Regina Miracle Announces FY2020 Annual Results Revenue Increases by 1.2% to HK$6.3 Billion Net Profit and EBITDA Increased 2.7% and 30.0% To HK$290.0 Million and HK$969.7 Million Respectively

06/03/2020 | Corporate

Regina Miracle Announces FY2020 Annual Results Revenue Increases by 1.2% to HK$6.3 Billion Net Profit and EBITDA Increased 2.7% and 30.0% To HK$290.0 Million and HK$969.7 Million Respectively

Optimised Production Layout with Factories in Vietnam VSIP Hài Phòng Largely Commenced Operation

Seize Business Opportunities by Innovations Amidst COVID-19 and Embrace Economic Recovery with Readiness

(Hong Kong, 29 June 2020) Regina Miracle International (Holdings) Limited (“Regina Miracle” or the “Company,” together with its subsidiaries, collectively the “Group”) (HKEX: 2199), a leading global intimate apparel company boasting an Innovative Design Manufacturer (“IDM”) business model, has announced its annual results for the year ended 31 March 2020 (“FY2020” or the “Year”).

In FY2020, the Group recorded a revenue of HK$6,341.0 million (FY2019: HK$6,263.3 million) amidst the difficult operating environment, representing a year-on-year increase of 1.2%. Benefiting from the rising production capacity and efficiency of its Vietnam factories, earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 30.0% to HK$969.7 million, with EBITDA margin lifted meaningfully to 15.3% (FY2019: HK$745.9 million and 11.9%, respectively). Meanwhile, net profit rose by 2.7% to HK$290.0 million, with a net profit margin of 4.6% (FY2019: HK$282.4 million and 4.5%, respectively). Basic earnings per share attributable to owners of the Company amounted to HK23.7cents (FY2019: HK23.1 cents).

The Group is in a healthy financial position. In addition to stable operating cash flows, it also holds sufficient cash in hand and total undrawn bank facilities of approximately HK$587.6 million and HK$2,571 million, respectively as at 31 March 2020 (31 March 2019: HK$466.4 million and HK$1,731 million, respectively).
To share the positive results of the Group with shareholders, the Board has resolved to propose a final dividend of HK4.0 cents per share. Together with an interim dividend of HK3.8 cents per share paid, the total dividend will amount to HK7.8 cents per share (FY2019: HK7.6 cents), which is in line with the Group’s policy of paying no less than 30% of its net profit as dividends for the fiscal year.

Mr. YY Hung, Chairman, Chief Executive Officer & Executive Director of Regina Miracle, said, “Our production capacity layout and IDM capabilities in the PRC and Vietnam have already laid a solid foundation for the business before the Pandemic. By leveraging our ongoing advancements in craftsmanship, we have not only developed multiple trendsetting products and reinforced collaborative ties with world-renowned brand partners during the Year, but also made good use of our existing technologies and resources amidst this pandemic for business expansion towards pandemic prevention products such as fabric face masks and protective clothing, and at the same time invested resources in developing household and health concept products, as well as sports peripheral products, thereby enhancing our risk resilience while promoting the development of business diversification.”

Business Review

Doubled volume of Bra Top orders, strengthened ties with brand partners and better balanced customer portfolio
Bras and intimate wear products remain the major source of revenue of the Group. This segment contributed HK$5,061.4 million (FY2019: HK$4,874.6 million), representing a year-on-year increase of 3.8% and accounting for approximately 79.8% of the overall revenue. In addition, gross profit amounted to HK$1,183.8 million, with gross profit margin improving to 23.4% (FY2019: HK$1,070.3 million and 22.0%).

The chic bra top series sold successfully, which significantly bolstered the volume of orders. It not only became the major growth driver of this segment, but more importantly also contributed to a closer partnership with the brands, thus achieving a more balanced customer portfolio. Therefore, although the Pandemic spread across the globe in March had caused a delay in the shipment of certain orders, the revenue of this segment still recorded an increase during the Year.

Bra pads and other molded products remain stable; shipments of fabric processing and other electronic accessories for a well-known multinational tech firm

Revenue generated from bra pads and other molded products business amounted to HK$677.1 million (FY2019: HK$530.9 million), representing a significant year-on-year increase of 27.5%, amounting for 10.7% of the total revenue. Gross profit and gross profit margin from the segment were HK$144.2 million and 21.3% respectively (FY2019: HK$111.6 million and 21.0%, respectively).

The double-digit revenue growth of this segment was mainly driven by an increase in sales of fabric processing and other accessories used in consumer electronic products, which was the fruitful results of Regina Miracle’s R&D efforts in actively expanding its business across different sectors and product categories for nearly two years. During FY2020, not only did the Group record high double-digit growth in orders of virtual reality (VR) glasses accessories from its existing VR technology partner, but also gained a well-known multinational technology partner, for which the Group manufactured a wider range of components for consumer electronic products beyond VR glasses accessories. The revenue from bra pads maintained a moderate growth due to a slight increase in revenue from external sales of bra pads. The Group has reserved the majority of its bra pads capacity to facilitate in-house manufacturing of finished bras in recent years. At present, not only can the Vietnam factory completely self-supply bra pads, but it can also supply to the Shenzhen factory which helps strengthen its cost control.

Orders of international sports and leisure brand products achieve solid growth

The functional sports products business contributed HK$602.5 million (FY2019: HK$857.8 million) in revenue during the Year, a year-on-year decrease of 29.8%, and accounted for 9.5% of the total revenue of the Group. The segment also recorded a gross profit of HK$112.7 million and a gross profit margin of 18.7% (FY2019: HK$160.1 million and 18.7%, respectively).

The Group has executed the optimisation strategy for its brand customer and product portfolio in the second half of FY2019, with the aim of facilitating more effective allocation of R&D and production resources. For footwear business, the Group focused on cooperating with an American casual footwear brand partner during FY2020 after terminating its sports footwear business with another brand. As for the sportswear business, the Group also focused on cooperating with internationally renowned brands to promote the steady growth of its business. By leveraging the excellent craftsmanship of seamless bonding, Regina Miracle has developed innovative products for international sports and leisure brand partners. As a result, the Group recorded growth in sportswear order volume despite the exits of other sportswear customers, establishing another growth point of its business.

A big step towards the full commissioning of Vietnam VSIP factories, significantly drives productivity to an optimal level and meets expectations

During the Year, Factories D and E, which house more automated machineries, have formally commenced production, marking a big step towards the full commissioning of the Group’s factories located in Vietnam Singapore Industrial Park (“VSIP”) in Hài Phòng City, Vietnam, with the proportion of local production accounted for approximately 60% of the total revenue last year rising to approximately 73% in FY2020. Operations in Vietnam Factories A and B have steadily matured where skilled workers with over 1 year of experience accounted for 73%, which facilitated a significant improvement in production efficiency and met expectations. Based on the successful operation in Factories A and B, the Group adjusted the allocation of production lines across Factories C, D and E according to the demand, all in a bid to improve the efficiency of existing facilities and drive productivity to an optimal level.

Optimised cost structures, diversifying revenue streams, fully reviewing operation and production flows to lay solid foundation for seizing opportunities arising from the economic recovery

Going forward, the Pandemic is expected to bring unprecedented challenges and more uncertainties to the global economy. In response to the impacts brought by the Pandemic, including a series of shop closures and government pandemic prevention measures, some brand partners have temporarily postponed certain orders in the past few months. The Group expects the sales of FY2021 to be impacted given that the market will need some time to fully recover after the lockdown and it will likely take time for the brand partners to clear the inventory accumulated during the Pandemic.

Despite the uncertain outlook, the management is convinced that challenges coexist with opportunities. The Group will actively develop products that can generate demand for its brand partners, with a view to enabling swift market launch and catering to the rebound of consumer demands after the Pandemic has stabilised. In the PRC, as the Pandemic has come under control along with the gradual resumption of work and production, consumer sentiment is expected to revive and generate a new round of opportunities. Therefore, the Group intends to invest more resources for an expansion in the Chinese market in the medium-to long-term for business expansion, in relation to intimate wear and functional sports products.

In respect of capacity planning, the Group has largely commenced operation of all its factories at VSIP Hài Phòng in Vietnam, while the production of footwear products currently in Shenzhen is expected to be transferred to Vietnam Factory E after the Pandemic has stabilised. The facility in Hung Yen Province, Vietnam, which operates principally with seamless knitting technology, will defer its commencement of operation to the first half of 2021 due to the impact of the Pandemic. Given that production line expansion and production efficiency improvement in the existing factories will be sufficient to drive growth in the near- to medium-term, the Group has stated in the first half of FY2020 that it has no plans to invest in new production facilities in the next two years, but will focus on enhancing the efficiency and productivity of its existing and upcoming facilities. As for the Shenzhen factory, its will continue to focus on the manufacturing of products that are sold in the local Chinese markets of its brand partners, as the factory undergoes upgrade and transformation to support the Group’s business expansion that spans different sectors and product categories, fabric processing as well as other accessories for consumer electronic products.

Besides, the Group has also invested in the development of pandemic prevention products (including fabric face masks and protective clothing), sports peripheral products and health products. This will not only diversify its product portfolio and enhance business resilience against risks, but also contribute to communities by making the best use of its existing technology and resources to achieve an all-win outcome. Since the beginning of this year, the Group has produced pandemic prevention products for its existing brand partners. In the future, the Group will continue to apply for the production certificates of such products in line with international regulations, and seek cooperation with a more diverse clientele, as demand for pandemic prevention products is expected to continue to grow.

Given the commitment to reducing its costs while diversifying revenue streams, the Group imposes stricter cost control on labour, raw materials and operation, especially under the Pandemic, such as adjustments to the working hours of production staff and employees based on actual orders (including the implementation of a rota system in the Shenzhen factory), and the enhancement of upstream supply chain management, all in a bid to reduce labour costs and other peripheral costs. Also mindful of financial prudence during this Pandemic, the Group will temporarily suspend unnecessary investment in fixed assets to reduce capital expenditure and ensure sufficient cash flow for operations. Apart from its stable operational cash flow, the Group is positioned with ample cash on hand and undrawn total bank credit, enabling it to withstand market fluctuations.

Mr. Hung concluded, “Regina Miracle has undergone multiple economic cycles for more than two decades. Leveraging our experienced management team with great visions, we believe the Group can prevail over difficulties and break new grounds in business with steady and prudent development policies, and make good use of current opportunities to review internal operations and production processes so as to lay a solid foundation for long-term development by streamlining the structure and optimising processes. We will create more high value-added and cost-effective innovative products for our brand partners with the goal to swiftly seize opportunities when the economy recovers and stand out in the industry integration.”