Financial Performance - For the fiscal year 2021/2022, the company reported a revenue of RMB 1,916 million, a decrease of 2.7% compared to RMB 1,970 million in the previous year[25]. - The operating loss for the year was RMB 1,751 million, compared to an operating profit of RMB 2,070 million in the prior year[25]. - The gross profit margin decreased to 63.9% from 65.6% year-on-year[25]. - The net loss attributable to shareholders was RMB 1,747 million, compared to a profit of RMB 1,811 million in the previous year[25]. - Basic and diluted loss per share was RMB 29.79, down from earnings of RMB 30.88 per share in the previous year[25]. - The group recorded revenue of RMB 1,916 million for the fiscal year ending March 31, 2022, a decrease of 2.7% year-on-year[40]. - The net loss attributable to equity holders was RMB 1,747 million during the reporting period[40]. - The group's gross profit was RMB 1,225 million, a decrease of RMB 67 million from RMB 1,292 million in the previous period, with a gross margin of 63.9% (previous period: 65.6%)[111]. - The group reported a loss attributable to owners of RMB 1,747 million for the reporting period, compared to a profit of RMB 1,811 million in the previous year[99]. Assets and Liabilities - Total assets as of March 31, 2022, were RMB 10,485 million, a decrease from RMB 12,638 million in the previous year[27]. - The company's net current assets amounted to RMB 4,484 million, down from RMB 5,764 million in the previous year[27]. - The debt-to-equity ratio increased to 0.12 from 0.10 year-on-year[28]. - The group had a net asset value attributable to equity holders of RMB 9,351 million as of March 31, 2022, down from RMB 11,533 million as of March 31, 2021[1]. - The group's current ratio as of March 31, 2022, was 6.7 times, down from 9.0 times as of March 31, 2021[1]. Market and Industry Trends - In 2021, the sportswear industry in China reached a market size of 385.8 billion yuan, with expectations to exceed 400 billion yuan in 2022[65]. - The national sports industry is projected to reach a total scale of 5 trillion yuan by 2025, with a target of 38.5% of the population regularly participating in sports[65]. - Online retail sales of physical goods grew by 12.0% in 2021, accounting for 24.5% of total retail sales, which exceeded 40 trillion yuan, reflecting a 12.5% year-on-year increase[54]. - The sportswear industry is focusing on digital transformation and expanding online channels, with increasing revenue from platforms like Xiaohongshu and Douyin[65]. Strategic Initiatives - The company aims to become the most desirable sports lifestyle brand, focusing on talent and management excellence[7]. - Future strategies include market expansion and potential new product development to enhance brand presence[39]. - The group aims to deepen digital transformation and enhance omnichannel operations to capture opportunities in the sports industry[44]. - The group plans to focus on the rapidly growing snow sports industry, investing in Xinjiang to create a comprehensive system around skiing equipment and training[43]. - The group will continue to integrate online and offline channels to optimize sales strategies and expand customer reach[40]. - The group is actively collaborating with local designers and brands to launch co-branded products, enhancing brand image[40]. - The group is committed to providing high-quality products and services in the Chinese market, maintaining its long-term commitment[40]. Corporate Governance and Management - The company has adhered to the corporate governance code as per the Hong Kong Stock Exchange rules, with the exception of the chairman's absence at the annual general meeting due to important matters[176]. - The board consists of seven members, including four executive directors and three independent non-executive directors, ensuring a balanced composition with sufficient knowledge and experience[182]. - The company has established an Environmental, Social, and Governance (ESG) committee to oversee its commitment to sustainability[88]. - The company has implemented environmental, social, and governance (ESG) reporting guidelines, disclosing relevant information in its ESG report[178]. - The executive committee is authorized by the board to manage the company's daily operations, focusing on overall strategy, financial matters, and risk management[179]. Marketing and Brand Development - Kappa brand successfully held its first annual fashion show in China in May 2021, marking a significant milestone in its 20-year market presence[70]. - Kappa has sponsored multiple national teams and sports events, achieving high visibility and brand recognition, with Kappa apparel worn by many athletes during competitions[73]. - Kappa's marketing strategy during the Lunar New Year included a campaign featuring Olympic champion Sun Yiwen, enhancing brand visibility through social media[70]. - The group has seen challenges in the operating environment due to the COVID-19 pandemic and a warm winter, impacting product demand[68]. - Kappa's brand promotion efforts have significantly increased brand awareness and image through various marketing combinations during major sports events[68]. Operational Efficiency - The group aims to strengthen its market position by optimizing online and offline sales channels and enhancing overall operational efficiency[68]. - The group aims to enhance operational efficiency by closing underperforming stores while expanding its e-commerce presence[80]. - The company is optimizing its offline store operations and enhancing digital management for better efficiency[65]. - The group has expanded its online store count to 764, facilitating flexible inventory management[78]. Future Outlook - The management has provided guidance for the next fiscal year, projecting a revenue growth of 10% to 12%[166]. - The company maintains an optimistic outlook on the sports apparel industry, anticipating growth opportunities as the pandemic situation improves[80]. - The company plans to expand its market presence in Southeast Asia, targeting a 30% increase in market share over the next two years[161].

Financial Performance - For the six months ended September 30, 2021, the company recorded revenue of RMB 852 million, an increase of 4.5% year-on-year[13]. - The gross profit was RMB 552 million, down 2.6% from RMB 567 million in the previous year, with a gross margin of 64.8%, a decrease of 4.8 percentage points[13]. - The company reported a net loss attributable to shareholders of RMB 748 million, compared to a profit of RMB 1,116 million in the same period last year, representing a decline of 167.0%[13]. - Basic loss per share was RMB 12.76, compared to earnings of RMB 19.04 per share in the previous year[13]. - The total sales revenue for the Kappa brand during the reporting period was RMB 747 million, a slight decrease of RMB 1 million compared to RMB 748 million in the previous period[50]. - The overall sales revenue for the group increased by 4.5% to RMB 852 million from RMB 815 million in the previous period[47]. - The gross profit for the group was RMB 558 million, up RMB 21 million from RMB 537 million in the previous period, resulting in a gross margin of 65.5%[53]. - The company incurred a loss from operations of RMB 769,769,000, compared to a profit of RMB 1,281,925,000 in the previous year, reflecting a significant decline[117]. - The total comprehensive loss for the period amounted to RMB 812,443,000, compared to a comprehensive income of RMB 913,720,000 in the previous year[119]. Store Expansion and Brand Strategy - The company opened 46 new Kappa brand stores, bringing the total to 1,421 stores as of September 30, 2021[17]. - Kappa has established a new brand core strategy of "returning to sports," actively sponsoring various sports teams, including the official sponsorship of the Chinese national skateboarding, equestrian, and fencing teams for the Tokyo Olympics[18]. - Kappa's first brand concept store opened in Beijing's Sanlitun, aiming to provide a high-end, customized shopping experience[33]. - Kappa has launched new product lines, including the Kappa x Jianyi Street co-branded skateboard shoes, and held offline events to enhance brand visibility[25]. - Kappa's collaboration with Olympic gold medalist Sun Yiman as a brand ambassador highlights the brand's commitment to promoting sports in China[33]. Market and Consumer Trends - The retail sales of consumer goods in China increased by 13.9% year-on-year in the first half of 2021, with online physical goods retail sales reaching approximately RMB 6.1 trillion, a year-on-year growth of 23.2%[28]. - The market size of China's sports footwear and apparel industry reached RMB 385.8 billion in 2021, with a compound annual growth rate (CAGR) of 9.83% from 2021 to 2023, ranking second among consumer sub-industries[30]. - The penetration rate of sports apparel consumption in China is only 12.5% of total footwear and apparel consumption, indicating significant growth potential[30]. - The Chinese sports footwear market is experiencing faster growth than the overall footwear market, driven by increasing health awareness and consumer demand for sports products[30]. Investment and Financial Strategy - The group reported an investment loss of RMB 661 million during the period, compared to an investment income of RMB 1,243 million previously, with net assets in the investment division decreasing by 9.8% to RMB 9,488 million as of September 30, 2021[22]. - The group aims to optimize its investment asset structure and strengthen cooperation with project management parties to ensure prudent investment in new projects[22]. - The company is committed to innovation and seizing opportunities in the sports industry, aiming to provide stable returns to shareholders despite uncertainties[23]. - The company has adjusted its investment strategy to optimize asset structure and ensure long-term stable returns for shareholders[42]. - The company has a capital commitment of RMB 300 million related to various investment agreements as of September 30, 2021[86]. Operational Challenges - The company faced challenges due to a resurgence of COVID-19 and adverse weather conditions, which impacted revenue in August and September 2021[15]. - The overall sales cost has increased due to rising raw material prices, with cotton prices reaching an annual high in September, impacting the retail performance of the apparel industry[28]. - The company experienced a fair value adjustment loss on investments due to macro market fluctuations since March 2021[15]. - The company reported a significant increase in inventory impairment losses, totaling RMB 5,893,000 compared to a reversal of RMB 30,738,000 in the previous year[117]. Digital and Omnichannel Strategies - Kappa is focusing on digital and omnichannel marketing strategies, enhancing private domain channels and launching new marketing scenarios to drive sales conversion[21]. - The company continues to deepen its sales layout in emerging channels like Douyin and Dewu to enhance online brand marketing and increase total sales[21]. - The company is leveraging digital technology to enhance the circulation and sales processes of its products, integrating online and offline sales channels[30]. - The company continues to focus on digitalization and omnichannel strategies to enhance brand competitiveness and operational efficiency[42]. Corporate Governance and Compliance - The company has committed to maintaining high standards of corporate governance and compliance with the Hong Kong Stock Exchange's listing rules[114]. - The company reported financial data for the six months ending September 30, 2021, which is unaudited[144]. - The company’s accounting policies remain consistent with those used in the annual financial statements for the year ending March 31, 2021[147].

�� | --- | --- | |-----------------------------------------------------------------------|--------| | | | | | AA | | | AA | | Ax Kappa | Ab | | | Ak | | 2020/2021 | AA | | | Ak | | 年度 ヤ景信 | AA | | | AA | | | Ak Ak | | | Ak | | | Ab | | | Ak | | | Ab | | | AA | | | Ab | | | Ak | | | AA | | | AA | | DONG ANG | AA | | China Dongxiang (Group) Co., Ltd. 中 國 動 向 ( 集 團 ) 有 限 公 司 | Ak | | (於開曼群島註因成立的有限公司） 股份代號: 3818 | Ab Ak | Kappa 目錄 | --- | --- | --- | |-------|--------------------------|-------| | | | | | | | | ...

Company Information [Company Profile](index=4&type=section&id=Company%20Profile) This section provides basic information about China Dongxiang (Group) Co., Ltd., including its board members, auditors, legal advisors, registered office, and main business locations - The company's board of directors comprises executive directors, including Chen Yihong (Chairman) and Zhang Zhiyong (CEO), and independent non-executive directors such as Chen Guogang and Liu Xiaosong[5](index=5&type=chunk) - The company's auditor is PricewaterhouseCoopers, with legal advisors including Norton Rose Fulbright Hong Kong and Beijing Tianda & G.H. Law Firm[5](index=5&type=chunk) - The company's registered office is in the Cayman Islands, its principal place of business in Hong Kong is at Lippo Centre, Admiralty, and its main office in China is in Beijing Economic-Technological Development Area[5](index=5&type=chunk) Investor Information [Share and Dividend Information](index=6&type=section&id=Share%20and%20Dividend%20Information) This section details China Dongxiang's share listing, outstanding ordinary shares, interim dividend distribution, key dates, and investor relations contact information - The company's shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited on October 10, 2007, with stock code 03818[9](index=9&type=chunk) Share and Dividend Information | Indicator | Value | | :----------- | :----------------------------------- | | Number of Ordinary Shares Issued | 5,886,121,025 shares (as of September 30, 2020) | | Interim Dividend | RMB 5.69 cents per share | | Payment Date | On or about December 21, 2020 | | Results Announcement Date | November 25, 2020 | | Share Register Closure Period | December 10 to December 14, 2020 | - Investor Relations contact details include telephone (8610) 6783 6585 and email ir@dxsport.com.cn[9](index=9&type=chunk) Performance Highlights [Key Financial Indicators](index=7&type=section&id=Key%20Financial%20Indicators) For the six months ended September 30, 2020, the company's revenue remained flat, but net profit attributable to owners and basic earnings per share increased nearly fivefold, with a recommended interim dividend of 30% of net profit Performance Highlights for the Six Months Ended September 30 | Indicator | 2020 (RMB million) | 2019 (RMB million) | Change | | :------------------------------------ | :-------------------- | :-------------------- | :------------ | | Revenue | 899 | 899 | — | | Gross Profit | 540 | 588 | -8.2% | | Gross Profit (before inventory impairment provision/(reversal)) | 563 | 561 | 0.4% | | Gross Profit Margin | 60.1% | 65.4% | -5.3 percentage points | | Gross Profit Margin (before inventory impairment provision/(reversal)) | 62.6% | 62.4% | 0.2 percentage points | | Operating Profit | 1,240 | 247 | 402.0% | | Operating Profit excluding Investment Segment | 5 | 89 | –94.4% | | Net Profit Attributable to Owners of the Company | 1,116 | 188 | 493.6% | | Basic/Diluted Earnings Per Share (RMB cents) | 19.04 | 3.21 | 493.1% | | Interim Dividend Per Share (RMB cents) | 5.69 | 1.61 | 253.4% | - The Board recommended an interim dividend of **30% of the net profit attributable to equity holders** for the six months ended September 30, 2020[11](index=11&type=chunk) Chairman's Statement [Macroeconomic and Industry Overview](index=8&type=section&id=Macroeconomic%20and%20Industry%20Overview) During the reporting period, the global economy was severely impacted by COVID-19, while China's economy gradually recovered, driven by domestic demand and increased consumer focus on health and sports - The COVID-19 pandemic continued to severely impact the global economy, with severe outbreaks in Europe and America, and multiple Asian economies facing contraction[13](index=13&type=chunk) - China's epidemic was gradually brought under control, leading to economic recovery, with increased economic growth in the third quarter and domestic consumption becoming one of the most critical drivers of economic growth[13](index=13&type=chunk) - In the post-pandemic era, consumers focused on mental and physical health, sports, and fitness, with the gradual resumption of sports events indirectly boosting demand for sportswear[13](index=13&type=chunk) [Group Performance and Dividend Policy](index=8&type=section&id=Group%20Performance%20and%20Dividend%20Policy) The Group's revenue remained flat during the reporting period, but profit attributable to equity holders and basic EPS increased nearly fivefold, with a recommended interim dividend of 30% of net profit Group Key Financial Performance | Indicator | 2020 (RMB million) | Change | | :------------------- | :-------------------- | :-------- | | Revenue | 899 | Flat year-on-year | | Profit Attributable to Equity Holders | 1,116 | Up 493.6% year-on-year | | Basic Earnings Per Share (RMB cents) | 19.04 | Up 493.1% year-on-year | - The Board recommended an interim dividend of **30% of the net profit attributable to equity holders** for the six months ended September 30, 2020[14](index=14&type=chunk) [China Business Reform and Brand Promotion](index=8&type=section&id=China%20Business%20Reform%20and%20Brand%20Promotion) China's business deepened its "quasi-direct-to-consumer" model reform and digital transformation, with Kappa achieving progress in retail performance, inventory, and cash flow, enhancing brand exposure and youth appeal through collaborations and marketing - China's business comprehensively deepened the "quasi-direct-to-consumer" model reform, actively promoting omnichannel digitalization across channels, products, and supply chain management[15](index=15&type=chunk) - Kappa brand business achieved new phased progress in retail performance, terminal inventory levels, and cash flow, meeting management expectations[15](index=15&type=chunk) - The brand continued to collaborate with renowned designers and anime IPs to expand its customer base and increase exposure in the trendy market; it also hosted online music events, invited Lexie Liu and Justin Huang as brand ambassadors/spokespersons, and became an industry partner for "Honor of Girls Season 2," leading e-sports trends[16](index=16&type=chunk) - The Group continued to optimize its offline channel structure, with outlet channels and shopping malls showing stable growth; as of September 30, 2020, the total number of Kappa brand stores was **1,153**, a net increase of **24**, with plans to continue closing inefficient stores in the future[17](index=17&type=chunk) - E-commerce business continued to grow, launching a digital omnichannel operating platform to connect online and offline inventory and orders[18](index=18&type=chunk) [Japan Business Adjustment](index=9&type=section&id=Japan%20Business%20Adjustment) Due to the pandemic, the Group decided to focus on the China market, selling Kappa Japan trademarks and licensing the "Phenix" brand to a third party to consolidate resources - In July 2020, the Group sold Kappa Japan trademarks and miscellaneous intellectual property assets to a subsidiary of BasicNet S.p.A. for **USD 13 million**[19](index=19&type=chunk) - The decision was made to grant a license for the "Phenix" brand to a licensee to consolidate resources and marketing efforts, focusing on the China market[19](index=19&type=chunk) [Investment Business and Future Outlook](index=9&type=section&id=Investment%20Business%20and%20Future%20Outlook) The Group's investment business operated steadily with net assets of RMB 10 billion and RMB 1,261 million in net investment income, primarily from market valuation increases, with future plans for prudent investment and stable shareholder returns Investment Business Key Data | Indicator | Value (as of September 30, 2020) | | :----------- | :----------------------- | | Net Investment Assets | RMB 10 billion | | Net Investment Income | RMB 1,261 million | - The significant increase in investment income primarily resulted from increased book gains due to the rising valuation of major market investment products[20](index=20&type=chunk) - Looking ahead, the Group will continue to uphold the Kappa brand spirit, seize opportunities in the sports industry, prudently implement global strategies and investments, and deliver long-term stable returns to shareholders[20](index=20&type=chunk) Management Discussion and Analysis [Macroeconomic and Industry Review](index=11&type=section&id=Macroeconomic%20and%20Industry%20Review) During the reporting period, the global economy faced severe COVID-19 impacts, while China's economy gradually recovered with 4.9% GDP growth in Q3, driven by domestic consumption, and the sports and e-commerce sectors saw accelerated growth - In 2020, global GDP was projected to shrink by **4.5%**, with the US GDP shrinking by **5.9%**, the EU economy by **8.3%**, and developing Asian economies experiencing their first contraction[28](index=28&type=chunk) - China's economy continued to recover, with **GDP growing 4.9% year-on-year** in the third quarter, and cumulative growth for the first three quarters turning positive to **0.7%**, with domestic consumption driving GDP growth by **1.7 percentage points**[28](index=28&type=chunk) - China's total retail sales of consumer goods increased by **3.3% year-on-year** in September, with sports and entertainment goods growing by **8.0%**, and cumulative growth for nine months reaching **6.8% year-on-year**[28](index=28&type=chunk) - E-commerce further developed, with online retail sales of physical goods increasing by **11.3% year-on-year** in September, and online penetration rate rising by **4.8 percentage points to 24.3%** year-on-year[28](index=28&type=chunk) [Business Review](index=12&type=section&id=Business%20Review) The Group's China Kappa brand business advanced through reforms and digital transformation, enhancing competitiveness via diverse promotion and product innovation, while Japan operations adjusted strategically by selling Kappa trademarks and licensing Phenix to focus on China - The China Kappa brand business achieved new phased progress under channel, product, and supply chain management reforms, meeting management expectations[32](index=32&type=chunk) - In brand promotion, Kappa continued to collaborate with entertainment, music, and art sectors, hosted online music festivals, and invited Lexie Liu and Justin Huang as brand ambassadors/spokespersons to enhance brand image and youth appeal[32](index=32&type=chunk)[35](index=35&type=chunk) - Kappa actively sponsored the National Equestrian Team and the Chinese Fencing Team, became the title sponsor of e-sports team RNG DOTA2, and an industry partner for "Honor of Girls Season 2," leading e-sports trends[35](index=35&type=chunk) - In product design and R&D, Kappa launched series like BANDA, LABS, and Newtro-Ku, collaborated with IPs such as Crayon Shin-chan and Doraemon, significantly transforming footwear with a focus on personalized design and comfort, and expanding independent sales channels[35](index=35&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - The omnichannel retail network continued to optimize, with the total number of Kappa brand stores increasing by a net of **24 to 1,153**; e-commerce business continued to grow, launching a digital omnichannel operating platform[44](index=44&type=chunk) - Japan's business adjusted due to the pandemic and global uncertainties, selling Kappa Japan trademarks and intellectual property, and licensing the Phenix brand to a third party to focus on the China market[44](index=44&type=chunk)[46](index=46&type=chunk) [Investment Business](index=16&type=section&id=Investment%20Business) The Group's investment business remained prudent amid the pandemic, with RMB 10 billion in net investment assets and RMB 1,261 million in net investment income, primarily from rising market valuations, with future plans to strengthen partnerships - The Group maintained a prudent and pragmatic approach, controlling the scale and risk of investment assets[47](index=47&type=chunk) Investment Business Key Data | Indicator | Value (as of September 30, 2020) | | :----------- | :----------------------- | | Net Investment Assets | RMB 10 billion | | Net Investment Income | RMB 1,261 million | - The significant increase in investment income primarily resulted from increased book gains due to the rising valuation of major market investment products[47](index=47&type=chunk) - Looking ahead, the Group will strengthen cooperation with excellent investment partners, maintain a prudent attitude, patience, and focus to deliver stable returns to shareholders[47](index=47&type=chunk) [Outlook](index=16&type=section&id=Outlook) The Group is confident in China's economy and sportswear industry, expecting stable growth in the second half, and will continue to refine brand strategy, optimize operations, and prudently invest globally for long-term returns - Performance in the second half of the fiscal year is expected to achieve stable growth, as the Group remains confident in the prospects of China's economy and the sportswear industry[48](index=48&type=chunk) - In the future, the Group will continue to uphold the historical spirit of the Kappa brand, implement localized sales team strategies, accelerate omnichannel inventory turnover, and enhance the professional capabilities of the product team[48](index=48&type=chunk) - The Group will seize development opportunities in the sports industry, rationally utilize resources, expand brand promotion channels, and prudently implement global strategies and investments, combining capital with sports to deliver long-term stable returns to shareholders[48](index=48&type=chunk) [Financial Review](index=17&type=section&id=Financial%20Review) During the period, Group sales were flat, but profit attributable to owners surged nearly fivefold due to significantly higher net financial and other investment income, with strong performance in China's Kappa segment offsetting a decline in Japan, maintaining robust liquidity - For the six months ended September 30, 2020, the Group's sales amounted to **RMB 899 million**, remaining flat compared to the same period last year[51](index=51&type=chunk) - Profit attributable to equity holders of the Company significantly increased to **RMB 1,116 million** (2019: RMB 188 million)[51](index=51&type=chunk) Sales Analysis (by Region, Business Segment, and Product Category) | Segment/Product | 2020 (RMB million) | 2019 (RMB million) | Change | | :------------- | :-------------------- | :-------------------- | :------ | | China Segment Total | 815 | 749 | 8.8% | | - Kappa Apparel | 560 | 500 | 12.0% | | - Kappa Footwear | 169 | 143 | 18.2% | | - Kappa Accessories | 19 | 18 | 5.6% | | - Kids' Wear Business | 46 | 52 | -11.5% | | Japan Segment Total | 84 | 150 | -44.0% | | - Phenix Brand | 55 | 98 | -43.9% | | - Kappa Brand | 29 | 52 | -44.2% | | Group Total | 899 | 899 | 0.0% | Kappa Brand Sales by Channel (China Segment) | Channel | 2020 (RMB million) | 2019 (RMB million) | Change | | :------------- | :-------------------- | :-------------------- | :------ | | Non-Direct Operated | 309 | 236 | 30.9% | | Direct Operated | 439 | 425 | 3.3% | | Kappa Brand Total | 748 | 661 | 13.2% | - The Group's gross profit (before provision for impairment losses on inventories) was **RMB 563 million**, an increase of **RMB 2 million** year-on-year, with an overall gross profit margin of **62.6%**, up **0.2 percentage points**[58](index=58&type=chunk) Gross Profit Margin Analysis (by Region, Business Segment, and Product Category) | Segment/Product | 2020 Gross Margin | 2019 Gross Margin | Change (percentage points) | | :------------- | :----------- | :----------- | :------------ | | China Segment | 65.9% | 67.2% | -1.3 | | - Kappa Brand Total | 69.6% | 73.0% | -3.4 | | Japan Segment | 31.0% | 38.7% | -7.7 | | Group Overall | 62.6% | 62.4% | 0.2 | - Net gain from financial assets and other investments was **RMB 1,355 million**, a significant increase from **RMB 224 million** in the prior year, with the investment segment contributing **RMB 1,261 million**[61](index=61&type=chunk) Investment Segment Income (by Investment Direction) | Investment Direction | Investment Segment Income (RMB million) | Of which: Fair Value Change Gain on Financial Instruments (RMB million) | | :------------------- | :-------------------------- | :-------------------------------------------- | | Equities | 404 | 256 | | Private Equity Funds | 388 | 341 | | Equity Funds | 219 | 177 | | Single Equity Investments | 148 | 140 | | Debt, Bonds, Debt Funds | 95 | 32 | | Others | 7 | – | | Total | 1,261 | 946 | - Total distribution costs and administrative expenses were **RMB 658 million**, accounting for **73.2% of total sales**, an increase of **10.4 percentage points** from the prior year, primarily due to increased sales and the scaling back of Japan operations[66](index=66&type=chunk) - Operating profit was **RMB 1,240 million**, with an operating profit margin of **137.9%**; operating profit excluding the investment segment was **RMB 5 million**[67](index=67&type=chunk) - Profit attributable to equity holders of the Company was **RMB 1,116 million**, with a net profit margin of **124.1%**; basic and diluted earnings per share were both **RMB 19.04 cents**, an increase of **493.1%** year-on-year[70](index=70&type=chunk) - The Board resolved to distribute an interim dividend of **RMB 5.69 cents per ordinary share**, totaling approximately **RMB 334,920,000**[70](index=70&type=chunk) - As of September 30, 2020, the Group's cash and bank balances were **RMB 2,993 million**, an increase of **RMB 892 million** from March 31; net asset value was **RMB 11,371 million**, and the current ratio was **8.3 times**[76](index=76&type=chunk) Financial Asset Investments (at Fair Value) | Investment Item | September 30, 2020 (RMB million) | March 31, 2020 (RMB million) | | :----------------------- | :--------------------------- | :--------------------------- | | **Listed Securities** | | | | Alibaba | 568 | 1,166 | | Other Listed Securities | 996 | 1,020 | | **Total** | **1,564** | **2,186** | | **Other Unlisted Investments** | | | | Yunfeng USD Fund II | 477 | 424 | | Harvest Select Cornerstone | 353 | 364 | | Pingtao (Hong Kong) Limited | 309 | 174 | | Panfeng Value Private Securities Investment Fund C | 263 | 344 | | Yunfeng RMB Fund IV (Yunfeng Qitai) | 208 | 196 | | Yunfeng RMB Fund II (Yunfeng Xinchuang) | 196 | 196 | | Golden China Fund | 182 | 132 | | Harvest Select Fund II No. 3 | 174 | 178 | | Hangzhou Hanyun Xinling (Alibaba New Retail Fund) | 163 | 133 | | Yunfeng USD Fund III | 119 | 115 | | Yunfeng RMB Fund III (Yunfeng Xincheng) | 118 | 117 | | Jiachen RMB Fund I (Weixin Zhonghua) | 111 | 69 | | Hongtai Growth Fund (Angel Plus) | 108 | 108 | | Boyu RMB Fund II (Guokai Boyu) | 103 | 78 | | Others | 2,588 | 2,132 | | **Total** | **5,472** | **4,760** | - As of September 30, 2020, the Group's assets pledged were **RMB 130 million**, a decrease from **RMB 400 million** as of March 31[83](index=83&type=chunk) - The Group has various capital commitments, including investment commitments to private equity funds such as Shanghai Xianghe Yongyuan, Hangzhou Hanyun Xinling, Yunfeng Fund III, Xiamen Yuanfeng, Persistent Edge China Partners, Ltd., and CR Tech Investment Limited, with total outstanding commitments of approximately **RMB 500 million**[84](index=84&type=chunk)[85](index=85&type=chunk) - The Group faces foreign exchange risk, primarily due to fluctuations in USD, HKD, and JPY exchange rates against RMB, impacting net assets, revenue, and net profit[89](index=89&type=chunk) Significant Investment: Alibaba Group Holding Limited | Company Name & Stock Code | Number of Shares Held | Holding Percentage | Investment Cost (RMB million) | Fair Value (RMB million) | % of Total Assets | | :----------------------- | :------- | :------- | :---------------------- | :---------------------- | :----------- | | Alibaba Group Holding Limited (NYSE: BABA) | 198,919 | 0.007% | 87 | 398 | 3.2% | | Alibaba Group Holding Limited — SW (09988.HK) | 701,944 | 0.003% | 112 | 170 | 1.4% | | Total | | | 199 | 568 | 4.6% | - During the period, the company recognized an unrealized fair value change gain of **RMB 198 million** on Alibaba shares and a net disposal gain of **RMB 105 million**[93](index=93&type=chunk) Other Information [Restricted Share Award Scheme](index=28&type=section&id=Restricted%20Share%20Award%20Scheme) The company adopted a restricted share award scheme in 2010 to retain and incentivize employees, with a trustee holding shares until vesting conditions are met; no new shares were granted this period, with 23,050,071 shares awarded as of September 30, 2020 - The scheme was adopted on December 10, 2010, to retain and incentivize individuals who continuously contribute to the Group's operations and development[96](index=96&type=chunk) - The trustee is required to purchase a maximum of **30,000,000 existing shares** in the market and hold them in trust for the selected participants until the shares vest according to the scheme rules[96](index=96&type=chunk) - For the six months ended September 30, 2020, no restricted shares were granted to any eligible participants under the scheme[96](index=96&type=chunk) - As of September 30, 2020, the number of restricted shares awarded under the scheme was **23,050,071 shares**[96](index=96&type=chunk) [Share Option Scheme](index=29&type=section&id=Share%20Option%20Scheme) The company adopted a share option scheme in 2019 to reward and retain contributors, outlining eligibility, exercise price determination, and share limits; multiple options were granted to management and employees during the period, with some lapsing due to resignations - The share option scheme was adopted on August 8, 2019, to provide incentives to eligible participants to enhance company value and shareholder interests[99](index=99&type=chunk) - The exercise price of share options is determined by the Board and shall not be less than the highest of the closing price on the offer date, the average closing price for the preceding five business days, and the nominal value of the shares[99](index=99&type=chunk) - Under the scheme, the maximum number of shares that may be granted under options shall not exceed **10% of the total issued shares** on the adoption date, which is **588,612,102 shares**[99](index=99&type=chunk) Share Option Scheme Movement Details (for the six months ended September 30, 2020) | Grant Date | Unexercised as of April 1, 2020 | Granted during the six months ended September 30, 2020 | Unexercised as of September 30, 2020 | Lapsed during the period | Unexercised as of this interim report date | | :------------ | :------------------- | :---------------------------- | :-------------------- | :------- | :--------------------- | | 16/09/2019 | 18,300,000 | — | 18,300,000 | 480,000 | 17,820,000 | | 07/01/2020 | 1,560,000 | — | 1,560,000 | 480,000 | 1,080,000 | | 01/04/2020 | 2,400,000 | — | 2,400,000 | — | 2,400,000 | | 01/09/2020 | — | 1,200,000 | 1,200,000 | — | 1,200,000 | | **Total** | **22,260,000** | **1,200,000** | **23,460,000** | **960,000** | **22,500,000** | - During the period ended September 30, 2020, no share options were exercised or cancelled, while **960,000 share options** lapsed due to resignations[104](index=104&type=chunk) [Directors' and Major Shareholders' Interests in Securities](index=31&type=section&id=Directors%27%20and%20Major%20Shareholders%27%20Interests%20in%20Securities) This section discloses the interests and short positions of the company's directors, chief executives, and major shareholders in the company's shares as of September 30, 2020, with Chairman Mr. Chen Yihong and his controlled entities holding a majority stake Directors' Interests in Securities (as of September 30, 2020) | Director Name | Nature of Interest | Number and Class of Securities (Long Position) | Approximate Percentage | | :--------- | :------------- | :--------------------- | :--------- | | Mr. Chen Yihong | Controlled Corporation Interest | 2,273,024,000 shares | 38.62% | | | Controlled Corporation Interest | 315,698,025 shares | 5.36% | | Mr. Zhang Zhiyong | Beneficial Owner | 166,120,025 shares | 2.82% | | Ms. Chen Chen | Controlled Corporation Interest | 176,787,730 shares | 3.00% | | | Beneficial Owner | 21,500,000 shares | 0.37% | | Mr. Lv Guanghong | Beneficial Owner | 10,000,000 shares | 0.17% | Major Shareholders' Interests and Short Positions (as of September 30, 2020) | Shareholder Name | Nature of Interest | Number of Shares (Long Position) | Approximate Holding Percentage | | :----------------------- | :------------- | :--------------- | :------------- | | Poseidon Sports Limited | Beneficial Owner | 2,273,024,000 | 38.62% | | | Controlled Corporation Interest | 315,698,025 | 5.36% | | Harvest Luck Development Limited | Controlled Corporation Interest | 2,273,024,000 | 38.62% | | | Controlled Corporation Interest | 315,698,025 | 5.36% | - Mr. Chen Yihong wholly owns and controls Harvest Luck Development Limited, which holds all issued share capital of Poseidon Sports Limited, thus Mr. Chen Yihong is deemed to have an interest in the shares held by Poseidon[114](index=114&type=chunk) [Corporate Governance and Compliance](index=32&type=section&id=Corporate%20Governance%20and%20Compliance) The company is committed to high-quality corporate governance, complying with HKEX codes, with most directors attending the AGM despite some absences, and the audit committee reviewed interim financials and internal controls, with no listed securities transactions during the period - The company has complied with the code provisions set out in the Corporate Governance Code of the Hong Kong Stock Exchange, although Chairman Mr. Chen Yihong and independent non-executive director Mr. Liu Xiaosong were unable to attend the Annual General Meeting due to important engagements[126](index=126&type=chunk) - All directors of the company confirmed compliance with the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules throughout the review period[127](index=127&type=chunk) - The Audit Committee has reviewed the company's interim financial information, financial reporting system, and internal controls, and the interim condensed consolidated financial information has been reviewed by PricewaterhouseCoopers[128](index=128&type=chunk) - For the six months ended September 30, 2020, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[129](index=129&type=chunk) Interim Condensed Consolidated Financial Information [Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=34&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended September 30, 2020, Group revenue was flat, but operating profit and net profit attributable to owners significantly increased due to fair value gains on financial assets, offset by other comprehensive losses from foreign currency translation differences Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Summary | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | Change | | :------------------------------------ | :------------------ | :------------------ | :-------- | | Revenue | 898,957 | 899,318 | -0.04% | | Gross Profit | 539,888 | 587,853 | -8.2% | | Other Net Income | 1,355,193 | 223,802 | 505.5% | | Operating Profit | 1,240,301 | 246,926 | 402.3% | | Net Finance (Expenses)/Income | (21,975) | 4,197 | Negative to Positive | | Profit Before Income Tax | 1,204,666 | 253,424 | 375.4% | | Income Tax Expense | (91,073) | (66,990) | 35.9% | | Profit for the Period | 1,113,593 | 186,434 | 497.3% | | Profit Attributable to Owners of the Company | 1,116,183 | 188,107 | 493.4% | | Other Comprehensive (Loss)/Income (net of tax) | (199,873) | 207,062 | Negative to Positive | | Total Comprehensive Income for the Period | 913,720 | 393,496 | 132.2% | | Basic/Diluted Earnings Per Share (RMB cents) | 19.04 | 3.21 | 493.1% | - The significant increase in other net income was primarily due to fair value changes in financial instruments at fair value through profit or loss[133](index=133&type=chunk) - Foreign currency translation differences for foreign operations resulted in an other comprehensive loss of **RMB 199,873 thousand** for the current period, compared to a gain in the prior period[136](index=136&type=chunk) [Interim Condensed Consolidated Statement of Financial Position](index=36&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of September 30, 2020, Group total assets grew to RMB 12,548 million, driven by increases in financial assets at fair value through profit or loss (non-current) and cash and cash equivalents, with total equity also rising and current liabilities remaining stable Interim Condensed Consolidated Statement of Financial Position Summary | Indicator | September 30, 2020 (RMB thousand) | March 31, 2020 (RMB thousand) | Change | | :------------------------------------ | :------------------------- | :------------------------- | :-------- | | **Assets** | | | | | Total Non-Current Assets | 5,763,520 | 4,954,441 | 16.3% | | - Financial assets at fair value through profit or loss | 4,576,815 | 3,688,063 | 24.1% | | Total Current Assets | 6,784,534 | 6,735,055 | 0.7% | | - Cash and cash equivalents | 2,993,280 | 2,063,150 | 45.1% | | Total Assets | 12,548,054 | 11,689,496 | 7.3% | | **Equity** | | | | | Capital and Reserves Attributable to Owners of the Company | 11,370,695 | 10,611,650 | 7.2% | | Total Equity | 11,370,584 | 10,615,854 | 7.1% | | **Liabilities** | | | | | Total Non-Current Liabilities | 355,050 | 281,695 | 26.0% | | Total Current Liabilities | 822,420 | 791,947 | 3.8% | | Total Liabilities | 1,177,470 | 1,073,642 | 9.7% | - Among non-current assets, financial assets at fair value through profit or loss showed significant growth, reflecting an increase in the value of the investment portfolio[139](index=139&type=chunk) - Cash and cash equivalents substantially increased, indicating ample liquidity for the Group[139](index=139&type=chunk) [Interim Condensed Consolidated Statement of Changes in Equity](index=38&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) For the six months ended September 30, 2020, equity attributable to owners increased from RMB 10,611,650 thousand to RMB 11,370,695 thousand, primarily due to significant profit for the period, despite negative impacts from other comprehensive losses and dividends paid Interim Condensed Consolidated Statement of Changes in Equity Summary | Indicator | September 30, 2020 (RMB thousand) | March 31, 2020 (RMB thousand) | | :------------------------------------ | :------------------------- | :------------------------- | | Balance at Beginning of Period | 10,611,650 | 10,611,650 | | Profit for the Period | 1,116,183 | 1,116,183 | | Other Comprehensive Loss | (199,873) | (199,873) | | Total Comprehensive Income | 916,310 | 916,310 | | Related to 2019/20 Final Dividend | (158,702) | (158,702) | | Share Option Scheme | 1,437 | 1,437 | | Disposal of a Non-Wholly Owned Subsidiary | (1,725) | (1,725) | | Balance at End of Period | 11,370,695 | 11,370,695 | - Profit for the period of **RMB 1,116,183 thousand** was the primary driver of equity growth[147](index=147&type=chunk) - Other comprehensive loss of **RMB 199,873 thousand** and final dividends paid of **RMB 158,702 thousand** had a negative impact on equity[147](index=147&type=chunk) [Interim Condensed Consolidated Statement of Cash Flows](index=40&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For the six months ended September 30, 2020, Group cash and cash equivalents increased by RMB 1,011,378 thousand, primarily driven by strong cash inflows from investing activities, despite net cash outflow from operating activities and increased financing cash outflows Interim Condensed Consolidated Statement of Cash Flows Summary | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :------------------------------------ | :------------------ | :------------------ | | Net Cash Used in Operating Activities | (60,989) | (103,447) | | Net Cash From Investing Activities | 1,320,204 | 127,267 | | Net Cash Used in Financing Activities | (247,837) | (239,207) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 1,011,378 | (215,387) | | Cash and Cash Equivalents at Beginning of Period | 2,063,150 | 766,722 | | Cash and Cash Equivalents at End of Period | 2,993,280 | 556,436 | - Net cash from investing activities significantly increased to **RMB 1,320,204 thousand**, primarily from proceeds from disposal of financial assets at fair value through profit or loss[149](index=149&type=chunk) - Cash outflow from operating activities decreased but remained a net outflow; cash outflow from financing activities slightly increased, mainly due to dividends paid and repayment of bank borrowings[149](index=149&type=chunk) Notes to the Interim Condensed Consolidated Financial Information [General Information and Basis of Preparation](index=41&type=section&id=General%20Information%20and%20Basis%20of%20Preparation) This section outlines China Dongxiang Group's core business in sportswear brand development, design, and sales, alongside investment activities, with interim condensed consolidated financial information prepared under IAS 34, considering COVID-19 impacts on valuations - The Group is principally engaged in brand development, design, and sales of sports-related apparel, footwear, and accessories, as well as investment activities in Mainland China and overseas[152](index=152&type=chunk) - This interim condensed consolidated financial information has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, taking into account the latest developments of the COVID-19 pandemic and its impact on the Group's business operations[156](index=156&type=chunk) - This interim condensed consolidated financial information should be read in conjunction with the Group's annual financial statements for the year ended March 31, 2020[156](index=156&type=chunk) [Changes in Accounting Policies and Estimates](index=42&type=section&id=Changes%20in%20Accounting%20Policies%20and%20Estimates) During the period, the Group adopted new and revised IFRS, early adopting IFRS 16 amendments for COVID-19 related rent concessions, resulting in RMB 1,918,000 in negative variable lease payments, with financial statement preparation involving management judgment and estimates - The Group adopted several new and revised standards, including IAS 1 and IAS 8 (Amendments) "Definition of Material" and IFRS 3 (Amendments) "Definition of a Business"[162](index=162&type=chunk) - The Group elected to early adopt IFRS 16 (Amendment) "COVID-19-Related Rent Concessions" and applied the practical expedient to eligible lease arrangements[163](index=163&type=chunk) - For the six months ended September 30, 2020, an amount of **RMB 1,918,000** was recognized in profit or loss as negative variable lease payments[163](index=163&type=chunk) - The preparation of interim condensed consolidated financial information requires management to make judgments, estimates, and assumptions regarding the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses[166](index=166&type=chunk) [Financial Risk Management and Financial Instruments](index=43&type=section&id=Financial%20Risk%20Management%20and%20Financial%20Instruments) The Group faces market (currency and price), credit, and liquidity risks, using an expected credit loss model for credit risk, with fair value measurements employing a three-level hierarchy where Level 3 instruments significantly impact Group earnings - The Group's activities expose it to market risk (including foreign currency risk and price risk), credit risk, and liquidity risk, with no changes in risk management policies since March 31, 2020[167](index=167&type=chunk)[168](index=168&type=chunk) - Credit risk primarily arises from loans receivable and trade receivables, and the Group adopts an "expected credit loss" model for impairment assessment[169](index=169&type=chunk) Fair Value Hierarchy for Financial Assets and Liabilities (as of September 30, 2020) | Category | Level 1 (RMB thousand) | Level 2 (RMB thousand) | Level 3 (RMB thousand) | Total (RMB thousand) | | :----------------------- | :----------------- | :----------------- | :----------------- | :---------------- | | **Financial Assets** | | | | | | Financial assets at fair value through profit or loss | | | | | | - Private Equity Fund Investments | — | — | 4,948,123 | 4,948,123 | | - Other Unlisted Investments | — | 42,536 | 379,947 | 422,483 | | - Listed Equity Securities — Equities | 1,121,404 | — | — | 1,121,404 | | - Listed Perpetual Bonds | 418,890 | — | — | 418,890 | | - Listed Debt Securities | 23,253 | — | — | 23,253 | | - Unlisted Fixed Rate Notes | — | — | 101,617 | 101,617 | | **Total Financial Assets** | **1,563,547** | **42,536** | **5,429,687** | **7,035,770** | | **Financial Liabilities** | | | | | | Derivative Instruments | — | — | (91,984) | (91,984) | Level 3 Instruments Movement (for the six months ended September 30, 2020) | Indicator | Financial Assets at Fair Value Through Profit or Loss (RMB thousand) | Derivative Instruments (RMB thousand) | Total (RMB thousand) | | :------------------------------------ | :-------------------------------------------- | :-------------------- | :---------------- | | Balance at April 1, 2020 | 4,514,638 | (29,616) | 4,485,022 | | Acquisitions | 1,266,046 | — | 1,266,046 | | Disposals | (936,306) | — | (936,306) | | Other Net Income | 648,004 | (64,800) | 583,204 | | Currency Translation Differences | (62,695) | 2,432 | (60,263) | | Balance at September 30, 2020 | 5,429,687 | (91,984) | 5,337,703 | - Level 3 fair value measurements primarily include private equity fund investments, other unlisted investments, unlisted fixed-rate notes, and wealth management products, whose valuation methods and unobservable input data significantly impact fair value[182](index=182&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) [Segment Information](index=51&type=section&id=Segment%20Information) The Group operates three main segments: China Apparel, Japan Apparel, and Investment; China Apparel showed good revenue and operating profit, Japan Apparel's revenue declined and operating loss widened, while the Investment segment contributed most operating profit - The Group primarily operates three reportable segments: China Apparel (including Kappa brand and other sports-related products), Japan Apparel (including Kappa, Phenix, and other brands), and Investment (financial assets and wealth management products)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) Segment Results (for the six months ended September 30, 2020) | Indicator | China — Apparel (RMB thousand) | Japan — Apparel (RMB thousand) | Investment (RMB thousand) | Total (RMB thousand) | | :------------------- | :----------------------- | :----------------------- | :---------------- | :---------------- | | Revenue from External Customers | 814,788 | 84,169 | — | 898,957 | | Segment Gross Profit | 567,482 | (27,594) | — | 539,888 | | Other Net Income | 16,229 | 78,127 | 1,260,837 | 1,355,193 | | Segment Operating Profit/(Loss) | 64,694 | (59,781) | 1,235,388 | 1,240,301 | | Profit/(Loss) for the Period | 18,831 | (56,798) | 1,151,560 | 1,113,593 | Segment Assets and Liabilities (as of September 30, 2020) | Indicator | China — Apparel (RMB thousand) | Japan — Apparel (RMB thousand) | Investment (RMB thousand) | Total (RMB thousand) | | :------------------- | :----------------------- | :----------------------- | :---------------- | :---------------- | | Segment Assets | 1,911,360 | 172,380 | 10,464,314 | 12,548,054 | | Segment Liabilities | 633,910 | 78,949 | 464,611 | 1,177,470 | - The investment segment contributed the vast majority of operating profit and profit for the period, demonstrating its critical role in the Group's overall performance[209](index=209&type=chunk) [Analysis of Other Net Income and Expenses](index=56&type=section&id=Analysis%20of%20Other%20Net%20Income%20and%20Expenses) The Group's other net income significantly increased, primarily from fair value changes in financial instruments, while key expense items like advertising, employee compensation, and right-of-use asset depreciation also saw changes Other Net Income (for the six months ended September 30, 2020) | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | Change | | :------------------------------------ | :------------------ | :------------------ | :-------- | | Fair value changes of financial instruments at fair value through profit or loss | 946,215 | 54,146 | 1647.2% | | Investment income from financial assets at fair value through profit or loss | 143,960 | 54,089 | 166.2% | | Gain on disposal of financial assets at fair value through profit or loss | 139,072 | 26,615 | 422.5% | | Gain on disposal of Kappa trademark | 75,378 | — | New | | Interest income from loans receivable | 31,179 | 31,085 | 0.3% | | Government grants income | 15,445 | 49,636 | -68.9% | | Brand usage rights income | 2,189 | 652 | 235.7% | | Others | 1,755 | 7,579 | -76.8% | | **Total** | **1,355,193** | **223,802** | **505.5%** | Expenses Presented by Nature (for the six months ended September 30, 2020) | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | Change | | :------------------------------------ | :------------------ | :------------------ | :-------- | | Cost of inventories recognized as cost of sales | 335,303 | 337,260 | -0.6% | | Advertising and marketing expenses | 391,080 | 337,989 | 15.7% | | Employee compensation and benefits expenses | 84,697 | 91,759 | -7.7% | | Impairment of property, plant and equipment and right-of-use assets | 34,106 | — | New | | Depreciation of right-of-use assets | 28,813 | 23,532 | 22.4% | | Logistics and transportation costs | 27,851 | 27,478 | 1.4% | | Inventory impairment provision/(reversal) | 23,254 | (26,468) | Negative to Positive | | Product design and development expenses | 19,568 | 20,783 | -5.9% | | Short-term lease rentals and variable lease payments not included in lease liabilities and rent-related expenses | 17,297 | 22,429 | -22.8% | | Depreciation of property, plant and equipment and amortization of intangible assets | 10,185 | 10,563 | -3.6% | | Travel and entertainment expenses | 3,338 | 8,846 | -62.3% | | Auditor's remuneration | 1,800 | 1,800 | 0.0% | | Professional fees | 2,810 | 1,697 | 65.6% | | Others | 36,569 | 18,365 | 99.1% | | **Total** | **1,016,671** | **876,033** | **16.0%** | [Net Finance (Expenses)/Income and Income Tax Expense](index=58&type=section&id=Net%20Finance%20(Expenses)%2FIncome%20and%20Income%20Tax%20Expense) The Group's net finance shifted from income to expense due to exchange losses, and while income tax expense increased, the effective tax rate significantly decreased due to profit structure changes, with China corporate and withholding taxes being primary, and Japan paying minimum resident tax due to losses Net Finance (Expenses)/Income (for the six months ended September 30, 2020) | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--------------- | :------------------ | :------------------ | | Finance Income: | | | | - Net exchange gains | — | 5,438 | | - Interest income | 2,581 | 4,781 | | **Subtotal** | **2,581** | **10,219** | | Finance Expenses: | | | | - Net exchange losses | (17,038) | — | | - Interest expense | (4,729) | (3,768) | | - Interest on lease liabilities | (2,532) | (2,017) | | - Others | (257) | (237) | | **Subtotal** | **(24,556)** | **(6,022)** | | **Net Finance (Expenses)/Income** | **(21,975)** | **4,197** | Income Tax Expense (for the six months ended September 30, 2020) | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--------------- | :------------------ | :------------------ | | Current Income Tax | | | | - China Corporate Income Tax | 6,945 | 9,282 | | - Japan Tax | (1,300) | 649 | | Deferred Income Tax | 85,428 | 57,059 | | **Total** | **91,073** | **66,990** | - The Group's income tax expense was **RMB 91,073 thousand**, with an effective tax rate of **7.6%**, a significant decrease from **26.5%** in the prior year[231](index=231&type=chunk) - The China corporate income tax rate is **25%**, with a **15% rate** for subsidiaries in the Tibet Autonomous Region; the Group has provided deferred tax liabilities of **RMB 173,265 thousand** for future distributed profits of its Chinese subsidiaries[235](index=235&type=chunk)[236](index=236&type=chunk) - Japanese subsidiaries, having not recorded taxable profits, were only required to pay the minimum resident tax amount[237](index=237&type=chunk) [Earnings Per Share and Dividends](index=60&type=section&id=Earnings%20Per%20Share%20and%20Dividends) For the six months ended September 30, 2020, both basic and diluted earnings per share significantly increased to RMB 19.04 cents, with the Board recommending an interim dividend of RMB 5.69 cents per share, totaling approximately RMB 334,920 thousand Basic Earnings Per Share (for the six months ended September 30, 2020) | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :------------------------------------ | :------------------ | :------------------ | | Profit Attributable to Owners of the Company | 1,116,183 | 188,107 | | Weighted Average Number of Ordinary Shares in Issue (thousand shares) | 5,863,071 | 5,863,071 | | **Basic Earnings Per Share (RMB cents)** | **19.04** | **3.21** | Diluted Earnings Per Share (for the six months ended September 30, 2020) | Indicator | 2020 (RMB thousand) | 2019 (RMB thousand) | | :------------------------------------ | :------------------ | :------------------ | | Profit Attributable to Owners of the Company | 1,116,183 | 188,107 | | Weighted Average Number of Ordinary Shares in Issue for Basic EPS (thousand shares) | 5,863,071 | 5,863,071 | | Adjustment for Granted and Assumed Exercised Share Options (thousand options) | 38 | 176 | | **Diluted Earnings Per Share (RMB cents)** | **19.04** | **3.21** | Dividends (for the six months ended September 30, 2020) | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :------------------------------------ | :------------------ | :------------------ | | Final dividend paid of RMB 0.91 cents per share | 52,719 | 115,368 | | Final special dividend paid of RMB 1.84 cents per share | 106,597 | 28,842 | | Proposed interim dividend of RMB 5.69 cents per share | 334,920 | 56,507 | | Proposed interim special dividend of RMB 0 cents per share | — | 38,260 | | **Total** | **494,236** | **238,977** | - The total dividends paid for the six months ended September 30, 2020, amounted to **RMB 159,316 thousand** or **RMB 2.75 cents per share**[250](index=250&type=chunk) [Details of Asset Changes](index=63&type=section&id=Details%20of%20Asset%20Changes) This section details changes in property, plant and equipment, intangible assets, and right-of-use assets; PPE net book value decreased, intangible assets reduced due to Kappa Japan trademark sale, right-of-use assets varied with additions and impairments, and lease-related cash outflows increased Property, Plant and Equipment Net Book Value Movement (for the six months ended September 30, 2020) | Item | April 1, 2020 (RMB thousand) | Additions (RMB thousand) | Disposals (RMB thousand) | Depreciation (RMB thousand) | Impairment (RMB thousand) | Exchange Differences (RMB thousand) | September 30, 2020 (RMB thousand) | | :--------------- | :------------------------ | :---------------- | :---------------- | :---------------- | :---------------- | :-------------------- | :------------------------- | | Land | 25,237 | — | — | — | — | (843) | 24,394 | | Buildings | 54,278 | — | — | (2,307) | (208) | (1,041) | 50,722 | | Office Furniture and Equipment | 10,161 | 1,367 | (299) | (1,581) | (5,030) | (101) | 4,517 | | Motor Vehicles | 319 | 8 | (7) | (71) | — | — | 249 | | Leasehold Improvements | 6,989 | — | (155) | (1,372) | (4,677) | (119) | 666 | | **Total** | **96,984** | **1,375** | **(461)** | **(5,331)** | **(9,915)** | **(2,104)** | **80,548** | Intangible Assets Net Book Value Movement (for the six months ended September 30, 2020) | Item | April 1, 2020 (RMB thousand) | Additions (RMB thousand) | Disposals (RMB thousand) | Amortization (RMB thousand) | Exchange Differences (RMB thousand) | September 30, 2020 (RMB thousand) | | :--------------- | :------------------------ | :---------------- | :---------------- | :---------------- | :-------------------- | :------------------------- | | Kappa Trademarks | 194,895 | — | (13,524) | (3,756) | (238) | 177,377 | | Phenix and Other Brands | 6,473 | — | — | (109) | — | 6,364 | | Computer Software | 4,212 | 224 | — | (989) | (6) | 3,441 | | **Total** | **205,580** | **224** | **(13,524)** | **(4,854)** | **(244)** | **187,182** | - The Group derecognized intangible assets with a net book value of **RMB 13,524 thousand** due to the disposal of Kappa Japan trademarks and miscellaneous intellectual property assets, recognizing a gain of **RMB 75,378 thousand**[264](index=264&type=chunk) Right-of-Use Assets Movement (for the six months ended September 30, 2020) | Item | April 1, 2020 (RMB thousand) | Additions (RMB thousand) | Disposals (RMB thousand) | Depreciation Expense (RMB thousand) | Impairment (RMB thousand) | Exchange Differences (RMB thousand) | September 30, 2020 (RMB thousand) | | :--------------- | :------------------------ | :---------------- | :---------------- | :-------------------- | :---------------- | :-------------------- | :------------------------- | | Right-of-Use Assets | 100,161 | 49,172 | (2,417) | (28,813) | (24,191) | (581) | 93,331 | - Total cash outflow for leases for the six months ended September 30, 2020, was approximately **RMB 48,654 thousand**, an increase from **RMB 37,266 thousand** in the prior period[278](index=278&type=chunk) [Investments Accounted for Using the Equity Method and Trade Receivables and Payables](index=69&type=section&id=Investments%20Accounted%20for%20Using%20the%20Equity%20Method%20and%20Trade%20Receivables%20and%20Payables) Investments accounted for using the equity method decreased in carrying value, mainly due to shared losses; net trade receivables increased, primarily from third parties, with reduced impairment provisions, while total trade payables rose, reflecting supply chain activity changes Investments Accounted for Using the Equity Method Movement (for the six months ended September 30, 2020) | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--------------- | :------------------ | :------------------ | | Beginning of Period | 117,173 | 151,680 | | Additions | 1,000 | — | | Disposals | — | (8) | | Share of (Loss)/Profit | (13,660) | 2,301 | | Offset of Unrealized Profit | 721 | 2,033 | | Reclassified as Assets Held for Sale | — | (7,971) | | Exchange Differences | (1,121) | 1,434 | | **End of Period** | **104,113** | **149,469** | Net Trade Receivables (as of September 30, 2020) | Item | September 30, 2020 (RMB thousand) | March 31, 2020 (RMB thousand) | | :--------------- | :------------------------- | :------------------------- | | Trade Receivables | | | | - Third Parties | 182,626 | 146,623 | | - Related Parties | 22,627 | 33,903 | | **Subtotal** | **205,253** | **180,526** | | Less: Impairment Provision | (20,273) | (39,463) | | **Net Trade Receivables** | **184,980** | **141,063** | - The average turnover days for trade receivables decreased, primarily due to increased sales revenue in the current period[76](index=76&type=chunk) Trade Payables Aging Analysis (as of September 30, 2020) | Aging | September 30, 2020 (RMB thousand) | March 31, 2020 (RMB thousand) | | :------------- | :------------------------- | :------------------------- | | Within 30 days | 88,270 | 76,338 | | 31 to 180 days | 110,240 | 61,738 | | Over 180 days | 10,792 | 10,398 | | **Total** | **209,302** | **148,474** | [Other Financial Assets and Accrued Expenses](index=71&type=section&id=Other%20Financial%20Assets%20and%20Accrued%20Expenses) Other financial assets at amortized cost include loans to third parties and key management, with RMB 698 million in third-party loans secured by collateral; accrued expenses and other payables remained stable, comprising salaries, taxes, supplier deposits, and related party amounts Other Financial Assets at Amortized Cost (as of September 30, 2020) | Item | September 30, 2020 (RMB thousand) | March 31, 2020 (RMB thousand) | | :--------------- | :------------------------- | :------------------------- | | **Current Portion:** | | | | Loans Receivable | 479,368 | 573,126 | | Loans to Related Parties | 14,606 | 14,606 | | Others | 87,324 | 97,988 | | Less: Impairment Provision | (36,546) | (20,922) | | **Total** | **544,752** | **664,798** | | **Non-Current Portion:** | | | | Loans Receivable | 219,526 | 126,591 | | Loans to Key Management Personnel | 298,737 | 315,467 | | Less: Impairment Provision | — | — | | **Total** | **518,263** | **442,058** | - As of September 30, 2020, the total amount of loans receivable from third parties was approximately **RMB 698,894 thousand**, with annual interest rates ranging from **8% to 11%**, secured by collateral such as equity, private equity fund investments, and properties[291](index=291&type=chunk) Accrued Expenses and Other Payables (as of September 30, 2020) | Item | September 30, 2020 (RMB thousand) | March 31, 2020 (RMB thousand) | | :--------------- | :------------------------- | :------------------------- | | **Current Portion:** | | | | Salaries and Welfare Payable | 17,643 | 19,615 | | Other Taxes and Levies Payable | 17,837 | 9,215 | | Refund Liabilities | 13,383 | 24,371 | | Supplier Deposits | 76,600 | 73,087 | | Amounts Payable to Related Parties | 28,119 | 37,620 | | Marketing Expenses Payable | 37,631 | 38,286 | | Logistics Expenses Payable | 14,539 | 12,205 | | Professional Fees Payable | 3,702 | 5,842 | | Others | 44,364 | 37,185 | | **Subtotal** | **253,818** | **257,426** | | **Non-Current Portion:** | | | | Other Payables | — | 1,245 | | **Total** | **253,818** | **258,671** | [Share Capital, Share Schemes and Borrowings](index=74&type=section&id=Share%20Capital,%20Share%20Schemes%20and%20Borrowings) Group share capital and share premium remained stable, with no change in shares held by the employee share scheme; the 2019 share option scheme granted multiple options to management and employees, recognizing corresponding employee service value, while total borrowings decreased due to reduced secured bank loans Share Capital and Share Premium Account (as of September 30, 2020) | Item | Number of Ordinary Shares | Nominal Value of Issued Ordinary Shares (HKD thousand) | Equivalent Nominal Value of Ordinary Shares (RMB thousand) | Share Premium Account (RMB thousand) | Total (RMB thousand) | | :--------------- | :---------------- | :------------------------ | :-------------------------- | :---------------------- | :---------------- | | As of September 30, 2020 | 5,886,121,025 | 58,862 | 56,466 | 1,033,539 | 1,090,005 | Shares Held by Employee Share Scheme (as of September 30, 2020) | Item | Number of Shares | Value (RMB thousand) | | :--------------- | :---------------- | :---------------- | | Shares held by Employee Share Scheme | 23,050,071 | 196 | - The 2019 Share Option Scheme granted multiple tranches of share options to management and employees, with **RMB 1,437 thousand** recognized as employee service value for the six months ended September 30, 2020[300](index=300&type=chunk)[307](index=307&type=chunk) Borrowings (as of September 30, 2020) | Item | September 30, 2020 (RMB thousand) | March 31, 2020 (RMB thousand) | | :--------------- | :------------------------- | :------------------------- | | Bank Loans | | | | - Secured | 130,026 | 196,647 | | Loans from a Company | | | | - Unsecured and Interest-Free | 47,734 | 49,661 | | **Total** | **177,760** | **246,308** | - Secured bank loans are collateralized by equivalent assets held by banks, including USD, JPY, and HKD loans[309](index=309&type=chunk) [Commitments and Related Party Transactions](index=78&type=section&id=Commitments%20and%20Related%20Party%20Transactions) The Group has multiple capital commitments, primarily investment pledges in private equity funds totaling approximately RMB 500 million; related party transactions include sales to joint ventures, interest income, commissions, and loans to management, all conducted on a mutually agreed basis - As of September 30, 2020, the Group had future minimum lease payments under non-cancellable short-term leases of **RMB 14,064 thousand**[313](index=313&type=chunk) - The Group has various capital commitments, including investment commitments to private equity funds such as Shanghai Xianghe Yongyuan, Hangzhou Hanyun Xinling, Yunfeng Fund III, Persistent Edge China Partners, Ltd., and CR Tech Investment Limited, with total outstanding commitments of approximately **RMB 500 million**[315](index=315&type=chunk)[316](index=316&type=chunk) Transactions with Related Parties (for the six months ended September 30, 2020) | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--------------- | :------------------ | :------------------ | | Sales of goods to the Group's joint ventures | 4,977 | 5,400 | | Interest income from loans to the Group's joint ventures | 163 | 142 | | Interest income from loans to management personnel | 2,489 | 3,299 | | Commissions to the Group's joint ventures | 48,683 | 39,519 | | Loans granted to the Group's joint ventures | 15,000 | — | | Repayment of loans by the Group's joint ventures | 15,000 | — | Balances with Related Parties (as of September 30, 2020) | Item | September 30, 2020 (RMB thousand) | March 31, 2020 (RMB thousand) | | :--------------- | :------------------------- | :------------------------- | | Trade receivables — The Group's joint ventures | 22,627 | 33,903 | | Other financial assets — Non-current portion — Management personnel | 298,737 | 315,467 | | Accrued expenses and other payables — The Group's joint ventures | 28,119 | 37,620 | Key Management Compensation (for the six months ended September 30, 2020) | Item | 2020 (RMB thousand) | 2019 (RMB thousand) | | :--------------- | :------------------ | :------------------ | | Salaries, bonuses and other benefits | 5,433 | 4,878 | | Pension schemes — Defined contribution plans | 8 | 81 | | **Total** | **5,441** | **4,959** | [Events After the Reporting Period](index=82&type=section&id=Events%20After%20the%20Reporting%20Period) After the reporting period, on October 7, 2020, the Group entered an agreement with Shifune Co., Ltd., granting exclusive rights to use the "Phenix" trademark in Japan, South Korea, and parts of Europe for three years and three months, further focusing on the China market - On October 7, 2020, the Group entered into an agreement with Shifune Co., Ltd., granting exclusive rights to use the "Phenix" trademark in Japan, South Korea, and parts of Europe for a period of three years and three months[330](index=330&type=chunk) - This move aims to consolidate resources and marketing efforts, striving to become one of China's top sportswear companies and further focusing on the China market[330](index=330&type=chunk)

Financial Performance - Sales revenue for the fiscal year ending March 31, 2020, was RMB 1,841 million, an increase from RMB 1,635 million in the previous year[22] - Operating profit decreased to RMB 484 million from RMB 584 million year-on-year[22] - Profit attributable to equity holders was RMB 366 million, down from RMB 429 million in the previous year[22] - Gross profit margin improved to 61.8% from 55.9% year-on-year[22] - Net profit margin decreased to 19.9% from 26.3% year-on-year[22] - Basic earnings per share decreased to RMB 6.25 from RMB 7.34 year-on-year[22] - The group recorded revenue of RMB 1,841 million, an increase of 12.6% year-on-year, while profit attributable to equity holders decreased by 14.7% to RMB 366 million[35] - Basic earnings per share decreased by 14.9% to RMB 6.25, with a total dividend payout ratio of 45% for the year[35] Assets and Liabilities - Total assets as of March 31, 2020, were RMB 11,689 million, slightly up from RMB 11,650 million the previous year[23] - Current assets increased to RMB 6,735 million from RMB 4,475 million year-on-year[23] - The debt-to-equity ratio improved to 0.10 from 0.14 year-on-year[24] - The group's net asset value attributable to equity holders was RMB 10,612 million as of March 31, 2020, compared to RMB 10,251 million as of March 31, 2019[1] - The group's cash and bank balances amounted to RMB 2,101 million, an increase from RMB 1,157 million as of March 31, 2019[1] Market and Economic Conditions - The global economic slowdown led to a 6.1% GDP growth in China for 2019, but the first quarter of 2020 saw a significant decline of 6.8% due to the pandemic[49][50] - The retail sales of consumer goods in China for 2019 reached RMB 4,116.49 billion, with a nominal growth of 8.0% year-on-year[51] - In response to the pandemic, the Chinese government implemented various policies to boost domestic demand and consumer spending, aiming to recover the economy[59] - The pandemic has intensified the public's awareness of fitness and health, positively impacting the sports goods industry[59] - The sports industry in China is expected to become a pillar of the national economy, with increasing contributions and development opportunities, especially with the upcoming Winter Olympics[59] Brand and Product Development - The company aims to become the most desirable sports lifestyle brand[10] - The total number of Kappa brand stores was 1,372, a net decrease of 132 stores compared to the previous year, with plans to continue closing inefficient stores[38] - The children's clothing business generated revenue of RMB 88 million, accounting for 4.8% of the group's total revenue[38] - Kappa brand achieved significant progress despite the challenges posed by COVID-19, through deep reforms in channel, product, and supply chain management[60] - Kappa's brand promotion in Japan targets heavy skiers aged 25 to 45, enhancing brand value through various marketing channels[68] - Kappa's shoe segment has undergone significant transformation, with the new KOLUMN vulcanized shoe series driving sales and showing notable increases compared to the same period last year[76] E-commerce and Sales Channels - E-commerce business maintained continuous growth, leveraging online big data for sustainable sales network development[38] - The sales distribution for the Kappa brand was 43.3% from non-self-operated channels and 56.7% from self-operated channels, compared to 34.2% and 65.8% respectively in the previous year[101] - Self-operated channel sales for the Kappa brand in China amounted to RMB 787 million, up RMB 52 million from RMB 735 million in the previous period, representing 56.7% of Kappa's sales in China (previous period: 65.8%) [102] Corporate Social Responsibility - The group has committed RMB 600,000 in donations to support frontline medical workers during the COVID-19 pandemic[38] - The company actively engages in community activities and social donations to fulfill its corporate social responsibility[177] - The company emphasizes the importance of talent and has established a comprehensive compensation and training system to provide a good promotion platform for employees[146] Investment Strategy - The investment division's net assets reached RMB 9,245 million, a 4.1% increase from the previous year, with net investment income of RMB 567 million during the reporting period[41] - The company plans to continue investing prudently while ensuring investment safety and providing stable returns to shareholders amid market uncertainties[134] - The investment portfolio's valuation has steadily increased under a prudent approach, ensuring safety and reasonable returns for shareholders[82] Governance and Compliance - The company prioritizes compliance with laws and regulations, ensuring a transparent corporate governance structure[168] - The company promotes a culture of integrity and fairness, implementing anti-corruption measures and ensuring compliance in operations[164] - The company has established a transparent and standardized supplier bidding process to eliminate corruption in the bidding department[193] Employee Welfare and Development - The company has implemented a comprehensive occupational health and safety management system, ensuring all factory workers are equipped with protective gear[198] - The company conducted annual health check-ups for employees and organized health seminars to promote health awareness[198] - A series of training systems were established, including management and new employee training, to enhance talent development[200]

Financial Performance - The group recorded revenue of RMB 899 million, representing a year-on-year increase of 14.2%[12] - Net profit attributable to equity holders increased by 36.2% to RMB 188 million[17] - Basic earnings per share rose by 36.0% to RMB 3.21[17] - Gross profit (before inventory impairment reversal) was RMB 561 million, up 23.8%[14] - Operating profit reached RMB 247 million, reflecting a 7.9% increase[14] - The gross profit margin (before inventory impairment reversal) improved by 4.8 percentage points to 62.4%[14] - The group's sales for the six months ended September 30, 2019, reached RMB 899 million, a 14.2% increase from RMB 787 million in the previous period[63] - Profit attributable to equity holders for the same period was RMB 188 million, up 36.2% from RMB 138 million in the previous period[63] - The overall gross profit margin for the group improved to 62.4%, an increase of 4.8 percentage points from 57.6% in the previous period[74] - Total comprehensive income for the period was RMB 393.496 million, up 44.1% from RMB 272.922 million in the previous year[130] Dividends and Payouts - The company proposed an interim dividend of RMB 0.96 per share and a special interim dividend of RMB 0.65 per share, with a total payout ratio of 50%[14] - The company declared an interim dividend of RMB 0.96 per share and a special interim dividend of RMB 0.65 per share[82] - The company reported a dividend payment of approximately RMB 145 million during the reporting period[89] Market and Brand Development - The Chinese division experienced stable growth, while the Japanese division actively explored different customer sources[13] - The company emphasized brand promotion and marketing strategies, including collaborations with celebrities and participation in various trend events[18] - Kappa brand appointed celebrity Huang Zitao as its spokesperson, achieving media exposure of 48 million on the announcement day[19] - Kappa's e-commerce customer base saw a 16 percentage point increase in the 18-24 age group, reaching 50%[20] - Kappa Kids' revenue reached RMB 52 million, accounting for 6.9% of the total revenue in the China region[22] - Kappa's marketing strategy includes online and offline integrated promotions, collaborating with celebrities and KOLs to enhance brand penetration in the trendy market[32] - Kappa celebrated its 50th anniversary with a global launch event in Tokyo, showcasing its historical achievements and future vision[33] - Kappa participated in various fashion weeks, including Seoul and Paris, to enhance brand visibility and align with contemporary fashion trends[34] Store Operations and Strategy - As of September 30, 2019, Kappa brand had a total of 1,461 stores, a net decrease of 43 stores since March 31, 2019[20] - The group plans to continue closing underperforming stores to enhance overall store efficiency[20] - The number of self-operated stores for the Kappa brand reached 377, with self-operated channel sales amounting to RMB 425 million, a 30.4% increase from RMB 326 million in the previous period[71] Economic Outlook - The overall economic environment remains uncertain, but the company anticipates continued healthy development in the Chinese economy[16] - In the first three quarters of this year, China's total retail sales of consumer goods reached RMB 29.7 trillion, with a nominal year-on-year growth of 8.2%[28] - The sports industry in China has been growing steadily for twelve consecutive years, with an average annual growth rate of 24.6% from 2014 to 2017, and is expected to reach 60% of GDP by 2022[28] - The Chinese sports consumption market is projected to reach RMB 1.5 trillion by 2020, indicating a broad market outlook[30] Investment and Financial Strategy - The group's investment net assets increased by 2.5% to RMB 8,882 million compared to March 31, 2019, and net investment income was RMB 166 million[24] - The group's investment strategy remains cautious, focusing on maintaining stable valuations amid market uncertainties[24] - The company aims to leverage global perspectives to seek opportunities for capital and sports integration, enhancing returns for shareholders[62] - The company is closely monitoring currency exchange rate fluctuations, particularly between USD, HKD, and JPY against RMB, due to the impact on net assets, revenue, and net profit[102] Inventory and Cash Flow Management - The company is actively managing inventory levels to promote sales of certain products, indicating a strategic approach to inventory management[45] - The average inventory turnover days increased to 238 days during the reporting period, compared to 179 days in the previous period[88] - The company reported a net cash used in operating activities of RMB 103,447,000, compared to RMB 108,284,000 for the same period in 2018, indicating a slight improvement[145] Shareholder Information - As of September 30, 2019, the company’s major shareholder, Mr. Chen Yihong, holds 2,277,084,000 shares, representing approximately 38.69% of the total issued shares[116] - The company has not established any arrangements for directors or their family members to acquire shares or bonds of the company or any other corporation[105] - The company’s board of directors has confirmed adherence to the standards of the code of conduct for securities transactions during the review period[124] Compliance and Governance - The company has maintained a strong focus on improving corporate governance and compliance with the Hong Kong Stock Exchange's listing rules[125] - The company confirms compliance with the standards of the code of conduct for securities transactions throughout the review period[124] Product Development and Innovation - Kappa brand's shoe products underwent significant transformation with the launch of the new KOLUMN series, leading to improved sales and consumer feedback[19] - The company aims to innovate and upgrade products while leveraging market trends to enhance brand promotion and resource utilization[25] - Kappa's new product line, including the "ZTAO Purple" exclusive collection, was launched to attract a younger demographic[45] Financial Assets and Liabilities - The company reported a total of RMB 2,196,024,000 in listed equity securities under Level 1 as of September 30, 2019[182] - The company’s financial assets totalled RMB 7,451,872,000 as of March 31, 2019, with significant holdings in non-listed equity securities[182] - The company reported a foreign currency translation gain of RMB 207.062 million, compared to RMB 137.714 million in the previous year[130]

Financial Performance - Sales revenue for the fiscal year ending March 31, 2019, was RMB 2,144 million, an increase of 15.4% compared to RMB 1,858 million for the previous fiscal year[18]. - Operating profit for the same period was RMB 1,040 million, a decrease of 28.5% from RMB 1,453 million in the prior year[18]. - Profit attributable to equity holders was RMB 866 million, down 27.1% from RMB 1,189 million in the previous year[18]. - Gross profit margin before impairment losses was 58.9%, slightly down from 60.1% in the previous year[18]. - Net profit margin was 40.4%, significantly lower than 64.0% in the prior year[18]. - Basic earnings per share for the fiscal year were RMB 14.91, down from RMB 21.36 in the previous year[18]. - The group's sales for the reporting period reached RMB 2,144 million, an increase of 15.4% compared to RMB 1,858 million in the previous period[99]. - Profit attributable to equity holders for the reporting period was RMB 866 million, a decrease of 27.2% from RMB 1,189 million in the previous period[99]. - The group's gross profit was RMB 1,262 million, up from RMB 1,116 million, with a gross margin of 58.9%, down from 60.1% in the previous period[108]. - Operating profit decreased to RMB 1,040 million, with an operating profit margin of 48.5%, down from 78.2% in the previous period[120]. Assets and Liabilities - Total assets as of March 31, 2019, were RMB 11,650 million, an increase from RMB 10,921 million at the end of 2017[19]. - Non-current assets increased to RMB 7,176 million from RMB 6,288 million in the previous year[19]. - Current liabilities rose to RMB 1,118 million from RMB 885 million in the previous year[19]. - The debt-to-equity ratio remained stable at 0.14, unchanged from the previous year[20]. - The group's net asset value attributable to equity holders increased to RMB 10,251 million as of March 31, 2019, up from RMB 9,585 million as of December 31, 2017[140]. - The current ratio as of March 31, 2019, was 4.0 times, down from 5.2 times as of December 31, 2017, indicating a decrease in liquidity[140]. Market and Industry Trends - The global economic recovery is facing downward pressure, with the World Trade Organization's trade index dropping to 96.3, the lowest since March 2010[50]. - In 2018, domestic consumption contributed 76.2% to China's economic growth, highlighting its importance in stabilizing the economy[51]. - In Q1 2019, China's retail sales of consumer goods reached RMB 9.8 trillion, growing by 9.3% year-on-year, indicating a steady expansion of the domestic consumption market[52]. - The Chinese sports industry is projected to reach a total consumption scale of RMB 1.5 trillion by 2020, with a significant increase in per capita sports consumption expenditure[52]. - The sports goods industry is expected to have broad development space supported by favorable policies and the upgrading of consumer spending structures[81]. Brand and Product Development - The Kappa brand's total number of stores reached 1,502, with a net increase of 15 stores since the end of 2017[37]. - The children's clothing business generated revenue of RMB 151 million, accounting for 8.6% of the revenue in the China region[40]. - Kappa brand has been actively engaging in cross-industry collaborations and digital marketing strategies to enhance brand recognition and consumer engagement[60]. - Kappa's digital media marketing strategy achieved a reading volume of 510,000 times since January 2019, effectively connecting the brand with target consumers[60]. - Kappa celebrated the 50th anniversary of its Omini logo in 2019 with nationwide exhibitions, enhancing brand heritage and cultural significance[61]. - The company is focusing on integrating fashion elements into its sports apparel to meet diverse consumer demands and maintain market growth[53]. - Kappa's new product launches included innovative designs in the WMNS series, showcasing a mix of comfort and style[72]. - Kappa's marketing strategy included story-driven promotions and collaborations to attract younger consumers[74]. E-commerce and Digital Strategy - E-commerce business recorded significant growth, with increased investment in new products on online platforms[37]. - Kappa's e-commerce maintained stable growth, with improved sales performance on platforms like Vipshop, Tmall, and JD.com[79]. - The group actively developed a digital membership recruitment plan to enhance member repurchase rates through big data[36]. Corporate Governance and Investor Relations - The company has actively engaged in investor relations, conducting earnings releases and investor summits in March, August 2018, and February 2019[157]. - Continuous communication with investors and analysts has been maintained through one-on-one meetings and conference calls[158]. - The company emphasizes transparent communication with shareholders during annual general meetings, respecting the rights of all shareholders[161]. - Future plans include proactive investor relations efforts to enhance communication and build a stable shareholder structure[162]. Sustainability and Social Responsibility - The company focuses on sustainable development through its ESG policies, which include quality products, collaboration, employee care, and environmental protection[166]. - The company has established an ESG management framework, with the board overseeing ESG policies and performance[177]. - The company actively engages in community investment and social responsibility initiatives, reflecting its commitment to compliance and public welfare[182]. - The company recognizes the importance of environmental, social, and governance factors for sustainable development and aims for continuous improvement in these areas[89]. Human Resources and Employee Welfare - The group emphasizes the importance of human resources management and talent development in enhancing management efficiency and productivity[94]. - The company promotes employee welfare and diversity, aiming to enhance employee recognition and belonging within the organization[195]. - Employee health and safety are prioritized, with adherence to relevant laws and regulations, and no major violations reported during the reporting period[200]. - The company provides annual professional health seminars to enhance employee health awareness and regularly disinfects drinking water facilities[200]. - A dedicated gym has been established at the headquarters to encourage employee participation in physical exercise, along with the formation of a dance fitness club[200].

Financial Performance - Sales revenue for the fiscal year ending March 31, 2019, was RMB 2,144 million, an increase of 15.4% compared to RMB 1,858 million for the previous fiscal year[18]. - Operating profit for the same period was RMB 1,040 million, a decrease of 28.5% from RMB 1,453 million in the prior year[18]. - Profit attributable to equity holders was RMB 866 million, down 27.1% from RMB 1,189 million in the previous year[18]. - Gross profit margin before impairment losses was 58.9%, slightly down from 60.1% in the previous year[18]. - Net profit margin was 40.4%, significantly lower than 64.0% in the prior year[18]. - Basic earnings per share for the fiscal year were RMB 14.91, down from RMB 21.36 in the previous year[18]. - The group recorded revenue of RMB 2,144 million and a profit attributable to equity holders of RMB 866 million for the reporting period[35]. - Basic and diluted earnings per share were RMB 14.91, with a total dividend payout ratio of 50% based on the net profit attributable to equity holders[35]. - The overall gross margin for the Kappa brand in China decreased by 2.1 percentage points to 66.8% compared to 68.9% in the previous period[112]. - The net investment income for the group was RMB 1,109 million, down from RMB 1,341 million in the previous period[114]. - The investment division generated a profit of RMB 1,054 million, a decrease from RMB 1,295 million in the previous period[115]. - Distribution and administrative expenses totaled RMB 1,337 million, an increase of 7.9 percentage points from the previous period, accounting for 62.4% of total sales[118]. - Operating profit decreased to RMB 1,040 million, with an operating profit margin of 48.5%, down from 78.2% in the previous period[120]. - Income tax expense was RMB 167 million, with an effective tax rate of 16.3%, up from 12.4% in the previous period[122]. - Profit attributable to equity holders was RMB 866 million, resulting in a net profit margin of 40.4%, down from 64.0%[123]. - Basic and diluted earnings per share decreased by 30.2% to RMB 14.91, compared to RMB 21.36 in the previous period[126]. Assets and Liabilities - Total assets as of March 31, 2019, were RMB 11,650 million, an increase from RMB 10,921 million at the end of 2017[19]. - Non-current assets increased to RMB 7,176 million from RMB 6,288 million in the previous year[19]. - Current liabilities rose to RMB 1,118 million from RMB 885 million in the previous year[19]. - The debt-to-equity ratio remained stable at 0.14 as of March 31, 2019, unchanged from the previous year[19]. - The current ratio of the group as of March 31, 2019, was 4.0 times, down from 5.2 times as of December 31, 2017[140]. - The net asset value attributable to equity holders of the group increased to RMB 10,251 million as of March 31, 2019, up from RMB 9,585 million as of December 31, 2017[140]. Market and Sales Performance - The Kappa brand's total number of stores reached 1,502, with a net increase of 15 stores since the end of 2017[37]. - The children's clothing business generated revenue of RMB 151 million, accounting for 8.6% of the revenue in the China region[40]. - E-commerce operations recorded significant growth, with increased investment in new products on online platforms achieving ideal sales performance[37]. - The total sales for the Kappa brand in China reached RMB 1,527 million, an increase of RMB 223 million compared to the previous period's sales of RMB 1,304 million[101]. - The overall sales for the China division amounted to RMB 1,751 million, representing an 18.0% increase from RMB 1,484 million in the previous period[101]. - The Kappa brand's sales through self-operated channels in China reached RMB 937 million, a 21.2% increase from RMB 773 million in the previous period[109]. - The sales in the Japan division amounted to RMB 393 million, an increase of RMB 19 million from RMB 374 million in the previous period[107]. Marketing and Brand Strategy - Kappa brand's marketing strategy includes digital media integration and collaborations with industry influencers, achieving a reading volume of 510,000 times since January 2019[60]. - Kappa's Omini logo celebrated its 50th anniversary in 2019 with nationwide exhibitions, enhancing brand recognition and cultural significance[61]. - Kappa launched new products including the BANDA series and LABS series, focusing on trendy designs and street style to attract younger consumers[68][69]. - The Kappa Kids Cup and other sponsorships in youth football events helped expand brand recognition in the children's apparel market[64]. - The Kappa Training Wear series emphasized functionality and fashion, appealing to consumers through endorsements from top athletes[65]. - Kappa is actively participating in major international trend events to enhance brand image and consumer engagement[59]. - Kappa's collaboration with top media platforms has significantly increased brand exposure and consumer recognition in the fashion sports sector[61]. Digital and E-commerce Initiatives - The group actively developed a digital membership recruitment plan to enhance member repurchase rates through big data-driven marketing strategies[36]. - The group plans to connect the retail end system of quasi-direct customers with the company's ERP system to facilitate rapid product movement[37]. - E-commerce sales showed stable growth, with improved performance on platforms like Vipshop, Tmall, and JD.com, alongside various offline promotional activities[79]. Economic and Industry Outlook - The global economic recovery faces downward pressure, with the World Trade Organization's trade index dropping to 96.3, the lowest since March 2010[50]. - In 2018, domestic consumption contributed 76.2% to China's economic growth, highlighting its importance in stabilizing the economy[51]. - The sports industry in China is projected to reach a total consumption scale of RMB 1.5 trillion by 2020, with a significant increase in per capita sports spending[52]. - The sports goods industry is expected to have broad development space supported by favorable policies and the upgrading of consumer spending structures[81]. Corporate Governance and ESG - The company emphasizes sustainable development as part of its ESG strategy, focusing on quality products, collaboration, employee care, and environmental protection[166]. - The company has established an ESG management framework, with the board overseeing ESG policies and performance[177]. - The company aims to improve its investor relations by providing accurate and timely disclosures to enhance understanding among investors[162]. - The company encourages feedback from shareholders and analysts to continuously improve its management practices[162]. - The company recognizes the importance of environmental, social, and governance factors for sustainable development and aims for continuous improvement in these areas[89]. Human Resources and Employee Welfare - The group emphasizes the importance of human resources management and talent development in enhancing management efficiency and productivity[94]. - The company emphasizes employee care and diversity, enhancing employee recognition and belonging within the organization[195]. - Regular health seminars are conducted for employees to enhance health awareness, and safety measures are in place for drinking water hygiene[200]. - The company provides personal protective equipment for production staff and enforces strict safety inspections to minimize production and fire safety risks[200]. - A dedicated gym has been established at the headquarters to encourage employee participation in physical fitness activities[200]. - The company has formed a fitness dance club and hires professional instructors to guide employees in fitness activities, promoting stress relief and enriching leisure time[200]. Compliance and Quality Assurance - The company adheres to strict quality assurance standards, complying with national regulations to ensure product safety and quality[185]. - The company has implemented measures to protect consumer privacy, including encryption of sensitive data and the use of electronic shipping labels to safeguard personal information[194]. - The company conducts thorough safety assessments during product development and production to mitigate risks associated with product usage[188]. - The company maintains strict advertising management practices to ensure compliance with legal standards and protect its brand image[189]. - The company strictly adheres to various labor laws and regulations in China, ensuring compliance in employment practices without any significant violations reported during the reporting period[196]. - The company has implemented a comprehensive human resources management system, including recruitment and resignation management, to ensure standardized and regulated operations[199]. - The company has not reported any significant violations related to employee health and safety laws during the reporting period, demonstrating a commitment to providing a safe working environment[200].