周黑鸭(01458) - 2019 - 中期财报

Corporate Information Business Review and Outlook Market Overview In the first half of 2019, China's casual braised food industry faced unprecedented fierce competition, challenged by tight raw material supply, declining brand loyalty among younger consumers, low-price online competitors, new offline regional brands, and intensified competition for prime retail locations - The industry faces unprecedented fierce competition from supply chain issues, evolving consumer habits, and new online and offline competitors[11][12][13] - The company will focus on product innovation, integrate online and offline resources, deploy omni-channel retail scenarios, and explore diversified channel strategies to adapt to market changes[14] Overall Business and Financial Performance In the first half of 2019, the company advanced its store network optimization, production capacity expansion, youth-focused brand marketing, and online channel development, achieving notable revenue growth in South China and strong performance in e-commerce and delivery services Store Network Expansion and Optimization In H1, the company opened 84 new self-operated stores and closed 117, resulting in a net decrease of 33 stores to 1,255 across 96 cities in 17 provinces, with Central China remaining the primary market and South China showing strong revenue growth of 28.8% - As of June 30, 2019, the company's total self-operated stores numbered 1,255, with a net decrease of 33 in the first half of the year[16][17] Self-Operated Store Network by Geographical Location (As of June 30) | Region | 2019 Number of Stores | 2019 Share | 2018 Number of Stores | 2018 Share | | :--- | :--- | :--- | :--- | :--- | | Central China | 560 | 44.7% | 520 | 43.4% | | South China | 226 | 18.0% | 207 | 17.3% | | East China | 203 | 16.2% | 228 | 19.1% | | North China | 180 | 14.3% | 178 | 14.9% | | Southwest China | 77 | 6.1% | 63 | 5.3% | | Northwest China | 9 | 0.7% | – | – | | Total | 1,255 | 100.0% | 1,196 | 100.0% | Self-Operated Store Revenue by Geographical Location (For the Six Months Ended June 30) | Region | 2019 Revenue (RMB '000) | 2019 Share | 2018 Revenue (RMB '000) | 2018 Share | | :--- | :--- | :--- | :--- | :--- | | Central China | 841,575 | 60.0% | 865,030 | 62.8% | | South China | 224,735 | 16.0% | 174,540 | 12.6% | | East China | 153,530 | 10.9% | 167,378 | 12.2% | | North China | 149,573 | 10.7% | 147,065 | 10.7% | | Southwest China | 28,315 | 2.0% | 23,376 | 1.7% | | Northwest China | 5,446 | 0.4% | – | – | | Total | 1,403,174 | 100.0% | 1,377,389 | 100.0% | Production Capacity To support market expansion and enhance logistics efficiency, the company continues to expand its production capacity, with a new processing plant in Dongguan, Guangdong, commencing operations in H1 2019, and ongoing development of five regional factories across China - The new Dongguan factory in Guangdong commenced operations in the first half of 2019, with production capacity expansion across five major regions (Hebei, Hubei, Guangdong, Jiangsu, Sichuan) currently underway[23][26] Branding and Marketing The company continuously upgrades its brand image, focusing on youth and trendiness through integrated online and offline marketing, including collaborations with trendy idols, advertising in transport hubs, social media content marketing, and updated brand IP for new product packaging - Marketing strategies primarily target younger consumers born in the 1990s and 2000s, building a youthful and trendy brand image through online social media content marketing and offline idol collaborations and fan engagement events[25][27][28] - The company engaged a renowned design firm to upgrade its brand IP, creating a more youthful and personalized image applied to product packaging[28][30] E-Commerce and Online Ordering and Delivering Operation Facing declining online traffic dividends, the company deepened its proprietary platforms and accelerated new online channel development, achieving growth in online channel revenue through product innovation and diverse marketing activities, while significantly increasing delivery service revenue - For the six months ended June 30, 2019, e-commerce channel revenue increased by 9.3% year-on-year[29][31] - For the six months ended June 30, 2019, delivery channel revenue increased by 47.5% year-on-year[32] Industry and Business Outlook Despite rising costs and intensified competition, the company anticipates omni-channel multi-scenario retail as the new normal, aiming to enhance core competitiveness and expand market share through strategies including franchise expansion, diversified channels, product innovation, integrated marketing, and performance-based talent incentives - The company's five key future business strategies include: - Market penetration and expansion through a franchise model - Exploration of diversified distribution channels - Enhanced product innovation - Optimized integrated marketing resources - Establishment of performance-oriented talent incentive programs[35] Management Discussion and Analysis Financial Performance In H1 2019, total revenue slightly increased by 1.8% to RMB 1.626 billion, but rising raw material, depreciation, and labor costs led to an 11.9% increase in cost of sales, reducing gross margin from 59.9% to 55.9%, and consequently, profit for the period significantly decreased by 32.4% to RMB 224 million, with net margin falling from 20.8% to 13.8% Summary of Consolidated Statement of Profit or Loss for H1 2019 | Indicator | H1 2019 (RMB '000) | H1 2018 (RMB '000) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 1,625,947 | 1,596,582 | +1.8% | | Cost of sales | (717,314) | (640,905) | +11.9% | | Gross Profit | 908,633 | 955,677 | -4.9% | | Gross Margin | 55.9% | 59.9% | -4.0 p.p. | | Selling and Distribution Expenses | (551,251) | (495,158) | +11.3% | | Administrative Expenses | (101,290) | (86,560) | +17.0% | | Profit Before Tax | 294,575 | 439,176 | -32.9% | | Profit for the Period | 224,055 | 331,511 | -32.4% | | Net Margin | 13.8% | 20.8% | -7.0 p.p. | | Basic Earnings Per Share (RMB) | 0.10 | 0.14 | -28.6% | - Total revenue slightly increased by 1.8% year-on-year to RMB 1.626 billion, primarily due to a slight increase in sales from self-operated stores and online channels[38] - Gross margin decreased from 59.9% in the prior period to 55.9%, mainly due to overall increases in raw material costs, higher depreciation from new factory operations, and rising labor costs[39] - Selling and distribution expenses increased by 11.3% year-on-year, primarily due to higher rental, staff welfare, advertising, and transportation expenses associated with store network expansion[39] - Administrative expenses increased by 17.0% year-on-year, mainly due to increased operating costs for new factories in Hubei and Dongguan, and amortization expenses related to the SAP system[40][41] Liquidity and Capital Resources The company maintains a robust financial position, primarily funded by operating cash flow and IPO proceeds, with no bank borrowings as of June 30, 2019, approximately RMB 1.5 billion in cash and bank balances, and RMB 1.124 billion in unutilized IPO proceeds, while operating cash flow significantly improved to a net inflow of RMB 469 million, with capital expenditures mainly directed towards processing facilities and store upgrades - As of June 30, 2019, the Group had no interest-bearing bank borrowings, indicating a sound financial position[43] - As of June 30, 2019, RMB 1.124 billion of net IPO proceeds remained unutilized, primarily allocated for store network development, brand image activities, R&D, and IT system upgrades[46][51] Condensed Cash Flow Statement (For the Six Months Ended June 30) | Item | 2019 (RMB Million) | 2018 (RMB Million) | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 469.4 | 207.2 | | Net Cash Generated from/(Used in) Investing Activities | 151.0 | (18.4) | | Net Cash Used in Financing Activities | (434.2) | (235.9) | - Capital expenditure for the first half of the year amounted to RMB 213 million, primarily for establishing and improving processing facilities and upgrading self-operated stores[60][62] Turnover Ratios and Other Metrics In H1 2019, the company's turnover ratios remained relatively stable, with average inventory turnover days at 67.0 days, trade receivables turnover days slightly increasing to 3.6 days, and trade payables turnover days at 23.7 days, while the Group had 4,933 employees at period-end, and total labor costs accounted for 15.1% of total revenue Average Turnover Days (For the Six Months Ended June 30) | Indicator | 2019 | 2018 | | :--- | :--- | :--- | | Inventory Turnover Days | 67.0 Days | 68.0 Days | | Trade Receivables Turnover Days | 3.6 Days | 2.7 Days | | Trade Payables Turnover Days | 23.7 Days | 22.3 Days | Other Information Directors' and Shareholders' Interests As of June 30, 2019, Mr. Zhou Fuyu, the company's Chairman, indirectly held approximately 61.89% of the company's shares through his spouse, Ms. Tang Jianfang, who held the interest via personal holdings, controlled corporations, and a family trust, with other major shareholders including Ms. Zhou Ping (5.73%) and Tiantu Capital related parties (7.67%) - Mr. Zhou Fuyu, the company's Chairman, is deemed to hold an interest in 1,474,936,500 shares, representing approximately 61.89% of the total share capital, derived from his spouse Ms. Tang Jianfang's holdings[67][68] Corporate Governance and Other Disclosures During the reporting period, the company temporarily deviated from the corporate governance code requiring separation of Chairman and CEO roles, with Chairman Mr. Zhou Fuyu serving as interim CEO from May 16, 2019, a situation rectified upon Mr. Zhang Yuchen's appointment as new CEO on August 27, 2019, while the Board resolved not to declare an interim dividend for 2019, and the Audit Committee reviewed this interim report - From May 16 to August 27, 2019, Chairman Mr. Zhou Fuyu concurrently served as CEO, temporarily deviating from Corporate Governance Code Provision A.2.1, which was rectified upon the appointment of Mr. Zhang Yuchen as the new CEO, bringing the company back into compliance[81][82] - The Board resolved not to declare an interim dividend for the six months ended June 30, 2019[87][92] Interim Condensed Consolidated Financial Statements Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income This statement presents the company's revenue, costs, expenses, and profit for the first half of 2019, indicating that despite a slight revenue increase, rising costs and expenses led to a 32.4% year-on-year decrease in profit for the period, from RMB 332 million to RMB 224 million Key Profit or Loss Statement Data (For the Six Months Ended June 30) | Indicator | 2019 (RMB '000) | 2018 (RMB '000) | | :--- | :--- | :--- | | Revenue | 1,625,947 | 1,596,582 | | Gross Profit | 908,633 | 955,677 | | Profit Before Tax | 294,575 | 439,176 | | Profit for the Period | 224,055 | 331,511 | Interim Condensed Consolidated Statement of Financial Position This statement reflects the company's assets, liabilities, and equity as of June 30, 2019, with total assets of RMB 4.95 billion, total liabilities of RMB 918 million, and net assets of RMB 4.033 billion, notably including RMB 565 million in new right-of-use assets and corresponding lease liabilities due to the adoption of HKFRS 16 Key Financial Position Statement Data (As of June 30) | Indicator | 2019 (RMB '000) | 2018 December 31 (RMB '000) | | :--- | :--- | :--- | | Total Non-Current Assets | 2,392,507 | 1,776,078 | | Total Current Assets | 2,557,541 | 2,880,027 | | Total Assets | 4,950,048 | 4,656,105 | | Total Current Liabilities | 626,796 | 482,221 | | Total Non-Current Liabilities | 290,679 | 48,177 | | Total Liabilities | 917,475 | 530,398 | | Net Assets | 4,032,573 | 4,125,707 | Notes to the Interim Condensed Consolidated Financial Statements The notes to the financial statements provide detailed explanations and supplementary information, highlighting the significant impact of adopting HKFRS 16 on assets and liabilities from January 1, 2019, and disclosing the company's operation as a single segment, revenue composition, inventory, and related party transactions Note 2: Changes in Accounting Policies The Group first adopted HKFRS 16 Leases from January 1, 2019, significantly impacting the financial statements by recognizing right-of-use assets and lease liabilities using a modified retrospective approach without restating comparative periods, resulting in a RMB 418 million increase in total assets and liabilities as of January 1, 2019, primarily from RMB 590 million in right-of-use assets and RMB 418 million in interest-bearing bank and other borrowings (including lease liabilities) - Effective January 1, 2019, the Group adopted the new lease accounting standard HKFRS 16, requiring lessees to recognize all leases (except short-term and low-value leases) on the balance sheet[112][113][117] Impact of Adopting HKFRS 16 on Opening Balances as of January 1, 2019 | Item | Increase/(Decrease) (RMB '000) | | :--- | :--- | | Assets | | | Increase in Right-of-Use Assets | 590,397 | | Decrease in Prepaid Land Lease Payments | (128,898) | | Decrease in Prepayments, Deposits and Other Receivables | (43,930) | | Total Assets Increase | 417,569 | | Liabilities | | | Increase in Interest-Bearing Bank and Other Borrowings | 417,569 | | Total Liabilities Increase | 417,569 | Note 3: Operating Segment Information For management purposes, the Group operates as a single segment, encompassing the production, marketing, and retail of casual braised duck-related food products, with all revenue and substantially all non-current assets located in mainland China, thus no geographical segment information is presented, and no single customer accounts for over 10% of total revenue - The company has only one reportable operating segment, which is the production, marketing, and retail of casual braised duck products[150][153] Note 4: Revenue Breakdown The company's total revenue primarily derives from modified atmosphere packaging products, which contributed RMB 1.433 billion or approximately 88.1% of total revenue in H1 2019, while vacuum-packed products contributed RMB 180 million, accounting for approximately 11.1% Revenue Breakdown by Product Type (For the Six Months Ended June 30) | Product Type | 2019 (RMB '000) | 2018 (RMB '000) | | :--- | :--- | :--- | | Vacuum-Packed Products | 179,855 | 141,455 | | Modified Atmosphere Packaging Products | 1,433,223 | 1,443,087 | | Other Products | 12,869 | 12,040 | | Total | 1,625,947 | 1,596,582 |