Company Update : Hongguo Riding On The Needs Of Modern Woman

Excellent set of results. High Double digit growth with improving net profits and increasing mix of excellent products. Management is savvy in brand building, ambitious in aggressive expansion. Influx of joint ventures with well known brands.


What else more can you expect ? Dividends are for stable companies. Not giving dividends is a sign of a growth company. Some companies tries to hard to please shareholders with dividends after listing.To give dividends and yet at the same time borrow money which you have to pay the bank interest on unless the company can spend the money better like Hongguo, its wise management.


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Hongguo International - Riding on The Needs Of Modern Woman


Cheers
Niversphere.


PRESS RELEASE – FY2005 RESULTS
SGX-LISTED CHINESE LEADING FASHION GROUP
HONGGUO FY 2005 NET PROFIT GROWS 33.8%


C Banner ladies shoes have become the second most popular shoe brand in PRC in FY 2005

Retail outlets increased to 615 at end of FY2005 from 487 a year earlier.

Growth propelled by continued strong demand for inhouse brands and increased capacity from higher production capacity in Nanjing and Dongguan

Group has achieved three-year compounded average annual growth rate of 29%


SINGAPORE – 20 February 2006 – Singapore Exchange Mainboard-listed Hongguo International Holdings Limited (“Hongguo” or “the Group”) announced today that its net profit attributable to shareholders grew 33.8% to RMB 70.8 million (S$14.45 million) in the financial year ended 31 December 2005 (“FY2005”), continuing its trend of sustained strong bottom-line growth.


The leading fashion group in China said the net profit was achieved on the back of a 44.2%- rise in revenue to RMB 424.5 million (S$86.6 million) in FY2005 from RMB 294.5 million (S$60.1 million) in FY2004, driven by the growing demand for Hongguo’s in-house brands. Hongguo has posted a compounded average annual growth rate of 29% since the start of FY2003, the year of its public listing. Earnings per share rose 38.5% to 0.18 RMB cent in FY2005 from 0.13 in FY2004 while Net Asset Value backing per share rose to RMB 0.79 as at 31 December 2005 from RMB 0.65 as at 31 December 2004.

The Group has benefited from the aggressive expansion of its distribution network, with the number of retail outlets increasing to 615 at the end of FY2005 from 487 a year earlier, exceeding previously announced estimates of 607 outlets. Retail sales, which contributed 87.3% to Hongguo’s FY2005 revenue, registered a 56.4% increase to RMB 370.8 million (S$75.7 million) from RMB 237.1 million (S$48.4 million) a year ago. To cope with rising demand for its in-house ladies’ shoes brands C.Banner and E.Blan, the Group has deployed more manufacturing capacity at its new plants in Nanjing and Dongguan, both of which were completed in FY2005, thus raising total annual production capacity to 2.52 million pairs of shoes, 50% higher than the 1.68 million of FY2004.

Hongguo also announced today that it would invest RMB 8 million to expand its design and logistics centre in Guangzhou. When completed by end of FY2006, design capability will increase from 1,000 to 4,000 models per year.

In line with its growth strategies, 100%-owned fashion brand distributor Jiangsu Unity Corporation (“JUC”), which was acquired in June 2004, contributed RMB45.9 million (S$9.37 million), or 10.82%, of the Group’s total revenue in FY2005. With more retail outlets, as well as a possible expansion in brand portfolio, JUC – which has distribution rights in parts of China for several well-known foreign fashion brands such as Ermenegildo Zegna, Max Mara and Byford – is expected to contribute more substantially to the Group in future. Two Tommy Hillfiger stores will open in FY2006.

Commenting on the FY2005 performance, Hongguo’s Managing Director, Mr Li Wei, said, “Our in-house brands have continued to gain ground and market share despite increasing domestic competition.
Our flagship “C.Banner” was recently named the second most recognised brand of ladies’ shoes in China by the China Industrial Information Issuing
Center.

The Group plans to increase the total number of retail outlets from 615 to 730 outlets by end of FY2006.


“We have invested in brand-building efforts, design capability as well as increased capacity and distribution network to stay ahead of the competition while achieving economies of scale and hence maintain operating margins. Demand for quality fashion wear in China continues to grow with rising affluence. With our combined strategy we are confident of continued growth in the near future,” he said.


About Hongguo International Holdings Limited

Hongguo, listed on the Mainboard of Singapore Exchange since 5 June 2003, is a specialised designer, manufacturer and retailer of fashion wear headquartered in Nanjing, China. With manufacturing facilities in Nanjing and Dongguan, Hongguo shoes (under inhouse ladies’ shoes brands C.Banner 千百度and E.Blan 伊伴) are available at over 615 points of sale across China’s major cities and provinces. In 2005, C.Banner was ranked second in terms of market share up from the third position it held for three consecutive years, according to an annual market survey of the ladies’ leather shoes industry conducted by the National Statistics Board of China. Apart from its principal business in footwear, Hongguo also wholly owns Jiangsu Unity Corporation, a retail management company distributing fashion brands such as Ermenegildo Zegna, MaxMara, Byford, G2000, U2 and Hugo BOSS in China.

For more information, please visit www.hongguo.com.

http://www.listedcompany.com/ir/hongguo/newsroom
/HongguoResultsPressRelease200206.pdf