During the review period, administrative expenses increased by 43.3% to RMB219.7 million (1H2015:RMB153.2 million), accounting for approximately 8.6% of the Group's revenue (1H2015: 6.9%). The increase was mainly due to the surge in research and development ("R&D") expenses, the salary increases for management staffs of the overseas business development unit, and the depreciation cost incurred by the new Xiamen headquarter. During the review period, the Group continued to invest in both internal and external R&D teams to enhance product development and competitiveness, which drove R&D expenses up to RMB72.4 million (1H2015:RMB54.4 million), representing 2.8% of the Group's revenue (1H2015: 2.5%). Advertising and promotional expenses increased by 15.4% to RMB310.9 million (1H2015:RMB 269.4 million), accounting for 12.2% of the Group's revenue.

As at 30 June 2016, more than 89.3% of trade debtors were within 90 days (1H2015: 75.7%) with none over 180 days.

After deducting finance costs of RMB78.1 million (1H2015:RMB62.8 million), profit before taxation was RMB427.2 million (1H2015:RMB422.7 million).

After deducting the income tax of RMB149.7 million, profit attributable to equity shareholders grew 1.3% to RMB273.1 million (1H2015:RMB269.6 million), equivalent to earnings per share of RMB13.2 cents.

During the review period, net cash generated from operating activities amounted to RMB372.4 million (1H2015:RMB233.1 million). Net cash position of the Group (including deposits and other cash equivalents) was RMB2.5 billion (1H2015:RMB2.7 billion). Its strong financial position stands the Group in good stead for future business opportunities in China's sportswear industry.

Noting the satisfactory results of the Group, the Board of Directors have declared an interim dividend of RMB5 cents per share (1H2015:RMB5 cents per share), and a special dividend of RMB5 cents per share. The Group will strive to steadily improve the dividend payout ratio, in order to reward its shareholders for their long term support.

Operational Highlights

In the first half of 2016, 361˚ continued to focus on China's mass functional sportswear market, and adopted a multi-brand strategy with 361˚, 361˚Kids and outdoor brand ONE WAY, to capture multi-channel sales opportunities. As of 30 June 2016, the Group has a franchised network of 6,853 stores in China. The Group will focus on building a sustainable business model, increase investment in R&D, product differentiation, and upgrade terminal payment methods to enhance the efficiency and profitability of the stores. The Group also encourages the development of large-scale composite stores (with 361˚ Kids), so as to enhance footfall and further drive sales. Same store sales growth of 361 has achieved high single-digit growth for six consecutive quarters, which showed that all of our initiatives have yielded significant results.

In the first half of 2016, the number of 361˚Kids stores reached 2,416, with 1,134 located in adults' stores. During the review period, the kids business continued to grow steadily, and contributed to more than 10.7% of the Group's revenue. 361˚Kids is highly acclaimed in the industry and among consumers, which has been granted numerous awards during the review period, including "China's Top Ten Kids Brands" and "China's Best Kids Brands" and "March 15th Influential Brands in China Consumer Market and Industry". With the full implementation of the two-child policy, the potential consumer group of 361˚Kids and the kids market will continue to grow, the Group is confident in the expansion of the kids' wear brand.

Internet and mobile sales have evolved to become an important driving force of all retail business in recent years, the Group has focused on building its contemporary e-commerce business. Currently, apart from 361's official website, the Group has also entered major e-commerce platforms such as Tmall, Taobao, Jingdong and VIP Shop. In addition, the Group has launched online exclusive merchandises, including "361 + Baidu smart kids' shoes" and "361 + iMate smart running shoes" to achieve product differentiation and create synergy between online shops and offline retail stores. During the review period, revenue from the sales of online exclusive merchandise to the Group's e-commerce distributor was RMB 166.4 million (1H2015:RMB 62.4 million), accounting for 6.5% of the Group's total revenue (1H2015: 2.8%). The Group aims to expand online sales business, and make it a significant contributor of the Group's revenue in the future.

The Group has been consistently strengthening its product innovation and has devoted a full range of R&D efforts to seizing market share with multi-functional and value-for-money products. The Group began its own R&D of iMate smart running shoes in the second half of 2015. The self-developed series combined the three elements of shoes, smart chip and mobile APP, which aim to enhance running experience with its outstanding functionality and advanced technology. This iMate smart running shoes were introduced to market in May this year and has been well received by runners at different levels. At the same time, the Group has continued to optimize its R&D capabilities by improving the design, modeling and fabric selection, and introduced the cutting-edge patented fabrics in all kinds of footwear and apparel products, to achieve product differentiation.

In order to further diversify its business and explore growth potential, the Group has been exploring new business opportunities and actively tapping into overseas market. As of 30 June 2016, the Group has set up wholly-owned subsidiaries in Brazil and the United States and established 908, 180 and 52 points of sales in Brazil, the United States, and Europe respectively. At the 2016 Rio Olympics and Paralympic Games, the Group is supporting many athletes and delegates as an Official Tier-2 Supporter. As the first Chinese sportswear brand that has ever been the sponsor of the worldwide sports events, the sponsorship will allow the Group to enhance brand awareness in overseas market, and bring the Group's brand value to new heights. During the review period, revenue from overseas business more than doubled to RMB45.2 million (2015:RMB20.5 million) and contributed about 1.7% of the total revenue of the Group. In the coming three to five years, the Group will accelerate the development of its international business. The Group expects the international business to play an increasingly important role in terms of revenue contribution.

After Beijing's successful bid to host the 2022 Winter Olympics, the Chinese government has implemented the "300 Million People Winter Sports Plan" to enhance public awareness of winter sports, which is expected to raise public interest in winter sports and the subsequent demand for related equipment. As such, the Group expects its high-end winter sports brand ONE WAY to hugely benefit from this trend. As of 30 June 2016, ONE WAY had 65 self-operated stores in 29 first-tier and second-tier cities of China. In the future, the Group will continue to expand its sales network to lay the foundation for rapid development.

Since 2015, the Chinese government has introduced a number of reforms to promote football development, including "Chinese Football Sports Reform Plan," and "Chinese Football Mid to Long Term Development Plan" issued by the National Development and Reform Commission in April 2016, which is expected to raise public awareness of this sport. The Group launched a series of soccer products in September 2015. Its fast execution and professionalism of products once again received warm market response. Also, 361˚ has signed Yang Xu, the striker in China's national soccer squad, as its brand ambassador to promote 361˚ soccer products. In the forthcoming future, the Group will further strengthen its R&D capabilities and introduce more value-for-money and professional soccer equipment to help popularize soccer along with national policy.

Prospects

The Chinese government announced the "National Fitness Program 2016-2020", with an aim to promote sports consumption to reach RMB1.5 trillion by 2020. Looking ahead, China's sports industry will further expand, and demand for professional sportswear will remain on a steady rise. Faced with fierce industry competition, 361˚ is confident in the prospects of the Group. The Group will remain devoted to product innovation and R&D to maintain its leading position with product differentiation. In addition, the Group will expand its contemporary e-commerce business and boost online sales, and promote its emerging brand ONE WAY. The Group will also improve overall operational efficiency to achieve long-term profitability, and strength its leading position.

Mr. Ding Wuhao, President of 361˚ Group concludes, "361˚ will continue to target the mass market, and establish a sustainable business model. The Group will continue to leverage its multi-brand strategy to meet the needs of different customers. 361˚will consolidate flagship products for running, and develop products with bright prospects, such as soccer and winter sports. At the same time, the Group will expand its international business and compete with international brand with our superb product quality. In addition, the Group will continue to increase the proportion of e-commerce sales, and improve sales from online channels. We will also remain focused on product development, and maintain our leading position with cutting-edge technologies. The Group supports the Rio Olympics and Paralympics Games as an Official Supporter, I believe it will further help our brand gain huge prominence and bring it to new heights!"

- End -

About 361 Degrees International Limited

Established in 2003, 361˚ is a leading sportswear brand enterprise in China with a growing international presence. The Group designs, develops, manufactures and sells functional, innovative and stylish sportswear products to cater to the active, athletic and casual sportswear needs of adults, young adults and children. The Group offers high-performance and value-for-money footwear, apparel, and accessories products targeted at mass market.

The Group operates a distributorship business model through 31 exclusive distributors and authorized retailers to manage an extensive distribution network of approximately 7,000 retail stores across China. It has established a leading position in third-tier and below cities in China.

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

For further information, please contact:

361 Degrees International Limited
Ms. Nina Zhan
Vice-President, Investor Relations
361 Degrees International Limited
Email: nina@361sportshk.com

iPR Ogilvy & Mather
Natalie Tam / Lorraine Luk / Hazel Chan / Bianca Yu
Tel: (852) 2136 6182 / 2169 0467 / 3920 7651 / 3920 7637
Fax: (852) 3170 6606
Email: 361@iprogilvy.com

SOURCE: 361 Degrees International Limited