CHOW SANG SANG HOLDINGS INTERNATIONAL LIMITED 周 生 生 集 團 國 際 有 限 公 司 Stock code: 116
2014 Interim Results Presentation
August 2014 Disclaimer and Forward Looking Statements
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2 Presentation Outline
I. Business Overview
II. Financial Highlights
III Strategy Outline
IV. Q&A Session
V. Appendix
3 Business Overview
4 Company Structure
Physical metals trading Precious service Metals Wholesale Commission based Services Generated 10.7% of total revenue for 2014 1H
Jewellery Retail Chow Sang Sang Group
8 HK offices and Internet Securities platform Brokerage Commission based Main business segment No proprietary trading 380 self-operated stores in Generated 0.2% of total Greater China and Internet revenue for 2014 1H platform Operates under “Chow Sang Sang" and “Emphasis Investment Properties Other Jewellery” Investments Shares of HKEx Generated 88.0% of total Generated 1.1% of total revenue for 2014 1H revenue for 2014 1H
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 (51) 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 (50) (94) 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) 300(2) –
HK / Macau 47 12 Hainan Taiwan - 21 as at Jun 30, 2014 (1) Covered cities Southern (105) (1) Excluding Hong Kong and Macau (2) Reached 303 as of Aug 26, 2014 8 Focus on Growth in Mainland China
Increasing No. of Stores in Mainland China
(No. of Stores)
New New New shops shops shops +50 +32 +10*
Same-store Sales +37% +5% +20% -20% Growth
* as of August 26, 2014, 32 new locations signed up to be completed in 2014. 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 …but Robust Demand from PRC Consumers
2012 2013 2014 1H
Sales Attributable to PRC 71% +1% 72% +5% 77% Customers(1)
Mainland customers’ contribution continues to increase
(1) China sales + HK/Macau sales by PRC customers 15 Consolidated Sales Mix – (Retail)
2013 1H 2014 1H
Gross margin: Gold* : 12%-16% Non gold jewellery: 39%-44% Watches: 22%-24% * Include gold price movement 16 Consolidated Gross Profit Contribution – (Retail)
2013 1H 2014 1H
17 Change of Average Selling Price
Hong Kong/Macau - Gold Hong Kong/Macau - Jewellery
(HK$) (HK$)
China - Gold China - Jewellery
(RMB) (RMB)
…drop in the price of gold and introduction of lighter pieces.
18 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 6 months ended % change 2012 2013 2014 13 vs 14 Turnover 9,096 14,089 9,333 -33.8% Jewellery Retail 7,275 10,886 8,214 -24.5% Other businesses 1,821 3,203 1,119 -65.1% Gross profit 1,597 2,062 2,173 +5.4% Operating profit 560 800 678 -15.3% EBITDA 627 878 770 -12.3% Profit attributable to equity holders 439 615 520 -15.4% EPS (HK cents) 64.9 90.8 76.8 -15.4% Dividend per share (HK cents) 10.0 14.0 12.0 -14.3% Capital expenditure 107 127 64 -49.6%
20 Other Financial Information
(HK$ million) As at Dec-31 Jun-30 2012 2013 2014 Cash and cash equivalents 674 1,009 1,516 Available-for-sale investments1 671 659 735 Gearing2 27.1% 23.4% 24.3% Unused banking facilities 4,052 4,114 3,931
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 in related to jewellery business and bullion loans.
21 Strategy Outline
22 Expansion with Distinctiveness in PRC
Around 50 new stores in PRC in 2014
Expansion Philosophy Self-Run Store Model
Target mid-high end consumers Ensure consistent and superior service quality Brand development and fine-tuning is more Leverage on high-end shopping malls and important than growth in the number of department stores’ own positioning to stores enhance image Leverage on e-shops to expand coverage More flagship and premium-status stores and reach
23 Product Mix and Branding
Jewellery Focus and Product Differentiation
Clear presence and visibility of international brands Develop house brands - focus on quality and sophistication appropriate to different customer segments
Marketing Initiatives
Continue with existing programs with focus:
Expand e-shop, synergizing with physical stores Capitalize on CRM database Revamp VM at stores
24 Q&A Session
25 Appendix
26 Company History
1930-1970 1970-1980 1980-1990 1990-2000 2000-2014
1934 1973 1998 2005 2006 2009 2011 2014 1H
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 9 380 Stores
Turnover 130 9,333 (HK$ mm)
27 Industry Analysis – PRC Jewellery Market Overview
China is forecast to account for the highest overall value sales increase over the next five years of over US$17 billion. This will equate to 26% of the total global contribution.
Source: Euromonitor International
Source: Bain & Company Luxury Industry Overview 2013
Mainland China surpassing France, gaining a 4th position globally
China had already become a leading luxury market by 2010 and could overtake Japan to become the biggest such market by 2015.
Source: MCKINSEY
28 Industry Analysis – PRC Jewellery & Watches Forecast
PRC jewellery & watches Market Value Forecast 2011–2016
CAGR: 11.2% Continued Strong Growth into 2016:
CAGR 11.2% estimated growth rate for PRC jewellery & watches market value from 2011 to 2016. The total value will increase from US$ 43,829.5 million (2011) to US$ 74,470.5 million (2016).
Source: MARKETLINE
29 Chow Sang Sang marketing update Jan to Jun, 2014
30 CNY Promotion
To celebrate the year of HORSE, bring New Year blessings to the mass audience and create top of mind awareness for seasonal gifting associating with “Horse” products
Touch points included print, OOH, POSM, Digital and store display
31 Valentine’s Day Promotion
• Extending the concept of Christmas campaign launched in 2013, Valentine’s Day campaign featured Romantic and fantasy through imagination to conceive a world full of extraordinary sweetness and love, integrating our romantic affordable luxury products.
• Touch points included ATL, OOH, digital, social media, Store display and POSM.
32 Mother’s day Promotion
Gifting to mothers are one of the featured segment identified especially for China Market In May, a mother’s day campaign was launched with a key focus in digital and store display to drive attention to “gifting to mothers” A recordable gift card was distributed upon purchase during promotional period for customers to express their love to mothers
33 Bridal Campaign
Integrated bridal thematic campaign “Love is All” launched in May 2014. Covering the Greater China Region and targeting wedding couples.
Touch points covered above the line thematic communication, digital engagement campaign, below the line exhibition and events, store POSM and window display
Featured signature collections such as Infini Love, Promessa, La Pelle and Chinese Wedding Collection.
34 Bridal Campaign – Outdoor Advertising and Video
35 Bridal Campaign –Mall Exhibitions
36 Bridal Campaign – CRM Programme
Workshops were conducted in selected stores and HK bridal zone to promote the wedding theme to gain PR coverage. Selected customers were invited to join different wedding theme workshops.
37 CRM – Star Shoppers Star Dollars Programme
Star Dollars was successfully launched in China and Hong Kong. Upon designated promotions, star shoppers can gain star dollars which can be spent on any gem set products on their next purchase .
38 International Brand Strategic Partnership
Organized a tuck show with Gucci featuring “Gucci’s Fine Jewelry Precious Collection” started in June 2014 Hosted in Causeway Bay and Canton Road stores in Hong Kong
39 2014 New Stores
Airport, HK
Kowloon Bay, HK
Galaxy,Macau
Kunming, China
Mongkok, HK
Guangzhou, China
Fuzhou, China 40