China Dongxiang Announces Interim Results FY2019/2020

Reform Management, Business Stable Growth and Maintain High Dividend Payout

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Results
Highlights

(RMB million)	For the six months ended 30 September
	2019	2018	Change
Revenue	899	787	14.2%
Gross profit (before reversal of impairment of inventories)	561	453	23.8%
Gross profit margin (before reversal of impairment of inventories)	62.4%	57.6%	4.8%pts
Operating profit	247	229	7.9%
Operating profit excluding gains of investment segment	89	37	140.5%
Net profit attributable to owners of the Company	188	138	36.2%
Basic/Diluted earnings per share (RMB cents)	3.21	2.36	36.0%
Interim dividend and interim special dividend per share (RMB cents)	1.61	N/A	N/A

HONG KONG, CHINA - Media OutReach - 27 November
2019 – 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 2019 (the “Reporting Period”). The
Group registered revenue of RMB899 million for the Reporting Period,
representing year-on-year growth of 14.2%, while the net profit attributable to
owners increased by 36.2% to RMB188 million. Basic earnings per share increased
by 36.0% to RMB3.21 cents. The Board of Directors has proposed to distribute 30%
and 20% of the net profit attributable to owners for the six months ended 30
September 2019 as interim dividend and interim special dividend, respectively,
representing in aggregate a dividend payout ratio of 50%.

Operational Highlights during the Reporting Period

 

• China
  Segment: Reform Management and Business Stable Growth

During the first half of 2019, the brand enhanced its brand penetration in the
fashion market as it promoted its brand substance and philosophy through
cross-sector cooperation with celebrities and KOLs (key opinion leaders) in in
various sectors, such as entertainment, music and art, in ongoing
implementation of its integrated online and offline marketing strategy. During the Reporting
Period, the Group announced the official appointment of celebrated artist Zitao Huang as its brand ambassador, and the
brand embarked on a range of marketing activities focused on the ambassador. In
the meantime,
the Group hosted
and participated in fashion extravaganzas and sponsored various sporting
events, in a bid to
increase its brand and product exposure and develop its brand assets. In
addition, effects of the Group’s optimisation and reform of channels have
gradually become apparent. Strong sales growth was also reported at shopping
malls channel, as ongoing improvements were being made to the overall offline
store structure. In addition, the Group reported higher growth in overall
performance of outlet stores. During the Reporting Period, thanks to the Group’s implementation of a multi-platform
strategy, sales through Tmall and JD.com continued
to grow. Customers aged between 18 and 24 as a percentage of the brand’s
e-commerce customers increased by 16 percentage points to 50%.

 

During the first half of 2019, The Group’s kids
wear business continued to enhance its competitiveness in the kids wear market
through complementary branding activities and store promotions. The “Chinese
Football Boy” campaign remained a favourite of its fans, which attracted a huge
following among the media and the public. Video clips of relevant events have also
claimed more than 100 million clicks. For the Reporting Period, revenue
generated by the kids wear business reached RMB52 million, accounting for 6.9%
of the revenue from China segment.

 

As at 30 September 2019, the Group had a total
of 1,461 Kappa stores (including 285 Kappa Kid’s stores), representing a net
decrease of 43 stores as compared to that as at 31 March 2019 (a net decrease
of 33 Kappa stores and a net decrease of 10 Kappa Kids stores). For the next
step, the Group will further reduce the number of underperforming stores.

 

• Japan Segment: Diversification of Customer
  Base

The Group’s Japan business continued to undergo
reforms. During the Reporting Period, revenue from the Japan segment was substantially
in line with that for the corresponding period of last year. The Group
organised numerous marketing activities tailored to the characteristics of
local consumer spending in Japan, providing sponsorships to golfers in addition
to hosting footballing activities, in a bid to maintain stable sales by raising
consumer awareness for the brand and increasing the number of retail store
visitors. Meanwhile, the Group placed a strong emphasis on online promotion via
social media, with a view to broadening its reach to various customer groups
and further enhancing its brand value.

 

• Investment Segment: Enhancing Cooperation and
  Investing with Prudence

Since 2019, under the background of the gradual
cooling financial investment market and the increasing uncertainty of the
project, the overall valuation of the Group’s investment portfolio remains
stable. The Group continued to monitor the size and risks of investment assets with
a cautious and prudent approach. As of 30 September 2019, the Group reported a
net asset value of RMB8,882 million for its investments, representing a 2.5%
growth compared to 31 March 2019 and a 102% premium to the Group’s market
capitalisation for the corresponding period. The Group’s investment net gains
for the Reporting Period amounted to RMB166 million.

Mr. Chen
Yihong, Chairman and Executive Director of China Dongxiang, said, “Despite ongoing
volatility in the macro-market, the Group achieved stable growth in its Kappa
brand business, thanks to efforts in new customer development and the
introduction of the direct-franchise model which ensured sufficiency in product
supply. China Dongxiang will uphold the traditional spirit of the Kappa brand
and engage in product innovation and upgrade in close tandem with the fashion
trends of the market, capitalising on sound opportunities in the sporting
industry and making reasonable use of its resources to explore channels for
brand promotion and marketing, bringing long-term reasonable stable and
considerable returns to 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 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.