As at 30 June 2018, the revenue of Kappa brand increased by 10.7% YoY toRMB569 million. During the reporting period, the Company achieved its interimtargets for same-store sales and retail sales growth, and recorded middle tolow 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 asclosing down and upgrading of underperforming stores. Based ona number of elaborate market research, the Company further clarified Kappa'sbrand DNA and the brandassets, as well as developinga more effective product category and building a brand barrier. In themeantime, the Company continued to further enhanced its unique brandpositioning as a trendsetter as it made all-out online and offline marketingefforts via the digital new media. Through cross-sector collaboration with well-known designers and IPfocused on the BANDA element, the brand substance and philosophy has beenfurther reinforced. Looking to the second half of 2018, the Group will step upwith more innovative attempts for the BANDA series. In addition, e-commercehas always been an integral part of the business mix of the Group, which hasbeen consistently seeking changes to strive for further growth in the increasinglycompetitive e-commerce market. During the first half of 2018, the Groupactively collaborated with well-known e-commerce platforms, such as Tmall,JD.com and VIP Shop to launch promotional campaigns during popular festiveseasons, while enhancing promotion of new products on online platforms tofacilitate combination of online and offline marketing.

 

• Kappa Kids

On top ofstable development, the kids' wear business was enhancing its brand assetsduring the first half of 2018 through its sponsorship for the "Chinese FootballBoy" (中國足球小將) tournament, whose popularity continued togrow during the period with the launch of activities such as youth footballtraining and the "Kappa Kids Cup National Tour" in furtherconsolidation of the brand's position inthe kids'wear market. As at 30 June 2018, revenue of the kids' wear business amounted toRMB50 million, an increase of 16.3% YoY, accounting for 7.7% of revenue of theChina region.

 

As at 30 June 2018, the Group had a total of1,439 Kappa stores (including 335 Kappa Kid's stores). 

 

• Japan Segment: Stabilized As LossMinimised 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 shranksubstantially with an improved financial condition as compared with the sameperiod last year. In particular, PHENIX brand, whichboasts outstanding quality of its skiing apparel and superb handicraft,supported the Norwegian Skiing Team to top the scoreboard in terms of bothgolds medal and medals in general at the 2018 PyeongChang Winter Olympics.Meanwhile, on top of securing stable growth in Japan business, the Group hasendeavoured to expand the business development of PHENIX in China as well asoverseas sales based in the European market. Since 2018, PHENIX China has beenstepping up with its effort in channel expansion, membership services and brandmarketing in active preparation for the four-year cycle leading to the BeijingWinter Olympics. 

 

• InvestmentSegment: Stable Performance Secured withProgress Made in a Cautious Way

Adhering to the strategies of "profit orientation, cooperation withtrusted partners and focus on worthwhile projects", the Group's investmentbusiness generated ample returns for shareholders. In the first half of 2018,the investment business achieved a satisfactory performance despite challengingcircumstances, such as fluctuation from systematic risk in the market andadoption of IFRS 9. As at 30 June 2018, the Group reported net asset value ofits investments of RMB9,137 million, an increase of 5.7% as compared with thatas 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 RMB423million. The price of Alibaba shares held by the Group further increased, andthe value of our investment in Ant Financial through special purpose vehicle ("SPV")investment soared after a new financing plan announced. Looking ahead, the Group willexercise extra caution in selecting cooperation partners and investments, andseize opportunities to release its investments for securing return on itsinvestments.

 

Mr. ChenYihong, Chairman and Executive Director of China Dongxiang, said, "In thefirst half of 2018, China Dongxiang was facing drastic changes in the domesticas well as international market landscapes. To seize potential opportunitiesarising from new developments, we continued to implement reforms while makingrealistic adjustments in a timely fashion to roll out a range of importantmeasures in a target-special manner, resulting in impressive performance. As acompany that has been established for almost sixteen years, China Dongxiangwill continue to uphold the 'work hard' spirit, and strive for new milestonesin the future with full confidence."

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

ChinaDongxiang (Group) Co., Ltd. is a leading international sportswear brandenterprise in China which has been listed on the Main Board of the Hong KongStock Exchange since 10 October 2007. The Group is primarily engaged in thedesign, development, marketing and wholesale of branded sportswear in China.Currently, China Dongxiang owns all rights to the internationally renownedKappa brand in China, Macau and Japan. On 1 May 2008, China Dongxiang completedthe acquisition of PHENIX, a Japanese sportswear enterprise. PHENIX is the mostpopular ski brand in Japan with the largest market share, as well as awell-known brand in the international market.