2017 interim results presentation - todayirlivewebcast.todayir.com/shenguan_17ir/ppt.pdf · the...
TRANSCRIPT
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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 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 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.
Disclaimer
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Results Highlights
Financial position remained stable, with cash and cash equivalents together with pledged deposits was RMB531.8 million, and a net cash position of about RMB239.5 million as at end of June, which was RMB8.1 million higher as compared with end of 2016
Revenue for the first half of the year decreased slightly by 0.2% to RMB429.9 million, reflecting the 12.2% volume growth of collagen casing products is not sufficient to offset the decrease in overall average selling price
Profit attributable to owners of the Company (excluding RMB25.6 million return received from the contract in progress recorded in the first half of 2016) has decreased by about 47.6% to about RMB33.2 million, earnings per share was RMB1.02 cents
Net cash inflow from operating activities was RMB176.3 million, which has increased by RMB24.6 million forthe prior period
China’s largest manufacturer of edible collagen casing products with stable market share
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New products of “Meday” and “COLL-FULL” brands are both qualified for mass production and products were officially launched for sales in early 2017; Chinese actress Xu Lu was appointed in May as ambassador for “COLL-FULL” brand, preparing to further strengthen market planning and marketing
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Gross Profit & Gross Margin
(RMB million)
Revenue and Gross Margin Analysis
Revenue Trend
Sales volume of collagen sausage casing products increased byabout 12.2%
Overall decrease in product price in the industry and Group’scommitment to reduce inventory level have led to ASP decline;ASP still dropped slightly in 1Q2017 when comparing with4Q2016, but started to rebound from 2Q2017 as inventorypressure eased, and ASP for 2Q2017 was similar to 4Q2016
Revenue decreased
Excluding the reversal of provision of inventory, the cost ofsales increased by about 12.1% to about RMB321.2 millionand the increase was similar to sales volume growth
Various measures to control unit costs of production
Reasons of gross margin declineReasons of revenue decline
430.7 429.9
1H2016 1H2017
Revenue
(RMB million)
-0.2% 144.2
109.8
33.5% 25.5%
1H2016 1H2017
-23.8%
(RMB million)
683.3 670.9
435.7 430.7 429.9
971.2
732.1
618.9549.9
2013 2014 2015 2016 2017
1H
1H
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Cost of Sales Analysis
113,200
66,40055,900
128,600
71,80062,100
Raw materials & consumables
Water, electricity & coal
Salary & employee benefit
Raw materials and consumables
128,600 40.2% 113,200 39.5%
Water, electricity & coal
71,800 22.4%66,400 23.2%
Salary & employee
benefit62,100 19.4% 55,900 19.5%
Others57,600 18.0%51,500 17.8%
(RMB ‘000) (RMB ‘000)
1H2017
1H2016
Cost of Sales Breakdown Cost of Sales Comparison
Cost of sales increased by 11.7% to RMB320.1 million, mainly reflecting sales volume growth of about 12.2%
Excluding the reversal of inventory provision, the cost of sales increased by about 12.1%
The Group has take various measures to control costs during the period
+8.1%+11.0%
+13.6%
1H20161H2017
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Other income and gains
Other Income and Gains
The Group entered into a settlement
agreement pursuant to which, the Group
received a refund of the contract costs
together with the accrued return of 10%
per annum
An accumulated return of about RMB25.6
million was booked last year
38,600
17,900
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
1H2016 1H2017
(RMB ‘000)
-53.6%
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Selling and distribution expenses
Selling and Distribution Expenses
Selling and distribution expenses increased
by about 128.7% from approx. RMB8.8
million for the Prior Period to approx.
RMB20.1 million for the Period
Increase in marketing costs for promotion
of various new products including “Meday”
collagen chips and “COLL-FULL” collagen
piece facial masks, as well as the increase in
wages due to the expansion in sales team
Selling and distribution expenses as
percentage of revenue increased from
approx. 2.0% for the Prior Period to approx.
4.7% for the Period
8,800
20,100
0
5,000
10,000
15,000
20,000
25,000
1H2016 1H2017
(RMB ‘000)
+128.7%
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Administrative expenses
Administrative expenses
Technologies acquired through Guangdong
Victory acquisition will be amortized over 5
years and related amortization expense was
approx. RMB25.4 million for the Period;
after deducting minority interest and
deferred tax of Guangdong Victory, the
effect of the related amortization expense
on net profit was approx. RMB11.6 million
The factor above which had a relatively
material impact on the net profit for the
Period were non-cash items and the cash
flow of the Group was not affected
73,500
72,300
60,000
65,000
70,000
75,000
1H2016 1H2017
(RMB ‘000)
-1.5%
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Net Profit and Margin
Net Profit and Margin
Major reasons:
Decrease in ASP led to decline in gross
margin
Decrease in other Income and gains
Increase in selling and distribution expense
loss attributable to minority interest of
approx. 8.1 million
Excluding return received from contract in
progress of approx. RMB25.6 million for the
Prior Period, profit attributable to owners
of the Company would decrease by approx.
47.6%
89,00020.7%
33,2007.7%
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
1H2016 1H2017
(RMB ‘000)
-62.7%
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Working Capital Analysis
81.7
106.9 110.4 107.3
131.9
0
20
40
60
80
100
120
140
1H15 FY15 1H16 FY16 1H17
(Day )
* Calculated as the average of the opening and closing balance of the period
Trade and Bills Payable Turnover Days *
62.5 66.0 64.673.9
89.9
0
20
40
60
80
100
120
1H15 FY15 1H16 FY16 1H17
(Day)
Trade and Bills Receivables Turnover Days *
Trade payable turnover days increased by approx. 25 days, the Group tends to make full use ofsuppliers’ credit terms for working capital
Trade receivable turnover days increased by approx. 16 days; the Group closely monitors theoperating situation of China’s meat products industry and strictly controls customer credit, but thecorresponding turnover days still increased due to the difficult operating environment of theoverall food industry
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Working Capital Analysis
70.0
52.6
40.233.7 34.1
0
20
40
60
80
1H15 FY15 1H16 FY16 1H17
Inventory Turnover Days – Raw Materials *
703.2
495.7553.6
422.0 406.1
0
200
400
600
800
1H15 FY15 1H16 FY16 1H17
(Day)
Inventory Turnover Days – FG & WIP *
(Day)
Turnover days of raw materials was largely steady vs YE2016; turnover days of FG and WIP
decreased by 15.9 days, mainly as the Group followed its strategy to boost sales volume and
speed up destocking by selling products at lower margin
* Calculated as the average of the opening and closing balance of the period
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Cash & Bank Borrowings
Note: Debt-to-equity ratio was calculated by dividing total borrowings by the total equity
Operating cash inflow was approx. RMB176.3 million, increased by RMB24.6 million
from the Prior Period
Cash and cash equivalents together with the pledged deposits amounted to approx.
RMB531.8 million
Total bank borrowings amounted to approx. RMB292.3 million,
which includes:
▪ RMB250.0 million denominated in Renminbi
▪ HKD48.7 million in Hong Kong Dollars
(equivalent to RMB42.3 million)
Net cash position of RMB239.5 million,
increased by RMB8.1 million as at YE2016
Debt-to-equity ratio reduced to approx. 10.4% (As at 31 Dec 2016:11.9%)
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Results Highlights
For the six months ended 30 June
2017 2016 Change
(in million RMB, unless otherwise stated)
Revenue 429.9 430.7 -0.2%
Gross profit margin (%) 25.5 33.5 -8.0p.p.
Profit attributable to owners of the Company 33.2 89.0 -62.7%Profit attributable to owners of the Company (excluding exceptional and non-recurring items)
33.2 63.3 -47.6%
Net margin (%) 7.7 20.7 -13.0p.p.Net margin (excluding exceptional and non-recurring items) %
7.7 .614.7 -7.0p.p.
Cash inflow from operating activities 176.3 151.7 +16.2%
Capital expenditure 9.0 18.8 -52.1%
Basic earnings per share (RMB cents) 1.02 2.73 -62.6%
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Gradually Achieve Product Diversification
“Meday” collagen chips and “COLL-FULL” collagen piece facial masks
are both qualified for mass production and their products were
officially launched for sales in early 2017
Appointed Chinese actress Xu Lu in May this year, as ambassador for
the “COLL-FULL” brand, and will further strengthen
market planning and marketing accordingly so as
to capture a larger market share
The Group will launch new products, such as
solid collagen, in the second
half of 2017
“COLL-FULL”
collagen
piece
facial masks
“Meday”
solid
collagen
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Increased Equity Interests in New Businesses
the Group is increasing its equity interests in Guangdong Victory Biotech Co., Ltd. And Ferguson
(Wuhan) Biotech Company Limited during 1H2017
Our interests in Guangdong Victory has increased to 80% as at the end of the Period; the acquisition
of equity interest in Ferguson Wuhan have not been completed as at the end of the Period but was
completed in early August
Collagen Casings & Foods Medical Use
100% equity interest
Wuzhou Shenguan
100% equity interest
Sanjian
Pharmaceutical100% equity interest
Nanning Nuyou
80% equity interest
Guangdong
Victory 100% equity interest
Guangxi Luxianna
100% equity interest
Nanning Shangguan
15% equity interest
Ferguson Wuhan
Beauty & Healthcare
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Outlook
The 13th Five-Year Plan promulgated by the PRC Government and the relevant departments have added the collagen biotechnology industry into the list of strategic emerging industries with national support, which includes:▪ The “13th Five-Year Development Plan on the National Strategic Emerging Industry” 《「十三五」国家战略性新兴产业发展规划》
▪ The “13th Five-Year plan on National Science and Technology Innovation” 《「十三五」国家科技创新规划》
▪ The “Catalogue of Key Products and Services in Strategic Emerging Industries” 《战略性新兴产业重点产品和服务指导目录》
▪ “Pharmaceutical Industry Development Planning Guide”《医药工业发展规划指南》
Various documents, such as the “Notice Regarding the National Nutrition Programme (2017–2030) – Guo Ban Fa [2017] No. 60” (國民營養計劃(2017–2030年)的通知-國辦發[2017]60號) published by the General Office of the State Council of the PRC during the Period and the “Guiding Opinions on the Promotion of the Sound Development of the Food Industry – Fa Gai Chan Ye [2017] No. 19” (關於促進食品工業健康發展的指導意見-發改產業[2017]19號) published by the National Development and Reform Commission and the Ministry of Industry and Information Technology of the PRC, will be more conducive to the future development of the Group
Continue to use collagen technologies as the core, collagen sausage casing business as the foundation, and set collagen-based products such as foods, healthcare products , cosmetic products, medical products and medical materials as the development direction
To achieve product diversification through automation and knowledge-based measures
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Adhere to the mission of “de-stocking, adjusting structure, maintaining stable growth”, to
enhance development in setting up the Group’s management model, and sales and marketing
system so as to maintain leading position in collagen sausage casing market
Establish quality control model and introduce stringent quality responsibility system to ensure
quality objectives are achieved
Take into account the effect of climate and sales seasonality
in production management and make full use of abundant
production capacity when formulate annual,
monthly and daily production plans
Consolidate marketing and sales team, in
particular step up the establishment of marketing
team for non-casing new products for further
expansion of the sales channels of its products,
formulate sales incentive policy and customer
support in order to accomplish sales targets
Strategy and Plan