China Dongxiang Announces Annual Results FY2020/2021?Revenue Increases by 27.8% to RMB1,970 Million

Direct Franchised Reform Bears Fruit

Overall Business Achieved Healthy and Stable Development

Results Highlights

(RMB million)	For the twelve months ended 31 March
	FY2021	FY2020	Change
Revenue	1,970	1,541	+27.8%
Gross profit (before reversal of/ provision for impairment of inventories)	1,292	1,023	+26.3%
Gross profit margin (before reversal of/ provision for impairment of inventories)	65.6%	66.4%	-0.8ppt
Operating profit	2,070	530	+290.6%
Operating profit excluding gains of investment segment	59	-18	N/A
Profit attributable to owners of the Company	1,811	366	+394.8%
Basic earnings per share (RMB cents)	30.88	6.25	+394.1%
Recommended total dividend per share (RMB cents)	10.77	4.36	+147.0%

HONG KONG SAR – Media OutReach – 23 June 2021 – 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 2021 (the “Reporting Period”). The Group’s revenue reached RMB1,970 million for the Reporting Period, representing a growth of 27.8% year-on-year (yoy). Profit attributable to owners of the Company was RMB1,811 million, representing an increase of 394.8% yoy. Basic earnings per share increased by 394.1% yoy to RMB30.88 cents. The Board of Directors has proposed to distribute 35% of the profit attributable to owners of the Company for the twelve months ended 31 March 2021 as full-year dividend.

Operational Highlights

Intensive cultivation focusing on China market

During the Reporting Period, domestic consumer sentiments gradually improved as the pandemic has come under control, accelerating the growth of new trend in online purchasing. The Group seized the opportunities with the implementation of delicacy operation in three dimensions of big logistics, retail localization and product sales, strengthening management of localized sales teams, driving digitalization of the omni-channel and uplifting the professional competence of product management teams. It further speeded up inventory turnover of omni-channel, enhanced channel control and swiftly responded to market, bringing great improvement in operational efficiency. During the Reporting Period, the Group reported stable growth in the performance of outlet stores and shopping malls. As at 31 March 2021, the Group had a total of 1,170 Kappa stores (excluding Kappa Kid’s stores), representing a net increase of 41 stores as compared to last year.

Delivering brand connotation by focusing on minority sports activities

In terms of brand marketing, the Group continued its cross-sector collaboration with IP and celebrities, incorporating latest trends and cultural ideas into the brand, delivering the brand spirit of “Never Settling for the Mediocre; Never Compromise”. This included the Halloween AI Series in collaboration with young domestic artist Cao Yu (??); teamed up with Mak Ling Ling, a well-known Feng Shui master in Hong Kong, to launch the 2021 CNY “Kappa Fortune” series, increasing its brand exposure. The Group will swift its brand focus back to sports and target the younger generation as its customer group. Focusing on niche and high-end sports, the Group partnered with Chinese Equestrian Team, National Fencing Team and Skateboarding Team to open up opportunities arising in middle- to high-end sports market segment.

Embracing the new era with ongoing digitalized omni-channel model

With the pandemic gradually recovering and reviving customer traffic, the Group’s digitalization and omni-channel reform has become evident. During the Reporting Period, the Group’s e-commerce has achieved stable growth, with digitalization and omni-channel operation remained as its strategic focus. In addition to maintaining its competitiveness on mainstream platforms, the brand also actively explored new emerging platforms, such as Xiaohongshu, Pinduoduo and Douyin, demonstrating the Group’s versatile marketing strategies of targeting younger customer groups. On the other hand, the Group optimized its SCRM membership system, cloud storage and smart store system to facilitate the integration of omni-channel. E-commerce business recorded a 31.7% growth for the full year.

To better focus on its business in China market, subsequent to the disposal of the trademark of “Kappa” Japan in July 2020, the Group also decided to license the “Phenix” brand to franchised operators. This allows the Group to dedicate all of its resources and marketing efforts to the development of its core brand in China market.

Investment segment performs well with diversified portfolios to spread risk

During the Reporting Period, the Group reported a net asset value of RMB10,518 million for its investment segment, representing growth of 10.1% as compared to the same period last year, with investment gains amounted to RMB2,095 million. In the future, the Group believes that investment segment will generate stable and sustainable return for shareholders with prudent investment strategies and outstanding investment partners.

Mr. Chen Yihong, Chairman and Executive Director of China Dongxiang, said, “The pandemic brought enormous challenges to the industry, but also presented unprecedented opportunities to sportswear brands in China. The post-pandemic change in consumption preference has indirectly driven the demand for sportswear products. The Group successfully navigated the situation with the brand spirit of innovation and “Not Settling for the Mediocre”, achieving fruitful results. Looking forward, the Group is fully confident in the prospects of China’s economy and sportswear industry. With a number of international sporting events coming up, the Group will seize the market opportunities ahead, striving to achieve record-high results. The Group will continue to take profitability at the core, and collaborate with outstanding partners in quality projects with a global vision, generating stable and sustainable returns for our shareholders.”

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 Mainland China and Macau. Since April 2008, the Group became the owner of the brand Phenix. Phenix is a well-known skiing brand in the international market.

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