china yongda automobiles services holdings limited · china’s passenger vehicle market has...
TRANSCRIPT
2013 Interim Results Presentation
China Yongda Automobiles Services
Holdings Limited
September 2013
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Disclaimer
The slides/materials used in this presentation are strictly confidential and are being furnished to you solely for your information and may not be taken away, reproduced, redistributed, published, or transmitted directly or indirectly to any other person (whether within or outside your organization/firm), in whole or in part for any purpose. In particular, neither the information contained in this presentation nor any copy may be reproduced, redistributed, published, or transmitted directly or indirectly into the United Kingdom, Australia, the PRC, United States, Canada, Japan or any other jurisdiction which prohibits the same expect in compliance with applicable securities laws. These slides/ materials and the information contained therein do not constitute an offer or invitation to enter into, or offer to enter into, any agreement to purchase, acquire, dispose of, subscribe for or underwrite any securities or structured products 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. The shares of China Yongda Automobiles Services Holdings Limited (the “Company”) have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or the securities laws of any state of the United States and may not be offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and any applicable state or local securities laws. There will be no public offering of the Company’s shares in the United States. In Hong Kong, no securities of the Company may be offered to the public unless a prospectus in connection with the offering of such securities has been formally approved by The Stock Exchange of Hong Kong Limited pursuant to the Companies Ordinances (Chapter 32 of the laws of Hong Kong) and duly registered at the Companies Registry of Hong Kong, or except in circumstances under which an offer is made to professional investors as defined in the Securities and Futures Ordinances (Chapter 571 of the laws of Hong Kong) or any rules made thereunder, or in other circumstances which do not result in the offering document being a prospectus as defined under the Companies Ordinance, or which do not constitute an offer to the public within the meaning of the Companies Ordinance. Any decision to purchase or subscribe for securities in any offering should be made solely on the basis of the information contained in such offering document to be published in relation to such offering. This presentation may contain forward-looking statements. Any such forward-looking statements are based on a number of assumptions about the operations of the Company and factors beyond the Company’s control and are subject to significant risks and uncertainties, and accordingly, actual results may differ materially from these forward-looking statements. The Company undertakes no obligation to update these forward-looking statements for events or circumstances that occur subsequent to such dates. The information in this presentation should be considered in the context of the circumstances prevailing at the time of its presentation and has not been, and will not be, updated to reflect material developments which may occur after the date of this presentation. The information is not intended to provide, and you may not rely on this presentation and the information contained therein as providing a complete or comprehensive analysis of the Company's financial or trading position or prospects. Some of the information is still in draft form. This presentation also contains information and statistics relating to the automobiles industry. The Company has derived such information and data from unofficial sources, without independent verification. The Company cannot ensure that these sources have compiled such data and information on the same basis or with the same degree of accuracy or completeness as are found in other industries. You should not place undue reliance on statements in this presentation regarding the automobile industries. The information contained in this presentation does not constitute a due diligence review and should not be construed as such. The information contained in this presentation has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of any information or opinion contained herein. None of the Company or its advisers, or any of their respective directors, officers, employees, agents or advisers shall be in any way responsible for the contents hereof, or shall be liable whatsoever (in negligence or otherwise) for any loss or damage whatsoever arising from use of the information contained in this presentation or otherwise arising in connection therewith and none of them shall owe you any fiduciary duty in relation to this presentation. By attending this presentation, you are agreeing to be bound by the foregoing restrictions and to maintain absolute confidentiality regarding the information disclosed in this presentation. Any failure to comply with these restrictions may constitute a violation of applicable securities laws. In addition, you are deemed to have represented and agreed that he and any customers he represents are either (a) qualified institutional buyers (within the meaning of Regulation 144A under the U.S. Securities Act), or not a U.S. person and are outside of the United States and not acting for the account or benefit of a U.S. person; and (b) a “professional investor” as defined under Schedule 1 to the Securities and Futures Ordinance or any rules made thereunder.
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Management Team
Dong Ying
Deputy GM Wang Zhigao
Vice chairman
Cai Yingjie
Vice Chairman Vice President
Cheung Tak On
Chairman Xu Yue
Executive Deputy GM
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Table of contents
Sections Presenters
Cai Yingjie
Xu Yue
Wang Zhigao
Cheung Tak On
Dong Ying
Management
Industry overview 1
Business overview 3
Management innovation 4
Financial overview 5
Business strategy
Q&A
6
7
Network expansion 2 Cai Yingjie
Section 1
Industry Overview
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New vehicle sales
Source: CAAM (China Association of Automobile Manufacturers)
Sales volume of new passenger vehicles was
approximately 8,665,100 units for the first half of 2013, approximately
13.8% increase compared to the same period in 2012
China’s passenger vehicle market has continued its moderate
growth during the first half of 2013 at a pace faster than the
same period in 2012
Automobile sales volume in China was approximately 10,782,200
units for the first half of 2013, approximately 12.3% increase
compared to the same period in 2012
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Sales growth of key luxury vehicle brands in the first half of 2013:
BMW：15% to 182,800 vehicles
Audi：18% to 227,900 vehicles
Jaguar and Land Rover：15% to 41,900 vehicles
New vehicle sales
The market for luxury and ultra-luxury passenger vehicles has
continued its fast growth; however, compared to a rapid growth rate
in 2012, the growth in first half of 2013, in particular, during the first
quarter of 2013 slowed down. The growth rate rebounded during the
second quarter of 2013 driven by factors such as the introduction of
new models of passenger vehicles to the market.
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After-sales services
China’s after-sales services’ market has continued its fast
pace during the first half of 2013
Source: Roland Berger
After-sales services
in the luxury and
ultra-luxury segment
is expected to
generate about
RMB179.1 billion
revenue with a CAGR
of approximately 28%
till 2015
The number of vehicles is expected to
reach 9.18 million units and maintain a
CAGR of approximately 29% till 2015
The average age of vehicles is increasing.
The percentage of vehicles older than two
years is expected to rise to approximately
61% by 2015
1
2
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Pre-owned vehicle , extended services, automobile
financing and leasing and other after-sales services
Transaction volumes of pre-owned
vehicles are expected
to grow at a CAGR of approximately
25% in the next 5 years
Automobile rental business is
expected to grow at a CAGR of
approximately 20% in the next 5 years
After-sales services’ market will continue its fast growth driven by the fast
growth in the businesses of maintenance and repair services, automobile
extended products and services, insurance business and financing products,
pre-owned vehicles and automobile financing and leasing
Source: Roland Berger
Section 2
Network Expansion
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As of now, 15 new outlets authorized in 2013
New outlets authorized and established
Other brands
BMW: 4
Audi: 4
Lincoln: 1
Jaguar / Land Rover: 4
Other brands: 2
As of now, 13 new outlets established in 2013
BMW: 4
Audi: 3
Jaguar / Land Rover: 3
Porsche: 1
Bentley: 1
Cadillac: 1
Flagship BMW showroom in Shanghai Porsche 4S dealership in Nantong
Flagship Audi store in Shanghai
Huzhou Jaguar / Land Rover 4S dealership Audi 4S dealership in Baoshan, Shanghai
Jaguar and Land Rover store in Zhengzhou
Bentley showroom BMW 4S dealership in Yancheng, Jiangsu
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Brand development of Audi
In May 2013, Yongda has entered into a strategic cooperation
framework agreement with Audi, making it one of Audi’s five
strategic dealerships in China and the only Audi strategic partner
amongst all the passenger vehicle retailers listed in Hong Kong
In accordance with the strategic cooperation framework agreement
with Audi, Audi agrees to grant us several pre-authorized projects
per annum and will prioritize the requests of the Audi dealerships
controlled by us. We are also entitled to have top priority for Audi’s
network development. Meanwhile, we are entitled to have priority in
sales of Audi’s new model of vehicles, as well as expand the
cooperation with Audi in other areas.
We believe Audi is expected to have great potential to develop its
business in China. Benefit from the strategic partnership with Audi,
we will no longer be restricted by dealerships development
constraints imposed by Audi previously and seize the opportunity
of the fast development of Audi in China. We plan to significantly
increase market shares in the sales of Audi vehicles in China to
achieve leapfrog development.
Strong partnership between Yongda and Audi
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Successfully acquired two 4S dealerships at lower
costs
In 2013, we successfully acquired two 4S dealerships at lower costs. We will actively to
implement the strategy of acquisition at lower cost.
Audi 4S dealership in Lishui, Zhejiang
Buick 4S dealership in Jiaxing, Zhejiang
Amount
Amount
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Number of outlets
At the end of August 2013, we have 120
outlets in total
Breakdown:
Outlets in operation: 85
Outlets authorized (pending opening): 35
Luxury and ultra-
luxury brands
Mid- to high-
end brands
24%
76%
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Strive for innovation and embark into finance
leasing sector
In May 2013, Shanghai Yongda Finance Leasing Company Limited commenced its
operation after obtaining the approval from the Ministry of Commerce of the People Republic of
China, which laid a milestone in our efforts to provide financing products and services to our
clients.
40% of sales of automobiles and related service in matured market like Europe and America used
finance leasing; automobile finance leasing is at its initial stage and has great potential for future
development and achieve profitability in China.
Automobile finance leasing has covered the comprehensive industry chain of passenger
vehicle sales services. We expect to gain revenue and increasing profit from new passenger
vehicles sales and interest earnings, as well as from automobile financing related business such
as maintenance and repair services, automobile extended products and services, insurance and
pre-owned vehicle businesses.
Section 3
Business Overview
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Table of contents
Rapid sales growth for new passenger vehicles and
rebound in gross margin
Rapid growth of after-sales services with continuous
increased gross profit margin
On-going development of other after-sales services
Stable growth of automobile rental services
1
2
3
4
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Sales volume of new passenger vehicles increased in the first half of 2013
Gross profit and margin for new passenger vehicles sales exhibited an upward trend since 2H12
Gross profit and gross margin
Rapid sales growth for new passenger vehicles
and rebound in gross margin 1
Sales volume
2011
(%)
2012
(%)
1H2013
(%)
2011-2012
growth
1H2012-
1H2013
Luxury &
ultra-
luxury
47.6% 48.7% 50.5% 16.9% 22.8%
Mid- to
high-end 52.4% 51.3% 49.5% 11.6% 19.3%
Revenue
2011
(%)
2012
(%)
1H2013
(%)
2011-2012
growth
1H2012-
1H2013
Luxury
& ultra-
luxury
76.9% 77.2% 78.5% 4.9% 16.6%
Mid- to
high-end 23.1% 22.8% 21.5% 3.0% 14.6%
(RMB million) (units)
2011
Gross
margin
2012
Gross
margin
1H 2012
Gross
margin
2H 2012
Gross
margin
1H 2013
Gross
margin
Luxury &
ultra-
luxury
6.0% 4.1% 5.5% 2.9% 4.1%
Mid- to
high-end 2.4% 3.5% 4.3% 2.9% 3.1%
(RMB million)
14,306 15,009
7,110
8,291
4,301 4,431
1,976 2,265
2011 2012 1H 2012 1H2013
852
621
391
229
338
103 157
85 72 71
2011 2012 1H 2012 2H 2012 1H2013
29,121
34,039
15,315
18,800
32,108
35,844
15,458
18,447
2011 2012 1H 2012 1H2013
豪华和超豪华 中高端Luxury and ultra-luxury Mid-to high-end
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Rapid growth of after-sales services with
continuous increased gross profit margin
After-sales services revenue
(RMB million)
2
(RMB million)
After-sales services gross profit and margin
The repair and maintenance services have achieved fast growth in the first half of 2013. This is a result of 1) our fast-growing customer base, in
particular, the customers for luxury and ultra-luxury passenger vehicles, which in turn increased the demand for our after-sales services. 2) Our
comprehensive “one-stop shop” automobile-related quality services and the recognition of well-known “Yongda” brand which achieved a high
degree of customer satisfaction have helped to increase customer retention rates and continuous consumption and attract new customers
through referrals. 3) Our continued efforts in enhancing cooperation with insurance companies and efficiency in our after-sales services
In addition, we are also committed to provide comprehensive, diversified and value-added automobile extended products and services through
our “one-stop shop” services, which mainly include automobile decoration, automobile spare parts, automobile adaptations, automobile care
services, automobile extended warranty services, agency services of vehicle title registration and vehicle inspection services, road rescue
services and club membership services
The automobile extended products and services have largely promoted the growth of after-sales services, mainly driven by our continuous
improvement of sales process, competitive evaluation and remuneration system and the introduction of suppliers and products that meet
customers’ demands
Rapid growth of after-sales services with continuous increased gross profit margin
1,517
2,049
973 1,136
968
1,338
628 774
2011 2012 1H2012 1H2013
Overall Luxury and ultra-luxury
580
912
424 488 527
38.2%
44.5%
43.5% 45.4% 46.4%
2011 2012 1H 2012 2H 2012 1H 2013
Gross profit Gross profit margin
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On-going development of other after-sales
services
Automobile insurance and financial
products
3
During the first half of 2013, we have strengthened our
cooperation with insurance companies, banks and
other financial institutions and we have achieved a
steady business from our agency services for
automobile insurance and financial products
Pre-owned vehicle business
We have actively promoted pre-owned vehicle business
in the first half of 2013 by upgrading information
management system for pre-owned vehicles, increasing
the proportion of brand certified pre-owned vehicles,
using a third-party auction system for pre-owned
vehicles and the establishment of pre-owned vehicle
center which has greatly improved our sales volumes
and profit of pre-owned vehicle business
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Stable growth of automobile rental services
In the first half of 2013, we proactively promoted our automobile
rental services by exploring new customers and expanding our fleet
size. As a result, the revenue of automobile rental services
increased 20.7% compared to the same period in 2012
Although facing a higher labor cost and the temporary adverse
impact of the tax reform by PRC government to change business
tax to value-added tax in 2012, the gross profit margin for
automobile rental services has remained stable in the first half of
2013 compared the second half of 2012
4
Sales of Automobile rental services
Gross profit and margin of automobile
rental services
Major customers:
(RMB million)
181
223
105 118 127
2011 2012 1H 2012 2H 2012 1H 2013
66
81
42 40 42 36.4% 36.5%
39.6% 33.7%
33.1%
2011 2012 1H 2012 2H 2012 1H 2013
Gross profit Gross margin
(RMB million)
Section 4
Management Innovation
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Management optimization
Key measures of management
process optimization Recent awards
Establishment of a brand management department
to enhance the resource sharing and synergies
among brand sales and outlet services
Strengthening the management of gross profit
margin and inventory turnover days
Enhancing the management of expense budgeting
to profitability improvement
Establishment of a specialized division and system
to speed up the training of strategic talents in order
to build up sufficient numbers of management
personnel and team
Enhancement of information technology system to
improve efficiency through consistent and
transparent internal operation
Continuous engagement of third-party consulting
firms to identify areas of the business processes of
the Group which needs improvement
The only passenger vehicle retailer listed in Hong
Kong that has three dealerships being selected by
BMW in its Top10 list of “BMW Best Performance
Dealer Awards”
A Shanghai-based Jaguar and Land Rover 4S
dealership has been awarded five best annual
awards in different categories nationwide by Jaguar,
Land Rover at the same time
A Wuxi-based Porsche 4S dealership has achieved
top sales in China for the first half of 2013 by Porsche
A Hefei, Anhui-based Porsche 4S dealership has
been placed No. 2 by Porsche in its sub-item
evaluation of after-sales services in China
Several Buick 4S dealerships have been awarded
five-star authorized sales and after-sales service
centers by Buick
In May 2013, "Yongda" has been awarded “2012
Shanghai Top Ten Brands” title, for the professional
services, corporate strength and outstanding
corporate image. We are the only company in the
passenger vehicle sales and services industry that
won this award
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Brand building
China Famous Trademark National Model Unit
Top Ten Shanghai Brands
Quality customer service
1. Emphasize customers' satisfaction to our services and
strengthen our brand
2. Introduced VIP program to promote royalty of our high-value
customers
3. Organized several activities only targeted at VIP clients
4. Implemented regular visiting to high-net-wealth clients to
improve client evaluation
Establishment of full spectrum of service platform
1. Promoting 96818 multi-media customer service platform including
telephone, text message and website
2. Free 24-hour nationwide customer service hotline: 4008096818
3. Launched official Weibo of the Group and 4S dealership
4. Developed our own multimedia social-media interactive platform
(interactive channels provided by WeChat and other mobile apps)
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Brand building
Diversified marketing channels
1. Actively participated in the 15th Shanghai International
Automobile Industry Exhibition
2. Held a series of activities under "Yongda Luxury Vehicle
Tasting" during the International Automobile Industry Exhibition
to promote the Yongda brand
3. Constant innovation of marketing activities: Joint exhibitions of
vehicles and real estate – one of the series of activities of
"Yongda Luxury Vehicle Tasting"
Proactive and innovative advertising
1. Yongda exclusively sponsored "Yongda Night" Fireworks
Festival for Shanghai Tourism Festival
2. Sponsorship of large promotional activities to promote the
Yongda brand
3. Outdoor billboards
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Marketing innovation
Sales from TV shopping increased in 1H 2013
Sales volume from TV
shopping
Revenue from TV
shopping
(units) (RMB million)
On-line automobile sales increased in 1H 2013
Yongda Auto Franchise Store on Tmall further increased the sales TV shopping continued to become
one of the effective channels
The sales volume and revenue
amounted to c.1,679units and
RMB308 million, representing a
growth of 48.2% and 43.0%,
respectively, indicating unrivalled
in upside potential
1,133
1,679
1H2012 1H2013
216
308
1H2012 1H2013
Section 5
Financial Overview
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Financial overview
Revenue
(RMB million)
Gross profit and gross margin
(RMB million)
Net profit attributable to owners of the Company
(RMB million) (RMB million)
Net profit and net margin
1,600 1,771
941 829
978
7.9% 8.2%
9.3%
7.2%
8.3%
2011 2012 1H2012 2H2012 1H2013
Gross profit Gross margin
20,304 21,712
10,165 11,547 11,818
2011 2012 1H2012 2H2012 1H2013
505 470
300
170
230
2011 2012 1H2012 2H2012 1H2013
Net profit attributable to owners of the Company
563 515
332
184
267
2.8% 2.4%
3.3%
1.6%
2.3%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2011 2012 1H2012 2H2012 1H2013
Net profit Net margin
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Rapid sales growth for new passenger vehicles and
after-sales services with rebound and increased in
gross margin
Revenue breakdown by segment Gross profit breakdown by segment
Revenue growth by segment Gross margin by segment
1.0%
92.1%
6.9%
2010 2012
9.4%
89.6%
1.0%
33.1%
63.9%
3.0%
51.5%
43.9%
4.6%
2010 2012
9.6%
89.3%
1.1%
53.9%
41.8%4.3%
1H2013 1H2013
2011 – 2012
Passenger vehicle sales
After-sales services
Automobile rental
4.5%
35.1%
23.5%
Passenger vehicle sales
After-sales services
Automobile rental
5.1%
38.2%
36.4%
2011
4.0%
44.5%
36.5%
2012
5.2%
43.5%
39.6%
1H2012
1H2012 – 1H2013
16.2%
16.7%
20.7%
3.9%
46.4%
33.1%
1H2013
2.9%
45.4%
33.7%
2H2012
After-sales services
(Luxury and ultra-luxury) 38.2% 23.4%
Passenger vehicle sales After-sales services Automobile rental
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Gearing ratio and cash flow
Note:
1 Gearing ratio = net debt (total debt – (bank balance and cash + pledged bank deposit))/ total equity
(RMB million)
26%
81%
56%
2012 1H2012 1H2013
157
-234 -366
1,895
978 1,006
2012 1H2012 1H2013
Operating cash flows Cash and cash equivalent
Operating cash flows and
cash and cash equivalent Gearing ratio1
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Working capital management
(Days) (Days) (Days)
Average trade receivables
turnover days2 Average inventory turnover days1 Average trade and bills payable
turnover days3
48.5
47.6
Jun 30, 2012 Jun 30, 2013
3.1
2.6
Jun 30, 2012 Jun 30, 2013
36.3
28.8
Jun 30, 2012 Jun 30, 2013
Note:
1 Average inventory turnover days = [(beginning inventory + ending inventory) / 2] / cost of goods sold x 365
2 Average trade receivables turnover days= [(beginning trade receivables + ending trade receivables) / 2] / revenue x 365
3 Average trade and bills payable turnover days = [(beginning trade and bills payable + ending trade and bills payable) / 2] / cost of goods sold x 365
Section 6
Business Strategies
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Industry outlook
China's luxury and ultra-luxury passenger vehicle market will continue to grow rapidly for a
long period of time in the future
China’s luxury and ultra-luxury passenger vehicles market may maintain a CAGR
of 12% up to 2020
The annual sale volume of passenger vehicles in China is expected to reach 2.25
million units by no later than 2016, ranking first in the global luxury and ultra-
luxury passenger vehicles markets
Maintenance and repair services, automobile extended products and services,
pre-owned vehicles, insurance and financial products, automobiles rental and
automobile financing and leasing businesses are also expected to increase
rapidly, continuously increasing the profitability of the automobile industry
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Business strategies
Management
optimization
Business
innovation
Talent strategy
• The sector's cyclical point would be an opportunity for Yongda's network expansion. Competitors may
reduce investments or even exit the industry due to unfavourable environment, which would be an
excellent opportunity for the network expansion
• Seize the opportunity to actively expand the network by both organic growth and acquisitions
− Organic growth: "The strong will get stronger and the weak will get weaker". It will be difficult for
competitors to obtain authorization. Yongda will seize the opportunity to actively expand the network
− Acquisition: Focus on acquisition opportunities at lower cost. We have successfully acquired two 4S
dealerships in the first half of 2013
• Continuous management optimization to promote overall competitive advantages
− Establishment of a brand management department to enhance the resource sharing and synergies
among outlet services
− Strengthening the target management of gross profit margin and inventory turnover days
− Enhancing the pricing management to improve profitability
− Improving client relationship management:: fully understand the needs of clients to promote clients'
satisfaction
• Business innovation and expansion, such as:
− In May 2013, Shanghai Yongda Finance Leasing Company Limited commenced its operation after
obtaining the approval from the Ministry of Commerce of the People Republic of China. Automobile
finance leasing is at its initial stage and has great potential for future development and achieve
profitability in China
• Talent strategy is our core strategy in the future
• By leveraging on cooperation with international professional companies to fully promote our human
resource management
2
3
4
Network
expansion 1
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Company vision
We are committed to implementing our corporate core value of “Creditable,
Innovative, Professional and Efficient”, strengthening our position as a leading
passenger vehicle retailer and comprehensive service provider in China, focusing
on luxury and ultra-luxury brands, and we aim to create greater value for our
shareholders, employees and the society and become the most reputable
automobile service brand in China!
Section 7
Q&A