Slide 1: 2012 Annual Results
2012 2012 財政年度業績 ANNUAL RESULTS 2013年3月 March 2013
Slide 2: Disclaimer
Disclaimer This presentation incorporates information contained in the annual results announcement (the “Results Announcement”) for the period ended 31 December 2012 of Li Ning Company Limited (the “Company”). This presentation should be read in conjunction with the Results Announcement and is quali
Slide 3: Agenda
AGENDA • Review of Strategies • Financial Highlights • Business Review • Future Outlook • Open Forum
Slide 4: Review of strategies
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Slide 5: Industry Challenges and Growth Drivers
INDUSTRY CHALLENGES AND GROWTH DRIVERS Near Term Challenges CAGR: Low to mid teens percentage Competition, over-expansion, excess channel inventory, cost pressure and wholesale model 2011E 2012E 2013E 2014E 2015E Long-term drivers Urbanization Urbanization continues to move 1~2% rural population to
Slide 6: Impact on Li Ning
IMPACT ON LI NING Wholesale-oriented Model Store Count Sell In > Sell Through 7,915 8,255 6,434 Current Challenges 2010 2011 2012 Lower Average Trade Receivable Days Higher mix of distributor Excess old products Declining and sub- channel retail 97 leading to distributor inventory performance 76 hea
Slide 7: Year of 2012 in Review
YEAR OF 2012 IN REVIEW January – Introduction of Strategic Investor Key strategic investor TPG was brought in for operational value add July - Transformation plan Enhanced board composition and management execution capabilities Pioneers a new sports market-driven and retail-oriented business m
Slide 8: Three Strategic Focuses
THREE STRATEGIC FOCUSES Three core focuses Retail-oriented business model China Market Core Brand Management and Execution Capabilities Sports culture 3 core focuses (China market, core brand and sports culture ) + adopting a retail oriented, sports marketing-driven business model 7
Slide 9: Li Ning Is Leading an Industry Transformation
LI NING IS LEADING AN INDUSTRY TRANSFORMATION Initiatives to transform from the traditional wholesale practice to a retail-oriented and sports marketing driven business model have inspired meaningful discussions and debates in the industry 8
Slide 10: 2012 London Olympic Games
2012 LONDON OLYMPIC GAMES China’s five gold medal teams Other Delegations Swedish Delegation Spanish/Argentina Basketball Team American Diving Team Others •Sponsored spiked running shoes and accessories for 4 international athletes •Package for Eritrean Track & Field Team: 22 pieces 40 medals in tot
Slide 11: CBA Sponsorship
CBA SPONSORSHIP Promote the recognition of Li Ning brand’s presence in basketball among young consumers Creating new consumer groups Actively promote the performance of the basketball business Eye-catching performance of new line of basketball products in 1Q13 Encouraging retail sell-throu
Slide 12: Wade Sponsorship
WADE SPONSORSHIP Enhance the overall reputation of the LI-NING Brand Generate interest among young consumers and basketball fans Boost the intention to purchase LI-NING products 11
Slide 13: Financial Highlights
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Slide 14: Key Factors Impacting Financial Results
KEY FACTORS IMPACTING FINANCIAL RESULTS Resize the Fix the Business Impact on P&L Business Reduce inventory Sell in reduction Revenue and gross Reduce non- Support channels to profit reduction performing stores improve sales and A/R & inventory Improve channel collections provisions pr
Slide 15: Summary of Income Statement
SUMMARY OF INCOME STATEMENT FY2012 FY2011 Change For the 12 months ended 31 December 2012 (RMB (RMB million) Revenue 6,738.9 8,928.5 -24.5% Gross Profit 2,549.9 4,042.1 -36.9% - Distribution costs * 2,635.4 2,909.9 -9.4% - Administrative expenses ** 1,675.6 644.6 159.9% - Other income and other gain
Slide 16: Profit Margins and Expense Ratios
PROFIT MARGINS AND EXPENSE RATIOS FY2012 FY2011 Change For the 12 months ended 31 December 2012 Gross Profit Margin 37.8% 45.3% -7.5p.p. Operating Profit Margin -23.6% 7.1% -30.7p.p. Margin of Profit / (Loss) Attributable to Equity Holders -29.4% 4.3% -33.7p.p. R&D Expenses (as % of revenue) 2.8% 2.
Slide 17: Key Operational Indicators
KEY OPERATIONAL INDICATORS FY2012 FY2011 Change For the 12 months ended 31 December 2012 Inventory Turnover (Days) 90 72 18 Average Trade Receivables Turnover (Days) 97 76 21 Average Trade Payables Turnover (Days) 112 93 19 Cash Conversion Cycle (Days) 75 55 20 Return on Equity (ROE) -77.8% 11.3% -8
Slide 18: Summary of Balance Sheet
SUMMARY OF BALANCE SHEET 2012-12-31 2011-12-31 Change (RMB (RMB Million) million) Cash and Cash Equivalents 1,248.6 1,196.5 4.4% Bank Borrowings 1,447.2 838.1 72.7% Convertible Bonds Liabilities 664.1 - - Net Cash / (Debt) * -862.7 358.4 -340.7% Current Liabilities 3,276.6 3,063.1 7.0% Current Ratio
Slide 19: Li-Ning Brand Revenue Breakdown by Product Category
LI-NING BRAND REVENUE BREAKDOWN BY PRODUCT CATEGORY LI-NING Brand Revenue Breakdown Revenue from LI-NING Brand by Product Category to the Group Total 88.0% 91.4% 51.7% 49.1% 44.5% 41.8% 6.4% 6.5% 12.0% 8.6% LI-NING brand apparel Revenue from LI-NING brand LI-NING brand footwear LI-NING brand accesso
Slide 20: Li-Ning Brand Revenue Breakdown by Geography
LI-NING BRAND REVENUE BREAKDOWN BY GEOGRAPHY International Market 2.4% Northern -28.0% 40.1% Eastern Domestic Western -39.1% Market -21.3% 23.5% 17.0% 97.6% Southern 19.4% -14.0% The Group streamlined the regional distribution layout of its sales channels by YoY Change conducting adjustment to the o
Slide 21: Li-Ning Business Review
LI-NING
Slide 22: Transformation Plan: Building Capabilities for the Future
TRANSFORMATION PLAN Building capabilities for the future NEAR TERM MEDIUM TO LONG TERM #1 Management Team #2 Management Distribution and Execution Channel Capabilities #3 Products and Merchandising #4 Branding and Marketing Vision: Solidify LI-NING #5 Cost Structure as the leading brand in Chinese s
Slide 23: Operational Initiatives: Enhanced Team and Internal Process
OPERATIONAL INITIATIVES AND PROGRESS #1 Enhanced team and internal process Chairman and Vice Chairman Founder / Vice Chairman Chairman Introduce outstanding talents to build a strong management team Chief Supply Acting Chief Chief Product Chief Marketing Chain Chief Designer Sales Officer Officer Of
Slide 24: Operational Initiatives: Distribution Channel
OPERATIONAL INITIATIVES AND PROGRESS #2 Distribution Channel Channel Revival Plan Current Status Target Results Actions Channel inventory Operational clearance and buyback Currently in execution at Inventory level and mix of new Network rationalization products back to healthy levels distrib
Slide 25: Distribution Channel: Store Network and Closures
OPERATIONAL INITIATIVES AND PROGRESS #2 Distribution Channel (Cont’d) 2012 vs. 2011 LI-NING Brand Store closure structural analysis distribution channel network Closed store breakdown Self-owned and Distributor Stores 8,255 Sub-distributor 6,434 Store productivity (RMB / store) Closed Stores All Sto
Slide 26: Distribution Channel: Inventory Sell-Through and Turnover
OPERATIONAL INITIATIVES AND PROGRESS #2 Distribution Channel (Cont’d) Channel Inventory Sell-Through Y-o-Y growth of pilot and Turnover Months distributor compared to all stores Inventory Volume (RMB) Inventory Turnover Months (% difference) ~7.5 months ~5-6 months Dec-11 PEAK (2Q12) LATEST (Feb-13)
Slide 27: Products & Merchandising
OPERATIONAL INITIATIVES AND PROGRESS #3 Products & Merchandising Retail pricing of current season Sell out rates of current products (as % tag price) season products (%) 1Q-3Q 12 4Q12 1Q13 1Q-3Q 12 4Q12 1Q13 SKU rationalization starting in 4Q12 leading to improved performance of current season produ
Slide 28: Products & Merchandising: Retail-Oriented Ordering Model
OPERATIONAL INITIATIVES AND PROGRESS #3 Products & Merchandising (Cont’d) Trade Fair Selling Period 1.Prescriptive 100%+ Order Retail 2. Quick Replenishment 3. Fast Response Retail-oriented ordering model characterized by “prescriptive orders + replenishment of best-selling SKUs + 27 fast response p
Slide 29: Products & Merchandising: Combat 1 Series
OPERATIONAL INITIATIVES AND PROGRESS #3 Products & Merchandising (Cont’d) “Combat 1” Series Sell Out Rates (%) Pilot Rollout Overall Footwear 5 successful pilots completed and being commercialized Monthly calendar for commercializing quick strike products 28
Slide 30: Branding & Marketing
OPERATIONAL INITIATIVES AND PROGRESS #4 Branding & Marketing NATIONAL TEAMS CORE SPORTS Five gold medal teams, Basketball Track & Field/Running Badminton representing over 1/2 of gold medals that CBA: A key driving force of Leading sponsorships China won at the last – Main China’s running cu
Slide 31: Cost Structure Optimization
OPERATIONAL INITIATIVES AND PROGRESS #5 Cost Structure Optimization More effective use of Overseas procurement channel support Optimize / Centralize purchasing New suppliers for Customer healthy competition Li Ning Company Supplier Optimize marketing, operational and organizational costs
Slide 32: Retail Business Model
OPERATIONAL INITIATIVES AND PROGRESS #6 Retail Business Model Replenishment Manufacturing Warehouse Stores Time plant Past Retail Future Regular SKU Logistics Special SKU Production Staged production Individual store allocation Product Fast replenishment Optimize logistics network layout R
Slide 33: Retail Business Model: Pilot Stores Outperform
OPERATIONAL INITIATIVES AND PROGRESS #6 Retail Business Model (Cont’d) Sell Through YoY Growth (%) New Products as % of Total during Pilot Period Sell Through Pilot Stores New products Other Retail New products Pilot Stores Other Retail Stores Pilot Stores outperform other retail stores 32
Slide 34: Other Brands
OTHER BRANDS Provided unique on-site equipment in the London 2012 Olympic Games for both table tennis and badminton events Reinforce its competitive edge in Table Tennis and maintain collaborative relationships with top-notch table tennis athletes and clubs Strengthen product research and developmen
Slide 35: Future Outlook
uture Outlook
Slide 36: Future Outlook
FUTURE OUTLOOK Short-term Long-term Challenging near term industry Positive long-term on China’s outlook poses uncertainty sportswear industry Rapid pace of urbanisation Further operational Increasing disposable income transformation, and reducing Increasing participation in sports reliance on the w
Slide 37: Open Forum
OPEN FORUM investor@li-ning.com.cn LNCIR@brunswickgroup.com http://www.lining.com http://www.li-ning.com.cn