CAMK.L Regulatory News (CAMK)

10 August 2015

Camkids Group plc

("Camkids" or the "Group")

Trading statement, distributor update and extension of payment terms

Camkids Group plc (AIM: CAMK), a leading Chinese designer, manufacturer and distributor of branded outdoor clothing, footwear and equipment for children, announces the following trading update.

The Board expects that the Group's turnover for the year ending 31 December 2015 will broadly be in line with market forecasts. The order book was down 45% for Autumn / Winter on a year-on-year basis, which is marginally more than the previously announced reduction on the year-on-year Spring / Summer order book.

The Board considers that the current difficult macro-economic conditions in China represent an opportunity for Camkids to review its arrangements with underperforming distributors. Following the conclusion of this review, the Board has decided to terminate the Group's relationship with three of its existing distributors. These distributors represented approximately 17.5% of the Group's revenues in 2014 and this figure is expected to be no more than 14.5% of revenues in the first half of 2015.

The termination arrangements, which are subject to ongoing negotiation, are expected to include a requirement that the Group purchases back the inventory held by the distributors, for an amount totalling approximately RMB285 million. Furthermore, the Board anticipates that the Group will be required to make contractual compensation payments to the outgoing distributors in relation to their stores, totalling approximately RMB70 million.

Camkids has already identified two new replacement distributors to cover the entirety of the territories previously covered by the outgoing distributors. The Board anticipates that the majority of the repurchased inventory will be resold to the new distributors but likely at a substantially reduced price. As a result of these exceptional costs, the Board expects that the Group will report a meaningful net loss after exceptional items in its 2015 results. The Group's cash reserves will be substantially reduced by virtue of the sums being paid to the distributors. Notwithstanding this, the Board believes that replacing the outgoing distributors is necessary and acquiring all of their remaining Camkids inventory will ensure that this is not sold in such a way as to damage the Camkids brand.

The Board continues to review the Group's cost base and strategy and looks forward to the benefits of its enhanced distributor network. None of the Group's distributors, including the outgoing distributors and the new distributors, are connected to any director or substantial shareholder of Camkids or any of their family members.

The Group also intends to repurchase approximately RMB80 million of inventory from its remaining distributors. In keeping with its social responsibility practice in previous years, this inventory will be donated to children in poorer areas of China. The Board also sees this as an important exercise in promoting the Camkids brand throughout China, as well as in preventing discounted sales of its products. In addition, on account of the continuing difficult trading conditions in China, the Group has agreed with its distributors to temporarily extend payment terms from 120 days to 180 days until the end of 2015.

Camkids' Chairman, Zhang Congming, commented: "Trading conditions remain difficult in China and we anticipate the trend of decreasing order books continuing into 2016. However, we are seeking to use these conditions to our advantage in replacing underperforming distributors at a lower cost than we would otherwise have been able to had trading conditions been better.

"Excluding the exceptional costs of replacing certain distributors and repurchasing unsold inventory, we anticipate that Camkids will achieve a small operating profit for the year ending 31 December 2015, which, although behind market forecasts, we consider to be encouraging given the current macro-economic climate."

-Ends-

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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 1,336 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.