361 DEGREES INTERNATIONAL : ' 2016 Revenue Up 12.6% - Adopt a Multi-brand Strategy Focus on Functional Products

[For Immediate Release] 361 Degrees International Limited 361 度 國 際 有 限 公 司

(incorporated in the Cayman Islands with limited liability)

361 Degrees' 2016 Revenue Up 12.6% Adopt a Multi-brand Strategy Focus on Functional Products

(14 March 2017 - Hong Kong) - The leading sportswear brand enterprise in China, 361 Degrees International Limited ("361˚" or the "Company", together with its subsidiaries, the "Group"; HKSE stock code: 1361), is pleased to announce its results for the year ended 31 December 2016.

Financial Highlights

For the year ended 31 December

(RMB million) 2016	2015
Revenue 5,022.7	4,458.7	+12.6%
Gross profit 2,109.9	1,823.0	+15.7%
Operating profit 949.3	914.7	+3.8%
Profit before taxation 707.3	789.2	-10.4%
Profit attributable to equity shareholders 402.7	517.6	-22.2%

Change

Net profit excluding the one-off loss on repurchase of senior unsecured notes

457.7

517.6 -11.6%

Profitability ratios (%)

Basic EPS (RMB cents) 19.5 25.0 -22.0%

Gross margin	42.0	40.9	+1.1 p.p.
Operating margin	18.9	20.5	-1.6 p.p.
Net margin	8.0	11.6	-3.6 p.p.
Effective income tax rate	40.5	32.9	+7.6 p.p.

Operating ratio as percentage of revenue (%)

R&D	3.7	3.1 +0.6 p.p.
Staff costs	8.7	8.3 +0.4 p.p.
Advertising and Promotion	11.4	12.8 -1.4 p.p.
Cash position (RMB million)	Change (RMB mil)
Net cash (including deposits and cash equivalents)	2,801.2	2,403.7 397.5
Net cash generated from operating activities	1,131.6	245.4 886.2
Dividends
Interim dividends per share (RMB cents)	10.0	5.0 --
Final dividends per share (RMB cents)	1.0	5.3 --

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During the review period, the Group's revenue rose by 12.6% to RMB5,022.7 million (2015: RMB4,458.7 million), mainly driven by the growth in trade fair order in 2016. Revenue contribution from footwear segment increased to 43.9%; apparel sales accounted for 39.1% of the Group's revenue. In addition, the revenue of 361° Kids continued its strong momentum and grew by 10.6% to RMB651.2 million (2015: RMB588.9 million), representing 13.0% of the Group's revenue. Such growth reflected a well-established customer base for the kids' sportswear business and great potential for further growth.

The gross profit in 2016 was RMB2,109.9 million (2015: RMB1,823.0 million), gross margin increased to 42.0%.

Profit attributable to the equity shareholders was RMB402.7 million (2015: RMB517.6 million), representing a decrease of 22.2%. Basic earnings per share were RMB19.5 cents (2015: RMB25.0 cents). A one-off net loss of RMB55.1 million was recorded on the Group's repurchase of senior unsecured notes due 2017; net profit excluding such loss was RMB457.7 million.

During the review period, net cash generated from operating activities was RMB1,131.6 million (2015: RMB 245.4 million). Net cash (including deposits and cash equivalents) was RMB2.8 billion (2015: RMB2.4 billion). The Group's strong financial position put it in good stead to capture future business development opportunities in China's continuously growing sportswear industry.

The Board of Directors have declared a final dividend of RMB1.0 cent per share, which together with the interim dividend and the special dividend of RMB10.0 cents, bringing the total dividend for the year amounted to RMB11.0 cents per share (2015: RMB10.3 cents), representing an annual dividend payout ratio of 56.5%. The Group will strive to steadily improve dividend payout ratio, in order to reward its shareholders for their long term support.

Operational Highlights Multi-brand strategy to tap into various market segments

In 2016, 361˚ continued to adopt a multi-brand strategy with 361˚, 361˚Kids and outdoor brand ONE WAY, to target the domestic mass market, kids' sport and high-end outdoor sport market respectively. As of 31 December 2016, total number of 361˚ retail outlets streamlined from 7,208 to 6,357 in China. The Group has refined management by switching from quantitative expansion to a qualitative boost in same-store efficiency. The same-store sales growth of the Group's retail outlets has maintained stable at around 7%, surpassing the industry average. The Group will focus on building a sustainable business model and establishing a unified retail ecosystem. The Group also encourages the development of large-scale composite stores (with 361˚ Kids), so as to enhance footfall and further drive same-store sales. Also, the Group will continue to increase investment in R&D, product differentiation and upgrade terminal payment methods. The Group will also concentrate on developing functional high-end running and comprehensive training products to enhance user experience and customer loyalty.

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In 2016, there were 2,000 points-of-sale offering 361˚Kids products, of which 606 stores were stand-alone street levels stores, 921 were within the 361˚ core brand authorized retail stores. During the review period, kids wear business continued to grow steadily and contributed to 13.0% of the Group's revenue, representing a year-on-year growth of 10.6%. In 2016, there were three trade fairs hosted for 361˚Kids, all of which achieved satisfactory growth. The Group's kids wear business has been granted numerous awards during the review period, including "March 15th Influential Brands in China Consumer Market and Industry", "China's Top Ten Kids Brands" and "China's Best Kids Brands", which altogether laid the solid foundation for future growth of the kids' wear segment. 361˚ Kids launched children underwear series in 2017, and more products of this category will be released in the future. Due to the rapid rise in disposable income and the full implementation of two-child policy, the kids wear segment is expected to maintain rapid growth going forward.

Currently, the ski and outdoor sportswear industry in China is still in the early stage of development. However, the public interest of winter sports and the demand for related products have already picked up due to the government's supportive policies and the publicity given to winter sports on Beijing and Zhangjiakou's host of the 2022 Winter Olympic Games. It is expected that ONE WAY, the Group's high-end winter sports brand, will unleash its huge growth potential. As of 31 December 2016, there were 58 self-operated ONE WAY stores in China. ONE WAY has been building its brand through the sponsorship of gold medal national teams, Olympic champions and World Championships. In the future, the Group will continue to expand its sales network in order to lay a sturdy foundation for rapid development.

Focus on functional products Overseas business began to burgeon

In order to further diversify its business and explore growth potential, the Group has been actively expanding into overseas market. As of 31 December 2016, the Group has established 1,017, 264, 67 and 20 points of sales in Brazil, the United States, Europe and Taiwan respectively. Currently, the network in Europe covers the United Kingdom, Germany, France, Austria and Switzerland. International products are also available in 135 361˚ stores located in the first-tier and second-tier cities in China, and the Group intends to further expand its sales network. 361˚ international has launched a series of functional running shoes, which were recommended by Runners' World, a professional running magazine. Sensation, a series with critical acclaim, has been evolved to the second generation. It was well received by professional runners for its superior functionality after successful launch to the market in November 2016, and was recommended by Runner's World as its top pick this spring. During the review period, revenue from overseas business contributed about 1.6% of the total revenue of the Group, representing a growth rate of 80.6%. The Group expects international business to play an increasingly important role in terms of revenue contribution in the next three to five years.

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Historic sponsorship of Rio Olympics Continue to promote the strategy of internationalization

As the first Chinese sportswear brand to sponsor the Olympic Games, the Group appeared at the 2016 Rio Olympics and Paralympic Games as an official supporter. The sponsorship rapidly enhanced 361's brand awareness and influence in the world. The Chinese National Swimming Team, the Chinese National Cycling Team, Greece and South Africa delegations sponsored by the Group had all achieved excellent performance, promulgating the beliefs of "Passion is Gold" and "Love without Boundaries" to sports lovers all over the world.

In terms of sports resources, apart from the existing celebrity endorsements, the Group newly signed outstanding basketball player Jimmer Fredette, up-and-coming swimming stars LIU Xiang and ZHANG Yufei. Meanwhile, the Group maintained close cooperative relationship with swimmer SUN Yang, the Chinese National Swimming Team and the Chinese National Cycling Team. In addition, through the sponsorship of Mr. Kai Markus, a German runner's 12,000-kilometer's Silk Road long-running project, the Group responded to the government's "One Belt and One Road" strategy and promoted the cultural exchange between China and the West, while further expanding its international influence. In the future, the Group will continue to promote its strategy of internationalization and support the development of the whole sports industry.

E-commerce business to become the new growth driver

With online shopping growing at a fast pace, the Group also strived to build its contemporary e-commerce platform to seize growth opportunities. Currently, the Group conducts its modern e-commerce business mainly through its official website and other renowned e-commerce platforms in China including Tmall, Taobao, and JD to achieve product differentiation and create synergy between online and offline stores. On August 30 2016, the Group acquired 80% equity interest of its e-commerce distributor to switch from distribution model to self-operation. For the four months ended 31 December 2016, the e-commerce business contributed RMB71.1 million of revenue and accounted for 1.4% of the Group's total revenue. The Group aims to expand online sales, and make it a significant part of the Group's revenue in the future.

Enhance products' technology and functionality

The Group has been consistently strengthening its R&D capabilities to optimize its product design and yield better product differentiation for various market needs. During the review period, the Group adopted a number of constructive ideas in fashion design, shape and fabric selection. The Group also integrated popular elements into the design concept and introduced advanced materials made from cutting-edge technology. In addition, the Group builds on its self-developed technologies such as SAC-air, NFO, Quikfoam to enhance functionality of footwear products. As of 31 December 2016, the Group has obtained 210 patents, which created technological barrier in favor of the Group to some extent. During the review period, R&D expenses accounted for 3.7% of the Group's revenue. The number is expected to increase due to the Group's intensifying efforts to strengthen product functionality and achieve product differentiation.

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