10th Aug 2015 11:39
LONDON (Alliance News) - Camkids Group PLC Monday said it expects to make a small operating profit excluding exceptional costs in 2015, but that it will fall behind market expectations in a tough Chinese trading environment.
Shares in Camkids fell 28.9% at 8.00 pence following the announcement.
The Chinese children's clothing retailer said that revenue in 2015 will be broadly in line with market forecasts, adding that the order book was down 45% for Autumn/Winter year-on-year, marginally more than the reduction in the Spring/Summer order book.
Camkids said that difficult macro-economic conditions in China are making trading tough, which it said led it to terminate its relationship with three underperforming distributors.
Under the termination arrangements, Camkids may have to purchase back the inventory held by the distributors for around CNY285 million and make contractual compensation payments totalling approximately CNY70 million.
The company said it has already identified two new replacement distributors and said it will sell the majority of the repurchased inventory to them but at a substantially reduced price. It said it expects to report a "meaningful" net loss after exceptional items as a result of this, adding that its cash reserves will be substantially reduced.
Camkids added that it also intends to repurchase approximately CNY80 million of inventory from its remaining distributors which it will donate to children in poorer areas of China. On account of difficult trading conditions, Camkids has agreed to temporarily extend payment terms with its distributors to 180 days from 120 days until the end of 2015, it said.
"Trading conditions remain difficult in China and we anticipate the trend of decreasing order books continuing into 2016. However, we are seeking to use these conditions to our advantage in replacing underperforming distributors at a lower cost than we would otherwise have been able to had trading conditions been better," Chairman Zhang Congming said in a statement.
"Excluding the exceptional costs of replacing certain distributors and repurchasing unsold inventory, we anticipate that Camkids will achieve a small operating profit for the year ending December 31, 2015, which, although behind market forecasts, we consider to be encouraging given the current macro-economic climate," Congming added.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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