Yue Yuen Industrial
F2017 9M Results
November 2017
Yue Yuen Industrial (Holdings) Limited
(551.HK)
1
Disclaimer
While every care has been taken in preparing the information in this
presentation and the discussion following, such information is provided "as
is" without warranty of any kind, either expressed or implied. In particular, no
warranty regarding accuracy or fitness for a purpose is given in connection
with such information. The opinions expressed in this presentation and the
discussion following, do not constitute investment advice. Neither Yue Yuen
nor any of its officers will be liable for any direct or indirect or any other
damages of any kind arising from or in connection with any reliance placed
on any information in this presentation and the discussion following.
1
2
Founded in 1988, and listed on the HKEx in 1992 (551.HK)
Core Business: Footwear OEM/ODM and Pou Sheng (3813.HK)
OEM/ODM – Footwear manufacturing, predominately athletic and casual / outdoor
Pou Sheng – Retail sales network & sports services in the Greater China Region
2017 Interim Dividend: HK$ 0.4/share and one-time Special Dividend: HK$ 3.5/share
Vietnam Indonesia PRC Others*
Company Profile
9M17 Revenue by Product Category Production Volume by Location
9M16
9M17
43%
45%
34%
35%
22% 17%
1% 3%
4%
7%
Others*: Bangladesh, Cambodia, Myanmar, and Mexico
9M17: 238.7 mn vs. 9M16: 236.1 mn pairs 7%
OEM/ODM
67%
Casual/Outdoor
Soles, Components & Others
Athletic
Sandals
33%
13 %
1%
46%
9M17 Total Revenue US$ 6,718.0 million
Retail*: incl. Pou Sheng Revenue US$ 2,031.5 million
Retail*
48%
3
2016 Financial Performance Overview
Source: Company audited financial statements and management accounts
435 331 390
535
7.6
8.0
8.4 8.5
2013 2014 2015 2016
Profit Attrib. to Owners
Revenue
Revenue
(USD’bn)
Profit ‘mn
535
8.5
54%
74% 65%
56%
1.1
1.15 1.2
1.4
2013 2014 2015 2016
Payout ratio
HK$ Per Share
Dividend
(HK$/Share)
Payout Ratio
56%
$1.4
16.77
17.53 17.25
16.88
313
307
318 322
2013 2014 2015 2016
Avg. Selling Price
Production volume
Prod. Vol.
(’mn Pairs)
ASP
$16.88
322
9M F2017
Financial Highlights
5
Key Financial Highlights for 9M 2017
Revenue
US$ 6.7 bn
+ 6.8%
GP Margin
21.4% US$ 1,003 mn
+ 11.3%
Production Volume
239 mn pairs
ASP
US$ 16.94
Revenue
RMB 13.9 bn
+ 14.1%
Profit Attrib. to Owners
US$ 396 mn
+4.5%
OP Margin
4.6% RMB 632 mn
Group
OEM/ODM PS Retails
6
3,011.3
917.3
66.8
1,843.6
454.4
3,101.9
885.2 57.7
2,201.5
471.7
Athletic Casual/Outdoor Sandals Retails* Others**
9M16 9M17
19.4%
3.8%
Y-o-Y Revenue by Product Category (US$’ mn)
9M17 Shoes Only
Casual/Outdoor
Sandals
Athletic
77%
22%
1%
3.0%
3.5%
13.6%
Shoe Production
Rev: US$ 4,044.8 mn
Volume 1.1%
ASP 0.2% * Pou Sheng 9M17 Rev.: US$ 2,031.5 mn
** Soles, Components & Others
7
Revenue and Profit Attributable to Owners
Revenue
In US$’mn
1,845
4,448
+7%
9M 16 9M 17
2,032
4,687
Profit Attrib. to Owners
In US$’mn
Pou Sheng
OEM/ODM
Pou Sheng
OEM/ODM
The above figures of Pou Sheng include profit attributable to “Non-YY”
shareholders (i.e. the 37.6% minority interests)
83
328
49
365
+5%
YY Group
2,300
6,135
+1%
2015 2016
2,444
6,037
65
351
88
480
+37%
2015 2016
9M 16 9M 17
8
Source: Company accounts
Please refer to the announcement on the HKEx website for the unaudited consolidated income statements of 9M F2017 & 9M F2016
YY Group Financial Highlights
9M F2017 9M F2016 Y-o-Y
US$'000 % US$'000 % + / -
Revenue 6,718,014 100.00 6,293,301 100.00 6.75%
Cost of Sales (5,012,730) -74.62 (4,731,134) -75.18 5.95%
Gross Profit 1,705,284 25.38 1,562,167 24.82 9.16%
SG&A* (1,183,002) -17.61 (1,045,130) -16.61 13.19%
Other Income & Expenses, net* (84,473) -1.26 (92,781) -1.47 -8.95%
Operating Profit 437,809 6.52 424,256 6.74 3.19%
Share of Results of A&JV 50,606 0.75 47,228 0.75 7.15%
Finance Cost & Other Gains/(Losses) (7,727) -0.12 2,728 0.04 N / A
Income Tax (59,127) -0.88 (57,925) -0.92 2.07%
Profit for the Period 421,561 6.28 416,287 6.61 1.27%
Profit attrib. to Owners 395,857 5.89 378,771 6.02 4.51%
* The comparative figures of SG&A and Other Income & Expenses, net have been reclassified to conform to the presentation in the current
period
9
Financial Ratios
(US$’mn) 9M F2017 9M F2016
Depreciation & Amortization 223.6 198.9
EBITDA 654.5 616.7
Capital Expenditure 411.9 305.6
Product Development* 159.2 148.7**
30 September 2017 31 December 2016
Total Borrowings 1,971.9 960.1
Net Total Borrowings 162.3 Net Cash: 82.8
Total Debt to Equity (%) 43.4% 18.8%
Net Debt to Equity (%) 3.6% N / A
9M F2017 9M F2016
Total Debt to EBITDA (X) annualized 2.3 X 1.2 X
Net Debt to EBITDA (X) annualized 0.2 X N / A
Return on Equity (%) LTM 13.3% 10.9%
Return on Asset (%) annualized 6.2% 7.2%
Source: Company accounts (figures rounded)
Please refer to the announcement on the HKEx website for the unaudited consolidated income statements of 9M F2017 & 9M F2016
* Includes US$7.1 mn for 9M 2017 and US$12.9 mn for 9M 2016 sample sales revenue, which reduces Product Development Expense
** Reclassified 2016 figures
10
YY Group ROE Trend Based on US$
8.0
7.5
9.9
8.7
9.4
11.3 11.3
6M14 FY14 6M15 FY15 6M16 FY16 6M17
ROE
(%)
Remark: ROE=NP attributable to owners of the company/ (Total Equity - Minority Interests); half year data is on LTM basis
OEM/ODM
Note: The figures in the following slides covers the core manufacturing and other operations of the consolidated entity
of Yue Yuen Group, and are for analytical purposes only (prepared using the management accounts)
12
OEM/ODM Financial Highlights
9M F2017 9M F2016 Y-o-Y
US$'000 % US$'000 % + / -
Revenue 4,686,507 100.00 4,448,302 100.00 5.35%
Cost of Sales (3,683,095) -78.59 (3,546,464) -79.73 3.85%
Gross Profit 1,003,412 21.41 901,838 20.27 11.26%
SG&A* (548,265) -11.70 (487,278) -10.95 12.52%
Other Income & Expenses, net* (110,444) -2.36 (113,883) -2.56 -3.02%
Operating Profit 344,703 7.36 300,677 6.76 14.64%
Share of Results of A&JV 50,878 1.09 48,775 1.10 4.31%
Finance Cost & Other Gains/(Losses) 5,184 0.11 6,272 0.14 -17.35%
Income Tax (31,147) -0.66 (23,906) -0.54 30.29%
Profit for the Period 369,618 7.89 331,818 7.46 11.39%
Profit Attrib. to Owners 365,086 7.79 327,592 7.36 11.45%
Source: Company management accounts
* The comparative figures of SG&A and Other Income & Expenses, net have been reclassified to conform to the presentation in the
current period
13
OEM/ODM Financial Ratios
(US$’mn) 9M F2017 9M F2016
Depreciation & Amortization 178.5 171.2
EBITDA 517.0 467.0
Capital Expenditure 348.8 261.5
30 September 2017 31 December 2016
Total Borrowings 1,616.3 762.3
Net Total Borrowings Net Cash: 168.0 Net Cash: 209.8
Total Debt to Equity (%) 41.8% 17.0%
Net Debt to Equity (%) N / A N / A
9M F2017 9M F2016
Total Debt to EBITDA (X) annualized 2.3 X 1.3 X
Net Debt to EBITDA (X) annualized N / A N / A
Return on Equity (%) annualized 12.7% 10.1%
Return on Asset (%) annualized 6.5% 6.9%
Source: Company management accounts (figures rounded)
14
19.6
18.7
20.3
18.7
19.1
18.9
21.9
19.8
20.5
20.5
22.8
21.0
21.6 21.6
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Gross Profit Margin
OEM/ODM GP Margin Trend
(%)
Based on US$
15
OEM/ODM OP Margin Trend
(%)
Based on US$
1.5
5.2
6.5
5.3
6.1
3.7
6.8
5.9
7.5
6.7
9.8
6.9
7.1
8.0
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Operating Profit Margin
Pou Sheng International
Note: The figures in the following slides are based on Pou Sheng’s management accounts and announcements, and Pou Sheng adopts
RMB as its reporting currency
17
Pou Sheng Key Business Activities
Retail Business
Leading distributor of footwear, apparel & accessories for international brands in China
A key partner to Nike and adidas
Sells through directly operated stores, or on a wholesale basis to sub-distributors, online & offline
Store locations include department stores, shopping malls, sports cities, street level & outlets
Brand licensee Business
Sport Services Platform
Provides full range of sports services
Products + Services
364 + 1
Online & Offline
Mainland China & Taiwan
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Directly Operated Stores
Sub-Distributor Stores
Mono Brand Stores
Multi-Brand Stores
YY Sports, YY Kids, YY Life, etc.
Outlets: New shopping experience for fast growing brands
Omni-Channel Strategy Across China
Brick and Mortar Stores
Online Stores
Retail Network
YYsports.com
YYkids.com
Rockport.com.cn
3rd party: T-Mall, JD Mall, SuNing..etc.
B2B services
Covers 300 cities in the Greater China
B2B
B2C
19
Operation Efficiency
Receivable Days
28 28
Inventory Days
145
Payable Days 2016 9M17
Based on RMB
22 18
150
20
Pou Sheng Store Performance
Number of Stores
Directly Operated Sub-Distributors Total Stores
As at December 31, 2016 5,560 3,199 8,759
Net New Store + / (-) * (96) (47) (143)
As at September 30, 2017 5,464 3,152 8,616
2017 1Q 2Q 3Q 4Q
Directly Operated Stores 1.9% 5.6% 1.5%
Same Store Sales Growth (SSSg)
* Disposal of certain subsidiaries in the current period: reduced directly operated 153 stores & sub-distributors 323 stores
21
Distinguished Partners and Events
22
Pou Sheng Financial Highlights (in RMB)
9M F2017 9M F2016* Y-o-Y
RMB’mn % RMB’mn % + / -
Revenue 13,883 100.00 12,165 100.00 14.12%
Cost of Sales (9,086) -65.45 (7,811) -64.21 16.32%
Gross Profit 4,797 34.55 4,354 35.79 10.17%
SG&A (4,358) -31.39 (3,724) -30.61 17.02%
Other Income & Expenses, net 193 1.39 153 1.26 26.14%
Operating Profit 632 4.55 783 6.44 -19.28%
Share of Results of A&JV (2) -0.01 (10) -0.08 -80.00%
Finance Cost & Other Gains/(Losses) (84) -0.60 (15) -0.12 460.00%
Income Tax (191) -1.38 (224) -1.84 -14.73%
Profit for the Period 355 2.56 533 4.38 -33.40%
Profit Attrib. to Owners 337 2.43 522 4.29 -35.44%
Source: Based on Pou Sheng’s Results Announcement
* The figures for the nine months ended September 30, 2016 have been restated due to the application of merger accounting
23
Pou Sheng Financial Highlights (in USD)
9M F2017 9M F2016 Y-o-Y
US$'000 % US$'000 % + / -
Revenue 2,031,507 100.00 1,844,999 100.00 10.11%
Cost of Sales (1,329,635) -65.45 (1,184,670) -64.21 12.24%
Gross Profit 701,872 34.55 660,329 35.79 6.29%
SG&A (634,737) -31.24 (557,852) -30.24 13.78%
Other Income & Expenses, net 25,342 1.25 19,790 1.07 28.05%
Operating Profit 92,477 4.55 122,267 6.63 -24.36%
Share of Results of A&JV (272) -0.01 (1,547) -0.08 -82.42%
Finance Cost & Other Gains/(Losses) (12,283) -0.60 (2,232) -0.12 450.31%
Income Tax (27,980) -1.38 (34,019) -1.84 -17.75%
Profit for the Period 51,942 2.56 84,469 4.58 -38.51%
Profit Attrib. to Owners 49,305 2.43 82,774 4.49 -40.43%
Source : Internal analysis report (figures rounded); various accounting reclassification and adjustments are made to some of the figures
when consolidating Pou Sheng numbers into the Yue Yuen Group in order to comply with the requirements of accounting standards
24
Pou Sheng Financial Ratios (in RMB)
(RMB’mn) 9M F2017 9M F2016
Depreciation & Amortization 305.4 179.2
EBITDA* 931.0 979.4
Capital Expenditure 430.7 290.9
30 September 2017 31 December 2016
Total Borrowings 2,575 1,666
Net Total Borrowings 2,197 1,183
Total Debt to Equity (%) 40.4% 27.2%
Net Debt to Equity (%) 34.5% 19.3%
9M F2017 9M F2016
Total Debt to EBITDA (X) annualized* 2.1 X 1.2 X
Net Debt to EBITDA (X) annualized* 1.8 X 0.9 X
Return on Equity (%) annualized* 7.4% 11.6%
Return on Asset (%) annualized* 4.2% 6.8%
Source: Internal analysis report (figures rounded)
* the figures for the nine months ended September 30, 2106 have been restated due to the application of merger accounting
25
29.7
28.3
29.4
30.9
33.4
33.2
35.8
34.9
36.3
36.2
34.8
33.6
35.6
34.5
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Gross Profit Margin
Pou Sheng GP Margin Trend
(%)
26
1.5 1.9
1.6
3.5
5.8
4.3
2.9
6.6
7.2
5.5
3.5
4.5
6.1
2.9
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15* 1Q16* 2Q16* 3Q16* 4Q16 1Q17 2Q17 3Q17
Operating Profit Margin
Pou Sheng OP Margin Trend
(%)
* the figures have been restated due to the application of merger accounting
27
2017 Sports Event Timeline
Physical Fitness Basketball Running Event
7,
9-12
4-7,
9-12
9,10
7,8,
11,12
7,
9-12
▼ Student League Competitions
▼ Star Competitions (CPBL)
▼ YY Camp (U22)
▼ Mini baseball roadshow (U10)
▼ NBA Star China Tour – D.Rose
▼ NBA / CBA Live Party
▼ Sports Meeting
▼ Family Picnic Day
▼ University Relay
▼ running clinics & lectures
▼ Shenyang Marathon clinics
▼ group training classes
▼ PT Training programs
▼ Fitness Playground Development
Baseball
▼ YY Camp
▼ YY Night(3V3)
▼ College bb League
▼ “Play like Elite” clinics
▼ Harden / Wiggins /
Lillard / Rose
▼ Races
▼ Taicang Marathon
▼ College RUN League
▼ Hood To Coast
▼ Terrex Trail Running
▼ YY Running Club
▼ College Running League
▼ Fight NOW - 2V2
▼ collegial / teens /
youths / couples /
female / families
▼ Lucky Ball
▼ Marathon Training
▼ HTC
▼ Terrex
▼ BJ Marathon
▼ Running Lecture
▼ Running clinics
▼ YaoPao 24hr
Appendix
29
Shareholding Structure
Tsai Family
Pou Chen (9904.TT)
Others
Footwear
OEM/ODM
Pou Sheng (3813.HK)
Yue Yuen Industrial (Holdings) Ltd.
(551.HK) 62.4%
7% 43%
50%
100%
* As at September 30, 2017
30
Company Milestones
Production Established
1988 China
1992
Indonesia
1994 Vietnam
2000 Mexico
2010 Bangladesh
Cambodia
2015 Myanmar
1993
First brand licensee 1993
Started retail business
2008 Listed on HKEx (3813.HK)
2016
Acquired PCG Bros
Listed on HKEx (551.HK)
1988 Founded
1992
2012 New CEO on board
2017
OEM/ODM PS Retails Group
Market Cap: US$ 6.3 bn (As at Sep 30)
31
OEM/ODM Highlights for 12M 2016
12M F2016 12M F2015 Y-o-Y
US$'000 % US$'000 % + / -
Revenue 6,036,828 100.00 6,134,741 100.00 -1.60%
Cost of Sales (4,772,468) -79.06 (4,928,522) -80.34 -3.17%
Gross Profit 1,264,360 20.94 1,206,219 19.66 4.82%
SG&A (688,779) -11.41 (776,584) -12.66 -11.31%
Other Income & Expenses, net (119,270) -1.98 (90,905) -1.48 31.20%
Operating Profit 456,311 7.56 338,730 5.52 34.71%
Share of Results of A&JV 68,639 1.14 83,503 1.36 -17.80%
Finance Cost & Other Gains/(Losses) (2,026) -0.03 (24,132) -0.39 -91.60%
Income Tax (36,620) -0.61 (42,586) -0.69 -14.01%
Profit for the Year 486,304 8.06 355,515 5.80 36.79%
Profit Attrib. to Owners 479,839 7.95 350,665 5.72 36.84%
Source: Company management accounts
32
PS Highlights for 12M F2016 (in RMB)
12M F2016 12M F2015 Y-o-Y
RMB’mn % RMB’mn % + / -
Revenue 16,236 100.00 14,466 100.00 12.24%
Cost of Sales (10,468) -64.47 (9,648) -66.70 8.50%
Gross Profit 5,768 35.53 4,818 33.30 19.72%
SG&A (5,072) -31.24 (4,340) -30.00 16.87%
Other Income & Expenses, net 228 1.41 121 0.84 88.43%
Operating Profit 924 5.69 599 4.14 54.26%
Share of Results of A&JV (12) -0.07 (8) -0.06 50.00%
Finance Cost & Other Gains/(Losses) (80) -0.49 (59) -0.40 35.59%
Income Tax (262) -1.62 (149) -1.03 75.84%
Profit for the Year 570 3.51 383 2.65 48.83%
Profit Attrib. to Owners 561 3.46 397 2.74 41.31%
Source: Based on Pou Sheng’s Results Announcement
Pou Sheng has changed its presentation currency for the preparation of its consolidated financial statements from USD to RMB
starting from the 2016 interim results. The comparative figures for the year 2016 and 2015 have been restated to RMB accordingly
33
PS Highlights for 12M F2016 (in USD)
12M F2016 12M F2015 Y-o-Y
US$'000 % US$'000 % + / -
Revenue 2,443,730 100.00 2,300,174 100.00 6.24%
Cost of Sales (1,575,525) -64.47 (1,534,115) -66.70 2.70%
Gross Profit 868,205 35.53 766,059 33.30 13.33%
SG&A* (756,975) -30.97 (683,402) -29.71 10.77%
Other Income & Expenses, net* 31,860 1.30 14,014 0.61 127.34%
Operating Profit 143,090 5.86 96,671 4.20 48.02%
Share of Results of A&JV (1,793) -0.07 (1,332) -0.06 34.61%
Finance Cost & Other Gains/(Losses) (12,066) -0.49 (9,237) -0.40 30.63%
Income Tax (39,468) -1.62 (23,744) -1.03 66.22%
Profit for the Year 89,763 3.67 62,358 2.71 43.95%
Profit attrib. to Owners 88,403 3.62 64,498 2.80 37.06%
Source: Internal analysis report (figures rounded)
* Various accounting reclassification and adjustments are made to these figures when consolidating Pou Sheng numbers into the
Yue Yuen Group in order to comply with the requirements of accounting standards