Yue Yuen Industrial (Holdings) Limited · HKEX:551
Yue Yuen Industrial (Holdings) — FY2021 Earnings Presentation
55 slides from Yue Yuen Industrial (Holdings)'s earnings presentation, Mar 15, 2022
Slide 1: Yue Yuen Industrial 2021 Annual Results
Yue Yuen Industrial 2021 Annual Results 15 Mar 2022
Slide 2: Disclaimer
Disclaimer Yue Yuen and Pou Sheng have taken every reasonable care in preparing this presentation. However, please be reminded that the information, materials, opinions and statements contained or referred to in this presentation are all provided on an "as is" basis. None of the aforesaid informatio
Slide 3: Company Profile
Company Profile Founded in 1988, and listed on the HKEX in 1992 (551.HK) A yield play with solid performance – committed to driving return and value for shareholders FY21 Business Structure Soles, Components & Others 5.4% (FY20: 4.3%) Pou Sheng^ Athletic / Outdoor Shoes* 42.4% (FY20: 43.9%) 44.1% (F
Slide 4: 2021 Financial Performance Overview
2021 Financial Performance Overview Profit / Loss Earnings Dividend* Operating Revenue Attrib. to Owners Per Share Per Share Cash Flow $8,533mn $115mn $7.15cents HK$0.20 $463mn 2021 +$88mn +1.0% +$206mn N/A +$12.79cents N/A -$371mn -44.5% (US$) (Y-o-Y Change) (% of Revenue) (Y-o-Y Change) (Payout Ra
Slide 5: Our Growth Strategy
Our Growth Strategy Irreplaceable Partnership 5 Values 4 Directions Speed 3 Segments Design 2 E2E Platform Flexibility Footwear Equipment OEM / ODM 1 World’s Leading Sporting Goods Innovation Apparel MFG Platform Material Retail Quality Accessories Process Sustainability Unique Strategic Values 5
Slide 6: Corporate Social Responsibility
Corporate Social Responsibility The Only FLA Accredited A Top-ranking Footwear OEM/ODM Globally Responsible Investment Target Employee Communication Education Implementation Relations 2030 Goal: Reducing GHG emissions by 46.2% vs. 2019 Compliance Risk Control ESH & ESG 6
Slide 7: Recognition and Achievement
Recognition and Achievement CORPORATE ESG Rest of Asia Consumer/Discretionary In 2021, Yue Yuen received a rating of BBB in Combined Ranking the MSCI ESG Ratings assessment. *Upgraded from BB (2020) to BBB (2021) Best CEO – 3rd Place Notable improvement in Best CFO – 3rd Place Corporate Governance B
Slide 8: Manpower Structure
Manpower Structure FY21: 317,200 MFG Employees by Region (%) No. of Employees FY20: 298,500 6.3% CN 8 9% 11% 89% 91% VN 44 IN 6 Others 42 Retail MFG 29,600 287,600 FY20 FY21 8
Slide 9: FY 2021 Group Operation Highlights
FY 2021 Group Operation Highlights
Slide 10: Key Financial Highlights for FY 2021
Key Financial Highlights for FY 2021 Group Revenue Operating Profit Profit Attrib. to Owners US$ 8,533.3 mn US$161.6 mn US$ 115.1 mn +1.0% + US$ 172.3 mn + US$ 205.9 mn MFG GP Margin Shoe Volume ASP 15.5% 238.3 mn pairs US$ 18.68 per pair +0.8pp -2.5% +4.4% Retail Revenue OP Margin Profit Attrib. to
Slide 11: Y-o-Y Revenue by Category
Y-o-Y Revenue by Category FY21: US$ 8,533.3 mn 1.0% Total Revenue FY20: US$ 8,444.9 mn Athletic / Casual Shoes Outdoor Shoes* & Sport Sandals* 85% 3,762.2 2.6% 15% Athletic / Outdoor Shoes* 3,666.6 US$ 4,450.5 mn Y-o-Y: 1.8% 688.3 Casual Shoes 2.5% 706.3 & Sport Sandals* Omni-Channel 463.5 B&M Retai
Slide 12: FY21 Manufacturing Revenue by Destination
FY21 Manufacturing Revenue by Destination Europe FY21: US$ 4,914.0 mn MFG Revenue FY20: US$ 4,735.7 mn 3.8% 24.6% FY20: 26.4% Y-o-Y: -3.2%# US 34.4% Mainland China FY20: 29.7% 17.5% Y-o-Y: +20.4%# FY20: 19.1% Y-o-Y: -5.1%# Others* 23.5% FY20: 24.8% Y-o-Y: -1.9%# # Y-o-Y changes in revenue amount * O
Slide 13: Shoe Volume by Region
Shoe Volume by Region Shoe Volume FY21: 238.3 mn pairs 2.5%# FY20: 244.4 mn pairs 1% 4% 4% 5% 100% 17.0%# 80% 31% 39% 39% 48% 19.7%# 60% 34% 40% Others* 44% 46% 25.4%# 35% Indonesia 20% Vietnam 34% 13% 11% 12% 5.0%# China 0% 2013 2019 2020 2021 # Y-o-Y changes in volume (pairs) * Others include Bang
Slide 14: YY Group Financial Highlights
YY Group Financial Highlights (US$’000) FY 2021 FY 2020 Y-o-Y Revenue 8,533,337 8,444,935 +1.05% Gross Profit 2,048,235 1,831,015 +11.86% Gross Profit Margin 24.00% 21.68% +2.32pp Operating Profit (Loss) 161,561 (10,716) N/A Operating Profit (Loss) Margin 1.89% -0.13% +2.02pp Profit (Loss) attrib. t
Slide 15: YY Group Financial Ratios
YY Group Financial Ratios (US$’mn) FY 2021 FY 2020 Y-o-Y Depreciation & Amortization^ 582.9 546.8 +6.6% EBITDA 727.4 527.5 +37.9% Capital Expenditure 286.0 255.3 +12.0% Product Development 185.4 187.1 -0.9% Total Borrowings* 1,717.1 1,867.9 -8.1% Net Borrowings* 879.1 971.0 -9.5% As of Total Borrowi
Slide 16: Enhanced Capital Structure & Finance Cost
Enhanced Capital Structure & Finance Cost FY21: US$ 1,717.1 mn Borrowings FY20: US$ 1,867.9 mn 8.1% Finance Cost In US$’mn FY21 vs. FY20 Bank Borrowings Composition 68.08 24% 14% 20.25 52.70 22.6% 15% 16% 16.22 20.92 10.54 35.0% 31.61 21.24 32.8% 69% FY20 FY21 62% Pou Sheng – Interest exp. on Lease
Slide 17: YY Group Sources and Uses of Fund
YY Group Sources and Uses of Fund (US$’mn) +546.5 -83.4 -286.0 Tax +84.6 -204.6 CAPEX Proceeds -10.8 -182.2 from Lease +76.9 Cash Disposal of Net from Asso. & JV Liabilities Interest Operations Repayment Int. Cost - Net Others and Int. Income Borrowings 897.0 Interest Repaid 838.0 Free Cash Flow: Ba
Slide 18: YY Group ROE & ROA Trend
YY Group ROE & ROA Trend (%) 12.1 11.3 10.0 8.0 7.4 7.3 5.3 7.4 6.6 5.3 2.8 4.1 4.4 4.0 0.3 3.2 -0.8 1.6 -0.1 -2.3 1H17 FY17 1H18 FY18 1H19 FY19 1H20 FY20 1H21 FY21 ROA ROE Remark: ROE = Profit (Loss) attributable to owners of the company / (Total Equity - Minority Interests); half year data is on L
Slide 19: Manufacturing
Manufacturing Note: The figures in the following slides cover the core manufacturing and other operations of the consolidated entity of Yue Yuen Group, and are for analytical purposes only (prepared using the management accounts).
Slide 20: Manufacturing Financial Highlights
Manufacturing Financial Highlights (US$’000) FY 2021 FY 2020 Y-o-Y Revenue 4,914,043 4,735,704 +3.77% Gross Profit 761,843 697,540 +9.22% Gross Profit Margin 15.50% 14.73% +0.77pp Operating Profit (Loss) 13,305 (109,227) N/A Operating Profit (Loss) Margin 0.27% -2.31% +2.58pp Profit (Loss) attrib. t
Slide 21: Manufacturing – GP Margin Trend
Manufacturing – GP Margin Trend (%) GPM in 4Q21 +10.0pp Gross Profit Margin (MFG only) Gross Profit Margin (incl. MFG & TCHC*) vs 3Q21 due to reopening in VN 22.7 21.6 21.6 21.4 21.3 20.1 19.9 19.6 18.7 18.5 19.2 18.2 18.2 18.3 21.0 20.7 20.4 21.8 16.0 20.2 20.3 18.7 18.9 18.2 17.9 12.7 15.7 11.7 6.
Slide 22: Manufacturing – OP Margin Trend
Manufacturing – OP Margin Trend (%) OPM in 4Q21 +15.2pp Operating Profit Margin (MFG only) vs 3Q21 due to reopening in VN 7.8 8.6 7.2 6.7 4.6 5.2 6.9 1.1 5.7 4.8 4.8 4.5 3.6 3.6 4.4 4.4 -4.8 -1.0 -9.7 -14.1 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q2
Slide 23: Manufacturing – Net Profit Margin
Manufacturing – Net Profit Margin (%) Recovery & Operating Leverage Neutralized by VN Idle Capacity and Low Utilization in 2H +1.27 +0.34 +3.70 -2.37 +2.42 Others 1.70 Disposal Gain -0.61 Fair Value & Others FY21 -2.49 -0.56 Changes Loss on Gain vs. Loss FY20 Factory SG&A Other in FY20 Material Labo
Slide 24: Manufacturing – COGS Decomposition and Y-o-Y
Manufacturing – COGS Decomposition and Y-o-Y % of Revenue Amount (Y-o-Y) Resumption of Growth Leveraging Effects 14.7% 15.5% Gross Profit • Rebound is capped by • High UT% across 9.2% capacity constraints China & Indonesia Capacity UT%* 36.6% 37.1% Material Revenue • +1pp vs FY20 GPM 5.4% +4% • 73%
Slide 25: Enhanced SG&A Expense and Other Expenses
Enhanced SG&A Expense and Other Expenses SG&A and Net Other Expenses Ratio Strict Cost Control Measures 20.1% • Cost saving measures in absence of furlough; FY21 SG&A % slightly 17.0% increased by 0.6pp YoY 14.9% 15.2% 13.8% 14.0% Efficiency Improvement 15.3% • Improving productivity in 11.6% China
Slide 26: Manufacturing Operation Efficiency – FY21
Manufacturing Operation Efficiency – FY21 Trade Receivable Days Inventory Level 58 In US$’mn FY20: 66 682 868 Inventory Days Working 0 Capital Days Inventory Level 76 FY20: 62 100 Cash Position FY20: 94 In US$’mn Trade Payable Days 34 629 644 FY20: 34 0 Cash Position FY20 FY21 26
Slide 27: Manufacturing – Financial Ratios
Manufacturing – Financial Ratios (US$’mn) FY 2021 FY 2020 Y-o-Y Depreciation & Amortization 292.2 282.2 +3.5% EBITDA 292.8 167.1 +75.2% Capital Expenditure 215.9 170.6 +26.6% Total Borrowings* 1,468.6 1,568.2 -6.4% As of Net Borrowings* 824.5 939.2 -12.2% 31 Dec Total Borrowings to Equity # 40.8% 45
Slide 28: Pou Sheng International
Pou Sheng International Note: The figures in the following slides are based on Pou Sheng’s management accounts and announcements, and Pou Sheng adopts RMB as its reporting currency
Slide 29: __ AKE
__ AKE SP RTS YOU CIF —LE tached NETS —
Slide 30: Agenda: Financial Summary, Business Highlights
Agenda 01 Financial Summary p 31-35 02 Business Highlights p 37-41 03 Future Target & Strategy p 43 30
Slide 31: Pou Sheng Financial Highlights (in RMB)
Pou Sheng Financial Highlights (in RMB) FY 2021 FY 2020 Y-o-Y RMB’mn % RMB’mn % % ppt Revenue 23,350 100.0 25,611 100.0 -8.8 -- Cost of Sales (15,051) -64.5 (17,785) -69.4 -15.4 +4.9 Gross Profit 8,299 35.5 7,826 30.6 +6.0 +4.9 SG&A (7,829) -33.5 (7,505) -29.3 +4.3 -4.2 Other Income & Expenses, net
Slide 32: Pou Sheng GP Margin Trend
Pou Sheng GP Margin Trend (%) Gross Profit Margin 38.4 35.2 34.6 34.3 34.4 33.8 33.9 35.3 33.9 31.6 33.3 33.5 30.4 32.2 30.7 29.4 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 FY 2018 FY 2019 FY 2020 FY 2021 33.5% 34.1% 30.6% 35.5% 32
Slide 33: Pou Sheng OP Margin Trend
Pou Sheng OP Margin Trend (%) Operating Profit Margin 7.1 7.2 6.2 4.9 5.4 5.2 4.5 3.6 4.6 4.9 3.0 3.5 3.1 1.3 -1.3 -0.9 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 FY 2018 FY 2019 FY 2020 FY 2021 4.3% 5.4% 2.6% 4.0% 33
Slide 34: Operation Efficiency – FY21
Operation Efficiency – FY21 Based on RMB Inventory Level Trade Receivable Days 8,000 In RMB’mn Acquisition 7,000 impacts 6,000 22 5,000 4,000 FY20: 22 3,000 7,578 5,870 2,000 Working 1,000 Inventory Days 0 Capital Days Inventory Level 163* 147 Cash Position FY20: 143 FY20: 142 2,000 In RMB’mn Trade
Slide 35: Pou Sheng Financial Ratios (in RMB)
Pou Sheng Financial Ratios (in RMB) (RMB’mn) FY 2021 FY 2020 Y-o-Y Depreciation of PPE & Amortization 640.6 644.1 -0.5% Depreciation of ROUA 1,234.6 1,182.6 +4.4% EBITDA 2,652.2 2,511.6 +5.6% EBITDA minus Depreciation of ROUA 1,417.6 1,329.0 +6.7% Capital Expenditure 452.4 585.0 -22.7% Total Borrowi
Slide 36: Agenda: Financial Summary, Business Highlights
Agenda 01 Financial Summary p 31-35 02 Business Highlights p 37-41 03 Future Target & Strategy p 43 36
Slide 37: Pou Sheng Retail Strategy
Pou Sheng Retail Strategy Pou Sheng is one of the largest retailers and sports services providers for world renowned sportswear brands in the Greater China region Omni-channel Brick & Mortar Retail B2C Channel: Directly Operated Stores: • Private Traffic Domain: WeChat • Mono-Brands Stores: 4,590 st
Slide 38: Solid B&M Network
Solid B&M Network Number of Stores >300m2 : 682 (13%) >300m2 : 752 (16%) Directly Operated (Own-Store) 5,240 609 4,631 Sub-Distributor (Franchisee) 3,835 49 3,786 Total Store 9,075 -658 8,417 As at As at 31 December 2020 Net New Store +/- 31 December 2021 38
Slide 39: Pou Sheng Same Store Sales Growth (SSSg)
Pou Sheng Same Store Sales Growth (SSSg) (%) Same Store Sales Growth 32.3% 10.1% 8.9% 6.0% -1.0% 8.7% 8.4% 2.2% 4.2% 1.9% -13.0% -17.8% -11.4% -28.9% -25.3% -32.5% 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 FY 2018 FY 2019 FY 2020 FY 2021 7.4% 5.0% -15.9% -10.8%
Slide 40: Our Customized Pan-WeChat Ecosphere
Our Customized Pan-WeChat Ecosphere Stable and solid foundation with much better conversion, return rate and full-price in-season sales FY21: 7.1% Better ASP than 3rd party platform e.g. T-Mall, JD, Vipshop, etc. Connect with digitally-enabled experience 9.4 9.2 stores and ExP (Energy x Power) membe
Slide 41: Our Customized Pan-WeChat Ecosphere (Cont.)
Our Customized Pan-WeChat Ecosphere (Cont.) Comprehensive relations with members by designated Key Opinion Staff (KOS) and interesting contents (ExP) as first step to elevate our services to consumers 24-hr digital Sports services and WeChat interface by membership program stores designated KOS YYsp
Slide 42: Agenda: Future Target & Strategy
Agenda 01 Financial Summary p 31-35 02 Business Highlights p 37-41 03 Future Target & Strategy p 43 42
Slide 43: Critical Missions in 3 Years
Critical Missions in 3 Years Committed to drive Quality Revenue Growth Best of choice: strive to be the best choice to business partners NEXT for quality growth with creative omni-models that keep with the pace of Store future trends Solid digital developments: provide quality services to members vi
Slide 44: Growth by Digital, Membership & Store Efficiency
Growth by Digital, Membership & Store Efficiency Product Daily Larger Members Sales Sports Stores Stores Only Journey 44
Slide 45: Appendix
Appendix
Slide 46: Shareholding Structure
Shareholding Structure Pou Chen (9904.TT) 51.11% Yue Yuen Industrial (Holdings) Ltd. (551.HK) 100% 62.55% Manufacturing Pou Sheng and Others (3813.HK) * As at 31 Dec 2021 46
Slide 47: Company Milestones
Company Milestones Omni-channel contributed 21% of total sales 2021 SBTi 2030 goal: reducing GHG emissions by 46.2% vs. 2019 Next Store launched in Shenyang, China Third wave implementation of SAP ERP system Next Store launched in Hsinchu, Taiwan 2020 2025 goal: net-zero increase in GHG emissions vs
Slide 48: Revenue & Profit Attributable to Owners
Revenue & Profit Attributable to Owners Revenue Profit Attrib. to Owners In US$’mn In US$’mn 8,445 8,533 1% 115 34 3,709 3,619 2% (91) 81 27 4,736 4,914 4% (118) FY20 FY21 FY20 FY21 FY21 Pou Sheng Pou Sheng MFG MFG The above figures of Pou Sheng exclude profit attributable to “Non-YY” shareholders (
Slide 49: YY Group Financial Highlights
YY Group Financial Highlights FY 2021 FY 2020 Y-o-Y US$'000 % US$'000 % % Revenue 8,533,337 100.00 8,444,935 100.00 +1.05 Cost of Sales (6,485,102) -76.00 (6,613,920) -78.32 -1.95 Gross Profit 2,048,235 24.00 1,831,015 21.68 +11.86 SG&A (1,801,374) -21.11 (1,625,837) -19.25 +10.80 Other Income & Exp
Slide 50: Manufacturing Financial Highlights
Manufacturing Financial Highlights FY 2021 FY 2020 Y-o-Y US$'000 % US$'000 % % Revenue 4,914,043 100.00 4,735,704 100.00 +3.77 Cost of Sales (4,152,200) -84.50 (4,038,164) -85.27 +2.82 Gross Profit 761,843 15.50 697,540 14.73 +9.22 SG&A (599,298) -12.20 (548,452) -11.59 +9.27 Other Income & Expenses
Slide 51: Pou Sheng Financial Highlights (in USD)
Pou Sheng Financial Highlights (in USD) FY 2021 FY 2020 Y-o-Y US$’000 % US$’000 % % Revenue 3,619,294 100.00 3,709,231 100.00 -2.42 Cost of Sales (2,332,902) -64.46 (2,575,756) -69.44 -9.43 Gross Profit 1,286,392 35.54 1,133,475 30.56 +13.49 SG&A (1,202,076) -33.21 (1,077,385) -29.05 +11.57 Other In
Slide 52: Manufacturing – Revenue Trend
Manufacturing – Revenue Trend Revenue (US$’mn) Y-o-Y (%) 6,092 6,001 5,881 4,914 4,736 22.8 6.3 8.3 5.0 2.7 1.1 -0.8 -0.4 1.3 -0.4 -0.8 -2.4 -4.5 -2.6 -6.7 -9.6 -18.9 -17.1 1,600 -24.6 1,400 -30.4 1,200 1,000 800 600 400 200 - 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY 2017 FY 20
Slide 53: Manufacturing – Shoe Volume Trend
Manufacturing – Shoe Volume Trend Shoe Volume (mn pairs) Y-o-Y (%) 325 326 322 16.6 7.5 6.7 2.5 4.3 244 0.7 -3.8 flat flat -1.0 -1.4 -4.5 238 -5.1 -7.6 -9.7 -12.5 -12.9 -20.7 -28.3 100 -36.0 90 80 70 60 50 40 30 20 10 - 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY 2017 FY 2018 FY 2
Slide 54: Pou Sheng Revenue Trend
Pou Sheng Revenue Trend Revenue (RMB’mn) Y-o-Y (%) 27,190 25,611 22,677 23,350 47.7 24.4 22.0 19.9 21.9 17.7 17.7 18.9 19.1 0.3 -0.4 1.1 -15.1 -25.0 -25.1 -26.7 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY 2018 FY 2019 FY 2020 FY 2021 54
Slide 55: Thank you Q&A
Thank you Q&A
Yue Yuen Industrial (Holdings) — FY2021 Earnings Presentation on 6ix