China Dongxiang Announces Second Interim Results 2018

February 27, 2019 - 06:24
China Dongxiang Announces Second Interim Results 2018

Reform on Sales Channels & Implementation of Para-direct Operation Model Yield Notable Results



(RMB million)

For the twelve months ended 31 December









Gross profit (before provision for / reversal of impairment losses of inventories )




Gross profit margin (before provision for / reversal of impairment losses of inventories)



-3.2 pts

Operating profit




-59.3 %

Operating profit excluding investment income





Profit for the period attributable to equity holders of the Company




Basic earnings per share (RMB cents)




-62.5 %


HONGKONG, CHINA - Media OutReach  - 27 February 2019 - The leading international sportswear brand enterprise inthe PRC, China Dongxiang (Group) Co.,Ltd. ("China Dongxiang" or "the Company", together withits subsidiaries, "the Group", HKEx stock code: 3818) announces itsunaudited second interim results for the twelve months ended 31 December 2018("reporting period"). The Group's revenue for the reporting period increased by17.3%, year-on-year ("YoY"), to RMB1,706 million, while profit attributable toequity holders of the Company reached RMB315 million withthe basic earnings per share as RMB5.44 cents. The Group's profit fell mainlydue to negative factors including the trade war. In the second half of 2018,major global stock market indexes has recorded continued drop. The price of theshares that the Group held, including Alibaba, has fallen accordingly. As atthe date of this results announcement, the loss from the drop in price of stockhas however been fully recovered as a result of the improved performance ofstock markets. The Board resolved not to declare any interim dividend for thetwelve months ended 31 December 2018.


Operational Highlights of 2018


  • China Segment: Introduction of NewCustomers and Launch of New Model


As at 31 December 2018, the revenueof Kappa brand increased by 20.3% YoY to RMB1,370 million. During the reportingperiod, the Group made diligent efforts to optimise its existing store mix andactively establish top stores, shopping-mall stores and outlets, whilerenovating and closing underperforming stores in an ongoing move to consolidatereforms at deeper levels. Benefiting from a highly effective reform on saleschannels, the same store sales and retail performance of the Group maintainedstable growth. In the meantime, the brand continued to adopt a 360-degree brandmarketing through a combination of online and offline activities by closelycooperating with new media and top stars in China and actively participating ininternational fashion events, leading to a greater recognition worldwide ofKappa's brand image of being "rebellious, passionate and outgoing". Inaddition, the Group continued to develop a new para-direct operation model tofurther secure sufficient supply of products, laying a concrete foundation forenhancement of the Group's operational performance. With regards to E-commerce,as an integral part of the business of the Group, its performance for theperiod was in line with expectation. In 2018, the Group continued to penetrateinto major e-commerce platforms, such as Tmall, and, by activelyparticipating in their large-scale promotion activities.


  • Kappa Kids
In 2018, thekid's wear business continued to make progress in a stable manner. As thepopularity of the "Chinese Football Boy" (中國足球小將) campaign sponsored by "Kappa Kids" has been on the rise, the ChineseFootball Boys have been arranged to participate in friendly matches with thetop international youth football teams in addition to the nationwide games infull swing, resulting in a further enhancement of brand awareness and itsinfluence in kidswear industry. The revenue of kid's wear business for theReporting Period reached RMB130 million, accounting for 9.5% of the revenuefrom the China segment.


As at 31 December 2018, the Group had a totalof 1,496 Kappa stores (including 316 Kappa Kid's stores), representing a netincrease of 9 as compared to that as at the end of December 2017. 


  • Japan Segment: Progressive Improvement in FinancialPerformance and Exploration of New Sources for Customers
The Japan business continued to undergo reforms in 2018. During theReporting Period, revenue from Japan segment grew significantly and financialloss shrank substantially with an improved financial condition as compared withthe same period of last year. As overseas tourists to Japan have become a newpotential source for customers, the Group has made greater efforts in productspromotion at the renowned sightseeing spots for autumn and winter in Japan soas to develop a new business engine for growth. Additionally, the Groupcontinued to relish a huge opportunity in winter sports by vigorouslydeveloping and expanding PHENIX brand in China and Europe. PHENIX China haspositioned itself well in advance for the coming of Beijing 2022 WinterOlympics since 2018 by focusing on omni-channel expansion, club member servicesand brand marketing, achieving progressive increase in brand awareness.


  • InvestmentSegment: High Responsiveness and Sensitivityto Market Change with Progress Made in a Cautious Way
In 2018, part of the Group's investment projects was affected by thegeneral fluctuation of the global capital market, but the size and risks of theGroup's investments were effectively controlled with the priority of capitalsafety and reasonable return by pooling the Group's considerable experience ininvestment and risk management. As at 31 December 2018, the Group reported netasset value of its investments of RMB9,231 million, an increase of 6.8% ascompared with that in 2017, and a 49.2% surplus over the market capitalisationof the Group for the corresponding period. During the Reporting Period, theGroup had investment net gains of RMB424 million. Looking forward, the Groupwill extra caution in selecting cooperation partners and investment projectsand release the value of the projects in a timely manner, so as to securestable returns from investments as well as capital safety andeffectiveness. 


Mr. ChenYihong , Chairman and Executive Director of China Dongxiang, said, "In 2018,domestic and international environment was complicated and complex with toughercompetition in the industry. In order to grasp the potential opportunitiesduring the new development stage of the sports gear industry, we continued todeepen our reform and achieved some progress with initial achievements byleveraging on extensive experience in the industry. As a company that has beenestablished for sixteen years, China Dongxiang will continue to move forwardwith our 'work hard' spirit, and strive for new milestones in the future."


About China Dongxiang (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.