IncludingAIGLE,KasonandZ-DO.
-15-TheGroup'scorebrand,LI-NINGbrand,recordedrevenueofRMB3,432,658,000,whichaccountedfor88.
5%oftheGroup'stotalrevenue,representingadecreaseof11.
9%ascomparedtothecorrespondingperiodlastyearwithdeclinesinrevenuefromitsvariousproductcategories.
Duringtheperiod,duetotheoveralleconomicconditionandindustrylandscape,thesportinggoodsindustryinChinaexperiencedafurtherslowdownaswellastheincreasingpressurefrominventoriesinretailchannels.
Meanwhile,theincreasinglyintensifiedcompetitionsinretailmarketandhigherretaildiscounts,coupledwithrisinglabourcostsandrentals,ledtofurthershrinkingprofitmarginsintheretailend.
Inviewoftheindustrialandmarketconditions,theGroupscaleddownthesalestodistributorstomitigatethepressurefrominventoriesinretailchannelsandfocuseditsoperationson:1)expeditingtheclearanceofstockandoptimisingtheinventorystructureinretailend.
Accordingtoitsstockrepurchasepolicy,theGroupcontinuedtobuybackaportionofoutdatedstockfromdistributorsduringtheperiod,whichweresoldthroughfactoryoutletsanddiscountstores,seekingtoacceleratetheturnoverofretailstocksandtoresumetheinventoryinretailchannelstoahealthylevelassoonaspossible;2)improvingsaleschannelbuildingandenhancingchannelefficiency.
TheGroupcontinuedtosetupfactoryoutletsanddiscountstoresasscheduled,whileplacingemphasisonimprovingtheprofitabilityofitsretailendandclosingupcertaininefficientstores.
AmongthevariousbrandsundertheGroup,revenueofDoubleHappinessbrandmaintainedasteadygrowthrateof17.
6%.
Lottobrand,inprogressofbusinesstransformation,recordedaslightdropinrevenueyear-on-year.
Asforotherbrands,AIGLEbrandrecordedasignificantyear-on-yearincreaseof47.
6%inrevenuewhichfurtherdemonstrateditsbrandstrength;Kasonbrandrecordedanotablerevenuegrowthof53.
2%year-on-year;andZ-DObrand,inthelaststageofstockclearance,postedamaterialyear-on-yeardecreaseinrevenue.
PercentageofrevenueofLI-NINGbrandbysaleschannelSixmonthsended30June20122011%ofrevenueof%ofrevenueofLI-NINGbrandLI-NINGbrandChangeLI-NINGbrandPRCmarketSalestofranchiseddistributors77.
079.
2(2.
2)Salesfromdirectoperation20.
819.
11.
7Internationalmarkets2.
21.
70.
5Total100.
0100.
0Withthedecreaseinrevenuegeneratedfromsalestofranchiseddistributorsandtheincreaseinrevenuegeneratedfrominternationalmarkets,revenuegeneratedfromsalestofranchiseddistributorsofLI-NINGbrandasapercentagetototalrevenuedecreased.
-16-RevenuebreakdownofLI-NINGbrandbygeographicallocationSixmonthsended30June20122011%ofrevenue%ofrevenueRevenueofLI-NINGofLI-NINGchangeNoteRMB'000brandRMB'000brand(%)LI-NINGbrandPRCmarketEasternregion1805,54823.
5985,89625.
3(18.
3)Northernregion21,442,60142.
01,600,58941.
1(9.
9)Southernregion3626,42318.
3614,62015.
81.
9Westernregion4480,94214.
0628,83416.
1(23.
5)Internationalmarkets77,1442.
265,5141.
717.
8Total3,432,658100.
03,895,453100.
0(11.
9)Notes:1.
EasternregionincludesShanghai,Zhejiang,Jiangsu,AnhuiandShandong.
2.
NorthernregionincludesBeijing,Hebei,Henan,Tianjin,Shanxi,InnerMongolia,Liaoning,JilinandHeilongjiang.
3.
SouthernregionincludesGuangdong,Guangxi,Fujian,Hainan,Jiangxi,Yunnan,GuizhouandHongKong.
4.
WesternregionincludesHunan,Hubei,Shaanxi,Gansu,Qinghai,Ningxia,Xinjiang,Sichuan,ChongqingandTibet.
5.
Duringtheperiod,theGroupadjustedtheorganisationstructureandgeographicaldelineationofthesalesregionsforLI-NINGbrand(seenotes1,2,3and4abovefordetails).
Asaresult,thesalesrevenueforthesixmonthsended30June2011isrestatedaccordingtotheadjustedgeographicaldelineation.
Duringtheperiod,theGroupstreamlinedtheregionaldistributionlayoutofitssaleschannelsbyconductingpartialadjustmenttotheorganisationstructureandgeographicaldelineationofitssalesregionssoastoenhanceregionalmanagement,regionalretailperformanceandcustomermanagementcapability.
TheGroupaimstoincreaseefficiencyindecision-makingandoperationsthroughfurtherintegrationofthesalesregions,inabidtofacilitatetheachievementofitsgoalofstrategicreform.
Duringtheperiod,theGroupcontinuedtoexplorenewchannelsininternationalmarketssuchasSoutheastAsia,resultinginayear-on-yearincreaseinrevenuefromLI-NINGbrandintheinternationalmarkets.
CostofSalesandGrossProfitForthesixmonthsended30June2012,overallcostofsalesoftheGroupamountedtoRMB2,164,614,000(2011:RMB2,260,168,000),andoverallgrossprofitmarginwas44.
2%(2011:47.
3%).
Thedecreaseinoverallgrossprofitmarginascomparedtothecorrespondingperiodin2011wasmainlyduetothehigheroveralldiscountratesintheretailend,theclearanceofobsoleteinventoryaswellasthehigherweightofotherbrands,whichhavelowergrossprofitmarginsthanLI-NINGbrand,intheGroup'stotalrevenue.
CostofsalesofLI-NINGbrandamountedtoRMB1,882,666,000(2011:RMB2,029,826,000),andgrossprofitmarginwas45.
2%(2011:47.
9%).
ThedecreaseingrossprofitmarginofLI-NINGbrandfortheperiodwasattributabletothehigheroveralldiscountratesintheretailendamidtheintensifiedmarketcompetitions,higherpercentagesofsalesthroughfactoryoutletsanddiscountstores,aslightmark-downofpricesforapparelproductsandtheclearanceofobsoleteinventory.
-17-CostofsalesofDoubleHappinessbrandamountedtoRMB185,194,000(2011:RMB150,915,000),andgrossprofitmarginwas39.
4%(2011:41.
9%).
Theslightyear-on-yeardecreaseingrossprofitmarginofDoubleHappinessbrandwasattributabletotherisingrawmaterialandlabourcostsofupstreamsuppliersduringtheperiod.
CostofsalesofLottobrandamountedtoRMB31,235,000(2011:RMB36,823,000),andgrossprofitmarginwas38.
9%(2011:31.
8%).
TheincreaseingrossprofitmarginofLottobrandwasattributabletothehigherpercentageofproductsalesthroughthedirectly-operatedstoresduringtheperiod.
DistributionCostsForthesixmonthsended30June2012,theGroup'soveralldistributioncostsamountedtoRMB1,152,921,000(2011:RMB1,323,873,000),accountingfor29.
7%(2011:30.
9%)oftheGroup'stotalrevenue.
DistributioncostsofLI-NINGbrandamountedtoRMB1,042,602,000(2011:RMB1,177,830,000),accountingfor30.
4%(2011:30.
2%)ofLI-NINGbrand'srevenue.
AstheGroupstreamlineditscostsandexpensestoenhanceoperatingefficiency,advertisingandmarketingexpensesdecreasedsubstantiallyandthesalariesandbenefitsofsalesstaff,depreciationandamortisationcharges,sundryexpenses,etc.
remainedstableorreduced,resultingintheoveralldecreaseindistributioncosts.
Meanwhile,theGroupstrivedforenhancingretailsalescapabilitiesandconsolidatingandclosinguptheinefficientstores.
However,anoverallincreaseinrentalcostsofretailingwasrecordedduetothehigherunitrentalcost.
Asaresultoftheforegoing,thepercentageofoveralldistributioncostsofLI-NINGbrandtorevenueofLI-NINGbrandincreasedslightlyascomparedtothesameperiodin2011.
Inthesecondhalfyear,theGroupwillcontinuetooptimiseitscoststructureandgiventhemarketingactivitiesforeventsincludingLondonOlympicsandthesponsorshipfortheChineseBasketballAssociation(CBA),anincreaseintheGroup'sadvertisingandmarketingexpensesisexpectedforthewholeyearof2012.
DistributioncostsofDoubleHappinessbrandamountedtoRMB40,604,000(2011:RMB31,855,000),accountingfor13.
3%ofDoubleHappinessbrand'srevenuewhichwas1.
0percentagepointabovethe12.
3%recordedinthesameperiodin2011.
Thiswasmainlyattributabletohighertransportationandwarehousingcostonthebackoftheincreasedrevenue.
DistributioncostsofLottobrandamountedtoRMB44,654,000(2011:RMB72,480,000).
ThedecreaseindistributioncostswasattributabletotheceasingoftheconsiderableamortisationoflicensefeeastheGroupmadeafullamountimpairmentprovisionforLottobrand'slicenseasadjustedunderasupplementalagreemententeredintowiththelicensor,togetherwithasignificantdecreaseinmarketingexpensesduetotheeffectivecontrol.
TheimpairmentprovisionforlicenserightamountingtoRMB127,838,000wasincludedintoLottobrand'sadministrativeexpenses,andtheone-offincomeofRMB68,302,000arisingfromtherevisiontotheoriginalagreementwasincludedintoLottobrand'sothergains.
AdministrativeExpensesForthesixmonthsended30June2012,theGroup'soveralladministrativeexpensesamountedtoRMB503,934,000(2011:RMB336,605,000),accountingfor13.
0%(2011:7.
8%)oftheGroup'stotalrevenue.
AdministrativeexpensesofLI-NINGbrandamountedtoRMB326,260,000(2011:RMB291,142,000),accountingfor9.
5%ofLI-NINGbrand'srevenue,whichwas2.
0percentagepointsabovethe7.
5%recordedinthesameperiodin2011.
Suchexpensesmainlycomprisedstaffcosts,managementconsultingexpenses,officerental,depreciationandamortisationcharges,taxes,provisionforimpairmentofassetsandothersundryexpenses.
GiventhedeclineinLI-NINGbrand'srevenue,theGrouphasexercisedeffectivecontrolonandreducedthesundryexpensesandlabourcosts.
However,duetotheincreaseininventorybalanceasaresultofthebuy-backofaportionofinventoriesfromdistributorsduringtheperiodandflatgrowthinorders,togetherwiththehigherbalanceoflongageingtradereceivables,theprovisionforimpairmentofassetsincreasednoticeably,resultinginanincreaseinadministrativeexpensesasapercentagetotherevenueofLI-NINGbrand.
-18-AdministrativeexpensesofDoubleHappinessbrandamountedtoRMB23,972,000(2011:RMB29,380,000),accountingfor7.
8%(2011:11.
3%)ofDoubleHappinessbrand'srevenue.
Suchexpensesmainlycomprisedstaffcosts,depreciationandamortisationcharges,provisionforimpairmentofassetsandothersundryexpenses.
Whilethesalesrevenueregisteredstablegrowth,thedailyadministrativeexpensesremainedsteadyorreducedwhich,togetherwithapartialreversalofimpairmentprovisionuponsaleofinventories,overalladministrativeexpensesofDoubleHappinessbrandrecordedayear-on-yeardecrease.
AdministrativeexpensesofLottobrandamountedtoRMB144,463,000(2011:RMB4,855,000),accountingfor282.
8%(2011:9.
0%)ofLottobrand'srevenue.
Suchexpensesmainlycomprisedstaffcosts,basicresearchanddevelopmentcosts,depreciationandamortisationcharges,provisionforimpairmentofassetsandothersundryexpenses.
Duringtheperiod,theGroupmadeafullamountprovisionofRMB127,838,000forimpairmentofintangibleassetsbasedonLottobrand'slicenseasadjustedunderasupplementalagreemententeredintowiththelicensor.
Meanwhile,duetotheincreaseininventoriesandchangesintheageingstructureofinventoriesaswellasthehigherbalanceoflongageingtradereceivables,theprovisionforimpairmentofotherassetsalsoincreasedsubstantiallyduringtheperiod.
Otheradministrativeexpensessuchassundryexpensesandstaffcostsremainedsteadyorreduced.
EarningsbeforeInterest,Tax,DepreciationandAmortisation(EBITDA)Forthesixmonthsended30June2012,theGroup'sEBITDAamountedtoRMB304,958,000(2011:RMB568,013,000),representingadecreaseof46.
3%ascomparedtothecorrespondingperiodlastyear.
ThedecreaseinEBITDAwasmainlyattributabletothedecreaseinsalesrevenueandgrossprofitaswellastheincreaseinrentalcosts,alargerprovisionforimpairmentofassetsduetoslowerassetturnoverrateandtheconsiderableimpairmentprovisionforLottobrandlicense,thoughpartiallyoffsetbythedecreasesinadvertisingandmarketingexpenses,sundryexpensesandlabourcostsduringtheperiod.
EBITDAofLI-NINGbrandamountedtoRMB346,167,000(2011:RMB572,914,000),representingayear-on-yeardecreaseof39.
6%.
Thiswasmainlyattributabletothedecreaseingrossprofitandtheincreaseinexpenseratio.
EBITDAofDoubleHappinessbrandamountedtoRMB64,516,000(2011:RMB56,514,000),representingayear-on-yearincreaseof14.
2%.
Thiswasmainlyattributabletotheincreaseingrossprofitontherisingsalesrevenue,whiletheoverallexpenseratioremainedstableduringtheperiod.
EBITDAofLottobrandrecordedalossofRMB100,582,000(2011:lossofRMB49,928,000).
Thesignificantincreaseinlosswasattributabletothesubstantiallyincreasedprovisionforimpairmentofassets,thoughpartiallyoffsetbythedecreaseinmarketingexpenses.
FinanceCostsForthesixmonthsended30June2012,theGroup'snetfinancecostsamountedtoRMB86,760,000(2011:RMB30,423,000),representing2.
2%(2011:0.
7%)oftheGroup'stotalrevenue,amongstwhichtheinterestexpenseonconvertiblebondsfortheperiodwasRMB21,289,000(2011:nil).
Theincreaseinfinancecostswasalsoattributabletotheincreaseinshort-termborrowingsandtherisinginterestratesduringtheperiod.
IncomeTaxExpenseForthesixmonthsended30June2012,incometaxexpensesoftheGroupamountedtoRMB31,548,000(2011:RMB102,183,000)andtheeffectivetaxratewas33.
8%(2011:24.
8%).
-19-OverallProfitabilityIndicatorsDuetothedecreasesinsalesrevenueandgrossprofitandtheincreaseinexpenseratio,theoverallprofitabilityindicatorsoftheGroupforthesixmonthsended30June2012declinedsignificantly.
Forthesixmonthsended30June2012,theGroup'sprofitattributabletoequityholdersamountedtoRMB44,294,000(2011:RMB293,740,000),representingayear-on-yeardecreaseof84.
9%ascomparedtothesameperiodin2011.
Marginofprofitattributabletoequityholderswas1.
1%(2011:6.
8%),representingadecreaseof5.
7percentagepointsascomparedtothesameperiodin2011.
ReturnonequityoftheGroupwas1.
2%(2011:8.
6%),representingadecreaseof7.
4percentagepointsascomparedtothesameperiodin2011.
ProvisionforInventoriesTheGroup'spolicyinrespectofprovisionforinventoriesforthefirsthalfof2012wasthesameasthatin2011.
Inventoriesarestatedatthelowerofcostandnetrealisablevalue.
Intheeventthatnetrealisablevaluefallsbelowcost,thedifferenceistakenasprovisionforinventories.
TheGroupconsidersthattheaforesaidpolicyensuressufficientprovisionforinventoriesoftheGroup.
Asat30June2012,theaccumulatedprovisionforinventorieswasRMB222,841,000(31December2011:RMB187,509,000).
TheincreasedinventorybalanceforLI-NINGbrandattheendoftheperiodresultedintheincreaseintheoverallprovisionforinventoriesfortheperiod.
ProvisionforDoubtfulDebtsTheGroup'spolicyinrespectofprovisionfordoubtfuldebtsforthefirsthalfof2012wasthesameasthatin2011.
Asat30June2012,theaccumulatedprovisionfordoubtfuldebtswasRMB61,223,000(31December2011:RMB11,400,000).
Duetotheincreasedlongageingtradereceivables,thebalanceofprovisionfordoubtfuldebtsattheendoftheperiodexperiencedasubstantialincrease.
LiquidityandFinancialResourcesTheGroup'snetcashusedinoperatingactivitiesforthesixmonthsended30June2012amountedtoRMB601,847,000(2011:netcashinflowofRMB373,574,000).
Asat30June2012,cashandcashequivalents(includingcashatbanksandinhand,andfixeddepositsheldatbankswithoriginalmaturityofnomorethanthreemonths)amountedtoRMB1,326,874,000,representinganetincreaseofRMB130,400,000ascomparedwiththepositionasat31December2011.
Theincreasewasbroughtaboutbythefollowingitems:UnauditedSixmonthsended30June2012ItemsRMB'000Netcashusedinoperatingactivities(601,847)Netcapitalexpenditure(125,010)Prepaymentforotherinvestments(12,100)Netproceedsfrombankborrowings185,127Proceedsfromissuanceofconvertiblebonds745,691Othernetcashoutflow(61,461)Netincreaseincashandcashequivalents130,400-20-Giventhefactsthatthecashturnoverrateofdistributorsdecreasedasaffectedbytheretailmarketandthegovernment'stightenedmonetarypolicy,theGroupdecidedtoextendfurthersupporttoitsdistributors,whichledtotheincreaseinaccountsreceivableturnoverdaysandtheoverallcashturnoverdaysfortheperiod,causingasubstantialimpactontheGroup'soperatingcashflow.
TheGroupisactivelytakinginitiativesinordertoimprovethereceivables.
TheGrouphassufficientstandbybankcreditfacilitiestocopewiththefundingneedsarisingfromdailyoperationsandfuturedevelopments.
Asat30June2012,theGroup'savailablebankingfacilitiesamountedtoRMB1,998,600,000,amongstwhichoutstandingbankborrowingsamountedtoRMB1,024,040,000.
Duringtheperiod,theGroupalsoissuedconvertiblebondsintheamountofRMB750,000,000,andreceivednetproceedsofRMB745,691,000afterdeductingtheissuanceexpenses.
Asattheendoftheperiod,theoutstandingbankborrowingsandbondspayabletoequityholders'equityratio(i.
e.
thegearingratio)was46.
2%(31December2011:24.
1%).
Duringtheperiod,theGroupdidnothedgeitsexposuretointerestraterisksbywayofinterest-rateswap.
ForeignExchangeRiskTheoperationoftheGroupismainlycarriedoutinthePRC,withmosttransactionssettledinRenminbi.
ThereportingcurrencyoftheGroupisRenminbi.
TheGroup'ssubsidiariesinSingaporeandtheUnitedStatesuseSingaporeDollarsandUnitedStatesDollarsastheirrespectivefunctionalcurrencies.
AsmallportionoftheGroup'scashandbankdepositsaredenominatedinHongKongDollars,UnitedStatesDollars,EurosandSingaporeDollars.
TheCompanyalsopaysdividendsinHongKongDollars.
Inaddition,theGrouppayscertainlicensefeesandsponsorshipfeesinUnitedStatesDollarsorEuros,andrepayssomebankborrowingsinHongKongDollars.
TheGroupdidnothedgeitsexposuretorisksarisingfromfluctuationsinexchangeratesduringtheperiod.
AnysignificantexchangeratefluctuationsofforeigncurrenciesagainstRenminbimayhavefinancialimpactsontheGroup.
PledgeofAssetsAsat30June2012,buildingswithnetbookvalueofRMB19,315,000(31December2011:RMB20,190,000)andlanduserightswithnetbookvalueofRMB14,764,000(31December2011:RMB14,934,000)oftheGroupwerepledgedtosecurecertainbankborrowingsofacompanyoftheGroup.
ContingentLiabilitiesAsat30June2012,theGrouphadnosignificantcontingentliabilities.
-21-BUSINESSREVIEWDuringthefirsthalfof2012,inthefaceoftheindustryslowdownandintensifyingcompetition,theGroup'sbusinessperformanceshowedarelativelylargedegreeofdecline.
Toeffectivelyrespondtotheindustryenvironment,andtopropeltheGroup'slong-term,sustainabledevelopment,theGroupdecidedtofocusitsresourcesonthecoreLI-NINGbrandandtheChinesemarket,centreontheessenceofsports,togivefullplaytothebrandvalue.
Meanwhile,theGroupstrovetoclearinventoryattheretaillevel,streamlinethestorenetwork,closedowninefficientstoresandimproveretailefficiency.
Moreover,theGroupendeavouredtostrengthensportsmarketing,aswellasoptimiseproductsandthesupplychaininordertosteertheGroupbackontoahealthypathofdevelopmentasquicklyaspossible.
LI-NINGBrandBrandMarketingandPromotionAdheringtothestrategyoffocusingonitscorebusiness,duringthefirsthalfof2012,theGroupformulatedandexecuteditsOlympicsintegratedmarketingplanandsustaineditsconsistentcommunicationwithconsumersonthebrandpositioningviamarketingplatformsfoundedoncoresportscompetitions,combinedwithnewproductfunctionalityanduniquebrandpersonalitytostrengthenbrandequity.
CoreSportsCategoriesBasketballSponsorshipofthe"ChineseBasketballAssociation"("CBA")–InJune2012,theGroupsignedamemorandumofcooperationregardingtheGroup'sroleasanequipmentsponsorfortheCBAforfiveseasonsfrom2012/2013through2016/2017.
Afteryearsofdevelopment,theCBAhasbuiltsubstantialcommercialaswellasbrandvalue.
IthasgrowntobecomeoneofthemostpopularsportsleagueswiththehighestfanloyaltyinChina.
SponsorshipoftheCBAisanimportantstrategicchoicemadebytheGrouptoexemplifythetrueessenceofsportsintheLI-NINGbrand.
ArmedwiththesponsorshiprightsfortheCBA,theGroupwillfullyutilisetheCBA'ssportsmarketingplatform,extensiveexposureandexcellentresourcestoexpandtheLI-NINGbrand'sbasketballbusiness,enhancebrandvalueandfurtherdeveloptheGroup'sbusinessoverall.
Sponsorshipofthe"NationalBasketballLeague"("NBL")–LiNingGroupalsocooperateswiththeCBAthroughsponsorshipoftheNBLwhichprovidesanotherprofessionalcompetitionplatformforLI-NINGbrand'sbasketballcategory.
TheNBL's2012season-openingpressconferencewashostedinAprilinBeijing.
AsthetopofficialstrategicpartneroftheNBL,LI-NINGbrandheldaparallelexhibitionon-sitetoshowcasetheprofessionalbasketballequipmenttobeusedduringtheforthcomingNBLseason.
GansuTelevisionwillmaintainitscloseworkingrelationshipwiththeleaguetoreporttheentireNBLtournament,whilelocaltelevisionstationsofthehomecityofeachclubwillalsoactivelybroadcastthegames.
DuringthisseasonaportionoftheHongKongClub'sgameswillbeplayedinHongKong,markingthefirsttimethatNBLentersHongKong,expandingtheNBL'snationwideinfluence.
"TurningPoint001(旋機001)andYearoftheDragonSpecialEdition"PromotionCampaign–Duringtheperiod,theexclusivesignatureshoesdesignedfortheGroup'ssponsoredNBAstar–EvanTurner,calledthefirst-generation"TurningPoint001",werelaunchedintwospecialeditioncolourpalettesnamed"Blueandwhiteporcelain"and"Imperialrobe"tomarktheYearoftheDragon.
InJanuary2012,afterfiveroundsofweb-basedwarm-uprallies,representativesfrom19printandonlinemedia,opinionleadersinthebasketballfieldfromBeijingandotherregions,aswellasrepresentativesofLI-NINGbasketballfans,gatheredatSanlitun,Beijingtojointlywitnesstheproductlaunch.
ThiseventeffectivelyboostedtheLI-NINGbrand'sexposureandproductsales.
-22-TrackandField"IAAFDiamondLeague"–ThistrackandfieldmeetistheprofessionalcompetitionplatformforLI-NINGbrand'srunningcategory.
China'smostimportantinternationaltrackandfieldmeetoftheyear,theDiamondLeagueShanghaiwasheldinMay2012.
ThreeofLI-NINGbrand'ssponsoredinternationalathletes–100mJamaicansprinterAsafaPowell,men'sjavelinchampionAndreasThorkildsenandmen'striple-jumpathleteChristianTaylor,participatedinthecompetition.
AsafaPowell,whoisaformerworldrecordholder,wontheraceasheoutpacedallcompetitorstocrossthefinishlinein10.
02seconds.
BothAndreasThorkildsenandChristianTaylorcameinthirdintheirrespectiveevents.
Throughtheirperformancesatthestadium,thethreeathletesfullyembodiedthethemeadvocatedbytheLI-NINGbrand:"Self-Sharpening,MaketheChange"(歷煉,讓改變發生).
Running"LI-NINGChina10KRoadRacingLeague"–ThisisthecompetitionplatformforLI-NINGbrand'srunningcategorywhichunitesprofessionalandgrassrootsrunningeventsasone.
ThisrunningleagueisapprovedbytheChineseAthleticsAssociationasthefirstofficialrunningcompetitionheldintheformofaleague.
Asthefoundingsponsor,LiNingCompanymaintainsexclusivetitlerightstotheleague.
WiththesupportoftheChineseAthleticAssociationandsportsbureausofvariousprovincesandcities,the2012"LI-NINGChina10KRoadRacingLeague"washeldoverthreeseparatestationsinXi'an,ShenzhenandShanghai,withnearly12,000participants.
Duringthetournaments,LiNingCompanysetupa"LI-NINGRunningExperienceCentre"toprovidephysicalfitnesstests,runningtechniqueanalysis,runningproductsexperienceaswellasaplatformofinteractionbetweenrunners.
"BeijingInternationalRunningFestival"–Withahistoryspanning56years,thisisBeijing'straditionallarge-scalemasssportsevent.
LiNingCompanyleveragedthiseventasanopenerforthe"LI-NINGChina10KRoadRacingLeague"tofullylaunchthefirstdomesticofficialrunningracesintheformofaleague.
ThismarathonhasbeenlistedintheWorldChampionshipsinAthleticsSeriessince2011.
Withabout20,000runners,theeventhasgainednation-widemediacoverageandreceivedstrongattentionfromthecommunity.
"RunOffPressureandTakeaBreath"(跑掉壓力輕呼吸)9thGenerationUltralightRunningShoesLaunch–Duringthesecondquarterof2012,thelong-establishedcoreassetofLI-NINGrunningshoes–"Ultralight",wasextendedandtheGrouplaunchedthe9thgenerationultralightrunningshoes–"LightVessel"(輕舟).
Toaccompanythelaunchof"LightVessel"products,LI-NINGbrandhostedanintegratedbrandmarketingcampaignwiththetheme"RunOffPressureandTakeaBreath".
Thetechnologywhichgivestheproductitslightnessandcomfort,aswellastheproduct'sdistinctcharacteristics,wereblendedwithanathlete'sstorytoadddepthtotheinterpretationandapplicationforcommunicatingthe"RunOffPressureandTakeaBreath"concept,helpingtofurthershapeLI-NING'sprofessionalbrandimageinrunning.
Manyprominentmediawereinvitedtoexperiencethe"LightVessel"runningshoesatthe9thgenerationultralightrunningshoeslaunchevent,whichresultedinwiderecognitionandpositivecoverage.
TheGroupalsousedSinaWeiboasaplatformtopromoteinteractiveonlineactivitiesandcontentmarketingcommunications,whichdrewover100,000activefollowers,furtherstrengtheningtheawarenessandloyaltyamongconsumerstoLI-NINGbrand.
"MiniFunRun"BrandExperienceEvent–"FunRun"and"MiniFunRun"areimportantinteractiveplatformsforLI-NINGbrand'srunningcategorytocommunicateseasonalbrandconceptsandproductinformationtobeginnerrunners.
Duringthesecondquarterof2012,inordertocomplementthemarketingtheme"RunOffPressureandTakeaBreath",whichrevolvedaroundthepromotionsofthe9thgenerationultralightrunningshoes"LightVessel"products,andtoextendLI-NINGbrand's"FunRun"interactiveplatform,theGrouplaunched"MiniFunRun",alsoknownas"LI-NING5KNightRun"event.
Over4,000runningenthusiastsparticipatedintheevent,allowingLI-NINGbrandtothoroughlypresentitsproducts'technologyandbrandattributes.
-23-"LI-NINGiRUN"Club–ThisintegratedplatformallowsLI-NINGbrand'srunningcategorytointeractwithexperiencedrunners.
"LI-NINGiRUN"Clubhasestablishedrunningorganisationsin12citiesacrossthenation,andboastsmembershipsofover5,000runningenthusiasts.
Duringthefirsthalfof2012,"LI-NINGiRUN"ClubarrangedforrunnerstoparticipateinvariousmajoractivitiesincludingtheXiamenInternationalMarathon,TianjinInternationalMarathon,DalianInternationalMarathonandtheDiamondLeagueShanghai,providingthemwithaprofessionalrunningexperience.
SuchactivitieseffectivelyconveythebrandandproductmessagewhileofferingbroadexposureoftheLI-NINGbrand.
Theonlinecommunityofthe"LI-NINGiRUN"Clubprovidesaninteractiveplatformonwhichparticipantscanshareknowledgeofprofessionalrunning,productdescriptionsandtakepartininteractiveactivities.
ThisplatformhasbecomeanimportantchannelfortheLI-NINGbrand'srunningcategorytocommunicateandinteractwithconsumers,aswellastoobtainimportantmarketinformation.
BadmintonLiNingCompany'smarketingforthebadmintoncategoryadoptsmulti-brands,multi-channelsandmulti-platformsthroughintegratedpromotions,andhashelpedmaintainitsnumberoneassociationwiththeChineseNationalBadmintonTeamandChina'sbadmintonsector.
"2012ThomasCupandUberCup"–InMay2012,the27thAnnualThomasCuporBWFMen'sWorldTeamChampionships,and24thAnnualUberCuporBWFWomen'sWorldTeamChampionshipswereheldinWuhan,China.
TheThomasCupandtheUberCuparetwoofthemostrespectedinternationalbadmintoncompetitions.
Despitenotbeingasponsorofthecompetition,theLI-NINGbrandleveragedtheeventtocarryoutintegratedmarketingpromotionsforthebadmintoncategory,whichwerecloselylinkedtothethemeof"Agility,MaketheChange"(靈敏,讓改變發生).
Throughtop-notchsponsorshipresource,LinDan(林丹)'smonologue–"LettheGameFollowMe"(比賽只能聽我的),theGroupeffectivelystrengthenedthecloseassociationbetweentheLI-NINGbrandandthismajorbadmintoncompetition.
Tocomplementthemedia'sreportsofcompetitionresults,publicrelationsmessagesrelatedtotheThomasCupandUberCupprofessionalgearweremassivelyconveyed.
Thesemessages,whichrevolvedaroundthecompetitionapparel,LinDan's"HERO"competitionshoes,"3DBreaking-free"(立體風刃)and"AirStreamSystem"(風動導流)technologyplatforms,andthebrand'sthemeof"Agility,MaketheChange",werefrequentlycitedbythemedia.
Greatpromotionaleffectwasachievedduringthesevendaysofthecompetition,asthesebrandmessageswereincludedinlivereportsofthetournamentanditsresultsbyCCTVandothermedia.
Atthesametime,onlinemarketinghasbecomemoredeeplyengagedinthebadmintoncategory.
Duringthecompetitions,theGroupdevelopedafeaturepageforthetheme"Agility,MaketheChange"ontheGroup'sofficialwebsitewhichattracted114,234visitors.
Themostrenownedbadmintonforum,"badmintoncn.
com",wastargetedasamarketingfocusandresultedinatotalof210,000clickthroughsforthepostwhichintroducedLI-NINGbrand'sprofessionalgeardesignedfortheChineseNationalBadmintonTeamcompetingintheThomasCupandUberCup.
AsapreludetotheOlympicGames,theThomasCupandUberCupallowedtheGrouptoaccumulateawealthofexperienceforitsOlympicGamesmarketing.
"2012SingaporeOpen"–AsoneofthemajortoursoftheBWFSuperSeries,theSingaporeopenisalsooneofLI-NINGbrand'simportantinternationalcompetitionresources.
Duringthe2012SingaporeOpen,LI-NINGbrand'ssponsoredbadmintonplayer,BoonsakPonsana,wonthemen'ssinglestitlewhilewearingthe"SkillSilo"(靈)seriesprofessionalcompetitionshoes.
ThiswashissecondSingaporeOpenchampionship.
-24-MarketingandPromotionsforLondon2012OlympicGamesTorchRelayinAthens–TheGroup'sChairman,Mr.
LiNing,wasinvitedtoparticipateintheGreeklegofthetorchrelayfortheLondon2012OlympicGamesasarepresentativeoftheBeijingOlympics,andsuccessfullyconcludedthetorchrelayacrossGreecewiththelastflamehandover.
FollowinghispreviousappointmentasthefinaltorchbearerattheopeningceremonyoftheBeijing2008OlympicGames,Mr.
LiNingwasreunitedwiththeOlympicFlametoonceagaindelivertheOlympicdream,thistimeatthebirthplaceoftheOlympicGames.
The"OlympicFlameWitnessesChange"(聖火見證改變)eventreceivedmuchattentionandwasvastlyreportedbydomesticmainstreamtelevision,printandonlinemedia,andwasvisitednumeroustimesonsocialmediaplatformssuchasSinaWeibo,TencentWeiboandRenren.
The"OlympicFlameWitnessesChange"eventachievedgreatresultsasthefirstkeyactivityintheGroup'sOlympicsmarketingpromotioncampaign.
"WitnesstheChange,theDragonDazzlesLondon"(見證改變,龍耀倫敦)PressConferenceforSponsorshipofFiveNationalGoldMedalTeams'OlympicSportsGear–InJune2012,theGroupheldapressconferenceinBeijingwiththetheme"WitnesstheChange,theDragonDazzlesLondon"tounveilitsOlympicsportsgear.
TheGrouponceagainusedthedragonthemein2012–theYearofDragon–tolaunchthe"ScarletScales"(赤鱗)sportswearseriesandprovideprofessionalcompetitiongearfortheChineseNationalGymnasticsTeam,ChineseNationalShootingTeam,ChineseNationalDivingTeam,ChineseNationalTableTennisTeamandChineseNationalBadmintonTeamduringtheirquestsforgloryattheLondon2012OlympicGames.
Theeventattractedimmenseattentionandwasreportedheavilybydomesticmainstreamtelevision,printandonlinemedia.
"TheChinesewillMaketheChange"(中國人讓改變發生)themedOlympicsmarketingandpromotions–JustbeforetheLondon2012OlympicGames,LI-NINGbrandlaunchedthemarketingandpromotioncampaignfortheOlympics,withthetheme"TheChinesewillMaketheChange",whichintegratesavarietyofresourcesincludingTVcommercial,outdooradvertisement,brandpublicrelations,in-storePOPkeyvision,in-storedisplaysofgold-medalteamspotlightproducts,fieldevents,themedsalesaswellasdigitalsalesandmarketing.
ThecampaignfullyleveragedtheGroup'ssportsresources,thefiveChinese"DreamTeams"whichLI-NINGbrandsponsors,tosolidifyLI-NING'sstatusas"China'snumberonesportsbrand"andtogreatlyenhancetheassociationbetweentheLI-NINGbrandandtheOlympicGames.
LiNingCompanyalsofilmedthefivegold-medaldocumentaryseriescalled"DreamTeams–Preparingfor2012"(夢之隊-備戰2012),jointlywiththefivenationalgold-medalteams.
ThisseriesofshortfilmscombinesthedistinctivefeaturesofeachsportofthefiveOlympicgold-medalteamswithindividualstoriesofteammemberstoilluminatethestrongsportsmanshipofChineseathletes,conveyLI-NINGbrand'scoremessageduringtheLondon2012OlympicGamesandfurtherenhanceLI-NINGbrand'sassociationwiththefivenationalgold-medalteams.
DuringtheLondonOlympics,LI-NINGandTencentjoinedforcestoestablish"ChineseLegion"and"FiveGoldMedalTeamsFeature"tofurtherpropagatethebrand'simage.
Thesewebsiteswerevisitedbyoveronebillionnetizens.
LI-NINGbrand'ssponsoredathletesallusedthestandardisedLI-NINGbackgroundfortheirWeibosites,whichwerevisitedbyover400millionnetizens.
Duringthecompetition,throughaseriesofchampion-spotlightgestures,thefivegold-medalteams'sportsgearachievedalargeamountofmediaexposure,whichfurtherstrengthenedLI-NINGbrand'sassociationwiththeChineseOlympicchampions.
Afterthecompetitions,theGroupleveragedWeiboasaplatformtoquicklydisseminateits"Attitude"commercialspertainingtothefivegold-medalteams,generatingstrongawarenessandapprovalfromtheindustryandthemasses,andeffectivelyincreasingthebrand'sgoodwillamongconsumers.
OlympicsExhibitionTour–WiththeopportunitybroughtforthbytheLondon2012OlympicGames,LiNingCompanyorganisedanexhibitiontourtoshowcaseLI-NINGbrand'sprofessionalOlympicgearforthefivenationalgoldmedalteamsintheshoppingmallsof12majorcities,includingBeijing,GuangzhouandShenzhen,fromJulythroughAugust.
Throughthisexhibition,theGroupelaboratedontheproductconceptbehindLI-NINGbrand'sOlympicgear,thefivenationalgoldmedalteams'OlympicshistoryandtheevolutionofLI-NING'ssportsstars.
Inaddition,liveinteractionwithcelebritiesandon-sitepromotionswerealsoheldtopromoteLI-NINGbrand'sOlympicsresources,enhancethebrand'sessenceofprofessionalisminsports,anddriveretailsalesinlocalstores.
-25-LiNingCompanyseizedtheopportunityofferedbytheLondon2012OlympicGamestodrawthetiesbetweentheLI-NINGbrandandtheconceptofsportsmanshipclosertogetherinthemindsofconsumersinordertoimprovetheirappreciationoftheLI-NINGbrand'sprofessionalisminsports.
LI-NINGsportsgearhelpedsportsteamsandathletestoachievetheirbestlevelofcompetitioninthestadiumandtofullydemonstratethespiritof"MaketheChange":ChineseNationalBadmintonTeam–The2012ThomasCupandUberCupkickedoffinWuhaninMay.
BoththeChineseNationalBadmintonMen'sandWomen'sTeamsovercametheiropponentsbylargemarginstowinthechampioncups.
TheChineseNationalBadmintonTeamwasequippedwithafullsetoftop-notchLI-NINGbrandgear,andbadmintonproductsboastingthelatesttechnologywerealsoshowcasedattheThomasCupandUberCup,helptheteamtovictory.
DuringtheLondon2012OlympicGames,LI-NINGbrandhelpedtheChineseNationalBadmintonTeamtoobtaingreatresultsoffivegoldmedals,twosilvermedalsandonebronzemedal,markingthefirsttimeinhistoryateamhassweptallthegoldmedalsinthisevent.
LI-NINGbrand'ssponsoredathlete,LinDan(林丹),alsobecamethefirsttwo-timeOlympicchampioninbadmintonhistory.
ChineseNationalGymnasticsTeam–DuringtheArtisticGymnasticsWorldCup2012inZiboheldinApril,hostcountryChina'snationalteamcapturedsixgoldmedalsin10events,tobecomethemostoutstandingteam.
AttheLondon2012Olympics,theChineseNationalGymnasticsTeamwonfourgoldmedals,threesilvermedalsandonebronzemedal,whiletheTrampolineTeamwononegoldmedal,onesilvermedalandtwobronzemedals.
ChineseNationalDivingTeam–AsarehearsalfortheOlympics,theChineseNationalDivingTeamcapturedalleightgoldmedalsatthe"2012FINADivingWorldCup",oneoftheworld'sthreemostnotabledivingcompetitions.
AttheLondon2012OlympicGames,theChineseNationalDivingTeamwonsixgoldmedals,threesilvermedalsandonebronzemedal.
ChineseNationalTableTennisTeam–Theteamparticipatedin12eventsorganisedbytheInternationalTableTennisFederation.
Inparticular,theteamcompetedintwoeventsfortheA-League,eightfortheB-LeagueandtwofortheC-League.
Theteamalsocompetedfourtimesindomesticcommercialcompetitionsandwarm-upmatches.
AttheLondon2012OlympicGames,theteamwonfourgoldmedalsandtwosilvermedals,onceagainsweepingallthegoldmedalsinthisevent.
ChineseNationalShootingTeam–Duringthefirsthalfof2012,theteamcompetedinnineeventsorganisedbytheInternationalShootingSportFederation.
Inparticular,theteamcompetedintwoeventsfortheA-league,fiveeventsfortheB-leagueandtwoeventsintheC-league.
Theteamalsocompetedsixtimesindomesticcommercialcompetitionsandwarm-upmatches.
AttheLondon2012OlympicGames,theteamwontwogoldmedals,twosilvermedalsandthreebronzemedals,includingthefirstOlympicgoldbyYiSiling(易思玲).
DuringtheLondonOlympics,thefivegoldmedalteamsswept22goldmedalsintotal,accountingfor57.
9%ofthenation'stotalgoldmedalcount.
NationalsportsresourcessponsoredbyLI-NINGbrandalsoachievedoutstandingresultsattheLondonOlympics,givingthebrandgreatexposurewhiledemonstratingthecharismaofsportsmanship:SpanishBasketballTeam/ArgentinaBasketballTeam–TheSpanishandArgentinaBasketballTeamsbothfoughthardthroughoutthecompetitiontoreachthefinalgoldmedalgameandthebronzemedalgamerespectively.
Ultimately,theSpanishBasketballTeamwonthesilvermedalwhiledisplayingitssuperbskillsandtenaciousstyle,winningworldacclaimandalsopropellingtheLI-NINGbrandandthesponsoredsportsgeartobecomeahottopic.
USATriple-jumping–Americantriple-jumprisingstar,ChristianTaylor,worethelatestLI-NINGprofessionalspikedshoestowinhisfirstOlympicgoldmedal,andbecamethisyear'sgrand-slamwinnerinbothWorldChampionshipsandtheOlympics.
USADivingTeam–Sincewinningmedals12yearsagoattheSydneyOlympics,theUSADivingTeambrokethroughfromnilforthefirsttimetowinonegoldmedal,onesilvermedalandtwobronzemedalsattheLondon2012OlympicGames.
TheteamalsostagedabrilliantduelwiththeChineseteaminthemen's10meterplatformevent,furtherstrengtheningthebrand'sexposure.
-26-RussianPoleVaulting–Russianpolevaultingveteran,YelenaIsinbaeva,cameinthirdattheLondon2012OlympicGames.
SwedishOlympicDelegation–TheSwedishOlympicDelegationwononegold,foursilversandthreebronzemedalsattheLondon2012OlympicGames.
OtherSportsCategoryTennisInJune2012,theGroup-sponsoredMarinCiliccapturedthechampiontrophyintheAEGONChampionshipsatQueen'sClubwithafive-matchwinningstreak.
TheQueen'sCupmarkedMarinCilic'sfirstgrass-courtATPtitle,andisalsotheseventhATPWorldTourtitleofhiscareer.
SalesChannelExpansionandManagementRetailStoresAsat30June2012,thetotalnumberofLI-NINGbrandconventionalstores,flagshipstores,factoryoutletsanddiscountstoresamountedto7,303,representinganetdecreaseof952storesascomparedto31December2011.
Therewere52distributors,fivefewerthanat31December2011.
Thiswasmainlyduetotheintegrationofcertainsmall-scaledistributorsintosomelarge-scaledistributorsortheGroup'ssubsidiariesduringtheperiodinordertoimprovemanagementefficiencyofdistributionchannels.
Storebreakdownasat30June2012wasasfollows:Numberoffranchisedanddirectly-operatedretailstores30June31DecemberLI-NINGbrandstores20122011ChangeFranchisedretailstores6,6577,495(11.
2%)Directly-operatedretailstores646760(15.
0%)Total7,3038,255(11.
5%)Numberofretailstoresbygeographicallocation30June31DecemberLI-NINGbrandstores20122011ChangeEasternRegion(Note1)2,1792,433(10.
4%)NorthernRegion(Note2)2,4212,679(9.
6%)SouthernRegion(Note3)1,3291,493(11.
0%)WesternRegion(Note4)1,3741,650(16.
7%)Total7,3038,255(11.
5%)-27-Notes:1.
EasternregionincludesShanghai,Zhejiang,Jiangsu,AnhuiandShandong.
2.
NorthernregionincludesBeijing,Hebei,Henan,Tianjin,Shanxi,InnerMongolia,Liaoning,JilinandHeilongjiang.
3.
SouthernregionincludesGuangdong,Guangxi,Fujian,Hainan,Jiangxi,Yunnan,GuizhouandHongKong.
4.
WesternregionincludesHunan,Hubei,Shaanxi,Gansu,Qinghai,Ningxia,Xinjiang,Sichuan,ChongqingandTibet.
5.
Duringtheperiod,theGroupadjustedtheorganisationstructureandgeographicaldelineationofthesalesregionsforLI-NINGbrand(seenotes1,2,3and4abovefordetails).
Asaresult,thenumberofretailstoresasat31December2011isrestatedaccordingtotheadjustedgeographicaldelineation.
ThemeasuresregardingitschannelexpansionandmanagementwhichtheGroupimplementedduringthefirsthalfof2012,andtheresultsitachievedareasfollows:Managementofstoreprofitability:Inviewofthecurrentmarketenvironment,theGroupevaluatedtheperformanceofallstoresbasedontheprincipleofprofitabilityandcost-savings.
TheGroupmadestructuraladjustmentstoitsstoresaccordingtotheevaluationresults,andclosed1,200inefficientstores.
TheGroupalsokeptclosecontrolofthecostandefficiencyofnewlyopenedstorestohelpensurethateachstoreachievesacertainlevelofprofitability.
Duringthefirsthalfof2012,248storeswereopenedbasedonthisprinciple.
Inthesecondhalf,theGroupwillcontinueitsexpansionplanswithstoreprofitabilityasapriority.
Managementofclearancechannels:Asat30June2012,therewere271LI-NINGbrandfactoryoutletsand394LI-NINGbranddiscountstores(31December2011:269factoryoutlets,358discountstores)andtheproportionofretailrevenueaccountedbyclearancechannelsincreased.
Inthesecondhalfof2012,theGroupwillstepupitsconstructionofhigh-efficiencyfactoryoutletsforitssubsidiariesinordertoimprovetheirinventoryclearancecapabilities.
Constructionofsixth-generationstores:Asat30June2012,therewere499sixth-generationstores(31December2011:219stores).
Duringthesecondhalf,theGroupwillpressaheadwithconstructionofsixth-generationstoresandpolishthesixth-generationimageofstoresattheretailend.
TheGroupwillsystematicallyenhancetheretailoperationsofstorestoincreaseefficiency,improvestoreperformanceandenrichconsumers'shoppingexperiences.
Managementofsub-distributors:Duringthefirsthalf,theGroupannounceditsnewsub-distributionpolicyfor2013withaviewtoallocatingchannelbenefitsinareasonablemannerandenhancingthelevelofcontroloversub-distributionchannels.
Thispolicyissettoprovideafullrangeofservicestosub-distributors,aswellastofollowuponnewproductroll-outplansandtheimplementationofretailoperationstandards.
Thepolicyisalsosettoestablishstructuralrationalisationofchannellayoutfortheregionalbenchmarkingstoresandsub-distributorstores.
Constructionofbrandimagestoresandbenchmarkingstores:DevelopedbrandimagestorestoenhancetheimageoftheLI-NINGbrandinkeyshoppingcentres,upper-tiermarketsandcoreshoppingarcades.
Establishedbenchmarkingstoresattheprovincialandprefecturelevelstohelpelevateitsregionalbrandpositionandincreasemarketshare.
-28-E-CommerceWiththesurgingnumberofinternetusersandgrowthofe-commerceinChina,theGroupactivelyexpandeditsonlinemarketthroughtheestablishmentofacomprehensivee-commercedistributionsystem.
Currently,theGrouphasestablishedtheofficialLI-NINGOnlineShop(www.
e-lining.
com).
OfficialonlineshopsfortheLI-NINGbrandhavealsobeenopenedonreputablethird-partye-commerceplatformsinChinasuchasTaobao.
com,360buy.
comandPaipai.
com.
Otherwell-knowne-shopsinChina,includingAmazon.
cn,Suning.
com,andS.
CN,havededicatedwebpagesforpurchasingLI-NINGbrandproductsonline.
Inaddition,theGroupcollaboratedwithvariousprominentmainlandbanksonbank-hostedvirtualshoppingmalls.
TheGroupisactivelypromotingitsnewcross-channel,cross-salesterminalsandcross-mediabusinessmodel,whichallowsconsumerstopurchaseLI-NINGbrandproductsdirectlythroughcomputerterminals,TVterminalsandmobilephones.
TheGrouphaswonseveralindustryawardsandaccoladesforitse-commerceachievements.
Duringtheperiod,theGroupwasawarded"TheMostInvestmentValueofE-CommerceBusinessesin2012"byAnalysysInternational,demonstratingstrongrecognitionfromtheindustry.
ProductDesign,ResearchandDevelopmentAsaprofessionalsportinggoodsbrand,theGrouphascontinuedtoadvanceitsproductdesignandinnovation.
Throughcontinuousenhancementinproductfunctionalityandquality,theGroupiscommittedtocreatingproductofferingswhichareabletomeettheneedsofbothgeneralconsumersandprofessionalathletes.
ResearchandDesignCentresTheGroupoperatesitsdesign,innovationandresearchanddevelopmentcentres.
"LiNingSportsScienceResearchCentre",locatedattheGroup'sBeijingheadquarters,isequippedwithanarrayofadvancedtestinginstrumentsandequipment.
ThecentreconsistsofSportsBiomechanicslaboratory,FootwearMechanicalTestinglaboratory,FootShapeShoeLastResearchlaboratoryandComputerSimulationlaboratory.
Closelymonitoringglobaltechnologicalandsportsscienceadvances,theresearchcentrecollaboratescloselywithanumberofdomesticandoverseasuniversitiesandprofessionalbodiestoconductinnovativeresearchinanumberofareas,includingbutnotlimitedto,badmintonshoes,tennisshoesandjoggingshoes.
Inearly2012,theGroupbeganplanningtheindustry'sfirstprofessionalbiomechanicaltestingfacilityforbadmintonshoes,aimedatdetectingvariouskeymovementsofprofessionalbadmintonathletesaswellasthree-dimensionalbiomechanicsdatafromtheshoesole.
TheGroupalsoincreaseditsresearchanddevelopmenteffortsinapparelproducts,byworkingwithrenowneddomesticacademicinstitutesandorganisations,whilealsoimprovingitsownresearchanddevelopmentcapabilities.
ThefirstphaseoflaboratoryfunctionalitytestingofapparelhasbeencompletedandhasplayedanimportantroleinthedevelopmentofnewmaterialsforuseintheGroup'sproducts.
Top-notchGearsforSponsorshipsInadditiontobeingalong-termsponsorofhigh-techgeartotheChineseNationalBadmintonTeam,ChineseNationalDivingTeam,ChineseNationalShootingTeam,ChineseNationalTableTennisTeamandtheChineseNationalGymnasticsTeam,theGroupalsosponsorsotherdomesticandinternationalsportsresourceswithitstop-notchgeartosupporttheseathletesinachievingoutstandingperformances.
SponsorshipofNBLincollaborationwithChineseBasketballAssociationwithprofessionalshoesproductsincluding"YuShuaiVI","YuShuaiVII","VillainTD"(馭帥VI、馭帥VII、梟雄TD),whichhavebeenwell-receivedbyNBLplayers;BasketballshoesdevelopedforNBAstars,including"YushuaiVII"(馭帥VII)forJoseCalderonand"TurningPoint"(旋機)forEvanTurner;-29-JamaicansprinterAsafaPowellperformedimpressivelywhilewearingthelatestLI-NINGultralightspikedshoesatthe2012IAAFDiamondLeague,finishingin10.
02secondstowinthechampionshipattheShanghailegheldinMay.
Hethenfinishedin9.
91seconds,cominginasfirstrunner-upattheLausanneleg.
AsafaPowellfinishedasfirstrunner-upinthecompetition'sNorwaylegin9.
85secondsinJune;ChristianTaylor,anAmericantriple-jumpathlete,worethelatestLI-NINGsponsoredgearduringthe2012IAAFDiamondLeague,wherehejumped16.
96metrestoplacethirdattheShanghailegheldinMay.
InJune,hethenwontheEugenelegwithaworld-record17.
62metresleap.
AttheLondon2012OlympicGames,hewonagoldmedal;Theworld'sNo.
1polevaultathlete,YelenaIsinbaeva,broketheworldrecordinindoorpolevaultwhilewearingthelatestLI-NINGsponsoredshoeswithaperformanceof5.
01metresattheXLGalanmeetinginStockholm,SwedeninFebruary.
Shereclaimedtheworldchampiontitlewitha4.
80metresjumpattheWorldIndoorChampionshipsinIstanbul,TurkeyheldinMarch.
ShethenwonabronzemedalattheLondon2012OlympicGames;Wearing"HERO"(貼地飛行)professionalbadmintonproducts,renownedmen'sbadmintonsinglesplayer,LinDan(林丹),tookthechampion'stitleatanumberofcompetitions,inparticular,the2012ThomasCupandsuccessfullydefendedhistitleasmen'ssingleschampionattheLondon2012Olympics,becomingthefirstathleteinOlympichistorytowinthechampiontitletwoyearsinarowforthisevent;Jan.
Jrgensen,anemergingDanishbadmintonathleteinmen'sbadmintonsingles,qualifiedfortheLondon2012OlympicGameswearingthe"PowerSilo"(奪)badmintonshoes;BoonsakPonsana,theNo.
1men'sbadmintonsingleschampioninThailand,wonthe2012SingaporeOpenandqualifiedfortheLondon2012OlympicGameswearingthe"SkillSilo"(靈)badmintonshoes;AstheLondon2012OlympicGamesfallintheYearofDragon,theLI-NINGbrandlaunchedthe"ScarletScales"(赤鱗)sportswearforprofessionalathletes.
Theinnovative"ScarletScales"designwasinspiredbythecharacteristicsofadragonintraditionalChinesecultureandrooftilesshapedlikedragonscales,datingbacksome8,000years.
The"ScarletScaleVents"(赤鱗窗),whichareinnovated,designedandmadefromtheconceptofrooftilesshapedlikedragonscales,markacorebreakthroughinthedesignofsportswearforthe2012NationalOlympicteams.
The"ScarletScaleVents"arescale-shapedbreathingventsatthebackofthegarmentwhichopenandclosebasedontheathlete'smovements:whenanathleteismovingwithhigh-intensityorperformingaspecificandhighlytechnicalmotion,theventswillopentoincreasetheairflowbetweenthebodyandthematerial;whentheathleteiscarryingoutbasicactivities,the"ScarletScaleVents"willclosetopreventheatlossandhelpmaintainenergy;AlloftheOlympicssportsweardesignedforChineseNationalGymnasticsTeam,ChineseNationalDivingTeam,ChineseNationalTableTennisTeamandChineseNationalBadmintonTeamutiliseelasticmaterialswithoutstandingflexibility.
Thismaterialminimisesthelossofresilience,henceprovidingthewearerwithsustainedsupport.
Theflexiblematerialalsohelpsathletestoperformasitallowsfreedomofmovement.
Inaddition,thecapabilitiesofeachteam'sprototypeisdesignedaccordingtoindividualbodyshape,formingone-of-a-kindproductstoboostoverallfunctionalityandadapttothespecificmovementofdifferentbodyparts;InJune,tennisstarMarinCilicwore"Qiyu"(奇魚)shoesintheQueen'sClubAEGONChampionshipswhilewinninghisfirstgrasstitleintheATP;andZhengSaisai(鄭賽賽),theupcomingwomen'stennissensation,currentlyrankedNo.
4inChinesetenniswomen'ssingle,wore"GlammerWing"(蝶翼)women'stennisshoeswhilecapturingthewomen'ssinglestitleintheInternationalWomen'sCupheldinFukuoka,JapaninMay.
Shealsochalkedupherfirstwininwomen'ssingleintheWimbledongrassqualificationmatchheldinEnglandinJune.
-30-FootwearProductsInadditiontodevelopingproductsforprofessionalathletes,LI-NINGbrandalsooffersawiderangeoffootwearproductsforgeneralsportsenthusiasts.
TheGroupisactivelydevotedtofootwearresearchandinnovation,focusingonenhancingcomfort,shock-absorption,bounce,lightness,personalisationandfitness.
TheGrouphasachievedsatisfactoryresultsinitsresearchanddevelopmentinitiatives,andhasdevelopedaseriesofnewtechnologiesapplicabletofootwear.
Tocontinueevolvingproductinnovation,theCompany's"innovationcommittee"continuouslydeepenedandpromotedvariousmeasuresin2012.
TheGroup'sresearchanddevelopmentteamcontinuedtodevelopitscoretechnology,the"LI-NINGBOW"(李寧弓)technologyplatform,andtoconductcross-sportscategoryresearchinordertograduallyapplythesetechnologiestodifferentsportscategories,including,butnotlimitedto,basketball,tennisandbadminton.
TheGroupaimstodevelopvariousfootwearproductstargetedatconsumerswithdifferentpurchasingpowerandsportinghabitsandprovidemorecomfortablefootweartogeneralsportsenthusiaststhatwillenablethemtoattainmorefulfillingsportsexperiences.
Inaddition,theGroupapplied"Chinahemp"(漢麻)technologytoLI-NINGbrandfootwearproducts.
"Chinahemp"ismoistureandodourabsorbent,drieseasily,hasanti-bacterialandanti-mouldqualitiesandprovideslastingelasticityandcomfort.
"Chinahemp"canbetracedbacktoancientChina8,000yearsagoandisamongthefirstfibresusedfortextilemanufacturing.
Withitsexcellentstructureandchemicalcomposition,"Chinahemp"iscombinedwithadvancedprocessingtechnologytoblendthousandsofyearsoforientalwisdomtoproducemoderngearaimedatgreatersportsenjoyment.
Duringtheperiod,thefollowingnewfootwearproductswerelaunchedundertheLI-NINGbrand:LI-NING9thgenerationultralightrunningshoes:TheshoesurfaceisconstructedwithMonoMesh,amaterialwithsuperbventilation.
Theuniqueshoesurfacestructurallysupportsthe"openwindow'designtoenhanceventilationandeffectivelyimprovethebreathabilityofthesole.
TheshoesoleisdesignedbasedonancientChineseboatsusingthe"FormEVAlite"injectionmidsole,makingtheshoeslighterandmorecomfortable;LI-NINGARC(寧孤)runningshoes:Utilisesabrandnewshock-absorptiontechnologyviaaunifiedsolewithhollowedbowstructureaswellasafulllengthflexiblesolestructurewithoutstandinganti-shockcapabilityandflexibility,whichgiveswearersagreaterfeelingofcomfortandhelpsthemexercisemoreeffectively;DragonYearSpecialeditionLI-NINGbasketballshoes:IncorporatingaYearoftheDragontheme,four"DragonYearSpecialEdition"basketballshoesweredesignedincelebrationofthedragonspiritandblendedwithdesignbrilliancefromEasttoWest;LI-NINGUnit-bow"Phoenix"(鳳凰)basketballshoes:Inspiredbythewingsofthephoenix,thebasketballshoesarethefirsttoutilisesingle-unitshockabsorbenttechnology,andpossessbetterpressbufferinganddiversionforanenhancedshock-reliefcapability;"YuShuaiVII"(馭帥VII)basketballshoes:Theshoesurfaceadoptedthelatest"stitchless"seamingtechniqueandreplacedtheentiresolepreviouslymadeofBounSeshock-relievingrubberwithInjectionPhylon("IP").
TheIPsoleismuchlighterthanBounSe,henceloweringtheshoes'overallweightandallowingthewearertomovemoreflexiblyandclosertotheground;"Glory92"(征榮92)Engravedshoes:Aspartofthe"HailHeroes"(向英雄致敬)seriestheseshoeswerelaunchedbasedontheshoeswornbytheChinaOlympicDelegatesintheawardceremonyofthe1992BarcelonaOlympicGames.
WiththeresurgenceofthefiveclassiccoloursoftheOlympicssymbol,theseshoesconveyasenseofretrothroughtheirmaterialanddetails;andUrbanSports"InfiniteMotion"(動無限)series:Thisseriesupholdstheconceptof"Letrelaxationandvibrancyprogresstogether,letsimplicityandbeautycoexist"(讓輕鬆與活力並進,讓簡約與美觀共存),theseriesemploysrealleatherwithcushionprotectivematerialsand"Chinahemp"technologytocreateahealthyandcomfortableenvironmentforfootmovement.
Theshock-absorbinganddurablesolesalsomaketheshoessuitableforvariousoccasions.
-31-ApparelProductsTheapparelresearchanddevelopmentteamcontinuedtomakebreakthroughsininnovationinproducttechnologyanddeepentheanalysisandresearchofdataregardinghumansportsmovement,whilegraduallyapplyingthesetoproductsfortesting.
Basedontheresults,adjustmentstoproductsaremadeandtheprototypesarethenincorporatedforpracticaluseintofinalproducts.
Duringtheperiod,theGroupimplementedthefollowinginitiativesinapparelinnovation:Continueditspreliminaryresearchondevelopingultralightsportscoatforjogging.
Men'sultralightsportswindbreaker,ataconceptuallevel,wascertifiedas"TheLightestMen'sSportCoatintheWorld"bytheWorldRecordAssociation;Madeadjustmentsintheapparelblockforwomen'sprofessionalbadmintonapparelandrefinedtheinitialapparelblockandwaiststructure,throughresearchonthebodyshapeofprofessionalbadmintonathletes.
Thisnotonlyenablestheproductstofulfillprofessionalneeds,butalsohighlightsthephysicalbeautyofthewearer;Throughcollaborationwithuniversitiesandprofessionalsportsunderwearmanufacturers,theGroupconducteddataresearchonthestressonwomen'sbreastsandmotiondisplacementduringprofessionalsports,suchasyoga,running,badminton,tennis,etc.
,anddevelopedLI-NINGbrandsportsunderwearwithnormalsupport(suitableforyoga),sportsunderwearwithmediumsupport(suitableforrunning)andsportsunderwearwithstrongsupport(suitableforbadmintonandtennis);TheATTechnologyPlatformwasreorganisedtobecomebetter-structured,morescientifically-soundandcomprehensiveinfunctionality,andtheGroupisnowabletocategorisefunctionalproductsmulti-dimensionally.
Atthesametime,theGroupalsosortedandregisteredthetrademarksforvariousfunctionalitythattheATseriesoffers,aswellasregulatedtheuseofvariousfunctionaltrademarks;FurtherdevelopedthedistributionofbodyshapesandsizesinthesalesregionsofLI-NINGbrandproductsbycontinuouslyimprovingtheapparelblocksystemofsportswear(slimfit,regularfitandloosefit)tobetterfitthesportsnatureandthebodysizesofChineseconsumers;Tocontinuetheconnectionbetweenprofessionalcompetitionwearandthebrand'sDNA,theGroupappliedforappearancepatentsforthe"LuckyLine"designoftheLI-NINGbrandcompetitionwearandhasbeengrantedvariousappearancepatentsfromtheStateIntellectualPropertyOffice;andContinuouslyadvocatedthe"GreenApparel"conceptbyapplyingEco-circle,arecyclableenvironmentally-friendlyfabric,ontheLI-NINGbrand2012Springmen'ssportsproductline.
TheLI-NINGbrand2012SpringandSummerwomen'sfitnessproductlinesuseEcoCut,anenvironmentally-conscioustailoringconceptwhichincreasesutilisationoffabricandreduceswastagethroughspecialproductdesigns.
BadmintonRacketsAsoneoftheGroup'scoresportscategories,theLI-NINGRacketResearchandDevelopmentManufacturingCentreisequippedwithadvancedfacilitiesandhighlyqualifiedresearchstaffintheindustry.
TheCentreactivelyconductsresearchininnovativebadmintonrackettechnology.
In2011,LI-NINGbrandwasthefirstintheindustrytointroducethe"3DBreaking-free"(立體風刃)and"AirStreamSystem"(風動導流)technologyplatform,highlightingthecutting-edgeadvantagetheGroupholdsinracketresearchandproduction,craftsmanshipanddevelopmenttechniques.
Thenewsponsorshipproductsdesignedonthisfoundationhavereceivedhighcommendationfromtopprofessionalathletes,distributionchannelsandconsumers.
Inadditiontothenewexperiencebroughtbytheproducttechnology,theproductitselfisequippedwithground-breakingmanufacturingcraftsmanshipthathasmadetheproductsinstanthits,strengtheningtheprofessionalstatusofLI-NINGbrandinthebadmintonracketmarket.
-32-SupplyChainManagementTheGroupendeavourstoestablishademand-driven,flexibleandmarket-responsivesupplychainsystemtoeffectivelycopewithitsbusinessmodelandgrowth.
Duringthefirsthalfof2012,theGroupundertookthefollowingmeasuresinrespecttoenhanceitssupplychainmanagement:Inordertocombatthechangesofthesocio-economicenvironmentin2012,theGroupfocusedoncontrollingcosts,clearinginventory,assessingrisksandincreasingoperationalefficiency.
TheGrouphasbeenexecutingtheinventoryclearanceplanstep-by-stepinordertonormaliseinventorylevels.
TheGrouphasrespondedtotherapidescalationinlabourcostsandtheunstablesupplyoflabourinrecentyearsbyproactivelyinitiatingashiftinproductionbaseandestablishedanall-in-oneproductionanddeliverybaseinHubeitoensurestabilityinproductionsupplyandcost.
ThebaseisnowacorecomponentoftheGroup'ssupplychaintoensurestableproductionandlogisticsmanagement,whilealsoachievingcostadvantages.
TheGroupcomplementedtheHubei-basedfacilitieswiththeconstructionof"LI-NINGLogisticsCentre"inJingmenwhichcommencedtrialoperationsinApril2012.
TheLogisticsCentreisamodern,fully-automatedwarehousecomprisingthelatestlogisticsconceptsandtechnologiestosupporttheentiresupplychaininwholesale,retail,directdeliveryandsupplier'sinventorymanagement.
Withthecommencementof"LI-NINGLogisticsCentre",thepositioningofotherlogisticcentreschangedaccordingly,forminganewlogisticsstructurewithoptimisedcostsandservicequality.
TheGroupalsoproactivelyexploredandattemptedoverseasprocurementtodevelopnewsuppliersinSoutheastAsiainanefforttoachievegreatercostoptimisation.
TheGroupcontinuestodeepenitsorganisationofthelogisticssystemaccordingtoaservice-basedanddemand-drivenmodel,withanaimtoconstructingaflexiblelogisticssystemtobettersupportthecombinedwholesaleandretailbusinessmodel.
Allpartsofthesystemwillgraduallybeequippedtorespondtothelogisticplansandoperationalcapacityneededunderavarietyofmodels,andwhichcanalsoeffectivelypredictandmitigateoperationalrisks.
Inthefirsthalfof2012,theGroupcontinuedtostrengthenmanagementofsuppliersonfulfillingsocialresponsibilitiesandadherencetoenvironmentalregulations:Conductedevaluationonthesuppliers'fulfillmentinsocialresponsibilitiesaswellasexaminationofthecomplianceofthesuppliers'socialresponsibilities.
Requiredallsuppliers'factoriestocomplywithapplicablelawsandregulationsandindustrystandards,whileincludingthesuppliers'performanceonsocialresponsibilitiesaspartoftheiroverallevaluationandasanimportantindicatorintheassessmentofsuppliers.
Continuedtoconductin-depthexchangesandcollaborationswithvariousbrandsthrough"TheJointRoadmaptowardsZeroDischargeofHazardousChemicalsby2020".
TheGroupalsofollowedupwiththeeliminationofhazardouschemicalsinday-to-dayworkandconductofthesubprojects,aswellasmaintainedcommunicationanddialoguewithallkeystakeholders.
Simultaneouslyimplementedperformancemanagementpoliciesregardingenvironmentalprotectionforbothproductandsupplychain.
TheGroupinitiatedresearchonchemicalqualitycontrolthatmainlytargetsmaterialsuppliersandformulatedcontrolrequirementsforchemicalsreleasedbysuppliersbasedontheresearchresults.
Complementingtheimplementationof"TheRestrictedSubstancesListforApparel,FootwearandAccessoriesProducts",theGroupprovidedsupplierswithtrainingandseminarstopromotechemicalsafetyandcontrol.
-33-DoubleHappinessBrandDoubleHappinessbrandisownedbyShanghaiDoubleHappinessCo.
,Ltd.
anditssubsidiaries(collectively,"DoubleHappiness"),inwhichtheGroupholds57.
5%equityinterest.
Itisprincipallyengagedinthemanufacture,researchanddevelopment,marketingandsaleoftabletennisandothersportsequipment.
Synergiesinbrandmarketing,promotion,sportstournamentsponsorshipanddistributionchannelexpansionofthetwobrands,LI-NINGandDoubleHappiness,havefurtherstrengthenedtheGroup'spositioninChina'stabletennismarket.
Duringtheperiod,DoubleHappinesscontinuedtoadopt"sponsorshipofsportsstarsandsportsevents"asitscoremarketingandpromotionstrategy.
In2012,DoubleHappinessmaintaineditsendorsementofoutstandingtabletennisplayersinChina,includingWangHao(王皓),WangLiqin(王勵勤),MaLong(馬龍),DingNing(丁寧)andLiXiaoxia(李曉霞)asspokespersonsforitstabletennisequipment.
DoubleHappinessalsoactivelysponsoredvariousprofessionaltournamentsinChinaandaroundtheworld.
Inthefirsthalfof2012,DoubleHappinesssponsoredandprovidedprofessionalequipmentforeventsincludingtheInternationalTableTennisFederation("ITTF")ProTour–10Stops,the51stDortmundWorldTableTennisChampionshipandtheChineseTableTennisClubSuperLeague.
DoubleHappinessalsoprovideduniqueon-siteequipmentintheLondon2012OlympicGamesforbothtabletennisandbadmintonevents.
ThetabletennisathletesrepresentingChinamainlyusedequipmentprovidedbytheDoubleHappinessbrand.
DoubleHappinesssignedthe2013-2016ITTFcooperationagreementinwhichDoubleHappinesswasgrantedtheofficialequipmentsupplierstatusforthe2016OlympicGames.
ThiscomprehensivecooperationalsogivesDoubleHappinesstheroleofofficialequipmentsupplierfortheWorldTableTennisChampionshipsfrom2014to2016,theWorldCupfrom2013to2016andtheITTFProTourfrom2013to2016.
DoubleHappinesspossessesstrongcapabilitiesinproductresearch,developmentanddesign.
Over80%ofChinaNationalTableTennisTeammembersoptedfortheDoubleHappinessbrandcovering.
Besidesequipmentforprofessionalplayers,DoubleHappinesssuccessfullyrolledoutover100newproductsinthefirsthalfof2012.
DoubleHappinesscontinuedtopromotethenewtypeofcoveringthatutilisessecrethigh-elasticityspongetechnology,furtherimprovingtheracquetsystemforathletesandtheirrespectiveplayingtechniques.
Toexpandbeyondtheexistingprofessionalapparelandfootwearproductlines,DoubleHappinessalsolaunchedtabletennisflooring,andthe"TMSeries"tabletennistablesthatarespeciallymanufacturedwithenvironmentallyfriendlymethods.
Inaddition,DoubleHappinesscontinuedtoexpandtheresearchanddevelopmentoftabletennis,badminton,football,basketball,volleyball,andsmall-sizedfitnessequipmentexclusivelysoldinsupermarkets.
DoubleHappinessproductsaremainlydistributedviawholesaleandintegratedsportinggoodsstores.
Ithasadoptedawholesalemodelwitharelativelystableclienteleacross30provincesandmunicipalities.
In2012,DoubleHappinesscontinuedtorefinethedistributorpolicessetoutin2011andmanagedthereformsonthetwodistributionchannels–professionaltabletennisequipmentdistributorsystemandsupermarketdistributorsystemtofurtherintegratecustomerresourcesandstrengthencustomermanagement.
LottoBrandTheGroupstarteditslicensingbusinessoftheLottobrandin2009.
Afterthreeyearsofoperation,despitegrowingbrandrecognitionfortheLottobrand,thepaceofdevelopmentofthelicensingbusinessoftheLottobrandhasfallenshortofexpectations.
Asaresult,aftertheCompany'sactivediscussionwiththelicensor,thepartiesbothrecognisethattherehavebeenchangesinthemarketsinceenteringintothelicenseagreementin2008,and,therefore,signedasupplementalagreementon11June2012.
Underthesupplementalagreement,theterminationdateofthelicenseoftheLottobrandwasamendedto31December2018fromtheoriginaldateof31December2028.
ThisactisinlinewiththeGroup'sstrategytofocustheGroup'sresourcesontheLI-NINGbrand.
-34-In2012,Lottobrandadjusteditsstrategies,whichgraduallytransformedthebusinessmodelfromproduction-to-ordertoprofit-oriented.
Duringtheperiod,LottobrandfocusedontheretailendandmadeuseoftheGroup'se-commercechannelstopromoteproductsandsales.
Lottobrandalsosetupfactoryoutletsanddiscountstorestoclearinventory.
UtilisationofTVshowsremainedasLottobrand'smainadvertisingmeans,andnewproductsforthecollaborationseries"AvrilxLotto"werealsolaunchedinthefirsthalfof2012.
AIGLEBrandAIGLEcontinuestogainhigherbrandrecognitionamongconsumers,largelyduetothebrand'suniquecompetitiveedge.
Duringtheperiod,thebusinessoftheAIGLEbrandremainedstableasaresultofeffectiveretailmanagementandawell-pacedshopopeningstrategy.
Inaddition,existingstoresalesmaintaineddouble-digitgrowthandtheperformancetrendofnewstoresremainedpositive.
AIGLEbrandhasmaintaineditsstandingasoneoftheleadingoutdoorandcasualbrandsinmajorshoppingmalls.
Duringtheperiod,AIGLEbrandcontinuedtoimplementthefollowingmajoroperationalmeasuresinordertoincreasebrandrecognitionandloyaltyamongconsumersandenhancesinglestoresalesgrowthandoutputaswellasmarketshare:AIGLEbrand'suniquepositioningwasfurtherstrengthenedbyitscasualstyle,combinedwithfunctionalfabricandstylishFrenchdesigns;Marketingandpromotioneffortswereaimedatenhancingbrandexposureandawarenessthroughcontinuousplacementinoutdoorandtravelmedia;GraduallyestablishedAIGLEbrandimagestoresinfirst-tiercitiesinadditiontosettinguppointsofsaleinkeyshoppingmallsinmajorcities,andincreasedretailstorecoverageincitiesabovetheprovinciallevel;andContinuedtostrengthenretailmanagementtoenhancecustomerrelationsmanagementandeffectiveinventorymanagement.
KasonBrandKason,awell-knownbadmintonequipmentbrandwithover20yearsofhistory,isanintegralpartoftheGroup'sbadmintonbusiness.
ItssponsorshipresourcesincludetheChineseNationalBadmintonTeam'snumberoneMen'sDoubles,FuHaifeng(付海峰)andCaiYun(蔡贇),theChineseYouthBadmintonTeamandsixstrongprovincialbadmintonteams.
Duringtheperiod,Kasonbrand'ssalesinapparel,footwear,racketsandequipmentaccessoriesgrewrapidlyasaresultofthecomprehensiveupgradeofitsbrandpositioning,productmix,researchanddevelopmentandsaleschannel.
Throughbranddifferentiationandpositioning,theGroupwillcontinuetomakefulluseoftheadvantagesfromthesportsmarketingresourcesoftheLI-NINGbrandandKasonbrandtoincreaseitsmarketshareinthebadmintoncategory.
ORGANISATIONALREFORMANDHUMANRESOURCESAsat30June2012,theGrouphad3,732employees(31December2011:4,180),ofwhom,1,803(31December2011:2,176)werefromtheGroup'sheadquartersandretailsubsidiaries,and1,929(31December2011:2,004)werefromothersubsidiaries.
-35-TheGroupmadetimelyadjustmentstohumanresourcesallocationinaccordancetothechangesinitsbusinessstrategy,withemphasisonefficiencyandperformance.
In2012,theGroupstrategicallyrepositionedtosharpenfocusontheLI-NINGbrandandthecorebusiness.
Throughconsolidationofresources,streamliningworkforceandmotivationofkeyemployees,theGroupmodifiedtheorganisationalstructureandoptimisedprocessesofthecorebusinessunitsofLI-NINGbrandtocomplementbusinessgrowth.
Thiseffectivelyloweredhumanresourcescostswhilecontinuingtoimprovethebusinessexecutionabilities,performanceevaluationandoperationalefficiency.
TheGroupregardsitsworkforcedevelopmentasthecornerstoneforitscorporatedevelopmentandhasplacedemphasisontherecruitment,training,retentionandmotivationofcoremanagementandprofessionalstaff.
TheGroupsystematicallybuildsupinternalandexternaltalentpools,emphasisingonidentification,assessment,promotionandappointmentofinternaltalent.
TheGroupalsolaunchedprojectsaimedatbuildingleadershipforkeystaffinsupportofemployees'careerdevelopment.
TheGroup'sremunerationpolicyadherestotheprincipleofputtingthejobpositions,performanceandindividualcapabilitiesinconsiderationfortheemployeescompensationpackages,andadoptsadiversifiedbenefitssystemandpersonalisedincentiveplans,includingbonus,cashrewardsandshareschemes,etc.
inordertoensurecompetitivenessofremunerationforitsemployees.
Duringtheperiod,theGroupadjusteditsstrategicandseniormanagementstaffaccordingtothelong-termgoalofimprovingtheCompany'scorecompetitivenessandprofitabilityinordertostrengthentheorganisationandexecutioncapabilities.
TheGroupisdiligentaboutcommunicatingwithemployeesinatimelymanner,aswellaslisteningtoandrespectingemployees'feedback.
TheGroupencouragesallemployeestostayalignedwiththeCompany'sstrategicobjectivesandtoworkwithmanagementtoovercomechallengeswithcourage.
OUTLOOKFORTHEFULLYEAROF2012ANDSTRATEGIESIn2012,theChinesegovernmentwillplaceemphasisonmaintainingsteadygrowthinitseconomicpolicies.
Withimplementationofstructuraltaxreduction,stimulationofdomesticdemandandotherinitiatives,theChineseeconomyinthesecondhalfof2012isexpectedtofarebetterthanthefirsthalf.
Inthelong-run,theconsumergoodsindustry,whichtheGroupoperatesin,willstillbenefitfromthetransformationofChina'seconomyfrombeinginvestment-driventoconsumption-driven.
Atthesametime,theescalatingcompetitionwithintheChinesesportinggoodsindustryisalsofuelinggreaterintensityamongstsportswearbrands'competingfordistributionchannels,sportsresourcesandmediaresources.
Moreover,consumersnowposegreaterdemandsonbrandandproductvalue.
Facingtheseshiftsindemandandincreasingcosts,theGroupexpectschangesinthecompetitivelandscapeoftheChinesesportinggoodsindustryoverthenextthreeyears.
FinancialOutlookfortheFullYearof2012AspreviouslystatedintheCompany'sannouncement("JuneAnnouncement")issuedon11June2012,theGrouphastakentheinitiativetoworkcloserwithdistributorstoregulateorderarrangementsinlightofthecurrentharshindustryconditions,soastoavoidcreatingincreasedinventorypressureattheretailend.
AsstatedintheJuneAnnouncement,basedonthefullyeartradefairresultsfor2012,theGrouphadalreadyexpectednegativegrowthinrevenueascomparedto2011andhadalsoanticipatedthattheGroup'sprofitbeforetaxationandprofitattributabletoequityholdersforthefullyearof2012willhavearathersubstantialdeclineascomparedto2011.
Underthecurrentbusinessenvironment,managementanticipatesthatfullyearrevenuefor2012willfurtherdeclineandthattheGroupmaypostlossattributabletoequityholdersfortheyearwhentakingintoconsiderationtheshort-termadjustmentsintheoperationsandfinancialresourcestheGroupismakingforitslong-termdevelopment.
TheaboveestimatedfinancialresultsoftheGroupforfullyearof2012aremerelybasedonmanagement'spreliminaryassessmentoftheGroup'sinformationcurrentlyavailableandarenotbasedonanyfiguresorinformationauditedorreviewedbytheCompany'sauditor.
PotentialinvestorsandshareholdersareadvisedtoexercisecautionwhendealinginthesharesoftheCompany.
-36-GoForwardPlanandShort-termInitiativesTocopewiththeever-changingindustryconditionsandthechallengingbusinessenvironment,theCompanyiscommittedtostrengtheningitsmanagementteamandtheBoardinordertorealiseitslong-termgrowthpotentialandvalueasaleadingChinesesportsbrand.
Meanwhile,withthemaingoalofimprovingtheCompany'scorestrengthandachievinglong-termprofitabilityinmind,theCompanyhasdevelopedthefollowingthreestagetransformationblueprint:Phase1startswithcertainshort-termstrategicandoperationalmeasures,including1)focusingonsellthroughandclearanceofchannelinventory;2)improvingcoststructureinproductandoperations;3)strengtheningorganisationandexecutioncapabilities;4)improvingchannelproductivity,profitabilityandperformance;5)focusingoncoreproductsanddomesticmarket;and6)investinginbrandandimprovingmarketingeffectiveness.
Theplanforphase2(2013–2014),alreadyinitspilotphase,includes1)improvingthesupplychainmanagement,go-to-marketandmerchandisingmodel;and2)providingmoreexcitingproductsandconsumerexperiencetosolidifythebrand'sleadingpositioninChina'ssportswearmarket.
Thephase3mediumtolong-termplan(coming2to4years)nowunderdevelopmentwillfocusmainlyontransformingtheGroup'sbusinessmodelthrough:1)improvementofprofitstructurefortheCompanyanditschannels;2)drawingconsumers'productandbrandexperienceclosertomarketdemand;and3)developmentofvirtuouscyclesbasedonhigherretailproductivityandreturnoncashandinvestments.
TheBoardandthemanagementoftheCompanybelievethat,whiletransformationwithintheindustryandthecompetitiveenvironmentisinevitable,theongoingmanagementreformsandadjustmentinstrategieswhichtheGroupiscurrentlyundertakingwillequiptheGroupwithahighercapabilitytoadapttothelong-termdevelopmentofChina'ssportinggoodsindustryandbuildourcompetitiveedgeforthefuture.
ISSUEOFCONVERTIBLEBONDSOn19January2012,theCompanyenteredintosubscriptionagreementswithTPGASIA,Inc.
("TPG")andTetradVenturesPte.
Ltd.
("GICInvestor"),aninvestmentvehiclemanagedbyaprivateequityinvestmentarmoftheGovernmentofSingaporeInvestmentCorporationPte.
Ltd.
,respectively,inrelationtoitsissueofconvertiblebondsinanaggregateprincipalamountofRMB750,000,000("ConvertibleBonds").
TheConvertibleBondsbearminimuminterestattherateof4%perannumandwillbedueonthefifthanniversaryofthedateofissueoftheConvertibleBonds.
TheConvertibleBondsareconvertibleintosharesoftheCompanyataninitialconversionpriceofHK$7.
74pershare.
TheissueoftheConvertibleBondswascompletedon8February2012.
ConvertibleBondsintheprincipalamountofRMB561,000,000wereissuedtoTPGStallionHoldings,L.
P.
(whichisanaffiliateofTPG)andConvertibleBondsintheprincipalamountofRMB189,000,000wereissuedtoGICInvestor.
ThenetproceedsoftheConvertibleBondsissue,afterdeductionofexpenses,amountedtoapproximatelyRMB745,691,000,andareusedbytheCompanytocontinueitsinvestmentinthebusinessdevelopmentofLI-NINGbrand,includingbranding,securingsportsponsorships,roll-outofthesixth-generationstoresaswellasproductdesignandresearchanddevelopmentandasgeneralworkingcapitaloftheGroup.
TheBoardisoftheviewthatthenewfundingwillnotonlybringtheCompanymoreflexibilityinexecutingitsdevelopmentstrategies,butwillalsoenabletheGrouptobenefitfromTPG'sexperienceinbranding,retailingandproducts,whichisimportantfortheGrouptotapitsgrowthpotential.
Asof30June2012,noConvertibleBondshavebeenconvertedintosharesoftheCompanyunderthesubscriptionagreements.
-37-PURCHASE,SALEORREDEMPTIONOFTHECOMPANY'SSHARESTheCompanyhadnotredeemedanyofitssharesduringthesixmonthsended30June2012.
NeithertheCompanynoranyofitssubsidiarieshadpurchasedorsoldanyoftheCompany'ssharesduringtheperiod.
CORPORATEGOVERNANCEFortheperiodfrom1January2012to31March2012,theCompanycompliedwithallthecodeprovisionssetoutintheCodeonCorporateGovernancePracticescontainedinAppendix14totheRulesGoverningtheListingofSecuritiesonTheStockExchangeofHongKongLimited("CorporateGovernanceCode"),effectivebefore1April2012.
Fortheperiodfrom1April2012to30June2012,withtheexceptionofthecompositionoftheNominationCommitteeoftheBoard,theCompanycompliedwiththeallothercodeprovisionssetoutintheCorporateGovernanceCode,effectivefrom1April2012.
CodeprovisionA.
5.
1oftheCorporateGovernanceCodestatesthatthechairmanoftheNominationCommitteemusteitherbeheldbythechairmanoftheBoard,oranindependentnon-executivedirector,andthemajorityofitsmembersmustbeindependentnon-executivedirectors.
TheCompany'sNominationCommitteecurrentlyconsistsofthefollowingdirectors:Mr.
Jin-GoonKim(ExecutiveVice-Chairman),Mr.
LiNing(ExecutiveChairman)andMr.
ChanChungBun,Bunny(independentnon-executiveDirector),withMr.
Jin-GoonKimactingasthechairmanofthecommittee.
InviewoftheGroupcurrentlybeingamidstaperiodofreform,theBoardhopestogarnergreatersupportfromTPG-nominateddirectorsduringthisprocessofreform,andthushasdecidedtoappointMr.
Jin-GoonKimastheChairmanoftheNominationCommittee.
TheBoardalsoneedstheExecutiveChairman,Mr.
LiNing,tobecomemoreinvolvedwiththeworkoftheNominationCommittee.
TheBoardbelievesthisarrangementisnecessaryfortheCompanyinthiscurrentstage.
TheAuditCommitteeoftheCompany,consistingofthreeindependentnon-executivedirectors,hasreviewedtheaccountingprinciplesandpracticesadoptedbytheGroupandhasalsoreviewedauditing,internalcontrolandfinancialreportingmatters,includingthereviewoftheinterimresultsforthesixmonthsended30June2012.
TheCompany'sexternalauditor,PricewaterhouseCoopers,hasperformedareviewoftheGroup'sinterimfinancialinformationforthesixmonthsended30June2012inaccordancewithInternationalStandardonReviewEngagements2410,"ReviewofInterimFinancialInformationPerformedbytheIndependentAuditoroftheEntity".
Basedontheirreview,PricewaterhouseCoopersconfirmedthatnothinghascometotheirattentionthatcausesthemtobelievethattheinterimfinancialinformationisnotprepared,inallmaterialrespects,inaccordancewithInternationalAccountingStandard34"InterimFinancialReporting".
ByorderoftheBoardLiNingCompanyLimitedLiNingExecutiveChairmanHongKong,22August2012Asatthedateofthisannouncement,theexecutivedirectorsoftheCompanyareMr.
LiNing,Mr.
Jin–GoonKim,Mr.
ZhangZhiYongandMr.
ChongYikKay.
Thenon-executivedirectorsareMr.
ChuWahHui,Mr.
JamesChun-HsienWeiandMr.
ChenYue,Scott.
Theindependentnon-executivedirectorsareMr.
KooFookSun,Louis,Ms.
WangYaFei,Mr.
ChanChungBun,BunnyandMr.
SuJingShyh,Samuel.