361 Degrees Announces Its Annual Results for the Financial Year 2011

Profit attributable to equity shareholders rose 30.5% to RMB1,196.1 million

HONG KONG, Aug. 23, 2011 /PRNewswire-Asia/ --

Financial Overview

361 Degrees International Limited ("361 Degrees" or the "Company", together with its subsidiaries, the "Group"; HKSE stock code: 1361), one of the leading sports brand enterprises in China, reported a strong set of results for the financial year ("FY") 2011, reflecting the benefits of the Group's ongoing efforts in enhancing the 361 Degrees brand, its distribution network and the product quality.

The bulk of the improvement in the Group's turnover came from Footwear, which posted healthy increases in both volume and average selling price ("ASP"). There was a marginal increase in Apparel sales where higher selling prices offset lower volumes due to increased competition.

361 Degrees Kids, a separate product group, continued its relatively modest start, with revenues topping RMB238.7 million in this first full year of operations against RMB37.6m for FY2010.

In terms of revenue mix, the weightage shifted in favour of Footwear in FY2011, which accounted for about 51.2% of the total against 44.5% in the previous year. However, this is primarily a function of revenue recognition upon deliveries and does not represent a longer term trend. The retail market for Apparel remains much larger and so is the order book received at the Trade Fairs. There is a small but appreciable improvement in Accessories as higher quality products enabled a strong rise in both ASP and volume, but the contribution still remains relatively insignificant.

In terms of regional breakdown, the Group remains a leading player in Northern China where it has about 39.0% of its stores. It believes it is gaining market share at the expense of the competition as revenues have improved by more than 35.5% this year, on a relatively large base. The Group is also expanding very quickly in the Western region where it has increased its presence by 16.3% in terms of store units whilst revenues have leapt by almost 40% in this financial year. As economic development in China further drifts westwards, the Group will stand to gain appreciably in the longer term.

Despite a very challenging year in terms of rising costs, the Group has managed to increase its gross profit margin to 42.3%, a very commendable 2.9% improvement. This has been achieved by leveraging on in-house production at a time when many OEM suppliers were struggling to find sufficient labour as well as maintaining working capital.

During the financial year, the number of exclusive distributors remained unchanged at 32. The distributors themselves oversaw 3,438 authorized dealers who in turn owned and managed a total of 7,681 retail outlets. This number of outlets as at 30 June 2011 represented a net increase of 754 from the 6,927 of last year, with the overall mix in strong favour of third-tier and smaller cities, which together account for 72% of the total. The Group has made solid progress on the electronic points-of-sale ("ePOS") linkage to its retail outlets. Currently operating as a separate module, it will eventually dovetail into an enterprise resource planning ("ERP") system for supply chain management. As at 30 June 2011, the e-POS linkage is extended to 4,146 outlets.

In the year to 30 June 2011, the Group reported very strong same store sales growth for its retail network every quarter, with rates ranging from 14% to 18%. Such robust front-end sales have in turn encouraged the franchised retail operators to place very strong orders with the Group, confident that the increasing appeal of the 361 Degrees brand will be sustained. In the three Trade Fairs held during the financial year, the Group registered strong order book growths of between 20% and 27% based on wholesale values.

During the financial year, the Group capitalized on its advantage as the Prestige Partner of the 2010 Guangzhou Asian Games and the Global Partner of the 2011 Summer Universiade in Shenzhen to strengthen its brand and marketing promotion as well as to enhance the recognition of 361 Degrees as a brand. Whilst such event sponsorship featuring multi-sports will continue to be the thrust of the Group's advertising strategy, there will also be a conscious alert for endorsement opportunities by star athletes and celebrity professionals as the next phase of brand-building unfolds.

The Group's second manufacturing facility in Jinjiang, namely the Wuli Industrial Park was substantially completed as at 30 June 2011. This new facility costing a total of about RMB800 million increases the production capacity of Footwear and introduces a modest element of in-house production of Apparel in an effort to stay abreast of industry trends and developments. It also houses trade and exhibition halls, a central warehouse and comprehensive staff facilities.

The Group's balance sheet as at 30 June 2011 remains very strong, with cash and cash equivalents amounting to RMB2.2 billion. There is further improvement in the collection of Accounts Receivables, which has now dropped to 83 days, and the cash conversion cycle of the Group's operations, taking into consideration, the Accounts Payables and Inventory levels, is a very healthy 20 days, which is among the best in the industry.

Looking ahead, Mr. Ding Wuhao, the Company's President and Executive Director, said, "The prospects of the industry and channel management are on the spotlight, with uncertain global economic situation, exacerbating inflation pressure in Mainland China. However, we believe that China's ongoing steady economic growth and urbanization will continue to create a favorable environment for the sportswear sector as a whole and offer tremendous opportunities in the market.

The Group will continue to strengthen its edges in network deployment and land additional footholds in second-tier, third-tier, and fourth-tier cities where consumption power is on the rise. The Group attaches importance to the value created for the Group from network locations and therefore will continue to strengthen the cooperation with distributors and retailers whilst providing training and guidance to further improve same store sales. The Group has invested heavily to build a strong foundation and remains confident that with the fundamentals of the sportswear industry in China remaining solid, it will be able to deliver long-term sustainable shareholder value."

Taking into account the excellent results, the Board is recommending for approval by shareholders at the next Annual General Meeting, a final dividend of HK 19.4 cents per share, bringing the total dividend for the year to HK27.7 cents per share, which is 82% higher than that of the previous year.

Noting that the Group essentially operates only in China and that all its major subsidiary companies have a mandatory 31 December year-end, the Board has also decided to change the year-end of the Company to 31 December as this will improve standards, reduce costs and create synergistic benefits. The next set of financial statements will be prepared for the year ended 31 December 2011.

About 361 Degrees Company Limited

361 Degrees Company Limited is one of the leading sports brand enterprises in the China, possessing brand marketing, research and development, design, manufacturing, distribution and retail capabilities. The Group's products include footwear, apparel, accessories and equipment for sport and leisure uses. The Group has established an extensive supply chain management system, and exclusive distribution and retail network in the PRC primarily through in-house and outsourced manufacturing operations and distribution via authorized distributors.