Li Ning Company Limited · HKEX:2331
Li Ning — FY2014 Earnings Presentation
37 slides from Li Ning's earnings presentation, March 2015
Slide 1: Li Ning Company Limited
LI NING COMPANY LIMITED 李寧有限公司
Slide 2: Disclaimer
Disclaimer This presentation incorporates information contained in the annual results announcement (the “Results Announcement”) for the year ended 31 December 2014 of Li Ning Company Limited (the “Company”). This presentation should be read in conjunction with the Results Announcement and is qualifi
Slide 3: Agenda
Agenda Results Highlights Financial Review Operational Review and Strategy Appendix 3
Slide 4: Results Highlights
Results Highlights
Slide 5: 2014 Results Highlights
2014 Results Highlights Revenue grew significantly - Full year up 16% to RMB 6,728 million - 2014H2 growth accelerated to 23% YoY Adjusted EBITDA* improved - Full year loss narrowed 48% - 2014H2 loss narrowed 82% YoY Old channel inventory reduced significantly, with higher new product mix Ch
Slide 6: More Improvements Required
More Improvements Required Control of operating cost and expenses Working capital management Channel profitability Regain mass market share Operational efficiency to be improved to resume profitability 6
Slide 7: Financial Review
Financial Review “SEs
Slide 8: Revenue
Revenue (Whole Group) 2014 revenue increased significantly -RMB Million- Other Brands 8,887 Double Happiness LN Brand +16% 6,676 6,728 5,824 10% 2% 8,165 5,926 5,083 5,932 +17% 88% 2011 2012 2013 2014 Revenue increased for the first time since 2011 8
Slide 9: Revenue and Sell-Through Mix
Revenue and Sell-Through Mix (LN Brand, excl. international market sales) Company Revenue Mix Product Retail Sell-Through Mix (All Stores) Retail (Direct operation) Wholesale (Franchised distributors) Old Product New Product (Current and Last Season) 100% 100% 66% 63% 62% 61% 68% 72% 81% 77% 34% 37%
Slide 10: 2014 Same Store Sales Growth (SSSG) Rate
2014 Same Store Sales Growth (SSSG) Rate (LN Brand) Overall Platform By Channel Retail (Direct Operation) High-Single-Digit Mid-Single-Digit Q1 Q2 Q3 Q4 Wholesale (Franchised Distributors) Mid-Single-Digit Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 SSSG stabilized and returned to positive in H2 10
Slide 11: Wholesale Business
Wholesale^ Business (LN Brand) Business Performance Trade Fair Order* (Tag Price) Growth, % YoY Revenue (RMB Million) No. of Stores (Period End) 2013 2014 2015 7,495 Mid-teens 5,803 High-teens Mid-twenties 4,989 6,448 4,424 +10% 4,482 3,633 3,288 Positive Growth 2011 2012 2013 2014 Q1 Q2 Q3 Q4 Q1 Q2
Slide 12: Retail Business
Retail^ Business (LN Brand) Business Performance Revenue per Selling Area Revenue (RMB Million) No. of Stores, Period End Net Floor Area Revenue per Selling Area ('000 Square Meter) (RMB '000 per Square Meter) +30% 1,202 +12% 926 760 13.4 631 +28% 11.9 2,123 159 1,561 1,657 139 1,301 2011 2012 2013
Slide 13: Profitability Analysis – H2
Profitability Analysis – H2 (Net Change of Major P&L Items) -RMB Million- 2013H2 Interest 2014H2 Non-operating Gross Platform Reported Direct Cost & Reported Items Profit Operation Costs Net Profit Tax Net Profit Bad Debt Other Income Direct Advertising Other Logistics Provision & Other Gains Stores
Slide 14: Channel Inventory
Channel Inventory Inventory Level Inventory Mix -RMB Million- Inventory Level (Tag Price) Turnover Months 6 months or less 7 - 12 months Over 12 Months ~9 (New Product) ~7.5 <8 100% ~7.5 24% 46%* 40% 39% Improved by 33% 20% 15% 27% 54% 56% 46% 33% 2011 2012 2013 2014 2011 2012 2013 2014 Significant
Slide 15: Company Inventory
Company Inventory Inventory (Gross Amount) Inventory Mix -RMB Million- 6 months or less 7 - 12 months over 12 months 100% 1,554 1,487 23% 28% 33% 1,306 1,324 39% 21% 22% 22% 14% 56% 50% 46% 47% 2011 2012 2013 2014 2011 2012 2013 2014 Inventory increased mainly due to direct retail business expansion
Slide 16: Trade Receivables
Trade Receivables Trade Receivables (Gross Amount) Trade Receivables Mix (Gross Amount) -RMB Million- Below 90 days 91 - 180 days over 180 days 100% 2,417 25% 29% 26% 26% 2,099 1,962 1,857 34% 30% 32% 75% 40% 40% 44% 2011 2012 2013 2014 2011 2012 2013 2014 Trade receivables reduced with revenue grow
Slide 17: Working Capital Efficiency
Working Capital Efficiency Working Capital Inventory* Trade Receivables* Payables* -RMB Million- Working Capital^ Working Capital^ as % of Revenue 4000 3000 2,660 2000 2,455 2,415 46% 37% 36% 1,654 1000 19% 0 -1000 -2000 2011 2012 2013 2014 Working capital stabilize but still high and costly to fund
Slide 18: Balance Sheet Summary and Cash Position
Balance Sheet Summary and Cash Position As of 31 Dec 2012 As of 31 Dec 2013 As of 31 Dec 2014 -RMB Million- Cash and 1,241 1,281 1,031 Cash Equivalents Borrowings* 1,447 400 997 Net Cash / (Debt)** (206) 881 34 Financing needed to improve gearing ratio and provide funding for growth *Borrowings incl
Slide 19: Performance Review of Past Three Years
Performance Review of Past Three Years FY12 FY13 FY14 Inventory Amount YoY % (Tag Price) 17% 15% 5% Channel New*: Over 30% New*: Over 45% New*: Over 55% Inventory Mix Over 12 months: Approx. 40% Over 12 months: Approx. 40% Over 12 months: Approx. 25% New Product* Retail Sales Growt
Slide 20: Operational Review & Strategy
Operational Review & Strategy
Slide 21: "Three Pillars" Strategy to Support Five Core Categories
“Three Pillars” Strategy to Support Five Core Categories Basketball Running Badminton Sports Life Training Product Channel Retail Capability 21
Slide 22: Retail Sell-through Mix of Five Core Product Categories
Retail Sell-through Mix of Five Core Products Categories* PRODUCT Basketball Running Training Sports Life Others FY13 FY14 10% 13% 23% 33% 20% 17% 8% 14% 33% 29% In 2014, Core Categories* accounted for 77% of total, increased 10 p.p. yoy Focus on Five Core Categories for revenue growth *Five Core Pr
Slide 23: Performance of Five Core Categories
Performance of Five Core Categories PRODUCT Categories Business Performance* Market Positioning Best Sellers •Products with professional functionality •Retail Sell-through Growth: 22% Basketball •Design: To satisfy functional demand •New Product Retail Sell-through CBA drifting sand •Target Consumer
Slide 24: Market Positioning of Products – Sports Functionality
Market Positioning of Products – Sports Functionality (Aimed at Sports Enthusiasts) PRODUCT 24
Slide 25: Market Positioning of Products – Sports Life
Market Positioning of Products – Sports Life (Aimed at Mass Market Consumers) PRODUCT 25
Slide 26: Channel Development Opportunities
Channel Development Opportunities CHANNEL No. of Store (Period End) 8,255 6,434 5,915 5,626 2011 2012 2013 2014 Re-expanding channel network and targeting low-penetrated markets 26
Slide 27: Store Remodeling to Enhance Customer Experience
Store Remodeling to Enhance Customer Experience RETAIL CAPABILITY Tianjin Shanxi Suzhou No. 10 地址：(Tianjin) 天津萬達店 - 和平區和平路168號萬達商業廣場商鋪2A-2B-2C (Shanxi) 山西長治店 - 英雄中路與府後西街東北交岔口店 (Suzhou No. 10) 蘇州10店 - 蘇州市觀前街169號 27
Slide 28: Execution Discipline is Critical for Retail Capability
Execution Discipline is Critical for Retail Capability RETAIL CAPABILITY Optimize product Monitor sales across all development process products at all stages, centralize and product mix product allocation to enhance planning efficiency Product 3 2 Development Product Sales Mix 1 Consumer and market-
Slide 29: Building LI-NING Digitalized Sports Business
Building LI-NING Digitalized Sports Business Vdian Store Manager* MARVEL Mobile Devices O2O Innovation to tap into digital world & new consumers ; A new driver for further growth *李寧微店長 29
Slide 30: Ready for Growth
Ready for Growth • Notable progress made in 2014, room for further improvement still exists • Mr. Li Ning appointed as Interim CEO which facilitates business planning and execution of strategies, and is beneficial to the company and shareholders • Internally reorganized into 3 vertically aligned uni
Slide 31: Open Forum
Open Forum
Slide 32: Appendix
Appendix
Slide 33: Profitability Analysis – Full Year
Profitability Analysis – Full Year (Net change of major P&L items) -RMB Million- 2013 One Interest 2014 Non-operating Gross Platform Reported Time Direct Cost & Reported Items Profit Operation Costs Net Profit Costs^ Tax Net Profit Bad Debt Other Income Direct Advertising Other Logistics Provision &
Slide 34: Summary of Income Statement
Summary of Income Statement (RMB million) 2014 2013 (RMB million) Better/(Worse) 31 Dec Revenue 6,728 5,824 16% Gross Profit 3,004 2,594 16% Distribution costs -2,864 -2,674 (7%) Administrative expenses -703 -236 (198%) Other income and other gains – net 34 147 (77%) Operating (Loss) /Profit -529 -1
Slide 35: Profit Margins And Expense Ratios
Profit Margins And Expense Ratios (RMB million) 2014 2013 Better/(Worse) 31 Dec Gross Profit Margin 44.6% 44.5% 0.1p.p. Operating Profit Margin -7.9% -2.9% (5.0p.p.) EBITDA Margin -4.8% 0.4% (5.2p.p.) Margin of (Loss) /Profit Attributable to Equity -11.6% -6.7% (4.9p.p.) Holders R&D Expenses(as % of
Slide 36: Key Operational Indicators
Key Operational Indicators (RMB million) 2014 2013 Better/(Worse) 31 Dec Average Inventory Turnover(Days) 109 104 (5) Average Trade Receivables Turnover(Days) 71 89 18 Average Trade Payables Turnover(Days) 84 104 (20) Cash Conversion Cycle(Days) 96 89 (7) Return on Equity(ROE) -33.7% -18.2% (15.5p.p
Slide 37: Summary of Balance Sheet
Summary of Balance Sheet (RMB million) 2014 2013 (RMB Million) Better/(Worse) 31 Dec Cash and Cash Equivalents 1,031 1,281 (20%) Borrowings* 997 400 (149%) Convertible Bonds Liabilities 689 658 (5%) Net Cash** 34 881 (96%) Current Liabilities 2,679 2,018 (33%) Current Ratio(times) 1.5x 2.0x (0.5x) T