Li Ning Company Limited · HKEX:2331
Li Ning — H1 2016 Earnings Presentation
38 slides from Li Ning's earnings presentation, 2016
Slide 1: 2016 interim
2016 interim (Incorporated in the Cayman Islands with limited liability) (Stock Code: 2331)
Slide 2: Disclaimer
Disclaimer This presentation incorporates information contained in the interim results announcement (the “Results Announcement”) for the six months period ended 30 June 2016 of Li Ning Company Limited (the “Company”). This presentation should be read in conjunction with the Results Announcement and
Slide 3: Agenda
Agenda Results Highlights Financial Review Business Review Appendix 3
Slide 4: Results highlights
Results highlights 4
Slide 5: 2016H1 Highlights
2016H1 Highlights Financial Highlights : • Reported net profit of RMB 113 million, improved from losses of RMB 29 million in 2015H1 Revenue up 13% to RMB 3,596 million Gross profit margin expanded 1.5 percentage points Rationalized cost structure, particularly without provision impact • Operat
Slide 6: Financial review
—— LI-NING SMAAT \ VY AP x Financial review ————
Slide 7: Revenue
Revenue Growth, YoY growth YoY -RMB Million- Group: 16% 13% Other Brands LN Brand: 17% 14% LN Brand 3,902 3,596 3,320 3,187 2,727 2,674 3,258 3,127 3,845 3,553 H1 H2 H1 H2 H1 2014* 2014* 2015* 2015 2016 Double digit growth continued, led by effective execution *Excluded Double Happiness 7
Slide 8: Revenue and Sell-Through Mix
Revenue and Sell-Through Mix Sell-Through Mix Company Revenue Mix (Incl. Retail, Wholesale and E-commerce) Retail Wholesale E-commerce Old Product New Product (Current and Last Season) 100% 4% 6% 7% 100% 10% 13% 57% 59% 52% 65% 69% 69% 69% 60% 51% 76% 39% 35% 41% 36% 30% 35% 31% 31% 31% 24% H1 H2 H1
Slide 9: Online and Offline Expansion
Online and Offline Expansion No. of POS (Period End) Sell-through growth, YoY % Offline Channel Online and Offline Channels Opened: 441 6,133 6,169 2014 2015 2016 Closed: (405) Net: +36 1H 2H 1H 2H 1H 12% 13% 10% 8% 8% 5,745 5,671 5% 4% 5,626 2% Jun Dec Jun Dec Jun -6% -7% 2014 2014 2015 2015 2016 P
Slide 10: Same Store Sales Growth (SSSG) Rate
Same Store Sales Growth (SSSG) Rate SSSG (H1: 2016 vs 2015) Retail Mid-Single Mid-Single Overall Mid-Single Digit Negative Digit Mid-Single Digit Retail Low-Single Digit Digit Flat Wholesale Low-Single Digit 0% E-commerce High-sixties Q3 Q4 Q1 Q2 2015 2015 2016 2016 Overall Platform High-Singl
Slide 11: Wholesale Business
Wholesale Business^ Business Performance Trade Fair Order* (Tag Price) Growth, % YoY Revenue No. of POS (Period End) (RMB million) 4,671 4,618 2015 2016 2017 4,552 High-Single Digit 4,424 4,453 9%,,YoY 8% YoY High-Single Digit 2,260 1,855 1,753 1,604 1,489 H1 H2 H1 H2 H1 2014 2014 2015 2015 2016 Q2
Slide 12: Retail Business
Retail Business^ Business Performance Revenue Growth Analysis Revenue No. of POS (Period End) (RMB million) Growth Productive Drivers Expansion Initiatives 1,515 1,498 1,202 1,292 -177 1,119 +177 -128 2%, 21%,YoY YoY -49 1239 1261 +22 1,261 1,239 1099 1118 1024 H1 H2 H1 H2 H1 Special H1 H1 Same New
Slide 13: GP Margin Analysis – 2016H1 vs 2015H1
GP Margin Analysis – 2016H1 vs 2015H1 2015H1 Direct Retail Wholesale Channel 2016H1 Inventory Cost of Reported New Product New Product Revenue Reported Provision Goods GP Margin Mix Mix Mix GP Margin +0.4p.p. 46.7% +0.6p.p. +0.7p.p. 45.2% -1.0p.p. +0.8p.p. Gross profit (GP) margin expansion driven b
Slide 14: Profitability Analysis – 2016H1 vs 2015H1
Profitability Analysis – 2016H1 vs 2015H1 -RMB Million- 2015H1 2016H1 Bad Debt Gross Sales Related Platform Operation Other Interest Reported Reported Provision Profit Variable Costs Costs Income* Tax Net Loss Net Profit Retail & EC Logistics Advertising & Other Business & Others Promotion Expenses
Slide 15: Channel Inventory
Channel Inventory Hypothetical demonstration* 15H1 16H1 Change Tag Sales 143 155 +8.3% Discount rate 70% 73% 4.3% impact 100% 7.6 Sell-through 8% , YoY 100 113 +13% 29% 24% 28% 24% 25% 7.3 7.1 19% 15% 6.8 21% 6.7 21% 23% 57% 61% 50% 49% 54% Jun Dec Jun Dec Jun Jun Dec Jun Dec Jun 2014 2014 2015 2015
Slide 16: Company Inventory
Company Inventory At cost, before provision 6 months or less 7 - 12 months over 12 months (RMB Million) 100% 1,418 1,358 27% 23% 26% 30% 28% 1,227 1,205 1,129 21% 17% 22% 20% 21% 53% 56% 55% 53% 49% Jun Dec Jun Dec Jun Jun Dec Jun Dec Jun 2014 2014 2015 2015 2016 2014 2014 2015 2015 2016 Healthy inv
Slide 17: Trade Receivables
Trade Receivables Below 90 days 91 - 180 days over 180 days At gross amount, before provision (RMB Million) 100% 19% 25% 26% 28% 1,969 33% 1,839 1,915 1,879 1,800 27% 23% 18% 30% 25% 49% 54% 52% 44% 47% Jun Dec Jun Dec Jun Jun Dec Jun Dec Jun 2014 2014 2015 2015 2016 2014 2014 2015 2015 2016 Receiva
Slide 18: Working Capital Efficiency
Working Capital Efficiency -RMB Million- Inventory* Trade Receivables* Payables* Working Capital^ Working Capital^ as % of Revenue# 4000 3000 2000 2,412 2,371 2,332 2,164 2,068 43% 36% 37% 28% 29% 1000 0 -1000 -2000 H1 H2 H1 H2 H1 2014 2014 2015 2015 2016 Working capital improvement continued * Simp
Slide 19: Balance sheet summary and cash position
Balance sheet summary and cash position -RMB Million- H2 H1 H2 H1 H1 2014 2014 2015 2015 2016 86% 55% 40% 41% 29% Net cash / (Debt)^ 1247 1335 993 Interest-bearing debt-to-equity ratio 258 -105 -For the Six Months Period- Cash Conversion Cycle (Days) 101 97 90 71 75 Operating Cash Flow (389) (6) 91
Slide 20: Business Review
LI-NING SMAAT VP Business Review~ =z, ———
Slide 21: Enticed Sports Enthusiastic Consumers by “Performance” and “Functionalities”
Enticed Sports Enthusiastic Consumers by “Performance” and “Functionalities” Applied technologies on products Pushed boundaries of the “value for money” proposition offered by most domestic brands Provided products to satisfy sports Sports Embedded culture in products participating consumers + Promo
Slide 22: National Policies Go in Favor of Industry Development
National Policies Go in Favor of Industry Development <National Fitness Program 2016-2020> Announced in June 2016 Maximise the impact of Chinese people’s fitness training on educational, economic and social functions, to Some 700 million* people will participate in facilitate mutual development of o
Slide 23: The “Three-Pillar” Strategy: Enhanced User Experience
The “Three-Pillar” Strategy: Enhanced User Experience Promoted products through the authorized product- Perpetuated the LI-NING brand’s technology testing platforms (http://www.i-size.com.cn/) edges, groom the “Super Light” range into the lightest running trainers in history Organised a variet
Slide 24: The “Three-Pillar” Strategy: Core Competitiveness led to Profitability
The “Three-Pillar” Strategy: Core Competitiveness led to Profitability Reforms in Channels Sharing Improved and Distribution Model Experiences Retail Operation Online Management Sports Experiences Core Competences Offline Profitability Retail Experience Product Experiences Drove Brand Value 24
Slide 25: Five Core Categories Drove Business Growth
Five Core Categories* Drove Business Growth Experience Retail Sell-through – Mix Retail Sell-through – YoY Change Non-Core Total Value 8% Categories 10% Basketball 12% Basketball 17% Running 31% Fitness Training 14% Sports Life 32% Running Sports 25% 6% Life Fitness Non-Core 30% Training 16% Sell-in
Slide 26: Smart Products: Boosted Business Growth and Brand Rejuvenation
Smart Products: Boosted Business Growth and Brand Rejuvenation Experience Smart Running Trainers Professional Products + Smart Hardware Retail Sales volume of Li-Ning Smart Running Shoes + Mobile Internet + Big Data analysis Exceeded 700 thousands pairs* Established new ways to communicate with targ
Slide 27: Smart Products: LI-NING Smart Running Family 2016
Smart Products： LI-NING Smart Running Family 2016 Experience Shock-absorbers LI-NING Bow shock absorbing Cloud 3 Shock-absorbing smart running trainers smart running trainers Price：RMB 499 Price：RMB 419 Ring-Bow provides superior Li-Ning Cloud Technology Platform cushioning effects Outstanding
Slide 28: Non-Smart Products: Integrating Professionalism & Fashion
Non-Smart Products： Integrating Professionalism & Fashion Experience Running Basketball Training Super Light 13th CBA Professional Boot LI-NING Hero Single-piece knit Cloud Phantom Super Trainer Product Running shoes Tag price: RMB 469 Tag price: RMB 599 Tag price: RMB 379 • Launched in 16Q2 • Launc
Slide 29: Channel: POS Expansion & Performance Enhancement
Channel: 渠道 POS Expansion & Performance Enhancement Experience 6,169 point-of-sales (POS) by end-Jun 2016, net addition of 36 from end-Dec 2015 (newly opened: 441; closed: 405)，including： - 19 net additions - 21 net additions Target for the whole year is maintained at net additions of 300-500 POS St
Slide 30: Channel: E-Commerce Business Development
Channel： Experience E-Commerce Business Development Revenue from e-commerce doubled YoY Reinforced all-channel business development, achieved inventory allocation across channels Established market trend analysis system, to identify consumer demand with Big Data and Contributing 13% to the total rev
Slide 31: Channel: Provided Professional Services to Running Enthusiasts
Channel： Experience Provided Professional Services to Running Enthusiasts The first LI-NING running product specialty store opened in Shanghai, it stands as new landmark for running enthusiasts, offering a combination of professional equipment, tests and sports-social interactions. Professional Runn
Slide 32: A Business Model based on Retail Mentality
A Business Model based on Retail Mentality Experience Consolidated online and offline merchandise Previous management and marketing campaign model： Wholesale Established a fully integrated all-inventory Mentality Merchandise system，improving inventory structure and Planning operational efficiency St
Slide 33: Retail Capability: Strengthened the Retail Operation “Closed Loop”
Retail Capability: Strengthened the Retail Operation “Closed Loop” Experience （Data reflected the situation in the first half of 2016 and YoY change Overall Channel Sales Efficiency Offline Channel Sales Performance SSSG: low single-digit growth Sell-through: high single-digit growth Retail Discount
Slide 34: Open Forum
LI-NING SMAAT VP Qpen Forum ~ A A
Slide 35: Summary of Income Statement
Summary of Income Statement H1 H1 (RMB million) 2016 2015 Better/(Worse) Period ended 30 June Revenue 3,596 3,186 13% Gross Profit 1,678 1,441 16% Distribution costs -1,355 -1,243 (9%) Administrative expenses -203 -158 (28%) Other income and other gains – net 33 17 94% Operating Profit 153 57 167% E
Slide 36: Profit Margins And Expense Ratios
Profit Margins And Expense Ratios H1 H1 2016 2015 Better/(Worse) Period ended 30 June Gross Profit Margin 46.7% 45.2% 1.5p.p. Operating Profit Margin 4.2% 1.8% 2.4p.p. EBITDA Margin 8.6% 5.1% 3.5p.p. Margin of (Loss) /Profit Attributable to Equity Holders 3.2% -0.9% 4.1p.p. R&D Expenses(as % of reve
Slide 37: Key Operational Indicators
Key Operational Indicators H1 H1 2016 2015 Better/(Worse) Period ended 30 June Average Inventory Turnover(Days) 94 112 18 Average Trade Receivables Turnover(Days) 72 71 (1) Average Trade Payables Turnover(Days) 91 93 (2) Cash Conversion Cycle(Days) 75 90 15 Return on Equity(ROE) 3.5% -1.2% 4.7p.p. R
Slide 38: Summary of Balance Sheet
Summary of Balance Sheet (RMB Million) 30 Jun 2016 31 Dec 2015 Better/(Worse) Cash and Cash Equivalents 1,545 1,813 (15%) Borrowings 210 566 63% Convertible Bonds Liabilities 741 723 (2%) Net Cash* 1,335 1,246 7% Current Liabilities 2,259 2,472 9% Current Ratio(times) 2.4 2.2 0.2x Total Liabilities