Annual Report 2018/2019
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China DX_AR18-19 FSC 13.5mmOP.pdf 1 18/6/2019 下午4:50 (Incorporated in the Cayman Islands with limited liability) www.dxsport.com Stock Code: 3818 C M Y CM MY CY CMY K ANNUAL2019 REPORT 2018/ Annual Report 2018/2019 C102904 Contents Vision & Mission 2 Corporate Information 6 Five-Year Financial Highlights 8 Chairman’s Statement 12 Brand Portfolio 14 Management Discussion and Analysis 16 Investor Relations Report 35 Environmental, Social and Governance Report 36 Directors and Senior Management 52 Corporate Governance Report 55 Report of the Directors 69 Independent Auditor’s Report 78 Consolidated Statement of Comprehensive Income 84 Consolidated Balance Sheet 86 Consolidated Statement of Changes in Equity 88 Consolidated Statement of Cash Flows 90 Notes to the Consolidated Financial Statements 91 China Dongxiang (Group) Co., Ltd. Vision & Mission 2 Annual Report 2018/2019 Vision & Mission Vision By uniting OUTSTANDING INDIVIDUALS and striving for MANAGERIAL EXCELLENCE, we’ll lead the SPORTS FASHION industry, all with JOY and PASSION Mission To be the most PIONEERING and DESIRED SPORT-LIFE brands 3 China Dongxiang (Group) Co., Ltd. Corporate Information Executive Directors Mr. Chen Yihong (Chairman) Mr. Zhang Zhiyong (Chief Executive Officer) Ms. Chen Chen Independent Non-Executive Directors Dr. Chen Guogang Mr. Gao Yu Mr. Liu Xiaosong (appointed and effective from 27 March 2019) Mr. Chen Johnny (resigned and effective from 27 March 2019) Auditor PricewaterhouseCoopers Certified Public Accountants Legal Advisers Norton Rose Fulbright Hong Kong Conyers Dill & Pearman (Cayman) Limited East & Concord Partners (Beijing) Authorised Representatives Mr. Gao Yu Ms. Wai Pui Man Company Secretary Ms. Wai Pui Man Principal Share Registrar and Transfer Office SMP Partners (Cayman) Limited Royal Bank House — 3rd Floor, 24 Shedden Road, P.O. Box 1586, Grand Cayman, KY1-1110, Cayman Islands Hong Kong Branch Share Registrar Computershare Hong Kong Investor Services Limited and Transfer Office Shops 1712–1716, 17/F Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong Registered Office Cricket Square, Hutchins Drive, P.O. Box 2681 Grand Cayman KY1-1111, Cayman Islands Principal Place of Business in Hong Kong Office Unit 9, 13/F, Tower Two, Lippo Centre, No. 89 Queensway, Hong Kong Head Office in People’s Republic of China Building 21, No. 2 Jingyuanbei Street, Beijing Economic-Technological Development Area, Beijing 100176, People’s Republic of China Principal Bankers Morgan Stanley Asia International Limited Industrial and Commercial Bank of China Website www.dxsport.com 6 7 China Dongxiang (Group) Co., Ltd. Five-Year Financial Highlights (All amounts in Renminbi million unless otherwise stated) For the For the For the For the For the For the fifteen fifteen twelve twelve twelve twelve months months months months months months ended ended ended ended ended ended 31 March 31 March 31 December 31 December 31 December 31 December 2019 2018 2017 2016 2015 2014 Sales 2,144 1,858 1,455 1,501 1,469 1,262 Operating profit 1,040 1,453 1,027 1,016 1,005 989 Profit before income tax 1,026 1,350 930 1,048 1,021 975 Profit attributable to equity holders 866 1,189 805 870 803 915 Gross profit margin (%) (before reversal of/ provision for impairment losses of inventories) 58.9 60.1 59.2 56.7 56.2 50.7 Net profit margin (%) 40.4 64.0 55.3 58.0 54.7 72.5 Earnings per share — basic (RMB cents) 14.91 21.36 14.51 15.79 14.56 16.61 — diluted (RMB cents) 14.91 21.36 14.51 15.79 14.56 16.61 The Company’s financial year end date has been changed from 31 December to 31 March. Accordingly, the current financial period covers financial information of the fifteen months from 1 January 2018 to 31 March 2019 and a comparative period from 1 January 2017 to 31 December 2017. To enhance information comparability, the Company also voluntarily presented certain financial information of the fifteen months from 1 January 2017 to 31 March 2018 as directly comparable information. 31 March 31 December 31 December 31 December 31 December Note 2019 2017 2016 2015 2014 Non-current assets 7,176 6,288 5,415 4,701 5,378 Current assets 4,475 4,634 5,730 5,880 5,931 Current liabilities 1,118 885 1,352 974 939 Net current assets 3,357 3,749 4,378 4,906 4,992 Total assets 11,650 10,921 11,145 10,581 11,309 Total assets less current liabilities 10,532 10,036 9,793 9,607 10,370 Equity holders’ equity 10,251 9,585 9,658 9,531 10,340 Total assets per share (RMB cents) 1 200.56 196.94 202.15 191.94 205.21 Debt to equity holders’ equity ratio 2 0.14 0.14 0.15 0.11 0.09 Notes: (1) The number of ordinary shares used in the calculation for the fifteen months ended 31 March 2019, for the twelve months ended 31 December 2017, 2016, 2015 and 2014, are 5,808,853,000 shares, 5,545,204,000 shares, 5,513,180,000 shares, 5,512,580,000 shares, and 5,511,030,000 shares, which were the weighted average number of shares for the periods. (2) The debt to equity holders’ equity ratio is calculated based on total liabilities of the Group divided by equity attributable to equity holders of the Company as at the reporting date. 8 Annual Report 2018/2019 Five-Year Financial Highlights (All amounts in Renminbi million unless otherwise stated) SALES PROFIT ATTRIBUTABLE TO EQUITY HOLDERS 18/19 2,144 18/19 866 17 1,455 17 805 16 1,501 16 870 15 1,469 15 803 14 1,262 14 915 0 500 1,000 1,500 2,000 2,500 0 500 1,000 EARNINGS PER SHARE — BASIC (RMB CENTS) TOTAL ASSETS PER SHARE (RMB CENTS) 18/19 14.91 18/19 200.56 17 14.51 17 196.94 16 15.79 16 202.15 15 14.56 15 191.94 14 16.61 14 205.21 0 10 20 0 60 120 180 240 TOTAL ASSETS DEBT TO EQUITY HOLDERS’ EQUITY RATIO (TIMES) 18/19 11,650 18/19 0.14 17 10,921 17 0.14 16 11,145 16 0.15 15 10,581 15 0.11 14 11,309 14 0.09 0 4,000 8,000 12,000 0 0.1 0.2 Note: 18/19 is the financial data for the 15 months ended 31 March and 14 to 17 are the financial data for the 12 months ended 31 December. 9 China Dongxiang (Group) Co., Ltd. Chairman’s Statement Dear Shareholders, I am pleased to present on behalf of the Board our results for the fifteen months ended 31 March 2019 (the “Reporting Period”): During the Reporting Period, downward pressure on global economic recovery has increased with sluggish growth in major economies and shrinkage in international trade and investment activities. China’s economy, though, has faced increasing downward pressure imposed by a number of internal and external factors, such as deleveraging and China-US trade conflicts, and its macro-economic environment presents a struggle between upward momentum and downward pressure, thanks to, among others, the benefits of tax reduction as well as the policy favourable to the development of sports industry adopted by the Chinese government, size of domestic consumer market has been expanding this year, particularly sports consumption. The Group’s revenue for the reporting period was RMB2,144 million, while profit attributable to equity holders was RMB866 million. Basic and diluted earnings per share was RMB14.91 cents. As a reward to shareholders for their unfailing support, the Board of Directors has proposed to distribute 30% and 20% of the net profit attributable to equity holders for the fifteen months ended 31 March 2019 as final dividend and special final dividend, respectively, representing a dividend payout ratio of 50% for the full period. China Dongxiang continued its reforms by adopting a series of effective measures and made some progress with interim achievements in line with expectation, even though the domestic and international economic environment was complicated and complex: CHINA SEGMENT: LAUNCHING A NEW MODEL AND SECURING PRODUCT SUPPLY In connection with our “Brand + Product” initiative, the Group reinforced cross-sector collaboration with celebrities and key opinion leaders (KOL) in various sectors in the Reporting Period to fully envision the fashion trends and strengthen our brand penetration. Kappa steps up with innovative spirit to infuse fashion elements into its product design, interpreting the brand spirit and the prevailing fashion trend with its own features. Above all, the latest design of Kappa’s vulcanised shoes has been in line with international fashion trend, providing consumers a new footwear series with unique and youthful features. At the beginning of 2019, sales performance of our footwear segment was satisfactory, rolling in a “heatwave” to youngsters. In addition, Kappa has continued its all-out online and offline marketing efforts via the digital new media, entered into a deeper cooperation with informative media and fashion media for reaching target consumers in a more effective way, in order to boost our brand awareness and initiate an upgrade and transformation of fashion consumption. The Group has also endeavoured to develop a digitalised member recruitment programme for Kappa to increase members’ repeat purchase and strengthen interactions with the members by omni-channel management of members and big data utilisation for precise marketing. For the “Brand + Retail” business, the Group has stayed focusing on point-of-sale reform by optimising existing structure of our stores and actively managing the proportion of top stores, shopping mall stores and outlets.