Stella International Holdings Limited · HKEX:1836
Stella International — FY2020 Earnings Presentation
26 slides from Stella International's earnings presentation, 2021
Slide 1: Annual Results 2020
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Slide 2: Disclaimer
Disclaimer This presentation and the accompanying slides (the “Presentation”) which have been prepared by Stella International Holdings Limited (“Stella” or the “Company”) do not constitute any offer or invitation to purchase or subscribe for any securities, and shall not form the basis for or be re
Slide 3: Financial Summary
FINANCIAL SUMMARY 3
Slide 4: Key Highlights
Key Highlights Revenue decreased by 26.5% year-on-year due to widespread disruption to global retail caused by COVID-19 Reported net profit of US$1.1 million and adjusted net profit* of US$52.4 million Net cash inflow increased to US$47.3 million from US$5.8 million in 2019 due to active credit risk
Slide 5: Impact of COVID-19
Impact of COVID-19 Timeline 2020 • Disruption to factory operations in China Feb Mid-Mar • Europe and US lockdowns affected our customers, leading to onwards shipment postponement and order cancellation • Philippines and Bangladesh factories temporarily closed for >1 month Apr • China reopened and r
Slide 6: Financial Highlights
Financial Highlights For the year ended 31 December 2019 2020 US$ mn (audited) (audited) Change Revenue 1,544.8 1,135.9 -26.5% Gross Profit 293.6 201.7 -31.3% Operating Profit 102.8 2.1 -98.0% Net Profit 95.9 1.1 -98.9% EPS (US¢) 12.1 0.2 -98.3% Dividend per share (HK¢) 85 0 - *Repurchased 0.6 milli
Slide 7: Breakdown of One-Off Non-Recurring Items
Breakdown of One-Off Non-Recurring Items US$ mn Reported Operating Profit 2.1 Severance payments and other factories closure costs 52.5 Overhead costs related to factory suspensions resulting from COVID-19 2.7 PRC Government subsidies related to COVID-19 (1.9) Compensation received related to land s
Slide 8: Cost Structure Affected by Lower Utilization
Cost Structure Affected by Lower Utilization Breakdown of Costs of Sale (as % of Revenue) 100% 19.0% 17.8% 75% 6.5% 6.0% 2.6% 3.8% 0.7% 9.6% 1.3% 11.4% 50% 25% 61.6% 59.7% 0% 2019 2020 Direct material Direct labour Subcontracting costs Depreciation Manufacture overhead Gross Profit *Manufacturing on
Slide 9: Capex and Cash Flow Summary
Capex and Cash Flow Summary For the year ended 31 December 2019 2020 US$ mn (unaudited) (unaudited) Change Cash flows from operating activities 223.5 170.5 -23.7% Profit before Tax 100.0 2.2 -97.8% Depreciation (45.0) (49.9) -10.9% Changes in working capital 37.6 27.3 -27.4% Other operating cash flo
Slide 10: Solid Financial Position with Net Cash
Solid Financial Position with Net Cash For the year ended 31 December 2019 2020 US$ mn (audited) (audited) Cash and cash equivalents 68.1 108.7 Debt (3.0) (2.9) Net Cash / (Debt) 65.1 105.8 Net Gearing -6.8% -11.5% Current assets 659.9 625.3 Non-current assets 473.5 524.2 Current liabilities 166.7 2
Slide 11: Business Review: Manufacturing Business
BUSINESS REVIEW Manufacturing BUSINESS 11
Slide 12: World's Leading Footwear Brand Customers
World’s Leading Footwear Brand Customers Our client base includes well-known global Fashion, Luxury, Sports and Casual footwear brands Sports Luxury Fashion Casual 12
Slide 13: Sports Category the Most Resilient
Sports Category the Most Resilient Breakdown of Manufacturing Revenue by Product Category 2019 2020 Sports Casual 30.1% Casual Sports 34.3% 42.6% 42.3% Luxury 6.2% Fashion Fashion 21.1% 17.5% Luxury 5.9% # Chart for 2019 has already restated, based on recent reclassification of some customer brands
Slide 14: Stable Geographic Breakdown for Group Revenue
Stable Geographic Breakdown for Group Revenue 2019 Revenue 2020 Revenue US$1,544.8 mn US$1,135.9 mn Asia (ex. Other PRC) 2.8% Asia (ex. Other 6.3% PRC) 2.1% PRC (inc. 6.2% HK) 12.1% PRC (inc. HK) North 16.3% America North 51.2% America 53.6% Europe Europe 27.6% 21.8% 14
Slide 15: Volume & ASP Trends
Volume & ASP Trends Shipment Volume 80 58.2 60.2 59.4 • Sports category 53.3 56.6 60 52.6 50.8 50.8 53.1 52.9 was the most 43.4 resilient under (mn pairs) 40 pandemic 20 CAGR = -2.0% 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 ASP • ASP about flat 27.1 28.6 28.3 29.6 29.3 28.1 despite c
Slide 16: Our Manufacturing Facilities
Our Manufacturing Facilities Facility Locations (Footwear) Geog. Mix of Production Hebei Hunan • Weiyuan • Shuangfeng • Shaoyang Liantai China • Dongkou Selena 2019 12% 33% 55% Guangxi Dongguan • Beiliu * • Stella PCC • Lingshan • NPCC 2020 13% 22% 65% Bangladesh Guangdong • Longchuan 2021 • Bay Foo
Slide 17: Business Review: Branding Business
BUSINESS REVIEW Branding BUSINESS 17
Slide 18: Our Retail Brand Positioning: Affordable Luxury
Our Retail Brand Positioning: Affordable Luxury Higher End Basic Classic Modern Fashion Luxury (US$400+) Premium (US$121-400) Mid-price (US$51-120) Value (below US$50) Contemporary 18
Slide 19: Media Exposure
MEDIA EXPOSURE ASIA CELEBRITY Tamia Liu(刘涛), Jane Zhang(张靓颖), Chinese actress Chinese singer 19
Slide 20: Media Exposure
MEDIA EXPOSURE ASIA CELEBRITY Gabrielle, Xiaotong Guan (关晓彤), Xiaotang Zhao(赵小棠), Chinese actress Chinese singer 20
Slide 21: Branding Business – Loss Narrowed Despite Pandemic
Branding Business – Loss Narrowed Despite Pandemic Own brand products serve to demonstrate Stella’s high-end craftsmanship, design and commercialization capability Retail business in Europe severely affected by the pandemic with city lockdowns at various times throughout the year Reviewing the retai
Slide 22: Outlook
OUTLOOK 22
Slide 23: Challenges and Opportunities
Challenges and Opportunities Challenges Opportunities - COVID-19 - Global trade tensions - Speed-to-market flexibility - DTC is the new direction - Increased popularity of athleisure - Ongoing consolidation among - High fashion brands expanding into brands athleisure category - Counter-party risk co
Slide 24: Outlook
Outlook • Visibility remains low for 2H21 • Continue to improve credit risk and cashflow management • Enhance operational efficiency (including lean working capital management) and resume margin growth in 2021 • Continue to implement long-term strategic initiatives o Enhance cost efficiency -- New f
Slide 25: Supplementary Information
SUPPLEMENTARY INFORMATION 25
Slide 26: World Premium Footwear Market – Our Target Market
World Premium Footwear Market – Our Target Market Premium Footwear Manufacturing Industry in Western Europe and Brazil (2019, million pairs) Export price ‘m pairs/ USD Production (leather only) (USD per pair) Italy 106 75 France 30 72 Spain 43 40 Germany 95 40 Portugal 54 33 Netherland 45 33 Belgium
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