Final Results

23 April 2015

Camkids Group plc

("Camkids" or the "Group")

Final results

Camkids Group plc (AIM: CAMK), a leading designer, manufacturer and distributor of branded outdoor clothing, footwear and equipment for children and teenagers in China, today announces its final results for the year ended 31 December 2014.

Highlights

· Group revenues decreased marginally by 6% to RMB1,016 million (2013: RMB1,083 million)

· Gross profit decreased marginally by 6% to RMB376 million (2013: RMB402 million)

· Gross margin was maintained at 37%

· EBIT* decreased by RMB68.9 million to RMB235.2 million (2013: RMB304.1 million)

· Net profit after tax decreased by RMB52.5 million to RMB173.7 million resulting in a margin of 17.1% (2013: 20.9%)

· Footwear business revenues increased to RMB345 million (2013: RMB337 million)

· Camkids remains cash generative with year-end net cash of RMB401 million (2013: RMB313 million)

· Total number of stores increased to 1,398 at 31 December 2014 (31 December 2013: 1,285)

· Growing middle classes in China's second and third tier cities expected by the Directors to be the new drivers of the domestic retail market

· Change of Government policy leads to the Company expecting a baby boom that may last for five to eight years. Camkids has therefore introduced a new range of products designed for children aged 2 and older

*Earnings before interest and taxation ("EBIT") is a non IFRS measure which the Group uses to assess its performance. It is defined as earnings before interest and taxation.

The illustrative average exchange rate for the year 2014 is 1 GBP : 10.1219 RMB.

Commenting on the final results, Zhang Congming, Executive Chairman of Camkids, said: "We are pleased with our performance during 2014 in what remains a challenging time in China. During the year ahead we expect the industry to continue to consolidate and the larger players to gain market share at the expense of the smaller operators and we hope to be able to take advantage of this.

"In the first two months of the current year sales were down 5% and the order book for this year's Spring/Summer collection is down 38% on last year. The Board expects this trend to continue into the second half of 2015. As a result, our previously announced review of our projected cost base for 2015 and beyond has resulted in the Board taking the decision to delay the planned construction of its new plant. Instead, we will focus our production on the most productive manufacturing lines and adjust our work force accordingly. We will continue to review our cost base in light of the difficult market.

"Camkids remains committed to increasing its advertising and marketing efforts and the Board remains confident in the Camkids' product portfolio and is optimistic about the Group's medium-term prospects."

-Ends-

For further information:

Notes to editors

Camkids is a leading Chinese designer, manufacturer and distributor of branded outdoor clothing, footwear and equipment for children and teenagers.

Based in Fujian province in China, the Group focuses on children's sportswear for outdoor activities, combining functionality and innovation. The products are mid-range price based, targeting mid and high range markets within China.

 The three main product areas are:

· Camkids outdoor clothing - all weather jackets, waterproof trousers, shirts, tops and T-shirts, woollen sweaters, jeans, trousers shorts and skirts

· Camkids footwear - hiking boots, outdoor leisure footwear, flip-flops, sandals and boots

· Camkids equipment and accessories - telescopes, backpacks, technical packs, tents, sleeping bags, headgear, caps, kettles, headlights and torches.

The Group designs its entire product range and manufactures the majority of its footwear. Outdoor apparel and accessories are currently manufactured by third party OEMs.

Camkids' primary route to market for the sale of its products is through its network of distributors. The Group has established an extensive distribution network across 29 provinces, 4 municipalities and 5 autonomous regions within the PRC and is successfully expanding its presence in tier 3 and tier 4 cities. The Group has 17 authorised distributors operating over 1,389 franchised retail outlets, and is in the early stages of developing an online e-commerce platform to target online retail.

Camkids has received a number of prestigious awards. In January 2014, the Group was recognised by Asia Brand Association as the Top Brand in China for 2013 and one of the top ten Industry Customer Satisfaction Brand's. The Group's Chairman also received one of Brand China's 'People of the Year' awards.

For more information please visit www.camkids-ir.com

Executive Chairman's statement

Overview

Trading conditions in 2014 have been challenging for all market participants and, in view of this, we are pleased that we have only suffered a marginal decline in both our revenue and profit figures. Importantly, we have been able to keep our average receivable days at approximately 149 days in FY2014 -and have seen a reduction in our receivables in absolute terms.

We have seen a number of factors that have resulted in the cancellation and postponement of sales orders, in particular the reduced growth of the Chinese economy and the Chinese Government's on-going anti-corruption and frugality campaigns which have had an impact on overall consumption trends. Gift giving cash equivalent vouchers that can be used in department stores was once an important part of Chinese culture. Today, official policy forbids gift giving as it can be considered bribery. Such curtailment has had repercussions across a large number of consumer products. Against the backdrop of slower sales growth in a competitive retail market, major international brands are offering greater discounts and/or adjusting their price points in order to attract more sales from increasingly cost conscious consumers. Nevertheless, we are pleased that we were able to maintain our gross margins at 37% (2013: 37%). The increasing competition we are seeing as more players, both domestic and international, enter the market is also transferring across from the adult market into the children's segment.

On a mid-to-long terms basis the Directors believe that the growing middle classes in China's second and third tier cities will be the new drivers of the domestic retail market. The Chinese middle classes are willing to spend more time and money on their recreation activities and tourism and the Company expects this to be a driver for growth in the long term.

The number of Camkids stores has increased to 1,398 by end of 2014 compared with 1,285 at the end of 2013. However, given the current short-term trading environment, our distributors are currently reviewing the situation and we expect that they will be consolidating some of their stores.

At the Autumn/Winter 2015 sales fair, held in Jinjiang in January 2015, we launched a new brand ambassador to promote our products and to associate our brands with a healthy active lifestyle. Camkids has created a family of four cartoon camels that are adventurous and love outdoor activities, to encourage children to pursue a healthy active lifestyle in line with the Company's brand values.

New product range for young children from 2 years old upwards

The Third Plenary Session of the 18th Communist Party of China Central Committee in November 2013 decided to relax China's family planning policy by allowing couples to have a second child if one of the parents is the only child in his or her family. According to the School of Sociology and Population Studies of Renmin University of China, approximately 90 million babies would be born if all these couples had a second child. The Chinese Government is anticipating at least one million more babies to be born in 2015 than in 2014 as a result of this significant policy change. With the prospect of the family planning policy being eased still further in the future the Company expects a baby boom that may last for five to eight years. As a consequence, Camkids sees the introduction a new range of products designed for children aged 2 and older as an important development to ensure the sustained long term growth potential of the Company.

New product range - cycling

In September 2014 the Chinese Government unveiled plans to accelerate the development of sports to promote "all kinds of sporting resources" and required State-owned sports venues to become more accessible to the public. The Group believes more people will take up outdoor activities as they adopt healthy lifestyles in response to the Government initiative. Calls by the Chinese Government to protect the environment have led the Company to believe that this will lead to consumers adopting less-polluting lifestyles, such as cycling.

Financial results

As previously reported, the market in which the Company operates has become more challenging with sales and profits in 2014 both affected. Revenue for the year decreased marginally by 6% to RMB1,016 million (2013: RMB1,083 million) with gross profit at a similar level of 6% to RMB376 million (2013: RMB402 million). The Company's gross profit margin for the year remained roughly stable at 37% and Camkids continues to be cash generative with a cash position at the year-end of RMB401 million (2013: RMB313 million).

Despite the difficult trading conditions experienced throughout the year, the Camkids footwear business has continued to perform well, with sales and profits slightly ahead of the prior period.

Clothing business

The Group's clothing business offers a wide range of outdoor clothing, such as waterproof jackets and trousers, ski jackets, shirts and t-shirts. Revenue in this division decreased marginally by 6% to RMB589 million (2013: RMB625 million). Camkids outsources the manufacturing of its clothing to third party OEMs and due to the Company's scale and strong relationship with the contract manufacturers we continue to have strong pricing power.

Footwear business

As announced in September 2013, the Group has ceased manufacturing OEM orders as part of its strategy to focus on the higher margin Camkids' branded products. Revenue in this division increased to RMB345 million (2013: RMB337 million), representing 34% of Group revenue.

Equipment and accessories business

Camkids sub-contracts all of the manufacturing of its equipment and accessories, which include caps, torches, socks and sleeping bags, to third parties. This business contributed sales of RMB82.4 million (2013: RMB91.9 million) representing 8.1% of Group revenue during the period. Gross profit was RMB36.1 million (2013: RMB40.5 million), generating a gross profit margin at 43.8% (2013: 44.1%) which is higher than the average for the Group.

Product development

The emphasis of our R&D effort is to enhance the quality of our products and reinforce the credibility of the Camkids brands. The Group's ability to satisfy the consumer's preference for fashion, style and value for money is an essential factor in the continued success of the business. We have invested heavily in testing equipment to ensure the materials used in our products are safe, comfortable, durable and suitable for children. We have also worked extensively with independent design firms to increase our product development capabilities and ensure the Group's product portfolio stays ahead of market trends and fashions.

Marketing and branding

With the expansion of the middle classes, Chinese consumers are now more educated, fashion conscious and active on social media. Marketing spend has increased during the period, largely as a result of the number of events the Group has sponsored in order to raise the profile of the Camkids brand. These activities include the launching of a charity campaign for the collection of old children's clothing and shoes for re-use in less affluent parts of the country, the sponsorship of university students cycling to Tibet and sponsorship of the National floorball team. These campaigns form part of the Group's corporate social responsibility strategy which were publicised through the media by newspaper, TV and internet. These activities, along with other events in various provinces, have helped to secure the position of the Camkids brand in the market. To enhance its brand image in China, the group has changed all the logos in the stores to include a mountain peak, a trademark owned by the Group. This logo suits a more outdoor inspired image for the Group's brands and compliments Camkids' established image of the camel.

During the year the Company participated in several international trade shows (such as Beijing ISPO 2014, Asia Outdoor Trade Show in Nanjiang and the Jinjiang Shoes Trade show) to showcase the Group's new and innovative products and distinguish the Camkids brand from its competitors.

The Group has also invested in the ongoing training of our distributors retail staff to enhance their sales skills and product knowledge. This programme of constant improvement is vital as customers are now demanding much higher levels of customer service.

Awards

During the year the success of the Group, its management and employees has been recognised by numerous awards:

· The China Top Sales of Teenager Outdoor Sport Footwear Award 2013 - China Industrial Information Issuing Center. This is the 3rd year running Camkids has received this award.

· Top 500 Asia Brands, September 2014 - 9th Asia Brand Ceremony

· The Most Competitive Brand Leader in China Children and Teenager Outdoor Sport Equipment -The 10th China Corporate Integrity & Competiveness Forum Summit 2014

· China Shoe Industry's Most Influential Brand - Shoes hc360.com

· 2014 Jinjiang Top 10 Business Man - awarded to Mr. Hong Qinming

· Jinjiang Industry Special Contribution Award of the Year - awarded to Mr. Zhang Congming

E-commerce

As previously announced, the Group has identified e-commerce as a source of significant growth for the business as more Chinese consumers do their shopping on-line via their smartphones and other internet enabled devices.

In November 2014 Camkids reported that online sales from its Chinese Double 11 day, a national online shopping carnival which took place on 11 November 2014, were encouraging with Camkids being ranked 3rd in the children's outdoor sales after Anta and Nike Kids. Double 11 day draws in millions of Chinese shoppers looking for discounts, who typically spend significant sums on China's e-commerce sites during that one day of discounts. Whilst still in its infancy, the Board is confident that its online business has significant growth potential.

A draft of China's first e-commerce law will be completed by end of 2015 to include provisions for an honest trade environment, the quality of goods and services, protection of consumers' interests and intellectual property rights. As a consequence the e-commerce platform service providers are now more stringent in their criteria on the selection of on-line merchants and the partnerships we signed with Taobao and JD.com are important for Camkids in ensuring the integrity of our on-line offer.

The increasingly regulated environment for on-line transactions is good news for Camkids as it will ensure that only good quality and reliable brands are sold on-line.

Production

Following the Group's review of planned costs for 2015, the Board has decided to discontinue use of older, less productive machinery which will result in the laying off of about 170 jobs. Plans for the construction of new plant will be deferred until there are signs of a pick-up in sales orders. As part of the cost cutting measures, the Board has also engaged a professional team to review the Group's production processes looking at efficiency and productivity. The Board anticipates that this extensive review will lead to initiatives that will cut wastage, improve productivity, achieve better profit margins and improve Camkids' competitiveness in the market.

Outlook

The Board expects that trading conditions in 2015 will continue to be challenging. The industry is expected to continue to consolidate and the larger players with the financial resources to invest in branding and product development will continue to gain market share. As a result, Camkids is committed to increasing its advertising and marketing efforts to include campaigns on TV and in the media. The Group will also maintain its focus on R&D to design new, innovative and functional products.

Revenues for the first two months of 2015 were approximately RMB 156m (unaudited), some 4.9% down on the RMB 164m generated in the first two months of 2014. The Group's original order book for its spring/summer collection 2015 (H1:2015) was RMB 378m, some 13% down on the H1:2014 order book. However, the difficult trading conditions within China at the current time have resulted in cancellations of orders. Added to this, increased price pressure and competitiveness from international brands has necessitated price reductions of between 5% and 12% across the Group's brands with effect from 1 April 2015. This has resulted in the final order book standing at RMB 269m, 38% down on the H1:2014 order book. The Directors anticipate that a similar trend will be experienced for the Group's H2:2015 order book. The Board continues to review the Group's cost base in 2015. Further announcements will be made at the appropriate time.

In light of the challenging market conditions the Company is anticipating, the Board of Camkids has decided not to propose a final dividend. The Directors believe that it is in the best interests of the Company to conserve its cash during this period and have adopted a conservative approach to cash management. As part of this, all of the Company's Directors, supervisory level and above employees have agreed to reductions in their salaries. The Board recognises the importance of a dividend to its shareholders and intends to resume the payment of a regular dividend as and when market conditions improve.

Zhang Congming

Executive Chairman

23 April 2015

Financial Review

Basis of reporting

The Group financial statements in this report have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the EU, together with the associated International Financial Reporting Interpretation Council ("IFRIC") interpretations and those parts of the Companies (Jersey) Law 1991 applicable to entities reporting under IFRS.

Accounting policies

The Group has reviewed its accounting policies in accordance with IAS 8 and determined that they are appropriate for the Group. These have been consistently applied.

Results overview

Operating Results

Revenue has decreased by 6.2% to RMB1,016 million (2013: RMB1,083 million) resulting in a gross profit of RMB375.8 million (2013: RMB401.6 million) and profit before tax decreased by 21.7% to RMB238.5 million (2013: RMB304.7 million).

The decrease in revenue is as a result of Group's distributors adopting a cautious approach given the macro-economic backdrop in China and the reduction in consumer spending. Certain of the Group's distributors requested the postponement or cancellation of some orders, totalling RMB79 million. The R&D department continued to design new innovative and highly technical products and introduced a new product range to include cycling clothing. The Chinese government is relaxing its one-child policy, allowing couples to have a second child to ease the rapidly ageing society. The Group believed this a growth potential and has expanded the product age group to include younger children from 2 years old onwards. The Group has 17 distributors and together they operated 1,398 Camkids stores in China as at 31 December 2014.

Breakdown by products group for FY2014 and FY2013

The Group's top five distributors contributed 40.7% of total revenue for FY2014 (2013: 49.5%).

Expenses

Selling and distribution expenses increased by 78.4% to RMB91.0 million (2013: RMB51.0 million), approximately 9.0% of the Group's total annual revenue (2013: 4.7%). This is mainly attributable to increased advertising and renovation subsidy fees for the new retail shops and renovation of existing shops. During the period, the Group has changed its logos in all the retail stores to include mountain peak, which is a trademark registered by the Group. Camkids has sponsored the Jinjiang Cycling Championship, organised events like "Bring the Children Out" and "Winter Care". These events encouraged parents to spend time with their children enjoying outdoor activities like hiking and cycling. In the Winter Care event, the Group set up collection booth in shopping malls to collect recycled clothing and shoes for children living in mountain region area. This event was broadcast by Hunan Satellite TV station. E-commerce is growing rapidly with more Chinese shopping online via desktop and mobile devices, the Group has increased its online advertising on Taobao and JD.com and participated in Chinese Double 11 day, the country's national online shopping day. Camkids ranked 3rd in children's outdoor sales after Anta and Nike Kids. During the period, the Group opened 233 new retail shops and renovated 292 existing stores. Every year our distributors will access the performance of their stores and in 2014 they have closed about 120 stores due to reasons like relocation of stores, expiry of the store tenancy agreement and unsatisfactory performance of the store.

Administrative expenses have increased to RMB49.6 million from RMB46.6 million, mainly caused by R&D expenses and Trade shows expenses. The Group believes an increased design capacity is vital in enabling the Group to continue to create a diversified product portfolio and quality products. R&D expenses include salary increment required for staff retention and external design consultancy fees to increase its capabilities. The Group has participated in 3 international trade shows, ISPO Beijing 2014 (which was attended by Allenby Capital Limited, the Group's nominated adviser and broker), Asia Outdoor Trade show in Nanjiang and Jinjiang Shoes Trade show to further enhance its brand and product appeal, distinguishing its brand from its competitors.

The Group's profit before tax decreased by 21.7% to RMB238.5 million, reflecting the reduction in revenue and the increase in expenses. This resulted in an operating profit before tax margin of 23.5% (2013: 28.1%). Camkids will continue to design and develop more innovative and high quality products that appeal to the consumer preference on styles and fashion.

Taxation

Camkids' PRC operating subsidiary is subjected to the income tax rate of 25%, which is in accordance with PRC Enterprise Income Tax Law that came into effect on 1 January 2008. The Group's net profit after tax decreased by RMB52.5 million to RMB173.7 million resulting in a net profit margin of 17.1% (2013: 20.9%) which is in line with the Group's decreased revenue and gross profit.

Balance sheet

Camkids maintained its strong balance sheet with a net cash position of RMB401.5 million (2013: RMB313.4 million). 

Net assets at 31 December 2014 were RMB867.9 million, increased from RMB711.9 million last year. This is mainly attributable to the net profit recorded in the year. Trade receivables decreased by RMB74.6 million which is in line with the decrease in Camkids revenues. The Group's current payment terms are 120 days and all the debts are within the credit terms and there are no bad debts during the period. The average receivable days remain stable at approximately 149 days in FY2014. (FY2013:140 days).

Earnings per share

The earnings per share (basic and diluted) for FY2014 based on the weighted average number of ordinary shares outstanding for the year ended 31 December 2014 of 76.2 million is approximately 22.5 pence. The exchange rate is based average exchange rate for 2014 of 1 GBP : 10.1219 RMB.

 (2013: based on the 75.4 million shares outstanding was approximately 31.0 pence based on average exchange rate for 2013 of 1 GBP : 9.6826 RMB).

Dividend policy

The Group declared an interim dividend of 2.4 pence per share in scrip or 2.0 pence per share in cash for the financial period 30 June 2014. This dividend was paid on 19 December 2014. The Board has decided not to propose a final dividend.

Ng Pei Eng

Chief Finance Officer

23 April 2015

Consolidated statement of comprehensive income

Year ended 31 December 2014

Consolidated statement of financial position

For the year ended 31 December 2014

Consolidated statement of changes in equity

For the year ended 31 December 2014

Year ended 31 December 2014

Consolidated statement of cash flows

For the year ended 31 December 2014

Notes to the financial statements

1. General information and basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") issued by the International Accounting Standards Board ("IASB"), including related Interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC").

The financial statements are measured and presented in the currency of the primary economic environment in which the key trading entity operates (its functional currency). The financial statements of the Group are presented in Chinese Renminbi ("RMB"). The functional currency of Ming Wei is also Chinese Renminbi ("RMB"). All financial information presented in RMB has been recorded to the nearest thousand.

The financial information set out in this announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2014, but was derived from those financial statements. The auditors have reported on the statutory financial statements for the year ended 31 December 2014; this report was unqualified.

The financial information set out in this announcement was approved by the board on 23 April 2015.

The directors have paid an interim dividend of 2.4 pence per share in scrip or 2.0 pence per share in cash in respect of the year ended 31 December 2014.

2. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in Note 1, management made judgements, estimates and assumptions about the carrying amounts of assets and liabilities that were not readily apparent from other sources. The estimates and associated assumptions were based on historical experience and other factors that were considered to be reasonable under the circumstances. Actual results may differ from these estimates.

These estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

2.1 Critical judgements in applying the entity's accounting policies

The following are the critical judgements, apart from those involving estimations (see below) that management has made in the process of applying the Group's accounting policies and which have the significant effect on the amounts recognised in the financial statements.

Impairment of financial assets

The Group follows the guidance of IAS 39 - Financial Instruments: Recognition and Measurement, in determining whether a financial asset is impaired. This determination requires significant judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of a financial asset is less than its cost and the financial health of and near-term business outlook for the financial asset, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

Acquisition of Jinjiang Li Hong

Ming Wei has acquired the land use right for a new plot of land through the acquisition of all equitable interest in Jinjiang Li Hong on 09 November 2014. The land is 12,831 square meter with a usable area of 8,340 square meter located at Jinjiang City, Nei Keng Town, Zai Nei Village for commercial use. Li Hongis a dormant company with no trading activities. Li Hong is now a 100% owned subsidiary of the Group.

In determining the appropriate accounting treatment for the above transactions, the directors considered IFRS 3 "Business Combinations" (Revised 2008). However, they concluded that the substance of this transaction was an assets purchase rather than a business combination, therefore not treated in line with IFRS 3.

2.2 Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the financial year / period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Allowance for trade and other receivables

Management reviews its loans and receivables for objective evidence of impairment at least quarterly. Significant financial difficulties of the debtor, the probability that the debtor will enter bankruptcy, and default or significant delay in payments are considered objective evidence that a receivable is impaired. In determining this, management makes judgment as to whether there is observable data indicating that there has been a significant change in the payment ability of the debtor, or whether there have been significant changes with adverse effect in the technological, market, economic or legal environment in which the debtor operates in.

The allowance policy for doubtful debts of the Group is based on the ageing analysis and management's on-going evaluation of the recoverability of the outstanding receivables. Once a debtor has been identified as having evidence of impairment, it is regularly reviewed and an appropriate impairment provision applied. The carrying amounts of the Group's trade and other receivables as at 31 December 2013 and 2014 were RMB 475.6 million and RMB 408.2 million, respectively. No provisions to any of these debts have been provided for during any of these periods and none are past due.

Impairment of intangible assets and land use rights

Determining whether intangible assets or land use rights are impaired requires an estimation of the value in use of the cash-generating units (CGU) to which intangible assets have been allocated. The value-in-use calculation requires the entity to estimate the future cash flows expected to arise from the CGU and a suitable discount rate in order to calculate present value. There were no impairment triggers identified at the year end. The carrying amount of the land use rights as at 31 December 2013 and 2014 were RMB 9.7 million and RMB 39.3 million, respectively.

Provision for income taxes

The amount of income tax is being calculated on estimated assessable profits based on the completed contract method which is in accordance with the tax rules and regulations applicable in the PRC. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amounts of the Group's income tax payables as at 31 December 2013 and 2014 were RMB 23.9 million and RMB 10.6 million, respectively.

3. Business segments

The Group applies IFRS 8 Operating segments. Per IFRS 8, operating segments are based on internal reports about components of the Group, which are regularly reviewed and used by the board of directors being the Chief Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate resources to the segment and to assess its performance. The Group's reportable operating segments are as follows:

1) Footwear. These are outdoor footwear that are design and manufactured in house for sales to distributors in the PRC under the Camkids brand.

2) Apparels. These are outdoor apparels that are design by the in house R&D team, outsource to external contract manufacturers for sales to distributors in the PRC under the Camkids brand.

3) Accessories. These are accessories that are design by the in house R&D team, outsource to external contract manufacturers for sales to distributors in the PRC under the Camkids brand.

4) OEM Sales. Manufacture and sale of footwear under the terms of OEM agreement entered with the PRC export intermediaries.

5) Unallocated amount. These amounts include selling & distribution expenses, administrative expenses, interest income and expenses, trade receivables, intangible assets, fixed assets, other payables which are not allocated to segments. These expenses are for the design, manufacture and distributors for the outdoor footwear, apparels and accessories to the distributors in the PRC.

The CODM monitors the operating results of each segment for the purpose of performance assessments and making decisions on resource allocation. Performance is measured based on segment gross profit as management believes that such information is the most relevant in evaluating the results of each segment. Segment assets and liabilities are presented inclusive of inter-segment balances.

Geographical segments

As the business of the Group is principally engaged in the PRC, no reporting by geographical location of operation is presented.

The segment information provided to management for the reportable segments for the year ended 31 December 2014 is as follows:

Year ended 31 December 2014

Revenue from the Group's top three distributors represent approximately RMB274.7 million (or 27.0 per cent) of the total revenue for the year ended 31 December 2014, comprising RMB 101.6 million (10.0 per cent), RMB97.4 million (9.6 per cent) and RMB75.7 million (7.5 per cent), respectively.

The segment information provided to management for the reportable segments for the year ended 31 December 2013 is as follows:

Year ended 31 December 2013

Revenue from the Group's top three distributors represent approximately RMB345.7 million (or 31.9 per cent) of the total revenue for the year ended 31 December 2013, comprising RMB120.2 million (11.1 per cent), RMB119.4 million (11.0 per cent) and RMB106.1 million (9.8 per cent), respectively.

4. Profit for the year and auditor's remuneration

The Group's profit before taxation is arrived at:

5. Aggregated directors' remuneration

The total amounts for directors' remuneration were as follows:

The Group reimburses the directors for expenses incurred by them or their service companies in the performance of their duties for the Group.

6. Staff costs and numbers

The average number of persons employed by the Group during the year including executive directors is analysed below:

Group employment costs - all employees including executive directors

7. Financial income

8. Finance costs

9. Taxation

The tax rate used for the reconciliations below is the Enterprise Income Tax ("EIT") rate of 25 per cent, payable by corporate entities in the PRC on taxable profits under tax law in that jurisdiction.

The charge for each period can be reconciled to the profit or loss per the consolidated income statements as follows:

10. Earnings per share

The calculation of basic and diluted earnings per share at 31 December 2014 was based on the profit attributable to ordinary shareholders of RMB177,124,000 (2013: 226,138,000). The weighted average number of ordinary shares outstanding during the year ended 31 December 2014 and 2013 and the effect of the potentially dilutive ordinary shares to be issued (of which there are none) are shown below.

11. Dividend

The directors have declared and paid a final dividend for the year ended 31 December 2013 of 2 pence per share. The dividend has been paid on 11 July 2014 by the Company, of which GBP460,270.55 was paid in cash and issue of 1,653,439 in new shares.

The directors have declared and paid an interim dividend for the period ended 30 June 2014 of 2.4 pence per share in scrip or 2.0 pence per share in cash. The dividend has been paid on 19 December 2014 by the Company, of which GBP1,326,264.64 was paid in cash and issue 678,292 in new shares.

12. Land use rights

The land use right is a plot of land where the Group's factory/office are located, at Jinjiang City, Qing Yang Town, San Guang Tian Village for commercial use.

As at 31 December 2014 and 2013, the land use right was mortgaged to secure a short term loan of RMB 6 million as set out in Note 20.

The Group has acquired the land use right for a new plot of land through the acquisition of all equitable interest in Jinjiang Li Hong on 09 November. The land is 12,831 square meter with a usable area of 8,340 square meter located at Jinjiang City, Nei Keng Town, Zai Nei Village for commercial use. The remaining useful life of the land use right is approximately 42 years and will amortised over the remaining useful life from January 2015.

In determining the appropriate accounting treatment for the above transactions, the directors considered IFRS 3 "Business Combinations" (Revised 2008). However, they concluded that the substance of this transaction was an assets purchase rather than a business combination, therefore not treated in line with IFRS 3.

13. Property, plant and equipment (Group)

14. Investments in subsidiary undertakings

Details of the subsidiaries, all of which have a 31 December year end, are as follows:

On 09 November 2014, Jinjiang Ming Wei has entered into an agreement to acquire all equitable interest in Jinjiang LiHong, a dormant company. The cash consideration of RMB29.83 million was for a land use right of a commercial land of usage area 8,340 square meter located at Jinjiang City Nei Keng Town Zai Nei Village. Jinjiang is now a 100% wholly owned subsidiary of Jinjiang Ming Wei.

15. Inventories

16. Trade and other receivables

The directors consider that the carrying amount of trade and other receivables approximated their fair value.

The ageing of Group trade receivables is as follows:

17. Cash and cash equivalents

A charge over bank balances has been registered, for securing all monies due or becoming due from the Company to its bankers.

18. Financial risk management

The Group's overall financial risk management programme seeks to minimise potential adverse effects of financial performance of the Group. Management has in place processes and procedures to monitor the Group's risks exposures whilst balancing the costs associated with such monitoring and management against the costs of risk occurrence. The Group's risk management policies are reviewed periodically for changes in market conditions and the Group's operations.

The Group are exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk.

As at 31 December 2013 and 2014, the Group's financial instruments mainly consisted of cash and bank balances, trade and other receivables, trade payables, other payables and accruals.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of the Group's financial instruments will fluctuate because of changes in market interest rates.

The Group's exposure to interest rates on financial assets and liabilities are set out below:

The Group's exposure to interest rate risk due to the fluctuation of the prevailing market interest rate is confined to bank deposits and bank borrowings.

Interest rate sensitivity

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for fixed rate financial assets and liabilities at fair value through profit and loss. Therefore a change in interest rates at reporting date would not affect profit and loss.

Cash flow sensitivity analysis for variable rate instruments

For variable rate financial assets, the Group has determined that the carrying amounts of bank deposits and bank borrowings based on their notional amounts, reasonably approximate their fair value because these are mostly short term in nature or are reprised frequently. Below is the table which shows the impact on the interest income, using 100 basis points:

Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group performs ongoing credit evaluation of its counterparties' financial condition and does not hold any collateral as security over its customers. The Group's major classes of financial assets are cash and bank balances, trade receivables, prepayments and amounts due to a shareholder.

As at the end of the financial year, the Group's maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the consolidated statements of financial position.

As at 31 December 2013 and 31 December 2014, substantially all the cash and bank balances as detailed in Notes 17 to the consolidated financial statements are held in major financial institutions which are regulated and located in the PRC, which management believes are of high credit quality. The management does not expect any losses arising from non-performance by these counterparties.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date of the Group is as follows:

Camkids Group plc has no significant concentrations of credit risk. Cash is placed with established financial institutions. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.

Trade receivables that are past due but not impaired

Camkids Group plc's trade receivables that are not impaired are as follows:

Currency risk

The Group has no significant exposure to foreign exchange risk as its cash flows and financial assets and liabilities are mainly denominated in Renminbi.

Interest rate risk

The Group has interest rate risk with the banks for banking facilities as set out in Note 20. Except for the term loans, the Group has no recognised or undisclosed financial instruments as at balance sheet date.

Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The principal liabilities of the Group arise in respect of the on-going research and development programs, trade and other payables. Trade and other payables are all payable within 12 months.

The Board receives cash flow projections on a regular basis as well as information on cash balances.

Derivatives, financial instruments and risk management

The Group does not use derivative instruments or other financial instruments to manage its exposure to fluctuations in foreign currency exchange rates, interest rates and commodity prices.

Capital risk management

The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during each of the years ended 31 December 2013 and 2014.

The Group monitors capital using a gearing ratio, which is net debt divided by total equity plus net debts. The Group includes within net debt, loans and borrowings, trade and other payables. Equity includes equity attributable to the equity holders of the Group.

The gearing ratios as at 31 December 2013 and 2014, were as follows:

Trade payables

Camkids Group plc's trade payables that are not impaired are as follows:

19. Trade and other payables

Trade payables and accruals principally comprise amounts outstanding for on-going costs.

The directors consider that the carrying amount of trade and other payables approximated their fair value.

Trade payables are paid between 30 to 60 days of receipt of the invoice.

20. Short term borrowings

Short term bank borrowings are secured by pledge of the Group's fixed assets and land use rights.

21. Stated capital

Ordinary shares of no par value

The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the Company.

22. Reserves

(a) Statutory reserve

According to the relevant PRC regulations and the Articles of Association of the subsidiary, it is required to transfer 10 per cent of its profit after income to the statutory surplus reserve until the reserve reaches 50 per cent of their registered capital. The transfer to this reserve must be made before the distribution of dividends to equity owners. Statutory surplus reserve can be used to make good previous years' losses, if any, and be converted into paid-in capital in proportion to the existing interests of equity owners, provided that the balance after such conversion is not less than 25 per cent of the registered capital.

(b) Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

23. Operating lease commitments

As at each of the balance sheet dates, the future aggregated minimum lease payments under non-cancellable operating leases contracted for but not recognised as liabilities, are as follows:

Operating lease payments represent advertising and trademark license.

Capital commitments

As at 31 December 2014, the Group has an unpaid capital contribution to its subsidiary Jinjiang Mingwei of an amount approximately RMB4.5 million (HK$5.7 million).

24. Related party transactions

Inter-group balances

In order for individual subsidiary companies to carry out the objectives of the Group, amounts are loaned to them on an unsecured, interest-free and repayable on demand basis. At the year end the following amounts were outstanding:

Key management compensation

Key management personnel are the executive officers of the company including executive directors. Key Management personnel compensation is analysed as follows: