Daphne International Holdings Limited · HKEX:210
Daphne International — H1 2014 Earnings Presentation
42 slides from Daphne International's earnings presentation, Aug 20, 2014
Slide 1: 2014 Interim Results Presentation
2014 Interim Results Presentation 20 August 2014
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: 2014 Interim Results Highlights
2014 Interim Results Highlights Group turnover decreased by 1.7% to HK$5,080.7 million Turnover of Core Brands business decreased by 1.1% to HK$4,685.0 million Same store sales of Core Brands declined by 5.5% YoY Group gross profit margin was 56.4% Group operating margin was 4.7% Profit
Slide 4: Financial Review
FINANCIAL REVIEW Seeee@ z2me eR BR Bh AA DAPHNE INTERNATIONAL HOLDINGS LIMITED
Slide 5: Group Financial Highlights
Group Financial Highlights (HK$ million) 1H 2014 1H 2013 YoY Change 2H 2013 HoH Change Turnover 5,080.7 5,168.2 -1.7% 5,278.4 -3.7% Gross profit 2,865.5 3,013.2 -4.9% 2,825.1 +1.4% Operating profit 240.7 450.5 -46.6% 69.7 +245.5% Profit attributable to 172.4 310.3 -44.5% 18.8 +814.5% shareholders Ba
Slide 6: Group Turnover
Group Turnover Turnover Breakdown (For the 6 months ended 30 Jun) HK$5,080.7 million 1H 2014 91% 7% 2% HK$5,168.2 million 1H 2013 91% 6% 3% Core Brands business Other Brands business OEM business Note: Core Brands segment refers mainly to the operations under the brands “Daphne” and “Shoebox” in Mai
Slide 7: Group Profit Margins
Group Profit Margins Group gross profit margin decreased by 1.9 ppt YoY, and increased by 2.9 ppt HoH Change in product sales mix Aggressive clearance of off-season items Group operating profit margin decreased by 4.0 ppt YoY, and increased by 3.4 ppt HoH Increasing key operating costs suc
Slide 8: Inventory Turnover Days & Working Capital
Inventory Turnover Days & Working Capital Group inventory turnover days was 208 days, improved from that of last year Aggressive clearance of off-season items Increase diversity of clearance channels, such as strengthened partnership with online flash sales platforms Creditor turnover days l
Slide 9: Other Key Financial Indicators
Other Key Financial Indicators Hold cash and bank balances of HK$1,427.4 million Maturity date of convertible bonds was extended to 24 April 2015 and no conversion during the first half of 2014 (HK$ million) As at 30 Jun 2014 As at 31 Dec 2013 Change Cash and bank balances 1,427.4 1,374.4 +3.9%
Slide 10: Historical Financial Performance
Historical Financial Performance Turnover Basic EPS (For the 6 months ended 30 Jun) (For the 6 months ended 30 Jun) (HK$ million) (HK cents) 6,000 40 5,079.5 5,168.2 5,080.7 5,000 29.4 3,939.3 30 26.9 4,000 3,138.1 19.9 18.8 3,000 20 2,000 10.5 10 1,000 0 0 2010 2011 2012 2013 2014 2010* 2011 2012 2
Slide 11: Business Review
BUSINESS REVIEW Seeee@ z2me eR BR Bh AA DAPHNE INTERNATIONAL HOLDINGS LIMITED
Slide 12: Group Sales Network
Group Sales Network Remained cautious in its store network Total Number of Points-of-Sales (POS) development Net reduction of 104 POS 7,054 (+173) (1H 2013: net addition of 173 POS) 6,702 (-352) 6,598 (-104) 473 383 364 Core Brands total POS = 6,234 Net reduction of 85 POS (1H 2013: net addi
Slide 13: Core Brands Sales Network
Core Brands Sales Network Proportion of directly-managed stores increased to 88% Net reduction of 85 POS (including 18 directly-managed stores and 67 franchised stores) Number of POS As at 30 Jun As at 30 Jun % As at 31 Dec Change Change % Change 2014 2013 Change 2013 - Directly-managed POS 5,47
Slide 14: Core Brands Sales Network (cont'd)
Core Brands Sales Network (cont’d) The Group maintained greater representation in lower tier cities As at 30 Jun 2014 As at 31 Dec 2013 No. % No. % Change % Change Tier 1 Cities 673 11% 703 11% -30 -4.3% Tier 2 Cities 1,395 22% 1,394 22% +1 +0.1% Tier 3 Cities 995 16% 992 16% +3 +0.3% Tier 4-6 Cit
Slide 15: Core Brands Business - Performance
Core Brands Business - Performance (HK$ million) 1H 2014 1H 2013 YoY Change 2H 2013 HoH Change Turnover 4,685.0 4,738.6 -1.1% 4,822.7 -2.9% Gross profit 2,622.1 2,760.2 -5.0% 2,584.4 +1.5% Gross margin 56.0% 58.2% -2.2 ppt 53.6% +2.4 ppt Operating profit 264.8 490.5 -46.0% 125.7 +110.6% Operating ma
Slide 16: Core Brands Business - SSSG
Core Brands Business - SSSG Same store sales improved 2014 1Q 2Q 1H Same store sales growth -9.5% -2.4% -5.5% 2013 1Q 2Q 1H 3Q 4Q FY Same store sales growth -2.5% -13.7% -9.2% -18.1% -5.4% -10.4% Average selling price decreased by 5.5% to RMB 183 Dragged by aggressive clearance of off-season i
Slide 17: Other Brands Business
Other Brands Business (HK$ million) 1H 2014 1H 2013 YoY Change 2H 2013 HoH Change Turnover 358.1 328.8 +8.9% 403.0 -11.2% Gross profit 223.3 194.7 +14.7% 210.9 +5.9% Gross margin 62.4% 59.2% +3.2 ppt 52.3% +10.1 ppt Operating loss (8.5) (40.0) -78.8% (46.1) -81.6% Operating margin (2.4%) (12.2%) +9.
Slide 18: Outlook & Strategies
OUTLOOK & STRATEGIES Seeee@ z2me eR BR Bh AA DAPHNE INTERNATIONAL HOLDINGS LIMITED
Slide 19: Operating Environment for 2H 2014
Operating Environment for 2H 2014 External Internal • Chinese government puts urbanisation as • Continue to improve sales and operational one of the priorities efficiency • Continuous urbanisation helps drive • Through in-depth reviews of the progress and domestic consumption and expand the results
Slide 20: Boost Sales Productivity
Boost Sales Productivity Uplift store image Renovation plan on target with progress on track Renovated stores showed improvement in performance and sales per sq. ft. Full-year target of renovating approximately 600 stores remains unchanged Diversify sales channels Preliminary results in
Slide 21: Boost Sales Productivity (cont'd)
Boost Sales Productivity (cont’d) Improve frontline staff sales productivity 1. Increase staff stability 2. Strengthen frontline 3. Strengthen frontline • Increased salary staff training supervisory management • Raised commission rate • Introduced e-learning and • Provide management training and o
Slide 22: Enhance Supply Chain and Inventory Management
Enhance Supply Chain and Inventory Management Strengthen inventory management Continue the focus on clearance of off-season items by engaging diverse channels • Increase the number of clearance outlets, warehouse sales/clearance fairs, staff, online and franchisee sales, etc. Continue the impl
Slide 23: Strengthen Merchandising and Marketing
Strengthen Merchandising and Marketing Enrich Core Brands’ value, image and drive differentiation to enhance their appeal to customers Appointed new brand ambassadors: Jun Ji-Hyun, Nicholas Tse, Guo Xuefu, et. al. Celebrity-driven marketing campaigns • Gao Yuanyuan (top actress in China) “ONDU
Slide 24: Strengthen Merchandising and Marketing (cont'd)
Strengthen Merchandising and Marketing (cont’d) Broaden product categories to include more accessories Improve product design and display of handbags to improve sales mix Make customer loyalty programme more interesting and attractive Increase frequency and attractiveness of members’ activit
Slide 25: Grow E-commerce Presence
Grow E-commerce Presence Increase the depth and breadth of partnership with key online marketplace platforms Strengthen the backend operation and drive integration to support future O2O strategies Continue to build the e-commerce team, improve the infrastructure and enhance the execution effic
Slide 26: E-commerce platform
E-commerce platform Omni-channel Distribution Model Physical Stores Virtual Stores Official Online Store Third-party marketplaces (www.daphne.com.cn) Tmall JD.com Dangdang Yihaodian VIP.com CRM enables targeted marketing to drive sales 26
Slide 27: Vision
Vision A leading brand management company that provides ladies and their family members with trendsetting and quality products “The Group is committed and confident to strengthen its competitiveness, and achieve growth in mid-to-long term” 27
Slide 28: Thank You
THANK YOU weuaee Q&A Session alt, — ate z2me eR BR Bh AA DAPHNE INTERNATIONAL HOLDINGS LIMITED
Slide 29: Investor Relations Contact
Investor Relations Contact Ms. Macy Leung +852 2367 9022 macyleung@daphneholdings.com 29
Slide 30: Appendix
APPENDIX Seeee@ z2me eR BR Bh AA DAPHNE INTERNATIONAL HOLDINGS LIMITED
Slide 31: Growing Market Potential of China
Growing Market Potential of China Continued urbanisation Increasing per capita Growing domestic • Government policies to embark on income consumption a new phase of urbanisation • Continued urbanisation drives • Per capita disposable • Rebalancing of China consumption growth income on the rise econo
Slide 32: China Women's Footwear Market Potential
China Women’s Footwear Market Potential 2013 Per Capita Women’s Footwear Consumption Spending (USD) (Female Population Aged 15 or Above) 700 610.2 600 500 400 300 277 183.6 193.8 201.1 190.8 200 107.8 106.4 100 48.5 0 China Hong Kong Japan SingaporeSouth Korea US France Germany UK Data Source: Eurom
Slide 33: China Women's Footwear Market Potential (cont'd)
China Women’s Footwear Market Potential (cont’d) China Women’s Footwear Market Growth Forecast (RMB million) +10.1% 300,000 CAGR: 9.7% +10.0% +9.9% 245,571 250,000 +8.6% 223,044 +10.5% 202,767 200,000 +13.0% 184,501 169,878 153,736 150,000 136,049 100,000 50,000 0 2011 2012 2013 2014E 2015E 2016E 20
Slide 34: Company Overview
Company Overview One of the leading women’s footwear retailers in China Engage in product design & development, production, distribution, retail, and brand management Has 6,598 points-of-sale (POS) (as at 30 June 2014) The Group’s core brands (“Daphne” and “ShoeBox”) are distributed in 6,234
Slide 35: Major Brand Portfolio
Major Brand Portfolio Brand Ownership ASP (RMB) Own brand (product) 200 – 300 Core Brands Own brand (channel) <200 Own brand (product) Sole distributorship Mid- to (international brand) High- end 400 – 1,200 Brands Sole distributorship (international brand) Own brand (channel) 35
Slide 36: Daphne Group's Turnover Growth
Daphne Group’s Turnover Growth (HK$ million) 12,000 11,000 10,529.1 10,446.5 10,000 9,000 8,576.8 8,000 7,000 6,623.8 5,832.0 6,000 5,289.3 5,000 3,853.6 4,000 3,093.1 3,000 2,622.7 2,000 1,788.5 1,407.0 1,180.7 933.1 955.7 1,000 492.9 597.3 672.8 254.6 291.6 384.4 329.1 25.8 82.9 176.2 0 2002 2003
Slide 37: Daphne Group's Market Share
Daphne Group’s Market Share China Women’s Footwear Market in 2013: RMB 169.9 billion 5.5% Daphne Group Data source: Euromonitor 37
Slide 38: Competitive Advantages
Competitive Advantages Leading retailer in women’s footwear in China with strong own-brands, “Daphne” and “Shoebox” Unparalleled leadership position in the mass market Extensive nationwide sales network with near 6,600 outlets penetrating into even 6th tier cities Vast directly-managed store
Slide 39: Growth Drivers
Growth Drivers More focused sales operation Increasing the depth and breadth of More agile and efficient supply chain management marketing Further enhancement in product design and Strengthening brand management development Strengthen presence in e-commerce 39
Slide 40: Shareholding Structure
Shareholding Structure As at 30 June 2014 Lucky Earn Top Glory Assets Int’l Ltd. Ltd. Pushkin Holding Ltd. (held by Mr. CHANG Chih- (held by Mr. CHEN (held by Mr. CHEN Ying- Premier China Ltd. Public Kai, Mr. CHANG Chih- Tommy Yi-Hsun and his Chieh and his family) Chiao and their family) family) 24.
Slide 41: Group Milestones
Group Milestones • Retail POS exceeded 6,700 • Retail POS exceeded 6,000 • Entered mid- to high-end ladies’ footwear market through acquisition of Full Pearl Group • Exited sportswear market • Renamed as “Daphne International Holdings Ltd.” • Established 2nd own brand “ShoeBox” • Entered sportswear
Slide 42: Vision
Vision A leading brand management company that provides ladies and their family members with trendsetting and quality products Brands Products Diversification Strategy Pricing Sales Channels 42
Daphne International Holdings — H1 2014 Earnings Presentation on 6ix