MNSO(MNSO) - 2024 Q2 - Quarterly Report

Company Information Details the company's leadership and public listing status - The company is led by Executive Director, Chairman, and CEO Mr. YE Guofu. The board includes three Independent Non-Executive Directors: Ms. XU Lili, Mr. ZHU Yonghua, and Mr. WANG Yongping[5] - MINISO Group Holding Limited is a publicly traded company listed on the Hong Kong Stock Exchange (Stock Code: 9896) and the New York Stock Exchange (NYSE Symbol: MNSO)[20] Change of Financial Year end Date The company changed its financial year-end from June 30 to December 31, impacting comparability of current period figures - On January 17, 2024, the Board changed the company's financial year-end date from June 30 to December 31. Consequently, this annual report covers the six-month period from July 1, 2023, to December 31, 2023, and some comparative figures may not be directly comparable[21] Financial Performance Highlights Overview of key financial metrics showing significant growth in revenue and profitability for the six-month period Key Financial Metrics for the Six Months Ended December 31, 2023 | Financial Metric | For the six months ended Dec 31, 2023 (RMB thousands) | For the six months ended Dec 31, 2022 (RMB thousands) | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 7,632,467 | 5,266,878 | +44.9% | | Gross Profit | 3,241,039 | 1,985,660 | +63.2% | | Operating Profit | 1,553,707 | 957,070 | +62.3% | | Profit for the period | 1,256,077 | 763,911 | +64.4% | | Adjusted Net Profit (Non-IFRS) | 1,302,509 | 790,491 | +64.8% | - The company uses Adjusted Net Profit as a non-IFRS supplemental measure to assess operating performance. It is defined as profit for the period excluding equity-settled share-based payment expenses[23][24] Reconciliation of Profit to Adjusted Net Profit (RMB thousands) | Description | For the six months ended Dec 31, 2023 (RMB thousands) | For the six months ended Dec 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Profit for the period | 1,256,077 | 763,911 | | Add back: Equity-settled share-based payment expenses | 46,432 | 26,580 | | Adjusted Net Profit (Non-IFRS) | 1,302,509 | 790,491 | Business Review and Outlook Comprehensive review of operational performance, store network expansion, and strategic outlook for future growth Business Review for the Six Months Ended December 31, 2023 During the six months ended December 31, 2023, MINISO demonstrated strong growth, expanding its global store network and achieving significant GMV. The company continued to innovate its product offerings under its two main brands, MINISO and TOP TOY, launching an average of 930 new SKUs per month for MINISO - The total number of MINISO stores globally increased from 5,791 to 6,413, while TOP TOY stores grew from 118 to 148 in the six-month period[32] - The aggregate Gross Merchandise Volume (GMV) for the Group reached approximately RMB 14.3 billion for the six months ended December 31, 2023[32] - MINISO offered around 9,500 core SKUs across 11 major categories, while TOP TOY offered around 8,400 SKUs in categories like blind boxes, toy bricks, and model figures[33] Store Network and Operations The company significantly expanded its store network both in China and overseas. In China, growth was driven by the MINISO Retail Partner model, with a strategic focus on penetrating lower-tier cities. Overseas expansion utilized a flexible mix of directly operated stores, retail partners, and distributors MINISO Store Count by Region and Model | Region/Model | As of Dec 31, 2023 | As of June 30, 2023 | | :--- | :--- | :--- | | China | 3,926 | 3,604 | | - Directly operated | 26 | 15 | | - Retail Partner | 3,878 | 3,569 | | - Distributor | 22 | 20 | | Overseas | 2,487 | 2,187 | | - Directly operated | 238 | 176 | | - Retail Partner | 283 | 252 | | - Distributor | 1,966 | 1,759 | | Total | 6,413 | 5,791 | - In China, the number of MINISO stores in third-tier or lower cities grew from 1,634 to 1,787, reflecting the company's focus on penetrating these markets[44] - The number of MINISO Retail Partners in China increased from 1,040 to 1,064, while the number of overseas distributors remained stable at 230[47][55] Key Operating Data Key operating metrics for the six-month period showed strong performance. MINISO China's GMV reached RMB 6.9 billion with an average spending per transaction of RMB 37.6. Overseas GMV was RMB 6.5 billion, led by the Americas. The TOP TOY brand also saw significant growth, with GMV reaching RMB 445 million MINISO China Operating Data (Six Months Ended Dec 31, 2023) | Metric | Value | | :--- | :--- | | Total GMV | RMB 6,895 million | | Avg. revenue per store | RMB 1.2 million | | Number of transactions | 183.2 million | | Avg. spending per transaction | RMB 37.6 | MINISO Overseas GMV by Region (Six Months Ended Dec 31, 2023) | Region | GMV (RMB millions) | | :--- | :--- | | Americas | 3,235 | | Asian countries (ex-China) | 2,323 | | Europe | 575 | | Others | 319 | | Total | 6,452 | TOP TOY Operating Data (Six Months Ended Dec 31, 2023) | Metric | Value | | :--- | :--- | | Total GMV | RMB 445 million | | Avg. revenue per store | RMB 2.8 million | | Avg. spending per transaction | RMB 118.7 | Recent Developments and Business Outlook Post-reporting period data indicates continued strong momentum, with significant year-over-year GMV growth in both China and overseas markets in early 2024. The company's future strategy focuses on globalization, product innovation with an emphasis on IP design, and store network optimization. Key initiatives include the "Super Store" strategy and targeting "Big Beauty," "Big Toys," and "Big IPs" as super categories - For the two months ended February 29, 2024, GMV of MINISO's offline stores in China increased by approximately 13% year-over-year, while overseas business GMV grew by around 40% year-over-year[70] - At its January 2024 Investor Day, the company announced its vision to become the world's No.1 IP design retail group, emphasizing product innovation, affordability, and globalization[73] - Future strategies include implementing a "Super Store" strategy, focusing on "Big Beauty," "Big Toys," and "Big IPs" as super categories, expanding into lower-tier cities in China, and continuing to grow in strategic overseas markets like North America, Asia, and Europe[74][75] Management Discussion and Analysis Detailed analysis of financial performance, liquidity, capital resources, and other key financial information for the period Comparison of Six Months Ended Dec 31, 2023 vs. Six Months Ended Dec 31, 2022 The company achieved substantial year-over-year growth across all key financial metrics. Total revenue increased by 44.9%, driven by strong performance in both China (+44.1%) and overseas markets (+46.3%). Profitability improved significantly, with gross profit rising 63.2% and profit for the period increasing by 64.4%. The gross margin expanded from 37.7% to 42.5%, attributed to product optimization, a higher contribution from directly operated overseas markets, and the brand upgrade strategy in China Year-over-Year Financial Performance (Six Months Ended Dec 31) | Metric | 2023 (RMB millions) | 2022 (RMB millions) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | 7,632.5 | 5,266.9 | +44.9% | | - China Revenue | 4,843.1 | 3,360.2 | +44.1% | | - Overseas Revenue | 2,789.3 | 1,906.7 | +46.3% | | Gross Profit | 3,241.0 | 1,985.7 | +63.2% | | Operating Profit | 1,553.7 | 957.1 | +62.3% | | Profit for the Period | 1,256.1 | 763.9 | +64.4% | - Gross margin increased from 37.7% to 42.5% year-over-year, driven by product optimization, higher revenue from directly operated overseas markets, the brand upgrade in China, and a more profitable product mix for TOP TOY[109] - Selling and distribution expenses rose by 70.8% to RMB 1,363.1 million, primarily due to increased personnel, logistics, IP licensing, and promotion expenses related to business growth and brand upgrades[111] Liquidity, Capital Resources, and Other Financial Information The company maintained a strong liquidity position, primarily funded by cash from operations, with cash and other liquid assets totaling RMB 6.9 billion. The gearing ratio was extremely low at 0.1%. Key contingent liabilities include a tax payment commitment in Guangzhou and an ongoing securities class action lawsuit in the U.S. The company employed 4,964 full-time staff as of December 31, 2023 - As of December 31, 2023, cash, cash equivalents, restricted cash, term deposits, and other current investments totaled RMB 6,887.0 million[130] - The gearing ratio was 0.1% as of December 31, 2023, calculated as loans and borrowings divided by total equity[141] - The company has a contingent liability related to a commitment to pay aggregate taxes of no less than RMB 965.0 million in Guangzhou over a five-year period ending in 2025. It is also facing a putative federal securities class action lawsuit in the U.S., for which the outcome cannot be assessed[144][149] - The company had 4,964 full-time employees as of December 31, 2023, with 2,375 in China and 2,589 overseas[154] Directors' Report Outlines principal risks, connected transactions, and dividend policy, providing insights into governance and shareholder returns Principal Risks and Uncertainties The company identifies three main categories of risks: business and industry risks, risks related to doing business in China, and risks related to its securities. Key business risks include dependence on brand strength, consumer discretionary spending, and successful product innovation. China-specific risks involve the legal system, potential government intervention, and regulatory scrutiny of U.S.-listed Chinese companies, including risks under the Holding Foreign Companies Accountable Act (HFCAA) - Business risks include dependence on brand strength, consumer demand, product innovation, and the performance of MINISO Retail Partners and distributors[169][174] - Risks of doing business in China include potential delisting of ADSs under the HFCAA if the PCAOB cannot inspect auditors, PRC government regulatory oversight, and uncertainties in the legal system[177] Connected Transactions The company engaged in a continuing connected transaction with MINISO Lifestyle Nigeria Limited, an entity controlled by the company's Chairman and CEO, Mr. Ye Guofu. The transaction, governed by an IP Licensing, Sales and Distribution Framework Agreement, was reviewed by independent non-executive directors and the auditor, who confirmed it was conducted on normal commercial terms and within the approved annual cap - The transaction involves granting exclusive IP licenses and distribution rights in Nigeria to MINISO Nigeria, an associate of Controlling Shareholder Mr. Ye[191][195] - For the six months ended December 31, 2023, the transaction amount was approximately RMB 11.6 million, which was below the pro-rated annual cap of RMB 18.0 million[196] Dividends On March 12, 2024, the Board approved a special cash dividend of US$0.0725 per ordinary share (US$0.2900 per ADS). The total dividend payment amounted to approximately US$90.5 million, representing about 50% of the company's adjusted net profit for the six-month period - A special cash dividend of US$0.0725 per ordinary share was approved on March 12, 2024, for shareholders of record as of March 28, 2024[216] - The total dividend of approximately US$90.5 million represented about 50% of the adjusted net profit for the six months ended December 31, 2023, and was distributed from additional paid-in capital[216] Directors and Senior Management Profiles the key individuals leading the company, including the Board of Directors and senior executives - Mr. YE Guofu is the founder, Chairman of the Board, and Chief Executive Officer, responsible for the overall strategy and management of the Group[248] - The senior management team includes Mr. YE Guofu (CEO), Ms. DOU Na (Executive VP, Product), Ms. YANG Yunyun (VP, Risk Management), and Mr. ZHANG Jingjing (CFO & VP)[262] - Mr. ZHANG Jingjing has served as the Chief Financial Officer and Vice President since January 2023 and also serves as a Joint Company Secretary[266][269] Corporate Governance Report Details the company's governance structure, including board composition, risk management, and shareholder communication policies Board Composition and Committees The Board consists of one executive Director and three independent non-executive Directors, meeting the HKEX requirements for independence and board composition. The company deviates from the code provision of separating the Chairman and CEO roles, with Mr. Ye Guofu holding both positions to ensure consistent leadership. The Board has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each with a majority of independent directors - The company deviates from code provision C.2.1 of the Corporate Governance Code, as Mr. Ye Guofu serves as both Chairman and CEO. The Board believes this ensures consistent leadership and efficient strategic planning[289][290] - The Audit Committee, chaired by Ms. XU Lili, comprises three independent non-executive Directors and is responsible for monitoring financial integrity and internal controls[312][315] - The company has adopted a Board Diversity Policy and targets maintaining at least the current level of female representation (1 out of 4 directors) on its Board[329][334] Risk Management, Internal Control, and Shareholder Relations The Board is responsible for the Group's risk management and internal control systems, which it reviewed and considered effective and adequate for the reporting period. The company has adopted a dividend policy effective July 27, 2023, targeting an annual dividend of no less than 50% of its annual adjusted net profit. Communication with shareholders is managed through a formal policy, an investor relations website, and annual general meetings - The Board, supported by the Audit Committee, reviewed the risk management and internal control systems for the period and considered them effective and adequate[341][347] - A formal Dividend Policy was adopted on July 27, 2023, targeting an annual dividend of no less than 50% of the company's annual adjusted net profit[360][361] - The company maintains a Shareholders' communication policy to ensure effective two-way communication and provides up-to-date information on its investor relations website[362][365] Other Information Covers details on shareholding interests, incentive plans, share repurchases, and the utilization of offering proceeds Disclosure of Interests As of December 31, 2023, the company's founder, Chairman, and CEO, Mr. Ye Guofu, held a controlling interest. Through various entities and trusts, he and his spouse, Ms. Yang, are deemed to be interested in approximately 62.5% of the company's shares Interests of Directors and Substantial Shareholders (as of Dec 31, 2023) | Shareholder | Capacity/Nature of Interest | Number of Shares (Long Position) | Approximate % of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Ye Guofu & Ms. Yang | Interest in controlled corporations, trusts, and spouse's interest | 789,541,061 | 62.5% | 2020 Share Incentive Plan The company operates a 2020 Share Incentive Plan to attract and retain talent. During the reporting period, RSUs representing 125,672 underlying shares were granted. As of December 31, 2023, 5,169,104 options and 5,958,256 RSUs were outstanding under the plan - The maximum aggregate number of shares that may be issued under the plan is 147,301,128. As of December 31, 2023, awards representing 7,071,028 shares were available for grant[397][401] Movement of Share Options (Reporting Period) | Description | Number of Options | | :--- | :--- | | Outstanding as of July 1, 2023 | 5,701,396 | | Lapsed during the period | (104,800) | | Exercised during the period | (427,492) | | Outstanding as of Dec 31, 2023 | 5,169,104 | Movement of Restricted Share Units (RSUs) (Reporting Period) | Description | Number of RSUs | | :--- | :--- | | Outstanding as of July 1, 2023 | 6,165,460 | | Granted during the period | 125,672 | | Lapsed during the period | (123,760) | | Vested during the period | (208,116) | | Outstanding as of Dec 31, 2023 | 5,958,256 | Share Repurchases and Use of Proceeds During the reporting period, the company repurchased shares on both the HKEX and NYSE under its share repurchase program. The use of proceeds from the July 2022 Global Offering is largely complete, with a remaining unutilized amount of HK$20.6 million designated for strengthening technology capabilities Share Repurchases (Six Months Ended Dec 31, 2023) | Exchange | Shares/ADSs Repurchased | Aggregate Consideration | | :--- | :--- | :--- | | HKEX | 708,400 Shares | HKD 26,290,421 | | NYSE | 362,527 ADSs (1,450,108 Shares) | USD 6,981,016 | - From the HKD 482.1 million net proceeds of the Global Offering, HKD 461.5 million has been utilized as of December 31, 2023. The remaining HKD 20.6 million is expected to be fully used within 48 months from the Listing Date[426][429] Independent Auditor's Report Presents the auditor's unqualified opinion on the consolidated financial statements and highlights key audit matters - The auditor, KPMG, issued an unqualified opinion, stating that the consolidated financial statements give a true and fair view of the Group's financial position as of December 31, 2023, and its financial performance for the six months then ended[435] - The Key Audit Matters identified were: 1. Assessment of write-down of inventories, due to the high degree of subjective judgment required in forecasting future product demand and selling prices 2. Assessment of impairment of property, plant and equipment, and right-of-use assets related to self-operated stores, due to the subjectivity and sensitivity of assumptions like forecasted sales and market rentals[439][441][446] Consolidated Financial Statements Presents the comprehensive consolidated financial statements, including profit or loss, financial position, and cash flows Consolidated Financial Statement Summary (RMB thousands) | Statement Item | For the six months ended Dec 31, 2023 (RMB thousands) | As of Dec 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Profit or Loss: | | | | Revenue | 7,632,467 | - | | Profit for the period | 1,256,077 | - | | Financial Position: | | | | Total Assets | - | 14,485,309 | | Total Liabilities | - | 5,294,092 | | Total Equity | - | 9,191,217 | | Cash Flows: | | | | Net cash from operating activities | 1,097,541 | - | | Net cash from investing activities | 177,073 | - | | Net cash used in financing activities | (1,320,899) | - | Five Year Financial Summary Provides a historical overview of key financial data over the past five years for trend analysis Historical Financial Data (RMB thousands) | Metric | FY 2021 (RMB thousands) | FY 2022 (RMB thousands) | FY 2023 (RMB thousands) | 6M ended Dec 31, 2023 (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 9,071,659 | 10,085,649 | 11,473,208 | 7,632,467 | | Profit/(loss) before taxation | (1,216,192) | 906,813 | 2,333,614 | 1,652,742 | | Total assets | 10,705,030 | 11,281,788 | 13,447,713 | 14,485,309 | | Total liabilities | 4,052,876 | 4,254,388 | 4,529,445 | 5,294,092 |