HONG KONG, Nov 27, 2020 – (ACN Newswire) – 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 unaudited interim results for the six months ended 30 September 2020 (the “Period”).
During the Period under review, the global economy was battered by the COVID-19 pandemic. The Group recorded a revenue of HK$2,517.6 million (1HF2020: HK$3,128.7 million) amid the difficult operating environment, representing a year-on-year decline of 19.5%. The decrease in revenue inevitably led to the deleveraging of operations, with gross profit down by 30.8% to HK$487.0 million, and gross profit margin down to 19.3% (1HF2020: approximately HK$703.7 million and 22.5%, respectively). However, owing to the Group’s efforts to proactively broaden sources of income and reduce expenditures, the Group recorded earnings before interest, taxes, depreciation and amortisation (EBITDA) of HK$288.3 million with an EBITDA margin of 11.5% (1HF2020: approximately HK$441.8 million and 14.1%, respectively).
The Group recorded a net loss of HK$32.4 million for the Period (1HF2020: net profit of approximately HK$141.4 million) due to the deleveraging of operations and two items of one-off expenses pertaining to the streamlining of production capacity and human resources, including the distribution of severance payments totalling approximately HK$35.0 million to approximately 470 employees, as well as the write-off of fixed assets of approximately HK$9.5 million recorded from surrendering parts of the leased factory in Shenzhen. Basic loss per share attributable to owners of the Company amounted to HK2.6 cents (1HF2020: basic earnings per share of HK11.6 cents). Excluding the aforementioned one-off expenditures, adjusted EBITDA would have been HK$332.8 million, with an EBITDA rate of 13.2%, while the Group would have recorded adjusted net profit of HK$12.1 million, with a net profit margin of 0.5%.
The Group remains in a healthy financial position, with adequate resources to address the Pandemic. In addition to stable operating cash flows, the Group also holds ample cash in hand and total undrawn bank credit of approximately HK$763.4million and HK$2,811.4 million, respectively, as at 30 September 2020 (31 March 2020: HK$587.6 million and HK$2,571 million, respectively)
Mr YY Hung, Chairman, Chief Executive Officer & Executive Director of Regina Miracle, said, “Despite in difficult conditions, Regina Miracle lost no time to embrace the changes to develop and produce fabric face masks for our customers, enabling the Group to better utilize our overall capacity during the Period. Within just a few months, this strategy greatly contributed to revenue generation; We are also pleased to witness certain regions gain control of the Pandemic, thus enabling some of our closer partners to gradually resume operations and place orders starting in the second quarter. As a result, we saw a significant improvement in sales during the second quarter.
Apart from actively exploring market opportunities amid the Pandemic, we also comprehensively reviewed the internal structure and operational model, consequently, we streamlined our manpower and surrendered parts of the leased factory in Shenzhen, in order to improve human resources and production capacity allocation in China and Vietnam in the long run. Such efforts will save recurring operating expenses and increase overall operational efficiency over the long term. This Pandemic has been both a test to and opportunity, being especially beneficial to sizeable businesses such as Regina Miracle, with its multi-regional capacity layout. After a five-year investment period since our listing, we have attained a strengthened factory layout and infrastructure in Vietnam. Leveraging the agile production model, we have continuously improved our production efficiency and flexibility, thereby bolstering the leading edge amid the consolidation of the intimate wear industry.”
Sales of sports bras up by 30% yoy, three new world-renowned retail and sports brand partners are expected to be one of the growth drivers in the coming year
Bras and intimate wear products contributed HK$1,521.0 million in revenue (1HF2020: HK$2,580.3 million), accounting for 60.5% of the total revenue. Gross profit of this segment amounted to HK$298.9 million, with gross profit margin at 19.7% (1HF2020: HK$590.3 million and 22.9%, respectively). The sales of this segment representing a year-on-year decrease of 41.1%, mainly due to the fact that the Pandemic prompted brand partners to either reduce or postpone orders and to scale back their shipments in the first quarter, which dealt a major blow on the traditional business of bras and intimate wear.
Nevertheless, sports bras showing strong resilience stood out as an exceptional performer, with sales up by over 30% from the same period last year, owing to the greater popularity of sports and home exercise amid the heightened public attention to health under the Pandemic. Furthermore, the Group started to reap the benefits from the early-stage investment in development activities with three new world-renowned retail and sports brand partners during the Period, which is not an easy feat given the challenging operational environment, and is expected to serve as one of the growth drivers of this segment in the coming year. In addition, bra top and bra products that provide comfortable and chic lounge wear experiences have also become best sellers during the Pandemic, as reflected by their strong sales performance. The Group has also added several domestic emerging e-commerce brand partners, which will pave the way for future business growth and a more balanced customer portfolio.
Sales from the fabric processing and other accessories for consumer electronics rose by nearly 40%
Revenue from the bra pads and other molded products business amounted to HK$232.4 million (1HF2020: HK$345.6 million), representing a year-on-year decrease of 32.8%, and accounting for 9.2% of the total revenue. Gross profit and gross profit margin from the segment were HK$51.2 million and 22.0%, respectively (1HF2020: HK$74.7 million and 21.6%, respectively).
The revenue decline experienced by this segment was mainly due to lacklustre sales of bra pads induced by the Pandemic, which was largely in-line with the traditional bras and intimate wear segment. However, Regina Miracle has been effective with its cross-industry and cross-product category business expansion efforts in recent years. Sales from the fabric processing and other accessories for consumer electronics produced for its reputable multinational technology partners rose by nearly 40% from the same period last year.
Revenue from functional sports products business substantially up by 92.7% yoy, driven by growing needs for exercise amid Pandemic
The functional sports products business contributed HK$390.7 million in revenue (1HF2020: HK$202.8 million), representing a significant year-on-year uptick of 92.7%, and accounting for 15.5% of the total revenue. The segment also recorded a gross profit of HK$67.2 million and a gross profit margin of 17.2% (1HF2020: HK$38.7 million and 19.1%, respectively).
Higher revenue from this segment was mainly due to the popularity of sports products in recent years, which maintained resilient growth despite the Pandemic. Other drivers include greater awareness of the need to exercise amid the Pandemic, the increasing popularity of “working from home”, and travel restrictions imposed by many countries. Such developments resulted in greater market demand for products that are comfortable, suitable for lounging at home, light exercising.
In terms of footwear, the Group’s single-major American casual footwear brand partner mainly sells its products online, and this sub-segment was able to sustain double-digit sales growth during the Period.
With regard to the sportswear business, Regina Miracle has continued to develop innovative products for international sports and leisure brand partners by leveraging its unique development capabilities and craftsmanship, leading to satisfactory sales performance by the sub-segment.
Make best use of capacity to enter pandemic prevention products (“PPP”) business
Targeting the surging market demand for anti-epidemic products in the wake of the Pandemic, the Group has engaged in relevant research and development (“R&D”) and produced fabric face masks for its customers starting in March by making best use of its existing resources and technologies. With deliveries commencing in the first quarter, the PPP business has contributed HK$373.4 million in revenue in less than half a year and has accounted for 14.8% of total revenue. The segment has recorded a gross profit of HK$69.7 million and a gross profit margin of 18.7%. The segment derives the largest portion of its revenue from fabric face masks that are manufactured by the Vietnam factories and designated for its European and American brand partners.
Vietnam’s production increased to nearly 80%, comprehensively examine the internal structure and operational model to improve the production efficiency
The Group has largely completed its factory layout at the Vietnam Singapore Industrial Park (“VSIP”) in Hai Phong City, Vietnam. Benefiting from the satisfactory growth of sports bras and comfortable lounging bra products, the Group’s core business has gradually returned to normal. Thus, recruitment has resumed since July, driving output in the second quarter. As of 30 September 2020, production in Vietnam accounted for approximately 76% of the total revenue, up from approximately 65% last year.
It has been the Group’s top priority to improve production efficiency of its factories in China and Vietnam. The Pandemic has only strengthened the Group’s resolve to comprehensively examine its internal structure and operational model. Consequently, it introduced a plan to streamline human resources and surrender parts of the leased factory in Shenzhen. Not only will these result in savings on operating expenses, it will also optimise human resources and production capacity in the long run, which in turn will raise operational efficiency. As Vietnam’s production efficiency continues to improve, and the number of employees and new production lines in Vietnam continue to increase, the overall production capacity of the Group in Vietnam will further increase to meet business needs.
Business has steadily resumed the growth momentum, confident in business recovery and sustainable growth
In entering the second half of 2020, the Group’s brand partners have gradually adapted to the new normal in the post-Pandemic period after clearing their inventories, orders of core bras and intimate wear products have improved significantly when compared with the first half. Leveraging its IDM capabilities and flexible response, the Regina Miracle team has been able to actively develop products that can generate demand for its brand partners, driving a surge in overall orders the Group received in the second half of Fiscal 2021 when compared with the first half, and is expected to return to a positive growth year-over-year. The management considers the short-term challenges arising from the Pandemic are behind us and the business has steadily resumed its growth momentum, and is confident that the Group’s business will return to the right track and maintain satisfactory growth.
Although the PPP business has contributed to revenue generation during the review period, the Group will uphold the principle of prioritizing its core businesses, and pour considerable R&D and production resources into its long-term strength – the core businesses as they resume. In respect of product types, aside from the rising demand for household and comfortable intimate wear, the Pandemic has also driven a new “home exercise” trend that is expected to continue driving resilient and sustainable growth in demand for light sportswear and functional sports products. The production of comfortable and value-for-money household and functional sports products are strengths that Regina Miracle possesses, the Group trusts that these products will remain one of its major growth drivers going forward.
The Group has also updated its strategies for market penetration and customer portfolio. Consequently, Regina Miracle has further expanded its presence in China over the past six months and will gradually increase its proportion of domestic orders. China is not only among the few countries that has been able to quickly gain control of the Pandemic, but is also an economy that has been able to achieve a prompt post-Pandemic recovery. The Group, optimistic about the huge development potential of this market, has added some domestic e-commerce customers this year. This has helped it to withstand the impact of the Pandemic on its business, expand its customer base, achieve more balanced and sound market distribution, enhance its resilience to risk and prepare for future business growth.
The Pandemic has also proved to be a catalyst for online shopping. Online purchased products require the simplification of their sizes, this resulted in better sales of comfortable household products, whose development has been emphasised by Regina Miracle since a few years ago. As such, the Group has also been able to keep abreast of the latest trends and promptly cater for the needs of its brand partners.
In respect of capacity planning, the Group has largely completed its production capacity layout in Vietnam, which is sufficient for the Group’s development in the next three years. Future development will focus on bolstering production effectiveness and efficiency as well as allocating production capacity in line with demand from emerging markets and brand partners in the Post-Pandemic Era. Part of footwear production has been gradually transferred from the Shenzhen factory to Vietnam Factory E, with the transfer set to be completed in the first half of 2021. The Group’s facility in Hung Yen Province of Vietnam, which operates principally with seamless knitting technology, experienced a modest impact on construction schedule due to the Pandemic. Its first phase is now undergoing fitting-out and is scheduled to commence operation in the first half of next year.
As for the Shenzhen factory which is expected to become even more efficient with a streamlined structure, it will focus on R&D as well as expansion of the domestic China market with brand partners. The Shenzhen factory has also undergone upgrade and transformation to support the fabric processing and other accessories for high value-added consumer electronic products. The Shenzhen facility serves as another production location, along with the Vietnamese factories, for expanding the Group’s domestic business.
Mr Hung concluded, “We will continue to leverage the solid foundation brought by our leadership and a superior brand customer base to best utilise our strengths. We strive for strengthening our unique position as an innovation partner for brand customers while capturing enormous business opportunities brought by the ‘Post-Pandemic New Normal’. This will involve the judicious and timely optimisation of our product portfolio and market development strategies. We are pleased to see that market demand has picked up following the adjustment of the industry, and are confident that the overall business trend will continue to improve, which will in turn create long-term 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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