Daphne International Holdings Limited · HKEX:210
Daphne International — FY2018 Earnings Presentation
37 slides from Daphne International's earnings presentation, Mar 27, 2019
Slide 1: 2018 Annual Results Announcement
2018 ANNUAL RESULTS ANNOUNCEMENT
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: Progress of Business Transformation
Progress of Business Transformation Continued to downsize business by closing down loss-making stores in face of the deteriorating operational environment Fully committed to implementing transformation strategies to restore profitability: - On-going product upgrade received positive feedback fro
Slide 4: 2018 Performance Highlights
2018 Performance Highlights YoY same-store sales performance of Core Brands Business narrowed to -7.6%, compared to -12.4% for previous year Group turnover decreased by 20.8% YoY despite a reduction of 26.2% in total POS Gross margin fell by 2.9ppt YoY to 49.9% due to aggressive liquidation of
Slide 5: Operational Highlights
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Slide 6: Group Financial Highlights
Group Financial Highlights (HK$ million) 2018 2017 Change Turnover 4,127.1 5,211.0 -20.8% Gross profit 2,061.0 2,753.0 -25.1% Operating loss (786.6) (688.8) +14.2% Loss attributable to shareholders (994.4) (734.2) +35.4% Basic loss per share (HK cents) (60.3) (44.5) +35.5% Gross margin 49.9% 52.8% -
Slide 7: Group Turnover Breakdown
Group Turnover Breakdown 2018: HK$4,127.1 million 2017: HK$5,211.0 million 14% 14% 86% 86% Core Brands Business Other Brands Business 7
Slide 8: Group Gross Margin
Group Gross Margin Group’s gross margin decreased by 2.9ppt YoY, mainly due to: - Higher proportion of aged inventory in sales mix - Inflationary raw material cost - The stable pricing policy on new products failed to offset the negative effect brought by stock clearance 8
Slide 9: Group Operating Expense
Group Operating Expense Decreased by HK$594.9 million (-17.1% YoY) (HK$ million) 6,000 5,559.0 5,288.3 5,000 4,207.8 -17.1% 4,000 3,485.1 2,890.2 3,000 2,000 1,000 0 2014 2015 2016 2017 2018 (For the year ended 31 December) 9
Slide 10: Group Operating Profit Analysis
Group Operating Profit Analysis Group gross margin decreased by 2.9ppt YoY Group operating margin dropped by 5.9ppt YoY (HK$ million) 0.0 -200.0 -400.0 -600.0 -800.0 (688.8) (786.6) -1000.0 +227.0 -1200.0 -1400.0 -692.0 +367.2 -1600.0 2017 Decline in Decrease in Decrease in 2018 operating loss g
Slide 11: Inventory Level and Turnover Days
Inventory Level and Turnover Days Group average inventory turnover was 198 days (2017: 198 days), and inventory level continued to decrease to HK$992.3 million, a reduction of HK$254.6 million, as compared to that of 31 December 2017 After reviewing inventory level, the Group made provision for
Slide 12: Working Capital and Capital Expenditure
Working Capital and Capital Expenditure Capital expenditure decreased due to less new store openings in 2018 2018 2017 Change Average Inventory Turnover (days) 198 198 - Average Debtors Turnover (days) 15 14 +1 Average Creditors Turnover (days) 115 121 -6 Cash Conversion Cycle (days) 98 91 +7 Capi
Slide 13: Other Key Financial Indicators
Other Key Financial Indicators The Group maintained its net cash position As at 31 Dec 2018 As at 31 Dec 2017 Change Cash and bank balances 363.0 -25.4% (HK$ million) 486.3 Bank loans (HK$ million) 192.3 156.3 +23.1% Equity attributable to 1,779.8 -38.1% shareholders (HK$ million) 2,874.9 Current
Slide 14: Operational Highlights
Slide 15: Group Sales Network
Group Sales Network Core Brands had a net reduction of Number of Points-of Sales (POS) 941 POS, bringing the total to 2,648 of the Group Other Brands had a net closure of 75 POS 4,900(-1,030) Mainly attributable to : 302(-31) 3,836(-1,064) - continued with its channel mix 247(-55) adjustments
Slide 16: Core Brands Sales Network
Core Brands Sales Network Net reduction of 941 POS (including 899 directly-managed stores and 42 franchised stores) Number of POS As at 31 Dec As at 31 Dec Change % Change 2018 2017 Directly-managed POS 2,404 (91%) 3,303 (92%) -899 -27.2% Franchised POS 244 (9%) 286 (8%) -42 -14.7% Core Brands Tot
Slide 17: Core Brands Sales Network (cont'd)
Core Brands Sales Network (cont’d) Maintained greater representation in lower tier cities As at 31 Dec 2018 As at 31 Dec 2017 Change % Change No. % No. % Tier 1 Cities 254 10% 364 10% -110 -30.2% Tier 2 Cities 606 23% 877 25% -271 -30.9% Tier 3 Cities 520 20% 680 19% -160 -23.5% Tier 4-6 Cities 1,
Slide 18: Core Brands Business - Performance
Core Brands Business - Performance (HK$ million) 2018 2017 Change Turnover 3,798.8 4,703.2 -19.2% Gross profit 1,715.8 2,314.9 -25.9% Gross margin 45.2% 49.2% -4.0ppt Operating loss (797.7) (667.6) +19.5% Operating margin -21.0% -14.2% -6.8ppt Turnover of Core Brands Business Operating margin de
Slide 19: Other Brands Business - Performance
Other Brands Business - Performance (HK$ million) 2018 2017 Change Turnover 582.5 733.5 -20.6% Gross profit 317.1 426.8 -25.7% Gross margin 54.4% 58.2% -3.8ppt Operating (loss) (26.7) (7.1) +276.1% Operating margin -4.6% -1.0% -3.6ppt Turnover of Other Brands Business E-commerce increased its co
Slide 20: 2019 Outlook
Slide 21: 2017-2018: Business Transformation Phase I
2017-2018 : Business Transformation Phase I Adopted remedial measures to lay the groundwork for organic development Inventory • Substantial reduction in inventory level to optimise adjustment inventory mix and restore inventory to a healthy level Channel • Downsizing of sales network through closure
Slide 22: 2019 Outlook: Business Transformation Phase II
2019 Outlook: Business Transformation Phase II Business Model Innovation Pressing ahead with Improving efficiency product upgrade of sales channels Staying in touch with Enhancing consumers management efficiency 22
Slide 23: Business Model Innovation
Business Model Innovation Pressing ahead with Improving efficiency product upgrade of sales channels Staying in touch with Enhancing consumers management efficiency 23
Slide 24: Product upgrade
Product upgrade Driven by market demand while enhancing product development capabilities - Increase investment in product research and development with emphasis on trendiness and comfort - Continue to enrich its portfolio of diverse products with more trendy and athleisure shoes to better serve cust
Slide 25: Supply chain acceleration
Supply chain acceleration Build up an efficient supply chain system to meet the demand of product development and sales at store - Identify new manufacturers that are capable to carry out quick response manufacturing - Determine production volume according to market feedback to minimise obsolete inv
Slide 26: Business Model Innovation
Business Model Innovation Pressing ahead with Improving efficiency product upgrade of sales channels Staying in touch with Enhancing consumers management efficiency 26
Slide 27: Offline channel optimisation
Offline channel optimisation - Introduce a “partnership system” to mitigate the business risk associated with the existing “asset heavy” business model - Closely monitor store performance and promptly remedy under-performing stores New operational model Self-managed Self-managed Franchise Franchise
Slide 28: Unleash the potential of online business
Unleash the potential of online business - Work closely with product design and supply chain departments to launch products that meet the specific demands of online customers - Commit more resources to its cooperation with social media and e-commerce platforms to better adapt to the fast-changing co
Slide 29: Business Model Innovation
Business Model Innovation Pressing ahead with Improving efficiency product upgrade of sales channels Staying in touch with Enhancing consumers management efficiency 29
Slide 30: Staying in touch with consumers
Staying in touch with consumers Enhance the capability to apply the big data analytics - Continue to cooperate with a big data company to Identify opportunities effectively on the market Launch products to meet with enthusiastic market responses Strengthen its refreshed brand image - Collaborate w
Slide 31: Improve customer relationship management (CRM)
Improve customer relationship management (“CRM”) - Continue to expand membership base and strengthen its connection with members - Introduce upgraded membership activities and benefits to boost customer loyalty and repeat sales - Leveraging CRM tools to provide Membership benefit upgrade customers w
Slide 32: Business Model Innovation
Business Model Innovation Pressing ahead with Improving efficiency product upgrade of sales channels Staying in touch with Enhancing consumers management efficiency 32
Slide 33: Enhance management efficiency
Enhance management efficiency - Further streamline organisational structure and optimise internal process to become a leaner and more efficient organisation - Introduce new incentive and appraisal schemes to motivate the staff to be best in class - Build a competitive cost structure through stringen
Slide 34: Core Strategic System Objective
Core Strategic System Objective Revive the growth path and achieve turnaround ASAP #4 Enhance #1 Product #2 Improve sales #3 Stay in touch management upgrade channel efficiency with consumers efficiency - Enhance product - Introduce a - Consumer data - Streamline development “partnership system” ana
Slide 35: Key Plans
Key Plans Short term Mid- to long-term #1 Strengthening product development #2 Supply chain acceleration #3 Roll-out of “partnership system” #4 Sales channel optimisation #5 Staying in touch with consumers #6 Organisational restructure #7 Cost structure rationalisation 35
Slide 36: Vision
Vision To be the most popular mass-fashion lady’s footwear brand with leading market share and consumer reputation, whilst creating superior shareholder’s return 36
Slide 37: Thank You
Thank You Investor relations contact Jelly Lin +852 2367 9021 jellylin@daphneholdings.com 37
Daphne International Holdings — FY2018 Earnings Presentation on 6ix