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Investor PresentationJuly 2010
2
SKNL - a story of Growth
Over the years, SKNL has evolved to a
577451-001
A customer led, design-centric player with focused brands for each market segment
Global reach with brands and businesses in India, USA, Canada, UK and Italy
Rapidly growing in Ready to wear and Branded Fabrics markets
Vertically and laterally integrated business conglomerate
Seamless supply chain
Multi-locational with manufacturing units in India, Italy, UK, USA, and Canada
Led and managed by industry experts
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SKNL is a Multinational Clothing Major with estimated revenues in excess of US$ 1 billion**
577451-001
SKNL Indian OperationsSKNL European Operations*SKNL North American Operations*
HMX, USA Coppley,Canada SKNL UK Leggiuno, Italy SKNL & RTIL
Revenues: Rs.1169 Crs – 28 % Revenues: US$ 42 mn – 5% Revenues: US$ 699 mn– 81 %
Export Markets
* Only for a part of the year ** Annualised for CY 2010
SKNL North American Operations*
Revenues: US$ 117 mn– 14%
RTIL
26%
SKNL
55%
Overseas
19%
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The SKNL Value Creation Chain577451-001
Garmenting
Retail
Wholesale
5
Corporate Structure577451-001
Consumer Textiles
Luxury Textiles
HVFCPremium
Ready-to-wear garments
Ready-to-wear
garments
Future SBUs
74.4%
SKNLInternational Operations
Leggiuno
ItalySKNL (UK)
HMX
USA
100 %
Home Textiles
SKNLListed on Indian Stock Exchanges
Reid & Taylor (India) Limited
GIC
25.6%
Note: GIC acquired 25.6% stake in Reid & Taylor (India) Limited for INR 9,000mm
6
Strategic Growth577451-001
Achieved a consistent revenue growth of 35% (CAGR) for the last 3 years in the
domestic businesses
Global acquisitions provided 37 brands
across premium and super-premium segments of the apparel market
with distribution network of large departmental and specialty stores
Additionally, gained access to brands in the luxury segment enabling supply of fabrics
These acquisitions are based on the ‘back-end, front-end’ synergy model that leverages
key strengths
These acquisitions facilitate transfer of technical know-how for High Value shirting
and Garmenting
7
Present in all Product Categories - 1
Brands catering to different Socio- Economic Segments2
Not Dependent on any one single raw-material3
Key Own Manufacturing Units with cost effective out-sourcing4
Fabrics Apparels Home Textiles
De-risked Strong Business Structure
8
Segment Initiative Status
Leggiuno Italy
One of the top three Shirt Fabric manufacturers in the world.
Produces dyed yarn, piece dyed and digitally printed linen fabrics for high end shirt brands
Completed
HMX, USA US Premier tailored clothing manufacturer Completed
Baruche SuperFine Cotton (BSFC)
Setting up capacity to cater to the international as well as domestic markets Commissioned
Home Textiles Capacity expansion to cater to high demand in the post quota regime Under installation
Luxury Textiles
Weaving & Spinning capacity expansion along with balancing equipment to cater to the domestic and international markets
Under implementation
Consumer Textiles Increased value addition by scaling up premium blended suitings and adding
capacity for spinning, weaving and processing of premium blended fabrics
Under implementation
Ready-to-Wear
Introducing new brands to increase market share in the segment
Casual premium brand
Mass brand
Luxury brand
Setting up a suits factory at Bangalore
Setting up a Shirtsfactory in Gujarat
Under implementation
BSFC– spinning unit Setting up cotton spinning capacity – backward integration of BSFC Under implementation
Growth Initiatives Across Different Segments
Growth Initiatives – Building Scale & Creating Synergy Organically and Inorganically
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Roll out of 160 additional EBOs
Expansion of franchisee EBO networks
Deeper penetration in MBO channels
Setting up suits factory (300,000 pcs / annum)
Setting up shirts factory ( 3 million pcs/ annum)
Scaling up capacity utilisation at HVFC
Capacity expansion in luxury and mid-premium textiles
Growth Drivers
Capturing more value from direct retailing
Backward & forward integration in HVFC and Belmonte
Increased share of RTW in revenue composition from 11% to 25% (Target 40% in coming 2 years)
Scaling up the value chain in all brands
Expansion of Topline Enhancement of Margins
Drivers of Growth
10
Pillars of Strength for SKNL577451-001
1
Mirroring the India consumption growth story
Strong portfolio of domestic and international brands
2 Diversified business with product offering across the market segments
3 Multi-format distribution network
4Fully-integrated production facilities
5 Experienced management team
6 Strong financial growth trajectory
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Brands577451-001
1
The only Indian company to operate 45
globally well established textile brands
Diversified portfolio of well recognized brands
Strengthened through celebrity
endorsements
Advertising campaign across India using
different media in several languages
Brand Products Achievements
Worsted fabrics Ready-to-wear
One of the leading players in Luxury Suitings
Blended fabrics Workwear Ready-to-wear School Uniform
One of the leading player in uniforms
Bed Linen & Bath Linen Table & Kitchen Linen
Development of home textiles as strategic business unit
Ready-to-wear for men and women
A brand with British heritage for India
A total wardrobe in terms of Shirts/Trousers/ T-shirts/Denims/ Accessories
Strong value proposition.
Soft Launch in 3 states in southern India. Pan India Launch toward year end.
Fashion inclined casual
clothing for Out Of Office Wear (OOOW)
To be launched
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Brands577451-001
1
Men’s tailored clothing, furnishings and Sportswear
Men’s tailored clothing, furnishings and sportswear
Knitwear
Career apparel and sportswear
Denim and sportswear
Sportswear and golfwear
Men’s tailored clothing and furnishings
Men’s denim and sportswear
Denim and sportswear
Men’s tailored clothing sold exclusively at Kohl’s
High Fashion shirt fabric brand preferred by
Luxury brands
Internationally renowned brand
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Strong Brand Visibility - India577451-001
1
Contemporary in design and customer friendly stores
14
Strong Brand Visibility - Internationally577451-001
1
Pan-USA wholesale distribution to all leading US department stores and speciality stores
15
Company Overview – Strength Through Diversity577451-001
* to be launched this year
The only company in India to operate across all 3 segments of the industry - Fabrics - Apparels - Home Textiles Branded presence in all socio-economic segments Operates in all fibre segments
(1) Only includes revenue of HMX from August 7, 2009 onward
(2) After Minority Interest
(3) Figures above have been rounded to nearest whole number.
(4) 1 US $ = INR 45, consolidated figures may be subject to some rounding errors
Luxury Textiles Consumer Textiles HVFC Home Textiles (THE)
Sales: US$ 170 mn
EBITDA: US$ 62 mn
EBITDA Margin: 36.7%
Contribution
Sales: 20%
Sales: US$ 352
EBITDA : US$ 73 mn
EBITDA Margin: 20.8 %
Contribution
Sales: 41%
Sales: US$ 3 mn*
EBITDA : US$ 0.1 mn
EBITDA Margin: 3.3 %
Contribution
Sales: 0 %
Sales: US$ 86 mn
EBITDA: US$ 15 mn
EBITDA Margin: 17.9%
Contribution
Sales: 10%
Sales: US$ 88 mn
EBITDA: Rs. 19Crs
EBITDA Margin: 21.1 %
Contribution
Sales: 11 %
2009–10
Reid & TaylorLuxury Suitings
Reid & TaylorPremium NaturalFiber Suitings
High Value Fine Cotton & 100% Natural Fiber Shirtings
“Baruche”
Carmichael HousePremium
International
Sales(1): US$ 159 mn
EBITDA: US$ 2 mn
EBITDA Margin: 1.4 %
Contribution
Sales: 18%
Leggiuno, Italy HMX SKNL (UK)
CONSOLIDATED
Sales US $ 858 mn, PBIDT US$171 mn, PBIDT Margin 20 %PAT2 US$ 51 mn, ROACE 20.3 % D/NW 1.16
BelmonteDaily Wear
Uniformity Uniform Fabrics
Medium Value Cotton Fabrics
S. KumarsWork Wear
Ready to Wear (TWS)
Stephens BrothersSuper Premium
Reid & TaylorPremium
KRUGER*Casual Premium
BelmonteMid-Premium
World PlayerEconomy
2
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Present in all Product and Fibre Categories577451-001
SKNL Product Segments
Only Textile Major in All Fiber and Product categories
Market Leader in Uniforms with 30% market share
# 2 in Worsted Suitings
Largest Institutional Supplier of Textiles
Natural
Fibers
Blended
Fibers
Man Made
Fibers
Wool Poly-Wool Polyester
Cotton Poly-Viscose Viscose
Linen Wool-Linen Nylon
PREMIUM
MID PREMIUM
ECONOMY
SUITING , APPAREL & HOME TEXTILES
SUITINGS, APPAREL & HOME TEXTILES
SUITINGS, APPAREL & HOME TEXTILES
SUPER PREMIUMLUXURY APPAREL & SUITINGS
75mn people
160mn people
250mn people
25mn people
Un-branded 450mn people
Market Position
Caters to all socio-economic segments of the Indian society
Well placed to capitalize on the growth in consumption pattern of the Indian middle class
Launching a Pan-India brand in the economy segment – the largest section of the society
Luxury Textiles
24%
Apparel 25%
Consumer Textiles
41%
Home Textiles
10%
2
17
Presence in All Branded Socio-Economic Segments577451-001
MID-PRICEBelmonte
ECONOMYS.Kumars
PREMIUMReid & Taylor / Baruche
FABRIC
Not Catered to by SKNL UNBRANDED
SUPER PREMIUMStephens Brothers
LUXURY
PREMIUMReid & Taylor/ KRUGER
MID-PRICE Belmonte
READY TO WEAR
Not Catered to by SKNL UNBRANDED
ECONOMYWorld Player
PREMIUMCarmichael House
ECONOMY
LUXURY
HOME TEXTILES
UNBRANDEDNot Catered to by SKNL
Present across diverse categories and in different socio-economic segments
2
18
Revenue Composition577451-001
On account of the acquisitions which are largely in ready to wear; extension of fabric brands into
garments and launch of new garment brands, the share of RTW in total revenues will increase to
30% this year.
212
646
448
56
2008-09 2009-10
Fabrics Garments
Garment Fabric Mix
89%
11%
US
$ M
n 75%
25%
2
19
Multi-format Pan-India Distribution Network577451-001
3
Deep distribution model penetrating all addressable markets for SKNL products
Luxury Textiles Consumer Textiles HVFC Home Textiles Ready to Wear (TWS)
Reid & TaylorLuxury Suitings
Reid & TaylorPremium NaturalFibre Suitings
S.KumarsWork Wear
BelmonteDaily Wear
UniformityUniform fabrics
100% Natural Fibre Shirtings
Super Premium
Carmichael HousePremium
New Brand (To be launched)Mid-Premium
Stephens BrothersSuper Premium
Reid & TaylorPremium
Kruger (to be launched)Casual Premium
BelmonteMid-Premium
Multi Brand Outlets 60%
Large Format Stores
6%
Institutional Sales15%
Export Sales3%
Exclusive Brand Outlets
16%
60+
Agents
400+
Wholesale Dealers
30,000+
Retailers
FranchiseeModel
Company Operated
Note: Distr ibut ion channel cont r ibut ion as on March 2010
20
Multi-format Global Distribution Network577451-001
3
Large network of agents, resellers, wholesaler and retailers
Specialty Stores Department Stores Wholesale Distribution Exclusive Brand Outlets
GolfCustom Clothing
OwnFranchised
21
Manufacturing577451-001
4
Sno Major Plants Location Products Manufactured
1. Reid & Taylor Worsted Suiting Unit
Mysore, Karnataka Worsted Suiting, Premium P/V Blended Suiting
2. S.Kumars Suiting Unit Dewas,Madhya Pradesh Uniforms, Work Wear Fabrics, Polyester and Polyester-Viscose Blended Suitings
3. Home Textile Chamunda Standard Mills
Dewas, Madhya Pradesh Polyester Blended Yarn, Grey Fabrics (PV, PC, 100% Cotton), Medium Value Cotton
4. Total Wardrobe Solutions Bengaluru, Karnataka Shirts, Trousers, Blazers, Suits and Other Accessories
5. Home Textiles (Under -Implementation)
Jhagadia,Gujarat Home Textiles
6. HVFC Jhagadia,Gujarat High Value Fine Cotton Shirting
7. Leggiuno Italy,& UK Luxury Cotton Shirting & Woolen Fabrics
8. HMX Illinois, USA Tailored Products
9. HMX New York, USA Tailored Products
10. Coppley Hamilton, Canada Tailored Products
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Human Capital577451-001
5
Anil Channa
Dy. Managing Director & COO
STRATEGIC BUSINESS UNITS (SBUs)
Board of Directors
Nitin Kasliwal
Vice Chairman & Managing Director
Col. S. K. RajeGroup Admin & HRD
Janak Dave
COO – Reid & Taylor
BarucheSuperfine
Cottons
Anupam Dikshit
COO
Luxury Suitings
Arvind Gupta
COO
Home Textiles
Dinesh Sharma
COO
Vijay Bakshi
President
Exports Business
D.D. AvariDirector – Corp. Affairs
J. S. ShettyPresident- Finance & CFO
Anees FazalbhoyGroup Director
Corporate
Functions
Nimesh ShahCompany Secretary
ConsumerTextiles
Rajan K. Garg
COO
Seasoned professionals acknowledged as leaders with great relationships and domain expertise
Pradeep Mukim
COO - Belmonte
Johnny John
COO – World Player
Paolo Ingegnoli
CEO
Leggiuno
Doug Williams
CEO
HMX
Michael Morris
President
SKNL (UK)Ready-to-
Wear (TWS)
Ashesh Amin
President –
Apparel
& Retail
Nitin Chabbra
Brand Head – Reid & Taylor
Quateel AhmadSVP - Advertising
Ashley Potter
Director
SKNLInternational
Salil BawaSVP – Investor Relations
Paritosh Jain
COO Retail Ops.
Surjit Singh
COO – Retail Dev.
23
Revenues PBIDT Margin
Consolidated Financials
858
391
275
506
2006-07 2007-08 2008-09 2009-10
172
90
56
108
20.2%
23.0%
20.0%
21.4%
0
20
40
60
80
100
120
140
160
180
200
2006-07 2007-08 2008-09 2009-10
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
CAGR 46%
US
$ M
n
PBIDT marginPBIDT
6
24
Net Profit after minority interest ROACE & EPS(in Rs.)
Consolidated Financials (contd)
51
46
24
39
2006-07 2007-08 2008-09 2009-10
20.3%21.1%
16.3%
20.1%
7.4
9.710.2
8.1
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2006-07 2007-08 2008-09 2009-10
0.0
2.0
4.0
6.0
8.0
10.0
12.0
CAGR 29%
US
$ M
n
EPS (Basic)ROACE%
ROACE excludes investment in new projects
6
25
SKNL has a healthy Total Debt to Networth Ratio in the Region of 1:1
Top 10 textile companies’ average D/Nw ratio is 2.63
Weighted Average Cost of Debt is 10 %
Technology Upgradation Funds @ 7–8 %
Debt in overseas companies @ 5–6 %
Healthy Total Debt to NW Ratio
544
630
387 384
1.16
1.01
0
100
200
300
400
500
600
700
2008-09 2009-10
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
Total Debt Networth D/E
6
26
SKNL does not follow bill discounting/factoring model prevalent in the industry
Current Asset Levels have reduced despite a 35% CAGR in Domestic Sales
Exports account for a meager 3% of Total Sales
Avoidance of discount Sale of Fabrics
Delcredere Agents / Distribution Network has a long association with the Group
Negligible Bad Debts History
3.5
5.95.5
5.9
4.54.0
4.95.1
4.0
6.6
2005-06 2006-07 2007-08 2008-09 2009-10
Inventory Level (No. of months of sales) Debtors Level (No. of months of sales)
Current Asset Levels6
27
Capex Plans
670
426
2007-08 2008-09
Capital Expenditure
Completed On-Going
Luxury Textiles Weaving Capacity Expansion
(4.8 mn mts to 8.4 mn mts)
HVFC Setting up Capacity
Home Textiles* Capacity Expansion * Under Installation
Luxury Textiles Weaving & Spinning Capacity Expansion
(8.4 mn mts to 10.2 mn mts)
Belmonte Fabrics Weaving, Spinning, Processing
Ready-To-Wear New Brand Launches, Suits Factory, Shirts Stitching Unit
HVFC Cotton Spinning Unit
INR
Cr
6
28
Advantage SKNL
SKNL is a diversified, brands-led, multi-fibre, multi-product company operating in different
consumer segments across the globe, through multi-locational manufacturing which mitigates risk
SKNL’s business model leverages robust domestic growth
Captures value at each stage in the chain
Strategic overseas acquisitions
Provide access to premium/ luxury retailers in the North America & Western Europe
Back-end, front-end synergy
A win-win situation with telescopic margins
Management teams at the helm of each business are seasoned professionals
Leaders with great relationships and domain expertise
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Overseas businesses to provide front-end back-end Synergy
Enable capturing of Telescopic Margins
HVFC Luxury Textiles RTW Brands
RTW Brands and Stitching Units International Businesses
Focus on High Margin Businesses2
Focus on Lean Working Capital Businesses3
Focus on Huge Value Addition Capturing4
Wool to ready Suits at Best Retail Counters around the world Cotton to Ready Shirts Capture Retail Sales
Successful Overseas Acquisitions 5
Revenue Growth - CAGR 35%, EPS poised to double by 20126
Leverage on Low cost of Debt7
Considering Unlocking the Reid & Taylor value through an IPO1
Measures for Shareholder Value Accretion
30
STRICTLY PRIVATE AND CONFIDENTIAL
Important Notice
By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations:
The information in this document has been prepared by S.Kumars Nationwide Limited (“SKNL") solely for use at a presentation. This document and its contents are confidential and may not be distributed, published, reproduced (in whole or in part) by any medium or in any form, or disclosed or made available by recipients, to any other person.
Nothing in this presentation constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient.
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, or opinions contained herein. Neither SKNL, its investment manager, nor any of SKNL's advisors or representatives shall have any responsibility or liability whatsoever (for negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. The information set out herein may be subject to updating, completion, revision, verification and amendment and such information may change materially.
This document does not constitute or form part of, and should not be construed as, an offer, invitation or inducement to purchase or subscribe for any securities nor shall it or any part of it form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. Any decision to purchase securities should not made on the basis of the information contained in this document. This document does not constitute a recommendation regarding the securities of SKNL.
The information communicated in this document contains certain statements that are or may be forward looking. These statements typically contain words such as "expects" and "anticipates" and words of similar import. By their nature forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. z
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Thank you