Chow Tai Fook Jewellery Group LimitedHong Kong, Macau and other markets Mainland China Platinum /...

Chow Tai Fook Jewellery Group Limited

1 Core operating profit = Aggregate of adjusted gross profit and other income, less selling and distribution costs and general and administrative expenses2 A net foreign exchange loss of HK$326 million was recorded in 1HFY2019 (1HFY2018: a net gain of HK$115 million)

Revenue

HK$29,703

Same store sales

Mainland China Hong Kong and Macau

Profit attributable to shareholders2

HK$1,936

8.8%

Dividend per share

20.0%

Core operating profit1

HK$2,989

24.7%

Basic EPS

HK$0.19

4.9% 24.4%million

million million

HK$0.151H2018

HK$0.18 77.5%

Payout ratio

1H2019 Results Highlights

1

1H2019 Operational Highlights

1 SIS/CIS = “shop-in-shop”/”counter-in-shop” format2 RSV = Retail Sales Value measured the sales at the ending price (VAT inclusive, if any) of products sold to customers in the POS network and other channels3 RSV YoY change measured at constant exchange ratesNote: Data for retail network and presence were as at 30 September 2018

Retail network

2,822 POS 237

Hong Kong and

Macau

Mainland China

233

Net openings

Other markets

4

Mainland China e-commerce RSV2

12.7%3

RSV Retail sales volume

5.1% 14.0%

Contribution to respective

2

Multi-brand strategy

Introduction of ARTRIUM

T MARK

POS2456 CIS1

Mainland China Hong Kong and

Macau

134.8% 156.7%

RSV2

Summary – Income Statement

For the six months ended 30 September(HK$ m)

1H2017 1H2018 1H2019YoY

Change

Revenue 21,526 24,754 29,703 +20.0%

Contribution of gem-set jewellery1 27.2% 24.2% 23.4% -0.8% pts

Gross profit 6,828 7,166 8,529 +19.0%

Gross profit margin 31.7% 28.9% 28.7% -0.2% pts

Adjusted gross profit margin2 30.1% 28.7% 28.1% -0.6% pts

Selling and distribution costs and general and administrative expenses (“SG&A”)

4,941 4,887 5,517 +12.9%

SG&A to revenue ratio 23.0% 19.7% 18.6% -1.1% pts

Core operating profit 1,708 2,396 2,989 +24.7%

Core operating profit margin 7.9% 9.7% 10.1% +0.4% pts

Profit attributable to shareholders 1,222 1,779 1,936 +8.8%

Basic earnings per share HK$0.12 HK$0.18 HK$0.19 +8.8%

Dividend per share3 HK$0.21 HK$0.12 HK$0.15 N/A

1 Revenue from jewellery trading and service income from franchisees excluded2 Adjusted gross profit margin = Gross profit margin excluding the impact of the unrealised loss (gain) on gold loans3 Dividend per share included a special dividend of HK$0.15 for 1H2017

4

Revenue Breakdown

Revenue by reportable segment (HK$ m)Revenue by product (HK$ m)

(Excluding jewellery trading and service income from franchisees)

1H2015 1H2016 1H2017 1H2018 1H2019 1H2015 1H2016 1H2017 1H2018 1H2019

Hong Kong, Macau and other markets

Mainland China

Platinum / Karat gold products

Gem-set jewelleryGold products

Watches

28,023

21,301

29,240

28.1%

55.7%

27.2%

49.6%

16.2%12.7% 12.9%

5.0% 6.3%

53.6%

26.6%

6.1%

24,127

24.2%

11.3%6.7%

57.8%

17.5%

27.2%

12.5%

YoY Change

21.5%

1.4%

20.6%

19.1%

YoY Change

20.0%

59.7%

59.2%

28,124

40.8%40.3%

21,526

60.4%

39.6%

24,754

29,320

58.0%

42.0%

29,703

60.7%

39.3%

29,309

23.4%

10.5%

5.6%

60.5%

5

5.4%

13.0%

5.2%

17.4%

26.0%

23.0%

11.4%

9.0%

5.0%

6.8%

3.8%

5.7%

Same Store Sales Growth (“SSSG”) – Major Markets

1H2018 1H2019

SSSG SSSG SSS volume growth

Mainland China 10.3% 4.9% -0.8%

Hong Kong and Macau 9.5% 24.4% 13.1%

1Q 2Q 3Q 4Q 1Q 2Q

FY2018 FY2019


6

8.5%

20.6%

-0.9%

17.8%

30.9%

40.7%

-4.4%

7.4%

22.2%

15.6%

26.4%

-2.3%

16.1%14.8%

8.1%13.6%

10.8% 11.1%

3.3%-1.4% -1.4%

-7.7%-3.8%

1.0%

SSSG – Major Products

Same store average selling price1 (HK$)

1H2018 1H2019

Gem-set jewellery 6,400 6,700

Gold products 3,700 4,100

SSSG – Mainland China SSSG – Hong Kong and Macau

Gem-set jewellery Gold products Gem-set jewellery Gold products

1Q 2Q 3Q 4Q 1Q 2Q

FY2018 FY2019

1Q 2Q 3Q 4Q 1Q 2Q

FY2018 FY2019

Same store average selling price1 (HK$)

1H2018 1H2019

Gem-set jewellery 10,800 10,400

Gold products 7,100 8,200

1 Average selling price on 1H2019 same store basis, was rounded to the nearest hundred HK dollar and measured at constant exchange rates; Value-added tax (VAT) in Mainland China included

7

25.8% 25.5% 25.5%

24.6%20.5%

18.1%

1.8%

5.5%7.9%

1H2017 1H2018 1H2019

Core operating profit marginAdjusted gross profit margin SG&A ratio

32.9%30.7% 29.7%

21.8%19.2% 18.9%

12.1% 12.4%11.4%

1H2017 1H2018 1H2019

1,549

1,853

2,062

159

543

926

1H2017 1H2018 1H2019

Mainland China


Core Operating Profit and Profitability Analysis

Core operating profit YoY 1H2018 1H2019

Mainland China 19.6% 11.3%


242.2% 70.5%

Core operating profit by reportable segment (HK$ m) Profitability – Mainland China

Profitability – Hong Kong, Macau and other markets

Core operating profit marginAdjusted gross profit margin SG&A ratio

8

922 930 1,128

385 383 413 180 178

313

952 817

769

771 809

860

1,731 1,770

2,035

23.0%

19.7%18.6%

% %

8.0%

0.8%

4.4%

3.6%

4.4%

1.8%

7.1%

0.7%

3.8%

3.3%

3.3%

1.5%

%

6.8%

1.1%

3.8%

2.9%

2.6%

1.4%

1H2017 1H2018 1H2019

4,941 4,887

5,517

SG&A Analysis (HK$ m)

15.0%

-5.8%

75.7%

7.8%

21.2%

YoY Change

12.9%

As a % of revenue

Depreciation and amortisation

Concessionaire fees

Advertising and promotion expenses

Rental expenses

Other SG&A

Staff costs

9

6.3%

1H2017 1H2018 1H2019

31.2%

61.1%

36.9%

57.5%

625624

54.0%

39.5%

725

7.8%7.1% 6.7%

1H2017 1H2018 1H2019

27.7%

68.8%

34.3%

62.3%

1,1331,092

1,303

32.8%

63.5%

8.5%7.6%

7.2%

1H2019 Average no. of employees1

20,320+3.8% YoY

3,140-1.6% YoY

1H2019 Average no. of employees1

3.4%3.5% 6.5%5.5%7.7%

YoY Change

10.0%

15.0%

24.0%

16.1%

YoY Change

22.7% 36.9%

SG&A – Staff Costs and Related Expenses (HK$ m)

As a % of respective revenue

Variable staff costs

Fixed staff costsOther staff related expenses

As a % of respective revenue

Variable staff costs

Fixed staff costsOther staff related expenses


1 Employees in production function excluded 10

3.6%

17.3%9.0%

761 801

853

1H2017 1H2018 1H2019

9.8%7.4%

5.2%

9.2% 8.8%8.6%

6.1%5.5%7.7%

YoY Change

6.4%

-13.7%

YoY Change

SG&A – Concessionaire Fees and Rental Expenses (HK$ m)

As a % of respective revenueConcessionaire fees


801

667

575

1H2017 1H2018 1H2019

As a % of respective revenueRental expenses

11

89 56 70

283

240

261

1H2018 FY2018 1H2019

296

372

331

2,207 2,097 1,801

2,539 2,723 2,895

12,684 11,819 13,202

18,305 18,179

20,458

1H2018 FY2018 1H2019

34,81835,735

38,356

Inventory Analysis

Finished goods

Raw materials

1 Packing materials excluded2 Inventory turnover period = Closing inventory balances (excluding packing materials) / cost of goods sold x 183 (for 1H figures) or 365 (for FY figures)

Inventory balances by product1 (HK$ m) Inventory turnover period by category2 (day)

Watches

Gem-set jewellery

Gold productsPlatinum / Karat gold products

%

52.2%

6.0%

7.8%

33.9%

%

51.2%

6.2%

7.1%

35.5%

12

53.3%

34.4%

%

7.5%

4.7%

98 73 73

38 61 47

136 159

299

126 117

109

1H2017 1H2018 1H2019

410398

18 68 46

118

77 148

262 265

334

1H2017 1H2018 1H2019

410398

528 528

Capital Expenditure (HK$ m)

Furniture, fixtures and equipment & leasehold improvements

Land and buildings & construction in progressPlant and machinery & motor vehicles

Capex by nature Capex by function

Offices

Projects

POSProductions

13

Changes in Capital Structure

(HK$ m)As at

31 Mar 18% to total

equityAs at

30 Sep 18% to total

equityIncrease/

(decrease)

Non-current assets 8,258 24.2% 7,963 26.7% (296)

Inventories 34,929 102.4% 38,484 129.0% 3,554

Bank deposits and cash equivalents1 7,944 23.3% 4,831 16.2% (3,113)

Total borrowings 13,258 38.9% 16,789 56.3% 3,531

Bank borrowings 7,923 23.3% 9,783 32.8% 1,860

Gold loans 5,335 15.6% 7,006 23.5% 1,671

Net debt2 5,314 15.6% 11,958 40.1% 6,644

Net current assets 28,593 83.9% 23,955 80.3% (4,638)

Total equity 34,098 100.0% 29,823 100.0% (4,275)

1 Bank balances and cash included 2 Aggregate of bank borrowings, gold loans, net of bank deposits and cash equivalents

14

7,944

3,124 2,992

317 528

1,860 4,561

3334,831

FY2018(31 Mar 18)

1H2019(30 Sep 18)

Summary – Movements in Cash Flows (HK$ m)

Net cash used in inventories2

Operating cash flows before movements in working capital

Net cash from other operating activities

Capital expenditure

Net increase in bank borrowings

Dividends paid

Other movements

Bank balances and cash

Bank balances and cash

1 Net cash from operating activities less capital expenditure and net movements for gold loans2 Net cash used in inventories included net change in inventories, gold loan raised and repayment of gold loans

Pro forma free cash flows1

-79

15

Retail Network Update – 1H2019

Mainland China

233 POS

POS movement1 1H2018 FY2018 Addition Reduction Net 1H2019

Mainland China 2,358 2,449 286 (53) 233 2,682

Hong Kong 75 80 3 (3) – 80

Macau 20 19 – – – 19

Taiwan 21 22 – – – 22

Korea 5 7 1 – 1 8

Japan 2 2 1 – 1 3

Malaysia 2 2 1 – 1 3

Singapore 1 1 1 – 1 2

United States 4 3 – – – 3

Total 2,488 2,585 293 (56) 237 2,822

1 Shop-in-shop and counter-in-shop excluded

Hong Kong and Macau

Other markets

4 POS

17

57.6%

38.0%

4.4%

58.0%

36.0%

5.9%

% of % of POS RSV

Department store

Shopping mall

Standalone store

11.8%

53.2%

35.0%

17.1%

59.1%

23.7%

% of % of POS RSV

Tier I cities

Tier II cities

Tier III cities and others

58.0%

42.0%

63.4%

36.6%

RSV and POS by operation model RSV and POS by tier of cities

RSV YoYNet POS

movement

Tier I cities 13.7% +34

Tier II cities 13.3% +95

Tier III andother cities

15.7% +91

RSV YoYNet POS

movement

Department store

2.0% +1

Shopping mall

27.0% +79

Standalone store

-6.4% -2

% of % of POS RSV

Self-operated

Franchised

RSV YoYNet POS

movement

Self-operated 9.1% +78

Franchised 23.4% +142

RSV and POS by self-operated model

Updates on Mainland China – CHOW TAI FOOK

JEWELLERY POS

18

Net openings of 220 CHOW TAI FOOK

JEWELLERY POS in 1HFY2019;

FY2019 net openings expected to be

~400 POS

Continue to deepen market penetration

in lower tier cities through franchised

model

Store segmentation with ARTRIUM and

JEWELRIA to complement the classic

CHOW TAI FOOK JEWELLERY POS

Retail network management

ARTRIUM, Changsha, Hunan Province(湖南省長沙市)

JEWELRIA, Beijing(北京)

Updates on Mainland China – CHOW TAI FOOK

JEWELLERY POS

19

59.9%

40.1%

65.7%

34.3%

RSV YoYNet POS

movement

Touristic area2 20.4% -1

Other area 26.5% +1

Shinsegae DF Gangnam, Korea

Updates on Hong Kong, Macau and Other Markets

RSV settled by China UnionPay, Alipay,

WeChat Pay or RMB

45.4%(1H2018: 42.6%)

1 Total number of POS in Hong Kong and Macau was 99 as at 31 March 2018 and 30 September 2018, respectively

2 Touristic area includes Causeway Bay, Tsim Sha Tsui, Mong Kok, Yau Ma Tei, Shatin, Sheung Shui, Hong Kong International Airport, Hong Kong Disneyland and Macau

% of % ofPOS RSV

Touristic area2

Other area

Nil change in the total number of POS in

1HFY2019

~1 net POS opening expected in 2HFY2019

Hong Kong and Macau

Other markets

Retail network management

Vivo City, Singapore

Net openings of 4 POS in 1HFY2019

Opportunistic in future expansion to Asia-

Pacific region

HK and Macau RSV and POS by area1

20

Products and Brands – Multi-brand Strategy

MONOLOGUEStylish fashion jewellery

for young generation

SOINLOVETop of mind jewellery gifting product of millennial girls

HOUSE 1929One-of-a-kind artistic high jewellery pieces

JEWELRIAInternational jewellery

product offerings

HEARTS ON FIREUS premium diamond brand with exquisite cutting craftsmanship

CHOW TAI FOOK JEWELLERY

Iconic brand with classic product offerings

T MARKIn pursuit of true diamond authenticity and traceability

ARTRIUMArtisan jewellery pieces with

meticulous craftsmanship

21

Updates on T MARK and HEARTS ON FIRE

HEARTS ON FIRE, Causeway Bay

T MARK, Shanghai

Retailer locations

51621

POS

192

Mainland China165


27SIS/CIS

405 CIS 1 POS 44 CIS 1 POS

Hong Kong and MacauMainland China

RSV

18.6% 25.2%

134.8% YoY 156.7% YoY

of diamond product RSV

of diamond product RSV

22

Updates on SOINLOVE and MONOLOGUE

A net of 5 POS were opened 1HFY2019

Expect ~20 openings in FY2019

6 POS were opened in 1HFY2019

Expect ~20 openings in FY2019

MONOLOGUE, Guangzhou, Guangdong Province

SOINLOVE, Guangzhou, Guangdong Province

23

“Gifting” experience shop

Retail Experience

• Themed CHOW TAI FOOK JEWELLERYexperience shops will be graduallyintroduced in Mainland China in2HFY2019

Experience shop

• Rolled out in 5 cities in Mainland Chinato reach out to potential customers invarious locations

Self-service experience corner

“Inheritance” experience shop Self-service experience corner, Chongqing

24

Updates on E-commerce – Mainland China

12.7% YoY

E-commerce RSV

Unique daily visitors1

Number of followers2

405,000

4,889,000+

Average selling price

HK$1,3001H2018

Contribution to respective

5.1%

14.0%

RSV

Retail sales volume

1 Source from Chow Tai Fook e-shop, Tmall and JD.com2 Source from official Sina Weibo, Tencent Weibo and WeChat accounts

HK$1,400

26

Customer Relationship Management

1,744,000

22.3%


32.6%

Members as at 30 September 2018

932,000

Repeat purchase as a % of RSV in 1H2019

27

Business Outlook and Strategies

Market outlook

• Growth momentum is expected to moderate in 2HFY2019 following the escalating comparison base and macro headwinds

• The Chinese government has ramped up efforts in deploying a series of measures that should vitalise domestic consumption and counteract slowing economy

• Cautiously optimistic about the prospect of the Greater China jewellery market for the foreseeable future

“Smart+ 2020” strategic plan

• Multi-brand strategy and innovative retail experience

• Conversion to an agile C2M business model to enable customer engagement along the supply chain

• Investment in data analytics to drive insights and values along business operations

• Incubation of innovative and entrepreneurial culture

29

Retail Network Update – Mainland China – 1H2019

POS movement by store brand1

FY2017 FY2018 Addition Reduction Net 1H2019


2,118 2,317 268 (48) 220 2,537

CTF WATCH 117 106 4 (3) 1 107

T MARK – – 1 – 1 1

HEARTS ON FIRE 8 6 1 (1) – 6

SOINLOVE – 9 6 – 6 15

MONOLOGUE 3 11 6 (1) 5 16

Total 2,246 2,449 286 (53) 233 2,682


33

Mainland China

233 POS

Retail Network Update – Hong Kong, Macau and other

markets – 1H2019


POS movement by store brand1 FY2017 FY2018 Addition Reduction Net 1H2019


118 119 5 (1) 4 123

Hong Kong 80 78 1 (1) – 78

Macau 18 18 – – – 18

Other markets 20 23 4 – 4 27

CTF WATCH 4 3 – (2) (2) 1

T MARK – – 1 – 1 1

HEARTS ON FIRE 13 14 1 – 1 15

Total 135 136 7 (3) 4 140Other markets

4 POS

Hong Kong and Macau

34

These materials have been prepared by Chow Tai Fook Jewellery Group Limited (the “Company”) solely for use at this presentation and are not for publicdissemination.

The slides and any other materials used in this presentation are the property of the Company and must be treated as such. The information contained inthis presentation is being furnished to you solely for your information and may not be forwarded, published or distributed, directly or indirectly, to anyother person (whether within or outside your organisation/firm), in whole or in part, for any purpose and may not be reproduced in any mannerwhatsoever. Any forwarding, publication, distribution or reproduction of this document in whole or in part is unauthorised.

The information contained in this presentation does not constitute or form part of any offer for sale or subscription of or solicitation or invitation of anyoffer to buy or subscribe for any securities or other interests of the Company or its holding Company or any of its subsidiaries in any jurisdiction or aninducement to enter into any investment activity, nor shall it or any part of it form the basis of or be relied on in connection with any contracts, commitmentor investment decision whatsoever.

This presentation contains forward-looking statements. Such forward-looking statements are based on a number of assumptions about the operations ofthe Company and other factors, many of which may be beyond the Company’s control. By their nature, forward-looking statements involve risks anduncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Accordingly, the Company’s actualresults may differ materially from those expressed or implied by such forward-looking statements. The Company has no obligation and does not undertaketo update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The information contained in thispresentation has been compiled as of the date of this presentation, speaks as of the date of this presentation (or earlier, if so indicated) and will not beupdated to reflect material developments which may occur after the date of this presentation, and is subject to change, including substantial changes,without notice.

This presentation may include measures of financial performance which are not a measure of financial performance under IFRS, such as “Core operatingprofit”. These measures are presented because the Company believes they are useful measures to determine the Company’s operating cash flow andhistorical ability to meet debt service and capital expenditure requirements. “Core operating profit” should not be considered as an alternative to cashflows from operating activities, a measure of liquidity or an alternative to net profit or indicators of the Company’s operating performance on any othermeasure of performance derived in accordance with IFRS. Because it is not an IFRS measure, “Core operating profit” may not be comparable to similarlytitled measures presented by other companies.

The information contained in this presentation has not been independently verified. No representation, warranty, or undertaking express or implied, ismade as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of any information or opinion contained herein. It isnot the intention to provide, and you may not rely on this document as providing, a complete or comprehensive analysis of the Company’s financial ortrading position or prospects. None of the Company or any of its directors, officers, employees, agents, shareholders, affiliates, subsidiary, advisors orrepresentatives shall be in any way responsible for the contents hereof, or shall be liable (in negligence or otherwise) for any loss howsoever arising fromany use of this document or the information contained in this presentation or otherwise arising in connection therewith.

Disclaimer

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