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CHIA XINI ADR : China Xiniya Fashion Limited Reports Fiscal Year 2010 Financial Results

03/29/2011 | 05:25am US/Eastern

China Xiniya Fashion Limited ("Xiniya" or the "Company") (NYSE:XNY), a leading provider of men's business casual apparel in China, today reported financial results for fiscal year 2010. The financial statements and other financial information included in this press release are prepared in conformity with International Financial Reporting Standards ("IFRS").

The Company publishes its financial statements in Renminbi ("RMB"). Unless otherwise noted, all translations from RMB to U.S. dollars were made at the rate as certified by the Federal Reserve Board of the United States as of December 30, 2010, which was RMB6.6000 to $1.00.

Fiscal Year 2010 Highlights

  • Total revenue in 2010 increased by 33.8% year-over-year to RMB899.3 million ($136.3 million) - at the high-end of prior guidance of RMB880 million to RMB900 million.
  • Gross profit margin was 34.5% in 2010 compared to 34.7% in 2009; a 21.6% increase in ASP helped to offset the increase in materials and labor costs.
  • Net profit increased 29.8% year-over-year to RMB252.3 million compared with RMB194.3 million in 2009.
  • Earnings per ADS increased by 27.1% year-over-year to $0.75 per ADS in 2010.
  • Non-IFRS earnings per ADS (excluding share-based compensation expenses) increased by 28.8% year-over-year to $0.76 per ADS in 2010.
  • Xiniya added 223 new retail outlets opened by its network of authorized retailers, which was higher than the original planned increase of 180-200 new outlets.

Guidance

  • Following a successful bi-annual sales fair held in September 2010, first quarter 2011 revenue in RMB is expected to increase by 29%-30% compared to the first quarter of 2010. Gross margin in the first quarter of 2011 is expected to range between 33%-34% versus 32.5% in the first quarter of 2010.
  • Earnings per ADS are expected to be in the range of $0.08-$0.09 compared to $0.09 in the first quarter of 2010, due to the expiration of the Company's preferential PRC tax treatment at the end of 2010. Xiniya's tax rate will increase to 25% from 2011 onwards versus a rate of 12.6% in 2010.
  • Revenue in RMB in the first half of 2011 is expected to increase by 27%-30% and gross margin is expected to be in the range of 32-33% compared with 31.9% in the first half of 2010.
  • Xiniya plans to increase the number of retail outlets managed or authorized by its distributors by approximately 180 to 220 in 2011.
  • Through February 2011, Xiniya's network of authorized distributors added 28 new retail stores compared to 24 stores added in the first two months of 2010. As of March 28, 2011, a total of 41 new retail stores have been added, compared to 35 new stores added in the first three months of 2010. In 2010, 39% of our new stores for the year were opened in the first half of the year, while 61% of the new stores were opened in the second half.

Mr. Qiming Xu, Chairman and Chief Executive Officer, commented, "After our successful listing on the New York Stock Exchange last November, I am pleased to announce our strong operating performance for the year ended December 31, 2010. Our business casual assortment was well received in the marketplace and was the main driver behind our solid sales growth for the year. Going forward, we expect continued growth in the first half of 2011 and continued momentum during the year as we will be allocating more resources towards our marketing activities. We are strengthening our brand to position ourselves for long-term growth and become one of the leading menswear brands in China."

Fiscal Year 2010 Results

Revenue for the year ended December 31, 2010 was RMB899.3 million, compared with revenue of RMB672.1 million for the year ended December 31, 2009, which represented a 33.8% increase. Revenue was driven by volume growth of 10.0%, with the number of units sold increasing from 5.1 million units in 2009 to 5.6 million units in 2010. ASP grew 21.6% from RMB131.7 in 2009 to RMB160.2 in 2010, which was attributable to approximately a 13% benefit from a change in product mix and approximately an 8% increase to reflect higher materials and labor costs.

At the end of 2010, Xiniya completed the restructuring of its department store chains operated by department store operators, placing them under the supervision of its distributors. This initiative increased sales rebates in 2010 by approximately RMB9 million, which negatively impacted revenue growth by approximately 1% for the full year. Xiniya will begin to realize the full effect of an increase in sales rebates granted to distributors from 2011 onwards, but the Company believes this is an important measure to streamline its distribution network and strengthen control over its retail channels, which will ultimately contribute to improved long-term operational efficiency.

During 2010, Xiniya's authorized network of retailers opened 223 new retail outlets, which was higher than the Company's original planned increase of 180-200 new outlets. The total store count as of December 31, 2010 was 1,404. The Company places significant emphasis on opening quality stores and maintaining sustainable store expansion rates. The chart below sets forth the number of retail stores by outlet type.

 
As of December 31,
Outlet Type          

2008

              2009               2010
Flagship 1 1 1
Managed by Distributors 30 49 68
Managed by Department Store Chains 257 304 326
Managed by Authorized Retailers 720               827               1,009
Total Store Counts 1,008               1,181               1,404

Gross profit increased 32.9% to RMB310.0 million in 2010 from RMB233.3 million in 2009. Gross margin was 34.5% compared with 34.7% achieved in 2009. The modest decline in gross margin was mainly attributable to the increase in outsourced production and the increase in sales rebates arising from the restructuring of our sales outlets that resulted in the department store chains coming under the direct supervision of the distributors. ASP growth of 21.6% in 2010 helped to mitigate higher materials and labor costs.

Selling and distribution expenses increased by 38.0% year-over-year due to an increase in freight, sales fair and packaging expenses. Advertising and promotional expense accounted for RMB3.9 million, or 0.4% of revenue, in 2010, compared with RMB4.5 million, or 0.7% of revenue, in 2009. This expense was mainly related to the sponsorship agreement with the Company's spokesperson, Jacky Cheung, one of the leading pop stars in China.

Administrative expenses were significantly higher, rising to RMB10.1 million in 2010 from RMB2.9 million in 2009, due to an increase in the number of personnel, public company listing fees of approximately RMB2.2 million and share-based compensation expenses of approximately RMB2.2 million. Furthermore, the number of administrative and sales staff increased to 85 in 2010 compared to 62 in 2009.

Operating profit before taxes of RMB288.8 million in 2010 represented an increase of 29.8% compared with RMB222.5 million in the prior year. Operating margin was 32.1% in 2010 compared with 33.1% in 2009.

Non-IFRS operating income (ie, excluding share-based compensation expenses) in 2010 increased 30.8% to RMB290.9 million compared with RMB222.5 million in the prior year. Non-IFRS operating income margin was 32.4% in 2010 compared with 33.1% in the prior year.

Interest income was RMB0.8 million in both 2009 and 2010.

Income tax expense was RMB36.4 million in 2010, which resulted in an effective tax rate of 12.6%. This compares with income tax expense of RMB28.1 million and an effective tax rate of 12.6% in 2009.

Profit for the year increased 29.8% year-over-year to RMB252.3 million compared with RMB194.3 million. Earnings per ADS were $0.75 per ADS in 2010, compared to $0.59 per ADS in 2009. Non-IFRS earnings per ADS (excluding share-based compensation expenses) increased by 28.8% year-over-year to $0.76 per ADS in 2010.

Financial Position

As of December 31, 2010, the Company had cash and cash equivalents of RMB862.8 million. The cash balance included RMB519.9 million, or approximately $78.8 million in net proceeds from the Company's initial public offering of its American depositary shares, which was successfully completed on November 23, 2010.

As of December 31, 2010, the Company had trade receivables of RMB221.4 million arising wholly from its sales recognized during the fourth quarter of 2010. The trade receivables as of December 31, 2010 were down from RMB276.0 million in trade receivables as of September 30, 2010 which were entirely related to sales recognized during the third quarter of 2010. The trade receivables outstanding as of December 31, 2010 were fully collected by March 28, 2011 in accordance with the Company's standard maximum 90-day credit terms. The three-months moving average trade receivables turnover days were 67 days and 64 days as of December 31, 2010 and March 28, 2011, respectively. The trade receivables as of March 28, 2011 are entirely related to sales recognized during the first quarter of 2011.

Outlook for First Quarter 2011

Following a strong response to the Xiniya brand during the bi-annual sales fair in September 2010, revenue for the first quarter ended March 31, 2011, is expected to increase 29%-30% in RMB terms, based on the anticipated increase in unit volume of approximately 8%-9% and ASP growth of approximately 18%-19%. ASP is expected to be higher in the first quarter of 2011 as compared to the prior year driven mainly by the shift in product mix. Xiniya improved its product mix by introducing more new designs and higher quality products. The Company also held its sales fair earlier in September 2010, thereby allowing its OEMs to purchase their materials earlier in an effort to manage rising materials costs.

Gross margin is expected to be in the range of 33%-34% in the first quarter of 2011 versus 32.5% in the first quarter of 2010. An 18%-19% increase in ASP is expected to fully offset the increase in materials and labor costs as well as the impact of sales rebate increases, leading to overall gross margin improvement.

Earnings per ADS are expected to be in the range of $0.08-$0.09, which compares to $0.09 in the prior year period. Due to the expiration of its preferential PRC tax treatment at the end of 2010, Xiniya's tax rate will increase to 25% from 2011 onwards versus a rate of 12.6% in 2010.

Outlook for First Half 2011

Based on the planned production and delivery schedule, Xiniya expects to realize revenue growth in the first half of 2011 of approximately 27%-30% in RMB terms compared to the same period in 2010. The growth is expected to be mainly attributable to organic sales growth at existing stores as well as additions of new stores, which is projected to lead to overall increases of approximately 16%-17% in unit volume and approximately 10%-11% in ASP.

Gross margin in the first half of 2011 is expected to be in the 32%-33% range, compared with 31.9% in the first half of 2010. A projected 10%-11% increase in ASP is expected to fully offset the increase in materials and labor costs as well as the impact of sales rebate increases, leading to overall gross margin improvement.

Momentum of new store openings remains strong. As of the end of February 2011, Xiniya's network of authorized distributors added 28 new stores as compared to 24 during same period in 2010. As of March 28, 2011, a total of 41 new retail stores have been added, compared to 35 new stores added in the first three months of 2010. In 2010, 39% of the new stores for the year were opened in the first half of the year, while 61% of the new stores were opened in the second half. For the full year 2011, Xiniya targets the opening of 180-220 additional stores by its authorized retailer network.

Conference Call

Xiniya will host a conference call and live webcast at 9 am Eastern Standard Time (EST) (9 pm Beijing time on March 29, 2011).

The dial-in details for the live conference call are as follows:

  • Participant Dial In (Toll Free USA): 1-877-317-6789
  • International Dial In: +1 412-317-6789
  • China Toll Free (Northern): 10-800-712-2304
  • China Toll Free (Southern): 10-800-120-2304
  • Hong Kong Toll Free: 800-962-475
     Conference ID: - 449451

A live webcast of the conference call will be available in the investor relations section of the Company's website at: http://ir.xiniya.com.

A telephone replay of the call will be available 1 hour after the end of the conference through April 8, 2011 at 9:00 AM EDT.

The dial-in details for the replay are as follows:

  • US Toll Free: 1-877-344-7529
  • International Toll: 1-412-317-0088
     Conference Number: - 449451

Use OF Non-IFRS Financial Measures

The Company has included in this press release certain non-IFRS financial measures, including measures that exclude share-based compensation. The Company believes that both management and investors benefit from referring to these non-IFRS financial measures in assessing the performance of the Company and when planning and forecasting future periods. Readers are cautioned not to view non-IFRS financial measures on a stand-alone basis or as a substitute for IFRS measures, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of IFRS measures with non-IFRS measures also included herein.

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "going forward," "outlook" and similar statements. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company's control, which may cause the Company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law.

About China Xiniya Fashion Limited

Xiniya is a leading provider of men's business casual apparel in China. The Company designs and manufactures men's business casual and business formal apparel and accessories, which are marketed under the Xiniya brand, and sells through its distribution network that includes 26 distributors and 24 department store chains. Its products are sold to consumers at over 1,400 authorized retail outlets owned and managed by third parties located in 21 provinces, five autonomous regions, and four municipalities in China. This retail network focuses on second- and lower-tier cities, where increasing affluence has led to an improvement in living standards and where most international men's apparel brands do not have a significant presence. The Company's target consumers are male working professionals in China between the ages of 25 and 45 who seek fashionable clothing to suit their working and lifestyle needs. For more information, please visit the Company's website at http://ir.xiniya.com.

 

CHINA XINIYA FASHION LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Chinese Renminbi in thousands except shares and per share and per ADS data)
For the Three Months and Years Ended December 31, 2009 and 2010
         

Three Months Ended Dec 31

Year Ended Dec 31

  2009     2010     2009     2010  
Revenue

 

256,867

 

333,556

 

672,075

 

899,252

Cost of sales   (159,293 )   (213,957 )   (438,773 )   (589,233 )
Gross profit 97,574 119,599 233,302 310,019
 
Interest income 241 236 793 847
Selling and distribution expenses (2,317 ) (2,964 ) (8,744 ) (11,999 )
Administrative expenses   (826 )   (6,055 )   (2,898 )   (10,108 )
Profit before taxation 94,672 110,816 222,453 288,759
Income tax expense   (11,897 )   (13,957 )   (28,109 )   (36,413 )
Profit for the year 82,775 96,859 194,344 252,346
 
Earnings per share - basic and diluted (in RMB) 0.41 0.45 0.97 1.24
Earnings per ADS - basic and diluted (in USD) 0.25 0.27 0.59 0.75
 
Weighted average shares outstanding in the period 200,000,000 213,565,217 200,000,000 203,419,178
Weighted average ADS outstanding in the period 50,000,000 53,391,304 50,000,000 50,854,795
One ADS represents four ordinary shares.
 
 
CHINA XINIYA FASHION LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Chinese Renminbi in thousands)
As at December 31, 2009 and 2010
                 
2009 2010
Assets  
Non-current assets
Property, plant and equipment 2,776 1,642
Prepayments   - 5,018
Total non-current assets   2,776 6,660
 
Current assets
Cash and cash equivalents 142,302 862,797
Trade receivables 127,819 221,356
Inventories 11,018 5,658
Other receivables and prepayments   2,575 5,054
Total current assets   283,714 1,094,865
 
Total assets   286,490 1,101,525
 
Equity and liabilities
Equity
Share capital 9,843 77
Additional paid-in capital - 529,650
Statutory reserve 43,897 69,351
Retained earnings   174,667 403,754
Total equity   228,407 1,002,832
 
Current liabilities
Trade payables 28,017 46,358
Other payables and accruals 18,168 38,378
Current income tax payable   11,898 13,957
Total current liabilities   58,083 98,693
 
Total equity and liabilities   286,490 1,101,525
 
 

CHINA XINIYA FASHION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Chinese Renminbi in thousands)
For the Years Ended December 31, 2009 and 2010

 
    2009       2010  
Cash flows from operating activities:
Profit before taxation

 

222,453

 

288,759

Adjustments for:
Depreciation for property, plant and equipment 518 389
Loss on disposal of property, plant and equipment - 351
Share-based compensation   -     2,195  
Operating profit before working capital changes 222,971 291,694
Increase in trade receivable (77,162 ) (93,537 )
(Increase)/decrease in inventories (7,524 ) 5,360
(Increase)/decrease in other receivables and prepayments 4,506 (8,400 )
Increase/(decrease) in trade payables (15,743 ) 18,341
Increase/(decrease) in other payables and accruals   (3,821 )   12,472  
Cash generated by operating activities 123,227 225,930
Income tax paid   (23,458 )   (34,354 )
Net cash generated by operating activities 99,769 191,576
Cash flows from investing activities:
Proceeds from the disposal of property, plant and equipment - 396
Acquisition of property, plant and equipment   -     (2 )
Net cash generated by investing activities - 394
Cash flows from financing activities:
Proceeds from share issued, net - 519,884
Dividends paid (113,339 ) -
Increase/(decrease) in advance to and from director   (767 )   8,641  
Net cash (used in)/generated by financing activities (114,106 ) 528,525
Net increase/(decrease) in cash and cash equivalents (14,337 ) 720,495
Cash and cash equivalents at beginning of the year   156,639     142,302  
Cash and cash equivalents at end of the year   142,302     862,797  
 

     

CHINA XINIYA FASHION LIMITED
RECONCILIATION OF IFRS TO NON-IFRS FINANCIAL DATA
(in thousands of Renminbi, except for ADS data and per ADS data)

 

Three months ended
December 31,

Twelve months ended
December 31,

2009   2010   %   2009   2010   %
     
IFRS operating expenses (3,143 ) (9,019 ) 187.0 % (11,642 ) (22,107 ) 89.9 %
Adjustment:
Share-based compensation -     2,195   -     2,195  
Non-IFRS operating expenses (3,143 )   (6,824 ) 117.1 % (11,642 )   (19,912 ) 71.0 %
 
IFRS profit before taxation 94,672 110,816 17.1 % 222,453 288,759 29.8 %
IFRS operating margin 36.9 % 33.2 % 33.1 % 32.1 %
Adjustment:
Share-based compensation -     2,195   -     2,195  
Non-IFRS profit before taxation 94,672 113,011 19.4 % 222,453 290,954 30.8 %
Non-IFRS operating margin 36.9 %   33.9 % 33.1 %   32.4 %
 
IFRS profit for the year 82,775 96,859 17.0 % 194,344 252,346 29.8 %
IFRS net margin 32.2 % 29.0 % 28.9 % 28.1 %
Adjustment:
Share-based compensation -     2,195   -     2,195  
Non-IFRS profit for the year 82,775 99,054 19.7 % 194,344 254,541 31.0 %
Non-IFRS net margin 32.2 %   29.7 % 28.9 %   28.3 %
 
IFRS Earnings per ADS 0.25 0.27 8.0 % 0.59 0.75 27.1 %
Adjustment:
Share-based compensation -     0.01   -     0.01  
Non-IFRS Earnings per ADS 0.25     0.28   12.0 % 0.59     0.76   28.8 %
 
Weighted average ADS outstanding, basic and diluted (in thousands)1

50,000

53,391

50,000

50,855

 

1 Each ADS represents 4 ordinary shares.

China Xiniya Fashion Limited
Chee Jiong Ng, +86 1365 5939 932
Chief Financial Officer
ngcheejiong@xiniya.com
or
Christensen
Kimberly Minarovich, +1-212-618-1978
kminarovich@christensenir.com
or
Linda Bergkamp, +1-480-614-3000
lbergkamp@christensenir.com


© Business Wire 2011
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