Giordano International Limited · HKEX:709
Giordano International — H1 2015 Earnings Presentation
47 slides from Giordano International's earnings presentation, Aug 13, 2015
Slide 1: 2015 Interim Results
2015 Interim Results 13 August 2015
Slide 2: Overview
Overview Brand sales ↑2%, CSS ↑6%. Accounting sales ↑2%, exclude currency: ↑5% Strong CSS in Greater China & South East Asia, mid-single digit growth in Middle East Offset by sales reduction in Korea and closure of unprofitable stores in China and Hong Kong Gross margin ↓1.4pp Narrowed fro
Slide 3: Sales Growth and Contribution by Region
Sales Growth and Contribution by Region Recovery in 1Q continued in 2Q (HK$ millions) 3,000 2,736 2,672 2,500 Mainland China 762 (28%) 773 (29%) 1%* / 1% 2,000 Mainland China Hong Kong & Taiwan Hong Kong & Taiwan 819 (30%) Rest of Asia Pacific 1,500 786 (29%) 5%* / 4% Middle East Wholesale sales
Slide 4: Brand Sales Growth by quarter – Group
Brand Sales Growth by quarter – Group Growth momentum continued in 2Q despite a higher base 8% 7% 1H15 1H14 Variance 6% 6% Global brand sales (HK$ millions) 3,595 3,536 +2% 4% Comparable store sales growth 6% (4%) 3% 2% 2% 0% -1% -1% 1% -2% -2% -2% -2% -2% -2% -4% -3% -6% -6% -4% -6% -6% -6% -8% 3Q1
Slide 5: Brand Sales Growth by quarter – Mainland China
Brand Sales Growth by quarter – Mainland China Double digit CSS in 1H 2015 Store closure on loss making shops impacted total sales 20% 14% 15% 10% 10% 6% 5% 1% 1% 1% 0% 1% -5% -5% -8% -3% -10% -6% -10% -7% -10% -10% -10% -15% -13% -15% -20% 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 (up Total Bran
Slide 6: Brand Sales Growth by quarter – Hong Kong
Brand Sales Growth by quarter – Hong Kong Tourist areas slow down but compensated by stronger sales in residential areas Better merchandising boost volume 15% 12% 12% 10% 6% 5% 2% 4% 0% 0% 2% 0% 0% -4% -3% -5% -2% -5% -7% -4% -6% -7% -10% -8% 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 (up to 10-Au
Slide 7: Brand Sales Growth by quarter – Taiwan
Brand Sales Growth by quarter – Taiwan Growth slowed in 2Q with higher base 20% 18% 15% 16% 10% 6% 5% 5% 5% 3% 1% 5% 1% 4% 3% 0% -3% 1% 0% -5% -3% -7% -10% -10% -11% -15% 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 (up to 10-Aug) Total Brand Sales Growth Comparable Store Sales Growth 13 August 2015
Slide 8: Brand Sales Growth by quarter – Rest of Asia Pacific
Brand Sales Growth by quarter – Rest of Asia Pacific SG returned to growth after tuning the merchandising mix MY impacted by GST implementation ID & TH are strong 25% SMIT SG 4% SMIT 20% ID 21% SG 29% MY 11% ID 3% 15% 13% TH 28% MY 9% TH 7% 10% 12% 8% 7% 6% 5% 3% 7% 1% 6% 0% 0% 3% 2% S
Slide 9: Brand Sales Growth by quarter – Singapore
Brand Sales Growth by quarter – Singapore 40% 29% 30% 26% 20% 18% 10% 10% 4% 0% -2% -5% -7% -7% -3% -4% -10% -7% -12% -8% -17% -10% -20% -16% -18% 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 (up to 10-Aug) Total Brand Sales Growth Comparable Store Sales Growth 13 August 2015 Giordano 2015 Interim R
Slide 10: Brand Sales Growth by quarter – Indonesia
Brand Sales Growth by quarter – Indonesia 40% 29% 30% 21% 20% 17% 14% 14% 13% 18% 10% 10% 12% 3% -1% 6% 0% 3% 4% 3% -2% -10% -9% -11% -20% 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 (up to 10-Aug) Total Brand Sales Growth Comparable Store Sales Growth 13 August 2015 Giordano 2015 Interim Results 1
Slide 11: Brand Sales Growth by quarter – Malaysia
Brand Sales Growth by quarter – Malaysia 10% 7% 6% 5% 3% 3% 0% 0% 0% 2% 0% -5% -7% -7% -8% -10% -10% -8% -11% -9% -12% -15% -13% -16% -20% 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 (up to 10-Aug) Total Brand Sales Growth Comparable Store Sales Growth 13 August 2015 Giordano 2015 Interim Results 1
Slide 12: Brand Sales Growth by quarter – Thailand
Brand Sales Growth by quarter – Thailand 40% 30% 30% 28% 20% 19% 25% 20% 24% 15% 15% 10% 6% 7% 5% 1% -2% 5% 0% -4% -10% -6% -10% -10% -20% 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 (up to 10-Aug) Total Brand Sales Growth Comparable Store Sales Growth 13 August 2015 Giordano 2015 Interim Results 1
Slide 13: Brand Sales Growth by quarter – Middle East
Brand Sales Growth by quarter – Middle East KSA: impacted by falling of oil prices UAE: Lower footfalls from Russian and regional tourists Other ME regions: Growth from Pakistan, Sri Lanka, Zambia, Georgia 15% KSA 12% 10% UAE 5% 10% Others 2% KSA 8% 5% 5% 3% UAE 3% Others 12% 4% 4% KSA 9% -1%
Slide 14: Brand Sales Growth by quarter – South Korea
Brand Sales Growth by quarter – South Korea Outbreak of MERS impacted sales but expected to see gradual recovery 10% 5% 5% 3% 1% 4% 0% 0% 0% -1% -1% -5% -5% -4% -8% -5% -10% -11% -8% -11% -9% -12% -15% -13% -20% 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 (up to 10-Aug) Total Brand Sales Growth Com
Slide 15: Global Retail Network
Global Retail Network Kuwait -2 to 9 outlets Mainland China -33 to 928 outlets Armenia 3 outlets Iran South Korea Georgia -1 to 10 outlets -19 to 200 outlets 11 outlets Pakistan Japan Canada -1 to 4 outlets +3 to 9 outlets 1 outlet Lebanon Nepal Hong Kong & Macau 2 outlets 1 outlet -5 to 74 outlets
Slide 16: Gross Profit Reconciliation
Gross Profit Reconciliation Solid growth with volume ↑8%. More focused product range on simplicity & function Weakening currencies impacted GP margin (HK$ millions) Average cost Average price Volume Flat 3% 8% 2,500 2% 2% 2,000 26 133 1,500 (5) (26) (43) (84) 1,000 1,565 +1m (Flat) 1,566 (58.6%)
Slide 17: Gross Margin Reconciliation
Gross Margin Reconciliation 60% 59% 58% 0.1% (0.9%) 0.4% 57% 0.2% (0.2%) (0.8%) (0.2%) 56% 55% 58.6% 54% -1.4pp 57.2% 53% 52% 51% 50% 1H14 Increase in Margin erosion Margin erosion Margin Margin Margin Less wholesale 1H15 Gross margin purchase costs in Mainland in Hong Kong improvement improvement i
Slide 18: Total Operating Expenses Reconciliation
Total Operating Expenses Reconciliation OPEX to sales down 2pp. Decreased rent and shop overhead from store closures was partially offset by staff cost increase to merit improved profitability (HK$ millions) Shop area 1% Total headcount 4% 2,000 Rent/sq.ft. 1% Average salaries 10% Shop headcount
Slide 19: PATS Reconciliation
PATS Reconciliation Key markets improved underlying profitability (HK$ millions) 300 250 8 10 1 10 28 (8) 200 15 (30) 150 238 26% 208 100 174 189 20% 50 0 1H14 PATS 2014 1H14 PATS Rest of Asia Mainland Taiwan Middle East Share of Tax, NCI & 1H15 PATS Currency 1H15 transactional (exclude Pacific Ch
Slide 20: 5-Year Currency Impact to PATS
5-Year Currency Impact to PATS (HK$ millions) 800 728 726 700 663 600 537 500 549 558 541 408 400 458 288 383 300 200 100 0 2009 2010 2011 2012 2013 2014 Actual PATS Adjusted PATS (rebase using 2009 exchange rates) 13 August 2015 Giordano 2015 Interim Results 20
Slide 21: EBIT and Free Cash Flow from Operations
EBIT and Free Cash Flow from Operations Strong cash flow from healthy working capital (HK$ millions) 500 450 78 7 400 (21) 71 13 350 (58) (32) 300 250 200 1H15 vs 1H14 357 150 299 Profit after tax 234 +17% Free cash Flow 357 +41% 254 100 Conversion rate* 139% +8pp 50 *Conversion rate of free cash fl
Slide 22: Changes in Working Capital
Changes in Working Capital Changes in Kuwait & Forfeiture of Completion working Qatar consideration dividend At Dec-14 capital Acquisition payable payable At Jun-15 Inventory 514 (65) 4 453 Accounts receivables 291 (59) 232 Other receivables 180 15 4 199 Accounts payables (167) 60 (1)
Slide 23: Inventory, Trade Receivables, Trade Payables
Inventory Trade Receivables (HK$ millions) (Days) (HK$ millions) (Days) 700 80 90 350 44 50 73 70 80 40 45 600 300 70 40 500 250 33 60 35 400 200 30 50 25 300 40 150 263 291 20 514 453 30 232 200 445 100 15 20 10 100 10 50 5 0 0 0 0 Jun 2014 Dec 2014 Jun 2015 Jun 2014 Dec 2014 Jun 2015 Inventory Tur
Slide 24: Total Inventory and Inventory Ageing Analysis
Total Inventory including finished goods at suppliers Jun Dec Jun vs Dec-14 vs Jun-14 2014 2014 2015 Inventory balance held by the Group 445 514 453 (61) 8 Inventory held by China AD 79 80 70 (10) (9) Finished goods at suppliers (not yet shipped) 16 23 51 28 35 Total system inventory 540 617 574 (43
Slide 25: Outlook & Strategy
OUTOOK & Se SITaiegy GIORDANO
Slide 26: Multi-brand Strategy – progress update
Multi-brand Strategy – progress update (% of global sales in brackets) Giordano Men (61%) Giordano Women (21%) Giordano Ladies (7%) • 1H CSS up 4% • 1H CSS up 5%, two • 1H CSS up 7% • Cost reduction via: consecutive quarters with • Strengthen operation Global programs (Message CSS growth, reflecting
Slide 27: Giordano Men FW15 collection
Giordano Men FW15 collection
Slide 28: Giordano Women FW15 collection
Giordano Women FW15 collection
Slide 29: Giordano Ladies fall winter 2015 collection
giordano/ladies fall winter 2015 collection living the Best of Both Worlds
Slide 30: Giordano Junior x TO-FU OYAKO
Giordano Junior x TO-FU OYAKO
Slide 31: Patrick Kong x BSX – Love Is Nothing
Patrick Kong x BSX – “LOVE IS NOTHING”
Slide 32: Renovation of Beau Monde Shops in China
BEFORE AFTER New renovation of Beau Monde Shops in China
Slide 33: Key Objectives in 2H
Key Objectives in 2H Mainland China Strengthen operations with new management teams and profit centres Grow our franchise network (1H: net +4 shops) Discipline over inventory management Open Beau Monde shops in 4Q and secure merchandise mix for F/W Closure of loss making stores. Loss ↓HK
Slide 34: Key Objectives in 2H (cont’d)
Key Objectives in 2H (cont’d) South East Asia Singapore – differentiate merchandise mix between residential and tourist areas Malaysia, Indonesia, Thailand & Vietnam – focus on effective merchandising, inventory controls, cash flow management and store network expansion Middle East UAE and
Slide 35: Key Objectives in 2H (cont’d)
Key Objectives in 2H (cont’d) Digital Strategy In Mainland China, establish new relationships with different online platforms (10% of China’s sales now) Enhance our operations in Korea and Taiwan and look to develop online capability in Hong Kong and other markets by building new team of digit
Slide 36: Movement of China franchised stores
Movement of China franchised stores 900 827 800 809 767 700 709 666 4 franchised stores 629 600 from Dec 2014 563 500 489 493 400 70 franchised stores 300 from Jun 2014 200 100 0 Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2
Slide 37: BRUCE LEE Forever Hero campaign
BRUCE LEE Forever Hero campaign
Slide 38: New shop in HK Airport
New shop in HK Airport 38
Slide 39: Crossover with Movie To The Fore in HK
Crossover with Movie “TO THE FORE” in HK
Slide 40: Current product campaigns in Taiwan
Current product campaigns in Taiwan
Slide 41: Store upgrade in Taiwan
Store upgrade in Taiwan
Slide 42: New shops in Vietnam
New shops in Vietnam
Slide 43: LINE FRIENDS – a new marketing campaign in SEA
LINE FRIENDS – a new marketing campaign in SEA
Slide 44: New shops opened in current ME franchised markets
New shops opened in current ME franchised markets
Slide 45: GIORDANO
GIORDANO
Slide 46: Summary of Sales Performance by Market
Summary of Sales Performance by Market Accounting sales Brand sales Comparable store sales (HK$ millions) 1H15 1H14 Variance 1H15 1H14 Variance 1H15 1H14 Mainland China 762 773 -1% 931 940 -1% +12% -5% Hong Kong & Macau 479 470 +2% 479 470 +2% +8% -6% Taiwan 340 316 +8% 340 307 +11% +12% -4% Singapo
Slide 47: Global Retail Network
Global Retail Network As at 30 June 2015 As at Number of outlets Giordano Giordano Change BSX Others Total Dec-14 & Junior Ladies Mainland China 876 21 22 9 928 961 -33 Hong Kong & Macau 47 12 15 74 79 -5 Taiwan 171 16 14 201 199 +2 Singapore 44 4 48 49 -1 Indonesia 160 6 42 208 203 +5 Mal
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