China Dongxiang Announces Annual Results FY2019/2020

Revenue increases 12.6% to RMB1.84 Billion

Gradual Results Delivered From Operational Reforms

Optimises Sales Channel Mix

Results Highlights

HONG KONG, CHINA – Media OutReach – 17 June 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 annual results for the twelve months ended 31 March 2020 (the “Reporting
Period”). The Group registered revenue of RMB1,841 million for the
Reporting Period, representing year-on-year growth of 12.6%, while the net profit attributable to equity holders of the
Group was RMB366 million. Basic earnings per share decreased by 14.9% to
RMB6.25 cents. The Board of Directors has proposed to distribute 30% and 40% of the net profit attributable to equity
holders for the twelve months ended 31 March 2020 as full-year dividend and
full-year special dividend, respectively, representing a dividend payout ratio
of 70% in aggregate.

Operational Highlights during FY2019/2020

• China Segment:
  Delivering Gradual Results While Optimising the Product Portfolio

With the completion
of in-depth reform in channels, products and supply chain management, the
Group’s Kappa brand business has achieved initial success. During the Reporting
Period, the Kappa brand continued to deepen collaboration with celebrities and
key opinion leaders (KOL) in various sectors, such as entertainment, music and
art. In the meantime, it also conducted a brand and image revamp, launching the
new brand concept of “K is for Kappa”.

In addition, the Group continued to optimise its channel and management, promote sales localisation reform and improve
its offline store structure. Since the beginning of 2020, the Group has
sustained stable growth for the existing outlet stores as well as the
Shanxi-Shandong-Henan regions, while the
performance of offline business in Central China, West China and South China
has seen notable growth. For the e-commerce business, leveraging the
segmentation of people and goods facilitated by online big data, the Group has
built a sustainable (interactive) e-commerce sales network, resulting in
consistent growth throughout the year.

During the Reporting Period, the Group continued to conduct its kid’s
wear business through the three main channels of shopping malls, department
stores and outlets. In the meantime, the development of direct sales and
e-commerce was enhanced to increase the percentage share of point-of-sale
outlet stores, further uplift the Group’s competitiveness in the kid’s wear
market. During the Reporting Period, revenue generated by the kid’s wear
business reached RMB8.8 million, accounting for 4.8%
of the Group’s revenue.

As at 31 March 2020, the Group had a total of 1,372 Kappa stores
(including 243 Kappa Kid’s stores), representing a net decrease of 132 stores
as compared to that at 31 March last year (a net decrease of 80 Kappa stores
and a net decrease of 52 Kappa Kid’s stores). For the next step, the Group will
further reduce the number of underperforming stores.

• Japan Segment:
  Ongoing Diversification of Consumers

Japan business continued to undergo reforms. During the Reporting
Period, Japan segment recorded revenue of RMB301 million. Further to the
upgrading of product designs, the Group took diversified marketing initiatives
targeting the consumer trends and their sporting preferences, attracting market
attention especially the younger generation. The Group also collaborated with
Japanese football comics in organising events and sponsoring women sportswear
in golf tournaments. Phenix’s brand equity was further enhanced through a
number of sponsorship events as well as marketing initiatives.

• Investment Segment:
  Sustaining a Prudent and Pragmatic Investment Strategy

During the Reporting Period, the valuation of the Group’s investment
portfolio showed steady growth. As at 31 March 2020, the Group reported a net
asset value of RMB9,245 million for its investments, representing a 4.1% growth compared to 30 September 2019 and a 156.6% premium to the Group’s market capitalisation for
the corresponding period as at 31 March 2020. The Group’s investment net gains
for the Reporting Period amounted to RMB567 million. In the future, the Group
will continue to control the size and risks of its investment funds in a
prudent and pragmatic manner, so as to secure stable returns for shareholders
while assuring the safety and effectiveness of its investments amidst
uncertainties in the financial market.

Mr. Chen Yihong, Chairman and Executive Director of
China Dongxiang, said, “Last year, the Group continued to optimise its store network and
improve its store efficiency. We have adopted a dual mechanism of traditional
e-commerce and e-commerce via social media in a move to diversify the
consumption pattern. Our e-commerce business has sustained a general trend of
sales growth in spite of the business doldrums caused by the pandemic. Looking
forward, in the face of uncertainties, China Dongxiang will continue to uphold
the traditional spirit of the Kappa brand and follow the stated path of reform
and effective channel strategies. The Group will also engage in product
innovation and upgrade in close tandem with the fashion trends of the market,
and will dedicate to generate long-term and stable returns for its shareholders
through prudent global deployment and investment.”

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

China Dongxiang (Group) Co., Ltd. is a leading international sportswear
brand enterprise in China 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. Currently, China Dongxiang owns all rights to the internationally
renowned Kappa brand in China, Macau and Japan. 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.