Strong Ties with Clients and Solid Market Demand Drive Growth
Bangladesh Facilities Continue to Enjoy Economies of Scale
HONG KONG – (ACN Newswire) – Evergreen Products Group Limited (“Evergreen” or the “Group”; HKEX stock code: 1962), a leading global manufacturer of hair goods, has announced its interim results for the six months ended 30 June 2018 (the “Period”), reporting significant revenue growth of 22.1% to HK$373.3 million, driven by long-standing ties with its existing clients and strong overall market demand for Evergreen’s wigs and hair products.
During the Period, the Group continued to enjoy low labor costs at the Bangladesh Factory, which contributed positively to the overall improvement of its gross profit. Subsequently, gross profit increased by 23.9% to HK$131.7 million, while gross profit margin reached 35.3% (1H 2017: 34.8%). Net profit for the Period increased by 10.7% to HK$51.7 million. If excluding the value of the charge for employee services of newly granted share award of HK$3.0 million and the listing expenses of HK$11.5 million, along with the change in fair value of redeemable convertible preferred shares of HK$16.8 million recognised for both periods, the Group’s adjusted net profit for the period would have amounted to HK$54.7 million, or an upsurge of 32.1%. Basic earnings per share was HK$9 cents. The Board has recommended the payment of an interim dividend of HK4.2 cents per share for the Period (1H 2017: Nil) with dividend ratio of 49.9%.
Mr. Felix Chang, Chairman, Chief Executive Officer and Executive Director of Evergreen, said, “During the Period, the Group continued to strengthen ties with existing clients. At the same time, our production facilities in Bangladesh achieved greater economies of scale; serving as the main revenue source of the Group and contributing significantly to our profitability. By leveraging our production capabilities, including our production base in Bangladesh with its large pool of low cost labor, we trust that the Group will continue to sustain growth in the long run.”
Business Review
Evergreen boasts a comprehensive product portfolio that includes wigs, hair accessories and others, high-end human hair extensions, and Halloween products, which target different ethnic groups and the Halloween market. The United States continued to be the Group’s principal market and accounted for 82.7% of its total revenue during the Period.
The Group has three production centres in China and two production centres in Bangladesh as at 30 June 2018. The production centres in China occupy a total gross floor area (“GFA”) of 54,091 square metres, and the production centres in Bangladesh occupy a total GFA of 109,944 square metres. The production facilities in Bangladesh, which houses Evergreen’s principal manufacturing capacity, contributed significantly to the Group’s profitability, thus substantiating the effectiveness of the Group’s strategic factory deployment plan. In January 2018, construction of the GT Hand Tie Facility in Bangladesh, dedicated to producing hand tied extensions, was completed and commenced production. The facility will cater for the growing demand for the Group’s products.
Wigs, hair accessories and others continued to be the Group’s key revenue contributor, with revenue surging 32.0% to HK$272.0 million, mainly due to an increase in sales of high-margin products such as lace wigs, and a significant increase in sales of own branded products sold directly to end-users through e-commerce. Gross profit and gross profit margin of the segment was up by 38.6% and 1.6 percentage points to HK$86.9 million and 32.0% respectively.
Revenue from high-end human hair extensions increased by 6.8% to HK$75.8 million, owing to higher sales volume facilitated by enlarged production at the Bangladesh factory. As a result of the increase in sales of the Group’s own branded products that have higher profit margin, gross profit and gross profit margin were up by 14.1% and 3.2 percentage points to HK$38.0 million and 50.1% respectively. Revenue from Halloween products slightly decreased to HK$25.5 million mainly due to early delivery of finished goods for the corresponding period in 2017 when compared to the Period. Gross profit and gross profit margin were HK$6.8 million (1H 2017: HK$10.3 million) and 26.7% (1H 2017: 35.9%) respectively, reflecting the additional costs incurred from setting up an additional Halloween product design unit at the Bangladesh production base.
Business Outlook
Looking ahead, the Group will continue to expand its product portfolio and improve its production efficiency by further consolidating raw materials processing and the hair goods production operations in Bangladesh to maintain its profitability.
In addition, to meet the anticipated increase in demand for its products and to capture business opportunities brought by the growing hair goods industry, the Group will further expand its production capacity and the scope of its operations in Bangladesh to include human hair sourcing, bleaching and dyeing, printing and cartoning. Following the completion of the GT Hand Tie Facility, the Group plans to proceed with completing construction of the remaining three production facilities in Bangladesh by the end of 2019. The Bleaching and Dyeing Complex is already close to completion and trial run has begun, following which formal operation will start. In addition, the Group completed construction of the UEPZ Printing Facility early this year and trial run has begun after which formal operation will start. As at 30 June 2018, GFA of 35,077 square metres had been built for the Bleaching and Dyeing Complex and GFA of 10,145 square metres had been built for the UEPZ Printing Facility, representing a total GFA of 45,222 square metres. Construction of the new cartoning facility is expected to commence around the end of 2018.
Mr. Chang concluded, “Evergreen will continue to strength ties with its customers and offer a greater variety of products, with the ultimate goal of seizing greater market share. Also, by continuing to expand product capacity and engage in product development, we will be ready to capture new opportunities ahead. We will fully utilize our new facilities in Bangladesh and strengthen our core competencies, in order to achieve long-term sustainable growth and secure lucrative returns for our shareholders.”
About Evergreen Products Group Limited
Evergreen is a leading global manufacturer of hair goods, including wigs, hairpieces, braids and high-end human hair extensions. Since 1962 when its founder commenced trading of wig products, Evergreen has kept growing and ranked fifth in synthetic hair goods sales globally with an approximately 4.0% share of the global synthetic hair goods market by revenue in 2016. It operates on a comprehensive business model covering various aspects of the hair goods business, from initial design, research and development to final delivery. With two production centres in Bangladesh and three productions centres in China, the Group benefits from its low labour costs and large labour pools, thus it enjoys economies of scale. For more details about Evergreen, please visit the Group’s website: www.epfhk.com
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