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Naibu Global Intl Co (NBU)

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Wednesday 18 September, 2013

Naibu Global Intl Co

Interim Results

RNS Number : 2361O
Naibu Global International Co PLC
18 September 2013
 



 

 

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





 


Unaudited condensed consolidated statement of changes in equity

For the six month period ended30 June 2013

 


Stated

capital

account

Statutory

reserve

Retained

earnings

Reconstruction

reserve

Foreign

currency

translation

reserve

Total equity attributable to

equity holders

of the parent


RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000








Balance at 1 January 2013

54,314

116,547

767,149

31,415

2,658

972,083

Profit for the period

-

-

159,283

-

-

 

159,283

 

Other comprehensive income:







Exchange differences on translation of foreign operations

-

-

-

-

(2,608)

 

(2,608)

Total comprehensive income for the period

-

-

159,283

-

(2,608)

 

156,675

Balance at 30 June 2013

54,314

116,547

926,432

31,415

50

1,128,758

 

 


Stated

Capital

account

Statutory

reserve

Retained

earnings

Reconstruction

reserve

Foreign

currency

translation

reserve

Total equity

attributable to

equity holders

of the parent







RMB'000








Balance at 1 January 2012

-

88,835

529,731

31,426

2,178

652,170

 

 







Issue of ordinary shares, net of share issue costs

54,314

-

-

(11)

-

54,303








Profit for the period

-

-

135,608

-

-

135,608

 

Other comprehensive income:







Exchange differences on translation of foreign operations

-

-

-

-

(1,441)

(1,441)

Total comprehensive income for the period

-

-

135,608

-

(1,441)

134,167

Balance at 30 June 2012

54,314

88,835

665,339

31,415

737

840,640


Notes to the financial information

 

1

General information

 

The Company was incorporated in Jersey, the Channel Islands, on 15 December 2011.  The Company's registered office is at 26 New Street, St Helier, Jersey JE4 9WG, Channel Islands.  The nature of the Company's operations and its principal activities are to act as the holding company of a group engaged in the design, manufacture and supply of Naibu branded sports shoes and the design and supply of Naibu branded clothing and accessories.

 

2

Basis of preparation

 

The financial information for the six months ended 30 June 2013 set out in this interim financial information is unaudited and does not constitute statutory financial statements.

 

The financial information for the year ended 31 December 2012 set out in this interim financial information does not comprise the Group's statutory financial statements.  The consolidated results of the Company for the year ended 31 December 2012 have been audited.  The auditor has expressed an unqualified opinion on those financial statements in their report dated 19 June 2013.

 

The interim financial information has been prepared in accordance with the principles of International Financial Reporting Standards as adopted by the European Union ("IFRSs"). The standards have been applied consistently (except as otherwise stated).

 

The principal accounting policies used in preparing the interim results are those the Group expect to apply in its financial statements for the year ending 31 December 2013 and are consistent with the principles of those applied in the financial statements of the Company for the year ended 31 December 2012.

 

The preparation of the interim financial report in conformity with the principles of IFRSs, requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis.  Actual results may differ from these estimates.

 

The interim financial report contains consolidated financial information and selected explanatory notes.  The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance since the financial statements for the year ended 31 December 2012.  The interim financial report thereon does not include all of the information required for full set of financial statements prepared in accordance with IFRSs.

 

The directors approved the interim financial information for the six months ended 30 June 2013 on 17 September 2013.

 

Copies of this interim financial information will be available on the Company's website.

 

3

Turnover and segment reporting

 

(a) Turnover

 

The principal activities of the Group are design, manufacturing and trading of sporting goods and leisure wear, including shoes, apparels and accessories in the PRC. Turnover represents the sales value of goods sold less returns, discounts and value added taxes and other sales taxes, which are analysed as follows:

 


Six months

ended

Six months

ended

Year

ended


30 June 2013

30 June 2012

31 Dec 2012


RMB'000

RMB'000

RMB'000





Shoes

507,073

409,630

919,271

Apparels

422,267

363,037

706,457

Accessories

20,740

16,074

50,885


950,080

788,741

1,676,613

 

  

The Group's customer base is diversified.  For the six months ended 30 June 2013, there was only one customer with whom the transaction has exceeded 10% of the Group's turnover (2012: One).

 

(b) Segment reporting

 

The Group has adopted IFRS 8, Operating Segments for the June 2013 interim reporting. IFRS 8 requires that segments represent the level at which financial information is reported to the Board of directors ("The Board") of the Group, being the chief operating decision maker as defined in IFRS 8.  The Board consists of the Chairman, the Chief Executive Officer, the Chief Financial Officer and the independent director.  The Board determines the operating segments based on reports reviewed and used by the Board for strategic decision-making and resource allocation.

 

Segment information is presented in respect of the Group's geographical and operating segments. The Group's operating segments are as follows:

 

(i)         Shoes

(ii)        Apparel and accessories

 



Operating segments - Six months ended 30 June 2013

 







Shoes

Apparel and

accessories

Head office

and other

adjustments

Consolidated


RMB'000

RMB'000

RMB'000

RMB'000






Revenue

507,073

443,007

-

950,080

Gross profit

135,164

130,334

-

265,498

Profits before taxation

108,004

106,604

171

214,779

Taxation

29,619

25,877

-

55,496

Net profits after tax

78,385

80,727

171

159,283

Segment assets

493,834

435,358

399,853

1,329,045

Segment liabilities

113,304

70,595

16,388

200,287

Finance income

444

388

2,544

3,376

Depreciation and amortisation

5,906

4,464

-

10,370

Capital expenditure

534

466

-

1,000

 

Operating segments - Six months ended 30 June 2012

 







Shoes

Apparel and

accessories

Head office

and other

adjustments

Consolidated


RMB'000

RMB'000

RMB'000

RMB'000






Revenue

409,630

379,111

-

788,741

Gross profit

103,967

123,619

-

227,586

Profits before taxation

94,038

90,895

-

184,933

Taxation

25,082

24,243

-

49,325

Net profits after tax

68,956

66,652

-

135,608

Segment assets

370,243

290,905

339,066

1,000,214

Segment liabilities

91,335

56,361

4,810

152,506

Finance income

294

231

-

525

Depreciation and amortisation

1,188

112

-

1,300

Capital expenditure

-

-

-

-

 

Operating segments - Year ended 31 December 2012

 







Shoes

Apparel and

accessories

Unallocated

and other

adjustments

Consolidated


RMB'000

RMB'000

RMB'000

RMB'000






Revenue

919,271

757,342

-

1,676,613

Gross profit

241,350

228,039

-

469,389

Profit before taxation

186,982

182,971

(9,500)

360,453

Taxation

52,237

43,086

-

95,323

Net profit after tax

134,745

139,885

(9,500)

265,130

Segment assets

377,472

330,506

463,075

1,171,053

Segment liabilities

85,801

100,172

12,997

198,970

Finance income

703

579

694

1,970

Depreciation and amortisation

3,744

1,771

-

5,515

Capital expenditure

19,853

16,355

-

36,208

 



 

4

Income tax expense

 

The income tax charge for the six months ended 30 June 2013 has been based on the standard corporate income tax rate of 25%, being the same for the six months ended 30 June 2012.

 

Deferred tax for the Group is a result of the tax treatment for dividend payments.  Pursuant to prevailing PRC tax laws and regulations, dividends distributed to a foreign investor by Foreign Invested Enterprises ("FIE") in the PRC are subject to a withholding tax of 5% to 10%.  Deferred tax liabilities arising from such tax rules are recognised to the extent that the management intends to distribute dividends from retained earnings.  The PRC corporate rules stipulates that FIE should provide 10% of the current year profit for the reserve fund, and the remaining 90% can be used for distribution to investors.  During the period, the deferred tax calculation of Group is based on 10% of the retained earnings which can be distributed to investors.

 


Six months ended 30 June


2013

2012


RMB'000

RMB'000




PRC income tax

54,051

47,623

PRC withholding tax

-

-

Total current tax

54,051

47,623

Deferred tax

1,445

1,702

Total income tax charge

55,496

49,325

 

 

5

Capital and reserves

 

(a) Stated capital account

For the six months ended 30 June 2013, no ordinary shares of no par value were issued.  Therefore, the stated capital account remained unchanged from 31 December 2012: the number of ordinary shares in issue was 54,838,716 with the stated amount of RMB 54,314,000.

 

Please note that the share capital of Naibu (China) Co., Ltd has been fully paid up by its holding company Naibu (H.K) International Investment Limited in May 2012.

 

(b) Statutory reserve

Pursuant to applicable PRC regulations, PRC subsidiaries are required to appropriate 10% of their profit after tax (after offsetting prior year losses) to the statutory reserve until such reserve reaches 50% of the registered capital.  The transfer to the reserve must be made before distribution of dividends to shareholders.  The statutory reserve can be utilised, upon approval by the relevant authorities, to offset accumulated losses or to increase paid-in capital of the subsidiary, provided that the balance after such issue is not less than 25% of its registered capital.

 

(c) Reconstruction reserve

Reconstruction reserve arises from the reorganisation of the group structure during the year.

 

(d) Foreign currency translation reserve

Currency translation reserve represents translation differences arising from translation of functional currency financial statements into the Group's presentation currency.

 

6

Earnings per share

 

(a) Basic

 

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period:

 


Six months

ended

Six months

ended

Year

ended


30 June

2013

30 June

2012

31 December

2012


RMB'000

RMB'000

RMB'000





Profits attributable to equity holders of the Company (RMB'000)

159,283

135,608

265,130

Weighted average number of ordinary shares in issue ('000)

 

 

54,839

 

 

52,299

 

 

53,629





Profit per share (RMB)

2.90

2.59

4.94

 

(b) Diluted

 

Diluted earnings per share is calculated by adjusting the weighted number of ordinary shares in issue to assume conversion of all potential dilutive ordinary shares during the period.

 


Six months

ended

Six months

ended

Year

ended


30 June

2013

30 June

2012

31 December

2012


RMB'000

RMB'000

RMB'000





Profit attributable to equity holders of the Company (RMB'000)

 

159,283

 

135,608

 

265,130

Weighted average number of ordinary shares in issue ('000)

 

 

56,033

 

 

52,896

 

 

54,524





Profit per share (RMB)

2.84

2.56

4.86

 

The weighted average number of shares for the purposes of diluted earnings per share include approximately 1.2 million options of shares granted to Giles Elliott and Daniel Stewart & Company as part of the IPO process.  The share options have an exercise price of £1.24 and expire after five years.

7

Significant related party transactions

 

In addition to the transactions and balances detailed elsewhere in this report, the Group had the following transactions with related parties at agreed rates:

 

(1)  Transaction with related parties

 


Six months period ended

30 June


2013

2012


RMB'000

RMB'000




Rental paid to a related party(a)

480

480

Deposit paid to a related party(a) for acquisition of factory premise

-

10,000

Other receivable from a related party(a) (deposit payment)

 

10,100

 

100

Remuneration of Ms. Lin Zhenzhi(b)

68

66

 

(a)Related party relates to Fujian Jun Xiang Bags Co., Ltd. (formerly known as Quanzhou Naibu Sports Co., Ltd) in which a director, Mr Lin Huoyan was the shareholder in 2008 and 2009.  Mr Lin Huoyan transferred his shareholding to his mother in 2010.

 

The transaction for the acquisition of factory premise owned by the related party Fujian Jun Xiang Bags Co., Ltd. did not take place and was cancelled in 2012.  The deposit for the property acquisition RMB10 million has not been returned and was transferred to the deposit of long-term lease payment for the property.

 

(b) Ms. Lin Zhenzhi is the finance director of the Group's operating subsidiary Naibu China Co., Limited and she is Mr. Lin Huoyan's sister.

 

 

(2)  Remuneration of group directors

 

Directors' remuneration

  (inclusive of retirement scheme contribution)

Six month period ended 30 June


2013

2012


RMB'000

RMB'000




-       Mr. Lin Huoyan

900

345

-       Mr. Lin Congdeng

798

272

-       Ms. Li Zhen

246

-

-       Mr. Giles Elliott

287

156

-       Mr. David Thomas

191

104

-       Mr. Stephen Cheung

191

104

-       Mr. Chi Keung (Kenny) Law(c)

316

391

 

(c) On 22 January 2013, Mr. Kenny Law resigned from the board and the position of CFO and decided to return to Singapore.  On the same day, the Company announced the appointment of Ms. Zhen Li, as Mr. Law's successor as CFO of the Company.  The remuneration of Mr. Kenny Law paid during the six months period ended 30 June 2013 also included the amount of SGD50,000 as a listing bonus.

 

8

Dividends

 

Dividends disclosed represent dividends on ordinary shares declared and paid by the Company to its equity holders.

 

The Company has declared a final dividend for the year ended 31 December 2012 of 4 pence per share. The dividend will be paid on 30 September 2013 by the Company.

 

The Company has resolved to pay an interim dividend in respect of the period ended 30 June 2013 of 2 pence per share, subject to shareholder approval and the appropriate approval of the Chinese authorities.  The Extraordinary General Meeting to seek shareholder approval for the interim dividend is scheduled to occur at 11 a.m. on Monday 7 October 2013 at the offices of Daniel Stewart & Co., Beckett House, 36 Old Jewry, London EC2R 8DD.  A Notice of the EGM will be issued separately to all shareholders in due course.

 

 

9

Non-adjusting events after the reporting period

 

 

Except for the interim dividend as set out in Note 9 above, the other non-adjusting event after the reporting period is disclosed below:

 

On 12 September 2013, Naibu (H.K.) International Limited, a subsidiary of Naibu Global International Company PLC, signed an agreement with the People's Government of Dazhu County in Sichuan Province to the Group 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.

 

 

 

- Ends -


This information is provided by RNS
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