fy2019/20 interim results
november 2019honma golf (6858.hk)
one of the most prestigious andiconic brands in the golf industry

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These materials, and any further information made available to you during this presentation, are fully based on information that has already been in public domain.
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the materials contained herein, and any further information made available to you, may not be copied, reproduced or redistributed to any other person in any manneror published, in whole or in part, for any purpose, at any time, without the prior written consent of the Company. You will return to the Company all materials provided
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INTERIM REPORT FY2020

01

1 financial

highlights

INTERIM REPORT FY2020

2business review

3company outlook

4

appendix02

#1 Premium golf brand founded in 1959
Decades of dedications towards Quality and Craftsmanship

AS WE STAND
TODAY

Listed on the HKEx since

Market cap as of 28 nov 2019Oct 2016

HKD 4.2 Billion

Key Statistics as of
30 Sep 20191h fy2020 Revenue Mix – JPY 10,591 Million / USD 98 Million• 288 skilled craftsmen%

By Product• products sold in

approximately 50
countries worldwide• 74 HONMA branded%

5.1

and R&D personnel

By Region

9.3

By Channel%

4.6 4.6
7.2

24.8

9.3

43.4

15.0
76.3

75.2
25.2

self-operated stores• 3,898 doors via third
party retailers &wholesellers

INTERIM REPORT FY2020

Golf Clubs
Golf Bags & Other Accessories
Golf Balls
Apparels

Japan
Korea
China (Including Hong Kong and Macau)
Rest of the World
North America
EuropeDistributors
Self-Operated Stores

03

KEY
FINANCIALS

Half Year Ended 30 Sep 2019

YoY Change (JPY Base)Net Sales

JPY 10,591.0 Million / USD 98.3 Million (1)-7.9%Gross Profit Margin

49.7%-9.4 percentage points

Net Operating Profit (2)JPY 392.1 Million / USD 3.64 Million (1)-72.5%

Reported Earnings Per Share(JPY 0.08) / (HKD 0.006) (1)-102.3%

Net Operating Cash flow

JPY 402.4 Million / USD 3.7 Million (1)-87.6%Net Cash Position

JPY 4,622.1 Million / USD 42.9 Million (1)Proposed Dividend

Special Dividend: JPY 8.21 / share(distributed in Sep 2019)
Interim: JPY 1.64 / share(ex-dividend date: 11 Dec, 2019)

+463%

Note
(1) Exchange rate: 1USD = 107.7 JPY; 1HKD = 13.7 JPY(2) Net operating profit is derived from net profit by (i) subtracting other income and gains, (ii) adding other expenses and (iii) adding RSU expenses (iv) adding impact on tax

INTERIM REPORT FY202004

revenue
declinerevenue (nominal)

REVENUE DECLINED IN 1HFY2020 MAINLY DUE TO

JPY MM•%
CAGR: +7.0

24,242

26,296

27,771-7.9%

Due to seasonal andone-off impact

11,503

FY2017significant
revenue
growthin categories andmarkets critical to
the group’s growthstrategy

INTERIM REPORT FY2020

FY2018+73.1%FY20191HFY2019

10,591

1HFY2020•

Scheduled phase-out of Beres 06 vs high base of Beres family sales in
1HFY2019:•

Sales from Beres family was down by 22.8% on a constant currency
basis YOY, typically seen during product phase out;•

New Beres 07 will be launched in 2H FY2020

One-off impact from the Group’s decision to reposition Be Zeal family:•

to focus more on Beres and Tour World family targeting Super Premiumand Premium Performance segment•

Sales from Be Zeal family declined by 78.5%

Tour World sales up by 73.1% on aconstant currency basis thanks to
TW747 and global activation of XP-1

+53.5%

Golf ball sales grew by 53.5% on aconstant currency basis riding on
continued portfolio optimization andchannel expansion+51.4%+53.1%

Apparel sales grew by 53.1% on aconstant currency basis, on the back of asolid first collection (“SS19”)

51.4%

+9.4%

+9.4%

South Korea, Mainland China and Europe
lead the sales growth with YOY increaseof 51.4%, 9.4% and 9.4% respectively on
a constant currency basis.

05

grossmargindroppeddue to change inproduct mix &seasonal/one-off
impactINTERIM REPORT FY2020

Gross Profit

Gross Profit Margin dropped due to

JPY MM

14,54860.0%

FY2017

15,977

16,05760.8%

FY2018Gross Profit• One-off repositioning of Be Zeal club family following thedecision to focus on Beres and Tour World club family

6,796
57.8%

59.1%

FY20191HFY2019

5,261
49.7%

• Scheduled phase-out of Beres 06• Further sales gravitation towards wholesale and non-clubcategories

1HFY2020

Gross Margin

06

Operating Profit (1)Net operating Profit (2)JPY MM

JPY MM

6,242

4,946

5,309
2,037

ahead-ofthe-curve
investment in
distribution
foot print
to fuel growth in key
markets and productcategories

4,707

4,366
18.0%

17.9%

3,929
14.1%

1,425

-29
FY2017FY2018FY20191HFY2019

1HFY2020

FY2017FY2018FY2019Net Operating Profit

12.4%

3.7%
392

1HFY2019

1HFY2020

Net Operating Profit Margin

SG&A Expenses

SG&A Expenses Breakdown

JPY MM

AS % OF SALES

10,093

9,932

10,866

41.6%
5.9%

41.6%

FY201737.8%

FY2018
Total SG&A

39.1%

FY2019

4,816

5,320

41.9%

50.2%

1HFY2019

1HFY2020

SG&A as % to sales

5.6%

50.2%
37.8%
5.3%

5.1%

39.1%
4.4%

5.3%

41.9%

3.0%

5.7%

11.7%

6.3%

6.5%

6.5%

5.8%

6.5%

6.9%

10.2%

9.5%

11.4%

9.9%

13.4%

12.1%

11.5%

13.2%

15.8%

FY2017FY2018FY20191HFY2019

1HFY2020

Employee Benefits
Other Selling Expenses

A&P Expenses
Rental Fees

13.1%

Administrative Expenses

Note(1) Operating profit is derived from profit before tax by (i) subtracting other income and gains, (ii) adding other expenses, (iii) adding listing expenses and (iv) adding RSU expenses.
(2) Net operating profit is derived from net profit by (i) subtracting other income and gains, (ii) adding other expenses and (iii) adding RSU expenses (iv) adding impact on tax.

INTERIM REPORT FY2020

07

Net Operating Cash Flow

cash on hand

JPY MM

JPY MM

3,719.1

12,712.5

14,147.3

14,674.1
10,222.1

2,609.1
1,934.8

StrongOperatingCash Flow andRobust Capital
Structure

402.5
FY2017FY2018FY20191HFY2020

FY2017FY2018FY20191HFY2020

Interest-bearing Liabilities

Interest-bearing Liabilities / Total Equity

JPY MM%

5,600.03,800.0

24.3%

2,500.0
8.9%
291.3
FY2017

INTERIM REPORT FY2020

13.0%

1.1%
FY2018FY20191HFY2020

FY2017FY2018FY20191HFY2020

08

Receivables Turnover Days (1)Payables Turnover Days (2)Inventory Turnover Days (2)JPY MM

JPY MM

JPY MM+3 days

Continued
Improvementin Working
CapitalEfficiency

105
83+18 days

57

108

248
232

224

39

81

145

138

35

+23 days 247

118

145

30

24

24

22

80

82

81

1HFY2019

FY2019IHFY2020

30

64

FY2018

1HFY2019

FY20191HFY2020

FY2018

1HFY2019

FY20191HFY2020

FY2018Raw MaterialWork in Process

Finished Goods

Note(1) Turnover days are calculated using the average of the opening, mid year and closing balance of the relevant periods(2) Turnover days are calculated using the average of the opening and closing balance of the relevant periods.

INTERIM REPORT FY202009

1

financial highlights

2 business
review

INTERIM REPORT FY2020

3

company outlook

4

appendix10

1 Optimizing HONMA’s club product portfolio to focus
on super premium and premium performancesegments•

1h fy2020
Business
Highlights

Launch of the new XP series in Sep 2019, the first
performance enhancement series targeting double
handicappers within the premium performance segments

2 Accelerating growth in balls and relaunchingapparel business in home markets•

Sales in ball continued expanding robustly with 53.5%
increase in sales YOY•

1H FY2020 saw the launch of HONMA’s first apparelcollection; and sales up by 53.1% YOY

3 Continued executing growth strategy in North

4 Re-defining the HONMA brand•

1) 360 degree brand experience built into new retail space andenvironments

America and Europe•

North America: Tour World sales up by 205%; executing aunique direct-to-consumer distribution model and until
this date added 1 HONMA House and 13 shop-in-shop
Europe: Tour World sales up by 689% while POS increasedby 95

a. new retail image implemented in multiple home markets
b. rolling out premier shop-in-shop and POS with major retail
outlets in the US and Europe
2) Digital strategies:
a. active communication on global website and social platformsb. creating/revamping CRM systemc. adding e-commerce capabilities in key markets
3) Pro endorsement: Justin Rose sponsorship has generated
immediate and elevated exposure and interests
4) Customer events to drive brand awareness and provide first-handbrand experience

Note
The growth rate shown on this page are calculated on a constant currency basis

INTERIM REPORT FY202011overall sales down by 13.0% due to
one-off and seasonal impact

super premiumCLUB PRODUCTPORTFOLIO
optimized
tO FOCUS ON SUPERPREMIUM AND PREMIUMPERFORMANCE CONSUMERS
SEGMENTSSTOP RENEWAL

2

tour world family sales up by 73.1%

A.

premium performance

Affluent Consumers

Beres
•
•
•
•

Designed for affluent golfers
Latest version Beres 06 was launched in Jan
2018
YOY sales dropped by 22.8% as a result ofBere 06 phase-out
Next generation Beres 07 will be launched in
2H FY2020

Tour World
•
•
•
•

tr

High Price
AcceptanceDesigned for avid golfers
Latest version TW747 was launched in Nov
2018
1st performance enhancement series XP
launched in Sep 2019
YOY sales up by 73.1%•••

Designed for young and beginners
Repositioned hence no longer one of the
focus products
YOY sales dropped by 77.9%

5

Better & Serious golfers
Handicap 0-12

Game Improvement golfers
Handicap 8-20

1

Design &Design2

Design &Performance

3

4

Performance &Design5

Performance &Performance6

7

Price &
Design8

Price &
Performance

9

Design &Price

Performance &Price

Be Zealxp

6

Price &Price
Low Price
Acceptance
Low Level of Involvement

Objective:

2

SustainHigh Level of Involvement

6

Accelerate

5

Grow

Note
The growth rate shown on this page are calculated on a constant currency basis

INTERIM REPORT FY2020

12

B.

ACCELERATINGGROWTH IN
BALL ANDRELAUNCHINGAPPARELin home markets

Golf ball sales continued mid double digit growtH

Apparel sales recorded steep growth trajectory•

Sales grew by 53.5%•

Sales grew by 53.1%•

Dedicated sales force and go-to-market strategy in Japan,
Korea and China•

Adding 9 self operated stores and 15 third party stores in China•

Sales growth mainly from 2019 Spring/Summer collection
debut in Jan 2019•

Strategic partnership with Itochu to revamp HONMA’s apparelbusinesses•

Beefed up product marketing resources

JPY MM650

1HFY2019

997+53.5%

1HFY2020

JPY MM363

1HFY2019

556+47.5%

1HFY2020

Note
The growth rate shown on this page are calculated on a constant currency basis

INTERIM REPORT FY2020

13

New HONMA apparel collection offer
3 product lines resonating the target segmentof the club families

B.

ACCELERATINGGROWTH IN
BALL ANDRELAUNCHINGAPPAREL

black label
Super Premium
ComfortDelicacy
Black LabelRed Label

red labelPremium Performance
High-tech
Functionality

white label

Fashion athletic
Turf and Town
Active Lifestylein home markets(cont’d)

INTERIM REPORT FY2020

White Label

14

Japan, Tokyo
opened in Jun 2019

Self-owned stores
to upgrade as brand experience hubs acrossall marketsc.

360 degree
brandexperiencethrough omni channels• Total # of stores increased by 6 to 74• 12 new stores were opened, 9 of which werein Mainland China• Newly-designed retail space rolling out in all
markets to offer ultimate brand experienceand customizable consumer journey

China, Beijing
opened in Aug 2019

US, Carlsbad
opened in Oct 2019

Third-party retailers andwholesalers
continued to drive penetration and gain
mind share• POS increased by 164 in 1HFY2020 to 3,898
as at 30 Sep 2019

China, Hangzhou
opened in Aug 2019
INTERIM REPORT FY2020

Europe, Paris
opened in Nov 201915

Active digital communication
through Relaunched Global
Website and Social Media Accounts•

D.
Re-defining HONMA• To convey consistent brand image
and enhance brand awarenessacross all markets

Dynamic,
Modern,Global• To connect digital platform withretail activities, owning the entire
consumer experience and relevant
data•

INTERIM REPORT FY2020

Frequent updates on the relaunchedglobal website and social media
platforms including Instagram, Facebook,
WeChat service account, Weibo, etc.

Google Analytics shows the global
website attracted 377K new visitors and2mn page views during March 2019 until
the date; month-on-month double digit
growth in the organic traffic, conversion,
time on site among other matrixes

16

creating/revamping CRM system
while adding e-commercecapabilities• Create an end to end digital ecosystemD.
Re-defining HONMA

Dynamic,
Modern,Globalaround the re-defined brand andgolfers• Provide consumers with the ultimate
360-degree brand experience• Strengthen direct-to-consumer

distribution model and to eventually
increase sales both online and offline• E-commerce sites strengthened/addedin Japan, China & US(cont’d)

INTERIM REPORT FY2020

17

Justin Rose sponsorship and customer
events helped driving brand awarenessacross all markets, esp. usJustin Rose sponsorship•

Justin Rose has generated immediate and elevatedexposure and interests since becoming HONMA’s
Global Brand Ambassador on 1 Jan 2019•

over 50 earned coverage of HONMA products on print
and online professional golf media and TV programs in
the US and in Europe•

Sales of Tour World family clubs that he is using during
tours was up by 73.1% in 1H FY2020

D.
Re-defining HONMA

Dynamic,
Modern,Global(cont’d)Customer events•

During 1H FY2020, HONMA hosted close to 2500
customer days across its main markets•

The activities were mainly held on golf courses withdedicated fitters.

•

A most recent consumer survey in the US shows that:• aided awareness of the Honma brand has
increased to 63%

INTERIM REPORT FY2020

18

Robust growth across hero product categories
Overall sales dropped due to club portfolio
optimisatione.

Business
Reviewby Market

7.2

4.6

•
•

2nd largest golf equipment market in the world•

2290 golf facilities, representing half of thetotal facilities in Asia (2)•Around 12 million golf population (3)

4.6
43.4

15.0

25.2

Japan
Korea
China (Incl. HK and Macau)
North America
EuropeRest of the World

net sales

Total equipment market size in 2018
approximates to USD 1.2 billion by forecast (1)interim review•••

HOME MARKET

Japan

marketGolf ball sales surged by 68.6%
Apparel sales up by 48.5%
Club sales dropped by 34.5%• Tour World sales increased by 13.6%

JPY MM• Be Zeal sales dropped by 101.6% due to
product line repositioning

5,869
4,595
-21.7%

1HFY2019

1HFY2020

Note(1) Source : Golf Around the World 2017, the R&A(2) 2018 Yano’s White Paper on Golf Industry, Japan(3) Frost & Sullivan

INTERIM REPORT FY2020

19

Continued double digit growth into
the 7th consecutive year

e.

4.6
43.4

15.0

25.2

HOME MARKET

KOREA

•
•

Fast growing and under-penetrated market•

6.3 million of golf activity population, close to
15% of total population in Korea (1)

7.2

4.6

Business
Reviewby Market

marketJapan
Korea
China (Incl. HK and Macau)
North America
EuropeRest of the World

interim review•

Golf club sales up by 65.5% thanks tocontinued partnership with Kolon for clubs•

Golf ball sales up by 47.4% following creationof a strong local team to lead a direct toconsumer distribution model for the ball andapparel businesses

net sales
JPY MM

2,665
1,761

1HFY2019

INTERIM REPORT FY2020

3rd largest golf equipment market in the world
with USD 600 million equipment sales in 2018
by forecast (1)+51.4%

1HFY2020

Note(1) Source : KGPA, Korea Golf Association 201720

Apparel sales boomed after Apparelline relaunch and POS expansione.

Business
Reviewby Market

•
•
•

7.2

4.6

market

4.6
43.4

15.0

25.2

Japan
Korea
China (Incl. HK and Macau)
North America
EuropeRest of the World

interim review•(incl. HK and Macau)• Opened 22 new stores: 7 self-operated +15 third-party

net sales
JPY MM

1,735

1,666

•

1HFY2019

1HFY2020

Hong Kong and Macau sales dropped by 52.3%• Negatively affected by the recent social
turmoil in Hong Kong

-4.0%

INTERIM REPORT FY2020

Mainland China sales increased by 9.4%
• Apparel sales improved by 52.7%

HOME MARKETChina

New and developing golf market
496 golf courses, around 1 million golf activity
population (1)Solid and growing demand in active wear andfashion-athletic apparelNote(1) Source : Forward Golf White Paper Report 2017
(2) The growth rate shown on this page are calculated on a constant currency basis

21building a unique direct-to-customer
distribution model to capture super premiumand premium performance segment

e.

4.6

Business
Review byMarket4.6•

Largest golf market in the world with 53% of the
global golf retail sales (1)•2018 golf equipment sales approximates to USD
4.3 billion by forecast (1)•Around 24 million golf participants (1)

7.2

43.4

15.0

25.2

new MARKET

North
America

marketJapan
Korea
China (Incl. HK and Macau)
North America
EuropeRest of the World

interim review•

Sales decreased in 1H mainly due to scheduledphase out of Beres 06••

Sales from TourWorld club family surged by 205.4%

net sales
JPY MM

641
496-22.7%

1HFY2019

Unique direct-to-customer distribution model tocapture opportunities in premium performance andsuper-premium consumer segments•

HONMA House opened in Oct 2019 in Carlsbad,
California••

opened 13 shop-in-shop by Nov 20199 mobile hubs ready to launch within Nov 2019•new e-commerce portal soon to be connectedwith direct-to-consumer customization
capabilities

1HFY2020
Note(1) Source : Golf DataTech’s 2018 research report(2) The growth rate shown on this page are calculated on a constant currency basis

INTERIM REPORT FY2020

22

building a unique direct-to-customer
distribution model to capture super premiumand premium performance segmente.

Business
Review byMarketIn the next 18-24 months• 360 degree consumer experience built into an omni distribution strategy
brand headquarterand gallery

1 honma house

Digital Platform

new MARKET

North
America

30 premier
shop-in-shop(cont’d)

DTC
Distribution
Model

Digital Platform

30-50 honma hubs

Digital Platform• Well underpinned marketing plan to• Build brand awareness, loyalty and repurchase frequency• Drive traffic to HONMA house, hubs and shop in shops for the complete HONMA experience• Create, optimize and leverage digital channels as a day to day point of brand engagement with CRM mindset
INTERIM REPORT FY2020

23

Effective awareness elevation andcontinued POS increase

e.

4.6

market
•
•

7.2

4.6

Business
Review byMarket

43.4

15.0

Japan
Korea
China (Incl. HK and Macau)
North America
EuropeRest of the World

new MARKET

europenet sales
JPY MM459

1HFY2019

INTERIM REPORT FY2020

England, Austria, Germany, France and Sweden in
total accounts for around 12% of the world’ golf
equipment sales, which approximates to USD 1
billion (1)interim review•

25.2

Mature but fragmented golf market

Golf club sales increased by 9.4%•

Tour World family sales was significantly up
by 689%•Elevated awareness and exposure throughJustin Rose sponsorship and effective
marketing activities

502•

POS number net increased by 95 to 613 by Sep 30,
2019

+9.4%

•

1st shop-in-ship opened in Paris in Nov 2019

1HFY2020

Note(1) Source : KGPA, Korea Golf Association 2017
(2) The growth rate shown on this page are calculated on a constant currency basis

24

1

financial highlights

2business review

3 company
outlook

4

INTERIM REPORT FY2020

appendix25

Product••

HONMA Core Brand Valuehonma
growthstrategy•• Japanese craftsmanship• Premium performance

Channel•Matchrefined consumer focus•••• Super premium - affluent golfer• Premium performance - avid
golfer

Self-operated retail channels• Brand experience store• On-course and mobile hubs
Premier shop-in-shop with third parties in North America and Europe
Extensive POS with third party retailers and wholesalers
E-commerce capabilities in key markets including Japan, China and North America

sales revenue
growthConsumer Awareness & Loyalty••••

INTERIM REPORT FY2020

Focus on super premium (BERES) and premium performance (TOUR WORLD) club
family• Expand TOUR WORLD family to include performance enhancement series XP
targeting double handicappers
Nurture complimentary non-club categories• Strategic partnership with Itochu to expand apparel and accessories businessin Japan, China and Korea
Stay up with latest market trend with leading R&D capabilities• Sakata studio + North America product development hub

Upgrade online/offline retail experience
Strengthen digital and social media presence to reach younger internet-savvy
golfers
Create a streamlined tour team with professional players relevant to each market• Justin Rose as global brand ambassador• a network of local pros and influencers
Create/revamp CRM system to track consumer behavior and execute loyalty
program26

1financial highlights

2business review

3company outlook

4 appendix

INTERIM REPORT FY2020

27

For the six months ended 30 September
2019.9.30
2018.9.30
JPY

%

JPY

%

Year-on-Year Change%(In thousands, except for percentages and per share data)
Consolidated Statement of Profit or Loss
Revenue

10,590,973

100.0

11,503,203

100.0

9.3

Cost of sales-5,330,135-50.3-4,707,098

-40.9

13.2

Gross profit

5,260,838

49.7

6,796,105

59.1

-22.6

36,652

0.4

762,586

6.6

-95.2

Selling and distribution expenses-4,627,977-43.7-4,024,775

-35.0

15.0

Administrative expenses-691,916-6.5-791,420

-6.9

-12.6

Other (expenses)/income, net-519,534-4.9-8,732-0.1

5,849.8

Finance costs-28,476-0.3-5,422

-0.1

430.2

Finance income

59,6800.6

36,6000.3

63.1

Profit before tax-510,733-4.8

2,764,942

24.0

-81.5

Income tax expense

459,495

4.3-630,464

-5.5

-27.1

Net profit-51,238-0.5

2,134,478

18.6

-97.6

Other income and gains

Consolidated
P&L

Earnings per share attributable to ordinary equity holders of the parent:
Basic and diluted- For profit for the year (JPY)

-0.08

3.50

-97.6

Non-IFRS Financial Measures
Operating profit (1)-28,458-0.3

1,405,992

12.2

-98.0

Net operating profit (2)392,097

3.7

1,425,084

12.4

-72.5

Note
(1) Operating profit is derived from profit before tax by (i) subtracting other income and gains, (ii) adding other expenses, (iii) adding listing expenses and (iv) adding RSU expenses.
(2) Net operating profit is derived from net profit by (i) subtracting other income and gains, (ii) adding other expenses, (iii) adding listing expenses, (iv) adding RSU expenses and (v) adding impact on tax. The Group referred to such measure as
adjusted net profit in the Group’s Interim Results Announcement for the Six Months Ended 30 September 2019 dated 29 November 2019

INTERIM REPORT FY2020

28

For the six months ended 30 September
2019.9.30

2019.3.31
JPY

JPY(In thousands, except for percentages and per share data)
Consolidated Statement of Financial Position
AssetsConsolidated
Balance Sheet

INTERIM REPORT FY2020

Non-current assets

9,825,389

6,124,873

Current assets

28,148,741

32,962,725

Total Assets

37,974,130

39,087,598

Non-current Liabilities

2,975,818

1,754,481

Current Liabilities

11,992,926

8,140,390

Total Liabilities

14,968,744

9,894,871

Net current assets

16,155,815

24,822,335

Total assets less current liabilities

25,981,204

30,947,208

Net Assets

23,005,386

29,192,727

Total Equity

23,005,386

29,192,727

Liabilities

29

calendar year

Year 1

Q1Business Cycle
and Seasonality

Q2

Year 2

Q3

financial year

Q4

Q1

Q3

Q4

Q2

Q3

Q4

Year 1

Q1

Q2

Q1

Q2

• Low sales season• Season opening andsales ramping up

Q3• Phase out of older
generation

Q4• Activating of new
generation• Pre-book of new
generation

INTERIM REPORT FY202030

Thanks!
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