Samarkand Group plc : Interim Results

16 December 2021

 

Samarkand Group plc

("Samarkand", the "Company" or together with its subsidiaries the "Group")

 

Interim Results for the half-year ending 30 September 2021

 

Samarkand Group plc, the cross-border eCommerce technology solution provider, announces its unaudited interim results for the half year ending 30 September 2021 ("H1 2022").

 

David Hampstead, Chief Executive Officer of Samarkand Group, commented: "The first six months of the year represent a period of considerable progress for the Group. Following our listing onto the Aquis Stock Exchange in March, we have proceeded to continue exploiting the demand for access to the Chinese eCommerce market, whilst allocating the fundraised capital towards strategic growth and operational enhancements. I would like to take this opportunity to thank all of the Group's staff for their continued hard work and dedication.

 

We look to the future with real optimism, with the Group well-positioned in a space only set to expand further. We are confident in Samarkand's opportunity to become an integral driver of commerce in the world's largest eCommerce market."

 

Chief Executive's Review

 

Overview

I am pleased to be able to report on our first interim results, in which we have made strong operational progress and continued to invest for future growth in line with our strategy detailed at the time of IPO in March of this year. Our increased profile and the early traction of our Nomad Checkout solution soon after the IPO has catalysed significant developments for us with regards partnerships with leading global companies.

 

Accelerating technology investment

We took the decision to invest more proactively in our technology and personnel. This investment has enabled us to secure significant partnerships which will allow us to a) reach a much wider client base globally and b) consolidate our competitive lead and make our unique offering even more defendable. Our existing partnership with SF Express has already delivered two significant client wins for us in Asia where the SF Express network is particularly strong. We are now well underway with joint business development activities with SF Express sales teams in Japan, South Korea and Hong Kong and we expect to build a healthy pipeline of clients together. In other international markets we are developing partnerships with major organisations, and we look forward to updating shareholders in due course.

 

The opportunity for us to become an integral part of the infrastructure powering the future flow of commerce between international brands and consumers in the world's largest eCommerce market is within reach. Cross-border eCommerce is accelerating in markets globally as more consumers embrace shopping irrespective of borders, growing at twice the rate of domestic eCommerce. The next few years will be key to determining who wins in this new generation of global trade and we are positioning ourselves to be amongst them.

 

Revenue increase on core activities

Our technology and services enable brands in the West to access the world's most lucrative eCommerce market in China and as a result we have not been immune to the highly publicised supply chain issues which have impacted the retail industry. Considering this, revenues of £7.2m (H1 2021: £7.3m), flat year on year against a strong comparable period, when there was an unprecedented surge in eCommerce, is a very credible performance. Despite these headwinds, revenue from core activities has increased, Nomad technology revenue is up 15% and brand ownership revenue is up 13%. Inline with our strategy we have de-prioritised the wholesale distribution part of the business and revenue has decreased 31% from these activities. The deals that we have signed and new channels we have launched post-period have resulted in October and November trading being 15% and 25% ahead YoY respectively with this trend continuing to accelerate significantly into the first two weeks of December. Adjusted EBITDA loss was £2.6m (H1 2021 profit: £0.3m) which reflects the ongoing investments being made that we set out in our IPO prospectus. The Company continues to enjoy a strong balance sheet with cash and cash equivalents at 30 September of £10.4m.

 

Our Market

The Chinese eCommerce market continues to be by far the world's largest, both in terms of size and scale, representing immense opportunity for both our clients and the Company. The pandemic undoubtedly created both challenges and opportunities and, as a business, we have adapted well to restrictions imposed on international travel and found alternative ways to operate.

 

As noted at the time of Full Year Results in July, disruptions to travel have caused issues surrounding the discovery of Western brands by Chinese consumers. There has been increasing commentary around the rise in the pertinence of domestic Chinese brands in favour of household names in the West. Our experience suggests that this is largely concentrated around those goods which have been traditionally manufactured in the East by western brands, such as apparel. In the beauty and health markets, and particularly high-end segments, in which Samarkand currently operates, consumers recognise, and place great value on, the provenance, quality and cache of the products they buy.

 

Response to macro-challenges delivering results

The continuing strain placed on supply chains and the effect on consumer confidence felt globally, including China, has resulted in a challenging first half, especially when compared to the unprecedented surge we experienced at the start of the pandemic in H1 2020 when supply chains were still in good shape and consumers hadn't endured a year of uncertainty. We have anticipated those challenges and proactively adapted in a number of ways including taking advantage of our strong balance sheet to invest in additional stock and at the half year, the Group had inventory of £3.5 million compared to the £1.9 million worth of stock held at the same point in the prior year. We are pleased to have managed to remain stable with our first half revenue and we are now seeing the hard work, investment in new channels and increased capabilities coming through in H2 with October through to December performing strongly.

 

As part of our growth strategy, we have identified significant opportunities which will have a positive forward-looking effect. In near-China markets such as Japan, South Korea and SE Asia the dramatic reduction in Chinese tourists has meant an increased interest from merchants in cross-border eCommerce to reach these valuable consumers. In response to this we established an office in Japan to service this region and have recently signed two large enterprise clients to our Nomad Checkout solution which are planned to come online in early 2022. Our investment from, and partnership with, China's leading express delivery company, SF Express, has opened a healthy pipeline of potential clients in the region that we are actively developing together. Our recent announcements relating to Amorepacific and Strawberrynet is a direct result of the joint business development activities we are undertaking. We expect these to start contributing to the first quarter of the new year and to announce further client wins.

 

Strategic progress

As outlined at the time of listing, the net proceeds from the fundraising were to be allocated to development of the Nomad platform's functionality and services, to expand business development internationally, to extend marketing of our own brands and to pursue acquisitive growth opportunities. I am delighted that the first half of the year signifies a period of considerable progress made against these objectives.

 

International expansion

In line with our ambitions to expand internationally, in June we formally opened an office in Tokyo in order to help Japanese brands penetrate the Chinese eCommerce market. Japan is the world's 4th largest eCommerce market, and Japanese brands are highly sought after by Chinese consumers for their design and high-quality products. Samarkand's office in Tokyo is already engaged with a number of Japanese brands and retailers looking to improve their eCommerce penetration in China. We are also developing a strategy to penetrate further into Northeast Asian markets and have benefitted from one of the world's largest beauty conglomerates selecting our Nomad Checkout solution to power direct-to-consumer sales, from South Korea to Chinese consumers.

 

Complementary and fast growing acquisitions

In May we acquired Zita West Products Limited and a majority interest in Babawest Ltd for a total consideration of just over £2.8 million. Having collaborated commercially with both businesses for more than 3 years prior to their acquisition, the acquisition of these two businesses made sense from a strategic perspective. We had identified the businesses as attractive targets thanks to the sectors in which they operate. The fertility, pregnancy and mother & baby spaces continue to expand in China. Both companies have grown significantly since acquisition, taking advantage of the pre-existing supply chain of Probio7 which we had successfully established. Through the application of our market knowledge and the use of our Nomad platform, Zita West and Babawest sales have increased by 55% in the 5 months since acquisition compared to the same period last year. We have seen further increases in Zita West post period, driven by a new direct-to-consumer website in the UK, expanded listings in John Bell & Croydon and Harrods and the launch of a Tmall Flagship store in China.

 

More recently, the post-period acquisition of the Scottish brand, Napiers the Herbalists, signals a further execution of our stated intention to pursue acquisition opportunities. The business was acquired in November for an initial consideration of £1.7m. Napiers and Samarkand share the same vision, and we are confident that Napiers will benefit from our expertise and synergies and will follow similar trajectories to Probio7, Zita West Products and Baba West having integrated well into the Group.

 

New channels and major client wins for our technology

Despite the difficult trading period, revenues attributed to our Nomad Technology have increased 15%. In November we added the fastest growing eCommerce platform in China, Douyin, to our Nomad Storefront offering and launched our first store on the platform. Douyin is the Chinese version of TikTok and has become a major player in eCommerce with £95bn(forecast) of GMV on the platform in 2021 up from £17bn in 2019. Through our direct integration we can now offer international merchants the ability to ship directly from overseas to consumers shopping on Douyin and from bonded warehouses within China. We went live with our first store on the platform in November and we are very pleased with the results and expect to see significant growth from this exciting channel. The launch of our Nomad Checkout SaaS product in a pilot project with THG (The Hut Group) has been successful and we expect to announce a full roll-out and extension of services in due course. Client wins have quickly followed in South Korea and Hong Kong with other large organisations which are scheduled for launch in Q1 2022.

 

Growth through top-tier partnerships

We now find ourselves in a position where the solutions we first envisaged 4 years ago are now a reality, powering sales for major retailers and attracting the attention of global logistics, payments and eCommerce technology companies who we are seeking to build strategic partnerships with. In this regard, I am delighted that Philip Smiley will be joining the Board as an executive early in the New Year. Phil is well known to the Company, being the brother of co-founder and Chief Operating Officer, Simon. His experience and understanding of our markets and offering will be of huge value to our business. Previously Global CEO of the Consulting Division of Kantar, the world's leading data, insights and consulting company, he brings with him deep retail and consumer industry expertise and his proven track record in scaling b2b technology and services businesses, experience in acquisition, investment and partnership development will be invaluable. 

 

More widely there have been significant hires made across the Group in order to deal with the increases in working capacity as we expand our operations. Since our IPO in March 2021, our total number of staff has increased from 99 to over 150 in December 2021. The decision to accelerate investment in talent and capability has been taken to enable us to capitalise on the significant opportunities that we have developed since March with top-tier partners and enterprise clients. We did this despite the short-term trading headwinds we have experienced in the first half

 

Outlook statement

The first half presented Samarkand with challenges which were felt across the retail sector globally and impacted sales in the period. We have worked hard to mitigate the effect of supply chain issues and are pleased with the momentum shown in the first two months of H2 with 15% and 25% sales growth in October and November respectively year on year. This trend has accelerated into December and we expect to be further ahead by month end.  We will continue to see the benefit of deals signed in the first half start to come through during the rest of the financial year. The ongoing opportunity for the Group remains as strong as ever and any increased complexity in accessing the world's largest eCommerce market further strengthens our competitive advantage and barriers to entry for our competitors.

 

We have made considerable operational progress since IPO and the strength of our offering in accessing the world's largest eCommerce market has only increased. This is evidenced by the nature of the organisations that are looking to form strategic alliances with us. The Board remains confident in its execution of the plan outlined at IPO and in delivering significant returns for shareholders. We thank them for their continued support.

 

 

 

 

FINANCIAL REVIEW

 

Overview

During the year, the Group's revenues, excluding exceptional revenues of £5.8m in H1 2021, remained flat at £7.2m (H1 2021: £7.3m) with gross margin decreasing to 57% (H1 2021: 62% excluding exceptional revenue contract).

 

Revenues from our core activities, Nomad technology is up 15% to £3.0m (H1 2021: £2.6m) and brand ownership revenues is up 13% to £2.3m (H1 2021: £2.0m) with revenues from our legacy distribution business decreasing 31% to £1.8m (H1 2021: £2.6m). The Group continues its strategy of moving away from B2B distribution model and focusing on growing its own brands, its Nomad technology revenues and increasing its B2C capabilities in the UK, China and rest of the world.

 

The Group's gross margin has decreased to 57% (H1 2021: 62% excluding exceptional revenues). The reduction in gross margin is a result of a change in our product mix, supply chain pricing pressures not all which could be passed on to our customers.

 

Exceptional Revenues

In H1 2021, the Group was awarded a £5.8m government contract from the Department of Health and Social Care (the "Exceptional Revenue") for the supply of personal protective equipment. This contract was successfully fulfilled.

 

Operating expenses

Selling and distribution expenses increased to 45% (H1 2021: 36% excluding exceptional revenue contract) of revenue, as a result of an increase in market advertising and distribution costs for brands the Group work with. In market advertising includes social media activities such as livestreaming, on-platform and off-platform promotions. Furthermore, there is a significant increase in marketing investment in our own brand Probio7 in line with our plans set out at the IPO.

 

Administrative expenses, excluding one off cost such as exceptional revenues, share-based payment expense, acquisition and restructuring related costs, increased to 49% (H1 2021: 23%) of revenue as a result of an increase in staff costs and additional regulatory and compliance costs. Staff costs have increased to £2.8m (H1 2021: £1.2m) to allow for the accelerated rollout of our Nomad technology platform and an increase client service, fulfilment and operational capabilities as outlined at our IPO. The average number of employees for the six months ending 30 September 2021 was 130 (H1 2021: 73).

 

Earnings per share

Basic and diluted loss per share was 6.5 pence per share (H1 2021 earnings: 5.2 pence per share).

 

Net cash/(debt)

The Group listed on the Apex segment of the AQSE Growth Market in March 2021 and raised a total of £17m from both institutional investors and qualified investors. On 10 May 2021, the Group issued 2,737,840 new ordinary shares at a price of 115 pence raising £3,148,516 from United Win Asia Limited, a subsidiary of S.F. Holding Co., Ltd., as part of a strategic investment to further develop the Group's international expansion and technology.

 

 

As a result of the proceeds raised at the IPO and subsequent raise from United Win Asia Limited, the Group has moved from a net debt to net cash position. Alongside the funds raised, the directors' loans, former director loans and loan notes were converted into shares or repaid.

 

 

 

 

	Sep-21	Sep-20	Mar-21
Cash and cash equivalents	10,389,765	1,468,146	14,606,867
Right-of-use lease liabilities	(847,433)	(795,921)	(972,994)
Borrowings	(1,607,040)	(3,527,457)	(2,082,538)
Directors' loans	-	(501,563)	-
Net cash / (debt)	7,935,292	(3,356,795)	11,551,335

 

 

At the period end, the Group's net cash position was £7.9m (H1 2021: net debt £3.4m). The Group has brought forward significant investments in its technology and increased its client service, fulfilment and operational capabilities as well as invested in marketing its own brands. On the 1 May 2021, the Group also acquired Zita West Products Limited and majority stake in Babawest Limited for total cash consideration of £2.3m and £0.5m in shares.

 

Depreciation and amortisation

The total depreciation and amortisation costs were £0.1m and £0.2m respectively (H1 2021: £0.1m and £0.1m). The Group continued to invest in its Nomad Technology platform with a total of £0.5m (H1 2021: £0.3m) development costs capitalised during the period.

 

Adjusted EBITDA loss

Adjusted EBITDA loss of £2.7m (H1 2021: profit £0.3m). The increase in adjusted EBITDA loss is driven by the increase in staff cost and marketing.

 

Going Concern

The financial statements have been prepared on a going concern basis. In adopting this basis, the Directors have carried out a robust assessment of the emerging and principal risks facing the business. As a result of the assessment performed, the Directors consider that the Group has adequate resources to continue its normal course of operations for the foreseeable future.

 

 

Consolidated Unaudited Statement of Comprehensive Income

For the six month period ended 30 September 2021

		Period ended 30 September 2021 (Unaudited)		Period ended 30 September 2020 (Unaudited)		Year ended 31 March 2021 (Audited)
	Notes	£		£		£
Revenue	3	7,167,152		13,064,342		20,600,541
Cost of sales	3	(3,061,619)		(5,757,722)		(8,770,887)
Gross profit		4,105,533		7,306,620		11,829,654
Selling and distribution expenses		(3,262,723)		(3,301,438)		(6,189,506)
Administrative expenses	4	(3,917,370)		(1,682,048)		(4,506,290)
Adjusted EBITDA		(2,635,916)		300,019		(418,675)
Share-based payment and equity related expenses	5	(315,540)		-		(26,914)
IPO Listing Fees and acquisition costs	5	(123,104)		(16,506)		(460,174)
Exceptional revenue (net profit)		-		2,039,621		2,039,621
EBITDA		(3,074,560)		2,323,134		1,133,858
Depreciation and amortisation		(362,561)		(229,906)		(503,354)
Operating profit/(loss)		(3,437,121)		2,093,228		630,504
Finance income		86		27		115
Finance costs		(91,757)		(211,572)		(401,076)
Income/(loss) before taxation		(3,528,792)		1,881,683		229,543
Taxation		13,149		4,369		177,514
Income/(loss) after taxation		(3,515,643)		1,886,052		407,057
Exchange differences on translation of foreign operations
		13,435		(3,186)		(18,517)
Total comprehensive income/(loss) for the period		(3,502,208)		1,882,866		388,540
Income/(loss) attributable to:
Equity holders of the Company		(3,506,624)		1,847,866		405,074
Non-controlling interests		(9,019)		38,186		1,983
		(3,515,643)		1,886,052		407,057
Comprehensive income/(loss) attributable to:
Equity holders of the Company		(3,493,189)		1,844,680		386,557
Non-controlling interests		(9,019)		38,186		1,983
		(3,502,208)		1,882,866		388,540
Earnings/(loss) per share (basic and diluted)		(0.0648)		0.0523		0.0113

Consolidated Unaudited Statement of Financial Position
As at 30 September 2021

		30 September 2021		30 September 2020		31 March 2021
		Unaudited		Unaudited		Audited
ASSETS	Notes	£		£		£
Intangible assets	7	4,246,664		1,271,948		1,462,981
Property, plant and equipment		233,223		157,894		151,262
Right-of-use assets		724,621		956,594		840,607
Non-current assets		5,204,508		2,386,436		2,454,850
Inventories	8	3,547,425		1,752,239		1,857,239
Trade receivables		1,790,874		1,197,056		1,013,631
Corporation tax recoverable		52,846		-		98,893
Other receivables and prepayments		791,160		500,958		522,022
Cash and cash equivalents		10,389,765		1,468,146		14,606,867
Current assets		16,572,070		4,918,399		18,098,652
Total assets		21,776,578		7,304,835		20,553,502
EQUITY AND LIABILITIES
Share capital	9	547,148		1,767		516,190
Retained earnings		(4,436,296)		(1,494,337)		(929,672)
Currency translation reserve		5,168		(6,519)		(8,267)
Capital contribution		-		266,072		-
Share premium		21,022,957		-		17,412,900
Merger relief reserve		(2,063,814)		28,764		(2,063,814)
Non-controlling interest		(9,019)		6,018		-
Total equity		15,066,144		(1,198,235)		14,927,337
Right-of-use lease liabilities		590,159		847,433		720,353
Borrowings		1,367,144		1,163,654		1,372,964
Deferred tax liability		269,673		71,945		67,576
Total non-current liabilities		2,226,976		2,083,032		2,160,893
Trade and other payables		3,308,948		2,064,845		1,981,054
Accrued liabilities		655,722		1,045,314		472,807
Deferred revenue		21,618		196,025		42,563
Borrowings		239,896		2,363,803		709,574
Right-of-use lease liabilities		257,274		248,488		252,641
Loans from directors		-		501,563		-
Refund liabilities		-		-		6,633
Total current liabilities		4,483,458		6,420,038		3,465,272
Total liabilities		6,710,434		8,503,070		5,626,165
Total liabilities and equity		21,776,578		7,304,835		20,553,502

Consolidated Unaudited Statement of Changes in Equity

For the six month period ended 30 September 2021

	Share Capital	Share Premium	Merger relief reserve	Capital Contribution	Currency Translation Reserve	Retained earnings	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)
Loss after taxation	-	-	-	-	-	1,847,866	38,186	1,886,052
Other comprehensive loss	-	-	-	-	(3,186)	-	-	(3,186)
Total comprehensive loss for the year	-	-	-	-	(3,186)	1,847,866	38,186	1,882,866
Balance at 30 September 2020	1,767	-	28,764	266,072	(6,519)	(1,494,337)	6,018	(1,198,235)
Balance at 1 April 2021	516,190	17,412,900	(2,063,814)	-	(8,267)	(929,672)	-	14,927,337
Loss after taxation	-	-	-	-	-	(3,506,624)	(9,019)	(3,515,643)
Other comprehensive loss	-	-	-	-	13,435	-	-	13,435
Total comprehensive income/(loss) for the year	-	-	-	-	13,435	(3,506,624)	(9,019)	(3,502,208)
Shares issued net of transaction fees	30,958	3,610,057	-	-	-	-	-	3,641,015
	30,958	3,610,057	-	-	-	-	-	3,641,015
Balance at 30 September 2021	547,148	21,022,957	(2,063,814)	-	5,168	(4,436,296)	(9,019)	15,066,144
Balance at 1 April 2020	1,767	-	28,764	266,072	(3,333)	(3,342,203)	(32,168)	(3,081,101)
Profit after tax	-	-	-	-	-	405,074	1,983	407,057
Other comprehensive loss	-	-	-	-	(18,517)	-	-	(18,517)
Total comprehensive 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

Consolidated Unaudited Statement of Cash Flows

For the six month period ended 30 September 2021

 

	30 September 2021		30 September 2020		31 March 2021
	Unaudited		Unaudited		Audited
	£		£		£
Cash flows from operating activities
Income/(loss) after taxation	(3,515,643)		1,886,052		407,057
Cash flow from operations reconciliation:
Depreciation and amortisation	362,561		229,906		503,354
Interest expense	60,371		175,742		314,027
Finance income	(86)		(27)		(115)
Income tax credit	-		-		(177,514)
Share based payment	-		-		26,914
Working capital adjustments:
(Increase) in inventories	(1,468,921)		(457,046)		(562,046)
(Increase) in trade and other receivables	(1,012,158)		(328,173)		(209,168)
Increase in trade and other payables	1,318,496		1,231,380		482,589
Cash generated from/(used) in operating activities	(4,255,380)		2,737,834		785,098
Taxes (paid)/received	(42,898)		-		69,883
Net cash generated from/(used in) operating activities	(4,298,278)		2,737,834		854,981
Cash flows from investing activities
Purchase of property, plant and equipment	(117,661)		(47,190)		(71,238)
Payment of intangible assets	(499,253)		(279,072)		(586,226)
Acquisition of subsidiary, net of cash acquired	(1,829,993)		-		(9,125)
Disposal of subsidiary, net of cash sold	-		-		17,294
Finance income	86		(27)		115
Net cash used in investing activities	(2,446,821)		(326,289)		(649,180)
Cash flows from financing activities
Proceeds from issue of shares, net of fees	3,141,016		-		16,000,087
Repayment of right-of-use lease liabilities	(142,177)		(141,633)		(283,424)
Proceeds from borrowings	-		1,171,467		1,833,400
Repayment of borrowings	(483,505)		(2,527,526)		(3,703,069)
Net cash from financing activities	2,515,334		(1,497,692)		13,846,994
Net increase in cash and cash equivalents	(4,229,765)		913,853		14,052,795
Cash and cash equivalents - beginning of the period	14,606,867		572,586		572,586
Effects of exchange rate changes on the balance of cash held in foreign currencies
	12,663		(18,293)		(18,514)
Cash and cash equivalents - end of the period	10,389,765		1,468,146		14,606,867

 

Notes to the Consolidated Financial Statements
For the period ended 30 September 2021

1. General information

Samarkand Group plc's registered office is Unit 13 & 14 Nelson Trading Estate, The Path, Merton, London SW19 3BL.

The results for the six months ended 30 September 2021 and 30 September 2020 are unaudited.

The Consolidated Group financial statements represents the consolidated results of Samarkand Group plc and its subsidiaries, (together referred to as the "Group").

This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 15 December 2021. The financial information in this interim report has been prepared in accordance with UK adopted international accounting standards. The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 March 2021 and which will form the basis of the 2021 financial statements.

2. Basis of preparation and measurement

 

(a)       Basis of preparation

The financial information for the year ended 31 March 2021 included in these financial statements does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2021 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2020 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Unless otherwise stated, the financial statements are presented in Pounds Sterling (£) which is the currency of the primary economic environment in which the Group operates.

Transactions in foreign currencies are translated into £ at the rate of exchange on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the reporting date. The resulting gain or loss is reflected in the "Consolidated Statements of Comprehensive Income" within either "Finance income" or "Finance costs".

The financial statements have been prepared under the historical cost convention except for certain financial instruments that have been measured at fair value.

The financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. The directors of Samarkand Group plc have reviewed the Group's overall position and outlook and are of the opinion that the Group is sufficiently well funded to be able to operate as a going concern for at least the next twelve months from the date of approval of these financial statements

(b)      Basis of consolidation

The Consolidated Group financial statements comprises the financial statements of Samarkand Group plc and its subsidiaries.

A subsidiary is defined as an entity over which Samarkand Group plc has control. Samarkand Group plc controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

Intra-group transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.

3. Segmental analysis

An analysis of the Group's revenue and cost of sales is as follows:

 

		30 September 2021		30 September 2020		31 March 2021
		£		£		£
Revenue by business unit:
Brand ownership		2,246,237		1,992,178		3,518,615
NOMAD technology		3,035,286		2,647,107		6,360,740
Distribution		1,803,700		2,608,985		4,832,644
Exceptional revenue				5,780,000		5,780,000
Other		81,929		36,072		108,542
Total revenue		7,167,152		13,064,342		20,600,541
Revenue by geographical destination:
UK		2,380,437		7,140,368		8,960,128
China		4,743,191		5,646,203		11,131,560
Rest of the world		43,524		277,771		508,853
Total revenue		7,167,152		13,064,342		20,600,541
Cost of sale by business unit:
Brand ownership		842,751		587,086		1,126,480
NOMAD technology		1,024,792		740,686		2,001,204
Distribution		1,192,414		1,300,938		2,496,299
Exceptional		-		3,091,046		3,091,046
Other		1,662		37,966		55,858
Total costs of sale		3,061,619		5,757,722		8,770,887

 

Exceptional revenues:

In H1 2021, with teams in both the UK and China, the Group was ideally positioned to source and supply products necessary for the coronavirus response. As a result, a £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.

Segment assets:

The non-current assets of the Group are not measured or reported internally on a segmental basis as they are not considered to be attributable to any specific business segment.
 

4. Expenses by nature

An analysis of the Group's expenses by nature is as follows:

 

		30 September 2021		30 September 2020		31 March 2021
		£		£		£
Administrative expenses:
Property costs		181,083		93,670		227,910
Staff costs		2,767,053		1,226,071		2,982,338
Professional fees		313,547		163,798		382,068
Other		532,583		182,003		426,886
Share based payment		-		-		26,914
Restructuring costs		123,104		16,506		460,174
Total administrative expenses		3,917,370		1,682,048		4,506,290

 

5. Adjusted EBITDA

 

EBITDA and Adjusted EBITDA are non-GAAP measures and exclude exceptional items, depreciation, and amortisation. Exceptional items are those items the Group considers to be non-recurring or material in nature that may distort an understanding of financial performance or impair comparability.

 

Adjusted EBITDA is stated before exceptional items as follows:

 

		30 September 2021		30 September 2020		31 March 2021
	Note	£		£		£
Share based payment and equity related expenses	a	315,540		-		26,914
IPO Listing Fees and acquisition costs		123,104		16,506		460,174
Exceptional revenue (net profit)		-		(2,039,621)		(2,039,621)
		438,644		(2,023,115)		(1,552,533)

a. Recompense Share Purchase for Employee Share Option Scheme

In September 2020, when the Group repaid the initial seed loan to Iceland Foods, Simon Smiley and David Hampstead personally, from their own funds, acquired 26,500 shares in Samarkand Holdings, the then holding company of the group, from Iceland Foods and from an existing shareholder, for a total sum of £174,000. The shares were acquired for the purposes of satisfying the Employee Share Option Scheme which were granted to key employees of the Group. Typically, this would have been satisfied by new shares issued by the Company, however this was instead effected in a manner that did not dilute the existing shareholders. 

 

The board and the remuneration committee have agreed to repay Simon Smiley and David Hampstead the cost of these shares, by way of a one-off bonus payment. The total amount of the bonus would be £270,000 which represents the total cash paid grossed up for national insurance and income tax. This would result in Simon Smiley and David Hampstead being in a net nil position after tax. As a result of the Employee Share option Scheme, 10% of the Company's shares at 31 March 2021, were held by employees (outside the founders) with an additional 2% option holders yet to exercise.

 

6. Earnings per share

 

Basic earnings per share is calculated by dividing the profit attributable to the owners of the parent company by the weighted average number of ordinary shares in issue during the period. The same number of shares is used for the corresponding period in order to provide a meaningful comparison.

	30 September 2021	30 September 2020	31 March 2021
	£	£	£
Basic and diluted earnings/(loss) per share	(6.48) pence	5.23 pence	1.13 pence
Basic and diluted weighted average number of shares in issue	54,140,377	35,340,000	35,785,999

 

7. Intangible assets

	Development costs	Trademarks	Brands	Goodwill	Total
	£	£	£	£	£
Cost
At 1 April 2021	1,190,555	70,372	470,151	57,807	1,788,885
Reclassification	-	-	(10,235)	10,235	-
Restated balance as at 1 April 2021	1,190,555	70,372	459,916	68,042	1,788,885
Additions	491,057	8,196	-	-	499,253
Additions through business combinations	-	8,857	1,133,915	1,358,497	2,501,269
At 30 September 2021	1,681,612	87,425	1,593,831	1,426,539	4,789,407
Amortisation
At 1 April 2021	163,067	13,345	149,492	-	325,904
Amortisation charge	137,964	5,341	65,873	-	209,178
Amortisation charge through business combinations	-	7,661	-	-	7,661
At 30 September 2021	301,031	26,347	215,365	-	542,743
Net book value
At 31 March 2021	1,027,488	57,027	320,659	57,807	1,462,981
At 30 September 2021	1,380,581	61,078	1,378,466	1,426,539	4,246,664
	Development costs	Trademarks	Brands	Goodwill	Total
	£	£	£	£	£
Cost
At 1 April 2020	633,374	41,327	459,916	57,807	1,192,424
Additions	251,710	17,127	-	10,235	279,072
At 30 September 2020	885,084	58,454	459,916	68,042	1,471,496
Amortisation
At 1 April 2020	-	5,568	103,483	-	109,051
Amortisation charge	62,190	3,538	24,769	-	90,497
At 30 September 2020	62,190	9,106	128,252	-	199,548
Net book value
At 31 March 2020	633,374	35,759	356,433	57,807	1,083,373
At 30 September 2020	822,894	49,348	331,664	68,042	1,271,948
	Development costs	Trademarks	Brands	Goodwill	Total
	£	£	£	£	£
Cost
At 1 April 2020	633,374	41,327	459,916	57,807	1,192,424
Additions	557,181	29,045	-	-	586,226
Additions through business combinations	-	-	10,235	-	10,235
At 31 March 2021	1,190,555	70,372	470,151	57,807	1,788,885
Amortisation
At 1 April 2020	-	5,568	103,483	-	109,051
Amortisation charge	163,067	7,775	46,011	-	216,853
At 31 March 2021	163,067	13,343	149,494	-	325,904
Net book value
At 31 March 2020	633,374	35,759	356,433	57,807	1,083,373
At 31 March 2021	1,027,488	57,029	320,657	57,807	1,462,981

8. Inventories

		30 September 2021		30 September 2020		31 March 2021
		£		£		£
Finished goods		3,664,533		1,791,617		1,908,560
Provision for obsolescence		(117,108)		(39,378)		(51,321)
Total inventories		3,547,425		1,752,239		1,857,239
Cost of inventory recognised in profit and loss		3,061,619		5,757,722		8,770,887

 

 

9. Share capital

 

The following table summarises the share capital of Samarkand Group plc for the periods presented:

		Number of shares		Share capital
	Note	No.		£
Issued share capital in Samarkand Holdings Ltd at 31 March 2020		176,400		1,767
Exchanged for shares in Samarkand Group plc	(a)	35,340,000		353,400
Share issued on incorporation		1		-
Shares issued on 22 March 2021		16,278,965		162,790
At 31 March 2021		51,618,966		516,190
Shares issued on 4 May 2021	(b)	357,977		3,580
Shares issued on 10 May 2021	(c)	2,737,840		27,378
At 30 September 2021		54,714,783		547,148

 

1. On 16 February 2021, Samarkand Group plc issued 35,340,000 ordinary shares of £0,01 each in exchange for the entire share capital of Samarkand Holdings Limited on the basis of 1 ordinary share in Samarkand Holdings Limited for 200 shares in Samarkand Group plc.
2. On 4 May 2021, the Group acquired the entire share capital of London based Zita West Products Limited, www.zitawest.com, and 51% of Babawest , www.babawest.co.uk, for a total consideration of £2.4m, partly in cash and partly issued in shares.
3. On 10 May 2021, the Group issued 2,737,840 new ordinary shares at a price of 115 pence raising £3,148,516 from United Win Asia Limited, a subsidiary of S.F. Holding Co., Ltd., as part of a strategic investment to further develop the Group's international expansion and technology.

Shareholders are entitled to receive dividends as declared from time to time and are entitled to one vote per ordinary share at meetings of Samarkand Group plc.

 

10. Notes to the statements of cash flows

 

Net debt reconciliation:

	Opening balances	Cash flows	Foreign exchange movements	Closing balances
	£	£	£	£
Six month period ended 30 September 2021
Cash & cash equivalents	14,606,867	(4,229,765)	12,663	10,389,765
Right of use lease liabilities	(972,994)	125,561	-	(847,433)
Borrowings	(2,082,538)	475,498	-	(1,607,040)
Totals	11,551,335	(3,628,706)	12,663	7,935,292
Six month period ended 30 September 2020
Cash & cash equivalents	572,586	913,853	(18,293)	1,468,146
Right of use lease liabilities	(1,216,486)	420,565	-	(795,921)
Borrowings	(4,746,478)	1,219,021	-	(3,527,457)
Directors' loans	(499,511)	(2,052)	-	(501,563)
Totals	(5,889,889)	2,551,387	(18,293)	(3,356,795)
Year ended 31 March 2021
Cash & cash equivalents	572,586	14,052,795	(18,514)	14,606,867
Right of use lease liabilities	(1,216,486)	243,492	-	(972,994)
Borrowings	(4,746,478)	2,663,940	-	(2,082,538)
Directors' loans	(499,511)	499,511	-	-
Totals	(5,889,889)	17,459,738	(18,514)	11,551,335

  

 

 

11. Business Combination

On 4 May 2021, the Group acquired the entire share capital of London based Zita West Products Limited , www.zitawest.com, and 51% of Babawest , www.babawest.co.uk, for a total consideration of £2.8m.

 

Purchase consideration	£
Cash paid	2,285,189
Fair value of equity shares issued	500,000
Total purchase consideration	2,785,189
Intangible assets1	1,133,915
Intangible assets from acquisition	1,196
Property, plant and equipment	926
Inventories	221,264
Trade and other receivables	113,140
Cash and cash equivalents	455,196
Other liabilities	(147,905)
Trade and other payables	(135,596)
Deferred tax liability	(215,444)
Net identifiable assets acquired at fair value	1,426,692
Goodwill arising on acquisition	1,358,497
Purchase consideration transferred	2,785,189
Consideration transferred settled in cash	2,285,189
Cash and cash equivalents acquired	(455,196)
Net cash outflow on acquisition	1,829,993

 

1Intangible assets include brands relating to the Zita West and Babawest brand and reflects their fair value at acquisition date. They are estimated to have a useful life of 10 years.

In accordance with IFRS 3 'Business Combinations', the acquisition accounting will be finalised within 12 months of the acquisition date of 4 May 2021.

 

12. Material subsequent events

On 2 November 2021, the Group announced that it had acquired Napiers the Herbalists, www.napiers.net, for an initial consideration of £1.7m, deferred consideration of £0.1m and a contingent consideration of up to $0.7m.  The combined assets of Napiers generated £1m of revenue for the year ended 31 March 2021 and an EBITDA of £0.24m on an unaudited basis.

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 Joe Pederzolli	samarkand@almapr.co.uk

 

 

Notes to Editors

 

Samarkand is a cross-border eCommerce technology and retail group focusing on connecting Western Brands with China, the world's largest eCommerce market. The Group has developed a proprietary software platform, the Nomad platform, which is integrated across all necessary touch-points required for eCommerce in China including eCommerce platforms, payments, logistics, social media and customs. The Nomad platform is the foundation on which the Group's Nomad technology and service solutions are built. The core products include Nomad Checkout, Nomad Storefront, Nomad Commerce and Nomad Distribution.

 

The Company's current customer base comprises leading European brands such as 111SKIN, Shay & Blue, Omorovicza, ICONIC London, Philip Kingsley and Temple Spa. Samarkand has also successfully grown its own brand, Probio7, acquired in December 2017. Since its IPO in March 2021 Samarkand has acquired Zita West Products, Babawest and Napiers the Herbalists.

 

Founded in 2016, Samarkand is headquartered in London, UK with offices in Shanghai and Tokyo employing over 150 staff.

 

For further information please visit https://www.samarkand.global/