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Zuoan Fashion Limited Announces Third Quarter 2011 Financial Results

Forward-Looking Statements

This news release may contain forward-looking information about Zuoan Fashion Limited, which is covered under the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as believe, expect, may, will, should, project, plan, seek, intend, or anticipate or the negative thereof or comparable terminology, and include discussions of strategy and statements about industry trends and Zuoan Fashion Limited’s future performance, operations, and products.

Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including, among other things, those relating to our anticipated growth strategies, our future business development, our ability to promote our brand based on consumer preference or demand, our relationship with distributors and sub-distributors, and trends and competition in the fashion casual menswear industry. Actual performance results may vary significantly from expectations and projections. Further information regarding this and other risk factors are contained in Zuoan’s public filings with the U.S. Securities and Exchange Commission.

All information provided in this news release and in any attachments is as of the date of the release, and the companies do not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law.

       
 

ZUOAN FASHION LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

Three months ended September 30

Nine months ended September 30

2010 RMB

 

2011 RMB

 

2011 US$

2010 RMB

 

2011 RMB

 

2011 US$

(in thousands)
Revenues 311,057 424,765 66,598 613,878 875,568 137,279
Cost of goods sold (182,991)   (236,632) (37,101) (360,790)   (501,408) (78,615)
Gross profit 128,066 188,133 29,497 253,088 374,160 58,664
Other income 255 744 117 606 1,708 268
Selling, marketing and distribution expenses (14,283) (46,618) (7,309) (44,217) (76,108) (11,933)
General and administrative expenses (14,023) (15,571) (2,441) (27,885) (42,959) (6,735)
Finance costs (2,441)   (1,092) (171) (6,063)   (3,006) (471)
Profit before taxation 97,574 125,596 19,692 175,529 253,795 39,792
Income tax expense (26,666)   (33,443) (5,243) (47,846)   (68,257) (10,702)
Profit after taxation 70,908 92,153 14,449 127,683 185,538 29,090
 

Other comprehensive (loss)/profit:

Foreign exchange difference arising from translation of foreign currency financial statements

599   (822) (129) 786   (3,784) (593)
Total comprehensive income for the periods 71,507   91,331 14,320 128,469   181,754 28,497
 
Earnings per share :
Basic earnings per share 0.89 0.83 0.13 1.60 1.75 0.28
Diluted earnings per share 0.84 0.83 0.13 1.53 1.74 0.27
 
Weighted average basic number of shares (‘000) 80,000 110,952 80,000 105,777
Weighted average diluted number of shares (‘000) 86,723 111,279 86,456 106,871
 

Note:

Diluted earnings per share for the three months and nine months periods ended September 30, 2010 are pro forma result as adjusted to reflect the dilutive impact of the convertible loans assuming that would be issuable. Pro forma diluted earnings per share for the three months and nine months periods ended September 30, 2010 reflects an adjustment to increase profit after taxation by approximately RMB1,720,000 and RMB4,641,000 for the effect of the interest related to the convertible loans.

 
           

ZUOAN FASHION LIMITED UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

As of December 31

As of September 30

(in thousands) 2010     2011     2011
ASSETS RMB RMB     US$
 
Non-current assets
Property, plant and equipment 2,720 16,668 2,613
Deferred offering costs 5,757     -     -
8,477     16,668     2,613
Current assets
Inventories 22,339 28,466 4,463
Trade and other receivables 249,857 430,285 67,464
Prepayments 2,313 3,812 598
Fixed deposits – pledged 1,054 4,210 660
Cash and cash equivalents 367,731     732,782     114,892
643,294     1,199,555     188,077
Total assets 651,771     1,216,223     190,690
 
EQUITY AND LIABILITIES
 
Share capital 134 185 29
Share premium 129,599 426,165 66,818
Reserves 19,360 16,669 2,614
Retained profits 314,610     500,148     78,418
Total equity 463,703     943,167     147,878
 
LIABILITIES
 
Current liabilities
Trade and other payables 70,582 175,620 27,535
Interest-bearing bank borrowings 56,700 63,600 9,972
Convertible loans 40,961 - -
Current income tax payable 19,825     33,836     5,305
Total liabilities 188,068     273,056     42,812
 
Total equity and liabilities 651,771     1,216,223     190,690
 
       

ZUOAN FASHION LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS

 

Periods months ended September 30

(in thousands) 2010RMB     2011RMB     2011US$
Cash flows from operating activities
Profit before taxation 175,529 253,795 39,792
Adjustments for :
Depreciation of property, plant and equipment 472 1,784 280
Equity-settled employees benefit expenses - 7,342 1,151
Interest expense on bank borrowings 1,422 3,006 471
Interest expense on convertible loans 4,641 - -
Interest income (606)     (1,708)     (268)
 
Operating profit before working capital changes 181,458 264,219 41,427
Increase in inventories (8,467) (6,127) (961)
Increase in trade and other receivables (98,357) (184,411) (28,914)
Decrease/(Increase) in prepayments (3,753) 4,258 668
(Increase)/Decrease in fixed deposits pledged 1,400 (3,156) (495)
Increase in trade and other payables 10,280     111,222     17,438
Cash generated from operations 82,561 186,005 29,164
Interest paid (1,422) (3,006) (471)
Income tax paid (34,713)     (54,246)     (8,505)
Net cash generated from operating activities 46,426     128,753     20,187
 
Cash flows from investing activities
Acquisition of property, plant and equipment (1,324) (15,732) (2,467)
Interest received 606     1,708     268
Net cash used in investing activities (718)     (14,024)     (2,199)
 
 
Cash flows from financing activities
Bank loans obtained 48,000 70,150 10,999
Repayment of bank loans (18,050) (63,250) (9,917)
Issuance of ordinary shares - 41 6
Net IPO proceeds - 243,381 38,159
Convertible loan obtained 21,256     -     -
Net cash generated from financing activities 51,206     250,322     39,248
 
Net increase in cash and cash equivalents 96,914 365,051 57,236
Cash and cash equivalents at beginning of the periods 141,569     367,731     57,656
Cash and cash equivalents at end of the periods 238,483     732,782     114,892




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