Yue Yuen Industrial F2017 Interim Resultsinvestor.yueyuen.com/201906050700341773805174_tc.pdf · 3...
Transcript of Yue Yuen Industrial F2017 Interim Resultsinvestor.yueyuen.com/201906050700341773805174_tc.pdf · 3...
Yue Yuen Industrial
F2017 Interim Results
August 2017
Yue Yuen Industrial (Holdings) Limited
(551.HK)
1
Disclaimer
While every care has been taken in preparing the information in this
presentation and the discussion following, such information is provided "as
is" without warranty of any kind, either expressed or implied. In particular, no
warranty regarding accuracy or fitness for a purpose is given in connection
with such information. The opinions expressed in this presentation and the
discussion following, do not constitute investment advice. Neither Yue Yuen
nor any of its officers will be liable for any direct or indirect or any other
damages of any kind arising from or in connection with any reliance placed
on any information in this presentation and the discussion following.
1
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Founded in 1988, and listed on the HKEx in 1992 (551.HK)
Core Business: Footwear OEM/ODM and Pou Sheng (3813.HK)
OEM/ODM – Footwear manufacturing, predominately athletic and casual / outdoor
Pou Sheng – Retail sales network & sports services in the Greater China Region
Interim Dividend: HK$ 0.4/share and one-time Special Dividend: HK$ 3.5/share
Vietnam Indonesia PRC Others*
Company Profile
6M17 Revenue by Product Category Production Volume by Location
6M16
6M17
43%
46%
34%
35%
22% 17%
1% 2%
5%
2%
Others*: Bangladesh, Cambodia, Myanmar, and Mexico
6M16: 165.7 mn vs. 6M17: 163.0 mn pairs 7%
OEM/ODM
67%
Casual/Outdoor
Soles, Components & Others
Athletic
Sandals
33%
13 %
1%
46%
6M17 Total Revenue US$ 4,448.2 million
Retail*: incl. Pou Sheng Revenue US$ 1,379.6 million
Retail*
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2016 Financial Performance Overview
Source: Company audited financial statements and management accounts
435 331 390
535
7.6
8.0
8.4 8.5
2013 2014 2015 2016
Profit Attrib. to Owners
Revenue
Revenue
(USD’bn)
Profit ‘mn
535
8.5
54%
74% 65%
56%
1.1
1.15 1.2
1.4
2013 2014 2015 2016
Payout ratio
HK$ Per Share
Dividend
(HK$/Share)
Payout Ratio
56%
$1.4
16.77
17.53 17.25
16.88
313
307
318 322
2013 2014 2015 2016
Avg. Selling Price
Production volume
Prod. Vol.
(’mn Pairs)
ASP
$16.88
322
6M F2017
Financial Highlights
5
Key Financial Highlights for 6M 2017
Revenue
US$ 4.4 bn
+ 3.9%
GP Margin
21.3% US$ 654 mn
+ 7.6%
Production Volume
163 mn pairs
ASP
US$ 16.47
Revenue
RMB 9.5 bn
+ 14.5%
Profit Attrib. to Owners
US$ 259 mn
+4.0%
OP Margin
5.3% RMB 506 mn
Group
OEM/ODM PS Retails
6
2,064.8
610.5
54.4
1,267.8
283.2
2,071.5
569.0 44.7
1,458.1
304.9
Athletic Casual/Outdoor Sandals Retails* Others**
6M16 6M17
15.0%
7.6%
Y-o-Y Revenue by Product Category (US$’ mn)
6M17 Shoes Only
Casual/Outdoor
Sandals
Athletic
77%
21%
2%
0.3%
6.8%
18.0%
Shoe Production
Rev: US$ 2,685.2 mn
Volume 1.6%
ASP Flat * Pou Sheng 6M17 Rev.: US$ 1,379.6 mn
** Soles, Components & Others
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Revenue and Profit Attributable to Owners
Revenue
In US$’mn
1,268
3,012
+4%
6M 16 6M 17
1,380
3,069
Profit Attrib. to Owners
In US$’mn
Pou Sheng
OEM/ODM
Pou Sheng
OEM/ODM
The above figures of Pou Sheng include profit attributable to “Non-YY”
shareholders (i.e. the 37.6% minority interests)
59
212
43
232
+4%
YY Group
2,300
6,135
+1%
2015 2016
2,444
6,037
65
351
88
480
+37%
2015 2016
6M 16 6M 17
8
Source: Company accounts
Please refer to the announcement on the HKEx website for the unaudited consolidated income statements of 6M F2017 & 6M F2016
YY Group Financial Highlights
6M F2017 6M F2016 Y-o-Y
US$'000 % US$'000 % + / -
Revenue 4,448,172 100.00 4,280,785 100.00 3.91%
Cost of Sales (3,316,793) -74.57 (3,221,375) -75.25 2.96%
Gross Profit 1,131,379 25.43 1,059,410 24.75 6.79%
SG&A* (771,851) -17.35 (700,783) -16.37 10.14%
Other Income & Expenses, net* (69,694) -1.57 (64,608) -1.51 7.87%
Operating Profit 289,834 6.52 294,019 6.87 -1.42%
Share of Results of A&JV 26,715 0.60 21,481 0.50 24.37%
Finance Cost & Other Gains/(Losses) (559) -0.01 5,057 0.12 N / A
Income Tax (36,440) -0.82 (45,248) -1.06 -19.47%
Profit for the Period 279,550 6.28 275,309 6.43 1.54%
Profit attrib. to Owners 258,525 5.81 248,711 5.81 3.95%
* The comparative figures of SG&A and Other Income & Expenses, net have been reclassified to conform to the presentation in the
current period
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Financial Ratios
(US$’mn) 6M F2017 6M F2016
Depreciation & Amortization 145.3 133.0
EBITDA 430.5 422.7
Capital Expenditure 258.7 193.9
Product Development* 108.4 97.3
30 June 2017 31 December 2016
Total Borrowings 1,207.6 960.1
Net Total Borrowings 218.6 Net Cash: 82.2
Total Debt to Equity (%) 23.3% 18.8%
Net Debt to Equity (%) 4.2% N / A
6M F2017 6M F2016
Total Debt to EBITDA (X) annualized 1.4 X 1.1 X
Net Debt to EBITDA (X) annualized 0.3 X N / A
Return on Equity (%) annualized 10.7% 10.9%
Return on Asset (%) annualized 7.2% 7.6%
Source: Company accounts (figures rounded)
Please refer to the announcement on the HKEx website for the unaudited consolidated income statements of 6M F2017 & 6M F2016
* Includes US$ 4.7 mn for 6M 2017 and US$ 8.8 mn for 6M 2016 sample sales revenue, which reduces Product Development Expense
OEM/ODM
Note: The figures in the following slides covers the core manufacturing and other operations of the consolidated entity
of Yue Yuen Group, and are for analytical purposes only (prepared using the management accounts)
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OEM/ODM Financial Highlights
6M F2017 6M F2016 Y-o-Y
US$'000 % US$'000 % + / -
Revenue 3,068,573 100.00 3,012,397 100.00 1.86%
Cost of Sales (2,414,508) -78.69 (2,404,449) -79.82 0.42%
Gross Profit 654,065 21.31 607,948 20.18 7.59%
SG&A* (349,972) -11.40 (324,370) -10.77 7.89%
Other Income & Expenses, net* (87,999) -2.87 (79,589) -2.64 10.57%
Operating Profit 216,094 7.04 203,989 6.77 5.93%
Share of Results of A&JV 27,073 0.88 22,447 0.75 20.61%
Finance Cost & Other Gains/(Losses) 7,603 0.25 7,104 0.24 7.02%
Income Tax (16,390) -0.53 (18,685) -0.62 -12.28%
Profit for the Period 234,380 7.64 214,855 7.13 9.09%
Profit Attrib. to Owners 231,504 7.54 212,386 7.05 9.00%
Source: Company management accounts
* The comparative figures of SG&A and Other Income & Expenses, net have been reclassified to conform to the presentation in the
current period
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OEM/ODM Financial Ratios
(US$’mn) 6M F2017 6M F2016
Depreciation & Amortization 117.1 114.8
EBITDA 328.9 315.5
Capital Expenditure 218.5 172.3
30 June 2017 31 December 2016
Total Borrowings 887.2 762.3
Net Total Borrowings Net Cash: 35.5 Net Cash: 209.8
Total Debt to Equity (%) 19.5% 17.0%
Net Debt to Equity (%) N / A N / A
6M F2017 6M F2016
Total Debt to EBITDA (X) annualized 1.4 X 1.2 X
Net Debt to EBITDA (X) annualized N / A N / A
Return on Equity (%) annualized 10.3% 9.9%
Return on Asset (%) annualized 7.1% 6.9%
Source: Company management accounts (figures rounded)
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20.5
19.6
18.7
20.3
18.7
19.1
18.9
21.9
19.8
20.5
20.5
22.8
21.0
21.6
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Gross Profit Margin
OEM/ODM GP Margin Trend
(%)
Based on US$
Pou Sheng International
Note: The figures in the following slides are based on Pou Sheng’s management accounts and announcements
15
Pou Sheng Key Business Activities
Retail Business
Leading distributor of footwear, apparel & accessories for international brands in China
A key partner to Nike and adidas
Sells through directly operated stores, or on a wholesale basis to sub-distributors, online & offline
Store locations include department stores, shopping malls, sports cities, street level & outlets
Brand licensee Business
Sport Services Platform
Provides full range of sports services
Products + Services
364 + 1
Online & Offline
Mainland China & Taiwan
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Directly Operated Stores
Sub-Distributor Stores
Mono Brand Stores
Multi-Brand Stores
YY Sports, YY Kids, YY Life, etc.
Outlets: New shopping experience for fast growing brands
Omni-Channel Strategy Across China
Brick and Mortar Stores
Online Stores
Retail Network
YYsports.com
YYkids.com
Rockport.com.cn
3rd party: T-Mall, JD Mall, SuNing..etc.
B2B services
Covers 300 cities in the Greater China
B2B
B2C
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Revenue (RMB’mn) 4,674 4,841 3.6% 9,515
Gross Profit Margin 33.6% 35.6% 2.0% 34.6%
Operating Profit Margin 4.5% 6.1% 1.6% 5.3%
SSSg 1.9% 5.6% 3.7% 3.7%
Direct Store Discount % 23.0% 22% 1.0% 22.0%
Inventory Days 137 131 6 days 131
Net Store Increase*:
- Directly Operated (15) 72 - 57
- Sub-Distributors 99 61 - 160
Total 84 133 - 217
CAPEX (RMB’mn) 104 173 - 277
Q-o-Q Improvement – 1Q vs 2Q 2017
1Q 17 2Q 17 + / (-) 1H 17
* Excluding disposal of certain subsidiaries in the current period : reduced directly operated 153 stores & sub-distributors 323 stores
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Operation Efficiency
Receivable Days
28 28
Inventory Days
145
Payable Days 2016 6M17
Based on RMB
22 10
131
19
Pou Sheng Store Performance
Number of Stores
Directly Operated Sub-Distributors Total Stores
As at December 31, 2016 5,560 3,199 8,759
Net New Store + / (-) * (96) (163) (259)
As at June 30, 2017 5,464 3,036 8,500
2017 1Q 2Q 3Q 4Q
Directly Operated Stores 1.9% 5.6%
Same Store Sales Growth (SSSg)
* Disposal of certain subsidiaries in the current period: reduced directly operated 153 stores & sub-distributors 323 stores
20
Distinguished Partners and Events
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Pou Sheng Financial Highlights (in RMB)
6M F2017 6M F2016 Y-o-Y
RMB’mn % RMB’mn % + / -
Revenue 9,515 100.00 8,313 100.00 14.46%
Cost of Sales (6,223) -65.40 (5,354) -64.41 16.23%
Gross Profit 3,292 34.60 2,959 35.59 11.25%
SG&A (2,920) -30.69 (2,496) -30.03 16.99%
Other Income & Expenses, net 134 1.41 108 1.30 24.07%
Operating Profit 506 5.32 571 6.87 -11.38%
Share of Results of A&JV (3) -0.03 (7) -0.08 -57.14%
Finance Cost & Other Gains/(Losses) (53) -0.56 (7) -0.08 657.14%
Income Tax (138) -1.45 (174) -2.09 -20.69%
Profit for the Period 312 3.28 383 4.61 -18.54%
Profit Attrib. to Owners 299 3.14 371 4.46 -19.41%
Source: Based on Pou Sheng’s Results Announcement
Pou Sheng has changed its presentation currency for the preparation of its consolidated financial statements from USD to RMB
starting from the 2016 interim results. The comparative figures for the 6M 2016 have been restated to RMB accordingly.
22
Pou Sheng Financial Highlights (in USD)
6M F2017 6M F2016 Y-o-Y
US$'000 % US$'000 % + / -
Revenue 1,379,599 100.00 1,268,388 100 8.77%
Cost of Sales (902,285) -65.40 (816,926) 64.41 10.45%
Gross Profit 477,314 34.60 451,462 35.59 5.73%
SG&A* (421,879) -30.58 (376,413) -29.68 12.08%
Other Income & Expenses, net* 17,894 1.30 14,053 1.11 27.33%
Operating Profit 73,329 5.32 89,102 7.02 17.70%
Share of Results of A&JV (358) -0.03 (966) -0.08 -62.94%
Finance Cost & Other Gains/(Losses) (7,751) -0.56 (1,119) -0.09 592.67%
Income Tax (20,050) -1.45 (26,563) -2.09 -24.52%
Profit for the Period 45,170 3.27 60,454 4.77 -25.28%
Profit attrib. to Owners 43,296 3.14 58,731 4.63 -26.28%
Source: Internal analysis report (figures rounded)
* Various accounting reclassification and adjustments are made to these figures when consolidating Pou Sheng numbers into the
Yue Yuen Group in order to comply with the requirements of accounting standards
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Pou Sheng Financial Ratios (in RMB)
(RMB’mn) 6M F2017 6M F2016
Depreciation & Amortization 193 118
EBITDA 695 704
Capital Expenditure 277 144
30 June 2017 31 December 2016
Total Borrowings 2,172 1,666
Net Total Borrowings 1,723 1,183
Total Debt to Equity (%) 34.3% 27.2%
Net Debt to Equity (%) 27.2% 19.3%
6M F2017 6M F2016
Total Debt to EBITDA (X) annualized 1.6 X 0.8 X
Net Debt to EBITDA (X) annualized 1.2 X 0.6 X
Return on Equity (%) annualized 9.9% 12.6%
Return on Asset (%) annualized 6.1% 8.4%
Source: Internal analysis report (figures rounded)
24
29.8
29.7
28.3
29.4
30.9
33.4
33.2
35.8
34.9
36.3
36.2
34.7
33.6
35.6
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Gross Profit Margin
Pou Sheng GP Margin Trend
(%)
Based on US$
25
1.8
1.5
1.9
1.6
3.5
5.8
4.3
3.1
6.7
7.3
5.8
3.5
4.5
6.1
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Operating Profit Margin
Pou Sheng OP Margin Trend
(%)
Based on US$
26
Store Fronts and Shopping Experience
Partners with Top International Sports
and Iconic Leisure Brands
27
YY Sports Service Centers
New YY Sports Concept to Capture
Higher Sports & Leisure Consumption
28
Improve
Operational
Efficiency
Brand Partnership Model
Beijing WKS
adidas Mega Store
(Opened in July 2017)
X
Data
Tracking
Sports
Event
364+1
Services
In-Store
Training
YY Basketball
Night
Beijing
Marathon
Basketball
Court
Data
Tracking
adidas
Brand Sports
Services
364 Days
29
2017 Sports Event Timeline
Physical Fitness Basketball Running Event
7,
9-12
7,
9-12
9,10
7,8,
11,12
7,9,
10
▼ Student League Competitions
▼ Star Competitions (CPBL, MLB)
▼ Sports Meet
▼ Family Picnic Day
▼ University Relay
▼ NBA China Competition
▼ Coach Training
▼ YY Camp
▼ YaoPao 24hr
▼ Marathon
▼ Women’s Half-Marathon
▼ Coach Training
▼ Sport Management
▼ Fitness Playground Development
Baseball
Appendix
31
Shareholding Structure
Tsai Family
Pou Chen (9904.TT)
Others
Footwear
OEM/ODM
Pou Sheng (3813.HK)
Yue Yuen Industrial (Holdings) Ltd.
(551.HK) 62.4%
7% 43%
50%
100%
* As at June 30, 2017
32
Company Milestones
Production Established
1988 China
1992
Indonesia
1994 Vietnam
2000 Mexico
2010 Bangladesh
Cambodia
2015 Myanmar
1993
First brand licensee 1993
Started retail business
2008 Listed on HKEx (3813.HK)
2016
Acquired PCG Bros
Listed on HKEx (551.HK)
1988 Founded
1992
2012 New CEO on board
2017
OEM/ODM PS Retails Group
Market Cap: US$ 6.8 bn (As at Jun 30)
33
OEM/ODM Highlights for 12M 2016
12M F2016 12M F2015 Y-o-Y
US$'000 % US$'000 % + / -
Revenue 6,036,828 100.00 6,134,741 100.00 -1.60%
Cost of Sales (4,772,468) -79.06 (4,928,522) -80.34 -3.17%
Gross Profit 1,264,360 20.94 1,206,219 19.66 4.82%
SG&A (688,779) -11.41 (776,584) -12.66 -11.31%
Other Income & Expenses, net (119,270) -1.98 (90,905) -1.48 31.20%
Operating Profit 456,311 7.56 338,730 5.52 34.71%
Share of Results of A&JV 68,639 1.14 83,503 1.36 -17.80%
Finance Cost & Other Gains/(Losses) (2,026) -0.03 (24,132) -0.39 -91.60%
Income Tax (36,620) -0.61 (42,586) -0.69 -14.01%
Profit for the Year 486,304 8.06 355,515 5.80 36.79%
Profit Attrib. to Owners 479,839 7.95 350,665 5.72 36.84%
Source: Company management accounts
34
PS Highlights for 12M F2016 (in RMB)
12M F2016 12M F2015 Y-o-Y
RMB’mn % RMB’mn % + / -
Revenue 16,236 100.00 14,466 100.00 12.24%
Cost of Sales (10,468) -64.47 (9,648) -66.70 8.50%
Gross Profit 5,768 35.53 4,818 33.30 19.72%
SG&A (5,072) -31.24 (4,340) -30.00 16.87%
Other Income & Expenses, net 228 1.41 121 0.84 88.43%
Operating Profit 924 5.69 599 4.14 54.26%
Share of Results of A&JV (12) -0.07 (8) -0.06 50.00%
Finance Cost & Other Gains/(Losses) (80) -0.49 (59) -0.40 35.59%
Income Tax (262) -1.62 (149) -1.03 75.84%
Profit for the Year 570 3.51 383 2.65 48.83%
Profit Attrib. to Owners 561 3.46 397 2.74 41.31%
Source: Based on Pou Sheng’s Results Announcement
Pou Sheng has changed its presentation currency for the preparation of its consolidated financial statements from USD to RMB
starting from the 2016 interim results. The comparative figures for the year 2016 and 2015 have been restated to RMB accordingly
35
PS Highlights for 12M F2016 (in USD)
12M F2016 12M F2015 Y-o-Y
US$'000 % US$'000 % + / -
Revenue 2,443,730 100.00 2,300,174 100.00 6.24%
Cost of Sales (1,575,525) -64.47 (1,534,115) -66.70 2.70%
Gross Profit 868,205 35.53 766,059 33.30 13.33%
SG&A* (756,975) -30.97 (683,402) -29.71 10.77%
Other Income & Expenses, net* 31,860 1.30 14,014 0.61 127.34%
Operating Profit 143,090 5.86 96,671 4.20 48.02%
Share of Results of A&JV (1,793) -0.07 (1,332) -0.06 34.61%
Finance Cost & Other Gains/(Losses) (12,066) -0.49 (9,237) -0.40 30.63%
Income Tax (39,468) -1.62 (23,744) -1.03 66.22%
Profit for the Year 89,763 3.67 62,358 2.71 43.95%
Profit attrib. to Owners 88,403 3.62 64,498 2.80 37.06%
Source: Internal analysis report (figures rounded)
* Various accounting reclassification and adjustments are made to these figures when consolidating Pou Sheng numbers into the
Yue Yuen Group in order to comply with the requirements of accounting standards