Regina Miracle 1HF2024 Revenue Reaches HK$3.5 Billion
Various Indicators Improve Period-on-Period
Declares Interim Dividend of HK3.5 cents
Dividend Payout Ratio Exceeds 40%

Focuses on strengthening core businesses
Bolsters advantages through patent innovation
Drives steady growth of business

(Hong Kong, 29 November 2023) — Regina Miracle International (Holdings) Limited (“Regina Miracle” or the “Company”, together with its subsidiaries, the “Group”) (HKEX: 2199), a leading global intimate wear company boasting an innovative design manufacturer (“IDM”) business model, has announced its interim results for the six months ended 30 September 2023 (the “Period” or “1HF2024”).

During the Period, the overall market recovery was more tepid than expected, with a more cautious consumer sentiment posing challenges to the textile and retail industries. Despite that, the Group recorded revenue of approximately HK$3,544.8 million during the Period, an increase of 8.5% period-on-period (1HF2023: HK$4,613.3 million). Gross profit was approximately HK$842.7 million, up 14.9% period-on-period, with gross profit margin at 23.8% (1HF2023: HK$1,168.4 million and 25.3%, respectively). Earnings before interest, taxes, depreciation and amortization (EBITDA) was approximately HK$556.2 million and EBITDA margin was 15.7% (1HF2023: HK$811.0 million and 17.6%, respectively). During the Period, the Group recorded net profit of approximately HK$106.8 million, a significant increase of 52.0% period-on-period, with net profit margin at 3.0% (1HF2023: HK$313.0 million and 6.8%, respectively). Excluding restructuring costs and share of profits /(loss) of associate(s), the adjusted EBITDA was approximately HK$646.0 million and the adjusted EBITDA margin was 18.2% (1HF2023: HK$860.7 million and 18.7%, respectively). Adjusted net profit was approximately HK$196.6 million for the Period, representing a period-on-period increase of 104.8%, with adjusted net profit margin at 5.5% (1HF2023: HK$362.7 million and 7.9%, respectively).

The Board has resolved to declare an interim dividend of HK3.5 cents per share for Fiscal 2024 (1HF2023: HK8.5 cents), which is in line with the Group’s dividend policy of distributing no less than 30% of its net profit for a financial year.

Mr. YY Hung, Chairman, Chief Executive Officer and Executive Director of Regina Miracle, said, “Although there were marginal improvements in the inventory levels of certain brand partners, brand partners generally continued to embrace a prudent inventory management strategy. The end market remains discerning, as consumers are increasingly prioritizing products with specialized design, sophisticated production, exquisite aesthetics, and superior quality. In view of that, Regina Miracle has undertaken a comprehensive review of its Innovative Design Manufacturing (“IDM”) business model, which the Group has been adopting, and has realigned its strategy to prioritize its core business segments. On one hand, the Group has properly streamlined and adjusted its diverse and varying business segments. On the other hand, the Group has enhanced its support tailored to meet the brand partners’ demands for products with versatile functions and applications, in the Goup’s core intimate wear and sports products segments, thanks to the advancements and breakthroughs in raw materials and craftsmanship achieved in recent years. Furthermore, the Group has enhanced its partnerships with brand partners to navigate the uncertainties surrounding their operations, aiming to pursue a more sustainable, manageable and secure path for business expansion. Additionally, the joint venture (“VS China”) between the Group and Victoria’s Secret & Co. (“Victoria’s Secret”) has experienced noteworthy growth during the Period, contributing to the Group’s sales momentum in Mainland China. Looking ahead, as the destocking cycle of major brand partners progresses the mid-to-late stage, overall market sentiment has gradually bottomed out. The Group anticipates that revenue in the second half of Fiscal 2024 will exhibit steady growth compared to the previous period, and achieve year-on-year growth in Fiscal 2025, driving the gradual recovery of the Group’s overall business.”

Business Review

Revenue from intimate wear increases by 12.8% period-on-period, expands product offerings through differentiation

During the Period, the intimate wear segment contributed revenue of approximately HK$2,210.7 million (1HF2023: HK$2,464.3 million), accounting for 62.4% of the Group’s total revenue and remaining as the Group’s main source of revenue. Gross profit of the segment was approximately HK$544.5 million, with gross profit margin of 24.6% (1HF2023: HK$652.8 million and 26.5%, respectively). Although consumer sentiment is yet to fully recover, there has been a positive trend in overall orders from the Group’s major brand partners, with whom close collaboration is maintained. Revenue for the segment increased 12.8% on a period-on-period basis. Furthermore, capitalizing on the Group’s market insights and understanding of consumer demands, it continued to execute its differentiation strategy based on its leading research and development (“R&D”) capabilities and innovative craftsmanship to create high-quality and distinctive products, expand the category offerings in collaboration with its existing brand partners, and explore potential partnerships with emerging brands.

Revenue from sports products grows by 4.4% period-on-period, promotes product R&D and diversification

The sports products segment contributed revenue of approximately HK$994.2 million for the Period (1HF2023: HK$1,483.7 million), representing a period-on-period growth of 4.4% and accounting for 28.0% of the Group’s total revenue. Segmental gross profit was approximately HK$227.7 million and gross profit margin was 22.9% (1HF2023: HK$358.0 million and 24.1%, respectively). The operating conditions of the Group’s sports brand partners varied, with some partners witnessing a return to normal inventory levels from whom there was a resumption of both period-on-period and year-on-year growth in revenue from orders. However, other partners were still in the later stages of destocking, and their order performances had yet to recover during the Period. The Group remains committed to consolidating its market share in sports bras, and will enhance the sports leggings products while actively pursuing expansion into the sportswear segment by focusing on the implementation of seamless bonding craftsmanship.

Continuous optimization of Vietnam base and smooth transition of Chinese base, to build modern, high-end positioning and sustainable production capacity

Seizing the opportunities arising from industry consolidation and supply chain concentration, the Group remains dedicated to continuously enhancing its production processes through four key initiatives, namely structure verticalization, management intellectualization, equipment automation, and supply chain localization, to improve overall efficiency. Vietnam, serving as an important production base for supporting the expansion of the Group’s brand partners in the overseas markets, accounted for 82% of the Group’s total revenue. During the Period, it continued to strengthen its economies of scale, scalability and local supply chains to solidify its leading position in the supply chain. In addition, the relocation to the Zhaoqing production base progressed smoothly, with the consumer electronics components and bra pads production units completed relocation in the third quarter of 2023 and gradually commencing production. The relocation of the intimate wear and sports products production units are expected to be completed before the second quarter of 2024. As for workforce structures, as of 30 September 2023, the Vietnam production base had a total of approximately 29,600 employees. With efforts towards localization, local employees accounted for 98% of the workforce. In Mainland China, the Shenzhen production base employed around 4,380 individuals, while the Zhaoqing production base had approximately 920 employees.

VS China drives growth in IDM business, expands international market reach with leading proprietary technology products

By fostering integrated and seamless communication, along with an agile supply mechanism, the Group has bolstered its growth engine through collaboration with the VS China team, by launching differentiated products that leverage deep market insights. During the Period, VS China emerged as a major brand partner of the Group and made significant and consistent contributions to the Group’s IDM business. In the first half of the Group’s Fiscal 2024 (from 1 April 2023 to 30 September, 2023), VS China achieved a revenue of HK$882.9 million, representing a 51.1% increase compared to the corresponding period of previous year. The net profit reached HK$21.8 million, reflecting a year-on-year increase of HK$118.0 million. In terms of online sales, its ranking has continuously improved, and its e-commerce business revenue has experienced over 100% year-on-year growth. It is noteworthy that the Group’s leading proprietary bra pads and seamless bonding craftsmanship have been extensively utilized in hero products developed for VS China. Leveraging the unique characteristics of the e-commerce environment in China, the Group can swiftly test products in the PRC market through VS China and make targeted improvements, thus providing timely product reference for the brand in the international market. During the Period, certain products developed for the Chinese market have successfully been adopted in the brand’s overseas markets, creating growth opportunities for the Group’s IDM business through the introduction of localized products to the international markets.

To Propel Future Growth on Two Wheels: Harnessing Core Business Momentum and Proprietary Technologies to Reshape Market Perception

The macro operating environment is anticipated to remain challenging in the second half of Fiscal 2024. Consumers are demonstrating more discerning purchasing habits, favoring high-quality, innovative and differentiated products, which has led to a more diverse market landscape. Leading brands are expected to gain market share and achieve growth in the face of market downturns. Additionally, supply chain consolidation has prompted brand partners to strengthen their strategic partnerships with industry-leading supply chain companies that possess exceptional R&D capabilities. As a result, there is a growing trend of market concentration, with key players in the industry securing a larger market share. Therefore, Regina Miracle will implement the following future development strategies to leverage the opportunities presented by industry consolidation and solidify its competitive advantages. The Group will continue to deepen collaboration with existing brand partners while actively pursuing new brand partnerships to further expand its market share.

Streamline fluctuating segments and strengthen core businesses to foster sustainable and assured business growth

Acknowledging the challenges to its business faced by the Group’s major footwear brand partner in recent years, it has been noted that the segment has not attained optimal economies of scale in production. Consequently, following a careful evaluation, the Group has decided to streamline the footwear segment and reallocate resources to focus on outerwear products that utilize its cutting-edge proprietary seamless bonding technology, aiming to bridge the revenue gap.

On the other hand, consumer electronics component segment experiences noticeable seasonal fluctuation due to the timing of product iteration. Nevertheless, as the investments in the production machineries of this segment were supported by the respective brand partners, the Group did not make significant capital investments in this segment in the past. The Group will maintain open lines of communication with its brand partners to accurately identify the timing of new product launches, so as to better deploy variable manufacturing resources and sustain a stable earning model for the segment.

As orders for the intimate wear and sports products segments show signs of recovery, the Group will continue to focus on these two core businesses and proactively enhance their leading competitive advantages to mitigate any potential fluctuations in other business segments. Amid the industry’s downward cycle, the Group has adopted a contrary approach by investing in R&D and deepening its collaboration with brand partners. Through direct, clear, and targeted approach, the Group has showcased its R&D achievements in the intimate wear and sportswear, thereby increasing sales and a bolstering business initiative for the Group.

Achieve breakthroughs in proprietary raw materials and patent technologies, driving high-quality growth through multi-dimensional innovation

The Group, together with its partners, has consistently strengthened their collaborative efforts in the R&D of raw materials such as foam, fabrics, and adhesives, aiming to achieve breakthroughs in proprietary materials. One notable example is the continuous innovation in foam, leading to breakthroughs in lightness, air permeability, support, and body inclusivity, enabling the Group to demonstrate new and exceptional functionalities in its latest series of bra pad technologies, significantly enhancing the wearing experience of core product categories like intimate wear and sports bras. Concurrently with the upgrade of raw materials, the Group has taken the initiative to break away from the traditional machine sewing process prevalent in the market, consistently been driving forward the technological advancement and market application of its unique seamless bonding technology. In addition, substantial progress has been made in the development of materials, automated production equipment, and associated with the craftsmanship, resulting in remarkable improvements in production efficiency, aesthetics, product quality, and functionality when compared to conventional mainstream products. The Group will continue to leverage the potential of relevant craftsmanship and adopt a differentiation approach to develop mid-range to high-end “Better & Best” outerwear business and reshape market perception of the product category.

The Group has proactively implemented measures to fortify its initiatives in promoting the aforementioned upgrades and breakthroughs in raw materials and craftsmanship, while also forging stronger collaborations with major brand partners. The market response to these efforts has been favorable, resulting in the initiation of partnerships with several brand partners during the Period. As a key indicator of the Group’s core business development, the demand for R&D samples from brand partners across various product categories has demonstrated varying degrees of growth during the Period, in contrast to the previous year when the industry was experiencing a downturn. Looking ahead to Fiscal 2025 and beyond, the Group is confident in translating its R&D achievements into sales growth. It aims to re-establish a momentum of high-quality growth in its core segments by implementing the following strategies:

• Leveraging its expertise in world-leading raw materials (with a special focus on foam), in conjunction with its diverse and innovative bra pad technologies, to further enhance its competitive advantage in the bra business (intimate wear and sports bras).
• Capitalizing on its unique and proprietary seamless bonding craftsmanship to expand the application and market reach of its outerwear business (including shapewear, leggings and apparel, etc.) with major brand partners, achieving sustainable and stable revenue growth over the next five years.

Focus on differentiation positioning and optimize consolidated gross margin

The Group is committed to establishing itself as the premier partner for its major brand partners, with a specific focus on anchoring the mid-range to high-end (Better & Best) positioning within their product lines. This strategic approach aims to strengthen the Group’s value proposition by emphasizing product differentiation. Coupled with the Group’s efficiency enhancement initiatives, such as structure verticalization, production equipment automation and management intellectualization in China and Vietnam production bases over the past six months and in the future, it is expected to achieve notable improvement in the Group’s consolidated gross margin in Fiscal 2025.

Leverage the strategic capabilities of Zhaoqing production base, VS China business to develop rapidly as planned, accelerate the deployment in China market

As part of the Group’s strategic optimization of production facilities in China, the Zhaoqing production base has been designed with modern, high positioning, and sustainable features. It incorporates advanced automation and intelligent production and management systems to enhance production efficiency. With the gradual commencement of operations at this production base, the Group is now better equipped to meet the increasing local production demand driven by the rapid expansion of the domestic market. This development aligns with the strategies of international brand partners, VS China, and other domestic partners, who are seeking to capitalize on opportunities in the Chinese market.

In recent years, the Group has made remarkable progress in cultivating the domestic market, as evidenced by revenue from the domestic market surpassing 15% of the Group’s total revenue during the Period. VS China, being a key area of focus for the Group’s expansion in the Chinese market, has achieved noteworthy results through various measures including operational optimization and differentiated product developments, leading to substantial revenue and profit growth, aligning with plans. Catering to the e-commerce channel, the Group successfully developed several hero products for VS China, which will continue to drive growth of the Group’s IDM business in China.

Continuous promote ESG development to achieve “Solidarity in Sustainability” with all stakeholders

Regina Miracle firmly believes that the environmental, social and governance (“ESG”) is the cornerstone of corporate sustainability, thus it has actively integrated ESG into its management decisions, daily operations and corporate culture to enhance the implementation of the relevant philosophy. Aligned with the 2030 Sustainable Development Goals, the Group strives to advance in the four areas of carbon reduction, waste management, sustainable innovation, and people and community. During the Period, the Group made remarkable progress in various areas. Notably, extending the environmentally friendly design principles of the Vietnam factory, the first phase of construction of the newly established Zhaoqing factory was awarded the LEED (Leadership in Energy and Environmental Design) Gold Certification in June 2023. The Zhaoqing factory can better meet the sustainability requirements of the Group’s international brand partners. Moving forward, the Group remains dedicated to creating value for the industry and fulfilling its firm commitment to “Solidarity in Sustainability” with stakeholders such as investors, business partners and consumers.

Mr. Hung concluded, “In view of the industry’s volatility, Regina Miracle has implemented a strategic approach to streamline its diversified business portfolio, with a focus on strengthening core businesses and ensuring revenue growth. The Group will leverage the breakthroughs achieved in raw material research and development to solidify its global leadership in core product categories such as intimate wear and sports bras. Furthermore, the Group will capitalize on the immense potential of its proprietary unique seamless bonding technology to drive growth in the new outerwear segment. Meanwhile, the Group will continue to bolster growth of the China market, and further expand its market share through strategic planning for VS China. The gradual commencement of operation at the Zhaoqing base will also enhance the Group’s ability to meet the local production demand of brand partners and provide the necessary production capacity for further development in China. Moreover, the Group will maintain its focus on the mid-range to high-end “Better & Best” differentiated product positioning, aiming to improve added value and gross margin. With these initiatives, Regina Miracle is confident in overcoming industry challenges and regaining momentum in terms of growth. Last but not least, I would like to express my sincere gratitude to the management team and colleagues for their dedication, and to our brand partners, suppliers, business partners and shareholders for their strong support. Looking ahead, Regina Miracle will continue to leverage its strengths, seize market opportunities, and create long-term value for all stakeholders.”

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