Daphne International Holdings Limited · HKEX:210
Daphne International — FY2015 Earnings Presentation
36 slides from Daphne International's earnings presentation, Mar 30, 2016
Slide 1: 2015 Annual Results Presentation
2015 Annual Results Presentation 30 March 2016
Slide 2: Disclaimer
Disclaimer The information contained in this presentation is intended solely for your personal reference. Such information is subject to change without notice, its accuracy is not guaranteed and it may not contain all material information concerning Daphne International Holdings Limited (“the Compan
Slide 3: Group Faced Unprecedented Challenges in 2015
Group Faced Unprecedented Challenges in 2015 • In 2015, the Group’s performance was affected by: – General economic slowdown – Intense competition from local peers and online players – Inflationary operating costs including rental and staff costs – Erratic and extreme weather patterns – Increased ch
Slide 4: Financial Review
Financial Review de, aV% : AEROSOLES DAPHNE INTERNATIONAL HOLDINGS LIMITED HZBRMRARBR AR AA
Slide 5: Group Financial Highlights
Group Financial Highlights (HK$ million) 2015 2014 Change Turnover 8,379.1 10,355.6 -19.1% Gross profit 4,724.7 5,737.6 -17.7% Operating (loss)/profit (497.6) 262.4 -289.6% (Loss)/profit attributable to owners of (378.9) 176.0 -315.2% the Company Basic (loss)/earnings per share (23.0) 10.7 -315.0% (
Slide 6: Group Turnover
Group Turnover • Core Brands business remains the largest contributor to Group turnover Group Turnover Breakdown (For the year ended 31 December) 2015: HK$ 8,379.1 million 2014: HK$ 10,355.6 million 0% 2% 10% 8% 90% 90% Core Brands business Other Brands business OEM business Note: Core Brands busine
Slide 7: Group Profit Margins
Group Profit Margins • Group’s gross profit margin increased by 1.0ppt YoY. Group’s Gross Profit Margin ‒ Group gross profit margin recorded slight increase despite (For the year ended 31 December) lower Core Brands ASP ‒ Group’s gross profit margin, excluding inventory provision, increased by 4.8pp
Slide 8: Costs Incurred by Rationalisation Initiatives in 2015
Costs Incurred by Rationalisation Initiatives in 2015 • As 2H FY15 market conditions deteriorated, we undertook decisive actions: - Closed down loss-making stores - Relocated factories in coastal area to rationalise production cost - Downsized the back office (both at the regional offices and headqu
Slide 9: Cost Control Measures Delivered Substantial Cost Saving
Cost Control Measures Delivered Substantial Cost Saving • Managed to contain rising operating expenses under inflationary environment Operating Cost (For the year ended 31 December) (HK$ million) 5,900 5,700 5,559 (+2.7%) • Reduction of routine costs 5,413 (+8.8%) - Decline in rental cost 5,500 - Ne
Slide 10: Inventory Level and Turnover Days
Inventory Level and Turnover Days • Group inventory turnover days was 218 days (2014: 194 days) • After review of inventory level, the Group made a provision for slow-moving inventories of HK$216.9 million (2014: write-back HK$119.8 million) • Group inventory level continued to decrease as compared
Slide 11: Working Capital and CAPEX
Working Capital and CAPEX • Reduction in CAPEX mainly due to: – One-off purchase of self-use office incurred additional CAPEX in 2014 – Substantial reduction in new store openings and store renovation in 2015 2015 2014 Change Average Inventory Turnover (days) 218 194 +24 Average Debtors Turnover (da
Slide 12: Other Key Financial Indicators
Other Key Financial Indicators • Redemption of convertible bonds in 1HFY15 resulted in lower cash and bank balances • Post convertible bonds redemption, the Group maintains net cash position As at 31 Dec As at 31 Dec (HK$ million) 2015 2014 Change Cash and bank balances 1,075.6 1,528.7 -29.6% Bank l
Slide 13: Operational Highlights
Operational Highlights 2, aVGe ‘ AEROSOLES aaa DAPHNE INTERNATIONAL HOLDINGS LIMITED HZBRMRARBR AR AA
Slide 14: Group Sales Network
Group Sales Network Number of Points-of-Sales (POS) 6,702 (-179) 6,757 (+55) 383(-129) 355(-28) 5,930 (-827) 333(-22) 6,319 6,402 (+83) 5,597 (-50) (-805) • Store rationalisation – Core Brands had a net reduction of 805 POS, bringing the total to 5,597 2013/12/31 2014/12/31 2015/12/31 – Net reductio
Slide 15: Core Brands Sales Network
Core Brands Sales Network • Net reduction of 805 POS (including 692 directly-managed stores and 113 franchised stores ) • Accelerated store closures in 4Q2015 Number of POS As at 31 Dec As at 31 Dec 2015 2014 Change % Change Directly-managed POS 5,056 (90%) 5,748 (90%) -692 -12.0% Franchised POS 541
Slide 16: Core Brands Sales Network (cont'd)
Core Brands Sales Network (cont’d) • The Group maintained greater representation in lower tier cities As at 31 Dec 2015 As at 31 Dec 2014 No. % No. % Change % Change Tier 1 Cities 637 11% 731 12% -94 -12.9% Tier 2 Cities 1,376 25% 1,607 25% -231 -14.4% Tier 3 Cities 1,030 18% 1,238 19% -208 -16.8% T
Slide 17: Core Brands Business - Performance
Core Brands Business - Performance (HK$ million) 2015 2014 Change Turnover 7,720.2 9,492.6 -18.7% Gross profit 4,149.2 5,103.3 -18.7% Gross margin 53.7% 53.8% -0.1ppt Operating (loss)/profit (362.4) 225.2 -260.9% Operating margin -4.7% 2.4% -7.1ppt • Under the sluggish market, Core Brands’ • Gross p
Slide 18: Core Brands Business - SSSG
Core Brands Business - SSSG • Same store sales growth was -18.5% for the year of 2015 1Q 2015 2Q 2015 3Q 2015 4Q 2015 FY 2015 Same store -15.9% -17.7% -19.7% -20.2% -18.5% sales growth • Average selling price decreased by 4.6% to RMB167 (2014: RMB175) – Adopted different pricing and discounting stra
Slide 19: Other Brands Business - Performance
Other Brands Business - Performance (HK$ million) 2015 2014 Change Turnover 832.7 838.4 -0.7% Gross profit 505.6 525.3 -3.8% Gross margin 60.7% 62.7% -2.0ppt Operating profit 1.3 17.9 -92.7% Operating margin 0.2% 2.1% -1.9ppt • Turnover of Other Brands business decreased by 0.7% • Overall gross prof
Slide 20: Outlook
Outlook my DAPHNE INTERNATIONAL HOLDINGS LIMITED HZBRMRARBR AR AA
Slide 21: Retail Market Outlook
Retail Market Outlook + Positive Factors - Negative Factors - PRC government policies to - Slower economic growth of promote domestic consumption + China - Urbanisation continues - Fast-changing consumer preferences and behaviours - Raw material prices maintain at a low level which will benefit the
Slide 22: 2016 Turnaround Roadmap
2016 Turnaround Roadmap Store rationalisation Cost Inventory rationalisation Personnel rationalisation Enhance store performance Increase differentiation to strengthen competitiveness Sales Drive improvement in supply chain Margins Revitalise and diversify marketing efforts Expand e-
Slide 23: 2016 Improvement Plan
2016 Improvement Plan • For key initiatives we already made progress in 2015, we will continue in 2016: Store Closely monitor store performance and will address Rationalisation under-performing stores decisively Combine stores and open large stores to improve shopping environment and sales effic
Slide 24: Enhance Store Performance
Enhance Store Performance • Introduce new “multi-brand” store format • Enhance the store portfolio – Reduce the ratio of street stores to step up the adjustments in the channel mix – Testing the new “multi-brand” stores with larger size, so to offer better shopping environment and competitiveness –
Slide 25: Enhance Store Performance (cont'd)
Enhance Store Performance (cont’d) • Strengthen the motivation and accountability of frontline sales managers - Simplify the “Key Performance Index” system by putting the top priority on profit - Flatten the organisation structure, improve performance appraisal systems and incentive schemes to impro
Slide 26: New "Multi-Brand" Store Format
New “Multi-Brand” Store Format Aim：Broader product offerings in a more comfortable shopping environment to provide customers with more choices and improve sales performance • Located in shopping malls and hypermarkets/supermarkets — the combination of different shopping districts, together with tail
Slide 27: Increase Differentiation to Strengthen Competitiveness
Increase Differentiation to Strengthen Competitiveness • Invest in the development of “differentiated” products Explore Opportunities through a Customer Survey vis-à-vis competition • Add more trendy product categories - The survey interviewed 2,650 people, covering customers in 170 • Put more empha
Slide 28: Drive Improvement in Supply Chain
Drive Improvement in Supply Chain • Enable smaller-batch production • Increase flexibility of supply chain, including the dispatch system, to shorten the lead time • Make adjustment to quantity ordered • Enhance the feedback and communication mechanism to improve the effectiveness of best-selling pr
Slide 29: Revitalise and Diversify Marketing Efforts
Revitalise and Diversify Marketing Efforts • Revitalise and diversify marketing efforts to enhance brand image - Launched innovative products to project the trend-setting brand image Jointly-developed with Tencent the Disney kid shoes with GPS feature, by leveraging the technology of advanced blue
Slide 30: Expand E-Commerce Business
Expand E-Commerce Business • Leverage the leadership position and strong brand equity: - Daphne maintains its top ranking in the women’s shoe category of Alibaba’s Single’s Day event, despite fierce online competition in 2015 with entries of more international brands • Increase the exposures and num
Slide 31: Summary: Making Progress on the Turnaround Plan
Summary: Making Progress on the Turnaround Plan • Leading mass-consumer brand in China with the most extensive sales network nation-wide • Identified key action items to address the adverse macro environment and fierce competition • Took decisive actions and will continue to adopt new approaches in
Slide 32: A Summary of 2016 Improvement Plan
A Summary of 2016 Improvement Plan Profit Distribution Channel: Online and Offline Management Supply Product and Cost Chain Efficiency Sales Operation & Marketing Focus in key areas to enhance the management and cost efficiency, so to improve profitability 32
Slide 33: Daphne…
Daphne… 1 … Is No. 1 ladies’ footwear brand in China (mass market) 2 … Has the largest distribution network in the industry (for a single brand) 3 …Ranked 1st in the ladies’ shoes category of Alibaba’s Singles’ Day event 4 … Has over 20 years’ experience in the women’s footwear market in China …Weat
Slide 34: Ultimate Goal of 2016
Ultimate Goal of 2016 “The Group will endeavour to take comprehensive actions to weather the current headwinds, so that the Group can restore its performance and profitability.” 34
Slide 35: Thank you
Thank you besees Q&A session DAPHNE INTERNATIONAL HOLDINGS LIMITED wARARBR AR AA
Slide 36: Investor Relations Contact
Investor Relations Contact Ms. Macy Leung +852 2367 9022 macyleung@daphneholdings.com 36
Daphne International Holdings — FY2015 Earnings Presentation on 6ix