On behalf of the Board, I am pleased to present our interim results for the six months ended 30 June 2022.
Attaining Stable Growth, Maintaining Resilience and Striving for Breakthroughs
Amid the complex and evolving dynamics of global affairs coupled with escalated geopolitical risks, elevated global supply chain pressure and soaring inflation, China’s macro economy was faced with tremendous uncertainties in the first half of 2022. Furthermore, with waves of Pandemic outbreak in China since March 2022, there has been a significant drop in foot traffic alongside weakening consumer sentiment, leading to a heavy blow to the consumer market as a result.
What does not beat you makes you stronger. Over the past years, ANTA Sports has not only ridden on the rapid economic growth, but also been able to turn adversities into opportunities and forge ahead amid business challenges. In light of the current evolving business environment, we have taken concrete and pragmatic measures to respond proactively with a “Dynamic Management” approach through implementing rigorous cost management and prioritizing healthy inventory level, ultimately demonstrating greater resilience in times of adversity. As always, we have been achieving high-quality and stable growth while maintaining our leading position in terms of market share.
Uncertainties such as new waves of the Pandemic will continue to affect economic growth and consumer sentiment in the near term. Nevertheless, we remain optimistic about the long-term growth prospect of the Chinese sportswear industry. The stable and positive fundamentals of the industry as underpinned by favorable national policies will continue to drive long-term development of the sports industry in China. In addition, the Pandemic has been followed by the promotion of sports culture as a part of a healthy lifestyle and people have been more willing to spend time outdoors in nature. The sporting goods market continues to have tremendous potential and strong growth momentum. We steadfastly uphold longtermism. In the face of challenges, we have been more determined to adhere to our strategies and development goals to enhance the value of each brand, while strengthening each brand’s competitiveness so as to maintain high-quality growth. With proper execution to push forward our strategies steadily, we are confident that we can achieve business breakthroughs and succeed in all aspects amid the volatile market environment.
During the financial period, the Group adhered to long-term strategic planning and our strategy of “Single-focus, Multi-brand, Globalization” was yielding remarkable results. Our revenue hit another record high, having increased by 13.8% to RMB25.97 billion (2021 1H: RMB22.81 billion). The incubation model of news brands has been further developed, DESCENTE and KOLON SPORT grew significantly amid the Pandemic. The third growth curve began to take shape and demonstrated the advantages of multi-brand strategy. The overall gross profit margin decreased slightly by 1.2% point to 62.0% (2021 1H: 63.2%) and the overall profit from operations slightly declined by 1.9% to RMB5.79 billion (2021 1H: RMB5.91 billion). Despite the business environment having been impacted by the Pandemic since March 2022, the overall gross profit margin and operating profit margin during the financial period both witnessed noticeable improvement as compared with the second half of 2021. On a consolidated basis, without the effect of the share of loss of a joint venture, the profit attributable to equity shareholders decreased by 10.0% to RMB3.77 billion (2021 1H: RMB4.19 billion). On a consolidated basis, with the effect of share of loss of a joint venture, the profit attributable to equity shareholders decreased by 6.6% to RMB3.59 billion (2021 1H: RMB3.84 billion).
During the financial period, albeit the impact of the Pandemic, the Group’s financial position remained robust. Operating cash inflow of RMB4.98 billion (2021 1H: RMB6.31 billion) and free cash inflow of RMB4.11 billion (2021 1H: RMB5.86 billion) were recorded, reflecting our strong cash generating capability. Moreover, the Group had RMB24.93 billion in total amount of cash and cash equivalents, fixed deposits held at banks with maturity over three months and pledged deposits as of 30 June 2022. The abundant fund reflected our sound risk capacity and ability to withstand high-pressure scenarios. The Board has declared an interim dividend of HK62 cents per ordinary share (2021 1H: HK60 cents) for the six months ended 30 June 2022, increased by 3.3% year-on-year.
Adhering Longtermism and Sticking to Strategic Goals
Our resilience was underpinned by our strategic planning and outstanding execution capability. Although market conditions have become more unpredictable, we remain a positive attitude that drives us to stride forward steadfastly. We adhere to “Benchmarking with High Standard” and the strategy of “Single-Focus, Multi-Brand, Globalization”, in order to seek breakthroughs in terms of brand, product and channel. Each growth curve of the Group has been guiding our future direction with ample clarity.
ANTA has been executing the “Lead to Win” acceleration plan announced last year. With the core strategies of being “Rooted in and Known for Performance Sport” and fostering “Brand Transformation and Growth”, key performance indicators show that we are making progress as planned despite the Pandemic’s impact. Thanks to the successful conclusion to the Beijing 2022 Olympic Winter Games at the beginning of this year, ANTA enjoyed tremendous publicity. A variety of our proprietary technologies demonstrated ANTA’s genes of performance sports and professional image, which helped enhance the brand value. In addition, the sales of high-end basketball shoes and running shoes were satisfactory, while the spokesperson strategy also achieved decent results. During the financial period, ANTA segment’s revenue grew by 26.3% to RMB13.36 billion (2021 1H: RMB10.58 billion), cementing its leading position in China. The gross profit margin and operating profit margin were 55.1% (2021 1H: 52.8%) and 22.0% (2021 1H: 23.1%) respectively.
FILA is firmly positioned as a high-end athletic fashion brand. Leveraging its strategy of “Top-notch Products, Top-notch Brands and Top-notch Channels”, FILA has seized the opportunity to expand in the performance sports market as backboned by its century-old legacy in the sports industry while retaining its fashion elements. During the financial period, the brand took a relatively more severe hit by the latest wave of the Pandemic, with store closures taking place mainly in first and second-tier cities, where FILA has a significant presence. Despite the headwinds, FILA managed to solidify its fundamentals. During the financial period, the revenue of FILA segment fell slightly by 0.5% to RMB10.78 billion (2021 1H: RMB10.83 billion). The gross profit margin and operating profit margin were 68.6% (2021 1H: 72.3%) and 22.5% (2021 1H: 29.0%) respectively.
In the wake of the Pandemic, the public has paid greater attention to outdoor leisure activities, which acted as a catalyst to unlock the potential of many niche markets within the sports industry and opened up opportunities for our other brands to penetrate into new scenarios. Led by the strong growth momentum of DESCENTE and KOLON SPORT, the total revenue of all other brands(Including DESCENTE and KOLON SPORT) during the financial period leaped by 29.9% to RMB1.83 billion (2021 1H: RMB1.41 billion). The gross profit margin and operating profit margin achieving encouraging levels of 74.2% (2021 1H: 70.4%) and 21.6% (2021 1H: 21.0%), respectively.
Our “Globalization” strategy served as a robust growth engine. During the financial period, thanks to the satisfactory performance of Amer Sports’ overseas business and its steady development in the Mainland China market, the revenue of the joint venture holding Amer Sports grew by 21.1% to RMB9.67 billion (2021 1H: RMB7.99 billion), and its EBITDA grew by 28.2% to RMB714 million (2021 1H: RMB557 million) with depreciation and amortization expenses amounting to RMB631 million (2021 1H: RMB747 million) and interest expenses amounting to RMB389 million (20211H: 520 million). The share of loss to the Group reduced significantly from RMB346 million in the same period of last year to RMB178 million for the financial period.
As early as the Pandemic outbreak in 2020, we strategically expanded our investment in the e-commerce business in response to changing consumer habits. As a result, contribution from e-commerce business continued to grow. During the financial period, the e-commerce business contributed 28.9% (2021 1H: 27.3%) of the Group’s overall revenue, and increased by 20.6% as compared with the same period in 2021 in terms of absolute amount, achieving solid growth despite the high base of the same period of last year.
15 Years of Magnificence as A Listed Company –
Tiding over Challenges to Forge Excellence, Staying Inspired by our Original Aspiration
Rome was not built in a day – great achievements take time and persistence. In 2007, we were listed on the Main Board of the Hong Kong Stock Exchange, marking a significant milestone in the Group’s history. 15 years passed and we have evolved into a listed company with international competitiveness and modern governance standards. We have also become the largest company in terms of market capitalization among domestic sports brands and within the consumer discretionary sector. In the past decades, we remained inspired by our original aspiration no matter at good times or bad times – to make every effort to produce quality footwear and apparel.
Throughout the years, we continued to strive ahead and keep moving. With such dedication and consistency, we have consummated splendid achievements. On behalf of the Board, I would like to express my sincere gratitude to our Shareholders and investors for their continued support over the past 15 years, and I am looking forward to ANTA Sports reaching new heights in the next 15 years by creating even greater value for our Shareholders and for the society with outstanding performance.
Ding Shizhong Chairman Hong Kong, 23 August 2022