Giordano International Limited · HKEX:709
Giordano International — FY2013 Earnings Presentation
32 slides from Giordano International's earnings presentation, Feb 27, 2014
Slide 1: 2013 Annual Results
2013 Annual Results 27 February 2014
Slide 2: Overview
Overview Accounting Sales up 3%. Global Brand Sales down 2%. Sales mainly decline in China, Taiwan and Singapore offset by growth in other markets, particularly Thailand and Indonesia. GP % up 2pp to 60.7%. ME acquisition up 2.3% offset by adverse SEA currencies devaluation. OPEX down 1% (ex
Slide 3: Operations Highlights – Group
Operations Highlights – Group Sales up 3% but Trading PATS down 3% (In HK$ millions) 2013 2012 Variance Sales 5,848 5,673 +3% Gross margin 60.7% 58.7% +2.0pp Operating expenses (2,836) (2,620) +8% Comparable operating expenses (without Middle East) (2,606) (2,620) -1% Net profit as reported 663 826
Slide 4: PATS Reconciliation
PATS Reconciliation (HK$ millions) 900 800 700 57 (143) 46 600 (34) (39) 500 (50) 400 826 683 663 606 300 3% 11% 200 100 0 2012 Less: 2012 Decrease in Decrease in Decrease in Corporate 2013 Additional 2013 Reported exceptional Trading profit from profits from profits from expenses, Trading profits
Slide 5: 2013 Final Dividend
2013 Final Dividend Dividend remained 40 HK cents, 94% pay-out ratio (In HK cents) Dividend yield DPS[1] EPS Payout Ratio on full year average on current share price[2] share price 2013 40.0 42.6 94% 5% 8% 2012 as reported 40.0 53.8 74% 6% 2012 excluding accounting 40.0 46.4 87% 6% gains on deemed d
Slide 6: Sales Growth and Contribution by Region
Sales Growth and Contribution by Region Sales growth continuing in Southeast Asia; sales decline in China, Taiwan and Singapore (HK$ millions) 7,000 5,848 6,000 5,673 5,000 Mainland China 1,727 (30%) 1,898 (33%) 9% / 11%* Mainland China 4,000 Hong Kong & Taiwan Rest of Asia Pacific Hong Kong & Tai
Slide 7: Brand Sales Growth for the last 8 quarters
Brand Sales Growth for the last 8 quarters Tough trading conditions reflecting weakening macro and intense competition 6% 2013 2012 Variance Global brand sales (HK$ millions) 7,912 8,062 -2% 4% 3% 3% Comparable store sales growth -2% -1% 2% 2% 0% 0% 0% -1% -1% -1% -1% -2% -2% -2% -2% -2% -2% -2% -3%
Slide 8: Store Number by Market as at December 2013
Store Number by Market as at 31 December 2013 Other Markets, 1% 24 outlets as at Dec-13 -5 in 2013 Mainland China, 44% 1,161 outlets as at Dec-13 Japan, 0% -82 in 2013 10 outlets as at Dec-13 +4 in 2013 Myanmar, 4% South Korea, 9% 109 outlets as at Dec-13 244 outlets as at Dec-13 +
Slide 9: Gross Margin Reconciliation
Gross Margin Reconciliation Margin improved by Middle East acquisition and product mix changes. SEA currency depreciation adversely affected margin 62% 2.3% 61% 0.3% 60% (0.5%) (0.1%) 59% 58% 60.7% 57% 58.7% 56% 55% 2012 Middle East Increase in Margin erosion in Margin 2013 Gross Margin Impact purch
Slide 10: Gross Profit Reconciliation
Gross Profit Reconciliation Margin improved but volume went down (HK$ millions) Avg. Cost Avg. Price Volume 4% 7% 12% 4,000 356 329 3,500 (33) 3,000 (95) (337) 2,500 2,000 3,551 +220m (7%) (60.7%) 3,331 1,500 (58.7%) 1,000 500 0 2012 Cost Price Volume Middle East Stock Provision 2013 Gross Profi
Slide 11: Total Operating Expenses Reconciliation
Total Operating Expenses Reconciliation OPEX excluding Middle East down 1% reflecting strong cost controls (HK$ millions) Shop area 3% Headcounts Flat 3,500 Rent/sq.ft. Flat Average salaries 3% 3,000 18 27 230 (2%) (3%) (13) 2,500 (6) (5) (35) (2%) (5%) 2,000 2,836 2,620 1,500 +216m (8%) 48%
Slide 12: Operating Profit (Margin) by Region
Operating Profit (Margin) by Region Low sales growth deteriorated profit (HK$ millions) 400 Profit Contribution 18% 13% 31% 26% 35% 31% 3% 15% 13% 15% 350 301 (21.1%) 2012 2013 300 269 259 (15.3%) (17.8%) 250 218 (12.6%) 200 156 (8.2%) 155 150 124 112 (19.6%) 123 (6.5%) 108 100 29 50 (26.9
Slide 13: EBIT and Free Cash Flow from Operations
EBIT and Free Cash Flow from Operations Free cash flow weakened by increased working capital for inventory and rental deposits for store expansion in SE Asia (HK$ millions) 1,200 137 1,000 (156) 800 (41) (55) (31) 600 (184) 929 400 599 200 0 EBIT Depreciation & CAPEX less Share of Changes in Others
Slide 14: Changes in Working Capital
Changes in Working Capital (In HK$ millions) Changes in Middle East At Dec-12 working completion At Dec-13 capital dividend (net) Inventory 476 42 518 Trade receivables 361 (45) 316 Trade payables (193) 33 (160) Other receivables and payables (189) 25 (164) Middle East completion dividend (n
Slide 15: Inventory, Trade Receivables, Trade Payables
Inventory Trade Receivables (HK$ millions) (Days) (HK$ millions) (Days) 95 (ex-ME: 68days) 700 100 400 40 40 45 (ex-ME: 63 days) 82 90 38 600 350 40 74 80 300 35 500 70 73 92 ME 30 400 ME 60 250 25 50 200 300 605 40 358 361 20 518 150 316 476 426 30 15 200 403 100 20 10 100 50 5 10 0 0 0 0 Dec 2011
Slide 16: Total Inventory and Inventory Aging Analysis
Total Inventory including finished goods at suppliers (In HK$ millions) Dec 2013 Dec 2012 Inventory balance held by the Group 518 476 Inventory held by franchisees in Mainland China 94 133 Finished goods at suppliers (not yet shipped) 27 33 Total system inventory 639 642 Inventory Aging Analysis GRO
Slide 17: Change in Net Cash and Bank Balances
Change in Net Cash and Bank Balances (HK$ millions) 2,000 599 1,800 Completion dividend paid to NCI (87) of subsidiaries in Middle East 1,600 1,400 1,200 98 3 1,000 (768) 800 600 1,173 1,105 400 200 0 Net Cash & Bank Free Cash Flow Dividend paid to Proceeds from Exchange difference Net Cash & Bank B
Slide 18: Outlook
outlook
Slide 19: Mainland China: Multi-brand Strategy
Mainland China: Multi-brand Strategy To put the right merchandise in the right place New Budget New Women brand* brand* Giordano Men Giordano Women (GM) (GW) (GL) (GJ) New Budget brand New Women brand • Department stores • Replicate the success • To launch in 2Q14 • To launch in 2H14 strategy: mov
Slide 20: Mainland China: Other Strategies
Mainland China: Other Strategies E-strategy Fast marketing and • Partner with Alipay brand x-over • 12 campaigns launched in 2H • “online to offline” (O2O) applications positive feedback from business partners • >50% Eshop specific merchandise still need to improve the quality and coverage • Imp
Slide 21: Giordano Junior
Gléf&R DANO ans
Slide 22: Outlook for other regions
Outlook for other regions Hong Kong & Taiwan New “multi-brand” mini-department store format to roll out in Macau in 2014 High quality fast marketing programs continue to launch in 2014 X-over campaigns in Taiwan South East Asia Continue to expand to realize “First mover advantage” Laun
Slide 23: Concepts
“Concepts” Idea came from mini department store Each brand has its own renovation elements to highlight its brand image Elements of mini department store: 4 zones (Giordano, Giordano Essential, Junior, BSX) Corridor Different colour signature and renovation Variety of choices
Slide 24: Giordano Junior 4 zones
Giordano Junior 4 zones Giordano BSX Essential
Slide 25: An Artistic Collaboration
An Artistic Collaboration Product by 11 Asian Images taken by Event & pop-up Designers from WANG Chien-yang store at a Brand Hong Kong, China, New Arty Place, Taiwan, Japan, (王建揚), PMQ (元創方) @ Korea, and Thailand a famous Art Photographer in Hollywood Road Taiwan
Slide 26: Artist collaboration designs
Eunsun Kim (226i) Prudence Mak @ Chocolate Rain # 381% (#3) Ee } WOME BEI 4 PD» SLOLESVOZO CY We Siu Hak (35 (8) C wwAsaCOrA Po Dob Hog, -_ Jen Huang #173 (@2) ve TOUMA (B4) Wang Xu =F (+H) DEVILROBOTS - Tofu (A)
Slide 27: Slide 27
Slide 28: Slide 28
Slide 29: Other objectives for 2014
Other objectives for 2014 Maintain Strong Cash Flow Further rationalize inventory in 2014 Concentrating more cash at Headquarter by treasury initiatives Widen supplier base to maintain gross margin Invest prudently in store upgrades and marketing initiatives. Maintain strong control on h
Slide 30: Q&A
Q&A 27 February 2014 Giordano 2013 Annual Results 30
Slide 31: Summary of Total Sales and Comparable Store Sales Growth by Market
Summary of Total Sales and Comparable Store Sales Growth by Market Total sales[1] Comparable store sales[2] (HK$ millions) 2013 2012 Variance 2013 2012 Mainland China 1,727 1,898 -9% -6% -6% Hong Kong 1,042 1,024 +2% +2% +11% Taiwan 683 732 -7% -4% -9% Singapore 373 398 -6% -5% -5% Indonesia 435 380
Slide 32: Global Retail Network
Global Retail Network As at 31 December 2013 As at Number of outlets Giordano Giordano Change BSX Others Total Dec-12 & Junior Ladies Mainland China 1,104 27 30 1,161 1,243 -82 Hong Kong & Macau 57 13 18 88 84 +4 Taiwan 171 14 16 201 214 -13 Singapore 49 3 52 54 -2 Indonesia 147 5 27 179
Giordano International — FY2013 Earnings Presentation on 6ix