Disclaimer This presentation and the accompanying slides (the “Presentation”) which have been prepared by Stella International Holdings Limited (“Stella” or the “Company”) do not constitute any offer or invitation to purchase or subscribe for any securities, and shall not form the basis for or be relied on in connection with any contract or binding commitment whatsoever. They are only being furnished to you and may not be photocopied, reproduced or distributed to any other persons at any time without the prior written consent of the Company. This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this Presentation. This Presentation may not be all inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of or any omission from this Presentation is expressly excluded. Certain matters discussed in this presentation may contain statements regarding the Company’s market opportunity and business prospects that are individually and collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. The Company’s actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this Presentation, including, amongst others: whether the Company can successfully penetrate new markets and the degree to which the Company gains traction in these new markets; the sustainability of recent growth rates; the anticipation of the growth of certain market segments; the positioning of the Company’s products and services in those segments; the competitive environment; and general market conditions. The Company assumes no obligation to update any forward-looking information contained in this presentation. Any forward-looking statements and projections made by third parties included in this Presentation are not adopted by the Company and the Company is not responsible for such third-party statements and projections. 2
COMPANY OVERVIEW
Our Management Team Strong senior management with in-depth industry knowledge and established track record Years Years of Relevant Name Position with Experience Stella Executive Lawrence Chen Chairman 33 33 Directors: Stephen Chi Group CEO 23 23 Business Dermot Smowton Group COO 37 5 Division: Ray Chen GM of Men’s Footwear Business Division 32 32 Roger Yang GM of Overseas Footwear Business Division 32 32 Jeremy Huang GM of Fashion Footwear Business Division 22 22 Charles Gillman GM of Sports Fashion Footwear Business Division 36 2 Corporate Don Lee Group CFO 39 13 Division: Joe Wei Director, Business Development & Planning 23 4 Experienced Non-Executive Board with diversified background and competencies Mr. Jack Chiang , NED, over 38 years experience in management in the footwear industry Mr. Eric Chao , NED, over 38 years experience in management in the footwear industry Mr. Johnny Chen , INED, over 20 years experience in China’s capital market and professional service sectors Mr. Peter Bolliger , INED, over 30 years experience in footwear and retail Mr. William Chan , INED, over 30 years experience in human resources profession Mr. Thomas Yue , INED, over 35 years experience in accounting profession Mr. Jie Lian , INED, over 15 years experience in investment banking and private equity Ms. Shi Nan San, INED, over 30 years experience in media and entertainment 4
Corporate and Shareholder Structure Cordwalner Directors Public Bonaventure Inc. 32.98% 12.94% 54.08% STELLA 1836 Manufacturing Branding Processing Contractual Greater Distributor WFOE Europe factories arrangement China (Asia, GCC) 5
Employee Participation Pre IPO Combat Team- 2011 Vesting Period 5-year (in 5 tranches) 5-year (one-time), KPI triggered Arrangement Held under Cordwalner Held under several Special Purpose Bonaventure and several SPVs Vehicles (SPVs) Ownership 33% 6% Background Around 500 senior managements Founding families distributed 50mn and other employees shared 1/3 of shares to 500 middle managements the company. 30% already and supervisors distributed to employees Considerations Employees contributed capital to Discount to book value build PRC factories Roughly more than 1000 employees own about 40% of the company, which ensures Stella’s long term sustainability 6
Milestones Manufacturing focus Expansion to Branding Business International outreach 1982: Established in Taiwan 2006: Launched Branding business 2009: A global fashion brand – under own brand, Stella Luna , and Stella Luna opened first non-East 1991: Commenced production in the opened first Stella Luna store in Asia store in Dubai PRC Shanghai 2012: Opened first Stella Luna 1998: First factory in Vietnam 2007: Introduced another own brand, store in Paris What For , and opened its first store in 2010: Migrated to inland China Shanghai 2013: Opened first What For 2012: New Indonesian production line store in Paris 2008: Opened 100 th Stella Luna store 2013: Diversified our design and 2016: Continued overseas manufacturing capability into leather expansion to leading department accessories, such as handbags stores such as Lane Crawford and Barneys NY 2014: Established footholds in the Philippines and Bangladesh 2019: Concluded smooth management succession of the 2017: Built dedicated sports Group Chairman and CEO on 1 Jan footwear factory in Vietnam and 2019 commenced 2 nd phrase in 2018 7
FINANCIAL SUMMARY
Financial Performance For the year ended 31 December 2018 2019 (audited) (audited) Change US$ mn Revenue 1,588.6 1,544.8 -2.8% Gross Profit 277.1 293.6 6.0% EBIT 67.9 105.5 55.4% Net Profit 62.2 95.9 54.2% EPS (US¢) 8.3 12.1 45.8% ……………………………………………………………………………………………………………………………………………………… Excluding one-off non-recurring items in 2019: US$21.1 million (2018: US$42.9 million) Adjusted EBIT 110.8 126.6 14.3% Adjusted Net Profit 105.1 117.0 11.3% 9
Healthy Financial Position For the year end 31 December 2018 2019 (audited) (audited) Change US$ mn Cash and cash equivalents 63.0 68.1 8.1% Inventory 170.5 173.1 1.5% Trade receivables (*) 345.3 306.3 -11.3% 123.0 112.2 -8.8% Other receivables 108.0 122.8 13.7% Trade and other payables Current assets 702.5 659.9 -6.1% Non-current assets 464.0 473.5 2.0% Current liabilities 216.8 166.7 -23.1% 2.9 7.5 158.6% Non-current liabilities 949.8 959.2 1.0% Net assets Quick ratio 2.5 2.9 16.0% Current ratio 3.2 4.0 25.0% Return on invested capital( # ) 12.4% 14.3% 15.3% (*) Include associates ( #) Adjusted Operating Profit after tax divided by invested capital) 10
Operating Margins 27.0% Adjusted 21.0% 22.0% Gross Profit Margin 19.0% 18.5% 18.2% 17.4% 17.0% Adjusted EBITDA 11.1% 12.0% Margin 9.6% 9.5% Adjusted 8.2% 8.1% 7.8% EBIT 7.2% 7.0% Margin 7.0% 5.2% 5.2% 7.6% Adjusted Net 6.8% 6.6% Profit Margin 5.1% 5.0% 2.0% 2015 2016 2017 2018 2019 11
High Operating Leverage Breakdown of Costs of Sale (as % of Revenue) 100% 7.9% 6.5% 75% 2.6% 2.6% 0.6% 0.7% 10.4% 9.6% 50% 61.6% 61.1% 25% 0% 2018 2019 Manufacturing overhead Depreciation Subcontracting costs Direct labour Direct material *Manufacturing only 12
Summary of Cash Flow For the year end 31 December 2018 2019 (audited) (audited) Change US$ mn Cash flows (used in)/ from 94.6 221.7 134.4% operating activities Cash flows used in investing (47.7) (66.2) -38.8% activities (55.7) (73.0) -31.1% Capital Expenditure 8.0 6.8 -15.0% Others (61.5) (149.6) -143.3% Cash flows from financing activities (60.8) (86.1) -41.6% Dividend paid 2.2 (62.5) -2940.9% Bank borrowings (2.9) (1.0) 65.5% Others (14.6) 5.9 140.4% Net (outflow)/inflow of cash 13
Total Dividend in 2019 Earnings per share US 11.9 cents or HK 93.2 cents Total dividend per share HK 85 cents for the year Interim dividend HK 40 cents Final dividend HK 45 cents Dividend payout ratio for 91% the year Dividend yield* 10% *Based on the closing price as at 18 March 2020 14
BUSINESS REVIEW MANUFACTURING BUSINESS
Workforce Geographic Breakdown of Total Workforce As at 31 December 2019 Philippines 8% Bangladesh 8% China 36% Vietnam Indonesia 40% 8% 16
Our Facilities Facility Locations Capacity by Locations Hunan • Shuangfeng • Shaoyang Liantai 33% 55% 12% China 2019 12% • Dongkou Selena Dongguan • Selena Guangxi • Simona • Beiliu • Stella • Lingshan • NPCC • UAPCC 2020 Bangladesh Guangdong 20% 70% 10% • Longchuan (plan) • Bay Footwear Philippines • Hai Phong • Quang Ninh • Clark • Taiping Vietnam Overseas • Nike VN Coastal China Commercialisation Centres Inland China Indonesia • Surabaya 17
Labour Cost Index 2020 Labour Cost Index 100 52 44 38 33 20 DG Inland China Indonesia Vietnam Bangladesh Phillippines 18
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