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2016-08-30 / Corporate news

Goodbaby International Holdings Limited Announces 2016 Interim Results

Deliver Sustainable and Quality Growth through Brand Driven Strategy Profit for the Period Increased by 20.5% to HK$110.1 Million

16_08_Interim_EN

(30 August 2016, Hong Kong) Goodbaby International Holdings Limited (“Goodbaby International” or the “Company”, SEHK stock code: 1086, together with its subsidiaries, the “Group”), an international, vertically-integrated durable juvenile products company headquartered in China, today announces its interim results for the six months ended 30 June 2016 (“the Period”).

Delivering sustainable growth

During the first half of 2016, the Group has continued to deliver sustainable and quality growth, through the continued execution of the Group’s brand driven strategy. For the six months ended 30 June 2016, the Group’s net profit improved by approximately 20.5% to approximately HK$110.1 million. The increase was primarily driven by an improvement in gross margin across all product categories and all regions in the first half of 2016 by approximately 4.8 percentage points to approximately 33.4%, from approximately 28.6% as compared to the corresponding period in 2015. This improvement was a result of the planned increase in share of the Group’s total revenue made under the Group’s own brands which improved to approximately 75.3% in the first half 2016 from approximately 71.8% in the same period in 2015, and a better product mix as a result of lower margin product sales replaced by higher margin product sales. In addition, the continued focus on its supply chain resulted in manufacturing efficiency and procurement savings as the Group implemented the enhanced supply chain strategy.

The Group’s revenue during the Period fell by approximately 12.7% year on year to approximately HK$3,214.9 million, primarily driven by the planned reduction in sales from the Group’s blue chip business due to transformation of the Group’s business model from OPM to brand-driven, and slower sales in the China market as the management introduced the new branding and channeling strategy. The Board does not recommend payment of interim dividend.

Commenting on the Group’s interim results 2016, Goodbaby International’s Chief Executive Officer Mr. Martin Pos said, “During the first half of 2016, the Group has continued its business integration and through synergies it has built firm foundations for the Group’s future growth. Putting our consumers first, we have worked with our business partners to further enhance the brand and channel strategies ensuring that in every key market we operate in, our customers can find our brands in the correct channel, online and offline.”

Region APAC

The Group launched its exciting new branding and channeling strategic plan in the second half of 2015, reinforcing to build its new business model in the China market under its new management. Being target to complete this within 2016, however as the China market is in transition to the new branding and channeling strategy, the Group’s revenue generated in China market accordingly fell to approximately HK$658.8 million in the Period, representing a decrease of 24.7% (approximately 19.8% in RMB). This decline was mainly impacted within the Happy Dino brand, whilst the Cybex brand increased revenue. Management expects this decline to be temporary as the new branding and channeling strategy is already showing positive results.

Out of China, the Group initiated consolidating and integrating its brand portfolio with goodbaby, Geoby, gb Silver and Evenflo to an optimized brand mix to better utilize its resources and improve brand portfolio efficiency. As a result, the Group’s sales there decreased from approximately HK$ 248.7 million in the corresponding period in 2015 to approximately HK$222.8 million in the first half of 2016.

Region EMEA

The Group’s revenue generated in the EMEA region grew rapidly in 2015, which in turn required organisational and structural changes to be executed in early 2016. In the first half of 2016, the Group’s revenue in the EMEA region increased by approximately 18.1% to HK$680.7 million. The management is very encouraged by these results as during the Period a complete ERP system upgrade in the region to SAP was completed on time and on budget.

Region Americas

The Group reorganized the senior management within the American leadership team during 2015, which resulted in the successful turnaround of the Evenflo business ahead of schedule. In the first half of 2016, management has focused on the integration of the operational platform and driving synergies within all the teams in the region and also further improved profitability of Evenflo business, with EBIT margin improved by 3.2 percentage points to 5.9% resulting EBIT doubled comparing those numbers for the first half of 2015. A particular focus has been the continued upgrade of management and the successful introduction of the Group’s brand and channel strategies into the American and Canadian market places. As a result of these changes, revenue in the Period reduced modestly by approximately 5.7% to approximately HK$ 958.4 million.

Blue chip business

In the first half of 2016, revenue fell as planned by approximately 28.3% to approximately HK$694.2 million, mainly as a result of expected decline in sales to the Group’s largest Blue-Chip Customer due to the transformation of the Group’s business model from OPM to brand-driven. As planned the Group will continue to grow its blue chip business with its key customers, and this revenue continues to be a key focus for the Group.

Integration continues

The Group now operates under a one-dragon, vertically integrated business model, and has organised its structure for growth into five functions; technical services, supply chain, brands, national and international sales, and general services which includes finance, human resources and IT across 3 regions, Americas, EMEA and APAC.

The newly introduced group supply chain strategy has started to show strong results, delivering cost savings in procurement and efficiencies improvements in its manufacturing facilities in China and Americas. The Group has established faster technology services in regional areas. By utilizing these synergies and efficiencies, the Group targets to reduce the time to market and support the global company growth. Defining standard processes through its global technologies team improves the development of new products and increases its agility. As a result the Group can respond faster to market. The Group has continued to unify its national distribution teams in each region improving service levels to each of its customers, and reducing the time it takes to deliver to market.

Strong leadership and strategic appointment

The Group has always focused on strong entrepreneurial leadership. On 15 January 2016, Mr. Martin Pos succeeded Mr. Song Zhenghuan as Chief Executive Officer of the Company, and on 25 July 2016, Mr. Jan Rezab was appointed as Executive Director of the Company and CEO Digital Technologies of the Group. Mr. Jan Rezab, with his exceptional vision and knowledge about innovative digital technology, is primarily responsible for setting up and implementing the digital part of the Group’s BOOM strategy which integrates branding with the online-to-offline business model and leverages mobile devices. He will lead the Group’s sixth business unit to build up an eco-system for its fans connected through applications and smart mobile devices, speeding up the Group’s digital evolution and taking the Group’s comprehensive competence to the next level.

In January 2016 in Europe, Mr. Johannes Schlamminger succeeded Mr. Martin Pos as CEO of Cybex and gb brands, and in March 2016 the Group appointed Mr. Kim Zhao as CEO of Rollplay brand. The Group now has extensive experienced and talented leadership for all four of its strategic brands.

More opportunities ahead

Looking ahead, Goodbaby International’s Chairman Mr. Song Zhenghuan said, “During the first half of 2016, the Group has focused on operational integration and strengthening its management structure in each of its key regions. We have implemented globally our brand and channel strategies, which over the coming months will deliver improved results for the Group as our fans will easily be able to find the brand of their choice in the channel they expect it, online and offline. We have successfully begun the global roll out of the SAP ERP system, which will be a foundation for realizing efficiency and synergy through our global operations. Whilst doing this, we have improved our profit performance at all levels. In the second half of 2016, we expect improving performance from our strategic brands in each region, although we would expect the China market to remain challenging whilst on an improving trend. We expect the current profit performance trend will continue.”

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