TIDMCAMK
Camkids Group PLC
11 June 2015
11 June 2015
Camkids Group plc
Investor Conference Call Transcript
Further to this morning's investor conference call, Camkids is
pleased to publish the transcript. For an audio recording of the
call please dial 0208 196 1998 and use the access pin 8979100#.
This will be available for 7 days.
"Good morning,
Welcome to the Camkids Investor Conference Call. On the call
today we have, Alex Price and Charles Donaldson from Allenby
Capital and from the Company we have the Chairman Zhang Congming,
Jacque-Franck Dossin and myself, Pei Eng, all of whom attended the
Company's annual general meeting, held earlier today at the
Company's head office in Jinjiang. Before we start the Board of
Camkids would like to thank everyone for the questions they
submitted. Executive Chairman Zhang Congming will be giving a brief
introduction in Mandarin and I, Pei Eng, will be translating into
English. Following this, I will be reading out your questions and
the Companies answers one at a time.
Zhang Congming: Gives his introduction to the participants in
Mandarin.
Pei Eng will then translate into English: "Currently the Chinese
market is undergoing a lot of reform and restructuring and this is
affecting market growth rates. Camkids is facing competition from
multi-national companies with more established resources and
networks. They are reducing their retail prices and we are
adjusting our pricing accordingly to the market conditions. We hope
that the shareholders can understand the tough situation we are in
and stand with us during this period. We are all working to
generate shareholder value in the future."
We will now move on to the Questions and Answers:
1. How and why or on whose advice were you able to ever reach
the point of view that issuance of new shares could be described as
a dividend?
The issuance of scrip dividends is a well-established corporate
practice as a method of issuing more shares to current shareholders
effectively free of charge. There are major benefits for companies
in doing so since it enables companies to conserve cash balances
whilst at the same time giving a benefit to shareholders which they
can sell down in the market should they wish.
As a major shareholder in Camkids, I am confident in the Company
and feel the current share price is fundamentally undervalued. A
Scrip dividend was therefore offered as an alternative for those
shareholders who wish to re-invest. The decision to offer a Scrip
dividend as an alternative for a cash dividend was a joint Board
decision.
2. Whose idea was it to pursue that policy?
It was a joint Board decision.
3. Did you initially believe investors would find that credible
and indicative of good financial intentions towards them in the
future? Why?
Yes because we believe the current share price is fundamentally
undervalued and this was borne out by a number, although by no
means all, of investors electing to receive the scrip dividend
rather than cash.
4. The Company talks about long term positive market conditions
and conflicting short term news regarding the weakness of orders
from your distributors. What is your EPS and cash forecast for this
year?
Currently the Chinese market is undergoing a lot of reform and
restructuring and this is affecting market growth rates. Whilst
this is something that is beyond the Company's control, we are
confident this market adjustment is a good opportunity for both
Camkids and its distributors to reconsolidate their resources and
meet the need of the consumers' requirements. I believe this will
be good for the Company's future growth.
As a company, we are not permitted to make forecasts on our
current numbers but you can access a copy of Allenby Capital's
latest research note on its website.
5. After a significant decline the shares collapsed after the
odd decision to stop paying dividends. You had committed to a
progressive payment to loyal shareholders then profoundly let them
down. What do you intend to do with the cash? How can shareholders
trust you again?
We understand shareholders frustrations in this regards. Camkids
is facing competition from multi-national companies with more
established resources and networks. In view of the current market
shift within China, and our need to adapt to these changes, we will
use the cash saved to invest in product design and marketing
activities to strengthen our brand awareness. In the long-term, we
believe this will be better for investors since the Camkids will be
able to take advantage of the current opportunities and preserve
and grow its market share.
Our current intention is to recommence the payment of a dividend
as and when market conditions allow. We ask that shareholders bear
with us in this regard.
6. Will the Chairman accept that his Board is powerless to act
in shareholders' interests? The recent resignation of a UK non-exec
related to the dividend issue confirms that the Chairman dominates
the decision making process.
As the Chairman of the Company, I need to balance a number of
potentially competing interests. In view of the challenging market
conditions, I had asked my senior management team to take a pay-cut
and the board considered that, against that backdrop, the payment
of a dividend was not appropriate in the circumstances.
I am pleased to say that at Camkids we have always had regular
board meeting where differing views are discussed. On occasion,
these discussions can be rather heated but ultimately we are all
working for the benefit of Camkids and its stakeholders, be they
shareholders, customers or employees.
7. Why did you spend GBP1m to float the company? How does the
Chairman expect to sell his shares at some stage in the future if
the company can't be relied upon?
The reason we listed the company on AIM was to attract
distributors with better networks, recruit high calibre employees,
raise the Company profile and strengthen the brand in China. I
believe that the Company will continue to develop high quality
products that will result in strong revenue and increased Company
growth. Whilst I have no current intention of selling my
shareholding, should I ever decided to do so in the future I am
confident there will be investors who are interested in purchasing
them.
8. Can the cash be transferred into a UK bank account? Why isn't
this transfer done to reassure investors?
Camkids is a Chinese company operating in China and it would not
make business sense to transfer the funds to a UK bank account. The
cash is in a Chinese bank account as the Company's operations are
in China. The Company has been able to meet all of its payment
obligations to creditors, staff and other payables.
9. In light of other problems with recently floated Chinese
companies will future non-execs be given cheque authorisation
powers?
We cannot comment on issues being faced by other Chinese
companies save to say that NED authorisation on payments is not
usual practice since to obtain this may affect the normal
day-to-day operation of the Company.
10. It is evident that Camkids is a genuine company. One only
needs to go to the Chinese equivalent of Google maps in China
(tencent maps - map.qq.com) and make a search for the Chinese
character version of the name Camkids, to see that there are many,
many Camkids stores within China. It is possible to see the actual
stores in many cases in the street view feature. However, as a
result of what has occurred with other Chinese listings on AIM, the
market seems to suspect that it may not be a genuine company. This
is despite the accessible evidence to the contrary. Please could
you explain what the company plans to do to promote its legitimacy
and counter this incorrect view?
Our stores are located in first tier shopping malls in Beijing
and Shanghai and are very easily verifiable. We are planning on
appointing bilingual NEDs who understand the Chinese market and we
consider that the Company's ability to communicate and tackle these
misconceptions will be strengthened.
We are also considering putting on a showcase of our products
during our next trip to London in order that investors may come and
view a selection of these as well as to meet our senior staff.
11. Further to the above question, to clarify on the Chinese
characters used in Tencent for the search.
When we launched our "Camkids" brand in 2008, we use (Camel teen
outdoor equipment). We are currently changing all our stores logo
to Camkids .
12. When will the Executive Directors be in Europe and make
themselves available to investors? This is much better than a
distant video call. Investors have mostly paid far higher prices
for their shares and it would be correct for Directors to visit
their shareholders and to explain what they are doing
At the moment the Executive Directors need to focus all their
attention on the operational side of the business in order to adapt
to the current market environment and create shareholder value.
That said, we do understand the importance of regular visits to
London in order to keep our investors up to date with what is
happening on the ground in China. As and when we have formulated
plans for our next trip to London we will make an announcement at
the appropriate time.
13. What efforts are the Board going to make to find a new set
of institutional shareholders and to find some buyers for the
shares?
Our broker ensures that we hold regular discussions with
potential institutional investors.
14. What is the Board going to do to address the gap in
valuation between the Companies cash balances and the share
price?
We understand that there is currently a disconnect in this
regard and are working on a number of potential solutions to this.
We will update the market at the appropriate time.
15. The share price indicates that the Board does not care about
the share price. How do you explain you care?
I can assure that nothing could be further from the truth. As
the largest shareholder in Camkids, no one is more affected by the
current share price. I would say, however, that share prices are
affected by a number of factors, some which we can control but also
a significant number that we cannot control.
Trading conditions within China are difficult at present but I
firmly believe that in time the market will see that Camkids is
different from the other AIM listed Chinese companies and the
current discount applied because of this will ease.
16. Does the Board understand the enormous damage to the
reputation of the Company from the decision to cut the dividend? It
saved a very small amount of money (compared to the cash balances)
and has caused the share price to halve. Does the Board not
understand the loss of face involved in cutting the dividend?
As discussed previously, I understand shareholder frustrations
in this regard. However, as Chairman it is my responsibility to
balance all of the competing interests for the good of Camkids. The
dividend may be a small amount of money but given the current
challenging market conditions it is important for the Company to
conserve cash to be able to generate shareholder value in the
future.
17. How can the Company prove to the Stock Market that the
Company's cash balances actually exist? Has the Board considered an
independent investigation of the Company's finances to reassure the
market that they do exist?
As part of our annual audit our auditors visited our bank
account in order to obtain direct confirmation on our cash balances
from the bank itself.
We are aware that we will never be able to convince some people
in relation to these cash balances but we do feel it is noteworthy
that all suppliers, advisers, employees and directors are regularly
paid on time which of course we couldn't do if we didn't have
sufficient cash.
At the same time, as announced last year, we also place
significant sums in medium-term deposit accounts in order to
attract a better rate of interest and the effect of this can be
seen in our financial statements.
18. When will the Company be able to announce Board appointments
that bring new, independent Directors able to represent minority
shareholders and to bring some balance to the ExecutiveBoard?
We are currently in discussions with a number of credible
candidates and will make announcements on these at the appropriate
time. We feel it is more beneficial for shareholders to secure the
services of effective NEDs rather than rush into appointing the
first candidates that come along. Camkids has always been extremely
proud of the strength of its NEDs.
19. Does the Board consider there is enough information in the
market for there to be a fair valuation of the Company? If yes, do
the Board consider the current valuation to bereasonable?
We make announcements to the market on a regular basis to keep
investors informed and we will of course continue to do so. As a
major shareholder I believe the shares are currently fundamentally
undervalued.
20. How are you any different, as a stock market investment,
from Naibu?
Aside from the fact that we are located in the same geographical
area as Naibu Global, there are few similarities between our two
businesses as we are focused on very different market segments.
Camkids is one of the market leaders in its market segment, has an
easily discoverable product range and store locations online. We
try to focus on the strengths of Camkids as an investment rather
than on any other companies' weaknesses.
21. The latest 'Final Results' refer to the potential for the
company to grow its business through greater internet trading,
namely ' 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'. I can see no
indication what resources are being allocated to this and the
timescale the company is working towards to get this fully
operational. What sales did the company achieve on Chinese Double
11 day last year?
Camkids does indeed believe that there is significant potential
for it to grow its business through greater internet trading and we
have increased our on-line advertisement on Tmall and JD.com.
However, this business line remains fairly small at present and we
are currently looking to recruit suitably qualified staff with
e-commerce experience. Last year our sales on Chinese Double 11 day
were approximately RMB2 million.
22. The latest 'Final Results' refer to the 'order book' for
this year's spring/summer collection being 38% down on last year.
Is the order book based on sales taken at Trade exhibitions only,
as I also notice that the results mention that sales are only about
5% down in January/February compared with 2014. What other form of
sales do the company make apart from 'order book' sales and how
important are these relative to the 'order book' sales and overall
sales?
The sales order is based on the spring/summer Sales Fair held in
Jinjiang. Every year Camkids holds two sales fairs, one for the
spring/summer collection and the other for the autumn/winter
collection. During the sales fair, which has been attended by our
nomad and broker, Allenby Capital, our distributors and their
franchisees place their sales orders. Our spring/summer collection
which is comprised of mostly spring products, has to be delivered
to our distributors before the spring festival that falls in
mid-February.
In addition to the order book from our distributors, e-commerce
and retail sales from our only flagship store are the other forms
of sales for the Company. Approximately 98% of our sales are from
our distributors.
23. I assume the company has no exports to speak of at present.
Are there any overseas markets the company is looking to
potentially target or is the intention to retain the brand focus
within China. I note that the website uses Chinese and western
models equally for advertising the product ranges on its
website.
For the next few years, we will be focusing on the China market
but if there are good overseas opportunities then we will consider
them.
24. Contrary to some investors, I appreciate the Board's
conservative approach to dividend payment during periods of trading
pressure as long as due note is taken of them when the company
outlook improves.
Thank you for expressing your view through this forum.
25. The contact e-mail address shown on the company website
Koy@mingweishoes.com is not valid and needs updating.
Thank you for your feedback, we have updated the contact e-mail
address.
That concludes the call for today. Once again the Board would
like to thank you for your time and we hope that we have answered
your questions fully and clearly."
For further details, please contact:
Camkids Group plc
Zhang Congming, Executive Chairman Tel: +44 (0) 20 7653
9850
Ng Pei Eng, Chief Finance Officer www.camkids-ir.com
Allenby Capital Limited
Alex Price / James Reeve / Nick Tel: +44 (0) 20 3328
Athanas 5656
a.price@allenbycapital.com www.allenbycapital.com
Media enquiries:
Newgate
Adam Lloyd / Robyn McConnachie/Andre Tel: +44 (0) 20 7653 9850
Hamlyn
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 1,336
franchised retail outlets, and continues to develop its e-commerce
business and currently has over 200 product lines on offer through
its existing online partners of Taobao and JD.com.
Camkids has received a number of prestigious awards. In
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".
For more information please visit www.camkids-ir.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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