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Sa Sa International Holdings Limited
Interim Results FY11/12 Six months ended 30 September 2011
November 2011
1 1
Agenda
Financial Results
Business Review
Outlook & Strategies
2
Financial Results (For the 6 months
ended 30 September 2011)
3
Six months ended 30 Sep 2011
(HK$M) 1H 11/12 1H 10/11
+/- %
Change
Turnover 2,786.0 2,099.2 +32.7%
Gross profit 1,224.4 945.0 +29.6%
EBITDA 323.3 252.4 +28.1%
Profit for the period 224.3 176.3 +27.3%
EPS – basic 8.0 cents 6.3 cents* +26.4%
Return on equity 17.1% 15.7% +1.4%
GP margin 43.9% 45.0% -1.1%
Net profit margin 8.1% 8.4% -0.3%
Group Financial Highlights
* Adjusted for 1:1 bonus issue
4
Bonus Points System – Hong Kong & Macau
Bonus points system launched in Hong Kong and Macau in late May 2011
Small proportion of each sale treated as deferred income under Hong Kong International Financial Reporting Interpretation Committee - Interpretation 13 (“HK (IFRIC) – Int 13”)
The adoption of HK (IFRIC) – Int 13 (“Impact of Bonus Points System”) affected both sales revenue and gross profit margin in the first half
Bonus points expire on 31 March, 2012 – all bonus points would be redeemed or would expire by that date
5
Performance of the Group
(Excluded Impact of Bonus Points System)
Six months ended 30 Sep
2011
(HK$M)
1H 11/12 (as reported)
1H 10/11 +/- %
Change (as reported)
1H 11/12 (Excluded Impact
of Bonus Points
System)
+/- %
Change (Excluded Impact
of Bonus Points
System)
Turnover 2,786.0 2,099.2 +32.7% 2,817.1 +34.2%
GP margin 43.9% 45.0% -1.1% 44.4% -0.6%
Profit for the period 224.3 176.3 +27.3% 249.5 +41.5%
Net profit margin 8.1% 8.4% -0.3% 8.9% +0.5%
6
Six months ended 30 Sep 2011
(HK$) 1H 11/12 1H 10/11
Interim dividend per share
– basic
– special
6.0 cents
2.0 cents
4.0 cents
4.5 cents*
1.5 cents*
3.0 cents*
Dividend payout ratio 75.1% 71.3%
Dividends
* Adjusted for 1:1 bonus issue
7
Six months ended 30 Sep 2011 1H 11/12 1H 10/11 +/- Change
(HK$M)
CAPEX 111.5 62.0 +49.5
Cash generated from
operating activities 208.8 158.4 +50.4
Dividends for the period 168.5 125.7 +42.8
Cash and bank balance 454.7
(as of 30 Sept 2011) 502.7
(as of 30 Sep 2010) -48.0
Net working capital 84 days 74 days +10 days
Effective tax rate 17.8% 18.2% -0.4%
Key Financial Indicators
Group
8
Business Review
9
Group Turnover
— Geographical Analysis
Turnover
(HK$M)
% to Group
Turnover
HK & Macau 2,205.0 79.1% (LY:77.6%)
Mainland China 108.5 3.9% (LY:2.9%)
Singapore 117.0 4.2% (LY:4.4%)
Malaysia 117.6 4.2% (LY:4.9%)
Taiwan 107.1 3.9% (LY:3.7%)
sasa.com 130.8 4.7% (LY:6.5%)
Total 2,786.0 100%
Six months ended 30 Sep 2011
Total Turnover: HK$2,786.0M (+32.7%)
10
Single-brand stores / counters "Sasa" stores
#Include 5 clearance outlets
*Include 4 clearance outlets
An Overview of Retail Outlets
As of
31 Mar 11
Net +/-
(Apr11 – Sep11)
As of
30 Sep 11
HK & Macau 78# +6 84*
Mainland China 26 +13 39
Singapore 20 -- 20
Malaysia 38 +1 39
Taiwan 19 +2 21
Total 181 +22 203
As of
31 Mar 11
Net +/-
(Apr11 – Sep11)
As of
30 Sep 11
2 -- 2
21 -- 21
-- -- --
-- -- --
1 -- 1
24 -- 24
Six months ended 30 Sep 11
11
Six months ended 30 Sep 11 1H
YOY retail and wholesale sales growth 35.3%
YOY retail and wholesale sales growth
(Excluded Impact of Bonus Points System) 37.2%
YOY same store growth 24.1%
YOY same store growth
(Excluded Impact of Bonus Points System) 26.0%
Av sales/ transaction (HK$) 310
(+15.7%)
Total no. of transactions (M) 6.9
(+16.5%)
Performance in Hong Kong & Macau
12
Sales Performance in Other Markets
Retail and Wholesale (in local currencies)
Six months ended 30 Sep 11
1H
Mainland China
YOY sales growth
71.2%
Singapore
YOY sales growth
12.1%
Malaysia
YOY sales growth
9.3%
Taiwan
YOY sales growth
27.5%
13
Increased presence in PRC
- Net increase of 13 stores
(Q1: 6 stores; Q2: 7 stores)
- 39 “Sasa stores” and
21 Suisse Programme counters as of 30 September 2011
- Central cluster starting to take shape
(6 stores + 4 counters)
- 15 stores to open under leases signed,
covering 8 new cities and 6 existing cities
YOY sales growth +71.2%
Double-digit same-store sales growth in department store counters
Increasing support from landlords
Increasing support from major beauty groups
- L'Oréal Group: L'Oréal, Maybelline & Yue Sai
- Shiseido Group: Za
- KOSE Group: Junkisei, Nature & Co, RECIPEO and WHITE ST
Performance of Mainland China Market
Progress made:
2011 The Most
Popular Store,
An award received
from Wanda
‘Sasa’ stores FY10/11 As at 30 Sep 10
FY 11/12 As at 30 Sep 11
No. of Cities 5 14
No. of Stores 19 39
Gross Rental Footage
(sq. ft.) 52,645 113,040
No. of Store Staff ~330 ~600
14
Launched new store image
Performance of Mainland China Market
Six months ended 30 Sep 11
Progress made:
15
Added more well-known beauty brands
Performance of Mainland China Market
Six months ended 30 Sep 11
Progress made:
16
Beijing
Tianjin
Shanghai
Mainland China Market
—“Sasa” stores network
16 Six months ended 30 Sep 11
Central China
Shenyang
Wuhan
Xiamen
Yinchuan
Shijiazhuang
Zhenjiang
Addition to network in First Half (YE Mar 12)
Net Increase: 13 stores
Eastern China
Southern China
Northern China
Qingdao
Suzhou
Ningbo
Shaoxing
Yichang
“Sasa” stores in new cities
“Sasa” stores in existing cities
New outlets added during 1 Apr to 30 Sep 2011
9 existing cities
with “Sasa” stores opened
before 1 Apr 2011
5 new cities with
“Sasa” stores opened
between 1 Apr to 30 Sep 2011
Northern China
Beijing
Tianjin
Qingdao
Eastern China
Shanghai
Suzhou
Ningbo
Shaoxing
Central China
Wuhan
Yichang
Northern China
Shenyang
Yinchuan
Shijiazhuang
Eastern China
Zhenjiang
Southern China
Xiamen
15 leases signed but stores not yet opened
17
Turnover:
Steady improvements in YOY sales performance
New marketing and product strategies
Market diversification successful
Built loyalty - repeat purchases increased
Tapping the market within Mainland China
Now in top online shopping sites, incl. Taobao, 360Buy,
Paipai, Redbaby and Easybuy
Launched an award winning iPhone app (March 2011):
Certificate of Merit of iPhone app – Retail, in the WTIA
Marketing Smartphone Apps Industry Excellence Awards
organised by Hong Kong Wireless Technology Industry
Association in 2011
E-commerce - sasa.com
HK$ million 1H
Sales
YOY sales growth
130.8
-4.4%
Six months ended 30 Sep 11
18
Brand Management
Successfully broadened market segments; product
concepts and price points
Launched three House Brands with different product
concepts:
Mass Japanese skin care products
Home spa products
Natural and organic skin care products
Broadened the customer base of Own Brand products:
Quantity sold: +48.4%,
the highest among all product sources
Sales growth of House Brand products:
32.9%
Sales mix of House Brand products:
41.4% (LY: 41.2%)
Six months ended 30 Sep 11 *House brands = Own-brands + Sole-agent brands
19
Brand Management House brands gaining recognition and popularity in different Asian regions Products
received awards from leading women’s magazines:
Suisse Programme
Cellular Boosting
Solution
Editors Choice for
Favourite Daily
Skincare Essence Natio
Renew Radiance
Night Cream
Favourite Night Moisturizer
Gianfranco Ferre
Rose Princess EDT
The Cleo Beauty Hall of Fame 2011
Best Firming Cream Best Cream Eyeshadow
Best Eye Mask of the
above-RM100 category
Cyber Colors
Sparkling Liquid Eyeliner
Best Shimmery
Liquid Eyeliner
Malaysia
Singapore
The Balm Batter Up
Cream Eyeshadow
Collistar Intensive
Abdomen and Hip
Treatment Night
Hadatuko
Manten-Hada Eye Mask
The Malaysian
Women Weekly
Best Beauty Buys 2011
Best Compact Foundation
of the under-RM100
category
Cyber Colors
Cyber Snow
The Best Floral Scent
The CLEO
Beauty Hall of Fame 2011
CozyCot Holy Grail
Beauty & Fashion Awards
2011
Taiwan
Men’s Fragrance No. 1
GQ Men’s Care Awards
DSQUARED²
He Wood Ocean
20
Outlook
& Strategies
21
Constituent Member of
“Hang Seng Corporate Sustainability Benchmark Index”
We are building a sustainable business
Beauty focused
In region with lowest risks and biggest potential
Strong brand and competitive position in HK as well as outside of HK
Visionary and Strategically minded
Strong culture: Environmental, Social and Corporate Governance
Invest in: Staff development and training; consistent winners in
competitions
Invest in: Efficient and automated business process to enable scalability
Sa Sa was selected by Hang Seng Indexes Company Limited as a
constituent member of the 2011 “Hang Seng Corporate Sustainability
Benchmark Index”, effective on 5 September 2011
22
Hong Kong is a paradise for shopping beauty products
Prices are lower
Product offerings broader and product launches faster
Integrity and product quality assured
Continuous driving forces
Relentless RMB appreciation and inflation in Mainland
Rapid rise of the middle class in the Mainland
Continuing integration between Mainland & Hong Kong (infrastructure & way of life)
Spending covers broadening category, including daily necessities (e.g. personal health care)
Increasing Mainland Tourist Spending in Hong Kong
Chinese Delicacies (ginseng and dried seafood)
3%
Source: a survey by 0755 Weekly (0755 周刊), Sep 2011; Sample size: 604 office ladies in Guangdong province
Personal Care Products
23% Jewelry &
Timepieces
12%
Electronics
16%
Beauty and
Cosmetics
28%
Fashion
Apparel
19%
Main Purchases in Hong Kong
23
As of 30 Sep 2011
Retail Outlets in Mainland China Market
Beijing
Shanghai
Shenyang
Shaoxing
Suzhou
Tianjin
Yichang Ningbo
Qingdao
Wuhan
Existing cities with “Sasa” stores in first half of FY11/12
Zhenjiang
Xiamen
Yinchuan
Southern China
Eastern China
Northern China
23 23
8 Provinces and 3 Municipalities
15 new leases
13 Stores Opened in
First Half of FY11/12
15 Stores to be Opened in
Second Half of FY11/12
Northern China
Beijing (+3)
Tianjin (+2)
Shenyang (+2)
Yinchuan (+1)
Shijiazhuang (+1)
Eastern China
Shanghai (+1, -1)
Zhenjiang (+1)
Central China
Wuhan (+3, -1)
Southern China
Xiamen (+1)
Northern China
Beijing (+1)
Tianjin (+1)
Shenyang (+1)
Dalian (+1)*
Taiyuan (+1)*
Daqing (+1)*
Eastern China
Shanghai (+2)
Shaoxing (+1)
Changzhou (+1)*
Taizhou (+1)*
Central China
Wuhan (+1)
Zhengzhou (+1)*
Southern China
Fuzhou (+1)*
Guangzhou (+1)*
*8 new cities: Dalian, Taiyuan, Daqing, Changzhou, Taizhou, Zhengzhou, Fuzhou, Guangzhou
Shijiazhuang
Zhengzhou*
Dalian*
Taiyuan*
Daqing*
Changzhou*
Taizhou*
Fuzhou*
Guangzhou*
Central China
New cities with “Sasa” stores in second half of FY11/12
24
Strategy for Mainland China Market
Balance between breadth and depth of store network
• wide network more meaningful to partners but costly and difficult to manage
• Concentrated network more efficient to management but network less competitive
Human Resources - more resources will be deployed to support planning, coordination and
execution
• Secondment additional Hong Kong staff to Mainland to assist
• Step up recruitment and training of new staff
• Enhance division of work between store opening team and operations team
Automation of processes and systems – build and retain knowledge base and assist planning
and coordination (enable scalability)
• New store opening
• Inventory management
Own-brand product strategy for PRC market
• New products positioning targets PRC market as our main market
• Product gap analysis
Establish training centres for the China market
• Catering for >3,000 staff
25
Strategy for Other Markets – Singapore,
Malaysia and Taiwan
Build brand equity to gain recognition and broaden customer base
Expand retail network to increase competiveness and gain market
share
Build working relationship with landlords to facilitate network
expansion
Work closely with brands to build long term business together
Invest in brand building of own labels
Invest in human resources and IT to enable scalability
26
E-commerce
sasa.com
Launch new platform in late Nov 2011
– Multi-country platform
– More scalable and flexible
– More advanced functionalities; promotions,
search recommendations, social media etc.
Strengthen partnership with top online shopping
sites
Increase product offerings and strengthen core
competitiveness
Increase social media presence and further
integrate social media with marketing campaigns
Online business in China
Seek partners to increase penetration of sasa.com
in the mainland online market
Continue to build and localise China team
26
27
GoodSkin Labs
(Estée Lauder Group)
Category Management & Product Development
Increase house brands and product segments to target more customers
Strengthen the partnership with major beauty groups
Restructure department to increase accountability - more improvements to
materialise
Initiate procurement system to improve inventory planning and management
Haruhada
Orchid From Paradise
Home Secrets
28
No. of Retail Outlets
As of 31 Mar 11
As of
30 Sep 11
As of 17 Nov 11
By
31 Mar 12
HK & Macau 78 84 85 88
Mainland China 26 39 43 53
Singapore 20 20 21 23
Malaysia 38 39 39 44
Taiwan 19 21 23 27
Total 181 203 211 235
As of 31 Mar 11
As of
30 Sep 11
As of 17 Nov 11
By
31 Mar 12
2 2 2 2
21 21 23 18
-- -- -- --
-- -- -- --
1 1 1 1
24 24 26 21
Single-brand Stores/ Counters “Sasa” Stores
Network Expansion Plan in Asia
29
Thank you!