Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
2018 Annual Results Presentation20 March 2019
2
Disclaimer
These materials have been prepared solely for the use at the presentation by Health and Happiness (H&H) International Holdings Limited (“the
Company”) and have not been independently verified. No representation or warranty, expressed or implied, is made and no reliance should be placed
on the accuracy, fairness, correctness or completeness of the information presented or contained in these materials. The Company or any of its
affiliates, advisers or representatives accepts no liability whatsoever for any loss howsoever arising from any information presented or contained in
these materials. The information presented or contained in these materials is subject to change without notice and its accuracy is not guaranteed.
These materials contain certain forward-looking statements with respect to the Company, including its beliefs and expectations about the future as at
the date of this presentation. These forward-looking statements are based on a number of assumptions regarding the Company's operations and
factors beyond the Company's control, including but not limited to, the political and economic environment in which the Company and its subsidiaries
will operate in the future. Our actual results of operations, financial condition or business prospects may differ materially from those expressed or
implied in these forward-looking statements for a variety of reasons and as such, no reliance should be placed on these forward-looking statements.
The Company and its affiliates, advisors and representatives undertake no obligation to update these forward-looking statements for events or
circumstances that occur subsequent to such dates. This presentation does not constitute or form part of any offer for sale or invitation, or solicitation of
an offer to subscribe for or purchase any securities in the United States, Hong Kong or anywhere else. No part of this presentation shall form the basis
of or be relied upon in connection with any contract or commitment whatsoever. The information of the presentation should not be relied upon as
representation of the Company.
These materials are highly confidential, are being given solely for your information and for your use and may not be copied, reproduced or redistributed
to any other person (whether within or outside your organization/firm) in any manner. You agree to treat the contents of this presentation and these
materials as strictly confidential.
2018 Annual Results Presentation
3
Our Team
2018 Interim Results Presentation
Mr. Luo Fei Chairman
Ms. Joy Tsai Investor Relations Director
Mrs. Laetitia Garnier Chief Executive Officer
Presenter Title
Mr. Jason Wang Chief Financial Officer
Financial Highlights
4
5
(RMB million) For the Twelve Months Ended 31 December
2018 2017 Change
Revenue 10,132.5 8,095.3 25.2%
Adjusted EBITDA1 2,480.7 2,245.5 10.5%
Adjusted EBITDA margin 24.5% 27.7% -3.2 ppts
Adjusted net profit2 1,323.0 1,208.4 9.5%
Adjusted net profit margin 13.1% 14.9% -1.8 ppt
Operating cash flows3 2,409.7 2,405.4 0.2%
Adjusted EPS (RMB) 2.07 1.91 8.4%
Proposed DPS (HKD) 0.48 - -
Strong Growth Continued in 2018
Notes:
1. EBITDA for the year ended 31 December 2018 amounted to RMB2,158.6 million (2017: RMB2,060.4million). Adjusted EBITDA = EBITDA + Non-recurring losses of RMB16.2 million for the year ended 31 December 2018 (2017:
RMB94.7 million) + Non-cash losses of RMB305.9 million for the year ended 31 December 2018 (2017: RMB90.4 million)
2. Net profit for the year ended 31 December 2018 amounted to RMB843.1 million (2017: RMB928.5 million). Adjusted net profit = Net profit + EBITDA adjustment items of RMB322.1 million (2017: RMB185.1 million) + Other non-
recurring losses of RMB123.8 million (2017: RMB28.3 million) + Other non-cash losses of RMB34.0 million (2017: RMB66.5 million)
3. The operating cash flow is calculated on a pre-tax basis
2018 Annual Results Presentation
6
2018 Revenue
RMB 10,132.5 million
70.8%
24.8%
4.4%
Mainland China* Australia and New Zealand Rest of the World
67.7%
28.6%
3.7%
All Regions Achieved Growth while China Remained the Largest
Growth Driver
* Including active sales from Cross-border E-commerce (“CBEC”) and normal trade
2017 Revenue
RMB 8,095.3 million
2018 Annual Results Presentation
7
54.6%45.4%
Baby nutrition and care ("BNC")
Adult nutrition and care ("ANC")
58.1%
41.9%
Baby nutrition and care ("BNC")
Adult nutrition and care ("ANC")
Notes:
1. The revenue growth of the ANC segment is on a currency-adjusted basis
2. Adjusted EBITDA margin for the BNC and ANC segments was 23.0% and 26.5%, respectively
25.8%30.3%
8.4%
18.5%
BNC ANC
Revenue Adjusted EBITDA
Revenue Mix Adjusted EBITDA Mix Growth %
21
Strong Revenue and Adjusted EBITDA Growth across Both Segments
2018 Annual Results Presentation
8
BNC Revenue Mix
24.4%
75.2%
Mainland China Rest of the World
BNC Revenue Growth %
BNC - Robust Growth in Core Segments with Increasing Diversification
2018 Annual Results Presentation
96.2%
3.8%
Mainland China Rest of the World
9
ANC - Robust Growth Continued in both China and Australian Markets
59.2%
35.6%
5.2%
ANZ Mainland China Rest of the World
ANC Revenue Mix
13.7%
63.2%
79.9%
ANZ MainlandChina
Rest of theWorld
ANC Revenue Growth %1
2018 Annual Results Presentation
Note:
1. The revenue growth in all regions is on a currency-adjusted basis
Business Review
10
11
Three Key Milestones in 2018
1. IMF Registration 2. Swisse Global Transition 3. New Categories
Under the new registration rules,
the Group successfully registered
and launched its new IMF series
with upgraded formulas and new
packages under the Biostime and
Healthy Times brands, while
smoothly completing the transition
from old to new products
The Group has completed the
transition of the Swisse business
in several global markets,
including Hong Kong, Singapore,
Italy, Netherlands and the United
Kingdom
The Group has launched new
products in different markets,
including pregnancy and infants
range, probiotics range and
lifestyle range under the Swisse
brand
2018 Annual Results Presentation
12
Adult Nutrition and Care
Six Aspirational Brands under One Group Umbrella With Two New Brands
Joining the Group in 2018
Baby Nutrition
H&H Mission – to make people around the world healthier and happier
H&H Vision – to become a leading global player in premium wellness through superior products and aspirational brands
Power Our Passion Let’s be Brave One Big Team I Trust You
Baby Nutrition and Care Adult Nutrition and Care
Baby Care Baby FoodVitamin, Herbal, and Mineral Supplements
(VHMS) Skincare
Corporate Values
2018 Annual Results Presentation
Celebrate Life Everyday
13
Two Core Strategic Businesses with Diversified Product Categories
2018 Annual Results Presentation
IMF & Probiotic Supplements
Baby Care Products
Baby Food VHMS Skin Care
14
BNC – Delivered Robust Growth by Strong Branding, New Product
Development and Channel Investment • In 2018, the BNC segment achieved robust revenue growth both in China and international markets. Revenue derived from
the BNC business, which includes the Group’s IMF, probiotic and baby care products, reached RMB5,888.3 million in 2018,
up 25.8% compared to the previous year
• Thanks to our premium positioning, strong branding and marketing initiatives and channels investment, our IMF business
grew by 21.3% in 2018, which was mostly attributed to the Group’s premium and super premium IMF series
Branding Categories Channel
2018 Annual Results Presentation
15
13.8%10.6%
9.2%7.5% 7.3% 6.2% 5.9% 5.8%
3.6% 3.2%
#7 IMF player in the Chinese IMF market1
23.5%
11.3%10.3% 9.2% 9.2%6.4% 5.1% 4.2% 4.0% 3.9%
#3 in the super premium tier2 in the Chinese IMF market
55.7%
63.3%
16.4%
19.7% 12.5%
27.8%
4.5%
Industry Average
H&H
Baby specialty stores Supermarkets VIP Pharmacies E-commerce
Notes:
1. Source: Nielsen market share data for the past twelve months as of 31 December 2018
2. According to a Nielsen report, super premium tier products is the fastest growing segment in the IMF market and is driving the continuous growth towards premiumization
3. The Group’s BNC presence in the Chinese market as of 31 December 2018 included 31,355 baby specialty stores; 5,023 supermarkets; 4,626 VIP pharmacies and 613
regional distributors
Sales Contribution by Brand
(RMB million)
IMF Sales by Channel in China3
95.0%
4.7% 0.3%
Biostime Healthy Times Adimil
BNC – Strong Momentum with Overall IMF Market Share Gain
Incremental Sales Growth
(2018 versus 2017)
680.3
-23.2
134.2
(2017: 5.5%) (2017: 10.6%)
16
#4 in IMF sales in baby specialty stores #6 in IMF sales in supermarkets
19.5%
15.1%
10.7%
9.7%
9.0%
8.3%
6.2%
5.8%
4.0%
4.0%
11.2%
8.3%
7.6%
7.2%
6.7%
5.5%
5.4%
5.3%
3.6%
3.1%
15.6%
12.0%
9.1%
5.7%
5.0%
4.7%
4.6%
4.1%
3.4%
3.2%
2.0%
#12 in IMF sales in e-commerce
Source: Nielsen market share data for the past twelve months as of 31 December 2018
BNC – Maintained A Leading Position in Baby Specialty Stores
20.9%
(2017: 6.8%)
(2017: 7.4%)
(2017: 1.9%)
2018 Annual Results Presentation
17
BNC – Healthy Times Sales Momentum Continued Alongside Appointment
of New Brand Ambassador
• The Chinese organic IMF market1 grew a rapid 42.4% in 2018
• During the year under review, Healthy Times demonstrated robust
growth of 171.8% compared to 2017. The Group appointed a Chinese
celebrity as the brand ambassador for Healthy Times, while also
promoting the benefits of organic and natural raw ingredients for
infants
• Available at 11,323 baby specialty stores in China
2018 Annual Results Presentation
Note:
1. Nielsen market share data for the past twelve months as of 31 December 2018
18
• According to Euromonitor1 statistics certification, Biostime is the No.1
brand of pediatric probiotic supplements in the world
• Probiotic supplements maintained strong sales momentum in 2018, with
sales up by 33.6% YoY, which was mostly attributed to comprehensive
branding and marketing campaigns, and continued robust consumer
demand towards probiotic products
• Biostime probiotic supplements are now available in approximately 1,700
stores in the French market
Offline Presence of Probiotic
Supplements in Baby Specialty Stores
French VersionChinese Version Hong Kong Version
BNC – Probiotic Supplements Continued to Deliver Strong Revenue Growth
2018 Annual Results Presentation
Source: Euromonitor's research findings as generated via desk research and trade interviews, in terms of
retail sales value in 2017
19
BNC – Dodie Continued to Drive Further Brand Exposure with Appointment
of New Brand Ambassador
Offline Presence of Dodie Diaper Range
Dodie’s Peppa Pig Collection and Offline Presence in French Market
2018 Annual Results Presentation
• In the French market, the Group leveraged the 60th
anniversary of the iconic Dodie brand to launch a new
accessories collection, brand campaigns and a baby personal
care range which received very positive consumer feedback
• In the offline Chinese market, the Group rapidly grew the
presence of its premium diaper range under the Dodie brand,
with Guo Jingjing appointed as new brand ambassador. The
diaper range is currently available for sale in 7,656 stores
20
China sales3 through CBEC and Normal Trade contributed
35.6% of Swisse’s total sales in 2018
Australian Market Leader
Natural Health Brand
Chinese Market Leader
VHMS Brand Online2
VHMS
Market Share1
18.6% 29.9%
Multivitamin
Market Share1
6.5%
5.4%
2.5% 2.5%2.4%
Notes:
1. This data is based on LTM IRI scan data for the past twelve months as of 31 December 2018
2. Based on sales data from Earlydata for the past twelve months as of 31 December 2018
3. Swisse China sales for the twelve months as of 31 December 2018
ANC – Swisse Retains Leading Position in Australia and China Online
21
ANC – Swisse Leveraged Strategic Initiatives to Expand Sales Exposure
• In 2018, Swisse continued to invest in its home markets, while launching new product categories and expanding into new markets
• Thanks to a well-coordinated marketing strategy and new product development, the Group strengthened Swisse’s brand’s premium
position in the Australian and Chinese vitamin, herbal and mineral supplements (“VHMS”) markets, with the launch of new products
ranges, including new pregnancy and infant series, probiotics and lifestyle ranges
Adult Probiotics RangePregnancy and Infants Range
Lifestyle RangeCollagen Drink
Hyaluronic Acid Tablet
Swisse New Product Categories Launched in 2018 Swisse Offline Exposure in Different Markets
United States
Hong Kong Singapore
South Korea (Duty Free)
2018 Annual Results Presentation
22
ANC – Innovative Marketing Campaigns and Channel Expansion in China
• Swisse launched interactive marketing campaigns on a number
of Chinese E-commerce platforms, and was named the number
one health brand and number one imported consumer brand
across all industries during TMall’s landmark “Single’s Day”
shopping festival in November 2018
• A collaboration with Chinese celebrity Zhu Zhengting further
enhanced the premium image of Swisse among young Chinese
consumers and improved consumer awareness
2018 Annual Results Presentation
CosmeticsSupermarkets PharmaciesMBS
E-Commerce Normal Trade
• Last August, Swisse has become the first Australian company
to obtain a blue hat approval through filing for its best selling
product Calcium + Vitamin D and launched this newly
approved SKU in the Chinese offline market in October 2018
• At the end of 2018, 17 SKUs were available for sale in 12,698
retail stores in the China offline market, including cosmetic
channels
23
South Korea
Netherlands:
#3 beauty
supplements
US
Singapore: #2multivitamins
Hong Kong: #1 beauty
supplements
New Zealand
Australia: #1 VHMS brand
UK
Italy: #2 beauty
supplements
ANC – Swisse’s Global Market Footprint
• As of the end of June 2018, the Group had gained complete ownership of Swisse’s global distribution rights following the transfer of
rights for the Hong Kong, Singapore, Italy, Netherlands and United Kingdom markets from PGT Healthcare LLP (“PGT”)
• Following each market transition, the Group quickly deployed its well-tested global brand assets and partnerships and also enhanced
Swisse’s product portfolio with Beauty In & Out, which also provided new growth levers in Australia, New Zealand, China and globally
2018 Annual Results Presentation
Italy: #2 beauty
supplements
24
Sustainability Commitment & Development
• The Group launched its first ESG Report for the 2017 period, covering all businesses and operations worldwide, and has been
accepted in the United Nations Global Compact
• The Group has built on community programs with the launch of the global H&H Foundation, while kicking off World Community
Day with team members from all regions volunteering in their local communities
• The Group is listed among the top 90 companies in the Hang Seng Corporate Sustainability Benchmark Index
H&H World Community Day
2018 Annual Results Presentation
25
Prospects
26
BNC – Regulatory and Market Updates
2018 Annual Results Presentation
• The IMF market further consolidated as domestic brands benefit more given their deeper penetration of low-tier cities,
following the commencement of the new registration rules at the beginning of 2018
• The Group expects the overall market to remain competitive as major IMF brands step up their investment in branding and
marketing initiatives to grab the market share left by small brands due to the registration rules
• Despite several challenges including the declining birth-rate, weakening economic growth, and the stricter registration rules,
the Group’s outlook on the IMF market remains positive, particularly on the premium and super premium segments, due to
increasing premiumization
Infant Milk Formula Market
27
BNC – Premium Branding with Consumer and Customer Engagement
2018 Annual Results Presentation
• In January 2019, the Group became one of the key sponsors of the high-profile annual ceremony “Weibo Night”, achieving
12 billion brand exposures from the event
• “Weibo Night” invited top celebrities from across China and Biostime’s collaboration with the event further enhanced brand
awareness among consumers
28
BNC – High-profile Launch of Biostime Organic Series in Australian Market
• Leveraging on H&H’s existing distribution network, the Group launched Biostime’s organic IMF products and probiotics products in
Australia in the beginning of 2019, in order to drive further brand visibility
• The Group has appointed Australian supermodel Miranda Kerr as Biotime’s brand ambassador in Australian market
2018 Annual Results Presentation
29
BNC – Expansion into Organic Baby and Kids Healthy Food Categories
• During the course of the third quarter of 2018, the Group completed its acquisition of “Good Goût”, the fastest growing
organic baby food company in France
• This acquisition will enable the Group to better capture the strong growth momentum of the organic baby food segment
in France, China and other international markets
2018 Annual Results Presentation
30
BNC – Expansion into Fast-growing Goat Milk Infant Formula Market
Australia-based Factory and Its Production Process
2018 Annual Results Presentation
• The Group recently acquired a CNCA-approved factory
based in Australia, which has the capacity to produce
goat milk infant formula for the Chinese offline market
• This acquisition will enable the Group to explore new
opportunities in the fast-growing international goat milk
infant formula market
31
ANC – Regulatory and Market Updates
2018 Annual Results Presentation
Vitamin, Herbal and Mineral Supplements Market
• The Group’s ANC business growth is currently facing some headwinds from the impact of the new E-commerce law in China targeting
daigou-related channels. This law, which was first announced in August 2018 and came into force on 1 January 2019, requires all online
merchants, including daigou, to register with SAMR and file taxes with the Tax Bureau
• While the implementation of the new E-commerce law could benefit larger players operating within a more regulated environment, small-
scale merchants and daigou who are currently operating without an appropriate license may face pressure to exit the market
• Although its daigou channels are currently being impacted, the Group believes that overall demand for VHMS products will remain strong
and will gradually shift to major CBEC and other emerging online platforms. At the same time, the Group will continue to invest in marketing
globally in order to drive brand awareness, consumer education and conversion through its omni channels that better meet ever-changing
consumer demand across different channels
32
ANC – Introducing Swisse New Global Brand Ambassador Chris Hemsworth
2018 Annual Results Presentation
• The Group introduced an influential and recognized Hollywood actor Chris Hemsworth, and
his wife Elsa Pataky, an actress and supermodel, as Swisse’s new global brand ambassadors
• Chris Hemsworth and Elsa Pataky join Swisse's team of global and local ambassadors,
including highly-acclaimed actress Nicole Kidman, former international cricketer Ricky Ponting
and Australia’s No.1 men’s tennis player Alex de Minaur. These ambassadors enable the
Group to reach a wider consumer base and further enhance brand awareness
Marketing Campaigns (work in progress) of New Brand Ambassadors Chris Hemsworth and Elsa Pataky
33
ANC – Expanding the Care Segment and Exploring the Online Direct-to-
Consumer (DTC) Model
• Leveraging the trend towards natural organic cosmetics, as well as
innovations in probiotic skincare, the Group is taking steps to expand
its ANC segment beyond the Swisse brand with the acquisition of
Aurelia, an ultra-premium skincare brand that combines sustainably
sourced Bio-Organic botanical ingredients and probiotics
• The Group is exploring new DTC channels with Aurelia, which
currently reaches 40 overseas countries through its DTC platform
2018 Annual Results Presentation
Online Direct-to-Consumer (DTC) Model
Additional
Financial Information
34
35
(RMB million) 2018 2017 Change (%)
Infant Formulas 4,508.5 3,717.2 21.3%
Probiotic Supplements 1,044.6 781.7 33.6%
Other Pediatric Products 335.2 182.5 83.6%
Adult Nutrition and Care Products1 4,244.2 3,413.9 24.3%
Total 10,132.5 8,095.3 25.2%
2018 2017
Revenue Mix - Fast Growth across All Product Categories
Infant Formulas, 44.5%
Adult Nutrition and Care products,
41.9%
Probiotic Supplements,
10.3%
Other pediatric products, 3.3%
Note:
1. The ANC revenue growth is 30.3% on currency-adjusted basis
Infant Formulas, 45.9%Adult Nutrition and
Care products, 42.2%
Probiotic Supplements,
9.7%
Other pediatric products, 2.2%
2018 Annual Results Presentation
36
Gross Profit Margin Analysis
66.8%
77.1%
54.4%
64.5% 66.5%67.2%
75.8%
54.5%60.7%
65.0%
Infant Formulas Probiotic Supplements Other PediatricProducts
Adult Nutrition andCare Products
Total
2018 2017
1
2018 Annual Results Presentation
37
(RMB million)
S&D Expenses Ratio of SalesSelling and Distribution Expenses
2018 2017 2018 2017
A&M
1,485.6 A&M
843.9
A&M
10.4%
A&M
14.7%
Note:
A&M: Advertisement and Marketing
Selling and Distribution Expenses
3,703.4
2,711.7
36.5%33.5%
2018 Annual Results Presentation
2,217.8
1,867.8
21.8%
23.1%
2018 2017
38
(RMB million)
Administrative Expenses Ratio of Sales
Administrative Expenses
Administrative Expenses
2018 2017
619.6
486.0
6.1%
2018 Annual Results Presentation
6.0%
39
(RMB million)For Twelve Months
Ended 31 December
2018 2017
Reported EBITDA 2,158.6 2,060.4
Non-recurring transaction costs in relation to attempted refinancing of senior notes and M&A 16.2 -
Non-recurring integration costs - 29.9
One-time restructuring costs related to early childhood education business - 30.0
One-time expense paid to the original shareholders of Swisse on some tax refund - 34.8
Subtotal of Non-recurring items: 16.2 94.7
Net foreign exchange losses/ (gains)1 275.9 (53.9)
Net fair value losses on the financial instruments and partial derecognition of early redemption option
embedded in the senior notes30.0 144.3
Subtotal of Non-cash items: 305.9 90.4
Adjusted EBITDA 2,480.7 2,245.5
2018 Annual Results Presentation
Adjusted EBITDA
Note:
1. The net foreign exchange loss of RMB275.9 million mainly consisted of: 1) unrealized loss of RMB64.7 million from the revaluation on the Group’s term loan post refinancing on 27
June 2018 till late September 2018 upon completion of syndication and entrance into hedge agreements, and 2) unrealized loss of RMB153.4 million due to the revaluation on intra-
group loans between the Company and its subsidiaries resulting from historical intra-group transactions
40
Trade and Bills Receivables
Turnover DaysInventory Turnover
Days
Trade Payables
Turnover Days
Working Capital Management
2018 20172018 2017 2018 2017Notes:
1. Turnover days of accounts receivable is derived by dividing the arithmetic mean of the opening and closing balances of trade and bills receivables for the relevant period by turnover
and multiplying by 360 days
2. Turnover days of inventory is derived by dividing the arithmetic mean of the opening and closing balances of inventory for the relevant period by cost of sales multiplying 360 days,
and the inventory for BNC and ANC is 133 and 141, respectively
3. Turnover days of accounts payable is derived by dividing the arithmetic mean of the opening and closing balances of trade payables for the relevant period by cost of sales and
multiplying by 360 days
28 27
137
114 7874
2018 Annual Results Presentation
41
Cash Flows and Cash Balance
(RMB million) (RMB million)
2018 2017
Operating Cash Flows1 Cash Balance
Note:
1. The operating cash flow is calculated on a pre-tax basis
2018 Annual Results Presentation
1,905
1,955.7
135.0
2018 2017
2,101.31,932.32,405.42,409.7
42
2,692.3 2,352.7
3,274.7 3,930.7
2018 2017
Senior Notes Term Loan
(RMB million)
Type Principal Amount Maturity
Senior Notes US$475 million 2021-06
Term Loan US$400 million 2021-06
Net Leverage Ratio1Overview of Debt Instruments
Improved Capital Structure
Note:
1. The net leverage ratio is calculated by dividing the sum of the net debt by annualized adjusted EBITDA
2018 2017
5,966.96,283.4
1.6
1.9