361 Degrees International Ltd. · HKEX:1361
361 Degrees International — FY2013 Earnings Presentation
21 slides from 361 Degrees International's earnings presentation, March 2014
Slide 1: 361 Degrees International Limited FY2013 Full Year Results
361 Degrees International Limited FY2013 Full Year Results March 2014
Slide 2: Disclaimer
DISCLAIMER These presentation slides have been prepared by 361 Degrees International Limited (the “Company”) solely for us during its presentation held in connection with its results for the year ended 30 June 2013 and may not be reproduced or redistributed. In particular, these presentation slides
Slide 3: Agenda
AGENDA Operational Highlights Financial Highlights Outlook and Strategies for 2014 Q&A
Slide 4: Operational Highlights
Operational Highlights
Slide 5: Sportswear Industry Poised for a Recovery Post 2014
SPORTSWEAR INDUSTRY POISED FOR A RECOVERY POST 2014 2012 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 SSSG(1) 6.9% 5.1% 4.1% 4.3% -1.5% -0.8% Flat 1.5% Channel Inventories(2) 4.1x 4.3x 4.1x 4.1x 4.3x 4.4x 4.4x 4.2x Wholesale Orders y-o-y 23% 23% -10% -26% -23% -23% -19% -17% Wholesale Discount 58% 58% 58% 58% 60% 6
Slide 6: Emphasis on Retail Management for Sustained Profitability
EMPHASIS ON RETAIL MANAGEMENT FOR SUSTAINED PROFITABILITY Wholesale pricing structure was revised in 2013 to offer retailers better No. of Franchised Outlets cost prices. Rack Subsidy program continued in 2013 for qualified stores (2013: RMB170 mil; 2012: RMB203 mil) to improve image. About 60%
Slide 7: 2014 a Key Year for the 361° Brand with YOG and Asian Games
2014 A KEY YEAR FOR THE 361°BRAND WITH YOG AND ASIAN GAMES Key Strategic Partners Major Event Sponsorships Celebrity Athlete Endorsements Kevin Love Stephon Marbury The collaboration with CCTV5, the only national sports channel continued Sun Yang throughout 2013. Celebrity athletes also added star
Slide 8: Maximum Flexibility Between In-House Production and OEM
MAXIUMUM FLEXIBILITY BETWEEN IN-HOUSE PRODUCTION AND OEM Jiangtou Wuli Production Capacity Footwear 12 mil pieces / No Apparel Footwear 9 mil pieces / 2 Apparel Workshops Production workers 1,400 3,200 Cost of Investment RMB 55 mil RMB 800 mil 361° enjoys operational advantages with both factories
Slide 9: 361° Kids a Strong Growth Driver in a Fragmented Market
361°KIDS A STRONG GROWTH DRIVER IN A FRAGMENTED MARKET This is an independently-run unit leveraging only on the 361° brand and its distributorship network. Its target customer group is between the ages of 5 and 12. The business has grown very quickly from its inception in 2009 and by December 20
Slide 10: Financial Highlights
Financial Highlights
Slide 11: FY2013 Key Financial Highlights
FY2013 KEY FINANCIAL HIGHLIGHTS For the year ended 31 December (RMB mn unless indicated otherwise) 2013 2012 Change (%) Turnover 3,583.5 4,950.6 -27.6 Operating profit 352.2 864.4 -59.3 Profit attributable to equity shareholders 211.3 707.2 -70.1 Basic EPS (RMB cents) 10.2 34.2 -70.2 Interim dividen
Slide 12: Revenue Fell Almost 28% Whilst Overall GP Margin Largely Stable
REVENUE FELL ALMOST 28% WHILST OVERALL GP MARGIN LARGELY STABLE Revenue by product Gross margins by product (RMB ’000) 2013 2012 Change (%) 2013 2012 Change Footwear 1,521,032 2,212,306 -31.2 Footwear 41.0% 40.4% +0.6 p.p. Apparel 1,575,784 2,279,433 -30.9 Apparel 38.1% 39.3% -1.2 p.p. Accessories 6
Slide 13: Footwear and Apparel Revenues Down Due to Lower Volumes and ASP
FOOTWEAR AND APPAREL REVENUES DOWN DUE TO LOWER VOLUMES AND ASP Volume by Product Category ASP by Product Category (’000) (RMB) 2013 2012 Change (%) 32,000 28,724 28,000 23,213 Footwear 93.7 106.3 -11.9 24,000 20,807 20,000 16,226 Apparel 67.9 79.4 -14.5 16,000 12,000 7,114 Accessories 12.5 14.6 -14
Slide 14: Total Operating Costs Shed 16% but Disproportionate to Fall in Revenue
TOTAL OPERATING COSTS SHED 16% BUT DISPROPORTIONATE TO FALL IN REVENUE Selling and Distribution Costs Administrative Costs RMB mn 2013 2012 Change (%) RMB mn 2013 2012 Change (%) A&P 405.2 523.5 -22.6 R&D 85.8 86.6 -0.9 Rack Subsidies 170.4 203.0 -16.1 Debt 152.0 -- -- Impairment Salary 26.4 31.7 -1
Slide 15: Consolidated Balance Sheet at 31 December
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER (RMB ‘000) 2013 2012 Non-current assets Fixed assets 1,072,229 1,057,803 Other financial asset 17,550 17,550 Deposits and prepayments 121,148 142,140 Deferred tax assets 92,256 61,730 1,303,183 1,279,223 Current assets Inventories 409,358 460,715 Trade debto
Slide 16: A Worsening Position in Trade Debtors Necessitated an Impairment Charge
A WORSENING POSITION IN TRADE DEBTORS NECESSITATED AN IMPAIRMENT CHARGE RMB ‘000 At 31 Dec 2013 At 31 Dec 2012 Trade debtors 2,022,705 1,967,560 The Group failed to make good progress on Less: Allowance for doubtful debts (191,521) (39,520) collection of old trade receivables in 2013. About 18%
Slide 17: Group Remains Financially Sound but Most Cash Onshore
GROUP REMAINS FINANCIALLY SOUND BUT MOST CASH ONSHORE RMB ‘000 Effective Interest Rate (%) At 31 Dec 2013 At 31 Dec 2012 2013 2012 Pledged bank deposits 37,900 95,730 0.50-3.30 0.50-3.30 Deposits with bank with maturities >3 months 321,747 590,791 1.50-2.86 1.12-5.70 Cash and cash equivalents 2,494,
Slide 18: Dissecting Details of the Convertible Bonds
DISSECTING DETAILS OF THE CONVERTIBLE BONDS Liability component Redemption Redemption Conversion Total of convertible call option put option option RMB ‘000 bonds At 31 December 2012 753,062 (16,458) 51,992 120,984 909,580 Finance charges amortized during the year 76,923 -- -- -- 76,923 Interest pai
Slide 19: Outlook and Strategies for 2014
Outlook and Strategies for 2014
Slide 20: A Positive Outlook for 2014 as Fundamentals Remain Strong
A POSITIVE OUTLOOK FOR 2014 AS FUNDAMENTALS REMAIN STRONG 2014 will show signs of a gradual recovery in the market but may only impact FY2015 results Long-term fundamentals of the industry remain strong with urbanization and Industry Outlook rising income levels gathering momentum Relaxation o
Slide 21: Q&A
Q&A
361 Degrees International — FY2013 Earnings Presentation on 6ix