company presentation -...

Company Presentation

May 2015

Company Highlights

O2O Strategies

Financial Review

Company Overview

Ozner, as a leading drinking water solution provider in China, is a high-tech company focusing on R&D, manufacturing and leasing of water purifier. With superior proprietary technologies, our state-of-the-art purifiers produce high quality purified drinking water. We provide air sanitization services as well. We attribute our success also to the breakthrough “water purification lease and service” model, which revolutionized the conventional equipment-selling model. Incorporating Internet/Cloud technology, our proprietary logistics, warehousing, technician and service teams keep providing top-notch post-sales service to end users. The company generates revenue from annual service fees during the whole product life cycle, ensuring steady cash inflow and strong profitability. Ozner serves approximately 660k accounts and over 10 million customer base. Managing over 2,500 distributors, our proprietary post-sales team provides installation and maintenance services to customers in more than 150 cities in 30 provinces in China (excl. Tibet only ). Ozner’s Shaanxi manufacturing base has officially kicked off operation on August 2014. Together with the existing Zhejiang base, it will become one of the pillars for future development.

Ozner（SH）Headquarter

Ozner（HZ）Base

Ozner Shaanxi Base

Source: Prospectus, Company Information

Company History

2003 2011 2012 2010 2013

Drinking water

supplier for:

1) 26th World

University Games

2) Beijing

Aerospace

Control Center

Deputy Chief of

Industry Standard

Promulgation Panel

for water

purification industry

Mr. Xiao founded

Ozner‟s

predecessor

Investment from

SAIF

Investment from

Goldman Sachs

Most Promising

Chinese Enterprise

Award from Fudan

University and

Ernst & Young

History

Key

Milestones

Drinking water

supplier for

Shanghai Expo

Investment from

Ares

2014

“Top 100 of

Chinese Listed

Potential

Companies” in

Forbes

Successful IPO on

the HKSE‟s main

board: 2014.HK

Innovative Lease and Service Business Model

Difficult to Duplicate

Win-Win Management Philosophy

Distributors manage end user sourcing only with zero inventory /

Ozner’s proprietary post-sales team provides service to end users

Activation Card: Each card corresponds to one purifier only,

bearing distributor‟s exclusive ID number. Produced by Ozner.

Recharge Card: To pay service fees, corresponding to specific

distributor‟s exclusive ID number only, hence continuous

income for distributors. Produced by distributors.

Unique Dual-Card / Cloud Management System

Only For Sourcing End Users

Inventory

Management

Machine

Installation

Post-installation

Service

End User Distributors

Strong economic incentives to ensure distributors‟ loyalty

Minimum reliance on distributors

Manage our assets more effectively

Faster penetration and better access to potential end users

Recurring revenue stream

No need to purchase or maintain inventory

No need to provide post-installation services

Benefits for Distributors Benefits for Ozner

* 2nd generation machines equipped with “Cloud Tech”, enable the

setting of ID codes via Internet

Service and Distribution Network Covering 150+ Cities in China

Total Number of

distributors : 2,526 (As of March.2015)

30

6

714 871

1702

2526

1 2 3 42011 2012 2013 Mar 2015

Growing Rapidly…

Beijing

Guangxi

Hunan

Hubei

Hainan

Xinjiang

Ningxia

Jiangsu

Shanghai

Hebei

Inner Mongolia

Shanxi

TTianjin

Shandong

Sichuan

Henan

Heilongjiang

Jilin

Anhui

Zhejiang

Fujian

Shaanxi

Guangdong

South China (centered in

Guangzhou and

Shenzhen)

East China (centered in

Shanghai)

North China (centered in

Beijing)

Liaoning

Chongqing

Jiangxi

Yunnan

Qinghai

Guizhou

Gansu

* Ozner’s sales and service channels expand outward from developed areas

• Nearly 200 service centers covering 30 provinces and more than 150 cities

• More than 1,000 service professionals (online call / dispatch center + ground engineers)

• Established standardized proprietary inventory, logistics and service operational systems fundamentally tackled problems

associated with water purification industry‟s conventional contempt for service

• Established more than 1,000 standardized service procedures, e.g. “77 Rule”

Service and Distribution Network

Service and Distribution Network Covering 150+ Cities in China

107

309

463

657

0

100

200

300

400

500

600

700

2011 2012 2013 2014

Source: Prospectus, annual result 1 Renewal rate represents the percentage of our water purifying machines that remained installed and in service at the same end user’s premises after one-year service period.

High Renewal Rates

2012 2013 2014

Renewal Rate 98.6% 97.2% 97.1%

Fast Growth in Installment Base

Our total installed base was approx. 657,000 units

by end Dec 31, 2014

The renewal rates for our existing customers are

consistently above 97%,

Our large customer base and high customer renewal

rate serve as strong foundations for our sustainable

growth

(„000 Units)

Large Installment Base and High Renewal Rate

8

Commercial Customer Base In Various Sector

9

Superior Proprietary Technologies and Strong R&D Capabilities

Key Model

Types

Usage

Hub model:

for corporate headquarters

and department stores

For

office use

For schools

and hospitals

For kitchen use,

countertop style

For kitchen use,

under-cabinet style

Diversified Portfolio of Water Purifying Machines

First Generation Second Generation

Service

Renewal Recharge on-site Remotely via wireless

Servicing

End users call for

on-site

troubleshooting

Machine automatically

reports to service center

Water

Recovery Ratio 20% to 50% ≥95%

Machine

Management Manual recording

Real-time tracking

via GPS

Corporate Models Household Models


Strong Focus on Advanced Products and High-quality Service Drives Significant Growth

Advanced Features of Water Purifying Machines

Most safe and stable water purification technology: APO+

technology to ensure drinking water quality (filters + O3

sterilization + RO Membrane)

Self-developed durable material: self-developed

“antioxidant ABS” shell, 12-year lifespan

Only certified control system in the industry: control

through card and the internet

Most advanced RO water recovery ratio in the world

Non- standard spare parts to ensure “purity” of machines

Setting Industry Standard

Source: Prospectus, Company Information 1 Sales value for Ozner is calculated based on contract sales value.

2 As the date of 2013 according to Frost&Sullivan

Setting Industry Standard Pioneer and Leader in Water Purification Industry

Leading Market Position1

First to adopt leasing and service business model in China’s water purification industry

First to introduce the Internet of Things (IoT) to China’s water purification industry

Largest market share in the water purification service market

Leading water purification technology

Top 3 in Overall Market Top 1 in Commercial Segment

402

140

105

(RMB mm) Market Share

5.4%

1.9%

1.4%

935

700

460

(RMB mm) Market Share

2.2%

1.6%

1.1%

Help set national technical standards for water

purifying machines in China

Appointed as deputy chief of

“Industry Standard Promulgation Panel” under

the “National Household Electric Appliance

Technical Standardization Committee”

No.3 in Overall Market 2


Recognized By Domestic and Global Institutions

International SGS Test

Drinking Water Permit from

China‟s Ministry of Health

CB Certificate

CE Certificate

(European Union) RoHS Certificate

(European Union)

Patented Inventions and Designs Breakthrough Technology

100+ patents, including:

– Patents on ozone technology

– Patents on reverse osmosis

technology

– Patents on water and air

purification technology

Strong R&D capabilities and achievements recognized globally

Set up own R&D center with accomplished

researchers, and supported by collaborations

with Hong Kong Polytechnic University and

Zhejiang University, to develop:

Water quality meets or surpasses many

domestic and global industry standards

Purifying machines pass numerous

product and process safety tests

conducted periodically

USA NSF Test

Most safe and stable water purification technology: APO+

technology to ensure drinking water quality (filter +

sterilization)

RO water recovery technology: water recovery ratio

increased from 25% to 95% and passed CNAS‟ test

Apply internet technology to Ozner‟s Cloud Platform,

enhance customers‟ experience and lay down foundation

for future value-added service


Multiple absorption filters

Remove harmful substances in water

Reverse osmosis with 0.0001 micrometer pore filter

Improved by patented technologies

Ozone sterilization to kill germs and prevent secondary pollution

Energy efficient and no chemical contamination

Periodic water quality testing and consumption tracking

Alerting service center to assign repair service

A

P

O

+

Innovative APO+ Technology


Absorption

Purification

Ozonation

Cloud Technology (+)

Proprietary, patented technologies tailored specifically for water purification in China


Conventional Sterilization Method vs. Ozner’s Ozone Technology

1. Heat • Danger of getting burnt • Time and energy consuming • Inefficient sterilization effect

Technology

• Airtight seal up ensures safety • High voltage treatment, less energy

consumption

2. Chemicals • Chemical odor • Bacteria resistance • Harming residue

• Natural source of oxygen • Environmental friendly

3. UV-Rays • Blind angle

• No blind angle as ozone dissolves into water

• Repeated heating leads to bad taste; chemical odor Taste

• Oxygenation leaves fresh taste

Proprietary Technology Tailored to Meet Water Purification Demand in China

Production Capacity

Shaanxi Ozner

Environmental

Technology

Industrial Park

Phase1: 200,000 units

(construction completion in August 2014)

Phase2: 200,000 units)

(construction to be completed in 4Q2015)

15

Shangyu, Zhejiang

170,000 units

Designed Capacity

Company Highlights

O2O Strategies Financial Review

Five Channels of O2O Marketing Strategies

17

1 Leveraging Solid End User Base In the Corporate Sector to

Penetrate the Household Segment

• Approximately 479,000 corporate model machines installed

• Cooperated with Lenovo, ZTE, China Telecom, ICBC, etc., launching “Group

Buy” projects for their employees

18

2 Smart Cup & iFamily APP

• Market education – water quality monitoring

• Traffic sourcing and activeness enhancement –

fun and useful function, value-added health

related product

• Branding – push brand and promotion info, lead

to final conversion

19

Ozner App

iFamily App/WeChat

Coupon Sharing Online Mall My Wallet

Points

Redemption

Invitation History

20

3 Public Non-profit Water Bars & Experience Stores

Water Bars QR Code Scanning Registration

Conversion Referral / Word of Mouth Marketing

21

Shanghai Hongqiao Airport Dalian Airport Guangdong Telecom

3 Public Non-profit Water Bars

We have established public non-profit water bars in airports in Shanghai,

Ningbo, Qingdao, Dalian, Chongqing etc., and other public premises.

22

4 Brand Collaboration

Signed brand cooperation agreements with a number of corporate clients,

scheduled to launch in 2015

23

中国移动139邮箱

4 Brand Collaboration

Minsheng Bank Colour Life iKang Healthcare

24

Target to open experience stores in major cities to enhance brand image

5 Ozner Experience Stores

25

Company Highlights

Financial Review

O2O Strategies

Overview of Financial Performance

0

200

400

600

2011 2012 2013 2014

Water Purification Air Sanitization

(RMB mm)

58

187

273 335

57% 65%

68% 65%

0%

20%

40%

60%

80%

0

100

200

300

400

2011 2012 2013 2014

(RMB mm)

23

102

154 190 22%

35% 38% 37%

0%

20%

40%

0

100

200

300

2011 2012 2013 2014

(RMB mm)

Revenue Gross Profit and Margin

Net Profit and Margin (Adjusted) *

102

290

402

44%

56%

32%

68%

22%

78%


512

20%

80%

27

* Notes： • Adjusted net profit increases 23.5%, from

RMB154million(2013/12/31) to RMB 190 million(2014/12/31), excluding exchange gain/loss generated from amounts due to Fresh Water Group, one-off listing expenses and share option expenses.

107

309

463

657

0

200

400

600

800

2011 2012 2013 2014

Source: Prospectus, annual result 1 Renewal rate represents the percentage of our water purifying machines that remained installed and in service at the same end user’s premises after one-year service period.

High Renewal Rates1

2012 2013 2014

Renewal Rate 98.6% 97.2% 97.1%

Fast Growth in Installment Base

Our total installed base was approx. 657,000 units

by end Dec 31, 2014

The renewal rates for our existing customers are

consistently above 97%,

Our large customer base and high customer

renewal rate serve as strong foundations for our

sustainable growth

(„000 Units)

Large Installment Base and High Renewal Rate

28

0

100

200

300

400

500

2011 2012 2013 2014

Rental Income From Existing Machines

Retal Income From Newly Installed Machines

72 120

157 240

0

100

200

300

400

500

2011 2012 2013 2014

Rental income to be recongized in next fiscal year

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Contract Sales

Revenue in Current Year Revenue Deferred to Next Year

2014 2015

Water Purifying Service Provided Water Purifying Service Yet to be Provided

RMB 1,200 RMB 300

RMB 900

Key Assumptions

Water purifying machine installed

for end user in Oct 1, 2014

Annual leasing fee is RMB1,200

Illustrative Revenue Recognition

Highly Visible Rental Income Ratio of Rental Income from newly installed machines

vs Existing Machines

(RMB mm) (RMB mm)


Water Purification Business – Revenue Recognition & Contract Sales

29

100% 83%

17% 43%

57%

50%

50%


53

162 175 194

33

131

197

0

100

200

300

400

500

2011 2012 2013 2014

Other Revenue

Rental Income From Existing Machines (Income From ServiceRenewal)

Rental Income From Newly Installed Machines (Income From FirstYear Service)

314

(RMB mm) (RMB mm)

57

198

411

47

159

247

305

82% 81% 79% 74%

0%

30%

60%

90%

0

50

100

150

200

250

300

350

2011 2012 2013 2014

Other revenue

Rental Income – Existing Machines (service renewal)

Rental Income – Newly Installed Machines (first year of service）


Revenue includes rental income, training fee and sales of machines.

Water Purification Business

30

37

81 80 93

0

50

100

2011 2012 2013 2014Rendering of Services Sales of Equipment Consulting Fee

45

93 88


11

28 26

30 25%

31% 29% 30%

0%

10%

20%

30%

40%

0

20

40

2011 2012 2013 2014

(RMB mm) (RMB mm) 100

Air Sanitization Business – Profitability &Contract Sales

37 51 42 43

30 38

50 37

81 80

93

0

50

100

150

2011 2012 2013 1H 20142014

37 51

42 52

30

38 50

52 67

88

0

50

100

2011 2012 2013 2014

31

(RMB mm)

Contract Sales Sales Revenue

(RMB mm)

Source: Prospectus, 1H 2014 Interim Results, Company Information 1 RMB 16mm of contract sales from previous fiscal year is to be recognized in 2H 2014

1

Contract Sales to be Recognized in Next Fiscal Year

Contract Sales to be Recognized in Current Fiscal Year Revenue From Contract Sales of Current Fiscal Year

Revenue From Contract Sales of Previous Fiscal Year

92 104

10 18 22

41

3

7

17

21

6

13

19

31

19%

13% 14%

18%

0%

5%

10%

15%

20%

0

40

80

120

2011 2012 2013 2014

Salary and Welfare Advertising and Marketing Expenses

58

93


Selling, Distribution & Administrative Expenses

32

Selling and Distribution Expenses Administrative Expenses

(RMB mm) (RMB mm)

19

38

c.8% ex.

IPO

expenses

Selling and distribution expenses increased primarily

due to share option expenses, increase in number of

staff.

Administrative expenses increased primarily due to

share option expenses, one-off listing expenses.

c.16% ex. Share

option expenses

5 8 11

51

1 3

18

29

6 11

16

19

13%

7%

11%

19%

0%

5%

10%

15%

20%

0

40

80

120

2011 2012 2013 2014

Others Professional service

Salary and Welfare % Revenue

c.8% ex.

IPO

expenses

12

22

45

99

Use of Proceeds and Capital Expenditure

33

Terms % of use of

proceeds

Proceeds from

issuance

of ordinary shares

(RMB' MM)

Used in 2nd half

of 2014

(RMB' MM)

Unused balance

(RMB’MM)

Manufacturing of water

machines 54.0% 533.6 261.9 271.70

Construction of 2nd phrase of

production facility in Shaanxi 20.0% 197.6 75.3 122.30

Repayment of bank loan 11.0% 109.1 109.1 0.00

Sales and marketing fee 5.0% 49.4 11.6 37.80

General working capital 10.0% 98.5 29.6 68.90

Total 100.0% 988.2 443.5 500.7

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