Regina Miracle International (Holdings) Limited (Regina Miracle or the Company, together with its subsidiaries, collectively the Group) (HKG: 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 2022 (the year or Fiscal 2022).
During the year, despite the various challenges in the macro-environment, the Group’s revenue hit a historical high of approximately HK$8,346.7 million (Fiscal 2021: HK$5,974.3 million), representing a year-on-year increase of 39.7%, which was in line with the expected progress of the Group’s five-year plan. Gross profit grew correspondingly by 65.2% to approximately HK$2,045.4 million, with the gross profit margin up by 3.8 percentage points to 24.5% (Fiscal 2021: HK$1,238.0 million and 20.7%, respectively). As the satisfactory revenue growth and effective cost control measures resulted in enhanced operating leverage, earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 62.5% to approximately HK$1,333.8 million, with the EBITDA margin up by 2.3 percentage points to 16.0% (Fiscal 2021: HK$820.6 million and 13.7%, respectively). The Group recorded a net profit of approximately HK$520.7 million for the year, representing a year-on-year increase of 314.8%, with the net profit margin up by 4.1 percentage points to 6.2% (Fiscal 2021: HK$125.5 million and 2.1%, respectively). Basic earnings per share attributable to owners of the Company were HK42.5 cents (Fiscal 2021: basic earnings per share of HK10.3 cents). Excluding the one-off expense item arising from the surrender of parts of the leased factory in Shenzhen during the year, the adjusted EBITDA was approximately HK$1,394.9 million with an adjusted EBITDA margin of 16.7%, while the adjusted net profit was approximately HK$581.8 million with an adjusted net profit margin of 7.0%.
The Group is in a sound financial position, with cash and cash equivalents increased to approximately HK$995.0 million during the year (Fiscal 2021: HK$828.0 million). It has undrawn banking facilities of approximately HK$2,371.0 million in total as at 31 March 2022 (31 March 2021: HK$2,391.0 million). In order to share the fruitful results with shareholders, the Board has resolved to declare a final dividend of HK7.2 cents per share for Fiscal 2022 (Fiscal 2021: HK3.3 cents per share), together with the interim dividend of HK6.8 cents per share, making a total dividend of HK14.0 cents, in line with the Group’s dividend policy of 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, “While the Pandemic has further reshaped the global landscape, industry leaders with strong R&D capabilities, large scale, rapid response and multi-regional production capacity layout are strongly favored by the market, reflecting the fact that the strong get stronger. Furthermore, highly viscous brand partners have fully resumed their business operations and there is a greater demand for innovative designs appealing to consumers. The emphasis on continuous innovation, delivering speed and consistent quality of supply chain partners is gaining importance, while the approach to innovation-led services is increasingly valued and favored. Through six years of investment in innovation, automation and digital production, as well as the refinement of its production capacity layout, Regina Miracle has established a solid business foundation and formulated a five-year plan for Fiscal 2022 to 2026 tapping multiple favorable factors to fully capitalize on this golden period of growth. In the face of the diversified product needs to be driven by users’ changing lifestyles, and increasingly flexible supply chains and production cycles, the Group will continue to focus on various business segments to provide appropriate integrated solutions for different needs.”
Orders from European and American brand partners have fully recovered, thus the intimate wear segment has soared by more than 60%, exceeding the pre-epidemic level
During the year, this segment contributed approximately HK$4,716.0 million in revenue (Fiscal 2021: HK$2,886.0 million), a year-on-year surge of 63.4%, accounting for 56.5% of the Group’s total revenue, and remaining the main source of revenue for the Group. The segment’s gross profit grew by 94.1% to approximately HK$1,189.2 million, with the gross profit margin up by 4.0 percentage points to 25.2% (Fiscal 2021: HK$612.6 million and 21.2%, respectively). As a result of the better-than-anticipated recovery of the European and U.S. markets during the year, and the strong rebound in orders from the Group’s largest U.S. partner, the segment revenue hit a record high, with orders for traditional intimate wear rebounding and surpassing pre-epidemic levels. Drawing on its industry-leading R&D capabilities and innovative craftsmanship, Regina Miracle was able to fully capture the opportunities arising from the easing of the Pandemic and to work with its major brand partners to seize market opportunities whenever and wherever they arose through flexible production capabilities. In addition, the Group added a number of new emerging PRC e-commerce brands during the year, making its brand partner portfolio more diversified and paving the way for future business growth.
The sports product segment remained resilient, with revenue rising by more than 30% year-on-year, with continued product mix enrichment
This business segment contributed approximately HK$2,190.7 million in revenue during the year (Fiscal 2021: HK$1,596.4 million), a 37.2% year-on-year increase, accounting for 26.3% of total revenue. Segmental gross profit was approximately HK$513.9 million and the gross profit margin was 23.5% (Fiscal 2021: HK$298.9 million and 18.7%, respectively). As the Pandemic eased and the sports craze continued, related products maintained a strong performance, with the order momentum for sports bras from international brand partners being especially strong and thus serving as the main growth driver of this business segment. During the year, the sports leggings product category also showed great momentum through an enriched brand partner portfolio and represented a promising incremental growth driver for the sports products segment.
Riding on the emergence of the “Metaverse” concept, the consumer electronics components segment has grown by more than 60% year-on-year, highlighting broad development space
Revenue from this business segment amounted to approximately HK$496.2 million (Fiscal 2021: HK$291.4 million), representing a significant year-on-year increase of 70.3% and accounting for 5.9% of the Group’s total revenue. The segment’s gross profit increased by 79.5% to approximately HK$125.0 million, with the gross profit margin up by 1.3 percentage points to 25.2% (Fiscal 2021: HK$69.7 million and 23.9%, respectively). The demand for consumer home electronics continued to rise amid the Pandemic during the year, and with the rapid emergence of the “Metaverse” concept, demand for 5G and related products grew considerably and continuously during the year. As consumer electronics are high-value-added products and there is ample room for market development, the segment will continue to generate a new growth impetus for the Group in the future.
The revenue from production in Vietnam rose to 80%, with a multi-regional production capacity layout fully meeting the enthusiastic demand from domestic and overseas brand partners
As an important production base of Regina Miracle, Vietnam provides a solid foundation to support the continuous growth of the Group’s export business. As of 31 March 2022, the revenue from production in Vietnam rose to 80% of the total revenue of the Group. During the year, the Group completed its factory layout at the Vietnam Singapore Industrial Park in Hai Phong City (“VSIP Hai Phong”), Vietnam. It is worth mentioning that the Group’s recruitment and staff stability in the region have been satisfactory, enabling the Group to benefit to the maximum extent from the increasing proportion of mature employees, long service of employees and the master-apprentice model, ensuring that the production capacity and efficiency of each factory will increase year on year. To meet the robust demand of domestic and overseas brand partners as the market resumes, it will be the Group’s top priority to continuously enhance the efficiency and effectiveness of its five factories. Through the addition of new production lines and further implementation of automation and digitalization, the overall production capacity in Vietnam will be further increased. After four to six years of integration, the current operation and labor efficiency, as well as the single factory gross margin of the three factories which were first put into operation in Vietnam, have outperformed the three factories put into operation subsequently. According to the rigorous technological authentication conducted by the Company, there is still room for continuous growth and optimization of these factories. Meanwhile, leveraging the actual operational experience of the first three factories in Vietnam, the Group will accelerate the production efficiency of the other factories in Vietnam so as to enhance the consolidated gross margin. The first phase of the facility in Hung Yen Province, Vietnam, which mainly applies seamless knitting technology, officially commenced operation in April 2021 and active recruitment is still in progress. As for domestic operations in China, in order to enhance operational efficiency and optimize its cost structure, the Group surrendered parts of the leased factory in Shenzhen and made a write-off of fixed assets of approximately HK$61.1 million during the year. The aforementioned relocation of the Shenzhen production base to Zhaoqing will further help the Group achieve an optimized production capacity allocation in the long run.
The vaccination rates of eligible employees at the Group’s production bases in Shenzhen and Hai Phong reached approximately 95% and 90%, respectively, which, to a large extent, will protect the health of employees and the safety of the working environment, while maintaining stable production operations. From the end of 2021 to the beginning of 2022, there were temporary closures and lockdown measures implemented in Shenzhen and Vietnam, respectively, due to a further outbreak of the Pandemic. Thanks to the rapid response of the Shenzhen and Vietnam governments, the Pandemic was soon brought under control. The flexible deployment of human resources by its local managerial team also enabled the Group to minimize the impact of the Pandemic on its production capacity and avoid compromising its ability to fully capture the strong order demand from international and domestic brand partners.
Insist on innovation-driven development, thrive on vast experience, and expand multiple business segments to usher in a golden era of development
Faced with a combination of various factors, the industry is up against challenges such as tight supply chains and rising raw material costs and is undergoing a reshuffle. In this context, Regina Miracle’s comprehensive competitiveness in terms of technological barriers, world-leading product innovation capabilities and highly viscous brand-partner relationships established over the years will be further highlighted, laying a solid foundation for future growth and ushering in a golden era of development.
Continuous upgrading of core technologies and formation of a win-win and mutually beneficial strategic cooperative relationship with loyal brand partners
Over the years, Regina Miracle has adhered to its IDM business model, supported by its global industry-leading product innovation capabilities. The Group has formed a diversified technological matrix based on three core technologies: computer-aided mold design and production, 3D compression molding, and seamless bonding, with applications spanning various fields such as intimate wear, sports and consumer electronics. The uniqueness, leadership, malleability and versatility of the core technologies allow for a high degree of cross-use by different brand partners in different categories, as well as the ability to cater to the different positioning and needs of each brand and to continue to develop unique and innovative products for the Group’s brand partners. This, coupled with the Group’s insistence on a mutually beneficial win-win strategy, consistent quality and a high degree of flexibility, has won the trust and viscousness of various brand partners in terms of Regina Miracle’s IDM positioning, which will help strengthen the Group’s market position in the long run after the industry reshuffle. The Group has also strived to foster and steer the industry trends by continuously strengthening and upholding its technological barriers, registering patents and trademarks for its unique technologies, defining new standards for the industry and providing consumers with a more direct and in-depth understanding of high-value-added products, leading the development trend and demand of the market.
Realization of the Five-Year Plan blueprint for Fiscal 2022-2026 is well underway, promoting stability and diversified growth with a solid foundation
After several years of significant investment, Regina Miracle has laid a solid foundation for its future development. In order to lead the Group to a new chapter of development and a brighter future, after giving careful consideration to and conducting a comprehensive review of the market and the businesses, the management has formulated a brand-new five-year plan for Fiscal 2022-2026 focusing on the following areas:
I. Drive steady revenue growth: Adhere to the IDM business model to drive steady growth in sales through innovation and R&D, and accelerate the expansion into the PRC market;
II. Margin expansion: Continue to develop high value-added and innovative products with better margins, while enhancing management and production efficiency, improving operating leverage as revenue grows and effectuating faster growth in target earnings than in revenue; and
III. Sound financial position: Maintain healthy operating cash flows and control capital expenditures through the above measures in order to gradually lower gearing ratio in the medium and long terms, following the completion of the Group’s capex intensive investment phase in Northern Vietnam over the last few years.
During the year under review, the Group was successful in realizing its target blueprint for Fiscal 2022 set out in its five-year plan, and on the basis of achieving high sales growth, its efficiency and profit margin increased, laying the foundation for the Group’s medium- and long-term healthy financial position. Based on currently foreseeable orders, the Group remains optimistic that the business will continue to perform well in the first half of 2023. Looking forward, despite numerous uncertainties in the macro-environment, the Group will endeavor to comprehensively achieve the established goals in the five-year plan, fully utilize tailwinds from the advantages of the environment and itself, take stock of the situation and remain flexible to respond, and drive steady rise in the Group’s business.
At the business level, the Group’s future growth will be driven by the four business segments of intimate wear, sports products, consumer electronics components products and footwear:
— The intimate wear business is expected to continue growing steadily. The growth in the intimate wear segment is mainly attributable to the expansion of individual brand partners and the increase in market share of key brand partners, underpinned by the development of innovative craftsmanship products and the product expansion into several sub-categories.
— Growing share of the sports business, with innovative craftsmanship leading the rapid growth in industry demand. In recent years, international brands have become increasingly aware of the importance of the female sports market, of which sports bras are a core product that still has huge development potential. Owing to its foresighted planning several years ago, the Group’s strategic partnerships with several leading global brands have become increasingly steadfast and the addition of a number of fast-growing new brands has formed an ideal brand partner portfolio and helped the Group to grasp the growth momentum of the sports intimate wear industry. Meanwhile, Regina Miracle’s innovation and R&D capabilities have led to the evolution and upgrading of leggings in the sports segment, significantly enhancing their functionality and comfort, etc. Demand for products in the sports leggings segment is growing significantly and is expected to replicate the growth trajectory of sports bras.
— The consumer electronic components business is showing a trend of diversified development for the coming years to build a more stable product and brand partner portfolio. With the emergence of the “Metaverse” concept, more emphasis is being placed on consumer electronic soft goods products offering a more comfortable, skin-friendly wearing experience that is suitable for prolonged use. The Group is well-positioned to apply its innovative craftsmanship and three core technologies in the consumer electronics segment, conducive to developing market-leading products. In addition to the existing international brand partners, the Group introduced domestic leading brand partners during the year with the opportunities for expansion of product categories, driving the growth of the consumer electronics components segment of the Group in the coming years. Relevant brand partners have been promptly deploying in this field as well as lengthening their product cycles, resulting in relatively high sales visibility. The Group actively plans and responds to the changing high technology product market by implementing a strategy to diversify its brand partners and product portfolios, laying a flexible and stable foundation for the development of the consumer electronics components business.
— The footwear business will continue its steady growth on the current basis. The Group is currently focused on working with an American casual footwear brand. With years of joint development, the partners will continue to go hand in hand and maintain the growth momentum in the foreseeable future.
A maturing multi-regional production capacity layout, with advantages of Vietnam as a production base in the global supply chain becoming more prominent
In order to enhance its core competitive advantages, the Group is committed to multi-regional production capacity deployment, bolstering the growth of its export business with its production bases in Vietnam, while promoting the development of the PRC market by leveraging the production bases in China.
Against the backdrop of the increasing complexity of global competition and cooperation, Vietnam has become highly sought after by global manufacturing enterprises due to its status as a member state of various trade agreements, its advantages in terms of population size, labor costs and cultural standards, and the local government’s commitment to ensuring stable operations for supply chain enterprises. After around six years of strategic deployment for overseas production capacity layout and team cultivation, the Group’s production capacity in Vietnam now presents multiple advantages in terms of scale, power, agility and high-quality output. Meanwhile, the implementation of digital management has enabled the Group’s deployment of its production capacity to be more coordinated and agile. In addition, Regina Miracle has gradually refined its supply chain localization, including spearheading its core suppliers to accelerate the deployment or expansion of local production capacity in Vietnam, thereby shortening the delivery cycle, improving response time and forming an efficient local problem-solving mechanism, and ultimately optimizing integrated cost efficiency. The Group’s competitive advantages are becoming more evident as the industry supply undergoes consolidation.
In respect of its business development in the PRC, the Group has also improved production efficiency by promoting automation and digitalization to address the needs of production capacity, strengthening supply chain management, developing local suppliers and ensuring fast delivery, as well as planning production capacity deployment in advance. With the relocation of the Group’s R&D center and production base from Shenzhen to the new industrial park in Zhaoqing New District in the Greater Bay Area in phases during the period between mid-2023 and the end of 2024, to produce mainly intimate wear, sports apparel and consumer electronics components with its leading and innovative craftsmanship, the Group will be better positioned to collaborate with international brand partners in tapping the PRC market and to step up efforts to explore new opportunities with emerging online brands in the domestic market and across other channels.
Integrating technological innovation and digital intelligence to accelerate penetration into the PRC market
The intimate wear market in China is characterized by low brand concentration, with most of the existing brands offering a single or relatively narrow product range, while consumer demand is growing rapidly across product segmentation and functional specialization. This industry trend, coupled with the rapid development of e-commerce in the PRC, provides an excellent opportunity for all brands with the potential to expand their market share.
— Entered into a strategic partnership with Tmall Intimate Wear and TMIC
In order to better serve our brand partners that make sales in the PRC and to more quickly identify and address the latest market trends and consumer needs, the Group entered into a strategic partnership with Tmall Intimate Wear and Tmall Innovation Center (“TMIC”) on 20 May 2022. TMIC has gained insights into consumer aspirations and feedback from mass purchase activities, forward-looking trend data analysis and a deep understanding of consumer behavior, which helps the Group to carry out specialized and precise R&D, translate consumers’ demands into concrete technological solutions and integrate them into end products. Through the joint efforts of the three parties, the Group hopes to achieve the goals of incubating highly reputable and consistently best-selling products that could set new trends, create innovative technology IP, and establish industry standards for specific categories, thereby promoting the healthy and orderly development of the intimate wear market in the PRC.
–Established a joint venture with Victoria’s Secret to Seize the Opportunities in the PRC market
The establishment of a joint venture (VS China) between Regina Miracle and Victoria’s Secret & Co. (Victoria’s Secret in January 2022 also marks a strategic move toward the Group’s layout in the PRC market. As the world’s largest international intimate wear brand, Victoria’s Secret boasts strong consumer brand awareness and mature retail operation and marketing capabilities in the PRC market, which highly complement the Group’s strengths in product innovation, research and development, and manufacturing, as well as its deep insights into the PRC market and consumers. The joint venture will focus on three main dimensions encompassing product, supply chain and business operations, strengthening the brand in all aspects to better cater to the PRC market. Recently, the range of products that the Group has developed with VS China for the PRC market has been well-received. The first stage of the transformation of the brand’s online business has already yielded remarkable results, in which the first launch of “Double-Size ‘Jelly-Striped’ Bra Top” has seen cumulative sales of more than 250,000 units within four months, while the brand’s impact and performance has gradually become more consistent, which clearly demonstrates the synergies between VS China and Regina Miracle in setting the trend for the market.
ESG is incorporated into the supervisory responsibilities of the Board and the Group is committed to achieving the 2030 Sustainable Development Goals
In Fiscal 2022, Regina Miracle officially incorporated ESG into the supervisory responsibilities of the Board and established an environmental, social and governance committee (the ESG committee), led by the Group’s Chief Operating Officer, to strengthen the Board’s role in overseeing ESG policies, and facilitate better planning for the management and achievement of the Group’s sustainability goals. During the year, the Group decided upon six key issues of concern, including climate action, life on the land, clean water and sanitation, responsible consumption and production, decent work and economic growth, and gender equality, based on the United Nations’ 2030 Sustainable Development Goals. In response to these six major directions, the Group has set itself four goals for 2030, namely carbon reduction, waste management, sustainable innovation, and people and community. Regina Miracle will continue to be committed to promoting environmental and social sustainable development, creating long-term value for all stakeholders and assuming its social responsibility with a responsible attitude.
Mr. Hung concluded: “With years of perseverance in innovative design and manufacturing, Regina Miracle has successfully established solid technological barriers and developed market-leading products. In the future, the Group will continue to give full play to its advantages in various aspects and pursue win-win situations with its brand partners. At the same time, the Group will continue to be committed to fulfilling its social responsibilities and contributing to the enhancement of the environment, employees and the community, thereby achieving sustainability and delivering long-term value for shareholders and stakeholders. The Group’s encouraging performance during the year is attributed to the tireless efforts and dedication of the management team and colleagues. The Group would also like to express its sincere gratitude to the brand partners, supply chain partners and the shareholders for their unwavering support in overcoming the challenges created by the Pandemic. The management is confident that the Group can sustain its growth momentum in the future, further achieve the goals set out in its five-year plan, and move closer towards a golden era of development.”
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 products, including intimate wear, sports products, consumer electronics components, bra pads and moulded products, footwear and fabric masks. 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 its production capacity since 2016.