Daphne International Holdings Limited · HKEX:210
Daphne International — H1 2016 Earnings Presentation
29 slides from Daphne International's earnings presentation, Aug 24, 2016
Slide 1: 2016 Interim Results Presentation
2016 Interim Results Presentation 24 August 2016
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: 1H 2016 Overview
1H 2016 Overview Group turnover decreased by 22.3% (18.5% at constant currency) Turnover of Core Brands decreased by 22.8% (19.1% at constant currency) Negative same-store sales growth of 11.7% YoY Number of Group’s points-of-sale (“POS”) decreased by 16.8% YoY Net closure of Group’s POS was 466 dur
Slide 4: Financial Review
2 os e—o—o—e al So 3. 2 eS 9 ©—e—e—e
Slide 5: Group Financial Highlights
Group Financial Highlights (HK$ million) 1H 2016 1H 2015 Change Turnover 3,400.8 4,374.3 -22.3% Gross profit 1,884.2 2,654.6 -29.0% Operating (loss)/profit (249.5) 11.0 N/A (Loss)/profit attributable to owners of the (163.6) 2.5 N/A Company Basic EPS (HK cents) (9.9) 0.2 N/A Interim dividend per sha
Slide 6: Challenges Faced by the Group
Challenges Faced by the Group Group turnover was affected by: Soft consumer demand resulted from further economic slowdown in China Store traffic dampened by frequent rainstorms and flooding The YoY decrease of 16.8% in the number of POS for the Group Negative same-store sales growth of 11.7% Intens
Slide 7: Group Turnover Breakdown
Group Turnover Breakdown (For the six months ended 30 Jun) 2016: HK$3,400.8 million 2015: HK$4,374.3 million 0% 1% 11% 9% 89% 90% Core Brands business* Other Brands business OEM business *Core Brands business refers mainly to the operations under the brands “Daphne” and “Shoebox” in Mainland China 7
Slide 8: Group Gross Profit
Group Gross Profit Group gross profit margin (“GPM”) decreased by 5.3 ppt YoY, mainly due to: Increased weighting of aged products in the sales mix Aged products sold at lower price Highly promotional market Product cost higher due to enhanced quality Benefit from the increase in inventory write-bac
Slide 9: Group OPEX
Group OPEX Decreased by 18.3% YoY Group OPEX decreased broadly in line with the decline in turnover (HK$ million) 2,598.8 2,667.2 2,670.7 2600 2,423.1 -18.3% 2400 2200 2000 2,182.1 1800 1600 1400 1200 1000 800 2012 1H 2013 1H 2014 1H 2015 1H 2016 1H Operating Expense 9
Slide 10: Inventory Level and Turnover Days
Inventory Level and Turnover Days Group inventory turnover days was 232 days (2015: 238 days) Group inventory level continued to decline (HK$ million) Group Inventory Level 2,400 2,273.3 2,251.5 2,200 2,091.6 2,000 1,769.0 1,800 1,600 1,400 1,200 1,000 31 Dec 2014 30 Jun 2015 31 Dec 2015 30 Jun 2016
Slide 11: Inventory Optimisation
Inventory Optimisation Put emphasis on clearance of aged inventory Emphasis was made at clearance outlets and special sales events to increase the sales of aged products Increased the wholesales business for aged products Earlier start of promotional activities Increased usage of online discount sho
Slide 12: Working Capital and CAPEX
Working Capital and CAPEX CAPEX decreased by 53.8% YoY Less store openings in 1H 2016 1H 2016 1H 2015 Change Average Inventory Turnover (days) 232 238 -6 Average Debtors Turnover (days) 14 14 - Average Creditors Turnover (days) 124 105 +19 Cash Conversion Cycle (days) 122 147 -25 CAPEX (HK$ million)
Slide 13: Other Key Financial Indicators
Other Key Financial Indicators The Group maintains net cash position As at As at (HK$ million) Change 30 Jun 2016 31 Dec 2015 Cash and bank balances 592.2 1,075.6 -44.9% Bank loans 304.6 620.8 -50.9% Equity attributable to owners of 4,207.8 4,462.6 -5.7% the Company Current ratio (times) 3.1 2.4 +0.
Slide 14: Operational Highlights
o_o _e—e eo —~~o a Se. 2 ba eS be o 2 ws be @ ba os 2 J 2 3 & ¢ Q P & P . . be Bf t erational Highlights 4 ry 4 & ? & P & ? Q @ © o Q @ Q = 2 @ a x 2. Ss °. = 3° © eS o—eo—c—_e@ 9
Slide 15: Group Sales Network
Group Sales Network Continued the rationalisation of stores Number of POS Core Brands had a net reduction of 6,569 (-188) 450 POS, bringing the total to 5,147 348 (-7) 5,930 (-639) Other Brands had a net reduction of 5,464 (-466) 333 (-15) 16 POS 317 (-16) 6,221 (-181) 5,597 (-624) 5,147 (-450) 30 J
Slide 16: Core Brands Sales Network
Core Brands Sales Network Net reduction of 450 POS (including 400 directly-managed stores and 50 franchised stores) Stepped up store closures in 2Q 2016 Number of POS As at As at As at 30 Jun 31 Dec % % Change 30 Jun Change 2016 2015 Change Change 2015 Directly-managed 4,656 (90%) 5,056 (90%) -400 -
Slide 17: Core Brands Sales Network (cont’d)
Core Brands Sales Network (cont’d) The Group maintained greater representation in lower tier cities As at 30 Jun As at 31 Dec 2016 2015 Change No. % No. % Tier 1 Cities 588 11% 637 11% -49 -7.7% Tier 2 Cities 1,260 25% 1,376 25% -116 -8.4% Tier 3 Cities 949 18% 1,030 18% -81 -7.9% Tier 4-6 Cities 2,
Slide 18: Core Brands Business - SSSG
Core Brands Business - SSSG Average selling price decreased by 4.2% to RMB161 Change in sales mix Aged products sold at a lower price 1Q 2016 2Q 2016 1H 2016 Same store sales growth -6.2% -15.9% -11.7% 18
Slide 19: Core Brands Business - Performance
Core Brands Business - Performance (HK$ million) 1H 2016 1H 2015 Change Turnover 3,113.6 4,034.9 -22.8% Gross profit 1,649.7 2,376.5 -30.6% Gross profit margin 53.0% 58.9% -5.9 ppt Operating (loss)/profit (236.4) 41.8 N/A Operating profit margin -7.6% 1.0% -8.6 ppt Turnover of Core Brands business d
Slide 20: Other Brands Business
Other Brands Business (HK$ million) 1H 2016 1H 2015 Change Turnover 388.8 389.0 -0.1% Gross profit 221.2 249.0 -11.2% Gross profit margin 56.9% 64.0% -7.1 ppt Operating profit 1.7 5.0 -66.0% Operating profit margin 0.4% 1.3% -0.9 ppt Turnover of Other Brands business was Mid- to high-end brands’ per
Slide 21: E-Commerce Business
E-Commerce Business Continued to deliver strong turnover growth and remained profitable Increased its sales contribution to the Group’s turnover Brand equity of Daphne remained strong in China as reflected from its online leadership in women’s footwear More online discount sites were deployed to sup
Slide 22: Outlook
° 3. x Q , oie Outlook o 2 Q
Slide 23: Focus of Improvement Plan
Focus of Improvement Plan Focus on cost reduction and improving margins Key initiatives include: Progress made in 1H 2016 Next Steps Store rationalisation Net closures of 400 directly- Continue to have net managed stores under Core closures until the Group Brands resumes profitability Total op
Slide 24: Focus of Improvement Plan (cont’d)
Focus of Improvement Plan (cont’d) Progress made in 1H 2016 Next Steps Inventory Reduction of inventory level Continue to reduce the rationalisation and by 21.4% as compared to inventory level and optimisation that at 30 June 2015 turnover days Improvement of 6 days in Put emphasis on invent
Slide 25: Focus of Improvement Plan (cont’d)
Focus of Improvement Plan (cont’d) Progress made in 1H 2016 Next Steps Personnel Group’s total staff cost Continue to make rationalisation decreased significantly adjustment according to size of store network Streamline the workflows and organisational structure both at stores and back offices
Slide 26: Focus of Improvement Plan (cont’d)
Focus of Improvement Plan (cont’d) Progress made in 1H 2016 Next Steps Expand e-commerce Achieved growth higher than Continue to strengthen the that of overall e-commerce strategic relationship with both business sector* key and emerging online Increased its contribution to the partners Group’
Slide 27: Focus of Improvement Plan (cont’d)
Focus of Improvement Plan (cont’d) Progress made in 1H 2016 Next Steps Pursue Introduced a new multi-brand Make adjustments in various “differentiation” store format aspects of multi-brand stores Introduced combined and large to foster its successful strategy, and adopt store format growth a m
Slide 28: Thank you ... Q&A session
o_o _e—e eo —~~o a Se. 2 ba eS be So eS ws be @ ba os 2 fo Q - g ¢ Q P & f hank you t T } > bd : 2 L P t .++...Q&A session $ & P & 2 Q 2? ‘2 D Q = 2 @ a x 2. Ss °. = eo - eS o—eo—c—_e@ 9
Slide 29: Investor Relations Contact
Investor Relations Contact Ms. Macy Leung +852 2367 9022 macyleung@daphneholdings.com 29
Daphne International Holdings — H1 2016 Earnings Presentation on 6ix