30th Sep 2015 09:28
LONDON (Alliance News) - Camkids Group PLC Wednesday reported a huge drop in profit in the first half of 2015, as its sales declined in a challenging Chinese market and it faces a further loss due to the termination of agreements with three of its distributors and compensation payments it will have to pay out.
The Chinese children's clothing retailer said that its pretax profit in the six months ended June 30 fell to CNY11.5 million from CNY126.4 million the year before, as revenue declined to CNY274.0 million from CNY458.8 million.
Camkids said that it faced a challenging year which suffered from a slowdown in the Chinese economy, tough competition, lower consumer spending power and pricing pressure. It said that it anticipates these conditions to remain in the rest of 2015 and into 2016.
Back in August, Camkids announced that it had terminated its relationship with three underperforming distributors due to the tough trading conditions in China, and said that under the termination agreements it will have to purchase back the inventory held by the distributors for around CNY285 million.
On Wednesday, the company said that the two new distributors who are replacing the exiting three, have agreed to take over all the repurchased inventory at a discount of 15% to 60% to the price at which Camkids buys it back. This suggests that the new distributors will pay an estimated CNY142.9 million, resulting in a CNY142.1 million loss for Camkids.
Camkids said that it expects to make a total loss of CNY142.9 million for the buyback and resale of inventory. It will also pay an estimated CNY70 million in compensation settlements to the exiting distributors.
On Tuesday, Camkids revealed that one of its non-executive directors, Jacques-Franck Dossin, resigned as he opposed the financial compensation that the company intends to pay. Chief Financial Officer Ng Pei Eng also resigned, although the company did not state his reasons.
"2015 has been a challenging year for the company. The slowdown in the economy, increased competition, lower consumer spending power and pressure on pricing have all affected Camkids' financial and operating performance. Nevertheless, Camkids remains a strong brand in China and through the hard work of our R&D team the group continues to develop and launch new, innovative, high-quality products to further improve our market position," Chairman Zhang Congming said in a statement.
"We are pleased to have signed an agreement with Walt Disney to license their trademark for the Captain America and Avengers characters and we believe that this important collaboration will help to further strengthen our brand in China," he added.
"The board believes that despite the challenging market conditions our brand and market position are solid and we view the future with reasonable confidence," Congming concluded.
Shares in Camkids were suspended on Tuesday following the resignation of its nominated adviser and broker, Allenby Capital Ltd.
In accordance with AIM rules, if the company fails to appoint a replacement nominated adviser within one month, its shares will be cancelled.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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