EQS-News: 361 Degrees Announces 2021 Annual Results Revenue increased by 15.7% to RMB 5,933.5 million Profit attributable to equity shareholders increased by 45.0% to RMB 601.7 million

361 Degrees International Limited

361 度國際有限公司

361 Degrees Announces 2021 Annual Results

Revenue increased by 15.7% to RMB 5,933.5 million
Profit attributable to equity shareholders increased by 45.0% to RMB 601.7 million

(23 March 2022 - Hong Kong) - The leading sportswear brand in China, 361 Degrees International Limited ("361°" or the "Company", together with its subsidiaries, the "Group"; stock code: 1361.HK), announced its audited annual results for the year ended 31 December 2021.

Financial highlights

• Revenue increased by 15.7% to approximately RMB 5,933.5 million
• Gross profit increased by 27.3% to approximately RMB 2,472.4 million and gross profit margin increased by 3.8p.p. to 41.7%
• Profit attributable to equity shareholders increased by 45.0% to approximately RMB 601.7 million
• Cash and cash equivalents (including bank deposits and cash in hands, and fixed deposits with original maturities not exceeding three months) amounted to RMB 3,339.0 million

Operational highlights

• 361° is the first Chinese sports brand to sponsor the Olympic Games and has sponsored the Asian Games for four consecutive sessions. As the official partner of the 19th Asian Games Hangzhou 2022 in Hangzhou, 361° was awarded the "Outstanding Contribution Award of Asian Games" by the Olympic Council of Asia.
• Through the dual driving forces of "Professionalism + Fashion", the Group combines professional sports with fashionable sports, and its products cover running, basketball, comprehensive training, sports lifestyle and other categories.
• The Group has signed famous young actors GONG Jun and WANG An Yu as the brand global endorser and spokesperson during the year under review, and signed international basketball superstars Spencer Dinwiddie in early 2022. A rich resource matrix consists of more than 20 endorsers of various types has been formed, to build brand influence and boost sales performance through the driving forces of professional sports and fashionable sports.
• 12 co-branded IP products were launched during the year under review, including The Three-Body Problem, Saint Seiya, Minions, Captain Tsubasa, Gundam, Initial D, KAKAO FRIENDS, Lay's and Sanxingdui, China Aerospace・Space Imagination, Dunhuang and Little Monsters, and received overwhelming market response.
• 361 ° Kids promotes its brand with the statement "Love it, Kids! !", focuses on children and youth sports market, providing children and teenagers with products suitable for rope skipping, running, football, basketball, outdoor activities and campus life and other outstanding performance.
• 361°'s own running event "Track Three" and its own basketball tournament "A Fireball Plan" and "Touch Down and Burn" were successfully hosted in multiple major cities in China, which continued to enhance the brand's influence in the sports community.
• During the year under review, the number of stores of 361° core brand and 361° Kids increased by 105 and 193, respectively.
• The expansion of e-commerce channels continued to succeed, with a revenue contribution of RMB 1,227.4 million, representing a 55.1% year-on-year growth. Several high-tech products, exclusive celebrity series, IP series and other famous products were debuted in e-commerce, vigorously promoting the development of online retail business.

Financial Highlights

Financial Analysis

During the year under review, the Group's total revenue increased by 15.7% to RMB 5,933.5 million (2020: RMB 5,127.0 million). The revenue of two core product categories, namely footwear and apparel increased by 21.7% to RMB2,532.1 million and 7.3% to RMB2,147.0 million, respectively, accounted for 42.7% and 36.2% of the Group's total revenue, respectively. The revenue of 361° Kids increased by 18.7% to RMB 1,106.8 million, accounting for 18.7% of the Group's total revenue. During the year under review, the Group's e-commerce business recorded a revenue of RMB1,227.4 million from the sales of online exclusive products, accounting for approximately 20.7% of the Group's total revenue. The increasing contribution from e-commerce channels reflected the effectiveness of the Group's product offering and promotion strategy.

The gross profit in 2021 was RMB 2,472.4 million (2020: RMB 1,941.7 million), representing an increase of 27.3%. Gross margin increased by 3.8 percentage points to 41.7%. This was mainly due to an upward adjustment of the average wholesale price charged to distributors back to the normal level in the situation before the pandemic happened in early 2020 in view of the improved market environment in China, as well as an increase in the proportion of sales revenue generated from its e-commence platform which conducted business at a higher gross profit margin than the sales made to distributors. Since the Group redeemed the 7.25% senior notes due in 2021 during the year under review, there was a significant reduction in interest expenses. Profit attributable to equity shareholders increased by 45.0% to RMB 601.7 million (2020: RMB 415.1 million), equivalent to earnings per share of RMB 29.1 cents.

As at 31 December 2021, cash and cash equivalents (including bank deposits and cash in hands, and fixed deposits with original maturities not exceeding three months) amounted to RMB 3,339.0 million (31 December 2020: RMB 3,451.3 million). For the year ended 31 December 2021, trade and bills receivable turnover days decreased from 159 days to 149 days and the inventory turnover days decreased from 111 days to 87 days.

In view of the continuous outbreak of pandemic around the world, the uncertainty of the macroeconomic environment as well as the Company's development strategy, the Board has prudently decided not to distribute the 2021 final dividend for the time being in order to retain cash strength.

In 2021, China's economy recovered significantly as the prevention and control of the COVID-19 epidemic became normalised. The year of 2021 also marks the start of China's 14th Five-Year Plan, the Chinese government has been actively promoting the "internal circulation" policies, coupled with the orderly resumption of large-scale sports events, stimulating enthusiasm for sports consumption and huge market demand. In the medium to long term, the sports industry will step into the golden period of development and is moving towards a new stage of quality development.

Seizing the development opportunity of large-scale sports events and expanding the brand's international reach

In 2021, the sports industry was in full swing as a number of international tournaments were successfully held. The Group took advantage of this opportunity to sponsor large-scale sports events such as THE ROC Triathlon and Xuzhou International Marathon. It is worth mentioning that the Group has been sponsoring the Asian Games for four consecutive sessions and became the first enterprise ever to be awarded the "Outstanding Contribution Award of Asian Games" by Olympic Council of Asia for our outstanding contribution to the development of sports.

The Group has announced its new slogan of "Passion for China, One Extra Degree" for the 2022 Hangzhou Asian Games that will be kicked off in the coming September. Meanwhile as the Group continues to make every effort to promote the development of sports in Asia and the world, it will seize the opportunity of the Asian Games to expand its international influence and drive long-term business development.

Focusing on core brands and demonstrating strategic determination

361° has continued to develop 361° core brand and 361° Kids, demonstrating strategic determination and perseverance in development, while achieving outstanding business results. The Group adheres to strengthen its positioning as a specialised, youthful, and internationalised brand. The Group has been promoting the dual driving focuses of "Professionalism + Fashion", with professionalism at the forefront and integration of fashionable sports, relying on the brand's product strength in rope skipping, running, basketball, comprehensive training, and sports lifestyle categories to establish its differentiated competitiveness.

The Group has continued to promote its products to sports enthusiasts in different verticals through sponsorship and contracting. In terms of professional sporting product category, the Group's matrix of sports endorsers includes top players in marathon, basketball and boxing, such as international basketball superstars Aaron GORDON and Spencer DINWIDDIE. In the aspect of fashionable sports, the Group has signed contracts with well-known young Chinese actors GONG Jun and WANG An Yu to better align our brand with the young consumer group.

During the year under review, the Group has continued to explore potential innovative collaborations and launched 12 co-branded IP products such as The Three-Body Problem, Saint Seiya, Minions, Captain Tsubasa, Gundam, Initial D, KAKAO FRIENDS, Lay's and Sanxingdui. The above collaboration has successively won honors such as the Global Brand Development Award for the Best Licensee in the Fashion Category, the Effie Awards Greater China in 2020 and the Golden Wheat Awards in 2020, demonstrating the Group's highly-recognised marketing strategies.

Unleashing vitality of Kids' wear business and strengthening the brand's first-mover advantage

The Group promoted 361°Kids with the statement "Love it, Kids!", and continued to strive for extension in product mix and enrichment in product offering. At present, the product series has fully supported the needs of customers of all ages from toddlers to teenagers while the product categories cover running, football, basketball, outdoor activities, and campus life, thereby striving to better meet the needs of kid and teenagers' sports life.

361°Kids has always been committed to improving the professional functionality, healthy technology, and childish fashion of its products. In terms of professional functionality, 361° Kids has partnered with football clubs (youth training system) such as Shenhua, Evergrande, Guoan and Luneng to enhance collaborations in the field of youth soccer. It is worth mentioning that during the year under review, 361°Kids collaborated with a domestic professional rope skipping organisation and took inspiration from skipping antelope. After spending three years to polish and improve the "Sparkling Jump Rope Shoes", the rope skipping series will promote the brand's professional functionality, with "Sparkling Jump Rope Shoes" as the starting point. In terms of health technology, the Group has launched innovative technologies such as "dryness and FUNFOAM technology", "easy decontamination technology" and "Alken Heating Technology" in response to the differentiated functional needs of users, which greatly enhance product comfortability and health protection. In terms of childish fashion, the Group cooperated with the IP of "China Aerospace・Space Imagination" and launched several innovative and fashionable products. In this context, the revenue of 361° Kids for the year was RMB1,106.8 million, representing an increase of 18.7% and accounting for 18.7% of the total revenue.

Upgrading the omnichannel consumer experience and achieving healthy and rapid growth in e-commerce

The Group adheres to the "consumer-centric" business philosophy and provides customers with the best shopping experience by continuously enhancing the image of its stores to meet consumers' multi-scenario and diversified needs. During the year under review, the number of 361° core brand ninth-generation image stores reached 1,486, accounting for 28.2% of total, and the number of children's fourth-generation image stores has reached approximately 860, accounting for 45.4% of total, bringing consumers premium shopping experience.

As e-commerce is embracing for opportunities ahead, the Group is actively developing its e-commerce business and relying on the advantages of big data to continuously improve product planning and marketing effectiveness. During the year under review, the Group launched high-tech products, exclusive celebrity series and IP series on e-commerce, such as the AG series basketball shoes, which were sold out immediately after release. The revenue from the sales of the Group's web-exclusive products at the e-commerce business reached RMB1,227.4 million, accounting for 20.7% of the Group's total revenue.

Continuously investing in scientific research and innovation, laying a solid foundation for product development

Research and innovation have always been the core strength of 361°. During the year under review, the Group launched a number of technological materials, including the brand-new scientific material "ENRG-X" that combines both workout performance of QU!KFOAM and comfortable experience of NFO technology, and released the professional basketball shoes AG2X and 3TECH running shoes 2.0, bringing new technology experience to consumers. During the year under review, the Group's products have won several internationally renowned awards. For example, 361°'s Light Speed Suit won the 2021 German Red Dot Award, and the international line of running shoes 361-STRATA 4 was selected as "one of the best 25 Top Pairs for Running Shoes in 2021" by United States' "Runner's World" magazine, etc.

Prospects

Mr. Ding Wuhao, Executive Director and President of 361° said, "Looking forward to 2022, the demand of China's sporting goods market remains strong because of the normalisation of the epidemic, the rise of national products and rising health awareness. 361°, as China's leading sports brand, will fully grasp the opportunity and continue to develop the Group's business with one extra degree of passion, bringing surprises to those who love and support 361°. In September this year, the 19th Asian Games Hangzhou 2022 will be grandly opened, and we all look forward to seeing 361° shine again in the Asian Games."

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About 361 Degrees International Limited

Established in 2003, 361° is a leading sportswear enterprise in China. 361° is positioned in the mass market and has a full industrial chain business covering product research and development, manufacturing, distribution and marketing. Upholding the brand concept of "One Extra Degree of Passion" （多一度熱愛）, 361° insists on its "specialised, youthful and internationalised" brand positioning, , focusing on the development of 361° brand and 361° Kids. The 361° brand is driven by professional sports and fashionable sports, focusing on professional sports functionality, mainly on running, basketball, comprehensive training, sports life and other core categories of products, and cooperating with many well-known IP to launch co-branded products, covering the public sports consumer groups. 361° Kids's differentiation advantage is formed by professional functionality, healthy technology and children's fashion, meeting the needs of all ages from young children to teenagers. 361° is committed to promoting the development of sports and lifestyle in China and the world.

361° is committed to promoting the development of sports in China and the world, and is the first Chinese sports brand to sponsor the Olympic Games and the Asian Games for four consecutive years. 361° has signed up famous athletes in various sports, including international basketball stars Aaron GORDON and Spencer DINWIDDIE, Chinese professional basketball player Koran MAKAN and WBA Featherweight World Boxing Champion XU Can, etc. The rich resources of spokesmen have helped the brand value to rise continuously. In addition, 361° is committed to strengthening the trendy characteristics of its products and has signed famous young actors GONG Jun and WANG An Yu as spokespersons to successfully develop the young market.

Currently, 361° has established a leading position in major cities in China through its franchised distribution model, managing a vast distribution network of over 7,000 retail stores in China and worldwide through exclusive first-tier distributors and second-tier franchised retailers.

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

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