Yue Yuen Industrial (Holdings) Limited total turnover surged year on year by 15.9% to approximately $3.657 billion and net profit attributable to equity holders of the Company
increased year on year by 18.7% to approximately $353.6 million, respectively. Basic earnings per share increased by 18.5% year on year to 21.8 cents. One notable change in our turnover breakdown was the increase in revenue from the wholesale and retail operations in the Greater China region, which climbed 80.4% year-on-year to $305.0 million.
During the year under review, the Group booked an aggregate profit of $11.3 million from
increase in fair value of investment properties and the net gain on derivative and
modification/redemption of convertible bonds. Excluding these non-recurrent profits, the Groups net
profit attributable to equity holders of the Company would have increased by 14.9%.
The Directors have resolved to recommend the payment of a final dividend of HK$0.51 per share,
against HK$0.48 per share in FY2005. (Interim dividend in FY2006: HK$0.29 per share vs FY2005:
HK$0.27 per share). The total dividend for the year amounts to HK$0.80 per share, an increase of
6.7% compared with HK$0.75 cents in FY2005.
Operations
The Group recorded sustained sales growth in light of the increase of its footwear manufacturing
business and strong contributions from its Greater China wholesale and retail operations. The
contribution from associates and jointly controlled entities, with part of them also involving in China
retail projects, increased on the back of the Groups vertical and horizontal expansion strategy. There
was a balanced increase in the production of athletic shoes and casual/outdoor shoes, which grew by
11.1% and 12.0% respectively in fiscal 2006.
Turnover distribution among the three major markets the US, Asia and Europe became more
balanced. Strong growth in Asia was mainly due to the surge in China retail sales and the increase
from the sole and component operations.
The Group produced a total of 196.4 million pairs of shoes, a rise of 5.6% compared with the
previous year. The average selling price continued its upward trend, reflecting the product mix
change and the increase in underlying material costs. Turnover at the soles and components division
rose 16.5% year-on-year to US$483.5 million. This was the result of increased efforts in soliciting
new customers in the upstream business and material supplies segments.
Retail sales in the Greater China region rose 80.4% year-on-year to US$305 million. This was due to
the strong growth in the retail sales operation in mainland China and the increased contributions from
the wholesale operations in Taiwan and Hong Kong. There was a double-digit increase in same-store
sales in most of the shops operated for more than one year. The sports apparel and accessories
manufacturing operation under the “others category” recorded a 34.2% increase in turnover to
US$61.7 million in fiscal 2006.
During the year under review, the Group installed an additional 31 production lines, evenly spread
among the three production bases, and taking the total number of lines to 373.
The Groups efforts to expand horizontally into different footwear product categories, sports apparel
and accessories manufacturing began to bear fruit. Contributions from associates and jointly
controlled entities last year amounted to US$67.8 million, up from US$34.1 million in the
corresponding period in the previous year.
Looking Forward
The Groups turnover growth momentum remained steady in the first quarter of fiscal 2007. For the
three months ended December 2006, the Group recorded 10% year-on-year growth in turnover to
approximately US$962 million. This was due to sustained volume growth in the core manufacturing
business and an increase in the contribution of the China retail sales operation.
We expect the footwear-manufacturing sector continue facing market pricing pressure, as there is
constant demand for value-added services and cost savings along the supply chain, particularly on
the manufacturing front. Oil prices have dropped from their peak in the third quarter of 2006 but
there is continued rising pressure on wages, as well as currency fluctuations and international trade
disputes. The Group has experienced a tough operating environment since mid-2004 and has
demonstrated its ability to weather challenges. Indeed, the Group has consistently gained market
share in the last three years. Further consolidation in the footwear-manufacturing sector will provide
an opportunity for the Group to expand production capacity.
