361 Degrees Announces Solid 2015 Interim Results

HONG KONG, Aug. 11, 2015 /PRNewswire/ --

Highlights

• Net operating profit rose 34.4%
• Account receivables improved significantly
• Very sound balance sheet with RMB2.7 billion in net cash
• Strong order book for next three quarters
• A stronger second half envisaged

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, announces its results for the six months ended 30 June 2015.

The Group reported a strong set of results for the first half of 2015, with turnover improving by 5.7% over the comparative period last year, and by 22.0% over the previous six months, to register RMB2.2 billion. Gross margin gained a further 1.6 percentage points to 41.3% on the back of lower material costs. With a tight control over below-the-line costs, operating profit amounted to RMB485.5 million (2014: RMB361.1 million), an encouraging improvement of 34.4%, underlining a better time for the industry.

Profit attributable to equity shareholders for the period was RMB269.6 million, increased by 22.3% against a comparative of RMB220.4 million (adjusted for a one-time and unrealized gain relating to convertible bonds) in the previous period, despite higher finance costs and taxation charges.

Commenting on the results, Mr. Ding Wuhao, President and Executive Director, said "This promises to be a very good year for the Group as we see steady recovery in the industry and our brand gaining further acceptance in the market place."

Footwear turnover rose 16.0%, driven by both volume and ASP, as a new portfolio of performance products gained very positive reception from the retailers. Apparel turnover fell 3.5% because of a higher comparative base which was boosted by late deliveries in the fourth quarter of 2013. 361° Kids continued to show growth momentum as it differentiated itself from the regional brands.

The lower cost of raw materials, particularly cotton and oil-based derivative products, helped to cushion against higher labour costs, as the Group continued to balance its production between its own factories and third party manufacturers. The glut of manufacturing capacity in this sportswear industry will probably ensure such a production mix is maintainable whilst the Group endeavors to move up a notch in its retail pricing strategy, in the wake of better spending power among the middle income group of consumers seeking higher quality products.

Through its years of sponsorship of major multi-sport international events such as the Asian Games and Youth Olympics and its collaboration with CCTV-5, the national sports channel, the 361° brand has gained strong recognition in the market as a sports-based performance brand. To further augment this recognition, the Group continued its program of offering non-cash fittings subsidies to its franchised stores to establish a united, harmonious and high-level visibility throughout its network. For this first half, the charge of RMB147.4 million (2014: RMB125.6 million) is now regarded as an integral part of the Group's overall advertising and promotion strategies.

Other below-the-line costs are generally under control, except for staff costs which rose 20% due to the recruitment of senior executives in the overseas business unit, who only joined in the second half of 2014.

There has been a significant improvement in accounts receivable, with over 75% of the debts within 90 days old. Coupled with a reliable positive cash flow from its business operations and sound cash management, the net cash position of the Group continued to edge upwards, with balances now at RMB2.7 billion at the end of 30 June 2015.

Store productivity continued to be a central theme in future profitability. The current store count of 7,404 outlets is not likely to increase substantially in the foreseeable future as the retail landscape is fast changing with a new generation of consumers adopting different buying habits. The Group is very much attuned to these developments and has intensified efforts to promote various initiatives in internet and mobile sales. However, the days for the traditional brick-and-mortar store are far from over and particularly in our case, where over 70% of our outlets are in the Tier-3 and smaller cities, strong local connections with schools and sports clubs are an inherent advantage, especially as increasing numbers turn to sport as a form of recreation and lifestyle.

With a strong order book in hand for deliveries in the second half year, the Group is very confident of achieving a result for the full year of 2015 that is considerably higher than that of the previous year. In the meantime, the Board of Directors has declared the same level of interim dividend of RMB5.0 cents per share and reaffirmed that the dividend policy of distributing not less than 40% of earnings for the full year will remain unchanged.

About 361 Degrees International Limited

361 Degrees International Limited is one of the leading sports brand enterprises in 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 through proprietary and sub-contracted manufacturing operations; and an exclusive distribution and retail network in China through distribution via authorized distributors.

For more details, please refer to its website: www.361sport.com.

For further information, please contact:
361 Degrees International Limited
Mr. Y F Chen
Vice-President, Investor Relations
361 Degrees International Limited
Email:  yuanfeng@361sportshk.com

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Natalie Tam/ Charis Yau/ Janis Lai/ Heng Tam
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Fax: (852) 3170 6606
Email: 361@iprogilvy.com