DJ Samarkand Group plc: Interim Results
Samarkand Group plc (SMK) Samarkand Group plc: Interim Results 16-Dec-2021 / 07:00 GMT/BST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
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16 December 2021
Samarkand Group plc
("Samarkand", the "Company" or together with its subsidiaries the "Group")
Interim Results for the half-year ending 30 September 2021
Samarkand Group plc, the cross-border eCommerce technology solution provider, announces its unaudited interim results for the half year ending 30 September 2021 ("H1 2022").
David Hampstead, Chief Executive Officer of Samarkand Group, commented: "The first six months of the year represent a period of considerable progress for the Group. Following our listing onto the Aquis Stock Exchange in March, we have proceeded to continue exploiting the demand for access to the Chinese eCommerce market, whilst allocating the fundraised capital towards strategic growth and operational enhancements. I would like to take this opportunity to thank all of the Group's staff for their continued hard work and dedication.
We look to the future with real optimism, with the Group well-positioned in a space only set to expand further. We are confident in Samarkand's opportunity to become an integral driver of commerce in the world's largest eCommerce market."
Chief Executive's Review
Overview
I am pleased to be able to report on our first interim results, in which we have made strong operational progress and continued to invest for future growth in line with our strategy detailed at the time of IPO in March of this year. Our increased profile and the early traction of our Nomad Checkout solution soon after the IPO has catalysed significant developments for us with regards partnerships with leading global companies.
Accelerating technology investment
We took the decision to invest more proactively in our technology and personnel. This investment has enabled us to secure significant partnerships which will allow us to a) reach a much wider client base globally and b) consolidate our competitive lead and make our unique offering even more defendable. Our existing partnership with SF Express has already delivered two significant client wins for us in Asia where the SF Express network is particularly strong. We are now well underway with joint business development activities with SF Express sales teams in Japan, South Korea and Hong Kong and we expect to build a healthy pipeline of clients together. In other international markets we are developing partnerships with major organisations, and we look forward to updating shareholders in due course.
The opportunity for us to become an integral part of the infrastructure powering the future flow of commerce between international brands and consumers in the world's largest eCommerce market is within reach. Cross-border eCommerce is accelerating in markets globally as more consumers embrace shopping irrespective of borders, growing at twice the rate of domestic eCommerce. The next few years will be key to determining who wins in this new generation of global trade and we are positioning ourselves to be amongst them.
Revenue increase on core activities
Our technology and services enable brands in the West to access the world's most lucrative eCommerce market in China and as a result we have not been immune to the highly publicised supply chain issues which have impacted the retail industry. Considering this, revenues of GBP7.2m (H1 2021: GBP7.3m), flat year on year against a strong comparable period, when there was an unprecedented surge in eCommerce, is a very credible performance. Despite these headwinds, revenue from core activities has increased, Nomad technology revenue is up 15% and brand ownership revenue is up 13%. Inline with our strategy we have de-prioritised the wholesale distribution part of the business and revenue has decreased 31% from these activities. The deals that we have signed and new channels we have launched post-period have resulted in October and November trading being 15% and 25% ahead YoY respectively with this trend continuing to accelerate significantly into the first two weeks of December. Adjusted EBITDA loss was GBP2.6m (H1 2021 profit: GBP0.3m) which reflects the ongoing investments being made that we set out in our IPO prospectus. The Company continues to enjoy a strong balance sheet with cash and cash equivalents at 30 September of GBP10.4m.
Our Market
The Chinese eCommerce market continues to be by far the world's largest, both in terms of size and scale, representing immense opportunity for both our clients and the Company. The pandemic undoubtedly created both challenges and opportunities and, as a business, we have adapted well to restrictions imposed on international travel and found alternative ways to operate.
As noted at the time of Full Year Results in July, disruptions to travel have caused issues surrounding the discovery of Western brands by Chinese consumers. There has been increasing commentary around the rise in the pertinence of domestic Chinese brands in favour of household names in the West. Our experience suggests that this is largely concentrated around those goods which have been traditionally manufactured in the East by western brands, such as apparel. In the beauty and health markets, and particularly high-end segments, in which Samarkand currently operates, consumers recognise, and place great value on, the provenance, quality and cache of the products they buy.
Response to macro-challenges delivering results
The continuing strain placed on supply chains and the effect on consumer confidence felt globally, including China, has resulted in a challenging first half, especially when compared to the unprecedented surge we experienced at the start of the pandemic in H1 2020 when supply chains were still in good shape and consumers hadn't endured a year of uncertainty. We have anticipated those challenges and proactively adapted in a number of ways including taking advantage of our strong balance sheet to invest in additional stock and at the half year, the Group had inventory of GBP3.5 million compared to the GBP1.9 million worth of stock held at the same point in the prior year. We are pleased to have managed to remain stable with our first half revenue and we are now seeing the hard work, investment in new channels and increased capabilities coming through in H2 with October through to December performing strongly.
As part of our growth strategy, we have identified significant opportunities which will have a positive forward-looking effect. In near-China markets such as Japan, South Korea and SE Asia the dramatic reduction in Chinese tourists has meant an increased interest from merchants in cross-border eCommerce to reach these valuable consumers. In response to this we established an office in Japan to service this region and have recently signed two large enterprise clients to our Nomad Checkout solution which are planned to come online in early 2022. Our investment from, and partnership with, China's leading express delivery company, SF Express, has opened a healthy pipeline of potential clients in the region that we are actively developing together. Our recent announcements relating to Amorepacific and Strawberrynet is a direct result of the joint business development activities we are undertaking. We expect these to start contributing to the first quarter of the new year and to announce further client wins.
Strategic progress
As outlined at the time of listing, the net proceeds from the fundraising were to be allocated to development of the Nomad platform's functionality and services, to expand business development internationally, to extend marketing of our own brands and to pursue acquisitive growth opportunities. I am delighted that the first half of the year signifies a period of considerable progress made against these objectives.
International expansion
In line with our ambitions to expand internationally, in June we formally opened an office in Tokyo in order to help Japanese brands penetrate the Chinese eCommerce market. Japan is the world's 4th largest eCommerce market, and Japanese brands are highly sought after by Chinese consumers for their design and high-quality products. Samarkand's office in Tokyo is already engaged with a number of Japanese brands and retailers looking to improve their eCommerce penetration in China. We are also developing a strategy to penetrate further into Northeast Asian markets and have benefitted from one of the world's largest beauty conglomerates selecting our Nomad Checkout solution to power direct-to-consumer sales, from South Korea to Chinese consumers.
Complementary and fast growing acquisitions
In May we acquired Zita West Products Limited and a majority interest in Babawest Ltd for a total consideration of just over GBP2.8 million. Having collaborated commercially with both businesses for more than 3 years prior to their acquisition, the acquisition of these two businesses made sense from a strategic perspective. We had identified the businesses as attractive targets thanks to the sectors in which they operate. The fertility, pregnancy and mother & baby spaces continue to expand in China. Both companies have grown significantly since acquisition, taking advantage of the pre-existing supply chain of Probio7 which we had successfully established. Through the application of our market knowledge and the use of our Nomad platform, Zita West and Babawest sales have increased by 55% in the 5 months since acquisition compared to the same period last year. We have seen further increases in Zita West post period, driven by a new direct-to-consumer website in the UK, expanded listings in John Bell & Croydon and Harrods and the launch of a Tmall Flagship store in China.
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DJ Samarkand Group plc: Interim Results -2-
More recently, the post-period acquisition of the Scottish brand, Napiers the Herbalists, signals a further execution of our stated intention to pursue acquisition opportunities. The business was acquired in November for an initial consideration of GBP1.7m. Napiers and Samarkand share the same vision, and we are confident that Napiers will benefit from our expertise and synergies and will follow similar trajectories to Probio7, Zita West Products and Baba West having integrated well into the Group.
New channels and major client wins for our technology
Despite the difficult trading period, revenues attributed to our Nomad Technology have increased 15%. In November we added the fastest growing eCommerce platform in China, Douyin, to our Nomad Storefront offering and launched our first store on the platform. Douyin is the Chinese version of TikTok and has become a major player in eCommerce with GBP95bn (forecast) of GMV on the platform in 2021 up from GBP17bn in 2019. Through our direct integration we can now offer international merchants the ability to ship directly from overseas to consumers shopping on Douyin and from bonded warehouses within China. We went live with our first store on the platform in November and we are very pleased with the results and expect to see significant growth from this exciting channel. The launch of our Nomad Checkout SaaS product in a pilot project with THG (The Hut Group) has been successful and we expect to announce a full roll-out and extension of services in due course. Client wins have quickly followed in South Korea and Hong Kong with other large organisations which are scheduled for launch in Q1 2022.
Growth through top-tier partnerships
We now find ourselves in a position where the solutions we first envisaged 4 years ago are now a reality, powering sales for major retailers and attracting the attention of global logistics, payments and eCommerce technology companies who we are seeking to build strategic partnerships with. In this regard, I am delighted that Philip Smiley will be joining the Board as an executive early in the New Year. Phil is well known to the Company, being the brother of co-founder and Chief Operating Officer, Simon. His experience and understanding of our markets and offering will be of huge value to our business. Previously Global CEO of the Consulting Division of Kantar, the world's leading data, insights and consulting company, he brings with him deep retail and consumer industry expertise and his proven track record in scaling b2b technology and services businesses, experience in acquisition, investment and partnership development will be invaluable.
More widely there have been significant hires made across the Group in order to deal with the increases in working capacity as we expand our operations. Since our IPO in March 2021, our total number of staff has increased from 99 to over 150 in December 2021. The decision to accelerate investment in talent and capability has been taken to enable us to capitalise on the significant opportunities that we have developed since March with top-tier partners and enterprise clients. We did this despite the short-term trading headwinds we have experienced in the first half
Outlook statement
The first half presented Samarkand with challenges which were felt across the retail sector globally and impacted sales in the period. We have worked hard to mitigate the effect of supply chain issues and are pleased with the momentum shown in the first two months of H2 with 15% and 25% sales growth in October and November respectively year on year. This trend has accelerated into December and we expect to be further ahead by month end. We will continue to see the benefit of deals signed in the first half start to come through during the rest of the financial year. The ongoing opportunity for the Group remains as strong as ever and any increased complexity in accessing the world's largest eCommerce market further strengthens our competitive advantage and barriers to entry for our competitors.
We have made considerable operational progress since IPO and the strength of our offering in accessing the world's largest eCommerce market has only increased. This is evidenced by the nature of the organisations that are looking to form strategic alliances with us. The Board remains confident in its execution of the plan outlined at IPO and in delivering significant returns for shareholders. We thank them for their continued support.
FINANCIAL REVIEW
Overview
During the year, the Group's revenues, excluding exceptional revenues of GBP5.8m in H1 2021, remained flat at GBP7.2m (H1 2021: GBP7.3m) with gross margin decreasing to 57% (H1 2021: 62% excluding exceptional revenue contract).
Revenues from our core activities, Nomad technology is up 15% to GBP3.0m (H1 2021: GBP2.6m) and brand ownership revenues is up 13% to GBP2.3m (H1 2021: GBP2.0m) with revenues from our legacy distribution business decreasing 31% to GBP1.8m (H1 2021: GBP2.6m). The Group continues its strategy of moving away from B2B distribution model and focusing on growing its own brands, its Nomad technology revenues and increasing its B2C capabilities in the UK, China and rest of the world.
The Group's gross margin has decreased to 57% (H1 2021: 62% excluding exceptional revenues). The reduction in gross margin is a result of a change in our product mix, supply chain pricing pressures not all which could be passed on to our customers.
Exceptional Revenues
In H1 2021, the Group was awarded a GBP5.8m government contract from the Department of Health and Social Care (the "Exceptional Revenue") for the supply of personal protective equipment. This contract was successfully fulfilled.
Operating expenses
Selling and distribution expenses increased to 45% (H1 2021: 36% excluding exceptional revenue contract) of revenue, as a result of an increase in market advertising and distribution costs for brands the Group work with. In market advertising includes social media activities such as livestreaming, on-platform and off-platform promotions. Furthermore, there is a significant increase in marketing investment in our own brand Probio7 in line with our plans set out at the IPO.
Administrative expenses, excluding one off cost such as exceptional revenues, share-based payment expense, acquisition and restructuring related costs, increased to 49% (H1 2021: 23%) of revenue as a result of an increase in staff costs and additional regulatory and compliance costs. Staff costs have increased to GBP2.8m (H1 2021: GBP1.2m) to allow for the accelerated rollout of our Nomad technology platform and an increase client service, fulfilment and operational capabilities as outlined at our IPO. The average number of employees for the six months ending 30 September 2021 was 130 (H1 2021: 73).
Earnings per share
Basic and diluted loss per share was 6.5 pence per share (H1 2021 earnings: 5.2 pence per share).
Net cash/(debt)
The Group listed on the Apex segment of the AQSE Growth Market in March 2021 and raised a total of GBP17m from both institutional investors and qualified investors. On 10 May 2021, the Group issued 2,737,840 new ordinary shares at a price of 115 pence raising GBP3,148,516 from United Win Asia Limited, a subsidiary of S.F. Holding Co., Ltd., as part of a strategic investment to further develop the Group's international expansion and technology.
As a result of the proceeds raised at the IPO and subsequent raise from United Win Asia Limited, the Group has moved from a net debt to net cash position. Alongside the funds raised, the directors' loans, former director loans and loan notes were converted into shares or repaid.
Sep-21 Sep-20 Mar-21 Cash and cash equivalents 10,389,765 1,468,146 14,606,867 Right-of-use lease liabilities (847,433) (795,921) (972,994) Borrowings (1,607,040) (3,527,457) (2,082,538) Directors' loans - (501,563) - Net cash / (debt) 7,935,292 (3,356,795) 11,551,335
At the period end, the Group's net cash position was GBP7.9m (H1 2021: net debt GBP3.4m). The Group has brought forward significant investments in its technology and increased its client service, fulfilment and operational capabilities as well as invested in marketing its own brands. On the 1 May 2021, the Group also acquired Zita West Products Limited and majority stake in Babawest Limited for total cash consideration of GBP2.3m and GBP0.5m in shares.
Depreciation and amortisation
The total depreciation and amortisation costs were GBP0.1m and GBP0.2m respectively (H1 2021: GBP0.1m and GBP0.1m). The Group continued to invest in its Nomad Technology platform with a total of GBP0.5m (H1 2021: GBP0.3m) development costs capitalised during the period.
Adjusted EBITDA loss
Adjusted EBITDA loss of GBP2.7m (H1 2021: profit GBP0.3m). The increase in adjusted EBITDA loss is driven by the increase in staff cost and marketing.
Going Concern
The financial statements have been prepared on a going concern basis. In adopting this basis, the Directors have carried out a robust assessment of the emerging and principal risks facing the business. As a result of the assessment performed, the Directors consider that the Group has adequate resources to continue its normal course of operations for the foreseeable future.
Consolidated Unaudited Statement of Comprehensive Income
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For the six month period ended 30 September 2021
Period ended Period ended Year ended
30 September 2021 30 September 2020 31 March 2021
(Unaudited) (Unaudited) (Audited)
Notes GBP GBP GBP
Revenue 3 7,167,152 13,064,342 20,600,541
Cost of sales 3 (3,061,619) (5,757,722) (8,770,887)
Gross profit 4,105,533 7,306,620 11,829,654
Selling and distribution expenses (3,262,723) (3,301,438) (6,189,506)
Administrative expenses 4 (3,917,370) (1,682,048) (4,506,290)
Adjusted EBITDA (2,635,916) 300,019 (418,675)
Share-based payment and equity related 5 (315,540) - (26,914)
expenses
IPO Listing Fees and acquisition costs 5 (123,104) (16,506) (460,174)
Exceptional revenue (net profit) - 2,039,621 2,039,621
EBITDA (3,074,560) 2,323,134 1,133,858
Depreciation and amortisation (362,561) (229,906) (503,354)
Operating profit/(loss) (3,437,121) 2,093,228 630,504
Finance income 86 27 115
Finance costs (91,757) (211,572) (401,076)
Income/(loss) before taxation (3,528,792) 1,881,683 229,543
Taxation 13,149 4,369 177,514
Income/(loss) after taxation (3,515,643) 1,886,052 407,057
Exchange differences on translation of
foreign operations
13,435 (3,186) (18,517)
Total comprehensive income/(loss) for the (3,502,208) 1,882,866 388,540
period
Income/(loss) attributable to:
Equity holders of the Company (3,506,624) 1,847,866 405,074
Non-controlling interests (9,019) 38,186 1,983
(3,515,643) 1,886,052 407,057
Comprehensive income/(loss) attributable to:
Equity holders of the Company (3,493,189) 1,844,680 386,557
Non-controlling interests (9,019) 38,186 1,983
(3,502,208) 1,882,866 388,540
Earnings/(loss) per share (basic and (0.0648) 0.0523 0.0113
diluted) Consolidated Unaudited Statement of Financial Position As at 30 September 2021
30 September 2021 30 September 2020 31 March 2021
Unaudited Unaudited Audited
ASSETS Notes GBP GBP GBP
Intangible assets 7 4,246,664 1,271,948 1,462,981
Property, plant and equipment 233,223 157,894 151,262
Right-of-use assets 724,621 956,594 840,607
Non-current assets 5,204,508 2,386,436 2,454,850
Inventories 8 3,547,425 1,752,239 1,857,239
Trade receivables 1,790,874 1,197,056 1,013,631
Corporation tax recoverable 52,846 - 98,893
Other receivables and prepayments 791,160 500,958 522,022
Cash and cash equivalents 10,389,765 1,468,146 14,606,867
Current assets 16,572,070 4,918,399 18,098,652
Total assets 21,776,578 7,304,835 20,553,502
EQUITY AND LIABILITIES
Share capital 9 547,148 1,767 516,190
Retained earnings (4,436,296) (1,494,337) (929,672)
Currency translation reserve 5,168 (6,519) (8,267)
Capital contribution - 266,072 -
Share premium 21,022,957 - 17,412,900
Merger relief reserve (2,063,814) 28,764 (2,063,814)
Non-controlling interest (9,019) 6,018 -
Total equity 15,066,144 (1,198,235) 14,927,337
Right-of-use lease liabilities 590,159 847,433 720,353
Borrowings 1,367,144 1,163,654 1,372,964
Deferred tax liability 269,673 71,945 67,576
Total non-current liabilities 2,226,976 2,083,032 2,160,893
Trade and other payables 3,308,948 2,064,845 1,981,054
Accrued liabilities 655,722 1,045,314 472,807
Deferred revenue 21,618 196,025 42,563
Borrowings 239,896 2,363,803 709,574
Right-of-use lease liabilities 257,274 248,488 252,641
Loans from directors - 501,563 -
Refund liabilities - - 6,633
Total current liabilities 4,483,458 6,420,038 3,465,272
Total liabilities 6,710,434 8,503,070 5,626,165
Total liabilities and equity 21,776,578 7,304,835 20,553,502 Consolidated Unaudited Statement of Changes in Equity
For the six month period ended 30 September 2021
Share Share Merger Capital Currency Retained Non-controlling Total
Capital Premium relief Contribution Translation earnings interests equity
reserve Reserve
GBP GBP GBP GBP GBP GBP GBP GBP
Balance at 1 April 1,767 - 28,764 266,072 (3,333) (3,342,203) (32,168) (3,081,101)
2020
Loss after taxation - - - - - 1,847,866 38,186 1,886,052
Other comprehensive - - - - (3,186) - - (3,186)
loss
Total comprehensive - - - - (3,186) 1,847,866 38,186 1,882,866
loss for the year
Balance at 30 1,767 - 28,764 266,072 (6,519) (1,494,337) 6,018 (1,198,235)
September 2020
Balance at 1 April 516,190 17,412,900 (2,063,814) - (8,267) (929,672) - 14,927,337
2021
Loss after taxation - - - - - (3,506,624) (9,019) (3,515,643)
Other comprehensive - - - - 13,435 - - 13,435
loss
Total comprehensive
income/(loss) for the - - - - 13,435 (3,506,624) (9,019) (3,502,208)
year
Shares issued net of 30,958 3,610,057 - - - - - 3,641,015
transaction fees
30,958 3,610,057 - - - - - 3,641,015
Balance at 30 547,148 21,022,957 (2,063,814) - 5,168 (4,436,296) (9,019) 15,066,144
September 2021
Balance at 1 April 1,767 - 28,764 266,072 (3,333) (3,342,203) (32,168) (3,081,101)
2020
Profit after tax - - - - - 405,074 1,983 407,057
Other comprehensive - - - - (18,517) - - (18,517)
loss
Total comprehensive - - - - (18,517) 405,074 1,983 388,540
loss for the year
Disposal of minority - - - - - (12,891) 30,185 17,294
interests
Transactions with - - - - - (12,891) 30,185 17,294
owners
Group reconstruction 351,633 - (2,092,578) (266,072) 13,583 1,993,434 - -
Shares issued on
listing net of 147,804 15,852,283 - - - - - 16,000,087
transaction fees
Shares issued on 14,986 1,560,617 - - - - - 1,575,603
conversion of loans
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Share based payments - - - - - 26,914 - 26,914
514,423 17,412,900 (2,092,578) (266,072) 13,583 2,020,348 - 17,602,604
Balance at 31 March 516,190 17,412,900 (2,063,814) - (8,267) (929,672) - 14,927,337
2021 Consolidated Unaudited Statement of Cash Flows
For the six month period ended 30 September 2021
30 September 30 September 31 March
2021 2020 2021
Unaudited Unaudited Audited
GBP GBP GBP
Cash flows from operating activities
Income/(loss) after taxation (3,515,643) 1,886,052 407,057
Cash flow from operations reconciliation:
Depreciation and amortisation 362,561 229,906 503,354
Interest expense 60,371 175,742 314,027
Finance income (86) (27) (115)
Income tax credit - - (177,514)
Share based payment - - 26,914
Working capital adjustments:
(Increase) in inventories (1,468,921) (457,046) (562,046)
(Increase) in trade and other receivables (1,012,158) (328,173) (209,168)
Increase in trade and other payables 1,318,496 1,231,380 482,589
Cash generated from/(used) in operating activities (4,255,380) 2,737,834 785,098
Taxes (paid)/received (42,898) - 69,883
Net cash generated from/(used in) operating activities (4,298,278) 2,737,834 854,981
Cash flows from investing activities
Purchase of property, plant and equipment (117,661) (47,190) (71,238)
Payment of intangible assets (499,253) (279,072) (586,226)
Acquisition of subsidiary, net of cash acquired (1,829,993) - (9,125)
Disposal of subsidiary, net of cash sold - - 17,294
Finance income 86 (27) 115
Net cash used in investing activities (2,446,821) (326,289) (649,180)
Cash flows from financing activities
Proceeds from issue of shares, net of fees 3,141,016 - 16,000,087
Repayment of right-of-use lease liabilities (142,177) (141,633) (283,424)
Proceeds from borrowings - 1,171,467 1,833,400
Repayment of borrowings (483,505) (2,527,526) (3,703,069)
Net cash from financing activities 2,515,334 (1,497,692) 13,846,994
Net increase in cash and cash equivalents (4,229,765) 913,853 14,052,795
Cash and cash equivalents - beginning of the period 14,606,867 572,586 572,586
Effects of exchange rate changes on the balance of cash held in foreign
currencies
12,663 (18,293) (18,514)
Cash and cash equivalents - end of the period 10,389,765 1,468,146 14,606,867
Notes to the Consolidated Financial Statements For the period ended 30 September 2021 1. General information
Samarkand Group plc's registered office is Unit 13 & 14 Nelson Trading Estate, The Path, Merton, London SW19 3BL.
The results for the six months ended 30 September 2021 and 30 September 2020 are unaudited.
The Consolidated Group financial statements represents the consolidated results of Samarkand Group plc and its subsidiaries, (together referred to as the "Group").
This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 15 December 2021. The financial information in this interim report has been prepared in accordance with UK adopted international accounting standards. The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 March 2021 and which will form the basis of the 2021 financial statements. 2. Basis of preparation and measurement
(a) Basis of preparation
The financial information for the year ended 31 March 2021 included in these financial statements does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2021 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2020 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
Unless otherwise stated, the financial statements are presented in Pounds Sterling (GBP) which is the currency of the primary economic environment in which the Group operates.
Transactions in foreign currencies are translated into GBP at the rate of exchange on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the reporting date. The resulting gain or loss is reflected in the "Consolidated Statements of Comprehensive Income" within either "Finance income" or "Finance costs".
The financial statements have been prepared under the historical cost convention except for certain financial instruments that have been measured at fair value.
The financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. The directors of Samarkand Group plc have reviewed the Group's overall position and outlook and are of the opinion that the Group is sufficiently well funded to be able to operate as a going concern for at least the next twelve months from the date of approval of these financial statements
(b) Basis of consolidation
The Consolidated Group financial statements comprises the financial statements of Samarkand Group plc and its subsidiaries.
A subsidiary is defined as an entity over which Samarkand Group plc has control. Samarkand Group plc controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
Intra-group transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.
The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests. 3. Segmental analysis
An analysis of the Group's revenue and cost of sales is as follows:
30 September 2021 30 September 2020 31 March 2021
GBP GBP GBP
Revenue by business unit:
Brand ownership 2,246,237 1,992,178 3,518,615
NOMAD technology 3,035,286 2,647,107 6,360,740
Distribution 1,803,700 2,608,985 4,832,644
Exceptional revenue 5,780,000 5,780,000
Other 81,929 36,072 108,542
Total revenue 7,167,152 13,064,342 20,600,541
Revenue by geographical destination:
UK 2,380,437 7,140,368 8,960,128
China 4,743,191 5,646,203 11,131,560
Rest of the world 43,524 277,771 508,853
Total revenue 7,167,152 13,064,342 20,600,541
Cost of sale by business unit:
Brand ownership 842,751 587,086 1,126,480
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DJ Samarkand Group plc: Interim Results -5-
NOMAD technology 1,024,792 740,686 2,001,204 Distribution 1,192,414 1,300,938 2,496,299 Exceptional - 3,091,046 3,091,046 Other 1,662 37,966 55,858 Total costs of sale 3,061,619 5,757,722 8,770,887
Exceptional revenues:
In H1 2021, with teams in both the UK and China, the Group was ideally positioned to source and supply products necessary for the coronavirus response. As a result, a GBP5.8m government contract from the Department of Health and Social Care (DHSC) (the "Exceptional Revenue") was awarded to the Company in April 2020 for the supply of personal protective equipment. This contract was successfully fulfilled on time and within budget.
Segment assets:
The non-current assets of the Group are not measured or reported internally on a segmental basis as they are not considered to be attributable to any specific business segment. 4. Expenses by nature
An analysis of the Group's expenses by nature is as follows:
30 September 2021 30 September 2020 31 March 2021
GBP GBP GBP
Administrative expenses:
Property costs 181,083 93,670 227,910
Staff costs 2,767,053 1,226,071 2,982,338
Professional fees 313,547 163,798 382,068
Other 532,583 182,003 426,886
Share based payment - - 26,914
Restructuring costs 123,104 16,506 460,174
Total administrative expenses 3,917,370 1,682,048 4,506,290 5. Adjusted EBITDA
EBITDA and Adjusted EBITDA are non-GAAP measures and exclude exceptional items, depreciation, and amortisation. Exceptional items are those items the Group considers to be non-recurring or material in nature that may distort an understanding of financial performance or impair comparability.
Adjusted EBITDA is stated before exceptional items as follows:
30 September 2021 30 September 2020 31 March 2021
Note GBP GBP GBP
Share based payment and equity related expenses a 315,540 - 26,914
IPO Listing Fees and acquisition costs 123,104 16,506 460,174
Exceptional revenue (net profit) - (2,039,621) (2,039,621)
438,644 (2,023,115) (1,552,533)
a. Recompense Share Purchase for Employee Share Option Scheme
In September 2020, when the Group repaid the initial seed loan to Iceland Foods, Simon Smiley and David Hampstead personally, from their own funds, acquired 26,500 shares in Samarkand Holdings, the then holding company of the group, from Iceland Foods and from an existing shareholder, for a total sum of GBP174,000. The shares were acquired for the purposes of satisfying the Employee Share Option Scheme which were granted to key employees of the Group. Typically, this would have been satisfied by new shares issued by the Company, however this was instead effected in a manner that did not dilute the existing shareholders.
The board and the remuneration committee have agreed to repay Simon Smiley and David Hampstead the cost of these shares, by way of a one-off bonus payment. The total amount of the bonus would be GBP270,000 which represents the total cash paid grossed up for national insurance and income tax. This would result in Simon Smiley and David Hampstead being in a net nil position after tax. As a result of the Employee Share option Scheme, 10% of the Company's shares at 31 March 2021, were held by employees (outside the founders) with an additional 2% option holders yet to exercise. 6. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of the parent company by the weighted average number of ordinary shares in issue during the period. The same number of shares is used for the corresponding period in order to provide a meaningful comparison.
30 September 2021 30 September 2020 31 March 2021
GBP GBP GBP
Basic and diluted earnings/(loss) per share (6.48) pence 1.13 pence
5.23 pence
Basic and diluted weighted average number of shares in issue 54,140,377 35,340,000 35,785,999 7. Intangible assets
Development costs Trademarks Brands Goodwill Total
GBP GBP GBP GBP GBP
Cost
At 1 April 2021 1,190,555 70,372 470,151 57,807 1,788,885
Reclassification - - (10,235) 10,235 -
Restated balance as at 1 April 2021 1,190,555 70,372 459,916 68,042 1,788,885
Additions 491,057 8,196 - - 499,253
Additions through business combinations - 8,857 1,133,915 1,358,497 2,501,269
At 30 September 2021 1,681,612 87,425 1,593,831 1,426,539 4,789,407
Amortisation
At 1 April 2021 163,067 13,345 149,492 - 325,904
Amortisation charge 137,964 5,341 65,873 - 209,178
Amortisation charge through business combinations - 7,661 - - 7,661
At 30 September 2021 301,031 26,347 215,365 - 542,743
Net book value
At 31 March 2021 1,027,488 57,027 320,659 57,807 1,462,981
At 30 September 2021 1,380,581 61,078 1,378,466 1,426,539 4,246,664
Development costs Trademarks Brands Goodwill Total
GBP GBP GBP GBP GBP
Cost
At 1 April 2020 633,374 41,327 459,916 57,807 1,192,424
Additions 251,710 17,127 - 10,235 279,072
At 30 September 2020 885,084 58,454 459,916 68,042 1,471,496
Amortisation
At 1 April 2020 - 5,568 103,483 - 109,051
Amortisation charge 62,190 3,538 24,769 - 90,497
At 30 September 2020 62,190 9,106 128,252 - 199,548
Net book value
At 31 March 2020 633,374 35,759 356,433 57,807 1,083,373
At 30 September 2020 822,894 49,348 331,664 68,042 1,271,948
Development costs Trademarks Brands Goodwill Total
GBP GBP GBP GBP GBP
Cost
At 1 April 2020 633,374 41,327 459,916 57,807 1,192,424
Additions 557,181 29,045 - - 586,226
Additions through business combinations - - 10,235 - 10,235
At 31 March 2021 1,190,555 70,372 470,151 57,807 1,788,885
Amortisation
At 1 April 2020 - 5,568 103,483 - 109,051
Amortisation charge 163,067 7,775 46,011 - 216,853
At 31 March 2021 163,067 13,343 149,494 - 325,904
Net book value
At 31 March 2020 633,374 35,759 356,433 57,807 1,083,373
At 31 March 2021 1,027,488 57,029 320,657 57,807 1,462,981
8. Inventories
30 September 2021 30 September 2020 31 March 2021
GBP GBP GBP
Finished goods 3,664,533 1,791,617 1,908,560
Provision for obsolescence (117,108) (39,378) (51,321)
Total inventories 3,547,425 1,752,239 1,857,239
Cost of inventory recognised in profit and loss 3,061,619 5,757,722 8,770,887 9. Share capital
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DJ Samarkand Group plc: Interim Results -6-
The following table summarises the share capital of Samarkand Group plc for the periods presented:
Number of shares Share capital
Note No. GBP
Issued share capital in Samarkand Holdings Ltd at 31 March 2020
176,400 1,767
Exchanged for shares in Samarkand Group plc (a) 35,340,000 353,400
Share issued on incorporation 1 -
Shares issued on 22 March 2021 16,278,965 162,790
At 31 March 2021 51,618,966 516,190
Shares issued on 4 May 2021 (b) 357,977 3,580
Shares issued on 10 May 2021 (c) 2,737,840 27,378
At 30 September 2021 54,714,783 547,148 a. On 16 February 2021, Samarkand Group plc issued 35,340,000 ordinary shares of GBP0,01 each in exchange forthe entire share capital of Samarkand Holdings Limited on the basis of 1 ordinary share in Samarkand HoldingsLimited for 200 shares in Samarkand Group plc. b. On 4 May 2021, the Group acquired the entire share capital of London based Zita West Products Limited,www.zitawest.com, and 51% of Babawest , www.babawest.co.uk, for a total consideration of GBP2.4m, partly in cash andpartly issued in shares. c. On 10 May 2021, the Group issued 2,737,840 new ordinary shares at a price of 115 pence raising GBP3,148,516from United Win Asia Limited, a subsidiary of S.F. Holding Co., Ltd., as part of a strategic investment to furtherdevelop the Group's international expansion and technology.
Shareholders are entitled to receive dividends as declared from time to time and are entitled to one vote per ordinary share at meetings of Samarkand Group plc. 10. Notes to the statements of cash flows
Net debt reconciliation:
Opening balances Cash flows Foreign exchange movements Closing balances
GBP GBP GBP GBP
Six month period ended 30 September 2021
Cash & cash equivalents 14,606,867 (4,229,765) 12,663 10,389,765
Right of use lease liabilities (972,994) 125,561 - (847,433)
Borrowings (2,082,538) 475,498 - (1,607,040)
Totals 11,551,335 (3,628,706) 12,663 7,935,292
Six month period ended 30 September 2020
Cash & cash equivalents 572,586 913,853 (18,293) 1,468,146
Right of use lease liabilities (1,216,486) 420,565 - (795,921)
Borrowings (4,746,478) 1,219,021 - (3,527,457)
Directors' loans (499,511) (2,052) - (501,563)
Totals (5,889,889) 2,551,387 (18,293) (3,356,795)
Year ended 31 March 2021
Cash & cash equivalents 572,586 14,052,795 (18,514) 14,606,867
Right of use lease liabilities (1,216,486) 243,492 - (972,994)
Borrowings (4,746,478) 2,663,940 - (2,082,538)
Directors' loans (499,511) 499,511 - -
Totals (5,889,889) 17,459,738 (18,514) 11,551,335 11. Business Combination
On 4 May 2021, the Group acquired the entire share capital of London based Zita West Products Limited , www.zitawest.com, and 51% of Babawest , www.babawest.co.uk, for a total consideration of GBP2.8m.
Purchase consideration GBP Cash paid 2,285,189 Fair value of equity shares issued 500,000 Total purchase consideration 2,785,189 Intangible assets1 1,133,915 Intangible assets from acquisition 1,196 Property, plant and equipment 926 Inventories 221,264 Trade and other receivables 113,140 Cash and cash equivalents 455,196 Other liabilities (147,905) Trade and other payables (135,596) Deferred tax liability (215,444) Net identifiable assets acquired at fair value 1,426,692 Goodwill arising on acquisition 1,358,497 Purchase consideration transferred 2,785,189 Consideration transferred settled in cash 2,285,189 Cash and cash equivalents acquired (455,196) Net cash outflow on acquisition 1,829,993
1Intangible assets include brands relating to the Zita West and Babawest brand and reflects their fair value at acquisition date. They are estimated to have a useful life of 10 years.
In accordance with IFRS 3 'Business Combinations', the acquisition accounting will be finalised within 12 months of the acquisition date of 4 May 2021. 12. Material subsequent events
On 2 November 2021, the Group announced that it had acquired Napiers the Herbalists, www.napiers.net, for an initial consideration of GBP1.7m, deferred consideration of GBP0.1m and a contingent consideration of up to USD0.7m. The combined assets of Napiers generated GBP1m of revenue for the year ended 31 March 2021 and an EBITDA of GBP0.24m on an unaudited basis.
For more information, please contact:
Samarkand Group plc Via Alma PR
David Hampstead, Chief Executive Officer
http://samarkand.global/
Eva Hang, Chief Financial Officer
VSA Capital - AQSE Corporate Adviser and Broker +44(0)20 3005 5000
Andrew Raca, James Deathe, Pascal Wiese (Corporate Finance)
IPO@vsacapital.com
Andrew Monk (Corporate Broking)
Alma PR +44(0)20 3405 0213
Josh Royston
samarkand@almapr.co.uk
Joe Pederzolli
Notes to Editors
Samarkand is a cross-border eCommerce technology and retail group focusing on connecting Western Brands with China, the world's largest eCommerce market. The Group has developed a proprietary software platform, the Nomad platform, which is integrated across all necessary touch-points required for eCommerce in China including eCommerce platforms, payments, logistics, social media and customs. The Nomad platform is the foundation on which the Group's Nomad technology and service solutions are built. The core products include Nomad Checkout, Nomad Storefront, Nomad Commerce and Nomad Distribution.
The Company's current customer base comprises leading European brands such as 111SKIN, Shay & Blue, Omorovicza, ICONIC London, Philip Kingsley and Temple Spa. Samarkand has also successfully grown its own brand, Probio7, acquired in December 2017. Since its IPO in March 2021 Samarkand has acquired Zita West Products, Babawest and Napiers the Herbalists.
Founded in 2016, Samarkand is headquartered in London, UK with offices in Shanghai and Tokyo employing over 150 staff.
For further information please visit https://www.samarkand.global/
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