TIDMNBU
RNS Number : 4818R
Naibu Global International Co PLC
12 September 2014
Press Release 12 September 2014
Naibu Global International Company Plc
("Naibu", the "Company" or the "Group")
Unaudited Interim Results
Naibu Global International Company Plc(AIM:NBU), a leading
Chinese manufacturer and supplier of branded sportswear, today
announces its unaudited interim results for the six months ended 30
June 2014.
Highlights
- Revenues for H1-2014 increased by 8.4% to RMB 1,029.9
million (approximately GBP98.1 million) (H1-2013: RMB
950.1 million)
- Profit before tax for H1-2014 was RMB 206.5 million (approximately
GBP19.7 million) (H1-2013: RMB 214.8 million)
- Earnings per share for H1-2014 of RMB 2.59 (H1-2013:
RMB 2.90)
- Nil interim dividend for the period due to significant
capital investment in the coming year (2013: 2 pence)
- Group balance sheet with cash position of RMB 332.7 million
as at 30 June 2014. The Group has no outstanding bank
loans or overdue debt
- 3,192 Naibu-branded stores in total (H1-2013:3,144)
- R&D expenditure in H1-2014 accounted for 1.7% of turnover
(H1-2013: 1.4%) with further strengthening of R&D investment
going forward
The illustrative exchange rate as at 30 June 2014 is 1 GBP :
10.4978 RMB.
Commenting on the interim results, Huoyan Lin, Executive
Chairman of Naibu, said: "The Group has delivered record sales in
the first half of 2014 and this has been achieved in a marketplace
which has witnessed competition intensify as well as increased
pressures on costs. As anticipated, consolidation in the sportswear
sector has occurred and a number of smaller players have now exited
the market. With a substantial clearance of inventory, leaner sales
networks, stricter cost control measures and a prudent approach in
placing and accepting orders, the stronger sportswear manufacturers
are now in better shape and there are some signs of recovery in our
end markets.
"Due to the competitive pressures that the Group is currently
seeing as well as the significant future capital requirements for
the Dazhu Industrial Zone Project, no interim dividend will be paid
this year to enable the Group to conserve cash.
"Although the Group has encountered some difficulties with
putting the Quangang factory into operation due to a sudden change
in the labour market in the coastal regions, given the revenue
achieved in H1-2014 and the orders that have been received for the
remainder of the year, I am confident that my management team has
the capability to overcome the setback at Quangang.
"The Group is ready to accept the challenge and to achieve
sustainable development going forward. Achieving sustainable
business growth and creating value for stakeholders in the
long-term are objectives which the Board continues to focus
on."
- Ends -
For further information:
Naibu Global International Company
Plc
Huoyan Lin, Executive Chairman Tel: +44 (0) 20 7398
7702
Li Zhen, Chief Financial Officer www.naibu.com
Daniel Stewart & Company Plc Tel: +44 (0) 20 7776
6550
Paul Shackleton / Martin Lampshire www.danielstewart.co.uk
Media enquiries:
Abchurch
Henry Harrison-Topham / Quincy Allan Tel: +44 (0) 20 7398
7702
henry.ht@abchurch-group.com www.abchurch-group.com
Chairman's Statement
On behalf of the Board, I am pleased to present Naibu's interim
results for the six months ended 30 June 2014 to shareholders of
the Company.
Industry review
China's sportswear industry was on relatively firmer ground in
2014 and showed signs of recovery during the first half year of
2014during which market surpluses were cleared and excess retail
outlets closed. Sportswear manufacturers and distributors continued
to work together to clear their stocks by offering discounts,
controlling the volume of orders placed, and re-arranging delivery
schedules to match actual sales achieved in the previous season.
With a substantial clearance of inventory, leaner sales networks,
stricter cost control measures and a prudent approach in placing
and accepting orders, the stronger sportswear manufacturers are now
in better shape.
However, China's sportswear market continues to be highly
competitive as foreign brands have stepped up their business
expansion from first tierinto second and third tier cities. To
compete, domestic sportswear manufacturers have had to
differentiate themselves with innovative products, niche markets
and distinctive brand images.
Operational review
During the first half of 2014, the Group achieved record
half-year sales of RMB 1,029.9million, an increase of 8.4% over the
same period in 2013. However, pre-tax profits for the same period
decreased slightly by 3.9% to RMB 206.5million, mainly due to a
reduction in gross profit margin.
In this period, Naibu continued to reinforce its brand position
by differentiating the Group from itspeers as an affordable leading
fashion sportswear brand. The Group continued to focus its strategy
on raising awareness of the Naibubrand in its primary target
markets in third and fourth tier Chinese cities where, through
urbanisation, the disposable income of young consumers has steadily
increased. These interim results reflect the growing recognition of
Naibu's brand amongst that target market.
During the period under review, the Group adopted a defensive
business strategy to address the challenges in the market. To
further strengthen the competitiveness of the Group's distribution
channels, the Group has increased monitoring of its sales network,
increased the guidance and training it provided to its
distributors' retail channels and reinforced its operational
management. The Group has also adopted a more prudent approach in
its expansion plans by focusing on growing existing stores versus
new store openings. The Group also encouraged authorised retailers
to close underperforming retail outlets and streamlined its product
offering to focus on high-margin and best-selling products.
Due to current competitive pressures in the market, as of May
2014, the Company extended the credit terms to distributors by an
additional month to 120 days. This has not, however, impacted the
Company's ability to collect its trade receivables, and the Company
has not seen any bad debts accrue as a result.
Overall, the Group consolidated its position in its mass markets
of China's third and fourth tier cities. Naibu will continue
toenhance its execution capabilities at all levels to gain market
share in Western China, to further optimise its nationwide network
and to prudently mitigate future business risks.
Product range and sales
In the six month period ended 30 June 2014, the Group continued
to manufacture Naibu-branded leisure and sports shoes, which were
sold through its nationwide network of Naibu outlets alongside
Naibu-branded leisurewear, sportswear, sports accessories and
equipment sourced from original equipment manufacturer ("OEM")
suppliers. During the period, sales and marketing of these items
remained focused on mass-market buyers, especially those young,
innovative consumers aged between 12 and 35, targeted by three
separate product lines: "Vital Campus", "Urban Business" and
"Holiday Leisure".
During H1-2014, the sale of shoes accounted for approximately
53.6% of the Group's revenues (H1-2013: 53.4%), clothing for 44.2%
(H1-2013: 44.4%), and sales of accessories made up the balance.
Shoes continued to account for the majority of the Group's
sales, with first half-year sales of RMB 551.7million, up 8.8%
compared to the same period last year, and which is slightly higher
than the overall increase in sales of 8.4%. This sales growth is
mainly attributable to increases in sales volume.
The Group also achieved growth in the sale of clothing and
accessories. Clothing sales reached RMB 455.3 million, an increase
of 7.8% compared to the same period in the previous year. Sales of
accessories such as rucksacks, caps, socks and balls, increased
significantly by RMB 2.2 million or 10.6% compared to the same
period last year. Both increases in growth were primarily driven by
increases in sales volume.
In summary, sales growth in the first half of 2014 was mainly a
result of sales volume growth. Unit sale prices remained at 2013
levels due to tough competition from other sportswear brands.
Research and development ("R&D")
The Group currently has a R&D team of 81 staff (H1-2013: 95)
at its Jinjiang factory, and this team is responsible for the
design of all shoes and clothing. The R&D team consists of both
design and sample production teams. The fall in the overall number
of R&D staff members was principally attributable to a
reduction in the sample production teams that were based at the now
closed Shishi factory.
The R&D team comprises three divisions respectively covering
product design, product development and technology development. It
creates two seasonal collections each year ("Spring and Summer" and
"Autumn and Winter"). The Group successfully launched a number of
new designs during the 2014 seasonal fairs. The R&D department
plans to launch 560 new Naibu products in 2014.
Innovation is the key to Naibu's success. The Group is
constantly striving to offer high quality value-added products at
affordable prices for its target customers. The Group continued to
improve or upgrade itsproducts in terms of functionality, comfort
and design. In addition, the Group has incorporated advanced
fabrics and up-to-date designs into its apparel products in
response to its consumers' increasingly sophisticated tastes.
As previously outlined, the Group is developing a new brand,
"NIBO", based on a European fashion concept and this new brand is
targeted for launch in 2015.
During the six month period ended 30 June 2014, R&D
expenditure as a proportion of Group turnover was 1.7% (H1-2013:
1.4%). This level of R&D expenditure is considered essential to
maintain the Group's competitiveness.
Manufacturing
Naibu's production centeris located in Jinjiang, Fujian
Province, where the Group leases two shoe production lines.
At 30 June 2014, the Group employed 839 staff in the production
and warehousing departments (H1-2013: 1,950). The fall is a result
of the closure of the Shishi factory. Approximately 19.8% of the
shoes sold and distributed by the Group during the period were
produced at the Jinjiang plant. The remaining shoes, as well as all
of the Group's clothes and accessories, were sourced from OEM
suppliers.
As previously announced, the new Quangang plant has not
commenced production due to a lack of skilled workers. The Group
has considered some alternative options, including letting out the
factory or marketing the facility for sale. As it could take some
time to find a buyer who would be able to acquire the Quangang
plant at a reasonable price in one payment and not over several
installments, the Group will lease out the facility in the meantime
while it seeks such a buyer. The Group has signed a property lease
contract with a tenant who will rent the Quangang property and
facility at an annual rent of RMB 6 million over a three year
term.
In the interim, the Company has made arrangements with its OEM
suppliers to supply the shoes which it would have otherwise have
produced at Quangang and therefore, there will not be any
disruption to production.
Regarding the progress of the Naibu Industrial Zone in Dazhu
County, Sichuan Province, the Group paid the second instalment of
RMB 30 million for the land use rights in May 2014, and the
remaining RMB 22 million is expected to be paid upon the grant of
the land use rights certificate, which is expected in Q1-2015.
The land is in the process of being prepared by the local
government. It is expected that this work will be completed in
October 2014 and the facility to be operational in Q2-2016.
Sales and distribution
The Group has an active and experienced sales team of 68 staff
(H1-2013: 71) responsible for product sales.
There are six regional sales managers responsible for individual
geographic areas across Naibu's established sales network,
communicating regularly with key customers and monitoring consumer
trends and competitor performance. In 2014, Northern China, Eastern
China and Southern China remained the key markets for Naibu. Total
revenues from these three regions in H1-2014 and H1-2013 accounted
for 65.5% and 66.1%% respectively of Group sales. However, those
regions where sales were lagging, the Central and North Western
parts of China, will in the near future become the focus of the
Group's sales initiatives.
During H1-2014, the Group maintained stable relationships with
25 distributors, and the number of Naibu stores increased to 3,192.
New store locations continued to be selected jointly by
distributors and the Group, and are based on market research,
estimated costs and local sales potential. The Group continued to
provide its distributors with guidance on store decoration layout
and how products should best be presented, in order to maintain the
Naibu brand image and the Group's high standards of service.
Over the past six months, thanks to the combined efforts of the
Group, its distributors and sub-distributors, sales from Naibu
stores have increased. Total sales space of Naibu stores increased
to approximately176,000 square meters as at the end of June 2014,
with average annual sales of Naibu stores reaching a record of more
than RMB 11,700 per square metre, up 6.4% over the same period in
2013. However, the Group is not planning to expand sales space too
quickly in order to mitigate potential business risk, and is trying
to consolidate and improve sales in existing outlets.
Marketing
Naibu continued to invest in brand marketing and promotional
work during the first half of 2014. Advertising expenditure as a
proportion of turnover during the six months period was 1.4%
(H1-2013: 1.4%).
The marketing and sales teams analyse retail data and share
market information on a timely basis with the distributors. The
Group also endeavours to keep its retailers competitive by offering
comprehensive training and guidance for store openings and
quarterly ordering plans. In order to help network partners reduce
their operating cost pressures, the Group granted subsidies to
distributors for the refurbishment of store outlets at the end of
2012 to standardise store layout and improve brand image. This
investment has seen the Group's sales benefit in 2013 and in the
first half of 2014, through offering a refreshing new shopping
experience for customers. The distributors have signed three year
contracts to keep these Naibu branded shops open and the Group
believes that the provision of such a subsidy has been of direct
assistance in upgrading the retail stores and improving the Group's
competitive advantage in the market.
Management and staff
As at 30 June 2014, the Group had 1,029 full time staff
(H1-2013: 2,320). The significant reduction in personnel was due to
the closure of the Shishi factory as a result of the lease expiring
at the end of 2013.
The Group continues to offer staff various training programmes
and promotion opportunities, and organises skills competitions and
social events for team building. The Group also continues to
improve management systems and develop a strong corporate culture
to attract talented staff.
Interim Dividend
Due to the competitive pressures that the Group is currently
seeing as well as the significant future capital requirements for
the Dazhu Industrial Zone Project, no interim dividend will be paid
this year to enable the Group to conserve cash.
Outlook
Looking ahead, industry players will continue to be challenged
by cost pressures and increasing competition. The consolidation of
the sportswear industry is near the end, as a considerable number
of smaller companies have already exited the market. Naibu believes
that the remaining players in the industry will take a more
cautious stance when expanding their businesses in order to avoid
another round of excess inventory.
It is believed that the economy of China will benefit from the
New Type of Urbanisation Plan proposed by the Central Government.
The Naibu Board is expecting another round of demand growth for the
sportswear industry in China as the economy growth model shifts to
one primarily driven by consumption. The Group will use its
competitive edge to seize every market opportunity.
Although the Group has encountered some difficulties with
putting the Quangang factory into operation due to a sudden change
in the labour market in the coastal regions, given the revenue
achieved in H1-2014 and the orders that have been received for the
remainder of the year, I am confident that my management team has
the capability to overcome the setback at Quangang.
The Group is ready to accept the challenge and to achieve
sustainable development going forward. Achieving sustainable
business growth and creating value for stakeholders in the
long-term are objectives which the Board continues to focus on.
Huoyan Lin
Executive Chairman
11 September 2014
Financial review
Key financials
H1-2014 (RMB) H1-2013 (RMB)
---------------- --------------
Revenue 1,029.9 million 950.1 million
Profit before tax 206.5 million 214.8 million
Earnings per share (basic) 2.59 2.90
Cash used in operations 105.5 million 63.2 million
Proposed interim dividend Nil 2 pence
per share
Turnover
Naibu's revenue increased year-on-year by 8.4% during the half
year period, rising to a record RMB 1,029.9million.
Turnover Breakdown by Product
Shoes remained the strongest contributor of turnover to the
Group. Clothing and accessories accounted for 44.2% and 2.2%
respectively. Accessories showed the strongest growth during the
period. Sales of clothing lagged behind the other two categories,
mainly due to a timing difference in the delivery of sales
orders.
For the six months period ended 30 June
2014 2013
Category Revenue % of Revenue % of % of
(RMB, 000) turnover (RMB, 000) turnover increase
------------ ---------- ------------ ---------- ----------
Shoes 551,657 53.6% 507,073 53.4% 8.8%
Clothing 455,320 44.2% 422,267 44.4% 7.8%
Accessories 22,935 2.2% 20,740 2.2% 10.6%
------------ ---------- ------------ ---------- ----------
Total 1,029,912 100.0% 950,080 100.0% 8.4%
------------ ---------- ------------ ---------- ----------
Turnover Breakdown by Region
Sales in the Group's principal markets of North, East and South
China accounted for 65.5% of total revenues in H1-2014 (H1-2013:
66.1%), while market growth in Central China and South-West China
showed the greatest increase during the period. This reflected the
Group's progress in building its distribution channels in SouthWest
and Central China. The Group will continue to strengthen and build
its distribution channels in North West and Central China.
Area Six Months Period Six Months Period %
Ended Ended change
30 June 2014 30 June 2013
--------
(RMB,000) % of (RMB,000) % of
turnover turnover
---------- ---------- ---------- ---------- --------
North China 260,815 25.3% 244,510 25.7% 6.7%
East China 241,894 23.5% 225,110 23.7% 7.5%
South China 172,063 16.7% 157,948 16.6% 8.9%
Central China 126,812 12.3% 116,776 12.3% 8.6%
North-West
China 90,738 8.8% 83,037 8.8% 9.3%
South-West
China 137,590 13.4% 122,699 12.9% 12.1%
---------- ---------- ---------- ---------- --------
Total 1,029,912 100.0% 950,080 100.0% 8.4%
---------- ---------- ---------- ---------- --------
Cost of Sales
Cost of sales of the Group for the first half of 2014 increased
by 11.9% year-on-year to RMB 766.0 million.
Six months ended Six months ended
30 June 2014 30 June 2013
Operating Cost % of total Operating % of total
(RMB,000) costs Cost costs
of (RMB,000) of %
sales sales Change
Group Manufacturing (Shoes)
Raw materials 57,486 7.5% 142,877 20.9% -59.8%
Labour costs 17,677 2.3% 42,955 6.2% -58.8%
Overheads 8,133 1.1% 13,659 2.0% -40.5%
--------------- ----------- ----------- ----------- --------
Subtotal 83,296 10.9% 199,491 29.1% -58.2%
OEM Supplies
Shoes 337,904 44.1% 172,418 25.2% 96.0%
Clothing 329,146 43.0% 298,829 43.7% 10.1%
Accessories 15,624 2.0% 13,844 2.0% 12.9%
-------- ------- -------- ------- ------
Subtotal 682,674 89.1% 485,091 70.9% 40.7%
-------- ------- -------- ------- ------
Total 765,970 100.0% 684,582 100.0% 11.9%
-------- ------- -------- ------- ------
During the period, the percentage of OEM supplies increased
significantly compared with the same period last year, as a result
of internal production capacity constraints due to the closure of
the Shishi factory and the difficulties encountered in opening
Quangang. Self produced shoes amounted to 1.2 million pairs, and
the volume of shoes via OEM was 5.0 million pairs during the period
under review. The increased OEM percentage has impactedgross profit
margins due to the higher unit purchase cost.
During the six months under review, research and development
costs were RMB 17.6 million, an increase of 36.4% year-on-year,
representing 1.7% of the turnover (H1-2013: 1.4%), or 2.3% of the
cost of sales (H1-2013: 1.9%). The Group will continue to increase
investment in research and development to further improve product
quality and adapt to consumer preferences.
Gross Profit
Gross profit for the Group was RMB263.9million for the first
half of 2014. The gross profit margin was 25.6%, down from 27.9%
compared to the same period of 2013. This was mainly due to three
reasons: first, there was increased delivery of shoe products
during the period, with shoes having a lower gross profit margin
than the other two product categories; secondly, costs increased by
more than the increase in the sale price of shoes, clothingand
accessories during the period under review, mainly as a result of
cost pressures in the industry; and thirdly, more of the Group's
shoe production had to be sourced from its OEM suppliers.
For the six months period ended 30 June
2014 2013
Category Gross Profit Gross Profit Gross Profit Gross Profit
(RMB, 000) Margin % (RMB, 000) Margin
%
------------- ------------- ------------- -------------
Shoes 130,457 23.7% 135,165 26.7%
Clothing 126,174 27.7% 123,438 29.2%
Accessories 7,310 31.9% 6,895 33.3%
------------- ------------- ------------- -------------
Total 263,941 25.6% 265,498 27.9%
------------- ------------- ------------- -------------
Other income
Other income refers to the interest income of the Group. During
the period under review, the interest income of the Group was
RMB0.9 million.
Selling and distribution expenses
Selling and distribution expenses decreased by4.2% to RMB 39.0
million during the six months period under review, primary as a
result of the reduced amount of renovation subsidy for new open
outlets, which was reducedby 90.4% to RMB 0.4 million (H1-2013: RMB
4.4 million). The number of new Naibu branded outlets or stores
during the year was significantly reduced compared with the same
period last year as a result of the Group pursuing a prudent
strategy.
During the six months under review, the amount of advertising
and marketing expenses increased by 10.7% year-on-year to RMB 14.5
million. Advertising and marketing expenses as a percentage of
turnover was 1.40% (H1-2013: 1.38%), a level the Group considers
appropriate to allow it to continue to consolidate brand image and
strengthen market awareness and thereby drive increases in market
share.
Administrative expenses
Administrative expenses increased by 26.5% to RMB 16.9 million
for the six months ended 30 June 2014.
The increase was mainly due to a rise in administrative labour
cost, which increased by 69.4% year-on-year. During the period,
only two production lines at the Jinjiang factory were operational,
and the salary for redundant workers was booked in administrative
expenses instead of cost of production.
Finance expenses
Finance expenses during the period under review refers to
foreign exchange losses. The Group incurred an exchange loss of RMB
1.8 million during the period under review, as a result of the
depreciation of the Hong Kong Dollar. In the period ended 30 June
2013, the Group had a foreign exchange gain of RMB 2.5 million
which was booked in the account of other income.
Other expenses
Other expense during the period under review refers to the loss
following the disposal of old production lines that were used in
the Shishi factory.
Income tax expenses
During the period under review, income tax expenses for the
Group amounted to RMB 54.9 million (H1-2013: RMB 55.5million),
including current income tax expenses RMB 53.9 million and deferred
income tax expenses RMB 1.0 million. The current income tax charge
for the six months ended 30 June 2014 has been based on the
standard corporate income tax rate of the PRC of 25%, being the
same for the six months ended 30 June 2013.
Six months period Year
ended Ended 31
30 June December
Item 2014 2013 2013
Profit margin before tax 20.0% 22.6% 21.6%
Impact of income tax expense on
net profit margins -5.2% -5.7% -5.6%
Impact of deferred tax on net
profit margins -0.10% -0.15% -0.09%
Net profit margins 14.7% 16.8% 16.0%
Profit for the period
Profit for the period under review was RMB151.6million,
representing a reduction of 4.8% year-on-year. Basic earnings per
share for the period under review was RMB 2.59, a decrease of 10.8%
year-on-year. The net profit margin for the period under review was
14.7%, and the reduced gross profit margin mainly contributed to
the reduced net profit margin compared with the same period in
2013.
Balance sheet position
As of 30 June 2014, the Group's total assets amounted to RMB
1,649.3 million, total liabilities were RMB 222.8 million, and
shareholders' equity rose to RMB 1,426.5 million. The Group has no
bank loans and no overdue debts.
Category Six Months Period Year Ended
Ended 30 June 31 December
2014 2013 2013
Asset-liability ratio 13.5% 15.1% 14.7%
Current ratio 665.6% 677.9% 609.4%
Proportion of current
assets 85.7% 97.4% 85.4%
Proportion of shareholders'
equity 86.5% 84.9% 85.3%
As of 30 June 2014, the Group's cash and cash equivalent was RMB
332.7million, down from RMB 468.3 million as at 31 December 2013.
The Group's cash was mainly deposited in the Agriculture Bank of
China, which is one of the four largest stated-owned banks in
China. The effective interest rate for the Renminbi current
deposits during the period under review was 0.35%.
Working capital management
The average working capital cycle for the six months ended 30
June 2014 was 119 days (year ended 31 December 2013: 102 days).
This was mainly due to the increase of trade receivable days when
compared with six months ago.
Trade receivables rose significantly by 46.8% to RMB916.8million
as at 30 June 2014 compared to six months ago, and the average
trade receivable turnover days rose to 135 days during the period
under review. Due to the competitive market conditions, as of May
2014, the Company extended the credit terms to its distributors by
an additional month to 120 days. None of the trade debtors were
considered impaired. The Group believes that the support it
provides to its distributors and retailers in running their stores
network is important and it maintains close contacts with all the
distributors and will continue to monitor all the debts.
The average inventory turnover cycle was 17days for the six
months ended 30 June 2014, a further decrease from the level of in
2013 (20 days),which reflects relatively good stock control and
management. Inventory amounted to RMB 56.2 million, a decrease of
38.6% when compared with the RMB 91.6 million at 31 December
2013.
The average trade payable cycle was 33days for the six months
ended 30 June 2014, compared with the 35 days for the year ended 31
December 2013. This is due to timely payment to suppliers to secure
quality and cost of raw materials.
Category Six Months Period Ended Year Ended
30 June 31 December
2014 2013 2013
Accounts receivable
(average debtor days) 135 116 106
Inventory (days) 17 20 20
Accounts payable
(days) 33 33 35
As at 30 June 2014, the balance of prepayments to suppliers was
RMB 65.2 million, the same amountas at the year ended 31 December
2013. The prepayments were upfront deposits paid to suppliers for
the acceptance of orders and to establish long-term cooperation
relationship. The main reason for the relatively high level of
prepayment to trade suppliers was to lock in favourable purchase
prices with suppliers and avoid unfavourable fluctuation of raw
material costs to secure the gross margin of products.
Employees and emoluments
As at 30 June 2014, the Group employed a total of 1,029
(H1-2013: 2,320) full time employees in the PRC which included
management and administrative staff, R&D staff, sales persons
and workers.
For the six months ended 30 June 2014, the Group's total
remuneration of employees (including non-executive directors) was
RMB 23.9 million, representing 2.3% (H1-2013: 4.1%) of the turnover
of the Group. The Group's emolument policies, based on the
performance of individual employees, are formulated to attract
talent and retain quality staff. Discretionary bonuses are awarded
to employees according to individual performance. The Group
believes its strength lies in the quality of its employees and has
placed a great deal of emphasis on benefits offered to
employees.
Commitments and contingencies
As at 30 June 2014, the Group had not provided any form of
guarantee for any company outside the Group. The Group is currently
not involved in any litigation matters and is not aware of any
pending or potential material legal proceedings relating to the
Group.
Financial management policy
The Group continues to maintain a prudent approach to financial
risk. The directors recognise the value of the UK Corporate
Governance Code ("the Code"), and whilst under AIM Rules full
compliance is not required, the directors believe that the Company
applies the recommendations insofar as is practicable and
appropriate for a public company of its size. The Group's business
is principally conducted in RMB, so the impact of exchange rate
risk on Group activities is limited. The Group does not take
positions with financial instruments for hedging purposes. The
Board does, however, continue to monitor foreign exchange risk, and
is prepared to implement prudent risk-reduction measures such as
hedging as and when necessary.
Significant investments and acquisitions
During the period under review, the Group has made no major
investments or any material acquisition or disposal of any
subsidiaries or businesses. The Group will, however, continue to
seek business opportunities such as cooperation with international
business partners to increase returns on shareholders' equity.
Li Zhen
Chief Financial Officer
11 September 2014
Unaudited condensed consolidated statement of comprehensive
income
For the six month period ended 30 June 2014
Six months Six months Year
ended ended ended
30 June 2014 30 June 2013 31 Dec 2013
Notes Unaudited Unaudited Audited
RMB'000 RMB'000 RMB'000
Revenue 3 1,029,912 950,080 1,927,967
Cost of sales (765,971) (684,582) (1,392,483)
-------------- -------------- -------------
Gross profit 263,941 265,498 535,484
Other income 888 3,376 1,985
Selling and distribution
expenses (39,013) (40,726) (90,403)
Administrative expenses (16,911) (13,369) (29,027)
Finance expenses (1,798) - (924)
Other expenses (647) - -
-------------- -------------- -------------
Profit before taxation 206,460 214,779 417,115
Income tax expense 4 (54,898) (55,496) (109,332)
Profit after taxation
for the period attributable
to equity holders 151,562 159,283 307,783
Other comprehensive
income, net of tax
Exchange differences
on translating foreign
operations 1,667 (2,608) 784
-------------- -------------- -------------
Total comprehensive
income for the period
attributable to
equity holders of
the parent 153,229 156,675 308,567
============== ============== =============
Earnings per share
(RMB) 7
Basic 2.59 2.90 5.54
Diluted 2.54 2.84 5.42
Unaudited consolidated statement of financial position as at 30
June 2014
As at As at As at
30 June 30 June 31 December
2014 2013 2013
Notes
Unaudited Unaudited Audited
RMB'000 RMB'000 RMB'000
Assets
Non-current assets
Property, plant and equipment 132,731 10,245 105,202
Intangible assets - land
use rights 97,500 97,500
Long-term prepayment 6,132 24,227 15,179
236,363 34,472 217,881
---------- ---------- -------------
Current assets
Inventories 56,211 83,521 91,606
Trade and other receivables 1,024,094 821,298 713,395
Cash and cash equivalents 332,658 389,754 468,281
----------
1,412,963 1,294,573 1,273,282
---------- ---------- -------------
Total assets 1,649,326 1,329,045 1,491,163
========== ========== =============
Equity and liabilities
Current liabilities
Trade payables 141,784 120,034 137,872
Other payables and accruals 36,484 36,923 42,674
Amount due to shareholders 3,235 2,155 4,228
Income tax payable 30,769 31,869 24,168
212,272 190,981 208,943
---------- ---------- ----------
Non-current liabilities
Deferred income tax liabilities 10,547 9,306 9,564
---------- ---------- ----------
Total liabilities 222,819 200,287 218,507
---------- ---------- ----------
Capital and reserves
Stated capital account 5 77,667 54,314 77,667
Reserves 5 184,853 148,012 183,186
Retained earnings 1,163,987 926,432 1,011,803
Total equity attributable
to equity holders of the
parent 1,426,507 1,128,758 1,272,656
----------
Total equity and liabilities 1,649,326 1,329,045 1,491,163
========== ========== ==========
Unaudited condensed statement of cash flows
For the six month period ended 30 June 2014
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec 2013
2014 2013
Unaudited Unaudited Audited
RMB'000 RMB'000 RMB'000
Cash flows from operating activities
Profit before taxation for the
period 206,460 214,779 417,115
Adjustments for:
Depreciation of property, plant
and equipment 9,991 10,370 21,063
Interest income (888) (837) (1,691)
Operating profit before working
capital changes: 215,563 224,312 436,487
Changes in working capital
(Increase)/decrease in inventories 35,395 (18,693) (26,777)
Increase in trade and other receivables (307,761) (214,429) (101,183)
(Decrease)/increase in trade payables 3,912 (14,561) 3,277
Increase/(decrease) in accruals
and other payables (6,193) 1,914 7,666
----------- ----------- -------------
Cash generated from/(used in) operating
activities (59,084) (21,457) 319,470
Interest received 888 837 1,691
Income tax paid (47,313) (42,628) (103,907)
----------- ----------- -------------
Net cash (used in)/generated from
operating activities (105,509) (63,248) 217,254
----------- ----------- -------------
Cash flows from investing activities
Acquisition of property, plant
and equipment (800) (1,000) (89,602)
Purchase of land use rights (30,000) - (105,500)
Disposal of fixed assets 1,680 - -
----------- ----------- -------------
Net cash used in investing activities (29,120) (1,000) (195,102)
----------- ----------- -------------
Cash flows from financing activities
(Repayments to) / advances from
shareholders (994) 1,096 3,169
Dividends paid - - (9,946)
----------- ----------- -------------
Net cash (used in) / from financing
activities (994) 1,096 (6,777)
----------- ----------- -------------
Net (decrease) / increase in cash
and cash equivalents (135,623) (63,152) 15,375
Cash and cash equivalents at the
beginning of the period 468,281 452,906 452,906
Cash and cash equivalents at the
end of the period 332,658 389,754 468,281
=========== =========== =============
Unaudited condensed consolidated statement of changes in
equity
For the six month period ended30 June 2014
Stated Statutory Retained Reconstruction Foreign Total equity
capital reserve earnings reserve currency attributable
account translation to
reserve equity holders
of the parent
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
-------------
Balance at 1 January 2013 54,314 116,547 767,149 31,415 2,658 972,083
Profit for the period - - 159,283 - - 159,283
Other comprehensive income:
Exchange differences on
translation
of foreign operations - - - - (2,608) (2,608)
--------- ---------- ---------- --------------- ------------- ----------------
Total comprehensive income
for the period - - 159,283 - (2,608) 156,675
--------- ---------- ---------- --------------- ------------- ----------------
Balance at 30 June 2013 54,314 116,547 926,432 31,415 50 1,128,758
========= ========== ========== =============== ============= ================
Total equity
Foreign attributable
Stated currency to
Capital Statutory Retained Reconstruction translation equity holders
account reserve earnings reserve reserve of the parent
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
-------------
Balance at 1 January 2014 77,667 148,329 1,011803 31,415 3,442 1,272,656
Profit for the period - - 151,562 - - 151,562
Other comprehensive income:
Exchange differences on
translation
of foreign operations - - - - 1,667 1,667
--------- ---------- ---------- --------------- ------------- ----------------
Total comprehensive income
for the period - - 151,562 - 1,667 153,229
--------- ---------- ---------- --------------- ------------- ----------------
Share based payments 622 622
========= ========== ========== =============== ============= ================
Balance at 30 June 2014 77,667 148,329 1,163,987 31,415 5,109 1,426,507
========= ========== ========== =============== ============= ================
Notes to the financial information
1 General information
The Company was incorporated in Jersey, the Channel Islands, on
15 December 2011. The Company's registered office is at 26 New
Street, St Helier, Jersey JE4 9WG, Channel Islands. The nature of
the Company's operations and its principal activities are to act as
the holding company of a group engaged in the design, manufacture
and supply of Naibu branded sports shoes and the design and supply
of Naibu branded clothing and accessories.
2 Basis of preparation
The financial information for the six months ended 30 June 2014
set out in this interim financial information is unaudited and does
not constitute statutory financial statements.
The financial information for the year ended 31 December 2013
set out in this interim financial information does not comprise the
Group's statutory financial statements. The consolidated results of
the Company for the year ended 31 December 2013 have been audited.
The auditor has expressed an unqualified opinion on those financial
statements in their report dated.
The interim financial information has been prepared in
accordance with the principles of International Financial Reporting
Standards as adopted by the European Union ("IFRSs"). The standards
have been applied consistently (except as otherwise stated).
The principal accounting policies used in preparing the interim
results are those the Group expect to apply in its financial
statements for the year ending 31 December 2013 and are consistent
with the principles of those applied in the financial statements of
the Company for the year ended 31 December 2012.
The preparation of the interim financial report in conformity
with the principles of IFRSs, requires management to make
judgments, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and
expenses on a year to date basis. Actual results may differ from
these estimates.
The interim financial report contains consolidated financial
information and selected explanatory notes. The notes include an
explanation of events and transactions that are significant to an
understanding of the changes in financial position and performance
since the financial statements for the year ended 31 December 2013.
The interim financial report thereon does not include all of the
information required for full set of financial statements prepared
in accordance with IFRSs.
The directors approved the interim financial information for the
six months ended 30 June 2014 on 11 September 2014.
Copies of this interim financial information will be available
on the Company's website.
3 Turnover and segment reporting
(a) Turnover
The principal activities of the Group are design, manufacturing
and trading of sporting goods and leisure wear, including shoes,
apparels and accessories in the PRC. Turnover represents the sales
value of goods sold less returns, discounts and value added taxes
and other sales taxes, which are analysed as follows:
Six months Six months Year
ended ended ended
30 June 2014 30 June 2013 31 Dec 2013
RMB'000 RMB'000 RMB'000
============= ============= ============
Shoes 551,657 507,073 1,033,431
Apparels 455,320 422,267 828,789
Accessories 22,935 20,740 65,747
1,029,912 950,080 1,927,967
The Group's customer base is diversified. For the six months
ended 30 June 2014, there was only one customer with whom the
transaction has exceeded 10% of the Group's turnover (H1-2013:
One). The percentage of sales to this customer accounted 10.1% of
total turnover during this period. (H1-2013: 10.7%)
(b) Segment reporting
The Group has adopted IFRS 8, Operating Segments for the June
2013 interim reporting. IFRS 8 requires that segments represent the
level at which financial information is reported to the Board of
directors ("The Board") of the Group, being the chief operating
decision maker as defined in IFRS 8. The Board consists of the
Chairman, the Chief Executive Officer, the Chief Financial Officer
and the independent director. The Board determines the operating
segments based on reports reviewed and used by the Board for
strategic decision-making and resource allocation.
Segment information is presented in respect of the Group's
geographical and operating segments. The Group's operating segments
are as follows:
(i) Shoes
(ii) Apparel and accessories
Operating segments - Six months ended 30 June 2014
Shoes Apparel and Head office Consolidated
accessories and other
adjustments
RMB'000 RMB'000 RMB'000 RMB'000
------------------------- -------- ------------- ------------- -------------
Revenue 551,657 478,255 - 1,029,912
Gross profit 130,457 133,484 - 263,941
Profits before taxation 101,853 109,247 (4,640) 206,460
Taxation 29,405 25,493 - 54,898
Net profits after
tax 72,448 83,754 (4,640) 151,562
Segment assets 557,677 529,791 561,858 1,649,326
Segment liabilities 120,990 83,968 17,861 222,818
Other income 476 412 888
Finance expenses - - 1,798 1,798
Depreciation and
amortisation 5,609 4,382 - 9,991
Capital expenditure 30,429 371 - 30,800
Operating segments - Six months ended 30 June 2013
Shoes Apparel and Head office Consolidated
accessories and other
adjustments
RMB'000 RMB'000 RMB'000 RMB'000
------------------------- -------- ------------- ------------- -------------
Revenue 507,073 443,007 - 950,080
Gross profit 135,164 130,334 - 265,498
Profits before taxation 108,004 106,604 171 214,779
Taxation 29,619 25,877 - 55,496
Net profits after
tax 78,385 80,727 171 159,283
Segment assets 493,834 435,358 399,853 1,329,045
Segment liabilities 113,304 70,595 16,388 200,287
Finance income 444 388 2,544 3,376
Depreciation and
amortisation 5,906 4,464 - 10,370
Capital expenditure 534 466 - 1,000
Operating segments - Year ended 31 December 2013
Shoes Apparel and Unallocated Consolidated
accessories and other
adjustments
RMB'000 RMB'000 RMB'000 RMB'000
------------------------ ---------- ------------- ------------- -------------
Revenue 1,033,431 894,536 - 1,927,967
Gross profit 272,265 263,219 - 535,484
Profit before taxation 212,799 211,490 (7,174) 417,115
Taxation 58,604 50,728 - 109,332
Net profit after
tax 154,195 160,762 (7,174) 307,783
Segment assets 575,358 442,356 473,449 1,491,163
Segment liabilities 109,736 90,394 18,377 218,507
Other income 1,200 785 - 1,985
Finance expenses 4 3 917 924
Depreciation and
amortisation 12,030 9,033 - 21,063
Capital expenditure 97,601 1 - 97,602
4 Income tax expense
The income tax charge for the six months ended 30 June 2014 has
been based on the standard corporate income tax rate of 25%, being
the same for the six months ended 30 June 2013.
Deferred tax for the Group is a result of the tax treatment for
dividend payments. Pursuant to prevailing PRC tax laws and
regulations, dividends distributed to a foreign investor by Foreign
Invested Enterprises ("FIE") in the PRC are subject to a
withholding tax of 5% to 10%. Deferred tax liabilities arising from
such tax rules are recognised to the extent that the management
intends to distribute dividends from retained earnings. The PRC
corporate rules stipulates that FIE should provide 10% of the
current year profit for the reserve fund, and the remaining 90% can
be used for distribution to investors. During the period, the
deferred tax calculation of Group is based on 10% of the retained
earnings which can be distributed to investors.
Six months ended 30 June
2014 2013
RMB'000 RMB'000
PRC income tax 53,480 54,051
PRC withholding tax 435 -
----------------------------- -------------------------------
Total current tax 53,915 54,051
Deferred tax 983 1,445
----------------------------- -------------------------------
Total income tax charge 54,898 55,496
============================= ===============================
5 Capital and reserves
(a) Stated capital account
For the six months ended 30 June 2014, no ordinary shares of no
par value were issued. Therefore, the stated capital account
remained unchanged from 31 December 2013: the number of ordinary
shares in issue was 58,576,611 with the stated amount of RMB
77,667,000.
(b) Statutory reserve
Pursuant to applicable PRC laws and regulations, the subsidiary
of the Company established in the PRC is required to appropriate
10% of its profit after taxation (after offsetting prior year
losses) to the statutory reserve until such reserve balance reaches
50% of the respective registered capital. The transfer to the
reserve must be made before distribution of dividends to
shareholders. The statutory reserve can be utilised, upon approval
by the relevant authorities, to offset accumulated losses or to
increase paid-in capital of the subsidiary, provided that the
balance after such issue is not less than 25% of its registered
capital.
(c) Reconstruction reserve
Reconstruction reserve arises from the reorganisation of the
group structure during the year.
(d) Foreign currency translation reserve
Currency translation reserve represents translation differences
arising from translation of functional currency financial
statements into the Group's presentation currency.
6 Share options and warrants
(a) Share options
The Group has established a share option scheme for Directors
of the Group. The share option scheme is administered
by the Remuneration Committee.
Details of the share options outstanding at the period
end are as follows: Number Exercise Number Exercise
30 June Price 30 June Price
2014 30June 2013 30 June
2014 2013
--------- --------- --------- ---------
Outstanding at
1 January 645,161 124p - -
Granted during
year - - 645,161 124p
Outstanding at
30 June 645,161 124p 645,161 124p
Exercisable at - - - -
30 June
The options were issued to Giles Elliott, and will vest
in three equal tranches on 30 March 2014, 30 March 2015
and 30 March 2016. The options can be exercised from 30
March 2014 and will expire on 30 March 2022.
A charge of RMB 622,279 (H1-2013: RMB nil) has been recognised
in the statement of comprehensive income within administrative
expenses on a pro-rata basis over the vesting period for
the year relating to these options.
These fair values were calculated using the Black Scholes
option pricing model. The inputs into the model were as
follows: Share Options
granted 30
March 2012
--------------
Options Granted 645,161
Stock price 124p
Exercise price 124p
Risk free rate 0.35%
Volatility 50.05%
Time to maturity 10 years
(b) Warrants
On 30 March 2012, the Group executed a warrant instrument
to create and issue warrants to Daniel Stewart Securities
plc to subscribe for an aggregate of 548,387 ordinary
shares. The warrants will expire five years after admission
and were exercisable immediately at the placing price
of 124p. The ordinary shares to be allotted and issued
on the exercise of any or all of the warrants will rank
for all dividends and other distributions declared after
the date of the allotment of such shares but not before
such date and otherwise pari passu in all respects with
the ordinary shares in issue on the date of such exercise
allotment.
These fair values were calculated using the Black Scholes
warrant pricing model. The inputs into the model were
as follows: Warrants
issued 30
March 2012
------------
Warrants Granted 548,387
Stock price 124p
Exercise price 124p
Risk free rate 0.35%
Volatility 50.05%
Time to maturity 5 years
A charge of RMB nil (H1-2013: RMB nil) has been recognised
in equity for the period within stated capital with an
equivalent increase in stated capital.
7 Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the period:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
RMB'000 RMB'000 RMB'000
Profits attributable to
equity holders of the Company
(RMB'000) 151,562 159,283 307,783
Weighted average number
of ordinary shares in issue
('000) 58,577 54,839 55,589
Profit per share (RMB) 2.59 2.90 5.54
(b) Diluted
Diluted earnings per share is calculated by adjusting the
weighted number of ordinary shares in issue to assume conversion of
all potential dilutive ordinary shares during the period.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
RMB'000 RMB'000 RMB'000
Profit attributable to
equity holders of the Company
(RMB'000) 151,562 159,283 307,783
Weighted average number
of ordinary shares in issue
('000) 59,770 56,033 56,782
Profit per share (RMB) 2.54 2.84 5.42
The weighted average number of shares for the purposes of
diluted earnings per share include approximately 1.2 million
options of shares granted to Giles Elliott and Daniel Stewart
Securities Plc as part of the IPO process. The share options have
an exercise price of GBP1.24 and expire after five years.
8 Significant related party transactions
In addition to the transactions and balances detailed elsewhere
in this report, the Group had the following transactions with
related parties at agreed rates:
(1) Transaction with related parties
Six months period ended
30 June
2014 2013
RMB'000 RMB'000
Rental paid to a related party(a) 480 480
Other receivable from a related party(a)
(deposit payment) 5,100 10,100
Remuneration of Ms. Lin Zhenzhi(b) 68 68
(a)Related party relates to Fujian Jun Xiang Bags Co., Ltd.
(formerly known as Quanzhou Naibu Sports Co., Ltd) in which a
director, Mr Lin Huoyan was the shareholder in 2008 and 2009. Mr
Lin Huoyan transferred his shareholding to his mother in 2010.
The transaction for the acquisition of factory premise owned by
the related party Fujian Jun Xiang Bags Co., Ltd. did not take
place and was cancelled in 2012. The deposit for the property
acquisition RMB 10 million has been partly returned to the Company
and the rest RMB 5 million was transferred to the deposit of
long-term lease payment for the property. The remaining RMB 5
million has been returned to the Company on 26 August 2014.
(b) Ms. Lin Zhenzhi is the finance director of the Group's
operating subsidiary Naibu China Co., Limited and she is Mr. Lin
Huoyan's sister.
(2) Remuneration of group directors
Directors' remuneration Six month period ended
(inclusive of retirement scheme 30 June
contribution)
2014 2013
RMB'000 RMB'000
* Mr. Lin Huoyan 900 900
* Mr. Lin Congdeng 798 798
* Ms. Li Zhen 246 246
* Mr. Giles Elliott 309 287
* Mr. David Thomas 206 191
* Mr. Stephen Cheung 206 191
* Mr. Chi Keung (Kenny) Law(c) - 316
(c) On 22 January 2013, Mr. Kenny Law resigned from the board
and the position of CFO and decided to return to Singapore. On the
same day, the Company announced the appointment of Ms. Zhen Li, as
Mr. Law's successor as CFO of the Company. The remuneration of Mr.
Kenny Law paid during the period ended 31 December 2013 also
included the amount of SGD 50,000 as a listing bonus.
9 Dividends
Dividends disclosed represent dividends on ordinary shares
declared and paid by the Company to its equity holders.
The Company has declared a final dividend for the year ended 31
December 2013 of 4 pence per share. The dividend was paid on 15
August 2014 by the Company. To those shareholders who elected for a
scrip dividend, the Company has issued a total of 1,972,759 new
ordinary shares of no par value.
The Company has resolved not to pay an interim dividend in
respect of the period ended 30 June 2014.
10 Non-adjusting events after the reporting period
Except for the interim dividend as set out in Note 9 above,
there is no other non-adjusting event after the reporting
period.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KFLFFZKFLBBZ
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