Interim Results FY17/18 For the 6 months ended 30 September 2017 23 November 2017
Agenda Group s Financial Performance Business Review by Market Outlook And The Way Forward 1
Group s Financial Performance
Group Performance in 1H Six months ended 30 Sep (HK$M) 2017/18 2016/17 YoY % Change Turnover 3,659.9 3,602.1 +1.6% Gross profit 1,551.7 1,505.1 +3.1% EBITDA 186.7 181.5 +2.9% Profit for the period 109.9 96.0 +14.5% EPS basic 3.7 cents 3.3 cents +10.6% Return on equity 4.7% 4.0 % +0.7p.p. Gross profit margin 42.4% 41.8 % +0.6p.p. Net profit margin 3.0% 2.7 % +0.3p.p. Interim dividend* 3.5 cents 9.0 cents -61.1% Dividend payout ratio ~96% ~ 278% -182p.p. * The interim dividends will be payable in cash, with a scrip dividend alternative. A 5% discount is offered on the subscription price for eligible shareholders who elect to receive the dividends in scrip. 3
Group Geographical Sales Mix Total Turnover : HK$3,659.9 M (+1.6%) Six months ended 30 Sep 2017 Turnover (HK$M) % to Group Turnover HK & Macau 2,983.6 81.5%(LY:81.0%) Mainland China 138.3 3.8% (LY:3.8%) Singapore 98.7 2.7% (LY:2.8%) Malaysia 169.3 4.6% (LY:4.5%) Taiwan 92.9 2.5% (LY:2.7%) E-commerce 177.1 4.9% (LY:5.2%) Total 3,659.9 100% 4
Group: Sound Financial Position Group Six months ended 30 Sep (HK$M) 2017/18 2016/17 +/- Change CAPEX 106.0 37.4 +68.6 Net cash generated from operating activities 326.1 238.8 +87.3 Dividend for the period 105.8 266.5-160.7 Net cash and bank balance (As of 30 Sep) 1,197.7 1,276.2-78.5 5
Business Review by Market
HK & Macau: Sales Stabilising FY2017/18 1H YOY retail sales changes +2.2% YOY same store changes -2.1% Total no. of transactions (Million / YoY change%) 8.9/-1.1% Avg. ticket size (HK$ / YoY change%) 329/+3.4% Same store performance has been affected by parallel operations of new and old stores as we relocate to better retail positions to capitalise on a weak rental market Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points 7
China: Consistent Improvements Over Last 3 years Six months ended 30 Sep (RMB 000 ) 2017/18 2016/17 2015/16 Impact on Net Profit Avg number of multi-brand Sasa stores* 53 54 57-1 Retail sales 119,729 115,231 119,883 +4,498 YoY sales change +3.9% -3.9% -8.6% N/A Total operating loss -6,587-11,726-19,928 +5,139 Improvements due to: Stabilisation of management team Improvement of importation process leading to shorter lead time and faster product launches Close underperforming stores in remote cities Cautiously expand in regions with high operation effectiveness Building clusters of stores and management team in well managed provincial capitals Further upgrading of store image & visual merchandising Improving new products offerings Streamlining product offerings to improve product and store productivity *Remarks: As at 31 Mar 2016, there were 57 multi-brand Sasa stores; as at 30 Sep 2016, there were 53 multi-brand Sasa stores in PRC As at 31 Mar 2017, there were 56 multi-brand Sasa stores in PRC ; as at 30 Sep 2017, there were 54 multi-brand Sasa stores in PRC The average no.of stores during the stated period 8 8
Other Markets Performance Retail Sales (in local currencies) FY2017/18 17/18 1H 16/17 1H YoY Change Singapore Average no. of stores* YoY sales performance YoY same store performance Malaysia Average no. of stores* YoY sales performance YoY same store performance Taiwan Average no. of stores* YoY sales performance YoY same store performance 20-2.3% 7.0% 72 9.1% 1.1% 23-8.9% 0.8% 23-11.0% -13.0% 66 19.3% 11.2% 30-22.8% -19.5% -3 +8.7p.p. +20.0p.p. 6-10.2p.p. -10.1p.p. 7 +13.9p.p. +20.3p.p. Persistent management efforts driving continuous same store improvements in Singapore and Taiwan. Taiwan significant same store improvements not yet sufficient to recoup the effect of 7 store closures Singapore same store performance improvements are closer to recuperating loss of sales of 3 stores closures Malaysia same store performance declined due to weaker consumer demand *The average no. of stores during the stated period Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points. 9 9
E-commerce: Losses Reduced Significantly FY17/18 (HK$M) Q1 Q2 17/18 1H 16/17 1H YoY Change (%) Total sales 87.9 89.2 177.1 188.4-6.0% Net Loss (16.3) (33.9) 17.6M Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points. High sales base from last year due to efforts to recover sales after relocation of warehouse in HK Current year emphasis on backend support improvement, raised prices and hurdle for free shipments in the short term Resulted in slight drop in sales and reduction of deficit Significantly improved logistic operation, resulting in 10% (% of turnover) decline in the logistic cost Substantially improved market exposure through major e-commerce platforms Continuous upgrading of mobile app to provide better shopping experience 10 10
Brand Management : House Brand Mix Stabilising Group House Brand mix increased to 38.9% (LY: 38.8%) *House brands = Own brands + Sole-agent brands Six months ended 31 Sep 17 11
Outlook And The Way Forward 12
Hong Kong & Macau Hong Kong retail market has seen the worst: One-trip-per-week policy fully reflected RMB has stabilised Hong Kong is the most popular travel destination for Mainland China travelers (Wechat) Soon to open Hong Kong-Zhuhai-Macao Bridge and Guangzhou- Shenzhen-Hong Kong Express Rail Link will boost PRC tourists arrivals 13
Hong Kong & Macau Continue to strengthen store network Establish stores in better locations Improve store network coverage in residential areas and transport hubs and near the Mainland Brand new mobile app to improve customer engagement Leverage on process automation and new warehouse to improve overall supply chain management 14
Mainland China Popularity of e-commerce brings both pressure and opportunities to brick and mortar operations allowing expansion of store network at reasonable cost Streamlining products yielding results: continue to leverage on new products Continue to roll out our optimising new store format to attract more traffic (esp. younger customers) Strengthen training E-learning platform Junior Beauty Training Programme New Store Training Programme 15 15
E-commerce: Improve Customer Experience Improve inventory management and product offerings Improve shopping experience by using big data analytics, multiple customer touch points and upgrading systems to enable flexibility and efficiency Continue to improve logistics Further collaborate with top e-commerce platforms to increase exposure and acquire new customers 16 16
Singapore, Malaysia and Taiwan Market Singapore market: Incentives to improve staff morale Improve store design to provide space for better shopping experience and broaden customer base of younger age group Expand network cautiously to increase store level contribution Malaysia market Consumer sentiments have shown signs of slowdown, will implement a comparatively conservative development strategy Taiwan market Streamline store network to enable more effective management 17 17
Category Management & Product Development Strategies Strengthen makeup product portfolio and display Increase digital media exposure for house brands Fill product gaps according to function and at different price points to accelerate new product launches Improve management of product life cycle, reduce number of SKUs 18 18
Store Network Strategy Varies Between Markets Multi-brand Sasa Stores No. of Retail Outlets As of 31 Mar 17 Opened Closed As of 30 Sep 17 HK & Macau 115 6* 6** 115 Mainland China 56 4 6 54 Singapore 20-1 19 Malaysia 70 4 1 73 Taiwan 25-4 21 Total 286 14 18 282 HK & Macau: Rationalise stores in tourist locations, build stores in residential locations, and modify size of specific stores to enhance productivity and profitability Malaysia: Expansion mode (increase penetration) Mainland China, Singapore and Taiwan: Optimisation mode (enhance store contribution) * Opened: Tourist stores: 2 Non-tourist stores: 4 ** Closed: Tourist stores: 2 Non-tourist stores: 4 Remarks: Tourist stores are defined as the traditional tourist area stores, which are different from the Group s internal definition As at 30 September 2017, there were 1 single-branded stores/ counters in HK & Macau, totaling 283 retail outlets for the Group 19 19
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