Yue Yuen Industrial : UNAUDITED CONSOLIDATED RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2021

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YUE YUEN INDUSTRIAL (HOLDINGS) LIMITED

裕 元 工 業（ 集 團 ）有 限 公 司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 00551)

UNAUDITED CONSOLIDATED RESULTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021

Summary

The Directors of Yue Yuen Industrial (Holdings) Limited announce the unaudited consolidated results of the Group for the three months ended March 31, 2021. This announcement is made as part of the Company's current practice to publish its financial results quarterly and pursuant to paragraph 13.09(2) of the Listing Rules and Part XIVA of the SFO.

The unaudited consolidated profit attributable to owners of the Company for the three months ended March 31, 2021 was approximately US$85.4 million.

The directors (the "Directors") of Yue Yuen Industrial (Holdings) Limited ("the Company") are making this announcement of the unaudited consolidated results of the Company and its subsidiaries (the "Group") for the three months ended March 31, 2021 in line with its current practice to publish the Group's financial results quarterly and pursuant to paragraph 13.09(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the "SFO").

• For identification purpose only

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Consolidated Income Statement

For the three months ended March 31, 2021

	For the three months
	ended March 31,
	2021		2020
	(Unaudited)	(Unaudited)
	US$'000	US$'000
Revenue	2,493,272		1,969,468
Cost of sales	(1,858,106)	(1,553,572)
Gross profit	635,166		415,896
Other income	30,996		38,705
Selling and distribution expenses	(319,950)	(234,161)
Administrative expenses	(150,616)	(154,994)
Other expenses	(54,827)	(83,957)
Finance costs	(13,767)	(20,721)
Share of results of associates	8,559		3,820
Share of results of joint ventures	11,539		1,080
Other gains and losses	(1,096)	(20,198)
Profit (loss) before taxation	146,004		(54,530)
Income tax expense	(37,160)	(10,763)
Profit (loss) for the period	108,844		(65,293)
Attributable to:
Owners of the Company	85,379		(56,281)
Non-controlling interests	23,465		(9,012)
	108,844		(65,293)

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Consolidated Statement of Comprehensive Income

For the three months ended March 31, 2021

	For the three months
	ended March 31,
	2021		2020
	(Unaudited)	(Unaudited)
	US$'000	US$'000
Profit (loss) for the period	108,844		(65,293)
Other comprehensive income (expense)
Items that will not be reclassified subsequently to
profit or loss:
Fair value gain (loss) on equity instruments at fair
value through other comprehensive income	1,906		(10,902)
Share of other comprehensive income (expense) of
an associate	2,189		(1,097)
	4,095		(11,999)
Items that may be reclassified subsequently to
profit or loss:
Exchange difference arising on the translation of
foreign operations	(10,895)	(19,235)
Share of other comprehensive expense of associates
and joint ventures	(9,218)	(7,147)
Reserve released upon disposal of associates	(868)	(270)
	(20,981)	(26,652)
Other comprehensive expense for the period	(16,886)	(38,651)
Total comprehensive income (expense) for the period	91,958		(103,944)
Total comprehensive income (expense) for the period
attributable to:
Owners of the Company	72,743		(86,980)
Non-controlling interests	19,215		(16,964)
	91,958		(103,944)

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Basis of preparation and principal accounting policies

The unaudited consolidated results for the three months ended March 31, 2021 have been prepared on the historical cost basis except for certain properties and financial instruments, which are measured at revalued amount or fair values as appropriate.

Other than changes in accounting policies resulting from application of amendments to Hong Kong Financial Reporting Standards ("HKFRSs"), the accounting policies applied and methods of computation used in the unaudited consolidated results for the three months ended March 31, 2021 are the same as those presented in the Group's annual financial statements for the year ended December 31, 2020. The comparative figures of administrative expenses and other expenses in the consolidated income statement were reclassified to conform to the presentation in the current period.

In the current period, the Group has applied, for the first time, certain amendments to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants which are mandatorily effective for the annual period beginning on or after January 1, 2021 for the preparation of the Group's unaudited consolidated results for the three months ended March 31, 2021. The adoption of the amendments to HKFRSs does not have material impact on the Group's results and financial positions for the current or prior periods.

MANAGEMENT DISCUSSION AND ANALYSIS

Business Review

Global consumer sentiment and supply chain capacity started to normalize in the first three months of 2021 as economies around the world started to emerge from the downturn caused by the Novel Coronavirus ("COVID-19") pandemic. The Group realized a considerable improvement in the performance of its manufacturing and retail businesses during the period. On the manufacturing side, the Group saw recovery in global demand for its products, despite continuing to see volatility due to the COVID-19 pandemic. This facilitated an improvement in production efficiency during the quarter, supporting the Company's growth recovery and return to profitability.

The Group's retail subsidiary Pou Sheng International (Holdings) Limited ("Pou Sheng") saw a sustained turnaround during the period, as it further leveraged increasing health awareness among consumers post COVID-19, rising sports participation rates and the growing 'athleisure' trend in the Greater China region. It continued to see robust growth in its omni-channels driven by its increasingly diverse B2C channels and the integration of sports services content across all of its channels, enriching the consumer experience. For more financial details of the Group's retail business, please refer to the results announcement of Pou Sheng.

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Revenue Analysis

The Group recorded revenue of US$2,493.3 million in the three months ended March 31, 2021, representing an increase of 26.6% compared to revenue of US$1,969.5 million in the same period of 2020. The increase in revenue was attributable to increased orders amidst the ongoing recovery of global demand for the Group's products and an increase in production efficiency, on top of a low-base effect due to the COVID-19 pandemic in 2020. In addition, Pou Sheng's growth continued to accelerate alongside the quick rebound of the sportswear markets in mainland China.

In the three months ended March 31, 2021, the revenue attributable to footwear manufacturing activity (including athletic/outdoor shoes, casual shoes and sports sandals) increased by 3.9% to US$1,214.4 million, compared with the same period of last year. Although benefiting strongly from demand recovery, the volume of shoes shipped during the period decreased by 4.5% to 68.3 million pairs, a result of the Group's efforts to refine and optimize its capacity and product mix. The average selling price increased by 8.7% to US$17.79 per pair, as compared with the same period of last year, led largely by growing demand for high-end categories in the Group's product portfolio.

The Group's total revenue with respect to the manufacturing business (including footwear, as well as soles, components and others) during the period was US$1,365.6 million, representing an increase of 8.3% as compared with the same period of last year. While all categories experienced consumer-led recovery during the period, the increase in overall manufacturing revenue was supported by the exceptional growth of the Group's Soles, Components & Others category, which grew 64.3% year-on-year.

During the period, the revenue attributable to Pou Sheng, the Group's retail subsidiary, increased by 59.3% to US$1,127.7 million, compared to US$708.1 million in the same period of last year. In RMB terms (Pou Sheng's reporting currency), revenue during the first three months in 2021 increased by 47.7% to RMB7,306.8 million, compared to RMB4,947.1 million in the same period of last year. The increase in revenue was mainly attributed to sustained consumer recovery in China amid the fading of COVID-19 and the reopening since the second quarter of 2020.

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