2014 annual results - todayir · results highlights revenue and profit remain stable amid tough...
TRANSCRIPT
March 2015
2014 Annual Results
Disclaimer
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The information contained in this presentation is intended solely for your personal reference.
Such information is subject to change without notice, its accuracy is not guaranteed and it may not
contain all material information concerning Fuguiniao Co., Ltd. (the “Company”). The Company
makes no representation regarding, and assumes no responsibility or liability for, the accuracy or
completeness of, or any errors or omissions in, any information contained herein.
In addition, the information contains projections and forward-looking statements that may reflect the
Company’s current views with respect to future events and financial performance. These views are
based on current assumptions which are subject to various risks and which may change over time.
No assurance can be given that future events will occur, that projections will be achieved, or that the
Company’s assumptions are correct. It is not the intention to provide, and you may not rely on this
presentation as providing, a complete or comprehensive analysis of the Company's financial or
trading position or prospects.
This presentation does not constitute an offer or invitation to purchase or subscribe for any securities
or financial instruments or to provide any investment service or investment advice, and no part of it
shall form the basis of or be relied upon in connection with any contract, commitment or investment
decision in relation thereto.
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Agenda and Presenters
Photo of
Presenter 2
Photo of
Presenter 4
(If applicable)
Mr. Lu Wenli
CEO
Mr. Chan Wai Shing, Wilson
CFO
Section Presenter
Results Highlights Mr. Chan Wai Shing, Wilson
Financial Overview Mr. Chan Wai Shing, Wilson
Business Review Mr. Lu Wenli
Prospects Mr. Lu Wenli
Q&A All
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Results Highlights
Results Highlights
Revenue and profit remain stable amid tough market situation
Turnover up 1.3%
Gross profit margin up 0.9 pp
Strong e-commerce development
Online sales up 26.3%
Continue to enhance the efficiency of distribution networks
Decent progress and positive market response of health
function footwear
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Financial Overview
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Financial Overview
(Denominated in RMB’000, unless otherwise stated)
2014 2013 Change
Turnover 2,322,982 2,294,287 +1.3%
Gross Profit 917,338 886,271 +3.5%
Profit before Taxation 602,134 593,312 +1.5%
EBITDA 641,093 638,283 +0.4%
Profit for the year 451,222 443,729 +1.7%
Basic EPS (RMB) 0.84 1.10 -23.6%
Final Dividend (RMB per Ordinary
Share)0.35 0.24 +45.8%
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Financial Overview(Cont’d)
(Denominated in RMB’000, unless otherwise stated)
2014 2013 Change
Total Assets 3,113,449 2,743,061 +13.5%
Total Equity 2,193,066 1,939,697 +13.1%
Cash and Cash Equivalents 401,634 843,353 -52.4%
2014 2013 Change
Gross Profit Margin 39.5% 38.6% +0.9 p.p
Operating profit margin 26.9% 26.9% -
Net Profit Margin 19.4% 19.3% +0.1 p.p
Turnover by Product Type
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2014
(RMB’000) 2014 2013 Change
Women’s Footwear 1,172,572 1,196,638 -2.0%
Men’s Footwear 644,833 618,883 +4.2%
Menswear 485,623 473,504 +2.6%
Leather Accessories 19,954 5,262 +277.4%
Total 2,322,982 2,294,287 +1.3%
2013
Number of Units Sold and ASP
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ASP
No. of units sold
(’000) 2014 2013 Change
Footwear 8,353 8,567 -2.3%
Menswear 3,129 3,082 +1.3%
Leather Accessories 201 53 +279.2%
(RMB) 2014 2013 Change
Footwear 217.58 211.93 +2.7%
Menswear 155.20 153.64 +1.0%
Leather Accessories 99.27 99.28 --
Turnover by Brands
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(RMB’000) 2014 2013 Change
Fuguiniao 1,857,090 1,771,568 +4.8%
FGN 72,193 126,949 -43.1%
AnyWalk 50,496 45,398 +11.2%
OEM/ODM 343,203 350,372 -2.0%
Total 2,322,982 2,294,287 +1.3%
2014
2013
Turnover by Sales Channel
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(RMB’000) 2014 2013 Change
Distributors 1,594,589 1,605,926 -0.7%
Proprietary outlets 243,830 221,524 +10.1%
Large-scale institutional
purchases42,164 37,940 +11.1%
Online Sales 99,196 78,526 +26.3%
OEM/ODM customers 343,203 350,371 -2.0%
Total 2,322,982 2,294,287 +1.3%
2014
2013
Costs Analysis
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(Denominated in RMB’000,
unless otherwise stated)2014 2013 Change
Costs of Sales 1,405,644 1,408,016 -0.2%
In-house Production 772,090 733,703 +5.2%
-Raw Materials 589,356 555,128 +6.2%
-Direct Labor 107,512 108,502 -0.9%
-Production Overhead 75,222 70,073 +7.3%
Subcontracting Charges 633,554 674,313 -6.0%
Operating Expenses Analysis
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(RMB million) (RMB million)
SELLING AND DISTRIBUTION EXPENSESADMINISTRATIVE AND OTHER
OPERATING EXPENSES
EBITDA and Profit
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(RMB ‘000) (RMB ‘000)
PROFIT FOR THE YEAREBITDA
451,222
Working Capital Analysis
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INVENTORY TURNOVER DAYSTRADE AND BILLS RECEIVABLE
TURNOVER DAYS
TRADE AND BILLS PAYABLE
DAYS
(Days) (Days) (Days)
Financial Ratios
RETURN ON EQUITY RETURN ON TOTAL ASSETS CURRENT RATIO
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(%) (%) (%)
Financial Ratios
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GEARING RATIO DEBT TO EQUITYINTEREST COVERAGE
(%)
2013 2014
Net cash
position
Net cash
position
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Business Review
Brands: Fuguiniao
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The Fuguiniao brand was launched in 1991 and focused solely on men’s leather footwear. The brand has been
famous for its excellent product quality and comfortable fitting. In 1997, we expanded into the design, manufacture
and sales of women’s footwear and has won several national awards
Products sold under our Fuguiniao brand include: Men’s and women’s shoes, business casual menswear, and
leather accessories
Market Positioning: Members of the working and professional classes aged from 28 to 45
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Brands: Fuguiniao (Con’t)
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Brands: FGN
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In 2012, we launched our FGN brand as our middle-to-high brand. With FGN, we offer a range of business and
business casual footwear. The brand is popular among customers due to its excellent material quality and
fashionable design.
Products sold under our FGN brand include middle-to-high business and business casual footwear
Market Positioning: Urban population aged from 25 to 40
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Brands: FGN (Con’t)
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Brands: Anywalk
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We launched our AnyWalk brand in 2010. Under AnyWalk, we offer a range of middle-to-high fashion and casual
footwear. The brand combines fashionable design elements with untraditional materials, bringing the latest international
fashion trend.
Products sold under our AnyWalk brand includes middle-to-high end fashion and casual men and women’s footwear
Market Positioning: Younger, fashion-conscious population aged from 16 to 35
New Product Themes
Three different themes and style were launched this year to adapt to consumers’ new consumption
demand:
“New Classical Style” / “New Business Style” / “New Comfortable Style”
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New Product Themes (Con’t)
“New Classical Style”
“New Business Style”
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Sales and Distribution Network
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POS Breakdown by Store Type
Total: 3,144
2014 2013
No. of Retail Outlets 3,144 3,359
No. of Distributors 61 60
Sales and Distribution Network (Cont’d)
Taken a more conservative approach in expanding retail network in 2014 in
line with our business growth and to ensure the profitability of the retail
stores
Set out uniform standards for store decoration and displays, marketing
activities and daily operations for distributors and third-party retailers to
provide uniform and quality services across retail network
Required distributors and third-party retailers to obtain the Group’s approval
for the final location of each retail outlet
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Inventory and Product Development
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Launched an in-house developed online trading platform to facilitate
distributors in managing their inventory levels
Sales orders from trade fairs enabled a more efficient management
of the Group’s inventory of raw materials and finished products
Our strong in-house research, design and development capabilities
have been critical to our success
Capable to introduce over 1,500 Stock Keeping Units (SKUs) into
the market for branded footwear products and approximately 300
SKUs for business casual menswear products for each season
Our combined annual self-production capacity was approximately
5.8 million pairs of footwear with effective usage of machine in
production process
Inventory
Management
Product
Design
Production
E-Commerce
With e-commerce, consumers are more prone to focusing on the characteristics of the footwear
and apparel products. In the footwear and apparel industry, the “product-oriented” era is gradually
replacing the “channel-oriented” era.
With the long-standing reputation of high quality and comfort of the Fuguiniao brand, we believe
that the Company still has strong core competence in this “product-oriented” era of e-commerce.
In early August 2014, the Company launched a We Chat platform which has commenced
operation.
In late August 2014, the Company launched a new O2O platform, leveraging interactive
membership management to realise precision marketing.
The introduction of the We Chat platform and O2O platform will play a crucial role in paving the
path for the Company to enter the e-commerce sector.
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Marketing and Promotion
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Engaged in advertising campaigns, fashion
shows and department store promotional
events to increase brand awareness
Continued to engage Mr. Lu Yi (陆毅), a well-
known actor in the PRC, to be the
ambassador of business casual menswear
products
Continued to hold fashion shows in
the Group’s trade fairs in 2014 and
displayed advertising videos to
promote brands and presented
newly-released footwear and
menswear collections
Organized product theme
promotions in department stores and
invited singers, actors and other
PRC celebrities to participate in
these promotional events
Marketing and Promotion (Con’t)
Mr. Luyi features Fuguiniao’s business menswear series
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Trade Fairs
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• Hold national trade fairs each year in:
– March, May, September and November for the autumn, winter, spring and summer
collections of Fuguiniao and FGN branded footwear and Fuguiniao branded leather
accessories
– April and September for the autumn/winter and spring/summer collections of AnyWalk
branded footwear and Fuguiniao branded menswear
• Attendees include our existing or potential distributors, as well as certain
third-party retailers and retail store managers
• Distributors can place orders with us directly and third-party retailers and
retail store manager can place orders through our distributors
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Prospects
Business Strategies
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Refine the offline sales and distribution network and
enhance same-store operating efficiency
Include e-commerce as the key development strategy and
identify suitable e-commerce enterprises as targets for
merger and acquisition
Actively explore sales and large group purchase
opportunities on overseas e-commerce platforms
Further promote the brands to increase brand awareness
Adopt thematic product design and marketing ideas
Focus on promoting the Fuguiniao Health Function Footwear
series throughout the country
Continue to enhance the information systems technology so
as to strengthen the vertically integrated business model7
Business Strategies
– O2O and Wechat Marketing Model
• Include e-commerce as key development strategy and focus efforts on
increasing e-commerce as a percentage of the total sales of the Company
– Increase the infrastructure investment in Online-to-Offline (“O2O”) and the WeChat platform
– Establish an independent team to proactively explore the opportunities to market the
Company’s products on overseas e-commerce platforms
– Increase human resources for the management and development of its existing domestic e-
commerce operations.
• Increase the use of WeChat
– Quickly disseminate information about new stores and marketing information as well as
accumulate e-commerce end-customers
– Implement precision marketing by encouraging distributor customers to focus more efforts on
stores and technology in order to increase the frequency of retail sales
• Actively seek targets for merger and acquisition
– Cross-border e-businesses will be the targets for merger and acquisition so as to speed up
the expansion of the overseas online business
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Business Strategies – Health Function Footwear
• Ample potential of development
– One of the targeted new industries supported by PRC government
– Aging population, Sub-health state and the climate change in environment
– Rising awareness of healthcare among Chinese consumers
• The Group introduced Health Function Footwear in 2014
– Designed according to new technology, ergonomics and human mechanics
• Entered into the Fuguiniao Health Function Footwear
Cooperation Project Agreement with Wuhan Union Hospital under
Tongji Medical College, Huazhong University of Science & Technology
– Entrust the party to conduct a clinical trial on “The ability of Fuguiniao Health
Function Footwear to improve the microcirculation in feet and relieve the
discomfort of the spine and knee joint” and prepare a clinical report.
• Entered into the Strategic Cooperation Agreement with Huazhong
University of Science & Technology
– Provide theories, experimental basis and clinical certification for particular
products of the Company with its strong scientific research capability
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Q&A