Annual Report 2019 Report Annual
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Li Ning Company Limited (Incorporated in the Cayman Islands with limited liability) (Stock Code: 2331) www.lining.com Annual Report 2019 ANNUAL REPORT 2019 ABOUT LI NING GROUP Li Ning Company Limited is one of the leading sports brand companies in China, mainly operating professional and leisure footwear, apparel, equipment and accessories under the LI-NING brand. Headquartered in Beijing, the Group has brand marketing, research and development, design, manufacturing, distribution and retail capabilities. It has established an extensive retail distribution network and supply chain management system in China. We are committed to becoming a world-class international professional sports brand enterprise with fashion attributes that can represent China and be recognized worldwide. In addition to its core LI- NING brand, the Group also manufactures, develops, markets, distributes, sells various sports products which are self-owned by or licensed to the Group, including Double Happiness (table tennis), AIGLE (outdoor sports), Danskin (fashionable fitness products for dance and yoga) and Kason (badminton), which are operated through joint venture/associate with third parties of the Group. Mission Let Sports Light Your Passion Vision Leading Sports Brand Values “Living for Dream” “Consumer Oriented” “WE Culture” “Breakthrough” CONTENTS 2 Corporate Information 4 Five-Year Financial Highlights 8 Chairman’s Statement 14 Management Discussion and Analysis 34 Corporate Governance Report 50 Environmental, Social and Governance Report 77 Investor Relations Report 79 Directors and Senior Management 86 Report of the Directors 101 Independent Auditor’s Report 107 Consolidated Balance Sheet 109 Consolidated Income Statement 110 Consolidated Statement of Comprehensive Income 111 Consolidated Statement of Changes in Equity 113 Consolidated Statement of Cash Flows 114 Notes to the Consolidated Financial Statements 192 Glossary CORPORATE INFORMATION BOARD OF DIRECTORS NOMINATION COMMITTEE Executive Directors Mr. SU Jing Shyh, Samuel (Committee Chairman) Mr. LI Ning Mr. LI Ning (Executive Chairman and Dr. CHAN Chung Bun, Bunny, GBS, JP Joint Chief Executive Officer) Mr. KOSAKA Takeshi (Joint Chief Executive Officer) AUTHORISED REPRESENTATIVES Mr. LI Qilin Mr. LI Ning Ms. WANG Ya Fei Independent non-executive Directors COMPANY SECRETARY Mr. KOO Fook Sun, Louis Ms. TAI Kar Lei Ms. WANG Ya Fei Dr. CHAN Chung Bun, Bunny, GBS, JP REGISTERED OFFICE Mr. SU Jing Shyh, Samuel Cricket Square AUDIT COMMITTEE Hutchins Drive P.O. Box 2681 Mr. KOO Fook Sun, Louis (Committee Chairman) Grand Cayman KY1-1111 Ms. WANG Ya Fei Cayman Islands Dr. CHAN Chung Bun, Bunny, GBS, JP REMUNERATION COMMITTEE PRINCIPAL PLACE OF BUSINESS IN HONG KONG Ms. WANG Ya Fei (Committee Chairperson) Unit 3301, 33/F., BEA Tower Mr. LI Qilin Millennium City 5, 418 Kwun Tong Road Dr. CHAN Chung Bun, Bunny, GBS, JP Kowloon, Hong Kong Telephone: +852 3541 6000 Fax: +852 3102 0927 2 Li Ning Company Limited | Annual Report 2019 OPERATIONAL HEADQUARTER AUDITOR No. 8 Xing Guang 5th Street PricewaterhouseCoopers Opto-Mechatronics Industrial Park Certified Public Accountants and Registered PIE Auditor Zhongguancun Science & Technology Area Tongzhou District LEGAL ADVISORS Beijing, PRC Hong Kong law Postal Code: 101111 LC Lawyers LLP Telephone: +8610 8080 0808 Fax: +8610 8080 0000 PRC law TAHOTA Law Firm PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE PRINCIPAL BANKERS SMP Partners (Cayman) Limited Hong Kong Royal Bank House – Hang Seng Bank Limited 3rd Floor, 24 Shedden Road China MinSheng Banking Corporation Limited P.O. Box 1586 The Hongkong and Shanghai Banking Corporation Limited Grand Cayman KY1-1110 Cayman Islands PRC Industrial & Commercial Bank of China HONG KONG BRANCH SHARE China Construction Bank REGISTRAR AND TRANSFER OFFICE Bank of China Computershare Hong Kong Investor Services Limited China Merchants Bank Shops 1712-1716, 17th Floor, Hopewell Centre China MinSheng Banking Corporation Limited 183 Queen’s Road East Ping An Bank Co., Ltd. Wanchai Hong Kong Li Ning Company Limited | Annual Report 2019 3 FIVE-YEAR FINANCIAL HIGHLIGHTS Unit: RMB’000 2019 2018 2017 2016 2015 Operating results: Turnover 13,869,630 10,510,898 8,873,912 8,015,293 7,089,495 Operating profit 1,543,209 777,177 445,678 385,805 157,069 Profit before taxation 1,856,546 850,321 537,524 287,946 30,814 Profit attributable to equity holders 1,499,139 715,263 515,155 643,254 14,309 Earnings before interest, tax, depreciation and 2,707,649 1,252,222 889,271 713,147 393,953 amortisation (EBITDA) Assets and liabilities: Total non-current assets 4,008,158 2,341,051 2,210,967 2,130,054 1,413,942 Total current assets 8,539,316 6,386,254 5,110,382 4,650,440 5,483,516 Total current liabilities 4,716,620 2,777,471 2,127,810 2,673,915 2,471,786 Net current assets 3,822,696 3,608,783 2,982,572 1,976,525 3,011,730 Total assets 12,547,474 8,727,305 7,321,349 6,780,494 6,897,458 Total assets less current liabilities 7,830,854 5,949,834 5,193,539 4,106,579 4,425,672 Capital and reserves attributable to equity holders 7,121,639 5,817,040 5,071,047 3,994,599 3,179,903 Key financial indicators: Gross profit margin 49.1% 48.1% 47.1% 46.2% 45.0% Margin of profit attributable to equity holders 10.8% 6.8% 5.8% 8.0% 0.2% EBITDA ratio 19.5% 11.9% 10.0% 8.9% 5.6% Earnings per share – basic (RMB cents) 61.94 29.63 21.47 29.03 0.66 – diluted (RMB cents) 60.13 29.19 20.87 28.95 0.66 Dividend per share (RMB cents) 15.47 8.78 – – – Return on equity attributable to equity holders 23.2% 13.1% 11.4% 17.9% 0.6% Net tangible assets per share (RMB cents) 299.55 254.87 219.21 182.47 162.59 Debt-to-Equity ratio 76.2% 50.0% 44.3% 69.7% 109.7% 4 Li Ning Company Limited | Annual Report 2019 Li Ning Company Limited | Annual Report 2019 5 CHAIRMAN’S STATEMENT Mr. LI Ning Executive Chairman and Joint Chief Executive Officer Dear Shareholders, In 2019, the national economy of the PRC remained stable with steadily improving quality of development despite the uncertainties in the external environment. With the increasingly promising domestic consumption outlook, national consumption is undergoing quality upgrade and consumption has become the key driver for economic growth. To keep pace with the increase in macro demand and the progressive implementation of national policies, the sports market in the PRC is constantly in the process of evolution and innovation, steering development and leading continuous industrial upgrade based on sports consumption. During the year, the Group continued to focus on the strategy of “Single Brand, Multi-categories, Diversified Channels” to During the year under review, revenue of the Group continued strengthen and optimize LI-NING’s experience value, which to grow with our profitability improving steadily. The profit has further enhanced its product and brand competitiveness. attributable to equity holders increased from RMB715 million in 2018 to RMB1,266 million (excluding one-off profit and loss not According to the statistics of the National Bureau of Statistics related to operation of RMB234 million). During the year, the of the PRC, China’s Gross National Product (GNP) registered a Group devoted great efforts in enhancing LI-NING’s experience year-on-year increase of 6.1% in 2019, the national disposable value with the implementation of the development strategy income per capita recorded a real increase of 7.8%, while of “Single Brand, Multi-categories, Diversified Channels”. Engel coefficient decreased by 0.2 percentage point, reflecting Our innate sports DNA has impelled us to make continuous continuous improvement of the consumption structure. In respect investment in research and development of sports science, of sports, given the increasing public awareness of healthy with a view to optimizing and enhancing the professional and lifestyle, sports consumption is now a major and emerging functional features of our products. We offered professional consumption pattern, promoting the rapid development of the products with vitality and creativity by analyzing the cultural sports industry towards a more professional, standardized and and popular trend, which help attracted more young consumer industrialized direction. According to the plan of the General groups and consolidated our brand influence. During the year, Administration of Sport of China, it is expected that the number the Group continued to demonstrate its creative brand image of people regularly participating in physical exercises in the during the international fashion weeks, thus building sound country will exceed 630 million by 2035, boosting the value of reputation while enhancing product competitiveness. the sports industry to RMB11.3 trillion. The sports industry will grow in terms of strengths, vitality and quality, thereby becoming a pillar of the national economy. Li Ning Company Limited | Annual Report 2019 9 CHAIRMAN’S STATEMENT CONTINUE TO ENHANCE Empowering professional sports with technology, we worked aggressively on research and development and accumulated PROFITABILITY AND FACILITATE experience, and launched the racing shoes specially made for STEADY IMPROVEMENT OF marathon, namely, “LI-NING 䨻” (李寧䨻). The running shoes OPERATIONAL INDICATORS adopted “LI-NING 䨻” (李寧䨻) technology with lightweight and high resilience features. Combined with an embedded full palm In 2019, the Group’s various key operational indicators further heterogeneous carbon plate, the shoes serve as an excellent improved. Revenue of the Group grew by 32%, after excluding booster for athletes with the linked power feedback mechanism. the one-off profit and loss not related to operation, the net Using 1.5mm ultra-thin sole technology, the resistance of the profit margin rose from 6.8% last year to 9.1%. Cash flow from running shoes is 5 times higher than that of the traditional operating activities increased by 110% to RMB3,503 million.