Daphne International Holdings Limited · HKEX:210
Daphne International — FY2013 Earnings Presentation
46 slides from Daphne International's earnings presentation, Mar 26, 2014
Slide 1: Annual Results Presentation
Annual Results Presentation 26 March 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: 2013 Annual Results Highlights
2013 Annual Results Highlights Group turnover decreased marginally to HK$10,446.5 million Turnover of Core Brands business was essentially flat at HK$9,561.3 million Core Brands’ same store sales declined by 10.4% YoY Group’s gross profit margin was 55.9% Group’s operating profit margin wa
Slide 4: Financial Review
FINANCIAL REVIEW
Slide 5: Group Financial Highlights
Group Financial Highlights (HK$ million) 2013 2012 Change Turnover 10,446.5 10,529.1 -0.8% Gross profit 5,838.3 6,228.8 -6.3% Operating profit 520.2 1,364.9 -61.9% Profit attributable to shareholders 329.1 955.7 -65.6% Basic EPS (HK cents) 20.0 58.1 -65.6% Dividend per share (HK cents) 8.0 18.0 -55.
Slide 6: Group Turnover
Group Turnover Core Brands segment remained the Turnover Breakdown largest contributor to the Group’s total turnover HK$10,446.5 million 2013 90% 7% 3% HK$10,529.1 million 2012 90% 7% 3% HK$8,576.8 million 2011 89% 6% 5% Core Brands business Other Brands business OEM business (For the 12 months en
Slide 7: Group Profit Margins
Group Profit Margins Group gross profit margin decreased by 3.3 ppt Change in product sales mix Aggressive clearance of off-season items Significant increase in inventory provision Group operating profit margin dropped by 8.0 ppt Significant negative operating leverage, especially during
Slide 8: Inventory Turnover Days & Working Capital
Inventory Turnover Days & Working Capital Group inventory turnover days was 198 days Lower-than-expected turnover growth Soft economy and unusual weather pattern affected sales of current season items Adjusted volume of procurement for 2014 and stepped up inventory management and control L
Slide 9: Other Key Financial Indicators
Other Key Financial Indicators Increase in working capital led to decrease in cash and bank balance No convertible bonds were converted during the year Decrease in current ratio is mainly due to convertible bonds with maturity within one year (HK$ million) As at 31 Dec 2013 As at 31 Dec 2012 C
Slide 10: Historical Financial Performance
Historical Financial Performance Turnover Basic EPS (For the 12 months ended 31 Dec) (For the 12 months ended 31 Dec) (HK$ million) (HK cents) 12,000 10,529.1 10,446.5 70 57.0 58.1 10,000 8,576.8 60 8,000 50 41.1 6,623.8 36.5 5,832.0 40 6,000 30 20.0 4,000 20 2,000 10 0 0 2009 2010 2011 2012 2013 20
Slide 11: Business Review
BUSINESS REVIEW
Slide 12: Group Sales Network
Group Sales Network Initiated rationalisation of sales Total Number of Points-of-Sales (POS) network in view of soft market and rental pressure 6,881 (+716) 6,702 (-179) 512 Net reduction of 179 POS 6,165 (+966) 383 (2012: net addition of 716 POS) 563 Core Brands total POS = 6,319 Net reduct
Slide 13: Core Brands Sales Network – by Store Category
Core Brands Sales Network – by Store Category Number of POS As at 31 Dec As at 31 Dec 2013 2012 Change % Change - Directly-managed POS 5,491 (87%) 5,427 (85%) +64 +1.2% - Franchised POS 828 (13%) 942 (15%) -114 -12.1% Core Brands Total 6,319 6,369 -50 -0.8% Quarterly change in POS number Q1 Q2 Q3 Q4
Slide 14: Core Brands Sales Network – by City Tier
Core Brands Sales Network – by City Tier The Group maintained greater representation in lower tier cities As at 31 Dec 2013 As at 31 Dec 2012 No. % No. % Change % Change Tier 1 Cities 703 11% 721 11% -18 -2.5% Tier 2 Cities 1,394 22% 1,342 21% +52 +3.9% Tier 3 Cities 992 16% 981 15% +11 +1.1% Tier
Slide 15: Core Brands Business - Performance
Core Brands Business - Performance (HK$ million) 2013 2012 Change Turnover 9,561.3 9,591.9 -0.3% Gross profit 5,344.6 5,661.8 -5.6% Gross margin 55.9% 59.0% -3.1 ppt Operating profit 616.2 1,475.7 -58.2% Operating margin 6.4% 15.4% -9.0 ppt (For the 12 months ended 31 Dec) Turnover of Core Brands
Slide 16: Core Brands Business - SSSG
Core Brands Business - SSSG Same store sales growth Q1 Q2 Q3 Q4 FY 2013 -2.5% -13.7% -18.1% -5.4% -10.4% Same store sales decreased by 10.4% Average selling price was almost flat at RMB 184 16
Slide 17: Other Brands Business
Other Brands Business Gross profit margin improved by 1.0 ppt despite increase in (HK$ million) 2013 2012 Change inventory provision Turnover 731.8 690.9 +5.9% Lower product cost Gross profit 405.6 375.6 +8.0% Change in product sales mix Gross margin 55.4% 54.4% +1.0 ppt Operating loss decre
Slide 18: Major Progress Made in 2H 2013
Major Progress Made in 2H 2013 Initiated rationalisation of store network and closed non-performing stores in 4Q Improved staff turnover ratio which stabilised in 1Q 2014 Launched Retail Management System in Shoebox in 4Q as planned Consolidated Other Brands business with improved financial
Slide 19: Outlook & Strategies
OUTLOOK & STRATEGIES
Slide 20: 2014 Operating Environment
2014 Operating Environment • Consumption sentiment is still weak and takes time to improve External • Inflationary pressure of operating costs including staff and rental costs • Competition from e-commerce • More intense competition from regional players • Improve staff retention and sales productiv
Slide 21: 2014 Strategies
2014 Strategies People Channels Products (physical stores + virtual stores) Retail is Detail Adopt multi-pronged strategies to enhance sales & operational efficiency, and build the foundation for future growth Marketing Management & Systems 21
Slide 22: 2014 Key Objectives
2014 Key Objectives Boost Strengthen Sales Productivity Merchandising Enhance and Marketing Supply Chain and Inventory Management 22
Slide 23: Boost Sales Productivity
Boost Sales Productivity 1. Uplift Store Image Launch new store design Renovate stores at strategic locations Strengthen visual merchandising to increase the appeal of stores and products Enhance Shopping Experience 23
Slide 24: Boost Sales Productivity (cont'd)
Boost Sales Productivity (cont’d) 2. Review and adjust channel strategy Perform more prudent pre-store-opening analysis and post-store-opening follow-up Focus on store-level profitability Conduct in-depth analysis and monitor sales trend of various retail channels engaged by the Group Consid
Slide 25: Boost Sales Productivity (cont'd)
Boost Sales Productivity (cont’d) 3. Strengthen Frontline Operation Management Objectives: 1 boost staff motivation 2 improve staff loyalty 3 instill accountability 3.1 Enhance frontline sales staff productivity 3.2 Improve management efficiency of Improve incentive packages frontline middle manag
Slide 26: Enhance Supply Chain and Inventory Management
Enhance Supply Chain and Inventory Management Enhance product allocation and inventory management via Retail Management System Enhance category planning to further improve customisation of product allocation through data and trend analysis Simplify and automate stock allocation to improve effi
Slide 27: Strengthen Merchandising and Marketing
Strengthen Merchandising and Marketing Increase product competitiveness Increase emphasis on the prevailing trend in product designs Expand product categories Offer greater diversity in product portfolio Step up marketing efforts Increase intensity of marketing in terms of breath and dep
Slide 28: Celebrity Endorsement
Celebrity Endorsement Artistic & Creative Director – Mr. Nicholas Tse (謝霆鋒) Ms. Jun Ji-Hyun (全智賢) recently appointed as new brand ambassador for Daphne brand 28
Slide 29: E-commerce Platform
E-commerce Platform Omni-channel Distribution Model Physical Stores Virtual Stores Official Online Store Third-party (www.daphne.com.cn) marketplaces Tmall Dangdang JD.com QQ Shop CRM enables targeted marketing to drive sales 29
Slide 30: E-commerce
E-commerce Broaden partnership with more e-commerce leaders to extend coverage and enhance online shopping experience Launch more integrated marketing and promotional campaigns across online and offline Step up efforts to thwart online IP infringement and fake products Expand and strengthen
Slide 31: Outlook
Outlook Leading position in mass market Chinese government policies to embark on Extensive nationwide a new phase of sales network urbanisation drive consumption growth Directly-managed sales network offer direct interface with customers Increasing disposable income Competitive Unparalle
Slide 32: Thank you
Thank you Saeet Q&A Session DAPHNE INTERNATIONAL HOLDINGS LIMITED 2@ Fk A Ee eR BR BA A
Slide 33: Investor Relations Contact
Investor Relations Contact Ms. Macy Leung (852)-2367 9022 macyleung@daphneholdings.com 33
Slide 34: Appendix
APPENDIX = ae ¥ ~ : t
Slide 35: Growing Market Potential of China
Growing Market Potential of China 2013 Per capita consumption Continued urbanisation (RMB) • Government policies to 18,023 embark on a new phase of urbanisation 731M 53.7% 6,626 2.7x Urban population China urbanisation rate • Continued urbanisation drives consumption growth Urban Rural Increasing pe
Slide 36: China Women's Footwear Market Potential
China Women’s Footwear Market Potential million US$ million 700.0 40,000.0 37,680.7 650.5 35,000.0 600.0 30,000.0 0.65x 500.0 24,355.0 25,000.0 400.0 4x 20,000.0 US 300.0 China 15,000.0 200.0 160.6 10,000.0 100.0 5,000.0 0.0 0.0 Female Population Women's Footwear Market Size (as at July 2013) (2012)
Slide 37: China Women's Footwear Market Potential (cont'd)
China Women’s Footwear Market Potential (cont’d) (RMB million) China Women’s Footwear Market Growth Forecast 300,000 +10.1% CAGR: 9.8% +10.0% 245,571 250,000 +9.9% 223,044 +9.6% 202,767 200,000 +9.5% 184,501 +14.0% 168,341 153,736 150,000 134,861 100,000 50,000 0 2011 2012 2013E 2014E 2015E 2016E 20
Slide 38: 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 6,702 points-of-sale (POS) (as at 31 December 2013) The Group’s core brands (“Daphne” and “ShoeBox”) are distributed in n
Slide 39: Major Brand Portfolio
Major Brand Portfolio Brand Ownership ASP (RMB) Own brand (product) 200 – 300 Core Brands Own brand (channel) <200 Own brand (product) Mid- Sole distributorship to (international brand) High- 400 – 1,200 end Sole distributorship Brands (international brand) Own brand (channel) 39
Slide 40: 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 1,180.7 1,407.0 933.1 955.7 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 41: Daphne Group's Market Share
Daphne Group’s Market Share China Women’s Footwear Market Share* 2011 2012 5.3% 6.1% Daphne Women’s footwear Women’s footwear Group market 2011: market 2012: RMB 134.9 billion RMB 153.7 billion *Data source: Euromonitor 41
Slide 42: 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, reaching county level with over 6,700 outlets Vast directly-managed store network enable
Slide 43: Growth Drivers
Growth Drivers More focused sales operation Increasing the depth and breadth of marketing More agile and efficient supply chain management Strengthening brand management Further enhancement in product design and Strengthen presence in e-commerce development 43
Slide 44: Shareholding Structure
Shareholding Structure As at 31 December, 2013 Lucky Earn Top Glory Assets Int’l Ltd. Pushkin Holding Ltd. Ltd. (held by Mr. CHANG Premier China Ltd. Public (held by Mr. CHEN Chih-Kai, (held by Mr. CHEN Ying- Tommy Yi-Hsun and his Mr. CHANG Chih-Chiao Chieh and his family) family) and their family)
Slide 45: 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 46: 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 46
Daphne International Holdings — FY2013 Earnings Presentation on 6ix