2015/16 Final results Corporate Presentationjhc.com.hk/tch/investor-relations/financial...Stock...

2015/16 Final results

Corporate Presentation

25 July 2016

Stock code: 1373

International Housewares Retail Company Limited 2015/16 Final Results

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and BOCI Asia Limited (the “Sole Sponsor” or the "Sole Global Coordinator") that you are a professional investor (as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and rules made thereunder) and are a person located outside of the United States (within the meaning of Regulation S of the

U.S. Securities Act of 1933, as amended (the “Securities Act”)).

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It is not the intention of the Company, the Sole Sponsor, the Sole Global Coordinator or any other person to provide, and you may not rely on this presentation and/or these materials as providing, a complete or comprehensive analysis of the Company and its subsidiaries and proposed subsidiaries (collectively, the "Group"), its

condition (financial or otherwise) or prospects. The information contained in this presentation and these materials has not been independently verified and is subject to verification, completion and change without notice. The information contained in this presentation and these materials is only current as of the date of this

presentation and these materials. None of the Company, the Sole Sponsor, the Sole Global Coordinator and their respective affiliates, advisers, agents and representatives nor any other person is under any obligation to update or keep current the information contained in this presentation and these materials subsequent to the date

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Sole Global Coordinator or any of their respective affiliates or any other person as to, and no reliance should be placed for any purpose whatsoever on, the fairness, reasonableness, accuracy, correctness or completeness of the information contained in this presentation and/or these materials. By attending this presentation or

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(financial or otherwise) and the potential future performance of its business. None of the Company, the Sole Sponsor, the Sole Global Coordinator and their respective affiliates, nor any of the directors, officers, employees, shareholders, advisers, agents or representatives of the Company, the Sole Sponsor, the Sole Global

Coordinator or any of their respective affiliates or any other person accepts any liability whatsoever for any loss howsoever arising from any use of this presentation or these materials or their contents or otherwise arising in connection with this presentation and/or these materials and/or their contents.

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subject to significant risks and uncertainties. These forward-looking statements, if any, reflect the Company’s current views, beliefs, plans, estimates and/or expectations with respect to future events and are by no means a guarantee of future performance or results. Actual results, performance or achievements of the Group may

differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements, if any. Such forward-looking statements, if any, are based on numerous assumptions regarding factors such as the Group's present and future business strategies and the environment in which the Group

will operate in the future, which are beyond the Company's control, and must be read together with such assumptions. Predictions, projections or forecasts, if any, of the economy or economic trends of the markets are not necessarily indicative of the future or likely performance of the Group, and the forecast financial performance of

the Group, if any, is not guaranteed. You are cautioned not to place reliance on these forward-looking statements, if any.

None of the Company, the Sole Sponsor, the Sole Global Coordinator and their respective affiliates, nor any of the directors, officers, employees, shareholders, advisers, agents or representatives of the Company, the Sole Sponsor, the Sole Global Coordinator or any of their respective affiliates or any other person shall have any

liability for any inaccuracy, error or omission of this presentation or these materials or their contents nor for any loss, howsoever and directly or indirectly, arising from any use of this presentation or these materials or their contents or otherwise arising in connection with this presentation and/or these materials and/or its contents. In

addition, none of the Company, the Sole Sponsor, the Sole Global Coordinator and their respective affiliates, nor any of the directors, officers, employees, shareholders, advisers, agents or representatives of the Company, the Sole Sponsor, the Sole Global Coordinator or any of their respective affiliates or any other person is under

any obligation to provide any additional information or to supplement, amend or update this presentation or these materials or any additional information or to correct any inaccuracy, error or omission which may become apparent or otherwise.

This presentation and these materials are for informational purposes only and do not and are by no means intended to constitute or form part of an offer, invitation or solicitation to acquire, purchase or subscribe for any securities of the Company in the United States or anywhere else. Securities of the Company may not be offered or

sold in the United States absent registration or an exemption from registration under the Securities Act and the applicable securities laws of any state or other jurisdiction of the United States. No securities described herein, if any, have been or will be registered under the Securities Act. No part of this presentation and these

materials shall form the basis of, or be relied upon in connection with, any contract, commitment or investment decision whatsoever. Any decision to acquire, purchase or subscribe for any securities of the Company in any offering shall be made solely on the basis of the information contained in a prospectus or offering circular to be

issued by the Company in connection with such offering.

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By attending this presentation or receiving these materials, you acknowledge, accept, agree and/or undertake with, and are deemed to have acknowledged, accepted, agreed and undertaken with, the Company, the Sole Sponsor, the Sole Global Coordinator and any and all of their respective affiliates and advisers that:

1. You are a professional investor (as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and rules made thereunder) and are a person located outside of the United States (within the meaning of the Securities Act).

2. You have the knowledge, experience and capability to conduct your own assessment of the market and the market position of the Company and the Group, that you have conducted or will conduct your own analysis and be solely responsible for forming your own view of the Company and its securities and the Group, its condition

(financial or otherwise) and the potential future performance of its business, and that you have obtained or will obtain your own independent legal, financial, tax and other professional advice relating to investment in any securities of the Company.

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any material information including forward-looking information (whether qualitative or quantitative) concerning the Group that is not: (i) reasonably expected to be included in the prospectus or offering circular to be issued by the Company; or (ii) publicly available.

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of or be relied on in connection with any contract or commitment whatsoever.

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6. None of the Company, the Sole Sponsor, the Sole Global Coordinator and their respective affiliates, nor any of the directors, officers, employees, shareholders, advisers, agents or representatives of the Company, the Sole Sponsor, the Sole Global Coordinator or any of their respective affiliates, makes any express or implied

representation or warranty as to the fairness, reasonableness, accuracy, correctness or completeness of this presentation or these materials or any information in any of them, and none of them is under any obligation, legal or otherwise, to update or keep current this presentation or these materials or any information in any of them.

7. Each of the Company, the Sole Sponsor, the Sole Global Coordinator and their respective affiliates, and each of the directors, officers, employees, shareholders, advisers, agents and representatives of the Company, the Sole Sponsor, the Sole Global Coordinator and their respective affiliates, expressly disclaims any and all

liability on the basis of this presentation or these materials or any information in, or omitted from, or any inaccuracy or error in respect of, this presentation or these materials or otherwise.

2

Stock code: 1373


Agenda

3

Business Highlights

Business Review by Market

Financial Performance

Outlook and Strategies

4 International Housewares Retail Company Limited 2015/16 Final Results

Business Highlights

Stock code: 1373


HK business contributed

HK$97.4 million to net profit

*before on-off item (i)

Results Highlights – FY2016

5

Revenue grew 4.5% to

HK$2,039.6 million

Strong financial position with

cash of HK$406.1 million

Profit attributable to equity holders is HK$80.4 million

*before on-off items(i&ii)

Proposed interim Dividend 5.6 HK cents per share

Gross Profit increased by 5.0%

to HK$947.6 million

HK net profit margin for 2H

FY16 improved to 6.4% from 6.2%

2H FY15

* One-off items: (i) exiting cost from Malaysia and Mainland China market of HK$10.2m ;and (ii) exchange loss on RMB deposit of HK$3.7m.

Stock code: 1373


Retail Network

358 stores

6

FY2013 FY2014 FY2015 FY2016 Net change

Hong Kong 230 241 267 277 10

Singapore 32 52 65 62 (3)

West Malaysia 9 15 12 0 (12)

PRC 7 9 8 0 (8)

Macau 5 6 8 8 0

Total 283 323 360 347 (13)

Number of directly-owned stores

Hong Kong: 277 stores

Macau: 8 stores

Singapore: 62 stores

347 Directly-owned Stores

East Malaysia: 1 stores

Saudi Arabia: 5 stores

New Zealand: 1 stores

Indonesia: 1 stores

Cambodia: 3 stores

11 Licence Stores

+10 stores in Hong Kong in FY16


Financial Performance

Stock code: 1373


For the 6 months to Apr 2016 Apr 2015 Change

Turnover (HK$’000) 940,004 899,387 +4.5%

Gross Profit (HK$’000) 437,456 407,866 +7.3%

*Net profit from Hong Kong Business (HK$’000) 60,751 55,398 +9.7%

Key ratios

Gross profit margin 46.5% 45.3% +1.2pp

*Net profit margin 6.5% 6.2% +0.3pp

Financial Performance – Hong Kong 2H FY2016

8

* Excluding one-off item of HK$0.7m exchange loss on RMB deposit

Stock code: 1373


For the 12 months to Apr 2016 Apr 2015 Change

Turnover (HK$’000) 2,039,575 1,951,278 +4.5%

Gross Profit (HK$’000) 947,577 902,790 +5.0%

*Net profit from Hong Kong Business (HK$’000) 97,416 106,016 -8.1%

*Profit attributable to equity holders (HK$’000) 80,378 88,390 -9.1%

Key ratios


*Net profit margin 3.9% 4.5% -0.6pp

Total Dividend

Interim dividend (HK cents) 5.0 4.9 +0.1

Final dividend (HK cents) 5.6 5.6 -

Total Dividend 10.6 10.5 -0.1

Payout Ratio 114 86% +28pp

Financial Performance – Group FY2016

9

* Excluding one-off items HK$3.7m exchange loss on RMB deposit and HK$10.2m cost for exiting Malaysia and China market

Stock code: 1373


As at April 2016 2015 Change

CAPEX: Plant & equipment (HK$’000) 26,922 37,609 -28.4%

CAPEX: Property (HK$’000) 12,463 42,618 -70.8%

Net Cash generated from Operating

Activities (HK$’000) 105,554 112,494 -6.2%

Cash and cash equivalents (HK$’000) 406,080 447,376 -9.2%

Inventory Turnover (1) 94 103 -9 days

Trade Payable Turnover (2) 54 53 +1 day

10

Notes:

1. Inventory turnover = Closing inventory / Cost of sales x365

2. Trade payables turnover = Closing trade payables / Cost of sales x365

Financial Performance – Group FY2016


Business Review by Market

Stock code: 1373


Revenue Breakdown

Revenue breakdown

12

Macau

Singapore

Hong Kong

Revenue growth by region

Compared in Local Currency

1,489,652 1,651,154

1,755,006

200,128

238,213 231,115

FY2014 FY2015 FY2016

Hong Kong Singapore West Malaysia PRC Macau

1,951,279

33,635 4,306

19,117

36,560 4,945

20,407

39,341 4,822 9,290 11,746,838

2,039,575

Stock code: 1373


As at Dec / for the year ended Dec 2016 2015 Change

Number of stores 277 267 +10 stores


Comparable store sales growth (CSSG) 5.3% 8.2% -2.9pp

Hong Kong – Strategic Focus with steadfast growth

Revenue growth driven by increase of retail stores and comparable store sales

Number of members growing over 390,000, contributing 14% of total retails sales in Hong Kong

Introducing New store format “123 by ELLA”, offering accessories in a range of fixed prices

Number of Ella stores up from 7 (acquired in Dec 14) to 13 as at 30-Apr-16 with 2 of which 2 is “123 by

ELLA”

Boosting sales by shop profiling and product mix optimization

Improving gross margin : (1) long-established relationship and stably purchase enabling us to constantly ask

for better price /support from suppliers; (2) enlarging sourcing capacity for higher margin products ; (3)

benefiting from the strong HK$/US$; and (4) leveraging on extensive supplier network

Broadening product categories on JHCeshop to attract more online shoppers

Reviewing internal procedures and cost structure regularly so as to improve operation efficiency

13

Record high revenue, an increase of 6.3%

Stock code: 1373


Singapore – 2nd market with strong focus

Consumer sentiment remaining weak

Continuing to improve CSSG and operational efficiency

More conservative approach to store opening

Holding optimistic view on further development

14

As at Apr / for the year ended Apr

2016 2015 Change

Number of stores 62 65 -3 stores

Comparable store sales growth (CSSG)* -1.9% -8.9% +7.0pp

Revenue grew by 3.7%* with significant improvement on CSSG

* Compared in local currency

Stock code: 1373


Other Markets

15

* Compared in local currency

Macau Good profit margin with steady growth

West Malaysia Exited

China Exited


Business Updates

Stock code: 1373


Focusing in Hong Kong & Singapore 1

17

Continue expansion in Hong Kong home market

Revamp eShop, be more appealing to online shoppers

Look Singapore as the 2nd important market, maintain strong focus, hold optimistic

view in mid-to-long term

Stock code: 1373


New Store Format : 123 by Ella 2

18

Offering products in a range of fixed prices

Simple store with fast-moving and trendy products of lifestyle, health

and beauty in treasure hunting shopping environment

1st store in Wong Tin Sin by converting an existing “Ella” into a “123

by Ella” store in Nov-15 with 46% CSSG for the 5 months to Apr-16

2nd store in Tin Shui Wai, newly set up in Apr-16 with encouraging

sales

Target at over 25 stores in Hong Kong by the end of FY2017

Stock code: 1373


Overseas Franchise 3

19

New Franchise: Australia

New Franchise: Vietnam

Existing Franchise

Malaysia

Saudi Arabia

New Zealand

Indonesia

Cambodia

1

2

3

4

5

6

7

Signed up in Oct-15

2 stores will be in Sydney in July

2016

Signed up in May-16

It is expected that 3 stores to be

opened in first year

http://www.google.com.hk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwins9T7rOnNAhWELpQKHeqaA1AQjRwIBw&url=http://www.canstockphoto.com.br/ilustracao/vietcong.html&psig=AFQjCNF1w8llCznW0_ouqnTjwFcyls-Y3g&ust=1468255694710086

Stock code: 1373


Reinforce the leading position and sustainable growth in Hong Kong

4.1

20

CSSG by Strategic Renovation Plan

Concept stores to appeal to younger segment

Providing customers with better shopping environment

Attracting traffic by modernized look and customer-oriented display

A clear message of “we are staying to provide better services and

products”

Setting up concept stores at strategic locations

Contemporary fixtures, flooring and lighting, creating pleasant and

comfortable store atmosphere

Tailored product-mix in 8 Zones, inspiring new ideas in living

Offering good-value, trendy and stylish products to target

customers

1 2 3 4 5 6 7 8

Stock code: 1373



21

Unique Private Label Products with higher margins

4.2

Working across assortment, series, new items, product mix and product range each for

private label based consumer trends

Adding value and enhancing uniqueness by package design

Good-value products to customers in return for higher margins

Personal & health Bedding and linens Umbrellas

Gardening Stationery

Stationery Porcelain kitchenware Ceramic ware

Charcoal products

Stock code: 1373



22

JHCeShop Mobile Apps

4.3

Extending from web-based desktop to

mobile

Broadening product categories to attract

more business

Strengthening logistic capacity

Free pick-up service at extensive retail

locations

Effective way to spread promotion

information

Full range front-end features for the

customer loyalty program

Quick information of store locations

Linkage to JHCeShop

Stock code: 1373



23

Operational Efficiency

4.4

Regularly reviewing and monitoring internal procedures/cost structure to enhance

competitiveness

Improving operation efficiency by simplifying workflow and coordinating with business-

partners even closer

Stock code: 1373


Network Expansion Plan and CAPEX

Planned store expansion & estimated capital expenditures

24

Store expansion

(number of stores) Actual at 30 Apr 16 Net increase

FY2017

Net increase

FY2018

Hong Kong (incl. Ella) 277 20 20

Macau 8 1 2

Singapore 62 3 5

Total 347 24 27

Estimated capital expenditures

HKD’000 FY2017 FY2018

New store openings 20,000 21,000

Ongoing renovations of existing stores 22,000 22,000

The above estimated capital expenditures not including the

acquisition & improvements to logistics of HK$50m


Q & A


Thank You!

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