Post on 21-Jul-2020
16 March 2017
Trinity Limited
Stock Code: 891
ANNUAL RESULTS 2016
Back to Basics. 16 March 2017
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ANNUAL RESULTS 2016
• Market
• Company
• Results
• Priorities
• Brands
• Outlook
Agenda
Back to basics.
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ANNUAL RESULTS 2016
• Subdued spending environment for premium goods in Greater China continues
• Decline in Chinese visitors to Hong Kong and Macau, as well as reduced spending in these markets − Tourism arrivals from the Chinese Mainland to Hong Kong, saw a
drop of 6.7%
• The value of sterling has encouraged good levels of traffic in No 1 Savile Row
• Current market conditions expected to continue in 2017
Market
Back to basics.
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ANNUAL RESULTS 2016
• Beckham Kent & Curwen capsule collection launched − Highly successful launch on Mr Porter
• Very visible pop-up Cerruti 1881 store opened in Paris
• Closed non-performing stores in Greater China, net closure of 30 stores, 321 stores in the network
• Restructure of supply chain network continued apace − Closed casual wear production line in Hong Kong (Restructuring
costs of HK$23.1 million) − Closed formal wear production line in Hong Kong in Q1 2017
• Streamlined management layers and reduced involvement of consultants
• Sold final 20% stake in Ferragamo businesses
Company
Back to basics.
ANNUAL RESULTS 2016
Results for 2016
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ANNUAL RESULTS 2016
• Revenue was impacted by the dampened consumer sentiment in Greater China
• Excluding the effect of exchange rate differences, revenue decreased by 3.7%
• Gross margin was adversely affected by higher promotional discounts and rising proportion of wholesale
HK$ million 2016 2015 16 vs 15 Variance
Revenue 1,777.0 1,914.1 (137.1) (7.2%)
Gross Profit Gross margin
1,213.2 68.3%
1,385.2 72.4%
(172.0)
(12.4%) (4.1 pp)
Core Operating Profit/(Loss) (406.5) (273.4) (133.1) (48.7%)
Financials
Results for 2016
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ANNUAL RESULTS 2016
HK$ million 2016 2015 Note
Core Operating Profit/(Loss) (406.5) (273.4)
Gain on Remeasurement of Contingent Purchase Consideration Payable for Acquisition - 85.0 1
Gain on disposal of an associate 16.5 -
Restructuring Costs (23.1) - 2
Net Finance Costs (19.0) (15.6) Other (Expenses)/Income (8.8) 75.0 3
Income Tax (0.6) 40.5 4
Loss Attributable to Shareholders (441.5) (88.5)
Financial Reconciliation
1. Relates to Gieves & Hawkes acquisition 2. Restructuring costs due to closure of casual wear production line 3. Decline mainly due to compensation income of HK$61.5 million for surrendering a store in
France 4. Income tax credit in 2015 did not recur in 2016
Results for 2016
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ANNUAL RESULTS 2016
Sales Analysis – Full Year HK$ million Total Sales Change in
Total Sales 2016 2015 In HK$ Local
Currency Retail
Chinese Mainland 739.9 845.8 (12.5%) (7.9%)
Hong Kong & Macau 525.0 556.1 (5.6%) (5.6%)
Taiwan 129.4 148.9 (13.1%) (12.0%)
Rest of the World 145.1 155.9 (6.9%) 3.7%
Retail Subtotal 1,539.4 1,706.7 (9.8%) (6.5%)
Wholesale and Licensing 237.6 207.4 14.6% 18.9%
Group Total 1,777.0 1,914.1 (7.2%) (3.7%)
Change in Same Store Sales
In HK$ Local Currency
(3.4%) 1.7%
(4.7%) (4.7%)
(13.5%) (12.4%)
(14.4%) (3.9%)
(6.0%) (2.7%)
• Group total sales declined 3.7% in local currency
• Same Store Sales in Chinese Mainland grew 1.7% in local currency
Results for 2016
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ANNUAL RESULTS 2016
Sales Analysis – 1st Half and 2nd Half HK$ million
1st Half 2nd Half In HK$ Local
Currency In HK$ Local
Currency Retail
Chinese Mainland (23.1%) (19.5%) 2.1% 8.2%
Hong Kong & Macau (13.0%) (13.0%) 2.9% 2.9%
Taiwan (17.8%) (14.2%) (7.9%) (9.6%)
Rest of the World (12.1%) (7.5%) (1.2%) 15.6%
Retail Subtotal (18.7%) (16.0%) 1.1% 5.5%
Wholesale and Licensing 102.9% 109.3% (20.2%) (16.7%)
Group Total (11.5%) (8.7%) (2.4%) 1.8%
• Retail revenue grew in 2nd half as did the Chinese Mainland and Hong Kong & Macau
• In local currency Group revenue grew by 1.8% and Chinese Mainland by 8.2% in the second half
Results for 2016
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ANNUAL RESULTS 2016
Gross Margin Analysis 2016 2015
% %
Retail
Chinese Mainland 70.1% 73.5%
Hong Kong & Macau 71.0% 74.7%
Taiwan 65.9% 67.6%
Greater China 70.0% 73.3%
Rest of the World 56.3% 54.9%
Wholesale and Licensing 65.2% 78.2%
Group Total 68.3% 72.4%
• Gross margin was adversely affected by higher promotional discount, rising wholesale business with relatively lower margin
• The retail gross margin in our main market, Greater China, maintained at 70%
Results for 2016
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ANNUAL RESULTS 2016
Store Network 2016
31 Dec 2015
31 Dec 2014
31 Dec
Chinese Mainland 230 261 311
Hong Kong & Macau 38 36 38
Taiwan 40 41 41
Rest of the World 13 11 9
Total 321 349 399
• Net decrease of 31 stores in Chinese Mainland in 2016
• Closed non-performing stores and opened in new improved locations
• Continued to improve the quality of the store network in Greater China
Results for 2016
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ANNUAL RESULTS 2016
Inventory 31 Dec
2016 31 Dec
2015
Inventory Turnover Days (days) 356 416
Inventory Balance (HK$ million)
505 592
• Significant improvement in inventory turnover days since the end of last year.
• Inventory level remains a core focus for the Group going forward
Results for 2016
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ANNUAL RESULTS 2016
Headcount
• Significant headcount reduction (697 personnel, 21% of 2014 headcount) over past two years
• Closure of Hong Kong formal wear production line (182 personnel) in Q1 2017
2016 31 Dec
2015 31 Dec
2014 31 Dec
Total 2,633 2,738 3,330
Results for 2016
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ANNUAL RESULTS 2016
Gearing Ratio
• Gearing ratio increased due to operating loss but remains moderate
2016 31 Dec
2016 30 Jun
2015 31 Dec
Net Debt (HK$ million) 723.7 678.5 491.0
Gearing Ratio 21.1% 18.5% 13.3%
Results for 2016
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ANNUAL RESULTS 2016
2016 Results Summary
• Remained a tough market
• Retail revenue increased in 2nd half
• Group total sales declined - 3.7% in local currency
• Same Store Sales in Chinese Mainland grew - 1.7% in local currency
• Retail gross margin in Greater China maintained at 70%
• Inventory reduced by 60 days
• Loss making stores reduced = higher quality store network
Results for 2016
ANNUAL RESULTS 2016
Priorities
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ANNUAL RESULTS 2016
Back to basics
Key priorities remain the same
• Improve organisational effectiveness
• Control costs
• Optimise the supply chain
• Drive revenue through the brands
Priorities
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ANNUAL RESULTS 2016
Creating a highly focused organisation
Trinity Asia Retail
Brands Build brand equity Provide design leadership Drive license income Wholesale – strategic locations Global marketing / ecommerce
Retail Drive revenue / GM % Optimise locations Merchandise & store presentation Local marketing / ecommerce
G&H K&C
Cerruti
Priorities
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ANNUAL RESULTS 2016
Controlling Costs
Action:
• Reduction in senior management and consultants
• Manufacturing facilities closed 2016/17
• Tighter expense control - SOP instituted
• Reduction in number of loss making stores by 50%
Priorities
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ANNUAL RESULTS 2016
Optimise Supply Chain Action:
• Major area of focus
• Restructuring supply arrangements
• Refocused to third parties to UK/Italy for formal wear
• Optimising vendor base for casual wear
• Driving cost efficiencies
Priorities
ANNUAL RESULTS 2016
Driving revenue
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ANNUAL RESULTS 2016
“No 1 British Luxury Brand” position with high-end ready to wear Bespoke tailoring equivalent to Zegna
Reputable global clubwear, sportswear brand Competes with Ralph Lauren and Hackett Designed for the younger consumer
Desirable and distinctive European lifestyle brand, with full range of ready to wear & accessories Competes with Hugo Boss and Armani
Brand positioning
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Driving revenue
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ANNUAL RESULTS 2016
Driving revenue
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Driving revenue
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Driving revenue
Kent & Curwen Macau Four Seasons
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Driving revenue
Kent & Curwen Macau Four Seasons
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Driving revenue
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Driving revenue
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Driving revenue
Cerruti Harbour City
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Driving revenue
Cerruti Taipei 101
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Driving revenue
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ANNUAL RESULTS 2016
Driving revenue
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ANNUAL RESULTS 2016
Driving revenue
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e-Commerce
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ANNUAL RESULTS 2016
• Trinity is focused on the Chinese consumer
• Quality store network across Greater China is our competitive advantage
• Heritage brands are a core asset
• Leverage David Beckham to expand Kent & Curwen globally
• Management team is working effectively
• However, recovery of the premium menswear sector will not be immediate
• Steps taken in 2016 will serve to improve the financial position of the Group in 2017 and beyond
Outlook
Outlook
ANNUAL RESULTS 2016
Thank you