Li & Fung has announced its annual results for 2019. The Company’s financial performance was affected by the multi-year trend of destocking and customer turnover as well as store closures and bankruptcies in the retail industry. As a result, it experienced a revenues and operating profit decrease in all business segments except for Logistics.
Total revenues decreased by 10.1% to $11,413m due to continued destocking by customers, store closures and customer bankruptcies, as well as the Company’s higher-risk and non-strategic customers. Operating profit decreased by 22.9% to $228m. This was due to reductions in turnover and margin pressure in the Supply Chain Solutions business. Total margin percentage improved 0.1 percentage points to 10.7% primarily as a result of contribution from the Logistics business.
Supply Chain Solutions recorded $8,834m, a 11.1% decrease year-on-year, and accounted for 79% of revenues in 2019. Operating profit were down by 38.4% year-on-year to $91m. The segment was affected by customer turnover, the exit of certain bankrupt customers, and customers’ destocking.
The Logistics business maintained profitability accounting for around 10% of the company’s total revenues for the year. Here, turnover increased 3.5% to $1,713m and operating profit increased by 1.0% to $94m. The growth of the division continued to be driven by growth momentum in China, e-logistics growth, and solid results in the new markets of Japan, Korea and India.
Onshore Wholesale business division’s revenues totalled $1,439m, down 13.6% year-on-year. Operating profit in the division were also down 21.7% year-on-year to $43m. The company confirmed that it was experience weak consumer sentiment and an unstable economic environment particularly in Europe.
Spencer Fung, Group CEO of Li & Fung, said: “In line with our three-year plan, we are transforming from a traditional agent into a digital supply chain service provider. We have a leadership position in 3D digital product development and are delivering value-added services to our customers.”
The Company said that it has also continued to manage the impact of the US-China trade war, increased complexity of global supply chains and, more recently, the COVID-19 pandemic, working around-the-clock with customers and suppliers to manage that.
Moving forward, Li & Fung intends to leverage its combined Supply Chain Solutions, Logistics and Onshore Wholesale businesses with its digital applications to provide differentiated end-to-end supply chain.
On 20 March 2020, Golden Lincoln Holdings I Limited and Li & Fung also issued a joint announcement in connection with the proposed transaction for the privatisation of the Company by way of a scheme of arrangement. The shareholders of the Offeror consist of the Fung family, the controlling shareholder of Li & Fung, and GLP Pte Limited, a global logistics warehouse operator and investor, headquartered in Singapore.
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