China Dongxiang (Group) Co., Ltd. Announces Annual Results for the Year Ended 31 December 2013

(18 March 2014, Hong Kong) - The leading international sportswear brand enterprise in the PRC, China Dongxiang (Group) Co., Ltd. (“China Dongxiang" or "the Group" ; HKEx stock code: 3818) announced its annual results for the year ended 31 December 2013.

2013 was a year of opportunities and challenges for the sporting goods industry. Under the double impact of lacklustre sentiments in the retail market and fierce competition with e-commerce, traditional brand operators were facing cutbacks to various extents in terms of sales, profit and the size of their retail network. For the year ended 31 December 2013, the sales of the Group was RMB1,414 million, decreased by 20.2% compared to last year and the Group's net profit attributable to equity holders reached RMB210 million, representing a year-on-year increase of 18.6%. Basic earnings per share improved 19.7%, year-on-year, to RMB3.82 cents. As at 31 December 2013, cash and bank balance and treasury products held by the Group amounted to RMB4,648 million, providing the financial conditions and flexibility required for the implementation of strategic measures for long-term development. In line with the Group's usual dividend policy, the Group proposed to distribute 30% of the net profit attributable to equity holders for the year ended 31 December 2013 as final dividend. In view of the sound financial position of the Group, the Board of Directors has further proposed to distribute 40% of the net profit attributable to equity holders for the year ended 31 December 2013 as special dividend. Therefore, the overall dividend payout ratio for the year ended 31 December 2013 is 70%.

Mr. Chen Yihong, Chairman, Chief Executive Officer and Executive Director of China Dongxiang, commented, "Conditions in the sporting goods industry during the past year were volatile and challenging. In view of the baffling changes, which sometimes represented radical or revolutionary transformation, taking place in the past year, the customary mindset from the past is no longer valid. New issues and challenges require to be solved by new ideas and approaches."

During the period, in terms of sales channel, the Group evolved from a system comprising authorised dealers only to a mixture of "self-owned retail outlets + dealership + franchise chain". These three formats were effectively combined according to the characteristics and needs of different regions for maximum market development, better business control and the building of a solid and sound network. In 2013, the Group established 7 subsidiaries operating self-owned retail outlets to bring the total number of self-owned outlets to 272 supported by close to 800 staff. This crucial step will have profound significance for the future transformation and development of the Group.

Leveraging on its diversified portfolio of sales channels, the Group further reduced and optimized its inventory in 2013 to dispose of off-season inventory with a total worth of over RMB1 billion in terms of tag price. The Group did not neglect the protection of its brand image and the ongoing development of new channels in the course of destocking, which substantially alleviated the pressure on future operations.

During the year, the Group continued to release a series of products with character and unique styles. The "Kappa KOMBAT" series, including new product lines such as KOMBAT hoodie and KOMBAT down feather jackets in addition to the popular KOMBAT pants, was met with enthusiastic market response and recognition upon its official launch in 2013.

In terms of brand promotion, the "LOVE • KOMBAT" product launch presentation for the"KOMBAT" series held in 2013 showcased Kappa as a subtle brand with exceptional style by cleverly combining the impact of the media, celebrities, designers, distributors and consumers. In the meantime, through various forms of cooperation with different media groups such as Trends Media Group, Mahua Funage Plays, Music Radio and CCTV5, we succeeded in effectively marketing the brand in a fashionable manner and with precision to impart in consumers a more distinctive, affable and characteristic image for Kappa.

The Group's supply chain and logistics system were substantially upgraded and optimised in 2013. The rolling order system of the supply chain, the incorporation of technologies from Japan, as well as B2C-based fast logistical distribution, have afforded strong support for front-desk business development.

Mr. Chen Yihong, Chairman, Chief Executive Officer and the Executive Director of China Dongxiang, commented, "Looking into 2014, we should expect Dongxiang to make major strides forward on the road to reform. We will continue to develop the business setup of "self-owned retail outlets + dealership + franchise chain" in greater depth, striving to restore our channel network to a more healthy and efficient state sooner. We will also seek to respond to the high expectations from customers and consumers for Kappa as a sporting fashion by offering products with a greater design tone and fashion sense. Meanwhile, we will increase efforts in the development of our brand image, supply chain system, logistics system and e-commerce platform."

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 renowned Kappa and Robe Di Kappa (RDK) brands in China, Macau and Japan. Its products convey an active, fashionable and youthful image that are welcomed warmly by China's fast growing and high potential consumers. The Group completed the acquisition of a Japanese sportswear enterprise, Phenix, on 1 May 2008. Phenix is the most popular ski brand in Japan with the largest market share, which has gained strong recognition in the international market.