China Dongxiang Announces FY2020/2021 Interim Results

Business Reforms Gradually Deliver Results

Revenue and Gross Profit Show Steady Growth

Launched Digitalised Omni-channel Operating Platform

Optimised Distribution Channel to Boost Offline Sales Growth

Results Highlights

*Before provision for/ reversal of impairment of inventories

HONG KONG SAR – Media OutReach – 25 November 2020 – The leading international sportswear brand enterprise in the PRC, China Dongxiang (Group) Co., Ltd. (“China Dongxiang” or “the Company”, together with its subsidiaries, “the Group”, HKEx stock code: 3818) announces its interim results for the six months ended 30 September 2020 (the “Reporting Period”). The Group’s revenue and gross profit before provision for/ reversal of impairment of inventories amounted to RMB899 million and RMB563 million respectively for the Reporting Period, maintaining at similar level with last year. Benefitting from the profit generated from investment segment, operating profit and profit attributable to owners of the Company increased to RMB1,240 million and RMB1,116 million respectively, representing year-on-year growth of 402.0% and 493.6%. Operating profit excluding gains of investment segment amounted to RMB5 million, a decrease of 94.4% year-on-year. Basic earnings per share rose by 493.1% to RMB19.04 cents. The Board of Directors has determined to distribute 30% of the net profit attributable to equity holders for the six months ended 30 September 2020 as interim dividend.

Operational Highlights

• Business in China:

Implemented Comprehensive In-depth Reform Achieved Low-teens Growth for Kappa Brand

During the first half of FY2020, the Group adhered to implement its established strategies and rolled out comprehensive reforms on channel, product and supply chain management, achieving new interim progress. During the Reporting Period, through optimization of channel structure, consolidation of localised management of sales teams, promoting the omni-channel digitalisation, strengthening of professional capabilities of product management teams, the Group has achieved stable growth in the performance of outlet stores and shopping malls, contributing to the growth momentum in offline sales, while accelerating the turnover of omni-channel retailing and reduced inventory level. For e-commerce business, the Group has revamped its online marketing operations and launched its digitalised omni-channel operating platform in September this year to allow mutual access between online and offline stores in relation to inventory in stock and purchase orders. The Group also continued active development of new business platforms to provide a solid foundation for the future development of e-commerce.

In respect of sales and marketing initiatives, Kappa brand has continued to implement its integrated online and offline marketing strategy through cross-sector cooperation with celebrities and KOLs (Key Opinion Leaders) in entertainment, music and art, aiming to increase its exposure and share in the fashion market. During the Reporting Period, the brand has appointed Lexie Liu, a new-generation indie singer-songwriter, as Kappa’s “Women Style Ambassador”, and Justin Huang, a passionate young star, as its brand ambassadors to connect with the new generation. In addition, Kappa continued to expand its investment in sports assets, supporting the Chinese National Fencing Team and Chinese National Equestrian Team with the supply of professional training outfits, advocating a healthy and elegant high-end lifestyle among Chinese customers.

In terms of product design and R&D, Kappa continued to strive for product type upgrade, actively collaborating with various sectors, engaging the mass consumers by launching a variety of co-branded series, which were followed and sought after by fashionistas with great enthusiasm. In addition, Kappa footwear experienced substantial transformation during the period through the development of more variety of footwear combination, focusing on tailormade designs and personal wearing experience, diversifying new channels, which helped realise the business growth for footwear business.

With the above-mentioned, in spite of the adverse factors such as intensive competition and the pandemic, sales of Kappa brand products in China (excluding Kappa Kids’ apparel and international businesses) increased by 13.2% year-on-year to RMB748 million, demonstrating a growth momentum.

• Business in Japan: Gradually Deepen Adjustment

During the Reporting Period, in view of the recurrent outbreak of the COVID-19 pandemic and uncertainties in global market, the Group has decided to focus on the development of its core brand in the China market and completed the disposal of the trademark, intellectual properties and miscellaneous assets of Kappa Japan to Basic Trademark S.r.l. con socio unico, a wholly-owned subsidiary of Italian group BasicNet S.p.A. (“BasicNet”), for a consideration of USD13 million in July 2020. Subsequently, the Group has determined to license the “Phenix” brand to franchised operators within Japan, Korea (South) and partial European countries. These are conducive to the integration of the Group’s resources and marketing operations, as a bid to become one of the best sportswear companies in China.

• Investment Business: Strengthening Cooperation and Investing with Prudence

During the Reporting Period, the Group has continued to control the size and risks of its investment assets in a prudent and pragmatic manner. As at 30 September 2020, the Group reported a net asset value of RMB10 billion for its investment segment. The Group’s net investment gains for the Reporting Period amounted to RMB1,261 million. The significant increase in investment gains was mostly due to increase in unrealised gain from rise in valuation of investment products in major markets. The Group will continue to strengthen close cooperation with high-calibre investment partners in a prudent manner, so as to generate stable returns for shareholders while assuring the safety and effectiveness of its investments.

Mr. Chen Yihong, Chairman and Executive Director of China Dongxiang, said, “Since the beginning of the year, the COVID-19 pandemic has posed great challenges to the global economy. The Group has concentrated on developing the brand’s business in China to capitalise on the rapid growth of domestic consumption. In the meantime, we will face various challenges with flexibility and innovation to seize the opportunities brought forth by the e-commerce new normal through better use of diverse and effective channel strategies. We will also unlock the value of investments in a prudent and pragmatic manner when opportunities arise, so as to generate stable returns for shareholders.”

About China Dongxiang (Group) Co., Ltd. (Stock code: 3818)

China Dongxiang (Group) Co., Ltd. is a leading international sportswear brand enterprise in China Mainland which has been listed on the Main Board of the Hong Kong Stock Exchange since 10 October 2007. The Group is primarily engaged in the design, development, marketing and wholesale of branded sportswear in China Mainland. Currently, China Dongxiang owns all rights to the internationally renowned Kappa brand in China Mainland and Macau. On 1 May 2008, China Dongxiang completed the acquisition of PHENIX, a Japanese sportswear enterprise. PHENIX is the most popular ski brand in Japan with the largest market share, as well as a well-known brand in the international market.

For more information, please visit http://www.dxsport.com/