Samarkand Group plc : FY23 Results

7 August 2023

Samarkand Group plc
 

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

 

FY23 Results

Samarkand Group plc, the cross-border eCommerce technology solution provider, is pleased to announce its audited results for the year ended 31 March 2023 ("FY23").

FY23 Financial highlights:

• Revenue increased by 5.4% to £17.5m (2022: £16.6m)
  • Brand Ownership revenues increased 48.1% to £6.7m (2022: £4.5m)
  • Nomad Technology revenue decreased 19.4% to £6.0m (2022: £7.5m)
  • Distribution revenues remained flat at £4.4m (2022: £4.4m)
• Gross margin increased from 50% to 55%
• Adjusted EBITDA loss decreased to by 64% to £2.2m (2022: £6.2m)
• Operating loss after taxation decreased by 40% to £4.6m (2022: £7.7m)

FY23 Strategic and operational highlights:

• Launched successful open offer in September 2022, raising £1.9m from existing shareholders, giving the group the ability to continue to pursue its strategic objectives.
• Generated top line growth across the Group despite ongoing COVID related disruptions in China during the year.
• Major reduction in losses vs prior year as a result of adjustment of cost base and improvement in gross profit margins as we focus on our core activities and our goal of moving the Group into profitability.
• Expanded the portfolio of niche premium skincare and health and wellness brands, targeting key consumer trends in China.
• Saw the benefit of investment in acquisitions and impact of improvements made in higher growth rates for our owned brand portfolio in the UK and in China.
• Expanded the Napiers the Herbalists premium natural beauty product line, grew sales channels and successfully introduced the brand in China.
• Expanded our influencer livestream commerce capabilities through the Douyin social commerce platform. New material sales opportunities were unlocked for our brands, working in partnership with Chinese influencers.
• Shifted the focus of our technology resources to embedding and commercialising what has already been developed vs feature innovation enabling a reduction in our cost base.
• Improved operating efficiency across the business and strong progress in reducing inventory levels and improving stock turns.

Post period end highlights:

• April and May revenue 13% above prior year, with an improvement in gross profit percentage from 53% to 63%.
• Revenue during the key shopping festival in June was 25% lower than prior year. The cancellation of key promotional events and weaker than expected performance across several livestream channels resulted in lower than expected sales. As a result, Q1 FY24 overall revenue is 5% below prior year.
• July month is on track to be in line with our expectations in terms of top and bottom line results. A number of new sales channels and partner relationships in the China market will come on stream in Q2 expanding the route to market and sales potential for our brands.
• Strong growth in influencer led livestream commerce with sales via the Douyin platform growing 220% year over year in Q1 FY24.
• Extended partnership with 1 existing brand and added 7 new niche beauty and skin care brands to our portfolio related to emerging skincare trends and beauty tools.
• Signed leading Southeast Asian duty-free retailer to our Nomad Checkout platform for cross-border DTC sales.
• Samarkand named “Best Cross-border Campaign” finalist in 2023 eCommerce Awards, in recognition of highly innovative China market entry strategy for Napiers the Herbalists, effectively leveraging the rapidly expanding Douyin platform to generate substantial sales.

David Hampstead, Chief Executive Officer of Samarkand Group, commented: 

“I am delighted that we have been able to grow the business and to make strong progress towards profitability in an unprecedented and challenging trading environment. This demonstrates the resilience and adaptability of the business and in particular the capability of our colleagues. The reopening of the Chinese economy, a growing pipeline of new clients and channel partners and an ongoing focus on operational efficiency puts us in a good position to capitalise on opportunities that may emerge in the market. We are encouraged by the start of the new financial year and remain confident that the interplay of our China market development capabilities, underlying eCommerce technology and owned brand portfolio will put us in a good position to make further progress towards our goal of profitability.”

For more information, please contact:

 

Samarkand Group plc	Via Alma PR
David Hampstead, Chief Executive Officer 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 International Brands with China, the world's largest eCommerce market. The Group has developed a proprietary software platform, the Nomad platform, which is integrated across all necessary touchpoints required for eCommerce in China including eCommerce platforms, payments, logistics, social media and customs. The Nomad platform is the foundation on which the Group's Nomad technology and service solutions are built. The core products include Nomad Checkout, Nomad Storefront and Nomad Distribution. 

 

Founded in 2016, Samarkand is headquartered in London, UK with offices in Shanghai.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Chairperson’s Statement

I am delighted with the progress being made at Samarkand despite operating in a period of ongoing disruption, as result of the extended zero tolerance approach to COVID in China. The fact that the business has produced growth and significantly reduced losses in a volatile and uncertain environment is of great credit to the whole team.

I would like to take this opportunity to thank the entire team for their contribution and commitment, as well as their resilience and adaptability in moving the group forward over the last 12 months. The business has responded well to an evolving situation in China and continued to make strategic progress despite the disruptions.

It is particularly pleasing to note the growing contribution of the 2021 acquisitions Zita West and Napiers the Herbalists and their impact on the group performance, providing some protection from the disruption in China.

The team’s focus on becoming profitable is abundantly clear from the excellent progress made in reducing losses through improvements in gross margins, cutting costs, and better financial planning and analysis across the business.

A well-timed open offer in September 2022 received strong backing from existing shareholders enabling the team to focus on delivering their ambition and making progress towards their goal of becoming profitable.

Financial Results

The Group delivered revenues of £17.5m which equates to growth of 5.4% over the prior year. More importantly adjusted EBITDA losses were reduced by over 60% to £2.2m and operating losses reduced by 40% to £4.6m as result of stronger gross margins and reduction in operating costs.

Strong growth in owned brands and a small decline in revenues from acceleration and distribution activities which were most impacted by COVID related issues in China, combined to produce year over year growth in revenues in what was another year of disruption.

People

The Samarkand team has responded well to the challenges of the year and demonstrated their ability to deal with disruption on many fronts as well their willingness to take difficult decisions and execute at speed. I would like to give a special mention to our colleagues in China who despite extended lockdowns followed by a sudden and unexpected reopening were able to continue to operate and serve our partners and clients in the most difficult of circumstances. The team’s performance can largely be attributed to the sense of community we have built across the Group and a culture that encourages our teams to grow and take on new challenges. They have not only displayed resilience in the face of various challenges throughout the year but have also consistently exhibited their capacity to adapt and thrive.

Board and Governance

Our Board which was established at the time of the IPO is operating well, bringing a wealth of experience to the Group. Sustainability, Remuneration, Nomination and Audit committees have been established and I would like to thank my fellow Directors for their service and flexibility in the last year in which their guidance has been invaluable.

Summary and Outlook

The Chinese economy has reopened and is recovering from two years of extended and extremely tough lockdowns. There is ground for optimism as consumers and channels return to some degree of normality although it is important to note that while COVID related restrictions are now lifted, Chinese consumer confidence has yet to recover to pre-COVID levels.

The Group is well positioned to capitalise on a reopening economy with a strong portfolio of desirable, premium international brand partners and proprietary technology which enables merchants and brands to sell direct to Chinese consumers in a compliant cross-border manner.

The Group has demonstrated its ability to adapt to an ever-changing eCommerce landscape in China where market dynamics shift rapidly, and new channels emerge at great speed – as evidenced by the strong growth in sales we have been experiencing through livestream influencer commerce.

The brands we acquired in 2021, Zita West and Napiers the Herbalists are well placed for further growth as investments made in FY23 begin to translate into higher sales with the added benefit of being less dependent on the China market.

In line with their goal of becoming profitable, I am confident that the team continue to challenge costs and look for opportunities to improve operational efficiencies across the business.

Tanith Dodge

Chairperson
 

CEO REVIEW

In our third year as a public company, we have made strong progress towards our goal of becoming profitable despite encountering a significant amount of disruption as strict lockdowns continued in China, disrupting sales and distribution activities.

We acted quickly to adjust our cost base and benefited from strong growth in our UK based acquisitions, the combination of which enabled to us to deliver revenue growth year over and reduce our Adjusted EBITDA losses by over 60%.

I am proud of how our team adapted and pulled together throughout the year, enabling us to make good progress against our strategic goals despite a volatile situation on the ground with China. We moved quickly to open new sales channels and navigate the supply side disruptions throughout the year and have made positive improvements to the brands we acquired, this is testimony to our ability to execute at speed.

At 31 March 2023, cash and cash equivalents was £2.0m and net current assets of £3.3m. Following a successful open offer it is our intent use the proceeds to reach profitability in the coming 12 months. In a fast-evolving industry we remain open to potential new strategic investors.

China Market Environment

The zero-tolerance approach to COVID was rapidly abandoned in December 2022 and the following months were a period of adjustment for the market as restrictions were lifted almost overnight and the disease spread quickly through society.

The macroeconomy appears to be recovering with most analysts predicting GDP growth in the 5%-6% range, lower than historical levels but still a growth leader among the world’s largest economies.

Household savings balances in China are at record levels and while some analysts have predicted a major rebound in consumer spending. Our assessment is slightly more cautious based on the fact that Chinese consumer confidence is yet to recover to pre-pandemic levels, although we do observe undoubtedly improving prospects.

Overall, we are more optimistic about the year to come given lockdowns are now a thing of the past and, despite mixed economic signals, we are confident in the secular trends for eCommerce, cross-border eCommerce and consumer appetite for niche, premium brands in beauty and health and wellness.

We note that the geopolitical environment between China and the West in particular is strained at the moment and while we are optimistic that the impact of potential future developments on trade will be limited, it is conceivable that shifts in the political environment could impact trade in the future. The continued growth of our owned brand portfolio in markets outside of China provides the Group with some protection against this.

Strategic Progress

Our overriding goal is to become profitable and I am pleased to report that we made strong progress towards this objective in the year. This can be attributed to a strong performance from our owned brand portfolio, a focus on profitable growth in everything we do, as well as selective adjustments to our cost base.

Our owned brand portfolio grew at 48% in the year, or 27% on a like-for-like basis, in turn improving our gross margin mix. Zita West revenues grew 85% from prior year or 70% on a like-for-like basis and Napiers the Herbalists grew by 419% or 201% on a like-for-like basis. We were able to make material improvements to both brands in terms of marketing, customer acquisition, expanding sales channels and developing international sales.

In China eCommerce acceleration we strengthened the portfolio of brands we work with adding high potential brands in trending areas including Doctor led skincare, beauty tools and haircare. We are excited about the potential for our existing partner brands and have put strong plans in place for the year to come designed to capitalise on the reopening of the economy. We strengthened our capabilities in the fast-growing livestream eCommerce market and have been able to offer new sales opportunities to our brands all enabled by our underlying Nomad platform.

With our cross-border eCommerce technology solutions we shifted our attention to consolidating and commercialising what we have already developed vs adding new features. This enabled us to reduce our software development cost base to a core team. With the re-opening of the Chinese economy we anticipate that a growing number of merchants will see China as an opportunity market and will opt to use partners and technology to tap into this opportunity.

Outlook statement

As the Chinese economy reopens we are positive about the opportunities that may emerge in the year to come. Our brand portfolio and sales channels are well positioned to take advantage of demand without the supply side restrictions we experienced in FY23.

In addition to accelerating top line growth, we will continue to challenge our cost base and look for opportunities to improve operating efficiency as we seek to move into profitability in the coming financial year.

The reopening of international travel means our leadership can visit China for the first time in over 3 years and we look forward to getting back into the market and re-connecting with our team and partners on the ground.

I recently observed first-hand the changes that have occurred over the last few years when I visited China in June 2023. The market has always been fast moving and constantly evolving and it was clear that the pace of change is accelerating.

David Hampstead
Chief Executive Officer
 

FINANCIAL REVIEW

Overview

Group revenues for the year increased by 5.4% to £17.5m (2022: £16.6m). Revenue growth in China was dampened by the disruptions caused by the continued impacts of the pandemic in China with revenues remaining flat at £11.7m (2022: £11.6m). Revenue growth in UK and ROW remained strong and was augmented by growth in the acquisitions made in the prior year, revenues in the UK increased by 16% to £5.8m (2022: £5.0m).

Revenues in Brand Ownership up 48% to £6.7m (2022: £4.5m), Nomad Technology down 19.3% to £6.0m (2022: £7.5m), and distribution revenues remaining flat at £4.4m (2022: £4.5m).

The Group’s gross margin increased to 55% from 50% in FY 2022, driven by increase in revenues from Brand Ownership as a % of total revenue.

Operating expenses

Selling and distribution expenses, have decreased significantly to 31% (2022: 42%) of revenue, as a result of increasing use of bonded warehouses in China to mitigate disruptions, more targeted investments in our own brands and structural changes in our sales mix as well as focus on improving operating efficiency across the business.

Administrative expenses decreased to 44% (2022: 49%) of revenue as the Group made selective adjustments to its cost base. The Group’s total head count as at 31 March 2023 was 104 (2022: 158). During the year the Group incurred a number of significant non-recurring costs which have been shown as exceptional items in the financial statements. These items include redundancy and restructuring costs as a result of the Group’s adjustment to its cost base in light of the challenges presented by the disruptions.

Depreciation and amortisation

The total depreciation and amortisation costs were £0.4m and £0.8m respectively (2022: £0.3m and £0.5m). The Group continued to invest in its Nomad Technology platform with a total of £1.1m (2022: £1.1m) development costs capitalised during the year.

Adjusted EBITDA

Adjusted EBITDA means the non-GAAP measure which is defined as Earnings Before Interest, Taxes, Depreciation, and Amortisation and exceptional items. It provides a useful measure of the underlying profitability of the business and is used by management to evaluate the operating performance to make financial, strategic and operating decisions and provides the underlying trends on a comparable basis year on year.

Adjusted EBITDA losses decreased to £2.2m (2022: £6.2m), after deducting £0.5m in restructuring costs and £0.7m for share based payment expenses. The decrease in losses is a result of the adjustments made to the Group’s cost base and improvements made in operating efficiencies.

	Mar-23	Mar-22
Operation (loss)/profit	(4,587,848)	(7,677,082)
Depreciation and amortisation	1,140,524	786,639
Share-based payment	712,271	-
Repayment of share option plan	-	306,579
Acquisition and restructuring costs	507,085	347,615
Adjusted EBITDA	(2,227,968)	(6,236,249)

 

Earnings per share

Basic and diluted loss per share was 7.78 pence per share (2022: 14 pence per share).

Net cash/(debt)

	Mar-23	Mar-22
Cash and cash equivalents	2,017,150	4,049,118
Right-of-use lease liabilities	(573,785)	(720,353)
Borrowings	(1,453,298)	(1,452,127)
Net cash/(debt)	(9,933)	1,876,638

At the year end, the Group’s net debt position was £0.01m (2022: net cash £1.9m), excluding the IFRS 16 lease liabilities, net cash was £0.6m (2022: £2.6m). The adjustments made to the Group’s cost base including the reduction in its head count and the improvements to its operating efficiencies with targeted marketing and structural changes in its sales mix and activities saw the Group’s negative operating cash flow fall to £2.4m from £8.0m.

The payment of deferred consideration in relation to the prior year acquisition of Napiers the Herbalists, together with the continued investment into its technology platform resulted in cash outflow from investing activities of £1.2m (2022: £4.7m). In September 2022, the Group received £1.9m from its existing Shareholders in an open offer together with the repayment of borrowings and lease liabilities, the net cash from financing activities was £1.5m (2022: £2.3m).

Financing costs of £0.16m (2022: £0.17m) comprised of interest expenses of £0.1m (2022: £0.1m).

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Year ended 31 March 2023		Year ended 31 March 2022
		£		£
Revenue		17,476,825		16,576,228
Cost of sales		(7,814,362)		(8,226,260)
Gross profit		9,662,463		8,349,968
Selling and distribution expenses		(5,381,270)		(7,056,415)
Administrative expenses		(7,728,517)		(8,183,996)
Adjusted EBITDA		(2,227,968)		(6,236,249)
Share-based payment and related expenses		(712,271)		-
Repayment of share option plan		-		(306,579)
Acquisition costs		-		(218,143)
Restructuring costs		(507,085)		(129,472)
EBITDA		(3,447,324)		(6,890,443)
Depreciation and amortisation		(1,140,524)		(786,639)
Operating loss		(4,587,848)		(7,677,082)
Finance income		20		86
Finance costs		(162,502)		(171,455)
Loss before taxation		(4,750,330)		(7,848,451)
Taxation		129,465		141,499
Loss after taxation		(4,620,865)		(7,706,952)
Other comprehensive income:
Exchange differences on translation of foreign operations		(47,859)		(23,234)
Items that may be reclassified to profit and loss in subsequent periods		(47,859)		(23,234)
Total comprehensive loss for the year		(4,668,724)		(7,730,186)
Loss attributable to:
Equity holders of the Company		(4,571,494)		(7,617,081)
Non-controlling interests		(49,371)		(89,871)
		(4,620,865)		(7,706,952)
Loss per share (basic and diluted)		(0.0778)		(0.1399)
Comprehensive loss attributable to:
Equity holders of the Company		(4,619,353)		(7,640,315)
Non-controlling interests		(49,371)		(89,871)
		(4,668,724)		(7,730,186)

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		31 March 2023		31 March 2022
		£		£
ASSETS
Intangible assets		7,338,884		7,011,236
Property, plant and equipment		203,417		243,417
Right-of-use assets		489,890		608,635
Non-current assets		8,032,191		7,863,288
Inventories		2,212,227		3,720,248
Trade receivables		1,722,637		1,512,702
Corporation tax recoverable		227,946		113,710
Other receivables and prepayments		706,513		1,012,371
Cash and cash equivalents		2,017,150		4,049,118
Current assets		6,886,473		10,408,149
Total assets		14,918,664		18,271,437
EQUITY AND LIABILITIES
Share capital		583,582		547,148
Share premium		22,954,413		21,022,958
Merger relief reserve		(2,063,814)		(2,063,814)
Accumulated loss		(12,901,901)		(8,546,753)
Currency translation reserve		(79,360)		(31,501)
Total equity attributable to parent		8,492,920		10,928,038
Non-controlling interest		(139,242)		(89,871)
Total equity		8,353,678		10,838,167
Right-of-use lease liabilities		260,779		458,352
Borrowings		1,398,787		1,390,035
Deferred tax liability		347,884		370,590
Accrued liabilities		512,441		512,441
Total non-current liabilities		2,519,891		2,731,418
Trade and other payables		2,088,101		3,597,110
Accrued liabilities		1,261,043		566,266
Deferred revenue		328,434		214,383
Borrowings		54,511		62,092
Right-of-use lease liabilities		313,006		262,001
Total current liabilities		4,045,095		4,701,852
Total liabilities		6,564,986		7,433,270
Total liabilities and equity		14,918,664		18,271,437

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital		Share premium		Merger relief reserve		Currency translation reserve		Accumulated loss		Non-controlling interests		Total equity
	£		£		£		£		£		£		£
Balance at 1 April 2021	516,190		17,412,900		(2,063,814)		(8,267)		(929,672)		-		14,927,337
Loss after taxation	-		-		-		-		(7,617,081)		(89,871)		(7,706,952)
Other comprehensive 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
Loss after taxation	-		-		-		-		(4,571,494)		(49,371)		(4,620,865)
Other comprehensive loss	-		-		-		(47,859)		-		-		(47,859)
Total comprehensive income/(loss) for the year	-		-		-		(47,859)		(4,571,494)		(49,371)		(4,668,724)
Shares issued on subscription	35,976		1,902,413		-		-		-		-		1,938,389
Shares issued on acquisition	458		29,042		-		-		-		-		29,500
Share based payments	-		-		-		-		216,346		-		216,346
	36,434		1,931,455		-		-		216,346		-		2,184,235
Balance at 31 March 2023	583,582		22,954,413		(2,063,814)		(79,360)		(12,901,901)		(139,242)		8,353,678

 

CONSOLIDATED STATEMENT OF CASH FLOWS

		31 March 2023		31 March 2022
		£		£
Cash flows from operating activities
Income/(loss) after taxation		(4,620,865)		(7,706,952)
Cash flow from operations reconciliation:
Depreciation and amortisation		1,140,524		786,639
Finance expense		20,630		60,182
Finance income		(20)		(86)
Income tax credit		(129,465)		(141,499)
Share based payment		216,346		-
Working capital adjustments:
Decrease/(increase) in inventories		1,508,021		(1,544,851)
Decrease/(increase) in trade and other receivables		131,918		(780,763)
(Decrease)/increase in trade and other payables		(626,169)		1,258,687
Cash used in operating activities		(2,359,080)		(8,068,643)
Taxes (paid)/received		(7,477)		20,803
Net cash used in operating activities		(2,366,557)		(8,047,840)
Cash flows from investing activities
Purchase of property, plant and equipment		(67,602)		(175,151)
Purchase of intangible assets		(1,095,564)		(1,228,096)
Payment of deferred consideration		(80,000)
Acquisition of subsidiary, net of cash acquired		-		(3,341,477)
Disposal of property, plant and equipment		9,336		-
Finance income		20		86
Net cash used in investing activities		(1,233,810)		(4,744,638)
Cash flows from financing activities
Proceeds from issue of shares, net of fees		1,937,889		3,141,016
Repayment of right-of-use lease liabilities		(329,001)		(252,641)
Interest paid		(24,671)		-
Repayment of borrowings		(71,131)		(630,411)
Net cash generated from financing activities		1,513,086		2,257,964
Net decrease in cash and cash equivalents		(2,087,282)		(10,534,514)
Cash and cash equivalents – beginning of the year		4,049,118		14,606,867
Effects of exchange rate changes on the balance of cash held in foreign currencies		55,314		(23,235)
Cash and cash equivalents – end of the year		2,017,150		4,049,118

 

1. General information

Samarkand Group plc was incorporated in England and Wales on 12 January 2021 as a public company with limited liability under the Companies Act 2006.

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

The Consolidated Group financial statements represents the consolidated results of Samarkand Group plc and its subsidiaries, (together referred to as the “Group”). The Parent Company financial statements present information about the Company as a separate entity and not about its Group.

2. Basis of preparation and measurement

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 2023 or 31 March 2022.

Statutory accounts for the year ended 31 March 2022 have been filed with the Registrar of Companies and those for the year ended 31 March 2023 will be delivered to the Registrar in due course; both have been reported on by independent auditors. The independent auditor's report for the year ended 31 March 2023 is unmodified with the material uncertainty in respect of going concern:

We draw attention to the paragraph below, which indicates that the Group made a total comprehensive loss of £4.7m during the year ended 31 March 2023 and had an adjusted EBITDA loss of £2.2m. The Directors recognise the importance of moving the Group into profitability for the year ended 31 March 2024 and are additionally actively exploring additional funding options to support the Group's operations and long-term viability. In this regard the Group is considering various options including but not limited to trade financing, sale of non-core assets and other strategic opportunities. Despite the cost base reduction and ongoing exploration of additional funding, in the event that trading does not proceed as planned, the Group's financial performance and cash flow projections indicate the existence of material uncertainties that may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

The independent auditor's reports on the Annual Report and Accounts for the year ended 31 March 2022 was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006 but included a material uncertainty in respect of going concern.

Going concern

The financial statements have been prepared on a going concern basis, assuming that the Group will continue its operations for the foreseeable future. The Directors have assessed the Company's ability to continue as a going concern, taking into consideration the current economic and market conditions, as well as the group's financial performance and cash flow projections.

The Group faced another challenging year, with ongoing widespread COVID lockdowns in China and China's rapid exit of the zero COVID position in December 2022 which generated high levels of disruptions to the Group's trade.

During the year ended 31 March 2023, the Group has continued to take significant measures to reduce its cost base. These cost reduction initiatives included streamlining its operations, optimising resource allocation, and implementing efficiency measures. These actions were aimed at improving the Group's financial position and mitigating the impact of challenging market conditions. For the year ended 31 March 2023, the Group reported an adjusted EBITDA loss of £2.2m (2022: £6.2m) and total comprehensive loss of £4.7m (2022: £7.7m).

The Directors recognise the importance of moving the Group into profitability for the year ending 31 March 2024 and have made significant progress towards this goal. In addition, the Directors are actively exploring additional funding options to support the Group's operations and long-term viability. In this regard the Group is considering various options, including but not limited to, trade financing, sale of non-core assets and other strategic opportunities. These efforts are ongoing, and the Directors are diligently working towards these goals.

Despite the cost base reduction and ongoing exploration of additional funding, in the event that trading does not proceed as planned, the Group's financial performance and cash flow projections indicate the existence of material uncertainties that may cast significant doubt on the Group's ability to continue as a going concern. Although there are material uncertainties, several mitigating factors have been considered by the Directors in their assessment of the going concern assumption. These include the steps taken to further reduce costs, the progress made in exploring various strategic options to raise additional funds and its pre-COVID trading record. The directors believe that these factors, will enable the group to overcome the identified challenges and continue its operations.

To address the material uncertainties, the directors will continue to closely monitor the Group's financial performance, cash flow projections, and market conditions. They will continue to proactively manage the Group's cost base, seeking further efficiencies where possible.

The Directors are confident in the Group's ability to mitigate the identified risks and uncertainties. There is no certainty regarding the economic and market conditions after the exit of zero COVID policy in China or the timing or success of securing additional funding. As a result, the financial statements have been prepared on a going concern basis, acknowledging the material uncertainties that may cast significant doubt on the Group's ability to continue as a going concern.

The financial statements do not include the adjustments that would result if the Group is unable to continue as a going concern.

3. Revenue from contracts with customers

 

Disaggregation of revenue from contracts with customers:

		31 March 2023		31 March 2022
		£		£
Revenue analysed by class of business:
Brand ownership		6,678,067		4,509,979
Nomad technology		6,027,090		7,480,941
Distribution		4,423,676		4,447,990
Other		347,992		137,318
Total revenue		17,476,825		16,576,228

 

Cost of sale by business unit:
Brand ownership		2,516,506		1,991,401
Nomad technology		2,072,450		3,240,269
Distribution		3,222,704		2,992,880
Other		2,702		1,710
Total costs of sale		7,814,362		8,226,260

 

4. Intangible assets

	Development costs		Trademarks		Brands		Goodwill		Website		Total
	£		£		£		£		£		£
Cost
At 1 April 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
Additions	1,076,159		18,624		-		-		782		1,095,565
At 31 March 2023	3,406,596		118,220		2,484,091		2,829,718		70,980		8,909,605
Amortisation
At 1 April 2021	163,067		13,343		149,494		-		-		325,904
Acquired through business combinations	-		7,663		-		-		-		7,663
Charge for the year	330,481		11,497		122,186		-		5,073		469,237
At 31 March 2022	493,548		32,503		271,680		-		5,073		802,804
Charge for the year	572,744		14,108		161,960		-		19,105		767,917
At 31 March 2023	1,066,292		46,611		433,640		-		24,178		1,570,721
Net book value
At 31 March 2023	2,340,304		71,609		2,050,451		2,829,718		46,802		7,338,884
At 31 March 2022	1,836,889		67,093		2,212,411		2,829,718		65,125		7,011,236

Impairment of intangible assets

At each reporting date, the Directors assess whether indications exist that an asset may be impaired. If indications do exist, the Directors estimate the asset’s recoverable amount. An asset’s recoverable amount is the higher of an assets or cash-generating unit’s fair value less costs to sell and its value-in-use.

Management have assessed that there are 3 cash generating units, these include Nomad Technology, Brand Ownership and Distribution. Nomad Technology encompasses the technology and service solutions designed to provide Clients cross border eCommerce solutions into China, the solutions are built on the Nomad Platform and is integrated with Chinese eCommerce platforms, payment providers and logistic companies. Brand Ownership includes the sale of our owned branded products through retailers, online and other marketplaces across the UK, China and ROW. Distribution includes the sale of third-party brands to UK and European retailers as well as through resellers on wholesale basis in China.

Management have performed an impairment review as required by IAS 36 and have concluded that no impairment is indicated for its 2 core cash generating units, Nomad Technology and Brand Ownership. The recoverable amount of the assets has been determined from a review of the current and forecasted performance of the cash generating units through to March 2028. The key assumptions for these calculations are discount rates and revenue growth rates. In preparing these projections, a discount rate of 15% has been used based on the weighted average cost of capital and the perpetual growth rate of 4% has been assumed. Management has also made assumptions around the growth in relation to revenues generated from its Nomad Technology platform and Brand Ownership Sales. This includes acquiring new customers, adding new third-party brands to its portfolio, increasing the number of sales channels and partners in its distribution network and adjusting its cost base. If management’s assumptions with regards to revenue were to change by 1% over the projected period with corresponding change to variable costs, the value in use calculation would result in a £30k change for Nomad Technology and £267k change for Brand Ownership, in the recoverable amount of the assets. If management’s assumptions with regards to discount rate were to change by 1% over the projected period, the value in use calculation would result in a £599k change for Nomad Technology and £570k change for Brand Ownership, in the recoverable amount of the asset.

 

5. Right-of-use assets

						Land and buildings		Total
						£		£
Cost
At 1 April 2021						1,362,545		1,362,545
Additions						-		-
At 31 March 2022						1,362,545		1,362,545
Additions						155,596		155,596
At 31 March 2023						1,518,141		1,518,141
Amortisation
At 1 April 2021						521,938		521,938
Charge for the year						231,972		231,972
At 31 March 2022						753,910		753,910
Charge for the year						274,341		274,341
At 31 March 2023						1,028,251		1,028,251
Net book value
At 31 March 2023						489,890		489,890
At 31 March 2022						608,635		608,635

 

The Group leases land and buildings for its offices and warehouses under agreements of between five to six years with, in some cases, options to extend. The leases have initial rent-free periods and 5 yearly upward only rent reviews. No extension to these leases has been assumed, the impact is not considered material to users of the financial statements.

 

Future minimum lease payments associated with the land and building leases were as follows:

		31 March 2023		31 March 2022
		£		£
Not later than one year		328,491		283,579
Later than one year and not later than two years		218,190		284,356
Later than two years and not later than five years		48,750		188,190
Total minimum lease payments		595.431		756,125
Less: future finance charges		(21,645)		(35,772)
Present value of future lease payments		573,786		720,353

 

6. Inventories

		31 March 2023		31 March 2022
		£		£
Finished goods		2,980,627		4,394,080
Provision for obsolescence		(768,400)		(673,832)
Total inventories		2,212,227		3,720,248
Cost of inventory recognised in profit and loss		7,814,364		8,226,260

 

7. Trade receivables

		31 March 2023		31 March 2022
		£		£
Trade receivables		1,840,464		1,584,768
Provision for expected credit loss		(117,827)		(72,066)
Total trade receivables		1,722,637		1,512,702

 

8. Other receivables and prepayments

		31 March 2023		31 March 2022
		£		£
Accrued income		-		2,517
Prepayments		423,352		561,910
Other receivables		283,161		447,944
Total other receivables and prepayments		706,513		1,012,371

 

9. Borrowings

The following table provides a reconciliation of the Group’s future maturities of its total borrowings for each of the periods presented:		31 March 2023		31 March 2022
		£		£
Not later than one year:
Bank loans		54,511		52,099
Other loans		-		9,993
Current		54,511		62,092
Payable after one year but less than five years:
Fixed rate secured loan notes		1,299,746		1,236,485
Bank loans		99,041		153,550
Non-current		1,398,787		1,390,035
Total borrowings		1,453,298		1,452,127