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/