Transcription
Analyst PresentationGlobal Brands Group Spin-offMay 2014
Li & Fung l Sourcing PlatformLF PrivateLabelLF AsiaIn-CountryLogisticsFreightForwardingLeading AsiaLogistics PlatformUSBrand &LicensingEuropeBrand &LicensingAsiaBrand &LicensingRest of WorldBrand &LicensingGlobal Brand & LicensingPlatform1
Three-Year Plan Target and Key Growth neCOPlarger than theentire grouptodayNew customer winsFurther penetration withexisting customersVendor Support Services2XCOPNetwork expansionOver2XCOPOmni channel logisticsFurther build out portfolioof licensed brandsInternational freightforwardingAdd additional categoriesto current brand portfolioStrategic acquisitionsIncrease geographic &channel footprint2
Global Brands Group utionin SpecieTradingLFLogisticsSourcing ArrangementLi & Fung will benefit from Global Brands Group growth via sourcing arrangement3
Spin-off RationaleSourcing and Brands businesses are different in nature, and both are growth areasRequires different expertise and management focusSourcingBrandsSourcing skills, product development and supply chain management forretailers and brands globallyFashion design capabilities, responsiveness to fashion trends, branddevelopment and marketing skills for licensed and owned brands globallyDedicated management focus on running the two “Pureplays”Grow faster by operating separatelyEnhanced financial flexibility4
Pro Forma Capital StructureConsolidation (Dec 2013)(US m)(US m)2,0001,500CapitalStructureGlobal Brands Group211Bank(US m)2,0002,0001,5001,5001811,000624 (2)1,2555034600Perps Pro Forma Li & FungBankBondCashPerps (1)COP871134737EBITDA1,111296815Equity (1)5,5502,3923,158Net Debt/TotalCapitalization (3)30%30%30%20%20%20%10%10%15%0%(1) Perps are classified as Equity(2) Includes US 30m bank borrowings and US 594m bank loan for repayment to Li & Fung(3) Total Capitalization Net Debt Equity0%17%Cash10%14%0%5
Relationship Between Li & Fung and Global Brands Group Post Spin-offBuying Agency AgreementProvision of sourcing and supply chain management services by Li & Fung to GBGMinimum commitment of 70% of GBG’s sourcing requirements over a 7-year term(1)Cost-effective and ensures certainty of meeting sourcing requirementsNon-Competition AgreementLi & Fung will not engage in the selling of products under licensed or owned brands as principal or brand managementbusiness in the apparel, footwear and fashion accessory segmentsRight of First Offer to GBG on brands business opportunities and disposal of Li & Fung’s licensed men’s brandeddress shirt businessRight of First Offer to Li & Fung on sourcing opportunitiesOther AgreementsMaster Property Agreement for sub-leasing between Li & Fung and GBG, to and from one another, on a cost basisTransitional IT Agreement prior to full physical separation of IT systems on a cost basisTransitional Services Agreement prior to full separation of administrative service systems on a cost basis(1) Subsequently amended to a minimum commitment of 50% of GBG’s sourcing requirements over a 3-year term in the final Listing Document post HKSE comments.6
Global Brands Group Business PlatformLicensed BrandsFashionCharactersAccessories& HomeControlled BrandsFootwearFashionAccessoriesFootwear7
Platform for Accelerated Brand GrowthDiversified License PortfolioLicenses leverage product &distribution platformSteady cash flow generationfrom licensing portfolioProduct PlatformFashionCharactersAccessories& HomeGlobal Distribution PlatformFootwearUSEuropeAsiaRest ofWorldActive portfolio managementto diversify riskAllocate capital to developselected controlled brandsControlled brands leverageproduct & distribution platformSelected Controlled BrandsPotential monetization ofdeveloped controlled brands8
Unrivaled Global NetworkHeadquartered in Hong Kong with Over 50 Offices and Showrooms Around the WorldShanghaiNew YorkLos AngelesPanyuGreensboroLondonMilanHong KongFashion CentersOfficesOperation Support Hub9
Global Brands Group Licensing PartnershipBe the “Go-To” partner for Brands to-Extend into additional product categoriesDistribute brands on a global basisOther Brand Licensing Companies Beauty & FragrancesDeep product expertise in the following categories: EyewearFashionCharacters WatchesAccessories& HomeFootwear10
Global Brands Group Unique Licensing ModelTypical Brand LifecycleAll brands have a lifecycleSalesLicense portfolio of brands tobuild a sustainable business- Steady cash flow generationTimePortfolio Diversification- Capture value at every stage of thebrand lifecycleGrow portfolio with product andglobal distribution platformSteady Cash Flow GenerationSalesManagement has extensivehistory working with brands andretailersTime11
Licensed Brands Growth DriversGrowth DriversFurther build out portfolio of licensed brandsAdd additional categories to our current brand portfolioIncrease geographic and channel footprintSome Examples:Design, develop &distribute Women’s beltsand Women’s / Men’scold weather accessoriesDesign, develop &distribute portfolio ofcharacter products acrosscategories & geographiesDesign, develop &distribute childrenapparel in US &accessories in AsiaDesign, develop &distribute soft home &children apparel12
PVH Case Study: 15 Year Relationship15 Year Relationship 110 Year Relationship 2Licensing since 2010CategoriesBoy’s TailoredClothing,UniformsSportswearPerformance AccessoriesSportswearFootwearBelts & SmallLeather GoodsBoys Clothing &SportswearTable TopBoys & GirlsClothingHome ProductsGeography & ChannelU.S.A1) Via Fishman & Tobin acquisition (2011)2) Via Cipriani / Max Leather & Jimlar acquisition (2010)North America, Central America,Europe, Middle-East, Russia, India,South Africa, Worldwide(for selected categories)U.S.A, Canadacalvinklein.com13
Controlled Brands Growth DriversGrow by Leveraging Product Platform & Global Distribution150 years heritage boots brandHigh-end contemporarycasual wear40% sales CAGR last 3 yearsDevelop into lifestyle brandExpand into new product categoriesOpen additional strategic retail stores1Expand eCommerce offering on newplatform1) Currently 4 retail storesPerformance skiwearDevelop into lifestyle brandDevelop & distribute expandedpremium international product lineIncrease distribution in European,Middle Eastern & Asian marketsExtend to new sport segmentsDevelop product line for multipleseasonsDistribute in new US channels andexpand international markets14
Global Brands Group Pro Forma 2013 FinancialsNet SalesUS 3.3bnMarginUS 1.0bnCOPUS 134m(US bn) PVHRalph LaurenCoachCotyGlobal Brands Group* Based on company filingsCalendar year 2013 sales except for PVH, Guess and GIII are based on latest fiscal year end.Exchange rate for EURUSD at 1.3764 and HKDUSD at 0.1290, as at December 31, 2013, respectively.FossilEspritMichael KorsGuessGIII15
Global Brands Group Financial Track RecordTurnoverTotal Margin(US m)(US re Operating Profit(US m)6.3%4.1%2001002013Operating Cash Flow(US 63-11%23-16%20112012201320112012201316
Adjustment of Non-Cash Items201120122013178(96)134Add: Amortization of computer software and system development costs645Add: Amortization of brand licenses and distribution rights93121127Add: Depreciation of Property, Plant & Equipment222430EBITDA129954296Net Profit for the Year10028114-(108)(75)Add: Non-cash Interest Expenses182116Add: Amortization of Other Intangible Assets314346148(16)101(US m)Core Operating ProfitLess: Gain on Remeasurement of Contingent Consideration PayableAdjusted Net Profit1) EBITDA is defined as net profit before net interest expenses, tax, depreciation and amortization. This also excludes share of results of joint ventures, material gains or losses which are ofcapital nature or non-operational related, acquisition related costs and non-cash gain or loss on remeasurement of contingent consideration payable.17
Analyst PresentationGlobal Brands Group Spin-offMay 2014
Appendix
Capturing Value in the Entire Brand LifecycleGlobal Brands Group platform can serve brands’ needs across the entire brand lifecycleStart-up PhaseSalesGrowth PhaseFunding for growthProduct category extensionsFind distribution partnersExpand to new markets / channelsScale with professionalinfrastructureBrand extensions / derivativesRebirth PhaseMature PhaseMore affordableproductsNew marketing / brand rejuvenationDevelop new product lineNew channels tersAccessories& HomeFootwearGlobal DistributionPlatformUSEuropeAsiaRest ofWorld18
History of Global Brands GroupGBG Started in 2005 to Capitalize on Li & Fung’s Expertise,Networks and History in the Global Apparel Industry Acquired SICEMInternational S.r.l.Multiple acquisitions to build product platform and brand portfolioOrganic growth as brands are brought onto the platform and benefitfrom global scale and specialized expertiseStarted to buildbrand business in theUSAcquired BrieflyStated Holdings andits portfolio of 40cartoon characterlicenses2005* Selected acquisitionsAcquired Rosettihandbags andaccessoriesAcquired Assets ofPacific AllianceManufacturingGroup, LLC, Regatta(USA) LLC andAmerican MarketingEnterprisesEntered long-termlicenses for Spyderand Juicy CoutureAcquired Jimlarwhich owns Fryeand licenses ofCoach and CalvinKlein footwearAcquired TVManiaand its licenses inEurope20132011201020072006Continue to identify and assessfurther brand, product andgeographical market-drivenacquisitions to extend brand platform19
Highly Experienced Management TeamExtensive industry experience with the ability to leverage relationshipswith brands and retailers worldwideWilliam FUNGBruce Philip ROCKOWITZNon-executive ChairmanVice Chairman / Chief Executive OfficerProvide strategic advice and guidance onthe business and operations of the GroupOverall strategic direction and business operations of theGroupDow Peter FAMULAKLEONG Kwok YeePresidentChief Financial OfficerManage the Group’s businessoperationsOverall management of all aspects of theGroup’s finance and treasury mattersJason Andrew RABINRonald VENTRICELLIChief Merchandising OfficerChief Operating OfficerOversee the Group’s merchandisingstrategy and global brand portfolioOversee the Group’s overall operatingplatform and business support20
Segment AnalysisTurnoverLicensedBrandsTotal Margin(US m)(US m)2,7001,5002,3532,6082,680(US m)40%35.8%28.1%1,800Core Operating 312%5.9%30020024.0%2005112012(US 38%0%36-8%(20)0%2011-8%-16%2013(US m)(US m)46720128%-16%20112012201321
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Portfolio Diversification Steady Cash Flow Generation Time Sales 11 Time Sales Global Brands Group Unique Licensing Model License portfolio of brands to build a sustainable business - Steady cash flow generation - Capture value at every stage of the brand lifecycle Grow portfolio with product and global
