Regina Miracle Announces Fiscal 2019 Annual Results
Revenue Increases by 6.7% to HK$6,263.3 Million
Net Profit Up 17.6% to HK$282.4 Million

06/25/2019 | Corporate

Regina Miracle Announces Fiscal 2019 Annual Results
Revenue Increases by 6.7% to HK$6,263.3 Million
Net Profit Up 17.6% to HK$282.4 Million

Strengthening Presence in Vietnam and Brand and Product Portfolio Optimization Near Complete for Bracing Long-term Business Development

(Hong Kong, 25 June 2019) 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 annual results for the year ended 31 March 2019 (“Fiscal 2019” or the “Year”).

Applying its unique and innovative technologies, the Group successfully developed a variety of comfortable products for different brand partners during the Year. Those products have been well received by the market, as reflected in the steady increase in sales. During Fiscal 2019, the Group recorded total revenue of HK$6,263.3 million, or a 6.7% increase year-on-year (Fiscal 2018: HK$5,868.0 million). Driven by the continued efficiency improvement of the Vietnam factories, gross profit increased by 8.8% to HK$1,341.9 million (Fiscal 2018: HK$1,233.9 million), with gross profit margin rising modestly to 21.4% (Fiscal 2018: 21.0%). Earnings before interest, taxes, depreciation and amortization (“EBITDA”) of HK$745.9 million was recorded (Fiscal 2018: HK$609.8 million), up 22.3%, with EBITDA margin rising to 11.9% (Fiscal 2018: 10.4%). Net profit also rose by 17.6% to HK$282.4 million (Fiscal 2018: HK$240.2 million), with net profit margin at 4.5% (Fiscal 2018: 4.1%).

To share the Group’s achievement with shareholders, the Board has resolved to declare a final dividend of HK4.0 cents per share. Together with the interim dividend of HK3.6 cents per share already paid, total dividend for the Year will amount to HK7.6 cents (Fiscal 2018: HK6.3 cents), which is in line with the Group’s policy of paying no less than 30% of its net profit as dividends for a fiscal year.

Mr. YY Hung, Chairman, Chief Executive Officer & Executive Director of Regina Miracle, said, “Looking back at the past year, the China-US trade negotiations have posed challenges to the global economy and trade activities. However, we have been engaging in preparations for strategic expansion in Vietnam for several years with the operation of the first facility there commencing in 2016. After efforts from more than three years, Regina Miracle has a strengthened presence in Vietnam now to support development of the Group’s business and satisfy the strong demand from brand partners for orders from production bases outside China, despite the unstable macro-environment for global trade. Our third Vietnamese facility officially commenced operation during the Year and has begun to contribute to the business growth of the Group.”

Business Review

Innovative products well received, strengthened ties with brand partners, leading to healthy increase in orders
Bras and intimate wear continued to be Regina Miracle’s primary revenue source, contributing HK$4,874.6 million (Fiscal 2018: HK$4,728.6 million) to the Group, up 3.1% year-on-year, and accounting for 77.8% of total revenue. Segmental gross profit was HK$1,070.3 million, with gross profit margin at 22.0% (Fiscal 2018: HK$1,008.9 million and 21.3%, respectively).

During the year, the bra and intimate wear segment was able to sustain stable growth due in part to contributions from a major brand partner which, in collaboration with the Group, introduced new product collections that were well received by consumers. At the same time, the Group continued to strengthen ties with several major international brand partners, with the partnerships becoming increasingly strong as reflected by the healthy incremental increase in orders.

Revenue generated from bra pads and other molded products sold to brand partners remained stable, owed mainly to the strategy of the Group to reserve the majority of its bra pad capacity for in-house manufacturing of finished bras. Consequently, the segment generated revenue of HK$530.9 million during the Year (Fiscal 2018: HK$524.7 million), representing a year-on-year increase of 1.2%. Gross profit of the segment reached HK$111.6 million, with gross profit margin at 21.0% (Fiscal 2018: HK$110.3 million and 21.0%, respectively).

Sales of sportswear products have achieved strong double-digit growth
Functional sports products contributed HK$857.8 million (Fiscal 2018: HK$614.8 million) in revenue, representing a year-on-year increase of 39.5%, accounting for 13.7% of the Group’s total revenue. Gross profit amounted to HK$160.1 million, with gross profit margin at 18.7% (Fiscal 2018: HK$114.7 million and 18.7%, respectively). As for footwear products, sales were driven by a young and casual footwear brand partner in the U.S. secured by Regina Miracle last year. This partnership has helped offset the decline in orders resulting from the Group’s strategic exit of the footwear business with a customer during the Year. As for sportswear products, sales saw a strong double-digit growth.

Production efficiency of Vietnam factories began to show
During the Year, the Group’s Factory A, B and C in the Vietnam Singapore Industrial Park (“VSIP”) in Hải Phòng City, Vietnam, were in operation. The Group had a combined workforce of approximately 30,000 in Vietnam as at the end of the fiscal year. With an increasing proportion being skilled workers, the operation of Factory A and B now has become increasingly mature over the past two to three years with production efficiency starting to show. Factory C, which commenced operation in the beginning of the fiscal year, has also been gradually ramped up, driving the increase of the overall production scale.

During the Year, production of the Vietnam factories accounted for approximately 60% of the Group’s total revenue, a marked increase from around 40% in the last fiscal year, and is expected to further expand in the coming fiscal year. Apart from the three operating factories affording higher efficiency, Factory D and E, will incorporate more automated machineries (commencing production in June and September 2019, respectively) and a factory in Hung Yen Province, which is armed with seamless knitting technology, will commence operation in the second half of 2020, giving another boost to the Group’s production capacity in Vietnam.

As for the factory in Shenzhen serving as the Group’s R&D hub as well as production base, it will continue to develop and produce products with high technical content, and also products that possess cross-industry capabilities. To align with brand partners’ strategy to tap the China market, the Shenzhen factory will also focus on producing locally products to be sold in the domestic Chinese market for brand partners. As at 31 March 2019, the factory had a workforce of approximately 10,000.

Six factories in Vietnam will be in operation in 2020, sufficient to drive steady production capacity growth in the next two to three years
Regarding capacity planning, the Group’s major target in the coming three years will be to deepen the optimization of its management by properly adjusting the resources allocation between Shenzhen and Vietnam, in order to concentrate on enhancing production and operating efficiency, and ultimately, strengthen its profitability. As the Group’s five factories in Hải Phòng and the factory in Hung Yen will all be in operation in 2020, the management expects the operating and upcoming production facilities will be sufficient to stably drive its production capacity growth in the next two to three years. On this major premise, the Group does not see the need to invest additional capital in new facilities in 2019 and 2020, although it does have land reserves in the VSIP, Hai Phòng, which could cope with long-term development. The Group will continue to monitor market development and consider a number of factors, such as cost competitiveness, policy, technical requirements and the demand of brand partners when optimizing production capacities among its Vietnam and Shenzhen factories. The Group will also seek to right-scale the latter as appropriate.

In the year ahead, another principle objective of Regina Miracle is to achieve steady revenue growth and enhance profitability, while also raising efficiency. Consistent with this objective, the Group will continue to be selective in brand partners and product portfolios, and focus on existing ones so as to maintain healthy orders.

In response, the Group has placed greater energies in the past two years, on top of constant efforts towards product innovation, in standardizing craftsmanship and automating production process. Consequently, the upcoming production equipment and technological developments will be led by automation concept, which will pave the way to greater production efficiency and agility. Externally, the Group will strengthen its supply chain management in order to create a healthy and competitive cooperation model that it can benefit from.

Mr. Hung concluded, “By leveraging our two strategic production bases in Shenzhen and Vietnam, as well as our innovative technologies well-recognized by our internationally renowned brand partners, we will develop brand-new products that lead the industry with our brand partners, which in turn helps us consolidate our leading position in the intimate wear industry while exploring new opportunities in functional sports products. We will strive to execute the abovementioned strategies with a steady and prudent development approach to steer Regina Miracle towards a new milestone in business development, and which leads ultimately to value creation for brand partners and shareholders.”