Naibu Global International Company PLC : Naibu - Interim Results 2013- Final RNS

Press Release 18 September 2013 Naibu Global International Company Plc("Naibu", the "Company" or the "Group")Unaudited Interim ResultsNaibu Global International Company Plc (AIM:NBU), a leading Chinese manufacturer and supplier of branded sportswear, today announces its unaudited interim results for the six months ended 30 June 2013.Highlights

-	Revenues for H1 2013 increased by 20.5% to RMB950.1 million (approximately £100.8 million) (H1 2012: RMB788.7 million)
-	Profit before tax for H1 2013 rose by 16.1% to a record RMB214.8 million (approximately £22.8 million) (H1 2012: RMB184.9 million)
-	Earnings per share for H1 2013 of RMB2.90 (H1 2012: RMB 2.59)
-	Maiden proposed Interim dividend of 2 pence per share declared (2012: Nil). Scrip dividend alternative to shareholders who wish to reinvest
-	Strong Group balance sheet with cash position of RMB389.8 million as at 30 June 2013. The Group has no outstanding bank loans or overdue debt
-	Plans to increase Naibu-branded product range to 530 items in 2013 (2012: 414)
-	104 new Naibu-branded stores opened in H1 2013, totalling 3,144 stores
-	R&D expenditure in H1 2013 accounted for 1.4% of turnover (H1 2012: 1.6%) with further strengthening of R&D investment going forward

The illustrative exchange rate as at 30 June 2013 is 1 GBP : 9.4213 RMB.

Commenting on the interim results, Huoyan Lin, Executive Chairman of Naibu, said:
"The Board is pleased with the progress that has been made during the period, with
104 new stores opened, significant investment made into R&D, and plans to improve the Group's production facilities progressing well.
"Government policies in China are supportive of urbanisation, a key growth factor for Naibu, and the Board intends to capitalise on the significant opportunity in China as disposable income continues to increase and sports activities become more popular.
Naibu is well placed to benefit from the opportunities for growth in the Chinese sportswear market, both in the near and longer term, and the Board is particularly excited about the Group's plans to expand into more cities and provinces over the coming months."

- Ends - For further information:

Naibu Global International Company Plc
Huoyan Lin, Executive Chairman	Tel: [phone]
Li Zhen, Chief Financial Officer	www.naibu.com

Daniel Stewart & Company Plc	Tel: [phone]
Paul Shackleton / Martin Lampshire	www.danielstewart.co.uk

Media enquiries:

Abchurch
Henry Harrison-Topham / Joanne Shears	Tel: [phone]
[e-mail]	www.abchurch-group.com

Chairman's Statement

On behalf of the Board, I am pleased to present Naibu's interim results for the six months ended 30 June 2013 to shareholders of the Company. These results place the Group in a solid position to achieve our business objectives for the remainder of the current financial year.Operational reviewThe Group achieved record half-year sales of RMB950.1 million (approximately
£100.8 million), an increase of 20.5% over the same period in 2012. Pre-tax profits for the same period rose 16.1% to a record RMB214.8 million (approximately £22.8 million).
The Group has continued to focus its strategy on raising awareness of our brand in its primary target market in second, third and fourth tier cities in China where, through urbanisation, the disposable income of young consumers has steadily increased and these interim results reflect the growing recognition of Naibu's brand amongst that target market.
Given the Group's continued growth, Naibu is excited to be moving into new manufacturing facilities in Quangang and to increasing its production lines from its existing eight lines to ten lines, six of which will be new.
In addition, whilst the Group's discussions to build additional shoe production facilities in Western China have taken slightly longer than anticipated, the Board is pleased to announce that the Group has now reached an agreement with the People's Government of Dazhu County in Sichuan Province to purchase land use rights, for 13.3 hectares of land, to develop a Naibu Industrial Zone to include R&D, manufacturing and logistic facilities. The Group will pay RMB60 million of which RMB8 million has already been paid as a deposit.Product range and salesIn the six month period ended 30 June 2013, the Group continued to manufacture Naibu-branded leisure and sports shoes, which were sold through its nationwide network of Naibu outlets alongside Naibu-branded leisurewear, sportswear, sports accessories and equipment sourced from original equipment manufacturer ("OEM") suppliers. During the period, sales and marketing of these items remained focused
on mass-market buyers, especially those young, innovative consumers aged between 12 and 35, targeted by three separate product lines: "Vital Campus", "Urban Business" and "Holiday Leisure". The proportion of sales across the Vital Campus series increased to around 89.5% of total Group's sales (H1 2012: 87.0%), while sales of the other two product lines reduced to around 10.5% (H1 2012:
13.0%).
During the first half of 2013, the sale of shoes accounted for approximately 53.4% of the Group's revenues (H1 2012: 51.9%), clothing for 44.4% (H1 2012: 46.0%), and sales of accessories made up the balance.
Shoes continued to account for the majority of the Group's sales, with first half-year sales of RMB507.1 million, up 23.8% compared to the same period last year, and which is slightly higher than the overall increase in sales of 20.5%. This sales growth is attributable to increases in both sales volume and unit selling price, while sales volume contributed more significantly to the overall increase.
The Group also achieved significant growth in the sales of clothing and accessories. Sales in the first half of the year reached RMB443.0 million, up 16.8%. Clothing sales reached RMB422.3 million, an increase of 16.3% compared to the same period in the previous year. Sales of accessories such as rucksacks, caps, socks and balls, in particular, increased significantly by RMB4.7 million or 29.0% compared to the same period last year. This growth resulted from increases in both unit prices and sales volume.
In summary, sales growth in the first half of 2013 mirrored the first half of 2012, with growth in both unit quantities and selling prices. The Board is pleased that the Group also made significant progress during the period in terms of brand positioning, product design and marketing.
The Group continues to expand its sales network and at 30 June 2013, the Group maintained its relationships with 25 distributors operating through 3,144 stores. Since 31 December 2012, 104 new stores have been opened by distributors and sub-distributors. The Group's sales to the top five major distributors increased by nearly 15.5% over the same period last year.
This expansion has further enhanced the Naibu brand in existing markets. In those regions where the Group has yet to fully establish a sales network, Naibu is now further positioned to strengthen local resources and open new outlets. These areas
continue to catch up with and even surpass the sales growth rate of the Group's developed markets.Research and development ("R&D")The Group continued to maintain a strong R&D team of around 95 (2012 H1: 93) staff at its Shishi and Jinjiang factories, and this team is responsible for the design of all shoes and clothing.
The R&D team comprises three divisions respectively covering product design, product development and technology development. It creates two season collections each year ("Spring and Summer" and "Autumn and Winter"). The Group successfully launched a number of new designs during the 2013 seasonal fairs. Naibu's distributors remained crucial to the R&D process during the year, providing market feedback and views on future sales potential. The department plans to launch over
530 new Naibu products in 2013, almost 100 more products than last year. Clothing is expected to account for nearly half of the expanded product lines.
Innovation is the key to Naibu's success. The Group is constantly striving to offer value-added products with great quality and affordable prices for its target customers. The Group is developing a new brand, "NIBO", based on a European fashion concept and this new brand is targeted to be launched in 2015. In addition, the Group has incorporated advanced fabrics and up to date designs into its apparel products in response to its consumers' increasingly sophisticated tastes.
During the six month period ended 30 June 2013, the R&D expenditure as a proportion of Group turnover was 1.4% (2012 H2: 1.6%). Naibu will further strengthen investment in R&D in the future.ManufacturingNaibu's production centers are located in Jinjiang and Shishi, both in Fujian Province, where the Group continues to lease two purpose-built production facilities operating a total of eight shoe production lines, four at each plant and where workers are engaged in stamping, sewing and stitching, and moulding. Both plants ran without interruption throughout the period to meet strong demand for the Group's products. This was achieved through the optimisation of production support systems and enhancing production efficiencies.
At 30 June 2013, the Group employed 1,950 production staff (H1 2012: 1,962). Approximately 53.6% of the shoes sold and distributed by the Group during the period were produced at the manufacturing plants. The remaining shoes, as well as all of the Group's clothes and accessories, were sourced from OEM suppliers.
In order to meet the increased production requirements of the Group, Naibu is planning to make a number of changes to its production facilities. This will allow Naibu to respond with greater flexibility to market changes whilst providing the Group with enhanced control over the production process.
At the moment, Naibu leases a total of eight production lines at two sites, four each at Jinjiang and Shishi. These facilities have served the Group well, but the production lines in Jinjiang are relatively old and the lease for the Shishi plant will expire in late 2013. In order to consolidate and improve the efficiency of the Group's production, the Group is in the process of acquiring a plant in Quangang where it intends to establish eight production lines later this year. This will be achieved by setting up six entirely new production lines, and a further two production lines will be transferred from Shishi. The other two production lines in Shishi will be transferred to Jinjiang, and the existing four lines in Jinjiang will cease production. The new production facility in Quangang is expected to commence operation by the end of
2013, and accordingly, the Group anticipates that it will be operating ten production lines in total by the end of the year. The closure of the Shishi plant and the commencement of operations at the Quangang plant are expected to be concurrent and the Group does not anticipate any negative impact on its manufacturing capabilities in 2013.
The plants in Jinjiang and Quangang are approximately 50km apart and both are part of Quanzhou city. Both the workforce and the R&D team are aware of the planned changes and many of them are willing to relocate to the new facility in Quangang. The Group does not anticipate any difficulty in recruiting additional staff required due to the availability of skilled labour in Quanzhou.
Naibu also continues to execute on its growth strategy of investing in the central and western areas of China. Whilst this has taken slightly longer than the Board had originally anticipated and which was a result of recent changes in the political leadership in China, negotiations with the People's Government of Dahzu County in Sichuan Province have now been concluded. As a result of these negotiations, the Group has entered into an agreement with the People's Government of Dazhu
County in Sichuan Province to purchase land use rights, for 13.3 hectares of land, to develop a Naibu Industrial Zone.
The Naibu Industrial Zone will include R&D, manufacturing and logistic facilities relating to the development of shoes, apparel, sports equipment, outdoor exercise goods and other sporting goods. It is anticipated that the Naibu Industrial Zone will include other relevant upstream and downstream industries in the supply chain for such goods.
The Group will pay RMB 60 million for the land use rights, of which RMB8 million has already been paid as a deposit. It is anticipated that the total cost of investment for the project will be RMB300 million.
As part of this development, the Board anticipates that a new factory with an additional 12 production lines will be built and fully operational in mid 2015.Sales and distributionThe Group continued to operate its Marketing and Sales Centre in Fuzhou, with 71 staff (H1 2012: 70) responsible for product sales. There are six regional sales managers responsible for individual geographic areas across Naibu's established sales network, communicating regularly with key customers and monitoring consumer trends and competitor performance. In 2013, Northern China, Eastern China and Southern China remained the key markets for Naibu. Total revenues from these three regions in H1 2013 and H1 2012 accounted for 66.1% and 67.4% respectively of Group sales. However, those regions where sales were lagging, the Central and North Western parts of China, will in the near future become the focus of the Group's sales initiatives.
During H1 2013, the Group maintained stable relationships with 25 distributors, and the number of Naibu stores increased to 3,144. New store locations continued to be selected jointly by distributors and the Group, and are based on market research, estimated costs and local sales potential. The Group continued to provide its distributors with guidance on the store decoration layout and how products should best be presented, in order to maintain the Naibu brand image and the Group's high standards of service.
Over the past six months, thanks to the combined efforts of the Group, its distributors and sub-distributors, sales from Naibu stores have increased significantly. Total sales space of Naibu stores increased to approximately 172,000 square meters as at
the end of June 2013, with average annual sales of Naibu stores reaching a record of exceeding RMB11,000 per square metre, up 10.4% over the same period in 2012. This shift paved the way for further widening of the sales base, particularly in regions such as Central China and South Western China.MarketingNaibu continued to invest in brand marketing and promotional work during the first half of 2013. Advertising expenditure as a proportion of turnover during the six months period was 1.4% (H1 2012: 1.6%). Through investment in television and other media advertising, Naibu branded products have continued to gain in popularity and have captured further market share, which in turn has enhanced the enthusiasm of the Group's distributors to expand the scale of their operations. There were 104 new stores opened by distributors and sub-distributors during the period. This was also supported by "front-line" information on consumer and competitor trends supplied by the Group's team of regional sales managers.
The marketing and sales teams analyse retail data and share market information on a timely basis with distributors. The Group also endeavours to keep its retailers competitive by offering comprehensive training and guidance for store openings and quarterly ordering plans. In order to help network partners reduce their operating cost pressures, the Group granted subsidies to distributors for the renovation of store outlets at the end of 2012 to standardise store layout and improve brand image. This has benefited sales through offering a refreshing new shopping experience for customers.Management and staffAs at 30 June 2013, the Group had 2,320 full time staff. Of these, approximately
2,200 were employed at the Group's production facilities in Jinjiang and Shishi, and the rest at the Group's headquarters in Fuzhou. The Group offers staff various training programmes and promotion opportunities, and organises skills competition and social events for team building. The Group continues to improve management systems and develop a strong corporate culture to attract talented staff. Staff turnover rate remained low, in large part reflecting the relatively high salary levels and progressive working conditions.
I would like to thank all of the Group's directors and staff members for their hard work and support. Their efforts are core to Naibu's ongoing success.Interim DividendI am pleased to announce that the Board is proposing an interim dividend of 2 pence per share, with scrip dividend alternative. The dividend will be paid on 16 December
2013 to shareholders on the register at the close of business on 11 October 2013.OutlookLooking ahead, industry players will continue to be challenged by inflation and increasing competition. However, government policies that support urbanisation, the popularisation of sports and increasing disposal income will continue to provide opportunities for China's sportswear market. Moreover, achieving sustainable business growth and creating value for stakeholders in the long term are objectives which the Board continues to focus on. The Group will consistently use its competitive edge to seize every market opportunity. Naibu will also enhance its execution capabilities at all levels to gain market share and prudently mitigate future business risks.
The Board is confident that Naibu is well positioned to continue with further strong growth through the remainder of 2013 and beyond, and to deliver further value as the Group continues with its planned expansion into more Chinese cities and provinces.Huoyan Lin Executive Chairman17 September 2013