Li & Fung Limited to spin off logistics business
Li & Fung Limited is set to spin off its burgeoning logistics business in an IPO set for the first half of next year.
Citing “a challenging macroeconomic and retail environment which saw continued destocking, store closures and bankruptcies,” Li & Fung Limited reported an 18 per cent decline in net profit for the first six months of this year.
But despite the muted overall result, the company said its logistics business continued to report “stellar performance” with turnover up 10.9 per cent to US$543 million.
“Our logistics business has grown double digit every year since it became part of Li & Fung at the end of 2010,” said Spencer Fung, Li & Fung Limited group CEO. “It continues to benefit from the tailwind of rising middle-class consumption in Asia, e-logistics, geographic and vertical expansions. We have decided to seek a separate listing of our logistics business to unlock its value and accelerate its growth, while further enhancing our capital structure and financial flexibility.”
He confirmed Li & Fung Limited would retain a majority stake in the logistics business after the IPO.
Meanwhile, the company reported a profit of $124 million, the decline due largely to the decrease in turnover and total margin in the supply chain solutions business. Turnover decreased 9.6 per cent to $5.85 billion and total margin as a percentage of turnover was 10.5 per cent. Adjusted profit attributable to shareholders for continuing operations was down 19.2 per cent to $50 million on a like-for-like basis, taking into account that last year’s interim result was impacted by a one-off $30 million gain relating to a contingency.
China led the company’s growth, as the economy benefited from an upsurge of domestic consumption, especially via e-commerce. Operations across the rest of Asia advanced “aggressively” and new markets including Korea, Japan and India recorded “impressive results,” the company said.
“Our customers continued to face a constantly changing retail environment and that in turn affected our performance in the first half,” said Spencer Fung in a statement. “We have announced an aggressive plan to bring greater focus on customers, business development, production platform and digital initiatives. Our speed and digital modules have helped our customers achieve better operational results by increasing sell-through, reducing mark-downs and improving inventory levels, and we want to accelerate our digital strategy.”