HONG KONG, CHINA - Media OutReach - 15 August 2018 - 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 unaudited interim results for the six months ended 30 June 2018 ("reporting period"). The Group's revenue for the reporting period increased by 14.4%, year-on-year ("YoY"), to RMB772 million, while profit attributable to equity holders of the Company reached RMB481 million with the basic earnings per share as RMB8.40 cents. In light of the sound cash condition of the Company, the Board of Directors has proposed to distribute 30% and 30% of the net profit attributable to equity holders for the six months ended 30 June 2018 as interim dividend and special interim dividend, respectively, representing a dividend payout ratio of 60%. The total distribution of dividends will amount to RMB4.90 cents (HKD5.5992 cents) per share.
Performance Highlights of 1H 2018
China Segment: Building Brand Clarity and Focusing on Retail-end for Regaining Growth
As at 30 June 2018, the revenue of Kappa brand increased by 10.7% YoY to RMB569 million. During the reporting period, the Company achieved its interim targets for same-store sales and retail sales growth, and recorded middle to low single digit growth in same store sales and retail sales despite a 20% - 25% YoY decline in forward orders through engaging new customers, as well as closing down and upgrading of underperforming stores. Based on a number of elaborate market research, the Company further clarified Kappa's brand DNA and the brand assets, as well as developing a more effective product category and building a brand barrier. In the meantime, the Company continued to further enhanced its unique brand positioning as a trendsetter as it made all-out online and offline marketing efforts via the digital new media. Through cross-sector collaboration with well-known designers and IP focused on the BANDA element, the brand substance and philosophy has been further reinforced. Looking to the second half of 2018, the Group will step up with more innovative attempts for the BANDA series. In addition, e-commerce has always been an integral part of the business mix of the Group, which has been consistently seeking changes to strive for further growth in the increasingly competitive e-commerce market. During the first half of 2018, the Group actively collaborated with well-known e-commerce platforms, such as Tmall, JD.com and VIP Shop to launch promotional campaigns during popular festive seasons, while enhancing promotion of new products on online platforms to facilitate combination of online and offline marketing.
On top of stable development, the kids' wear business was enhancing its brand assets during the first half of 2018 through its sponsorship for the "Chinese Football Boy" (中國足球小將) tournament, whose popularity continued to grow during the period with the launch of activities such as youth football training and the "Kappa Kids Cup National Tour" in further consolidation of the brand's position in the kids' wear market. As at 30 June 2018, revenue of the kids' wear business amounted to RMB50 million, an increase of 16.3% YoY, accounting for 7.7% of revenue of the China region.
As at 30 June 2018, the Group had a total of 1,439 Kappa stores (including 335 Kappa Kid's stores).
Japan Segment: Stabilized As Loss Minimised And Turnaround Can Be Expected
The Japan business continued to undergo reforms. During the reporting period, revenue from Japan segment grew significantly and financial loss shrank substantially with an improved financial condition as compared with the same period last year. In particular, PHENIX brand, which boasts outstanding quality of its skiing apparel and superb handicraft, supported the Norwegian Skiing Team to top the scoreboard in terms of both golds medal and medals in general at the 2018 PyeongChang Winter Olympics. Meanwhile, on top of securing stable growth in Japan business, the Group has endeavoured to expand the business development of PHENIX in China as well as overseas sales based in the European market. Since 2018, PHENIX China has been stepping up with its effort in channel expansion, membership services and brand marketing in active preparation for the four-year cycle leading to the Beijing Winter Olympics.
Investment Segment: Stable Performance Secured with Progress Made in a Cautious Way
Adhering to the strategies of "profit orientation, cooperation with trusted partners and focus on worthwhile projects", the Group's investment business generated ample returns for shareholders. In the first half of 2018, the investment business achieved a satisfactory performance despite challenging circumstances, such as fluctuation from systematic risk in the market and adoption of IFRS 9. As at 30 June 2018, the Group reported net asset value of its investments of RMB9,137 million, an increase of 5.7% as compared with that as at 31 December 2017, and an increase of 27.5% as compared with market value. During the reporting period, the Group had investment net gains of RMB423 million. The price of Alibaba shares held by the Group further increased, and the value of our investment in Ant Financial through special purpose vehicle ("SPV") investment soared after a new financing plan announced. Looking ahead, the Group will exercise extra caution in selecting cooperation partners and investments, and seize opportunities to release its investments for securing return on its investments.
Mr. Chen Yihong, Chairman and Executive Director of China Dongxiang, said, "In the first half of 2018, China Dongxiang was facing drastic changes in the domestic as well as international market landscapes. To seize potential opportunities arising from new developments, we continued to implement reforms while making realistic adjustments in a timely fashion to roll out a range of important measures in a target-special manner, resulting in impressive performance. As a company that has been established for almost sixteen years, China Dongxiang will continue to uphold the 'work hard' spirit, and strive for new milestones in the future with full confidence."
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.