Agenda. Overview. Financial Analysis. Business Review. Future Plans. Open Forum

Transcription

1 March

2 Disclaimer This presentation is prepared by Xtep International Holdings Limited (the Company ) and is solely for the purpose of corporate communication and general reference only. The presentation is not intended as an offer to sell, or to solicit an offer to buy or form any basis of investment decision for any class of securities of the Company in any jurisdiction. All such information should not be used or relied on without professional advice. The presentation is a brief summary in nature and do not purport to be a complete description of Company, its business, its current or historical operating results or its future prospects. This presentation is provided without any warranty or representation of any kind, either expressed or implied. The Company specifically disclaims all responsibilities in respect of any use or reliance of any information, whether financial or otherwise, contained in this presentation. This presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Company. These forward-looking statements represent the Company s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Certain statements, such as those that include the words potential, estimated, expect, anticipates, objective, intends, plans, believes, estimates, and similar expressions or variations on such expressions may be considered forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. Readers should be cautioned that a number of factors could cause actual results to differ in some instances materially, from those anticipated or implied in any forward-looking statement. Forward-looking statements speak only as of the date they are made, and it should not be assumed that they have been reviewed or updated in the light of new information or future events. Trends and factors that are expected to affect the Company s results of operations are described in the Financial Analysis, Business Review and Future Plans. 1

3 Agenda Overview Financial Analysis Business Review Future Plans Open Forum 2

4 2014 Market Review and Key Achievements Consolidation has been carried out in the sportswear industry. As a result, underperformed players have been driven out and market stability has been restored Maintains XTEP s leadership in domestic fashion sports segment Continues to focus on the 1) PRC market ; 2) mass market sector ; 3) sport of running Adopted proactive prudent sales ordering system and achieved HIGH single digit replenishment order Revenue growth has been restored in 2014 Payout ratio increased to 60% 3

5 Business Highlights Long-term Development Strategy Product Portfolio Improvement Increased the sales of higher gross profit margin and more competitive footwear products Introduced more high quality running footwear products Brand Equity Enhancement Continues with dual sports and entertainment marketing strategy Advertising and promotional expenses increased to approx. 13.1% of the Group s revenue Retail Channels Reformation Improve retail store profitability Implemented the XTEP 7 th generation store image across retail channels 4

6 Financial Analysis 5

7 Financial Highlights Reviving Financial Performance with Increase in Dividend Payout Ratio Growth in Revenue and Gross Profit Margin Total revenue up by 10% to RMB 4.78 billion, regain growth from decline in 2013 Gross profit margin up by 0.6pp to 40.8% Profit attributable to ordinary equity Shareholders decreased by RMB million to RMB million, mainly due to an increase of RMB million on advertising and promotional expenses Increase in Dividend Payout Ratio Final dividend HK 5.0 cents per Share Special dividend HK 3.0 cents per Share Together with interim dividend HK8.5 cents per Share Total dividend payout ratio is 60% Overall Working Capital Improvement Low gearing ratio at 23.1% Net asset value per Share up by 4.5% to RMB 2.16 (HK$ 2.71) Strong gross cash balance of RMB 4,443.2 million Cashflow from operating activities in 2H2014 was significantly improved to net cash inflow of approx. RMB471.3 million, compared to net cash outflow of approx. RMB376.7 million in 1H2014 6

8 Financial Highlights For the year ended 31 Dec (RMB mn) Change Revenue 4, , % Gross profit 1, , % Profit attributable to equity Shareholders (21.1)% Basic earnings per Share (RMB cents) (21.2)% Gross profit margin (%) pp Operating profit margin (%) (3.7)pp Net profit margin (%) (4.0)pp ROE (%) (3.4)pp 7

9 Revenue Regain Sales Momentum Revenue (RMB mn) 6,000 5, , % 4, % Margin (%) 42% 4,777.6 Revenue regained growth mainly due to: 1. Prudent sales orders management to minimize the risk of excessive stock in the distribution channels; 4, % 40.8% 41% 2. High single digit replenishment orders for new products; 3, Leadership among domestic fashion sportswear brands; and 2,000 1, % % 39% 4. Focused branding and marketing promotion in running events resulting in strong growth of footwear products Overall gross profit margin increased by 0.6 pp due to an increase in the gross profit margin of footwear products to 42.1% (2013: 40.9%) Revenue Gross Profit Margin 8

10 Revenue Breakdown & Product Analysis Overall Revenue Mix (RMB mn) 63.7% 1.0% 2014 RMB 4,777.6 mn [-]% [-]% 35.3% Increased product mix of footwear products, representing 63.7% of the Group s total revenue Footwear Accessories Apparel 1. XTEP s footwear products are highly recognized in the market for their high quality 2.0% 51.7% 46.3% 2013 RMB 4,343.1 mn 2. Footwear products are more quality competitive than apparel, the latter of which is under fierce competition due to lack of product differentiation 9

11 Revenue Breakdown & Product Analysis (Con t) Footwear Apparel Revenue (RMB mn) Margin (%) Revenue (RMB mn) Margin (%) 3,400 43% 2,200 60% 3, % 3, % 2,000 2, % 2,600 2,200 2, % 1,800 1,600 1, % 1, % 41% 1, % 38.5% 40% 1,400 1,200 1, % 1, % Revenue Gross Profit Margin Revenue Gross Profit Margin in both Revenue and GPM of XTEP Footwear Products due to proven successful sports marketing sponsorships in Revenue due to decrease to further reduce retail inventory level volume of products sold 10

12 Consistent High Dividend Payout Ratio Annual Dividend Payout ratio (%) Payout Ratio: 60.0% Dividend per Share Interim: HK 8.5 cents Final: HK 5.0 cents Special: HK 3.0 cents

13 Operating Expenses Analysis Advertising & Promotional Costs Research & Development Costs (RMB mn) % (RMB mn) % For the year ended 31 Dec For the year ended 31 Dec Change Change A&P costs (RMB mn) R&D costs (RMB mn) (3.5) Operating Ratio (as a % of revenue) 13.1% 11.2% 1.9 pp Operating Ratio (as a % of revenue) 2.2% 2.6% (0.4)pp Increased investment in sports and entertainment campaigns and endorsement deals Upgraded the retail distribution network to XTEP 7 th generation store image Decreased spending due to certain non-recurring consultancy expenses last year 12

14 Improved Net Operating Cashflow Cashflow From Operation (RMB mn) IH H H H 2014 Prudent and successful management strategies Control of wholesale inventory level and overall working capital 13

15 Strong Operating Cashflow in 2H (RMB mn) 1H H 2014 Full year Operation profit Change in inventories (241.0) (32.2) Change in trade and bills receivables (508.8) (339.0) Change in trade and bills payables (97.9) Others (278.5) (192.3) (470.8) Cash inflow from operating activities (376.7) Operating Cash Inflow in 2H 2014: RMB471.3 mn 14

16 Improvement on Working Capital Cycle Working Capital Turnover Days (T/O days ) days 77 For the year ended 31 Dec (Turnover days) Change Inventories Trade receivables Trade payables Overall The turnover days of working capital improved by 17 days due to improvement in inventory management and utilization on supply chain credit facilities 15

17 Strong Cash Balance For the year ended 31 Dec (RMB mn) Treasury deposits Bank deposits Cash and cash equivalent 3, ,563.2 Total cash and cash equivalent 4, ,388.6 Bank borrowings (1,839.0) (1,525.5) Net cash and cash equivalents 2, ,

18 Solid Balance Sheet A positive balance sheet provides solid and stabilised support to sustainable growth of the Group For the year ended 31 Dec (RMB mn) Change Current Assets 6, , % Current Liabilities 2, ,356.0 (0.2)% Net Current Assets 4, , % Current Asset Ratio (times) 3.0 x 2.7 x 0.3 x Shareholders Equity 4, , % Total Net Assets per Share RMB 2.16 RMB % 17

19 Business Review 18

20 Business Review Maintaining XTEP s Leadership in the Domestic Fashion Sportswear Segment Effective Branding Strategy Innovative Products Strategic Distribution Network 19

21 Effective Branding Strategy Unique brand building strategy by involving sports and entertainment marketing Sports Marketing Entertainment Marketing Running Football 20

22 Sports Marketing in 2014 Running 13 International Marathons Xiamen International Marathon Standard Chartered Hong Kong International Marathon Chongqing International Marathon China Zheng-kai International Marathon Yanhzhou International Half Marathon Taiyuan International Marathon Changshu Shang Lake Half Marathon Tianjin International Marathon The Pink Run Xtep Cross-Strait Women s Half Marathon Hangzhou International Marathon Gui Zhou, Tour of Lei Gong Mountain International 100km Ultra Trail Challenge Hefei International Marathon Guangzhou Marathon 21

23 Sports Marketing in 2014 (Con t) Football Football Clubs Sponsorship La Liga, Villarreal C.F. ( 西甲維拉利爾足球俱樂部 ) China All Star Football Team ( 中國明星足球隊 ) Chinese Football Reporter United ( 中國足球記者聯隊 ) Beijing Institute of Technology FC ( 北京理工大學足球俱樂部 ) Hong Kong First Division League, Hong Kong Rangers FC ( 港甲標準流浪足球會 ) Hong Kong All Star Sports Association ( 香港明星足球隊 ) Football Events Sponsorship Xtep China University Football League ( 特步中國大學生足球聯賽 ) Xtep China College Futsal League ( 特步中國大學生五人制足球聯賽 ) LFP World Challenge Asia Tour (Hong Kong) 22

24 Entertainment Marketing in 2014 Category Partners Campaigns TV Commercials Official broadcast partner TV Partnership CCTV Kids Channel Jiangsu Youman Cartoon TV Beijing Ka Ku TV Strategic partner Programme Sponsorship Hunan Satellite TV Title sponsorship of Day Day Up ( 天天向上 ) Internet Comprehensive online shopping experience with quality products and value-added customer service Unique brand positioning and differentiated marketing strategy to strengthen XTEP s brand image 23

25 Innovative Products Strong R&D Capabilities Over 700 talented in-house R&D team members comprising senior designers from Hong Kong, the U.S., Germany and South Korea Ability to develop approximately 3,000 SKU products annually Continued to invest in technology and explore innovative materials with R&D costs of RMB107.5 million In-house production ratios were 58% (2013: 64%) for footwear products and 15% (2013: 28%) for apparel products Xtep Light Running Series Helix 1.0 Running Series Dual Direction Shock Absorber 2.0 Running Series 24

26 Innovative Products (Con t) Product Portfolio Diversification Introduces designs leading to better mixing and matching, thereby encourages greater cross selling Sports Performance Collection Encompasses running, cross-training, football and outdoor series Launches seasonal series and are in line with the Group s sports marketing campaign Sports Lifestyle Collection Fashion-oriented sportswear series under four main labels: Campus, Classic, Denim and Urban XTOP 25

27 Strategic Distribution Network Consolidating Distribution Network to Enhance Operational Efficiency Sustainable distribution channels Total number of XTEP retail outlets as of 31 Dec 2014: 7,110 (31 Dec 2013: 7,360) Number of distributorships as of 31 Dec 2014: 37 (31 Dec 2013: 28) Closed the less efficiently operated retail stores Xtep Kids series have 500 POS as at 31 Dec 2014 (31 Dec 2013: 300 POS) Implement the XTEP 7th generation store image The largest flagship and first concept store to date, the Fashion Sports Experience Store was opened in Changsha in May 2014 Overseas operation: Unveiled XTEP mono-branded store in Valencia in Mar 2014 About 200 POS across the Middle East and Central and Western Europe Fashion Sports Experience Store E-commerce Official website and flagship store on leading online retail shopping platforms, including tmall.com, JD.com, taobao.com and Dangdang.com, etc. Top domestic sports footwear brand on Tmall as of 31 Dec

28 Strategic Distribution Network (Con t) Consolidating Distribution Network to Enhance Operational Efficiency Operational enhancement retail channel management through DRP system Increased DRP system s coverage to over 85% of the 7,110 XTEP retail outlets Enables the Group to quickly react to the latest trends and market demands by readily adjusting production schedules Sequential improvement in Q1 to Q4 sales fair orders, recorded improvement for 8 consecutive quarters since late

29 Future Plans 28

30 Future Plans Strengthen XTEP s leading position as a fashion sportswear brand Further expand customer base and raise brand awareness with growing presence Continue to Employ Differentiated Marketing Strategies Strengthen Product Portfolio Optimize Sales and Distribution Channel Management 29

31 Future Plans (Con t) Continue to Employ Differentiated Marketing Strategies Introduced new XTEP spokespersons Strengthen its fashion sportswear brand and further expand its customer base, especially among the mass market and the younger age segment in China Nana UNIQ Strong association with programs that possess significant sports and entertainment content as strategic sponsor Introduced new marketing campaign by an animated cartoon Dream Corps cartoon series will be launched in China in mid March 2015 Further increase XTEP s market share in the high growth segment of kids market Li Yifeng 30

32 Future Plans (Con t) Strengthen Product Portfolio New products incorporating advanced technologies, such as: Dual Direction Shock Absorber Technology: one of the runners top choice which elevates the running shoe to the next level by incorporating advanced shock absorbent PU materials Dynamic Foam: a new product design which offers soft rebound in shock absorption while providing resilience as well as protection of runners joints X-Helix: facilitates recovery from compression deformation and provides shoe sole integrity and foot stability by offering good resilience Air Mega: provides protection in the process of foot impact through a flexible range of soft cushioning 31

33 Future Plans (Con t) Optimize Sales and Distribution Channel Management Further enhances the existing portfolio of retail channels by bolstering efficiency Capitalizes on the DRP System to examine the performance of retail channels and to raise profitability, resulting a healthier retail operations matrix and inventory levels at the retail end Upgrades store image by implementing the XTEP 7th generation across retail channels Leads to greater overall operational efficiency and profitability as the ultimate aim 32

34 Open Forum 33

35 Contacts Xtep Investor Relations Department Tel : (852) ir@xtep.com.hk Strategic Financial Relations Limited Tel : (852) sprg_xtep@sprg.com.hk 34