International Housewares Retail : ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 30 APRIL 2017

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International Housewares Retail Company Limited

國際家居零售有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1373) ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 30 APRIL 2017

The board of directors (the "Board" or "Directors") of International Housewares Retail Company Limited (the "Company" or "we" ) is pleased to announce the consolidated annual results of the Company and its subsidiaries (collectively referred to as the "Group") for the year ended 30 April 2017 (the "Year") prepared in accordance with the relevant requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules" and the "Stock Exchange" respectively), together with the comparative figures for the financial year ended 30 April 2016 ("2015/16").

HIGHLIGHTS

• The Group‟s revenue increased by 3.5% to HK$2,111,001,000 (2015/16(1): HK$2,039,575,000).

• The Group achieved satisfactory comparable store sales growth(2) in Hong Kong of 3.0% (2015/16: 5.3%).

• The Group maintained a strong financial position with cash and cash equivalents of HK$403,753,000 (30 April 2016: HK$406,080,000).

  • The Group‟s gross profit rose by 4.4% to HK$989,153,000 (2015/16: HK$947,577,000) and gross profit margin was up to 46.9% (2015/16: 46.5%).

• Profit attributable to owners of the Company increased 31.6% to HK$87,492,000 (2015/16: HK$66,492,000).

• The Board has resolved to recommend the payment of a final dividend of HK5.6 cents per share. Combined with the interim dividend of HK5.0 cents per share, the total annual dividend would be HK10.6 cents per share.

Notes:

1. Comparative figures for the financial year ended 30 April 2016 are shown as 2015/16 in brackets.

2. Comparable store sales growth represents a comparison between the store sales of those stores that were open throughout the years being compared.

CORPORATE PROFILE

Established in 1991, the Group is the largest houseware retail chain in Hong Kong, Singapore and Macau1. The Group offers quality houseware products through an extensive retail network comprising 366 stores in Hong Kong, Singapore, Macau, Cambodia, East Malaysia, Saudi

Arabia and Australia under renowned brands including Japan Home Centre (日本城), City Life (生活提案), Epo Gifts & Stationery (文具世代), 123 by ELLA, and Japan Home (日本の家).

Supported by extensive sourcing channels and high-margin private label products, the Group provides to customers a full range of houseware items at competitive prices, giving them "one-stop" shopping convenience.

1 In terms of revenue and number of stores the Group operated in the calendar year 2012 according to the Frost & Sullivan Report.

FINANCIAL PERFORMANCE

The Group continued to increase the variety of product offerings to help it capture additional market opportunities and expand customer base. In addition, driven by opening new stores and growth in overall comparable store sales, as well as the increase in average spending per transaction for the Year, the Group‟s revenue rose by 3.5% to an historical high of HK$2,111,001,000 (2015/16: HK$2,039,575,000).

The discount driven marketplace had made more promotions and markdowns necessary and that presented considerable pressure on our gross profit margin. Fortunately, at the Group‟s continued effort to streamline logistics arrangement with suppliers and bargain for more favourable prices to reduce procurement cost, much of that pressure was alleviated. As a result, the Group managed to improve its gross profit margin. During the Year, the Group‟s gross profit rose by 4.4% to HK$989,153,000 (2015/16: HK$947,577,000) and gross profit margin was up to 46.9% (2015/16: 46.5%).

Boating brand recognition among consumers and popular product offerings, the Group was able to make record-high sales with operating expenses maintained at a stable level as a percentage of revenue during the Year. Coupled with prudence in managing expenses, the Group‟s operating expenses as a percentage of revenue reduced during the Year, standing at 42.9% (2015/16: 43.3%).

Profit attributable to owners of the Company increased 31.6% to HK$87,492,000 (2015/16: HK$66,492,000), owed mainly to the Group continuing to broaden its product portfolio, while constantly monitoring purchase prices and logistics costs of its sourcing activities, as well as prudently managing operating expenses. Furthermore, the Group closed down the business operations in West Malaysia and Mainland China to minimize negative effects on its retail business as a whole.

LIQUIDITY AND FINANCIAL RESOURCES

As at 30 April 2017, the Group had cash and cash equivalents amounting to HK$403,753,000 (30 April 2016: HK$406,080,000). Most of the Group‟s cash and bank deposits were denominated in Hong Kong dollars, and were deposited with major banks in Hong Kong with maturity dates falling within three months.

The Group‟s treasury management policy is not to engage in any highly leveraged or speculative derivative products and it continues to place a large part of surplus cash in Hong Kong dollars bank deposit with appropriate maturity period to meet funding requirements in the future. The current ratio for the Group was 2.8 (30 April 2016: 2.8). Total borrowings amounted to HK$22,426,000 as at 30 April 2017 (30 April 2016: HK$44,373,000). The Group was in a net cash position as at 30 April 2017 and its gearing ratio as determined by total borrowings divided by total equity was 3.2% (30 April 2016: 6.4%).

OPERATING EFFICIENCIES

Although the operating environment was ridden with challenges, the Group achieved satisfactory comparable store sales growth(1) in Hong Kong of 3.0% (2015/16: 5.3%) during the Year.

In the past few years, the overall rental expenses on shops in shopping malls continued to increase. Despite the adverse factor, enabled by the brand recognition the Group enjoys, its popular product offerings and decision to open new stores at less prime retail venues, the Group has been able to control rental expenses as it expands. We are also able to rent retail spaces of varying sizes, which gives us more flexibility in choosing retail spaces and controlling overall rental expenses. In addition, with salaries on general rise in recent years, we expect our employee expenses to increase alongside inflation. To mitigate the effects of increasing employee expenses, we have employee training programmes in place to maximise productivity and employees are redeployed to different stores from time to time to boost productivity further. As a result, the Group has been able to maintain employee expenses at a stable level as a percentage of revenue.

In spite of these adversities, enjoying brand recognition and boasting popular product offerings, the Group made record high sales with operating expenses maintained at a stable level as a percentage of revenue during the Year. Coupled with prudence in managing expenses, including closely monitoring store man-hour expenses and use of energy efficient lighting installations at retail stores which arise as a result of reduction in related operating expenses as a percentage of revenue against the last year, the Group‟s operating expenses reduced during the Year, standing at 42.9% (2015/16: 43.3%) as a percentage of revenue.

The following table provides details of the Group‟s operating expenses:

For the Year Ended 30 April	2017	2016
HK$	(%) of revenue	HK$	(%) of revenue	Change (%)
Distribution and advertising expenses	53,252,000	2.5%	56,981,000	2.8%	-6.5%
Administrative and other operating expenses	851,628,000	40.4%	826,453,000	40.5%	3.0%
Total operating expenses	904,880,000	42.9%	883,434,000	43.3%	2.4%

Note:

1. Comparable store sales growth represents a comparison between the store sales of those stores that were open throughout the years being compared.

DISTRIBUTION NETWORK

The Group offers quality houseware products through an extensive retail network comprising 366 stores in Hong Kong, Singapore, Macau, Cambodia, East Malaysia, Saudi Arabia and Australia under renowned brands including Japan Home Centre (日本城), City Life (生活提案), Epo Gifts & Stationery (文具世代), 123 by ELLA, and Japan Home (日本の家). Supported by extensive sourcing channels and high-margin private label products, the Group provides to

customers a full range of houseware items at competitive prices, giving them "one-stop" shopping convenience.

The Group believes that the cumulative brand awareness it enjoys over the years, its extensive and steadily growing retail network and large global supplier network have contributed and will continue to contribute to the Group‟s continuous business development. The Group remains positive about its business prospects in the medium-to-long-term and plans to continue to expand its operations in Hong Kong, Singapore and Macau. At the same time, it will continue to restructure with caution its store portfolio in Singapore, closing down underperforming stores to minimise negative effects on its retail business as a whole, focusing on profitable stores and opening new stores in high potential areas. The following table sets forth the number of our stores worldwide:

As at 30 April 2017	As at 30 April 2016	Net increase/ (decrease)
The Group's directly managed stores
Hong Kong	290	277	13
Singapore	57	62	(5)
Macau	8	8	-
Sub-total	355	347	8
The Group's licensed stores	-
East Malaysia	1	1	-
Saudi Arabia	5	5	-
New Zealand	-	1	(1)
Indonesia	-	1	(1)
Cambodia	3	3	-
Australia	2	-	2
Sub-total	11	11	-
Total	366	358	8