2010 Annual Results Announcement · Club Borussia Dortmund ... series, advertisement on the SNS...
Transcript of 2010 Annual Results Announcement · Club Borussia Dortmund ... series, advertisement on the SNS...
1
2010 Annual Results Announcement
March 2011
2
DisclaimerDisclaimer
Cautionary note regarding forward‐looking statements
This presentation material contains certain forward‐looking statements with respect to the financial
condition,
results
of
operations
and
business
of
the
Company. These
forward‐looking
statements
represent
the
Company’s
expectations
or
beliefs
concerning
future
events
and
involve
known
and
unknown
risks
and
uncertainty
that
could
cause
actual
results,
performance
or
events
to
differ
materially
from
those
expressed
or
implied
in
such
statements.
Certain
statements,
such
as
those
that
include
the
words
“potential”,
“estimated”,
“expect”,
“anticipates”,
“objective”,
“intends”,
“plans”,
“believes”,
“estimates”,
and
similar
expressions
or
variations
on
such
expressions
may
be
considered
“forward‐looking
statements”.
Forward‐looking
statements
involve
inherent
risks
and
uncertainties.
Readers
should
be
cautioned
that
a
number
of
factors
could
cause
actual
results
to
differ
in
some
instances
materially,
from
those
anticipated
or
implied
in
any
forward‐looking
statement.
Forward‐looking
statements
speak
only as
of
the
date
they
are
made,
and
it
should
not
be
assumed
that
they
have
been
reviewed
or
updated
in
the
light
of
new
information
or
future
events.
Trends
and
factors
that
are
expected
to
affect
the
Company’s
results
of
operations
are
described in the “Business Review and Financial Review”.
AgendaAgenda
Business ReviewBusiness Review
Strategies & Future PlansStrategies & Future Plans
Open Forum Open Forum
3
Annual Results OverviewAnnual Results Overview
Financial ReviewFinancial Review
4
Annual Results Overview
Financial
Achievement
Sales
+7.3%
Gross profit
+6.1%
Operating profit
+2.6%
High dividend
payout ratio
Dividend payout ratio: 70%
New management on Board
Increasing marketing
and advertising activities
Tightening
partnership with
retailers
Product innovation
through design and
development
Leveraged talents and resources from R&D center in Japan
Transformed Taicang
factory, Jiangsu into a technical center
Additions of professionals with international exposure
Chief Executive Officer ‐
Ms. Sandrine Zerbib
Chief Financial Officer ‐
Mr. Terence Hon
Annual Results OverviewAnnual Results Overview
Launched a series of Kappa brand image TV commercials on
CCTV5 and other regional TV channels
Launched a World Cup marketing campaign dubbed “Soccer
Frenzy”
during 2010 FIFA World Cup South Africa
Leveraging the partnership with GX Retail Group, enhanced
the brand experience at point of sale
Increased emphasis on internet sales
6
Business Review
Business ReviewBusiness ReviewBusiness Review
Brand Building
Expanding Brand Portfolio
Sales Network
Design and Development
7
Brand BuildingBrand Building
—— Kappa Kappa TVCsTVCs
LaunchedLaunched
Launched Kappa brand image TV commercials that featured the sports in season on CCTV 5,
Anhui TV, Zhejiang TV, Liaoning TV, etc. between May and October
2010
Adopted the theme of fusion between sports and fashion
TVCLaunched Kappa TVC in CCTV 5
during World Cup period
Online video Soft online marketing to
demonstrate Kappa’s
spirit of combining
sports and fashion
Art showCreative artwork displayed
in Wangfujing
and Solana,
BeijingCelebrity Campaign
Sponsored “DreamBoat
Soccer
Team”
and invited them to attend
the 2010 World Cup in South Africa
Brand BuildingBrand Building
—— FIFA World Cup South Africa 2010 FIFA World Cup South Africa 2010
Promotion ActivitiesPromotion Activities
Joint promotionKappa
x Bazaar Crossover
9
Online ad Attract young
consumers
Brand BuildingBrand Building
—— China OpenChina Open
10
Platinum
Sponsor
of
the
China
Open,
a
top
integrated tennis event held by ATP, WTA and ITF
Further
promoted
Kappa
brand
by
extending
its
promotional
activities
for
the
China
Open
to
retail
stores
Title
sponsor
of
the
event
“Kappa‐CRT”
with
the
goal of promoting tennis to the public
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“Hole
in
One
Kappa”
golf
day
was
organized
in
August 2010 featuring different celebrities in golf
games.
A
product
launch
show
for
the
Kappa
Golf series was organized
Kappa also offered full support to the HSBC
Golf
Championship,
which
was
held
in
Shanghai,
China in November 2010
Brand BuildingBrand Building
—— 2010 Kappa Golf2010 Kappa Golf
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Brand Building Brand Building
—— Sports MarketingSports Marketing
Co‐sponsorship of Italian Serie
A club AS Roma
Co‐sponsorship of German Bundesliga
Club
Borussia
Dortmund
Official Sponsorship of team clothing for
Virgin Racing F1 Team
SSports Sponsorships with ports Sponsorships with BasicNetBasicNet
and Brand Licenseesand Brand Licensees
Cooperated
with
Bazaar
Magazine
to
create
a
new
graphic
fashion
image,
a
fusion between fashion and sports
Shown on “Bazaar” and “Bazaar Men’s
Style”
issues
between
June
and
October
Joint
hands
with
Bazaar
to
launch
the
“Soccer
Frenzy”
carnival
with
the
presence of “DreamBoat
Soccer Team”
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Brand BuildingBrand Building
—— Crossover with Bazaar and BMWCrossover with Bazaar and BMW
Kappa is the
official clothing
sponsor
for “BMW Mission 3”
The alliance with a
world‐class,
high‐
end
brand
significantly
enhanced
Kappa’s brand image.
14
Internet MarketingInternet Marketing
Took full advantage of the internet platform to publicise
Kappa brand through online video
series, advertisement on the SNS public homepage and dissemination through 163 mailbox
signatures , etc
Online video
Advertisement on SNS
Interactive platform for Kappa Fans
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Expanding Brand PortfolioExpanding Brand Portfolio
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Expanding Brand Portfolio Expanding Brand Portfolio
—— Robe Di Kappa (Robe Di Kappa (““RDKRDK””))
Robe Di Kappa brings a new attitude and perspective towards sports and leisure to the world
– the inner beauty of sports with its artistically innovative line of products
First outlet was officially opened in Beijing in February 2010
A
series
of
marketing
activities
were
launched, e.g. 2010 Fall/Winter Fashion
Collection, introduction
of
a
special
selection of CD, “The Choice of RDK”
The
number
of
outlets
had
grown
to
20
as of end‐2010
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Expanding Brand Portfolio Expanding Brand Portfolio
—— PhenixPhenix
Japanese
outdoor
and
ski
brand
with
strong international recognition
Engaged
in
the
active
preparation
of
the
introduction
to
China
market
in
2011
Expanded
into
the
outdoor
segment
which
is
to
mitigate
the
effects
of
the
high
seasonality
of
ski
and
is
highly
suitable
for
the
efforts
to
develop
in
the China market
As of 31 December
2010As of 31 December
2009 Change
No. of Kappa stores 3,751 3,511 +240
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<25 Retail stores
25 to 50 Retail stores
50 to 100 Retail stores
>100
Retail stores
JV with GX Retail Group
RegionNet
Open
Northern 145
Central 35
Southern 59
Net Openings by Region
Fujian
(157)
Tianjin
(76)
TaiwanGuangxi
(51)
Guizhou
(65)
Hunan (137)
Jiangxi (77)
Anhui
(171)
Sichuan
(205)
Shandong
(236)
Hebei
(198)Shanxi
(75)
Gansu
(25)
Ningxia
(11)
Inner Mongolia
(72)
Jilin(118)
Qinghai (10)
Xinjiang
(48)
Tibet
(7)
Hainan
(29)
Shaanxi
(71)
Chongqing
(80)
Macao
(4)
Guangdong (294)
Beijing(149)
Yunnan (96)
Liaoning (209)
Jiangsu (237)
Zhejiang (323)
Shanghai(82)
Hubei (161)
Henan (118)
Heilongjiang
(159)
Sales Network Sales Network
—— Kappa Stores in ChinaKappa Stores in China
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Sales Network Sales Network
—— Online SalesOnline Sales
Online
sales
of
Kappa
products
grew
by
over 300% in 2010
With
joint
efforts
with
www.taobao.com,
daily
internet
sales
reached
RMB11.0
million
with the
number
of
visitors
to
Kappa
Taobao
online
store
hitting
1.5
million on 11 November, 2010
Aim
to
establish
an
integrated
online
sales
platform
while
at
the
same
time
tapping
into
multiple
popular
internet
channels
to
promote sales
To reinforce
the
image
of
Kappa
brand,
Kappa
Web
Visual
Identity
was
established
to
standardize
the
logo
and
webpage
layout.
Design and DevelopmentDesign and Development—— R&DR&D
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Evolution of Taicang
factory (Jiangsu) into a technical
centre
which
works
in
close
cooperation
with
Dongxiang technical centre in Niigata, Japan
Phenix
developed
several
new
product
lines
and
a
number
of
new
technologies
during
the
year,
including curve zippers and embossment patterns
Herring‐bone Stitch Curve zippers
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Design and DevelopmentDesign and Development—— Kappa PKappa P‐‐A.CA.C
Cooperated with Michael Michalsky, a renowned German
designer, and launched Kappa P‐A.C in July 2010
Originated
from
the
“Pack
Away
Concept”
which
caters
to the needs of the urban youth who are fond of carrying
various portable gadgets for convenient use at anytime
A
simple
and
fashionable
design
that
harmonizes
with
light and soft materials
The P‐A.C collection was promoted through an exhibition
tour
across
major
cities
in
China
including
Shanghai,
Chengdu and Beijing in August and September, 2010
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Financial Review
Financial ReviewFinancial ReviewFinancial Review
Results Highlights
Sales by Markets and Brands
Sales Breakdown by Products
Gross Profit Margin by Markets
and Products
Expenses Ratio to Sales
Working Capital Management
Financial Position
Return to Shareholders
23
24
Results HighlightsResults Highlights
2010 2009 ChangeFor the year ended 31 December
(RMB mn) (RMB mn) (%)
Sales 4,262 3,970 +7.3
Gross profit 2,546 2,399 +6.1
Operating profit 1,741 1,697 +2.6
Profit attributable to equity holders 1,464 1,460 +0.3
Gross profit margin (%) 59.7% 60.4% ‐0.7pt
Operating profit margin (%) 40.9% 42.7% ‐1.8pts
Net profit margin (%) 34.3% 36.8% ‐2.5pts(RMB cents) (RMB cents)
Basic earnings per share 25.83 25.76 +0.3
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Sales by Markets and BrandsSales by Markets and Brands
2010 2009 Change
For the year ended 31 December
(RMB mn) As a % of
total sales (RMB mn) As a % of
total sales (%)
China 3,650 85.6% 3,403 85.7% +7.3
–
Kappa
brand 3,633 85.2% 3,394 85.5% +7.0
–
RDK
brand 7.6 0.2% ‐ ‐ ‐
– Others 9.8 0.2% 8.8 0.2% +11.4Japan
–
Phenix, Kappa and
other brands
612 14.4% 567 14.3% +7.8
Total sales 4,262 100.0% 3,970 100.0% +7.3
Recorded sales growth in all markets and all brands
Online sales increased more than 3 times from 2009, though started with lower base
RDK brand first launched in China in February 2010
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Kappa Brand in China MarketKappa Brand in China Market
––
Sales Breakdown by ProductsSales Breakdown by Products
Accessories
3.4%(4.0%)
Apparel
74.8%(75.9%)
Footwear
21.8%(20.1%)
790.9133.9
123.5
2,718.12,577.6
682.8
2009 2010
5.5%
15.8%
7.7%
3,394.33,632.5
2010
Apparel
Footwear
Accessories
RMB mn
For the year ended 31 December Remarks: Comparable figures for 2009 are shown in brackets
[ ‐]An increase by 14.2% in sales volume of apparel was partly offset by higher rebates given to distributors,
resulting in an overall 5.5% growth.
Double
digit
growth
rate
of
footwear
was
mainly
due
to
improvement
in
design
and
technological
knowhow,
resulting
in
2.8%
higher
ASP
and
20.1%
higher
sales
volume. Proportion
of
footwear
sales
increased to 21.8% (2009: 20.1%).
Gross Profit Margin by Markets and ProductsGross Profit Margin by Markets and Products
2010 2009 ChangeFor the year ended 31 December
(%) (%) (% pt)
China 62.4 63.0 ‐0.6–
Kappa brand 62.4 63.1 ‐0.7– RDK Brand 68.0 N/A N/A– Others 44.9 24.5 +20.4
Japan 43.9 45.2 ‐1.3The Group overall 59.7 60.4 ‐0.7
Gross profit of Kappa products decreased mainly due to higher production cost and higher discount
rate offered to customers as well as impacted by a stock return provision of RMB 155M
RDK has become the product with the highest gross profit margin within our brand portfolio
Overall gross profit margin, declined by 0.7%pt27
2010 2009 ChangeFor the year ended 31 December
(%) (%) (% pt)
Apparel 64.4 65.3 ‐0.9Footwear 55.4 54.5 +0.9Accessories 64.8 63.9 +0.9
Overall 62.4 63.1 ‐0.7
China ‐
Kappa brand
2010 2009 ChangeFor the year ended 31 December
(%) (%) (% pt)
– A&P expenses
(% of sales)
9.3 7.4 +1.9
– Staff cost
(% of sales)
4.6 4.6 ‐
– Product R&D cost
(% of sales)
2.8 2.3 +0.5
Expenses ratios to salesExpenses ratios to sales
Increased advertising and sponsorship expenses on World Cup campaign, TV commercials,
China Open, and Norway Olympics Committee
Higher R&D cost: increasing leverage on design capability in Japan and closer collaboration with
University of the Arts of London
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China MarketChina Market
––
Working Capital ManagementWorking Capital Management
4544
2009 2010
Inventory TurnoverInventory TurnoverDay
For the year ended 31 December
37
24
2009 2010
Day
For the year ended 31 December
6561
2009 2010
Day
For the year ended 31 December
Considering the operation pressure of
distributors,
relaxed
credit
terms
were
given
to
major
distributors.
Despite higher A/R turnover days, the
ageing profile has been improved
No material changes of other working
capital indicators
29
A/R TurnoverA/R Turnover A/P TurnoverA/P Turnover
As at 31 December
2010As at 31 December
2009
% %
Current 75 63
1 ‐
30 days 21 31
31 ‐
120 days 4 6
Total 100 100
A/R Ageing Profile
2010 2009For the year ended 31 December
(RMB mn) (RMB mn)
Net cash generated from operating activities 1,444 1,485
As at 31 December
2010
As at 31 December
2009
(RMB mn) (RMB mn)
Cash & bank deposits 5,028 6,127
Investment in treasury products* 1,522 402
Bank balance and treasury products held 6,550 6,529
Current assets 7,441 7,073
Current liabilities 872 552
Net assets 7,515 7,354
Maintain Strong Financial PositionMaintain Strong Financial Position
30
Maintain strong cash position
Investments in government bonds and treasury products to enhance
return on unutilized cash
Stable cash flows to support future business development and acquisitions
No bank borrowings
*
Included
investments
in
treasury
products
issued
by
MOF,
PRC
and
principal‐guaranteed
treasury
products
issued
by
major
commercial banks in the PRC
31
Return to ShareholdersReturn to Shareholders
2010 2009 ChangeFor the year ended 31 December
(RMB cents) (RMB cents) (RMB cents)
Dividends per share
–
Interim paid 4.16 3.82 +0.34
– Special Interim paid 4.16 1.27 +2.89
– Final (proposed) 3.59 3.91 ‐0.32
– Special final (proposed) 6.17 9.04 ‐2.87
Total 18.08 18.04 +0.04
Payout ratio 70% 70% ‐
While maintaining stronger cash position for future strategic and initiatives are our priorities,
we continue to enhance shareholder value
High dividend payout of 70% of net profit in 2010
Our operating cash flow remains very strong
9.76
32
Strategies & Future Plans
33
2011: A year of adjustment2011: A year of adjustment
The sports industry is now reaching a certain level of maturity – slower growth, clearer
segmentation
In the meantime, the Chinese apparel and footwear market is expected to reach US level in the
coming 5 years, driven by key trends which all represent key opportunities:
Rise of the middle class
Urbanization and growing small cities
Trading‐up
Health and wellness
E‐commerce
Dongxiang has experienced extreme growth the past few years and now needs to strengthen its
foundations to be ready to grab new opportunities
2011 will be a year of adjustment:
Close monitoring of retail inventory and reduction to more healthy levels
Stronger brand pull through brand and product improvement
Improvement of existing store productivity via retail and sales management, with special focus on sub‐distributors
Optimization of current store portfolio
34
LongLong‐‐term Strategiesterm Strategies
Store / network management(Optimize and expand network)
Retail management
Supply chain(Improve supply chain
efficiency)
Process, org and others(Strengthen process/mgmt
discipline)
Brand(Clarify brand positioning
and strengthen equity)
Brand(Clarify brand positioning
and strengthen equity)
Product(Leverage Phenix platform)
Customer(GX relationship)
management(Basic customer
mgmt)
Improve basic competency Build advantages
35
LongLong‐‐term Strategiesterm Strategies
Strengthen brand identity and product
differentiation
Store network optimization
and geographic expansion
Brand diversification
Optimize product creation
Expand footwear products
Develop online sales platform
Shift focus from sell-in to sell-
through
Strengthen Brand IdentityStrengthen Brand Identity‐‐
Clarify Kappa brand positioningClarify Kappa brand positioning
36
Kappa is a color offer
• Full of life, passion,
richness of youthful
energy, in‐motion,
expressive, impulse,
bold, warmth,
open‐minded,
positive, optimistic
• Unisex‐to‐feminine
relevance
• An expression of
youthful optimism
or compensation for
the lack of it
(Focus group Feb.
2011)
“Live the creative beauty of sport”
The aesthetics and
creativity of sportsFashionable
casual look
Art as action expression
Romantic and artsy
• Clarify brand image and point of differentiation in the eyes of
consumers
• Regain momentum, especially among higher tier city and younger
consumers
• Strengthen fundamentals of brand in order to be able to expand range
beyond core casual business
Objectives
Expand Range to Street and FashionExpand Range to Street and Fashion‐‐
Introduction of C19Introduction of C19
Inspired by the colorful street fashion
and bicycle component
38
Form free
Engineered function Sexy
Exercises
Expand Footwear ProductsExpand Footwear Products—— Introduction of Introduction of ““CurvesCurves””
Optimize store portfolioOptimize store portfolio
39
Strategize store portfolio managementStrategize store portfolio management POS development and expansionPOS development and expansion
Refine store opening criteria
and support policies
Develop, manage and
control of store opening plans
Develop and execute granular store
footprint
1
2 2
Develop strategic alliance with
department stores and developers
Strengthen retail premium location of
Tier 1 cities
1
4
Enlarge average store size3 Apply consumer/product segmentation
to store segmentation and grasp
opportunities in casual space
3
Progressively replace low
performing/inadequate stores
4
40
Optimize store portfolioOptimize store portfolio
‐‐
Store segmentation based on systematic Store segmentation based on systematic
consumer/product segmentationconsumer/product segmentation
Sports Fashion
Consumer /
Product
segmentation
Store
segmentation(examples)
Sports floor
Low tier city store focus
Casual floor
Sports FashionCasual
ParticipantParticipant LoverLover Sports inspireSports inspire Brand drivenBrand driven Classic smartClassic smart FollowerFollower Early adaptorEarly adaptor
•
Professional
athletes•
Sports
lovers•
Requires
basic
function
sportswear
•
KAPPA
Fans•
Simple and
clean style•
Edgy
fashion
lovers
•
Trend
followers
41
Optimize store portfolioOptimize store portfolio
‐‐
New retail formatNew retail format
RETAIL OBJECTIVERETAIL OBJECTIVE 2012 NEW LOOK in Retail2012 NEW LOOK in Retail
2006
2009
EVOLUTION
INN
OV
ATI
ON
• More IMPACT on brand voice
• More CREATIVITY in space
•More ATTRACTIVE &
PRODUCTIVITY on product
Shift Focus From SellShift Focus From Sell‐‐in to Sellin to Sell‐‐throughthrough
42
Zero
control
on the
POS
Full
control on
the POS
•Move from "pure wholesale" to "managed retail”•Leverage GX partnership•Special focus on sub‐distributors
Purewholesale
Level of
control on
the POS
Where we are
now
Where we want
to be in the
future
•
Improve
business
intelligence
– Expand
POS system
•
Develop retail
operation
standards: –
VM, format,
services
•
Develop retail
academy for
customers
•
Develop retail
operation
supervision
system and
link incentives
to it
•
Develop
geography and
segment based
assortment
plans and tools
Franchise Retail
"Managed retail"
43
Brand DiversificationBrand Diversification
Achieved
satisfactory
results
since
the
opening
of
the
first
RDK
store
in
Beijing in 2010
Further
promote
the
RDK
series
through various marketing campaigns
Expect to open over 50 RDK stores in
China in 2011
Officially
introduce
Phenix
to
the
China market in 2011
Plan to open 20 to 30 stores in 2011
Optimize Product CreationOptimize Product Creation
44
Further
optimize
product
creation
by
strengthening
R&D
efforts
and
further
evolve
Taicang
factory
(Jiangsu)
into a technical
centre
which
works
in
close cooperation
with
Dongxiang
technical
centre
in
Niigata, Japan
Leveraging the talents and resources in Phenix design department
and at R&D centre in Japan
Expand Kappa’s official online store to a greater number of internet channelsEstablish
iKappa
website:
a
multi‐purpose
platform
covering
online
sales,
marketing,
customer service, brand education, feedback on news products and
a forum for Kappa
fans
Develop Online Sales PlatformDevelop Online Sales Platform
45
Expand the online sales business leveraging
on the investment in Mecox Lane Limited
46
Open Forum