XPD Soccer Gear Group Limited (ASX: XPD) is involved in the business of designing, development, manufacturing, marketing, and distribution of sportswear products. The group has a huge range of sportswear products, including soccer sports footwear, sports apparel and accessories, etc.
The company today, on 1st May 2019, released its quarterly cash flow report for the period ended 31 March 2019. The group reported a net cash outflow from operating activities of ~$4.78 million during the period. The cash and cash equivalents stood at ~$45.51 million for the reported period. The total estimated cash outflows for next quarter is reported at $17,628,000
Early April the company released its Annual report to the exchange. On the financial performance front, among the key highlights, the revenue for FY2018 decreased by 22.4% to $89.5 million when compared to FY2017 as per the annual report. Although the gross profit margins went down, it was still healthy at 25.4%. The net profit after income tax increased by 14.5% to $9.7 million for FY2018 as compared to $8.5 million in FY2017.
The company continues to view its branding position as targeting the third and fourth tier cities as opposed to first and second tier cities, where competition is more intense, and consumers tend to buy top international or domestic brands. The overall economic growth is high in the third and fourth tier cities as they experience moves towards becoming a more modern society; however, consequently, the company is also experiencing additional competition in these markets. Within these cities, XPD has several retail stores and resellers actively marketing and selling the XPD brand.
The company brand remains significant to ongoing marketing and sales efforts. The group is focused on marketing soccer-related products since 2005, although the company produces some other sports products. XPD continues to invest in marketing and promotion, using traditional media, including commercial TV, outdoor advertising, newspapers and magazines, as well as social media to advance branding growth.
The company continues to invest in school-based media, Internet, mobile apps, and other emerging new media marketing mechanisms as per the needs of the branding development. As part of the strategy, the company continues to target the younger generation through regular school promotional activities and support of junior soccer clubs.
China’s e-commerce market is the fastest growing and largest trading volume market in the world. XPD sells and promote its products and brands through an e-commerce platform without locality or time restrictions. It has online stores on the popular third-party e-commerce platforms, such as Tmall, JD and Paixie.
The e-commerce sector has also remained an area of competition with new brands being sold online at low prices. Tier 1 and Tier 2 international brands and Tier 1 domestic brand have strengthened their online sales aggressively, which had a negative impact on the company’s online sales with a noticeable reduction to the company’s e-commerce sales. The company is currently working with new e-commerce platforms to support sales into the future.
On the price-performance front, at market close on 1st May 2019, the stock of XPD Soccer Gear Group Limited was trading at $0.012, with a market capitalisation of $5.25 million. The stock has generated a negative YTD return of 47.83% and negative returns of 61.29%, 25.0% and 29.41% over the past six months, three months and one-month period, respectively. Its 52-week high price stands at $0.048 and a 52-week low price at $0.011, with an average trading volume of 539,368. The stock is trading at a PE multiple of 0.540x.
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