2014 Annual Results Presentation. March 2015

Transcription

1 214 Annual Results Presentation March 215

2 Disclaimer THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR INVITATION TO PURCHASE OR SUBSCRIBE FOR ANY SECURITIES AND NO PART OF IT SHALL FORM THE BASIS OF OR BE RELIED UPON IN CONNECTION WITH ANY CONTRACT, COMMITMENT OR INVESTMENT DECISION IN RELATION THERETO. THIS PRESENTATION MAY CONTAIN FORWARD-LOOKING STATEMENTS. ANY SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON A NUMBER OF ASSUMPTIONS ABOUT THE OPERATIONS OF THE COMPANY AND FACTORS BEYOND THE COMPANY S CONTROL AND ARE SUBJECT TO SIGNIFICANT RISKS AND UNCERTAINTIES, AND ACCORDINGLY, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THESE FORWARD- LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS FOR EVENTS OR CIRCUMSTANCES THAT OCCUR SUBSEQUENT TO SUCH DATES. THE INFORMATION IN THIS PRESENTATION HAS NOT BEEN INDEPENDENTLY VERIFIED. NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS MADE AS TO, AND NO RELIANCE SHOULD BE PLACE ON, THE FAIRNESS, ACCURACY, COMPLETENESS OR CORRECTNESS OF ANY INFORMATION OR OPINION CONTAINED HEREIN. NONE OF THE COMPANY, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR ADVISERS SHALL BE IN ANY WAY RESPONSIBLE FOR THE CONTENTS HEREOF, OR SHALL BE LIABLE WHATSOEVER (IN NEGLIGENCE OR OTHERWISE) FOR ANY LOSS OR DAMAGE WHATSOEVER ARISING FROM USE OF THE INFORMATION CONTAINED IN THIS PRESENTATION OR OTHERWISE ARISING IN CONNECTION THEREWITH AND NONE OF THEM SHALL OWE YOU ANY FIDUCIARY DUTY IN RELATION TO THIS PRESENTATION. 2

3 Agenda Section 1 Company Overview Section 2 Financial Highlights Section 3 Future Development 3

4 Section 1 Company Overview

5 Company Overview A Reputable Menswear Brand in China Strategically Integrated Business Model Our brand s history dates back to the early 199s. Since then, we have grown to become a reputable menswear company in the PRC, positioned in the largest and fastest-growing middleupper menswear segment We offer customers a one-stop shopping experience through our comprehensive product portfolio, which includes men s trousers, tops and accessories, primarily in the business formal and business casual categories We target middle-class men aged from 3 to 6, who have a growing preference for quality products as well as differentiated shopping experiences We also launched a new men s casual fashion series targeting young customers aged from 18 to 3 in 214. We operate a strategically integrated model, comprising brand management and marketing, design and product development; procurement; self and outsourced production; and sales and distribution Strong design and product development capabilities Substantially all of our products are sold on a wholesale basis to our distributors and their subdistributors As of Dec 31, 214, our retail network consisted of a total of 1,452 stores across over 24 cities and 31 provinces in China 1. According to Frost & Sullivan report and market share based on retail value. 5

6 Product Offering Business Casual Business Formal 214 Sales Breakdown Suggested Retail Price: RMB 34 2,9 Suggested Retail Price: RMB 39 3,7 Casual 6% 31% Accessories 8% 1% Suggested Retail Price: RMB 44 9 Suggested Retail Price: RMB 4 2,1 Note: (1) Business formal includes jackets and trousers. Business casual includes trousers, dress shirts, casual shirts, polo shirts, vests, jackets, coats, sweaters and overcoats. Accessories include ties, scarves, socks, belts, shoes, bags and wallets. (2) For illustrative purposes, suggested retail price was derived based on 4x (the mid-point of our suggested price range) of the wholesale price with reference to sales fair. 6

7 Business Model We control strategic components of our supply chain, enabling us to focus on our core competencies and capture profitability Value Creation at Each Step of the Value Chain Controlled by us Not controlled by us Branding, Marketing, Sales and Distribution Manufacturing Raw materials Procure at competitive price Design and Product Development Increase business casual product offering to match rising demand Strong focus on details and production techniques Innovative use of raw materials Product category extension, sales volume growth and margin expansion opportunities from our flexible manufacturing model Self-production allows us to protect our intellectual property and maintain our competitive positioning Our strong OEM contractors network provides us with additional flexibility to accommodate rising demand of our products as well as extensions into additional product categories (eg, accessories) with relatively low capex Ability to achieve rapid expansion at lower costs through adoption of a wholesale model Multiple marketing initiatives to continue strengthening our brand image Rising brand awareness provides us with bargaining power with our distributors Cost increase has been largely passed on to distributors Retail network consists of 1,452 retail outlets, spanning over 24 cities and 31 provinces 7

8 Design and Product Development Capabilities Led by our in-house design team, our collaborative development process facilitates the creation of high quality and functional products A designated industry consultant in menswear trousers One of the few enterprises who was invited to participate in menswear trousers industry standards drafting in 28 The only menswear enterprise who will jointly develop a research and development centre and establish menswear industry standards with China National Institute of Standardization Team size of 128 members 1 Key team members with average 1 years of experience in fashion Every SKU in each sales fair is new All SKUs are new every season to match latest fashion trends and evolving consumer demand We continue to evaluate our product portfolio and product development strategy based on our deep understanding of our target customers Successfully obtained numerous patents and awards 15 patents related to product, molding devices and manufacturing process development as of December 31, 214 Awards in 214 Quality Award by the China National Garment Asia Famous and Fine Brand Award and Top 5 Asia Brand by Asia Brand Ceremony Mr. Kwok Hon Fung was honored as PRC Top 1 (Industry) Brand Innovation Personality Award by the Asia Brand Association, Asia Television Limited, Global Times and China Economic Herald 1. As of December 31,

9 Distribution Network Our nationwide retail network consists of 1,452 retail outlets, spanning over 24 cities and 31 provinces 1 Our Distribution Strategy Expansion from provincial capitals to lower-tier cities Established footprint in first-tier cities: Beijing Shanghai Shenzhen Guangzhou Beijing Leverage our brand reputation established in higher-tier cities to create a nationwide footprint and strengthen penetration across channels Shanghai Provincial capitals First-tier cities Shenzhen Guangzhou Fourthtier 28% Third-tier 35% Retail outlet breakdown First-tier 1% Secondtier 27% Standalone 22.7% Department Store and Shopping Malls 77.3% provinces include autonomous regions and central government administered municipalities in the PRC as of 31 December, 214 9

10 Multi-Channel Marketing Strategy Through nationwide, regional and store-level marketing activities, we reinforce our brand positioning and elevate our brand image Spokesperson Invite Mr. Ma Tak Chung, Joe ( 馬 德 鐘 ) as the spokesperson for our business formal wear in China Advertising at Highways Stations Beijing, Shanghai, Shenzhen, Guangzhou, Wuhan, Zhengzhou, Chengdu, Shenyang, Qinhuangdao, Qufu, Bengbu, Xuzhou, Suzhou, Fuzhou, Xiamen, Changchun, Nanchang Uniform Store Layout Provide decorations to distributors and subdistributors at our own costs Outdoor and Print Advertisement Outdoor LED monitors and billboards On-site inspections to ensure uniform store layout Product Catalogues and Brochures Complimentary product catalogues and brochures for end-customers Support Distributors Marketing Initiatives Reimburse up to 5% of advertising and marketing costs related to approved activities initiated by our distributors 1

11 Section 2 Financial Highlights

12 P&L Summary For the year ended 31 Dec 214 (RMB ) 213 (RMB ) Change (%) Turnover 1,672,41 1,452, % Gross profit 591,73 496, % Profit before taxation 387,85 32, % EBITDA 439, , % Profit for the period 27, , % Basic and diluted EPS (RMB) 65 cents 66 cents -1.5% Dividend per share (HKD) 36 cents N/A Dividend payout ratio 5.4% N/A 12

13 Revenue Analysis Revenue Total Sales Volume Purchase Order (Wholesale Value) YoY Growth (m units) (RMB m) 1,8 1,6 1,4 1,2 1, Autumn / Winter +24.% 215 Spring / Summer +11.9% 1,672 1,453 1, (RMB/Unit) 2 15 Average Unit Wholesales Selling Price Sales increase driven by both sales volume and average wholesale price Sales volume in 214 increased by 7.6% Average wholesale price in 214 increased by 7.%

14 Increased Profit and Margins GP and GP Margin EBITDA 1 and EBITDA Margin NP and NP Margin (RMB m) (RMB m) (RMB m) % 34.2% 35.3% % 25.7% 26.3% % 16.4% 16.2% % % % The YoY increase in 214 GP margin was mainly due to increase in average wholesale price. The YoY increase in 214 EBITDA margin was a result of increase in gross margin offset with slight increase in percentage of operating expenses to revenue. YoY NP margin slightly decreased in 214 mainly due to provision of withholding tax on dividends and increase in advertising, promotion and decoration fee. Source: Company information 1. EBITDA = Profit from operations + interest expense + income tax + depreciation + amortization of lease prepayments and intangible assets 14

15 Cost Structure Administrative Expenses and Selling & Distribution Expenses ( RMB ) 25, 12% 2, 11% 16,99 % of Revenue 12,693 Research & Development Costs 15, 13,4 12,871 71,75 Listing Fee 1, 58,299 Advertising & Promotion, Decoration Fee 5, 28,533 33,73 Other Selling & Distribution Expense 47,59 56,778 Other Adminstrative Expenses

16 Operational Cycle Average Inventory Turnover Days 1 Average Trade Receivables Turnover Days 2 Average Trade Payable Turnover Days 3 Days Days Days We maintain low average inventory turnover days in 214 resulted from effective inventory control YoY increase in 214 was due to offer of longer credit periods to some distributors Average trade payable turnover days in 214 remained stable 1. Inventory days = Average Stock / Cost of Sales x 365 days 2. Trade Receivable Days = Average Trade Receivable / Turnover (including value-added tax) x 365 days 3. Trade Payable Days = Average Trade Payable / Cost of Sales x 365 days 16

17 Cash Flow Statement Cash and cash equivalents ( RMB ) 35, (328,436) 3, 223,26 225,399 25, 2, 183,254 15, 1, 63,31 5, Cash and cash equivalents at 1 Jan (1) 214 Net cash from operating activities Net cash used in investing activities Net cash from financing activities Cash and cash equivalents at 31 (1) Dec Excluded fixed deposits held at banks with original maturity over 3 months and bank deposits pledged as security for bank loans 17

18 Use of Proceeds Purpose of net proceeds Amount of net proceeds (HK$ m) Used (HK$ m) Amount not yet utilized (HK$ m) Brand promotion and marketing 27% (22.7) 1.1 Research, design and product development Repay a portion of bank borrowings Expand distribution network and provide storefront decoration 2% 9.9 (4.8) % 9.9 (9.9) - 13% 59.1 (22.5) 36.6 Installing ERP system 1% 45.5 (1.9) 43.6 Working capital and other general corporate purposes 1% 45.5 (45.5) - 1% (188.3)

19 Section 3 Future Development

20 Future Development We focus on strengthening our position in the menswear industry and achieving sustainable growth and profitability 1 2 Strengthen our supply chain management and distribution network Continue to invest in multi-channel marketing and branding activities to enhance our brand awareness 3 4 Continue to invest in research, product development and design Expand and diversify our product offering 2

21 THANK YOU Contact: 21