SHISHI, China, June 8, 2018
/PRNewswire/ -- KBS Fashion Group Limited ("KBS" or the "Company")
(NASDAQ: KBSF), a leading fully-integrated casual menswear company
in China, today announced its unaudited financial results for
the first quarter of 2018. Our consolidated financial
statements are presented in accordance with International Financial
Reporting Standards as issued by the International Accounting
Standards Board.
First quarter of 2018 Financial Highlights
- Net revenues decreased by 21.1% to $4.46 million for
the first quarter of 2018 from $5.51 million for the same
period of last year. The decrease was related to the termination of
bad contracts with some customers and the liquidation of excess
inventory.
- Gross profit decreased by 10.3% to $1.09 million for
the first quarter of 2018 from $1.21 million for the same
period of last year. Gross margin was 24.2% for the first quarter
of 2018, compared to 22.0% for the same period of last
year.
- Operating profit decreased by 10.0% to $2.01 million for the first quarter of 2018 from
$2.23 million for the same period of
last year.
- GAAP net loss was $1.90 million, or $0.886 loss
per basic and diluted share, for the first quarter of 2018,
compared to net income of $1.73 million,
or $0.977 loss per basic and diluted share, for the same
period of last year.
- *Non-GAAP net loss, was $1.90 million,
or $0.886 loss per basic and diluted share, for the first
quarter of 2018, compared to non-GAAP net loss of $1.73
million, or $0.977 loss per basic and diluted share, for
the same period of last year.
Mr. Keyan Yan, Chief Executive Officer of the Company
commented, "while our sales performance for the first quarter
reflects a challenging garment market, we remain optimistic about
our business as we continue to execute operationally, focus on
financial discipline, and aggressively pursue contracting
opportunities. The management team is also working on exploring
various options by cooperating with e-commerce stores to generate
sales momentum for our business. With our continuous efforts, we
are confident to deliver improved results going forward."
*Non-GAAP Financial Measures: This press
release contains certain non-GAAP financial measures. A
reconciliation of these non-GAAP measures to their nearest
comparable GAAP measures is included below. Management
believes the use of non-GAAP measures is an additional useful
method of evaluating our financial condition and results of
operations. The non-GAAP financial measures disclosed should
not be considered a substitute for, or superior to, financial
measures calculated in accordance with GAAP, and the expected
results calculated in accordance with GAAP and reconciliations to
those expected results should be carefully evaluated. The non-GAAP
financial measures we use may be calculated differently from, and
therefore may not be comparable to similarly titled measures used
by other companies. Management uses this information to measure
performance over time on a consistent basis and to identify trends
related to the Company's financial condition and results of
operations. Management believes that these non-GAAP measures
provide investors with information regarding the underlying
performance of the company's core business operating results.
References to GAAP refer to International Financial Reporting
Standards, as issued by the International Accounting Standards
Board (IFRS).
First quarter of 2018 Financial Results Analysis
For the Three Months Ended March 31,
|
|
($ millions,
except per share
data)
|
2018
|
|
2017
|
|
%
Change
|
Revenues
|
4.46
|
|
5.51
|
|
(21.1)%
|
Distribution network
|
3.91
|
|
4.86
|
|
(19.5)%
|
Corporate stores
|
0.15
|
|
0.21
|
|
(28.6)%
|
OEM
|
0.40
|
|
0.43
|
|
(7.0)%
|
Gross
profit
|
1.09
|
|
1.21
|
|
10.3%
|
Gross
margin
|
24.2%
|
|
22.0%
|
|
10.3%
|
Operating income
(loss)
|
(2.01)
|
|
(2.23)
|
|
(10.0)%
|
Operating (loss)
margin
|
(45.0)%
|
|
(40.5)%
|
|
(10.0)%
|
GAAP net income
(loss)
|
(1.90)
|
|
(1.73)
|
|
(9.5)%
|
Non-GAAP Earnings
(loss) per
share
|
(0.886)
|
|
(0.977)
|
|
(9.3)%
|
Revenues
- Total revenues decreased by $0.92 million, or 21.4%,
to $4.46 million for the first quarter of 2018
from $5.51 million for the same period of last year. The
decrease was related to the termination of bad contracts with some
customers and the liquidation of excess inventory. The Company
tries to avoid overstock due to the weak demand.
|
|
For the Three
Months Ended March 31,
|
|
|
2018
|
|
2017
|
($
millions)
|
|
Revenues
|
|
Gross
Profit
|
|
Gross
Margin
|
|
Revenues
|
|
Gross
Profit
|
|
Gross
Margin
|
Distribution
network
|
|
3.91
|
|
0.89
|
|
22.9%
|
|
4.86
|
|
0.97
|
|
20.0%
|
Corporate
stores
|
|
0.15
|
|
0.06
|
|
39.0%
|
|
0.21
|
|
0.12
|
|
55.0%
|
OEM
|
|
0.40
|
|
0.14
|
|
33.7%
|
|
0.43
|
|
0.13
|
|
20.0%
|
Total
|
|
4.46
|
|
1.09
|
|
24.4%
|
|
5.51
|
|
1.21
|
|
22.0%
|
Revenues from the Company's distribution network decreased
by $0.95 million, or 19.6%, to $3.91 million for the
first quarter of 2018 from $4.86 million for the same
period of last year. Distribution network contributed 87.6% of
total revenues for the first quarter of 2018, compared to 87.8% for
the same period of last year. The Company's distributor network
consisted of 14 distributors in 12 provinces during the first
quarter of 2018, compared to 30 distributors in 15 provinces during
the same period of last year. Most of these distributors, either
directly or through their sub-distributors, operate KBS-branded
stores. Some wholesale distributors sell our products to
multi-branded stores and online stores. As of March 31, 2018, the Company operated 39 branded
franchise stores, primarily in second and third tier cities. KBS
products distributed to the fourth and fifth tier cities are
primarily sold in multi-branded department stores and online shops.
As a comparison, the Company operated 52 branded franchise stores
as of March 31, 2017.
The following table lists by region the number of retail stores
operated by distributors and sub-distributors as of March 31, 2018:
|
|
|
|
Location
|
|
As of March
31,
2018
|
|
Fujian
|
|
6
|
|
Guangdong
|
|
2
|
|
Guangxi
|
|
3
|
|
Jiangsu
|
|
4
|
|
Anhui
|
|
1
|
|
Zhejiang
|
|
2
|
|
Chongqing
|
|
4
|
|
Inner
Mongolia
|
|
1
|
|
Tianjin
|
|
3
|
|
Hebei
|
|
4
|
|
Heilongjiang
|
|
4
|
|
Sichuan
|
|
5
|
|
Total
|
|
39
|
|
Revenues from corporate stores sales decreased by $0.06
million, or 29.4%, to $0.15 million for the first quarter
of 2018 from $0.21 million for the same period of last
year. Corporate stores accounted for 3.4% of total revenues for the
first quarter of 2018, compared to 5.5% for the same period of last
year. The decrease in corporate stores sales was due to the
competitive pressure. As of March 31,
2018, the Company operated 1 corporate store same as
March 31, 2017.
Revenues from OEM sales decreased by $0.03 million, or
6.7%, to $0.40 million for the first quarter of 2018
from $0.43 million for the same period of last year. OEM
accounted for 9.0% of total revenues for the first quarter of 2018,
compared to 6.7% for the same period of last year. The OEM segment
is comprised of products that are designed by the customers and
manufactured by the Company. The decrease in revenues from OEM
sales was primarily due to the competitive pressure.
Cost of Sales and Gross Profit
Total cost of sales decreased by $0.92 million, or 21.4%,
to $3.38 million for the first quarter of 2018
from $4.30 million for the same period of last
year.
Total gross profit increased by $0.12 million, or 10.3%,
to $1.09 million for the first quarter of 2018
from $1.21 million for the same period of last year.
Gross profits for distribution network, corporate stores and OEM
were $0.89 million, $0.06 million, and $0.14
million, respectively, for the first quarter of 2018, compared
to $0.97 million, $0.12 million, and $0.13 million,
respectively, for the same period of last year.
Overall gross margin was 24.4% for the first quarter of 2018,
compared to 22.0% for the same period of last year. On a segment
basis, gross margins for distribution network, corporate stores and
OEM were 22.9%, 39.0%, and 33.7%, respectively, for the first
quarter of 2018, compared to 19.9%, 55.4%, and 29.5%, respectively,
for the same period of last year. The increase in overall gross
margin was due to the R&D in our new products and our strategic
cost management. The new products have gained additional advantages
in pricing which helped increase our gross margin during the first
quarter.
Operating Expenses and Operating Income (Loss)
Distribution and selling expenses decreased by $0.14
million, or 15.8%, to $0.73 million for the first
quarter of 2018 from $0.87 million for the same period of
last year. The decrease in distribution and selling expenses was
mainly due to 30% less marketing and advertising expenses.
Administrative expenses increased by $1.24 million, or
106.9%, to $2.40 million for the first quarter of 2018
from $1.16 million for same period of last year. The
increase in administrative expenses was mainly due to the related
expenses for the board members and executives' stock
compensation.
Other operating expenses, including other income and other gains
and loss, totaled $30,354 for the first quarter of 2018,
compared to negative $1.42 million for the same period of
last year. Total operating expense decreased by $1.39 million,
or 98%, to $30,354 for the first quarter of 2018
from $1.35 million for the same period of last year. The
decrease was mainly due to the implementation of new accounting
policy on account receivable this year as we made certain
percentage of bad debt provision on some long age account
receivables as of March 31, 2017.
Total loss from operations was $2.01 million for the
first quarter of 2018, compared to operating loss of $2.23
million for the same period of last year. Operating loss
margin was 45.0% for the first quarter of 2018, compared to an
operating profit margin of 40.5% for the same period of last
year.
Income (Loss) before Income Taxes
Loss before income taxes was $2.04 million for the
first quarter of 2018, compared to income before taxes
of $2.26 million for the same period of last
year.
Income tax expense was $0.14 million for the first
quarter of 2018, compared to income tax expense of $0.52
million for the same period of last year.
About KBS Fashion Group Limited
Headquartered in Shishi, China, KBS Fashion Group Limited,
through its subsidiaries, is engaged in the business of designing,
manufacturing, selling and distributing its own casual menswear
brand, KBS, through a network of 39 KBS branded stores (as
of March 31, 2018) and over a number of multi-brand stores. To
learn more about the Company, please visit its corporate website
at www.kbsfashion.com.
Safe Harbor Statement
This press release may contain certain "forward-looking
statements" relating to the business of KBS Fashion Group Limited,
and its subsidiary companies. All statements, other than statements
of historical fact included herein, are "forward-looking
statements" in nature within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements,
often identified by the use of forward-looking terminology such as
"believes," "expects" or similar expressions, involve known and
unknown risks and uncertainties. Although the Company believes that
the expectations reflected in these forward-looking statements are
reasonable, they do involve assumptions, risks and uncertainties,
and these expectations may prove to be incorrect. Investors should
not place undue reliance on these forward-looking statements, which
speak only as of the date of this press release. The Company's
actual results could differ materially from those anticipated in
these forward-looking statements as a result of a variety of
factors, including those discussed in the Company's reports that
are filed with the Securities and Exchange Commission and available
on its website (http://www.sec.gov). All forward-looking statements
attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by these factors. Other than
as required under the securities laws, the Company does not assume
a duty to update these forward-looking statements.
For further information, please contact:
Lisa Tu
Chief Financial Officer
T: +86-158-5972-2469
E: lingsantu@hotmail.com
KBS Fashion
Group Limited
|
UNAUDITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(LOSS)
|
(Stated in US
dollars)
|
|
|
|
|
|
|
|
Three
months ended March 31
|
|
|
2018
|
|
2017
|
|
|
USD
|
|
USD
|
|
|
|
|
|
Revenue
|
|
4,464,161
|
|
5,509,752
|
Cost of
sales
|
|
(3,376,037)
|
|
(4,296,826)
|
Gross
profit
|
|
1,088,125
|
|
1,212,926
|
GP ratio
|
|
24.2%
|
|
22%
|
|
|
|
|
|
Other
income
|
|
30,144
|
|
42,302
|
Other gains and
losses
|
|
209
|
|
(1,462,007)
|
Distribution and
selling expenses
|
|
(729,349)
|
|
(866,157)
|
Administrative
expenses
|
|
(2,399,251)
|
|
(1,159,571)
|
Operating
profit
|
|
(2,010,121)
|
|
(2,232,506)
|
|
|
|
|
|
Finance
costs
|
|
(25,507)
|
|
(23,981)
|
Change in fair value
of warrant liabilities
|
|
-
|
|
-
|
Profit before
tax
|
|
(2,035,628)
|
|
(2,256,488)
|
|
|
|
|
|
Income tax
expense
|
|
137,313
|
|
522,902
|
Profit for the
year
|
|
(1,898,315)
|
|
(1,733,586)
|
|
|
|
|
|
Other comprehensive
income
|
|
|
|
|
-Currency translation
differences
|
|
(10,189,384)
|
|
(782,270)
|
Total
comprehensive income
|
|
(12,087,699)
|
|
(2,515,855)
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
Owner of the
Company
|
|
(12,087,699)
|
|
(2,515,855)
|
Minority
interests
|
|
-
|
|
-
|
|
|
|
|
|
Outstanding
shares
|
|
2,141,466
|
|
1,774,435
|
|
|
|
|
|
Profit per share -
basic and diluted
|
|
(0.886)
|
|
(0.977)
|
|
|
|
|
|
NON-GAAP Profit
per share-basic and diluted
|
|
(0.886)
|
|
(0.977)
|
KBS Fashion Group
Limited
|
Unaudited
Consolidated Statements of Financial Position
|
For the Period
ended March 31, 2018 (Stated in US dollars)
|
|
|
|
March 31,
2018
|
|
December 31,
2017
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
25,221,323
|
|
23,903,501
|
Trade
receivables
|
|
11,682,060
|
|
24,370,838
|
Other receivables and
prepayments
|
|
649,398
|
|
457,427
|
Related parties
receivables
|
|
-
|
|
-
|
Inventories
|
|
3,530,383
|
|
4,865,305
|
Subsidies prepaid to
distributors
|
|
-
|
|
194,998
|
Prepayments and
premiums under operating leases
|
|
94,406
|
|
86,758
|
Land Use Rights and
Trademark
|
|
|
|
|
|
|
41,177,570
|
|
56,343,823
|
Total current
assets
|
|
|
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
Prepayments and
premiums under operating leases
|
|
2,646,152
|
|
2,486,499
|
Prepayment for
construction of new plant
|
|
-
|
|
-
|
Prepayment for
acquisition of land use right
|
|
-
|
|
-
|
Construction in
progress
|
|
-
|
|
-
|
Property, plant and
equipment
|
|
28,531,786
|
|
26,539,278
|
Prepaid lease
payments
|
|
670,204
|
|
624,813
|
Deferred tax
asset
|
|
10,451,327
|
|
5,427,581
|
Total non-current
assets
|
|
42,299,469
|
|
34,754,942
|
|
|
|
|
|
Total
assets
|
|
83,477,039
|
|
91,098,765
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Short-term
loans
|
|
1,669,821
|
|
1,521,894
|
Trade and other
payables
|
|
5,082,110
|
|
3,084,857
|
Related parties
payables
|
|
326,215
|
|
1,093,990
|
Income tax
payable
|
|
-
|
|
893,239
|
Total current
liabilities
|
|
7,078,146
|
|
7,696,639
|
|
|
|
|
|
Warrant
liabilities
|
|
-
|
|
-
|
|
|
|
|
|
Total
liabilities
|
|
7,078,146
|
|
7,696,639
|
|
|
|
|
|
Equity
|
|
|
|
|
share
capital
|
|
227
|
|
177
|
share
premium
|
|
8,000,561
|
|
6,056,241
|
Revaluation
reserve
|
|
184,272
|
|
184,272
|
Statutory Surplus
reserve
|
|
6,084,836
|
|
6,084,836
|
Retained
earnings
|
|
75,393,472
|
|
77,231,199
|
Foreign currency
translation reserve
|
|
(13,264,474)
|
|
(7,193,706)
|
Total
equity
|
|
76,398,893
|
|
83,402,126
|
|
|
|
|
|
Total liabilities
and equity
|
|
83,477,039
|
|
91,098,765
|
KBS Fashion Group
Limited
|
Unaudited
Consolidated Statements of Cash Flow
|
For the three
Months ended March 31, 2018 and 2017
|
USD
|
|
|
2018
|
|
2017
|
|
USD
|
|
USD
|
|
|
|
|
Profit before
tax
|
(1,898,315)
|
|
(1,733,586)
|
Adjustments
for:
|
|
|
|
Finance
costs
|
25,507
|
|
(23,981)
|
change in fair value
of warrant liabilities
|
-
|
|
-
|
Interest
income
|
(20,264)
|
|
(20,493)
|
Bad debt
allowance
|
-
|
|
(1,450,798)
|
Share based
compensation
|
(1,314,420)
|
|
-
|
Depreciation of
property, plant and equipment
|
400,538
|
|
366,873
|
Amortisation of
prepaid lease payments and trademark
|
3,818
|
|
3,506
|
Amortisation of
subsidies prepaid to distributors
|
-
|
|
196,679
|
Amortisation of
prepayments and premiums under operating leases
|
27,727
|
|
27,387
|
Provision (Reversal)
of inventory obsolescence
|
(14,428)
|
|
(3,812)
|
Provision (Reversal)
of impairment loss in prepayments
|
-
|
|
-
|
Loss (gain) on
disposal of property, plant and equipment
|
-
|
|
1,394
|
Deferred income
tax
|
-
|
|
-
|
Operating cash
flows before movements in working capital
|
(2,789,837)
|
|
(2,636,831)
|
(Increase) / Decrease
in trade and other receivables
|
(765,977)
|
|
688,961
|
(Increase) / Decrease
in prepayments and deferred expenses
|
1,307,245
|
|
4,935,961
|
(Increase) / Decrease
in related parties receivables
|
-
|
|
-
|
(Increase) / Decrease
in inventories
|
(1,631,454)
|
|
(2,404,775)
|
Increase / (Decrease)
in trade and other payables
|
(597,447)
|
|
(78,357)
|
Increase / (Decrease)
in income tax payable
|
-
|
|
(999,583)
|
Increase / (Decrease)
in related parties payables
|
0
|
|
-
|
Cash generated
from operations
|
(4,477,469)
|
|
(494,623)
|
DTA
|
(137,313)
|
|
(522,902)
|
Income taxes
paid
|
-
|
|
-
|
Net cash from
operating activities
|
(4,614,781)
|
|
(1,017,525)
|
Investing
activities
|
|
|
|
Interest
received
|
20,264
|
|
20,493
|
Prepayments and
premiums paid under operating leases
|
-
|
|
-
|
withdraw the
prepayments and premiums paid under operating leases
|
-
|
|
-
|
Subsidies prepaid to
distributors
|
-
|
|
-
|
Prepayment for
construction of new plant
|
-
|
|
-
|
Prepayment for
acquisition of land use right
|
-
|
|
-
|
Purchase of property,
plant and equipment and construction in process
|
(20,575)
|
|
(1,429)
|
CIP
movement
|
-
|
|
-
|
Intangible
movements
|
-
|
|
-
|
Prepayment on prepaid
lease payments
|
-
|
|
-
|
Proceeds on disposal
of property, plant and equipment
|
-
|
|
-
|
Net cash used in
investing activities
|
(312)
|
|
19,063
|
Financing
activities
|
|
|
|
Advances from related
parities
|
163,315
|
|
164,880
|
Interest
paid
|
(25,507)
|
|
23,981
|
New bank loans
raised
|
1,662,146
|
|
-
|
Reclass
surplus
|
(1,662,146)
|
|
-
|
Shares
issued
|
-
|
|
-
|
Net cash used in
financing activities
|
137,808
|
|
188,861
|
|
|
|
|
Net increase in
cash and cash equivalent
|
(4,477,285)
|
|
(809,600)
|
Effects of currency
translation
|
5,306,418
|
|
136,760
|
Cash and cash
equivalents at beginning of year
|
25,221,323
|
|
24,576,341
|
Cash and cash
equivalents at end of year
|
26,050,456
|
|
23,903,501
|
KBS Fashion Group
Limited
|
Reconciliation of
IFRS profit to non-GAAP profit
|
For the three
Months ended March 31, 2018 and 2017
|
(Stated in US
dollars)
|
|
|
|
three months ended
March 31
|
|
|
2018
|
|
2017
|
|
|
USD
|
|
|
|
USD
|
|
|
|
|
Unaudited
|
|
EPS
|
|
Unaudited
|
|
EPS
|
Profit for the
period
|
$
|
(1,898,315)
|
$
|
(0.886)
|
$
|
(1,733,586)
|
$
|
(0.977)
|
Change in fair value of warrants
|
|
0
|
|
|
|
0
|
|
|
Non-GAAP profit
for the period
|
$
|
(1,898,315)
|
$
|
(0.886)
|
$
|
(1,733,586)
|
$
|
(0.977)
|
|
|
|
|
|
|
|
|
|
No. of shares
outstanding
|
|
2,141,466
|
|
|
|
1,774,435
|
|
|
View original
content:http://www.prnewswire.com/news-releases/kbs-fashion-group-limited-announces-financial-results-for-the-first-quarter-of-2018-300662297.html
SOURCE KBS Fashion Group Limited