TIDMNBU
RNS Number : 4385G
Naibu Global International Co PLC
29 June 2012
Naibu Global International Company Plc
("Naibu" or the "Company")
Final Results for the year ended 31 December 2011
and Notice of Annual General Meeting
London 29 June 2012 - Naibu Global International Company Plc is
pleased to provide its audited annual results for the year ended 31
December 2011.
For further information, please contact:
Naibu Global International Company Plc
Mr Kenny Law, Chief Financial Officer
Tel: +86 591 8820 5517/ +86 150 5948 7576/ +65 91060910
Daniel Stewart & Company plc
(Nominated Adviser & Broker)
Paul Shackleton/ Jamie Barklem/ Martin Lampshire
Tel: +44 (0) 207 776 6550
First City Tavistock
(Public Relations Adviser)
Allan Piper/ Lei Jiang Tel: +852 2854 2666
Simon Hudson/ Kelsey Traynor Tel: +44 (0) 20 7920 3170
Financial highlights
(2010: 1.25
Group sales revenues RMB 1.49 billion billion) +19.8%
(2010: 284.1
Pre-tax profit RMB 345.2 million million) +21.5%
Group total assets RMB 899 million (2010: 515 million) +74.5%
Chairman's statement
This is my first statement to shareholders since Naibu Global
International Company plc ("Naibu", or "the Company") was admitted
to trading on AIM in April 2012 following its incorporation on 15
December 2011. As such I am presenting this report and the
financial results for Naibu's wholly owned subsidiary, Naibu HK
Investment International Limited ("Naibu HK", or "the Group").
I am delighted to be presenting such positive and solid
financial results. With year-on-year sales increasing well ahead of
forecast by
19.8%, the Group achieved pre-tax profits of RMB 345.2 million
(approx. GBP34.5 million), maintaining the pattern of strong annual
growth since Naibu's inception in 2005.
We are extremely proud to have established Naibu firmly as
China's 10th largest sportswear brand, and equally proud to have
taken our first step into theinternational community withour AIM
admission.
Our objective now is to build an even stronger brand position as
more and more young Chinese consumers in China's second and third
tier cities gain access to disposable income.
That remains our primary focus for the foreseeable future, and
our figures for the 2011 financial year show we remain well on
course to continue strengthening Naibu's brand identity with those
target customers.
Growth during the period stemmed not only from a healthy
increase in unit sales but also from our success in increasing unit
prices - an approach we intend to maintain into the future.
At the same time, the contribution to overall sales of our
clothing and accessory lines, as opposedto shoes, increased to
44.4% - representing growth ahead of sales growth as a whole.
The Group also successfully broadened its distribution
footprint,so that whilst its five largest distributors still
contributed revenue growth of nearly 7%, they accounted for only
38% of Naibu HK's sales during the year, down from 43% twelve
months earlier.
I believe all of these trends reflect our dual success in
stabilising sales in regions where the Naibu brand is already well
established at the same time as we continue both tostrengthenour
presence in the few regions with poor historic sales and to open up
new areas.
By the end of the period, Naibu HK was working with a total of
25distributors across China, while the number of Naibu stores had
risen to 2,870. As our Operational Review, we have continued with
more than 200 new store openings in the current year, backed by
strong investment in TV and billboard advertising, in-store
promotional campaigns, anda well-paid, dedicated team of staff.
Against that fulfilling backdrop, Naibu now is well-advanced
with plans to build an additional shoe production facilityin
Western or Central China, asforeshadowed in our AIM Admission
Document. Following a series of exploratory visits to assess
potential sites, the choice has been narrowed down to two or three
possible locations, and we expect to make a final decision during
the current year.
We are supported by the experienced and expert teams atour
Fuzhou headquarters, atour two manufacturing plants and in our
sales outlets across China, and I thank them allfor their valuable
efforts throughout the year.
I have no doubt that we are strongly positioned to continuethis
strong growth through the year ahead, and to deliver furthervalue
as we continue with our expansion intomore Chinese cities.
Huoyan Lin
Executive Chairman
27 June 2012
Operational review
The 12-months to 31 December 2011 produced another set of
outstanding results for Naibu's wholly-owned subsidiary Naibu (HK)
Investment International Limited, with pre-tax profits rising 21.5%
to RMB 345 million (approx. GBP34.5 million) on sales up 20% to RMB
1.49 billion.
The strong increase maintained an unbroken growth pattern
sustained since the Group's inception in 2005, and reflected rising
demand for branded leisurewear, sportswear and equipment in Naibu's
target Chinese market. This consumer demand was met by the Group
over the course of the year with a broadening of its product range
and a sharpened focus on sales and distribution in both existing
and new locations. The post- tax operating margin for the year rose
to 19.0%, up from 18.2% during 2010 despite the loss of tax
concessions. The Group's cash position at the year-end stood at RMB
286.8 million.
Product range and sales
During the year, the Group continued with the manufacture of
Naibu-branded leisure and sports shoes, which were sold through its
nationwide Naibu outlets alongside Naibu-branded leisurewear,
sportswear, sports accessories and equipment sourced from OEM
suppliers. In all, the Group offered around 325 Naibu-branded
products, ranging from tennis shoes and sports socks, to rucksacks,
basketballs and tennis rackets. The sales and marketing of these
items focused on mass-market buyers between the ages of 12 and 35,
targeted by three separate product lines labelled "Vital Campus",
"Urban Business" and "Holiday Leisure".
Shoes continued to account for most of the Group's sales,
accounting for 55.6% of total revenue. Increased sales volume
alone, rather than price rises, accounted for all but a small part
of the increase, up 15.6% to RMB 829.5 million.
Strong revenue growth was also achieved from the sale of clothes
and accessories, which together accounted for the remaining 44.4%
of total revenues, up from 42.4% during 2010. That increase
primarily reflected a rise in the number of Naibu-branded stores
during the year, creating more display, and enabling more focus on
higher-margin products. Sales also benefited from the introduction
of higher-quality in-store sales teams.
Sales of accessories such as bags, golf equipment and
volleyballs showed the greatest growth, with revenues rising by RMB
14 million, or 54.7%. Only half of that growth stemmed from
increased sales volume, with the other half arising from successful
increases in unit prices. Price increases also contributed
significantly to higher revenue from clothing sales, accounting for
just above a third of the increase. Overall clothing sales reached
RMB 622.8 million, a year-on- year increase of 24.0%.
In all, whilst sales rose by RMB 246.7 million during the year,
representing a healthy growth rate of 19.8%, just over a quarter of
that was achieved through successful price rises. "Vital Campus"
sales accounted for around 90% of total revenues, identifying the
continuing opportunity for the expansion of sales from the other
two product lines.
Research and development
The Group maintained a product research and development
("R&D") team of around 92 employees at its Shish factory,
responsible for the design of all shoes and clothing, and overseen
by Naibu's founder and Executive Chairman, Mr. Huoyan Lin. The
R&D team comprises three divisions respectively covering
product design, product development and technology development. It
creates two season collections each year ("Spring and Summer" and
"Autumn and Winter") which during 2011 included several new product
designs successfully launched at seasonal fairs. Naibu's
distributors remained crucial to the R&D process during the
year, providing market feedback and views on forward sales
potential.
Manufacturing
The Group continued to lease two purpose-built production
facilities in Jinjiang and Shishi, both in Fujian Province,
operating a total of eight shoe production lines - four at each
plant. Both plants functioned smoothly throughout the year,
producing a record 7.36 million pairs of shoes, some 15% ahead of
design capacity, to meet strong demand for the Group's products.
This was achieved through the optimisation of production support
systems the improvement of equipment, enhanced production
efficiencies, and an increased number of workers on the production
lines. At the year- end, the Group employed 1,963 production staff,
up from 1,750 at the start of the year. Output from the
manufacturing plant, where workers are engaged in stamping, sewing,
stitching, and moulding accounted for approximately 65% of the
shoes produced by the Group during the year. The remaining 35% were
sourced from OEM suppliers.
Sales and distribution
The Group continued to operate its Marketing and Sales Centre in
Fuzhou, with 66 staff responsible for product sales. Six Regional
Sales Managers took responsibility for individual geographic areas
across Naibu's established Chinese network, communicating regularly
with key customers, and monitoring consumer trends and competitor
performance.
Northern China, Eastern China and Southern China remained the
main markets for Naibu in 2011. Total revenues from the three
regions accounted for 67.6% and 66.7% during 2010 and 2011,
respectively. However, annual growth rates for sales in Central
China and North West China increased, indicating how these markets
are set to become key sales regions for Naibu in the near
future.
Most of the Group's sales were made through distribution
agreements with 25 independent corporate and individual retail
distributors across China who, at 31 December 2011, operated 2,870
Naibu-branded stores and sales outlets, in 21provinces and three
municipalities. This represented an increase of 201 outlets over
the number at the end of 2010, all of them in third or fourth tier
cities in China. Most of the stores were directly owned by the
distributors, with others owned bytheir sub-distributors some
ofwhom also operated sales outlets in department stores
andsupermarkets.
To protect the Naibu brand imageand maintain high standards of
service quality, the Group continued providing retail distributors
with guidance on how products should best be presented.
Over the course of the year, Naibu also worked to spread
itssales more widely across the distributor base, so that while
revenue from the top five distributors increased by 7.0%to RMB 570
million,this accounted for 38.2% of total revenues, down from
the
42.8% attributable to the same distributors during 2010. This
shift has paved the way for furtherwidening of the sales base,
particularly in regions such as Central Chinaand South Western
China. New store locations, continued to be selected jointly by
distributors and the Group, basedon market research, estimated
costs and local sales potential.
Marketing
Naibu continued to invest in brand marketing and promotional
work during theyear.
As described above, this was supported by "front-line"
information on consumerand competitor trends supplied by the
Group's team of regional sales managers.
Management and staff
As of 31 December 2011, Naibu employed a total of 2,315staff, up
from 2,052 a yearpreviously. Of these,the vast majority, just under
2,000, were employed at the Group's production facilities in
Jinjiang and Shishi, with most of the rest at the Group's
headquarters in Fuzhou. Staff turnover remained low, in large part
reflecting relatively high salary levels and progressive
workingconditions.
Financial review
The Group's sales revenues increased by 19.8% during the year,
rising to a record RMB 1.492 billion thanks to increases in unit
prices, a successful broadening of the Naibu product ranges and
steady expansion of the Group's distribution network. Sales in
northern, eastern and southern China accounted for 66.7% of
revenues, down slightly from 67.6% as the Group worked to build
distribution in north-western and Central China.
Key financials
2011 (RMB) 2010 (RMB)
Revenue 1.492 billion 1.245 billion
Profit before tax 345 million 284 million
Earnings per share (basic) 28,327 22,742
Cash generated from operations 153 million 101 million
Revenues
The Group's sales revenues increased by 19.8% during the year,
rising to RMB 1.492 billion thanks to increases in unit prices, a
successful broadening of the Group's product ranges and steady
expansion of the Group's distribution network. Sales in northern,
eastern and southern China accounted for 66.7% of revenues, down
slightly from 67.6% as the Group worked to build distribution in
north-western and Central China.
The Group also generated additional revenues of RMB 290,300 from
the sale of scrap and RMB 535,000from interest income.
Year to 31 December 2011 Year to 31 December
2010
Category RMB'000 % of RMB'000 % of % change
turnover turnover
Shoes 829,546 55.6% 717,353 57.7% 15.6%
Clothing 622,811 41.8% 502,188 40.3% 24.0%
Accessories 39,288 2.6% 25,391 2.0% 54.7%
Total 1,491,645 100.0% 1,244,937 100.0% 19.8%
Area RMB'000 % of RMB'000 % of turnover % change
turnover
Northern China 396,412 26.6% 330,080 26.5% 20.1%
Eastern China 343,235 23.0% 295,614 23.7% 16.1%
Southern China 254,825 17.1% 216,182 17.4% 17.9%
Central China 176,809 11.9% 135,813 10.9% 30.1%
North-western
China 136,128 9.1% 105,514 8.5% 29.0%
South-western
China 184,237 12.4% 161,733 13.0% 13.9%
Total 1,491,645 100.0% 1,244,937 100.0% 19.8%
Costs and expenses
Operating costs fell by 5.7% during the year which reflects more
effective cost control by the management. Advertising and marketing
expense as a percentage of turnover declined by 1.5% in this fiscal
year and is attributable to cost effective use of advertising and
publicity by the Group to build its brand. With the benefits of the
Group's scale operation, labour cost as a percentage of turnover
declined by 0.5% this fiscal year. R&D expenses as a percentage
of turnover rose by 0.3%, in line with the Group's commitment to
design and develop more popular products.
Year to 31 December 2011 Year to 31 December 2010
Operating cost % Sales Operating % Sales cost % Change
(RMB'000) cost cost
(RMB'000)
Group Manufacturing
(Shoes)
Raw material 278,007 26.0% 243,096 27.6% 14.4%
Direct wages 82,951 7.8% 71,515 8.1% 16.0%
Indirect costs 33,256 3.1% 26,076 3.0% 27.6%
394,214 36.8% 340,687 38.7% 15.7%
OEM Supplies
Shoes 211,568 19.8% 176,298 20.0% 20.0%
Clothing 437,407 40.9% 345,388 39.3% 26.6%
Accessories 26,912 2.5% 17,212 2.0% 56.4%
675,887 63.2% 538,898 61.3% 25.4%
Total 1,070,101 100.0% 879,585 100.0% 21.7%
Year ended 31 December
2011 (%) 2010 (%) Change (%)
Advertising expenditures as proportion
of turnover 1.3% 2.3% (1.1%)
Labour cost as proportion turnover 5.9% 6.0% (0.1%)
R&D expenditure as proportion of
turnover 1.8% 1.5% 0.3%
Results for the year
Gross profit fell slightly to 28.3% during 2011 from 29.4% the
previous year. Operating profit rose to RMB 345 million,up 21.5%
year on year, showing growth ahead of the revenue increase, thanks
to improved management of operating costs.
Net profit after tax rose to RMB 283 million, compared to RMB
226 millionin 2010, showing growth of 25.3% despite the loss of
preferential tax concessions previously enjoyed by the Group.
Return on capital invested was 43.4%
Year ended 31 December Year ended 31 December
2011 2010
Gross profit Gross profit Gross profit Gross profit
Category RMB'000 margin % RMB'000 margin %
Shoes 223,765 27.0% 200,374 27.9%
Clothing 185,405 29.8% 156,799 31.2%
Accessories 12,375 31.5% 8,179 32.2%
Total 421,545 28.3% 365,352 29.4%
Balance sheet and cash flow
As at 31 December 2011, the total assets of the Group stood at
RMB 899 million, with current assets amounting to RMB 886 million.
With total liabilities of RMB 247 million, total shareholders'
equity rose to RMB 652 million.The Group had no outstanding bank
loans oroverdue debt.
The Group's year-end cash and cash equivalents amounted to RMB
287 million increasing by RMB 153 million from RMB 134 million at
December 2010. The increase reflected a net cash inflow RMB 153
million resulting from improved operating performance and
strengthenedcapital management.
Year ended 31 December
2011 2010 Change
Category RMB'000 RMB'000 RMB'000
Net cash inflow from operations 153,192 101,317 51,875
Net cash outflow from investments (20) (1,262) 1,242
Net cash inflow/(outflow) from funds
raised 19 (24,342) 24,361
Total 153,191 75,713 77,478
As both sales and the scale of operations increased
significantly duringthe year, the Group tightened controls over
inventory levels by more closely aligningproduction with demand.At
the same time, it extended credit terms to both suppliers and
distributors to foster established relationships while
simultaneously strengthening day-to-day controls over accounts
receivable. Average creditor days stretched from 70 to 99 during
the Year. The Group provided 90-day payment terms, and recognises
receivables of over 120 days asoverdue. As at the Year end, there
were no overdue accounts receivable.
Year ended 31 December
2011 2010 Change
Accounts receivable (average debtor
days) 103 72 (31)
Inventory (days) 19 12 (7)
Accounts payable (days) 44 27 17
Year ended 31 December
Category 2011 2010 Change
Asset-liability ratio 27.4% 28.4% (0.9%)
Current ratio 367.1% 430.9% (63.7%)
Proportion of current assets 98.5% 96.9% 1.6%
Proportion of shareholders' equity 72.6% 71.6% 1.0%
Tax
During the year, the Group paid tax at a rate of25% as tax
exemptions available over the previous five years fell away. During
2010, the Group had paid tax at a concessionary rate of12.5%.
Despite an increased tax rate to the full rate of 25%, the 2011
after tax profit margin rose to 19.0% as compared 18.2% in 2010.
This was due to more effective cost control by management in
2011
Year ended 31 December
Item 2011 2010 Change
Profit margin before tax 23.1% 22.8% 0.3%
Impact of income tax expense on net
profit margins (5.8%) (2.9%) (2.9%)
Impact of deferred tax on net profit
margins 1.7% (1.8%) 3.5%
Net profit margins 19.0% 18.2% 0.8%
Net profit margins without allowance
for deferred tax expenses 17.3% 20.0% (2.7%)
Commitments and contingencies
As at 31 December 2011, Naibu HK and its companies had no
external guarantees outstanding nor any form of external supply.
The Group iscurrently not involved in any litigationmatters and is
not aware ofany current or pending litigation issues relating tothe
Group.
Financial management policy
The Group continues to maintain a prudent approach to
financialrisk, and actively adopts internationally recognised
standards of Corporate Governance to protect the interests of the
shareholders. Group 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. TheBoard does, however, continue to monitor the
foreign exchange risk, and is prepared to implement prudent
risk-reduction measures such as hedging asand when necessary.
Significant investments and acquisitions
During the Year, the Group made no major investments and did not
dispose of or acquire any significant subsidiaries or businesses.
The Group continues to consider opportunities for the acquisition
of other brands and to review potential opportunities for
cooperation in line with its strategy of expanding the Naibu brand
portfolio to realise improved returns for shareholders.
Dividend
To maximise continued investment in theGroup's development, the
Board in November 2011 cancelled dividend payments of
RMB 55.9 million. The Group will not pay a dividendfor the year
to 31 December 2011.
Mr. Chi Keung (Kenny) Law
Chief Financial Officer
27 June 2012
Consolidated statement of comprehensive income
for the financial year ended 31 December 2011
2011 2010
Notes RMB'000 RMB'000
Revenue 1,491,645 1,244,937
Cost of sales (1,070,100) (879,585)
Gross profit 421,545 365,352
Other income 825 526
Selling and distribution expenses (58,858) (67,787)
Administrative expenses (18,311) (14,041)
Profit before taxation 345,201 284,050
Income tax expense (61,933) (57,963)
Profit after taxation 283,268 226,087
Other comprehensive gain, net of tax
-Translation differences arising from
foreign currency
financial statements recognised directly
in equity - 1,335
Total comprehensive income 283,268 227,422
Earnings per share - Basic (RMB) 28,327 22,742
Earnings per share - Diluted (RMB) 28,327 22,742
Consolidated statement of financial position
as at 31 December 2011
2011 (RMB'000) 2010 (RMB'000)
ASSETS
Non-current assets
Property, plant and equipment 13,150 15,799
13,150 15,799
Current assets
Inventories 78,974 34,002
Trade and other receivables 519,858 331,632
Cash and bank balances 286,801 133,610
885,633 499,244
Total assets 898,783 515,043
LIABILITIES AND EQUITY
Non-current liabilities
Deferred income tax liabilities 5,367 30,273
5,367 30,273
Current liabilities
Trade payables 182,339 80,207
Other payables and accruals 34,397 29,684
Amount due to a director/shareholder 19 -
Income tax payable 24,491 5,977
241,246 115,868
Total liabilities 246,613 146,141
Capital and reserves
Share capital 11 11
Reserves 122,428 96,434
Retained earnings 529,731 272,457
Total equity attributable to equity holders
of the parent 652,170 368,902
Total liabilities and equity 898,783 515,043
Consolidated statement of changesin equity
for the financial year ended 31 December 2011
Attributable to the HK Company's equity holders
Currency
Share Capital Translation Statutory
Capital Contribution Reserve Reserve Retained
(Note 20) (Note 21(a)) (Note (Note 21(c)) Profits Total
RMB'000 RMB'000 21(b)) RMB'000 RMB'000 RMB'000
RMB'000
Balance at 1 January
2010 11 - 843 37,995 142,396 181,245
Arising from
capitalization
of amount due to a
shareholder - 35,380 - - - 35,380
Transfer to retained
profits - (3,965) - - 3,965 -
Profit for the year - - - - 226,087 226,087
Other comprehensive
income
- Foreign currency
translation
differences - - 1,335 - - 1,335
Total comprehensive
income
for the year - - 1,335 - 226,087 227,422
Transfer to statutory
reserve - - - 24,846 (24,846) -
Dividends (Note 10) - - - - (75,145) (75,145)
Balance at 31 December
2010 11 31,415 2,178 62,841 272,457 368,902
Profit for the year - - - - 283,268 283,268
Total comprehensive
income
for the year - - - - 283,268 283,268
Transfer to statutory
reserve - - - 25,994 (25,994) -
Balance at 31 December
2011 11 31,415 2,178 88,835 529,731 652,170
Consolidated statement of cash flows
for the financial year ended 31 December 2011
2011 2010
RMB'000 RMB'000
Cash flows from operating activities
Profit before taxation 345,201 284,050
Adjustments for:
Depreciation of property, plant and equipment 2,669 2,637
Interest income (535) (333)
Operating profit before working capital changes 347,335 286,354
(Increase) in inventories (44,972) (9,340)
(Increase) in trade and other receivables (188,226) (165,969)
Increase in trade payables 102,132 26,184
Increase in accruals and other payables 4,713 2,728
Net cash generated by operating activities 220,982 139,957
Interest received 535 333
Income tax paid (68,325) (35,017)
Withholding tax paid - (3,956)
Net cash generated by operating activities 153,192 101,317
Cash flows from investing activities
Acquisition of property, plant and equipment (20) (1,262)
Net cash used in investing activities (20) (1,262)
Cash flows from financing activities
Dividends paid - (75,145)
Advances from a director/shareholder 19 50,803
Net cash generated from/(used in) financing activities 19 (24,342)
Net increase in cash and cash equivalent 153,191 75,713
Cash and cash equivalent at beginning of the financial
year 133,610 57,897
Cash and cash equivalent at end of the financial year 286,801 133,610
Annual General Meeting
The annual general meeting of the Company (the AGM) will be held
at the offices of Daniel Stewart & Company plc at Becket House,
36 Old Jewry, London, EC2R 8DD on 26 July 2012 at 12 noon. Copies
of its Annual Report and Accounts will be posted to shareholders on
29 June 2012, and can be found on the Group's website
(www.naibu.com) from that time.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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