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Naibu Global Intl Co (NBU)

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Friday 29 June, 2012

Naibu Global Intl Co

Final Results

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

 

 

 

Group sales revenues

RMB 1.49 billion

(2010: 1.25 billion)

+19.8%

Pre-tax profit

RMB 345.2 million

(2010: 284.1 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. £34.5 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. £34.5 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 turnover

RMB'000

      % of turnover

% change

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 turnover

RMB'000

% of turnover

% change

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

(RMB'000)

% Sales cost

Operating cost

 (RMB'000)

%  Sales cost

% Change

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 2011


Year ended 31 December 2010

 

Category

 

 

Gross profit

RMB'000

Gross profit margin %


Gross profit

RMB'000

Gross profit 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


 

Category

2011

RMB'000

2010

RMB'000

Change

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

 

 

 


 

Notes

2011

RMB'000

2010

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




financiastatements 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, planand 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


 

Share Capital (Note 20) RMB'000

 

Capital Contribution (Note 21(a)) RMB'000

Currency Translation Reserve (Note 21(b)) RMB'000

 

Statutory Reserve (Note 21(c)) RMB'000

 

 

Retained Profits RMB'000

 

 

 

Total

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

RMB'000

2010

RMB'000

Cash flows from operating activities



Profit before  taxation

345,201

284,050

Adjustments for:



Depreciation of property, planand 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, planand 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
 
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