China Dongxiang (Group) Co., Ltd. Announces Annual Results for the Year Ended 31 December 2014

(25 March 2015, 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 2014.

In retrospect of 2014, the Chinese economy experienced a gentle slowdown in growth amidst overall stability, as growth in total demand in the second half of the year was relatively weak in an apparent lack of consumers' confidence. The sportswear industry in general was gradually set on the path of recovery, showing signs of positive growth following a series of realignment and restructuring in the recent years. Against this backdrop, our employees worked in concerted effort to keep the end-market stable, while identifying and taking part in significant cooperative projects.

The Group reported a 335.7% year-on-year growth in net profit attributable to equity holders for the 12 months ended 31 December 2014 to RMB915 million. Basic earnings per share improved 334.8%, year-on-year, to RMB16.61 cents. As at 31 December 2014, cash and bank balance and treasury products amounted to RMB4,626 million, providing the financial resources and flexibility required for the implementation of strategic measures for long-term development. In line with the Group's usual dividend policy, we have proposed to distribute 30% of the net profit attributable to equity holders for the year ended 31 December 2014 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 2014 as special dividend. Therefore, the overall dividend payout ratio for the year ended 31 December 2014 is 70%.

The sales of China segment for the 12 months ended 31 December 2014 decreased by 8.4%, year-on-year, to RMB828 million, reflecting a 17.6% decrease for the first half of the year and a largely unchanged sales level for the second, as the Group succeeded in stabilising sales through a range of business control measures that proved to be effective. Gross profit margin for the China region improved from 55.2% to 59.8%, reflecting improved price concessions of off-season products and the increased weighting of new products which commanded higher profit margins. In terms of sales orders, the Group reported low double-digit growth for the value of orders received in 2015, reflecting primarily the Group's persistence in ongoing product explorations and improvements to enable innovative product design and development, which resulted in the launch of a number of novel and fashionable products hugely popular with the market, customers and consumers.

Mr. Chen Yihong, Chairman, Chief Executive Officer and Executive Director of China Dongxiang, commented, "In 2014, China Dongxiang welcomed the spring time of gradual market recovery and confirmed a sound development trend for steady progress in future, having survived a period of industry doldrums and volatile market conditions by adopting a range of reforms and innovative measures. The Group increased its concern and commitment to external investment projects and reported fruitful results, while assuring the development and progress of its principal business. In terms of external investment, the Group actively identified and participated in projects with long-term development space in a prudent and prospective manner, leveraging its existing resources and advantages to acquire better development opportunities and achieve better earnings, in a bid to assure the Group's stable development."

In 2014, the Group reported steady progress in its effort to intensify reforms, as it achieved encouraging results in stages through the building of a comprehensive and balanced sales network under its new business model of "self-owned retail outlets + dealership + franchise chain". In connection with sales, we have substantially enhanced the sell-through rate at retail-end levels by conducting reasonable and effective merchandise allocation and replenishment based on scientific analysis of retail-end data, drawing on insights from the Big Data concept. As at the end of the year, we had more than 1,200 retail outlets in China, forming a generally stable sales network. Sales of our 7 subsidiaries operating self-owned retail outlets in aggregate accounted for over 30% of our total sales in China segment.

In connection with our e-business, the group maintained firmly our rapid pace in development in an increasingly competitive e-commerce market and gradually repositioned our platform from an inventory clearing channel to introducing new products to our online channel. The successful sales of our retro and new products has further enhanced the overall profitability of our e-commerce business. Meanwhile, the Group has also achieved efficiency and cost optimization for its supply chain through the integration of its operations in China and in Japan and continued to shorten the lead-time for distribution through the building of its logistics regime. Currently, the "single retail store delivery" model is being implemented at owned subsidiaries on a trial basis.

In terms of brand promotion, the Group conducted in-depth streamlining of its brand attributes to clarify its brand positioning and image. A range of effective promotional campaigns were launched via diverse advertising means and platforms to highlight the fashionable and international characteristics of the brand. During the second half of 2014, Kappa continued to shine in graphic media promotion, as evidenced by the spectacular effects of its advertisements placed in popular fashion magazines. Meanwhile, we have continued to intensify our efforts in online and offline product promotion activities, such as collaborations with online social media including Weibo and Wechat, while the innovative "Kappa Bubble Soccer", which hit the market with instant sensation upon its launch in the four big cities of Shenzhen, Nanjing, Taiyuan and Dalian, has boosted sales and garnered considerable media exposure for the brand.

Mr. Chen Yihong, Chairman, Chief Executive Officer and the Executive Director of China Dongxiang, commented, "In the new year, the Group will focus on "stability" and "innovation" in an ongoing attempt to optimise its existing business and strengthen its existing business model of "self-owen retail outlets + dealership +franchise chain" to increase sales and improve outlet efficiency. We will also endeavour to refine our brand name and develop new products to provide consumers with more desirable choices and fulfill individual needs. The integration of online and offline businesses will be underpinned by efforts to expedite the rollout and development of e-commerce channels, improve efficiency of logistical distribution and response to market information, and optimise and strengthen mutual support and coordination between supply chains and logistics. Furthermore the Group will be engaged in ongoing efforts to develop new models, experiment new methods, broaden new thinking, explore new opportunities and frontiers for development in search for change and progress, with the aim of securing better opportunities for development, opening broader prospects for development. "

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.