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25 June 2015
Annual Results FY14/15 For the year ended 31 March 2015
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Agenda
• Group Financial Performance
• Business Review by Market
• Outlook And The Way Forward
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Group Financial Performance
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Year ended 31 Mar(HK$M)
2014/15 2013/14 YoY % Change
Turnover 8,992.8 8,756.1 +2.7%
Gross profit 4,039.2 4,073.0 -0.8%
EBITDA 1,172.5 1,314.2 -10.8%
Profit for the year 838.8 935.2 -10.3%
EPS – basic 29.5 cents 33.0 cents -10.6%
Return on equity 33.9% 40.2% -6.3 p.p.
Gross profit margin 44.9% 46.5% -1.6 p.p.
Net profit margin 9.3% 10.7% -1.4 p.p.
Final dividend per share 9.0 cents 9.0 cents --
Final special dividend per share 5.5 cents 5.5 cents --
Total annual dividend per share 23.5 cents 23.5 cents --
Dividend payout ratio ~ 80% ~ 71% +9.0 p.p.
Group
Performance for the Year
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Turnover
(HK$M)
% to Group
Turnover
HK & Macau 7,356.7 81.8% (LY: 81.4%)
Mainland China 347.0 3.9% (LY:4.2%)
Singapore 243.6 2.7% (LY:2.9%)
Malaysia 340.3 3.8% (LY:3.8%)
Taiwan 289.2 3.2% (LY:3.2%)
sasa.com 416.0 4.6% (LY:4.5%)
Total 8,992.8 100%
Year ended 31 Mar 2015
Total Turnover : HK$8,992.8M (+2.7%)
Group Geographical Sales Mix
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Year ended 31 Mar
(HK$M)2014/15 2013/14 +/- Change
CAPEX 149.9 267.8 -117.9
Net cash generated from
operating activities1,069.6 1,021.1 +48.5
Dividend for the year 668.5 668.0 +0.5
Net cash and bank balance
(As of 31 Mar)1,163.7 909.3 +254.4
Group
Sound Financial Position
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Business Review by Market
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FY2014/15 Q1 Q2 1H Q3 Q4 2H FY
YoY retail sales growth 6.7% 13.4% 10.2% 0.2% -4.3% -2.0% 3.3%
YoY same store growth 2.7% 10.7% 6.9% -1.4% -1.6% -1.5% 2.2%
Total no. of transactions (M)4.3
(+9.6%)
4.8
(+10.7%)
9.1
(+10.1%)
5.1
(+5.6%)
4.6
(+2.1%)
9.7
(+3.9%)
18.8
(+6.8%)
Avg sales/ transaction (HK$)370
(-2.6%)
376
(+2.5%)
373
(-0.0%)
402
(-5.1%)
396
(-6.3%)
399
(-5.7%)
386
(-3.3%)
Note: The above data includes the impact of deferred income adjustment on VIP bonus points scheme.
• Sales was significantly weaker in the second half, local consumption was badly affected by
local social environment in Q3 while tourist spending dropped in Q4 due to protests
• Ticket size held up for locals throughout the year while Mainland shoppers ticket size
weakened through the year
• Strength of the US Dollar make shopping in non US Dollar markets more attractive
HK & Macau Market
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Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points
*Source: Hong Kong Tourism Board
36.6%
23.3% 23.5%26.6%
15.6%
22.1%20.4%
12.0%21.2%
15.8%
11.1%
20.1%
11.8%13.8%
18.2%
7.7%3.2%
-3.2% -1.9%
-6.9%-8.6% -5.0%
-14.6% -15.1%
FY13/14 Q1 FY13/14 Q2 FY13/14 Q3 FY13/14 Q4 FY14/15 Q1 FY14/15 Q2 FY14/15 Q3 FY14/15 Q4
FY13/14 to FY14/15 Volume and ASP Changes of PRC Customers
Growth in no. of transactions
Growth of PRC tourist arrivals*
Change in avg sales/transaction
• Lower ticket size reflects changes in consumption behaviour
• Faster decline of ticket size in 2H due to our own drive to focus more on lower priced products to draw traffic
• Future sales growth driven by more traffic and quantity sold
0%
HK & Macau Market:
We Aim To Be The Driver of Lower Ticket Size
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• Focused on boutique stores roll out
• Sales decline due to product weaknesses: insufficient new product offerings and owned label importation issues
• Boutique stores increased contribution, narrowing operating losses
Year ended 31 Mar (RMB 000’)2014/15 2013/14
Sales 276,660 289,999
YoY sales growth -4.6% -0.02%
Total loss 24,474 53,723
China Market:
Focused on boutique stores roll out
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Retail (in local currencies)
Year ended 31 Mar
FY2014/15 2013/14
Singapore
YoY sales growth -2.6% +2.3%
Malaysia
YoY sales growth +6.2% +9.7%
Taiwan
YoY sales growth +3.8% +10.0%
Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points.
Weak performance due to
• Changes in management in the regional and local office
• The missing Malaysian Aircraft affecting Singapore and Malaysia
• Weak product offering
Other Markets Performance
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Year ended 31 Mar2014/15 2013/14
YoY sales growth +5.6% +2.6%
Remarks: The above data includes the impact of Deferred Income Adjustment for VIP bonus points.
• More focus on the China market which grew by 39%.
More weighting on flash and linked sales
Enhancing marketing capability & optimizing channel advertisements
Localized payment gateway
• Enhancing brand awareness e.g. Weibo fans grew from 1.4M to 2.1M
• Profitability affected by increased investments and A&P expenses
E-commerce
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12*House brands = Own brands + Sole-agent brands
Year ended 31 Mar 2015
• House Brand products sales mix declined from LY: 44.2% to CY: 43.3%
• Affected by sea-change in consumption pattern
• Average selling price of House Brand Products sold decreased by 12.1%
• Quantity of House Brand products sold increased by 14.3%
• Increased focus on local sources and PI products which are faster to market
• Personnel changes of Owned Label team affected the timeliness of our response to
fast changing market
• Changes resulted in weaker GP% and sales growth
Brand Management
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Outlook And The Way Forward
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• Moderating growth in Mainland tourist arrivals and weaker spending
• Sea Change in Mainland shoppers’ consumption preferences
• Anti-graft campaign in the PRC curtails demand towards high-priced items
• New Shenzhen residents Multi-Entry Visas limits visits to once a week
• USD/ HKD strength drives local customers and Mainland tourists to shop in
markets with weaker currencies
• Intensifying competition within the cosmetic industry, incl. price competition
• Political situation in HK and the anti- Mainland tourist sentiment
HK & Macau Market: Challenges
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Store portfolio
• Rationalize stores in tourist locations, build stores in residential locations, and modify size of specific stores to enhance productivity and profitability
• Try trendy boutique store format to attract new brands and customers to cater to new demand
Commence O2O business model and digitize personal service of our beauty consultants
• Cross border sales to Mainland customers after their return to the Mainland
Other initiatives to cope with new market circumstances
• Introduce more good value products to cater for the change of customer needs
• Strengthen the portfolio of Korean products and their visual merchandizing
• Attract and build local customer base
Strategy for Hong Kong And Macau Markets
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• Boutique store format bearing fruit
• Improve management structure and systems
• Improve operational efficiency and execution
• Improve product offerings and optimize commission scheme
Strategies for Mainland China Market
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New Senior VP in place: drive overall strategic development and execution
Strategies
• Build management resource, competence and team building
• Enhance product portfolio by introducing new brands and products
• Improve Visual Merchandising
• Intensive training programs, better incentive programs, and closer store
management monitoring
Cost initiative
• Reduce renovation cost
• Reduce inventory carrying cost
Strategies for
Singapore, Malaysia and Taiwan Markets
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Challenges
• Cross-border and online/offline competition
• Intensifying product and price competition from other shopping websites
and mobile apps
Initiatives
• Commence O2O operation and improve Cross Border fulfillment
• Launch new mobile app
• Synchronize platforms: cater for consumers’ cross platform behaviour
• Quick new product launches to adapt to fast changing market trends
• Adopt new marketing channels and optimization of old
• Build partnerships and alliances
Strategies for E-commerce
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Cross-border O2O Initiative drives future growth
Digitize the personal service of our beauty consultants
Drive sales and enhance online GP%
HK & Macauapproximately 1,200
well trained Beauty Consultants
provide exceptional service
Generated over HK$7 billion revenue (over 80% of Group’s total
turnover)
China
Online Shopping(Collect products in
stores or by post)
莎莎公眾號
Offline Shopping(Store)
Beauty Consultants
Moments(朋友圈) - Customers
Send standardized content Commission Commission
Advantage
• A more comprehensive online/offline shopping
experience for customers
• Contents delivered are standardized by the company
• Centralized customer data base for customer retention
• Can be replicated to other markets
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• New dedicated team to source new and trendy products
• Fast new product launches and re-order process to adapt to fast changing
market trends
• Supported by business and commercial intelligence
• Storyline and marketing improvements for Owned Label
• Build strategic relationships with major beauty brands
Category Management &
Product Development Strategies
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No. of Retail Outlets
As of 31 Mar 14
Opened ClosedAs of
31 Mar15
As of
31 Mar16
(estimated)
HK & Macau 106 9* 8** 107 112
Mainland China 61 15 14 62 62
Singapore 22 1 2 21 22
Malaysia 53 11 5 59 65
Taiwan 29 6 3 32 36
Total 271 42 32 281 297
Multi-brand “Sasa” Stores
* Opened: Tourist stores: 4; Non-tourist stores: 5
** Closed: Tourist stores: 3; Non-tourist stores: 5
Remarks: “Tourist stores” are defined as the traditional tourist area stores, which are different from the Group’s internal definition
There were three single-branded stores/counters in each of the HK & Macau and China markets as at 31 March 2015
• Expansion mode (increase penetration) – HK & Macau, Malaysia and Taiwan
• Optimization mode (enhance store contribution) – Mainland China and Singapore
Store Network Strategy Varies Between Markets
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Disclaimer
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the accuracy, timeliness, reliability, performance, completeness or suitability of the information
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commentaries, views and opinions, are provided for general reference only, and may contain
inaccuracies or errors. “Sa Sa” expressly exclude liability for any such inaccuracies or errors to
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shall not be liable to any direct and indirect damages and/or loss whatsoever related to the
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these terms and conditions.
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Q&A