2016 Annual Results Presentation
March 2017
CHOW SANG SANG HOLDINGS INTERNATIONAL LIMITED
周 生 生 集 團 國 際 有 限 公 司Stock code: 116
2
Disclaimer and Forward Looking Statements
• This document carries the information and the opinion is not for the purpose of
comprehensive research, financial services or legal opinion. Chow Sang Sang Holdings
International Ltd. does not guarantee its accuracy and integrity. This document contains the
information only to provide reference. They can not become or deemed to be sold or bought
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• This document contains information, opinion that only reflect Chow Sang Sang Holdings
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
or opinions obtained from this document.
• This document contains confidential information to be used solely for the purpose of
personal reference. In addition, this document may not be transmitted or transferred to
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• This document and the related discussion may include forward-looking statements with risk
and uncertain factors. Forward looking wording such as believe, expect, planning, forecast,
target, possible, hope, will, may, etc., will be used in this document. The reader of this
document should not excessively rely on such forward-looking statements to form their
opinions. These forward-looking statements are based on our own company and other
sources that we believe are reliable.
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Presentation Outline
I. Business Overview
II. Financial Highlights
III Future Plan and Strategy
IV. Q&A Session
V. Appendix
5
Company Structure
Jewellery Retail
Main business segment
472 self-operated stores in
Greater China and Internet
platform
Operates under “Chow
Sang Sang" and “Emphasis
Jewellery”
Generated 87% of total
revenue for 2016
Precious
Metals
Wholesale
Services
Other
Investments
Securities
Brokerage
Physical metals trading
service
Commission based
Generated 12% of total
revenue for 2016
8 HK offices and Internet
platform
Commission based
No proprietary trading
Generated 0.2% of total
revenue for 2016
Investment Properties
Shares of HKEx
Generated 0.7% of total
revenue for 2016
Chow Sang Sang Group
7
Product mix: Jewellery
Gold based Items
Gem-set Items
Licensed Products
International Brands (Gucci, Rolex, Tudor)
8
Distribution Network
(1) Excluding Hong Kong and Macau
(2) Reached 376 as of Mar 27, 2017
Covered cities
Guangdong
Fujian
JiangsuHenan
Xinjiang
Gansu
Inner Mongolia
Heilongjiang
Jilin
Liaoning
Tianjin
Hebei
Shandong
Yunnan
Sichuan
Guizhou
Guangxi
JiangxiHunan
Hubei
Shanxi
Anhui
Zhejiang
Shanghai
Beijing
Taiwan
Hong KongMacau
Eastern
(73)
Hainan
Southern (1)
(118)
Chongqing
Shaanxi
NingxiaQinghai
Tibet
Beijing Surrounding
Provinces(65)
Western
(32)
Hong Kong Flagship Stores
Kunming Flagship Store
Shanghai Flagship Store
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
Chow Sang Sang
Emphasis
Jewellery
Jewellery Watch
China(2) 365 9 –
HK / Macau 48 17 9
Taiwan - – 24
as at Dec 31, 2016
Northern
(86)
Chongqing Flagship Store
9
Focus on Growth in Mainland China
Increasing No. of Stores in Mainland China
(No. of Stores)
-12% +6%Same-store
Sales
Growth
-4%
New
shops
+40
New
shops
+47
11
Operating Performance …
Gross ProfitTurnover
(HK$ mm) (HK$ mm)
… primarily due to HK retail … gold price and improved mix protected margin
12
Operating Performance (Cont’d) …
Profit attributable to equity holders Operating Profit
(HK$ mm) (HK$ mm)
14
… Retail Performance …
Retail – Operating ResultsRetail – Revenue
(HK$ mm) (HK$ mm)
… despite revenue dropped, margin showed resistance
15
Mainland customers’ contribution continues to increase
2014 2016 2015
74% 74% 75%+1%
Sales
Attributable
to PRC
Customers(1)
(1) China sales + HK/Macau sales by PRC customers
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Consolidated Sales Mix – (Retail)
2015
Gross margin:
Gold* : 16%-22%
Non gold jewellery: 38%-42%
Watches: 20%-28%* Include gold price movement
2016
18
Change of Average Selling Price
Hong Kong/Macau - JewelleryHong Kong/Macau - Gold
China - Gold China - Jewellery
(HK$)
(RMB) (RMB)
(HK$)
19
Working Capital Trends
Average Receivables Turnover Days Average Inventory Turnover Days
Average Payables Turnover Days Cash Conversion Cycle
(No. of Days)
(No. of Days) (No. of Days)
(No. of Days)
20
Financial Highlights
(HK$ million)% change
2014 2015 2016 15 vs 16
Turnover 19,246 19,069 16,093 -15.6%
Jewellery Retail 16,933 16,723 14,045 -16.0%
Other businesses 2,313 2,346 2,047 -12.7%
Gross profit 4,295 4,228 4,050 -4.2%
Operating profit 1,395 1,150 1,019 -11.4%
EBITDA 1,579 1,582 1,201 -24.1%
Profit attributable to equity holders 1,082 1,130 742 -34.3%
EPS (HK cents) 159.9 167.0 109.6 -34.4%
Dividend per share (HK cents) 61.0 62.0 43.0 -30.6%
For the 12 months ended
or as at Dec 31,
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Other Financial Information
(HK$ million)
2014 2015 2016
Cash and cash equivalents 1,009 1,621 1,283
Available-for-sale investments1 869 825 763
Capital expenditure 189 172 197
Gearing2 26.1% 19.3% 20.4%
Unused banking facilities 3,813 3,831 4,318
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.
For the 12 months ended
or as at Dec 31,
23
Expansion with Distinctiveness in PRC
Target entry-mid end consumers
Brand development and fine-tuning are more
important than growth in the number of
stores
Leverage on e-shops to expand coverage
and reach
Expansion Philosophy
Ensure consistent and superior service quality
with seamless delivery
Leverage on high-end shopping malls and
department stores’ own positioning to
enhance image
Refresh store image to meet consumer
preferences
Self-Run Store Model
Around 50 new stores in PRC in 2017
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Product Mix and Branding
Clear presence and visibility of international brands and signature collections
Develop house brands - focus on quality and sophistication appropriate to different customer
segments
Jewellery Focus and Product Differentiation
Continue existing programs with focus:
Expand e-shop, synergizing with physical stores
Capitalize on CRM database
Reinforce Wedding; expand on Daily wear
Revamp VM at stores
Marketing Initiatives
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Company History
1930-1970 1970-1980 1980-1990 1990-2000 2000-2016
1934
Chow Sang
Sang
Goldsmith
established
in
Guangdong
2005
Became
sightholder
of Diamond
Trading
Company
1973
First
company in
the industry
listed on
Hong Kong
Stock
Exchange
1998
Re-entered
the
Mainland
China
market
2014
Opened
the first
Flagship
Store in
Shanghai
No. of
Stores9
Turnover
(HK$ mm)130
2011
Opened
the first
Flagship
Store in
Taiwan
2009
Opened
the first
Flagship
Store in
Beijing
2016
Stable
expansion
in China;
healthy
growth in e-
business
472
16,093
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Industry Analysis – PRC Luxury Market Overview
Personal luxury goods market
in China contracted to €17
billion in 2016, representing a
2% year-on-year decline.
Chinese consumers have slightly
decreased their contribution to the
global luxury market—from 31% in
2015 to 30% in 2016.
Longer term, China remains an
engine of growth for luxury goods as
the country’s middle class continues
to grow in size and purchasing power.
The behavior of Chinese consumers
epitomizes a larger global trend: the
re-localization of luxury.
Source: Bain & Company
* Note: RoW is rest of the world
* CAGR: Compound annual growth rate
* 2016 figures are estimates.
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27.1* 27.1*
22.7 22.2 24.0 24.2
20.9
23.4 24.9 25.5 25.7
32.3
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
RM
B b
n
FY2016 PRC Gold, Silver and Jewellery Sales
According to HK Census and Statistics
Department, total jewellery, watches and clocks,
and valuable gifts sales declined 17.2% y-o-y in
FY2016.
Retail sales for jewellery products in PRC stood
at RMB299.6 billion for FY2016 as against
RMB306.9 billion in FY2015.
Source: HK Census & Statistics
Source: National Bureau of Statistics of China* 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 2016 were investigated and released together. Here the data is
evenly divided as RMB27.1 billion.
7.63
5.84 5.13 5.30 5.50 5.47 5.48 5.76
5.24
6.13 5.67
8.19
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
HK
D b
n
FY2016 HK Jewellery, Watches and Clocks, and Valuable Gifts Sales
Industry Analysis – HK & PRC
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Chinese New Year Campaign
Celebrating the year of Monkey,
bringing New Year blessings to
the mass audience and creating
top of mind awareness for
seasonal gifting.
Touch points included digital
(social media), store POSM,
printing collaterals and window
display.
32
Valentine’s Day Campaign
Launched a Valentine’s Day campaign –
“The Return of Romance” featuring
affordable luxury jewellery which are
ideal for seasonal gifting. Launched the
new product features “sound wave” from
Love Decode collection.
Leverage the insight of modern
Valentine’s Day being a cliché on gifting,
we advocated the classic way of
expressing love by giving jewellery as a
romantic gesture.
Touch points covered above-the-line
thematic communication, digital
campaign, below-the-line PR, store
POSM, give-away and window display.
Key Visuals
Postcard & Chocolate as
seasonal give-away
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Valentine’s Day Campaign
Storefront iPad Sales Tool
The sound wave of the words
“I Love You”
Website with video
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White Day Campaign
Launched a new unisex Gold jewellery
collection “Noir” during White Day to
capture the demand of gifting between
couple.
Touch points covered digital campaign,
below the line PR, store POSM, sales
tool in iPad and designated collection
window display.
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Infini Love Diamond
After launching Infini Love Diamond rebranding in 2015, a campaign rerun was in place in
June 2016 to reinforce the emotional bonding of our top-notch diamond brand with the
customers.
On top of above-the-line advertising, we have brought a few celebrities who are popular
amongst Greater China to well elaborate the “Passion for Brilliance” stories.
Other touch points included digital (social media), PR and promotions.
Lala Hsu
Cheung Chi Lam & Anita Yuen Couple
Key Opinion Leader communications
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Infini Love Diamond
Roadshow tour has continued its footprint to cities in China
such as Chongqing.
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Bridal Campaign
Catering strong demand on bridal
market, we have launched “For Your
Precious Commitment” 360-degree
Integrated Campaign throughout HK,
China and Taiwan in second half of
2016.
Touch points included above-the-line
advertising i.e. TV commercial, print
media, digital media as well as social
media, and below-the-line activations
such as bridal events, catalogue and
visual merchandizing.
Featured our signature brands including
Infini Love Diamond, Promessa, La
Pelle, Personalized solitaire and
Chinese wedding gold jewellery.
A loyalty programme “Lasting Joy
Wedding Privileges” was launched on 1
Sep 2016 to enhance cross-selling of
wedding jewellery in HK.
Key Visual
Website pages
38
Christmas Campaign
Key Visual
To create top-of-mind awareness of X’mas gifting
season, a festive theme campaign “A Season of
Surprises” was launched in Dec 2016 covering
Greater China.
Targeting at sophisticated consumers, a full range of
diamond and gold jewellery were selected (Infini
Love Diamond, V&A, Charme and Lady heart etc.) to
bring end-users a romantic Christmas experience.
The campaign was focused on driving social touch
points including Facebook, Instagram, Wechat and
Weibo. A tailor-made give-away item and season VM
display were designed to create festive ambience.
Give-away for Media / Special VIP
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e-Shops Performance
Aside from our own eshop.chowsangsang.com, we partnered with different portals such
as TMALL, JD.com to launch various trading events and achieved some very positive
results.
During ecommerce giants’ sales event on 18th June, 2016, Chow Sang Sang topped the
list of jewellery business.
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2016 New Stores
APM, HK
Yuen Long Plaza, HK
Beijing Surrounding Provinces
Baoding, Beijing, Hengshui
Huhhot, Tangshan, Tianjing
East Rugao, Shanghai
NorthernChangchun, Chengdu, Dalian
Fuxin, Qingdao, Yantai
Southern
Changde, Chenzhou
Guangzhou, Guiyang, Haikou
Hengyang, Huizhou, JiuJiang
Kumming, Sanya, Shenzhen
Shiyan, Xiamen, Xiangyang
Wuhan, Zhanjiang
WesternKaifeng, Lanzhou
Xian, Urumqi
New Stores in ChinaNew Stores in Hong Kong
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