SHISHI, China, Dec. 31, 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 quarter ended September 30,
2018.
Third Quarter of 2018 Financial Highlights
- Net revenues decreased by 25.1% to $3.55 million for
the third quarter of 2018 from $4.74 million for the same
period of last year.
- Gross profit increased by 144.1% to $0.69 million for
the third quarter of 2018 from gross loss of $1.57 million for the same period of last
year. Gross margin was 19.5% for the third quarter of 2018,
compared to negative gross margin of 33.1% for the same period of
last year.
- Operating loss decreased by 86.0% to $0.77 million for the third quarter of 2018 from
operating loss of $5.52 million for
the same period of last year.
- GAAP net loss was $0.62 million, or $0.28 loss
per basic and diluted share, for the third quarter of 2018,
compared to net loss of $4.32 million, or $1.26 loss
per basic and diluted share, for the same period of last
year.
Mr. Keyan Yan, Chief Executive Officer of the Company
commented, "Similar to the second quarter, we continue to face a
challenging garment market. In the third quarter, we managed
to increase our OEM sales and have been working to increase
our sales through cross-broader e-Commerce channels. Given
the growing opportunities in
the OEM division, we are confident
in our ability to improve company profitability and focus on our
online sales which have greater growth potential. The management
team is committed to improving overall performance in the business
and increasing shareholders' long-term value."
Third quarter of 2018 Financial Results Analysis
Table 1
|
|
|
|
|
|
|
For the Three
Months Ended September 30,
|
($ millions,
except per share data)
|
2018
|
|
2017
|
|
%
Change
|
Revenues
|
3.55
|
|
4.74
|
|
-25.1%
|
Distribution network
|
2.77
|
|
3.29
|
|
-15.7%
|
Corporate stores
|
0.16
|
|
1.05
|
|
-84.3%
|
OEM
|
0.61
|
|
0.40
|
|
51.9%
|
Gross
profit
|
0.69
|
|
-1.57
|
|
-144.1%
|
Gross
margin
|
19.5%
|
|
-33.1%
|
|
-0.9 pp
|
Operating income
(loss)
|
-0.77
|
|
-5.52
|
|
-86.0%
|
Operating (loss)
margin
|
-21.7%
|
|
-116.4%
|
|
-77.1 pp
|
GAAP net income
(loss)
|
-0.62
|
|
-4.32
|
|
-85.7%
|
GAAP Earnings (loss)
per share
|
-0.28
|
|
-1.26
|
|
-78.1%
|
|
|
|
|
|
|
Revenues
Total revenues decreased by $1.19 million,
or 25.1%, to $3.55 million for the third quarter of 2018
from $4.74 million for the same period of last year. The
decrease was primarily due to the decreased sales from distribution
network and corporate stores divisions.
|
|
For the Three
Months Ended September 30,
|
|
|
2018
|
|
2017
|
($
millions)
|
|
Revenues
|
|
Gross
Profit
|
|
Gross
Margin
|
|
Revenues
|
|
Gross
Profit
|
|
Gross
Margin
|
Distribution
network
|
|
2.77
|
|
0.44
|
|
16.0%
|
|
3.29
|
|
0.36
|
|
11.1%
|
Corporate
stores
|
|
0.16
|
|
0.06
|
|
35.9%
|
|
1.05
|
|
-2.04
|
|
-195.0%
|
OEM
|
|
0.61
|
|
0.19
|
|
30.6%
|
|
0.40
|
|
0.10
|
|
25.4%
|
Total
|
|
3.55
|
|
0.69
|
|
19.5%
|
|
4.74
|
|
-1.57
|
|
-33.2%
|
Revenues from the Company's distribution
network decreased by $0.52 million, or 15.7%,
to $2.77 million for the third quarter of 2018
from $3.29 million for the same period of last year.
Distribution network contributed 78.1% of total revenues for the
third quarter of 2018, compared to 69.4% for the same period of
last year. The decrease in distribution network sales was due to
the termination of bad contracts with customers in the third quarter of last year.
Additionally, KBS continuously
liquidated its previous excess
inventory and limited orders based on the customers' demands.
The Company's distributor network consisted of 14 distributors
in 12 provinces during the third quarter of 2018, compared to the
same amount of distributors in 12 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 sold the products to multi-branded stores
and online stores. As of September
30, 2018, the
Company's distributors operated 38 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's
distributors operated 46 branded franchise stores as of
September 30, 2017.
The following table lists by region the number of retail stores
operated by distributors and sub-distributors as of September 30, 2018:
Location
|
|
As of September
30, 2018
|
Fujian
|
|
7
|
Guangdong
|
|
2
|
Guangxi
|
|
3
|
Jiangsu
|
|
4
|
Anhui
|
|
1
|
Zhejiang
|
|
2
|
Chongqing
|
|
4
|
Inner
Mongolia
|
|
1
|
Tianjin
|
|
3
|
Hebei
|
|
4
|
Heilongjiang
|
|
3
|
Sichuan
|
|
4
|
Total
|
|
38
|
Revenues from corporate stores sales decreased
by $0.88 million, or 84.3%, to $0.16 million for the
third quarter of 2018 from $1.05 million for the same
period of last year. Corporate stores accounted for 4.6% of total
revenues for the third quarter of 2018, compared to 22.1% for the
same period of last year. The decrease in corporate store sales was due to decreased sales
volume.
Revenues from OEM sales increased by $0.21
million, or 51.9% to $0.61 million for the third quarter
of 2018 from $0.40 million for the same period of last
year. OEM accounted for 17.3% of total revenues for the third
quarter of 2018, compared to 8.5% 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 increase in revenues
from OEM sales was primarily due to the additional orders increased from the
newly added client, Hangzhou Yiyuan
Apparel Co.
Cost of Sales and Gross Profit
Total cost of sales decreased by $3.45 million, 54.7%,
to $2.86 million for the third quarter of 2018
from $6.31 million for the same period of last
year.
Total gross profit increased by $2.26 million, or 144.1%,
to $0.69 million for the third quarter of 2018
from negative gross profit of $1.57 million for the same period of last
year. Gross profits for distribution network, corporate stores and
OEM were $0.44 million, $0.06 million, and $0.19
million, respectively, for the third quarter of 2018, compared
to $0.36 million, negative gross profit of $2.04 million, and $0.10 million,
respectively, for the same period of last year.
Overall gross margin was 19.5% for the third quarter of 2018,
compared to negative gross margin of 33.2% for the same period of
last year. On a segment basis, gross margins for distribution
network, corporate stores and OEM were 16.0%, 35.9%, and 30.6%,
respectively, for the third quarter of 2018, compared to 11.1%,
-195.0%, and 25.4%, respectively, for the same period of last year.
The significant increase in gross margin for distribution
network is due to the launch of newly developed products and price
advantages of the
Company's new products. The increase in the price has
helped offset the decreased volume in sales. Additionally, the VAT
decreased from 17% to 16% which contributed to an improved growth
margin. The increase in overall
gross margin was due to the Company buying back inventory from the
distributors and selling them at a discount last year, therefore,
when the normal prices were resumed this year, the gross margin
returned to a normal range.
Operating Expenses and Operating Income (Loss)
Distribution and selling expenses decreased by $0.35
million, or 36.1%, to $0.62 million for the third
quarter of 2018 from $0.97 million for the same period of
last year. The decrease in distribution and selling expenses was
mainly due to decreased marketing and advertising expenses.
Administrative expenses decreased by $0.67 million, or
43.9%, to $0.86 million for the third quarter of 2018
from $1.54 million for same period of last year. The
decrease in administrative expenses was mainly due to the decreased
expenses for external designing service and client
entertainment.
Total loss from operations was $0.77 million for the
third quarter of 2018, compared to operating loss of $5.52
million for the same period of last year. Operating loss
margin was 21.7% for the third quarter of 2018, compared to
operating loss margin of 116.4% for the same period of last
year.
Income (Loss) before Income Taxes
Loss before income taxes was $0.80 million for the
third quarter of 2018, compared to loss before taxes of $5.54
million for the same period of last year.
Income tax expense was $0.18 million for the third
quarter of 2018, compared to income tax expense of $1.22
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 38
KBS branded stores (as of September 30, 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 periodic
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
- Tables Below –
KBS Fashion Group
Limited
UNAUDITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Stated in US
Dollars)
|
|
|
2018/09/30
|
|
2017/09/30
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
20,219,652
|
|
21,262,243
|
Trade and other
receivables
|
12,695,833
|
|
16,868,533
|
Other receivables and
prepayments
|
454,126
|
|
448,978
|
Related parties
receivables
|
-
|
|
174,162
|
Inventories
|
3,369,305
|
|
8,476,558
|
Subsidies prepaid to
distributors
|
-
|
|
-
|
Prepayments and
premiums under operating leases
|
540,967
|
|
85,577
|
Prepaid lease
payments
|
|
|
|
Total current
assets
|
37,279,883
|
|
47,316,051
|
|
|
|
|
Non-current
assets
|
|
|
|
Prepayments and
premiums under operating leases
|
2,054,424
|
|
2,555,500
|
Prepayment for
construction of new plant
|
-
|
|
-
|
Prepayment for
acquisition of land use right
|
-
|
|
-
|
Construction in
progress
|
-
|
|
-
|
Property, plant and
equipment
|
25,346,271
|
|
27,776,177
|
Prepaid lease
payments
|
605,605
|
|
642,249
|
Deferred tax
asset
|
9,847,735
|
|
7,626,294
|
Total non-current
assets
|
37,854,036
|
|
38,600,219
|
|
|
|
|
Total
assets
|
75,133,919
|
|
85,916,270
|
|
|
|
|
Current
liabilities
|
|
|
|
Short-term
loans
|
1,090,243
|
|
1,582,064
|
Trade and other
payables
|
4,913,871
|
|
4,922,507
|
Related parties
payables
|
491,885
|
|
5,759,740
|
Income tax
payable
|
-
|
|
(388,038)
|
Total current
liabilities
|
6,495,999
|
|
11,876,273
|
|
|
|
|
Warrant
liabilities
|
-
|
|
|
|
|
|
|
Total
liabilities
|
6,495,999
|
|
7,282,509
|
|
|
|
|
Equity
|
|
|
|
Common
stock
|
227
|
|
2,867
|
Additional paid-in
capital
|
8,000,561
|
|
6,683,501
|
Capital
reserve
|
184,272
|
|
184,272
|
Surplus
reserve
|
6,084,836
|
|
6,084,836
|
Retained
earnings
|
61,168,114
|
|
69,887,114
|
Foreign currency
translation reserve
|
(6,800,088)
|
|
(8,802,592)
|
Total
equity
|
68,637,921
|
|
74,039,997
|
|
|
|
|
Total liabilities
and equity
|
75,133,920
|
|
85,916,271
|
KBS Fashion Group
Limited
UNAUDITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME(LOSS)
(Stated in US
Dollars)
|
|
|
|
|
|
|
|
Three months
ended September 30
|
|
|
|
2018
|
|
2017
|
|
|
|
USD
|
|
USD
|
|
|
|
|
|
|
Revenue
|
|
|
3,551,058
|
|
4,741,848
|
Cost of
sales
|
|
|
(2,859,205)
|
|
(6,311,858)
|
Gross
profit
|
|
|
691,853
|
|
(1,570,010)
|
GP ratio
|
|
|
19%
|
|
-33%
|
|
|
|
|
|
|
Other
income
|
|
|
33,686
|
|
14,584
|
Other gains and
losses
|
|
|
(17,421)
|
|
(1,457,367)
|
Distribution and
selling expenses
|
|
|
(619,185)
|
|
(969,300)
|
Administrative
expenses
|
|
|
(860,708)
|
|
(1,535,121)
|
Operating
profit
|
|
|
(771,775)
|
|
(5,517,214)
|
|
|
|
|
|
|
Finance
costs
|
|
|
(28,853)
|
|
(24,554)
|
Change in fair value
of warrant liabilities
|
|
|
-
|
|
-
|
Profit before
tax
|
|
|
(800,628)
|
|
(5,541,767)
|
|
|
|
|
|
|
Income tax
expense
|
|
|
183,496
|
|
1,224,400
|
Profit for the
year
|
|
|
(617,132)
|
|
(4,317,367)
|
|
|
|
|
|
|
Other comprehensive
income
|
|
|
|
|
|
-Currency translation
differences
|
|
|
(3,724,998)
|
|
(2,174,474)
|
Total
comprehensive income
|
|
|
(4,342,130)
|
|
(6,491,841)
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
Owner of the
Company
|
|
|
(4,342,130)
|
|
(6,491,841)
|
Minority
interests
|
|
|
-
|
|
-
|
|
|
|
|
|
|
Outstanding
shares
|
|
|
2,228,497
|
|
1,818,634
|
|
|
|
|
|
|
Profit per share -
basic and diluted
|
|
|
-0.2769
|
|
-1.2622
|
|
|
|
|
|
|
NON-GAAP Profit
per share-basic and diluted
|
|
|
-0.2769
|
|
-1.2622
|
|
|
|
|
|
|
KBS Fashion Group
Limited
UNAUDITED
CONSOLIDATED STATEMENT OF CASH FLOW
(Stated in US
Dollars)
|
|
|
|
|
|
2018
|
|
2017
|
Operating
activities
|
USD
|
|
USD
|
Profit before
tax
|
(617,123)
|
|
(4,317,367)
|
Adjustments
for:
|
|
|
-
|
Finance
costs
|
28,853
|
|
(24,554)
|
change in fair value
of warrant liabilities
|
-
|
|
0
|
Interest
income
|
(16,888)
|
|
(19,167)
|
Bad debt
allowance
|
|
|
(1,458,441)
|
Share based
compensation
|
|
|
629,950
|
Depreciation of
property, plant and equipment
|
369,799
|
|
383,048
|
Amortisation of
prepaid lease payments and trademark
|
3,526
|
|
3,623
|
Amortisation of
subsidies prepaid to distributors
|
-
|
|
-
|
Amortisation of
prepayments and premiums under operating leases
|
76,107
|
|
26,683
|
Provision (Reversal)
of inventory obsolescence
|
13,559
|
|
(16,030)
|
Loss (gain) on
disposal of property, plant and equipment
|
(1,338)
|
|
-
|
|
|
|
|
Operating cash
flows before movements in working capital
|
(2,858,633)
|
|
(4,792,255)
|
|
|
|
|
(Increase) / Decrease
in trade and other receivables
|
(1,359,254)
|
|
8,228,019
|
(Increase) / Decrease
in prepayments and deferred expenses
|
(185,546)
|
|
854,379
|
Subsidies prepaid to
distributors
|
-
|
|
-
|
(Increase) / Decrease
in related parties receivables
|
(613,971)
|
|
(4,866,433)
|
(Increase) / Decrease
in inventories
|
(130,327)
|
|
76,080
|
Increase / (Decrease)
in trade and other payables
|
-
|
|
(2,417)
|
Increase / (Decrease)
in related parties payables
|
(96,670)
|
|
5,837,288
|
Cash generated
from operations
|
(2,529,275)
|
|
5,334,662
|
Deferred income
tax
|
(183,493)
|
|
(1,224,400)
|
Income taxes
paid
|
-
|
|
28,197
|
Net cash from
operating activities
|
(2,712,768)
|
|
4,138,459
|
|
|
|
|
Investing
activities
|
|
|
|
Interest
received
|
42,538
|
|
19,167
|
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
|
(23)
|
|
(948,204)
|
Prepayment on prepaid
lease payments
|
-
|
|
-
|
Proceeds on disposal
of property, plant and equipment
|
-
|
|
-
|
Net cash used in
investing activities
|
21,523
|
|
(929,038)
|
|
|
|
|
Financing
activities
|
|
|
|
Advances from related
parities
|
(66,645)
|
|
-
|
Repayment to related
parties
|
-
|
|
-
|
Interest
paid
|
(28,853)
|
|
24,554
|
New bank loans
raised
|
-
|
|
-
|
Payment of bank
loans
|
(438,590)
|
|
-
|
Shares
issued
|
-
|
|
-
|
Net cash used in
financing activities
|
(534,088)
|
|
24,554
|
|
|
|
|
Net increase in
cash and cash equivalent
|
(3,204,340)
|
|
3,233,975
|
Effects of currency
translation
|
(699,118)
|
|
(5,303,989)
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
24,123,110
|
|
23,332,257
|
|
|
|
|
Cash and cash
equivalents at end of year
|
20,219,652
|
|
21,262,243
|
View original
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SOURCE KBS Fashion Group Limited