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2 Contents 1. Result Highlights 2. Business Development 3. Investment Cooperation 4. Financial Analysis
3 1. Result Highlights
4 Result Highlights
Continuous surge in new installations and high renewal rate
Growth in New Installations High Renewal Rate
2015 2016 1H2017 ('000 units) 350 Lease 97% 96.5% 96% y-o-y growth rate: 27% Buy-out 78% 71% 180
143 175 Renewal rate for Lease type is the rate of customers
201 who remain lease terms after one year. 160 124 Renewal rate for buy-out type is the rate of
0 customers who replace the filter after holding for 2015 2016 1H2017 more than one year. 1H New Installations 2H New Installations
5 Result Highlights (cont’d)
('000 units) Growth in household installation base
2,000 y-o-y growth: 16% 1,750 1,466 1,500 1,265 1,250
1,000 926 1,085 750 1,024
500 841
250 381 241 0 85 2015 2016 1H2017
Lease Total
6 Result Highlights (cont’d)
Service network coverage
2,000 y-o-y growth rate: 23% 1,600
1,300
1,000 800
0 2015 2016 1H2017
7 Result Highlights (cont’d)
Further expansion of distributors network (unit) y-o-y growth rate: 16% 6,000 780
1,332
3,000 1,216 4,980
3,648 2,432
0 2015 2016 1H2017
No. of original distributors No. of new distributors
8 Result Highlights (cont’d) 1H Financial Performance Overview Revenue Gross Profit (RMB mm) (RMB mm) 1,500 y-o-y growth rate: 23% y-o-y growth rate: 34% 750 1,250 1,000 921 502 745 500 439 750 498 249 500 406 231 250 250 568 339 423 312 208 253 0 2015 2016 1H2017 0 2015 2016 1H2017
2H Total 2H Total
Adjusted Net Profit* (RMB mm) 300 y-o-y growth rate:+7%
200 173 143 87 100 66 77 86 92 0 2015 2016 1H2017 1H 2H
* Note: excludes stock option expenses, change in fair value of convertible bonds and other non-recurrent expenses 9 2. Business Development
10 2.1 Public Water Purifying Business – upgrading cloud management platform
Cloud Platform
Upgrading Management
Public Water Purifying Channel Platform Regional Partner Management Commercial Traditional B2B Channels Ground Channels Traditional model: User / lack of management potential user
Experience Brand Store Cooperations
11 2.1 Public Water Purifying Business – Upgrading Ground Channel Platform
Diversified products
• Public Water • Distributor Purifying • End user Single • Ozner series Public Water office Purifying Sales • Strategic coop products customers product • Air sanitization Platform • Experience • Smart products store
Channels
Strategic Commercial Traditional Experience coop distributors channels stores customers
12 2.1 Public Water Purifying Business – Upgrading Business Model
“Partnering operation strategy” to be promoted through ground sales channels
1 city, Individual Locally 1 city, 1 startup 1 experience store operation registered
Self employment / Self Business self management Management actualization
Clear property “Family business” business Incentive Chief partner will be the legal model to realize Ozner’s “non- rights representative family family business” strategy Clear registered shareholding
13 2.1 Public Water Purifying Business – refine channels according to users need ① Standardize commercial water purifying channels
Grade B operators Grade C operators Grade A operators End user installations Grade D operators
Joint agent
② Standardize education & medical water purifying channels
G20 city operator
G100 City operators User G20 city operator
③ Standardize F&B and hotel water purifying channels
H20 operator
H100 operation商 User H5 agents 14 2.1 Public Water Purifying Business – current channel construction problem & solution
Problem
• Competitors entering commercial water purifying business, which brings copycats and pricing competition
Solution
• Strengthen service advantages • Distribution channel training • Localized and effective system • Fortify internal service inspection • Marketing strategies
15 2.1 Public Water Purifying Business – current channel construction problem & solution (cont’d)
Problem
• Slow product development • Lack of diversified product portfolio
Solution
• Accelerate new products QC and improve production line • Promote the launch of new generation of products • Monitor competitors’ products • Acquire new products through investment, cooperation and implementing new technologies 16 2.1 Public Water Purifying Business – current channel construction problem & solution (cont’d)
Problem • System is vast and inefficient • Lack of internal motivation • Mismatch of management coverage and rate of expansion
Solution
• Promote “1 city, 1 experience store” • Localized sales & marketing to build a unified system through partner system
17 2.1 Public Water Purifying Business – current channel construction problem & solution (cont’d)
Problem
• Internal system yet to be synchronized, channel advantage cannot be maximized
Solution
• Implement sales system platform and internal market system • Team cooperation between different departments
18 2.2 Household product development strategy
Diamond existing products Diamond Ozner household products
Traditional direct sales model Traditional Commercial lease products Buy-off Household buy-off products Traditional Household Model Public Water Purifier Household Leasing Water Purifying New Model Sustainable Purifying profit model Buy-off Household lease products Model Household internet products
Service model based on big data
Ozner Smart Household Service Health value-added products products APP
19 2.2 Household water purifying business model OZNER User OZNER Service Service
Product Product Product
Market: 3rd and 4th tier markets
Invest in brands
Lease program Lease
Direct sale model sale Direct Internet mode Internet Sustainable Sustainable Coop Household Coop profit from User User profit from filters brands Purifying brands Cluster filters
Brand: OZNER
Market: 1st- and 2nd- tier markets
Distribution channel
Mode 1: for-sale, Mode 2: leasing, one off income sustainable profit OZNER OZNER Service User Service
20 2.3 Service system development – partner program
Ozner Service Vehicle (mobile warehouse) Self pick up Provencal End user storage and service centre Delivery / logistics
Engineer + service vehicle model: Intern Engineer Star Engineer Service Vehicle Service Partner (mobile warehouse)
Continuous improvement of service through intern engineer incentive program
• Market settlement system: complement the lack of service in certain regions • Ensure Quality: open training system + strict register and screening process + online tracking and customers review • Advancement system: Quantify service quality to groom service partners 21 2.3 Service Development Positioning
Online Service (brand project team)
400 after-sales User data operation service team service team • Maintenance and • Installation follow up Commercial complaint service for • Purchase of household customers end users filters and renew service • Product return service • Brand product sales and • Consultation of operation End Ozner/other franchise & product • Sales of value-added Users strategic products brand customers
Storage / logistics/ offline service installation and maintenance Offline service (brand project team)
• Ozner Service agree on service and fee with commercial customers • Product sales & operation: distribution channel based on brand users data 22 2.3 Service Development Strategies
Revenue
Develop household service products and value-added products Extend Service to Phase 3 other products Community
Phase 2 Service Platform Professional that represents Provide quality upgraded service to create service platform sustainable income for environmental consumption Phase 1 household Leading Purifying Service products in the Platform PRC Time
23 2.4 New Product R&D – medical & education series
2017.3 2017.10 2018.3 Launch of the first Introducing Ozner’s Ozner – Bili product public water technologies to Bili series R&D and purifying model product series introduction
•600GPD anti penetration •Introduction of Ozner smart • Technology synergy •28L storage technology (2G) • Standardize products •Display of temperature •Introduction of Ozner filter • Complete introduction and water quality technology (RFID) of smart technology •Capacity: 50 people •Introduction of Ozner cloud operation (annual usage fee model) 24 2.5 Development of other main products
Kitchen machine Business Water Ejmono Commercial Installation machine Purification kitchen water Free Water 1.5 chip machine purification chip Purifying Desktop Machine Floor- machine Standing
25 2.6 Ozner Strategic Layout
Own Joint channel venture
Air sanitisation business group APP Joint venture Joint venture brand brand
Capital Technological R&D Technology Output Output Mode Ozner Service APP
Public water Customers Household water purifying business purifying business group APP group APP Continuous service income Self-run Self-run
Offline Offline channel channel Intelligent products business group APP
Channel Own joint brand 26 venture 3. Investment Cooperation
27 3.1 Significance of strategic cooperation
• Strategic cooperation to obtain channels, products, customers; integrate market; and reinforce the status • To focus on the healthy home theme, integrate environmental protection, electrical appliances, services and the whole industrial chain to help Ozner’s whole industry chain grow rapidly
Channel Diversified forms of cooperation:
Business cooperation Products Customers Setting up joint venture
Direct investment
Introducing third party investment
Reducing Market Issuing convertible bonds cost share M&A Profitability
28 3.2 Key focusing industry
Middlestream Upstream Water purifying / air Downstream Supply chain sanitisation / channel / Service & other products / customers
Strategic objectives: cost, Strategic objectives: rapid access Strategic objectives: capacity control to customers and channels, rich rapid expand service Activated carbon producers product categories, develop main team and platform, • Sewage treatment, business expand business water plant, air Water purifier enterprises Home appliance repair, purification, terminal • Large-scale enterprises with professional home equipment, etc. certain customer base and services business, RO diaphragm / filter brands inside and outside platform manufacturer border • Large-scale • Applicable to biological, Air purifier and health related enterprises and pharmaceutical, food, products enterprises platforms with water treatment, etc. • Large-scale enterprises with stable customer Other material producers certain customer base and base and brands • Electronic equipment, brands inside and outside Environmental accessories border protection enterprises • Pumps, valves, etc. Technological companies • Sewage treatment, • Support the development and water plant, operations of products and desalination, etc. platforms Channel companies • Different sales channels including Internet, direct marketing, exhibition, etc. and other sales platform and team 29 3.3 Strategic implementation – vertical expansion of the industry upstream
Lepu – leading micro motor manufacturer in China
Founded in 2001, engaged in micro-motor research and development, production and sales, products are widely used in home appliances and high-tech enterprises with industrial related equipment
Lepu products series
Main model
Shaded pole Product DC Brushless Shaded Pump Cross flow Shroud Capacitive centrifugal DC motor system water pump pole motor motor fan pump motor motors motor
Household appliances, central air conditioning, commercial office equipment, medical equipment, kitchen Application utensils, power tools, ventilation systems, stage lighting 3.3 Strategic implementation – vertical expansion of the industry upstream (cont’d)
Lepu main market and customers
Main customers: large electrical manufacturers Main market: China, US, Russia, France, etc.
Strategic synergies
Huge market growth 120 billion US dollars capacity of global micro-motor market China's per capita motor volume is only 1/4 of the developed countries, the average annual increase in the use of each family is a corresponding increase of 3-4 million units, the development potential is huge Reduce costs, ensure quality, reserve technology, support the development of new products Product export channels around the world Products sell well in Europe and America, Asia and other countries, which could increase in the effective export
channel for Ozner 31 3.3 Strategy implementation – depth development of market segments
Bili Leading campus and educational drinking fountains manufacturers in China
Founded in 2001, the founder of China's campus drinking fountains and market pioneers, high-tech enterprises in Guangdong Province
With more than 2,000 dealer channels nationwide
Bili product series
Main model Product Public drinking Infant drinking Drinking Water treatment Double water boilers system platform equipment machine equipment Institutions, schools, factories and other Schools, factories, Kindergartens, centralized water hospitals, units hospitals and Factories, engineering Application supply and highland dedicated drinking places where risk outdoor, etc. project areas (boiling water equipment of scalding temperature adjustable) 32 3.3 Strategy implementation – depth development of market segments(cont’d)
Ozner Bili Win-win
.Listed company endorsing the brand, subdivided areas to strengthen the brand Brand
.Leasing module import, R&D Channel .Both channels are integrated, new product development open and compatible
Manage- After- .Personnel, financial system output ment sale .Host original water machine, rely on Ozner for water machine rental service
Strategic synergies
Merge with public water purifying (campus), further consolidate the leading position of Ozner
Enrich the product line – special technology of school and public market, fill the gaps in engineering products, complete the product line layout in household water purifying market, fully cover the needs of household water purifying market
Ozner service business model, technology and resources output would bring new performance growth point to Bili 33 3.3 Strategy implementation – horizontal broaden the global layout
Diamond leading water purifying enterprise in Southeast Asia
Founded in 1995, proprietary water purification systems under its own brand via “sale & service” and “lease & service” models An established and Extensive network of distributors covering Malaysia, Singapore and Hong Kong well-known brand name in Singapore, Superior patented and proprietary water purification technology certified by world renowned authority on water quality such as Malaysia and Hong WQA and NSF Kong
Diamond high-end water purification products
Point-of-entry (POE)(1) Point-of-use (POU)(2) Other Lifestyle Water Bar & Purification Products Master Filter System Shower Filtration Others Systems
Other Residen Residen Home spa electroni tial and tial and system c items commer commer (e.g. air cial use cial use purifier)
Notes: 1. POE systems are attached to the household main waterline that allows water treatment before distribution to all lines within a home or building 2. POU systems treat water at specific supply lines prior to consumption 34 3.3 Strategy implementation – horizontal broaden the global layout (cont’d)
Diamond is a leader in Malaysia, Singapore & Hong Kong…
Others 14% Amway Others, Coway, Panasonic, 30% Others 27% 33% Evopure , 24% 9% 30%
BacFree , 3% Amway, Elken, Elken 15% 8% 18% Amway, Neptune NEP, NEP 3M, 15% 18% 29% 12% 29% NEP, 15%
Based on respective residential markets for year 2017 Source: Verify Markets Key figures … with a growing presence in China & Taiwan
> 600,000 customers
> distributors 1,200+ China (via Hong Kong) Taiwan (via Hong Kong) > 1,000,000 units sold Hong Kong
> 12%, 29% 及 15% market share(in Malaysia, Singapore and Hong Malaysia (Headquarters) Kong respt.)
Singapore > Presence in 5 countries
35 3.3 Strategy implementation – horizontal broaden the global layout(cont’d) Diamond Well known brand
Well known to the residential household and commercial sector High safety standards and quality assurance
Awarded the Gold Seal from United States Water Quality Association (WQA) in recognition of its reliability, safety and POU filtration performance Obtained accreditation of NSF/ANSI Standard 042 issued by NSF International of USA for filters Halal certification Neptune’s products have been vigorously tested by various agencies: POE SIRIM QAS International of Malaysia Malaysia Institute For Nuclear Technology Research (MINT) Chemical Analysis (Australia) PROBE Analytical of Australia Others ITS of Hong Kong PSB of Singapore Consolidated Laboratory of Malaysia Brand and products endorsed by celebrities Awards & accolades
Choi Lan, Hong Kong celebrity food critic Geneva Gold Medal and Special Jury Award Diamond Home Spring Water is just like natural spring water! It Reader’s Digest Trusted Brand Awards since 2005 tastes simply different – sweetish, smooth and refreshing every year (Asia, Singapore, Malaysia and/or Hong Maria Cordero, HK and Macau celebrity Kong categories) "After consuming Diamond Energy Water, health of my family Brussels Eureka 2002 - Gold members has been markedly improved" Global Golden Rim Golden Bull Award Dato’ Sheila Majid, Malaysian celebrity singer "Water is very important so we should drink the best one. I think DIAMOND water is the best" Nancy Sit, Hong Kong celebrity actress There's no doubt being a spokesperson for DIAMOND water because I have been using it for more than 7 years! Many say I look young. It's because of DIAMOND!
Miriam Yeung, Hong Kong celebrity singer & actress My discovery! Tap water to become Spa water is able to solve many problem. No more aged, dry, dull and sensitive skin. No more split ends and dry hair! 36 3.3 Strategy implementation – horizontal broaden the global layout (cont’d)
Strategic synergies
Enhance brand value: Diamond has a great impact among high-end brands in Southeast Asian and Hong Kong market, which will facilitate Ozner’s expansion of household market in the PRC
Channel and user: a total of more than 1,200 distributors and 600,000 users in Malaysia, Singapore, Hong Kong and Taiwan
Enrich product portfolio, integrate the productivity, reduce costs
Develop overseas commercial market: output Ozner business model
International capital market brand image
37 4. Financial Analysis
38 4.1 Revenue and Profitability
Revenue EBITDA
(RMB mm) (RMB mm)
800 y-o-y growth rate: 34% y-o-y growth rate: 10% 300
250
400 200 568 252 423 229 339 150 171
0 100 1H2015 1H2016 1H2017 1H2015 1H2016 1H2017
39 4.1 Gross Profit
Gross Profit Gross Profit Margin
(RMB mm) 80% 400 y-o-y growth rate: 23%
200 40% 61% 312 60% 55% 253 208
0 0% 1H2015 1H2016 1H2017 1H2015 1H2016 1H2017
40 4.2 Water Purifying Business
Revenue Gross Profit Margin (RMB mm) 600 75% y-o-y growth rate: 40%
500
400 50% 533 67% 63% 55% 300 382 298 200 25% 1H2015 1H2016 1H2017 1H2015 2H2016 1H2017
41 4.3 Air Sanitization Business
Revenue Gross Profit Rate
(RMB mm)
50 50% 41 0 37 40% 4 y-o-y : -41% 30% 25% 25 22 22% 41 20% 16% 33 11 10% 11 0 0% 1H2015 1H2016 1H2017 1H2015 1H2016 1H2017
Service Rev Equipment Sales
42 4.4 Expenses Analysis – No. of employees No. of employees & Departmental proportion
4,000
y-o-y growth rate: 58% 3,180
3,000 11%
2,374 2,018 36% 2,000 10% 14%
41% 45% 37% 1,000
33% 25% 16% 15% 17% 0 2015 2016 1H2017
Production Sales Service Administration
43 4.4 Expenses Analysis - Operating Selling & Distribution
(RMB mm)
140 40% 61% 129 5% 120 35% 19% 100 0% 30% 80 80 16% 80 25% 24%9% 9% 7% 23% 21% 60 20% 28% 19% 20% 40 60% 15%
20 56% 50% 10%
0 5% 1H2015 1H2016 1H2017
Salary & Welfare Ads & Markeitng Business Trip Others % of revenue Growth rate
Note:Deferred payment is not included 44 4.4 Expenses Analysis - Operating Administrative
(RMB mm) 60 57 40% 30%
50 35% 44 39 13% 51% 30% 40 25% 57% 30 51% 20% 14% 20 8% 11% 15% 11% 10% 10 35% 10% 41% 32% 10% 0 5% 1H2015 1H2016 1H2017
Salary & Welfare Professional Service Others % of Renvenue Growth rate
Note:Deferred payment is not included 4545 4.5 Liability Ratio Analysis
(RMB mm) 2015 2016 1H2017
Finance lease - 372 680 payable
Loan - 50 10
Total liability (exclude - 421 690 unconvertibal liability)
cash flow 518 529 840
Net cash flow (518) (108) (150)
Total assets 3,310 3,689 4,525
Liability ratio (exclude 0% 11% 15% unconvertibal liability)
For 1H2017, the ratio of borrowing of 3+ years was 79% 46 Thank you!