Regina Miracle International (Holdings) Limited (“Regina Miracle” or the “Group”) (Stock code: 2199) today announced a partnership agreement with Victoria’s Secret & Co. (“Victoria’s Secret”) (NYSE: VSCO) related to the latter’s existing company-owned business in China.
Regina Miracle and Victoria’s Secret have formed a joint venture (“JV”) to operate all Victoria’s Secret stores and the related online business in the People’s Republic of China (“PRC”). Under the terms of the agreement, Regina Miracle will own 49% of the equity interest in the JV with a consideration of US$45 million in cash while Victoria’s Secret will own the remaining 51% interest. The JV shall carry out the PRC business comprising designing, developing, manufacturing, marketing and sale of certain lingerie, intimate apparel as well as marketing and sale of personal care and beauty products under the agreed trademarks of Victoria’s Secret in the PRC through its subsidiaries.
YY Hung, Chairman, CEO & Executive Director of Regina Miracle, said, “We are honored and excited to be elevating our long-standing partnership with Victoria’s Secret through the formation of this joint venture in the promising China market. We are confident that our highly complementary strengths – Regina Miracle’s industry-leading innovation capabilities and market foresights as an Innovative Design Manufacturer, and Victoria’s Secret’s undisputed brand leadership, retailing and marketing expertise – will perfectly position this partnership in capturing the growth opportunities and creating value for consumers in China.”
Victoria’s Secret CEO Martin Waters commented, “I am delighted to announce this partnership with Regina Miracle, who has been a valued merchandise supplier partner for more than twenty years. Together with Regina Miracle, we aim to grow the China business through joint investment in product development, distribution, and marketing. We expect the partnership will positively impact the speed and agility of the business to benefit consumers and provide us with a platform for a strong future in this important market. This JV with Regina Miracle in China completes a multi-year repositioning of the International business of the Company and we believe establishes a platform for accelerated sales and earnings growth in the market over the next several years.”
About Regina Miracle International (Holdings) Limited
Regina Miracle International (Holdings) Limited (stock code: 2199), a global leader in the intimate wear manufacturing industry with a unique innovative design manufacturer (“IDM”) business model, is engaged in the innovation, design and manufacturing of a diverse range of products, including mainly intimate wear, sports bra and apparel, consumer electronics components, and footwear. Committed to product innovations through proprietary craftsmanship revolutions, patented product and production technological breakthroughs, the company has acquired a number of competitive industry edges that have spearheaded its developments over the years into being a global industry leader. Today, Regina Miracle has two strategic strongholds – its R&D and production base in China, and a major production base in Vietnam, with a combined workforce of more than 46,000.
About Victoria’s Secret & Co.
Victoria’s Secret & Co. (NYSE: VSCO) is the world’s largest intimates specialty retailer offering a wide assortment of modern, fashion-inspired collections including signature bras, panties, lingerie, casual sleepwear, athleisure and swim, as well as award-winning prestige fragrances and body care. With nearly 1,400 retail stores worldwide and a predominately female workforce of more than 25,000, Victoria’s Secret boasts the largest team of specialty trained bra fit experts worldwide. Victoria’s Secret is committed to inspiring women around the world with products and experiences that uplift and champion them and their journey while creating lifelong relationships and advocating for positive change.
Topic: Press release summary
Regina Miracle International (Holdings) Limited (“Regina Miracle” or the “Company”, together with its subsidiaries, collectively the “Group”) (HKEX: 2199), a leading global intimate wear company boasting an Innovative Design Manufacturer (“IDM”) business model, has announced its unaudited interim results for the six months ended 30 September 2021 (the “Period”).
During the Period, the Group’s revenue reached historical high at approximately HK$4.1 billion amid the Pandemic, representing a year-on-year increase of 62.1%. Gross profit grew by 101.3% to approximately HK$980.6 million, with gross profit margin up by 4.7 percentage points to 24.0%. Despite the write-off of fixed assets made for further surrendering parts of the leased factory in Shenzhen and the higher operating expenses incurred due to RMB and VND appreciation, having enhanced operating leverage attributable to the higher revenue and effective cost control measures, earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 125.7% to approximately HK$650.7 million, with EBITDA margin up by 4.4 percentage points to 15.9%. Consequently, the Group turned around to net profit of approximately HK$254.3 million (1HF2021: net loss of HK$32.4 million) and net profit margin at 6.2%. Basic earnings per share attributable to owners of the Company were HK20.8 cents (1HF2021: basic loss per share of HK2.6 cents). Excluding the one-off expense item arising from surrendering parts of the leased factory in Shenzhen, net profit should have been approximately HK$275.6 million with a net profit margin of 6.8%.
To share the fruitful results with shareholders, the Board has resolved to declare an interim dividend of HK6.8 cents per share for 1HF2022 (1HF2021: nil), in line with the Group’s dividend policy of distributing no less than 30% of its net profit for the financial year.
Mr. YY Hung, Chairman, Chief Executive Officer & Executive Director of Regina Miracle, said, “Leveraging on our well-established IDM capabilities, we continued to innovate in craftsmanship and develop production equipment to create products trendsetting in the market. Such efforts, plus having capacities strategically laid out in the PRC and Vietnam, we were able to achieve win-win together with brand partners amid the Pandemic. We are pleased to see the business of our long-term brand partners returning to normal and the closer than before working relationship with them. With our different businesses and regional markets all thriving, we recorded historical high revenue for the first half of the year.”
In the past few years, the Group has kept launching new products through craftsmanship revolutions and new production equipment developed, as well as coming up with products in new cross industries and cross product lines categories to form a diversified product matrix. To show the performance of its different business segments more clearly, the Group has regrouped its business into the following six major segments with effect from the current financial year.
Intimate wear: Regina Miracle’s innovative craftsmanship helps major brand partners resume their businesses, thus bringing segment revenue to record high
Intimate wear contributed HK$2,336.0 million in revenue, a year-on-year surge of 111.6%, accounting for 57.3% of the total revenue. Gross profit of the segment grew by 175.8% to approximately HK$569.9 million, with gross profit margin up by 5.7 percentage points to 24.4%. This segmental revenue reached historical high, thanks mainly to the decent recovery of European and U.S. markets, with orders for traditional intimate wear rebounding and surpassing pre-Pandemic levels. Drawing on its strong R&D capabilities and innovative craftsmanship, the Group developed new products that contributed to the business recovery of brand partners, with orders from the Group’s largest U.S. brand partner seeing a particularly strong rebound. Fueled by the new working from home norm, sales of trendy comfortable bra top products doubled during the Period. Furthermore, the Group found several new partners in emerging mainland e-commerce brands earlier and achieved decent growth in orders from them during the Period.
Sports products: Sales of sports bras double and sports leggings are well received by leading international emerging brands and domestic sports brands
The sportswear segment contributed approximately HK$1,036.4 million in revenue, up 58.6% year-on-year and accounting for 25.4% of total revenue. Segmental gross profit climbed by 100.2% to approximately HK$243.4 million, with gross profit margin up by 4.9 percentage points to 23.5%. Sports bras sustained strong performance, with sales doubled, driven by the prevailing sports craze. As for sportswear, the Group adjusted its strategic direction – shifting emphasis from apparel products to bra products in the partnership with a Japanese casualwear brand partner. In this sub-segment, the Group focused on sports leggings, embodying its superb craftsmanship, thus enriched its customer portfolio adding to it some leading emerging international brands and domestic sports brands.
Consumer electronics components: “Stay-at-home” trend drives sales to double amid Pandemic
Revenue from consumer electronics components segment amounted to approximately HK$232.7 million, representing a significant year-on-year increase of 104.0% and accounting for 5.7% of the total revenue. Gross profit of the segment increased by 117.1% to HK$58.2 million, with gross profit margin up by 1.5 percentage points to 25.0%. Segmental revenue doubled mainly because consumers spent more hours at home due to the Pandemic, thus fueled the marked growth in demand for consumer electronics for home use, such as virtual reality (VR) headsets, keyboards, mice and notebook bags. Based on the orders received in the second half year, the Group expects orders to continue to grow in the future and give it new growth impetus.
Bra pads and moulded products: As demand for intimate wear products picks up, revenue climbs by 60% year-on-year
Revenue from bra pads and moulded products segment amounted to HK$193.1 million, representing a significant 63.1% growth year-on-year and accounting for 4.7% of the total. Gross profit of the segment increased by 85.9% to HK$45.4 million, with gross profit margin up by 2.9 percentage points to 23.5%. The segmental revenue growth primarily stemmed from recovering demand for traditional intimate wear products.
Footwear products: Sales from a U.S. casual footwear brand partner continue to grow, driving revenue up 10% year-on-year
Revenue from this business segment amounted to HK$170.8 million, representing a year-on-year increase of 10.7% and accounting for 4.2% of the total revenue. The increase was attributable mainly to a U.S. casual footwear brand partner maintaining steady sales growth. Gross profit of the segment grew by 3.5% to HK$39.3 million, with gross profit margin of 23.0%, which reflected the reallocation of footwear production to Vietnam only starting from the Chinese New Year this year, thus production was still at an efficiency ramp-up stage.
Fabric masks: Produces featured fabric masks for major sports brands, Tokyo Olympics masks elicit enthusiastic market response
Fabric masks segment contributed revenue of approximately HK$111.7 million, accounting for 2.7% of the Group’s total revenue. Gross profit of the segment amounted to approximately HK$24.6 million and gross profit margin was 22.0%. as the Group mainly produces trendy fabric sports masks, the featured fabric masks it produced for major sports brands resonated the market needs, including the masks at the Tokyo Olympics manufactured for a well-known international sports brand.
Vietnamese factories output increased to 80%, higher efficiency and effectiveness enable the Group to grasp strong demand from domestic and overseas brand partners following market rebounds quickly
To quickly capture the robust demand of domestic and overseas brand partners as the market resumed, the Group continued to enhance the efficiency and effectiveness of its five factories at the Vietnam Singapore Industrial Park in Hai Phong City, Vietnam and added production lines, thereby boosted production capacity. The first phase of the facility in Hung Yen Province, Vietnam officially commenced operation in April 2021, which addressed the growing business demand. As an important production base, Vietnam has a well-laid foundation to support growth of the Group’s export business. As at 30 September 2021, the half-year revenue from production in Vietnam rose to 80% of the total revenue of the Group, as compared with 76% in first half of Fiscal year 2021.
As the Pandemic has been well under control in Hai Phong and surrounding provinces, operations in the six factories of Regina Miracle in Vietnam have remained normal. With the demand of international brand partners reviving since the second half of last year, the Group has had no complaint with hiring and retaining staff, allowing it to keep stable production capacity in Vietnam. About 90% of the employees suitable for receiving COVID-19 vaccination at the Hai Phong production base had taken the shots. That has not only ensured employees can work in a safe environment, but also that the Group has stable production operations in the country for capturing the strong demand and orders from international brand partners.
As for the Shenzhen factory in the PRC, the Group’s R&D centre and production base, it has continued to support international brand partners in pushing forward their strategy to develop the PRC market and also the Group’s own mainland business development. All employees who are fit for vaccination at the factory had taken the shots.
Insist on innovation-driven development, bolstering strengths, expanding multiple business segments, doors opening to a golden era of development
Regina Miracle has insisted on driving development with innovation. It firmly believes on top of working hard to maximise profit, a business should also aim for sustainable development. With more than 20 years of innovation-driven development under its belt, the Group has acquired a number of competitive industry edges and opened the golden era of development for its different business segments.
Continuous upgrade of core technologies cements technological barriers
Committed to technological innovation, the Group has continually upgraded its three core technologies. In recent years, it has also set up a special Manufacture Innovation Center for developing customised machinery and equipment with cutting-edge technologies, in a bid to ensure it has industry-leading and exclusive innovative technologies. The team also keeps revolutionising production crafts and developing new production equipment to support product innovation and, via fully use of templates and automation, to boost mass production efficiency and stability. The Group holds more than 140 patents and has many technology trademarks registered. As a state-level high-tech enterprise, the Group owns an industry-leading national laboratory. Such technological breakthroughs, innovative craftsmanship, capability in production equipment development and automation have given Regina Miracle high and strong technological barriers hard for others to cross.
A brand matrix with high growth potential is in place
Having extended application of its three core technologies across industries and product lines, the Group now operates three main business segments: underwear, sports and consumer electronics. All of the Group’s partners are top quality brands in the industry and have long-term cooperative relationship with it. The three segments together have given the Group a brand partnership matrix that permits it to open up more room for expanding business in the future, as well as capabilities more comprehensive to resist industry risks.
Win-win and mutually beneficial strategic cooperative relationship with loyal brand partners With market acumen and cutting-edge innovative technologies, Regina Miracle continues to supply market-leading innovative products to brand partners. Those unique technologies and leading innovative products have ensured the steady growth in market share for the Group as well as for its brand partners. Furthermore, affording products of consistent quality and timely delivery has seen Regina Miracle become a trusted partner of major brands.
A maturing multi-regional production capacity layout
After about five years of deploying capacities and building teams overseas, the Group’s production capacity in Vietnam has advantages in terms of scale, fast capacity ramp-up and quality output. In addition, via rolling out digitised management, the Group can better and more flexibly coordinate overall planning and deployment of production capacities, as well as achieve more timely and efficient on-site management, thus laying a solid foundation for future expansion of its multiple businesses.
The planned Zhaoqing Industrial Park in the Greater Bay Area is an important part of the Group’s effort to expand the PRC market. To support international brand partners in developing the PRC market and to strengthen exploration of new opportunities by the Group itself with emerging online brands and other channels in the market, the management plans to relocate the production base in Mainland China to the Zhaoqing New District by the end of 2023. The factory will mainly produce intimate wear, sportswear and consumer electronics components, to capture the tremendous potential of the mainland market. With a gross floor area of approximately 390,000 square metres, 50% larger than the existing Shenzhen factory, the new factory will be a highly-intelligent factory of the future, promising to significantly boost production efficiency.
Formulate a new five-year plan for Fiscal 2022-2026 to capitalize on the golden era of development
For five years after listing, the Group has kept innovating in craftsmanship and production equipment, pushing forward digitalisation and production automation, plus optimising capacity layout in Vietnam. Regina Miracle has a solid business foundation, a robust network of brand partners and product matrix now. All these advantages have enabled it to stand out more prominently in the challenging environment bred by the Pandemic and forge strong strategic ties with brand partners, in turn cemented industry leadership. Well-positioned in the market with an established presence in Vietnam and limited investment expected in the future, the Group is ready to fully capitalise on its golden era of growth in the next five years.
With the Group moving into the next mile of development, the management has re-examined the status of the Group’s businesses and formulated a new five-year plan for Fiscal 2022 to 2026. On the premise that the Pandemic remains under control, it believes the Group, armed with leading edge in innovative R&D and strong growth momentum, will retain robust growth in Fiscal 2022, continuing to record considerable increment in Fiscal 2023 and 2024 and steady growth in the years following. The management’s optimism for the next five years is founded on a number of favourable drivers.
In terms of business development, firstly, the Group has seen orders for its core intimate wear products surpassing levels in previous years, with sound growth expected to continue in the next few years on fervent market demand for innovative products. Secondly, with the entire sports segment booming, the Group has begun to venture beyond its well-received sports bras and extend into the athleisure sports apparel category that include such products as sports leggings, where the Group has innovative R&D capabilities and production capacity. It is confident of replicating the growth trajectory of sports bras for the sports leggings. Furthermore, consumer electronics are entering a period of rapid growth riding the “Metaverse” fever, with sales expected to increase considerably in coming years. The major sports brands and consumer electronics components partners have worked with the Group to formulate growth plans for business cooperation in the next five years. Based on the optimistic growth currently estimated, the management is confident in the development prospects of these businesses. As for footwear business, the Group is focusing currently on working with its U.S. casual footwear brand partner and the two companies have grown together over the past few years with product variety increasing, it believes it has a strong foundation for furthering healthy growth of the business.
In terms of product mix, the Group will shift toward a more favourable direction. In addition to growth opportunity in average selling price driven by the innovation-led high value product it develops, having strong innovation capabilities will also bring to the Group opportunities in cross-category product expansion.
On the market front, the Group will keep cultivating the rebounding European and U.S. markets and strengthen its close ties with existing international brand partners, while stepping up cooperation with young and fast-growing new brand partners. In the promising PRC market, it has just started its journey yet already achieved good initial results, and it expects the sales contribution from new retail channels to increase considerably.
To support the fast-growing business, the Group has adequate production capacity. The capacity utilisation of the Group’s existing Vietnamese facilities continues to increase, which complemented by automation and digitised management, will drive production capacity growth. As improving result, the Group’s planned production capacity can meet order demands of brand partners as well as its own in the coming years. Scheduled to commence mass production by the end of 2023 (i.e. second half of Fiscal 2024), the new Zhaoqing Industrial Park will be able to support business growth for Fiscal 2025 to 2026 under its five-year plan.
Regarding profit, the management also expects the Group to record a significant rise in profit for this fiscal year and continuous steady increases in the next few years, growing stronger than revenue at the Group developing high-value added products with better margin profile, achieving higher production efficiency with workers maturing in their skills, increased automation, digitised management and lean production planning, as well as attaining operating leverage from raising economies of scale by adding more production lines in Vietnam, while reducing and maintaining stable future capital expenditure. All of the above will help decrease depreciation expenses ratio and other fixed operating expenses. Also mindful of the volatility of exchange rates, the management will continue to monitor foreign currency exchange exposure and take prudent measures to minimise related risks whenever deemed fit.
Better profitability also helps the Group attain a healthier cash flow and financial position. With sales growth and profit continuing to increase, plus the first stage of the capacity deployment plan in Vietnam completed, capital expenditure will lower considerably in the year ahead, meaning the Group can hope to have more operating cash flows to gradually reduce debt in the coming few years and see its net gearing ratio coming down to a healthier level, enabling it to concentrate resources on expanding business in the years ahead.
Mr. Hung concluded, “Having world-leading industry strengths and shrewd insights of market trends and user requirements, we will firmly adhere to our innovation-driven development strategy, maintain our R&D advantages, and keep abreast of and respond swiftly to market demands, so as to develop innovative products that can satisfy consumer needs. We will seek to make the best of its multi-regional production capacity layout to open markets together with its brand and supply chain partners for win-win development. In addition to business development, we will also continue to contribute to sustainability by focusing on carbon reduction, waste management, sustainable innovation and people and community, thereby realise sustainability through solidarity with all stakeholders, and create long-term value for shareholders.”
About Regina Miracle International (Holdings) Limited
Founded in Hong Kong in 1998, Regina Miracle International (Holdings) Limited is a global leader in the intimate wear manufacturing industry. Adopting the innovative design manufacturer (“IDM”) business model, Regina Miracle offers its world-renowned brand partners diverse products, including intimate wear, sports products, consumer electronics components, bra pads and moulded products, footwear and fabric masks. The Group has two strategic strongholds – its R&D and production base in Shenzhen, China, and a major production base in Vietnam, where the Group has expanded production capacity since 2016.
Topic: Press release summary