FUJIAN, China, May 17, 2011 /PRNewswire-Asia/ -- Exceed Company Ltd. (NASDAQ: EDS) ("Exceed" or "the Company"), the owner and operator of "Xidelong" brand - one of the leading domestic sportswear brands in China, today released its unaudited financial results for the first quarter ended March 31, 2011.
Financial Highlights – First quarter ended March 31, 2011(1)
Shuipan Lin, Exceed's founder, Chairman and CEO, commented, "In the first quarter of 2011, we successfully executed our strategy to build Xidelong's brand recognition and deepen our market penetration in China. Our distribution network expansion plan remains focused on China's third-tier cities and in selected second-tier cities; consumers' purchasing power in these regions is growing and because our innovative and stylish products demonstrate good value for money, they have proven to be appealing to consumers in these cities. Our target customers have responded positively as we broaden the variety of footwear, apparel and accessory products that we offer. We have stepped up our investments in R&D to develop functional and fashionable new products and we will continue to dedicate resources to product development and manufacturing in order to regularly launch new products and expand our existing product lines.
"We remain focused on the long-term development and growth of Exceed, and we will maintain a level of cash balance that would enable us to have adequate coverage as we protect our market share in an increasingly competitive market. We are finalizing a new operational plan to address the impact of recent labor shortages and consolidation among outsourced manufacturers. As part of our plan, we are considering the acceleration of new factory construction and factory acquisitions, as well as the creation of a new network of regional sales and logistic centers. We are also investing to improve our employees' working conditions and living conditions so that we can retain our gifted employee base. Finally, as we endeavor to grow our top and bottom lines, we will make investments in production efficiency to enhance and integrate our supply chain."
First Quarter 2011 Financial Results
Revenue breakdown |
||||||
Three months |
Three months |
|||||
ended |
ended |
2011 Q1 |
||||
March 31 |
March 31 |
vs. |
||||
2011 |
% of |
2010 |
% of |
2010 Q1 |
||
RMB'000 |
revenue |
RMB'000 |
revenue |
growth % |
||
Footwear |
276,500 |
36.8% |
281,143 |
49.3% |
-1.7% |
|
Apparel |
464,665 |
61.8% |
284,119 |
49.9% |
63.5% |
|
Accessories |
10,248 |
1.4% |
4,555 |
0.8% |
125.0% |
|
Total |
751,413 |
100% |
569,817 |
100% |
31.9% |
|
Revenue. Revenue increased by 31.9%, from RMB569.8 million for the first quarter ended March 31, 2010 to RMB751.4 million (US$114.7 million) for the first quarter ended March 31, 2011. The increase in revenue was primarily driven by the continued success of our advertising and promotional campaign, as well as the successful launch of new series of apparel and footwear products. Beginning in 2010, we have used the phrase "happy lifestyle" as the main theme in our Xidelong brand promotional activities and product offerings. In early 2011, we were named to the 2010 list of the "Top Ten Sport-footwear Enterprises" in China and were selected as one of the "100 Most Valuable Brands of 2010 in the Footwear Industry" by the National Productivity Center of the Leather and Footwear Industry. Furthermore, we received the Outstanding Contribution Award from the General Administration of Sport of China for our sponsorship of the "Fitness for All Campaign – Walking to 100 Universities" program; these marketing initiatives have enhanced our brand significantly. Meanwhile, strong demand from consumers motivated the expansion of the Xidelong retail network by our distributors. The number of the Xidelong retail stores increased by 670, from 3,788 as of March 31, 2010 to 4,458 as of March 31, 2011.
Revenue from footwear decreased by 1.7%, from RMB281.1 million for the first quarter ended March 31, 2010 to RMB276.5 million (US$42.2 million) for the first quarter ended March 31, 2011, primarily due to a decrease in sales volume. The sales volume in the first quarter decreased by 7.2% compared with the same period in 2010, mainly because a labor shortage distorted our in-house footwear production schedule, limiting the amount of products that were delivered in the first quarter of 2011. This factor was generally faced by each of the players in the sportswear industry and we are finalizing a new operational plan in order to solve the problem permanently. However, the footwear Average Selling Price ("ASP") continued to increase, as a result of our continuous marketing and brand promotion efforts. The footwear ASP was increased by 6.0% year-over-year for the first quarter ended March 31, 2011.
Revenue from apparel increased by 63.5%, from RMB284.1 million for the first quarter ended March 31, 2010 to RMB464.7 million (US$71.0 million) for the first quarter ended March 31, 2011. This increase was primarily due to a 26.9% increase in sales volume and a 28.9% increase in ASP. ASP of apparel increased significantly as more expensive winter/spring apparel products were sold during the first quarter of 2011 compared to the same period in 2010. The sales volume of apparel grew because of the expansion of product varieties, particularly the new lifestyle apparel, which has created strong demand from consumers. In addition, the increase in the average size of the Xidelong retail stores, which typically now have larger display areas for apparel, has attracted more customer traffic. The increased consumer recognition of our Xidelong brand as a result of our continuous marketing and brand promotion efforts also contributed to the increase in ASP of our apparel products.
Gross profit and Gross profit margin. Gross profit increased by 29.4%, from RMB179.8 million for the first quarter ended March 31, 2010 to RMB232.6 million (US$35.5 million) for the first quarter ended March 31, 2011. Gross margin decreased from 31.6% for the first quarter ended March 31, 2010 to 31.0% for the first quarter ended March 31, 2011. This was primarily due to the decrease in in-house production of footwear resulting from the shortage of labor, a circumstance which was generally faced by all of the players in the sportswear industry. We have formulated a new operational plan in response to the labor shortage. Please refer to the "Business Highlights and Outlook" section of this release. On the other hand, the gross profit margin of footwear from outsourced manufacturers increased by 4.0 percentage points for the same period in the fiscal year 2011, reflecting our ability to maintain adequate control over our outsourced manufacturers' production costs. We will continue our efforts to balance the mix between in-house production and outsourced manufacturing.
Other income and gains. Other income and gains represented bank interest income. The increase from RMB0.5 million for the first quarter ended March 31, 2010 to RMB1.4 million (US$217,000) for the first quarter ended March 31, 2011 was mainly due to an increase in interest income, reflecting the higher average bank balance from our strong revenue growth.
Operating expenses. Total operating expenses for the first quarter ended March 31, 2011 were RMB105.8 million (US$16.1 million), an increase of approximately 17.2% from RMB90.3 million for the same period in 2010.
Finance costs. Finance costs decreased by 59.8%, from RMB0.6 million for the first quarter ended March 31, 2010 to RMB0.3 million (US$38,000) for the first quarter ended March 31, 2011, primarily due to a decrease in the average balance of our short-term bank borrowings.
Profit before tax. As a result of the foregoing, profit before tax increased by 43.3%, from RMB89.4 million for the first quarter ended March 31, 2010 to RMB128.0 million (US$19.5 million) for the first quarter ended March 31, 2011.
Tax. Tax expenses increased from RMB11.8 million for the first quarter ended March 31, 2010 to RMB17.1 million (US$2.6 million) for the first quarter ended March 31, 2011, primarily because of the increase in operating profit. The full exemption period of Xidelong (China) Co. Ltd., our principal PRC subsidiary, from PRC corporate income tax expired on December 31, 2009. Xidelong (China) Co. Ltd. was fully exempt from PRC corporate income tax before December 31, 2009 and is entitled to a 50% reduction in the PRC corporate income tax until December 31, 2012, after which it will be subject to the standard tax rate of 25%. The effective tax rate for 2010 and 2011 were 13.2 % and 13.3%, respectively.
Profit. As a result of the above factors, profit for the first quarter ended March 31, 2011 was RMB110.9 million (US$16.9 million), an increase of 43.0% from RMB77.6 million for the first quarter ended March 31, 2010.
Balance Sheet
Inventory. The average inventory turnover days for the first quarter ended March 31, 2011 and 2010 were 9 days and 12 days, respectively. Inventory turnover days decreased mainly due to better production planning, procurement control and logistics management.
Trade receivables. The average trade receivables turnover days for the first quarter ended March 31, 2011 and 2010 were 78 days and 114 days, respectively. We reviewed and tightened our credit control policy in 2010 and we will continue our efforts to maintain tight control on trade receivables balance.
Trade payables. The average trade payables turnover days for the first quarter ended March 31, 2011 and 2010 were 30 days and 49 days, respectively. Average trade payables turnover days decreased as a result of our decision to opt for the bulk purchase discounts offered by our suppliers in exchange for quicker payment for raw materials and finished products.
Cash and bank balances and pledged time deposits. Cash and bank balances and pledged time deposits increased to RMB930.7 million (US$142.1 million) as of March 31, 2011 from RMB762.8 million as of December 31, 2010, primarily as a result of the increase in sales and the shorter payment periods for our distributors.
Cash Flow
Cash inflow from operating activities was RMB182.0 million (US$27.8 million) for the first quarter ended March 31, 2011, compared to RMB298.6 million for the same period in 2010, a decrease that was primarily due to the growth in trade receivables related to the increase in sales. The effect was partially offset by the increase in trade payables for our improved cash management.
Business Highlights and Outlook
Second Quarter 2011 Guidance
Exceed expects to generate net revenues in the range of RMB717.6 million to RMB730.4 million in the second quarter of 2011, representing an approximate year-over-year increase of 12% to 14%, as compared with RMB640.7 million in the same period of 2010. The Company has recorded an order book growth of 25% for the 2011 Spring/Summer collection sales fair over the same sales fair last year. Since we delivered our summer products much earlier than last year in the first quarter of 2011, we achieved a higher revenue growth of 31.9% in the first quarter of 2011 against the same period of last year. The revenue growth in the second quarter of 2011 will therefore be comparatively lower. This represents the Company's preliminary estimates, and is subject to change.
Investor Conference Call / Webcast Details
The Company's senior management will host a conference call on Tuesday, May 17, 2011 at 5:00 am (US Pacific) / 8:00 am (US Eastern) / 8:00 pm (Beijing) to discuss the Company's 2011 first quarter financial results and recent business activity. The conference call may be accessed by dialing:
Toll Free |
Toll |
||
|
1 866 519 4004 |
||
|
800 819 0121 |
||
|
400 620 8038 |
||
|
800 930 346 |
852 2475 0994 |
|
|
0808 234 6646 |
||
|
1 718 354 1231 |
||
Participant Passcode |
"EDS" |
||
Please dial in 10 minutes before the call is scheduled to begin.
A replay of the conference call may be accessed by phone at the following numbers until Monday, May 23, 2011:
Toll Free |
Toll |
||
|
1 866 214 5335 |
1 718 354 1232 |
|
|
10800 714 0386/ 10800 140 0386 |
||
|
800 901 596 |
||
|
0800 731 7846 |
||
Participant Passcode |
60546820 |
||
Additionally, a live and archived webcast of the conference call will be available on the investor relations section of Exceed's website at http://www.ir.xdlong.cn.
About Exceed Company Ltd.
Exceed Company Ltd. designs, develops and engages in wholesale of footwear, apparel and accessories under its own brand, XIDELONG, in China. Since it began operations in 2002, Exceed has targeted its growth on the consumer markets in the second and third-tier cities in China. Exceed has three principal categories of products: (i) footwear, which comprises running, leisure, basketball, skateboarding and canvas footwear, (ii) apparel, which mainly comprises sports tops, pants, jackets, track suits and coats, and (iii) accessories, which mainly comprise bags, socks, hats and caps. Exceed Company Ltd. currently trades on Nasdaq under the symbols "EDS", "EDSWW" and "EDSUU".
Safe Harbor Statement
This announcement contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about us and our industry. All statements other than statements of historical fact in this form are forward-looking statements. These forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "anticipate", "estimate", "plan", "believe", "is/are likely to" or other similar expressions.
These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, we cannot assure you that our expectations will turn out to be correct. Our actual results could be materially different from and worse than our expectations. A number of factors could cause actual results to differ materially from those contained in these forward-looking statements, including but not limited to changes in our goals and strategies, our ability to control costs and expenses, success of our products, competition in the sportswear industry in China, and changes in PRC government preferential tax treatment and financial incentives. The forward-looking statements made in this announcement relate only to events or information as of the date on which this announcement is published. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date this announcement is published or to reflect the occurrence of unanticipated events.
Contacts: |
||
Taylor Rafferty (HK): Mahmoud Siddig +852 3196 3712 Exceed@Taylor-Rafferty.com |
Taylor Rafferty (US): Delia Cannan +1 (212) 889-4350 Exceed@Taylor-Rafferty.com |
|
– FINANCIAL TABLES TO FOLLOW –
EXCEED COMPANY LTD. AND SUBSIDIARIES CONDENSED STATEMENTS OF COMPREHENSIVE INCOME |
|||||||
Three months ended March 31 |
|||||||
2011 |
2011 |
2010 |
|||||
US$'000 |
RMB'000 |
RMB'000 |
|||||
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||
Revenue |
114,749 |
751,413 |
569,817 |
||||
Cost of sales |
(79,229) |
(518,817) |
(390,024) |
||||
Gross profit |
35,520 |
232,596 |
179,793 |
||||
Other income and gains |
217 |
1,418 |
453 |
||||
Selling and distribution costs |
(11,288) |
(73,915) |
(68,388) |
||||
Administrative expenses |
(2,914) |
(19,082) |
(10,299) |
||||
Research and development expenses |
(1,948) |
(12,755) |
(11,575) |
||||
OPEARTING PROFIT |
19,587 |
128,262 |
89,984 |
||||
Finance costs |
(38) |
(250) |
(622) |
||||
PROFIT BEFORE TAX |
19,549 |
128,012 |
89,362 |
||||
Tax |
(2,607) |
(17,074) |
(11,774) |
||||
PROFIT FOR THE PERIOD |
16,942 |
110,938 |
77,588 |
||||
EARNING PER SHARE |
|||||||
Net profit per share |
|||||||
Basic |
US$0.57 |
RMB3.74 |
RMB3.10 |
||||
Diluted |
US$0.51 |
RMB3.37 |
RMB2.64 |
||||
Weighted average number of shares outstanding |
|||||||
Basic |
29,678,487 |
29,678,487 |
25,015,165 |
||||
Diluted |
32,964,630 |
32,964,630 |
29,334,157 |
||||
EXCEED COMPANY LTD. AND SUBSIDIARIES CONDENSED STATEMENTS OF FINANCIAL POSITION |
|||||||
As of three months ended March 31 |
As of year ended December 31 |
||||||
2011 |
2011 |
2010 |
|||||
US$'000 |
RMB'000 |
RMB'000 |
|||||
(Unaudited) |
(Unaudited) |
||||||
NON-CURRENT ASSETS |
|||||||
Property, plant and equipment |
39,849 |
260,944 |
263,958 |
||||
Prepaid land lease payments |
4,339 |
28,412 |
28,599 |
||||
Deposit paid for acquisition of land use rights |
4,006 |
26,230 |
12,600 |
||||
Total non-current assets |
48,194 |
315,586 |
305,157 |
||||
CURRENT ASSETS |
|||||||
Inventories |
8,322 |
54,492 |
44,747 |
||||
Trade receivables |
104,407 |
683,686 |
611,660 |
||||
Prepayments, deposits and other receivables |
795 |
5,207 |
19,788 |
||||
Cash and bank balances |
142,129 |
930,700 |
762,798 |
||||
Total current assets |
255,653 |
1,674,085 |
1,438,993 |
||||
CURRENT LIABILITIES |
|||||||
Trade and bills payables |
35,498 |
232,455 |
111,001 |
||||
Deposits received, other payables and accruals |
10,988 |
71,948 |
65,585 |
||||
Interest-bearing bank borrowings |
2,749 |
18,000 |
18,000 |
||||
Tax payable |
2,605 |
17,060 |
12,858 |
||||
Total current liabilities |
51,840 |
339,463 |
207,444 |
||||
NET CURRENT ASSETS |
203,813 |
1,334,622 |
1,231,549 |
||||
Net assets |
252,007 |
1,650,208 |
1,536,706 |
||||
STOCKHOLDERS EQUITY |
|||||||
Issued share capital |
3 |
17 |
17 |
||||
Retained profits |
153,358 |
1,004,234 |
904,761 |
||||
Reserves |
98,646 |
645,957 |
631,928 |
||||
Total equity |
252,007 |
1,650,208 |
1,536,706 |
||||
EXCEED COMPANY LTD. AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS |
|||||||
Three months ended March 31 |
|||||||
2011 |
2011 |
2010 |
|||||
US$'000 |
RMB'000 |
RMB'000 |
|||||
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||
Net cash inflow from operating activities |
27,800 |
182,045 |
298,593 |
||||
Net cash outflow from investing activities |
(2,082) |
(13,637) |
(3,300) |
||||
Net cash inflow from financing activities |
- |
- |
26,645 |
||||
Effect of exchange rate changes |
(77) |
(506) |
(128) |
||||
Net increase in cash and cash equivalents |
25,641 |
167,902 |
321,810 |
||||
Cash at beginning of the period |
116,488 |
762,798 |
262,204 |
||||
Cash at end of the period |
142,129 |
930,700 |
584,014 |
||||