KBS Fashion Group Limited Reports Robust First Quarter 2019 Financial Results

Date : 06/03/2019 @ 2:00PM
Source : PR Newswire (US)
Stock : Kbs Fashion Grp. Limited (KBSF)
Quote : 2.71  0.0 (0.00%) @ 8:59AM

KBS Fashion Group Limited Reports Robust First Quarter 2019 Financial Results

KBS Fashion Group Limited (NASDAQ:KBSF)
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SHISHI, China, June 3, 2019 /PRNewswire/ -- KBS Fashion Group Limited ("KBS" or the "Company") (NASDAQ: KBSF), a leading fully-integrated casual menswear company in China, today announced its unaudited financial results for the first quarter ended March 31, 2019.

First quarter of 2019 Financial Highlights

  • Net revenues increased by 3.5% to $4.62 million for the first quarter of 2019 from $4.46 million for the same period of last year.
  • Gross profit increased by 48.3% to $1.61 million for the first quarter of 2019 from $1.09 million for the same period of last year. Gross margin was 34.9% for the first quarter of 2019, compared to 24.0% for the same period of last year. 
  • Operating profit increased by 127.0% to $0.54 million for the first quarter of 2019 from operating loss of $2.01 million for the same period of last year.
  • IFRS net income was $0.31 million, or $0.135 earnings per basic and diluted share, for the first quarter of 2019, compared to net loss of $1.90 million, or $0.886 loss per basic and diluted share, for the same period of last year. 

Mr. Keyan Yan, Chief Executive Officer of the Company commented, "we are very pleased with our operating and financial results for the first quarter, which demonstrated strong profitability given the first quarter being a slow season. The management team is working diligently to keep strong momentum by continuing to improve our operational efficiencies and increase our sales from different channels. Looking forward to the remaining of 2019, we are excited about the sales potential from the recently signed contract and integration of our potential acquisition of Tribe which is expected to put us in a prominent position in the smart clothe technology market. We are confident about our ability to outperform in 2019 and beyond."

First quarter of 2019 Financial Results Analysis


For the Three Months Ended March 31, 2019


($ millions, except per share data)

2019


2018


% Change

Revenues

4.62


4.46


3.5%

  Distribution network

3.04


3.91


-22.3%

  Corporate stores

0.17


0.15


13.3%

  OEM

1.40


0.40


250.0%

Gross profit

1.61


1.09


48.3%

Gross margin

34.9%


24.2%


44.3%

Operating income (loss)

0.54


-2.01


-127.0%

Operating (loss) margin

11.8%


-45.0%


-126.1%

IFRS net income (loss)

0.31


-1.90


-116.3%

IFRS Earnings (loss) per share

0.135


-0.886


-115.3%

Revenues

  • Total revenues increased by $0.16 million, or 3.5%, to $4.62 million for the first quarter of 2019 from $4.46 million for the same period of last year. The increase was mainly contributable to the increased orders from OEM segment.

 



For the Three Months Ended March 31, 2019



2019


2018

($ millions)


Revenues


Gross
Profit


Gross
Margin


Revenues


Gross
Profit


Gross
Margin

Distribution
network


3.04


0.97


31.9%


3.91


0.89


22.9%

Corporate
stores


0.17


0.07


37.4%


0.15


0.06


39.0%

OEM


1.40


0.58


41.2%


0.40


0.14


33.7%

Total


4.62


1.61


34.9%


4.46


1.09


24.4%

Revenues from the Company's distribution network decreased by $0.87 million, or 22.3%, to $3.04 million for the first quarter of 2019 from $3.91 million for the same period of last year. Distribution network contributed 65.9% of total revenues for the first quarter of 2019, compared to 87.8% for the same period of last year. The Company's distributor network consisted of 11 distributors in 10 provinces during the first quarter of 2019, compared to 14 distributors in 12 provinces during the same period of last year. Most of these distributors, either directly or through their sub-distributors, operate KBS-branded stores. Some wholesale distributors sold the products to multi-branded stores and online stores. As of March 31, 2019, there were 32 KBS-branded franchise stores operated by our distributors and sub-distributors, primarily in second and third tier cities. KBS products distributed to the fourth and fifth tier cities are primarily sold in multi-branded department stores and online shops. As a comparison, we had 39 KBS-branded franchise stores operated by our distributors and sub-distributors as of March 31, 2018. 

The following table lists by regions the number of retail stores operated by distributors and sub-distributors as of March 31, 2019: 





Location


As of March 31, 2019


Fujian


6


Guangdong


2


Guangxi


3


Jiangsu


4


Anhui


2


Chongqing


4


Tianjin


3


Hebei


4


Sichuan


4


Total


32


Revenues from corporate store sales increased by $0.02 million, or 13.3%, to $0.17 million for the first quarter of 2019 from $0.15 million for the same period of last year. We currently have one corporate store operated directly by us, sales of which accounted for 3.8% of total revenues for the first quarter of 2019, compared to 5.5% for the same period of last year. The increase in corporate store sales was due to the overall improvement on products this year.

Revenues from OEM sales increased by $1.00 million, or 247%, to $1.40 million for the first quarter of 2019 from $0.4 million for the same period of last year. OEM accounted for 30% of total revenues for the first quarter of 2019, compared to 7% for the same period of last year. The OEM segment is comprised of products that are designed by the customers and manufactured by the Company. The increase in revenues from OEM sales was primarily due to the increased orders from our two major customers: Hangzhou Ziyin and Hangzhou Yiyuan

Cost of Sales and Gross Profit

Total cost of sales decreased by $0.37 million, 11.0%, to $3.00 million for the first quarter of 2019 from $3.38 million for the same period of last year. The decrease in cost of sales was primarily due to higher products  pricing strategy this year comparing same period of last year.

Total gross profit increased by $0.52 million, or 48.3%, to $1.61 million for the first quarter of 2019 from $1.09 million for the same period of last year. Gross profits for distribution network, corporate stores and OEM were $0.97 million, $0.07 million, and $0.58 million, respectively, for the first quarter of 2018, compared to $0.89 million, $0.06 million, and $0.14 million, respectively, for the same period of last year. 

Overall gross margin was 34.9% for the first quarter of 2019, compared to 24.4% for the same period of last year. On a segment basis, gross margins for distribution network, corporate stores and OEM were 31.9%, 37.4%, and 41.2%, respectively, for the first quarter of 2019, compared to 22.9%, 39.0%, and 33.7%, respectively, for the same period of last year. The increase in overall gross margin was due to the rolling out of our new products. Our products of new styles have gained additional advantages in pricing which helped increase our gross margin during the first quarter of 2019. 

Operating Expenses and Operating Income (Loss)

Distribution and selling expenses decreased by $0.43 million, or 59.1%, to $0.30 million for the first quarter of 2019 from $0.73 million for the same period of last year. The decrease in distribution and selling expenses was mainly due to the Company's new cost effective business strategy, resulting in reduced cost in marketing and advertising as well as the labor. Additionally, the Company adjusted the allowance standard for the dealer rental allowance to save the cost.

Administrative expenses decreased by $1.53 million, or 63.8%, to $0.87 million for the first quarter of 2019 from $2.40 million for same period of last year. The decrease in administrative expenses was mainly due to the Company's new business strategy plan resulting in reduced labor salary, R&D expenses, and outsourced marketing team expanse. The depreciation expense was reduced relatively after the impairment of our Anhui facility at the end of 2018.

Other operating expenses, including other income and other gains and loss, totaled $95,314 for the first quarter of 2019, compared to $30,354 for the same period of last year. Operating profit was $0.54 million for the first quarter of 2019, compared to operating loss of $2.01 million for the same period of last year. Operating profit margin was 11.8% for the first quarter of 2019, compared to operating loss margin of 45.0% for the same period of last year.

Income (Loss) before Income Taxes

Profit before income taxes was $0.31 million for the first quarter of 2019, compared to loss before taxes of $2.04 million for the same period of last year. 

Income tax expense was $0.22 million for the first quarter of 2019, compared to income tax gain of $0.14 million for the same period of last year. 

About KBS Fashion Group Limited

Headquartered in Shishi, China, KBS Fashion Group Limited, through its subsidiaries, is engaged in the business of designing, manufacturing, selling and distributing casual menswear through a network of 33 KBS branded stores (as of March 31, 2019) and over a number of multi-brand stores. To learn more about the Company, please visit its corporate website at www.kbsfashion.com.

Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of KBS Fashion Group Limited, and its subsidiary companies. All statements, other than statements of historical fact included herein, are "forward-looking statements" in nature within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For further information, please contact:

Lisa Tu
Chief Financial Officer
T: +86 158-5972-2469
E: lingsantu@hotmail.com

 

 KBS Fashion Group Limited 

 UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) 

 (Stated in US dollars) 
















  Three months ended March 31 




2019


2018




 USD 


 USD 







Revenue



4,618,734


4,464,161

Cost of sales



(3,004,923)


(3,376,037)

Gross profit



1,613,811


1,088,125

GP ratio



34.9%


24%







Other income



66,469


30,144

Other gains and losses


28,846


209

Distribution and selling expenses


(298,277)


(729,349)

Administrative expenses


(867,496)


(2,399,251)

Operating profit



543,353


(2,010,121)







Finance costs



(17,210)


(25,507)

Change in fair value of warrant liabilities


-


-

Profit before tax



526,143


(2,035,628)







Income tax expense



(215,967)


137,313

Profit for the year



310,176


(1,898,315)







Other comprehensive income





-Currency translation differences


(1,486,930)


(10,189,384)

Total comprehensive income


(1,176,753)


(12,087,699)







Attributable to:






Owner of the Company


(1,176,753)


(12,087,699)

Minority interests



-


-







Outstanding shares



2,291,632


2,141,466







Profit per share - basic and diluted


0.135


-0.886







NON-GAAP Profit per share-basic and dilluted


0.135


-0.886













KBS Fashion Group Limited

Unaudited Consolidated Statements of Financial Position

  For the Period ended March 31, 2019(Stated in US dollars)










2019/03/31


2018/12/31

Current assets






Cash and cash equivalents


20,229,246


21,026,103

Trade receivables



10,556,303


8,122,223

Other receivables and prepayments


547,810


855,473

Related parties receivables


158,172


-

Inventories



1,344,772


1,245,800

Subsidies prepaid to distributors


-


-

Prepayments and premiums under operating leases


573,134


78,532

Land Use Rights and Trademark









33,409,436


31,328,132

Total current assets












Non-current assets



1,911,453


2,371,735

Prepayments and premiums under operating leases



-


-

Prepayment for construction of new plant



-


-

Prepayment for acquisition of land use right



-


-

Construction in progress



11,973,511


12,173,808

Property, plant and equipment


599,989


603,503

Prepaid lease payments


14,768,293


14,688,829

Deferred tax asset



29,253,247


29,837,875

Total non-current assets








62,662,683


61,166,006

Total assets












Current liabilities



1,092,785


1,092,785

Short-term loans



3,865,583


5,278,460

Trade and other payables


(323,233)


445,614

Related parties payables


164,554


47,828

Income tax payable



532,128


-

Total current liabilities


5,331,817


6,864,685













Total liabilities



5,331,817


6,864,685







Equity






share capital



257


227

share premium



9,135,130


8,000,561

Revaluation reserve



184,272


184,272

Statutory Surplus reserve



6,084,836


6,084,836

Retained earnings



46,488,390


46,178,214

Foreign currency translation reserve


(4,562,020)


(6,146,787)

Total equity



57,330,865


54,301,321







Total liabilities and equity


62,662,683


61,166,007

 

 

KBS Fashion Group Limited

Unaudited Consolidated Statements of Cash Flow

For the three Months ended March 31, 2019 and 2018

USD



2019


2018



 USD 


 USD 

Profit before tax

310,176


(1,898,315)

Adjustments for:




Finance costs

17,210


25,507

change in fair value of warrant liabilities

-


-

Interest income

(16,071)


(20,264)

Bad debt allowance

-


-

 Share based compensation 

1,134,600


(1,314,420)

Depreciation of property, plant and equipment

209,145


400,538

Amortisation of prepaid lease payments and trademark 

3,595


3,818

Amortisation of subsidies prepaid to distributors

-


-

Amortisation of prepayments and premiums under operating leases

105,868


27,727

Provision (Reversal) of inventory obsolescence

(41,469)


(14,428)

Provision (Reversal) of impairment loss in prepayments

-


-

 Loss (gain) on disposal of property, plant and equipment 

(808)


-

 Deferred income tax 

-


-

Operating cash flows before movements in working capital

1,722,246


(2,789,837)

(Increase) / Decrease in trade and other receivables

(2,342,359)


(765,977)

(Increase) / Decrease in prepayments and deferred expenses

233,252


1,307,245

(Increase) / Decrease in related parties receivables

-


-

(Increase) / Decrease in inventories

(34,008)


(1,631,454)

Increase / (Decrease) in trade and other payables

(508,054)


(597,447)

Increase / (Decrease) in income tax payable

534,099


-

Increase / (Decrease) in related parties payables

-


0

Cash generated from operations

(394,822)


(4,477,469)

DTA


69,711


(137,313)

Income taxes paid

-


-

Net cash from operating activities

(325,111)


(4,614,781)

Investing activities




Interest received

16,071


20,264

Prepayments and premiums paid under operating leases

-


-

withdraw the prepayments and premiums paid under operating leases

-


-

Subsidies prepaid to distributors

-


-

Prepayment for construction of new plant

-


-

Prepayment for acquisition of land use right

-


-

Purchase of property, plant and equipment and construction in process

(0)


(20,575)

CIP movement

-


-

Intangible movements

-


-

Prepayment on prepaid lease payments

-


-

Proceeds on disposal of property, plant and equipment

-


-

Net cash used in investing activities

16,071


(312)






Financing activities




 Advances from related parities 

54,074


163,315

 Interest paid 


(17,210)


(25,507)

 New bank loans raised  

1,117,960


1,662,146

 Payment of bank loans 

(1,117,960)


(1,662,146)

 Shares issued 

-


-

Net cash used in financing activities

36,864


137,808






Net increase in cash and cash equivalent

(272,176)


(4,477,285)

 Effects of currency translation 

(524,681)


5,306,418





5,282,494

Cash and cash equivalents at beginning of year

21,026,103


25,221,323






 Cash and cash equivalents at end of year 


20,229,246


26,050,456

 

Cision View original content:http://www.prnewswire.com/news-releases/kbs-fashion-group-limited-reports-robust-first-quarter-2019-financial-results-300860544.html

SOURCE KBS Fashion Group Limited

Copyright 2019 PR Newswire

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