KINGDOM HOLDINGS LIMITED Stock code ： 528.HK 2017 Annual Results
COMPANY OVERVIEW One of the leading linen yarn manufacturers and suppliers in the world; accounted for 45% of the PRC’s pure linen yarn export in FY2017 The PRC’s largest linen yarn exporter for 15 consecutive years Mainly produces high quality linen yarn About Kingdom Holdings Limited In FY2017, 62.2% of revenue was derived from Stock information export sales to markets such as the EU, Korea, Japan & India; approximately 37.8% of the Stock code : 528.HK revenue was contributed by domestic sales in Stock price (as of 23 Mar 2018) : HK$ 0.90 China Annual production capacity reached 22,000 Market cap (as of 23 Mar 2018) : HK$ 566.7 mn tonnes, the largest in China No. of shares outstanding : 629,678,000 Products are used in the following international brands/manufacturers: * Currency Rate: HKD1 = RMB0.83591 FY2017 Result highlights Revenue grew 19.6% to RMB 1,023,962,000 Gross margin at 11.4% due to strategic price reduction since April 2016 (FY2016: 17.7%) Net profit for the Year RMB622,000 Loss attributable to Owners of the parent RMB 3,132,000 Loss per share amounted to RMB 0.01 2
WHAT MAKES KINGDOM UNIQUE
COMPETITIVE ADVANTAGES Scale • No. 1 exporter of linen yarn in China for 15 consecutive years • Largest production capacity (22,000 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 56 patents including invention patents Management • Green production • Collaboration with leaders in each field, e.g. Siemens • Continuous improvement projects 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
2017 ANNUAL RESULTS
RESULTS SUMMARY RMB’000 Change FY2016 FY2017 Change Revenue 856,243 1,023,962 167,719 +19.6% Gross profit 151,878 116,268 (35,610) -23.4% Profit/(loss) attributable to 66,344 (3,132) (69,476) -104.7% Owners of the parent Gross Margin 17.7% 11.4% -6.3% pt. Net Margin 7.7% -0.3% -8.0% pt. Weighted average number of 629,678 629,678 - - ordinary shares (‘000 shares) Earnings/(loss) per share (RMB) 0.11 (0.01) (0.12) Dividend per share (HK cents) 5.0 2.0 (3.0) -60.0% Dividend payout ratio* 40.9% N/A * Currency Rate: HKD1 = RMB0.83591 7
REVENUE ANALYSIS Revenue analysis Revenue contribution from major linen yarn products FY2017 (FY2016) RMB million 26NM +19.6% 25.6 % (22.0%) 1,200 1024.0 1,000 24NM 856.2 27.0 % (22.4%) 800 600 36NM 400 30.0 % (20.2%) 200 Others 14.6 % (31.1%) 0 39NM FY2016 FY2017 2.8% (4.3%) *Comparable figures of FY2016 in parentheses Average selling price and sales volume of standard linen yarn products FY2016 FY2017 Change Average selling price * 58.3 53.7 -7.9% (RMB’000/ton) Sales volume (ton)* 13,679 18,328 +34.0% Gross profit margin 17.7% 11.4% -6.3% pt. * Other miscellaneous products not included. 8
REVENUE GEOGRAPHICAL BREAKDOWN Sales in Mainland China accounted for 37.8% of sales Geographical Breakdown FY2017 (FY2016) FY2016 FY2017 Change Mainland 38.5% 37.8% -0.7 % pt. China The EU Italy 19.6% 15.7% -3.9 % pt. 24.6% (29.4%) Non-EU India 12.2% 18.8% +6.6 % pt. 37.6% (32.1%) Korea -0.3 % pt. 8.8% 8.5% Mainland China Turkey 7.2% 6.6% -0.6 % pt. 37.8% (38.5%) Portugal 4.9% 3.8% -1.1 % pt. Lithuania 4.0% 4.0% - *Comparable figures of Japan -0.3 % pt. 2.7% 2.4% FY2016 in parentheses Others 2.1% 2.4% +0.3 % pt. 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 FY2017 (FY2016) Energy RMB million Gross margin (%) 17.7% 18% 10% (9%) Depreciation 200 5% (5%) 16% 14% Labour 150 Raw 12% 17% (16%) 11.4% material 59% (61%) 10% Others 100 8% 9 % (9%) *Comparable figures of 6% FY2016 in parentheses 50 4% FY2017 and FY2016 Major costs Average unit cost comparison 2% Raw material : - 3% 151.9 116.3 Energy (1) : + 12% 0 0% FY2016 FY2017 Labour : + 9% (1) Due to coal to gas conversion and installation of Central Air-conditioning in workshops. 10
SELLING AND DISTRIBUTION EXPENSES For the year ended 31st Dec Selling and distribution expenses RMB ’000 FY2016 FY2017 Change Marketing (commission, events) 13,069 10,063 -23.0% Transportation costs 16,757 20,403 +21.8% Insurance expenses 4,422 5,134 +16.1% Others 3,703 3,761 +1.6% Total 37,951 39,361 +3.7% As % of sales 4.4% * 3.8% * -0.6%pt. * The decrease in selling and distribution expenses as a percentage of revenue mainly due to fewer commission paid to sales agents. 11
KEY FINANCIALS RMB’000 As of 31 Dec 2016 As of 31 Dec 2017 Change Net assets 1,086,436 1,050,196 -3.3% 509,591 531,212 Inventories +4.2% 279,511 173,824 Cash and cash equivalents -37.8% Interest-bearing bank loans 631,903 595,161 -5.8% 166.7% 137.2% Current ratio -29.5% pt. Net asset value (RMB) per 1.73 1.67 -3.4% share 58.2% 56.7% Gearing ratio* -1.5% pt. 24.4% n/a Effective tax rate n/a *Total borrowings / Total equity 12
INVENTORY, A/R & A/P TURNOVER DAYS FY2016 FY2017 220 209 Inventory turnover days 129 108 Trade receivables turnover days (59) (64) Trade payables turnover days 290 253 Net turnover days As of As of RMB’000 31 Dec 2016 31 Dec 2017 205,594 326,175 Raw materials 39,235 37,995 Work in progress 264,762 167,042 Finished goods 13
SHAREHOLDING STRUCTURE Non-executive Chairman and Executive Director Director Executive Director Public Shareholders Ms. Shen Hong Mr. Ngan Kam Mr. Ren Weiming Wai Albert 48.01% 41.21% 0.07% 10.71% KINGDOM HOLDINGS LIMITED 金达控股有限公司 Stock Code ： 528.HK Total number of issued shares as at 31 Dec 2017: 629,678,000 shares 14
GROWTH STRATEGIES AND PLANS
GROWTH CATALYSTS 1. Increase selling price of linen yarn in 2018, and possibly continue in 2019 2. More emerging consumer markets like China and India 3. New Heilongjiang factory commenced trial production in Q3 2017 and full capacity in Q2 2018 Provide additional production capacity • New product – industrial hemp yarn • 4. Ethiopia factory is expected to commence trial operation in second half of 2019 1. Provide additional production capacity 2. Cost competitive One billion of population and abundant of young workers • available Labour and energy costs approx. 1/3 of that in Vietnam • 3. Avoid trade tariffs and custom duties in most countries in the world 5. Potential Horizontal and Vertical Integration Horizontal – Poland competitor (to gain global price-setting power) • Vertical – Industry Investment Fund to stabilize market demand and • price and facilitate strategic acquisitions. 16
GROWTH STRATEGIES Expansion of production capacity 1 ￭ Heilongjiang Plant expects to commence trial production in Q3 2017 – Designed annual production capacity of 4,000 tonnes of linen yarn ￭ Ethiopia Project: – Phase 1 with annual production capacity of 5,000 tonnes of linen yarn Africa Ethiopia – Expects trial operation in 2H 2019 ￭ 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 17
Recommend
More recommend
