Hong Kong-listed Man Wah Holdings suffered a dip in profits in its first half year, despite boosting production.

The furniture manufacturer and retailer, expanded its retail store network on the mainland by 117 stores during the period, taking the network of Cheers Five-star Mattress and Cheers fabric stores to 2516. The company is moving from a directly owned store model to franchising.

But its net profit slid 16.1 per cent to HK$665.3 million after gross profit margin fell from 17.1 per cent to 12.1 per cent and the company sustained paper losses on trading investments.

Total group revenue for the half year was up 18.6 per cent to $5.487 billion.

In its core China market, Man Wah continued to broaden its product range. In addition to selling sofas and bedding products to consumers, the company produced furniture for high-speed railway train carriages and cinema chains and other commercial customers.

In North America, competition remained “fierce” but the company managed to achieve steady sales growth by adjusting its product mix, strengthening its sales team and introducing a rapid delivery plan. Sales in North America rose by 19.1 per cent.

In Europe, sales of sofas fell by 4 per cent, but overall revenue rose despite the effects of weak economic growth and Brexit uncertainty, boosted by a 54 per cent rise in smart furniture spare parts and other products.

During the six months, Man Wah produced about 585,000 sets of sofa products in its China factories, an increase of approximately 2 per cent. One sofa set is defined as equal to six seats, and the figure excludes chairs and other products sold to commercial clients.