China Dongxiang Announces FY2020/2021 Interim Results

November 25, 2020 - 05:39
China Dongxiang Announces FY2020/2021 Interim Results

Business Reforms Gradually Deliver Results

Revenue and Gross Profit Show Steady Growth

LaunchedDigitalised Omni-channel Operating Platform

OptimisedDistribution Channel to Boost Offline Sales Growth



(RMB million)

For the six months ended 30 September








Gross profit*




Gross profit margin*



+0.2% pts

Operating profit




Operating profit excluding gains of investment segment




Net profit attributable to owners of the Company




Basic earnings per share (RMB cents)




Interim dividend per share (RMB cents)




*Before provisionfor/ reversal of impairment of inventories


HONG KONG SAR - Media OutReach - 25 November2020 - The leadinginternational 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 2020 (the"Reporting Period"). The Group's revenue and gross profit before provision for/reversal of impairment of inventories amounted to RMB899 million and RMB563million respectively for the Reporting Period, maintaining at similar levelwith last year. Benefitting from the profit generatedfrom investment segment, operating profit and profit attributable to owners ofthe Company increased to RMB1,240 million and RMB1,116 million respectively,representing year-on-year growth of 402.0% and 493.6%. Operating profit excluding gains of investmentsegment amounted to RMB5 million, a decrease of 94.4% year-on-year. Basic earnings per share roseby 493.1% to RMB19.04 cents. The Board of Directors has determined todistribute 30% of the net profit attributable to equity holders for the sixmonths ended 30 September 2020 as interim dividend.

Operational Highlights

  • Businessin China:

ImplementedComprehensive In-depth Reform         AchievedLow-teens Growth for Kappa Brand

During thefirst half of FY2020, the Group adhered to implement its established strategiesand rolled out comprehensive reforms on channel, product and supply chainmanagement, achieving new interim progress. During the Reporting Period,through optimization of channel structure, consolidation of localisedmanagement of sales teams, promoting the omni-channel digitalisation,strengthening of professional capabilities of product management teams, theGroup has achieved stable growth in the performance of outlet stores and shopping malls,contributing to the growth momentum in offline sales, while accelerating theturnover of omni-channel retailing and reduced inventorylevel. For e-commerce business, the Group has revamped its online marketingoperations and launched its digitalised omni-channel operating platform in September thisyear to allow mutual access between online and offline stores in relation toinventory in stock and purchase orders. The Group also continued active development of newbusiness platforms to provide a solid foundation for the future development ofe-commerce.


In respect of sales andmarketing initiatives, Kappa brand has continued to implement its integrated online and offlinemarketing strategy through cross-sector cooperation with celebrities and KOLs(Key Opinion Leaders) in entertainment, music and art, aiming to increase itsexposure and share in the fashion market. During the Reporting Period, thebrand has appointed Lexie Liu, a new-generation indie singer-songwriter, asKappa's "Women Style Ambassador", and Justin Huang, a passionate young star, asits brand ambassadors to connect with the new generation. In addition, Kappa continued to expand itsinvestment in sports assets, supporting the Chinese National Fencing Team andChinese National Equestrian Team with thesupply of professional training outfits, advocating a healthyand elegant high-end lifestyle among Chinese customers.


In terms of product design andR&D, Kappa continued to strive for product type upgrade, activelycollaborating with various sectors, engaging the mass consumers by launching avariety of co-branded series, which were followed and sought after byfashionistas with great enthusiasm. In addition, Kappa footwear experiencedsubstantial transformation during the period through the development of morevariety of footwear combination, focusing on tailormade designs and personalwearing experience, diversifying new channels, which helped realise the businessgrowth for footwear business.


With the above-mentioned, inspite of the adverse factors such as intensive competition and the pandemic,sales of Kappa brand products in China (excluding Kappa Kids' apparel andinternational businesses) increased by 13.2% year-on-year to RMB748 million,demonstrating a growth momentum.

  • Businessin Japan: Gradually Deepen Adjustment

During the Reporting Period,in view of the recurrent outbreak of the COVID-19 pandemic and uncertainties inglobal market, the Group has decided to focus on the development of its core brand inthe China market and completed the disposal of the trademark, intellectualproperties and miscellaneous assets of Kappa Japan to Basic Trademark S.r.l.con socio unico, a wholly-owned subsidiary of Italian group BasicNet S.p.A.("BasicNet"), for a consideration of USD13 million in July 2020. Subsequently,the Group has determined to license the "Phenix" brand to franchised operatorswithin Japan, Korea (South) and partial European countries. These are conduciveto the integration of the Group's resources and marketing operations, as a bidto become one of the best sportswear companies in China.


  • InvestmentBusiness: Strengthening Cooperation and Investing with Prudence

During the Reporting Period,the Group has continued to control the size and risks of its investment assetsin a prudent and pragmatic manner. As at 30 September 2020, the Group reporteda net asset value of RMB10 billion for its investment segment. The Group's netinvestment gains for the Reporting Period amounted to RMB1,261 million. The significant increase ininvestment gains was mostly due to increase in unrealised gainfrom rise in valuation of investment products in major markets. The Group will continue tostrengthen close cooperation with high-calibre investment partners in a prudentmanner, so as to generate stable returns for shareholders while assuring thesafety and effectiveness of its investments.


Mr. ChenYihong, Chairman and Executive Director of China Dongxiang, said,"Since the beginning of the year, the COVID-19 pandemic has posed greatchallenges to the global economy. The Group has concentrated on developing thebrand's business in China to capitalise on the rapid growth of domesticconsumption. In the meantime, we will face various challenges with flexibilityand innovation to seize the opportunities brought forth by the e-commerce newnormal through better use of diverse and effective channel strategies. We willalso unlock the value of investments in a prudent and pragmatic manner whenopportunities arise, so as to generate stable returns for shareholders."


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

China Dongxiang (Group) Co., Ltd. is a leadinginternational sportswear brand enterprise in China Mainland which has beenlisted on the Main Board of the Hong Kong Stock Exchange since 10 October 2007.The Group is primarily engaged in the design, development, marketing andwholesale of branded sportswear in China Mainland. Currently, China Dongxiang ownsall rights to the internationally renowned Kappa brand in China Mainland andMacau. On 1 May 2008, China Dongxiang completed the acquisition of PHENIX, aJapanese sportswear enterprise. PHENIX is the most popular ski brand in Japanwith the largest market share, as well as a well-known brand in theinternational market.


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