DJ Samarkand Group plc: FY22 Results, Publication of Annual Report and Notice of AGM
Samarkand Group plc (SMK) Samarkand Group plc: FY22 Results, Publication of Annual Report and Notice of AGM 05-Sep-2022 / 10:25 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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5 September 2022
Samarkand Group plc
("Samarkand", the "Company" or together with its subsidiaries the "Group")
FY22 Results Publication of Annual Report and Notice of AGM
Samarkand Group plc, the cross-border eCommerce technology solution provider, is pleased to announce its audited results for the year ended 31 March 2022 ("FY22").
FY22 Financial highlights:
-- Revenue excluding exceptional revenues increased by 11.9% to GBP16.6m (2021: GBP14.8m), and over the two-yearperiod increased by 142% (2020: GBP6.8m) -- Nomad Technology revenue increased 17.6% to GBP7.5m (2021: GBP6.4m)
-- Brand Ownership revenues increased 28.2% to GBP4.5m (2021: GBP3.5m)
-- Distribution revenues decreased by 8.0% to GBP4.5m (2021: GBP4.8m)
-- Gross margin, excluding exceptional revenue, decreased from 62% to 50%
-- Adjusted EBITDA loss increased to GBP6.2m (2021: GBP0.4m)
-- Operating loss after taxation increased to GBP7.7m (2021: profit GBP0.4m)
FY22 Strategic and operational highlights:
-- Completed the acquisition of Zita West Products Limited in May 2021 and Napiers the Herbalist in November2021
-- Accelerated growth of Zita West proposition through upgraded eCommerce capabilities, expanded presence inhigh end retail channels and leveraged group technology platform to enable direct to consumer sales in China
-- Upgraded Napiers store and online customer experience and expanded Napiers branded premium natural skincare range
-- Expanded distribution for Probio7 in speciality retail channels and launched new product variant AB21backed by clinical study demonstrating improved recovery from COVID
-- Launched WeChat integration for our Nomad Checkout solution, greatly simplifying the shopper experience.Formed partnership with leading global logistics platform FedEx
-- Signed 10 new merchants to our DTC checkout solution and leveraged partnerships with logistics companiesto grow our pipeline of new merchant opportunities
-- Strengthened China distribution capabilities by building expertise in fast growing live streamingcommerce platform Douyin (Tik Tok China) and opened new routes to consumer
-- Secured 5 new specialist prestige beauty and wellness brands for our cross-border eCommerce accelerationservices including The Organic Pharmacy and ilapothecary
Post period end highlights:
-- Strong start to the year with revenue in Q1 FY23 increasing by 24% vs prior year despite extendedlockdowns in mainland China. Strong performance in June shopping festival generating 34% growth in revenue over thesame period in prior year resulting in an EBITDA and net profit result for the month.
-- Adjusted EBITDA losses improved by GBP0.6m reduced from GBP1.1m loss in Q1 FY22 to GBP0.5m in Q1 FY23, as aresult of cost actions taken in Q4 FY22 and improved operational efficiency
-- Won multiple industry awards including Queens Award for international trade and Shanghai Cross-BordereCommerce Association: Outstanding Cross-Border Trade Enterprise Award
-- Secured agreement in principle from major existing strategic shareholder to increase investment in theGroup Annual Report and Accounts and Notice of Annual General Meeting ("AGM")
The Company is pleased to announce that it has today published its Annual Report and Accounts for the year ended 31 March 2022 ("Annual Report").
The Company announces that notice convening the Company's Annual General Meeting ("Notice of AGM"), to be held at 2:30 pm on Thursday 29 September 2022 at the offices of VSA Capital at Park House, 16-18 Finsbury Circus, London EC2M 7EB, will be posted to shareholders on 6 September 2022, together with the Annual Report.
Copies of the Annual Report and the Notice of AGM are also available on the Company's website at www.samarkand.global/investors
David Hampstead, Chief Executive Officer of Samarkand Group, commented:
"Despite the unprecedented and challenging backdrop we have been faced with during the period, our resilience has come to the fore. I am proud of the way in which we have adapted to the unfavourable trading environment and our long-term confidence in the business is as unwavering as it has ever been.
With improving prospects within the Chinese market, a growing pipeline of new clients and the prudent allocation of resources this year, we are confident that we will be able to capitalise on the increasing scale of opportunities we see ahead of us. Our software's strong prospects remain, and our acquired and now subsequently integrated brands have diversified the business and leveraged our infrastructure, expertise and technology. We are encouraged by trading levels in the current period and look forward to further updating shareholders on continued progress moving forwards."
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
Lily Soares Smith samarkand@almapr.co.uk
Joe Pederzolli
Notes to Editors
Samarkand is a cross-border eCommerce technology and retail group focusing on connecting International 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 touchpoints 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 and Nomad Distribution.
Founded in 2016, Samarkand is headquartered in London, UK with offices in Shanghai and Tokyo.
For further information please visit https://www.samarkand.global/
Chairperson Statement
I am immensely pleased with the resilient mindset and agility in which our employees have responded to the most challenging environment the Group has experienced since incorporation in 2016. We have navigated the business through unprecedented external market forces, in particular the zero-tolerance approach to COVID in mainland China which has generated a high degree of disruption in our operations across the Group.
The business has responded well to the unexpected challenging situations facing us and responded quickly to the changing marketplace in which it operates while continuing to make strategic progress in light of external volatility. By shifting focus and improving efficiency in its operations the Group has been able to make great strides in its mission to enable brands and merchants sell direct to Chinese consumers and to provide better choice of high-quality international product to Chinese consumers.
Despite the challenging year, there are improving prospects within the Chinese market, and we can look to the future with renewed optimism. The Group has demonstrated its resilience and adaptability this year and this is testimony to the hard work and commitment of everyone at Samarkand. I would like to take this opportunity to thank them all for their contribution and dedication.
Financial Results
The Group delivered revenues of GBP16.6m (2021: GBP14.8m excluding exceptional revenues). These results reflect the well covered disruption experienced during the year, with revenues in China increasing by 4% to GBP11.6m. I am confident the Group has taken appropriate measures to protect the company from future disruption and to enable it to continue progressing towards its goals, including engaging with existing strategic shareholders who are keen to increase their investment in the Group.
The focus on profitable growth will continue in the year to come.
People
The Samarkand team has responded well to the challenges of the year and demonstrated their ability to deal with disruption on many fronts. I would like to give a special mention to our colleagues in China who spent long periods of time isolated at home during the China lockdowns but were able to continue to operate and serve our clients in the most difficult of circumstances.
Board and Governance
Our board which was established at the time of the IPO is operating well, bringing a breadth of experience to the Group. Sustainability, Remuneration, Nomination and Audit committees have been established and I would like to thank my fellow directors for their service and flexibility in the last year in which their guidance has been invaluable.
Summary and Outlook
Despite these disruptions, the underlying trends on which the Group was founded endure - Chinese consumers' appetite for international brands and international merchants' desire to make their brands available to Chinese consumers. The eCommerce sector in which the Group operates remains vibrant globally and China is the world's largest eCommerce market, accounting for 50% of all eCommerce sales in the world and an even bigger share of the growth[1].
The recently acquired Zita West and Napiers performed strongly in the year and the Group is excited about their future potential. Our portfolio of premium health and wellness brands, including Probio7, is well positioned on key trends such as digestive health, fertility and natural herbal products, and as UK focused brands they are less dependent on the China market for future growth.
The Group is fortunate to work with a range of premium, independent beauty, health and wellness brands, as their China partner, enabling their growth and development in the China market. Strengthening our expertise in new and emerging eCommerce channels such as Douyin (TikTok in China) has given the Group the opportunity to further develop our clients' brands in the fast-moving China eCommerce market.
Our China Checkout solution gained traction in the year in the form of partnerships with large enterprise and SME merchants and logistics providers such as FedEx and our shareholder SF Express. Enabling international merchants to make China part of their DTC strategy is a significant opportunity for the Group and we see strong growth potential as many brands prioritise their DTC strategies.
The year ahead holds many exciting opportunities for the Group linked to the continued growth of eCommerce, the increasing importance of the direct-to-consumer business model as well as the positive trends driving the health, wellness and beauty sectors.
The last year has prepared us to navigate accordingly to the unexpected and the Group has demonstrated resilience, agility and flexibility in the face of a challenging environment and is well placed to continue to make progress.
Tanith Dodge
Chairperson
CEO REVIEW
In our first full year as a public company, we have adapted to the rapidly changing environment which we encountered in the second half of the year. The well documented disruptions in China as well as the subsequent widespread logistics and operational challenges resulted in reduced revenue performance and increased losses in the last financial year.
As conditions deteriorated, we quickly re-calibrated the business, which has resulted in a stronger first quarter of the current financial year, despite it being a period of peak disruption. Our first quarter revenue increased 24% on the previous year and adjusted EBITDA loss significantly reduced from GBP1.1m to GBP0.5m, demonstrating the work completed towards the end of the financial year has led to significant improvements in our margins and reduction in overheads. The month of June 2022 was profitable on an EBITDA and net profit basis. We expect conditions to remain volatile for the remainder of this calendar year and the disruptions to logistics networks to continue during this time yet are confident we have taken the right action to prepare the business to be able to navigate any future volatility and to capitalise on the opportunities it presents. In this period, our owned brands which are less exposed to China, have performed well and our China DTC technology solution has generated strong interest from the market.
Market environment
The second and third order effects of the pandemic will likely reverberate for years to come, changing many industries, and few will be affected as much as eCommerce and cross-border trade. Whilst this has created short-term challenges, it also generates mid to long-term opportunities for us to exploit.
China has contained the spread of COVID-19 using widespread lockdowns across many of its major cities. The implementation of comprehensive COVID prevention measures at the borders has meant infection rates have remained low but has also had knock-on effect on logistics, with customer orders being delayed or undeliverable. We anticipate that the normal operation of logistics routes will return in due course but in the short-term this has presented the single largest challenge to our business. Where we can, we have changed the way we service our customers in China by moving more of our fulfilment to bonded warehouses in mainland China which have fewer restrictions and have been impacted less by the COVID measures. However, this has impacted the roll-out of our Nomad Checkout solution which relies on efficient logistics from overseas markets. During this time, we have been able to lean on our well established B2B distribution networks which has allowed us to trade comparatively well.
Despite this disruption the secular trends for e-commerce, cross border e-commerce and the growth in direct-to-consumer business models and the investment brands are making in their direct-to-consumer operations remain highly positive and are encouraging for the Group. In addition, our portfolio of specialist, premium health and wellness brands are well positioned against major consumer trends of digestive/gut, fertility and natural herbal health and beauty.
Strategic Progress
Heading into FY22 the Company was experiencing triple digit growth in line with our expectations and during the first half of the year, investing the funds raised at IPO accordingly to provide the capacity needed to meet expected further growth. This investment was both in our underlying technology as well as additional personnel and logistics in China. As conditions deteriorated and the extent of the secondary lock downs in China took hold, the Board took the decision to pull back on many of the China associated costs and thereby manage exposure and risk. Although this lead to reduced headcount it is still at a higher level than it was at the time of our IPO. As conditions continue to normalise, these investments can return. Our investment in technology, which will continue to drive our anticipated growth, continued throughout.
Crucially, despite the challenging backdrop, the Group continued to make considerable strategic progress during the year.
We completed two acquisitions, both of which are performing ahead of expectations. The first, which completed in May 2021 was Zita West Products, a UK nutritional supplement brand providing specialist consumer products and information for fertility, pregnancy and post-natal needs. The product range has been developed over the past 20 years by Zita West herself, a world-renowned IVF and fertility specialist. The Zita West product range taps into the trend of increasingly popular fertility products and is well positioned on a global mega trend. The business was bought for GBP2.8 million and since acquisition, we have relaunched the business' eCommerce channels domestically and internationally, including China. In the first full year since the acquisition of Zita West Products, revenue increased 43% vs prior year with strong and improving metrics in customer acquisition, lifetime value and retention. In the first quarter of FY23 net sales for Zita West grew 129% vs the same period last year.
The second acquisition in November 2021 was for the natural health and beauty brand, Napiers the Herbalists, an iconic Scottish herbalist brand which is performing well as we improve the customer experience online and in store and enhance the product range and will be entering the Chinese market, where we see great potential, this financial year.
Our eCommerce acceleration capabilities improved in the year as we added new channels and routes to the consumer to our market development playbook. Douyin live streaming commerce is a highlight in this area and we now support many brands in capitalising on this emerging commerce channel. This helped us attract new brands and improve the margins we generate in distributing brands via China eCommerce. With our acceleration capabilities and checkout technology we are able to operate as an end-to-end market development for brands and merchants seeking controlled profitable growth in China.
Our China checkout solution made good progress in the year, securing our first proof of value merchant contracts and building a healthy pipeline of Enterprise and SME prospect merchants. Our partnerships with logistics companies began to generate merchant referrals, re-enforcing our belief that partnerships with logistics, payment and commerce platforms will be critical to the scaling of our solution.
Market Dynamics
We operate in the most dynamic and innovative eCommerce market in the world which evolves at breakneck speed. Platforms and channels that are popular today barely existed a few years ago. The platforms that will be popular tomorrow are not even conceived of yet and new consumer trends and tastes are yet to emerge. Chinese consumers will continue to value international products, prioritise price and authenticity and increase the variety of brands they consider. Convenience and trust play an important role in purchasing decision making and that will only increase over time and become more important for younger consumers.
The dominance of a relatively small number of eCommerce marketplaces in China is being disrupted by new regulations and changing consumer behaviours which we believe will have a positive impact on us and the adoption of our solutions as well as our ability to develop new routes to consumer for our brands.
Our technology has the potential to give Chinese consumers access to a much wider selection of international brands and products, at a lower cost and with comparable convenience. We have now formed partnerships and completed technology integrations with three of the leading logistics companies who are at the front line of eCommerce logistics and see the value our solutions can bring to their clients.
Outlook statement
We have made a great deal of progress in dealing with the ever-changing Chinese market, and whilst we anticipate the next 9-12 months to remain operationally challenging, we are confident that the measures we have taken this year will allow us to capitalise on the increasing scale of opportunities we see ahead of us.
The partnerships we have formed with leading logistics companies are starting to deliver a pipeline of new clients. The quarantine measures imposed on overseas parcels entering China has frustrated the launch of several projects however the situation is starting to improve, and the quarantine period has been reduced from 7-10 days to 24 hours making this route viable once again.
We have significantly raised our profile within the cross-border eCommerce industry this year through an active campaign across social media, particularly LinkedIn. This has been supported by the awards we have won this year including The Queens Award for Enterprise in the International Trade category and the Shanghai Cross-Border eCommerce Association Outstanding Enterprise Award.
The cost reduction and efficiency improvement actions taken in response to the disruption and the strategic progress we have made during FY22 put us in a good position to capitalise on the underlying positive trends in our service lines and markets as disruption eases. While future volatility cannot be ruled out, Q1 FY23 performance demonstrates the resilience and adaptability of the Group and our acquisitions have reduced our dependency on the China market.
At 31 March 2022, cash and cash equivalents was GBP4.0m and net current assets of GBP5.7m. Since closing of FY22 we have taken steps to improve our cash position, with increased investment from existing shareholders agreed in principle and encouraging ongoing dialogue with potential new strategic investors.
David Hampstead
Chief Executive Officer
FINANCIAL REVIEW
Overview
Group revenues excluding exceptional revenues for the year increased by 11.9% to GBP16.6m from GBP14.8m, and over the two-year period increased by 142% from GBP6.8m. Revenue growth in China was dampened by the disruptions caused by the continued impacts of the pandemic in China with revenues increasing by 4% to GBP11.6m. Revenue growth in UK remained strong and was augmented by the new acquisitions in the year, revenues increasing by 55% to GBP4.9m.
Revenues on our Nomad technology up 17.6% to GBP7.5m (2021: GBP6.4m), brand ownership revenues up 27% to GBP4.5m (2021: GBP3.5m) and distribution revenues decreased by 7.5% to GBP4.5m (2021: GBP4.8m).
The Group's gross margin excluding exceptional revenues decreased to 50% from 62% in FY 2021 but has improved from 48% in FY 2020. Managing delays in shipment, restrictions in bonded warehouses and availability of last mile delivery has resulted in higher than usual write-off of inventory and increases in promotional activity as the group adapts to the changing market conditions.
Operating expenses
Selling and distribution expenses, excluding exceptional revenues have increased to 42% (2021: 37%) of revenue, as a result in the increase in social selling, with transaction fees paid to Key Opinion Leaders ("KOLs") as well as an increase in marketing investment in our own brands.
Administrative expenses, excluding exceptional revenues and costs, increased to 49% (2021: 30%) of revenue as a result significant investment in its people, marketing and the additional regulatory and compliance costs as a result of being publicly listed. The group total head count as at 31 March 2022 was 158 (2021: 99). During the year the Group incurred a number of significant non-recurring costs which have been shown as exceptional items in the financial statements. These items relate to acquisition related costs owing to the new brands acquired in May and November 2021, redundancy and restructuring costs as a result of corrective actions taken in light of the challenges presented by the disruptions and the cost of recompense for share option scheme.
Depreciation and amortisation
The total depreciation and amortisation costs were GBP0.32m and GBP0.47m respectively (2021: GBP0.2m and GBP0.3m). The Group continued to invest in its Nomad Technology platform with a total of GBP1.1m (2021: GBP0.6m) development costs capitalised during the year.
Adjusted EBITDA
Adjusted EBITDA means the non-GAAP measure which is defined as Earnings Before Interest, Taxes, Depreciation, and Amortisation and exceptional items. It provides a useful measure of the underlying profitability of the business and is used by management to evaluate the operating performance to make financial, strategic and operating decisions and provides the underlying trends on a comparable basis year on year.
Adjusted EBITDA losses increased to GBP6.2m (2021: GBP0.4m), after deduction GBP0.3m in restructuring costs and GBP0.3m for the recompense for share options. The increase in losses reflects deeper investments made this year in our technology platform, in marketing our own brands and increasing our client service, fulfilment and operational capabilities. Furthermore, the dampened revenue growth in China due to the continued impacts of the pandemic has resulted in the increases in losses this year.
Mar-22 Mar-21 Operation (loss)/profit (7,677,082) 630,504 Depreciation and amortisation 786,639 503,354 Share-based payment - 26,914 Repayment of share option plan 306,579 - Acquisition and restructuring costs 347,615 44,945 IPO Listing Fees - 415,229 Exceptional Revenues Contract (net profit) - (2,039,621) Adjusted EBITDA (6,236,249) (418,675)
Earnings per share
Basic and diluted loss per share was 13.99 pence per share (2021: earnings 1.13 pence per share).
Net cash
Mar-22 Mar-21 Cash and cash equivalents 4,049,118 14,606,867 Right-of-use lease liabilities (720,353) (972,994) Borrowings (1,452,127) (2,082,538) Net cash 1,876,638 11,551,335
At the year end, the Group's net cash position was GBP1.9m (2021: GBP11.6m), excluding the IFRS 16 lease liabilities, net cash was GBP2.6m (2021: GBP12.5m). The Group's investment in technology, and increasing its client service, fulfilment and operational capabilities coupled with dampened revenue growth caused by the continued impacts of the pandemic in China resulted in negative operating cash flow of GBP7.7m (2021: GBP0.9m). The Group acquired Zita West Products, Baba West and Napiers the Herbalists during the year, together with the continued investment into its technology platform resulted in cash outflow from investing activities of GBP5m (2021: GBP0.6m). In May 2021, the Group received GBP3m from strategic investor together with the repayment of borrowings and lease liabilities, the net cash from financing activities was GBP2.2m (2021: GBP14.1m).
Financing costs of GBP0.17m (2021: GBP0.4m) comprised of interest expenses of GBP0.1m (2021: GBP0.3m).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended 31 March Year ended 31 March
2022 2021
GBP GBP
Revenue 16,576,228 20,600,541
Cost of sales (8,226,260) (8,770,887)
Gross profit 8,349,968 11,829,654
Selling and distribution expenses (7,056,415) (6,189,506)
Administrative expenses (8,183,996) (4,506,290)
Adjusted EBITDA (6,236,249) (418,675)
Share-based payment - (26,914)
Repayment of share option plan (306,579) -
Acquisition and restructuring costs (347,615) (44,945)
IPO Listing Fees - (415,229)
Exceptional profits - 2,039,621
EBITDA (6,890,443) 1,133,858
Depreciation and amortisation (786,639) (503,354)
Operating (loss)/profit (7,677,082) 630,504
Finance income 86 115
Finance costs (171,455) (401,076)
(Loss)/income before taxation (7,848,451) 229,543
Taxation 141,499 177,514
(Loss)/income after taxation (7,706,952) 407,057
Other comprehensive income:
Exchange differences on translation of foreign operations (23,234) (18,517)
Items that may be reclassified to profit and loss in subsequent
periods
(23,234) (18,517)
Total comprehensive (loss)/income for the year (7,730,186) 388,540
(Loss)/income attributable to:
Equity holders of the Company (7,617,081) 405,074
Non-controlling interests (89,871) 1,983
(7,706,952) 407,057
(Loss)/earnings per share (basic and diluted) (0.1399) 0.0113
Comprehensive (loss)/income attributable to:
Equity holders of the Company (7,640,315) 386,557
Non-controlling interests (89,871) 1,983
(7,730,186) 388,540
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 March 2022 31 March 2021
GBP GBP
ASSETS
Intangible assets 7,011,236 1,462,981
Property, plant and equipment 243,417 151,262
Right-of-use assets 608,635 840,607
Non-current assets 7,863,288 2,454,850
Inventories 3,720,248 1,857,239
Trade receivables 1,512,702 1,013,631
Corporation tax recoverable 113,710 98,893
Other receivables and prepayments 1,012,371 522,022
Cash and cash equivalents 4,049,118 14,606,867
Current assets 10,408,149 18,098,652
Total assets 18,271,437 20,553,502
EQUITY AND LIABILITIES
Share capital 547,148 516,190
Share premium 21,022,958 17,412,900
Merger relief reserve (2,063,814) (2,063,814)
Accumulated loss (8,546,753) (929,672)
Currency translation reserve (31,501) (8,267)
Total equity attributable to parent 10,928,038 14,927,337
Non-controlling interest (89,871) -
Total equity 10,838,167 14,927,337
Right-of-use lease liabilities 458,352 720,353
Borrowings 1,390,035 1,372,964
Deferred tax liability 370,590 67,576
Accrued liabilities 512,441 -
Total non-current liabilities 2,731,418 2,160,893
Trade and other payables 3,597,110 1,981,054
Accrued liabilities 566,266 472,807
Deferred revenue 214,383 42,563
Borrowings 62,092 709,574
Right-of-use lease liabilities 262,001 252,641
Refund liabilities - 6,633
Total current liabilities 4,701,852 3,465,272
Total liabilities 7,433,270 5,626,165
Total liabilities and equity 18,271,437 20,553,502
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Currency
Share Merger Non-controlling
Share relief Capital translation Accumulated Total
capital reserve loss interests
premium contribution reserve equity
GBP GBP GBP GBP GBP GBP GBP GBP
Balance at 1 1,767 - 28,764 266,072 (3,333) (3,342,203) (32,168) (3,081,101)
April 2020
Profit after - - - - - 405,074 1,983 407,057
taxation
Other
comprehensive - - - - (18,517) - - (18,517)
loss
Total
comprehensive - - - - (18,517) 405,074 1,983 388,540
income/(loss)
for the year
Disposal of
minority - - - - - (12,891) 30,185 17,294
interests
Transactions - - - - - (12,891) 30,185 17,294
with owners
Group 351,633 - (2,092,578) (266,072) 13,583 1,993,434 - -
reconstruction
Shares issued on
listing net of 147,804 15,852,283 - - - - - 16,000,087
transaction fees
Shares issued on
conversion of 14,986 1,560,617 - - - - - 1,575,603
loans
Share based - - - - - 26,914 - 26,914
payments
514,423 17,412,900 (2,092,578) (266,072) 13,583 2,020,348 - 17,602,604
Balance at 31 516,190 17,412,900 (2,063,814) - (8,267) (929,672) - 14,927,337
March 2021
Profit after - - - - - (7,617,081) (89,871) (7,706,952)
taxation
Other
comprehensive - - - - (23,234) - - (23,234)
loss
Total
comprehensive - - - - (23,234) (7,617,081) (89,871) (7,730,186)
income/(loss)
for the year
Shares issued on 27,378 3,113,638 - - - - - 3,141,016
subscription
Shares issued on 496,420 - - - - - 500,000
acquisition 3,580
30,958 3,610,058 - - - - - 3,641,016
Balance at 31 547,148 21,022,958 (2,063,814) - (31,501) (8,546,753) (89,871) 10,838,167
March 2022
CONSOLIDATED STATEMENT OF CASH FLOWS
31 March 2022 31 March 2021
GBP GBP
Cash flows from operating activities
Income/(loss) after taxation (7,706,952) 407,057
Cash flow from operations reconciliation:
Depreciation and amortisation 786,639 503,354
Interest expense 60,182 314,027
Finance income (86) (115)
Income tax credit (141,499) (177,514)
Share based payment - 26,914
Working capital adjustments:
(Increase) in inventories (1,544,851) (562,046)
(Increase) in trade and other receivables (780,763) (209,168)
Increase in trade and other payables 1,258,687 482,589
Cash generated from/(used) in operating activities (8,068,643) 785,098
Taxes (paid)/received 20,803 69,883
Net cash generated from/(used in) operating activities (8,047,840) 854,981
Cash flows from investing activities
Purchase of property, plant and equipment (175,151) (71,238)
Payment of intangible assets (1,228,096) (586,226)
Acquisition of subsidiary, net of cash acquired (3,341,477) (9,125)
Disposal of subsidiary, net of cash sold - 17,294
Finance income 86 115
Net cash used in investing activities (4,744,638) (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 (252,641) (283,424)
Proceeds from borrowings - 1,833,400
Repayment of borrowings (630,411) (3,703,069)
Net cash from financing activities 2,257,964 13,846,994
Net increase/(decrease) in cash and cash equivalents (10,534,514) 14,052,795
Cash and cash equivalents - beginning of the year 14,606,867 572,586
Effects of exchange rate changes on the balance of cash held in foreign currencies
(23,235) (18,514)
Cash and cash equivalents - end of the year 4,049,118 14,606,867
NOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS 1. General information
Samarkand Group plc was incorporated in England and Wales on 12 January 2021 as a public company with limited liability under the Companies Act 2006.
Samarkand Group plc's registered office is Unit 13 & 14 Nelson Trading Estate, The Path, Merton, London SW19 3BL. 2. Basis of preparation and measurement a. Basis of preparation
The financial statements have been prepared in accordance in accordance with UK-adopted International Accounting Standards.
The financial information set out in this document does not constitute the Group's statutory accounts for the year ended 31 March 2022 or 31 March 2021.
Statutory accounts for the year ended 31 March 2021 have been filed with the Registrar of Companies and those for the year ended 31 March 2022 will be delivered to the Registrar in due course; both have been reported on by independent auditors. The independent auditor's report for the year ended 31 March 2022 is unmodified with the material uncertainty in respect of going concern:
We draw attention to paragraph below, which indicates that the Group made a loss of GBP7.7m during the year ended 31 March 2022 and had a net operating cash out flows of GBP7.7m for that year. The Group's operations depend on financial support from existing shareholders and continuing operations which generate positive cash flows, indicating the existence of a material uncertainty that may cast doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter. The financial statements do not include the adjustments that would result if the Group is unable to continue as a going concern.
The independent auditor's reports on the Annual Report and Accounts for the year ended 31 March 2021 was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
Going Concerns
The Group and the Company faced its most challenging year to date, with external factors including the widespread COVID lockdowns in China generating high levels of disruptions to the Group.
For the year ended 31 March 2022, the Group reported a total comprehensive loss of GBP7.7m (2021: profit GBP0.4m), shareholders' equity of GBP10.8m (2021: 14.9m) and accumulated losses of GBP8.5m (2021: GBP0.9m).
The directors have considered the going concern assumption as a significant judgement given historical trading and funding considerations requirements and have formed the conclusion that it is appropriate to consider that the Group and Company will continue to operate in the foreseeable future.
The Group reacted quickly to disruption encountered in FY22, reducing staff and operational costs in Q4. The benefits of these actions translated into reduced operating losses in Q1 FY23. Further operational cost action will be implemented in the current financial year.
The Group has received financial commitment from an existing strategic shareholder in writing that it will increase its investment in the Group to a level which will enable the Group to meet its obligations. The combined effect of committed additional funding from a strategic shareholder, the realisation of cost actions taken in Q4 plus additional planned cost actions in the short term and improved trading outlook based on Q1 FY23 results lead the Directors to conclude that the Group and Company will continue to operate for a period of at least 12 months from the date of approval of these financial statements. Whilst the directors have concluded that the accounts should be prepared using the going concern basis of accounting, these conditions give rise to a material uncertainty which may cast significant doubt on the group and Company's ability to continue as a going concern. 3. Revenue from contracts with customers
Disaggregation of revenue from contracts with customers:
31 March 2022 31 March 2021
GBP GBP
Revenue analysed by class of business:
Brand ownership 4,509,979 3,518,615
Nomad technology 7,480,941 6,360,740
Distribution 4,447,990 4,832,644
Exceptional revenue - 5,780,000
Other 137,318 108,542
Total revenue 16,576,228 20,600,541
Cost of sale by business unit:
Brand ownership 1,991,401 1,126,480
Nomad technology 3,240,269 2,001,204
Distribution 2,992,880 2,496,299
Exceptional - 3,091,046
Other 1,710 55,858
Total costs of sale 8,226,260 8,770,887
Exceptional revenues:
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. 4. Intangible assets
Development costs Trademarks Brands Goodwill Website Total
GBP 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 10,235 - - 596,461
At 31 March 2021 1,190,555 70,372 470,151 57,807 - 1,788,885
Reclassification - - (10,235) 10,235 - -
Acquired through business - 8,857 2,024,175 2,761,676 - 4,794,708
combinations
1,139,882 20,367 - - 70,198 1,230,447
Additions
At 31 March 2022 2,330,437 99,596 2,484,091 2,829,718 70,198 7,814,040
Amortisation
At 1 April 2020 - 5,568 103,483 - - 109,051
Charge for the year 163,067 7,775 46,011 - - 216,853
At 31 March 2021 163,067 13,343 149,494 - - 325,904
Acquired through business - 7,663 - - - 7,663
combinations
Charge for the year 330,481 11,497 122,186 - 5,073 469,237
At 31 March 2022 493,548 32,503 271,680 - 5,073 802,804
Net book value
At 31 March 2022 1,836,889 67,093 2,212,411 2,829,718 65,125 7,011,236
At 31 March 2021 1,027,488 57,029 320,657 57,807 - 1,462,981
5. Property, plant and equipment
Office equipment Computer equipment Leasehold improve-ments Machi-nery Total
GBP GBP GBP GBP GBP
Cost
At 1 April 2020 65,873 48,613 58,430 - 172,916
Additions 22,734 48,917 - - 71,651
Transfer (459) 459 - - -
Foreign exchange - (771) - - (771)
At 31 March 2021 88,148 97,218 58,430 - 243,796
Reclassify (7,541) 7,541 - - -
Additions 23,059 90,492 20,145 50,745 184,441
Acquisition 24,388 17,255 - - 41,643
Disposal - (23,014) - - (23,014)
Foreign exchange 66 2,816 - - 2,505
At 31 March 2022 128,120 192,308 78,575 50,745 449,748
Depreciation
At 1 April 2020 14,539 17,491 6,336 - 38,366
Charge for the year 19,694 23,759 11,073 - 54,526
Transfer (83) 83 - - -
Foreign exchange - (358) - - (358)
At 31 March 2021 34,150 40,975 17,409 - 92,534
Reclassify (4,481) 4,481 - - -
Charge for the year 12,235 56,459 11,905 4,830 85,429
Acquisition 21,086 15,754 - - 36,840
Disposal - (10,459) - - (10,459)
Foreign exchange 31 2,156 - - 2,187
At 31 March 2022 63,021 109,366 29,314 4,830 206,531
Net book value
At 31 March 2022 65,099 82,942 49,261 45,915 243,217
At 31 March 2021 53,998 56,243 41,021 - 151,262 6. Right-of-use assets
Land and buildings Total
GBP GBP
Cost
At 1 April 2020 1,362,545 1,362,545
Additions - -
At 31 March 2021 1,362,545 1,362,545
Additions - -
At 31 March 2022 1,362,545 1,362,545
Amortisation
At 1 April 2020 289,965 289,965
Charge for the year 231,973 231,973
At 31 March 2021 521,938 521,938
Charge for the year 231,972 231,972
At 31 March 2022 753,910 753,910
Net book value
At 31 March 2022 608,635 608,635
At 31 March 2021 840,607 840,607
The Group leases land and buildings for its offices and warehouses under agreements of between five to six years with, in some cases, options to extend. The leases have initial rent-free periods and 5 yearly upward only rent reviews. No extension to these leases has been assumed.
Future minimum lease payments associated with the land and building leases were as follows:
31 March 2022 31 March 2021
GBP GBP
Not later than one year 283,579 283,579
Later than one year and not later than two years 284,356 283,579
Later than two years and not later than five years 188,190 472,545
Total minimum lease payments 756,125 1,039,703
Less: future finance charges (35,772) (66,709)
Present value of minimum lease payments 720,353 972,994 7. Inventories
31 March 2022 31 March 2021
GBP GBP
Finished goods 4,394,080 1,908,560
Provision for obsolescence (673,832) (51,321)
Total inventories 3,720,248 1,857,239
Cost of inventory recognised in profit and loss 8,226,260 8,770,887 8. Trade receivables
31 March 2022 31 March 2021
GBP GBP
Trade receivables 1,584,768 1,028,320
Provision for expected credit loss (72,066) (14,689)
Total trade receivables 1,512,702 1,013,631 9. Other receivables and prepayments
31 March 2022 31 March 2021
GBP GBP
Accrued income 2,517 660
Prepayments 561,910 400,205
Other receivables 447,944 121,157
Total other receivables and prepayments 1,012,371 522,022 10. Borrowings
The following table provides a reconciliation of the Group's future maturities of its total borrowings for each of the periods presented:
31 March 2022 31 March 2021
GBP GBP
Not later than one year:
Bank loans 52,099 413,333
Invoice discount advances - 210,996
Other loans 9,993 85,245
Current 62,092 709,574
Payable after one year but less than five years:
Fixed rate secured loan notes 1,236,485 1,176,304
Bank loans 153,550 186,667
Other loans - 9,993
Non-current 1,390,035 1,372,964
Total borrowings 1,452,127 2,082,538 11. Business combinations during the year
Acquisition of Zita West Products Limited and Babawest Ltd
On 4 May 2021, the Group acquired 100% of the share capital of Zita West Products Limited and 51% of Babawest Ltd for a total consideration of GBP2.8m.
Zita West Products Limited is a nutritional supplement brand specialising in fertility, pregnancy and post-natal needs and Babawest Ltd specialises in nutritional products focused on the mother and baby sector, both these brands are complementary to the Group's existing brand. The Group intends to use its market knowledge and the NOMAD technology platform to grow both brands in the cross-border ecommerce market in China and in its home market of the UK.
Goodwill recognised in the acquisition of Zita West Products Limited and Babawest Ltd relates to the presence of certain intangible assets such as an experienced workforce, which do not qualify for separate recognition.
The non-controlling interest of Babawest Ltd is 49% and it is measured at fair value.
Details of the fair value of identifiable assets and liabilities acquired and purchase consideration and goodwill are as follows:
Book value Adjustment Fair value
GBP GBP GBP
Intangible assets 1,194 819,806 821,000
Property, plant and equipment 926 - 926
Inventories 221,266 - 221,266
Trade and other receivables 113,139 - 113,139
Cash and cash equivalents 455,197 - 455,197
Trade and other payables (283,502) - (283,502)
Deferred tax liability - (130,893) (130,893)
Net identifiable assets acquired at fair value 508,220 688,913 1,197,133
Initial consideration 2,285,189
Fair value of equity shares issued 500,000
Total consideration 2,785,189
Goodwill arising on acquisition 1,588,056
Consideration transferred settled in cash 2,285,189
Cash and cash equivalents acquired (455,197)
Net cash outflow on acquisition 1,829,992
Since the acquisition date, Zita West Products Limited and Babawest Ltd contributed to GBP1.2m to the Group revenues and GBP0.07m to the Group losses. If the acquisition had occurred on the 1 April 2021, Group revenue would have been GBP16.7m and Group losses would have been GBP7.7m.
Acquisition of Napiers the Herbalists
In November 2021, the Group acquired the Napiers brand and its subsidiaries, for a total consideration of GBP2.3m.
Napiers the Herbalists is an iconic Scottish brand which still operates from its original apothecary store in Bristo Place and its website Napiers.net. This brand is complementary to the Group's existing brands. The Group intends to use its market knowledge and the NOMAD technology platform to grow the brand in the cross-border ecommerce market in China and in its home market of the UK.
Goodwill recognised in the acquisition of Napiers the Herbalists relates to the presence of certain intangible assets such as an experienced workforce, which do not qualify for separate recognition.
Details of the fair value of identifiable assets and liabilities acquired and purchase consideration and goodwill are as follows:
Book value Adjustment Fair value
GBP GBP GBP
Intangible assets - 1,204,369 1,204,369
Investment in subsidiaries 103,001 (103,001) -
Property, plant and equipment 3,856 - 3,856
Inventories 96,534 - 96,534
Trade and other receivables 16,858 (2,300) 14,558
Cash and cash equivalents 174,915 - 174,915
Trade and other payables (156,828) 13,773 (143,055)
Bank loan (22,917) - (22,917)
Deferred tax liability (745) (192,294) (193,039)
Net identifiable assets acquired at fair value 214,674 920,547 1,135,221
Initial consideration 1,686,400
Contingent consideration 512,441
Deferred consideration 110,000
Total consideration 2,308,841
Goodwill arising on acquisition 1,173,620
Consideration transferred settled in cash 1,686,400
Cash and cash equivalents acquired (174,915)
Net cash outflow on acquisition 1,511,485
Contingent consideration is payable upon a certain transaction occurring post acquisition which will be settled either in cash or the issuance of new Ordinary Shares, at the discretion of Company.
Since the acquisition date, Napiers the Herbalists contributed to GBP0.3m to the Group revenues and GBP0.03 to the Group losses. If the acquisition had occurred on the 1 April 2021, Group revenue would have been GBP17m and Group losses would have been GBP7.7m.
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[1] https://www.insiderintelligence.com/content/ global-historic-first-ecommerce-china-will-account-more-than-50-of-retail-sales
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ISIN: GB00BLH1QT30 Category Code: MSCH TIDM: SMK Sequence No.: 185876 EQS News ID: 1435195 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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(END) Dow Jones Newswires
September 05, 2022 05:26 ET (09:26 GMT)
