Fitch backs Lifestyle International China spinoff

Fitch Ratings says the proposed spin-off of Lifestyle International Holdings’ China business will improve the department store group’s financial profile.
However, it will have to rely on its Hong Kong stores, where sales are declining. As a result, Fitch does not see positive rating pressure in the next 12 to 18 months.
Lifestyle plans to spin off its China business by distributing shares to existing shareholders. The China business includes department stores in Shanghai, Suzhou and Dalian, and a commercial complex being built in Shanghai which will include the company’s second store in the city. The company also has an equity stake in Beiren Group, a retailer in Shijiazhuang, Hebei province.
Lifestyle’s China business accounted for just 20 per cent of revenue and 10 per cent of segment profit last year. At the same time, most of the planned capex for the group through to 2018 will be for the new Shanghai commercial complex.
After the deal, Lifestyle will comprise mainly Hong Kong assets, namely Sogo Causeway Bay and Sogo TST. The Hong Kong business is highly profitable (46 per cent EBITDA margin last year) and owns the Sogo Causeway Bay property.

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