Confident about Sustaining Strong Growth Momentum and Elevating Group to New Heights
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 2021.
During the year, the Group recorded revenue of HK$5,974.3 million (Fiscal 2020: HK$6,341.0 million), which was only approximately 5.8% lower than that of Fiscal 2020, despite the tough operating environment. This was due to the strong rebound in orders from its core business in the second half year which resulted in a significant increase of 37.3% in overall revenue as compared with the first half year. Gross profit declined by 14.1% to approximately HK$1,238.0 million, with gross profit margin at 20.7% (Fiscal 2020: approximately HK$1,440.7 million and 22.7%, respectively), owing to the drop in revenue. Thanks to the concerted effort of all colleagues and efforts to increase revenue and control costs, the Group’s earnings before interest, taxes, depreciation and amortization (EBITDA) was HK$820.6 million and EBITDA margin was 13.7% (Fiscal 2020: approximately HK$969.7 million and 15.3%, respectively). As a result of the deleveraging of operations and two one-off expenses due to the streamlining of production capacity and human resources, the Group recorded net profit of approximately HK$125.5 million, with net profit margin at 2.1% (Fiscal 2020: approximately HK$290.0 million and 4.6%, respectively). Basic earnings per share attributable to owners of the Company amounted to HK10.3 cents (Fiscal 2020: HK23.7 cents). Excluding the above one-off expense items, net profit decreased by 39.6% year-on-year to approximately HK$175.3 million with a net profit margin of 2.9%.
The Board has resolved to propose a final dividend of HK3.3 cents per share for Fiscal 2021 (Fiscal 2020: HK4.0 cents per share, plus an interim dividend of HK3.8 cents per share, brought the total dividend to HK7.8 cents per share) 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. It has also proposed a special dividend of HK1.5 cents per share in appreciation for the unwavering support of shareholders during the challenging year.
Mr. YY Hung, Chairman, Chief Executive Officer and Executive Director of Regina Miracle, said, “We are committed to maintaining stable business development amid the tough market conditions. We have a varied product portfolio, with sports-related products in particular showing resilient growth driven by the growing popularity of sporting activities during the pandemic. In addition, the ‘stay-at-home’ trend has led to the growth of comfortable lounge wear products and consumer electronics products in response to the cross-sector and cross-product line business expansion in recent years. We have also been proactively exploring new income sources, as evidenced by the development of the fabric face masks business, and focusing on the PRC market, which helped us expand revenue streams and diversify market risks. Even more encouraging, orders within our core business witnessed a sharp rebound in the second half year as the operations of our brand partners got back on track, which in turn enabled us to achieve the primary goal of maintaining stable business development during the review year.”
Sports bras added a few new internationally renowned retail and sports brand partners resulting in more than 30% year-on-year increase in sales
Bras and intimate wear products remained the Group’s primary source of revenue. This segment contributed HK$3,968.1 million (Fiscal 2020: HK$5,061.4 million), representing a year-on-year decrease of approximately 21.6% and accounting for approximately 66.4% of the overall revenue. Gross profit of the segment amounted to HK$835.4 million with gross profit margin at 21.1% (Fiscal 2020: HK$1,183.8 million and 23.4%, respectively). The decline in segment revenue was mainly due to reduced or delayed orders from brand partners in Europe and the United States in the first quarter of the fiscal year caused by anti-pandemic measures, which dealt a major blow to the traditional bra and intimate wear business.
However, sports bras proved to be a silver lining, delivering a resilient performance driven by the growing popularity of sports during the pandemic and support from a few new internationally renowned retail and sports brand partners, which ultimately resulted in an increase in sports bra sales of more than 30% when compared with last year. In addition, the “stay-at-home” trend also led to increased demand for comfortable lounge bra tops and bra products. In the domestic PRC market, the Group added several new e-commerce brand partners, resulting in a more balanced customer portfolio. Consequently, orders from this segment saw robust growth in the second half year and associated revenue also climbed by 60.9% as compared with the first half year.
“Stay at home” amid pandemic stimulates sales of consumer electronics; fabric processing and other accessories for consumer electronics soar by close to 60% year-on-year
Revenue from the bra pads and other molded products business amounted to HK$567.7 million (Fiscal 2020: HK$677.1 million), representing a year-on-year decline of 16.2%, and accounting for 9.5% of total revenue. Gross profit and gross profit margin of the segment were HK$128.3 million and 22.6%, respectively (Fiscal 2020: HK$144.2 million and 21.3%, respectively).
Although the performance of bra pads was affected by the pandemic, along with bras and intimate wear, it showed a strong rebound of 44.3% in the second half year when compared with the first half. Regina Miracle’s efforts in promoting cross-sector and cross-product line business development in recent years have borne fruit. The increase in “stay-at-home” time for the public under the pandemic has led to strong demand for consumer electronic products. This has benefited the Group’s sales of fabric processing and other accessories for consumer electronics, which are produced for its renowned multinational technology partners. Sales having surged by nearly 60% when compared with last year.
Pandemic-driven sports trend stimulates rise in revenue of functional sports products by 30% year-on-year
The functional sports products business contributed HK$788.8 million in revenue during the year (Fiscal 2020: HK$602.5 million), representing a year-on-year increase of 30.9%, and accounting for 13.2% of the Group’s total revenue. The segment also recorded a gross profit of HK$136.8 million and a gross profit margin of 17.3% (Fiscal 2020: HK$112.7 million and 18.7%, respectively).
The increase in segment revenue was mainly due to strong market growth of sports products amid the pandemic. In addition, the pandemic has led to increased awareness of sports and the growing popularity of the “work from home” model, as well as travel restrictions in many countries, which, in turn, resulted in strong demand for products that are comfortable, suitable for lounging at home and light exercising. Such demand has fueled the growth of both the sports shoes and sportswear businesses.
With regard to sports footwear, an American casual footwear brand partner maintained double-digit growth during the year. As for the sportswear business, Regina Miracle continued to develop innovative products with superior craftsmanship for its international brand partners, which has resulted in satisfactory performance. Moreover, with the addition of new domestic sports brands and emerging e-commerce partners, the customer portfolio of this sub-segment has also been enriched.
Pandemic prevention products contributed over 10% of revenue in just one year of development, demonstrating the Group’s agility and adaptability
Pandemic prevention products, a new business segment that emerged in the wake of the pandemic, has contributed revenue of HK$649.6 million to the Group in just one year of development, accounting for 10.9% of the Group’s total revenue. Gross profit of the segment was HK$137.4 million, with a gross profit margin of 21.2%. This business contributed remarkable revenue during the year, which demonstrated the Group’s agility and adaptability amid a difficult operating environment as well as its ability to make best use of unutilized production capacity during the challenging times.
Vietnam production output increased to about 78%; utilized production capacity and conducted comprehensive review of internal structure and operation model to improve operational efficiency
During the year, the Group largely completed its factory layout at the Vietnam Singapore Industrial Park in Hai Phong City, Vietnam. In the face of reduced or delayed orders from Europe and the United States in the first half year, the Group responded swiftly by developing and producing fabric face masks for its customers, which enabled production capacity to be fully utilized and helped offset the impact of the pandemic on the traditional bra and intimate wear business. Fortunately, the Group’s core business has gradually returned to normal owing to the satisfactory growth of sports bras and lounge bras, and therefore recruitment has resumed since July, with production output gradually returning to normal levels in the second half year. As at 31 March 2021, production in Vietnam accounted for approximately 78% of the Group’s total revenue, up from approximately 73% in FY2020.
In order to enhance the operational efficiency of its factories in the PRC and Vietnam, the Group conducted a comprehensive review of its internal structure and operation model and streamlined its manpower during the review year. It also surrendered the lease for part of the Shenzhen factory, which is expected to save operating expenses and improve capacity allocation in the long run. The overall production capacity in Vietnam will be further increased as production in Vietnam becomes more sophisticated and efficient, while the Group has increased production lines in existing factories to better utilize factory scale in response to the rising demand for orders.
Strong market growth momentum: Order growth reached new heights, full speed advancement propelled Regina Miracle’s business to the next level
As vaccination rates rise, the pandemic is expected to gradually be brought under control globally, boosting confidence in an economic recovery. Despite the pandemic, Regina Miracle, with its multi-regional production capacity and strong IDM capabilities, was able to build closer and stronger partnerships with international brands. The management is therefore confident that the challenges of the pandemic are largely over and that growth momentum will continue into FY2022, thus taking the Group’s business to the next level.
In respect of products, the Group’s core bra and intimate wear products saw a rapid rebound in orders; performing even better than in preceding years, as brand partners adapted to the new normal of the late-pandemic era. The growth momentum of sports products has remained strong, especially for sports bras. Since consumers have grown accustomed to life at home, comfort-driven products have consequently enjoyed high take-up. However, once the pandemic is kept under control and consumers return to the work place, there will be greater demand for innovative products that offer both comfort and aesthetic. As for the fabric processing and other accessories for consumer electronics segment, its satisfactory growth is set to continue in the coming year as it benefits from changing lifestyles arising from the late-pandemic era. The Group will maintain efforts to bolster this high value-added business through innovation. In the meantime, as orders for bras and sports bras have resumed growth, the Group has readjusted its production lines to support development of these products, which constitute its core businesses. The Group is confident that the growth momentum will continue.
Another huge change brought about by the pandemic has been the shift in sales channels. The Group will consequently intensify exploration and cooperation with emerging online brands and channels to prepare for future growth. Due to the need to simplify the size range of the bras as they are being purchased online so that consumers can conveniently pick a product that easily fits, comfortable loungewear-type products which tend to sell better online, and represents what Regina Miracle is particularly adept in, and therefore is able to quickly meet the needs of its brand partners.
In order to meet the strong demand in orders from its existing international brand partners, the Group will continue to improve the layout of its production capacity in Vietnam, including enhancing the efficiency and effectiveness of its factories at Hai Phong and adding production lines in the existing factories to increase production capacity. The first phase of the facility in Hung Yen Province, Vietnam, which operates principally using seamless knitting technology, officially commenced operation in April 2021 and is expected to be able to meet growing business demand through the increase in production capacity.
The management noticed that the pandemic has reshaped the global market landscape, and recognizes the importance of market diversification. As the first country to have effectively controlled the pandemic and thus the first economy to have recovered from its impact, the PRC is a key battleground for major brands. The management is targeting the vast prospects within the PRC market. This has included the development of new brand partners and new sales channels, such as e-commerce, in mainland over the past year. Capitalizing on its established reputation in the industry in terms of perseverance and achievements in product innovation and quality over the years, the Group has developed the domestic PRC business and achieved impressive results, building a solid foundation in less than a year. Going forward, the Group will further strengthen its business deployment in the PRC, including team building and production support.
In recent years, the Group’s Shenzhen factory has faced continuous difficulties in terms of recruitment and rising costs. However, in line with the strategy of the Group’s international brand partners regarding their vigorous development in the PRC as well as its own recent business development in the country, the Group has been mindful of the need to optimize its production layout in the country. After careful examination, the Group is considering relocating its production facilities. It has set its sights on the High-Tech Industrial Park in Zhaoqing New District, Guangdong Province in the Greater Bay Area, so as to satisfy the huge demand for innovative intimate wear, sportswear products, etc. from the Mainland Chinese market. The production base in Vietnam will continue to cater for international brand partners that require products produced outside the PRC. Detail planning for the development of the new facilities in Zhaoqing is underway and updates on its progress will be announced in due course.
Since the pandemic, the Group has greatly recognized the importance of optimizing internal risk controls. It will therefore pursue more precise and prudent deployment of human resources, raw materials and operations. In the face of the rising trend of raw materials in the coming year, the Group will suitably expand its supply channels, optimize its production processes and further pursue automation, enhance the effectiveness of its craftsmanship, etc. in order to maintain profitability through a multi-pronged approach that controls overall costs.
The management also understands the volatility of the novel coronavirus pandemic, and that the Group must actively devise contingencies to deal with such concerns. To facilitate greater agility in production planning and ensure that orders can be satisfied even if new lockdown measures are implemented due to the resurgence of the pandemic in Vietnam or Shenzhen, the Group will proactively improve its production processes as well as implement digital upgrades to unlock and analyze end-to-end information processing, compress production cycles, improve product quality and enhance operational efficiency on the manufacturing side. Furthermore, it will seek to gain greater insights into business demand and expedite response to market needs on the management side, so as to ensure stable operations.
Mr. Hung concluded, “We are pleased to note a continuously strong increase in sales orders and even record highs as a result, hence, we remain optimistic about the business in the coming year. We will continue to leverage our unique advantages in innovative design and manufacturing, as well as our industry-leading position in intimate wear and functional sports products, in a bid to seize market opportunities and drive the stable business development of Regina Miracle. As the Group is now in the best position in its development history, we look eagerly towards and are fully confident in the Group’s ability to sustain strong growth momentum. Together, we will elevate Regina Miracle to new heights and generate long-term sustainable value for brand partners and shareholders.”
About Regina Miracle International (Holdings) Limited
Founded in Hong Kong in 1998, Regina Miracle International (Holdings) Limited is a global leader in the intimate wear manufacturing industry. Adopting the innovative design manufacturer (“IDM”) business model, Regina Miracle offers its world-renowned brand partners diverse intimate wear and functional sports products, including bras, sports bras, panties, shapewear, bra pads, functional sports apparel, footwear, pandemic prevention products (such as face masks and protective clothing), etc. The Group has two strategic strongholds – its R&D and production base in Shenzhen, China, and a major production base in Vietnam, where the Group has expanded production capacity since 2016.
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