Daphne International Holdings Limited · HKEX:210
Daphne International — FY2014 Earnings Presentation
53 slides from Daphne International's earnings presentation, Mar 25, 2015
Slide 1: 2014 Annual Results Presentation
2014 Annual Results Presentation 25 March 2015
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: Challenges in 2014
Challenges in 2014 GDP growth of the China market continued to slow down Consumer sentiment remained soft Increasing competition from small regional retail chains Intense online competition Inflationary pressure in operating costs, especially labour Excess inventory to be managed Absen
Slide 4: Major Progress in 2014
Major Progress in 2014 Stepping up adaptation for China’s slower growth 4
Slide 5: Comparable Group Turnover Despite Sluggish Market
Comparable Group Turnover Despite Sluggish Market Group turnover remained stable despite sluggish market Full-year same store sales decline narrowed from -10.4% in 2013 to -3.4% in 2014 Despite lower average selling price “ASP”, Core Brands sales volume increased marginally, expanding the cust
Slide 6: Improved Inventory Level
Improved Inventory Level Material reduction in old stocks More balanced inventory mix reduces destocking pressure Inventory turnover days improved to 194 days (2013: 198 days) Overall inventory value reduced significantly Reduced overall inventory value helps preserve cash for the Group’s
Slide 7: Enhanced Brand Image
Enhanced Brand Image New celebrity-driven marketing strategy successfully revitalised brand image, improved store traffic, and supported e-commerce growth Launched cross-over products with top celebrities and well-known brands 7
Slide 8: Strong Digital Brand Equity
Strong Digital Brand Equity Daphne is the only local brand among top 5 in Baidu’s brand digital equity survey (品牌數字資產 榜) 2014 in Apparel & Accessories category, after Nike, Adidas, Zara and H&M The no. 1 ladies’ footwear brand in China Ranked no. 5 in the overall ranking, up from no. 8 in 2013
Slide 9: Store Renovation
Store Renovation Renovated over 600 stores to enhance store image and increase competitiveness 9
Slide 10: Fast Growth of E-Commerce Business
Fast Growth of E-Commerce Business Annual turnover of e-commerce nearly doubled 10
Slide 11: Fast Growth of E-Commerce Business (cont'd)
Fast Growth of E-Commerce Business (cont’d) Sales on Alibaba’s Singles’ Day 2014 almost doubled, and ranked top in the ladies’ shoes category More frequent and in-depth partnership with major e-commerce platforms (e.g. Tmall, VIP.com and JD.com) Broadened online customer base via more interact
Slide 12: Invested to Build Platform for Future Growth
Invested to Build Platform for Future Growth Strived to contain rising operating expenses under inflationary environment Group operating expense growth slowed down from 8.8% in 2013 to 2.7% in 2014 Variance Analysis 600 500 (101) 520 HK$ million 400 (127) 300 (30) 200 262 100 0 2013 Operating Pr
Slide 13: Financial Review
FINANCIAL REVIEW Seeee@ z2me eR BR Bh AA DAPHNE INTERNATIONAL HOLDINGS LIMITED
Slide 14: Group Financial Highlights
Group Financial Highlights (HK$ million) 2014 2013 YoY Change Turnover 10,355.6 10,446.5 -0.9% Gross profit 5,737.6 5,838.3 -1.7% Operating profit 262.4 520.2 -49.6% Profit attributable to shareholders 176.0 329.1 -46.5% Basic EPS (HK cents) 10.7 20.0 -46.5% Dividend per share (HK cents) 3.5 8.0 -56
Slide 15: Group Turnover
Group Turnover Group Turnover Breakdown Core Brands business remains the largest (For the 12 months ended 31 December) contributor to Group turnover HK$10,355.6 million Solid growth in Other Brands business, turnover of which increased to 8% of Group 2014 90% 8% 2% turnover HK$10,446.5 million 2
Slide 16: Group Profit Margins
Group Profit Margins Group gross profit margin decreased by 0.5 ppt YoY Aggressive clearance of old stocks led to higher sales mix of off-season products and more inventory provision write-back Gross profit margin of Other Brands business improved Group operating profit margin decreased by 2
Slide 17: Inventory Turnover Days & Working Capital
Inventory Turnover Days & Working Capital Group inventory turnover days was 194 days, down by 4 days YoY Aggressive clearance of off-season items resulted in a significant decline in overall inventory value Creditor turnover days lengthened by 18 days to 103 days Improvement in efficiency of
Slide 18: Other Key Financial Indicators
Other Key Financial Indicators Cash and bank balances increased by 11.2% to HK$ 1,528.7 million Reduction in overall inventory value Improvement in efficiency of working capital management Maturity date of convertible bonds with conversion price at HK$3.5 was extended to 24 April 2015 and no
Slide 19: Historical Financial Performance
Historical Financial Performance Turnover Basic EPS (For the 12 months ended 31 December) (For the 12 months ended 31 December) (HK$ million) (HK cents) 12,000 10,529.1 10,446.5 10,355.6 70 57.0 58.1 10,000 60 8,576.8 50 41.1 8,000 6,623.8 40 6,000 30 4,000 20.0 20 10.7 2,000 10 0 0 2010 2011 2012 2
Slide 20: Operational Highlights
OPERATIONAL HIGHLIGHTS Seeee@ z2me eR BR Bh AA DAPHNE INTERNATIONAL HOLDINGS LIMITED
Slide 21: Group Sales Network
Group Sales Network Total Number of Points-of-Sales (POS) 6,881 (+716) 6,702 (-179) 6,757 (+55) 512 383 355 6,369 6,319 6,402 31/12/2012 31/12/2013 31/12/2014 Core Brands Other Brands 21
Slide 22: Core Brands Sales Network
Core Brands Sales Network Proportion of directly-managed stores increased to 90% Net addition of 83 POS (including net opening of 257 directly-managed stores and net closure of 174 franchised stores) Stepped up opening of directly-managed stores in 2H as prompted by improved performance of new
Slide 23: Core Brands Sales Network (cont'd)
Core Brands Sales Network (cont’d) The Group maintained greater representation in lower tier cities As at 31 Dec 2014 As at 31 Dec 2013 No. % No. % Change % Change Tier 1 Cities 731 12% 703 11% +28 +4.0% Tier 2 Cities 1,607 25% 1,394 22% +213 +15.2% Tier 3 Cities 1,238 19% 992 16% +246 +24.8% Tier
Slide 24: Core Brands Business - Performance
Core Brands Business - Performance (HK$ million) 2014 2013 YoY Change Turnover 9,492.6 9,561.3 -0.7% Gross profit 5,103.3 5,344.6 -4.5% Gross margin 53.8% 55.9% -2.1 ppt Operating profit 225.2 616.2 -63.5% Operating margin 2.4% 6.4% -4.0 ppt Turnover of Core Brands business comparable Operating
Slide 25: Core Brands Business - SSSG
Core Brands Business - SSSG Same store sales improved to -3.4% (last year:-10.4%) 2014 1Q 2Q 1H 3Q 4Q FY Same store sales growth -9.5% -2.4% -5.5% +6.3% -7.5% -3.4% Average selling price decreased by 4.9% to RMB 175 Dragged by aggressive clearance of aged products 25
Slide 26: Other Brands Business
Other Brands Business (HK$ million) 2014 2013 YoY Change Turnover 838.4 731.8 +14.6% Gross profit 525.3 405.6 +29.5% Gross margin 62.7% 55.4% +7.3 ppt Operating profit /(loss) 17.9 (86.1) From loss to profit Operating margin 2.1% (11.8%) +13.9 ppt Driven by strong growth in e-commerce, turnover of
Slide 27: Outlook
OUTLOOK Seeee@ z2me eR BR Bh AA DAPHNE INTERNATIONAL HOLDINGS LIMITED
Slide 28: Retail Market Outlook in 2015
Retail Market Outlook in 2015 • Recent increase in minimum wage boosts purchasing power of mass-segment consumers • Urbanisation continues and leads to further Negative factors expansion of the mass market segment • Raw material costs likely to fall, which will help lower product cost and improve gr
Slide 29: Major Strategic Initiatives in 2015
Major Strategic Initiatives in 2015 Further Improving Market Margins Segmentation Accelerating E-commerce Development 29
Slide 30: Further Market Segmentation
Further Market Segmentation Jun Ji-Hyun Cecilia Liu Nicholas Tse Puff Kuo 全智賢 劉詩詩 謝霆鋒 郭雪芙 Parties & Evening Charm Cosmopolitan Soft & Comfort Daphne Young Stylish, vogue Comfortable, Young, Trend-setting, soft energetic, sexy, enchanting casual, trendy Gao Yuanyuan 高圓圓 Ondul Hello Kitty Dulala杜拉拉 El
Slide 31: Further Market Segmentation
Further Market Segmentation Add more styles to its product range to attract customers with different preferences and address various social occasions Expand the price range to target a wider scope of customers Enhance store and product display to include 7 product lines / sub-brands Drive fu
Slide 32: New Commercials for Daphne
New Commercials for Daphne 32
Slide 33: Further Market Segmentation (cont'd)
Further Market Segmentation (cont’d) Appoint Richie Jen (任賢齊) as Drive for channel diversification Shoebox’s brand ambassador Put emphasis on high-growth product categories Expand product offerings to capture different types of young customers 33
Slide 34: Accelerating E-commerce Development
Accelerating E-commerce Development To address the popularity of e-shopping among young customers, and offer shopping convenience to a broader customer base, the Group will allocate more resources to and accelerate the development of e-commerce business, including online shopping, mobile shopping,
Slide 35: Accelerating E-commerce Development (cont'd)
Accelerating E-commerce Development (cont’d) Strive to replicate the success factors of last Singles’ Day event to overall e-commerce operation Improve efficiency of e-commerce operation Strengthen partnership with major e-commerce online shopping platforms 35
Slide 36: Improving Margins
Improving Margins Strengthen inventory management Healthier inventory mix, after aggressive stock clearance in 2014, gradually reduces further destocking pressure Raise average selling price and gross margin by improving sales mix Healthier inventory level and more balanced sales mix will co
Slide 37: Daphne…
Daphne… … Is No. 1 ladies’ footwear brand in China (mass market) … Has the largest distribution network in the industry (for a single brand) … Ranked 1st in ladies’ footwear sector in Brand Digital Equity Ranking 2014, Baidu’s proprietary consumer brand survey … Is the only local brand ranking among
Slide 38: Vision
Vision A leading brand management company that provides ladies and their family members with trendsetting and quality products “The Group is committed and confident to strengthen its competitiveness, and achieve growth in mid-to-long term” 38
Slide 39: Thank You
THANK YOU — Q&A Session alt, — ate z2me eR BR Bh AA DAPHNE INTERNATIONAL HOLDINGS LIMITED
Slide 40: Investor Relations Contact
Investor Relations Contact Ms. Macy Leung +852 2367 9022 macyleung@daphneholdings.com 40
Slide 41: Appendix
APPENDIX Seeee@ z2me eR BR Bh AA DAPHNE INTERNATIONAL HOLDINGS LIMITED
Slide 42: Growing Market Potential of China
Growing Market Potential of China Continued urbanisation Increasing per capita Growing domestic • Government policies to embark on a income consumption new phase of urbanisation • Per capita disposable income on • Rebalancing of China economy • Continued urbanisation drives the rise favours growth o
Slide 43: China Women's Footwear Market Potential
China Women’s Footwear Market Potential 2013 Per Capita Women’s Footwear Consumption Spending (USD) (Female Population Aged 15 or Above) 700 610.2 600 500 400 300 277 183.6 193.8 201.1 190.8 200 107.8 106.4 100 48.5 0 China Hong Kong Japan SingaporeSouth Korea US France Germany UK Data Source: Eurom
Slide 44: China Women's Footwear Market Potential (cont'd)
China Women’s Footwear Market Potential (cont’d) China Women’s Footwear Market Growth Forecast (RMB million) +6.0% CAGR: 6.4% +6.5% +6.2% 250,000 +7.0% 233,830 +7.3% 220,595 +10.5% 207,716 195,039 200,000 182,279 169,878 153,736 150,000 100,000 50,000 0 2012 2013 2014E 2015E 2016E 2017E 2018E Data s
Slide 45: Company Overview
Company Overview One of the leading women’s footwear retailers in China Engage in product design & development, production, distribution, retail, and brand management Has 6,757 points-of-sale (POS) (as at 31 December 2014) The Group’s core brands (“Daphne” and “ShoeBox”) are distributed in 6
Slide 46: Major Brand Portfolio
Major Brand Portfolio Brand Ownership ASP (RMB) Own brand (product) 200 – 300 Core Brands Own brand (channel) <200 Own brand (product) Sole distributorship Mid- to (international brand) High- end 400 – 1,200 Brands Sole distributorship (international brand) Own brand (channel) 46
Slide 47: Daphne Group's Turnover Growth
Daphne Group’s Turnover Growth (HK$ million) 12,000 11,000 10,529.1 10,446.5 10,355.6 10,000 9,000 8,576.8 8,000 7,000 6,623.8 5,832.0 6,000 5,289.3 5,000 3,853.6 4,000 3,093.1 3,000 2,622.7 2,000 1,407.0 1,788.5 933.1 955.7 1,000 384.4 492.9 597.3 672.8 329.1 82.9 176.2 254.6 291.6 176.0 0 2003 200
Slide 48: Daphne Group's Market Share
Daphne Group’s Market Share China Women’s Footwear Market in 2013: RMB 169.9 billion 5.5% Daphne Group Data source: Euromonitor 48
Slide 49: Competitive Advantages
Competitive Advantages Leading retailer in women’s footwear in China with strong own-brands, “Daphne” and “Shoebox” Unparalleled leadership position in the mass market Extensive nationwide sales network with over 6,700 outlets penetrating into even 6th tier cities Vast directly-managed store
Slide 50: E-commerce platform
E-commerce platform Omni-channel Distribution Model Physical Stores Virtual Stores Official Online Store Third-party marketplaces (www.daphne.com.cn) Tmall JD.com Dangdang Yihaodian VIP.com CRM enables targeted marketing to drive sales 50
Slide 51: Growth Drivers
Growth Drivers More focused sales operation Increasing the depth and breadth of marketing More agile and efficient supply chain management Strengthening brand management Further enhancement in product design and Strengthen presence in e-commerce development 51
Slide 52: Shareholding Structure
Shareholding Structure As at 31 December 2014 Lucky Earn Top Glory Assets Pushkin Holding Int’l Ltd. Ltd. Ltd. (held by Mr. CHANG Chih- Premier China Ltd. Public (held by Mr. CHEN Tommy (held by Mr. CHEN Ying- Kai, Mr. CHANG Chih- Yi-Hsun and his family) Chieh and his family) Chiao and their family)
Slide 53: Group Milestones
Group Milestones • Retail POS exceeded 6,700 • Retail POS exceeded 6,000 • Entered mid- to high-end ladies’ footwear market through acquisition of Full Pearl Group • Exited sportswear market • Renamed as “Daphne International Holdings Ltd.” • Established 2nd own brand “ShoeBox” • Entered sportswear
Daphne International Holdings — FY2014 Earnings Presentation on 6ix