Hengdeli Holdings Limited, a world-leading retailer of internationally renowned brand watches, announced its annual results for the year ended 31 December 2015 (the “year under review”).
In 2015, the overall operating environment was very challenging and negatively impacted on the business development of the Group, resulting in weak sales of internationally renowned brand watches. Despite this, the Group’s industrial sector achieved relatively good results due to a series of reforms and innovations. During the year under review, the Group recorded revenues of RMB13,302,724,000, representing a year-on-year decrease of 9.9%. Retail sales amounted to RMB9,373,354,000, a year-on-year decrease of 11.6%. Revenue from industrial sector and others amounted to RMB539,991,000, a year-on-year increase of 25.9%. The Group recorded net profit of RMB190,164,000, a year-on-year decrease of 67.4%. Profit attributable to equity shareholders amounted to RMB144,868,000, a year-on-year decrease of 71.3%. This decrease in profits was mainly due to one-off revenue from the disposal of properties, which was included in the profit for the year of 2014, as well as a drop in sales and gross profit and impairment of goodwill and available-for-sale securities.
Mr. Zhang Yuping, Chairman and the Executive Director of Hengdeli, said, “In 2015, the overall business environment remained unstable. The increasingly diversified shopping locations and consumption patterns of Mainland Chinese consumers aggravated the harsh environment for product sales as a whole in the Greater China region, especially in Hong Kong. Businesses are faced with a loss of customers and a rise in labor costs. Despite these highly challenging business circumstances, the Group held fast to its operating principle of “healthy and sustainability” to ensure business stability and to better safeguard the interest of shareholders.”
During the year under review, the Group continued to be guided by the principle of “healthy and sustainability” along with “aiming for optimizing inventory and guaranteeing profits.” The Group also insisted on keeping in place a policy of mutual complementary and interactive operations across the Greater China region, including Mainland and Hong Kong, with mid-end brands serving as the mainstay in its brand mix in order to meet the affordability demands of the general public, and second, third and fourth tier cities as the main sales regions. The Group also continued to adjust the layout of retail network, constantly improving store quality and optimizing the inventory mix. The Group carefully steered business forward through strengthened scientific management and prudent operations. Despite the Group’s various efforts, it was unable to stem the decline in sales as affected by adverse macro condition and subdued consumer demand. Retail sales from Mainland China decreased 7.4% as compared with that of the previous year. Under dismal overall conditions, sales of Elegant Hong Kong decreased 26.8% year-on-year along in line with the overall market trends. As at 31st December 2015, after adjustments and optimization, the Group operated a total of 482 retail outlets across Mainland China, Hong Kong, Macau and Taiwan.
The industrial sector which is engaged in the manufacture of watch accessories made substantial progress during the year under review. Based on a previously launched marketing strategy and after more than one year of re-alignment and integration, the industrial sector has established a new business model comprising upstream and downstream operations of the watch industrial chain, spanning watchcase manufacturing, packaging products and commercial space design, to production and decoration as well as self-development of brands. A number of companies in the sector have earned goodwill in their respective markets, while a wide customer base covering China, Switzerland, the U.S. and other nations in the Asia-Pacific region was established. Co-operation with brand suppliers has been increasing and a close collaborative relationship with mutual trust and interest sharing was formed. Benefiting from quality management and bold innovations, overall performance of the industrial sector improved remarkably with sales increasing by approximately 35% year-on-year, reflecting a healthy uptrend and promising growth potential. The industrial sector is seen as becoming a strong driving force for the Group’s overall development and turning into an important business arm of the Group in the foreseeable future.
Following highly focused preparations and various enhancements , “censh.com” (www.censh.com), a new consumption model that merges the “Internet + Hengdeli”, was officially launched online during the year under review. “censh.com” is a media-based e-commerce cross-platform within the Group that operates its major flagship – “censh.com” (www.censh.com), drawing together a number of popular mobile internet software platforms, including WeChat, Weibo and other mobile communication applications. It provides a one-stop solution for six major functions, namely: e-commerce, ERP, product data management, customer resources management, call center and messaging. It offers a comprehensive online to offline service experience to watch lovers. The Group believes that with the successful online operation of “censh.com”, the online and offline resources will become highly synergistic, and will contribute significantly to the overall development of the Group.
The Group’s customer service network and maintenance business, renowned as a top-notch, retail group leader for internationally renowned watch brands, has been fully integrated and comprehensively covers the Greater China region. During the year under review, the Group added the CK brand into its comprehensive customer services arrangements with brand suppliers, including: Tissot, Mido, and Certina from the SWATCH Group, as well as others. The Group also entered into exclusive watch maintenance agent agreements with: Movado, Milus, Blita, LOCMAN, Million Horn and others. To date, the Group has become the maintenance agent for 74 international brands such as those from the SWATCH Group and LVMH Group and also serves as the exclusive maintenance agent for 45 of those brands.
In the brand distribution business, the Group has always maintained a sound co-operative relationship with numerous brand suppliers and brand retailers, and has received active general support from them. The Group has about 400 wholesale customers in over one hundred cities across China, distributing and exclusively distributing world-famous watch brands. For the coming year, the Group will continue to maintain and deepen its relationships with suppliers and retailers, while exploring new measures under the “new normal” economic climate to achieve harmonious growth and win-win situation.
In the coming year, the Group will hold on to a stable and healthy growth policy, while at the same time harboring a pragmatic view and fostering an innovative spirit in the search for a new development model to benefit the Group. We will also continue to make structural adjustments while ensuring healthy growth and seeking business sustainability. The Group will maintain a healthy and stable level of sale and inventory on the one hand while investing more resources in our industrial sector to help bolster faster development. The overall aim is to open up a road of continuous development for the Group amid today’s “new normal” economic climate and generate higher value for shareholders and the community at large.
Mr. Zhang concluded, “In 2016, as the road to full global economic recovery is still long and winding, China’s economy will also be faced with significant downward pressures. For this reason, the Group believes that under the new normal economic climate, the growth in sales for watches in the Greater China region will continue to lose steam. However, the long-term economic trend in China remains fundamentally favorable, which will offer unprecedented opportunities and challenges. By leveraging our core competitiveness, the Group will identify and take advantage of any and all new opportunities to achieve business breakthroughs and expand business despite the current headwinds and challenges. Ultimately we remain cautiously optimistic about the future prospects of the Group.”
