Regina Miracle Announces 2018/19 Interim Results. Revenue Increases by 8.9% to HK$3.06 Billion. Net Profit Up by 39.9% to HK$133.7 Million

11/26/2018 | Corporate

Regina Miracle Announces 2018/19 Interim Results. Revenue Increases by 8.9% to HK$3.06 Billion. Net Profit Up by 39.9% to HK$133.7 Million

Accelerate the Shift of Production Capacity from Shenzhen to Vietnam to Cater For Brand Partners’ Strong Order Demands

Adoption of Seven Innovative Technologies and Strictly Select Brand Partners and Optimise Product Portfolios to Enhance Profitability

(Hong Kong, 26 November 2018) Regina Miracle International (Holdings) Limited (“Regina Miracle” or the “Company,” together with its subsidiaries, collectively the “Group”) (HKEX: 2199), a leading global intimate wear company boasting an Innovative Design Manufacturer (“IDM”) business model, has announced its unaudited interim results for the six months ended 30 September 2018 (“1HFY2019” or the “Period”).

In 1HFY2019, the Group recorded a total revenue of HK$3,062.9 million (1HFY2018: HK$2,813.5 million), up 8.9% year-on-year. The Group’s gross profit for the Period rose by 12.7% to HK$658.1 million (1HFY2018: HK$583.8 million) and gross profit margin increased to 21.5% (1HFY2018: 20.7%). During the Period, the Group benefited from the continuous increase of production capacity and efficiency in its Vietnamese facilities and has recorded a continuously improving profit margin. Net profit increased by 39.9% to HK$133.7 million (1HFY2018: HK$95.6 million), with a net profit margin of 4.4% (1HFY2018: 3.4%). The Board has resolved to propose an interim dividend of HK3.6 cents per ordinary share for the six months ended 30 September 2018 (1HFY2018: 2.5 cents) and the Group’s dividend policy remains as distributing no less than 30% of its net profit for the financial year.

Mr YY Hung, Chairman, Chief Executive Officer & Executive Director of Regina Miracle, said, “Despite its impact on the global economy and trade since early 2018, the escalating China-US trade dispute has presented Regina Miracle with opportunities for market share gain, given the Group’s early-mover advantage to establish its presence in Vietnam. Under the management’s well-arranged deployment of manufacturing resources, Regina Miracle has been able to capture timely opportunities during the drastic shifts in the trade situation and fulfill brand partners’ quest for overseas production in response to their demand for high volume orders. Moreover, we have prioritised the research, development and adoption of our Seven Innovative Technologies in 2018 which helped us to develop well-received comfortable products for our partners and has driven the steady development of our sales performance.”

Business Review

Innovative technologies are welcomed by the market; bra-related products recorded stable sales growth
During the Period, bras and intimate wear products remained as the biggest revenue contributor of the Group. Revenue from this segment for the year increased by 4.0% year-on-year to HK$2,372.9 million (1HFY2018: HK$2,282.7 million), accounting for approximately 77.5% of the Group’s total revenue (1HFY2018: 81.1%). Regina Miracle has effectively incorporated the Seven Innovative Technologies to develop innovative differentiated products for world-renowned brand partners and these products have been well-received by the market, which has further strengthened the collaborative ties between the Group and its newly-added global brand partners, resulting in a more balanced customer mix.

Gross profit and gross profit margin of the segment amounted to HK$521.2million and 22.0%, respectively (1HFY2018: HK$476.9 million and 20.9%, respectively). During the Period, the efficiency of Vietnamese Factories A and B continued to improve, driving the expansion in the segment’s gross profit margin. However, as Factory C did not commence operation until the beginning of the Period and the training of newly joined production line staff was still underway, it partially offset the gains in gross profit margin of Factories A and B in Vietnam.

As for bra pads and other molded products business, since the Group strategically reserved a large portion of its bra pad capacity for in-house manufacturing of bra products, this segment’s revenue amounted to HK$258.0 million (1HFY2018: HK$272.0 million), representing 8.4% of the Group’s total revenue (1HFY2018: 9.7%). Gross profit and gross profit margin from the segment amounted to HK$55.2 million and 21.4% respectively (1HFY2018: HK$57.7 million and 21.2%). With the continuously improving production efficiency of Factory B in Vietnam, there has been an increase in the self-supply ratio of bra pads needed domestically by the Group’s Vietnamese factories, which will help ease the pressure from rising raw material prices.

Functional sports products experienced significant growth with expansion of both footwear and sportswear businesses

During the Period, revenue from functional sports products registered a significant increase of 67.0% to HK$432.0 million (1HFY2018: HK$258.7 million), which represented 14.1% of the total revenue. Gross profit and gross profit margin from the segment amounted to HK$81.7million and 18.9% respectively (1HFY2018: HK$49.2 million and 19.0% respectively).

During the Period, the Group effectively applied its technical know-how from the seamless bonding
craftsmanship of its intimate wear products to sportswear products, hence unique products have been developed, which lead to a satisfactory double-digit increase in sales of sportswear products. In respect of footwear products, the smooth collaboration between the Group and its new casual footwear brand partner from the US added last year has resulted in a rapid increase in orders within just one year. With both sportswear and footwear products recording satisfactory progress, and in turn drives the continuous expansion of the scale of the Group’s functional sports products business as a whole during the Period.

Improving production capacity layout in Vietnam to cater for the greater demand from major brand partners as trade war looms

During the Period, the Group continued to bolster its production capacity and efficiency in Vietnam, so as to coordinate the greater demand of orders from major brand partners for Vietnamese production bases under the shadow of the looming trade war. Meanwhile, the Group has also actively promoted automated production models boosted by information technology in a bid to enhance production management and efficiency.

As at 30 September 2018, the three Vietnamese factories had a total of approximately 27,500 staff members, among which skilled workers at production lines accounted for an increasing proportion in the first two facilities and thus has driven the steady improvement of production efficiency. With its production commencing in April this year, Factory C is mainly engaged in producing bras, intimate wear and functional sportswear. The Group has incorporated its latest self-developed automated production equipment into part of Factory C’s manufacturing processes, which is conducive to boosting the factory’s efficiency and stability in the long run.

During the Period, the Group continued to optimise its production capacity layout in Vietnam. Factory D and Phase 1 Factory E were under construction and are expected to commence production during the second quarter of 2019. Factory D will be equipped with the Group’s latest self-developed automation equipment and centred on three types of innovative craftsmanship for seamless bonding (from the Seven Innovative Technologies) to produce multiple categories of products. Phase 1 of Factory E, on the other hand, is planned to be furnished with production lines for bras and intimate wear and apparel, and equipped with in-house screen printing capabilities. Production capacity for footwear products will also be reserved in Factory E to support the steady development of the footwear business.

Primarily engaged in research, development and production, the Shenzhen factory will continue to be responsible for products with higher technical requirements and the supply of products sold to the domestic Chinese market for brand partners. As at 30 September 2018, the Group had nearly 12,000 staff members at the Shenzhen facility.

Carefully allocate production capacity between regions, striking a reasonable balance between business growth and improving profitability

Facing uncertainty brought by the international trade situation, coupled with the challenges posed by rising production costs and labour supply shortages in Shenzhen, the Group will take into account a number of factors to allocate and adjust the production capacities between its Vietnamese and Shenzhen factories as appropriate. In particular, the shift of production capacity from Shenzhen to Vietnam will be accelerated, to capture the ever-growing demand from international brand partners for Vietnamese production bases. The Group will also seek further opportunity for establishing production sites to prepare for longer-term business expansion. To effectively utilise its production capacity and cope with the demand of orders from brand partners, the Group will strengthen its strategy of strictly selecting brand partners and optimising product portfolios, with an aim to strike a reasonable balance between promoting steady development of its business scale and improving profitability, attaining the objective of optimum profit and laying a solid foundation for long-term, healthy development.

Mr. Hung concluded, “Looking ahead, to cope with the challenges arising from the macroeconomic environment, we will uphold our mission as an innovative design manufacturer to consolidate our industrial leadership through pioneering innovative technologies. We will continue to seek breakthroughs in technological innovation, work with suppliers to develop more proprietary production machinery, and create more unique products with higher added value for our brand partners in order to enhance and further explore collaborative ties with world-renowned brand partners. We will also work to secure satisfactory returns for its shareholders whilst promoting business growth.”