Soccer boot maker XPD’s profit fell by more than a third in 2017
Chinese soccer boot maker XPD has revealed its profit dropped 36 per cent last year in an annual report released just days after the ASX warned it to answer outstanding questions about governance issues or risk a de-listing by August 1.
The company’s (ASX:XPD) 2017 annual shareholders report highlighted the company’s consolidated group revenue was down 1 per cent to $115.4 million last year.
The business said exchange rate impact meant its gross profit margin had reduced, with XPD’s net profit after tax falling 36 per cent to $8.5 million in 2017, compared with $13.4 million in 2016.
XPD says demand for sports shoes in China will only grow with an ageing population, but also highlighted “market competition” had stretched its trading terms from 90 days towards 120 days.
“This resulted in the balance sheet showing a diminished cash balance of $32 million, down from FY2016’s $43.1 million,” management said.
The business is currently suspended from trading on the ASX and last traded at 3.3c in October.
Over the past six months, the company received multiple “please explain” letters from the ASX, including warnings the company needed to comply with the requirement to have two directors who ordinarily reside in Australia, and questions on compliance with substantial holding notice obligations.
The company’s major shareholder took the business to court in February after writing its investment down to zero.
In February, the ASX wrote to the company with a to-do list of governance actions to be completed by the end of July to avoid removal from the bourse.
These included tasks like appointing a communications representative and registering for online document lodgement.
The exchange wrote to XPD again in April to remind the business of these tasks.
On June 29 it warned the company it could be removed before August 1 if it did complete all of these tasks, including explaining delayed lodgements of change of interest in a substantial holder, and whether a delay in lodging its 2017 financial statements was caused “by an inability of XPD to transfer funds from China to Australia to pay its auditor for the audit work on its 2017 financial statements”.
The company answered these questions in a statement to the ASX on Friday, confirming: “The audit was not delayed as a result of inability to receive funds from China.”
Instead, the business said: “The audit fee estimate was then significantly higher than the previous year, with the Company’s CEO, Mr Jiameng Zhang, wishing to negotiate the fee before agreeing to commence the work.”
XPD confirmed last Thursday two of its directors, Tony Zhen Lu and Yapei Zhuang, had resigned their positions, “consistent with the company’s renewed commitment and focus on improved corporate governance and investor relations”.