Samarkand Group plc : FY22 Results, Publication of Annual Report and Notice of AGM DGAP

Samarkand Group plc (SMK)
Samarkand Group plc : FY22 Results, Publication of Annual Report and Notice of AGM

05-Sep-2022 / 10:25 GMT/BST
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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 £16.6m (2021: £14.8m), and over the two-year period increased by 142% (2020: £6.8m)
    • Nomad Technology revenue increased 17.6% to £7.5m (2021: £6.4m)
    • Brand Ownership revenues increased 28.2% to £4.5m (2021: £3.5m)
    • Distribution revenues decreased by 8.0% to £4.5m (2021: £4.8m)
  • Gross margin, excluding exceptional revenue, decreased from 62% to 50%
  • Adjusted EBITDA loss increased to £6.2m (2021: £0.4m)
  • Operating loss after taxation increased to £7.7m (2021:  profit £0.4m)

FY22 Strategic and operational highlights:

  • Completed the acquisition of Zita West Products Limited in May 2021 and Napiers the Herbalist in November 2021
  • Accelerated growth of Zita West proposition through upgraded eCommerce capabilities, expanded presence in high 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 skin care range
  • Expanded distribution for Probio7 in speciality retail channels and launched new product variant AB21 backed 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 companies to grow our pipeline of new merchant opportunities
  • Strengthened China distribution capabilities by building expertise in fast growing live streaming commerce 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 acceleration services 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 extended lockdowns in mainland China. Strong performance in June shopping festival generating 34% growth in revenue over the same period in prior year resulting in an EBITDA and net profit result for the month.
  • Adjusted EBITDA losses improved by £0.6m reduced from £1.1m loss in Q1 FY22 to £0.5m in Q1 FY23, as a result of cost actions taken in Q4 FY22 and improved operational efficiency
  • Won multiple industry awards including Queens Award for international trade and Shanghai Cross-Border eCommerce Association: Outstanding Cross-Border Trade Enterprise Award
  • Secured agreement in principle from major existing strategic shareholder to increase investment in the Group


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

Eva Hang, Chief Financial Officer

http://samarkand.global/

 

 

VSA Capital – AQSE Corporate Adviser and Broker

+44(0)20 3005 5000

Andrew Raca, James Deathe, Pascal Wiese (Corporate Finance)

Andrew Monk (Corporate Broking)

IPO@vsacapital.com

 

 

Alma PR

+44(0)20 3405 0213

Josh Royston

Lily Soares Smith

Joe Pederzolli

samarkand@almapr.co.uk

 

 

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 £16.6m (2021: £14.8m excluding exceptional revenues). These results reflect the well covered disruption experienced during the year, with revenues in China increasing by 4% to £11.6m. 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 £1.1m to £0.5m, 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 £2.8 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 £4.0m and net current assets of £5.7m. 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 £16.6m from £14.8m, and over the two-year period increased by 142% from £6.8m. 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 £11.6m. Revenue growth in UK remained strong and was augmented by the new acquisitions in the year, revenues increasing by 55% to £4.9m.

Revenues on our Nomad technology up 17.6% to £7.5m (2021: £6.4m), brand ownership revenues up 27% to £4.5m (2021: £3.5m) and distribution revenues decreased by 7.5% to £4.5m (2021: £4.8m).

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 £0.32m and £0.47m respectively (2021: £0.2m and £0.3m). The Group continued to invest in its Nomad Technology platform with a total of £1.1m (2021: £0.6m) 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 £6.2m (2021: £0.4m), after deduction £0.3m in restructuring costs and £0.3m 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 £1.9m (2021: £11.6m), excluding the IFRS 16 lease liabilities, net cash was £2.6m (2021: £12.5m). 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 £7.7m (2021: £0.9m). 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 £5m (2021: £0.6m). In May 2021, the Group received £3m from strategic investor together with the repayment of borrowings and lease liabilities, the net cash from financing activities was £2.2m (2021: £14.1m).

Financing costs of £0.17m (2021: £0.4m) comprised of interest expenses of £0.1m (2021: £0.3m).

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

Year ended 31 March 2022

 

Year ended 31 March 2021

 

£

 

£

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

 

£

 

£

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

 

 

Share 

capital 

 

 

Share 

premium 

 

Merger relief reserve 

 

 

Capital 

contribution 

 

Currency 

translation 

reserve 

 

 

Accumulated loss 

 

Non-controlling 

interests 

 

 

 

Total 

equity 

 

£ 

 

£ 

 

£ 

 

£ 

 

£ 

 

£ 

 

£ 

 

 

£ 

Balance at 1 April 2020 

1,767 

 

- 

 

28,764 

 

266,072 

 

(3,333) 

 

(3,342,203) 

 

(32,168) 

 

 

(3,081,101) 

Profit after taxation 

- 

 

- 

 

- 

 

- 

 

- 

 

405,074 

 

1,983 

 

 

407,057 

Other comprehensive loss 

- 

 

- 

 

- 

 

- 

 

(18,517) 

 

- 

 

- 

 

 

(18,517) 

Total comprehensive income/(loss) for the year 

- 

 

- 

 

- 

 

- 

 

(18,517) 

 

405,074 

 

1,983 

 

 

388,540 

Disposal of minority interests 

- 

 

- 

 

- 

 

- 

 

- 

 

(12,891) 

 

30,185 

 

 

17,294 

Transactions with owners 

- 

 

- 

 

- 

 

- 

 

- 

 

(12,891) 

 

30,185 

 

 

17,294 

Group reconstruction 

351,633 

 

- 

 

(2,092,578) 

 

(266,072) 

 

13,583 

 

1,993,434 

 

- 

 

 

- 

Shares issued on listing net of transaction fees 

147,804 

 

15,852,283 

 

- 

 

- 

 

- 

 

- 

 

- 

 

 

16,000,087 

Shares issued on conversion of loans 

14,986 

 

1,560,617 

 

- 

 

- 

 

- 

 

- 

 

- 

 

 

1,575,603 

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 2021 

516,190 

 

17,412,900 

 

(2,063,814) 

 

- 

 

(8,267) 

 

(929,672) 

 

- 

 

 

14,927,337 

Profit after taxation 

- 

 

- 

 

- 

 

- 

 

- 

 

(7,617,081) 

 

(89,871) 

 

 

(7,706,952) 

Other comprehensive loss 

- 

 

- 

 

- 

 

- 

 

(23,234) 

 

- 

 

- 

 

 

(23,234) 

Total comprehensive income/(loss) for the year 

- 

 

- 

 

- 

 

- 

 

(23,234) 

 

(7,617,081) 

 

(89,871) 

 

 

(7,730,186) 

Shares issued on subscription 

27,378 

 

3,113,638 

 

- 

 

- 

 

- 

 

- 

 

- 

 

 

3,141,016 

Shares issued on acquisition 

   3,580 

 

496,420 

 

- 

 

- 

 

- 

 

- 

 

- 

 

 

500,000 

 

30,958 

 

3,610,058 

 

- 

 

- 

 

- 

 

- 

 

- 

 

 

3,641,016 

Balance at 31 March 2022 

547,148 

 

21,022,958 

 

(2,063,814) 

 

- 

 

(31,501) 

 

(8,546,753) 

 

(89,871) 

 

 

10,838,167 

                                             

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

31 March 2022

 

31 March 2021

 

£

 

£

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.

  1. Basis of preparation and measurement
  1. 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 £7.7m during the year ended 31 March 2022 and had a net operating cash out flows of £7.7m 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 £7.7m (2021: profit £0.4m), shareholders’ equity of £10.8m (2021: 14.9m) and accumulated losses of £8.5m (2021: £0.9m).

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.

  1. Revenue from contracts with customers

 

Disaggregation of revenue from contracts with customers:

 

 

31 March 2022

 

31 March 2021

 

 

£

 

£

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 £5.8m 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.

 

 

 
  1. Intangible assets

 

Development costs 

 

Trademarks 

 

Brands 

 

Goodwill 

 

Website 

 

Total 

 

£ 

 

£ 

 

£ 

 

£ 

 

£ 

 

£ 

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 

Acquired through business combinations 

Additions 

 

- 

- 

1,139,882 

 

 

- 

8,857 

20,367 

 

 

(10,235) 

2,024,175 

- 

 

 

10,235 

2,761,676 

- 

 

 

- 

- 

70,198 

 

 

- 

4,794,708 

1,230,447 

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 

Acquired through business combinations 

163,067 

- 

 

13,343 

7,663 

 

149,494 

- 

 

- 

- 

 

- 

- 

 

325,904 

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 

 

 

 

 

 

 

 

 

 

 

 

 

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 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  1. Property, plant and equipment

 

Office equipment

 

Computer equipment

 

Leasehold improve-ments

 

Machi-nery

 

Total

 

£

 

£

 

£

 

£

 

£

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

Additions

Acquisition

Disposal

(7,541)

23,059

24,388

-

 

7,541

90,492

17,255

(23,014)

 

-

20,145

-

-

 

-

50,745

-

-

 

-

184,441

41,643

(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

Charge for the year

Acquisition

Disposal

(4,481)

12,235

21,086

-

 

4,481

56,459

15,754

(10,459)

 

-

11,905

-

-

 

-

4,830

-

-

 

-

85,429

36,840

(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

 

 

  1. Right-of-use assets

 

 

 

 

 

 

Land and buildings

 

Total

 

 

 

 

 

 

£

 

£

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

 

 

£

 

£

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

 

 

  1. Inventories

 

 

31 March 2022

 

31 March 2021

 

 

£

 

£

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

 

  1. Trade receivables

 

 

31 March 2022

 

31 March 2021

 

 

£

 

£

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

 

 

  1. Other receivables and prepayments

 

 

 

31 March 2022

 

31 March 2021

 

 

£

 

£

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

 

  1. 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

 

 

£

 

£

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

 

 

  1. 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 £2.8m.

 

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

 

£

£

£

 

 

 

 

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 £1.2m to the Group revenues and £0.07m to the Group losses. If the acquisition had occurred on the 1 April 2021, Group revenue would have been £16.7m and Group losses would have been £7.7m.

 

Acquisition of Napiers the Herbalists

In November 2021, the Group acquired the Napiers brand and its subsidiaries, for a total consideration of £2.3m.

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

 

£

£

£

 

 

 

 

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 £0.3m to the Group revenues and £0.03 to the Group losses. If the acquisition had occurred on the 1 April 2021, Group revenue would have been £17m and Group losses would have been £7.7m.

 


[1] https://www.insiderintelligence.com/content/global-historic-first-ecommerce-china-will-account-more-than-50-of-retail-sales



ISIN: GB00BLH1QT30
Category Code: MSCH
TIDM: SMK
Sequence No.: 185876
EQS News ID: 1435195

 
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