Giordano International Limited · HKEX:709

Giordano International — H1 2017 Earnings Presentation

20 slides from Giordano International's earnings presentation, Aug 10, 2017

  1. Slide 1: 2017 Interim Results Announcement

    2017 Interim Results Announcement  10 August 2017

  2. Slide 2: Highlights

    Highlights  Group sales +3.4%; gross profit +3.8%, positive growth since Q2.  Group Comparable store sales +4.6%; Comparable stores gross profit +6.6%, improved merchandise mix, early Ramadan; China e-commerce.  Gross margin +0.2pp to 59.8%.  PATS +20.1% to HK$245m; net margin +1.3pp to 9.4%. 

  3. Slide 3: Group Sales by Region

    Group Sales by Region % change at current constant exchange exchange (In HK$ million) 1H17 1H16 rates rates Rest of Asia Pacific 705 658 7.1% 7.4% Mainland China 605 637 (5.0%) (1.1%) Hong Kong & Macau 473 457 3.5% 3.5% Middle East 352 315 11.7% 11.7% Taiwan 304 323 (5.9%) (12.1%) Wholesales to over

  4. Slide 4: Quarterly Group CSS and CSGP Change

    Quarterly Group CSS and CSGP Change Stable CSS growth. Q1 CSS +0.5%; Apr and May CSS +6.3%; June CSS +14.1% 12% 11.1% CSS CSGP 10% 1H17 +4.6% +6.6% 9.1% 7.8% 8% 6% 5.7% 5.2% 4% 3.1% 2.2% 1.8% 2% 1.0% 0.2% 0.5% 0% -2% -1.8% -2.3% -3.0% -2.9% -4% -3.9% -6% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 CSS c

  5. Slide 5: Mainland China quarterly CSS and CSGP change

    Mainland China quarterly CSS and CSGP change Net +17 stores in the past 12 months, 31 were franchised stores; Increased e-business sales by 26.6%. 14% CSS CSGP 12% 11.4% 1H17 +4.2% +5.9% 10% 8.6% 8% 6.5% 6% 4.2% 4.1% 4% 3.1% 2.0% 2% 0.1% 0.1% 0.4% 0% -2% -1.8% -1.7% -4% -3.3% -3.4% -6% -5.7% -6.2% -

  6. Slide 6: Hong Kong and Macau Quarterly CSS and CSGP Change

    Hong Kong and Macau Quarterly CSS and CSGP Change Well executed marketing programs and enhanced brand image. 14% CSS CSGP 12.2% 12% 11.2% 1H17 +6.8% +7.9% 10.1%10.1% 10% 8.8% 8% 6% 5.2% 5.5% 4% 3.3% 3.1% 2.8% 1.8% 2% 1.4% 1.4% 0.6% 0% -0.2% -1.0% -2% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 CSS chang

  7. Slide 7: Taiwan Quarterly CSS and CSGP Change

    Taiwan Quarterly CSS and CSGP Change Chinese tourist arrivals yet to recover; Appreciation of NTD against RMB lowered product costs. 4% 3.1% 2% 0% -0.2% -2% -1.1% -2.4% -4% -2.9% -3.2% -3.6% -4.0% -3.7% -6% -4.9% -5.0% -6.6% -8% -7.5% -10% -10.0% -12% CSS CSGP -14% -13.4% -13.8% 1H17 -7.4% -2.1% -16

  8. Slide 8: Rest of Asia Pacific Quarterly CSS and CSGP Change

    Rest of Asia Pacific Quarterly CSS and CSGP Change Indonesia and Malaysia benefited from early Ramadan; Thailand sales growth slowed down from high base; Australia turnaround. 20% 1H17 CSS CSGP Rest of AP +7.0% +8.7% Singapore -0.6% +3.2% 15% 13.7% Indonesia +15.3% +17.5% 13.2% Malaysia +14.6% +15.6

  9. Slide 9: Middle East Quarterly CSS and CSGP Change

    Middle East Quarterly CSS and CSGP Change Early Ramadan coupled with successful promotion. 20% CSS CSGP 15.6% 14.5% 15% 1H17 +11.0% +9.9% 10% 6.5% 7.1% 6.7% 6.1% 4.9% 5% 3.0% 3.5% 1.5% 0% -5% -6.9% -7.2% -10% -8.0% -10.5% -12.0% -15% -14.7% -20% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 CSS change CSG

  10. Slide 10: South Korea Quarterly CSS and CSGP Change

    South Korea Quarterly CSS and CSGP Change Chinese tourists arrivals -20% in 1H. 4% CSS CSGP 2.5% 2.4% 2.1% 2% 1H17 -6.2% -3.3% 0% -1.1% -1.1% -2% -2.5% -2.6% -2.5% -4% -3.8% -4.0% -4.3% -5.0% -5.0% -6% -6.7% -7.1% -8% -8.0% -10% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 CSS change CSGP change 10 Augus

  11. Slide 11: Gross Profit Variance Analysis by Region

    Gross Profit Variance Analysis by Region 1H16 Translational 1H17 Gross Product Selling exchange Gross (In HK$ million) profit costs prices Volume impact Misc. profit Rest of Asia Pacific 388 2 15 20 (1) 1 425 Mainland China 348 13 (7)  (14) (4) 336 HK & Macau 313 11 (19) 23  2 330 Middle East 213

  12. Slide 12: Group OPEX trend

    Group OPEX trend OPEX to sales -1.2pp due to higher CSS improving leveraging, esp. in shop rental and staff costs. (HK$ million) OPEX to sales/GP$ (%) 1,600 1H16 1H17 100% 85.1% 82.7% 85.2% 87.2% 86.3% 87.1% 85.5% 90% 1,400 81.5% 80.2% 85.9% 84.0% 80% 1,200 80.1% 70% 1H16 1H17 1,000 50.7% 49.5% 60%

  13. Slide 13: Group Operating Profit by Region

    Group Operating Profit by Region Increase/(decrease) Operating profit translated at Operating margin current constant exchange exchange (In HK$ million) 1H17 1H16 rates rates 1H17 1H16 Rest of Asia Pacific 89 66 23 23 12.6% 10.0% Middle East 71 59 12 12 20.2% 18.7% Mainland China 48 48  2 7.9% 7.4%

  14. Slide 14: Changes in Net Cash and Bank Balances

    Changes in Net Cash and Bank Balances (In HK$ million) 1H17 1H16 Net cash and bank balances at Jan 1 1,095 1,076 Dividends paid to shareholders of the Company (236) (228) Dividends paid to non-controlling interests (13) (27) Share repurchase (6)  Proceeds from issuance of new shares 6  Exchange di

  15. Slide 15: Free Cash Flow from Operations

    Free Cash Flow from Operations (In HK$ million) 1H17 1H16 Profit before income taxes and finance expense 361 290 Depreciation and amortization 54 63 Changes in working capital 14 (19) Decrease in rental deposits and prepayments less amortization 13 7 Share of pre-tax profit of JVs (net of dividends)

  16. Slide 16: Working Capital Management

    Working Capital Management (In HK$ million) 1H17 Comments Increase in trade & other payables 25 AP turnover days +4 YOY to 36 days Decrease in trade & other receivables 3 AR turnover days -2 YOY to 43 days Increase in inventories (14) ITOC +9 YOY to 79 days Changes in working capital 14 10 August 20

  17. Slide 17: System Inventories

    System Inventories As at Jun 30 Dec 31 Jun 30 YOY (In HK$ million) 2017 2016 2016 change Inventories held by the Group 461 447 392 17.6% Inventories held by Korea JV 161 141 181 (11.0%) Inventories held by China franchisees 81 88 66 22.7% Finished goods at suppliers (not yet shipped) 43 20 52 (17.3%

  18. Slide 18: Outlook

    Outlook  Invest in marketing supported by healthy inventory and gross margin.  Refurbish stores to upgrade store ambience.  Giordano Junior as a key development programme.  Improve Mainland China franchisees’ operating margin  Increase investment in e-commerce.  Geographical expansion outside

  19. Slide 19: Summary of Group Sales, CSS and CSGP Growth

    Summary of Group Sales, CSS and CSGP Growth Total Sales CSS CSGP (HK$ million) 1H17 1H16 % change 1H17 1H16 1H17 1H16 Rest of Asia Pacific 707 658 7.4% 7.0% 5.2% 8.7% 4.0% Singapore 152 155 (1.9%) (0.6%) 1.9% 3.2% (0.3%) Indonesia 268 232 15.5% 15.3% 8.3% 17.5% 6.2% Malaysia 100 87 14.9% 14.6% 0.2%

  20. Slide 20: Store Portfolio at June 30

    Store Portfolio at June 30 Store numbers Retail floor space (sq. ft. in thousand) 2017 2016 2017 2016 Retail & Distribution Mainland China Franchised stores 567 536 446 436 Directly operated stores 346 360 283 302 Rest of Asia Pacific Indonesia 246 231 306 293 Thailand 156 151 107 98 Malaysia 88 91

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