2013 Annual Results Presentation
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2013 Annual Results Presentation March 2014 Disclaimer and Forward Looking Statements • This document carries the information and the opinion is not for the purpose of comprehensive research, financial services or legal opinion. Chow Sang Sang Holdings International Ltd. does not guarantee its accuracy and integrity. This document contains the information only to provide reference. They can not become or deemed to be sold or bought or subscribe for securities or other part for the invitation. • This document contains information, opinion that only reflect Chow Sang Sang Holdings International Ltd’s opinion on the date of the presentation. Chow Sang Sang Holdings International Ltd. can change anything on this document without notices. Chow Sang Sang Holdings International Ltd. is not liable for any losses incurred from the usage of information or opinions obtained from this document. • This document contains confidential information to be used solely for the purpose of personal reference. In addition, this document may not be transmitted or transferred to any other person or in any way be incorporated into other files or data. • This document and the related discussion may include forward-looking statements with risk and uncertain factors. Forward looking wording such as believe, expect, planning, forecast, target, possible, hope, will, may, etc., will be used in this document. The reader of this document should not excessively rely on such forward-looking statements to form their opinions. These forward-looking statements are based on our own company and other sources that we believe are reliable. 2 Presentation Outline I. Business Overview II. Financial Highlights III Future Plan and Strategy IV. Q&A Session V. Appendix 3 Business Overview 4 Company Structure Physical metals trading Precious service Metals Commission based Wholesale Generated 20% of total revenue for 2013 Jewellery Retail Chow Sang Sang Group 8 HK offices and Internet Securities platform Brokerage Commission based Main business segment No proprietary trading 375 self-operated stores in Generated 0.1% of total Greater China revenue for 2013 Operates under “Chow Sang Sang" and “Emphasis Jewellery” Investment Properties Other Generated 79% of total Investments Shares of HKEX revenue for 2013 Generated 0.7% of total revenue for 2013 5 Business Overview: Jewellery Segment 6 Product mix: Jewellery Gold based Items Gem-set Items Licensed Products (Hello Kitty) International Brands (Gucci, Rolex, Tudor) 7 Distribution Network Chow Sang Sang directly runs and controls all of its retail stores with no franchise operations Beijing Complementing the extensive retail network, the Surrounding eshop.chowsangsang.com working with key Provinces retail portals in China, offer online shopping (49) service Heilongjiang Beijing Flagship Store Inner Mongolia Jilin Xinjiang Beijing Liaoning Tianjin Shanghai Flagship Store Gansu Hebei Ningxia Shanxi Qinghai Shandong Eastern Northern Shaanxi Jiangsu Henan (51) (92) Anhui Tibet Hubei Shanghai Chongqing Sichuan Zhejiang Hunan Jiangxi Guizhou Fujian Kunming Flagship Store Guangdong Taiwan Chow Empasis Yunnan Guangxi Sang Sang Jewellery Hong Kong Flagship Stores Hong Kong Macau China(1) 296(2) – HK / Macau 46 12 Hainan Taiwan - 21 as at Dec 31, 2013 (1) Covered cities Southern (104) (1) Excluding Hong Kong and Macau (2) Reached 298 as of Mar 25, 2014 8 Focus on Growth in Mainland China Increasing No. of Stores in Mainland China (No. of Stores) New New shops shops +50 +32 Same-store Sales 37% 5% 20% Growth 9 Financial Highlights 10 Operating Performance … Turnover Gross Profit (HK$ mm) (HK$ mm) 11 Operating Performance (Cont’d) … Operating Profit Profit attributable to equity holders (HK$ mm) (HK$ mm) 12 …Driven by Retail Segment… Revenue Breakdown Results Breakdown 13 … Retail Performance … Retail – Revenue Retail – Operating Results (HK$ mm) (HK$ mm) 14 …and Robust Demand from PRC Consumers 2011 2012 2013 Sales Attributable to PRC 66% +5% 71% +1% 72% Customers(1) Mainland customers’ contribution continues to increase (1) China sales + HK/Macau sales by PRC customers 15 Consolidated Sales Mix – (Retail) 2012 2013 Gross margin: Gold* : 10%-13% Non gold jewellery: 39%-44% Watches: 22%-24% * Include gold price movement 16 Consolidated Gross Profit Contribution – (Retail) 2012 2013 17 Change of Average Selling Price Hong Kong/Macau - Gold Hong Kong/Macau - Jewellery (HK$) (HK$) China - Gold China - Jewellery (RMB) (RMB) 18 Improved Working Capital Trends Average Inventory Turnover Days Average Receivables Turnover Days (No. of Days) (No. of Days) Average Payables Turnover Days Cash Conversion Cycle (No. of Days) (No. of Days) 19 Financial Highlights (HK$ million) For the 12 months ended or as at Dec 31, % change 2011 2012 2013 12 vs 13 Turnover 17,158 18,260 25,142 +37.7% Jewellery Retail 12,645 14,861 19,943 +34.2% Other businesses 4,513 3,399 5,199 +53.0% Gross profit 3,254 3,432 4,208 +22.6% Operating profit 1,467 1,261 1,544 +22.4% EBITDA 1,574 1,400 1,712 +22.3% Profit attributable to equity holders 1,098 985 1,218 +23.7% EPS (HK cents) 162.2 145.5 180.0 +23.7% Dividend per share (HK cents) 60.0 55.0 68.0 +23.6% 20 Other Financial Information For the 12 months ended (HK$ million) or as at Dec 31, 2011 2012 2013 Cash and cash equivalents 631 674 1,009 Available-for-sale investments1 635 671 659 Capital expenditure 190 267 280 Gearing2 33.2% 27.1% 23.4% Unused banking facilities 2,663 4,052 4,114 1 Available-for-sale investments mainly represents HKEX shares which valued at quoted market prices 2 Total borrowings to total equity holders’ equity. Total borrowings includes interest-bearing bank borrowings, bullion loans and interest-bearing bank borrowings arising from securities and futures broking. 21 Future Plan and Strategy 22 Expansion with Distinctiveness in PRC Around 50 new stores in PRC in 2014 Capitalize on Existing Self-Run Store Model Expansion Philosophy Presence Large potential for growth: Ensure consistent and Target mid-high end consumers smaller store count compared to superior service quality Brand development and fine- competitors Leverage on high-end tuning is more important than Selective shop positioning and shopping malls and growth in the number of stores careful geographic spacing to department stores’ own Leverage on e-shops to expand maximize efficiency & exposure positioning to enhance image coverage and reach but avoid overconcentration of More flagship and premium- stores status stores 23 Product Mix and Branding Jewellery Focus and Product Differentiation Marketing Initiatives Clear presence and visibility of international Continue with existing programs with focus: brands Expand e-shop, synergizing with physical Develop house brands - focus on quality and stores sophistication appropriate to different Capitalize on CRM database customer segments Revamp VM at stores Collaboration with international brands for unique products Leverage on licensed products such as Hello Kitty 24 Improving Operating Efficiency initiatives for sustainable growth Build human capital o Implement training programs to nurture and develop middle management staff in PRC Incentive schemes to attract and motivate sales staff o Enhance inventory efficiency strengthen the logistical network with supply hubs to facilitate “just-in-time” delivery o Focus on R&D for quality enhancement and production efficiency 25 Q&A Session 26 Appendix 27 Company History 1930-1970 1970-1980 1980-1990 1990-2000 2000-2013 1934 1973 1998 2005 2006 2009 2011 2013 Chow Sang First Re-entered Became Launch Opened the Opened Stable Sang company in the sightholder brand first the first growth in Goldsmith the industry Mainland of Diamond revamp Flagship Flagship China established listed on China Trading campaign Store in Store in in Hong Kong market Company Beijing Taiwan Guangdong Stock Exchange No. of 9 375 Stores Turnover 130 25,142 (HK$ mm) 28 Industry Analysis – PRC Jewellery Market Overview While global jewellery sales returns to single … China became the world leading jewellery market, digit growth … beating USA and India Source: Euromonitor International, International Jewellery London 2013, Sept 4th Source: Euromonitor International, International Jewellery London 2013, Sept 4th 29 Industry Analysis – HK & PRC FY2013 HK Jewellery, Watches and Clocks, and Valuable Gifts Sales 14 13.11 Total jewellery, watches and clocks, and valuable gifts sales growth in HK is 22.97% y-o-y in FY13, according to HK 12 11.53 10.49 10.52 10.73 Census and Statistics Department, whereas the growth in 10.09 9.60 10 9.16 retail revenue from Chow Sang Sang’s HK and Macau 8.68 8.34 8.53 operations hit 36% y-o-y in FY13. 7.54 8 FY2013 PRC Gold, Silver and Jewellery Sales 6 billionHK$ 4 35 * * 30.3 2 30 26.5 26.5 26.9 26.8 0 25 23.0 23.8 22.7 22.9 22.1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 21.8 22.0 Source: HK Census & Statistics 20 15 Growth rate of retail sales for jewellery products in PRC RMB billion 10 stood at 25.8% y-o-y for FY13, whereas the growth in retail revenue from Chow Sang Sang’s China operations 5 hit 32% y-o-y in FY13. 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec * In order to eliminate the impact of the different date of the “Chinese New Year” Source: National Bureau of Statistics of China (CNY) each year, and enhance the comparability of data, in accordance with the national statistical system, the data in January and February 2013 were investigated and released together. Here the data is evenly divided as RMB26.50 billion. 30 Industry Analysis – PRC Jewellery & Watches Forecast PRC jewellery & watches Market Value Forecast 2011–2016 CAGR: 11.2% Continued Strong Growth into 2016: CAGR 11.2% estimated growth rate for PRC jewellery & watches market value from 2011 to 2016.