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CHOW SANG SANG HOLDINGS INTERNATIONAL LIMITED
周生生集團國際有限公司
Stock code: 116
2014 Annual Results Presentation
March 2015
Disclaimer and Forward Looking Statements
•
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comprehensive research, financial services or legal opinion. Chow Sang Sang Holdings
International Ltd. does not guarantee its accuracy and integrity. This document contains the
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•
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International Ltd’s opinion on the date of the presentation. Chow Sang Sang Holdings
International Ltd. can change anything on this document without notices. Chow Sang Sang
Holdings International Ltd. is not liable for any losses incurred from the usage of information
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•
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•
This document and the related discussion may include forward-looking statements with risk
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target, possible, hope, will, may, etc., will be used in this document. The reader of this
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opinions. These forward-looking statements are based on our own company and other
sources that we believe are reliable.
2
Presentation Outline
I.
Business Overview
II.
Financial Highlights
III
Future Plan and Strategy
IV.
Q&A Session
V.
Appendix
3
Business Overview
4
Company Structure

Precious
Metals
Wholesale
Services
Jewellery Retail
Physical metals trading
service
 Commission based
 Generated 11% of total
revenue for 2014
Chow Sang Sang Group

Securities
Brokerage




Main business segment
405 self-operated stores in
Greater China and Internet
platform
Operates under “Chow
Sang Sang" and “Emphasis
Jewellery”
Generated 88% of total
revenue for 2014

Other
Investments


8 HK offices and Internet
platform
 Commission based
 No proprietary trading
 Generated 0.2% of total
revenue for 2014
Investment Properties
Shares of HKEx
Generated 0.8% of total
revenue for 2014
5
Business Overview: Jewellery Segment
6
Product mix: Jewellery
Gold based Items
Gem-set Items
Licensed Products (Hello Kitty)
International Brands (Gucci, Rolex, Tudor)
7
Distribution Network

Chow Sang Sang directly runs and controls all
of its retail stores with no franchise operations

Complementing the extensive retail network, the
eshop.chowsangsang.com working with key
retail portals in China, offer online shopping
service
Beijing
Surrounding
Provinces
(56)
Heilongjiang
Beijing Flagship Store
Jilin
Inner Mongolia
Xinjiang
Liaoning
Beijing
Tianjin
Gansu
Qinghai
Northern
(104)
Tibet
Shanghai Flagship Store
Hebei
Ningxia
Shanxi
Shandong
Shaanxi
Jiangsu
Henan
Anhui
Chongqing
Hubei
Eastern
(65)
Shanghai
Sichuan
Zhejiang
Hunan
Jiangxi
Guizhou
Fujian
Kunming Flagship Store
Hong Kong Flagship Stores
Guangdong
Yunnan
Taiwan
Chow
Sang Sang
Guangxi
Hong Kong
Macau
Hainan
China(1)
HK / Macau
Taiwan
Covered cities
(1) Excluding Hong Kong and Macau
(2) Reached 326 as of Mar 26, 2015
Empasis
Jewellery
Southern (1)
(97)
322(2)
–
50
11
-
22
as at Dec 31, 2014
8
Focus on Growth in Mainland China
Increasing No. of Stores in Mainland China
(No. of Stores)
New
shops
+40
New
shops
+32
Same-store
Sales
Growth
+5%
+20%
-12%
9
Financial Highlights
10
Operating Performance …
Turnover
Gross Profit
(HK$ mm)
(HK$ mm)
30,000
6,000
25.0%
22.3%
5,500
25,142
25,000
5,000
20.0%
4,500
20,000
18,260
11,053
19,246
4,000
3,500
15,000
9,913
9,164
2,146
15.0%
2,122
1,835
10.0%
2,000
1,500
14,089
5,000
16.7%
3,432
3,000
2,500
10,000
4,208
18.8%
4,295
9,333
9,096
1,000
2,062
2,173
2013
2014
5.0%
1,597
500
0
0
2012
2013
2014
…high base, surge in gold sales last year
0.0%
2012
…product mix improved, higher margin
1H
2H
Gross Margin
11
Operating Performance (Cont’d) …
Operating Profit
Profit attributable to equity holders
(HK$ mm)
2,000
9.0%
(HK$ mm)
2,000
1,800
8.0%
1,800
1,600
7.2%
6.9%
1,544
6.1%
1,400
7.0%
1,395
1,600
7.0%
5.6%
5.4%
4.8%
1,400
6.0%
1,261
1,200
5.0%
717
1,000
701
1,000
1,082
4.0%
985
603
4.0%
800
800
5.0%
1,218
1,200
744
6.0%
562
3.0%
546
3.0%
600
400
800
560
2.0%
0
0.0%
1H
2H
400
615
200
2013
2.0%
678
1.0%
2012
600
2014
Operating Margin
200
439
520
0
1.0%
0.0%
2012
1H
2013
2H
2014
Net Profit Margin
12
…Driven by Retail Segment…
Revenue Breakdown
100%
90%
0.8%
0.2%
17.6%
0.7%
0.1%
Results Breakdown
0.8%
0.2%
11.0%
19.9%
100%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
81.4%
3.7%
0.6%
88.0%
3.9%
2.7%
1.0%
4.6%
3.2%
1.5%
93.0%
90.5%
93.6%
2012
2013
2014
1.7%
40%
79.3%
30%
30%
20%
20%
10%
10%
0%
0%
2012
Retail
2013
Wholesale
2014
Broking
Other
Retail
Wholesale
Broking
Other
13
… Retail Performance …
Retail – Revenue
(HK$ mm)
Retail – Operating Results
(HK$ mm)
19,943
20,000
2,000
10.0%
9.0%
16,933
15,000
14,861
7.5%
9,057
7.4%
1,500
1,350
8.0%
7.0%
1,255
8,719
6.8%
1,114
6.0%
7,586
10,000
619
1,000
621
609
4.0%
3.0%
10,886
5,000
500
8,214
7,275
2.0%
731
634
505
0
1.0%
0
2012
2013
5.0%
2014
0.0%
2012
2013
1H
2H
2014
Margin
14
…and Robust Demand from PRC Consumers
2012
Others
0.8%
2013
Others
0.6%
HK/Macau
28.7%
China
37.9%
Others
0.8%
HK/Macau
27.4%
China
37.4%
+1%
71%
HK/Macau
25.0%
China
40.8%
HK/Macau
(PRC
Customers)
33.4%
HK/Macau
(PRC
Customers)
34.6%
HK/Macau
(PRC
Customers)
32.6%
Sales
Attributable
to PRC
Customers(1)
2014
72%
+2%
74%
Mainland customers’ contribution continues to increase
(1) China sales + HK/Macau sales by PRC customers
15
Consolidated Sales Mix – (Retail)
2013
2014
Watches
4%
Watches
4%
Non gold
jewellery
27%
Gross margin:
Gold* :
Non gold jewellery:
Watches:
Gold
69%
Non gold
jewellery
32%
Gold
64%
12%-16%
39%-44%
20%-22%
* Include gold price movement
16
Consolidated Gross Profit Contribution – (Retail)
2013
2014
Taiwan
1%
Taiwan
1%
China
40%
Hong
Kong/
Macau
59%
China
44%
Hong
Kong/
Macau
55%
17
Change of Average Selling Price
Hong Kong/Macau - Gold
(HK$)
6,000
5,100
5,000
Hong Kong/Macau - Jewellery
(HK$)
18,000
4,700
4,200
12,000
3,000
9,000
2,000
6,000
1,000
3,000
0
0
2013
15,000
2012
2014
China - Gold
2013
2014
China - Jewellery
(RMB)
5,000
4,000
16,800
15,000
4,000
2012
16,900
(RMB)
12,000
3,300
10,900
10,800
2012
2013
2014
9,000
2,800
3,000
10,900
2,300
2,000
6,000
3,000
1,000
0
2012
2013
2014
0
18
Working Capital Trends
Average Inventory Turnover Days
(No. of Days)
180
174
158
150
117
120
90
60
30
0
2012
2013
2014
Average Receivables Turnover Days
(No. of Days)
14
12
10
8
6
4
2
0
11
2012
Average Payables Turnover Days
(No. of Days)
14
13
2013
2014
Cash Conversion Cycle
(No. of Days)
10
200
8
184
168
150
125
6
4
4
3
100
3
50
2
0
0
2012
2013
2014
2012
2013
2014
19
Financial Highlights
(HK$ million)
For the 12 months ended
or as at Dec 31,
2012
2013
% change
2014 13 vs 14
18,260
25,142
19,246
14,861
19,943
16,933
-15.1%
3,399
5,199
2,313
-55.5%
Gross profit
3,432
4,208
4,295
+2.1%
Operating profit
1,261
1,544
1,395
-9.7%
EBITDA
1,400
1,712
1,579
-7.8%
985
1,218
1,082
-11.2%
145.5
180.0
159.9
-11.2%
55.0
68.0
61.0
-10.3%
Turnover
Jewellery Retail
Other businesses
Profit attributable to equity holders
EPS (HK cents)
Dividend per share (HK cents)
-23.5%
20
Other Financial Information
(HK$ million)
For the 12 months ended
or as at Dec 31,
2014
2013
2012
Cash and cash equivalents
674
1,009
1,009
Available-for-sale investments1
671
659
869
Capital expenditure
267
280
189
Gearing2
27.1%
23.4%
26.1%
Unused banking facilities
4,052
4,114
3,813
1
Available-for-sale investments mainly represents HKEX shares which valued at quoted market prices
2
Total borrowings to total equity holders’ equity. Total borrowings includes interest-bearing bank borrowings, bullion loans
and interest-bearing bank borrowings arising from securities and futures broking.
21
Strategy Outline
22
Expansion with Distinctiveness in PRC
Around 50 new stores in PRC in 2015
Self-Run Store Model
Expansion Philosophy

Target mid-high end consumers

Ensure consistent and superior service quality

Brand development and fine-tuning is more
important than growth in the number of
stores

Leverage on high-end shopping malls and
department stores’ own positioning to
enhance image

Leverage on e-shops to expand coverage
and reach

More flagship and premium-status stores
23
Product Mix and Branding
Jewellery Focus and Product Differentiation

Clear presence and visibility of international brands

Develop house brands - focus on quality and sophistication appropriate to different customer
segments
Marketing Initiatives
Continue with existing programs with focus:

Expand e-shop, synergizing with physical stores

Capitalize on CRM database

Revamp VM at stores
24
Q&A Session
25
Appendix
26
Company History
1930-1970
1970-1980
1934
1973
1998
Chow Sang
Sang
Goldsmith
established
in
Guangdong
First
company in
the industry
listed on
Hong Kong
Stock
Exchange
Re-entered
the
Mainland
China
market
2005
1980-1990
2006
Launch
Became
brand
sightholder
revamp
of Diamond
campaign
Trading
Company
1990-2000
2000-2014
2009
2011
2014
Opened the
first
Flagship
Store in
Beijing
Opened
the first
Flagship
Store in
Taiwan
Flagship
Store in
Shanghai
No. of
Stores
9
405
Turnover
(HK$ mm)
130
19,246
27
Industry Analysis – PRC Luxury Market Overview
 Luxury sales in China increased by a real
US$9.6 billion in the five years to 2014
 China overtook France and Italy to become
number three in the world in 2013
 Government crackdown on luxury gifting has
led to a slight slowdown in demand but
growth potential remains positive in China
 China will overtake Japan to become the
world’s second largest luxury goods market
 China is forecast to have the second largest
population with annual gross income over
US$150,000 by 2020 behind the US
Source: Euromonitor International
28
Industry Analysis – HK & PRC
FY2014 HK Jewellery, Watches and Clocks,
and Valuable Gifts Sales
According to HK Census and Statistics Department, total
jewellery, watches and clocks, and valuable gifts sales
declined 13.7% y-o-y in FY14.
14
12
8
9.65
9.54
7.92
7.88
7.95
8.60
7.70
7.82
7.75
8.35
FY2014 PRC Gold, Silver and Jewellery Sales
7.38
35
6
30
4
29.3
*
29.3
25
2
*
28.
22.3
23.6
24.2
20.8
24.6
24.1
24.8
Aug
Sep
Oct
23.2
20.4
20
0
Jan
Feb Mar
Apr May
Source: HK Census & Statistics
Jun
Jul
Aug
Sep
Oct
Nov
Retail sales for jewellery products in PRC stood at
RMB297.3 billion for FY14 as against RMB295.9 billion in
2013.
* In order to eliminate the impact of the different date of the “Chinese New Year”
(CNY) each year, and enhance the comparability of data, in accordance with the
national statistical system, the data in January and February 2014 were
investigated and released together. Here the data is evenly divided as RMB29.30
billion.
Dec
15
RMB billion
HK$ billion
10
11.60
10
5
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Nov
De
Source: National Bureau of Statistics of China
29
Marketing Program Highlights
2014
30
Mother’s day Promotion

Gift-to-mothers is one of the featured segment identified especially for
China Market.

In May, a mother’s day campaign was launched with a key focus on digital
and store display to drive intention of gifting to mother.

A voice-recording gift card was distributed upon purchase during
promotional period for customers to express their love to mothers.
31
Bridal Campaign

Integrated bridal thematic campaign
“Love is All” was launched in May 2014,
covering the Greater China Region and
targeting wedding couples.

Touch points covered above the line
thematic communication, digital
engagement campaign, below the line
exhibition and events, store POSM and
window display

Featured signature collections such as
Infini Love, Promessa, La Pelle and
Chinese Wedding Collection.
32
Bridal Campaign - Video
Western Style
Chinese
Style
33
Bridal Campaign – Love Padlock Campaign

A digital engagement campaign featuring user-generated elements.
Participants were invited to create a personalized virtual love padlock, and
selected a designated location around the world to hang the padlock. Winners
were selected daily, whereas Chow Sang Sang would tailor make a silver love
padlock and helped delivering to their designated location.
 Wuhan was selected as a key place to launch this campaign.
34
80th Anniversary Brand Campaign
TVC

Launched a brand campaign
featuring our brand
proposition to increase the
awareness of the brand,
especially targeting China.

Touch points covered above
the line thematic
communication, digital
campaign, below the line PR
& events, store POSM and
window display.
Making-of
35
80th Anniversary Brand Campaign
VM featuring the collections
Signature Collections Brochure
Lucky draw
36
Christmas Campaign

Launched a Christmas
campaign – “Add sparkle to your
style” featuring our new and
stylish diamond jewellery.
 Using stylish fashion illustration
to attract new customer
segments and refresh the brand
during the Christmas season.
 Touch points covered above the
line thematic communication,
digital campaign, below the line
PR & events, store POSM and
window display.
Animation Video Content
37
New Customer Segment and shopping experience

Catering for the change of consumption trend in the region, focus on daily wear
and entry level jewellery for the younger audience, various affordable
collections were developed in 2014.

New VM system and digital devices were introduced at selected stores to
enhance shopping experiences.
38
New Customer Segment and shopping experience
Digital Device in store – Magic Necklace Mirror
Digital Device in store – Charme Touch Table for DIY bracelet
39
CRM – Star Shoppers Star Dollars Programme

Star Dollars Programme was successfully launched in China and Hong Kong.

Upon designated promotions, star shoppers can gain star dollars to be spent on
any gem set products during their next purchase .
40
2014 New Stores
Tai Po Mega Mall, HK
Chengdu, China
Galaxy, Macau
Kunming, China
Mira Mall, HK
41