Revenue for the year decreased by 11.9% to HK$1,290 million (2009: HK$1,464 million). The decrease incorporated a 4.5% decrease in the average selling price (“ASP”) and a 8.5% drop in output in terms of product volume.

Kingmaker Footwear Chairman and Managing Director Mr Chen Ming-hsiung, Mickey remarked: “As a result of our years of dedication to R&D, manufacturing system refinement, productivity enhancement and staff training and retention, we are able to develop a core competence to work with our customers to explore new production function and design possibilities. This has enabled us to constantly move up the value chain to achieve higher margins.”

During the year, Kingmaker developed a new “wellness” line of premium footwear – Shape Ups by Skechers – which was launched to a strong market response validating the Group’s R&D edge. This new product line also contributed to an improvement in the Group’s profit margin and the overall ASP.

The well balanced geographical customer diversification is another defence mechanism against the macro turbulence. During the year. shipments to the US contributed to 51.1% (2009: 50.4%) of Group revenue, while the European segment accounted for 41.5% (2009: 41.9%).

The Group has a strong manufacturing base centred on Southeast Asia and the PRC. It now operates a total 38 production lines in Zhuhai, Zhongshan and Jiangxi in the PRC, Vietnam and Cambodia, with annual capacity currently standing at 20 million pairs of footwear.

As a result of the lean manufacturing system, despite the increase in wage rates and the appreciation of the RMB, the Group was able to reduce total labour and staff costs by HK$10 million through productivity enhancement and talent engagement.

In the face of escalating manufacturing costs in southern China, the Group plans to adopt a three-pronged strategy for production. First, its existing Zhuhai and Zhongshan facilities will be upgraded to become a high-end R&D centre, dedicated to serve US clients and higher-added-value production. Meanwhile, production dedicated to European shipments is supported by the Vietnam and Cambodia factories. Finally, the inland facilities in Jiangxi will be designated for labour-intensive proecesses and lower-cost items.

At the same time, the Group will continue to pursue possible relocation of its production facilities in southern China to the lower-cost base in Jiangxi.

Major customers during the year include Skechers, Clarks, Stride Rite, Elefanten and Rockport, which in aggregate accounted for 94.3% of the Group’s revenue.

As part of its long-term diversification and margin-enhancement initiative, the Group has moved into the retailing of ladies’ shoes and bags through the acquisition of MOCCA. MOCCA made its first advance into the PRC during the year and currently operates five shops in Hong Kong, four in the RPC and one in Macau.

The retail unit introduced a new brand of infant shoes – Fiona’s Prince – which now has two shops in Hong Kong and four in the PRC. During the year, the Group also acquired FRD Group, a men’s fashion retail business owning the brand AIMS. The FRD Group currently operates two shops in Guangzhou in the PRC.

Mr Chen added: “We remain confident of a steady rebound in our manufacturing operations. With reference to the improvement in our order book, we predict a moderate growth in export volumes in the coming year, as well as a mild increase in ASP. In addition, we believe that the retailing segment will establish itself as another major source of income over the medium-to-long term.”

As at March 31, 2010, the Group maintained a strong financial position with cash and cash equivalents of HK$527 million (2009: HK$412 million). The current ratio was 2.08 (2009: 1.98) and the quick ratio was 1.75 (2009: 1.63).

About Kingmaker Footwear Holdings
Kingmaker Footwear Holdings Limited (HKEx: 01170) is a premium name-brand manufacturer of fashion casual and children’s footwear. The Group operates 38 production lines in China, Vietnam and Cambodia with a staff of 12,000. Its branded customers include Skechers, Clarks, Stride Rite, Elefanten and Rockport, etc. Its retail segment operates chains to carry footwear, apparel and accessories under the MOCCA, Fiona’s Prince and AIMS brands.