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Man Wah Holdings Reports US Sales Surge of Recliners & Sofas

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Man Wah Holdings Limited, together with its subsidiaries  the Chinese enterprise known for its "CHEERS" brand of recliner sofas, announced its annual results.

For the year ended 31 March 2011, the total revenue of the Group surged by 29.9% to record high of approximately HK$ 3,808 million (489 million USD) when comparing with year ended 31 March 2010 of HK$ 2,932 million, equally benefiting from both exports and domestic sales growth. During the year under review, although facing pressure from soaring transport costs, the company realized a net profit of HK$ 621.3 million, representing an increase of 0.6% over last fiscal year (FY2010:HK$ 617.3 million).

Basic earnings per share was HK$ 64.5 cents, representing an upsurge of approximately 2.1% when comparing with the pro forma EPS of HK$ 62.4 cents in FY2010. The Board of Directors recommended the payment of a final dividend of HK$ 13.0 cents (FY2010: HK$ 22.0 cents) per share, together with an interim dividend of HK$ 13.4 cents (FY2010: Nil) per share, the total basic dividend for the year amounted to HK$ 26.4 cents (FY2010: HK$ 22.0 cents) per share, representing an increase of 20%. The total basic dividend payout ratio for the year amounted to 41% (FY2010: 35%).

In the FY2011, the Group kept the gross profit margin stable at 42.5% (FY2010: 42.9%), very close to the previous year which reflected its outstanding ability in stringent cost control and success in sales strategy adjustments. The Group continues its healthy financial position by maintaining a strong balance sheet with cash on hand and bank balances rising 329.1% year-on-year to approximately HK$ 1,611 million (FY2010:HK$ 375 million), while bank loans dropped by 88.1% year-on-year to approximately HK$ 17.5 million (FY2010:HK$ 147 million), allowing our acid-test ratio to jump to 5.81 from 2.04 in FY2010.

Mr. Wong Man Li, Chairman and managing director of Man Wah Holdings said, "The problem of sharply increased raw material prices and labor costs, as well as RMB appreciation, affected all types of enterprises worldwide. Last year, we experienced the highest increase in raw material prices over the past 20 years. Fortunately, the Group successfully kept the gross profit margin at a high level through improving economies of scale and working efficiency, and also as over 100 new sofa models we launched were supported by our enhanced research and development capability. During the year under review, we increased the average selling price of export sofa product and PRC sofa product with 7% and 13%, respectively."

Sales Performance

U.S. market continues to be the Group's key market, which accounted for 54.3% of our total revenue. Revenue generated from the U.S. market surged significantly to 55.0% to HK$ 2,069 million(255 million USD), due to improving "CHEERS" brand recognition and the sales orders from U.S. retailers steadily grew. According to the latest research report of Euromonitor International Plc ("Euromonitor"), Man Wah's market share in the U.S. recliner sofa market increased to 7.3% in 2010 from 2.6% in 2008. Furthermore, "CHEERS" was upgraded to a Top 5 US recliner sofa brand from No.8 in 2008. Meanwhile, according to another independent information provider -- Furniture/Today's latest research report published on May 2011 -- Man Wah was the fastest-growing furniture supplier in the U.S. in terms of sales gains, by percentage increase in 2010 vs 2009, and has been ranked among the Top 10 Furniture Sources for the U.S. Market. The ranking is based on 2010 total furniture shipments to the U.S. market.

Sales Network Expansion

The PRC market was our second largest market, which accounted for 25.0% of our total revenue. It is composed of PRC sofa sales and PRC bedding sales which accounted for 20% and 5% of total revenue, respectively. During the year under review, PRC sofa sales increased 36.5% to approximately HK$ 760 million. PRC bedding sales reached HK$ 193 million, similar to the previous year. The Group continued to strengthen its exploration of the PRC market. The Company continued its balanced twin-pronged strategy of self-operated stores and distributor stores. As of 31 March 2011, the total number of "CHEERS" and "ENLANDA" brand retail outlets reached 660 from 509 in FY2010, representing the increase of 30% or 151 retail outlets. Out of these retail outlets, "CHEERS" brand retail outlets increased by 36.8%, or 109 stores, to 405 stores in total; "ENLANDA" brand retail outlets increased by 19.7%, or 42 stores, to 255 stores in total. As of 31 March 2011, our self-operated store network (both "CHEERS" and "ENLANDA" stores) covered 18 (FY2010: 16) first and second tier major cities in Mainland China, including Shanghai, Shenzhen and Guangzhou and 2 new cities, Chongqing and Quanzhou. The Group will continue to develop a high quality nationwide sales network in the future, with an aim to hit 1,000 stores by the end of FY2013. According to Euromonitor's market survey, Man Wah continues to hold its leading position in the PRC recliner sofa market, with its market share rising to 19.8% in 2010 from 16.2% in 2008.


Mr. Wong said, "The Group will continue to strengthen 'CHEERS' market-leading position and brand recognition in both the international and domestic market by enhancing product quality and extending our retail network. In the US market, the Group will further cooperate with US retailers as well as focusing on popular recliner chairs, targeting to further increase our market share in the US market. In the PRC market, the Group will continue to devote more resources in promoting the recliner sofa theme and further elevate the brand recognition of 'CHEERS' and 'ENLANDA'. The sales percentage of recliner sofas was only 6.8% of the total PRC sofa market, much lower than 36.7% in a developed market like the US over the past year, which means there is still a huge potential in the domestic recliner sofa market. Hence, we properly increased our domestic advertisement and promotion budget, and also plan to invest more in branding promotions in the future, since we believe the Group will benefit from it in the long run."

Capacity Expansion Plan

In order to meet constantly evolving capacity requirements, we are now working closely on the construction of a new production base in Wujiang, Jiangsu province, which is expected to be completed by the second half of 2012. By then, our annual sofa capacity will increase to 1.116 million sets. Furthermore, we plan to construct a new plant in Tianjin to cope with the increasing demand expected over the next 5 to 8 years, and also take advantage of the lower logistics costs and shorter delivery time in northern China.

Mr. Wong added: "We are optimistic about the potential of both the international and domestic recliner sofa markets, providing wide development potential for Man Wah. Looking ahead, we expect to see continual expansion and aim to create genuine shareholder value in the future."

About Man Wah Holdings Limited: Established in 1992, Man Wah Holdings L imited is a home furnishing group, primarily engaged in the design, manufacture and sale of a broad range of mid to high-end recliner sofas (specialty sofas with features such as reclines and footrests), which are sold through extensive distribution channels in Hong Kong and the PRC, and are directly exported to global markets including the US and Europe under its well-known brand - "Cheers". Man Wah is the No.1 recliner sofa manufacturer and retailer in the PRC and No.5 in the US.

The "Cheers" brand received the prestigious "China Top Brand" award in September 2007 from the PRC authorities. The Group currently has two sofa production facilities in the PRC. With the completion of Phase III of its Huizhou Daya Bay plant this year, total sofa production capacity for the Group reached 816,000 sofa sets per annum, to meet the growing demand from its expanding clientele base.

For more information, please visit: www.manwahholdings.com.

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