CHIA XINI ADR : China Xiniya Fashion Limited Reports Fiscal Year 2010 Financial Results
03/29/2011| 05:25am US/Eastern
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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
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