Samarkand Group plc (SMK)
Samarkand Group plc : FY23 Results
07-Aug-2023 / 07:00 GMT/BST
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7 August 2023
Samarkand Group plc
("Samarkand", the "Company" or together with its subsidiaries the "Group")
FY23 Results
Samarkand Group plc, the cross-border eCommerce technology solution provider, is pleased to announce its audited
results for the year ended 31 March 2023 ("FY23").
FY23 Financial highlights:
-- Revenue increased by 5.4% to GBP17.5m (2022: GBP16.6m)
-- Brand Ownership revenues increased 48.1% to GBP6.7m (2022: GBP4.5m)
-- Nomad Technology revenue decreased 19.4% to GBP6.0m (2022: GBP7.5m)
-- Distribution revenues remained flat at GBP4.4m (2022: GBP4.4m)
-- Gross margin increased from 50% to 55%
-- Adjusted EBITDA loss decreased to by 64% to GBP2.2m (2022: GBP6.2m)
-- Operating loss after taxation decreased by 40% to GBP4.6m (2022: GBP7.7m)
FY23 Strategic and operational highlights:
-- Launched successful open offer in September 2022, raising GBP1.9m from existing shareholders, giving the
group the ability to continue to pursue its strategic objectives.
-- Generated top line growth across the Group despite ongoing COVID related disruptions in China during the
year.
-- Major reduction in losses vs prior year as a result of adjustment of cost base and improvement in gross
profit margins as we focus on our core activities and our goal of moving the Group into profitability.
-- Expanded the portfolio of niche premium skincare and health and wellness brands, targeting key consumer
trends in China.
-- Saw the benefit of investment in acquisitions and impact of improvements made in higher growth rates for
our owned brand portfolio in the UK and in China.
-- Expanded the Napiers the Herbalists premium natural beauty product line, grew sales channels and
successfully introduced the brand in China.
-- Expanded our influencer livestream commerce capabilities through the Douyin social commerce platform. New
material sales opportunities were unlocked for our brands, working in partnership with Chinese influencers.
-- Shifted the focus of our technology resources to embedding and commercialising what has already been
developed vs feature innovation enabling a reduction in our cost base.
-- Improved operating efficiency across the business and strong progress in reducing inventory levels and
improving stock turns.
Post period end highlights:
-- April and May revenue 13% above prior year, with an improvement in gross profit percentage from 53% to
63%.
-- Revenue during the key shopping festival in June was 25% lower than prior year. The cancellation of key
promotional events and weaker than expected performance across several livestream channels resulted in lower than
expected sales. As a result, Q1 FY24 overall revenue is 5% below prior year.
-- July month is on track to be in line with our expectations in terms of top and bottom line results. A
number of new sales channels and partner relationships in the China market will come on stream in Q2 expanding the
route to market and sales potential for our brands.
-- Strong growth in influencer led livestream commerce with sales via the Douyin platform growing 220% year
over year in Q1 FY24.
-- Extended partnership with 1 existing brand and added 7 new niche beauty and skin care brands to our
portfolio related to emerging skincare trends and beauty tools.
-- Signed leading Southeast Asian duty-free retailer to our Nomad Checkout platform for cross-border DTC
sales.
-- Samarkand named "Best Cross-border Campaign" finalist in 2023 eCommerce Awards, in recognition of highly
innovative China market entry strategy for Napiers the Herbalists, effectively leveraging the rapidly expanding
Douyin platform to generate substantial sales.
David Hampstead, Chief Executive Officer of Samarkand Group, commented:
"I am delighted that we have been able to grow the business and to make strong progress towards profitability in an
unprecedented and challenging trading environment. This demonstrates the resilience and adaptability of the business
and in particular the capability of our colleagues. The reopening of the Chinese economy, a growing pipeline of new
clients and channel partners and an ongoing focus on operational efficiency puts us in a good position to capitalise on
opportunities that may emerge in the market. We are encouraged by the start of the new financial year and remain
confident that the interplay of our China market development capabilities, underlying eCommerce technology and owned
brand portfolio will put us in a good position to make further progress towards our goal of profitability."
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 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.
For further information please visit
https://www.samarkand.global/ Chairperson's Statement
I am delighted with the progress being made at Samarkand despite
operating in a period of ongoing disruption, as result of the
extended zero tolerance approach to COVID in China. The fact that
the business has produced growth and significantly reduced losses
in a volatile and uncertain environment is of great credit to the
whole team.
I would like to take this opportunity to thank the entire team
for their contribution and commitment, as well as their resilience
and adaptability in moving the group forward over the last 12
months. The business has responded well to an evolving situation in
China and continued to make strategic progress despite the
disruptions.
It is particularly pleasing to note the growing contribution of
the 2021 acquisitions Zita West and Napiers the Herbalists and
their impact on the group performance, providing some protection
from the disruption in China.
The team's focus on becoming profitable is abundantly clear from
the excellent progress made in reducing losses through improvements
in gross margins, cutting costs, and better financial planning and
analysis across the business.
A well-timed open offer in September 2022 received strong
backing from existing shareholders enabling the team to focus on
delivering their ambition and making progress towards their goal of
becoming profitable.
Financial Results
The Group delivered revenues of GBP17.5m which equates to growth
of 5.4% over the prior year. More importantly adjusted EBITDA
losses were reduced by over 60% to GBP2.2m and operating losses
reduced by 40% to GBP4.6m as result of stronger gross margins and
reduction in operating costs.
Strong growth in owned brands and a small decline in revenues
from acceleration and distribution activities which were most
impacted by COVID related issues in China, combined to produce year
over year growth in revenues in what was another year of
disruption.
People
The Samarkand team has responded well to the challenges of the
year and demonstrated their ability to deal with disruption on many
fronts as well their willingness to take difficult decisions and
execute at speed. I would like to give a special mention to our
colleagues in China who despite extended lockdowns followed by a
sudden and unexpected reopening were able to continue to operate
and serve our partners and clients in the most difficult of
circumstances. The team's performance can largely be attributed to
the sense of community we have built across the Group and a culture
that encourages our teams to grow and take on new challenges. They
have not only displayed resilience in the face of various
challenges throughout the year but have also consistently exhibited
their capacity to adapt and thrive.
Board and Governance
Our Board which was established at the time of the IPO is
operating well, bringing a wealth 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
The Chinese economy has reopened and is recovering from two
years of extended and extremely tough lockdowns. There is ground
for optimism as consumers and channels return to some degree of
normality although it is important to note that while COVID related
restrictions are now lifted, Chinese consumer confidence has yet to
recover to pre-COVID levels.
The Group is well positioned to capitalise on a reopening
economy with a strong portfolio of desirable, premium international
brand partners and proprietary technology which enables merchants
and brands to sell direct to Chinese consumers in a compliant
cross-border manner.
The Group has demonstrated its ability to adapt to an
ever-changing eCommerce landscape in China where market dynamics
shift rapidly, and new channels emerge at great speed - as
evidenced by the strong growth in sales we have been experiencing
through livestream influencer commerce.
The brands we acquired in 2021, Zita West and Napiers the
Herbalists are well placed for further growth as investments made
in FY23 begin to translate into higher sales with the added benefit
of being less dependent on the China market.
In line with their goal of becoming profitable, I am confident
that the team continue to challenge costs and look for
opportunities to improve operational efficiencies across the
business.
Tanith Dodge
Chairperson
CEO REVIEW
In our third year as a public company, we have made strong
progress towards our goal of becoming profitable despite
encountering a significant amount of disruption as strict lockdowns
continued in China, disrupting sales and distribution
activities.
We acted quickly to adjust our cost base and benefited from
strong growth in our UK based acquisitions, the combination of
which enabled to us to deliver revenue growth year over and reduce
our Adjusted EBITDA losses by over 60%.
I am proud of how our team adapted and pulled together
throughout the year, enabling us to make good progress against our
strategic goals despite a volatile situation on the ground with
China. We moved quickly to open new sales channels and navigate the
supply side disruptions throughout the year and have made positive
improvements to the brands we acquired, this is testimony to our
ability to execute at speed.
At 31 March 2023, cash and cash equivalents was GBP2.0m and net
current assets of GBP3.3m. Following a successful open offer it is
our intent use the proceeds to reach profitability in the coming 12
months. In a fast-evolving industry we remain open to potential new
strategic investors.
China Market Environment
The zero-tolerance approach to COVID was rapidly abandoned in
December 2022 and the following months were a period of adjustment
for the market as restrictions were lifted almost overnight and the
disease spread quickly through society.
The macroeconomy appears to be recovering with most analysts
predicting GDP growth in the 5%-6% range, lower than historical
levels but still a growth leader among the world's largest
economies.
Household savings balances in China are at record levels and
while some analysts have predicted a major rebound in consumer
spending. Our assessment is slightly more cautious based on the
fact that Chinese consumer confidence is yet to recover to
pre-pandemic levels, although we do observe undoubtedly improving
prospects.
Overall, we are more optimistic about the year to come given
lockdowns are now a thing of the past and, despite mixed economic
signals, we are confident in the secular trends for eCommerce,
cross-border eCommerce and consumer appetite for niche, premium
brands in beauty and health and wellness.
We note that the geopolitical environment between China and the
West in particular is strained at the moment and while we are
optimistic that the impact of potential future developments on
trade will be limited, it is conceivable that shifts in the
political environment could impact trade in the future. The
continued growth of our owned brand portfolio in markets outside of
China provides the Group with some protection against this.
Strategic Progress
Our overriding goal is to become profitable and I am pleased to
report that we made strong progress towards this objective in the
year. This can be attributed to a strong performance from our owned
brand portfolio, a focus on profitable growth in everything we do,
as well as selective adjustments to our cost base.
Our owned brand portfolio grew at 48% in the year, or 27% on a
like-for-like basis, in turn improving our gross margin mix. Zita
West revenues grew 85% from prior year or 70% on a like-for-like
basis and Napiers the Herbalists grew by 419% or 201% on a
like-for-like basis. We were able to make material improvements to
both brands in terms of marketing, customer acquisition, expanding
sales channels and developing international sales.
In China eCommerce acceleration we strengthened the portfolio of
brands we work with adding high potential brands in trending areas
including Doctor led skincare, beauty tools and haircare. We are
excited about the potential for our existing partner brands and
have put strong plans in place for the year to come designed to
capitalise on the reopening of the economy. We strengthened our
capabilities in the fast-growing livestream eCommerce market and
have been able to offer new sales opportunities to our brands all
enabled by our underlying Nomad platform.
With our cross-border eCommerce technology solutions we shifted
our attention to consolidating and commercialising what we have
already developed vs adding new features. This enabled us to reduce
our software development cost base to a core team. With the
re-opening of the Chinese economy we anticipate that a growing
number of merchants will see China as an opportunity market and
will opt to use partners and technology to tap into this
opportunity.
Outlook statement
As the Chinese economy reopens we are positive about the
opportunities that may emerge in the year to come. Our brand
portfolio and sales channels are well positioned to take advantage
of demand without the supply side restrictions we experienced in
FY23.
In addition to accelerating top line growth, we will continue to
challenge our cost base and look for opportunities to improve
operating efficiency as we seek to move into profitability in the
coming financial year.
The reopening of international travel means our leadership can
visit China for the first time in over 3 years and we look forward
to getting back into the market and re-connecting with our team and
partners on the ground.
I recently observed first-hand the changes that have occurred
over the last few years when I visited China in June 2023. The
market has always been fast moving and constantly evolving and it
was clear that the pace of change is accelerating.
David Hampstead Chief Executive Officer
FINANCIAL REVIEW
Overview
Group revenues for the year increased by 5.4% to GBP17.5m (2022:
GBP16.6m). Revenue growth in China was dampened by the disruptions
caused by the continued impacts of the pandemic in China with
revenues remaining flat at GBP11.7m (2022: GBP11.6m). Revenue
growth in UK and ROW remained strong and was augmented by growth in
the acquisitions made in the prior year, revenues in the UK
increased by 16% to GBP5.8m (2022: GBP5.0m).
Revenues in Brand Ownership up 48% to GBP6.7m (2022: GBP4.5m),
Nomad Technology down 19.3% to GBP6.0m (2022: GBP7.5m), and
distribution revenues remaining flat at GBP4.4m (2022:
GBP4.5m).
The Group's gross margin increased to 55% from 50% in FY 2022,
driven by increase in revenues from Brand Ownership as a % of total
revenue.
Operating expenses
Selling and distribution expenses, have decreased significantly
to 31% (2022: 42%) of revenue, as a result of increasing use of
bonded warehouses in China to mitigate disruptions, more targeted
investments in our own brands and structural changes in our sales
mix as well as focus on improving operating efficiency across the
business.
Administrative expenses decreased to 44% (2022: 49%) of revenue
as the Group made selective adjustments to its cost base. The
Group's total head count as at 31 March 2023 was 104 (2022: 158).
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 include redundancy and
restructuring costs as a result of the Group's adjustment to its
cost base in light of the challenges presented by the
disruptions.
Depreciation and amortisation
The total depreciation and amortisation costs were GBP0.4m and
GBP0.8m respectively (2022: GBP0.3m and GBP0.5m). The Group
continued to invest in its Nomad Technology platform with a total
of GBP1.1m (2022: GBP1.1m) 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 decreased to GBP2.2m (2022: GBP6.2m),
after deducting GBP0.5m in restructuring costs and GBP0.7m for
share based payment expenses. The decrease in losses is a result of
the adjustments made to the Group's cost base and improvements made
in operating efficiencies.
Mar-23 Mar-22
Operation (loss)/profit (4,587,848) (7,677,082)
Depreciation and amortisation 1,140,524 786,639
Share-based payment 712,271 -
Repayment of share option plan - 306,579
Acquisition and restructuring costs 507,085 347,615
Adjusted EBITDA (2,227,968) (6,236,249)
Earnings per share
Basic and diluted loss per share was 7.78 pence per share (2022:
14 pence per share).
Net cash/(debt)
Mar-23 Mar-22
Cash and cash equivalents 2,017,150 4,049,118
Right-of-use lease liabilities (573,785) (720,353)
Borrowings (1,453,298) (1,452,127)
Net cash/(debt) (9,933) 1,876,638
At the year end, the Group's net debt position was GBP0.01m
(2022: net cash GBP1.9m), excluding the IFRS 16 lease liabilities,
net cash was GBP0.6m (2022: GBP2.6m). The adjustments made to the
Group's cost base including the reduction in its head count and the
improvements to its operating efficiencies with targeted marketing
and structural changes in its sales mix and activities saw the
Group's negative operating cash flow fall to GBP2.4m from
GBP8.0m.
The payment of deferred consideration in relation to the prior
year acquisition of Napiers the Herbalists, together with the
continued investment into its technology platform resulted in cash
outflow from investing activities of GBP1.2m (2022: GBP4.7m). In
September 2022, the Group received GBP1.9m from its existing
Shareholders in an open offer together with the repayment of
borrowings and lease liabilities, the net cash from financing
activities was GBP1.5m (2022: GBP2.3m).
Financing costs of GBP0.16m (2022: GBP0.17m) comprised of
interest expenses of GBP0.1m (2022: GBP0.1m).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 March Year ended 31 March
2023 2022
GBP GBP
Revenue 17,476,825 16,576,228
Cost of sales (7,814,362) (8,226,260)
Gross profit 9,662,463 8,349,968
Selling and distribution expenses (5,381,270) (7,056,415)
Administrative expenses (7,728,517) (8,183,996)
Adjusted EBITDA (2,227,968) (6,236,249)
Share-based payment and related expenses (712,271) -
Repayment of share option plan - (306,579)
Acquisition costs - (218,143)
Restructuring costs (507,085) (129,472)
EBITDA (3,447,324) (6,890,443)
Depreciation and amortisation (1,140,524) (786,639)
Operating loss (4,587,848) (7,677,082)
Finance income 20 86
Finance costs (162,502) (171,455)
Loss before taxation (4,750,330) (7,848,451)
Taxation 129,465 141,499
Loss after taxation (4,620,865) (7,706,952)
Other comprehensive income:
Exchange differences on translation of foreign operations (47,859) (23,234)
Items that may be reclassified to profit and loss in subsequent
periods (47,859)
(23,234)
Total comprehensive loss for the year (4,668,724) (7,730,186)
Loss attributable to:
Equity holders of the Company (4,571,494) (7,617,081)
Non-controlling interests (49,371) (89,871)
(4,620,865) (7,706,952)
Loss per share (basic and diluted) (0.0778) (0.1399)
Comprehensive loss attributable to:
Equity holders of the Company (4,619,353) (7,640,315)
Non-controlling interests (49,371) (89,871)
(4,668,724) (7,730,186)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 March 2023 31 March 2022
GBP GBP
ASSETS
Intangible assets 7,338,884 7,011,236
Property, plant and equipment 203,417 243,417
Right-of-use assets 489,890 608,635
Non-current assets 8,032,191 7,863,288
Inventories 2,212,227 3,720,248
Trade receivables 1,722,637 1,512,702
Corporation tax recoverable 227,946 113,710
Other receivables and prepayments 706,513 1,012,371
Cash and cash equivalents 2,017,150 4,049,118
Current assets 6,886,473 10,408,149
Total assets 14,918,664 18,271,437
EQUITY AND LIABILITIES
Share capital 583,582 547,148
Share premium 22,954,413 21,022,958
Merger relief reserve (2,063,814) (2,063,814)
Accumulated loss (12,901,901) (8,546,753)
Currency translation reserve (79,360) (31,501)
Total equity attributable to parent 8,492,920 10,928,038
Non-controlling interest (139,242) (89,871)
Total equity 8,353,678 10,838,167
Right-of-use lease liabilities 260,779 458,352
Borrowings 1,398,787 1,390,035
Deferred tax liability 347,884 370,590
Accrued liabilities 512,441 512,441
Total non-current liabilities 2,519,891 2,731,418
Trade and other payables 2,088,101 3,597,110
Accrued liabilities 1,261,043 566,266
Deferred revenue 328,434 214,383
Borrowings 54,511 62,092
Right-of-use lease liabilities 313,006 262,001
Total current liabilities 4,045,095 4,701,852
Total liabilities 6,564,986 7,433,270
Total liabilities and equity 14,918,664 18,271,437
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Currency
Share Merger Non-controlling
Share relief translation Accumulated Total
capital reserve loss interests
premium reserve equity
GBP GBP GBP GBP GBP GBP GBP
Balance at 1 April 2021 516,190 17,412,900 (2,063,814) (8,267) (929,672) - 14,927,337
Loss after taxation - - - - (7,617,081) (89,871) (7,706,952)
Other comprehensive - - - (23,234) - - (23,234)
loss
Total comprehensive
income/(loss) for the - - - (23,234) (7,617,081) (89,871) (7,730,186)
year
Shares issued on 27,378 3,113,638 - - - - 3,141,016
subscription
Shares issued on 3,580 496,420 - - - - 500,000
acquisition
30,958 3,610,058 - - - - 3,641,016
Balance at 31 March 547,148 21,022,958 (2,063,814) (31,501) (8,546,753) (89,871) 10,838,167
2022
Loss after taxation - - - - (4,571,494) (49,371) (4,620,865)
Other comprehensive - - - (47,859) - - (47,859)
loss
Total comprehensive
income/(loss) for the - - - (47,859) (4,571,494) (49,371) (4,668,724)
year
Shares issued on 35,976 1,902,413 - - - - 1,938,389
subscription
Shares issued on 458 29,042 - - - - 29,500
acquisition
Share based payments - - - - 216,346 - 216,346
36,434 1,931,455 - - 216,346 - 2,184,235
Balance at 31 March 583,582 22,954,413 (2,063,814) (79,360) (12,901,901) (139,242) 8,353,678
2023
CONSOLIDATED STATEMENT OF CASH FLOWS
31 March 2023 31 March 2022
GBP GBP
Cash flows from operating activities
Income/(loss) after taxation (4,620,865) (7,706,952)
Cash flow from operations reconciliation:
Depreciation and amortisation 1,140,524 786,639
Finance expense 20,630 60,182
Finance income (20) (86)
Income tax credit (129,465) (141,499)
Share based payment 216,346 -
Working capital adjustments:
Decrease/(increase) in inventories 1,508,021 (1,544,851)
Decrease/(increase) in trade and other receivables 131,918 (780,763)
(Decrease)/increase in trade and other payables (626,169) 1,258,687
Cash used in operating activities (2,359,080) (8,068,643)
Taxes (paid)/received (7,477) 20,803
Net cash used in operating activities (2,366,557) (8,047,840)
Cash flows from investing activities
Purchase of property, plant and equipment (67,602) (175,151)
Purchase of intangible assets (1,095,564) (1,228,096)
Payment of deferred consideration (80,000)
Acquisition of subsidiary, net of cash acquired - (3,341,477)
Disposal of property, plant and equipment 9,336 -
Finance income 20 86
Net cash used in investing activities (1,233,810) (4,744,638)
Cash flows from financing activities
Proceeds from issue of shares, net of fees 1,937,889 3,141,016
Repayment of right-of-use lease liabilities (329,001) (252,641)
Interest paid (24,671) -
Repayment of borrowings (71,131) (630,411)
Net cash generated from financing activities 1,513,086 2,257,964
Net decrease in cash and cash equivalents (2,087,282) (10,534,514)
Cash and cash equivalents - beginning of the year 4,049,118 14,606,867
Effects of exchange rate changes on the balance of cash held in foreign currencies 55,314
(23,235)
Cash and cash equivalents - end of the year 2,017,150 4,049,118 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.
The Consolidated Group financial statements represents the
consolidated results of Samarkand Group plc and its subsidiaries,
(together referred to as the "Group"). The Parent Company financial
statements present information about the Company as a separate
entity and not about its Group. 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 2023 or 31 March 2022.
Statutory accounts for the year ended 31 March 2022 have been
filed with the Registrar of Companies and those for the year ended
31 March 2023 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 2023 is unmodified
with the material uncertainty in respect of going concern:
We draw attention to the paragraph below, which indicates that
the Group made a total comprehensive loss of GBP4.7m during the
year ended 31 March 2023 and had an adjusted EBITDA loss of
GBP2.2m. The Directors recognise the importance of moving the Group
into profitability for the year ended 31 March 2024 and are
additionally actively exploring additional funding options to
support the Group's operations and long-term viability. In this
regard the Group is considering various options including but not
limited to trade financing, sale of non-core assets and other
strategic opportunities. Despite the cost base reduction and
ongoing exploration of additional funding, in the event that
trading does not proceed as planned, the Group's financial
performance and cash flow projections indicate the existence of
material uncertainties that may cast significant doubt on the Group
and Parent Company's ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
The independent auditor's reports on the Annual Report and
Accounts for the year ended 31 March 2022 was unqualified and did
not contain a statement under 498(2) or 498(3) of the Companies Act
2006 but included a material uncertainty in respect of going
concern.
Going concern
The financial statements have been prepared on a going concern
basis, assuming that the Group will continue its operations for the
foreseeable future. The Directors have assessed the Company's
ability to continue as a going concern, taking into consideration
the current economic and market conditions, as well as the group's
financial performance and cash flow projections.
The Group faced another challenging year, with ongoing
widespread COVID lockdowns in China and China's rapid exit of the
zero COVID position in December 2022 which generated high levels of
disruptions to the Group's trade.
During the year ended 31 March 2023, the Group has continued to
take significant measures to reduce its cost base. These cost
reduction initiatives included streamlining its operations,
optimising resource allocation, and implementing efficiency
measures. These actions were aimed at improving the Group's
financial position and mitigating the impact of challenging market
conditions. For the year ended 31 March 2023, the Group reported an
adjusted EBITDA loss of GBP2.2m (2022: GBP6.2m) and total
comprehensive loss of GBP4.7m (2022: GBP7.7m).
The Directors recognise the importance of moving the Group into
profitability for the year ending 31 March 2024 and have made
significant progress towards this goal. In addition, the Directors
are actively exploring additional funding options to support the
Group's operations and long-term viability. In this regard the
Group is considering various options, including but not limited to,
trade financing, sale of non-core assets and other strategic
opportunities. These efforts are ongoing, and the Directors are
diligently working towards these goals.
Despite the cost base reduction and ongoing exploration of
additional funding, in the event that trading does not proceed as
planned, the Group's financial performance and cash flow
projections indicate the existence of material uncertainties that
may cast significant doubt on the Group's ability to continue as a
going concern. Although there are material uncertainties, several
mitigating factors have been considered by the Directors in their
assessment of the going concern assumption. These include the steps
taken to further reduce costs, the progress made in exploring
various strategic options to raise additional funds and its
pre-COVID trading record. The directors believe that these factors,
will enable the group to overcome the identified challenges and
continue its operations.
To address the material uncertainties, the directors will
continue to closely monitor the Group's financial performance, cash
flow projections, and market conditions. They will continue to
proactively manage the Group's cost base, seeking further
efficiencies where possible.
The Directors are confident in the Group's ability to mitigate
the identified risks and uncertainties. There is no certainty
regarding the economic and market conditions after the exit of zero
COVID policy in China or the timing or success of securing
additional funding. As a result, the financial statements have been
prepared on a going concern basis, acknowledging the material
uncertainties that may cast significant doubt on the Group's
ability to continue as a going concern.
The financial statements do not include the adjustments that
would result if the Group is unable to continue as a going concern.
3. Revenue from contracts with customers
Disaggregation of revenue from contracts with customers:
31 March 2023 31 March 2022
GBP GBP
Revenue analysed by class of business:
Brand ownership 6,678,067 4,509,979
Nomad technology 6,027,090 7,480,941
Distribution 4,423,676 4,447,990
Other 347,992 137,318
Total revenue 17,476,825 16,576,228
Cost of sale by business unit:
Brand ownership 2,516,506 1,991,401
Nomad technology 2,072,450 3,240,269
Distribution 3,222,704 2,992,880
Other 2,702 1,710
Total costs of sale 7,814,362 8,226,260 4. Intangible assets
Development costs Trademarks Brands Goodwill Website Total
GBP 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 - -
Acquired through business combinations - 8,857 2,024,175 2,761,676 - 4,794,708
Additions 1,139,882 20,367 - - 70,198 1,230,447
At 31 March 2022 2,330,437 99,596 2,484,091 2,829,718 70,198 7,814,040
1,076,159 18,624 - - 782 1,095,565
Additions
At 31 March 2023 3,406,596 118,220 2,484,091 2,829,718 70,980 8,909,605
Amortisation
At 1 April 2021 163,067 13,343 149,494 - - 325,904
Acquired through business combinations - 7,663 - - - 7,663
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
Charge for the year 572,744 14,108 161,960 - 19,105 767,917
At 31 March 2023 1,066,292 46,611 433,640 - 24,178 1,570,721
Net book value
At 31 March 2023 2,340,304 71,609 2,050,451 2,829,718 46,802 7,338,884
At 31 March 2022 1,836,889 67,093 2,212,411 2,829,718 65,125 7,011,236
Impairment of intangible assets
At each reporting date, the Directors assess whether indications
exist that an asset may be impaired. If indications do exist, the
Directors estimate the asset's recoverable amount. An asset's
recoverable amount is the higher of an assets or cash-generating
unit's fair value less costs to sell and its value-in-use.
Management have assessed that there are 3 cash generating units,
these include Nomad Technology, Brand Ownership and Distribution.
Nomad Technology encompasses the technology and service solutions
designed to provide Clients cross border eCommerce solutions into
China, the solutions are built on the Nomad Platform and is
integrated with Chinese eCommerce platforms, payment providers and
logistic companies. Brand Ownership includes the sale of our owned
branded products through retailers, online and other marketplaces
across the UK, China and ROW. Distribution includes the sale of
third-party brands to UK and European retailers as well as through
resellers on wholesale basis in China.
Management have performed an impairment review as required by
IAS 36 and have concluded that no impairment is indicated for its 2
core cash generating units, Nomad Technology and Brand Ownership.
The recoverable amount of the assets has been determined from a
review of the current and forecasted performance of the cash
generating units through to March 2028. The key assumptions for
these calculations are discount rates and revenue growth rates. In
preparing these projections, a discount rate of 15% has been used
based on the weighted average cost of capital and the perpetual
growth rate of 4% has been assumed. Management has also made
assumptions around the growth in relation to revenues generated
from its Nomad Technology platform and Brand Ownership Sales. This
includes acquiring new customers, adding new third-party brands to
its portfolio, increasing the number of sales channels and partners
in its distribution network and adjusting its cost base. If
management's assumptions with regards to revenue were to change by
1% over the projected period with corresponding change to variable
costs, the value in use calculation would result in a GBP30k change
for Nomad Technology and GBP267k change for Brand Ownership, in the
recoverable amount of the assets. If management's assumptions with
regards to discount rate were to change by 1% over the projected
period, the value in use calculation would result in a GBP599k
change for Nomad Technology and GBP570k change for Brand Ownership,
in the recoverable amount of the asset. 5. Right-of-use assets
Land and buildings Total
GBP GBP
Cost
At 1 April 2021 1,362,545 1,362,545
Additions - -
At 31 March 2022 1,362,545 1,362,545
Additions 155,596 155,596
At 31 March 2023 1,518,141 1,518,141
Amortisation
At 1 April 2021 521,938 521,938
Charge for the year 231,972 231,972
At 31 March 2022 753,910 753,910
Charge for the year 274,341 274,341
At 31 March 2023 1,028,251 1,028,251
Net book value
At 31 March 2023 489,890 489,890
At 31 March 2022 608,635 608,635
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, the impact is not considered
material to users of the financial statements.
Future minimum lease payments associated with the land and
building leases were as follows:
31 March 2023 31 March 2022
GBP GBP
Not later than one year 328,491 283,579
Later than one year and not later than two years 218,190 284,356
Later than two years and not later than five years 48,750 188,190
Total minimum lease payments 595.431 756,125
Less: future finance charges (21,645) (35,772)
Present value of future lease payments 573,786 720,353 6. Inventories
31 March 2023 31 March 2022
GBP GBP
Finished goods 2,980,627 4,394,080
Provision for obsolescence (768,400) (673,832)
Total inventories 2,212,227 3,720,248
Cost of inventory recognised in profit and loss 7,814,364 8,226,260 7. Trade receivables
31 March 2023 31 March 2022
GBP GBP
Trade receivables 1,840,464 1,584,768
Provision for expected credit loss (117,827) (72,066)
Total trade receivables 1,722,637 1,512,702 8. Other receivables and prepayments
31 March 2023 31 March 2022
GBP GBP
Accrued income - 2,517
Prepayments 423,352 561,910
Other receivables 283,161 447,944
Total other receivables and prepayments 706,513 1,012,371 9. Borrowings
The following table provides a reconciliation of the Group's future maturities of its total 31 March 31 March
borrowings for each of the periods presented: 2023 2022
GBP GBP
Not later than one year:
Bank loans 54,511 52,099
Other loans - 9,993
Current 54,511 62,092
Payable after one year but less than five years:
Fixed rate secured loan notes 1,299,746 1,236,485
Bank loans 99,041 153,550
Non-current 1,398,787 1,390,035
Total borrowings 1,453,298 1,452,127
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Dissemination of a Regulatory Announcement, transmitted by EQS
Group. The issuer is solely responsible for the content of this
announcement.
-----------------------------------------------------------------------------------------------------------------------
ISIN: GB00BLH1QT30
Category Code: MSCH
TIDM: SMK
Sequence No.: 262626
EQS News ID: 1696821
End of Announcement EQS News Service
=------------------------------------------------------------------------------------
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