2007 Annual Results Announcement. 14 April 2008

Transcription

1 2007 Annual Results Announcement 14 April 2008

2 Agenda 1. Financial Highlights 2. Business Review A. Brand Business B. OEM Business 3. Marketing & Promotion 4. Prospects A. Daphne B. Shoebox C. adidas D. OEM 5. New Business A. Licensed International Brand B. Self-owned Brand C. Sports Casual Brand 6. Q & A 1

3 Financial Highlights 2

4 Financial Highlights Change (HK$ million) For the year ended 31 Dec Turnover 3, , % Gross Profit 1, , % Gross Margin (%) 47.5% 45.1% +2.4p.p. Profit Attributable to Equity Holders % Net Margin (%) 10.0% 9.4% +0.6p.p. Basic EPS (HK cents) % Total Dividend Per Share (HK cents) - Proposed Final Dividend (HK cents) % 3

5 Five-year Summary HK$ million 4,000 3,500 3,000 2,500 2,000 1,500 1, ,407.0 Turnover CAGR: 29% 1, , , , For the year ended 31 Dec HK$ million Profit attributable to equity holders 82.9 CAGR: 47% For the year ended 31 Dec Basic EPS Margins HK cent CAGR: 44% % 40% 29.7% 38.3% 43.6% 45.1% 47.5% Gross margin % 0% 5.9% 9.9% 9.7% 9.4% 10.0% Net margin For the year ended 31 Dec For the year ended 31 Dec 4

6 Key Financial Indicators Change For the year ended 31 Dec Average Inventory Turnover (Days) Average Debtors Turnover (Days) Average Creditors Turnover (Days) Capital Expenditure (HK$ million) % Effective Tax Rate (%) p.p. 5

7 Key Financial Indicators Change (HK$ million) As at 31 Dec Cash & Cash Equivalents % Shareholders Equity 1, % Bank Loans % Current Ratio (Times) % Gearing Ratio (%) p.p. 6

8 Business Review 7

9 Individual Business Performance - Turnover 64% 60% % 7% 3% 25% 6% 5% 18% 67% % 8% Daphne Shoebox adidas OEM 8

10 Individual Business Performance -Operating Profit 35% % 2% -1% 82% 7% 17% 5% 3% 2% -1% % Daphne Shoebox adidas OEM 9

11 Business Performance Change (HK$ million) For the year ended 31 Dec Turnover 2, , % Gross Profit 1, , % Gross Margin (%) 55.7% 55.8% -0.1p.p. Operating Profit % Operating Margin (%) 17.2% 16.5% +0.7p.p. 10

12 Sales Network by Channel Directly-managed Stores Directly-managed Counters D18: D28: D18 & D28: D18: D28: D18 & D28: Changes As at 31 Dec 1, , , % +16% +17% +35% % +22% +17% +77% Franchised Outlets % Total Points-ofsale 2,374 1, % 11

13 Business Performance Changes (HK$ million) For the year ended 31 Dec Turnover % Gross Profit % Gross Margin (%) 53.5% 51.2% +2.3p.p. Operating Profit/(Loss) 14.1 (4.6) N/A Operating Margin (%) 4.7% (3.2%) +7.9p.p. 12

14 Sales Network by Channel Changes As at 31 Dec Directly-managed Stores % 13

15 Business Performance Changes (HK$ million) For the year ended 31 Dec Turnover % Gross Profit % Gross Margin (%) 44.8% 39.6% +5.2p.p. Operating Profit % Operating Margin (%) 9.2% 4.1% +5.1p.p. 14

16 Sales Network by Channel Changes As at 31 Dec Directly-managed Stores Directly-managed Counters % +27% Franchised Outlets Total Points-of-sale % +34% 15

17 Brand Business Key Operational Indices * Changes Changes Changes For the year ended 31 Dec Average Selling Price (RMB) % % % Same Store Sale Growth (%) p.p p.p p.p. Rental Expense Ratio (as % of sales) p.p p.p p.p. Personnel Expense Ratio (as % of sales) p.p p.p p.p. A & P Expenses Ratio (as % of sales) p.p p.p p.p. * Excluding Daphne s Outlets in Taiwan 16

18 Brand Business Sales Network by Region Total % (Region) As at 31 Dec 2007 Eastern China ,048 37% Southern China % Northeastern China Central China Northern China Southwestern China Northwestern China % 13% 9% 8% 4% Taiwan % TOTAL 2, , % % 83% 12% 5% 100% 17

19 Brand Business Contribution by City Tier * No. of Cities # Turnover Profit Turnover Profit Turnover Profit For the year ended 31 Dec 2007 Tier 1 3 1% 17.5% 16.7% 21.5% 22.6% 31.0% 15.5% Tier 2 Tier 3 Tier 4 Tier % 3% 11% 34% 22.6% 16.2% 15.9% 16.9% 20.2% 15.7% 17.1% 17.1% 23.4% 14.2% 16.6% 15.4% 27.6% 20.3% 13.0% 7.7% 51.0% 15.4% 2.3% 0.3% 63.4% 18.8% 2.0% 0.3% Tier % 10.9% 13.2% 8.9% 8.8% Total % 100% 100% 100% 100% 100% 100% Lower-tier cities cities enjoy higher margin than than higher-tier cities citiesfor for Daphne ;; Daphne and and Shoebox enjoy extensive national network, expansion especially active in in tier-4,5,6 cities cities #Including cities at prefecture and county levels only * Excluding Daphne s outlets in Taiwan 18

20 Sales Network by City Tier City Tier Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6 Total (Brand) As at 31 Dec 2007 Daphne* % % % % % % 2, % Shoebox 54 16% 80 22% 48 14% 59 17% 68 20% 37 11% % adidas 32 23% 66 47% 23 17% 14 10% 4 3% % Total % % % % % % 2, % * Excluding Daphne s outlets in Taiwan 19

21 OEM Business Business Performance Changes (HK$ million) For the year ended 31 Dec Turnover % Gross Profit % Gross Margin (%) 16.4% 18.0% -1.6p.p. Operating Profit % Operating Margin (%) 5.4% 9.0% -3.6p.p. 20

22 Marketing & Promotion 21

23 Brand Business Marketing Overview Celebrities Songs of Rene Liu and girl group S.H.E appeal to female customers targeted by D28 and D18 represented by the celebrity icons respectively Electronic Media Electronic media remains the main promotion platform for Daphne - Dragon TV, CCTV, Hunan TV, ETTV Asia, Xing Kong TV and Music Radio Print Media News of events are released to and covered by consumer and entertainment pages of major newspapers and magazines nationwide Internet Stores Teams Riding on corporate websites to promote brand spirit and aspirations Appealing to the five human senses, shop designs take onlookers on to a virtual stage as the heroin of the show Over 200 sales teams nationwide relentlessly promoting brand exposure and reputation 22

24 Prospects 23

25 Business Development Strategy Market Development Strategy Vast domestic demand in China Target customers are trendy individuals in mass market Market potential of developing over 10,000 stores in the long run Consolidate foothold in provinces, develop presence in cities and expand in counties Operational Management Strategy Net increase of about 400 points-of-sale per year Improve operational efficiency Strengthen control in merchandising management, logistics efficiency and cost control Effective control of administrative expenses Integrate information and establish intelligent analysis system 24

26 Business Development Strategy Market Development Strategy Market development focus on low to middle-income consumer groups in all city-tiers Uphold channel expansion principle of Progress gradually, build solid foundation to Consolidate foothold in provinces, develop presence in cities and expand in counties Over 1,000 retail outlets to be established by 2010 Operational Management Strategy Improve efficiency of store operation Step up management control on merchandising Strengthen control on administrative expenses Optimise information system and delivery system 25

27 Business Development Strategy Market Development Strategy Continue to consolidate leading position in higher-tier cities and speed up development of lower-tier cities to capture the markets with room for further growth potential Market Expansion Strategy of Afforestation Expect annual increase of points-of-sale, ensure profitability of every sales point via profitability analysis Operational Management Strategy Improve quality of sales network structure through the operation of professional management teams in sportswear industry Speed up circulation of products via the improvement of supply chain Enhance service of sales teams through professional retail training Synergise with logistics resources 26

28 OEM Business Business Development Strategy Market Development Strategy Strategically increase the production of own brand products Gradually re-allocate production capacity to higher margin brand business Increase proportion of high unit price and high profit margin products Maintain high utilisation of production capacity and strengthen volume production advantage Raise technical level and improve product quality Operational Management Strategy Fulfill three key production requirements quality, technology and comfort Effective control of production costs and administrative expenses Enhance staff productivity management and training 27

29 Brand Business Continuous Expansion Targets to add points-of-sale in 2008, and expects to establish a total of 3,500 points-of-sale by 2010 Targets to add points-of-sale in 2008, and expects to establish over 1,000 points-of-sale by 2010 Targets to add points-of sale in 2008, and establish a total of over 250 points-of-sale by

30 The Group s Strengths Leading footwear retailer in China with exceptional capability in ladies footwear business Enjoy prime standing for tapping industry growth opportunities and benefiting from economies of scale Renowned own brands Effective positioning of all own brands facilitates capture of future opportunities in corresponding markets Partner of leading brand enterprises Top team boasting successful experience in cooperating with international brands Realise growth through network expansion and diversification Capture industry growth opportunities through expanding customer base Well experienced senior management team Rich experience and deep understanding of footwear business operations in China 29

31 New Business 30

32 Competitive Environment Positioning of Ladies Footwear Market Daphne and Shoebox have solid foothold in mid-to-low-end mass market Expensive Local brands dominate in mid-to-highend market Simple Fashionable Imported ladies footwear enjoys unique competitive advantages in mid-to-highend market Inexpensive 31

33 Licensed International Brand- Brand description Brazilian stylish ladies footwear brand 225 specialty shops and 103 franchisees worldwide 8 new product launch conferences a year Launch new product items every week Strategic alliance Long-term strategic alliance with AREZZO Gain exclusive distribution right of AREZZO products in China Strengths: Independent sales, brand autonomy, product differentials 32

34 Brand positioning and strengths Positioning: High-end IMPORTED premium ladies footwear Target customers: Fashionable office ladies and fashion-conscious female consumers aged Strengths: Sales channels between with strong spending power Stand unique from other brands imported, stylish, trendy, personalised; new footwear items hit the store every week and in limited supply to ensure uniqueness High-end shopping malls in first-tier cities, with independent showcase window space Smaller scale in initial phase of operation, focuse on first-tier cities, and plan to expand as foothold strengthens Targets to establish approximately 10 points-of-sale in

35 - SHOCK COLOUR 34

36 - GRANDES FERRAGENS 35

37 - Bags & Accessories Fashionable bags and shoes match perfectly with accessories 36

38 -Store Image To tie-in to the products in different seasons, colours and decorative materials are changed to create different store environments Gives customers a new experience during every visit Emphasizes the exclusiveness of the products which are all limited editions To establish closer relationships with customers, activities are organised in stores to enrich the atmosphere 37

39 -Store Image Summer Autumn Winter 38

40 Licensed International Brand Brand description Sofft and Born are brands owned by H.H. Brown Sofft: Founded in 1927, major markets in the US and Europe Born: Founded for over 10 years, major markets in the US and Europe Strategic alliance Long-term strategic alliance with H.H. Brown Gain exclusive distribution rights of Sofft and Born in China Strengths: Independent sales, brand autonomy, product differentials 39

41 Brand positioning and strengths Positioning: Mid-to-high-end fashionable ladies footwear Target customers: Office ladies aged between 18&45 and working female consumers with strong financial power, who are independent and enjoys stylish leisure living Strengths: Stand out from other brands of similar market shoe design of Sofft are stylish and provides customers with elegant and comfortable ladies footwear; The style of Born shoes are casual and hand-made with quality leather and natural materials Sales channels Dedicated counters in department stores in first-tier cities Sofft and Born shoes will be sold under one store named Sofft Smaller scale in initial phase of operation, focuses on first-tier cities, and plans to expand as foothold strengthens Targets to open approximately 10 points-of-sale in

42 -Brand Positioning Comfort Design For all our competitors, they all have clear position, they focus on either comfort or style of the shoes 41

43 -Brand Positioning Sofft & Born: focus on both comfort & design Comfort + Design Sofft and Born : where design perfectly matches comfort 42

44 -Store Image 43

45 Self-Developed Brand Brand positioning Positioning: A channel brand selling footwear of quality with professionalism; also as a professional, multi-positioned and multi-brand shoe shop Target customers: Aged between 18 and 45 who are Sales channels fashionable, confident and have strong spending power Franchised business model with the production to orders and almost no inventory risks SHOESHOP sells a large variety of brands suitable for different retail channels, it is also promoted nationally as a new shoe shop brand. Rapid expansion in store openings, high operating profit margin Targets to expand to over 50 points-of-sale in

46 -Store Image 45

47 International Sport Brand - Major Business Mainly operates Nike Sport Performance series, which currently constitutes the largest proportion of Nike business in Mainland China Strategic Partnership Entered into an agreement with Nike for national cooperation, to become one of the major agents of the brand and expand in tier-1 to tier-6 cities Strong market growth potential in tier-3 to tier-6 cities in Mainland China Plan for New Outlets Targets expansion of points-of-sale annually Further information to be provided 46

48 Investor Relations Contact Alfred Ying Company phone & address (852) th Floor, Fung House Connaught Road Central Central, Hong Kong 47

49 Q & A 48