annual results presentation · presentation 2020.6.17. contents financial review business review 1...
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FY2019/20ANNUAL RESULTS
PRESENTATION
2020.6.17
Contents
Financial Review Business Review
1 2PART ONE PART TWO
3PART THREE
Outlook
2
Vincent Lyu
Executive Director and Chief Financial Officer
Financial Review
3
As at 31 March 2020 Unit:RMB million
*Before provision for/reversal of impairment losses of inventories**Data is 15 months.
Summary of Results
19/20 18/19 YOY Change
Revenue 1,841 1,635 +12.6%
Gross profit* 1,138 914 +24.5%
Operating profit 484 584 -17.1%
Operating profit excluding investment income-65 -61 -6.6%
Net profit attributable to equity owner of the of the Company
366 429 -14.7%
Gross profit margin* 61.8% 55.9% +5.9ppts
Operating profit margin 26.3% 35.7% -9.4ppts
Operating profit margin rate excluding excluding investment income
-3.5% -3.7% +0.2ppt
Net profit margin attributable to equity owner equity owner of the Company
19.9% 26.3% -6.4ppts
Basic earnings per share(RMB cents) 6.25 7.34 -14.9%
Interim dividend and interim special dividend dividend per share(RMB cents)
2.75 2.45** N.A.
4
1,301
1,540
334
301
0
400
800
1200
1600
2000
18/19财年 19/20财年
中国 日本
19/20财年
YOY Change
-9.9%
+12.6%
+18.4%
1,635
1,841
China83.7%
(Last Year:79.5%)
Japan16.3%
(Last Year:20.5%)
SALES ANALYSISGroup’s Sales Analysis — By Markets % of Sales
FY19/20
As at 31 March 2020 Unit:RMB million
FY18/19 FY19/20
China Japan
5
DO
522
DO
549
IDO
329
IDO
558
DO
184
DO
238
IDO 53
IDO 43
117
88
67
64
FY18/19 FY19/20
Offline
E-Com
1,301
1.540
Offline71.8%
(+4ppts)*
DO35.6%
IDO36.2%
FY19/20
DO 15.5%
IDO 2.8%
E-com18.3%
(0.1ppt)
Kid’s Wear5.7%
(-3.2ppts)
Others4.2%
(-0.9ppt)
-4.5%
+18.4%
-24.8%-18.9%
+29.3%
+69.6%
+5.2%
YOY change
Offline
E-com
SALES ANALYSISChina Sales Analysis — By Channels % of China Sales by Channels
As at 31 March 2020 Unit:RMB million
*The YOY Change of the same period in brackets
Kid‘s wear
Others
Kid‘s wearOthers
6
DO: directly-operated
IDO: indirectly-operated
GROSS MARGIN ANALYSIS *
19/20 18/19 YOY
China 66.4% 60.6% +5.8ppts
Japan 38.2% 37.4% +0.8ppt
Group 61.8% 55.9% +5.9ppts
Apparel 71.9% 67.0% +4.9ppts
Footwear 59.4% 55.2% +4.2ppts
Accessories 80.4% 89.5% -9.1ppts
Gross margin of KAPPA Brand 69.6% 65.1% +4.5ppts
By regional market
As at 31 March 2020
China segmentBy products
*Before provision for/reversal of impairment losses of inventories7
EXPENSES ANALYSISYOY Advertising and
selling expensesSalaries and
benefit expensesDesign and
product development
China +29.3% +7.0% -17.2%
Japan -6.0% -21.2% +63.6%
Group +26.4% -0.5% +5.0%
%of Sales
Advertising and selling expenses
18/19 19/20 YOY
China 33.9% 39.1% 5.2ppts
Japan 3.0% 2.6% (0.4ppt)
Group 36.9% 41.7% 4.8ppts
557
720
50
47Group
607
Group767
141 151
52 41
Group192
Group193
29 24
11 18
Group42
18/19 19/20 18/19 19/20 18/19 19/20
Japan
China
Design and product development
18/19 19/20 YOY
1.8% 1.3% (0.5ppt)
0.7% 1.0% 0.3ppt
2.4% 2.3% (0.1ppt)
Salaries and benefit expenses
18/19 19/20 YOY
8.6% 8.2% (0.4ppt)
3.2% 2.2% (1ppt)
11.8% 10.4% 1.4ppts
As at 31 March 2020 Unit: RMB million
Group40
8
RMB MillionYOY Change over end
of Mar 2019
Net inventory 352 +0.6%
Balance of trade receivables 134 -12.7%
Balance of trade payables 121 +12.4%
Turnoverdays
YOY Change
Inventory 248 +40 days
Trade receivables 30 -11 days
Trade payables 91 +28 days
Cash conversion cycle 187 +1 day
China Segment – Operating Efficiency AnalysisAs at 31 March 2020
9
Analysis of Investment Income from China
19/20
Gains on disposal of financial assets 25.12
Financial asset investment income 93.23
Changes in fair value of financial instruments 378.03
Interest income from loan receivables 59.89
Net amount of others 10.70
Total 566.97
As at 31 March 2020 Unit:RMB million
By categories
10
Summary of Investment & Funds
0
20
40
60
80
100
120
Market Value39
Cash & Investment103
Fixed income----------7%
Cash & cash equivalents----22%
Investments in financial assets--------48%
Quoted securities-----23%
As at 31 March 2020 HKD 100 Million
Partners: Yunfeng Funds, Fosun & CITIC PE Funds etc.Investing in advanced technologies, financial services, new energy, medicine and manufacturing, etc.
*As at 31 Mar 2020, exchange rate was HKD1.00 to RMB0.9137
11
Investment Portfolio
634MN
137MN
860MN其他
32MN
Investmentsin financial assets
4,497MN
132MN 337MN
1,001MN
1,364MN
Fixed incomeAverage annualised return
7%-8%
Investments in financial assetsHistorical average internal return
15%-20%
Cash & cash equivalentsAverage annualised return
1.5%-3.5%
As at 31 March 2020 RMB
2020/2021Estimated annualised returnon investment before tax
12
Recommended Final Dividend As at 31 March 2020
13
*YOY is 12 months
Basic earnings per share 6.25 7.34*
RMB Cent 2019/2020 2018/2019
Final dividend payout ratio 70%
Total dividend 4.36
Interim dividend per share and special interim dividend
1.61
Recommended final dividend per share and final special dividend
2.75
2019/2020
BUSINESS REVIEW
Johnathan Zhang
Executive Director, CEO and President
14
15
Offline E-commerce Offline+E-commerce
Growth in Overall Retail Performance and
Strong Growth in E-commerce Business
Offline E-commerce Offline+E-commerce
Low-single-digitgrowth
High-single-digitgrowth
Mid-single-digitgrowth
30% to 35%growth
50% to 60%mid-high growth
40% to 50%low growth
Mid-single-digitgrowth
10% to 20%mid-growth
10% to 20%low-growth
High-single-digitdecrease
Low-single-digitdecrease
Mid-low-single-digit decrease
30% to 35%growth
50% to 60%mid-high growth
40% to 50%low growth
Low-single-digitdecrease
Mid-high-singledigit growth
Mid-high-singledigit growth
Q4
Q3
YoY Change in Retail
Performance
YoY Change in Same
Store
FY
30% to 40%mid-low decrease
10% to 20%low decrease
20% to 30%high decrease
20% to 30%high growth
Low-single-digitdecrease
10% to 20%low decrease
Mid-low-singledigit decrease
Mid-low-singledigit growth
Mid-low-single-digit decrease
20% to 30%high growth
Mid-low-single-digit decrease
Low-single-digitgrowth
Q1
Q2
16
YOY Change in retail performance
1st to 22nd Jan 2020 23rd Jan to 31st Mar 2020
Offline 87% (70%)
E-commerce 45% (25%)
Retail Performance for Q4 Jan 2020 Feb 2020 Mar 2020
Offline 24% (92%) (48%)
E-commerce 45% (10%) (36%)
Before Epidemic After Epidemic
Online and Offline Retail Performance affected by COVID-19
17
% Retail of Performance
End of Mar 20
No. of Stores
231 289
910 794
6846
0
200
400
600
800
1,000
1,200
1,400
End Mar 2019 End Mar 2020
Mall Dep Stores & Sports Plaza Standalone stores
-32% 4%
-13% 70%
+25% 26%
YOY
-6%1,2091,129*
Dep Stores & Sports Plaza 68%
(-5ppts)
Mall(incl. special sale)*28%
(+7ppts)
Standalone stores
4%(-2ppts)
*The changes in the proportion of the same period in brackets
Head shops accounted for 4%, down 1ppt YOY
Outlets accounted for 12%, up 3ppts YOY
Sales Channel Analysis
• There are 1129 stores as at the end of FY2019 with new openings of 223, new renovation of 155 and closure of 303. The number of comparable newly-renovated stores are 149
• Average monthly performance of the 149 comparable newly-renovated stores is RMB164,300, a year-on-year growth of 15%, and average area of the stores increased by 9.2 square meter.
No of store
Proportion
*As of March 20
A level stores has 24, 41% YOY change, accounting for 2%
Outlets has 73, 23% YOY change, accounting for 6%
18
19
MarketingDec 2019
Kappa X R39, an e-sports brandINNERSECT
Jan 2020Kappa sponsors RNG DOTA 2
Jan 20208on8 x Kappa London
Fashion Week Men
Mar 2020 KAPPA. RNG DOTA 2
Mar 2020To Be aKappa Girl
Feb 2020Kappa special edition for Valentine’s Day
Mar 2020Kappa X Crayon Shin-chan
Oct 2019
Kappa X NPC
Shanghai Fashion Week
20
Anime Crossovers
2019.06 Kappa x Doraemon
2020.03 Kappax
Crayon Shin-chan
X
Coming Soon……Kappa x One Piece
21
K is for Kappa
Kappa BANDASeries
Kappa WMNSSeries
22
The “Streets and Alleys” Series – a New
Year Special
Claw cranes set up in stores for New Year
celebration
Online lucky draw for New Year
celebration
Kappa New Year Fortune Series
23
Excellent retail performance of special
Valentine’s Day edition vulcanized
shoes
Significant growth in sales of
accessories, such as handbags
Valentine’s Day series receive
numerous “likes” on social media
platforms
Valentine’s Day Series
24
Bulk Orders Management
Transfer to bulk orders model, build up bulk orders accounts.
Customer Transformation
Cloud logistics launched in Jan 2019.
No. of cloud stores increased from 154 in Mar 2019 to 465 in Mar 2020.
System Switching
From monthly settlement to daily real-time settlement.
Settlement Period
4 nationwide logistics and distribution centres: Wuhan, Chengdu, Xushui and Shenyang
Distribution rate increased by 95%.
Logistics Establishment
Establishment of incentive programme.
BU Incentive Implementation
25
Upgrades of sales channels
Product specialisation for each store in terms of
style, category and variety
Supply-demand structure
adjustmentMonthly adjustment on proportion of sub-categories of products subject to actual retail demand
Regional procurement
planGradual formationRight channels, right timing and right products
1 Bulk Orders Management 2
3 4Finalising procurement
plan before placing orders for
centralisation
Bulk Orders Management
Preparation
ProductPlanning
Design Development
Samplesadjustment
Order placement
meeting
Preparation For
product launch
Key Stages of Product Launch under Bulk Orders Model
26
Logistics optimisation
1. 4 distribution centres
Xushui
Wuhan
Chengdu
Shenyang
2. Efficiency enhancement
Significant time reduction for product returns
Distribution rate of 72 hours to stores
Increased efficiency in
orders handling in 48 hours3.Partnership
Increasing competitiveness and efficiency as well as controlling costs by introducing various operators;
Remarkably reducing unit cost
of packaging consumables;
Optimising distribution solutions
4. Cost optimisationLogistic costs for FY2019 was 3.1%
Logistic costs for the same period of FY2018 was 4.1%
1. Integration of retail finance and business
Achieving real-time updates between retail POS data and financial figures by integrating finance and business of retail
stores.
2. System implementation for bulk purchase
System switching for bulk purchase completed. The system covers 90% of the stores of bulk purchase customers.
3. Promotion of SCRM & omni-channel network
Ongoing facilitating and operating SCRM project for online inventory management through omni-channel network.
Backstage Support for Bulk Purchase Management
Upgrades of information
system
27
E-commerce BusinessAge18-24 Customers YOY growth over 50%
Consumption structure
0%
5%
10%
15%
20%
25%
30%
35%
40%
18-24 25-29 30-39 40-49 50+
2018 2019
28
618 shopping festival*↑70-80%
Double 11↑40-50%
Double 12↑60-70%
E-commerce Business
( searching products→products available for sale)
Digitalisation era
Products available for sale + brand asset customisation
Customer Appreciation
Original model – searching products
*618 Shopping Festival from 1st Jun to 20th Jun.
New flywheel effect
Data
Product Transformation
29
As offline stores affected by COVID-19,
they have increasingly
been supporting online sales
Tightened measures for
COVID-19 and caring for staff
Online sales underpinned byoffline diverse products
Launch of WXApp (WeChat shop)
On-time adjustment of orders
Measures implemented at back office;
No suspected or confirmed case of COVID-19 found in our Group
Sales channels COVID-19 Support - Voluntary actions
Donating medical
emergency supplies
29 January 2020:
• As said by Mr. Chen Yihong, the
chairman and an executive Director
of the Group, “it is our obligation and
responsibility to support the
nationwide prevention and control
measures of COVID-19”, and Kappa
brand and Phenix brand under the
Group has promptly donated RMB6
million in total through China Charity
Federation for supporting
nationwide prevention and control of
COVID-19
30 January 2020:
• As part of our corporate social
responsibility, the donation has
been announced via our WeChat
official account;
March 2020:
• China Dongxiang has donated
957 pairs of light -weight sport
shoes to Cabin Hospital in Wuhan
and Tianjin Medical Team
Measures in Response to COVID–19
Swift administrative response
OUTLOOK
Cherry Chen
Executive Director and Co-President
30
31
New retail planningOptimizing offline channels
Promoting Malls/Outlets
Over 150 new openings with
a focus on outlets operation
Enhancing store efficiency
Upgrading stores and
enhancing retail management
Promoting omni-channel
Integrating online and offline,
connecting market and sales
OthersFurther increasing efficiency to
improve inventory turnover
and liquidity
Setting up social customer relationshipmanagement
Setting up a new membership system
to increase members’ loyalty
and interaction
Improving cloud logistics
Ensuring effective sales support
to stores through effective control
over every part of cloud logistics
Opening WeChat Mall
No. of members
End of March, there were 860,000
members in total. Percentage of sales
revenue was 48% and repeat purchase
rate was 29%
Channel Strategy – Offline Optimisation and New Retail Planning
32
Brand Strategy
Deepening brand fashion positioning
Strengthening brand DNA, taking sports as the core,
leading the fashion
Guided by consumer demand, upgrading and
improving product line and wearing scenes
Strengthening communication and interaction with
consumers through IP/cross-border forms
33
Key Actions in Apparel Product Planning
Highlighting brand product features
Layout product lines with sports assets and brand DNA;
Significantly Improving quality to enhance products’
competitiveness;
Diversifying woman’s fashion in sports
Expanding women‘s fashion products;
Enhancing women's fashion
Diversifying product subgroups
Diversifying profitable product subgroups to identify new
business opportunities
Maximizing mix-and-match across product subgroups to
increase bundled sales of related products
34
Key Actions in Shoes Product Planning
Repositioning Vintage Series
Innovative works combined with brand DNA;
Material upgrades to improve texture and
wearing experience
Focusing on running shoes and vulcanized shoes
Focusing on running shoes and vulcanized
shoes
Reshaping Kolumn
Creating new shape of Kolumn on the basis of
its original form
Expanding woman’s fashion in sports,
strengthening sales opportunities with apparel
categories
35
IP Items
KAPPA XKazuki Kuraishi
KAPPA x JIEDA
KAPPA xSWAROVSKI
KAPPA x LEO
Brand
I P
Valentine’s Day EditionChristmas Edition
Limited
Edition
KAPPA x Doraemon
KAPPA x Modern Sky
KAPPA xCrayon Shin-chan
KAPPA xKeith Haring
KAPPA x One Piece
Anime
I P
The Spring Festival Edition
Supply chain reform
Strengthening product
innovation and development
Focusing on advancing the
flexible supply chain fast
reaction project
36
37
E-commerce Platforms
Key objectives in 2020
Targeting consumer groups of our brand and identifying mainstream platforms with an emphasis of
new consumption pattern of young consumers and sinking market as well as new consumption platforms
Live streamingApp
WeChat Group
Video clip
38
DisclaimerThis presentation contains certain forward-looking statements inrelation to the Company’s financial conditions, operating resultsand business. Such forward-looking statements represent theCompany’s expectations or beliefs regarding future events andare subject to known or unknown risks and uncertainties. Suchrisks and factors might result in significant difference betweenactual results, performances or events and the results,performances or events stated or implied in such statements.Certain statements, such as those including words andexpressions such as “potential,” “estimate,” “expect”,“anticipate,” “target”, “intend,” “plan,” “believe,” “project” andsimilar phrases expressed in different forms, can be regardedas “forward-looking statements.” Forward-looking statementsare subject to inherent risks and uncertainties. It should benoted that a number of factors might result in the actualoutcome deviating from conditions expected or implied in theforward-looking statements and such deviation might besignificant in some cases. The contents of the forward-lookingstatements are accurate as at the date on which such forward-looking statements are made, and should not be assumed tohave been revised or updated to reflect latest information orsubsequent events. Market trends and factors that are expectedto affect the operating results of the Company are set out in thesection headed “Financial Review” and other sections.
Website: http://www.dxspor t.co m Email: [email protected] Tel: +86 (10) 6783 6585 Fax: +86 (10) 6785 6606 Address: 21/F, 2 Jingyuan North Street, Beijing
Economic and Technological Development Zone, Beijing, China
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