KINGDOM HOLDINGS LIMITED Stock code ： 528.HK 2015 Annual Results
COMPANY OVERVIEW One of the leading linen yarn manufacturers and suppliers in the world; accounted for 32% of the PRC’s linen yarn export in FY2015 The PRC’s largest linen yarn exporter for 13 consecutive years Mainly produces high quality linen yarns, and will About Kingdom Holdings Limited gradually enhance product mix to high margin dyed linen yarns and linen fibre products Stock information In FY2015, 65% of revenue was derived from Stock code : 528.HK export sales to markets such as the EU, Korea, Japan & India; approximately 35% of the revenue Stock price (as of 17 Mar 2016) : HK$ 1.58 was contributed by domestic sales Market cap (as of 17 Mar 2016) : HK$ 994.9 mn Annual production capacity reached 18,000 tonnes, the largest in China Historical P/E*(as of 17 Mar 2016) : 7.0 x Products are used in the following international * Currency Rate: RMB1 = HKD1.19 brands/manufacturers: FY2015 Result highlights Revenue grew 12.2% to RMB 1,025,403,000 Gross margin at 25.8 % (FY2014: 26.8 %) Profit attributable to Owners of the parent amounted to RMB 120,369,000, up 9.0% yoy Earnings per share amounted to RMB 0.17, up 11.8% yoy 2
WHAT MAKES KINGDOM UNIQUE
COMPETITIVE ADVANTAGES Scale • No. 1 exporter of linen yarn in China for 13 consecutive years ; • Largest production capacity (18,000 tons p.a.) of linen yarn in China; • Largest raw material (fiber flax) buyer in Europe Skill / Technology • New factory with latest and most advanced technology machinery • Owns 49 patents including invention patents Management • Green production • Collaboration with leaders in each field, e.g. Siemens • Continuous improvement projects (34% savings on water consumption in FY2015) Brand • “Kingdom” brand is a renown international linen yarn brand • Represents high quality linen yarn • Sales office in Italy and sales agents in Portugal, Korea, Japan, Turkey and India. 4
GREEN MATTERS Interesting Facts Not Everyone Knows: • 100% of the raw materials used for production of linen yarn are recycleable. • Based on a study in France about the Life Cycle Assessment of cotton shirt and a linen shirt: • A linen shirt consumes only 1/4 of the water used for its life cycle compared with that of a cotton shirt • A cotton shirt causes 6 times more freshwater aquatic ecotoxicity * than a linen shirt • Kingdom already published its first Environmental, Social and Governance ( ESG ) report for FY2014 , despite HK listing rules on ESG report only became mandatory for accounting periods starting 1 Jan 2016. • Kingdom planted 10,000+ trees in and around the production facilities. • Kingdom uses only dew retting fiber flax . Dew retting is a purely natural and organic process, resulting zero water pollution (compared with pond or stream retting methods). * The freshwater aquatic ecotoxicity potential describes the toxic impact that the emitted substances have in the aquatic environment. 5
2015 ANNUAL RESULTS
RESULTS SUMMARY The new production plant (Haiyan Phase II) RMB’000 FY2014 Change FY2015 Change commenced production in June 2014 Revenue 914,279 1,025,403 111,124 +12.2% Gross profit 245,001 264,045 19,044 +7.8% Profit attributable to 110,477 120,369 9,892 +9.0% Owners of the parent Gross Margin 26.8% 25.8% -1.0 p.p. Net Margin 12.1% 11.7% -0.4 p.p. Weighted average number of 631,600 630,195 1,405 - 0.2% ordinary shares (‘000 shares) Earnings per share (RMB) 0.17 +11.8% 0.19 0.02 Dividend per share (HK cents) 7.50 8.0 Dividend payout ratio* 34.8% 35.1% * Currency Rate: RMB1 = HKD1.19 7
REVENUE ANALYSIS Revenue analysis Revenue contribution from major linen yarn products FY2015 (FY2014) RMB million 26NM +12.2% 23.8 % (22.3%) 1,200 24NM 1025.4 22.5 % (27.2%) 1,000 914.3 800 600 36NM 24.8 % (26.6%) 400 Others 200 24.0 % (19.5%) 0 39NM *Comparable figures of FY2014 FY2015 FY2014 in parentheses 4.9% (4.4%) Average selling price and sales volume of standard linen yarn products FY2014 FY2015 Change Average selling price 61.8 61.8 - (RMB’000/ton) Sales volume (ton)* 14,024 15,610 + 11.3 % Gross profit margin 26.8% 25.8% - 1.0 % pt. * Other miscellaneous products not included. 8
REVENUE GEOGRAPHICAL BREAKDOWN Sales in Mainland China accounted for 35.0% of sales Sales in fast growing emerging markets namely (India, Korea and Turkey) accounted for 34.7% Geographical Breakdown FY2015 (FY2014) FY2014 FY2015 Change Mainland 36.1% 35.0% -1.1 % pt. China The EU Italy 16.2% 17.9% +1.7 % pt. 25.2% (27.5%) Non-EU India 8.6% 15.4% +6.8 % pt. 39.8% ( 36.3 %) Korea -3.0 % pt. 13.5% 10.5% Mainland China Turkey 8.7% 8.8% +0.1 % pt. 35.0% ( 36.1 %) Portugal 7.6% 3.7% -3.9 % pt. Japan 3.6% 3.5% -0.1 % pt. *Comparable figures of Others -0.5 % pt. 5.7% 5.2% FY2014 in parentheses Total 100.0% 100.0% - 9
GROSS PROFIT AND GROSS MARGIN ANALYSIS For the year ended 31st Dec Gross profit and gross margin Cost structure FY2015 (FY2014) Energy RMB million Gross margin (%) 10% (9%) Depreciation 400 30% 5% (6%) 26.8% 350 25.8% 25% Labour 300 16% (17%) 264.0 20% 245.0 Raw 250 material 57% (56%) Others 200 15% 12 % (12%) 150 *Comparable figures of 10% FY2014 in parentheses 100 FY2015 and FY2014 Major costs 5% Average unit cost comparison 50 Raw material : + 8% Energy : - 8% 0 0% FY2014 FY2015 Labour : - 2% 10
NET PROFIT AND NET MARGIN ANALYSIS For the year ended 31st Dec Net profit and net margin Selling and distribution expenses RMB million Net margin (%) RMB ’000 FY2014 FY2015 Change 200 14% Marketing 12.1% (commission, 10,701 14,020 +31.0% 12% 11.7% events) 150 Transportation 10% 18,157 16,188 -10.8% costs 120.4 110.5 8% Insurance 4,276 4,798 +12.2% expenses 100 6% Others 4,736 3,681 -22.3% 4% 50 Total 37,870 38,687 +2.2% 2% As % of sales 4.1% 3.8% * -0.3%pt. 0 0% * The decrease in selling costs as a percentage of revenue mainly FY2014 FY2015 due to increase in products being sold to non-European countries like Korea and India with shorter distance and shipped from a closer port in Zhejiang province. 11
KEY FINANCIALS RMB’000 As of 31 Dec 2014 As of 31 Dec 2015 Change Net assets 961,662 1,043,978 + 8.6% 297,104 340,902 Inventories + 14.7% 217,185 237,214 Cash and cash equivalents + 9.2% Interest-bearing bank loans 280,875 368,033 + 31.0% 186.1% 179.1% Current ratio - 7.0 % pt. Net asset value (RMB) per 1.52 1.66 + 9.2% share 29.2% 35.3% Gearing ratio* + 6.1% pt. 26.2% 26.7% Effective tax rate + 0.5% pt. *Total borrowings / equity attributable to owners of the parent 12
INVENTORY, A/R & A/P TURNOVER DAYS FY2014 FY2015 153 153 Inventory turnover days 79 96 Trade receivables turnover days 73 60 Trade payables turnover days 159 189 Net turnover days As of As of RMB’000 31 Dec 2014 31 Dec 2015 208,587 178,318 Raw materials 27,623 32,741 Work in progress 60,894 129,843 Finished goods 13
SHAREHOLDING STRUCTURE Non-executive Non-executive Chairman and Director Director Executive Director Public Shareholders Mr. Ngan Kam Wai Mr. Tse Mark Mr. Ren Weiming Albert Chau Shing 48.01% 38.40% 10.80% 2.79% KINGDOM HOLDINGS LIMITED 金达控股有限公司 Stock Code ： 528.HK Total number of issued shares as at 31 Dec 2015: 629,678,000 shares 14
GROWTH STRATEGIES AND PLANS
GROWTH STRATEGIES Expansion of production capacity 1 ￭ 2nd phase of Haiyan Plant commenced formal production in June 2014 – Annual production capacity of 5,000 tonnes of linen yarn ￭ Production capacity: – Phase 1 with annual production capacity of 5,000 tonnes of linen yarn Africa Ethiopia – Expect commence operation around end of 2017 ￭ Advantage – Labour and energy cost savings – Enjoys free export tariff and no quota restriction to most countries in the world like E.U. – African Growth and Opportunity Act (AGOA) of U.S. - export apparel duty- free into the United States – Exemption of income tax for ten years 2 Enhancement of production efficiency ￭ Collaboration with Siemens for energy management system – Recycle of heat and water used – environmental friendly and reduce costs ￭ Technical upgrade and automation on 1st and 2nd factories ￭ Continuous R&D 16
PRODUCTION AND CAPEX PLAN Production plan FY2015 FY2016 FY2017 Actual Target Target Target Target Volume Gross production production gross gross sold margin capacity capacity margin margin (tonnes) (tonnes) (tonnes) Linen yarn (standard) 15,610 25.8% 18,000 25.7% 18,000 25.5% CAPEX plan Project CAPEX Source Internal Construction of production facility in Ethiopia FY2016 RMB 60 million resources Enhancement of production efficiency projects Bank loans Internal Construction of production facility in Ethiopia resources FY2017 RMB 130 million Enhancement of production efficiency projects Bank loans Capital market Total RMB 190 million 17
MAJOR MARKETS OF LINEN TEXTILE PRODUCTS USA Mainland China Brazil South Africa Mature market Emerging market Potential market 18
BUSINESS OVERVIEW
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