2011 annual results - giordanocorp.giordano.com.hk/files/results_material... · march 21, 2012...

2011 Annual Results 21 March 2012

March 21, 2012 Giordano 2011 Annual Results 2

Operations Highlights – Group Record sales and earnings

1 At the end of the period

2 Inventory held at period end divided by sales and multiplied by number of days in the period

(In HK$ millions) 2011 2010 YOY change

Sales 5,614 4,731 +19%


Sales 5,614 4,731 +19%

Gross profit 3,283 2,731 +20%

Gross margin 58.5% 57.7% +0.8 pp


Sales 5,614 4,731 +19%

Gross profit 3,283 2,731 +20%


EBITDA 1,123 866 +30%

Operating profit 909 695 +31%

Operating margin 16.2% 14.7% +1.5 pp


Sales 5,614 4,731 +19%

Gross profit 3,283 2,731 +20%


EBITDA 1,123 866 +30%



Profit attributable to shareholders 728 537 +36%

Net profit margin 13.0% 11.4% + 1.6 pp


Sales 5,614 4,731 +19%

Gross profit 3,283 2,731 +20%


EBITDA 1,123 866 +30%





Net cash inflow from operating activities 704 610 +15%

Net cash and bank balances 1 1,209 978 +24%


Sales 5,614 4,731 +19%

Gross profit 3,283 2,731 +20%


EBITDA 1,123 866 +30%







Inventory days of sales 2 39 31 +8


Sales 5,614 4,731 +19%

Gross profit 3,283 2,731 +20%


EBITDA 1,123 866 +30%







Inventory days of sales 2 39 31 +8

Number of outlets 1 2,671 2,353 +318


Ten-Year Financial Highlights Return on average shareholders’ funds was above industry average

18.8%

14.8%

20.6% 19.9%

10.0%

15.1% 16.4%

14.5%

23.7%

28.3%

vs 21.4%1

0%

5%

10%

15%

20%

25%

30%

35%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Return on Average Shareholders' Funds

1 Calculated on the latest year-end results in 2011 for major sportswear, footwear and apparel companies listed in Hong Kong.


Ten-Year Financial Highlights Record dividend

(In HK cents) Dividend per share 1 Earnings per share Payout Ratio Dividend yield 2

2011 38.0 48.2 79% 7%

2010 27.0 36.0 75% 7%

19.0 21.0 23.0 26.5 26.5

21.5

9.5 16.0

27.0

38.0

83%

114%

86% 96%

192%

109%

46%

83% 75% 79%

0%

40%

80%

120%

160%

200%

0

5

10

15

20

25

30

35

40

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

(%) (HK cents)

Dividend Per Share

Payout Ratio

1 Includes interim dividend of 15.0 HK cents and final dividend of 23.0 HK cents (2010: interim 8.5 HK cents; final 18.5 HK cents)

2 Calculated on full-year average share price (2011: HK$5.52; 2010: HK$3.68)

Book close date: June 14, 2012 / Dividend payment date: on or about June 26, 2012


394 (8%) 498 (9%)

1,109 (23%) 1,328 (24%)

1,447 (31%)

1,759 (31%)

1,781 (38%)

2,029 (36%)

0

1,000

2,000

3,000

4,000

5,000

6,000

2010 2011

(HK$ millions)

Mainland China

Hong Kong & Taiwan

Rest of Asia Pacific

Wholesales to Overseas

4,731

5,614

Mainland China 14% / 9%*

Hong Kong & Taiwan 22% / 18%*

Rest of Asia Pacific 20% / 12%*

Wholesales to overseas 26%

% to group sales in brackets

Sales Growth and Contribution by Region Growth across all sectors

* Sales growth excludes exchange effects


Total Sales for the last 8 quarters Continuous sales growth quarter on quarter

1,123 1,014

1,125

1,469 1,415

1,234 1,334

1,631

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Q1 Q2 Q3 Q4

423 367

403

588 550 403

439

637

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Q1 Q2 Q3 Q4

364 307 329

447 438 394 414 513

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Q1 Q2 Q3 Q4

253 246 278 332 320 311 336 361

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Q1 Q2 Q3 Q4 83 94 115 102 107 126 145 120

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Q1 Q2 Q3 Q4

(HK$ millions)

1Q10 1Q11 2Q10 2Q11 3Q10 3Q11 4Q10 4Q11


Total Brand Sales and Comparable Store Sales Growth for the last 8 quarters

Double digit sales growth

9%

12%

14%

10%

17% 17%

14%

9%

5% 5%

8% 7%

15%

13%

8%

6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

Total Brand Sales Growth Comp Store Sales Growth

2011 2010 Increase

Global brand sales (HK$ millions) 7,632 6,707 +14%

Comparable store sales growth +10.0% +6.3% +3.7 pp


Store Number by Market as at December 31, 2011 Steady expansion of global operations

Mainland China, 51% 1,372 outlets as at Dec-11 +184 outlets in 2011

Worldwide Total

2,671 outlets +318 in 2011

Taiwan, 8% 208 outlets as at Dec-11 +27 outlets in 2011

Indonesia, 4% 119 outlets as at Dec-11 +14 outlets in 2011

Thailand, 4% 99 outlets as at Dec-11 +6 outlets in 2011

Hong Kong & Macau, 3% 73 outlets as at Dec-11 -2 outlets in 2011

Malaysia, 3% 78 outlets as at Dec-11 +8 outlets in 2011

Singapore, 2% 56 outlets as at Dec-11 +4 outlets in 2011

Australia, 1% 35 outlets as at Dec-11 -1 outlets in 2011

India, 1% 30 outlets as at Dec-11 +2 outlets in 2011

Other Markets, 7% 185 outlets as at Dec-11 +36 outlets in 2011

South Korea, 9% 232 outlets as at Dec-11 +18 outlet in 2011

Middle East, 7% 184 outlets as at Dec-11 +22 outlets in 2011


Global Retail Network Wide presence in Asia and emerging markets

Australia (35)

Bahrain (3)

Algeria (1)

Armenia (2)

Brunei (2)

Lebanon (1)

Canada (1)

Georgia (10)

Hong Kong & Macau (73) India (30)

Indonesia (119)

Iran (14)

Saudi Arabia (80)

Jordan (2)

Kuwait (10) Mainland China (1,372)

Malaysia (78)

Myanmar (90)

Oman (3)

Philippines (56)

Qatar (3)

Singapore (56)

South Korea (232)

Taiwan (208)

Thailand (99)

U.A.E. (38)

Vietnam (16)

Worldwide total: 2,671 as at December 31, 2011

Iraq (1)

Pakistan (2)

Yemen (1)

Syria (4)

Nepal (1) Japan (2)

Aruba (6)

Panama (1)

Venezuela (2)

Trinidad & Tobago (2)

Costa Rica (3)

Columbia (2)

St. Maarten (1)

Sri Lanka (1)

Kazakhstan (2)

Kyrgyzstan (2)

Morocco (1) Sudan (1)

Tanzania (2)


Gross Profit Reconciliation Strong margin underlying brand strength

2,731 (57.7%)

129

414

(132 )

141

3,283 (58.5%)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2010 Gross Profit

Volume Increase

Price Increase

Cost Increase

Exchange Difference

2011 Gross Profit

(HK$M)


Total Operating Expenses Reconciliation Investments to support people and brands

2,159

46% of sales

109 (13%)

132 (30%)

87 (32%)

43 (52%)

(8)

2,522

45% of sales

0

500

1,000

1,500

2,000

2,500

3,000

2010 Total Operating Expenses

Shop Rental Shop Staff Costs Other Shop Overhead

Advertising & Promotion

Others 2011 Total Operating Expenses

(HK$M)


Operating Profit (Margin) by Region Operational excellence drives profitability

287

(16.1%)

217 (15.0%)

179 (16.1%)

51 (12.9%)

265

(13.1%)

345 (19.6%)

299 (22.5%)

60 (12.0%)

(50)

0

50

100

150

200

250

300

350

400

Mainland China Hong Kong & Taiwan Rest of Asia Pacific Wholesales to Overseas

(HK$M)

2010 2011

TW 92 (15.2%)

ID 70 (28.0%) TW

1591 (20.9%)

ID 112 (34.7%)

(50)

0

50

100

150

200

250

300

350

400


(HK$M)

MY 39 (21.8%)

MY 56 (26.2%)

(50)

0

50

100

150

200

250

300

350

400


(HK$M)

TH 20 (14.1%)

TH 33 (19.6%)

(50)

0

50

100

150

200

250

300

350

400


(HK$M)

AU 12 (6.3%)

(50)

0

50

100

150

200

250

300

350

400


(HK$M)

AU -5 (-2.9%) IN 1 (4.3%)

(50)

0

50

100

150

200

250

300

350

400


(HK$M)

HK 125 (14.9%)

HK 186 (18.7%)

SG 54 (15.0%)

SG 85 (20.8%)

1 Taiwan’s operating profit included HK$22m of VAT penalty refund. If excluded the refund, Taiwan’s operating profit and margin would be HK$137m and 18.0%.


EBIT and Free Cash Flow from Operations Effective conversion of profit to cash

1,028

95

(111)

(89)

(175)

78

(137)

689

0

200

400

600

800

1,000

1,200

EBIT Depreciation CAPEX less disposals

Share of Pre-tax Profit of

JCE/Assoc (net of dividend)

Changes in Non-cash Working Capital

Reduction in Rental Deposits & Prepayments

Net Interest Received

& Tax Paid

Free Cash Flow from Operations

(HK$M)


63

44

71

49 49 46

0

10

20

30

40

50

60

70

80

2H10 1H11 2H11

(HK$ millions) Capital Expenditure

Capital Expenditure Depreciation

282 358

35 40

0

5

10

15

20

25

30

35

40

45

0

50

100

150

200

250

300

350

400

Dec 31, 2010 Dec 31, 2011

(Days) (HK$ millions) Trade Receivables

Trade Receivables Days Sales Outstanding

163

298

23

36

0

5

10

15

20

25

30

35

40

0

50

100

150

200

250

300

350

Dec 31, 2010 Dec 31, 2011

(Days) (HK$ millions) Trade Payables

Trade Payables Days Purchases Outstanding

404

605

31

39

0

5

10

15

20

25

30

35

40

45

0

100

200

300

400

500

600

700

Dec 31, 2010 Dec 31, 2011

(Days) (HK$ millions) Inventory

Inventory Turnover Days


Change in Net Cash and Bank Balances Strong financial position continues

978

689 97

(555)

1,209

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Net Cash & Bank Bal. on Dec 31, 2010

Free Cash Flow from Operations

Proceeds from Issuance of New Shares

Dividend paid to Shareholders & NCI

Net Cash & Bank Bal. on Dec 31, 2011

(HK$M)



Total sales 1 2,029 1,781 +14% / +9%2

Retail self-operated stores 1,317 1,142 +15%

Wholesale to franchisees 712 639 +11%

Total brand sales 3 2,428 2,219 +9%

Comparable store sales 4 increase +6.3% +3.8% +2.5 pp

Gross profit 1,128 977 +15%


Operating profit 265 287 -8%

Operating margin 13.1% 16.1% -3.0 pp

Number of outlets 5 1,372 1,188 +184

Self-operated stores 545 448 +97

Franchised stores 827 740 +87

Performance Review by Region – Mainland China

1 Total Sales are total retail sales in self-operated stores and total wholesale sales to franchisees, translated at average exchange rates. 2 Sales Growth excludes exchange effect 3 Total Brand Sales are total retail sales, at constant exchange rates, in self-operated stores (include e-shop) and franchised stores. 4 Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores and e-shop that have been opened/operated in the prior period. 5 At the end of the period


Total Brand Sales and Comparable Store Sales Growth for the last 8 quarters – Mainland China Weakening second half

2%

8%

11%

8%

20%

11%

5%

2%

-1%

3%

8%

5%

17%

9%

1% -1%

-5%

0%

5%

10%

15%

20%

25%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11



Gross Profit Reconciliation – Mainland China Strong margin performance

977 (54.9%)

26

107

(34)

52

1,128 (55.6%)

0

200

400

600

800

1,000

1,200

2010 Gross Profit

Volume Increase

Price Increase

Cost Increase

Exchange Difference

2011 Gross Profit

(HK$M)



Total sales 1 1,759 1,447 +22% / +18%2

Comparable store sales 3 increase +18.0% +8.3% +9.7pp

Gross profit 1,173 953 +23%


Operating profit 4 345 217 +59%

Operating margin 4 19.6% 15.0% +4.6 pp

Number of outlets 5 281 256 +25

1 Total Sales are total retail sales translated at average exchange rates. 2 Sales growth excludes exchange effect 3 Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores that have been opened/operated in the prior period. 4 Taiwan’s operating profit included HK$22m of VAT penalty refund. If excluded the refund, operating profit and margin for Hong Kong and Taiwan would be

HK$323m and 18.4%. 5 At the end of the period

Performance Review by Region – Hong Kong and Taiwan Strong brand power generating sales and margin growth


Total Brand Sales and Comparable Store Sales Growth for the last 8 quarters – Hong Kong and Taiwan

-

7%

12%

8%

16%

23% 22%

14%

8%

10% 11%

7%

14%

20% 21%

19%

0%

5%

10%

15%

20%

25%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11



Gross Profit Reconciliation – Hong Kong and Taiwan Advertising and marketing drives margins

953 (65.9%)

44

193

(49)

32

1,173 (66.7%)

0

200

400

600

800

1,000

1,200

1,400

2010 Gross Profit

Volume Increase

Price Increase

Cost Increase

Exchange Difference

2011 Gross Profit

(HK$M)



Total sales 1 1,328 1,109 +20% / +12%2

Comparable store sales 3 increase +7.7% +8.2% -0.5 pp

Gross profit 887 705 +26%





1 Total Sales are total retail sales translated at average exchange rates. 2 Sales growth excludes exchange effect 3 Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores that have been opened/operated in the prior period. 4 At the end of the period

Performance Review by Region – Rest of Asia Pacific High growth and strong performance


Total Brand Sales and Comparable Store Sales Growth for the last 8 quarters – Rest of Asia Pacific Mixed performance in second half

12%

2%

6%

8%

14%

12%

8%

5%

13%

4% 6%

11% 12%

13%

6%

2% 0%

2%

4%

6%

8%

10%

12%

14%

16%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11



Gross Profit Reconciliation – Rest of Asia Pacific Balanced growth of volume and margin

705 (63.6%)

49 57 19

57

887 (66.8%)

0

100

200

300

400

500

600

700

800

900

1,000

2010 Gross Profit

Volume Increase

Price Increase

Cost Decrease

Exchange Difference

2011 Gross Profit

(HK$M)



Total Sales 498 394 +26%


Operating margin 12.0% 12.9% -0.9 pp


Performance Review by Region – Wholesales to Overseas Korea and Middle East drive sales growth

1 At the end of the period


Performance Review by Brand BSX is emerging, Ladies continues to be strong

Sales Operating profit / (loss) Number of outlets

(In HK$ millions) 2011 YOY change 2011 YOY change 2011 YOY change

Giordano & Giordano Junior

4,437 +18% 818 +36% 1,861 +217

BSX 242 +33% 26 -13% 120 +42

Giordano Ladies 348 +21% 67 +20% 53 +8

Concepts One 49 -28% (8) -14% 26 +2

Others 40 +54% 6 +100% 10 +1

Retail & Distribution total 5,116 +18% 909 +33% 2,070 +270



Total sales 1,563 1,286 +22%

Comparable store sales 1 increase +9.4% +17.7% -8.3 pp

Net profit 147 114 +29%

Net margin 9.4% 8.9% +0.5 pp

Share of profit 2 71 55 +29%


Operations Highlights for Jointly Controlled Company – South Korea Innovation drives growth

1 Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores that have been opened/operated in the prior period. 2 On 31 December 2011, the Group held 48.5% in Giordano South Korea. 3 At the end of the period



Total sales 642 506 +27%

Comparable store sales 1 increase +23.0% +5.2% +17.8 pp

Net profit 123 59 +108%

Net margin 19.2% 11.7% +7.5 pp

Share of profit 2 25 12 +108%


Operations Highlights for Associated Company – Middle East Strong expansion in Saudi Arabia

1 Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores that have been opened/operated in the prior period. 2 On 31 December 2011, the Group held 20.0% in Giordano Middle East. 3 At the end of the period

Outlook:


1. Mainland China expansion

Our new General Managers in four new command centres improving operational effectiveness in self managed stores, with sales growth clear in early 2012.

Renewing focus on franchisee partners, to develop their operational excellence in visual merchandising, in-store marketing and inventory management. Continue to consolidate franchise base.

Greater empowerment of local managers transforming our marketing operations in China, strengthening our brand position in the process; implementing visible and effective campaigns with local celebrities and business partners.

Focus on the quality of new shop expansion strategy to secure improved sales productivity per store.

Continue to develop our e-partnerships with virtual shopping malls in China and through more targeted product selection and on-line marketing, continue to grow our e-business.

Control costs tightly in response to an external environment which is highly competitive and an economy which is showing signs of cooling.

Outlook: (cont’d)


2. Increase marketing investment to enhance brand power

Expand our investment in advertising and marketing programs that boost our brand position, through local celebrity endorsements, crossover campaigns with business partners, exciting in-store activities, shop fixture upgrades and more visible street advertising.

Through our Hong Kong and Dongguan design centres, focus on developing innovative products with a fresh image, tailored to local tastes to continuously improve the quality of our sales and enhance our brand position.

3. Maintain gross and operating margins

Further leverage our long term supplier relationships to secure merchandise price reductions in line with falling material commodity prices.

Refocus on managing our operating expenses prudently and react quickly to control costs where this is appropriate.

Deliver strong cash flow and optimize our inventory holding to avoid mark-downs and preserve cash balances.


Summary of Total Sales and Comparable Store Sales Growth by Market

Total sales 1 Comparable store sales 2

(HK$ millions) 2011 2010 YOY increase 2011 2010

Mainland China 2,029 1,781 +14% +6% +4%

Hong Kong 997 841 +19% +23% +9%

Taiwan 762 606 +26% +12% +7%

Singapore 408 360 +13% +1% +2%

Indonesia 323 250 +29% +16% +18%

Malaysia 214 179 +20% +7% +17%

Thailand 168 142 +18% +13% +12%

Australia 192 175 +10% +7% -1%

Other markets 23 3 +667% +22% N/A

Retail & Distribution total 5,116 4,337 +18% +10% +6%

Wholesales to overseas 498 394 +26%

Group total 5,614 4,731 +19%

1 Total Sales are total retail sales in self-operated stores and total wholesale sales to franchisees, translated at average exchange rates. 2 Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores and e-shop that have been opened/operated in the prior period.


Global Retail Network

Number of outlets

As at December 31, 2011 As at

Dec-10 Change Giordano

& Junior Giordano

Ladies Concepts

One BSX Others Total

Mainland China 1,247 21 22 82 - 1,372 1,188 +184

Hong Kong & Macau 42 10 3 18 - 73 75 -2

Taiwan 174 14 - 20 - 208 181 +27

Singapore 53 3 - - - 56 52 +4

Indonesia 106 2 1 - 10 119 105 +14

Malaysia 77 1 - - - 78 70 +8

Thailand 97 2 - - - 99 93 +6

Australia 35 - - - - 35 36 -1

Other markets 30 - - - - 30 - +30

Retail & Distribution total 1,861 53 26 120 10 2,070 1,800 +270

South Korea 179 - 9 44 - 232 214 +18

Middle East 176 - 1 7 - 184 162 +22

Other markets 167 1 1 16 - 185 177 +8

Overseas franchisees total 522 1 11 67 - 601 553 +48

Group total 2,383 54 37 187 10 2,671 2,353 +318

2011 annual results - giordanocorp.giordano.com.hk/files/results_material... · march 21, 2012...

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