China Dongxiang (Group) Co., Ltd. Announces Interim Results for the Six Months Ended 30 June 2013

(21 August 2013, Hong Kong) - The leading international sportswear brand enterprise in the PRC, China Dongxiang (Group) Co., Ltd. ("China Dongxiang" or "the Group"; stock code: 3818) announced its interim results for the six months ended 30 June 2013.

The global economic economy remained sluggish in the first half of 2013. The decelerating economic growth of China, and the domestic demand for sportswear also slowed down. Brand operators focused on clearance of accumulated inventory from the past few years. Coupled with rising costs, this significantly affected the profitability. Among various operational challenges, sportswear brand operators also face competition by international sportswear brands and fast fashion brands as they are expanding aggressively. The sportswear market share was gradually being eaten away. Amidst depressed market conditions, the Group’s sales declined by 32.3% year-on-year to RMB563 million for the six months ended 30 June 2013. The net profit attributable to equity holders for the six months ended 30 June 2013 of the Group decreased by 5.2% year-on-year to RMB92 million. Basic earnings per share were RMB1.67 cents, a decrease of 4.6% compared to last year. Despite a declining revenue, the Group maintained a stable financial position. As at 30 June 2013, cash and bank balance including treasure products held by the Group totaled RMB4,661 million. This allows the Group sufficient position and flexibility in the implementation of various strategic measures. The Board of Directors proposed to distribute 30% of the profit attributable to equity holders for the six months ended 30 June 2013 as general dividend after taking into consideration the sound financial position of the Group. In addition, the Board recommended to distribute 40% of the profit attributable to equity holders for the six months ended 30 June 2013 as special dividend to reward shareholders for their unwavering support for the Group during tough times. Overall, the Group distributed 70% of its earnings for the six months ended 30 June 2013 as an interim dividend.

Mr. Chen Yihong, Chairman, Chief Executive Officer and Executive Director of China Dongxiang, commented, "Amidst the transformation period, the staff from top to bottom, has stood by China Dongxiang, the Group has adopted a pragmatic approach to its business management and operation during the period. This included streamlining our corporate structure and stringent cost control, etc. These measures have enabled the Group to continue to maintain a healthy operating profit and sound financial position despite declining sales performance."

During the period, the Group continued to optimise its retail network distribution and store efficiency by constantly assessing the performance of its retail outlets for duly adjustments. As at 30 June 2013, the Group had 27 authorised dealers in its China segment that directly or indirectly operated 1,398 retail outlets selling Kappa products. The distribution network of our retail outlets covers all of China’s core municipal cities and other major cities and towns. The Group established its first regional retail branch office in Hunan Province in the second half of 2012 and achieved satisfactory results. Since then, five more retail branch offices were set up in Dalian, Henan, Hubei, Shenzhen and Shanghai, respectively, thus further strengthening the distribution through a better management of local dealers as well as the opening of self-operated retail outlets across the country.

During the period, the Group continued to adopt "smart marketing" for greater cost effectiveness by infusing brand and product into consumers’ daily lives through social networks and new media, advertorials and product placement marketing. The group also sponsored drama, movies and related sports events and activities as well as innovative promotion campaigns to enhance the positioning of the brand, and further penetrated the product image into the minds of target customer groups. The Group continued to launch and develop diversified product, including Kappa Essential which is simple yet non-compromising in style, Kappa Rain Way which is a waterproof series that perfectly blends functionality and fashion, Kombat Pants which features comfortable pants crafted with multiple cutting lines, etc. They cater to consumers’ different needs in design and functionality. In addition, the Group’s outdoor sports brand Phenix developed steadily in both China and Japan market, and launched series including Phenix Assam Polo and Phenix Ramro JK UV Series, Alert Micro Short Pants and Phenix CapKeeper Waterproof Series, and they were all well-received by consumers.

Looking into the second half, based on thorough analysis and understanding of the sector dynamics, the Group deemed necessary to remain committed to strengthening the "brand + retail" business model, optimizing sales channels, further penetrating the retail end and strengthening the control and management of the channels. By drawing on the successful experiences of the Group’s subsidiary in Hunan, the Group increases the interaction between the brand and retail channels, and keeps abreast of the latest trends in the end-user market and demand from different consumer groups. With proper brand philosophy and clear product development direction, the Group will remain adhered to the positioning of "sport, fashion, sexy and stylish" that has always been well-received by consumers and also strive for constant improvement in product innovation, development and design. Meanwhile, the Group will continue to optimize the supply chain, establish a responsive supply chain information platform, improve supply chain flexibility, respond to market changes in a timely manner and accelerate repeat purchase processing, so as to ensure the sell-through rate at retail end.

Mr. Chen concluded, "During this transformation period, China Dongxiang will always committed to upholding innovation and creativity. We will continue to integrate our product design resources. Staying attuned to market changes by maintaining acute market sense, we will continue to make every effort to roll out high-quality, stylish and creative products that meet the market demand. Meanwhile, we will further strengthen our research and development capabilities, and pay more attention to the fine details of products and differentiate our products against competition. We will strive to meet different needs of consumers and offer flexibility to mix and match across different product lines. By doing so, we will be able to deliver a better product experience, thus enhancing our brand positioning. We are confident that, with determination and strategic planning, guided by our values of practicality, innovation and passion, we are emerging out of the shadows steadfastly and en route to spotlight."

About China Dongxiang (Group) Co. Ltd.
China Dongxiang (Group) Co., Ltd. (HKEx: 3818) is a leading international sportswear brand enterprise in China and was successfully listed on the Main Board of the Hong Kong Stock Exchange on 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 recognized Kappa and Robe Di Kappa (RDK) Brand in China, Macau and Japan. Its products convey an active, fashionable and youthful image and are warmly welcomed by China's fast growing and high potential consumers. The Group also owns Phenix, the most popular ski brand in Japan with the largest market share, which has gained strong recognition in the international market.