Samarkand Group plc : Market Update

20th February 2023

Samarkand Group plc

("Samarkand", the "Company" or together with its subsidiaries the "Group")

Market Update

Samarkand Group plc (AQSE:SMK), the cross-border eCommerce technology, services and consumer brand group, this morning provides a trading update based on recent trading conditions and the near-term outlook in its key market, China.

In December 2022 the zero-COVID policy that had been in effect since the start of the pandemic was reversed. The lifting of many of the restrictions that had been in place, resulted in a rapid spread of COVID through the population. This wave of infection caused disruption in late December, which lasted for several weeks. Since the Chinese New Year in late January, these impacts have significantly abated and early signs of returning consumer confidence are encouraging.

During the pandemic Chinese households accumulated savings which had resulted in a 42% increase in family bank balances since the start of 2020. This increase amounts to US$ 4.8 trillion, a sum which is larger than the Gross Domestic Product of the United Kingdom. [1]

The Company assesses that the combination of this high level of savings, the lifting of restrictions, and pent-up demand, point to a more positive outlook for the Chinese eCommerce market in the coming year. While the external environment appears to be improving, the Company notes that the situation on the ground remains hard to predict as China emerges from a period of extended lockdowns.

eCommerce Acceleration

This area of the business, where we operate as the China market development partner for prestigious international brands, has been the most impacted by the disruption in China. With COVID restrictions being removed, the mid-term outlook has strongly improved for this part of the business. Most of our existing partner brands are planning for strong China growth in the coming year and we have added several new premium beauty brands to our platform.

Owned brands

The Company’s owned brands continue to trade well in the months since the interim update. Napiers was launched into the Chinese market with the first eCommerce livestream taking place from the historic Edinburgh apothecary store in December on the Chinese platform Douyin. The 4-hour event exceeded our expectations, generating a material level of sales of Napiers skincare products. The brand has also secured prominent listings in premium Chinese retailer SKP as part of our plan to leverage our cross-border eCommerce infrastructure to introduce the brand in the China market. 

Our premium fertility brand Zita West continues to attract customers in line with expectations and is also benefiting from growth generated by our China market eCommerce capabilities. Probio7 has returned to growth in its domestic market and has been able to protect gross margins by effectively managing cost inflation.

Cross-border technology solutions

As noted in our December interims the adoption of our cross-border DTC Checkout solution is progressing at a slower pace than expected. This has been driven in part by the uncertainty around China over the last 18 months and longer sales cycles than anticipated. We continue to seek efficiencies in this specific solution while maintaining investment in our underlying Nomad technology platform.

Path to profitability

Further to our interim update in December, the key trading period of November resulted in a profitable performance for the group at a net profit level and we continue to make progress towards reaching our key objective of becoming profitable in the coming financial year through improving gross margin and a reduction in variable costs. With six weeks remaining of the current financial year the company expects results to be in line with expectations.

David Hampstead, Chief Executive Officer of Samarkand Group, commented “The past 18 months have been difficult for us and many businesses in our industry. That said, with the reversal of China’s zero COVID policy and its rapid re-opening, we are looking forward to a much-improved trading environment this year. We retain unwavering confidence in the value of our offering and we are well-positioned capitalise on the strong market opportunity ahead, having already been encouraged by the positive signals we are already seeing just a few weeks after the policy changes.”

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Notes to Editors

Samarkand is a cross-border eCommerce technology and retail group focusing on connecting International Brands with China, the world's largest eCommerce market. The Group has developed a proprietary software platform, the Nomad platform, which is integrated across all necessary touchpoints required for eCommerce in China including eCommerce platforms, payments, logistics, social media and customs. The Nomad platform is the foundation on which the Group's Nomad technology and service solutions are built. The core products include Nomad Checkout, Nomad Storefront and Nomad Distribution. 

Founded in 2016, Samarkand is headquartered in London, UK with offices in Shanghai.

For further information please visit https://www.samarkand.global/  

[1] https://global.matthewsasia.com/insights/sinology/2022/the-end-of-zero-covid-and-the-start-of-chinas-economic-recovery/