Manufacturer of athletic/outdoor and casual footwear Yue Yuen Industrial (Holdings) Limited reported its revenue increased by 17 percent in its unaudited consolidated results for six months ended 30th June, 2021.
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For the six months ended 30th June, 2021, the Group recorded revenue of US$4,807.1 million, representing an increase of 17.7 percent, compared with the corresponding period of last year. The increase in revenue was attributable to the decent recovery from the low base a year ago, when the COVID-19 outbreak negatively impacted the business in 2020.
In the first half of 2021, the profit attributable to owners of the Company was US$170.3 million, compared to the loss attributable to owners of the Company of US$136.8 million recorded for the corresponding period of last year. The basic earnings per share for the first half of 2021 was 10.57 US cents, compared to the basic loss per share of 8.49 US cents for the corresponding period of last year.
The Board has resolved not to declare an interim dividend for the six months ended 30th June, 2021. The Group is inclined to preserve more cash momentarily amidst the dynamic business environment until the global pandemic is under control and the Company’s profitability has stabilized. It remains committed to upholding a relatively steady dividend level over the long-term.
For the six months, revenue attributed to footwear manufacturing activity (including
athletic/outdoor shoes, casual shoes and sports sandals) increased by 11.8 percent to US$2,505.5 million, compared with the corresponding period of last year. The Group benefited strongly from demand recovery with the volume of shoes shipped during the period increasing by 5.0 percent to 136.4 million pairs, alongside the continued refinement and optimization of its capacity and product mix. The average selling price increased by 6.5 percent to US$18.37 per pair, as compared with the corresponding period of last year, led largely by growing demand for high-end categories in the Group’s product portfolio and its continued efforts to upgrade its mix with a focus on more high-value orders.
The Group’s total revenue with respect to the manufacturing business (including footwear, as well as soles, components and others) was US$2,786.6 million in the first half of 2021, representing an increase of 15.2 percent as compared to the corresponding period of last year.
In the six months ended 30th June, 2021, revenue attributed to Pou Sheng, the Group’s retail subsidiary, increased by 21.2 percent to US$2,020.5 million, compared to US$1,667.1 million in the corresponding period of last year. In RMB terms (Pou Sheng’s reporting currency), revenue in the first half of 2021 increased by 11.4 percent to RMB13,073.9 million, compared to RMB11,740.2 million in the corresponding period of last year.
The increase in revenue was mainly attributed to strong consumer recovery in China in the first quarter, despite the impact of market dynamics in the second quarter of 2021. As of June 30, 2021, Pou Sheng had 4,968 directly operated retail outlets and 3,860 sub-distributors stores across the Greater China region, representing a net closure of 247 stores as compared with the year end of 2020 – a result of continued refinement of its store portfolios.
Pou Sheng’s gross profit margin increased by 6.1 percentage points to 36.1 percent in the first half of 2021, as compared to the corresponding period of last year, which was mainly attributed to its effective promotion strategy, disciplined discount control and enhanced sales mix, along with increasing sales. Gross profit margins for the overall Group, manufacturing business and Pou Sheng all registered sequential improvements
during the second quarter of 2021, as compared to the first quarter of 2021.
The Group’s total selling and distribution expenses for the first half of 2021 amounted to US$615.1 million (first half of 2020: US$480.2 million), equivalent to approximately 12.8% (first half of 2020: 11.8%) of revenue.
Administrative expenses for the first half of 2021 amounted to US$308.5 million (first half of 2020: US$303.0 million), equivalent to approximately 6.4% (first half of 2020: 7.4%) of revenue.
Net other expenses for the first half of 2021 decreased by 68.0% to US$46.2 million (first half of 2020: US$144.3 million), equivalent to approximately 1.0% (first half of 2020: 3.5%) of revenue. The sharp decrease was mostly due to a high base in the corresponding period of last year, the majority of which were one-off charges totaling US$84 million arising from factory adjustments on the manufacturing side.
For the six months ended 30th June, 2021, the Group recognized a non-recurring loss attributable to owners of the Company of US$3.2 million, which included a gain of US$9.8 million due to fair value changes on financial instruments at fair value through profit or loss (“FVTPL”), which was offset by an impairment loss of US$14.0 million on interest in an associate.
In the same period of 2020, the Group recognized a non-recurring loss attributable to owners of the Company of US$13.1 million, which included a loss of US$21.9 million due to fair value changes on financial instruments at FVTPL, as well as an impairment loss of US$9.0 million on the interest in an associate, that was partly offset by a one-off gain of US$15.7 million on the partial disposal of an interest in a joint venture. Excluding all items of non-recurring in nature, the recurring profit attributable to owners of the Company for the six months ended June 30, 2021 was US$173.5 million, compared to a recurring loss attributable to owners of the Company of US$123.6 million for the corresponding period of last year.
During the first half of 2021, the share of results of associates and joint ventures was a combined profit of US$34.6 million, compared to a combined profit of US$8.4 million in the corresponding period of last year.
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Mr. Lu Chin Chu, Chairman, commented, “While our strong performance in the first half of 2021 was supported by a recovery in market demand, we should not lose sight of the contribution that came from the implementation of our long-term strategies. This includes the significant progress we have made in enhancing our product mix and improving our production efficiency. Although some short-term headwinds remain, we will continue to focus our full efforts in positioning ourselves for sustainable and profitable growth.”