CHINA XINIYA FASHION LTD (ADR) 
By XIAMEN, China, June 4, 2014 /PRNewswire/ -- 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 the first quarter of 2014. The financial statements and other financial information included in this press release have been prepared in conformity with International Financial Reporting Standards ("IFRS").
The Company publishes its financial statements in Renminbi ("RMB").
First Quarter 2014 Highlights
-- Revenue during the first quarter of 2014 decreased by 7.5% to RMB204.6
million, as compared to RMB221.2 million in the first quarter of 2013,
which is within the prior guidance of a decrease of 7%-11%.
-- Gross margin was 29.6% in the first quarter of 2014 as compared to 30.7%
in the first quarter of 2013.
-- Net profit in the first quarter of 2014 declined by 19.9% to RMB26.6
million as compared to RMB33.2 million in the first quarter of 2013.
-- Earnings per ADS were $0.08 in the first quarter of 2014 as compared to
$0.09 per ADS in the first quarter of 2013, which is above the prior
guidance of $0.03-$0.07 per ADS.
-- Xiniya's network of authorized retailers had a net reduction of 69
retail outlets in the first quarter of 2014, consisting of 13 new retail
outlets opened and 82 retail outlets closed. The total number of
authorized retail outlets was 1,514 as of March 31, 2014.
Recent developments
-- The Company held its Fall and Winter Collections Sales Fair in mid-April
2014 in Xiamen City, Fujian Province. The Company's distributors and
authorized retailers in attendance placed their purchase orders for
Xiniya's latest fall/winter collections. Xiniya exhibited over 2,000 new
products during the week-long sales fair including apparel, shoes, bags
and accessories for distributors and authorized retailers to select from
based on each store's location, climate and local consumer taste.
Deliveries will take place during the second half of 2014. The
distributors will then either deliver these products to authorized
retailers or display them in their own retail outlets. The value of
total purchase orders decreased 48% when compared to the value of total
purchase orders placed during the same period last year.
-- The Company renewed its celebrity endorsement contract with Jacky
Cheung, one of the most well-known pop singers in China. Mr. Cheung has
represented the Xiniya brand since October 2007.
Guidance
-- Revenue in RMB for the second quarter of 2014 is expected to decline in
the range of 15% to 10%.
-- Earnings per ADS in the second quarter of 2014 are expected to be in the
range of -$0.04 to +$0.01.
"Despite the continued negative effects of China's economic softening and the aggressive discounting done by other menswear brands in order to clear inventory, I am pleased to see revenue during the first quarter come in at the higher-end of our guidance with our gross margins remaining stable," commented Mr. Qiming Xu, Chairman and Chief Executive Officer of Xiniya. "While we are disappointed with our sales fair results, we have always encouraged our partners to remain cautious when placing orders in order to ensure their profitability and low inventory levels. This cautious approach has impacted our financial and operational results in the short-term but we believe that it is a good investment that will yield longer term value. By implementing our focused strategy now, we are providing support to our distributors and authorized retailers when they are most in need, giving them the support needed to navigate a market that is facing increasing downwards pressure."
"Our recommended retail prices during the sales fair remained stable however, demonstrating the continued fashion appeal of our products as we increase the breadth and depth of our collection in order to drive future sales. Using our strong cash position, we have increased our sales rebates and continue to extend longer credit periods for all our distributors. I am confident that these measures along with our shop rack and refurbishing initiatives will provide our partners with the support they need and ensure the future long-term sustainability of our business."
First Quarter 2014 Results
Revenue for the first quarter of 2014 decreased 7.5% to RMB204.6 million from RMB221.2 million during the first quarter of 2013. The Company delivered approximately 1.05 million units to its distributors during the first quarter of 2014, compared with 1.18 million units during the first quarter of 2013. The total retail outlet count as of March 31, 2014 was 1,514. The table below sets forth the number of retail outlets by outlet type:
As of December As of March
Outlet Type: 31, 2013 31, 2014
Company-operated flagship stores 1 1
Distributor-operated stores 99 97
Distributor-operated flagship stores 4 4
Distributor-operated retail website 1 1
Managed by authorized retailers 1,478 1,411
Total outlet count 1,583 1,514
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Gross profit decreased to RMB60.5 million in the first quarter of 2014 from RMB67.8 million in the first quarter of 2013. Gross margin was 29.6% in the first quarter of 2014 as compared with 30.7% in the first quarter of 2013. The decrease in gross margin was primarily due to increased expenses associated with the research and development of the Company's latest collection in order to improve their competitiveness and fashion appeal.
Interest and other income was RMB5.2 million in the first quarter of 2014 as compared to RMB4.2 million in the first quarter of 2013. The increase was mainly due to the higher interest income from higher time deposits placed with banks in the first quarter of 2014 as compared to the first quarter of 2013.
Selling and distribution expenses in the first quarter of 2014 increased to RMB20.4 million from RMB16.9 million in the first quarter of 2013. The increase was mainly due to printing costs associated with the Company's 2014 Spring / Summer collection magazine and shopper carrier bags.
During the first quarter of 2014, the Company paid for shop rack, signage and various outlet-related accessories for 13 new retail outlets and refurbished 32 existing retail outlets, which includes expanding floor space for 17 existing retail outlets, as compared to 37 new retail outlets and 28 refurbished retail outlets during the first quarter of 2013. The refurbishment of existing retail outlets is expected to upgrade the older retail store image, help attract new consumers and improve the presentation of Xiniya's products all in an effort to enhance retail outlet sales in the future. These expenses were approximately RMB11.8 million, or 5.8% of revenue, in the first quarter of 2014, compared with RMB11.5 million, or 5.2% of revenue during the first quarter of 2013.
Administrative expenses increased to RMB9.1 million in the first quarter of 2014 from RMB8.8 million in the first quarter of 2013, primarily due to amortization of ERP system.
Profit before taxation was RMB36.2 million in the first quarter of 2014, compared with RMB46.4 million in the first quarter of 2013.
Income tax expense in the first quarter of 2014 was RMB9.6 million, compared with RMB13.1 million in the first quarter of 2013.
Profit after taxation for the first quarter of 2014 was RMB26.6 million, compared with RMB33.2 million in the first quarter of 2013. Earnings per ADS were $0.08 in the first quarter of 2014, compared to $0.09 per ADS in the first quarter of 2013.
Financial Position
As of March 31, 2014, the Company had cash and cash equivalents of RMB827 million, and time deposits held at banks with maturities of more than three months of RMB350.0 million.
As of March 31, 2014, the Company had trade receivables of RMB359.8 million. The decrease in trade receivables was primarily due to collections from distributors in the first quarter of 2014.
Prepayments to suppliers are prepayments paid to the contract manufacturers for 2014 spring and summer orders. The decrease in these prepayments from December 31, 2013 was primarily due to offsets with payables to the contract manufacturers during the first quarter of 2014.
Deposits received from distributors are payments made by distributors for 2014 spring and summer orders placed with the Company. The decrease in these deposits from December 31, 2013 was primarily due to offsets trade receivables from these distributors during the first quarter of 2014.
Conference Call
Xiniya will host a conference call and live webcast at 8 a.m. Eastern Daylight Time (EDT) on June 5, 2014, (8 p.m. Beijing time on the same day).
The toll free dial-in details for the live conference call are as follows:
- USA: 1 800 8713110 or 1 888 7007397
- China: 800 803 6017
- Hong Kong: 800 96 8899
- International access: +886 2 21928018
Participant PIN Code: 147530 #
A live webcast of the conference call will be available on: http://www.corpasia.net/cancast/us/index.php?id=usXNY_31&version=e
A telephone replay of the call will be available 2 hours after the end of the conference through June 12, 2014 at 8 a.m. EDT.
Conference Playback:
1. Dial the playback number?+886 2 33220777
2. Enter playback reference number?152519#
3. Enter participant pin code?880346 #
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.
Exchange Rate Information
The United States dollar ($) amounts disclosed in this press release are presented solely for the convenience of the reader. Translations of amounts from RMB into United States dollars for the convenience of the reader were calculated at the certified exchange rate of $1.00 = RMB6.2164 on March 31, 2014 as set forth in the H.10 weekly statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into $ at that rate on March 31, 2014, or at any other date. The percentages stated are calculated based on RMB amounts.
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. Its products are sold to consumers at over 1,500 authorized retail outlets owned and managed by third parties located in 22 provinces, four 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://www.xiniya.com.
For additional information, please contact:
China Xiniya Fashion Limited
Mr. Chee Jiong Ng
Chief Financial Officer
Telephone: +86 1365 5939 932
Email: ngcheejiong@xiniya.com
Mr. Christian Arnell
Telephone +86-10-5900-1548 in Beijing
Email: carnell@christensenir.com
CHINA XINIYA FASHION LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in thousands, except per share and per ADS amounts)
Three months ended March 31
2013 2014 2014
RMB RMB USD
Revenue 221,166 204,591 32,911
Cost of sales (153,360) (144,122) (23,184)
-------- -------- -------
Gross profit 67,806 60,469 9,727
Interest and other income 4,219 5,234 842
Selling and distribution expenses (16,896) (20,417) (3,284)
Administrative expenses (8,777) (9,124) (1,468)
------ ------ ------
Profit before taxation 46,352 36,162 5,817
Income tax expense (13,125) (9,563) (1,538)
------- ------ ------
Profit for the period 33,227 26,599 4,279
Other comprehensive income for the period:
Exchange differences on translation of financial statements of entities outside the
mainland of the People's Republic of China (259) 739 119
Total comprehensive income for the period 32,968 27,338 4,398
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Earnings per share - basic and diluted (in RMB) 0.15 0.12 -
Earnings per ADS - basic and diluted (in USD) 0.09 - 0.08
Weighted average shares outstanding in the period ('000) 227,717 227,717 227,717
Weighted average ADS outstanding in the period ('000) 56,929 56,929 56,929
One ADS represents four ordinary shares.
CHINA XINIYA FASHION LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in thousands)
As of As of
December 31, March 31,
2013 2014 2014
RMB RMB USD
Unaudited Unaudited
Assets
Non-current assets
Property, plant and equipment 9,303 8,258 1,328
Intangible assets 8,566 8,019 1,290
Deposit for land use right 8,854 8,854 1,424
Total non-current assets 26,723 25,131 4,042
------ ------ -----
Current assets
Cash and cash equivalents 806,467 827,124 133,055
Time deposits held at banks with maturity over three
months 130,000 350,000 56,303
Trade receivables 580,337 359,814 57,882
Prepayments to suppliers 80,785 22,248 3,579
Inventories 32,042 89,691 14,428
Other receivables and prepayments 17,093 24,016 3,863
------ ------ -----
Total current assets 1,646,724 1,672,893 269,110
--------- --------- -------
Total assets 1,673,447 1,698,024 273,152
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Equity and liabilities
Equity
Share capital 77 77 12
Additional paid-in capital 519,077 519,077 83,501
Statutory reserve 122,615 122,615 19,724
Currency translation reserve (20,150) (19,411) (3,122)
Retained earnings 878,567 905,392 145,646
------- ------- -------
Total equity 1,500,186 1,527,750 245,761
--------- --------- -------
Current liabilities
Trade payables 25,594 86,725 13,951
Deposits received from distributors 99,900 52,650 8,469
Other payables and accruals 29,071 18,922 3,044
Current income tax payable 18,696 11,977 1,927
------ ------ -----
Total current liabilities 173,261 170,274 27,391
------- ------- ------
Total equity and liabilities 1,673,447 1,698,024 273,152
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CHINA XINIYA FASHION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands)
Three months ended March 31
2013 2014 2014
RMB RMB USD
Unaudited Unaudited Unaudited
Cash flows from operating activities:
Profit before taxation 46,352 36,162 5,817
Adjustments for:
Depreciation for property, plant and equipment 1,292 1,045 168
Amortization for intangible assets 613 547 88
Interest income (3,671) (4,964) (798)
Foreign exchange gains (276) (798) (128)
Share-based compensation 263 226 36
Operating profit before working capital changes 44,573 32,218 5,183
Decrease in trade receivable 126,786 220,523 35,474
Decrease in prepayments to suppliers 57,104 58,537 9,417
Increase in inventories (81,183) (57,649) (9,274)
Increase in other receivables and prepayments (1,204) (2,339) (376)
Increase in trade payables 22,943 61,131 9,834
Decrease in deposits received from distributors (47,900) (47,250) (7,601)
Decrease in other payables and accruals (20,558) (10,149) (1,633)
------- ------- ------
Cash generated by operating activities 100,561 255,022 41,024
Income tax paid (19,141) (16,282) (2,619)
------- ------- ------
Net cash generated by operating activities 81,420 238,740 38,405
------ ------- ------
Cash flows from investing activities:
Increase in time deposits held at banks with maturity over
three months (170,000) (220,000) (35,390)
Acquisition of property, plant and equipment (15) - -
Proceeds from VAT refund related to intangible assets 1,876 - -
Interest received 3,074 380 61
Net cash used in investing activities (165,065) (219,620) (35,329)
-------- -------- -------
Net (decrease)/increase in cash and cash equivalents (83,645) 19,120 3,076
Cash and cash equivalents at beginning of the period 1,096,103 806,467 129,732
Exchange gains on cash and cash equivalents 17 1,537 247
--- ----- ---
Cash and cash equivalents at end of the period 1,012,475 827,124 133,055
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SOURCE China Xiniya Fashion Limited
