li & fung overview software company 8. investor day 2019 li & fung spencer fung • change...

Spencer Fung, CEO

Li & Fung Overview

0

Investor Day 2019 LI & FUNG Spencer Fung

Highlights

1Spencer Fung

• New management with strong track record in place to restructure SCS

• 3D virtual design disrupting traditional supply chain and generating revenue

• Logistics continues strong momentum with multiple growth drivers

• Trade war leads to diversification out of China

• Opportunity for LF to leverage network of 50+ countries to gainmarket share

• Solid capital structure and strong operating cash flow


Our goal is to create the supply chain of the future to help our

customers navigate the digital economy and to improve the lives of

one billion people in the supply chain.

Three-Year Plan 2017-2019

2


Business SimplificationUS$

6.4B Divestment+ Spin off

2013

20.7B

3.3B 3.3B1.2B

3.3B1.2B1.9B

12.7B

201820162014

3


Our 3YP Core Themes

Speed Innovation Digitalization

Data Analytics Productivity Supply Chain

SolutionsGlobal Business

Development LF Ecosystem

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SCS Restructuring

5


Aggressive Plan to Respond to Changing Environment

Challenges What’s Needed Responses

Customer needs are changing

Production base shifting

End-to-EndDigital Supply Chain

Chief Digital Officer to accelerate digitalization

Chief Operating Officer to lead global sourcing & production platform

Reorganized account management teams

Bring greater focus on core customers

Improve global KPIs& productivity

Speed up development

6


Structure - Focused Reorganization

Focused Teams

Account Management

BusinessDevelopment

Sourcing & Production Platform

DigitalPlatform

Siloed Teams

Business Leader

Account Management

-Business

Development-

Production-

Digitalization

7


People - New Management Team

Joseph Phi, Group President

Darren Palfrey, CDODigital Platform

Wilson Zhu, COOSourcing & Production Platform

• 20 years with the Fung Group

• 9 years with Li & Fung and Executive Board

• 10+ years of high double-digit organic growth &

strong track record

• 32 years of experience

• Deep knowledge of China and the US

• 15 years as a Li & Fung customer

• Strong track record on execution

• 20 years of experience in retail and logistics

• Previously started digital supply chain

software company

8


• Change of culture

• Bridging of the siloes

• Leverage scale of LF and leverage cost

• Harmonize KPIs and improve customer service & vendor performance

• Enable faster shift of production between countries

• New team with a proven track record

Impact of Restructuring

9


LF Ecosystem

Speed Innovation Digitalization Data Analytics Productivity Supply ChainSolutions

Global Business Development

LF Ecosystem

• Our ecosystem of partners reaches more than US$2 Trillion of retail sales

• End-to-end sourcing and logistics services augmented by digital services

Areas of focus• 3D Virtual Design• Automation• Blockchain• Supply Chain Solutions

Types of partnership• Licenses• Strategic Alliances• Joint Ventures• Investments

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AM BD

SPPDP

Investor Day 2019 LI & FUNG Spencer Fung 11

1. Intermediary Disruption

2. Margin Disruption

SUPPLIER

3. Digital Disruption

CUSTOMER

BUYINGOFFICESUPPLIER CUSTOMER

SUPPLIER CUSTOMERLF

Analog Tasks Digital TasksDisrupting Traditional Supply Chains


1. Intermediary Disruption

2. Margin Disruption

SUPPLIER

3. Digital Disruption

CUSTOMER

BUYINGOFFICESUPPLIER CUSTOMER

SUPPLIER CUSTOMERLF

Analog Tasks Digital TasksDisrupting Traditional Supply Chains


Evolution of Global Trade

13

1974

• Multi Fibre Agreement created quota system that made global sourcing complex

2004 2005 2018

• China became factory of the world and simplified sourcing landscape

• US Sino relationship calls for diversification away from China

Macau

Taiwan

SingaporeKorea

Thailand

Indonesia

Malaysia

Shanghai

Honduras

Philippines

Shenzhen

Sri Lanka

Vietnam

Mauritius

Pakistan

Portugal

India

Bangladesh

Turkey

Cambodia

South Africa

Egypt

United Kingdom

Guatemala

United States

Mexico

Dominican Republic

Madagascar

Romania

Hanoi

Brunei

Germany

Nicaragua

France

Netherlands

Spain

Jordan

Bulgaria

Lithuania

Switzerland

Morocco

Italy

Dongguan

Panyu

Argentina

Brazil

Peru

Myanmar

Chile

2019+


Diversified Sourcing Strategy

Investor Day 2019 LI & FUNG 14Spencer Fung

China

Australia

Canada

United States

Mexico

GuatemalaNicaragua

BrazilIndonesia

Singapore

Madagascar

Vietnam

Hong Kong

Taiwan

Philippines

Japan

Korea

Thailand

Cambodia

Bangladesh

Chile

Egypt

FranceGermany

India

Italy

Malaysia

Mauritius

Netherlands

Pakistan

Portugal

Spain

Sri Lanka

Turkey

United Kingdom

Jordan

AM BD

SPPDP

Largest network in the industry helping retailers mitigate risks with increased tariffs

Global network about 50+production countries

20-30 years of deep relationships withlocal vendors, regulators and business communities

Proven ability to move quickly among countries of production

Total Sourcing Business from China: 2016: 54%

2017: 53%2018: 51%

Dominican Republic

Honduras

Kenya

Ethiopia

Lesotho

TunisiaMyanmar

Bulgaria

Lithuania

Romania

El Salvador

Haiti

Ukraine

Peru

Macau

Paraguay


Sizable Production Volume Outside China

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Vietnam India Bangladesh Cambodia Philippines

Latin America Turkey Sri-Lanka

Hard Goods

Soft Goods

Indonesia

$1 – 2 Bn $250M – 1Bn $100 – 250M

FOB volume (US$)

(1): include Guatemala, Mexico, Nicaragua, Haiti

(1)


India

Office opening since 1995

Vendor A 157M (16%) since 2005

Vendor B 123M (12%) since 2008

Vendor C 54M (5%) since 2005

Vendor D 53M (5%) since 2006

Vendor E 50M (5%) since 2006

Key Vendors Business Volume Years withLi & Fung

No. of Staff: 454

No. of Vendor: 416

No. of Factory: 484

Key Product Categories:

Bottoms(Pants / Shorts / ... )

Dress / Overall-Dresses

10%

11%

21%Home Textile(Bath Towels / Bedding...)

38%

Tops(T-shirt / Shirts... )

Others

19%


• Production will diversify out of China regardless of a trade deal

• Non-China vendors will have opportunity to absorb a large volumeof new orders

• China vendors will have opportunity to absorb orders fromsmaller vendors

• European customers will likely start looking at China more

• LF working with Chinese and Offshore governments toassist new factories to be set up

• LF can help with raw material sourcing and LF Logisticscan help with freight

2019 and Beyond

Spencer Fung


Summary

18Spencer Fung

• New management with strong track record in place to restructure SCS

• 3D virtual design disrupting traditional supply chain and generating revenue

• Logistics continues strong momentum with multiple growth drivers

• Trade war leads to diversification out of China

• Opportunity for LF to leverage network of 50+ countries to gainmarket share

• Solid capital structure and strong operating cash flow


• The information contained in this presentation is intended solely for your personal reference. Such information is subject to change without

notice and no representation or warranty express or implied is made as to, and no reliance, should be placed on, the fairness, accuracy,

completeness or correctness of the information contained in this presentation. This presentation does not intend to provide, and you may not

rely on this presentation as providing, a complete or comprehensive analysis of the Company�s financial or trading position or prospects.

None of the Company nor any of its respective affiliates, advisors or representatives shall have any liability (in negligence or otherwise)

whatsoever for any loss or damage howsoever arising from any use of this presentation or its contents or otherwise arising in connection with

this presentation.

• This presentation contains projections and forward looking statements that may reflect the Company�s current views with respect to future

events and financial performance. Readers are cautioned not to place undue reliance on these forward-looking statements which are subject

to various risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information,

future events or otherwise.

• This presentation does not constitute an offer or invitation to purchase or subscribe for any securities or financial instruments or the provision

of any investment advice, and no part of it shall form the basis of or be relied upon in connection with any contract, commitment or investment

decision in relation thereto, nor does this presentation constitute a recommendation regarding the securities or financial instruments of the

Company.

Disclaimer

li & fung overview software company 8. investor day 2019 li & fung spencer fung • change...

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