2015 Annual Results COMPANY OVERVIEW One of the leading linen yarn - - PowerPoint PPT Presentation

KINGDOM HOLDINGS LIMITED Stock code： 528.HK

2015 Annual Results

COMPANY OVERVIEW

2

About Kingdom Holdings Limited FY2015 Result highlights

 One of the leading linen yarn manufacturers and suppliers in the world; accounted for 32% of the PRC’s linen yarn export in FY2015  The PRC’s largest linen yarn exporter for 13 consecutive years

Stock information Stock code : 528.HK Stock price (as of 17 Mar 2016) : HK$ 1.58 Market cap (as of 17 Mar 2016) : HK$ 994.9 mn Historical P/E*(as of 17 Mar 2016) : 7.0 x

• Mainly produces high quality linen yarns, and will

gradually enhance product mix to high margin dyed linen yarns and linen fibre products

• In FY2015, 65% of revenue was derived from

export sales to markets such as the EU, Korea, Japan & India; approximately 35% of the revenue was contributed by domestic sales

• Annual production capacity reached 18,000

tonnes, the largest in China

• Products are used in the following international

brands/manufacturers:  Revenue grew 12.2% to RMB 1,025,403,000  Gross margin at 25.8 % (FY2014: 26.8 %)  Profit attributable to Owners of the parent amounted to RMB 120,369,000, up 9.0% yoy  Earnings per share amounted to RMB 0.17, up 11.8% yoy

* Currency Rate: RMB1 = HKD1.19

WHAT MAKES KINGDOM UNIQUE

COMPETITIVE ADVANTAGES

Scale

• No. 1 exporter of linen yarn in China for 13 consecutive years;
• Largest production capacity (18,000 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 49 patents including invention patents

Management

• Green production
• Collaboration with leaders in each field, e.g. Siemens
• Continuous improvement projects (34% savings on water consumption in FY2015)

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
• rganic process, resulting zero water pollution (compared with pond or stream

retting methods).

5 * The freshwater aquatic ecotoxicity potential describes the toxic impact that the emitted substances have in the aquatic environment.

2015 ANNUAL RESULTS

RMB’000 FY2014 FY2015 Change Change Revenue 914,279 1,025,403 111,124 +12.2% Gross profit 245,001 264,045 19,044 +7.8% Profit attributable to Owners of the parent 110,477 120,369 9,892 +9.0% Gross Margin 26.8% 25.8%

• 1.0 p.p.

Net Margin 12.1% 11.7%

• 0.4 p.p.

Weighted average number of

• rdinary shares (‘000 shares)

631,600 630,195 1,405

• 0.2%

Earnings per share (RMB) 0.17 0.19 0.02 +11.8% Dividend per share (HK cents) 7.50 8.0 Dividend payout ratio* 34.8% 35.1%

RESULTS SUMMARY

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* Currency Rate: RMB1 = HKD1.19

The new production plant (Haiyan Phase II) commenced production in June 2014

914.3 1025.4 200 400 600 800 1,000 1,200 FY2014 FY2015

REVENUE ANALYSIS

8

Average selling price and sales volume of standard linen yarn products

+12.2% Others

24.0% (19.5%)

24NM

22.5% (27.2%)

26NM

23.8% (22.3%)

36NM

24.8% (26.6%)

39NM

4.9% (4.4%) Revenue analysis Revenue contribution from major linen yarn products

RMB million FY2015 (FY2014)

*Comparable figures of FY2014 in parentheses

FY2014 FY2015 Change Average selling price (RMB’000/ton) 61.8 61.8

• Sales volume (ton)*

14,024 15,610 + 11.3 % Gross profit margin 26.8% 25.8%

• 1.0 % pt.

* Other miscellaneous products not included.

REVENUE GEOGRAPHICAL BREAKDOWN

9 Geographical Breakdown

FY2014 FY2015 Change Mainland China 36.1% 35.0%

• 1.1 % pt.

Italy 16.2% 17.9% +1.7 % pt. India 8.6% 15.4% +6.8 % pt. Korea 13.5% 10.5%

• 3.0 % pt.

Turkey 8.7% 8.8% +0.1 % pt. Portugal 7.6% 3.7%

• 3.9 % pt.

Japan 3.6% 3.5%

• 0.1 % pt.

Others 5.7% 5.2%

• 0.5 % pt.

Total 100.0% 100.0%

• 

Sales in Mainland China accounted for 35.0% of sales  Sales in fast growing emerging markets namely (India, Korea and Turkey) accounted for 34.7%

Mainland China

35.0% (36.1%)

Non-EU

39.8% (36.3%)

The EU

25.2% (27.5%) FY2015 (FY2014)

*Comparable figures of FY2014 in parentheses

GROSS PROFIT AND GROSS MARGIN ANALYSIS

10

245.0 264.0

26.8% 25.8%

0% 5% 10% 15% 20% 25% 30% 50 100 150 200 250 300 350 400 FY2014 FY2015 Energy 10% (9%) Depreciation 5% (6%) Labour 16% (17%) Others 12% (12%) Raw material 57% (56%)

Gross profit and gross margin

RMB million

Cost structure For the year ended 31st Dec

FY2015 (FY2014)

*Comparable figures of FY2014 in parentheses

Major costs FY2015 and FY2014 Average unit cost comparison Raw material : + 8% Energy :

• 8%

Labour :

• 2%

Gross margin (%)

NET PROFIT AND NET MARGIN ANALYSIS

11 110.5 120.4 12.1% 11.7%

0% 2% 4% 6% 8% 10% 12% 14% 50 100 150 200 FY2014 FY2015

RMB ’000 FY2014 FY2015 Change Marketing (commission, events) 10,701 14,020 +31.0% Transportation costs 18,157 16,188

• 10.8%

Insurance expenses 4,276 4,798 +12.2% Others 4,736 3,681

• 22.3%

Total 37,870 38,687 +2.2% As % of sales 4.1% 3.8% *

• 0.3%pt.

Net profit and net margin Selling and distribution expenses For the year ended 31st Dec

RMB million Net margin (%)

* The decrease in selling costs as a percentage of revenue mainly due to increase in products being sold to non-European countries like Korea and India with shorter distance and shipped from a closer port in Zhejiang province.

KEY FINANCIALS

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RMB’000 As of 31 Dec 2014 As of 31 Dec 2015 Change Net assets

961,662 1,043,978

+ 8.6% Inventories

297,104 340,902

+ 14.7% Cash and cash equivalents

217,185 237,214

+ 9.2% Interest-bearing bank loans

280,875 368,033

+ 31.0% Current ratio

186.1% 179.1%

• 7.0 % pt.

Net asset value (RMB) per share

1.52 1.66

+ 9.2% Gearing ratio*

29.2% 35.3%

+ 6.1% pt. Effective tax rate

26.2% 26.7%

+ 0.5% pt.

*Total borrowings / equity attributable to owners of the parent

INVENTORY, A/R & A/P TURNOVER DAYS

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RMB’000 As of 31 Dec 2014 As of 31 Dec 2015 Raw materials

208,587 178,318

Work in progress

27,623 32,741

Finished goods

60,894 129,843

FY2014 FY2015 Inventory turnover days

153 153

Trade receivables turnover days

79 96

Trade payables turnover days

73 60

Net turnover days

159 189

SHAREHOLDING STRUCTURE

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48.01% 10.80% 38.40% 2.79%

Chairman and Executive Director

• Mr. Ren Weiming

Non-executive Director

• Mr. Ngan Kam Wai

Albert Public Shareholders Non-executive Director

• Mr. Tse Mark

Chau Shing

KINGDOM HOLDINGS LIMITED

金达控股有限公司

Stock Code：528.HK

Total number of issued shares as at 31 Dec 2015: 629,678,000 shares

GROWTH STRATEGIES AND PLANS

GROWTH STRATEGIES

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Expansion of production capacity 1 ￭ 2nd phase of Haiyan Plant commenced formal production in June 2014 – Annual production capacity of 5,000 tonnes of linen yarn Enhancement of production efficiency 2

Ethiopia

￭ 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 ￭ Production capacity: – Phase 1 with annual production capacity of 5,000 tonnes of linen yarn – Expect commence operation around end of 2017 ￭ 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

Africa

PRODUCTION AND CAPEX PLAN

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Production plan CAPEX plan FY2015 FY2016 FY2017 Actual Volume sold (tonnes) Gross margin Target production capacity (tonnes) Target gross margin Target production capacity (tonnes) Target gross margin Linen yarn (standard) 15,610 25.8% 18,000 25.7% 18,000 25.5% Project CAPEX Source FY2016

• Construction of production facility in Ethiopia
• Enhancement of production efficiency projects

RMB 60 million

• Internal

resources

• Bank loans

FY2017

• Construction of production facility in Ethiopia
• Enhancement of production efficiency projects

RMB 130 million

• Internal

resources

• Bank loans
• Capital market

Total RMB 190 million

MAJOR MARKETS OF LINEN TEXTILE PRODUCTS

18 Brazil South Africa Mainland China USA Mature market Emerging market Potential market

BUSINESS OVERVIEW

BUSINESS MODEL

20

Flax flower and flaxseed Flax Production process Clothes

Kingdom Holdings Limited (528 HK) Linen yarn production

End application Garment and textile manufacturers

Raw material fiber flax are mainly procured from Europe

• Kingdom is the largest

raw material buyer in Europe, with strong bargaining power

• Good relationship with

suppliers

• Raw material

processing requires high expertise and experience

• Linen raw materials

need to be processed to match the standard

• f linen yarn

manufacturing

• Linen raw materials can

be stored for several years; generally, humid condition is more suitable for long term storage

• Linen yarn is produced

through wet spinning process, which can not be easily replicated by cotton yarn manufacturers

• Kingdom is capable to

produce wide range of products ranging from 3 - 75NM

Raw material procurement

External suppliers Self-supplied

Owns an organic fiber flax production base in Xinjiang

• High-end garment

manufacturers

• Household textile

manufacturers

• Outdoor textile

manufacturers

• Kingdom’s

products have become the benchmark in linen yarn market

Haiyan, Zhejiang Phase I

PRODUCTION PLANTS AND CAPACITY

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Production plant Product Annual production capacity Annual production capacity utilization in 2015 Haiyan, Zhejiang Phase I Linen yarn / dyed linen yarn 7,000 tonnes 100% Rugao, Jiangsu Linen yarn 6,000 tonnes 100% Haiyan, Zhejiang Phase II Linen yarn 5,000 tonnes 100% Total

• 18,000 tonnes *
• Rugao, Jiangsu Phase

Haiyan, Zhejiang Phase II

* Based on standardized 24NM. Actual production volume (with various NM specifications) will be lesser.

RAW MATERIAL PROCUREMENT & RISK MANAGEMENT

22

Raw material procurement Self-owned raw material production base in Xinjiang FY2014 FY2015

Volume (tons) Unit cost (RMB/ton) Volume (tons) Unit cost (RMB/ton)

Europe (Mainly France, Belgium & Holland) 18,182 19,100 23,640 19,559 Xinjiang 207 19,500

•  The largest raw material purchaser in Europe with strong bargaining power over suppliers

Europe 100% (99%) Xinjiang 0% (1%) Procurement volume for year ended 31 Dec 2015 Raw material production base in Xinjiang

• Mainly produce high quality organic raw materials

*Comparable figures of FY2014 in parentheses

Location : Zhaosu County, Yili, Xinjiang Area : 6,000 mu Production capacity : 400 tonnes

SALES NETWORK & BRANDS

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Sales network and agents Brands

 Extensive sales network covering over 20 countries and regions worldwide  With 5 distribution agents located in textile manufacturing centers 5 sales agents located in Europe and Asia:

• 1 in Portugal, Turkey and India respectively
• 2 in Korea

A subsidiary in Italy with stocks to ensure quality and timely services to high-end customers in Europe

Sales agent Subsidiary India Turkey Italy Portugal

Products: Linen yarn Markets: Korea, Japan and EU Established in 2005 Products: Linen yarn Markets: Domestic market Established in 2002 Products: Linen yarn Markets: Eastern Europe Established in 2001

APPENDIX

CORPORATE MILESTONES

25

• Obtained OEKO-TEX Standard 100

certificate

• The"CRAPE MYRTLE" trademark
• btained the registration

certificate issued by the International Trademark Bureau 2000 2003 2008 2010 2014 2005 2007 2006

• The dope-dyed

linen yarn officially launched into the market

• The Technical

Center of Zhejiang Jinyuan Flax Co.,

• Ltd. was recognized

as a provincial technical center of the Zhejiang Province

• Kingdom Europe srl was

established in Italy

• Obtained the organic textile

certificate issued by the Netherlands Control Union

• Listed on the main

board of the Hong Kong Stock Exchange

• Jiangsu Ziwei Flax

Co., Ltd was founded ￭Zhejiang Jinyuan Flax Co., Ltd and Jiangsu Jinyuan Flax Co., Ltd were founded

• The Phase I 5,000-ingot flax

production line was put successfully into production, and the first batch of flax was launched into the market, marking Kingdom's entry into the flax industry.

• CRAPE MYRTLE was

recognized as the "Export brand of Zhejiang" by the Department of Commerce

• f the Zhejiang Province
• China's first specialized
• rganic dew retting flax

production base – Zhaosu Jindi Flax Co., Ltd commenced

• peration
• The wet spinning of

coarse linen yarn project of Jiangsu Ziwei Flax Co., Ltd commenced operation

• The Zhejiang Jinlainuo Fiber Co.,

Ltd., which is able to produce differential flax fibres used for cotton, wool, silk blending, was founded

• Established a strategic

cooperation with Siemens and signed the implementation of the energy-saving renovation project

• First session of the overseas linen

yarn seminar was held in Istanbul, Turkey 2012 2013

• Haiyan New Plant (Haiyan Phase

II) was put into operation and has an annual production capacity of 5,000 tonnes of linen yarn

• Signed an investment agreement

with the minister of the Ethiopian Ministry of Industry

• Signed a strategic cooperation

agreement with Siemens in Shanghai

• Signed a supplementary

agreement to the investment agreement with the Ethiopian Investment Commission to change land for the project site.

• KINGDOM was listed as

the "Zhejiang Top Export Brand" by the Department

• f Commerce of the

Zhejiang Province 2015

DIRECTORS AND SENIOR MANAGEMENT

26

• Mr. Ren Wei Ming

Chairman and Executive Director

• Responsible for the overall management of the Group and drafting business development strategy
• f the Group
• Has over 30 years of experiences in the textile industry
• The vice-president of the PRC Bast and Leaf Fibers Textile Association and The Hong Kong General

Chamber of Textiles Ltd.

• Mr. Shen Yue Ming

Executive Director

• Responsible for the day-to-day operations and management of the Group and also take part in the

decision making of the Group

• A director of Kingdom Creative since April 2000
• A director and general manager of Zhejiand Jinyuan and Jiangsu Jinyuan.
• Mr. Zhang Hong Wen

Executive Director

• With years of professional experiences in finance and audit industry
• The director and financial controller of Zhejiang Jinyuan and Jiangsu Jinyuan
• Mr. Ngan Kam Wai Albert

Non-executive Director

• The chairman of Millionfull Company Limited, a company incorporated in Hong Kong engaged in the

trading of linen and linen blend textiles

• Years of professional experiences in trading and procurement of linen
• Permanent honorary chairman of The Hong Kong General Chamber of Textiles Ltd.
• Mr. Andy Chan

Chief Financial Officer and Company Secretary

• Over 20 years of experience in accounting and the financial sector
• A fellow member of the Hong Kong Institute of Certified Public Accountants and the Association of

Chartered Certified Accountants

• A holder of Practitioner’s Endorsement certificate issued by the Hong Kong Institute of Chartered

Secretaries

CONSOLIDATED STATEMENT OF INCOME

For the year ended 31 Dec For the year ended 31 Dec RMB’000 FY2014 FY2015 Revenue 914,279 1,025,403 Cost of sales (669,278) (761,358) Gross profit 245,001 264,045 Other income and gains 14,309 12,274 Selling and distribution expenses (37,870) (38,687) Administrative expenses (48,168) (55,628) Other expenses (12,931) (4,432) Finance costs (10,751) (13,236) Share of profits and losses of an associate 36 (28) Profit before tax 149,626 164,308 Income tax expense (39,149) (43,939) Attributable to: Owners of the parent 110,477 120,369 Basic earnings per share (RMB) 0.17 0.19 Gross profit margin 26.8% 25.8% Net profit margin 12.1% 11.7%

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

RMB’000 As at 31 Dec 2014 As at 31 Dec 2015 Total current asset 863,684 973,514 Inventories 297,104 340,902 Trade and notes receivables 232,922 306,821 Prepayments, deposits and other receivables 45,043 28,226 Derivative financial instruments 2,244

• Pledged deposits

69,186 60,351 Cash and cash equivalents 217,185 237,214 Total non-current assets 626,371 626,333 Property, plant and equipment 536,118 543,976 Investment property 3,580 2,080 Prepaid land lease payments 53,392 52,065 Intangible asset 9,606 9,083 Investment in an associate 5,919

• Prepayments for equipment

10,160 13,194 Deferred tax assets 7,596 5,935 Total current liabilities 464,123 543,681 Trade and notes payables 151,200 98,048 Other payables and accruals 57,592 51,462 Interest-bearing bank loans 230,875 368,033 Dividend payable 4 187 Derivative financial instruments

• 2,258

Amount due to a related company 100

• Tax payable

24,352 23,693 Total non-current liabilities 64,270 12,188 Deferred tax liabilities 14,270 12,188 Interest-bearing bank loans 50,000

• Net assets

961,662 1,043,978 Total equity 961,662 1,043,978 Equity attributable to owners of the parent Issued capital 6,345 6,329 Reserves 917,947 995,445 Proposed final dividend 37,370 42,204

Thank you!

Disclaimer This document may contain statements that constitute “forward-looking statements”, including, but not limited to, statements relating to the implementation of strategic initiatives, and other statements relating to our future business development and economic performance. While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other statutory requirements may render actual developments and results to differ materially from our expectations. These factors include, but are not limited to, (1) general market, macro-economic, governmental and regulatory trends, (2) movements in local and international securities markets, currency exchange rates and interest rates, (3) competitive pressures, (4) technology developments, (5) changes in the financial position or creditworthiness of our customers, obligors and counterparts, and changes in the developments in the markets in which they operate, (6) legislative developments, (7) management changes and changes to our business group structure and (8) other key factors that may adversely affect our business and financial model. We are not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements whether as a result of new information, future events, or otherwise. This material may not be reproduced, distributed or transmitted to any other person or incorporated in any way into another document or other material without the prior written consent of us. This document is not: a) an offer of securities for sale in Hong Kong or elsewhere; or b) an invitation to enter into an agreement to acquire, dispose of, subscribe for or underwrite securities; or related to the issue of any securities. This document (and the information contained herein) is not for publication or distribution to any person(s) except as permitted by us. Investor relations contact: ir@kingdom-china.com;