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Public company info - Regina Miracle International (Holdings) Ltd. , 02199.HK
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Regina Miracle International (Holdings) Ltd., 02199.HK - Company Profile
Chairman HUNG Yau Lit (also known as YY Hung)
Share Issued (share) 1,224,000,000
Par Currency U.S. Dollar
Par Value 0.01
Industry Textile & Apparels
Corporate Profile Business Summary: The Company is principally engaged in the manufacturing and trading of bras, intimate wear, bra pads, other molded products and functional sports products. Performance for the year: The Group’s total revenue increased by 1.2% from HK$6,263.3 million in Fiscal 2019 to HK$6,341.0 million in Fiscal 2020. The Group’s net profit for the year increased by 2.7% from HK$282.4 million in Fiscal 2019 to HK$290.0 million in Fiscal 2020. Net profit margin increased from 4.5% in Fiscal 2019 to 4.6% in Fiscal 2020. Business Review: During the year, the Group recorded a revenue of HK$6,341.0 million (Fiscal 2019: HK$6,263.3 million) amidst the difficult operating environment, representing a year-onyear increase of 1.2%. Gross profit grew by 7.4% to HK$1,440.7 million, with gross profit margin slightly lifted to 22.7% (Fiscal 2019: approximately HK$1,341.9 million and 21.4%, respectively). Benefiting from the rising production capacity and efficiency of its Vietnam factories, the Group recorded continuous improvements in profit margin. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 30.0% to HK$969.7 million, with EBITDA margin lifted meaningfully to 15.3% (Fiscal 2019: approximately 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% (Fiscal 2019: approximately HK$282.4 million and 4.5%, respectively). Basic earnings per share attributable to owners of the Company amounted to HK23.7 cents (Fiscal 2019: 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 trade and term loan 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$1,732 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 for the Fiscal 2020. Together with an interim dividend of HK3.8 cents per share paid during the year, the total dividend will amount to HK7.8 cents per share (Fiscal 2019: 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. The proposed final dividend is subject to approval from shareholders of the Company at the annual general meeting to be held on Friday, 21 August 2020. The final dividend is expected to be paid on or around Friday, 11 September 2020 to shareholders whose name appears on the register of members of the Company on Tuesday, 1 September 2020. Bras and intimate wear Bras and intimate wear products remain the major source of revenue of the Group. During the year, this segment contributed HK$5,061.4 million (Fiscal 2019: 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% (Fiscal 2019: HK$1,070.3 million and 22.0%, respectively). Driven by the heightened pursuit of consumers for comfortable and good value-for-money intimate wear, Regina Miracle has developed multiple innovative products for its worldrenowned brand partners with its trendsetting craftsmanship. Among them, the chic bra top series sold successfully, which significantly bolstered the volume of orders. The chic bra top products not only became the major growth driver of this segment, but more importantly they 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 Revenue from bra pads and other molded products business amounted to HK$677.1 million (Fiscal 2019: HK$530.9 million), a significant year-on-year increase of 27.5%, accounting for 10.7% of the total revenue. Gross profit and gross profit margin from the segment were HK$144.2 million and 21.3% (Fiscal 2019: 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 Fiscal 2020, 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. Functional sports products The functional sports products business contributed HK$602.5 million in revenue during the year (Fiscal 2019: HK$857.8 million), 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% (Fiscal 2019: HK$160.1 million and 18.7%, respectively). The decline in segment revenue was a result of the Group’s execution of its strategy to optimise its brand customer and product portfolio in the second half of Fiscal 2019, 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 Fiscal 2020 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, becoming another growth point of its business. Production capacity During the year, Factories D and E, which house more automated machineries, formally commenced production, marking a big step closer to 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 Fiscal 2020. As at 31 March 2020, the Group had a total of approximately 34,500 employees in Vietnam. With regard to the Shenzhen factory, a workforce of approximately 8,000 served the R&D hub and production base. The Group has accumulated several years of factory operation experience in Vietnam. In particular, 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. Prospects: 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 that the market will need some time to fully recover after the lockdown. Given that it will likely take time for the brand partners to clear the inventory accumulated during the Pandemic, the Group expects the sales of Fiscal 2021 to be impacted. Based on the preliminary assessment, the Group anticipates a low double-digit decline in sales to be recorded in the first quarter of Fiscal 2021 compared to the corresponding period in Fiscal 2020. Furthermore, as the Vietnam government imposed a nationwide lockdown from 1 to 23 April 2020, some employees were not able to commute and report to work from different districts during this period and therefore, the overall production efficiency was affected. And compounded by the deleveraging of operation, the Group’s profit performance is set to face greater challenges. It has managed to see a gradual sales improvement in the first quarter on a month-on-month basis as the operation and orders of certain partners are gradually recovering. However, it will still take time for its sales and profit performance to return to a normal level given the challenges ahead. Despite the uncertain outlook, the management is convinced that challenges coexist with opportunities. The Group believes that global consumer habits will change after the Pandemic. In terms of sales channels, “working from home” has become the new normal, which has boosted online shopping even more during the Pandemic and has partially compensated the decline in brick-and-mortar sales. In respect of product type, as consumers are more inclined to pursue more comfortable and value-for-money products, it is expected that related products will see a stronger demand. The production and offering of comfortable and value-for-money products are exactly the long-term strength of Regina Miracle, as sales of such products performed well subsequent to the review year. 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 nearto medium-term, the Group has stated in the first half of Fiscal 2020 that it has no plans to invest in new production facilities, but will focus on enhancing the efficiency and productivity of its existing and upcoming facilities. Fully aware of the importance of supply chain and management localization given the general disruptions of the supply chain in the PRC at the early stages of the Pandemic outbreak, coupled with the subsequent lockdown and travel restrictions across the world, the management will push ahead with the localization strategy in Vietnam. As for the Shenzhen factory, it 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. In response to the development of the Pandemic and trade environment, as well as the needs of brand partners, the Group will also right-size the Shenzhen factory, while remain agile in mobilising its production capacity in Vietnam and Shenzhen. Apart from that, it is the general market view that customers will pay more attention to pandemic prevention and health protection after the Pandemic. Therefore, 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. By doing so, the Group will not only diversify its product portfolio and enhance business resilience against risks, but it will 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. The management also plans to surrender parts of the leased plant in Shenzhen within Fiscal 2021. While such arrangement may result in a one-off non-cash expense, it will help reduce operating expenses for the Group in the long run. 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. In addition, the Shenzhen factory of the Group has also benefited from some national subsidy policies to support enterprises and secure employment amidst the Pandemic. Dedicated to executing the aforesaid strategies, the management will lead Regina Miracle to prevail over difficulties, break new grounds in business with steady and prudent development policies, take this opportunity to fully review its internal operations and lay a solid foundation for long-term and healthy development by streamlining the structure and optimising processes, so as to create long-term value for its brand partners and shareholders. It is the abundant industry experience and strong IDM capability of the management that empowers Regina Miracle, a company engaged in the intimate wear industry for over two decades, to keep growing its business through multiple economic cycles and market changes. This, together with the well-established manufacturing facilities in the PRC and Vietnam, serves as the key to maintaining its close cooperation with brand partners. Leveraging these competitive advantages, Regina Miracle will work with its brand partners to brave the difficulties and achieve mutual benefits in such times of trials.

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