Man Wah FY2021 Revenue from Main Business Up 35% to HK$16.4 Billion Despite Harsh Market Conditions, Net Profit Rises to HK$1.92 Billion

During the Review Year, Man Wah actively promoted the development of its domestic business, enabling the Group to overcome effectively the adverse external impact on its business. The Group’s market share in China’s recliner sofa market has expanded to 59%, an achievement which has made it the world’s top seller of recliner sofas for three consecutive years.

In FY2021, the Group’s sales revenue (excluding those from real estate, malls and other businesses) increased by 35.3% to HK$16.43 billion as it received a strong boost from sales revenue in the China market where revenue significantly increased by approximately 61.9%. Profit Attributable to Owners of the Company expanded by 17.5% to HK$1.92 billion. Net profit margin was approximately 11.7%. As of 31 March 2021, the Group was in a sound financial position, with a bank balance and cash of approximately HK$2.4 billion, and a current ratio at 1.4.

To reward shareholders for their long-term support, the Board has proposed a final dividend of HK16 cents per share. Together with the interim dividend of HK10 cents that was already paid, the total dividend for the year amounted to HK26 cents per ordinary share, representing a dividend payment ratio of 52.7% and an increase of 8.4 percentage points compared to the dividend payment ratio of 44.3% in the previous year.

Business Review

China Market
During the Review Year, China’s overall economy faced daunting challenges posed by the pandemic, but opportunities emerged as consumption recovered and demand for household products expanded. By employing effective store expansion, marketing and store operation, vigorous development of e-commerce sales, and active promotion of business model innovation, the Group gained more market share in the Chinese furniture market and it achieved strong revenue growth. Revenue from its main business in the China market expanded by 61.9% to HK$9.98 billion, accounting for more than 60% of the Group’s total revenue during the Review Year, and serving as its principal growth driver.

As of 31 March 2021, the Group had a total of 4,122 “CHEERS First-class Cabin” brand sofa and “CHEERS Five-star Mattress” brand stores in China. During the Review Year, the Group achieved a net increase of 1,125 in the number of its brand stores.

As regards online sales, the Group continued to enhance its sales on Tmall, JD.com and other e-commerce sales platforms, and it also actively promoted the live broadcast sales model. Using short video promotions, live broadcasts of its own stores, and in-depth collaboration with leading online streamers, the Group achieved a substantial expansion of business volume, fans base and brand influence. In addition, the Group also made active deployments in new retail business and it also undertook an integration of its online and offline business, a strategic move which drove online sales to grow by a very hefty approximate of 41.0% to HK$2.19 billion.

North America market
Although the Group’s business was adversely affected by its strategy of shifting from exports to domestic sales amid the pandemic overseas, its export orders to North America resumed their rapid growth in the second quarter of 2020, marked notably by sales revenue of its main business from the North America market which rose by approximately 30.5% to HK$4.58 billion. The capacity of the Group’s new plant in Vietnam, which started operating in 2020, increased rapidly, with most of the productions carried out for the U.S. customers have been basically transferred to the Vietnam plant, effectively mitigating the adverse impact of tariffs imposed by the US government.

Europe and other Overseas Markets
During the Review Year, the Group’s revenue in Europe was inevitably affected by the impact of Brexit and COVID-19. However, revenue from its main business (excluding that from the Home Group) in Europe and other overseas markets only decreased by 6.5% to HK$876.6 million.

The Home Group had five sofa manufacturing plants in Poland, the Baltic States and Ukraine which are mainly engaged in the design and production of stationary sofas and sofa beds. Products of the Home Group are sold to many European furniture retailers. Revenue from its main business increased by 2.7% from the level in the same period last year.

Prospects
China’s large population has indeed created a huge consumer market. In view of this, the Group will continue to strengthen its core competitiveness and branding in recliner sofas to maintain its leading position in the industry. It will also continue to raise its core competitiveness and build stronger barriers by further enhancing innovation and intelligent automation of iron frames and motors, representing moves that will ultimately reduce product costs and enable the attainment of price advantages. Since recliner sofas provide higher cost-performance and better styles, coupled with the introduction of e-commerce, live streaming, TikTok, and other measures, the Group has accelerated the exposure and recognition of recliner sofas. Looking ahead, Man Wah will continue to improve consumer experience on recliner sofas in both offline and online stores via experimental scenarios so as to create a better sales conversion rate.

With the easing of the pandemic and recovery of the economy, the export markets for recliner sofa will gradually pick up, with orders resuming their growth. In view of this, Man Wah has established its own brand “MW Home” in the North American market, and its export sales have posted growth. The Group also plans to expand its exports of stationary sofas, and produce more diversified and competitive products, as well as actively exploring more new customers, so as to maintain stable development of its export business.

Dr. Wong Man Li, Chairman of Man Wah, said, “Chinese consumers are giving more focus on comfort from household products. In view of this growing demand, the Group will continue focusing on stationary sofas, but it has also added more experiential functions and improved comfort of its recliner sofa products, providing consumers with a much enhanced experience. Thanks to the self-supply of core components, we are able to offer recliner sofas at more cost-effective prices to a wider range of families, while meeting rigid market demands. In the current market marked by low market share and differentiation, we insist on creating differentiated products and experiences for consumers in order for the Group to better achieve scale advantages and accelerate the penetration rate of our products in the soft market in the future, and bring better returns to our shareholders.”