Li Ning Company Limited · HKEX:2331
Li Ning — H1 2012 Earnings Presentation
26 slides from Li Ning's earnings presentation, August 2012
Slide 1: 2012 Interim Results
2012 INTERIM RESULTS August 2012
Slide 2: Agenda
AGENDA • Financial Highlights • Business Review • Operational Review & Future Strategies • Open Forum
Slide 3: Financial Highlights
(PL LI NING COMPANY LIMITED (# HA RZ #]) FINANCIAL HIGHLIGHTS ‘. ¥ Z. aa Eat ts A’ an HE
Slide 4: Summary of Income Statement
SUMMARY OF INCOME STATEMENT 1H2012 1H2011 Change For the six months ended 30 June (RMB million) Revenue 3,880.1 4,289.3 -9.5% Gross Profit 1,715.5 2,029.1 -15.5% - Distribution costs * -1,152.9 -1,323.9 -12.9% - Administrative expenses -503.9 -336.6 49.7% - Other income and other gains – net** 125.0
Slide 5: Profit Margins and Expense Ratios
PROFIT MARGINS AND EXPENSE RATIOS 1H2012 1H2011 Change For the six months ended 30 June Gross Profit Margin 44.2% 47.3% -3.1p.p. Operating Profit Margin 4.7% 10.3% -5.6p.p. Margin of Profit Attributable to Equity Holders 1.1% 6.8% -5.7p.p. R&D Expenses (as % of revenue) 2.4% 2.6% -0.2p.p. A&P Expens
Slide 6: Key Operational Indicators
KEY OPERATIONAL INDICATORS 1H2012 1H2011 Change For the six months ended 30 June Inventory Turnover (Days) 95 72 23 Average Trade Receivables Turnover (Days) 108 63 45 Average Trade Payables Turnover (Days) 112 91 21 Cash Conversion Cycle (Days) 91 44 47 Return on Equity (ROE) (half-yearly) 1.2% 8.6
Slide 7: Summary of Balance Sheet
SUMMARY OF BALANCE SHEET 2012-6-30 2012-12-31 Change (RMB Million) Cash and Cash Equivalents 1,326.9 1,196.5 10.9% Bank Borrowings 1,024.0 838.1 22.2% Convertible Bonds Liabilities 653.6 - - Net Cash* -350.7 358.4 -197.9% Current Liabilities 2,814.5 3,063.1 -8.1% Current Ratio (times) 1.92 1.56 0.36
Slide 8: Li-Ning Brand Revenue Breakdown by Product Category
LI-NING BRAND REVENUE BREAKDOWN BY PRODUCT CATEGORY LI-NING Brand Revenue Breakdown Revenue from LI-NING Brand by Product Category to the Group Total 88.5% 90.8% 49.3% 47.0% 46.7% 44.6% 6.3% 6.1% 11.5% 9.2% LI-NING brand apparel Revenue from LI-NING brand LI-NING brand footwear LI-NING brand accesso
Slide 9: Li-Ning Brand Revenue Breakdown by Geography
LI-NING BRAND REVENUE BREAKDOWN BY GEOGRAPHY International Market 2.2% Northern 42.0% -9.9% Western 14.0% -23.5% Eastern -18.3% 23.5% Domestic Market 97.8% Southern 1.9% 18.3% Change % of Total The Group streamlined the regional distribution layout of its sales channels by conducting adjustment to t
Slide 10: Business Review
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Slide 11: Industry Challenges and Growth Drivers
INDUSTRY CHALLENGES AND GROWTH DRIVERS Near Term Challenges CAGR: Low to mid 40.0 teens percentage 30.0 Competition, over-expansion, 20.0 excess channel inventory, cost 10.0 pressure and wholesale model 0.0 2011E 2012E 2013E 2014E 2015E Long-term drivers Urbanization Urbanization continues to move 1
Slide 12: Implement Brand Advertising and Marketing Focusing on Core Sports Categories
IMPLEMENT BRAND ADVERTISING AND MARKETING FOCUSING ON CORE SPORTS CATEGORIES Track and Field / Basketball Badminton Running Enormous market capacity Highlight professional nature by Integration promotions via Maintain a faster pace of participating high-level events multi-brands, multi-channels grow
Slide 13: Remarkable Achievement in London 2012 Olympic Games
REMARKABLE ACHIEVEMENT IN LONDON 2012 OLYMPIC GAMES Torch Relay in Athens “Witness the Change, the Dragon Dazzles London” Press Conference for Sponsorship of Five National Gold Medal Teams’ Olympic Sports Gear The Group sponsored five Chinese National gold medal teams and top-notched overseas athlet
Slide 14: Continue to Enhance Product Competitiveness
CONTINUE TO ENHANCE PRODUCT COMPETITIVENESS Support elite athletes with its top-notch gear Newly launched Apparel Badminton Racket in achieving outstanding footwear Products performances products Lin Dan Ultralight 9th AT Technology “3D Breaking-free” Generation Platform Platform Christian Taylor LI
Slide 15: Other Brands
OTHER BRANDS Provided unique on-site equipment in the London 2012 Olympic Games for both table tennis and badminton events Reinforce its competitive edge in Table Tennis and maintain collaborative relationships with top-notch table tennis athletes and clubs Strengthen product research and developmen
Slide 16: Operational Review & Future Strategies
OPERATIONAL REVIEW & FUTURE STRATEGIES
Slide 17: Building Capabilities for the Future
BUILDING CAPABILITIES FOR THE FUTURE Focus on core brand Improve store unit economics sportswear in China Rationalize network coverage Strategic investments in brand through retail profiling (e.g., CBA) Strengthen outlets and direct Make competitive products stores with exciting designs and Improve
Slide 18: Three Stage Transformation Blueprint
THREE STAGE TRANSFORMATION BLUEPRINT Focus on sell through and clearance of channel inventory Improve cost structure in product and operations Strengthen organization and execution capabilities Now – 12 months Ongoing initiatives Improve channel productivity, profitability, and perfo Narrow focus to
Slide 19: Pressing Ahead with Distribution Channel Reforms
PRESSING AHEAD WITH DISTRIBUTION CHANNEL REFORMS Progress in 1H2012 Reform direction in 2H2012 Continue to construct clearance channels: Step up in Continued pressing ahead retail inventory the construction of high-efficiency factory outlets to clearance: Increase the proportion of retail sales impr
Slide 20: Supply Chain Management
SUPPLY CHAIN MANAGEMENT Endeavours to establish a demand-driven, flexible and market-responsive supply chain system “LI-NING Logistics Centre” in Jingmen has commenced trial operations Proactively explored and attempted overseas OEM suppliers Improve logistics system Social responsibility and
Slide 21: Strong Leadership to Drive Transformation
STRONG LEADERSHIP TO DRIVE TRANSFORMATION Structure of the Board of Directors 3 non-executive 4 independent non- 4 executive directors directors executive directors Over 1/3 of all directors are independent non-executive directors Demonstrate high level of corporate governance Introduce outstanding
Slide 22: Enhanced Efforts on Business Management in Recent Two Months
ENHANCED EFFORTS ON BUSINESS MANAGEMENT IN RECENT TWO MONTHS Enhance internal communication and operational capability – Executive Chairman and Executive Vice Chairman participate operational meeting as well as to hold regular business review, to fully grasp the progress of reform and to provide sui
Slide 23: Vision, Mission and Core Values
VISION, MISSION AND CORE VALUES Vision Mission Core Values A world’s leading Through sports, Live for Dream brand in the we inspire Integrity and sporting goods people the desire commitment industry and power to “We” Culture make Achieving excellence breakthrough Consumer oriented Breakthrough 22 22
Slide 24: Open Forum
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Slide 25: IR Contact
IR CONTACT investor@li-ning.com.cn http://www.lining.com http://www.li-ning.com.cn http://www.irasia.com/listco/hk/lining/ http://www.hkex.com.hk 24
Slide 26: Disclaimer
Disclaimer This presentation incorporates information contained in the annual results announcement (the “Results Announcement”) for the period ended 30 June 2012 of Li Ning Company Limited (the “Company”). This presentation should be read in conjunction with the Results Announcement and is qualified