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Man Wah Records Historical High Revenue and Net Profit    2016-05-25

(Hong Kong-25 May 2016) - Man Wah Holdings Limited (“Man Wah” or the “Group,” stock code: 1999) today announced its audited annual results for the year ended 31 March 2016 (“FY2016” or the “Review Year”). The Group recorded outstanding results with a record high revenue and net profit during the Review Year, thanks to its continuous efforts in product innovation, expansion of production capacity and expansion of sales channels.

During the Review Year, total revenue grew by 11.8% to HK$7.33 billion. Gross profit surged year-on-year by 24.1% to HK$2.90 billion due to lower commodity prices and better production efficiency. Its gross profit margin also rose by 3.9 percentage points to 39.5%. Profit attributable to owners of the Company increased by 23.4% to HK$1.33 billion. Net profit margin rose to 18.1%. Basic earnings per share climbed by 22.7% to HK 68.3 cents.

As at 31 March 2016, the Group maintained in a sound financial position with bank balance and cash of approximately HK$1.45 billion and a current ratio of 3.0. To reward shareholders for their long-term support, the Board proposes a final dividend of HK19 cents per share. Together with the interim dividend of HK16 cents already paid, total dividends of the year amounted to HK35 cents per ordinary share, representing a dividend payment ratio of around 51.0%. The Board also proposes issue of one bonus share for every one existing share held by the qualifying shareholders, which is subject to the shareholders' approval at the Annual General Meeting.

Dr. Wong Man Li, Chairman of Man Wah, said, “During the Review Year, the macro economy was still characterised by uncertainties, but Man Wah managed to enhance its competitiveness by leveraging its abundant experience in reclining sofa market, effective implementation of its development strategy and continuous improvement of its internal production and operating efficiency to reduce costs. Boosted by a stronger performance management system, the Group was able to deliver yet another successful year.”

Business Review

Sales of branded sofa and auxiliary products as well as other products continues steady rise

During the Review Year, revenue from sofas and auxiliary products and other products continued to grow. Sales revenue of the former increased by around 11.4% to HK$6.88 billion, accounting for approximately 93.9% of the Group’s total revenue. Revenue from other products such as bedding, furniture components and other products rose by approximately 18.1% to HK$450 million.

China market

The China market was confronted with numerous challenges such as the slowdown in economic growth, the RMB depreciation, and real estate de-stocking in third- and fourth-tier cities. As the brand of Man Wah continued to be enhanced and more consumers in first- and second-tier cities seek healthy and comfortable sofa products, the Group strengthened the marketing and promotion in due course, launched more products accommodating the demand of targeted customer groups in different market segments, continued to expand its sales network and enhanced the efficiency of existing stores. As a result, the revenue of sofa products from the China market grew 21.1% to HK$2.10 billion and the Group strengthened its leading position in the sofa industry.

Since March 2016, the Group commenced the operation of bedding products stores in China with the “CHEERS Five-star Mattress” brand, aiming to create greater synergies with the “CHEERS” sofa brand.

As at 31 March 2016, the Group had a total of 1,645 “CHEERS”, “MOREWELL” and “CHEERS Five-star Mattress” self-operated and distributors’ retail stores in China and achieved a net increase of 204 stores in the China market during the year.

As for online sales, the Group continued to sell sofas and ancillary products to consumers through internet platforms such as TMALL (www.tmall.com). Revenue from internet and TV sales soared by approximately 59.9% year-on-year to HK$130 million during the Review Year.

North America market

During the Review Year, the Group enhanced its market position through product innovation and improving services while it benefitted from a favourable external economic environment, thus it achieved stable growth in the North America market. The Group has increased the proportion of high-price products and at the same time its product innovation has continued as a key driver to enlarge its market share. The Group participated in four furniture exhibitions where it introduced more than 200 new sofa models. In particular, at the recent High Point Furniture Exhibition held in the US, the Group launched a number of well-received new products, thereby again reinforcing its leading position in the reclining sofa market. During the Review Year, the Group secured 12 new customers in the North America market. Its revenue derived from the North America market rose by approximately 12.9% to HK$4.00 billion year-on-year.

Sofa markets in Europe and other overseas regions

While the weak European economy exerted pressure on sales, the Group has actively adjusted its product mix by increasing the proportion of sales of non-genuine leather sofas and focusing on the launch of innovative products. As a result, the Group achieved significant growth in gross profit margin in this market and recorded a revenue of HK$790 million.

Capacity expansion