Samarkand Group plc (SMK) Samarkand Group plc : Trading Update
07-Jul-2022 / 07:00 GMT/BST Dissemination of a Regulatory
Announcement, transmitted by EQS Group. The issuer is solely
responsible for the content of this announcement.
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7th July 2022
Samarkand Group plc
("Samarkand", the "Company" or together with its subsidiaries
the "Group")
Trading Update
Samarkand Group plc, the cross-border eCommerce technology,
services and consumer brand group, provides a trading update. As
outlined in our previous trading update, disruptions in China
impacted the group's operations and revenue during FY22. On an
unaudited basis, the financial year closed broadly in line with the
revised analyst guidance at GBP16.5m revenue (FY21: GBP14.8m
excluding exceptional revenues) and GBP6.2m adjusted EBITDA loss
(FY21: GBP0.4m). The Company continues to benefit from a strong
balance sheet with cash and cash equivalents of GBP4m and net
current assets of GBP5.6m.
The Group has successfully managed costs and exposure to risk in
response to the challenging backdrop, while continuing to make
strategic progress. In light of the external volatility in which we
are operating and our increased focus on improving profitability,
we are targeting FY23 revenues in line with FY22, with a material
reduction in operating losses through lower operating costs. Q1 has
demonstrated our adaptability to a changing landscape and the
impact of changes made to our cost base with top line coming in
slightly ahead of prior year and our EBITDA losses significantly
improved from the same period last year.
Market Update
The disruptions that began in 2021 continued to escalate with
widely reported shutdowns in many Chinese cities. Shanghai, where
the Group's base of operations is located, and where the Group's
largest number and highest spending customers are located, was in a
near-total lockdown for two months. A further 73 of the top 100
cities were previously in lockdown since the start of 2022,
severely impacting logistics. Shipping from overseas locations has
been suspended or severely delayed by parcel disinfection and
quarantine procedures. This impacted the group's ability to
operate, leading to reduced revenue and increased losses which is
reflected in the FY22 results.
There are improving prospects within the Chinese market, with
Shanghai having moved out of a general lockdown at the start of
June and other than localised lockdowns in Shenzhen, all the top 50
cities by economic size are now out of lockdown with less than 50
daily COVID cases reported nationally between June 20th and June
27th. However, the situation remains dynamic and future disruptions
cannot be ruled out.
Despite the widely reported supply chain issues impacting
international trade currently, global cross-border eCommerce is
projected to grow from USD765bn in 2021 to over USD6.2trn by 2030.
The last few years have seen the emergence of highly valued
technology providers and significant M&A activity in this
space. China represents the single largest market with a unique set
of complexities which our software and services solve, positioning
us well in this rapidly developing market.
A focus on reducing cost and exposure to risk
In response to the market disruptions and the potential that
this could continue for an extended period, measures were taken to
improve the structural profitability of the business, removing
costs from our run rate cost base and reducing cash burn. A cost
reduction programme was introduced along with operational changes
to deal with the headwinds. The actions have had a significant
impact and as mentioned, revenue will be ahead of Q1 FY22 and
adjusted EBITDA loss lower.
We have secured an agreement in principle from one of our major
strategic shareholders to increase their investment in the Group.
When complete this will put the group in the position to capitalise
on the likely recovery in China and pursue our strategic goals. We
continue to hold productive conversations with new strategic
investors and are encouraged by the interest received.
Executing on our Strategic priorities
We continue to focus on our strategic priorities: to scale our
Nomad Checkout solution, grow our owned brands, to improve margin
through operating leverage and to improve contribution from our
eCommerce business in China through operational discipline and
leverage.
Our Nomad Checkout software enables merchants outside China to
sell direct to Chinese consumers from their eCommerce sites.
Although delayed by disruption in China, we are pleased that the
solution continues to hit key milestones in terms of pilot
enterprise merchants, building a sales pipeline of qualified
merchant opportunity and forming partnerships with logistics
companies. Our software has now been integrated across several
platforms and is positioned to capitalise once the parcel delivery
restrictions in China are lifted. In addition to a strong pipeline
from existing partnerships, direct outreach to SME merchants is
underway with 3 new clients signed in June alone. New clients and
new partnership agreements will be confirmed in the coming
months.
Acquisitions performing ahead of expectations
The acquisition of Zita West Products was completed in May 2021
and has performed ahead of management expectations. The business is
on a strong growth trajectory with excellent unit economics. In the
12 months prior to the acquisition, revenue for Zita West Products
was GBP1.2m. In the 12 months since acquisition, revenue has
increased to GBP1.6m.
The recently acquired Napiers has been integrated into the group
with encouraging results as optimisations across retail and online
start to embed. The brand portfolio is expected to see further
growth as the Chinese market returns to normal and other
international channels are opened in the second half of the
year.
David Hampstead, CEO of Samarkand Group plc commented: "In the
first half of 2022 many Chinese cities experienced varying COVID
measures, with Shanghai in a complete lockdown for two months and
other cities in full or partial lockdown. We adapted rapidly to a
new environment. Every member of our team has made a valuable
contribution in navigating this turbulent period, particularly our
colleagues in Shanghai, many of whom were unable to leave their
homes for almost two months. With lockdowns lifting at the end of
May, logistics swinging back into action and with the measures put
in place earlier in the year, we have managed to achieve a Q1
revenue performance ahead of the previous year and significantly
reduced losses.
The continuing restrictions placed on overseas parcels and
widespread logistics issues have hampered the launch of several
clients using our Checkout software but we have continued to evolve
the product and forge partnerships with global logistics companies.
We remain confident in the prospects of our software, encouraged by
its adoption and are well positioned to capitalise as logistics
return to normal.
The brand acquisitions we made have given us diversification and
performed well since joining the group, leveraging our
infrastructure, expertise and technology to deliver immediate
improvements."
For more information, please contact:
Samarkand Group plc Via Alma PR
David Hampstead, Chief Executive Officer
http://samarkand.global/
Eva Hang, Chief Financial Officer
VSA Capital - AQSE Corporate Adviser and Broker +44(0)20 3005 5000
Andrew Raca, James Deathe, Pascal Wiese (Corporate Finance)
IPO@vsacapital.com
Andrew Monk (Corporate Broking)
Alma PR +44(0)20 3405 0213
Josh Royston
Lily Soares Smith samarkand@almapr.co.uk
Joe Pederzolli
Notes to Editors
Samarkand is a cross-border eCommerce technology and retail
group focusing on connecting International Brands with China, the
world's largest eCommerce market. The Group has developed a
proprietary software platform, the Nomad platform, which is
integrated across all necessary touchpoints required for eCommerce
in China including eCommerce platforms, payments, logistics, social
media and customs. The Nomad platform is the foundation on which
the Group's Nomad technology and service solutions are built. The
core products include Nomad Checkout, Nomad Storefront and Nomad
Distribution.
Founded in 2016, Samarkand is headquartered in London, UK with
offices in Shanghai and Tokyo.
For further information please visit
https://www.samarkand.global/
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ISIN: GB00BLH1QT30
Category Code: TST
TIDM: SMK
Sequence No.: 173105
EQS News ID: 1392439
End of Announcement EQS News Service
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