- Total revenue in 2010 increased by 33.8% year-over-year to RMB899.3 million ($136.3 million) - at the high-end of prior guidance of RMB880 million to RMB900 million.
- Gross profit margin was 34.5% in 2010 compared to 34.7% in 2009; a 21.6% increase in ASP helped to offset the increase in materials and labor costs.
- Net profit increased 29.8% year-over-year to RMB252.3 million compared with RMB194.3 million in 2009.
- Earnings per ADS increased by 27.1% year-over-year to $0.75 per ADS in 2010.
- Non-IFRS earnings per ADS (excluding share-based compensation expenses) increased by 28.8% year-over-year to $0.76 per ADS in 2010.
- Xiniya added 223 new retail outlets opened by its network of authorized retailers, which was higher than the original planned increase of 180-200 new outlets.
- Following a successful bi-annual sales fair held in September 2010, first quarter 2011 revenue in RMB is expected to increase by 29%-30% compared to the first quarter of 2010. Gross margin in the first quarter of 2011 is expected to range between 33%-34% versus 32.5% in the first quarter of 2010.
- Earnings per ADS are expected to be in the range of $0.08-$0.09 compared to $0.09 in the first quarter of 2010, due to the expiration of the Company’s preferential PRC tax treatment at the end of 2010. Xiniya’s tax rate will increase to 25% from 2011 onwards versus a rate of 12.6% in 2010.
- Revenue in RMB in the first half of 2011 is expected to increase by 27%-30% and gross margin is expected to be in the range of 32-33% compared with 31.9% in the first half of 2010.
- Xiniya plans to increase the number of retail outlets managed or authorized by its distributors by approximately 180 to 220 in 2011.
- Through February 2011, Xiniya’s network of authorized distributors added 28 new retail stores compared to 24 stores added in the first two months of 2010. As of March 28, 2011, a total of 41 new retail stores have been added, compared to 35 new stores added in the first three months of 2010. In 2010, 39% of our new stores for the year were opened in the first half of the year, while 61% of the new stores were opened in the second half.
Fiscal Year 2010 ResultsRevenue for the year ended December 31, 2010 was RMB899.3 million, compared with revenue of RMB672.1 million for the year ended December 31, 2009, which represented a 33.8% increase. Revenue was driven by volume growth of 10.0%, with the number of units sold increasing from 5.1 million units in 2009 to 5.6 million units in 2010. ASP grew 21.6% from RMB131.7 in 2009 to RMB160.2 in 2010, which was attributable to approximately a 13% benefit from a change in product mix and approximately an 8% increase to reflect higher materials and labor costs. At the end of 2010, Xiniya completed the restructuring of its department store chains operated by department store operators, placing them under the supervision of its distributors. This initiative increased sales rebates in 2010 by approximately RMB9 million, which negatively impacted revenue growth by approximately 1% for the full year. Xiniya will begin to realize the full effect of an increase in sales rebates granted to distributors from 2011 onwards, but the Company believes this is an important measure to streamline its distribution network and strengthen control over its retail channels, which will ultimately contribute to improved long-term operational efficiency. During 2010, Xiniya’s authorized network of retailers opened 223 new retail outlets, which was higher than the Company’s original planned increase of 180-200 new outlets. The total store count as of December 31, 2010 was 1,404. The Company places significant emphasis on opening quality stores and maintaining sustainable store expansion rates. The chart below sets forth the number of retail stores by outlet type.
|As of December 31,|
|Managed by Distributors||30||49||68|
|Managed by Department Store Chains||257||304||326|
|Managed by Authorized Retailers||720||827||1,009|
|Total Store Counts||1,008||1,181||1,404|
Selling and distribution expenses increased by 38.0% year-over-year due to an increase in freight, sales fair and packaging expenses. Advertising and promotional expense accounted for RMB3.9 million, or 0.4% of revenue, in 2010, compared with RMB4.5 million, or 0.7% of revenue, in 2009. This expense was mainly related to the sponsorship agreement with the Company’s spokesperson, Jacky Cheung, one of the leading pop stars in China.Administrative expenses were significantly higher, rising to RMB10.1 million in 2010 from RMB2.9 million in 2009, due to an increase in the number of personnel, public company listing fees of approximately RMB2.2 million and share-based compensation expenses of approximately RMB2.2 million. Furthermore, the number of administrative and sales staff increased to 85 in 2010 compared to 62 in 2009. Operating profit before taxes of RMB288.8 million in 2010 represented an increase of 29.8% compared with RMB222.5 million in the prior year. Operating margin was 32.1% in 2010 compared with 33.1% in 2009. Non-IFRS operating income (ie, excluding share-based compensation expenses) in 2010 increased 30.8% to RMB290.9 million compared with RMB222.5 million in the prior year. Non-IFRS operating income margin was 32.4% in 2010 compared with 33.1% in the prior year. Interest income was RMB0.8 million in both 2009 and 2010. Income tax expense was RMB36.4 million in 2010, which resulted in an effective tax rate of 12.6%. This compares with income tax expense of RMB28.1 million and an effective tax rate of 12.6% in 2009. Profit for the year increased 29.8% year-over-year to RMB252.3 million compared with RMB194.3 million. Earnings per ADS were $0.75 per ADS in 2010, compared to $0.59 per ADS in 2009. Non-IFRS earnings per ADS (excluding share-based compensation expenses) increased by 28.8% year-over-year to $0.76 per ADS in 2010. Financial Position As of December 31, 2010, the Company had cash and cash equivalents of RMB862.8 million. The cash balance included RMB519.9 million, or approximately $78.8 million in net proceeds from the Company's initial public offering of its American depositary shares, which was successfully completed on November 23, 2010.
As of December 31, 2010, the Company had trade receivables of RMB221.4 million arising wholly from its sales recognized during the fourth quarter of 2010. The trade receivables as of December 31, 2010 were down from RMB276.0 million in trade receivables as of September 30, 2010 which were entirely related to sales recognized during the third quarter of 2010. The trade receivables outstanding as of December 31, 2010 were fully collected by March 28, 2011 in accordance with the Company’s standard maximum 90-day credit terms. The three-months moving average trade receivables turnover days were 67 days and 64 days as of December 31, 2010 and March 28, 2011, respectively. The trade receivables as of March 28, 2011 are entirely related to sales recognized during the first quarter of 2011.Outlook for First Quarter 2011 Following a strong response to the Xiniya brand during the bi-annual sales fair in September 2010, revenue for the first quarter ended March 31, 2011, is expected to increase 29%-30% in RMB terms, based on the anticipated increase in unit volume of approximately 8%-9% and ASP growth of approximately 18%-19%. ASP is expected to be higher in the first quarter of 2011 as compared to the prior year driven mainly by the shift in product mix. Xiniya improved its product mix by introducing more new designs and higher quality products. The Company also held its sales fair earlier in September 2010, thereby allowing its OEMs to purchase their materials earlier in an effort to manage rising materials costs. Gross margin is expected to be in the range of 33%-34% in the first quarter of 2011 versus 32.5% in the first quarter of 2010. An 18%-19% increase in ASP is expected to fully offset the increase in materials and labor costs as well as the impact of sales rebate increases, leading to overall gross margin improvement.
Earnings per ADS are expected to be in the range of $0.08-$0.09, which compares to $0.09 in the prior year period. Due to the expiration of its preferential PRC tax treatment at the end of 2010, Xiniya’s tax rate will increase to 25% from 2011 onwards versus a rate of 12.6% in 2010.Outlook for First Half 2011 Based on the planned production and delivery schedule, Xiniya expects to realize revenue growth in the first half of 2011 of approximately 27%-30% in RMB terms compared to the same period in 2010. The growth is expected to be mainly attributable to organic sales growth at existing stores as well as additions of new stores, which is projected to lead to overall increases of approximately 16%-17% in unit volume and approximately 10%-11% in ASP. Gross margin in the first half of 2011 is expected to be in the 32%-33% range, compared with 31.9% in the first half of 2010. A projected 10%-11% increase in ASP is expected to fully offset the increase in materials and labor costs as well as the impact of sales rebate increases, leading to overall gross margin improvement. Momentum of new store openings remains strong. As of the end of February 2011, Xiniya’s network of authorized distributors added 28 new stores as compared to 24 during same period in 2010. As of March 28, 2011, a total of 41 new retail stores have been added, compared to 35 new stores added in the first three months of 2010. In 2010, 39% of the new stores for the year were opened in the first half of the year, while 61% of the new stores were opened in the second half. For the full year 2011, Xiniya targets the opening of 180-220 additional stores by its authorized retailer network. Conference Call Xiniya will host a conference call and live webcast at 9 am Eastern Standard Time (EST) (9 pm Beijing time on March 29, 2011).
The dial-in details for the live conference call are as follows:
- Participant Dial In (Toll Free USA): 1-877-317-6789
- International Dial In: +1 412-317-6789
- China Toll Free (Northern): 10-800-712-2304
- China Toll Free (Southern): 10-800-120-2304
- Hong Kong Toll Free: 800-962-475 Conference ID: – 449451
- US Toll Free: 1-877-344-7529
- International Toll: 1-412-317-0088 Conference Number: – 449451
About China Xiniya Fashion LimitedXiniya is a leading provider of men's business casual apparel in China. The Company designs and manufactures men's business casual and business formal apparel and accessories, which are marketed under the Xiniya brand, and sells through its distribution network that includes 26 distributors and 24 department store chains. Its products are sold to consumers at over 1,400 authorized retail outlets owned and managed by third parties located in 21 provinces, five autonomous regions, and four municipalities in China. This retail network focuses on second- and lower-tier cities, where increasing affluence has led to an improvement in living standards and where most international men's apparel brands do not have a significant presence. The Company's target consumers are male working professionals in China between the ages of 25 and 45 who seek fashionable clothing to suit their working and lifestyle needs. For more information, please visit the Company's website at http://ir.xiniya.com.
|CHINA XINIYA FASHION LIMITED|
|CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME|
|(Chinese Renminbi in thousands except shares and per share and per ADS data)|
|For the Three Months and Years Ended December 31, 2009 and 2010|
|Three Months Ended Dec 31||Year Ended Dec 31|
|Cost of sales||(159,293||)||(213,957||)||(438,773||)||(589,233||)|
|Selling and distribution expenses||(2,317||)||(2,964||)||(8,744||)||(11,999||)|
|Profit before taxation||94,672||110,816||222,453||288,759|
|Income tax expense||(11,897||)||(13,957||)||(28,109||)||(36,413||)|
|Profit for the year||82,775||96,859||194,344||252,346|
|Earnings per share - basic and diluted (in RMB)||0.41||0.45||0.97||1.24|
|Earnings per ADS - basic and diluted (in USD)||0.25||0.27||0.59||0.75|
|Weighted average shares outstanding in the period||200,000,000||213,565,217||200,000,000||203,419,178|
|Weighted average ADS outstanding in the period||50,000,000||53,391,304||50,000,000||50,854,795|
|One ADS represents four ordinary shares.|
|CHINA XINIYA FASHION LIMITED|
|CONSOLIDATED STATEMENTS OF FINANCIAL POSITION|
|(Chinese Renminbi in thousands)|
|As at December 31, 2009 and 2010|
|Property, plant and equipment||2,776||1,642|
|Total non-current assets||2,776||6,660|
|Cash and cash equivalents||142,302||862,797|
|Other receivables and prepayments||2,575||5,054|
|Total current assets||283,714||1,094,865|
|Equity and liabilities|
|Additional paid-in capital||-||529,650|
|Other payables and accruals||18,168||38,378|
|Current income tax payable||11,898||13,957|
|Total current liabilities||58,083||98,693|
|Total equity and liabilities||286,490||1,101,525|
|CHINA XINIYA FASHION LIMITEDCONSOLIDATED STATEMENTS OF CASH FLOWS(Chinese Renminbi in thousands)For the Years Ended December 31, 2009 and 2010|
|Cash flows from operating activities:|
|Profit before taxation||222,453||288,759|
|Depreciation for property, plant and equipment||518||389|
|Loss on disposal of property, plant and equipment||-||351|
|Operating profit before working capital changes||222,971||291,694|
|Increase in trade receivable||(77,162||)||(93,537||)|
|(Increase)/decrease in inventories||(7,524||)||5,360|
|(Increase)/decrease in other receivables and prepayments||4,506||(8,400||)|
|Increase/(decrease) in trade payables||(15,743||)||18,341|
|Increase/(decrease) in other payables and accruals||(3,821||)||12,472|
|Cash generated by operating activities||123,227||225,930|
|Income tax paid||(23,458||)||(34,354||)|
|Net cash generated by operating activities||99,769||191,576|
|Cash flows from investing activities:|
|Proceeds from the disposal of property, plant and equipment||-||396|
|Acquisition of property, plant and equipment||-||(2||)|
|Net cash generated by investing activities||-||394|
|Cash flows from financing activities:|
|Proceeds from share issued, net||-||519,884|
|Increase/(decrease) in advance to and from director||(767||)||8,641|
|Net cash (used in)/generated by financing activities||(114,106||)||528,525|
|Net increase/(decrease) in cash and cash equivalents||(14,337||)||720,495|
|Cash and cash equivalents at beginning of the year||156,639||142,302|
|Cash and cash equivalents at end of the year||142,302||862,797|
|CHINA XINIYA FASHION LIMITEDRECONCILIATION OF IFRS TO NON-IFRS FINANCIAL DATA(in thousands of Renminbi, except for ADS data and per ADS data)|
|Three months endedDecember 31,||Twelve months endedDecember 31,|
|IFRS operating expenses||(3,143||)||(9,019||)||187.0||%||(11,642||)||(22,107||)||89.9||%|
|Non-IFRS operating expenses||(3,143||)||(6,824||)||117.1||%||(11,642||)||(19,912||)||71.0||%|
|IFRS profit before taxation||94,672||110,816||17.1||%||222,453||288,759||29.8||%|
|IFRS operating margin||36.9||%||33.2||%||33.1||%||32.1||%|
|Non-IFRS profit before taxation||94,672||113,011||19.4||%||222,453||290,954||30.8||%|
|Non-IFRS operating margin||36.9||%||33.9||%||33.1||%||32.4||%|
|IFRS profit for the year||82,775||96,859||17.0||%||194,344||252,346||29.8||%|
|IFRS net margin||32.2||%||29.0||%||28.9||%||28.1||%|
|Non-IFRS profit for the year||82,775||99,054||19.7||%||194,344||254,541||31.0||%|
|Non-IFRS net margin||32.2||%||29.7||%||28.9||%||28.3||%|
|IFRS Earnings per ADS||0.25||0.27||8.0||%||0.59||0.75||27.1||%|
|Non-IFRS Earnings per ADS||0.25||0.28||12.0||%||0.59||0.76||28.8||%|
|Weighted average ADS outstanding, basic and diluted (in thousands) 1||50,000||53,391||50,000||50,855|