Giordano International Limited · HKEX:709
Giordano International — H1 2013 Earnings Presentation
39 slides from Giordano International's earnings presentation, Aug 13, 2013
Slide 1: 2013 Interim Results
2013 Interim Results 13 August 2013
Slide 2: Overview
Overview PATS up 10% excluding non-recurring disposal gains 16.0 HK cents interim dividend declared (2012: 15.0 HK cents) Middle East brought additional HK$35 million profit in 1H13 5% accounting sales growth, brand sales down 2% in 1H13 Sales decline in China, Taiwan and Singapore with sa
Slide 3: Operations Highlights – Group
Operations Highlights – Group Underlying Profit Attributable to Shareholders (PATS) up 10% (In HK$ millions) 1H13 1H12 Variance Sales 2,841 2,698 +5% Gross margin 62.1% 58.0% +4.1pp Operating expenses (1,392) (1,241) +12% Comparable operating expenses (without Middle East) (1,261) (1,241) +2% Net pr
Slide 4: PATS Reconciliation
PATS Reconciliation (HK$ millions) 400 350 35 8 8 300 (43) (3) (17) 250 200 352 340 305 340 150 309 10% 1% 100 50 0 1H12 Less: 1H12 Decrease in Decrease in Increase in Taxation, non- 1H13 Additional 1H13 Reported exceptional Trading profit from profits from profits from controlling Trading profits
Slide 5: Sales Growth and Contribution by Region
Sales Growth and Contribution by Region Sales growth continuing in Southeast Asia; sales decline in China, Taiwan and Singapore (HK$ millions) 2,841 3,000 2,698 2,500 Mainland China 854 (30%) 918 (34%) 7% / 9%* 2,000 Mainland China Hong Kong & Taiwan Hong Kong & Taiwan 840 (30%) Rest of Asia Pacif
Slide 6: Brand Sales Growth for the last 8 quarters
Brand Sales Growth for the last 8 quarters Despite strong SE Asia growth, overall sales growth is sluggish, reflecting tough market conditions, particularly in Greater China 16% 14% 14% 1H13 1H12 Variance 12% Global brand sales (HK$ millions) 3,674 3,756 -2% Comparable store sales growth -2% Flat -2
Slide 7: Store Number by Market as at June 2013
Store Number by Market as at 30 June 2013 Growth in SE Asia, India, Middle East and Korea; Continued consolidating and repositioning our China store portfolio Mainland China, 45% 1,178 outlets as at Jun-13 Philippines, 2% -65 outlets in 1H13 59 outlets as at Jun-13 +2 outlets in 1H13 South K
Slide 8: Gross Profit Reconciliation
Gross Profit Reconciliation Improved gross margin driven by lower input costs and stronger product mix Avg. Cost Avg. Price Volume (HK$ millions) 0% 8% 13% 2,000 1,800 187 187 (3) 1,600 (4) (168) 1,400 1,200 1,000 1,765 (62.1%) 800 1,566 (58.0%) 600 400 200 0 1H12 Cost Price Volume Middle East St
Slide 9: Total Operating Expenses Reconciliation
Total Operating Expenses Reconciliation OPEX excluding Middle East just up 2% reflecting strong cost controls (HK$ millions) 1,600 131 4 1,400 13 4 2 (2%) (2%) (1%) 6 1,200 (9) (16%) 1,000 800 1,392 1,241 49% 600 46% of sales of sales 400 200 0 1H12 Total Shop Rental Other Shop Staff Costs Adver
Slide 10: Operating Profit (Margin) by Region
Operating Profit (Margin) by Region SE Asia became the largest profit contributor to the Group. China OP was broadly in line with last year despite sales decline (HK$ millions) 200 Profit Contribution 21% 18% 34% 26% 34% 32% 0% 14% 8% 4% 180 160 137 1H12 1H13 127 129 (19.3%) 140 (19.7%) (1
Slide 11: Brand Sales Growth by quarter – Rest of Asia Pacific
Brand Sales Growth by quarter – Rest of Asia Pacific Growth momentum continues, Singapore will gradually recover 20% 18% 10% Singapore 5% 3% 3% 16% 2% 0% 2% -2% -3% -3% 14% 1% 14% -7% -1% -6% 13% -5% -5% -5% 12% -10% -8% -9% -15% -11% 10% 10% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 SMIT: 8% 8% 8% SG
Slide 12: Performance Review by Region – Rest of Asia Pacific
Performance Review by Region – Rest of Asia Pacific High growth and strong performance with good brand image, continue to expand store network (In HK$ millions) 1H13 1H12 Variance Total sales [1] 709 656 +8% / +10% [2] Comparable store sales [3] +5% +1% +4pp Gross profit 470 432 +9% Gross margin 66.
Slide 13: The Southeast Asia Markets
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Slide 14: Indonesia store locations by class
City (store number) 1. Bali (13) 2. Balikpapan (2) 3. Bandung (10) 4. Banjarmasin (1) 5. Bekasi (2) 6. Bogor (2) 7. Cibubur (1) 5 8. Cikarang (1) 9. Cirebon (1) 2 10. Depok (1) 2 1 1 11. Jakata (56) 1 2 12. Makassar (5) 13. Manado (2) 2 1 14. Medan (5) 15. Padang (1) 5 11 56 16. Palembang (2) 2 1 1
Slide 15: Malaysia store locations by class
City (store number) 1. Johor (11) 2. Kedah (3) 3. Kelantan (1) 4. Kuala Lumpur (16) 5. Melaka (4) 6. Negeri Sembilan (2) 7. Pahang (2) 8. Penang (7) 9. Perak (3) 10. Sabah (2) 3 11. Selangor (21) 2 12. Terengganu (1) 7 1 1 3 2 21 16 2 4 11 Location by class Tourist shops Premium Medium Local 34% 22%
Slide 16: Thailand store locations by class
City (store number) 1. Ayutthaya (1) 2. Bangkok (64) 3. Chantaburi (1) 2 4. Chiangmai (4) 4 2 5. Chiangrai (2) 6. Chonburi (7) 2 1 2 7. Korat (2) 3 8. Hadyai (3) 3 2 9. Hua Hin (1) 1 1 10. Kanchanaburi (1) 1 64 7 11. Khonkhen (3) 6 1 2 1 12. Koh Samui (1) 13. Krabi (2) 14. Lampang (2) 15. Nakorn Sri
Slide 17: Brand Sales Growth by quarter – Mainland China
Brand Sales Growth by quarter – Mainland China Negative growth due to closure of shops and weak external demand 6% 5% 4% 2% 2% 0% 1% -2% -1% -3% -3% -4% -4% -6% -5% -7% -8% -6% -8% -8% -8% -10% -9% -12% -12% -13% -14% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Total Brand Sales Growth Comparable Store
Slide 18: Performance Review by Region – Mainland China
Performance Review by Region – Mainland China Negative growth, reflecting weaken fashion apparel demand (In HK$ millions) 1H13 1H12 Variance Total sales [1] 854 918 -7% / -9% [2] Retail self-operated stores 629 691 -9% Wholesale sales to franchisees 225 227 -1% Total brand sales [3] 1,066 1,216 -12%
Slide 19: Total Operating Expenses Reconciliation – Mainland China
Total Operating Expenses Reconciliation – Mainland China (HK$M) Shop area 4% Headcounts 12% 500 Rent/sq.ft. 1% Average salaries 3% 450 (11) 9 (7) (13) 400 (5%) (9%) (7) (9%) (23%) 350 300 -38m (8%) 250 465 436 51% 200 51% of sales of sales 150 100 50 0 1H12 Total Shop Rental Other Shop St
Slide 20: Total number of staff by department as at June 2013
Total number of staff by department as at 30 June 2013 (compared to 30 June 2012) Back office staff 588 DOS shop staff ↓68 staff (↓10%) 2,456 ↓241 staff (↓9%) AD support Comparable stores: -93 (3%) and E-shop Other stores: -148 (6%) 208 At Jun-13 ↓29 staff (↓12%) 3,252 staff ↓338 staff (↓9%) 13 Au
Slide 21: Warehouses & logistics improvement in Mainland China
Warehouses & logistics improvement in Mainland China BEFORE AFTER THE LOGISTICS RE-ENGINEERING THE LOGISTICS RE-ENGINEERING Changchun Changchun Shenyang Shenyang Beijing: Beijing 2,800m2 From Jul 12 2,000m2 (29%) Dalian Dalian Jinan Tianjin Jinan Tianjin Shanghai Shanghai Chengdu: Wuhan Chengdu 450m
Slide 22: Brand Sales Growth by quarter – Hong Kong
Brand Sales Growth by quarter – Hong Kong Hong Kong delivered stable growth 30% 29% 25% 25% 25% 20% 16% 15% 13% 10% 8% 8% 11% 4% 5% 7% 6% 1% 0% 2% 3% 0% -5% -5% -10% -15% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Total Brand Sales Growth Comparable Store Sales Growth 13 August 2013 Giordano 2013 Inter
Slide 23: Performance Review by Region – Hong Kong
Performance Review by Region – Hong Kong Modest sales growth in Hong Kong, increased rental costs affected profitability (In HK$ millions) 1H13 1H12 Variance Total sales 500 490 +2% Comparable store sales [1] +2% +14% -12pp Gross profit 339 330 +3% Gross margin 67.8% 67.3% +0.5pp Operating profit 71
Slide 24: Brand Sales Growth by quarter – Taiwan
Brand Sales Growth by quarter – Taiwan Taiwan sales declined against a high base last year 25% 20% 20% 18% 16% 15% 10% 12% 11% 6% 5% 6% 4% 0% -5% -9% -9% -10% -12% -14% -15% -15% -14% -15% -16% -20% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Total Brand Sales Growth Comparable Store Sales Growth 13 Aug
Slide 25: Performance Review by Region – Taiwan
Performance Review by Region – Taiwan Taiwan slowly recovers through strong localized marketing campaign (In HK$ millions) 1H13 1H12 Variance Total sales [1] 340 369 -8% / -7% [2] Comparable store sales [3] -6% -3% -3pp Gross profit 212 224 -5% Gross margin 62.4% 60.7% +1.7pp Operating profit 39 44
Slide 26: Brand Sales Growth by quarter – Middle East
Brand Sales Growth by quarter – Middle East Slower growth from high base, in line with expectation 40% 28% 30% 27% 20% 16% 22% 22% KSA +1% UAE +1% 8% OTH -3% 10% 14% 1% 1% 1% 6% -1% 0% -2% -1% -4% -10% -6% KSA flat UAE flat OTH -8% -20% -30% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Total Brand Sales
Slide 27: Performance Review by Region – Middle East
Performance Review by Region – Middle East Negative growth from a high base last year (In HK$ millions) 1H13 1H12 Variance Total sales [1] 297 +100% Total brand sales [2] 294 294 Flat Comparable store sales [3] -4% +10% -14% Gross profit 187 +100% Gross margin 63.0% N/A N/A Operating profit 58
Slide 28: Jointly Controlled Company – South Korea
Jointly Controlled Company – South Korea Localized product development, new “Concept” store format and marketing help drive growth in South Korea (In HK$ millions) 1H13 1H12 Variance Total sales [1] 795 745 +7% Comparable store sales [2] -1% -1% Flat Gross profit 470 425 +11% Gross margin 59.1% 57.0
Slide 29: EBIT and Free Cash Flow from Operations
EBIT and Free Cash Flow from Operations Free cash flow weakened by increased working capital for inventory and rental deposits for store expansion in SE Asia (HK$ millions) 600 65 500 (55) 400 (43) (66) 300 (40) 470 200 (94) 100 237 0 EBIT Depreciation & CAPEX less Share of pre- Changes in Increase
Slide 30: Changes in Working Capital
Changes in Working Capital (In HK$ millions) Changes in Middle East At Dec-12 working completion At Jun-13 capital dividend (net) Inventory 476 42 518 Trade receivables 361 (51) 310 Trade payables (193) 15 (178) Other receivables and payables (192) 60 (132) Middle East completion dividend (n
Slide 31: Inventory, Trade Receivables, Trade Payables, Capital Expenditure
Inventory Trade Receivables (HK$ millions) (Days) (HK$ millions) (Days) 87 700 90 400 60 74 80 50 600 (ex-ME: 70 days) 350 43 50 60 70 300 500 (ex-ME: 63 days) 38 73 ME 100 ME 60 250 40 400 50 200 30 300 40 361 476 518 30 150 284 310 20 200 375 403 418 100 20 100 10 10 50 0 0 0 0 Jun-12 Dec-12 Jun-1
Slide 32: Total Inventory including finished goods at suppliers
Total Inventory including finished goods at suppliers (In HK$ millions) Jun-13 Dec-12 Jun-12 Comparable inventory excluding Middle East 418 403 375 Finished goods at suppliers (not yet shipped) 30 33 70 Comparable inventory including finished goods at 448 436 445 suppliers (excluding Middle East) In
Slide 33: Inventory Aging Analysis
Inventory Aging Analysis GROUP MAINLAND CHINA Jun-13 Dec-12 Jun-12 Jun-13 Dec-12 Jun-12 Core items 23% 30% 34% 5% 15% 26% Current season 57% 49% 41% 85% 70% 54% Past seasons 20% 21% 25% 10% 15% 20% 100% 100% 100% 100% 100% 100% 13 August 2013 Giordano 2013 Interim Results 52
Slide 34: Change in Net Cash and Bank Balances
Change in Net Cash and Bank Balances (HK$ millions) 1,600 237 1,400 Completion dividend paid to NCI of subsidiaries in Middle East 1,200 66 7 1,000 800 (497) 600 1,173 986 400 200 0 Net Cash & Bank Free Cash Flow Dividend paid Proceeds from Exchange Net Cash & Bank Balances on from Operations to sha
Slide 35: Outlook: Mainland China
Outlook: 1. Mainland China Fast marketing will continue to roll out as a brand differentiator Further roll out a significant number of upgrades to our Mainland China store portfolio, in both self managed and franchised stores Refine the women’s line and look to open more of these stores Cont
Slide 36: Outlook: Other Markets
Outlook: 2. Other Markets Taiwan – continue to differentiate and develop our brand using localized “fast marketing” campaigns Roll out fast marketing training to non-Greater China markets Singapore – store interior design upgrades (e.g. a new flagship store opened in late July) and local marke
Slide 37: Q&A
Q&A 13 August 2013 Giordano 2013 Interim Results 65
Slide 38: Summary of Total Sales and Comparable Store Sales Growth by Market
Summary of Total Sales and Comparable Store Sales Growth by Market Total sales[1] Comparable store sales[2] (HK$ millions) 1H13 1H12 Variance 1H13 1H12 Mainland China 854 918 -7% -7% -6% Hong Kong 500 490 +2% +2% +14% Taiwan 340 369 -8% -6% -3% Singapore 191 196 -3% -5% -8% Indonesia 203 167 +22% +1
Slide 39: Global Retail Network
Global Retail Network As at 30 June 2013 As at Number of outlets Giordano Giordano Change BSX Others Total Dec-12 & Junior Ladies Mainland China 1,111 24 43 1,178 1,243 -65 Hong Kong & Macau 56 12 15 83 84 -1 Taiwan 171 14 19 204 214 -10 Singapore 49 3 52 54 -2 Indonesia 130 5 16 151 143
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