Interim Results

Camkids Group plc

("Camkids" or the "Group")

Interim results

Camkids Group plc (AIM: CAMK), a leading Chinese designer, manufacturer and distributor of branded outdoor clothing, footwear and equipment for children and teenagers, today announces a strong set of interim results for the six months ended 30 June 2014.

Highlights

* 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 exchange rate as at 26 September 2014 is 1 GBP: 9.99 RMB.

Commenting on the interim results, Zhang Congming, Executive Chairman of Camkids, said: "The Board is pleased with the strong progress that the Group has made in the first half of 2014 and Camkids continues to be well placed to offer consumers a high quality product at a competitive price. Our core strategy of focusing on the larger cities, municipalities and provinces remains the same and is continuing to deliver solid trading results for us. At the same time, however, by also increasing our focus on tier three and tier four cities throughout China we believe that this will help to negate some of the current challenges in our end markets in terms of increased international competition and pressure on pricing.

"The Board believes that our prospects are solid and we view the future with confidence. As a management team, and on a personal note as the Group's largest shareholder, we are committed to Camkids' AIM listing and also to delivering attractive dividend returns to shareholders."

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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 1,285 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

On behalf of Camkids Group, I am pleased to present the Group's results for the six months ended 30 June 2014.

Overview

The Board confirms that Camkids has continued to make strong progress during the first half of 2014. This is particularly pleasing given the Board's decision to cease its OEM and ODM manufacturing for international brands in H2-2013, a segment which in H1-2013 accounted for 4% of Group revenues. This growth by the Group has also been achieved despite a backdrop of a slowing Chinese economy and in a sector (children's sportswear for outdoor activities) in which a number of international brands have started to provide larger discounts on their product ranges on sale in China.

Camkids has anticipated and reacted well to these market changes, in part by opening stores in tier three and four cities in China. The Group continues to leverage on its competitive edge of developing and distributing innovative branded outdoor clothing, footwear and equipment for children and teenagers, which are priced lower than those offered by the international brands operating in China. Camkids provides consumers with high quality, functional products whilst maintaining value for money and also playing to the Chinese desire to buy from a well-recognised leading brand.

Financial results

The Board is pleased to report that revenue for the six months ended 30 June 2014 increased by 5.8% to RMB 458.8 million (H1-2013: RMB 433.7 million), with gross profit up by 5.5% to RMB 175.0 million (H1-2013: RMB 165.9 million). Earnings before interest and taxation ("EBIT") increased by 3.5% to RMB 126.0 million (H1-2013: RMB 121.7 million), whilst EPS remained steady at RMB 1.20 (H1-2013: RMB 1.20).

The Group's continues to be highly cash generative and, as at 30 June 2014, had a strong cash position of RMB 485.5 million which is a 68.6% increase on the comparable period last year (H1-2013: RMB 288.0 million).

Sales and distribution

Whilst continuing to pursue its core strategy of focusing on the larger cities, municipalities and provinces within the PRC, the Group is also making strong progress with its strategic expansion into tier three and tier four cities throughout China.

As outlined in the Group's trading update issued at the end of July 2014, the Group had a total of 1,336 retail stores as at 30 June 2014, an increase of 51 retail stores from 31 December 2013 (H1-2013: 1,100 retail stores). All of the Camkids stores are currently undergoing a planned refit to bring them into line with the new Camkids branding and, once this is complete, the Group will commence with its advertising and marketing plan which will start with the launch of a new TV advertising campaign to attract new customers. In advance of this new promotional push, the Group has engaged a team of trainers to train all of Camkids distributors and their retailers on Camkid's corporate culture, sales skills, product knowledge, product display and building its brand with its customers.

Since its launch in August 2013, the Group has continued to develop its e-commerce business during the period under review and Camkid's currently has over 200 product lines on offer through its existing online partners of Taobao and JD.com. The Group is in the midst of preparing for Chinese Double 11 day, a national online shopping carnival scheduled for 11 November 2014, by placing more online advertising across relevant websites. Double 11 day draws in millions of Chinese shoppers looking for discounts and they spend significant sums on China's ecommerce sites during that one day of discounts. Whilst still in its infancy, the Board is pleased with the progress the e-commerce division is making to the Group (in H1-2014 it contributed 0.9% of Group revenue) and is confident that it has significant potential for the Group.

As announced on 26 February 2014, Camkids held its Autumn / Winter 2014 sales fair between 20 and 24 February 2014 which was also attended by the Company's nominated adviser and broker, Allenby Capital Limited. This was the first time the fair was held in Beijing, as it had previously been held at the Group's manufacturing facility in Fujian province. The fair in Beijing was held at a time to coincide with an important industry trade show, the ISPO Beijing 2014 China Kids Outdoor Development Forum, at which Camkids was a major sponsor and presenter (http://issuu.com/messemuenchen/docs/visitor_planner_updated). Other brands presenting were Adidas, Li-Ning Adventure, Nordica and RAB.

Research and development

The Group continues to focus on and invest heavily in research and development and it remains an important part of the Group's strategy of translating innovative ideas into product sales. Recently, Camkids has formed a strategic collaboration with a design school in China, where the students will design products for the Group's R&D department.

Manufacturing facility

All five of Camkid's production lines have been operating at over 85% capacity as the Group continues to see demand for its products.

The local municipality has now commenced the process of widening the main road adjacent to Camkids' premises. As previously announced, this road widening does not affect any of the Group's production lines, although it does impact staff accommodation in the short-term and the overall size of the existing site in the long-term. The Group has therefore rented a staff dormitory for those employees affected by the road widening which is in walking distance of the Camkids production facility and, as such, production has been unaffected by these road works.

The Group has also decided to purchase an additional piece of land not far away from the existing premises in order to develop the Group's new facilities. This process is still ongoing and whilst the Group has now identified a site, which is located near to Jinjiang train station, a contract has not yet been signed. The Board remains hopeful that negotiations will soon complete and construction will commence in early 2015 with the new facility being ready by 2016, at which point other Group operations will also migrate to the new headquarters.

This move will also allow the Group to offer prime accommodation to staff, which the Board believes will enable the Group to attract and retain highly skilled staff. As outlined in the Final Results statement issued in April 2014, the financing requirements for the new facility will comfortably covered by the Group's net cash reserves, which as at 30 June 2014 stood at RMB 485 million.

Dividend

The Board is also pleased to announce that the Group intends to pay an interim dividend of 2.4 pence per share (H1-2013: 2.3 pence share). Shareholders will have an option to receive either 2.4 pence per share in shares (scrip option), or 2.0 pence in cash. The dividend timetable will be announced shortly.

Zhang Congming, Camkids' Chairman, considers that the current share price of the Company is fundamentally undervalued. However, at the same time, he understands the concerns of investors in relation to an increase of his own shareholding. Accordingly, Mr Zhang will take as much of his own dividend under the scrip option but only in so far as this does not increase his percentage shareholding which is currently 66.91% of the Company's issued share capital. He will receive the remainder of his dividend in cash.

The Board remains committed to a progressive dividend policy and to delivering attractive dividend returns to shareholders going forward.

Media comment on Chinese AIM companies

The Board is aware of a number of recent media articles written on Chinese companies currently listed on AIM. These have mainly been in response to fluctuations in dividend payments and concerns on the commitment of those companies to AIM. The Board believes that this media environment has had a negative impact on the Group's share price.

The Board notes that Camkids is different in terms of product range, target market and competitors profile from these companies and considers that it should be considered on its own strong fundamental. Camkids, as the leading brand in the children outdoor segment in China, is quite different from companies operating in the much more competitive performance shoe market, and adult market. In essence, Camkids is an aspirational lifestyle brand dedicated to children.

Camkids remains committed to its AIM listing and the executive management team of the Company will be visiting with institutional investors in London during the week of 6 October 2014.

Current trading

Since 30 June 2014, Camkids has remained active in its promotional activities including being one of the main sponsors and presenters at the Asia Outdoor Trade Show in Nanjing in July (www.outdoor-show.com.cn/downloads/2014AO%20show%20guide%20web.pdf). Other presenters included Northface, Gore Tex, Asics and Columbia. In September 2014, Camkids made a charitable donation to schools in Yunnan province which had been affected by the earthquake that happened there in August 2014.

On 4 August 2014, the Group held its sales fair in Jinjiang City showcasing to distributors the Spring / Summer collection, which in terms of design and colour incorporated more outdoor inspiration. The Board is pleased to report that the initial feedback on the collection from distributors has been positive. The Group expects to finalise the order book in early October 2014.

The Board is pleased that the hard work and commitment of the Group's employees has been recognised externally and in early September 2014 it was announced that Camkids had been included in the rankings as one of "The Top 500 Asia Brands". In addition to this prestigious award, the Group's Chairman has also been honoured as one of the "Top ten new brand creators in Chinese industry".

Outlook

The Board is pleased with the good progress that the Group has made in the first half of 2014 and Camkids continues to be well placed to offer consumers a high quality product at a competitive price.

Our core strategy of focusing on the larger cities, municipalities and provinces remains the same and is continuing to deliver solid trading results for us. At the same time, however, by also increasing our focus on tier three and tier four cities throughout China the Board believes that this will help to negate some of the current challenges in our end markets in terms of increased international competition and pressure on pricing.

The Board believes that our prospects are solid and we view the future with confidence. As a management team, and on a personal note as the Group's largest shareholder, we are committed to Camkid's AIM listing and also to delivering attractive dividend returns to shareholders.

Zhang Congming

Executive Chairman

26 September 2014

Financial Review

Operating results

Revenue growth for the period has been driven by:

· an ability to develop innovative products that appeal to consumers;

· a marketing strategy that strengthen and enhance the brand; and

· an increase in number of stores and expansion into tier 3 and tier 4 cities throughout China. As at 30 June 2014 Number of stores: 1,336 (As at 30 June 2013: 1,100);

Revenue increased by 5.8% to RMB 458.8 million (H1-2013: RMB 433.7 million) with gross profit increasing by 5.5% to RMB 175.0 million (H1-2013: RMB 165.9 million). Operating profit before tax increased by 3.7% to RMB 126.4 million (H1-2013: RMB 121.9 million).

The breakdown of proportion of the Group's revenue and gross profit margin by products group for H1-2014 and H1-2013 is as follows:

The Group's top five distributors contributed 41.4% of total revenue for the period (H1-2013: 49.1%).

Expenses

Selling and distribution expenses for the period under review increased by 14.4%, approximately 5.8% of the Group's total revenue (H1-2013: 5.3%). This is largely attributable to increased advertising costs as the Group increased its promotional activities and sponsored a number of local events to raise the Group's profile.

Additionally, the costs incurred were associated with the fit out of new and existing stores, as well as increased staff for the e-commerce department. During the period, the Group opened 95 new retail stores and renovated 129 of its existing stores.

Administrative expenses as a proportion of revenue were static at approximately 4.9% (H1-2013: 4.9%), and were largely attributable to participation in trade shows. During the period, the Group participated in trade shows ISPO Beijing 2014 and The 16th Jinjiang Footwear (International) Exposition, China.

R&D expenses also increased during the period in order to increase in headcount and some salary adjustments that were required for staff retention.

Despite these expenses, the Group's operating profit before tax increased by 3.7% to RMB 126.4 million resulting in an operating profit before tax margin of 28.1% (H1-2013: 29.4%). Camkids will continue to design and develop more innovative and high quality products to seek to ensure the Group maintains its profit margins.

Taxation

Camkids' PRC operating subsidiary is subject to an income tax rate of 25%, which is in accordance with the PRC Enterprise Income Tax Law that came into effect on 1 January 2008. The Group's operating profit after tax increased to RMB 92.4million (H1-2013: RMB 90.2 million), an increase of 2.5%.

Balance sheet

Camkids has maintained a strong balance sheet during the period, with a net cash position of RMB 485.5 million as at 30 June 2014 (31 December 2013: RMB 313.4 million).

Net assets increased to RMB 806.1 million, an increase from RMB 711.9 million at 31 December 2013. This is mainly attributable to the net profit recorded during the period. Trade receivables decreased by RMB 142.2 million which is attributable to the sales seasonality where the Spring/Summer sales are lower than Autumn/Winter sales.

The Group's current payment terms remain at 120 days, all the debts are within the credit terms and there were no bad debts during the period.

Earnings per share

The earnings per share (basic and diluted) for H1-2014 based on the weighted average number of ordinary shares outstanding for the period ended 30 June 2014 of 75.4 million was approximately 12.0 pence (RMB 1.20), based on the exchange rate of 1 GBP: 9.99164 RMB as at 26 September 2014.

Ng Pei Eng

Chief Finance Officer

26 September 2014

Consolidated statement of comprehensive income

Six months ended 30June 2014

Consolidated statement of financial position

for the six months ended 30 June 2014

Consolidated statement of changes in equity

for the six months ended 30 June 2014

Consolidated statement of cash flows

for the six months ended 30 June 2014

Notes to the financial information

1. General information

Camkids Group plc ("the Company" or "Camkids") was incorporated and registered as a limited liability nil par value company under the laws of Jersey on the 10 August 2012 and with company number 111245. The Company's registered office is at 13-14 Esplanade, St Helier, Jersey JE1 1BD. The Company is domiciled in Jersey.

This financial information is for the Company and subsidiary undertakings.

Camkids Group plc is a holding company for Camkids (HK) Holding Limited and Jinjiang Mingwei Shoes & Garments Co., Ltd ("Ming Wei") (together, the "Group").

The principal place of business of the Group is in the People's Republic of China ("PRC").

This interim financial information is unaudited and has not been reviewed by the auditors under International Standard on Review Engagements (UK and Ireland) 2410.

This consolidated interim financial information has been approved for issue by the board of directors on 26 September 2014.

2. Accounting policies

The June 2014 interim consolidated financial information has been prepared in accordance with the principles of 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"). They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2013.  All principal accounting policies of the Group are consistent with those set out in the Annual Report and Accounts for 2013, have been consistently applied to all periods presented and are consistent with those which the Group expects to apply in its forthcoming financial statements for the year ending 31 December 2014.

The financial information is measured and presented in the currency of the primary economic environment in which the key trading entity operates (its functional currency). The financial information of the Group is 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.

Intra-group balances and transactions and any income and expenses arising from intra-group transactions are eliminated on consolidation. Unrealised gains and losses arising from transactions with associates and joint ventures are eliminated against the investment to the extent of the Group's interest in the investee.

The financial information of the subsidiary is prepared for the same reporting period as that of Group, using consistent accounting policies.

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) Design, manufacture and sale of outdoor footwear, apparels and accessories under the "Camkids" brand to distributors in the PRC.

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

The CODM monitors the operating results of each segment for the purpose of performance assessments and making decisions on resource allocation. Performance is based on assessing progress made on projects and the management of resources used. 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 six month ended 30 June 2014 is as follows:

Six month ended 30 June 2014

Revenue from the Group's top three distributors represent approximately RMB 124.5 million (or 27.1 per cent) of the total revenue for the six month ended 30 June 2014, comprising RMB 44.0 million (9.6 per cent), RMB 43.2 million (9.4 per cent) and RMB 37.2million (8.1 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 RMB 345.7 million (or 31.9 per cent) of the total revenue for the year ended 31 December 2013, comprising RMB 120.2 million (11.1per cent), RMB 119.4 million (11.0per cent) and RMB 106.1 million (9.8per cent), respectively.

The segment information provided to management for the reportable segments for the six month ended 30 June 2013 is as follows:

Six month ended 30 June 2013

Revenue from the Group's top three distributors represent approximately RMB 133.7 million (or 30.8 per cent) of the total revenue for the six month ended 30 June 2013, comprising RMB 46.8 million (10.8 per cent), RMB 45.0 million (10.4 per cent) and RMB 41.8 million (9.6 per cent), respectively.

4. Taxation

The taxation charge for the six month ended 30 June 2014 has been based on the estimated effective rate of 25% in China.

5. Earnings per share

The calculation for basic and diluted earnings per share for the relevant period was based on the profit attributable to ordinary shareholders for the six months ended 30 June 2014, 30 June 2013, and the year ended 31 December 2013 of RMB 94,185,000 (30 June 2013: RMB 90,153,000; 31 December 2013: RMB 226,138,000). The weighted average number of ordinary shares outstanding during the six months ended 30 June 2013, 30 June 2012, and the year ended 31 December 2012 and the effect of the potentially dilutive ordinary shares to be issued (of which there are none) are shown below.

6. Dividend

The directors have declared and paid a final dividend of 2.0 pence per share, with scrip dividend alternative in respect of the year ended 31 December 2013. The dividend payment date and the first day of dealing in the new Ordinary Shares was on 11 July 2014.

7. Inventories

8. Trade and other receivables

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