361 Degrees International Ltd. · HKEX:1361
361 Degrees International — FY2017 Earnings Presentation
40 slides from 361 Degrees International's earnings presentation, Mar 13, 2018
Slide 1: 361 Degrees International Limited
a 361 DEGREES INTERNATIONAL LIMITED
Slide 2: Disclaimer
Disclaimer These presentation slides have been prepared by 361 Degrees International Limited (the “Company”) solely for us during its presentation held in connection with its interim results for the year ended 30 Jun 2016 and may not be reproduced or redistributed. In particular, these presentation
Slide 3: Agenda
Section 1 Operating Strategies 3 Section 2 Financial Highlights 5 Section 3 Operational Highlights 17 Section 4 Outlook 31 Section 5 Appendix 34 Section 6 Q&A 39 2
Slide 4: Operating Strategies
Operating Strategies Ss
Slide 5: Operating Strategies
Operating Strategies Golden decade of International running shoes China’s sports industry received awards • Scale of China’s sports industry reached RMB1.9 • Recommended by the Runner’s World, USA trillion in 2016 • The Best Debut by the Competitor, USA • Production of sports products and related •
Slide 6: Financial Highlights
Financial Highlights Financial Highlights
Slide 7: Key Financial Highlights
Key Financial Highlights For the year ended 31 December RMB mn 2017 2016 Change Revenue 5,158.2 5,022.7 +2.7% Gross profit 2,156.4 2,109.9 +2.2% Operating profit 987.6 949.3 +4.0% Profit attributable to equity shareholders 456.7 402.7 +13.4% Basic EPS (RMB cents) 22.1 19.5 +13.3% Profitability Ratio
Slide 8: Revenue
Revenue RMB mn Gross margin (%) 6,000 45% 42.0% 41.8% 40% Revenue rose by 2.7% to RMB 5,500 5,158.2 million, mainly due to the 35% experience of warmer winter in the 5,000 PRC which resulted in delayed 30% delivery of some of the 2017 winter 4,500 products. 25% 4,000 Gross profit margin slightly
Slide 9: Revenue Analysis - Revenue Mix
Revenue Analysis - Revenue Mix 2.1% 1.5% 13.0% 13.8% 1.9% 1.5% Footwear 43.9% Apparel 44.7% 2016 2017 RMB5,022.7 mn Accessories RMB5,158.2 mn 361° Kids Others 39.1% 38.5% For the year ended 31 December 1. Footwear sales increased by 4.6%, and its contribution to the total revenue increased to 44.7%,
Slide 10: Revenue Analysis – by Product Type
Revenue Analysis – by Product Type Footwear Apparel RMB mn Gross margin (%) RMB mn Gross margin (%) 2,500 50% 2,500 50% 44.0% 43.0% 41.5% 40.8% 40% 2,000 40% 2,000 30% 1,500 30% 2,306.2 1,000 20% 2,204.7 20% 1,966.2 1,987.6 1,500 10% 500 10% 1,000 0% 0 0% 2016 2017 2016 2017 Footwear Apparel The A
Slide 11: Revenue Analysis – 361° Kids
Revenue Analysis – 361° Kids RMB mn Gross profit margin (%) 361° Kids 700 60% 650 Sales volume rose by 14.8% whereas 600 the AWP slightly contracted by 4.9% 43.5% 50% 550 Gross profit margin slightly declined 500 41.0% to 41.0%, due to the increased 40% 450 production costs for both footwear 400
Slide 12: Major Operating Expenses
Major Operating Expenses Selling and Distribution Costs Administrative Expenses For the year ended 31 December For the year ended 31 December RMB mn RMB mn 2017 2016 Change 2017 2016 Change A&P 506.5 570.7 -11.2% R&D 173.2 187.4 -7.5% Commission 85.9 29.6 +190.2% Salaries and staff +10.6% Packing 89
Slide 13: Operating Cash Flow
Operating Cash Flow For the year ended 31 December RMB mn 2017 2016 Operating profit 987.6 949.3 Change in inventories (273.2) 11.4 Change in trade and bills receivables 71.5 269.6 Change in trade and other payables 349.2 60.4 Change in deposits, prepayments and other (59.0) (20.5) receivables Taxes
Slide 14: Working Capital Cycle
Working Capital Cycle Working Capital Turnover Days （days） 100 As at 31 Dec As at 31 Dec Turnover days Change 2017 2016 90 80 76 Inventories 82 69 +13 70 60 60 Trade and bills 155 163 -8 50 receivable 40 Trade and bills 30 177 156 +21 payable 20 10 Overall 60 76 -16 0 31 Dec 2016 31 Dec 2017 13
Slide 15: Balance Sheet Highlights
Balance Sheet Highlights RMB mn As at 31 December 2017 As at 31 Dec 2016 Change Current assets 9,748.5 9,034.0 +7.9% Current liabilities 2,744.4 2,343.1 +17.1% Net current assets 7,004.1 6,690.9 +4.7% Equity attributable to owners of the 5,706.5 5,303.3 +7.6% company Net asset value per share (RMB)
Slide 16: Trade Debtors and Ageing Analysis
Trade Debtors and Ageing Analysis As at As at RMB’000 31 Dec 2017 31 Dec 2016 Trade debtors 1,985,544 2,093,569 As at 31 December 2017, Less: Allowance for doubtful debts (56,655) (56,655) approximately 76% of trade debtors are within 1,928,889 2,036,914 90 days ageing from Bills Receivable 220,90
Slide 17: Maintain a Strong Financial Position
Maintain a Strong Financial Position RMB ‘000 As at 31 Dec 2017 As at 31 Dec 2016 Pledged bank deposits 335,283 185,580 Deposits with bank with maturities > 3mths 3,605,691 2,537,113 Cash and cash equivalents 2,116,422 2,881,632 Total cash 6,057,396 5,604,325 Bank loans 12,814 76,236 Senior unsecure
Slide 18: Operational Highlights
Operational Highlights
Slide 19: 361° Sales Network
361° Sales Network Sales Network Types of Stores Types of stores No. of stores % to total stores Northern region 2,412 Street-level stores 4,453 76.7% Western region 1,196 Eastern region Mall Stores 1,355 23.3% 1,285 Total: 5,808 Southern region 5,808 100.0% 915 First-tier cities 8.3% Second-tier ci
Slide 20: Building the 361° Brand
Building the 361° Brand Generally, budget for brand promotion accounts for 8% to 10% of annual revenue Major International Events Sponsorships 2010 2011 2014 2016 2018 2010 Asian Games in World University Games Nanjing Youth Olympic Games Rio Olympic Games Jakarta Asian Games Guangzhou Asian Games
Slide 21: Building the 361° Brand (cont’d)
Building the 361° Brand (cont’d) National Marathon, Running Events and Events Sponsorships • Domestic Marathon: Dongguan Marathon, Suzhou Jinji Lake • SEE ME RUN: Held across 7 cities in China – 4.23 Beijing, 5.6 International Marathon, Jinmen Marathon, Tengchong Marathon, Shijiazhuang, 5.13 Taiyuan
Slide 22: Building the 361° Brand (cont’d)
Building the 361° Brand (cont’d) Celebrity Endorsement Sun Yang Zhang Yufei Liu Xiang Jimmer Fredette Guan Siyang Marcia Zhou Yang Xu Wei Chen 21
Slide 23: 361° Kids Operational Data
361° Kids Operational Data Sales Network Revenue (RMB million) Northern region 711.1 651.2 644 588.9 507.5 420.4 Western 370.1 region 238.7 300 Eastern region 482 37.6 (1) (1) Total: 1,797 Southern 2010 2011 2012 2013 2014 2015 2016 2017 region 371 Trade Fair Orders (wholesale value) First-tier citi
Slide 24: 361° Kids Core Products and Functional Technologies
361° Kids Core Products and Functional Technologies 2017 Kids Footwear Products’ Core Technologies 2017 Kids Apparel Products’ Functional Technologies Triangle rebound Spaceship streamlined Inner moisture Moisture-wicking Splash-proof structure structure wicking technology surface Dirt-p
Slide 25: 361° High-end Product Line — For International Market
361° High-end Product Line — For International Market Established in 2014, International business focuses on functional high-end running and integrated training products and develops winning strategies with high cost performance products Revenue Revenue (RMB (RMBmn) mn) %%ofofrevenue revenue Point
Slide 26: 361° High-end Product Line — Product Reputation
361° High-end Product Line — Product Reputation Winner of ISPO Global Design Award in Recognized as the Best Debut and Munich, Germany the Best New Shoes by German Runner’s World in 2017 Sensation 2 Finalist of 2017 10 Best Running Spire3 Tribal Shoes Awarded as the Top 7 Most Won Canadian
Slide 27: 361° High-end Outdoor JV Brand — ONE WAY
361° High-end Outdoor JV Brand — ONE WAY Operating 46 self-operated outlets in China as at 31 December 2017 ONE WAY presents its triple store function of “experience + gathering + shopping”, implying the successful upgrade of ONE WAY’s new high-end brand image Revenue (RMB bn) % to total revenue
Slide 28: 361° High-end Outdoor JV Brand — ONE WAY (cont’d)
361° High-end Outdoor JV Brand — ONE WAY (cont’d) ONE WAY’s first flagship store in Greater China opened in Hefei Swan Lake Wanda Department Store on 28 May National teams sponsored by OW include National Snowboarding Team, National Freestyle Halfpipe Ski Team, National Cross Country Ski Team, N
Slide 29: 361° E-commerce Business
361° E-commerce Business In recent years, 361° has been vigorously developed its E-commerce business. Online exclusive products of e-commerce now accounted for 7.7% of the Group’s total revenue. The Group collaborated with Tmall on “smart store” and implemented “Become member once you pay” initi
Slide 30: Constantly Enhancing Product Functionality
Constantly Enhancing Product Functionality R&D center completed contruction in May 2017 Honor received by R&D center in 2017 Recognized as “National Industrial Design Center” in 2017, the only Chinese sports brand to receive this honor Human-factors and ergonomics research center for sportswear
Slide 31: Constantly Enhancing Product Functionality (cont’d)
Constantly Enhancing Product Functionality (cont’d) As at 31 December 2017, the Group obtained 273 patents Core proprietary R&D technology Bombshell technology External ligaments Quick Dynamic Defense SAC-air CD stretch mesh NFO 3M reflective material Archlock Fabric Quikfoam Air s
Slide 32: Outlook
Outlook
Slide 33: Numerous Positive Factors for Industry Development, Enormous Growth Potential
Numerous Positive Factors for Industry Development, Enormous Growth Potential 2011-2022 Market size of China’s sportswear market (RMB bn) 400 356.6 350 324.2 293.7 300 264.9 250 237.2 193.0769 212.1 174.2468 188.6 156.4393 200 139.4139 166.9 148.3 122.8099 130.6 141.8 139.2 134.7 107.6171 150 93.397
Slide 34: Favorable Government Policies
Favorable Government Policies 2014 No. 46 Guidance issued by the State Council 2015 China’s National Soccer Reform Plan 2016 Opinions on the Acceleration of Winter Sports Development (2016-2022) Chinese Soccer Mid-long Term Development Plan National Fitness Program (2016-2020) The 13th F
Slide 35: Appendix
y > > is ASIANGAMES 4— Jakarta 2018 Palembang ‘ \ e oe Re 3s Appendix
Slide 36: 361° Brand Positioning
361° Brand Positioning Premium 10 ONE WAY 8 6 361° International 4 361° International 2 Fashion - -8 -6 -4 -2 0 2 4 6 8 10 Performance 10 -2 -4 361° Core Brand -6 361° Kids -8 -10 Mass Market Brand Description Market An integrated international sportswear brand that engages in brand, R&D, design, Ap
Slide 37: Mature and Effective Distributor Business Model with Unique Marketing Strategy
Mature and Effective Distributor Business Model with Unique Marketing Strategy Two-tier Distribution Network Effective Distribution Network Management Well-experienced management team Brand Annual renewal of brand licensing Management Reduce Strong profitable business model inventory Exclusi
Slide 38: 361° Core Brand Operational Data
361° Core Brand Operational Data Number of Stores & SSSG Channel Inventories (times) (No. of stores) (SSSG) 5,000 10% 4.4 4,155 4,068 4.3 3,916 3,819 3,772 4,097 3,707 3,864 3,749 4.3 4,000 3,539 3,509 3,543 3,643 8% 4.2 4.2 4.2 4.2 4.2 4.2 4.2 8.1% 7.9% 4.2 3,000 7.2% 7.2% 7.0% 7.3% 7.5% 7.0% 6% 4.
Slide 39: Established a Leading Position in the Industry as China’s Fastest-growing Sports Brand
Established a Leading Position in the Industry as China’s Fastest- growing Sports Brand 2014-2018 Comprehensive 2011-2013 upgrade Capital 2008-2010 enhancement As the first Chinese sports Further brand to sponsor the 2005-2007 development Olympic Games, 361° was and expansion Established a joint ven
Slide 40: Q&A
Q&A
361 Degrees International — FY2017 Earnings Presentation on 6ix