On behalf of the Board, I am pleased to present our interim results for the six months ended 30 June 2023.
Riding the Recovery Wave and Sticking to Correct Strategies
Meeting the challenges head-on like diamonds in the rough, which rise to the occasion and forge excellence through determination. In the first half of 2023, the Chinese sportswear market regained its momentum as social activities in China normalized and the retail market environment improved as compared with the same period last year. During the financial period, in-store foot traffic has gradually recovered alongside restoration of consumer demand. We proactively seized the market opportunities and expedited the implementation of various plans, which improved store efficiency and various retail indicators significantly. Not only did we achieve high-quality growth in our business, but we also far surpassed the retail sales scale in 2019. This noticeable achievement serves as a testament to our steadfast commitment to long-term strategic thinking.
In spite of China’s implementation of policies favorable to consumer market and sports industry, the complex global situation has presented uncertainties to both the global and Chinese economies, inevitably impacting the domestic consumer goods market. However, the Group’s “Single-focus, Multi-brand, Globalization” strategy has proven advantageous within the industry and has demonstrated robust resilience in the face of a rapidly changing business environment. We will deploy dynamic management, implement stringent cost management, prioritize healthy inventory levels and adhere to the correct strategic planning, while remaining optimistic about long-term business prospects.
Rising to Challenges and Achieving High-quality Leapfrog Growth
We firmly believe in embracing a consumeroriented approach. In the face of challenges, our determination to uphold the Group’s strategies and development goals has only grown stronger. We forge ahead with the spirit of “Keep Moving” and standing tall on our path to becoming the leading sportswear company in China. Despite the unpredictable external factors over the past few years, the Company continued to witness a spurt of progress in its business scale. Compared with the same period in 2019, the Group’s overall revenue has doubled, while ANTA and FILA segment revenues have grown by over 85% each and all other brands’ revenue has experienced an impressive growth of over 3.5 times. Furthermore, our must-win battles have achieved milestones across various fronts, as evidenced by a steady and consistent increase in market share over the past few years.
During the financial period, we were able to capitalize on the recovery in the retail market and overall revenue increased by 14.2% to RMB29.65 billion (2022 1H: RMB25.97 billion). All our brands demonstrated robust underlying performance, with overall gross profit margin and operating profit margin witnessing noticeable expansion compared with the same period in 2022. Overall gross profit margin rose by 1.3% point to an all-time high of 63.3% (2022 1H: 62.0%). Operating efficiency recorded considerable improvement, with overall operating profit surging 31.6% to RMB7.62 billion (2022 1H: RMB5.79 billion) and operating profit margin increasing 3.4% points to 25.7% (2022 1H: 22.3%). On a consolidated basis, without the effect of the share of profit or loss of a joint venture, the profit attributable to shareholders rebounded strongly, leaping 39.8% to RMB5.26 billion (2022 1H: RMB3.77 billion). On a consolidated basis, with the effect of the share of profit or loss of a joint venture, the profit attributable to shareholders increased by 32.3% to RMB4.75 billion (2022 1H: RMB3.59 billion).
During the financial period, net operating cash inflow of RMB10.16 billion (2022 1H: RMB4.98 billion) and free cash inflow of RMB9.52 billion (2022 1H: RMB4.11 billion) were recorded, underscoring our strong cash-generating capability. We strategically managed our capital allocation to further strengthen the Group’s financial position. As of 30 June 2023, the aggregate amount of cash and cash equivalents, fixed deposits held at banks with maturity over three months and pledged deposits registered RMB45.40 billion. The abundant fund provided substantial support for the orderly implementation of various business expansion plans and ensured solid protection for our operations.
The Group also strived to share the fruits of its success with its shareholders through sustainable growth in dividends. The Board has declared an interim dividend of HK82 cents per ordinary share (2022 1H: HK62 cents) for the six months ended 30 June 2023, representing an increase of 32.3% year-on-year.
Leveraging Innovation, Breakthroughs and Synergies of Multiple Brands We continued to foster multi-brands
We continued to foster multi-brand and all-round synergies through product design, R&D, and manufacturing to brand marketing and retail, which empowered us to adapt to the dynamic and diverse market demands swiftly. During the financial period, all our brands achieved outstanding results, driven by our spirit of innovation and breakthroughs.
Benefiting from the burgeoning rebound in the offline retail environment and the effective facilitation of the DTC model, ANTA segment revenue grew by 6.1% to RMB14.17 billion (2022 1H: RMB13.36 billion), cementing its leading position in China. Gross profit margin expanded to 55.8% (2022 1H: 55.1%) and operating profit margin decreased to 21.0% (2022 1H: 22.0%).
Characterized by having a high proportion of direct retail business, FILA segment delivered promising performance. Revenue increased by 13.5% to RMB12.23 billion (2022 1H: RMB10.78 billion), while gross profit margin and operating profit margin expanded to 69.2% (2022 1H: 68.6%) and 29.7% (2022 1H: 22.5%), respectively.
All other brands (including DESCENTE and KOLON SPORT) sustained their rapid upswing, with total revenue surging 77.6% to RMB3.25 billion (2022 1H: RMB1.83 billion). Gross profit margin recorded 73.4% (2022 1H: 74.2%), while operating profit margin expanded to 30.3% (2022 1H: 21.6%). The diligent efforts invested in incubating new brands have yielded remarkable results.
Amer Sports achieved splendid advancements to meet all its strategic goals and the businesses of its core brands delivered commendable results. Revenue of the joint venture grew by 37.2% to RMB13.27 billion (2022 1H: RMB9.67 billion), and EBITDA increased by 149.2% to RMB1.78 billion (2022 1H: RMB710 million). However, share of loss of the joint venture to the Group amounted to RMB516 million (2022 1H: RMB178 million) due to the effect of one-off nature items. Excluding these, the joint venture managed to achieve breakeven with operating profit adequately covering both interest expenses and purchase price allocation impact, making it the best-performing first half since the acquisition by the investor consortium.
Optimizing Corporate Governance and Embracing New Challenges
In pursuit of good corporate governance and our ESG vision, the Group made adjustments to its organizational structure and personnel appointments in early 2023, laying a vital foundation for a new phase of growth. We also achieved steady progress in the capital markets. During the financial period, the Group stood as one of the pioneering Hong Kong-listed companies to partake in the “HKD-RMB Dual Counter Model”, affording our shareholders and investors the choice of trading currencies and enhanced flexibility while contributing to the advancement of RMB internationalization.
In addition, we are committed to operating our business in a responsible and sustainable manner and continuously improving our sustainable practices. During the financial period, we published our “Supplier Sustainability Management Handbook” which assists suppliers in fostering and maintaining a safe, healthy and compliant manufacturing environment. We also refined several corporate governance policies and established sustainability-linked internal performance indicators for a more informed integration of sustainability principles into our operations. At the same time, we actively fostered harmonious labor relations and published our “Labor Policy” with the aim of creating an equitable, inclusive, healthy and safe working environment for our nearly 60,000 employees from over 40 countries and regions. We also implemented a training system for diversified talent development to create a brighter future for all our employees. Furthermore, the philanthropic platforms established by the Group and the Hemin Foundation became more mature, forming a socially responsible corporate philanthropy and charitable system. We firmly believe the realization of long-term value relies on sustainable development and progress of our partners and our business, and these initiatives reflect our belief in this guiding principle.
As always, on behalf of the Board, I would like to extend our heartfelt gratitude to our Shareholders, stakeholders and consumers for their unwavering support, and, not least, to our talented team who have served with dedication. Together, we will strive to make ANTA Sports a leading multi-brand sportswear group in the world and create even greater value for our Shareholders.
Ding Shizhong Chairman Hong Kong SAR, 22 August 2023