News Column

Ernest Borel Holdings Limited Announces Details of Proposed Listing on the Main Board of SEHK

June 29, 2014



- Global Offering of 66,000,000 Shares - At an Offer Price Range of HK$2.54 to HK$3.46 per Share

(from left to right): Mr. Ambrose Lee, Managing Director and Head of Hong Kong Coverage of BOCI, Mr. James Wong, Executive Director of Ernest Borel , Mr. David Su, Chairman and Executive Director of Ernest Borel, Mr. Thomson Lau, Group Finance Controller of Ernest Borel, Mr. Joseph Chan, Managing Director, Head of Equity Capital Markets Syndication and Co Head of Equity Capital Markets of BOCI
Hong Kong, June 29, 2014 - (ACN Newswire) - Ernest Borel Holdings Limited ("Ernest Borel" or the "Group"), one of the best-selling Swiss-made premium watch brands in the PRC, today announced the details of its proposed listing on the Main Board of The Stock Exchange of Hong Kong Limited ("SEHK"). Investment Highlights -- A Swiss watch brand established in 1856, the Group's self-owned brand Ernest Borel boasts a unique "romance and elegance" brand values. This plus the excellent quality of Swiss-made premium watches have made Ernest Borel an attractive brand in the global market -- The Group's long operating history and brand advantages have enabled Ernest Borel to become a leader in the PRC market: 1. Ranked second in the premium couple watch market in the PRC in terms of total retail sales value and total retail sales volume in 2013 2. One of the top five brands in the PRC premium watch market for three consecutive years from 2011 to 2013 -- The Group has an extensive global distribution network with more than 960 points of sales (POS) across 15 countries and regions as at 31 December 2013 -- The Group's vertically integrated business model enables it to effectively control its business, enhance operational efficiencies and respond quickly to the changing tastes and preferences of consumers. The Group also benefits from operational efficiencies that translate into more competitive pricing for its watches -- According to the Frost & Sullivan report, the future growth of the PRC luxury goods market will continue to outpace that of the global market. The retail sales value of the premium watch market in the PRC is expected to have a CAGR of 20% from 2013 to 2018. This key market will create immense opportunities for the Group -- The Group recorded satisfactory financial performance during the Track Record Period. Revenue and gross profit grew at a CAGR of 11.1% and 16.0% respectively from FY2011 to FY2013. Profit for FY2013 reached HK$93 million. For the three months ended 31 March 2014, the Group's revenue also increased by approximately 13.0% when compared with the same period in 2013 Offering Details The Group intends to issue a total of 66,000,000 shares globally (subject to the exercise of the overallotment option), of which 90% are for the International Offer. The remaining 10% are for the Hong Kong Public Offer. The indicative offer price range is between HK$2.54 and HK$3.46. Net proceeds from the global offering are estimated to be approximately HK$137.2 million to HK$196.1 million. The Hong Kong Public Offer will begin on 30 June 2014 (Monday) and end at noon on 4 July 2014 (Friday). The final offer price and allotment results are expected to be announced on 10 July 2014 (Thursday). Trading of Ernest Borel's shares is expected to commence on the Main Board of SEHK on 11 July 2014 (Friday) under the stock code 1856. The shares will be traded in board lots of 1,000 shares. BOCI Asia Limited is the Sole Sponsor, Sole Global Coordinator, Sole Book Runner, and the Sole Lead Manager of the listing. Corporate Highlights Established in Switzerland in 1856, Ernest Borel signifies the enduring spirit of elegance and romance through its brand image of a "dancing couple." The brand has become a leader in the Swiss-made premium couple watch market and an attractive global brand with its clear market positioning. The Group has also received certification from COSC, the official chronometer certification bodies, as a testament to its Swiss manufacturing quality and strict quality control. It ranked 9th, 12th and 11th among all Swiss-made watch brands in terms of number of chronometers that received COSC certification in 2011, 2012 and 2013, respectively. The Group has built an extensive distribution network which has delivered stable growth in the past years. As at 31 December 2013, the Group has more than 960 POS covering 15 countries and regions globally. The Group has also benefited from the rapid growth in the PRC, its largest market, with over 815 POS in 30 provinces and cities across the country to meet the rising demand for luxury goods driven by the increasing purchasing power in Mainland China. According to the Frost & Sullivan report, the Group has become one of the top five brands in the PRC premium watch market for three consecutive years from 2011 to 2013 in terms of total retail sales value and total retail sales volume. The Group has adopted a vertically integrated business model, providing control over the key stages of its operation chain, from product design and development, procurement of materials and components, production, logistics and quality control to promotion, distribution and after-sales services. This has helped the Group maintain high operational efficiencies and stablise costs. The Group's gross profit margin exceeded 50% in each financial year during the Track Record Period, which translates into more competitive pricing of its watches. Ernest Borel's vertically integrated business model has provided greater flexibility in the production capacity throughout the watch production process while ensuring excellent product quality. Moreover, by building a more diverse distributor base, the Group can keep abreast of the preferences of consumers and directly understand their needs. The Group has promoted its brand through effective marketing strategies across various media channels, such as television, radio, magazines, newspapers and billboards as well as sponsorship of various events and engagement of celebrities as its brand ambassadors, which have driven its income and gross profit to grow at a CAGR of 11.1% and 16.0% respectively between FY2011 and FY2013. According to the unaudited financial information for the three months ended 31 March 2014, the Group's revenue amounted to approximately HK$157.2 million, up by approximately 13.0% when compared with the same period of 2013. Future Strategies To drive sustainable growth in the future, Ernest Borel will further expand its sales and distribution network to strengthen its global brand position. The Group plans to add 300 POS in the PRC market in the coming three years with a focus on second- and third-tier cities. At the same time, the Group plans to extend its market reach by adding a total of 100 POS in the regions outside the PRC. Ernest Borel also intends to leverage its brand recognition and effective marketing strategy to develop more new markets and increase its market share in selected countries in Europe, the Middle East and Southeast Asia. Apart from expanding its sales network, the Group will boost profitability through enhancing its product mix and pricing strategy. In addition to improving its profitability by increasing design capabilities, production capacity and sales of its high-end and medium-high-end watches, the Group will also adopt cost effective approaches to purchase watch movements and other quality watch components at competitive prices through global sourcing so as to reduce production costs. The Group will also maintain its profit margin by increasing the average retail price of our watches by 4% to 6% each year in general. The Group will continue to expand its production capacity and design and development capabilities to meet the strong demand from global consumers for premium watches. To cope with the growth, the Group plans to expand its production capacity by constructing additional production facilities on the land parcel adjacent to its existing production facility in Le Noirmont, Switzerland. Assuming the additional production facility is fully utilised, the estimated maximum production capacity in terms of the number of watches will increase to 192,696 pieces. The Group also intends to expand its watch design and development department to further enhance its capabilities. Mr. David Su, Chairman and Executive Director of Ernest Borel, said, "We are pleased to announce the proposed listing of Ernest Borel on the Main Board of SEHK, marking an important milestone in the Group's development. This initiative not only strengthens our capital base, but also enhances the Group's corporate image and brand reputation in the market as well as increases the confidence and recognition of consumers, retailers and distributors. With our distinctive competitive advantages and rich operational experience in the premium watch industry, we are ready to advance Ernest Borel's leading position in the Swiss-made premium watch market and achieve further growth, thereby generating stable and promising returns in the long run." Use of Proceeds Assuming the offer price is fixed at HK$3.00 per share (being the mid-point of the indicative range of the offer price of HK$2.54 to HK$3.46 per share), net proceeds are estimated to be HK$166.6 million and will be used as follows: Items / Approximate percentage -- Expanding and enhancing distribution network - 35% -- Marketing and promotional activities of brand and watches - 35% -- Capital expenditures on ongoing expansion of production capacity - 20% -- Providing funding for working capital and other general corporate purposes - 10% Dividend Policy The Group plans to pay dividends of not less than 30% of its consolidated profit attributable to shareholders in the future, subject to factors such as future operations and earnings, capital requirements and surplus, general financial condition and contractual restrictions. Financial Performance

--------------------------------------------------------------------------- (HK$000) For the Financial Year ended 31 December --------------------------------------------------------------------------- 2011 2012 2013 --------------------------------------------------------------------------- Revenue 489,089 550,880 604,013 --------------------------------------------------------------------------- Gross Profit 282,613 332,747 380,126 --------------------------------------------------------------------------- Profit for the Year 141,557 99,474 93,021 --------------------------------------------------------------------------- Gross Profit Margin(%) 57.8% 60.4% 62.9% ---------------------------------------------------------------------------

About Ernest Borel Holdings Limited Founded in 1856, the Group is one of the oldest premium watchmakers in Switzerland. As a self-owned brand, Ernest Borel designs, manufactures, markets and sells Swiss-made mechanical and quartz premium timepieces for men and women. The brand is known throughout the world for its unique "romance and elegance" brand image, and is the second best selling premium couple watches brand in the PRC 1. Ernest Borel has an extensive distribution network and over 960 points of sales around the world, with particularly strong focus on the PRC and Hong Kong, Macau and Southeast Asia markets. The Group's watch portfolio comprises over 30 different collections of Swiss-made premium timepieces, with over 250 models that mainly target upper-middle-income end customers. For more details about Ernest Borel, please visit the Group's official website: http://www.ernestborel.ch Source: Ernest Borel Holdings Limited Contact:

Strategic Financial Relations LimitedHeidi So +852 2864 4826 heidi.so@sprg.com.hkAngelus Lau +852 2864 4805 angelus.lau@sprg.com.hkGladys Kong +852 2864 4806 gladys.kong@sprg.com.hk Fax: +852 2527 1196 Website www.sprg.com.hk

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Source: ACN Newswire (Japan)


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