Yue Yuen Industrial (Holdings) Ltd. recorded revenue of US$8,480.6 million, representing a growth of 0.5 percent compared to the financial year in 2015. Profit attributable to owners of the company increased by 37 percent to US$534.6 million, as compared with US$390.2 million recorded for the financial year in 2015. In 2016, basic earnings per share grew by 37 percent to 32.47 US cents as compared with 23.7 US cents for the financial year in 2015.

Excluding all items of non-recurring operating in nature, the recurring profit for the year ended December 31, 2016, increased by 29.5 percent to US$525.1 million, compared to recurring profit of US$405.5 million for the financial year in 2015. For the financial year 2016, the non-recurring profit amounted to US$9.4 million, which included recognition of US$11.5 million gains on fair value changes on derivatives financial instruments, as well as a US$4.5 million impairment loss on amounts due from joint ventures. For the year ended December 31, 2015, profit attributable to owners of the company included a non-recurring loss of US$15.3 million.

The Board is pleased to propose a final dividend of HK$1 per share for the year ended December 31, 2016 (2015: HK$80 cents per share), amounting to a dividend per share for the year of HK$1.40 (2015: HK$1.20).

Business Review

The revenue for the footwear manufacturing business declined by 1.6 percent in 2016 when compared to revenue recorded in the financial year 2015, whereas the production volume grew by 1.4 percent as compared with the same period in 2015. The Group’s manufacturing business produced a total of 322 million pairs of shoes, compared to 317.5 million pairs for the year ended December 31, 2015. The growth in volume was offset by a fall in average selling prices.

The Group is putting more strategic emphasis on transforming its business model from offering “economies of scale” and expertise in footwear manufacturing to “economies of value.” With the introduction of innovative services and solutions, and integrating the supply chain process, the Group strives to provide brand customers enhanced value proposition and better meet their changing demands and interests.

The revenue for Pou Sheng, the Group’s retail business, grew by 6.2 percent in 2016 to US$2,443.7 million when compared to revenue of US$2,300.2 million for the financial year 2015. Pou Sheng International (Holdings) Limited (Pou Sheng) has adopted RMB as its reporting currency from USD since its 2016 interim results in order to reduce the impact of foreign exchanges rate movements on its reported results and to provide shareholders with an accurate reflection of the Group’s retail business underlying performance. In RMB terms, Pou Sheng’s revenue increased by 12.2 percent to RMB16,236 million, compared to RMB 14,466 million in the same period last year.

Gross Profit
Gross profit margins for the manufacturing business improved, attributable mainly to better operational efficiency, while rising wages were partly offset by lower material costs tied to the commodity and oil price trend. The Group continued to work with international brand customers to enhance productivity across production sites and efficiency in its supply chain.

Pou Sheng had a gross profit improvement of 13.3 percent to US$868.2 million (or in RMB terms, 19.7 percent to RMB5,768.4 million) due to the stronger retail demand and fewer discounting activities.

Selling And Distribution Expenses And Administrative Expenses
For the Group, selling and distribution expenses for the year were US$834.6 million (2015: US$777.8 million), equivalent to approximately 9.8 percent (2015: 9.2 percent) of revenue. The increase in selling and distribution expenses was attributable mainly to the increased number of directly operated stores for Pou Sheng.

Administrative expenses for the year were US$611.1 million (2015: US$682.2 million), equivalent to approximately 7.2 percent (2015: 8.1 percent) of revenue. The decrease in administrative expenses was attributable mainly to a decrease in employee-related provisions. Since cost pressures continue to be significant for both the manufacturing and retail businesses, the management of both units will continuously look for ways to improve efficiency and productivity.

Share Of Results From Associates And Joint Ventures
During the review period in 2016, the share of results from associates and joint ventures was a combined profit of US$66.8 million, compared to a combined profit of US$82.2 million for last year. The decrease was mainly attributable to impairment loss recognized on certain assets of the joint ventures during the period in 2016 and the disposal of equity interests in Symphony Holdings Limited that contributed profit for 2015.

Lu Chin Chu, chairman, commented, “We are pleased with the Group’s performance despite the presence of uncertainties and slow global macroeconomic growth. We will continue to seek greater efficiency and provide value added solutions to our brand customers, while balancing the need for sustainable development. We will also continue to offer better sports-related experiences and choices to consumers, thereby helping our brand customers benefit from rising sports consumption in Greater China.”