hong kong television network limited...2018/08/30 · merchant payments (396,088) (217,108) 86,899...
TRANSCRIPT
30 August 2018
(SEHK stock code: 1137)
HONG KONG TELEVISION NETWORK LIMITED
香港電視網絡有限公司
Interim Results Presentation for the Period Ended 30 June 2018
1
Disclaimer This presentation and subsequent discussions may contain forward-looking statements and information that involve risks,
uncertainties and assumptions. Forward-looking statements are all statements that concern plans, objectives, goals,
strategies, future events or performance and underlying assumptions and other statements that are other than statements
of historical fact, including, but not limited to, those that are identified by the use of words such as "anticipates,'' "believes,''
"estimates,'' "expects,'' "intends,'' "plans,'' "predicts,'' "projects'‘, “target” and similar expressions.
The information included is solely for the use in this presentation and certain information has not been independently
verified. No representations or warranties, expressed or implied, are made as to, and no reliance should be placed on, the
fairness, accuracy, completeness or correctness of the information or opinions presented or contained in this presentation.
The performance and the results of operations of the Group contained within this presentation are historical in nature, and
past performance is no guarantee of the future results of the Group. Any forward-looking statements and opinions
contained within this presentation are based on current plans, estimates and projections, and therefore involve risks and
uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements and
opinions.
Certain information in this presentation is extracted from Google Analytics and rounded to the nearest thousand. The
computation method and basis of which have not been verified. The data could be overlapping (a) between TV
Programme Platform and Online Shopping Platform if the same user is watching our TV programmes and browsing the
online shopping mall at the same time; (b) between different type of devices among TV Programme Platform and among
Online Shopping Platform if the same user using more than one devices for watching TV programmes and/or browsing our
Online Shopping Platform at the same time; (c) or the same user using HKTVmall app to browse the HKTVmall web-page;
(d) if the same user using the same device to browse the online shopping mall through different channels/medias on the
same device. The information for the same period can be changed at different point of time when capturing the data as
Google Analytics performs the analysis on sampling basis. According to Google Analytics, the definition of “User” is “Users
that have had at least one session within the selected date range, which includes both new and returning users.” The
above data are unaudited and are not indicative of the Company’s business performance, financial condition or growth
prospect. Readers should not place reliance on these data.
For figures generated from internal systems and relevant platforms, which were rounded up to nearest integral percentage
or thousand, are unaudited and for reference only.
We are not required to correct or update any such statement or information to either reflect events or circumstances that
occur after the date the statement or information is made or to account for unanticipated events or otherwise. 2
Agenda
•Operational and Financial Review By Ms. Alice Wong, CFO
•Business Review and Outlook By Mr. Ricky Wong, Chairman
•Q & A
3
Operational and Financial Review BY Alice Wong, CFO
4
In Need of Online Shopping in Hong Kong!
5
Source:
(1) GMV and Average Daily Order – Internal platform and system
(2) Monthly Login User (HKTVmall only) – Google Analytics
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Average Daily Order Group GMV on Order Intake (HK$000) /
Monthly Login User (HKTVmall Only)
GMV (HK$000) Monthly Login User (HKTVmall) Average Daily Order
Sustainable Growth Momentum
Remark: GMV = Gross sales dollar value for merchandise sold excluding cash voucher sold, internal account sales, before deduction of mall level discounts, rebated used, cancellation and returns of merchandise sold. 6
115.7 67.9
453.8
203.9
816.7
388.6
-
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
HK$mnGMV for order intake
HK$mnTurnover
1H2016 1H2017 1H2018
90%
80%
76% of FY2017 GMV
80% of FY2017
Turnover
Growing Revenue and Decent Margin
Remark: GMV on completed order represents the total gross sales dollar value for merchandise sold through a particular marketplace and the customer has obtained control of the promised goods and services ordered over a certain time frame, after deduction of any discounts offered by the marketplace, relevant rebate used, cancellation and returns of merchandise.
7
Slightly lower blended commission rate in 1H2018 was mainly due to increase in GMV contribution from Electronics (by 222.2% versus 1H2017) which usually has lower commission rate relative to other product categories.
On Completed Orders 1H2018
HK$’000
1H2017
HK$’000
Direct merchandise sales
GMV on completed orders 297,165 148,181
Cost of Inventories (239,139) (124,556)
58,026 23,625
Gross margin % 19.5% 15.9%
Income from concessionaire sales and other service income
GMV on completed orders 482,987 271,769
Merchant payments (396,088) (217,108)
86,899 54,661
Blended commission rate 18.0% 20.1%
Licensing of programme rights and net advertising income 4,534 1,063
Multiple Growth Rate on Customer Base – Making real purchases at HKTVmall and / or HoKoBuy
8 Source: Internal system
+
187%
91%
9
Managed CAPEX for Sustainable Growth
Heavy construction CAPEX for new TKO headquarters was completed in 2016/2017. Upcoming CAPEX is scalable and for sustainable business growth – for the next 2 -3 years, mainly including: a) HK$140 million robotic system to be delivered by 2 phases by Q12019 and by Q12020; b) Expansion of logistics fleet for increase in order intake – 50+ trucks to be delivered in
Q32018; c) Renovation and equipment for new O2O shop opening – 10+ in 2H2018
384.6
111.3
26.4
131.4 112.6
77.5
1H2016 1H2017 1H2018
CAPEX (HK$) Cash Outflow on CAPEX included Deposits Paid (HK$)
Consolidated Income Statement
10
6 months ended 6 months ended
30 June 2018 30 June 2017
HK$'000 HK$'000 HK$'000 %
GMV on Order Intake 816,721 453,800 362,921 80%
Turnover
- Ecommerce 384,064 202,842 181,222 89%
- Multimedia 4,534 1,063 3,470 326%
Total Turnover 388,598 203,905 184,693 91%
Cost of inventories (239,139) (124,556) (114,583) 92%
Other operating expenses (336,315) (247,657) (88,658) 36%
Valuation gain 19,700 23,900 (4,200) -18%
Other income, net 30,030 48,787 (18,757) -38%
Finance costs (2,472) (782) (1,690) 216%
Income tax expense (265) 199 (464) -233%
Loss attributable to shareholders (139,863) (96,204) (43,660) 45%
Interest on bank loans 2,366 656 1,711 261%
Income tax expenses/(credit) 265 (199) 464 -233%
Investment returns (21,157) (29,410) 8,253 -28%
Depreciation 30,658 21,596 9,062 42%
Amortisation 10,989 6,516 4,473 69%
EBITDA loss (116,742) (97,045) (19,696) 20%
Major non-cash items (11,649) (29,094) 17,445 -60%
- Valuation gains on investment properties (19,700) (23,900) 4,200 -18%
- Exchange gain/(loss) (2,748) (12,111) 9,363 -77%
- Reversal of expected credit loss on debt securities measured at FVOCI (471) - (471) 0%
- Non-cash licensing income (3,813) - (3,813) 0%
- Equity-settled share-based transactions 7,188 6,917 271 4%
- Unrealised fair value loss on debt securities measured at FVPL 7,895 - 7,895 0%
Adjusted EBITDA loss (128,391) (126,139) (2,252) 2%
Variance
Key Highlight on Consolidated Income Statement
Adjusted EBITDA Loss of HK$128.4mn in 1H2018 vs. HK$126.1mn in 1H2017;
Net loss of HK$139.9mn in 1H2018 vs. HK$96.2mn in 1H2017.
Relative to 1H2017,
1. Turnover increased by HK$184.7mn to HK$388.6mn in 1H2018; Relative to FY2017, represented 80% of what we have achieved in FY2017;
2. Operating Expenses increased by HK$88.6mn to HK$336.3mn in 1H2018 mainly caused by increase in talent costs, advertising and marketing expenses, logistic and warehouse operating costs and non-cash depreciation and amortisation charges;.
3. Other Income decreased by HK$18.7mn to HK$30.0mn mainly caused by reduced investment income due to realization of investment for operating and capital expenditure and increased non-cash item on net exchange gain and from the adoption of HKFRS 9;
11
Other Operating Expenses
12
As a % of GMV on 1H2018 As a % of GMV on 1H2017 Variance
Functions completed orders HK$'000 completed orders HK$'000 HK$'000
Fulfillment cost 19% 148.4 26% 108.7 39.7
Marketing and promotion including O2O shop 6% 47.1 6% 24.7 22.4
Ecommerce operation and supporting functions 12% 92.0 19% 79.2 12.8
Non-cash items:
Depreciation 4% 30.7 5% 21.6 9.0
Amortisation 1% 11.0 2% 6.5 4.5
Equity settled share-base payment expenses 1% 7.2 2% 6.9 0.3
43% 336.3 59% 247.7 88.7
Total GMV on completed orders 780.2 420.0
• Though there was an increase of HK$39.7 million on Fulfillment costs, which only attributed to 19% of GMV on completed orders in 1H2018 vs 26% in 1H2017, another Volume Gain.
• Marketing and promotional costs increased mainly for new customer acquisition and O2O shop expansion during 1H2018. During 1H2018, we have total customer base of 427,000 vs 149,000 in 1H2017 who made purchases with HKTVmall and/or HoKoBuy during the period.
Consolidated Statement of Financial Position
Solid balance sheet with strong liquidity - as at 30 June 2018, 1. Under Property, plant and equipment, included self-owned properties at TKO Headquarters of over 300,000 Sq. Ft. and
investment and leasehold properties of about 153,000 Sq. Ft.. Among this, an MOU was signed to sell a subsidiary including about 52,500 Sq Ft. in August 2018 at HK$328.3 million subject to completion expected by end of September 2018, with an estimated gain on disposal at approximately HK$160.6 million.
2. Strong liquidity with investment in Other Financial Assets and cash balance, net of bank borrowings at HK$540.3 million. 13
Jun 2018 Dec 2017
HK$'000 HK$'000 HK$'000 in %
Property, plant and equipment 1,167,751 1,152,387 15,364 1%
Intangible assets 101,576 100,725 851 1%
Other financial assets (Fixed income and Equity investment)
Non-current 673,934 675,161 (1,227) 0%
Current 49,171 201,004 (151,833) -76%
Other receivable, deposits and prepayments 118,979 75,188 43,791 58%
Inventories 32,412 26,912 5,500 20%
Tax recoverable - 1,007 (1,007) NA
Pledged bank deposits 3,905 3,905 - NA
Cash at bank, in hand and term deposits 87,347 100,199 (12,852) -13%
Total Assets 2,235,075 2,336,488
Accounts payable 100,425 92,951 7,474 8%
Other payables and accrued charges 147,773 154,840 (7,067) -5%
Deposits received 4,286 4,286 - 0%
Bank loans 274,058 219,623 54,435 25%
Deferred tax liabilities 2,421 2,156 265 12%
Total Liabilities 528,963 473,856
NET ASSETS 1,706,112 1,862,632
Share capital 1,277,181 1,268,914 8,267 1%
Reserve 428,931 593,718 (164,787) -28%
TOTAL EQUITY 1,706,112 1,862,632
Variance
Business Review and Outlook By Ricky Wong, Chairman
14
Traditional Retail vs Online Retail Traditional Retail Online Retail
15
At HKTV Warehouse: ~20,000 SKU
Merchants’ Warehouses: ~160,000 SKU
Pick & Pack, Sorting Automation System at HKTV Distribution Centre
• To build an Ecosystem to transform Hong Kong business operation, trading, retail, finance and daily life onto a digital online platform.
• To maintain Hong Kong as one of the leading
cities in Asia
16
Our Mission
1. From online supermarket & grocery (40,000 SKU) online
department store/shopping mall (177,000 SKU);
2. From online shopping online insurance/finance platform
3. From online shopping big data (collection and utilization)
4. From consumer benefit value to merchants/retailers
5. O2O integration Integrating Online apps/web and Offline shop
6. We source products, we build the warehousing, we automate the pick and pack process, we design and own our delivery trucks, we design and build our apps/web and backend system everything in a single online shopping mall
17
Our Plan and Strategy
Flexibility for Different Merchants’ Requirements
18
Delivery Model Business ModelHKTVmall Own
Inventory
HKTVmall
Warehousing
Merchants send product to
HKTVmall warehouse upon
customer order placement
/ eCoupon by email for use
or for redemption
1H2018 GMV
Proportion
Buy and Sell
Consignment by
Merchant
Standard Delivery
Overseas Products
Merchant directly
deliver to
customer/eCoupon
Merchant Delivery / By
24%
HKTVmall deliver to
customer 76%
Remarks: 1. The sites in the top sites lists are ordered by their 1 month Alexa traffic rank. 2. The 1 month rank is calculated using a combination of average daily visitors and page views over the past month. The site with the highest combination of visitors and page views is ranked #1. The site’s metrics are estimated and based on traffic patterns across the web as a whole and using data normalization to correct for any biases.
No. 1 Hong Kong Based Online Shopping Platform
Top Sites in Hong Kong - as at 15 August 2018
Ranking in Hong Kong Sites
1 www.google.com.hk
2 www.youtube.com
3 www.google.com
4 www.facebook.com
5 www.yahoo.com
9 www.taobao.com
15 www.amazon.com
21 www.tmall.com
79 www.hktvmall.com
318 Zalora.com.hk
430 www.fortress.com.hk
453 www.hokobuy.com
542 www.ztore.com
642 www.parknshop.com
1062 https://www.broadwaylifestyle.com/
1196 www.watsons.com.hk
1210 www.wellcome.com.hk
1319 www.sasa.com
1338 www.fingershopping.com
4793 https://eshop.yata.hk
Source: https://www.alexa.com/topsites/countries;2/HK
19
For the month of June 2018 Dec 2017
No. of Unique Devices landing on PDP or performing search on HKTVmall (source: 1)
1,409,000 1,129,000
No. of Registered Email Subscriptions (source: 2)
4,522,000 4,280,000
No. of Apps download (source: 3)
3,880,000 3,571,000
Facebook likes (source: 4) 911,000 896,000
+
Source: 1. Data on Unique Device is extracted from our internal system and rounded to the nearest thousand. The data is collected based on the tracking cookies for web browser and
the device advertising ID for app, which could be overlapping if (a) same device is used to browse the online shopping web-page through different browsers; (b) same device is used to open online shopping app and to browse online shopping web-page; and (c) the user amends the advertising ID of its device. These data are unaudited and are not indicative of the Company’s business performance, financial condition or growth prospect. Readers should not place reliance on these data.
2. Internal system 3. Android Google Play Console and Apple iTunes Connect 4. Facebook
20
In 2 – 3 Years’ time - Become the Largest and “Profitable” Future Retail
Volume in Product Spectrum
in Visitor and Customer Base
in Automated Fulfillment and Logistic Capacity
are the Foundation which we are building.
Our aim is in 2 -3 years’ timeframe,
1) Expand the Penetration by new customers acquisition
2) Increase Gross Profit Margin and Commission Rate
3) Lower the Costs for Warehousing, Pick and Pack and Delivery Cost
21
Breakeven Profitable Stage
HKTVmall P&L model
We run the Ecommerce Business aiming to reach different stages to attain “Profitable” stage:
22
Stage 1 : Order fulfilment (Primarily Variable costs)
Stage 2 : Online shopping mall operation (Primarily Fixed costs)
Stage 3 : Supporting functions including Admin, Finance, TM,
Technical operation (Primarily Fixed costs)
Stage 4 : Research and Development (Primarily Fixed costs)
Efficiency Gain on Fulfillment Costs Driven by Volume and Automation
23 Source: Internal platform and system
1. Launched Phase 1 of Robotic System in March 2018
2. 2. Average Daily Order Intake > 10,000 since May 2018
Fulfillment costs included logistics, warehousing, picking and packing, logistic and redemption center operating costs incurred for order completion. Fulfillment costs per order is divided by total completed orders during the period which include e-coupon and merchant direct delivery.
107 100
84
-
20
40
60
80
100
120
2017 2018Q1 2018Q2
Fulfillment costs / order (HK$)
HK$
Supermarket Personal Care and Health
Fashion Housewares
Mother & Baby
Sports and Travel Dining and
Lifestyle Pets Electrical
Appliances
Offer > 177,000 product items - From own FMCG inventory to Merchant offered varieties
24
Toys and Books
As at 15 August 2018
Source: Internal systems and relevant platforms
Expanding Product Spectrum
Skincare & Make up
Upcoming: Financial Services
New Customers Acquisition
•Tier One Banks partnership – • Benefit from different database cross selling to accelerate new
customer acquisition • Ready for innovative TechFin development – 88 days technical
development to launch the first Pay with Points API with highly regulated Tier One Bank
•Reach the unreachable segments – • Expanding payment channels to non-credit card consumer segments • Enlarging physical presence in different geographic districts, now
having 24 O2O shops in operation, by end of 2018 35 •Cross Sectors Conversion –
• Collaboration with like-minded companies across different sectors to accelerate the digital conversion of consumers’ living.
25
26
Expanding Channels for Payment and Mall Dollars
1st Wave – TV Commercials for New Customer Acquisition 21 May – 30 June 2018, we sold more than 41,000 sets
27
https://youtu.be/WyY_U2mmPLA
2nd Wave – Just launch at 28 August 2018
嚟HKTVMALL (日本)和牛就係住家飯
28
https://youtu.be/-jDns_fQb1E
Increase in Merchant Commission Rate from 1 October 2018 onward
29
Just like other Hong Kong Retailers, we aim to increase our Blended Gross Margin and Commission Rate up to 27% to 33% in 2 – 3 years’ time.
Scalable Capacity - Phase II and III of Robotic System at
Self-Owned TKO Headquarters Investment
(HK$)
Estimated Daily Pick/Pack
Capacity
(Number of Orders)
Estimated Launch
Date
Phase 1 29,000,000 8,000 to 10,0001Q 2018
(officially launched)
Phase 2 92,000,000 20,000 Q1 2019
Phase 3 52,000,000 > 30,000 Q1 2020
30
Phase 3
Phase 2
Lowering Delivery cost
Another Volume Game, the more the order, the higher the density in each district, the shorter the delivery distance – and lower costs!
Aim at 6-8% of GMV$
Now, ~ 200 in operations
In 1 year’s time ~ 300 in operations
In 2 years’ time ~ 400 in operations
In 3 years’ time ~ 500 in operations
31
50+ cold trucks and 5.5
standard trucks to be delivered in Q3 2018
A New Way of Retail Store Concept
Pick Up (to suit different customer needs)
Education (to reach and convert new group of customers)
CS handling (to increase confidence on products and service level)
Brand awareness and build-up
A few hundreds sq. ft. shop “retailing” 177,000 sku
32
33
A New Way of RETAILING – Offline Patronage -> Online Shopping -> Offline Pick-up points
2017 :15
June 2018
:24
Now :30
Dec 2018
:35
Review on Collaboration with Google Partner Since Jan 2018 to groom SME
34
More precise target marketing in placing digital ad, this is our strength brought by BIG DATA collected from HKTVmall and HoKoBuy!
According to 2017 experiment, HKTVmall remarketing audience vs Google audience
Source: Google Awards (Jan – Dec 2017)
Conversion rate
Uplift 31x
Case Sharing 1 – Small Merchant Partnership Programme (update since 2017 annual results)
A new-joined small grocery shop by end of January 2018- • Selling (parallel import) baby goods, such as
diaper, cups, vacuum bottle, bathing oil etc.
• Annual Ad Budget: HK$100,000
• Ad Spent amount: HK$3,400 only in February 2018
35
• Cumulative Ad Spent (Jan – Jul 2018): HK$41,000 • Cumulative GMV (Jan – Jul 2018): HK$4.3 million
with July 2017 reached HK$1.1 million
● Existing merchant conversion from February 2018
● Store selling sterilizing products, such
as flea spray, hand sanitizer, floor cleaner, etc.
● From January 2018 to February 2018 :
○ Ad Spend amount: HK$2,100 only in February 2018
Case Sharing 2 – Small Merchant Partnership Programme
HK$35,000
HK$40,000
HK$45,000
HK$50,000
HK$55,000
HK$60,000
HK$65,000
Jan 2018 Feb 2018
GMV
36
• Cumulative Ad Spent (Jan – Jul 2018): HK$27k • Cumulative GMV (Jan – Jul 2018): HK$675k
What are the Difficulties We are Facing?
Lack of similar online operation in Hong Kong difficult to accelerate the “Online/Digital Ecosystem” momentum
Lag-behind scale of e-Wallet or e-Payment
Digital Ecosystem is incomplete Consumer behavior and Merchants commitment
37
THANK YOU
38
Retail Market Reference from Bricks and Mortar
39 Source: Respective listed company’s latest annual report
Market Cap
Listed Company
(Stock Code)
Mainly trading
as
as at 15
August
2018
Historical
P/BYear Ended NAV
GMV/Sale
s
GP Remarks
HK$bn HK$bn HK$bn
HKTV (1137)HKTVmall and
HoKoBuy2.0 1.09 31/12/2017 1.9 1.1
See
Remark
Direct Merchandise Sales Gross Margin : 1H2018:
19.5% ; FY2017: 14.7%;
Blended commission rate for Concessionarie sales:
1H2018: 18.0% ; 1H2017: 21.3%
Lifestyle International
Holdings Ltd (1212)Sogo 23.2 5.73 31/12/2017 4.0 10.2 26.1% GP: excluded Service Income and Other Income
Convenience Retail
Asia (831)
Circle K and
Saint Honore2.7 4.09 31/12/2017 0.7 4.2 34.8%
GMV: Include Merchandise sales revenue and e-Commerce
revenue, but exclude Bakery sales revenue, and mainly HK
based;
GP: Group basis include Convenience stores merchandise
sales, St Honor Bakery sales and e-Commerce sales
AEON Stores (Hong
Kong) Co Ltd (984)AEON 1.1 0.61 31/12/2017 1.7 4.3 24.7%
GMV: Included HK revenue which mainly for Direct Sales but
also included a certain portion of concessionary commission;
GP: on Group Direct Sales basis which include PRC segment
International
Housewares Retail
Co. Ltd (1373)
JHC日本城 1.4 1.91 30/4/2018 0.7 2.2 47.0% GMV & GP: Retail Segment only and mainly from HK sector
CEC International
Holdings Ltd (759)759 0.3 0.68 30/4/2018 0.5 1.8 35.0%
GMV: Retail Business only;
GP is the blended GP for Retail Business and Electronic
Component Manufacturing Business, while Electronic
Component Manufacturing Business only accounted for 6.6%
of sales
Key Financials