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TRANSCRIPT
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2007/08 Interim Results Announcement
Bosideng International Holdings Limited
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Disclaimer
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 Bosideng International Holdings Limited (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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Presentation Team
Mr. Gao Dekang Chairman and CEO
Ms. Mei Dong Executive Director
Ms. Claudia Lo CFO
Dr. Kong Shengyuan Executive Director
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Agenda
Milestones
Results Highlights
Business Overview
Future Plans and Strategies
Open Forum
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Milestones
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Milestones
Successfully listed on The Stock Exchange of Hong Kong Limited on October 11, 2007
Corporate
The only apparel brand awarded the distinction of “China’s World Famous Brand” in September 2007
Branding
Continuous expansion in sales and distribution network, number of outlets increased to 7,120 in total
Network
Strategically enhanced overall store image through consistent, modern and innovative interior décor
Retail
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Results Highlights
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Interim Financial Highlights
0.03
0.03
182.1
289.9
292.9
549.4
1,729.1
+50.6274.3Profit attributable to equity holders
- 1.1286.8Profit before tax
+66.70.05Basic EPS (RMB)
+14.5629.2Gross profit
+12.0328.0Operating profit
+66.70.05Diluted EPS (RMB)
+15.92,003.3Revenue
2007 2006
Half year ended 30 September Change
(%)
(RMB MM)
Sustainable Turnover and Profit Growth
1,381.5 1,508.3
347.6
495.0
0
400
800
1,200
1,600
2,000
2,400
2006 2007
Branded Down Apparel OEM Management
Revenue by Business SegmentRMB MM
1,729.1
2,003.3
182.6
274.3
0
50
100
150
200
250
300
2006 2007
Net ProfitRMB MM
Half year results ended 30 September
Half year results ended 30 September
+9.2%
+42.4%
+ 50.3%
Growth
+ 15.9%
Overview of Profit Margins
- 0.516.9%16.4%Operating margin
- 2.516.8%14.3%Profit before tax margin
- 0.431.8%31.4%Gross profit margin
10.6%
13.6%
37.7%
+3.417.0%OEM management
+3.113.7%Net margin
- 0.637.1%Branded down apparel
2007 2006
Half year ended 30 September Change(% pt)
Group’s GP margin and operating margin maintained at stable level, reflecting Group’s competiveness in the market
PBT margin decreased as a result of increase in borrowings to finance working capital needs and settle related party balances
Net profit margin widened, benefiting from tax exemptions of four subsidiaries
* Exclude “other down” gross profit and before sales rebate
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Note: Sales rebates are not deducted from the total down apparel revenue or from revenues of each brandSales rebates in 1H 2006/07 and 1H2007/08 were RMB 15.7 MM and RMB 10.0 MM respectively
Down Apparel Revenue CompositionBy Brands
7.3%9.2%3.6%
54.7% 53.3%
25.1% 24.0%
12.9%9.9%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2006 2007
Bosideng Snow Flying Bingjie Kangbo Others
RMB MM
Half year results ended 30 September
Sales: RMB1,340.0 MM
Sales: RMB1,488.6 MM
+5.7%
+3.8%
-16.6%+37.3%
Growth:n.a.
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Operating Expenses
Increase in distribution expenses due to opening of new sales companies and increase in concessionaire fees
Advertising and promotion expenses controlled at 7.4% of revenue (1H2006/07: 7.7%)
Increase in administrative expenses mainly came from increase in headcounts and general office expenses as a result of the business expansion
+23.513.4232.414.3287.1Distribution expenses
26.8
133.5
259.2
37.8
148.4
324.9 +32.315.016.2Total operating expenses
1.5
7.7
+41.11.9Administrative expenses
- 0.37.4Advertising andpromotion expenses
RMB MM
2007Change
(%)% of revenue RMB MM % of revenue
2006
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Working Capital and Financial Position
Inventory turnover days = Average inventory volume / cost of sales x 180 daysA/R turnover days = Average trade and bills receivable balance / sales x 180 daysA/P turnover days = Average trade and bills payable balance / cost of sales x 180 daysCurrent ratio = Current assets / current liabilitiesGearing ratio = Total debt / total equity
112.666.3
101.5
119.9A/P turnover days
148.3Inventory turnover days97.7A/R turnover days
Working Capital2007 2006
Half year ended 30 September
4.83.9Gearing ratio507.8814.0Cash and cash equivalents
(237.2)
1.11.1Current ratio
365.2Operating cash inflow/(outflow)
Financial Position2007 2006
As at 30 September
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Business Overview
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Key Initiatives in 1H2007/08
Design focus shifted increasingly from function to fashion
Utilised fabrics that are odourless, anti-bacterial and water-repellent
Vertically Integrated, Light Asset Business model
Product research, design and development
Outsourced manufacturing
Branding,marketing and distribution
Retail Network Management
Procurement plans based on sales contracts
Great purchasing and bargaining power to obtain favorable prices due to economies of scale
Diverse product portfolio appealedto customers of different age groups and varying tastes
Worked with internationally renowned advertising agency to create focused marketing strategies
Nationwide sales network increased to 7,120 outlets
Actively enhanced store image
Enhanced supply chain management by upgrading ERP system, Phase
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system upgrade completed and is now in operation
Raw material procurement
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Product R&D – From Function to Fashion
Colourful design, innovative fabrics and trendy styles to produce versatile light-weighted and fashionable down apparel
Utilise fabrics that are odourless, anti-bacterial and water-repellent for a selected range of Bosideng products
Collaborate with international design institutions to further strengthen the award-winning in-house design team
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Bosideng – China’s World Famous Brand
The only apparel brand awarded the distinction of “China’s World Famous Brand”
Focused integrated marketing campaign
Fashionable Fashionable ImageImage
CorporateCorporatePublic RelationPublic Relation
Sales Sales HighlightsHighlights
ChannelChannelInnovationInnovation
Exposure via the Internet, magazine, terminal, product, public rExposure via the Internet, magazine, terminal, product, public relationelation……..
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Retail Network Composition By Store Types
- 3834,9564,573Supervised / operated bythird party distributors
–33Operated by the Group
Specialty stores
6,844
867
1,018
+1501,017Supervised / operated bythird party distributors
+2767,120Total
Concessionary retail outlets
+5091,527Operated by the Group
30 Sep 2007 31 Mar 2007
As at
Change
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Down Apparel Revenue Composition By Sales Channel
Change in the mix of the outright sales and consignment sales reflects Group’s strategic shift to increase consignment sales as part of the branding and marketing strategy
RMB MM
1,381.0
Half year results ended 30 September
+9.2%
1,219.5 1,276.1
134.7202.427.329.7
0
200
400
600
800
1,000
1,200
1,400
1,600
2006 2007
Outright sales Consignment sales
1,508.2
+4.6%
+50.3%
Growth
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Eastern China:Eastern China:1,156 (1,156 (--38)38)
Shandong Province:Shandong Province:748(748(--1)1)
South Eastern China:South Eastern China:576 (576 (--90)90)
Central China:Central China:1,474 (+93)1,474 (+93)
Northern China:Northern China:799 (+31)799 (+31)
North Eastern China:North Eastern China:892 (+60)892 (+60)
North Western China:North Western China:1,475 (+221)1,475 (+221)
Nationwide Retail Network Coverage
As at Change
31 Mar 200730 Sep 2007
+ 2766,8447,120No. of Retail stores
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Note: At 30 September 2007Figures in bracket denote change as compared to 30 March 2007
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Future Plans and Strategies
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Fall/Winter Promotional Strategies
Organise a photography
competition with the theme “Beautiful Winter”
Introduce new sales and
promotional channels
A comprehensive, innovative and multi-pronged promotion strategy
Advertising slogan “Bosideng products making a more beautiful winter”
Collaborate with popular
magazines to promote brands
& products
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Winter 2007/28 New Products
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Development StrategyDomestic Market
Our principal goal: further strengthen our leading market positOur principal goal: further strengthen our leading market position in down apparel industryion in down apparel industry
Enhance market penetration with a multi-brand strategy
Strengthen the positioning of main brands from cold-resistant classical downapparel to the fashionable down apparel which satisfies varying needs of medium and high-end consumers
Strengthen Brand Differentiation, Loyalty
and Recognition
Develop self-managed specialty stores in medium and large cities to increasemarket penetration and to enhance brand image
Consolidate and optimize retail distribution network with effective cost control
Different product designs for different consumer segments
Enhance product research, design and development abilities throughcollaborations with international fashion design houses
Collaborate with domestic and international research institutes for development of new fabric
Upgrade management information system, strengthen quality control system and implement Phase 2 of ERP platform
Strengthen, Expand and Consolidate Retail
Distribution Network
Enhance Product R&D and Design Capability
Enhance Supply Chain Management
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Expansion Roadmap
Principal goal: selectively diversifying into new products and mPrincipal goal: selectively diversifying into new products and marketsarkets
Explore opportunities to establish a greater overseas market presence in Russiaand North America, through selective acquisitions, alliances, joint ventures orpartnerships
Explore Overseas Expansion Opportunities
Selectively diversify into non-down apparel products that are less sensitive toseasonality patterns, through targeted expansion and selective acquisitions
Expand brand portfolio associated with new products to meet the varying needsof different consumer segments
Selectively Diversify into New Product Lines
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Open Forum