Daphne International Holdings Limited · HKEX:210
Daphne International — FY2016 Earnings Presentation
39 slides from Daphne International's earnings presentation, Mar 29, 2017
Slide 1: 2016 Annual Results Presentation
2016 ANNUAL RESULTS PRESENTATION 29 March 2017
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: The Group had a tough year in 2016
The Group had a tough year in 2016 Weak consumer sentiment prevailed Intense competition from local peers and online players Inflationary pressure of operating expenses, including rental and staff costs, remained Negative operating leverage Charges from rationalisation of inventory, stores
Slide 4: Progress made in 2016
Progress made in 2016 Accelerated store rationalisation - Net closure of 1,030 POS Aggressive liquidation of aged inventory - Inventory level reduced by 32.4% to HK$1,414.5 million from HK$2,091.6 million Adopted prudent management decision on inventory rationalisation Continued stringent ex
Slide 5: Financial Review
Financial Review
Slide 6: Group Financial Highlights
Group Financial Highlights (HK$ million) 2016 2015 Change Turnover 6,501.7 8,379.1 -22.4% Gross profit 3,311.7 4,724.7 -29.9% Operating loss (819.5) (497.6) +64.7% Loss attributable to shareholders (819.1) (378.9) +116.2% Basic loss per share (HK cents) (49.7) (23.0) +116.1% Dividend per share (HK c
Slide 7: Group Turnover Breakdown
Group Turnover Breakdown Group Turnover Breakdown (For the year ended 31 December) 2016: HK$6,501.7 million 2015: HK$8,379.1 million 12% 10% 88% 90% Core Brands business Other Brands business Note: Core Brands business refers mainly to the operations under the brands “Daphne” and “Shoebox” in Mainla
Slide 8: Group Gross Margin
Group Gross Margin Group’s gross margin decreased by 5.5ppt YoY, mainly due to: - Increased weighting of aged products in the sales mix - Aged products sold at lower price - Highly promotional market New products’ gross margin was comparable to that of last year 8
Slide 9: Charges from Rationalisation Initiatives in 2016
Charges from Rationalisation Initiatives in 2016 Accelerated store closure - Net closure: 1,030 Increased staff severance payment Prudent inventory management and provision 9
Slide 10: Group Operating Expense
Group Operating Expense Decreased by 20.4% YoY Group operating expense decreased broadly in line with the decline in turnover, under inflationary environment Group Operating Expense (HK$ million) 6,000 5,412.7 5,559.0 5,288.3 4,974.0 -20.4% 5,000 4,207.8 4,000 3,000 2,000 1,000 0 2012 2013 2014
Slide 11: Group Operating Profit Analysis
Group Operating Profit Analysis Group gross margin decreased by 5.5ppt YoY Group operating margin dropped by 6.7ppt YoY Operating Profit Analysis (For the year ended 31 December) (HK$ million) 0 -500 (497.6) -1000 (819.5) -1500 +581.7 -2000 -1,413.1 +509.5 -2500 2015 Decline in Decrease in Decre
Slide 12: Inventory Level and Turnover Days
Inventory Level and Turnover Days Group inventory turnover days was 201 days, decreased by 17 days (2015: 218 days) Group inventory level continued to decrease to HK$1,414.5 million, a reduction of HK$677.1 million, as compared to that of 2015 year end After reviewing inventory level, the Grou
Slide 13: Working Capital and Capital Expenditure
Working Capital and Capital Expenditure Capital expenditure greatly reduced - Substantial reduction in new store openings in 2016 2016 2015 Change Average Inventory Turnover (days) 201 218 -17 Average Debtors Turnover (days) 13 12 +1 Average Creditors Turnover (days) 130 113 +17 Cash Conversion Cy
Slide 14: Other Key Financial Indicators
Other Key Financial Indicators The Group improved its net cash position The Group’s net cash was increased by HK$238.0 million in 2016 to HK$692.8 million, from HK$454.8 million, benefited from aggressive liquidation of aged inventories (HK$ million) As at 31 Dec 2016 As at 31 Dec 2015 Change Ca
Slide 15: Operational Highlights
Operational Highlights
Slide 16: Group Sales Network
Group Sales Network Number of Points-of-Sales (POS) 6,757 (+55) 355(-28) 5,930 (-827) 333(-22) 4,900 (-1,030) 302(-31) 6,402 (+83) 5,597 (-805) 4,598 (-999) Store rationalisation 2014 2015 2016 - Core Brands had a net reduction of 999 POS, bringing the total to 4,598 Core Brands Other Brands - Oth
Slide 17: Core Brands Sales Network
Core Brands Sales Network Net reduction of 999 POS (including 810 directly-managed stores and 189 franchised stores) Number of POS As at 31 Dec As at 31 Dec Change % Change 2016 2015 Directly-managed POS 4,246 (92%) 5,056 (90%) -810 -16.0% Franchised POS 352 (8%) 541 (10%) -189 -34.9% Core Brands
Slide 18: Core Brands Sales Network (cont'd)
Core Brands Sales Network (cont’d) Maintained greater representation in lower tier cities As at 31 Dec 2016 As at 31 Dec 2015 Change % Change No. % No. % Tier 1 Cities 514 11% 637 11% -123 -19.3% Tier 2 Cities 1,125 25% 1,376 25% -251 -18.2% Tier 3 Cities 890 19% 1,030 18% -140 -13.6% Tier 4-6 Cit
Slide 19: Core Brands Business - SSSG
Core Brands Business - SSSG Same-store sales growth was -11.7% for the year of 2016 Same-store 1Q 2Q 3Q 4Q FY sales growth 2016 -6.2% -15.9% -13.0% -10.1% -11.7% Average selling price decreased by 4.8% to RMB159 (2015: RMB167) 19
Slide 20: Core Brands Business - Performance
Core Brands Business - Performance (HK$ million) 2016 2015 Change Turnover 5,936.0 7,720.1 -23.1% Gross profit 2,808.2 4,149.2 -32.3% Gross margin 47.3% 53.7% -6.4ppt Operating loss (744.1) (362.4) +105.3% Operating margin -12.5% -4.7% -7.8ppt (For the year ended 31 December) Core Brands’ turnover
Slide 21: Other Brands Business - Performance
Other Brands Business - Performance (HK$ million) 2016 2015 Change Turnover 813.0 832.7 -2.4% Gross profit 480.1 505.6 -5.0% Gross margin 59.0% 60.7% -1.7ppt Operating profit 7.8 1.3 +500.0% Operating margin 1.0% 0.2% +0.8ppt (For the year ended 31 December) Turnover of Other Brands business decre
Slide 22: 2017 Outlook
2017 Outlook To turn a new page, and take on a new look……
Slide 23: New Logo
New Logo
Slide 24: New Logo
SHOEBOX New Logo
Slide 25: Our plan for 2017
To drive differentiation, and meet more sophisticated customers’ expectation, this is our plan for 2017: i. New logo ii. New store image iii. Initiate crossover projects iv. New marketing approach 25
Slide 26: 1. Brand Revamp
1. Brand Revamp Appointed professionals to lead the design process for the revamp of brand identities Place emphasis on the “stylish and chic” elements to enhance our appeal to young and more discerning customers today Tell customers that we are “Different” through a young, contemporary, trend
Slide 27: 1. Brand Revamp (cont'd): Initiate crossover projects
1. Brand Revamp (cont’d) iii. Initiate crossover projects Crossover partners: upcoming star fashion brands, online key-opinion leaders and celebrities Target different niche group of customers with different crossover partners Create the hip brand perception and broaden the appeal of Daphne 27
Slide 28: Opening Ceremony
Opening Ceremony A star fashion brand from USA, that is highly regarded by fashionistas
Slide 29: 1. Brand Revamp (cont'd): New Approach of Marketing
1. Brand Revamp (cont’d) iv. New Approach of Marketing Conduct a thorough review to enhance cost-efficiency in marketing Place emphasis on online marketing Leverage the upcoming crossover projects, and seasonal product launches Expand and restructure the marketing team to enhance marketing e
Slide 30: 2. Product Upgrade
2. Product Upgrade Make investment in product upgrade including design, and product quality Appoint a prominent designer with rich experience in renowned global and regional women’s shoes brands to lead the Group’s design team Expand and reorganise the product design team Offer more diversit
Slide 31: 2. Product Upgrade (cont'd)
2. Product Upgrade (cont’d) Increase the competitiveness by enhancing the brand proposition Product Strengthen product differentiation vs. local regional brands Upgrade Offer opportunity to increase ASP in future 31
Slide 32: 3. Boost Performance from Channel Management
3. Boost Performance from Channel Management May consider net store opening in 2017 if retail market becomes more stable in coming months Continue to reduce the ratio of street stores Pursue higher penetration in channels offering more stable performance and foot traffic Consider a gradual e
Slide 33: 4. Expand E-commerce Business
4. Expand E-commerce Business Accelerate the integration of online and offline businesses Increase pre-sale offers Drive more interactions with online customers to increase loyalty and sales Enhance cross-functional efforts to improve performance of e-commerce 33
Slide 34: 5. Enhance Shopping Experience
5. Enhance Shopping Experience Place emphasis on customer service Invest in people, both frontline and back office, to enhance staff’s capability and efficiency - Build a talent pool - Enrich the training programmes and mystery shoppers’ programmes - Enhance various incentive schemes 34
Slide 35: 2017 Strategies
2017 Strategies Stores E-commerce (Offline) (Online) 35
Slide 36: 2017 — "Be Focused"
2017 — “Be Focused” Invest in key areas Drive differentiation Increase competitiveness Enhance shopping experience Disciplined and diligent execution 36
Slide 37: Target Vision
Target Revive the growth path and achieve turnaround ASAP Vision To be the most popular mass-fashion brand with leading market share and customer reputation , whilst creating superior shareholder’s return 37
Slide 38: Thank You
DAPHNE INTERNATIONAL HOLDINGS LIMITED EBARRARRER AR AA 38
Slide 39: Investor Relations Contact
Investor Relations Contact Ms. Macy Leung +852 2367 9022 macyleung@daphneholdings.com 39
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