March 2015
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THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR INVITATION TO PURCHASE OR SUBSCRIBE FOR ANY SECURITIES 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.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-FORWARD-LOOKING STATEMENTS FOR EVENTS OR CIRCUMSTANCES THAT OCCUR SUBSEQUENT TO SUCH DATES.
THE INFORMATION IN THIS PRESENTATION HAS NOT BEEN INDEPENDENTLY VERIFIED. NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS MADE AS TO, AND NO RELIANCE SHOULD BE PLACE ON, THE FAIRNESS, ACCURACY, COMPLETENESS OR CORRECTNESS OF ANY INFORMATION OR OPINION CONTAINED HEREIN. NONE OF THE COMPANY, 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.
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Agenda
Company Overview
Financial Highlights
Future Development
Section 1
Section 2
Section 3
Section 1
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Our brand’s history dates back to the early 1990s. Since then, we have grown to become a
reputable menswear company in the PRC, positioned in the largest and fastest-growing
middle-upper menswear segment
We offer customers a
“one-stop” shopping experience
through our comprehensive product
portfolio, which includes men’s trousers, tops and accessories, primarily in the
business formal
and business casual
categories
We target
middle-class men aged from 30 to 60
, who have a growing preference for quality
products as well as differentiated shopping experiences
We also
launched a new men’s casual fashion
series targeting young customers
aged from
18 to 30
in 2014.
We operate a
strategically integrated model
, comprising brand management and marketing,
design and product development; procurement; self and outsourced production; and sales and
distribution
Strong design and product development capabilities
Substantially all of our products are sold on
a wholesale basis
to our distributors and their
sub-distributors
As of Dec 31, 2014, our retail network consisted of a total of
1,452 stores
across over 240 cities
and 31 provinces in China
A Reputable
Menswear Brand
in China
Strategically
Integrated
Business Model
Company Overview
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60%
31%
1%
8%
Product Offering
Suggested Retail Price: RMB 340 – 2,900
Business Casual
Suggested Retail Price: RMB 390 – 3,700
Business Formal
Suggested Retail Price: RMB 40 – 2,100
Accessories
Suggested Retail Price: RMB 440 – 900
Casual
Note: (1) Business formal includes jackets and trousers. Business casual includes trousers, dress shirts, casual shirts, polo shirts, vests, jackets, coats, sweaters and overcoats. Accessories include ties, scarves, socks, belts, shoes, bags and wallets. (2) For illustrative purposes, suggested retail price was derived based on 4x (the mid-point of our suggested price range) of the wholesale price with reference to sales fair.
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We control strategic components of our supply chain, enabling us to focus on our core
competencies and capture profitability
Raw
materials
Design and
Product
Development
Manufacturing
Branding,
Marketing, Sales
and Distribution
Value Creation at Each Step of the Value Chain
Product category extension, sales
volume growth and margin expansion
opportunities from our flexible
manufacturing model
Self-production allows us to protect
our intellectual property and maintain
our competitive positioning
Our strong OEM contractors network
provides us with additional flexibility
to accommodate rising demand of
our products as well as extensions
into additional product categories (eg,
accessories) with relatively low capex
Ability to achieve rapid expansion at
lower costs through adoption of a
wholesale model
Multiple marketing initiatives to
continue strengthening our brand
image
Rising brand awareness provides us
with bargaining power with our
distributors
Cost increase has been largely
passed on to distributors
Retail network consists of 1,452 retail
outlets, spanning over 240 cities and
31 provinces
Procure at competitive
price
Increase business casual
product offering to match
rising demand
Strong focus on details and
production techniques
Innovative use of raw
materials
Not controlled by us
Controlled by us
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Led by our in-house design team, our collaborative development process facilitates the
creation of high quality and functional products
A designated “industry consultant” in menswear trousers
Successfully obtained numerous patents and awards
One of the few enterprises who was invited to participate in
menswear trousers industry standards drafting in 2008
The only menswear enterprise who will jointly develop a
research and development centre and establish menswear
industry standards with China National Institute of
Standardization
All SKUs are new every season to match latest fashion trends
and evolving consumer demand
We continue to evaluate our product portfolio and product
development strategy based on our deep understanding of our
target customers
15 patents related to product, molding devices and manufacturing
process development as of December 31, 2014
Awards in 2014
–
“Quality Award” by the China National Garment
–
“Asia Famous and Fine Brand Award” and “Top 500 Asia Brand”
by Asia Brand Ceremony
–
Mr. Kwok Hon Fung was honored as “PRC Top 10 (Industry)
Brand Innovation Personality Award” by the Asia Brand
Association, Asia Television Limited, Global Times and China
Economic Herald
Every SKU in each sales fair is new
Design and Product Development Capabilities
1. As of December 31, 2014.
Team size of
128 members
1
Key team members with average
10 years
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Our nationwide retail network consists of 1,452 retail outlets, spanning over 240 cities
and 31 provinces
1
Beijing
Guangzhou
First-tier cities
Shanghai
Shenzhen
Our Distribution Strategy
Expansion from
provincial capitals
to lower-tier cities
First-tier 10% Second-tier 27% Third-tier 35% Fourth-tier 28%Established footprint
in first-tier cities:
Beijing
Shanghai
Shenzhen
Guangzhou
Leverage our brand reputation established in
higher-tier cities to create a nationwide
footprint and strengthen penetration across
channels
Provincial capitals
Retail outlet breakdown
Distribution Network
1. 31 provinces include autonomous regions and central government administered municipalities in the PRC as of 31 December, 2014
Stand-alone 22.7%
Department Store and Shopping Malls
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Multi-Channel Marketing Strategy
Through nationwide, regional and store-level marketing activities, we reinforce our
brand positioning and elevate our brand image
Product Catalogues and Brochures
•
Complimentary product catalogues and
brochures for end-customers
Support Distributors’
Marketing Initiatives
•
Reimburse up to 50% of advertising and
marketing costs related to approved
activities initiated by our distributors
Spokesperson
•
Invite Mr. Ma Tak Chung , Joe (馬德鐘) as the
spokesperson for our business formal wear in
China
Advertising at Highways Stations
•
Beijing, Shanghai, Shenzhen, Guangzhou,
Wuhan, Zhengzhou, Chengdu, Shenyang,
Qinhuangdao, Qufu, Bengbu, Xuzhou, Suzhou,
Fuzhou, Xiamen, Changchun, Nanchang
Outdoor and Print Advertisement
•
Outdoor LED monitors and billboards
Uniform Store Layout
•
Provide decorations to distributors and
sub-distributors at our own costs
•
On-site inspections to ensure uniform store
layout
Section 2
12
P&L Summary
For the year ended 31 Dec
2014
(RMB’ 000)
2013
(RMB’ 000)
Change
(%)
Turnover
1,672,410
1,452,811
15.1%
Gross profit
591,073
496,952
18.9%
Profit before taxation
387,085
320,586
20.7%
EBITDA
439,441
373,426
17.7%
Profit for the period
270,634
238,544
13.5%
Basic and diluted EPS (RMB)
65 cents
66 cents
-1.5%
Dividend per share (HKD)
36 cents
N/A
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Sales increase driven by both sales volume and average wholesale price
Sales volume in 2014 increased by 7.6%
Average wholesale price in 2014 increased by 7.0%
818
1,109
1,453
1,672
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2011
2012
2013
2014
(RMB m)
(m units)
(RMB/Unit)
Revenue
Total Sales Volume
Average Unit Wholesales Selling Price
Revenue Analysis
6.9
8.4
10.1
10.9
0
2
4
6
8
10
12
2011
2012
2013
2014
119
132
143
153
0
50
100
150
200
2011
2012
2013
2014
Purchase Order (Wholesale Value) YoY Growth 2014 Autumn / Winter +24.0% 2015 Spring / Summer +11.9%14
The YoY increase in 2014 GP margin was
mainly due to increase in average
wholesale price.
The YoY increase in 2014 EBITDA margin
was a result of increase in gross margin
offset with slight increase in percentage of
operating expenses to revenue.
YoY NP margin slightly decreased in 2014
mainly due to provision of withholding tax
on dividends and increase in advertising,
promotion and decoration fee.
GP and GP Margin
EBITDA
1and EBITDA Margin
NP and NP Margin
Source: Company information
1. EBITDA = Profit from operations + interest expense + income tax + depreciation + amortization of lease prepayments and intangible assets
Increased Profit and Margins
234 362 497 591 0 100 200 300 400 500 600 700 2011 2012 2013 2014 (RMB m) 162 254 373 439 0 50 100 150 200 250 300 350 400 450 500 2011 2012 2013 2014 (RMB m) 96 141 239 271 0 50 100 150 200 250 300 2011 2012 2013 2014 (RMB m) 19.80% 22.90% 25.70% 26.30% 11.70% 12.70% 16.40% 16.20% 28.50% 32.70% 34.20% 35.30%
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Administrative Expenses and Selling & Distribution Expenses
Cost Structure
47,059
56,778
28,533
33,730
58,299
71,750
12,871
12,693
13,400
16,990
0
50,000
100,000
150,000
200,000
250,000
2013
2014
Research & Development Costs
Listing Fee
Advertising & Promotion, Decoration Fee
Other Selling & Distribution Expense
Other Adminstrative Expenses
( RMB’ 000 )
11%
12%
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We maintain low average inventory
turnover days in 2014 resulted from
effective inventory control
YoY increase in 2014 was due to offer
of longer credit periods to some
distributors
Average trade payable turnover days
in 2014 remained stable
43
35
22
18
0
10
20
30
40
50
2011
2012
2013
2014
93
86
102
125
0
40
80
120
2011
2012
2013
2014
66
55
45
44
0
20
40
60
80
2011
2012
2013
2014
Days
Days
Days
Average Inventory Turnover Days
1Average Trade Receivables Turnover
Days
2Average Trade Payable Turnover
Days
31. Inventory days = Average Stock / Cost of Sales x 365 days
2. Trade Receivable Days = Average Trade Receivable / Turnover (including value-added tax) x 365 days 3. Trade Payable Days = Average Trade Payable / Cost of Sales x 365 days
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Cash and cash equivalents
Cash Flow Statement
63,031
223,260
(328,436)
225,399
183,254
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Cash and cash
equivalents at 1 Jan
2014
Net cash from
operating activities
Net cash used in
investing activities
Net cash from
financing activities
Cash and cash
equivalents at 31
Dec 2014
( RMB’ 000 )
(1)
