Press Release

18 September 2013

 

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 2013.

 

Highlights

 

	Revenues for H1 2013 increased by 20.5% to RMB950.1 million (approximately £100.8 million) (H1 2012: RMB788.7 million)
	Profit before tax for H1 2013 rose by 16.1% to a record RMB214.8 million (approximately £22.8 million) (H1 2012: RMB184.9 million)
	Earnings per share for H1 2013 of RMB2.90 (H1 2012: RMB 2.59)
	Maiden proposed Interim dividend of 2 pence per share declared (2012: Nil). Scrip dividend alternative to shareholders who wish to reinvest
	Strong Group balance sheet with cash position of RMB389.8 million as at 30 June 2013.  The Group has no outstanding bank loans or overdue debt
	Plans to increase Naibu-branded product range to 530 items in 2013 (2012: 414)
	104 new Naibu-branded stores opened in H1 2013, totalling 3,144 stores
	R&D expenditure in H1 2013 accounted for 1.4% of turnover (H1 2012: 1.6%) with further strengthening of R&D investment going forward

 

The illustrative exchange rate as at 30 June 2013 is 1 GBP : 9.4213 RMB.

 

Commenting on the interim results, Huoyan Lin, Executive Chairman of Naibu, said:

 

"The Board is pleased with the progress that has been made during the period, with 104 new stores opened, significant investment made into R&D, and plans to improve the Group's production facilities progressing well.

 

"Government policies in China are supportive of urbanisation, a key growth factor for Naibu, and the Board intends to capitalise on the significant opportunity in China as disposable income continues to increase and sports activities become more popular.  Naibu is well placed to benefit from the opportunities for growth in the Chinese sportswear market, both in the near and longer term, and the Board is particularly excited about the Group's plans to expand into more cities and provinces over the coming months."

 

- 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 / Joanne Shears	Tel: +44 (0) 20 7398 7702
[email protected]	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 2013 to shareholders of the Company.  These results place the Group in a solid position to achieve our business objectives for the remainder of the current financial year.

 

Operational review

 

The Group achieved record half-year sales of RMB950.1 million (approximately £100.8 million), an increase of 20.5% over the same period in 2012.  Pre-tax profits for the same period rose 16.1% to a record RMB214.8 million (approximately £22.8 million).

 

The Group has continued to focus its strategy on raising awareness of our brand in its primary target market in second, third and fourth tier cities in China where, through urbanisation, the disposable income of young consumers has steadily increased and these interim results reflect the growing recognition of Naibu's brand amongst that target market.

 

Given the Group's continued growth, Naibu is excited to be moving into new manufacturing facilities in Quangang and to increasing its production lines from its existing eight lines to ten lines, six of which will be new.

 

In addition, whilst the Group's discussions to build additional shoe production facilities in Western China have taken slightly longer than anticipated, the Board is pleased to announce that the Group has now reached an agreement with the People's Government of Dazhu County in Sichuan Province to purchase land use rights, for 13.3 hectares of land, to develop a Naibu Industrial Zone to include R&D, manufacturing and logistic facilities.  The Group will pay RMB60 million of which RMB8 million has already been paid as a deposit.

 

Product range and sales

 

In the six month period ended 30 June 2013, 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".  The proportion of sales across the Vital Campus series increased to around 89.5% of total Group's sales (H1 2012: 87.0%), while sales of the other two product lines reduced to around 10.5% (H1 2012: 13.0%).

 

During the first half of 2013, the sale of shoes accounted for approximately 53.4% of the Group's revenues (H1 2012: 51.9%), clothing for 44.4% (H1 2012: 46.0%), 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 RMB507.1 million, up 23.8% compared to the same period last year, and which is slightly higher than the overall increase in sales of 20.5%.  This sales growth is attributable to increases in both sales volume and unit selling price, while sales volume contributed more significantly to the overall increase.

 

The Group also achieved significant growth in the sales of clothing and accessories.  Sales in the first half of the year reached RMB443.0 million, up 16.8%.  Clothing sales reached RMB422.3 million, an increase of 16.3% compared to the same period in the previous year.  Sales of accessories such as rucksacks, caps, socks and balls, in particular, increased significantly by RMB4.7 million or 29.0% compared to the same period last year.  This growth resulted from increases in both unit prices and sales volume.

 

In summary, sales growth in the first half of 2013 mirrored the first half of 2012, with growth in both unit quantities and selling prices.  The Board is pleased that the Group also made significant progress during the period in terms of brand positioning, product design and marketing.

 

The Group continues to expand its sales network and at 30 June 2013, the Group maintained its relationships with 25 distributors operating through 3,144 stores.  Since 31 December 2012, 104 new stores have been opened by distributors and sub-distributors.  The Group's sales to the top five major distributors increased by nearly 15.5% over the same period last year.

 

This expansion has further enhanced the Naibu brand in existing markets.  In those regions where the Group has yet to fully establish a sales network, Naibu is now further positioned to strengthen local resources and open new outlets.  These areas continue to catch up with and even surpass the sales growth rate of the Group's developed markets.

 

Research and development ("R&D")

 

The Group continued to maintain a strong R&D team of around 95 (2012 H1: 93) staff at its Shishi and Jinjiang factories, and this team is responsible for the design of all shoes and clothing.

 

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").  The Group successfully launched a number of new designs during the 2013 seasonal fairs.  Naibu's distributors remained crucial to the R&D process during the year, providing market feedback and views on future sales potential.  The department plans to launch over 530 new Naibu products in 2013, almost 100 more products than last year.  Clothing is expected to account for nearly half of the expanded product lines.

 

Innovation is the key to Naibu's success.  The Group is constantly striving to offer value-added products with great quality and affordable prices for its target customers.  The Group is developing a new brand, "NIBO", based on a European fashion concept and this new brand is targeted to be launched in 2015.  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.

 

During the six month period ended 30 June 2013, the R&D expenditure as a proportion of Group turnover was 1.4% (2012 H2: 1.6%).  Naibu will further strengthen investment in R&D in the future.

 

Manufacturing

 

Naibu's production centers are located in Jinjiang and Shishi, both in Fujian Province, where the Group continues to lease two purpose-built production facilities operating a total of eight shoe production lines, four at each plant and where workers are engaged in stamping, sewing and stitching, and moulding.  Both plants ran without interruption throughout the period to meet strong demand for the Group's products.  This was achieved through the optimisation of production support systems and enhancing production efficiencies.

 

At 30 June 2013, the Group employed 1,950 production staff (H1 2012: 1,962).  Approximately 53.6% of the shoes sold and distributed by the Group during the period were produced at the manufacturing plants.  The remaining shoes, as well as all of the Group's clothes and accessories, were sourced from OEM suppliers.

 

In order to meet the increased production requirements of the Group, Naibu is planning to make a number of changes to its production facilities.  This will allow Naibu to respond with greater flexibility to market changes whilst providing the Group with enhanced control over the production process.

 

At the moment, Naibu leases a total of eight production lines at two sites, four each at Jinjiang and Shishi.  These facilities have served the Group well, but the production lines in Jinjiang are relatively old and the lease for the Shishi plant will expire in late 2013.  In order to consolidate and improve the efficiency of the Group's production, the Group is in the process of acquiring a plant in Quangang where it intends to establish eight production lines later this year.  This will be achieved by setting up six entirely new production lines, and a further two production lines will be transferred from Shishi.  The other two production lines in Shishi will be transferred to Jinjiang, and the existing four lines in Jinjiang will cease production.  The new production facility in Quangang is expected to commence operation by the end of 2013, and accordingly, the Group anticipates that it will be operating ten production lines in total by the end of the year.  The closure of the Shishi plant and the commencement of operations at the Quangang plant are expected to be concurrent and the Group does not anticipate any negative impact on its manufacturing capabilities in 2013.

 

The plants in Jinjiang and Quangang are approximately 50km apart and both are part of Quanzhou city.  Both the workforce and the R&D team are aware of the planned changes and many of them are willing to relocate to the new facility in Quangang.  The Group does not anticipate any difficulty in recruiting additional staff required due to the availability of skilled labour in Quanzhou.

 

Naibu also continues to execute on its growth strategy of investing in the central and western areas of China.  Whilst this has taken slightly longer than the Board had originally anticipated and which was a result of recent changes in the political leadership in China, negotiations with the People's Government of Dahzu County in Sichuan Province have now been concluded.  As a result of these negotiations, the Group has entered into an agreement with the People's Government of Dazhu County in Sichuan Province to purchase land use rights, for 13.3 hectares of land, to develop a Naibu Industrial Zone.

 

The Naibu Industrial Zone will include R&D, manufacturing and logistic facilities relating to the development of shoes, apparel, sports equipment, outdoor exercise goods and other sporting goods.  It is anticipated that the Naibu Industrial Zone will include other relevant upstream and downstream industries in the supply chain for such goods.

 

The Group will pay RMB 60 million for the land use rights, of which RMB8 million has already been paid as a deposit.  It is anticipated that the total cost of investment for the project will be RMB300 million.

 

As part of this development, the Board anticipates that a new factory with an additional 12 production lines will be built and fully operational in mid 2015.

 

Sales and distribution

 

The Group continued to operate its Marketing and Sales Centre in Fuzhou, with 71 staff (H1 2012: 70) 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 2013, Northern China, Eastern China and Southern China remained the key markets for Naibu.  Total revenues from these three regions in H1 2013 and H1 2012 accounted for 66.1% and 67.4% 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 2013, the Group maintained stable relationships with 25 distributors, and the number of Naibu stores increased to 3,144.  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 the 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 significantly.  Total sales space of Naibu stores increased to approximately 172,000 square meters as at the end of June 2013, with average annual sales of Naibu stores reaching a record of exceeding RMB11,000 per square metre, up 10.4% over the same period in 2012.  This shift paved the way for further widening of the sales base, particularly in regions such as Central China and South Western China.

 

Marketing

 

Naibu continued to invest in brand marketing and promotional work during the first half of 2013.  Advertising expenditure as a proportion of turnover during the six months period was 1.4% (H1 2012: 1.6%).  Through investment in television and other media advertising, Naibu branded products have continued to gain in popularity and have captured further market share, which in turn has enhanced the enthusiasm of the Group's distributors to expand the scale of their operations.  There were 104 new stores opened by distributors and sub-distributors during the period.  This was also supported by "front-line" information on consumer and competitor trends supplied by the Group's team of regional sales managers.

 

The marketing and sales teams analyse retail data and share market information on a timely basis with 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 renovation of store outlets at the end of 2012 to standardise store layout and improve brand image.  This has benefited sales through offering a refreshing new shopping experience for customers.

 

Management and staff

 

As at 30 June 2013, the Group had 2,320 full time staff.  Of these, approximately 2,200 were employed at the Group's production facilities in Jinjiang and Shishi, and the rest at the Group's headquarters in Fuzhou.  The Group offers staff various training programmes and promotion opportunities, and organises skills competition and social events for team building.  The Group continues to improve management systems and develop a strong corporate culture to attract talented staff.  Staff turnover rate remained low, in large part reflecting the relatively high salary levels and progressive working conditions.

 

I would like to thank all of the Group's directors and staff members for their hard work and support.  Their efforts are core to Naibu's ongoing success.

 

Interim Dividend

 

I am pleased to announce that the Board is proposing an interim dividend of 2 pence per share,with scrip dividend alternative.  The dividend will be paid on 16 December 2013 to shareholders on the register at the close of business on 11 October 2013.

 

Outlook

 

Looking ahead, industry players will continue to be challenged by inflation and increasing competition.  However, government policies that support urbanisation, the popularisation of sports and increasing disposal income will continue to provide opportunities for China's sportswear market.  Moreover, achieving sustainable business growth and creating value for stakeholders in the long term are objectives which the Board continues to focus on.  The Group will consistently use its competitive edge to seize every market opportunity.  Naibu will also enhance its execution capabilities at all levels to gain market share and prudently mitigate future business risks.

 

The Board is confident that Naibu is well positioned to continue with further strong growth through the remainder of 2013 and beyond, and to deliver further value as the Group continues with its planned expansion into more Chinese cities and provinces.

 

Huoyan Lin

Executive Chairman

17 September 2013

 

Financial review

 

Key financials

 

	H1 2013 (RMB)	H1 2012 (RMB)
Revenue	950.1 million	788.7 million
Profit before tax	214.8 million	184.9 million
Earnings per share (basic)	2.90	2.59
Cash used in operations	63.2 million	3.0 million
Proposed interim dividend per share	2 pence	Nil

 

Turnover

Naibu's revenue increased year-on-year by 20.5% during the half year period, rising to a record RMB950.1 million (approximately £100.8million) thanks to increases in both sales volume and unit prices, as a result of a successful broadening of Naibu's product range, a steady expansion of the Group's distribution network and the customer's wide acceptance.

 

Turnover Breakdown by Product

Shoes remained the strongest contributor of turnover to the Group.  Clothing and accessories accounted for 44.4% 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 which resulted in strong clothing sales in the first half of 2012.

 

	For the six months period ended                   2013                                             2012
Category	Revenue (RMB, 000)	% of turnover	Revenue (RMB, 000)	% of turnover	% of increase
Shoes	507,073	53.4%	409,630	51.9%	23.8%
Clothing	422,267	44.4%	363,037	46.0%	16.3%
Accessories	20,740	2.2%	16,074	2.1%	29.0%
Total	950,080	100.0%	788,741	100.0%	20.5%

 

Turnover Breakdown by Region

Sales in the Group's principal markets of North, East and South China accounted for 66.1% of total revenues in H1 2013 (H1 2012: 67.4%), while market growth in Central China and South-West China shows the greatest increase during the period.  The Group will continue to strengthen and build its distribution channels in North West and Central China.

 

Area	Six Months Period Ended 30 June 2013		Six Months Period Ended 30 June 2012		% change
	(RMB,000)	% of turnover	(RMB,000)	% of turnover
North China	244,510	25.7%	213,016	27.0%	14.8%
East China	225,110	23.7%	186,949	23.7%	20.4%
South China	157,948	16.6%	131,648	16.7%	20.0%
Central China	116,776	12.3%	90,201	11.4%	29.5%
North-West China	83,037	8.8%	69,346	8.8%	19.7%
South-West China	122,699	12.9%	97,581	12.4%	25.7%
Total	950,080	100.0%	788,741	100.0%	20.5%

 

Cost of Sales

Cost of sales of the Group for the first half of 2013 increased by 22.0% year on year to RMB 684.6 million.

 

	Six months ended 30 June 2013		Six months ended 30 June 2012		% Change
	Operating Cost (RMB,000)	% of total costs of sales	Operating Cost (RMB,000)	% of total costs of sales
Group Manufacturing (Shoes)
Raw materials	142,877	20.9%	156,578	27.9%	-8.8%
Labour costs	42,955	6.2%	46,297	8.3%	-7.2%
Overheads	13,659	2.0%	10,480	1.9%	30.3%
Subtotal	199,491	29.1%	213,355	38.1%	-6.5%

 

OEM Supplies
Shoes	172,418	25.1%	84,150	15.0%	104.9%
Clothing	298,829	43.7%	252,800	45.0%	18.2%
Accessories	13,844	2.0%	10,850	1.9%	27.6%
Subtotal	485,091	70.9%	347,800	61.9%	39.5%
Total	684,582	100.0%	561,155	100.0%	22.0%

 

During the period, the percentage of OEM supplies increased significantly compared with the same period last year, a result of internal production capacity constraints.

 

During the six months under review, research and development costs were RMB12.9 million, an increase of 3.5% year on year, representing 1.4% of the turnover (H1 2012: 1.6%), or 1.9% of the cost of sales (H1 2012: 2.2%).  The Group will continue to increase investment in research and development to further improve product quality and adapt to consumer preference.

 

Gross Profit

Gross profit for the Group was RMB265.5 million for the first half of 2013.  The gross profit margin was 27.9%, down from 28.9% compared to the same period of 2012.  This was mainly due to two reasons: the first was the increased delivery of shoe products during the period, and shoes having a lower gross profit margin than the other two product categories; and the second was the increase in costs being higher than increase in the price of shoes and clothing during the period under review, mainly as a result of cost pressure in the industry.  In addition, as mentioned above, the percentage of self produced shoes was less and the rest had to resort to OEM suppliers.  This situation will be alleviated once the Group expands its production facilities to meet the strong market demand which will also lead to margin improvement.

 

	For the six months period ended                         2013                                                              2012
Category	Gross Profit (RMB, 000)	Gross Profit Margin %	Gross Profit (RMB, 000)	Gross Profit Margin %
Shoes	135,165	26.7%	112,125	27.4%
Clothing	123,438	29.2%	110,237	30.4%
Accessories	6,895	33.3%	5,224	32.5%
Total	265,498	27.9%	227,586	28.9%

 

Other income

Other income includes interest income and foreign exchange gain of the Group.  During the period under review, the interest income of the Group was RMB0.8 million, and the foreign exchange gain reached RMB2.5 million.

 

Selling and distribution expenses

Selling and distribution expenses increased by 39.5% to RMB40.7 million during the six months period under review, primary as a result of the increase in amortisation expenses related to the store decoration subsidy for distributors' retail outlets.

 

At the end of 2012, the Group granted subsidies of RMB54 million to distributors for the renovation of store outlets.  These stores were mostly opened before 2009 and are therefore relatively old.  In order to standardise the store layout, improve brand image and the profile of the Group as a listed company, the Group decided to grant a renovation subsidy to distributors for store refurbishment.  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 its competitive advantage in the market.

 

During the six months under review, the amount of advertising and marketing expenses increased by 6.3% year-on-year to RMB13.1 million.  Advertising and marketing expenses as a percentage of turnover was 1.4% (H1 2012: 1.6%), and the Group will continue to consolidate brand image and strengthen market awareness in order to further increase market share.

 

Administrative expenses

Administrative expenses fell slightly by 4.4% to RMB13.4 million for the six months ended 30 June 2013.

 

The decrease was mainly due to reduced expenses for agency services.  During 2012, the Group successful listed on the AIM market of the London Stock Exchange, and the corresponding IPO costs were higher compared with the post-IPO maintenance service fees.

 

Income tax expenses

During the period under review, income tax expenses for the Group amounted to RMB55.5 million (H1 2012: RMB49.3 million), including current income tax expenses RMB54.1 million and deferred income tax expenses RMB1.4 million.  The current income tax charge for the six months ended 30 June 2013 has been based on the standard corporate income tax rate of PRC 25%, being the same for the six months ended 30 June 2012.

 

	Six months period ended 30 June		Year Ended 31 December
Item	2013	2012	2012
Profit margin before tax	22.6%	23.4%	21.5%
Impact of income tax expense on net profit margins	-5.7%	-6.0%	-5.5%
Impact of deferred tax on net profit margins	-0.15%	-0.2%	-0.15%
Net profit margins	16.8%	17.2%	15.8%

 

Profit for the period

Profit for the period under review increased to RMB159.3 million, representing an increase of 17.5% year-on-year.  Basic earnings per share for the period under review was RMB2.90, an increase of 12.0% year-on-year.  The net profit margin for the period under review was 16.8%, and the reduced gross profit margin and higher selling and distribution expenses contributed to the reduced net profit margin compared with the same period in 2012.

 

Balance sheet position

As of 30 June 2013, the Group's total assets amounted to RMB1,329.0 million, total liabilities were RMB200.3 million, and shareholders' equity rose to RMB1,128.8 million.  The Group has no bank loans nor overdue debts.

 

Category	Six Months Period Ended 30 June		Year Ended 31 December
	2013	2012	2012
Asset-liability ratio	15.1%	16.0%	17.0%
Current ratio	677.9%	648.1%	589.8%
Proportion of current assets	97.4%	98.8%	96.3%
Proportion of shareholders' equity	84.9%	84.0%	83.0%

 

As of 30 June 2013, the Group's cash and cash equivalent was RMB389.8 million, down from RMB452.9 million as at 31 December 2012.  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 2013 was 102 days (year ended 31 December 2012: 95 days).  This was mainly due to the reduction in trade payable days when compared with six months ago.

 

Trade receivables rose by 37.9% to RMB710.2 million as at 30 June 2013 compared to six months ago, although the average trade receivable turnover days fell to 116 days during the period under review.  None of the trade debtors were considered as impaired, and 93.0% of the trade debts were within 90 days.  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 20 days for the six months ended 30 June 2013, a further decrease from the level of in 2012, which reflects relatively good stock control and management.  Inventory amounted to RMB83.5 million, an increased of 28.8% when compared with the RMB64.8 million at 31 December 2012, and which is in line with the business scale and sales growth of the six months period under review.

 

The average trade payable cycle was 33 days for the six months ended 30 June 2013, compared with the 47 days for the year ended 31 December 2012.  This is due to timely payment to suppliers to secure quality and cost of raw materials.

 

Category	Six Months Period Ended 30 June		Year Ended 31 December
	2013	2012	2012
Accounts receivable (average debtor days)	116	124	121
Inventory (days)	20	26	21
Accounts payable (days)	33	44	47

 

As at 30 June 2013, the balance of prepayments to suppliers was RMB65.2 million, a slight decrease when compared with the RMB65.5 million at the year ended 31 December 2012.  The prepayments were upfront deposits paid to suppliers for the acceptance of orders and establish long-term cooperation relationship.  The main reason for the relatively high level of prepayment to trade suppliers was to lock in a favourable purchase price with suppliers and prevent the unfavourable fluctuation of raw material cost (the inflation level in China is relatively higher) to secure the gross margin of products.

 

Employees and emoluments

As at 30 June 2013, the Group employed a total of 2,320 full time employees in the PRC which included management and administrative staff, R&D staff, salespersons and workers.

 

For the six months ended 30 June 2013, the Group's total remuneration of employees (including non-executive directors) was RMB38.9 million, representing 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 2013, 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.  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.  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.

 

Dividend

Based on the business performance of the Group, to reward Naibu's shareholders for their long term support, the Board has decided to announce an interim dividend payment of 2 pence per share to our shareholders, with the option of scrip dividend.  This dividend is subject to shareholder approval and the appropriate approvals of the Chinese authorities.  The dividend of 2 pence per share is expected to be paid on 16 December 2013 to shareholders on the register at the close of business on 11 October 2013.  The shares will go ex-dividend on 9 October 2013.

 

Li Zhen

Chief Financial Officer

17 September 2013

Unaudited condensed consolidated statement of comprehensive income

For the six month period ended 30 June 2013

 

		Six months ended 30 June 2013	Six months ended 30 June 2012	Year ended 31 Dec 2012
	Notes	Unaudited	Unaudited	Audited
		RMB'000	RMB'000	RMB'000
Revenue	3	950,080	788,741	1,676,613
Cost of sales		(684,582)	(561,155)	(1,207,224)
Gross profit		265,498	227,586	469,389
Other income		3,376	525	1,976
Selling and distribution expenses		(40,726)	(29,187)	(79,044)
Administrative expenses		(13,369)	(13,991)	(31,868)
Profit before taxation		214,779	184,933	360,453
Income tax expense	4	(55,496)	(49,325)	(95,323)
Profit after taxation for the period attributable to equity holders		159,283	135,608	265,130
Other comprehensive income, net of tax -Exchange differences on translating foreign operations		(2,608)	(1,441)	480
Total comprehensive income for the period attributable to equity holders of the parent		156,675	134,167	265,610
Earnings per share (RMB)	6
Basic		2.90	2.59	4.94
Diluted		2.84	2.56	4.86

 

 

Unaudited consolidated statement of financial position as at 30 June 2013

 

 

	Notes	As at 30 June 2013	As at 30 June 2012	As at 31 December 2012
		Unaudited	Unaudited	Audited
		RMB'000	RMB'000	RMB'000
Assets
Non-current assets
Property, plant and equipment		10,245	11,850	10,568
Long-term prepayment		24,227	-	33,275
		34,472	11,850	43,843
Current assets
Inventories		83,521	80,560	64,829
Trade and other receivables		821,298	568,838	609,475
Cash and cash equivalents		389,754	338,966	452,906
		1,294,573	988,364	1,127,210
Total assets		1,329,045	1,000,214	1,171,053

Equity and liabilities
Current liabilities
Trade payables		120,034	89,193	134,595
Other payables and accruals		36,923	35,514	35,009
Amount due to shareholders		2,155	854	1,059
Income tax payable		31,869	26,945	20,446
		190,981	152,506	191,109
Non-current liabilities Deferred income tax liabilities		9,306	7,068	7,861
Total liabilities		200,287	159,574	198,970
Capital and reserves
Stated capital account	5	54,314	54,314	54,314
Reserves	5	148,012	120,987	150,621
Retained earnings		926,432	665,339	767,148
Total equity attributable to equity holders of the parent		1,128,758	840,640	972,083
Total equity and liabilities		1,329,045	1,000,214	1,171,053

 

Unaudited condensed statement of cash flows

For the six month period ended 30 June 2013

 

	Six months ended 30 June 2013	Six months ended 30 June 2012	Year ended 31 Dec 2012
	Unaudited	Unaudited	Audited
	RMB'000	RMB'000	RMB'000
Cash flows from operating activities
Profit for the period	214,779	184,933	360,453
Adjustments for:
Depreciation of property, plant and equipment	10,370	1,300	5,515
Interest income	(837)	(525)	(1,281)
Operating profit before working capital changes:	224,312	185,708	364,687
Changes in working capital
(Increase)/decrease in inventories	(18,693)	(1,586)	14,145
Increase in trade and other receivables	(214,429)	(48,980)	(89,149)
Decrease in trade payables	(14,561)	(93,147)	(47,743)
Increase in accruals and other payables	1,914	1,117	612
Cash generated from/(used in) operating activities	(21,457)	43,112	242,552
Interest received	837	525	1,281
Income tax paid	(42,628)	(46,621)	(96,875)
Net cash (used in)/generated from operating activities	(63,248)	(2,984)	146,958
Cash flows from investing activities
Acquisition of property, plant and equipment	(1,000)	-	(17)
Refurbishment of property, plant and equipment	-	-	(36,191)
Net cash used in investing activities	(1,000)	-	(36,280)
Cash flows from financing activities
Advances from shareholders	1,096	835	1,041
Share issue proceeds, net of share issue costs	-	54,314	54,314
Net cash from financing activities	1,096	55,149	55,355
Net increase in cash and cash equivalents	(63,152)	52,165	166,105
Cash and cash equivalents at the beginning of the period	452,906	286,801	286,801
Cash and cash equivalents at the end of the period	389,754	338,966	452,906