2018 Annual Report

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2018 Annual Report 2017/18 ANNUAL REPORT JNBY DESIGN LIMITED (Stock Code: 03306) CONTENTS 8 Corporate Introduction 9 Corporate Information 11 Financial Summary 12 Chairman’s Statement 13 Management Discussion and Analysis 20 Directors and Senior Management 26 Directors’ Report 37 Corporate Governance Report 47 Environmental, Social and Governance Report 60 Independent Auditor’s Report 64 Consolidated Statement of Comprehensive Income 65 Consolidated Balance Sheet 66 Consolidated Statement of Changes in Equity 67 Consolidated Statement of Cash Flows 68 Notes to the Consolidated Financial Statements P 8 + CORPORATE INTRODUCTION CORPORATE INTRODUCTION INFORMATION ON JNBY We are a leading designer brand fashion house based in China. According to the information provided by CIC (Note), in 2017, we ranked first in the Chinese designer brand fashion industry in terms of total retail sales. We design, promote and sell contemporary apparel, footwear and accessories as well as household products. Our brand portfolio currently comprises eight brands – (i) JNBY, (ii) CROQUIS (速寫), (iii) jnby by JNBY, (iv) less, (v) Pomme de terre (蓬馬), (vi) JNBYHOME, (vii) SAMO and (viii) REVERB, each targeting at a distinct customer segment and having a uniquely defined design identity based on our Group’s universal brand philosophy – “Just Naturally Be Yourself”. Our products target at middle- and upper-income customers who seek to express their individuality through fashionable products. Our broad range of product offering and brand portfolio create a lifestyle ecosystem that enables us to address our customers’ needs at different stages of their lives, which in turn allows us to build a large and loyal customer base. We started our business in 1994 by selling women’s apparel. According to a survey conducted by CIC (Note), our flagship brand, JNBY, is considered the most unique and recognizable women’s apparel designer brand in China, ranks first in terms of brand awareness and enjoys the highest brand loyalty in terms of the number of customers with repeated purchases among top 10 women’s apparel designer brands in China. We further expanded our brand portfolio between 2005 and 2011 to include CROQUIS (速寫), jnby by JNBY and less. During 2016-2018, we further launched Pomme de terre (蓬馬) for teenagers, JNBYHOME with designer household products and furniture products, SAMO for consummate professional men and REVERB, a brand new sustainable fashion brand, so that our brand and product mixes could be more diversified and we could cover consumers of most age groups. Taking into account our fans’ purchasing patterns and information needs, we have established an omni-channel interactive platform comprising physical retail stores, online platforms and WeChat-based social media interactive marketing service platform, with each component playing a critical role in transforming our potential fans into loyal fans. We aim to build up a “JNBY Fans Economy” strategy, which is based on a community of fans whose purchases are driven by their affinity to the lifestyle we aim to promote. Note: China Insights Consultancy Limited, the industry consultant JNBY DESIGN LIMITED ANNUAL REPORT 2017/18 P 9 + CORPORATE INFORMATION CORPORATE INFORMATION BOARD OF DIRectoRS EXECUTIVE DIRECTORS Mr. Wu Jian (Chairman) Ms. Li Lin Mr. Li Ming NON-EXECUTIVE DIRECTORS Mr. Wei Zhe Mr. Zhang Beili INDEPENDENT NON-EXECUTIVE Mr. Lam Yiu Por DIRECTORS Ms. Han Min Mr. Hu Huanxin BOARD COMMittees AUDIT COMMITTEE Mr. Lam Yiu Por (Chairman) Ms. Han Min Mr. Hu Huanxin REMUNERATION COMMITTEE Mr. Hu Huanxin (Chairman) Mr. Wu Jian Mr. Lam Yiu Por NOMINATION COMMITTEE Mr. Wu Jian (Chairman) Mr. Hu Huanxin Ms. Han Min COMPANY SECRETARY Ms. Ng Sau Mei (ACIS, ACS) AutHORIZED REPRESENTATIVES Mr. Wu Jian Ms. Ng Sau Mei REGisteRED OFFICE Cricket Square, Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands HEADQUARTERS 3/F, Blue Ocean Times Building No. 39 Yile Road, Xihu District Hangzhou, Zhejiang Province PRC PRINCIPAL PLACE OF Unit 709, 7/F, Lippo Sun Plaza BUSINESS IN HONG KONG 28 Canton Road Tsim Sha Tsui Kowloon Hong Kong AuditoR PricewaterhouseCoopers Certified Public Accountants 22/F Prince’s Building Central Hong Kong JNBY DESIGN LIMITED ANNUAL REPORT 2017/18 P 10 + CORPORATE INFORMATION COMPLIANCE ADVISER First Shanghai Capital Limited 19/F, Wing On House 71 Des Voeux Road Central Hong Kong THE CAYMAN ISLANDS Codan Trust Company (Cayman) Limited PRINCIPAL REGistRAR AND Cricket Square, Hutchins Drive TRANSFER OFFICE P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands HONG KONG SHARE REGistRAR Tricor Investor Services Limited Level 22, Hopewell Centre 183 Queen’s Road East Hong Kong PRINCIPAL BAnks Bank of Hangzhou, Guanxiangkou Branch Huaxia Bank, Heping Branch COMPANY’S WEBSITE http://www.jnbygroup.com/ Stock CODE 3306 ListinG DATE October 31, 2016 JNBY DESIGN LIMITED ANNUAL REPORT 2017/18 P 11 + FINANCIAL SUMMARY FINANCIAL SUMMARY For the year ended June 30, 2018 2017 increase RMB’000 RMB’000 % FINANCIAL SUMMARY Revenue 2,864,059 2,332,290 22.8% Gross profit 1,825,800 1,474,608 23.8% Operating profit 556,064 459,636 21.0% Net profit 410,351 331,572 23.8% Net cash flow from operating activities 378,838 290,620 30.4% Basic earnings per share (RMB) 0.80 0.71 Diluted earnings per share (RMB) 0.79 0.70 Financial Ratios Gross profit margin 63.7% 63.2% 0.5% Operating profit ratio 19.4% 19.7% -0.3% Net profit margin 14.3% 14.2% 0.1% As of As of June 30, 2018 June 30, 2017 Liquidity Ratios Trade receivables turnover days 11.3 12.6 Trade and bills payables turnover days 62.5 55.7 Inventory turnover days 234.4 214.5 Capital Ratios Debt to assets ratio 39.3% 34.7% Note: Debt to assets ratio = Total liabilities/Total assets CONSOLIDATED RESULTS For the year ended June 30, 2018 2017 2016 2015 2014 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Revenue 2,864,059 2,332,290 1,902,642 1,613,093 1,383,435 Gross profit 1,825,800 1,474,608 1,190,459 990,551 802,976 Gross profit margin 63.7% 63.2% 62.6% 61.4% 58.0% Operating profit 556,064 459,636 343,004 296,365 226,690 Net profit 410,351 331,572 239,336 196,952 149,916 Net profit margin 14.3% 14.2% 12.6% 12.2% 10.8% Profit attributable to the shareholders 410,351 331,572 239,336 196,819 149,464 As of June 30, As of June 30, As of June 30, As of June 30, As of June 30, 2018 2017 2016 2015 2014 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 ASSETS Non-current assets 318,054 208,815 156,338 96,934 79,967 Current assets 1,803,795 1,716,167 838,175 940,504 881,557 EQUITY AND LIABILITIES Total equity 1,287,879 1,257,239 287,942 499,454 306,545 Non-current liabilities 10,541 13,449 8,500 120,825 21,931 Current liabilities 823,429 654,294 698,071 417,159 633,048 JNBY DESIGN LIMITED ANNUAL REPORT 2017/18 P 12 + CHAIRman’s STATEMENT CHAIRMAN’S STATEMENT In recent years, coupled with the slowdown in the growth rate of the PRC economy, the growth of consumption also decelerated, posing greater challenge for the apparel industry. Meanwhile, benefiting from the upgraded consumption trend, with the rapid increase in the number of people pursuing distinguished life styles as well as the rising demand for personalized and stylish products, consumers have become increasingly demanding for products that can represent their personality, creating huge opportunities in the designer brand market segment. The year ended June 30, 2018 (“Fiscal Year 2018”) was the first full fiscal year after the listing of JNBY Design Limited (the “Company”). As a leading designer brand fashion group in China, the Company and its subsidiaries (the “Group”) continued to penetrate into this market segment, adhering to the strategic guidelines of “design-driven” and nurturing a “Fans Economy”, and with the concerted efforts of all our staff, the Group continued to make breakthroughs in its results, our income growth rate accelerated, our net profit steadily increased and our operating cash flow remained healthy and sufficient. In Fiscal Year 2018, the Group’s revenue was RMB2,864 million, representing an increase of 22.8% as compared with the year ended June 30, 2017 (“Fiscal Year 2017”), our net profit exceeded RMB410 million, representing an increase of 23.8% as compared with Fiscal Year 2017. During Fiscal Year 2018, benefitting from the upgraded consumption trend and proper operational management, the growth rate of revenue from our flagship brand JNBY further increased, and revenue from our brands other than JNBY launched in 2015 and 2016, including CROQUIS (速寫), jnby by JNBY, less, Pomme de terre (蓬馬) and JNBYHOME maintained significant growth, and the percentage of their aggregate revenue to total revenue also showed a trend of steady increase. During this fiscal year, we also increased our investment in enhancing design and R&D capabilities, as well as introducing SAMO, a designer fashion brand for consummate professional men and REVERB, a brand new sustainable fashion brand, so that our brand and product mixes could be further diversified. In Fiscal Year 2018, we focused on building our fans, utilized internet infrastructure and technologies, and constantly strengthened and optimized the establishment of our omni-channel interactive platform. As of June 30, 2018, the standalone retail stores operated by us globally reached 1,831, including 80 overseas points of sales, and our sales network has covered all provinces, autonomous regions and municipalities in China and across 17 other countries and regions around the world.
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