361 Degrees International Ltd. · HKEX:1361
361 Degrees International — H1 2016 Earnings Presentation
37 slides from 361 Degrees International's earnings presentation, August 2016
Slide 1: 2016 Interim Results
361 Degrees International Limited （Stock code: 1361:HK） 2016 Interim Results August 2016
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
1 Operating Strategies 2 Financial Highlights 3 Operational Highlights 4 Outlook 5 Appendix 6 Q&A
Slide 4: Operating Strategies
Operating Strategies
Slide 5: Operating Strategies
Operating Strategies Sunrise industry— Sports economy Dividend policy: steadily increase payout ratio but no less than 40% Year of the Olympics: Rapid growth of 361°’s five business segments Sustainable business model 4
Slide 6: Financial Highlights
Financial Highlights
Slide 7: Key Financial Highlights
Key Financial Highlights RMB mn For the six months ended 30 June 2016 2015 Change Revenue 2,555.5 2,208.3 +15.7% Gross profit 1,059.0 911.3 +16.2% Operating profit 506.1 485.5 +4.2% Profit attributable to equity 273.1 269.6 +1.3% shareholders Basic EPS (RMB cents) 13.2 13.0 +1.5% Profitability Ratio
Slide 8: Revenue
Revenue RMB mn Gross margin (%) 2,600 45% 41.3% 41.4% Revenue increased by 15.7％ to 40% RMB 2,555.5 million, mainly a 2,500 35% reflection of 15% order book growth of 2016’s spring and 2,400 30% summer trade fairs 25% Gross margin stabilized at 41.4% 2,300 2,555.5 20% 2,200 15% 10% 2,100 2,208.3
Slide 9: Overall Revenue Mix
Overall Revenue Mix 10.6% 2.2% 10.7% 1.7% 0.8% Footwear 43.8% 45.1% 2015 Apparel 2016 RMB2,208.3 mn Accessories RMB2,555.5 mn 361°Kids 43.9% Others 41.2% For the six months ended 30 June 1. As the Group became more focused on the development of footwear products, turnover from footwear increased to
Slide 10: Revenue Analysis – by Product
Revenue Analysis – by Product Footwear Apparel RMB mn Gross margin (%) RMB mn Gross margin (%) 1,200 45% 1,060 50% 41.0% 40.7% 41.8% 43.1% 45% 40% 1,150 1,040 35% 40% 1,100 1,020 35% 30% 30% 1,050 25% 1,000 25% 20% 1,052.2 1,000 1,153.5 980 20% 15% 950 960 15% 10% 10% 900 968.8 940 968.8 5% 5% 850 0
Slide 11: Revenue Analysis – 361° Kids
Revenue Analysis – 361° Kids RMB mn Gross margin (%) 361°Kids 280 60% Sales volume increased by 28.0% 270 50% whereas the AWP dropped by 8.9%; 43.0% mainly due to a higher proportion 260 40.3% of summer apparels were ordered 40% and delivered compared with the 250 same period of last year 30% 240
Slide 12: Operating Expenses Analysis
Operating Expenses Analysis Selling and Distribution Costs Administrative Expenses For the six months ended 30 June RMB mn For the six months ended 30 June RMB mn 2016 2015 Change 2016 2015 Change R&D 72.4 54.4 +33.1% A&P 310.9 269.4 +15.4% Depreciation 33.9 18.0 +88.3% Staff costs 46.7 38.4 +21.6%
Slide 13: Operating Cash flow
Operating Cash flow For the six months ended by 30 June RMB mn 2016 2015 Operating profit 506.1 485.5 Change in inventories (41.3) (11.4) Change in trade and bills receivables (83.2) (318.8) Change in trade and other payables 109.7 63.3 Change in deposits, prepayments and other 20.1 99.6 receivables
Slide 14: Working Capital Cycle
Working Capital Cycle Working Capital Turnover Days （days） 100 Turnover days 30 Jun 2016 31 Dec 2015 Change 95 90 80 Inventories 70 78 -8 69 70 60 Trade and bills 163 160 +3 receivable 50 40 Trade and bills 138 169 -31 payable 30 20 Overall working 95 69 +26 10 capital 0 31 Dec 2015 30 Jun 2016 13
Slide 15: Balance Sheet Highlights
Balance Sheet Highlights RMB mn As at 30 June 2016 As at 31 Dec 2015 Change Current assets 10,105.6 7,354.8 +37.4% Current liabilities 2,066.4 1,930.4 +7.0% Net current assets 8,039.3 5,424.3 +48.2% Current asset ratio (times) 4.9 3.8 +1.1 times Equity attributable to owners of the 5,443.3 5,282.6 +
Slide 16: Trade Debtors and Ageing Analysis
Trade Debtors and Ageing Analysis As at As at RMB ‘000 30 Jun 2016 31 Dec 2015 Trade debtors 2,233,211 2,097,831 Over 89% of trade debtors are within 90 Less: Allowance for doubtful debts (80,155) (80,155) days aging from 2,153,056 2,017,676 invoicing Bills Receivable 183,339 235,510 2,336,395 2,2
Slide 17: Maintain a Strong Financial Position
Maintain a Strong Financial Position RMB ‘000 As at 30 Jun 2016 As at 31 Dec 2015 Pledged bank deposits 167,766 122,026 Deposits with bank with maturities > 3mths 2,612,354 1,500,000 Cash and cash equivalents 3,774,571 2,286,225 Total cash 6,554,691 3,908,251 Bank loans 17,960 15,116 Senior unsecure
Slide 18: Operational Highlights
Operational Highlights 761
Slide 19: 361° Sales Network
361° Sales Network Sales Network Northern region 2,645 Western region 1,410 Eastern region 1,649 Approximately 1,468 Total 6,853 Southern region 1,149 Composite stores First-tier cities 8.7% 2014 2015 2016 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Second-tier cities Openings 159 352 404 469 249 249 265 264 230
Slide 20: 361° Operational Data
361° Operational Data Number of Stores & SSSG Channel Inventories (times) (Number of Stores) (SSSG) 5,000 10% 4.4 4,155 4,097 4.3 4,068 3,916 3,819 3,772 3,707 3,864 3,749 4.3 4,000 3,539 8% 4.2 4.2 4.2 4.2 4.2 8.1% 7.9% 4.2 3,000 7.2% 7.2% 7.0% 6% 4.1 4.1 4.1 6.3% 4.1 5.5% 4.0 2,000 4% 4.7% 4 1,000
Slide 21: Building the 361° Brand
Building the 361° Brand The 361°Group generally spends between 12-14% of its revenue on brand promotion Event sponsorship costs are amortized over the relevant contract periods Major Events Sponsorships Celebrity Endorsements 2010 2011 Basketball Running Football Stephon Marbury Dexter Lee Yang
Slide 22: 361° Kids Operational Data
361° Kids Operational Data Sales network Revenue (RMB million) 588.9 Northern region 751 507.5 420.4 Western region 370.1 351 272.1 238.7 Eastern region 793 37.6 Total 2,416 Southern region 521 2010 (1) 2011(1) 2012 2013 2014 2015 1H 2016 2014 2015 2016 First-tier Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 23: 361° Kids Brand
361° Kids Brand Now generally regarded as a leading kids’ brand in China and won three leading awards in March 2016： China’s Best Kids Brand China’s Top 10 Kids Brands March 15th Most Influential Brands in China Consumer Market and Industry Benefited from the sponsorship of “Let's Sing, Ki
Slide 24: Constantly Enhance Product Functionality, Launch Innovative Smart Products
Constantly Enhance Product Functionality, Launch Innovative Smart Products Leading position in functional footwear and has obtained 194 patents as at 30 Patented technologies June 2016 Applies its self-developed technologies such as SAC-air, NFO, Archlock, Quikfoam, colorful reflective material,
Slide 25: Constantly Enhance Product Functionality, Launch Innovative Smart Products (cont'd)
Constantly Enhance Product Functionality, Launch Innovative Smart Products（cont’d） + iMate Smart Running Shoes One-piece Knit Running Shoes In collaboration with Baidu Inc., in Launched in May 2016, product Launched in July 2016, applies March 2015, 361°kids smart shoes combines shoes, smart c
Slide 26: 361° International Strategy
361° International Strategy International business unit was established in 2014 with senior executives based in Taiwan and the United States Focus on high-end functional running products and cross training products, sticks to value-for-money strategy Sales of the international business sales m
Slide 27: 361° Contemporary E-commerce Business
361° Contemporary E-commerce Business E-commerce sale from web-exclusive products contributes 6.5% of the Group’s total revenue Currently 50% of e-commerce business assists in clearing old inventories at the retail level, 50% sells web-exclusive products Smart products and football related pro
Slide 28: 361° Outdoor and Skiing Strategy
361° Outdoor and Skiing Strategy A 70/30 JV with One Way Sport Oy established in 2013. JV has exclusive rights for Greater China area Expanded store network systematically from 2H 2015, with 65 self-operated outlets in 29 cities in China by the end of June 2016 Growing interests in winter spor
Slide 29: 361° Soccer Strategy
361° Soccer Strategy The Chinese government established a number of policies to vigorously promote the development of the soccer sport, which is expected to increase the popularity of soccer and boost the standard of Chinese soccer significantly Launched four series of value-for-money and highly
Slide 30: Outlook
Outlook
Slide 31: Enormous Potential for Future Growth of the Industry
Enormous Potential for Future Growth of the Industry 2010-2020 Market size of China’s sports apparel market (RMB bil) 300 246.7 250 230.9 214.6 198.0 67.0 200 181.4 63.2 165.0 59.1 148.3 54.7 9.9 141.8 139.2 134.7 50.2 9.2 150 130.6 8.4 48.2 45.6 7.7 43.4 38.1 37.0 40.7 6.9 38.8 36.1 36.4 6.2 34.3 1
Slide 32: Favorable Government Policies
Favorable Government Policies No. 46 Guidance issued by the State Council Reformation of soccer policies issued in March 2015 The State Council issued “Opinions on Accelerating the Development of Separated Chinese Football Association (CFA) from sports regulator by Sports Industry to Promote Sport
Slide 33: Appendix
Appendix 761
Slide 34: 361° Brand Positioning
361° Brand Positioning Brand Brief Introduction Market Premium An integrated international 10 Apparel, sportswear brand that engages Footwear, 8 in brand, R&D, design, Accessories manufacturing and distribution 6 361 International 4 2 A kids brand serving children Kids’ Apparel, Fashion -10 -8 -6 -4
Slide 35: Mature and Effective Distributor Business Model with Unique Marketing Strategy
Mature and Effective Distributor Business Model with Unique Marketing Strategy Polarized Distribution Network Effective Distribution Network Management Experienced management team Brand Brand licensing once a year Management Reduce Strong profitable business model inventory Exclusive distrib
Slide 36: Established leading position in the industry as China's fastest-growing sports brand
Established leading position in the industry as China's fastest-growing sports brand Second phase of brand development Change in capital 2014-2016 structure for further Increased the ratio of E- expansion commerce products and Change in business 2010-2013 enhanced product differentiation model and
Slide 37: Q&A
Q&A
361 Degrees International — H1 2016 Earnings Presentation on 6ix