House of Fraser’s parent group swung to a near £44m loss last year ahead of a deal to sell a 51% stake to the Chinese owner of Hamleys for £140m.
Documents filed at the Hong Kong stock exchange on Thursday by C.banner reveal that House of Fraser Group, which includes the department store’s two Chinese outlets, slumped from a £1.5m pretax profit in 2016 to a £43.9m loss last year.
The figure includes startup costs for the launch of stores in Nanjing and Xuzhou, and fees paid to the UK business for use of the House of Fraser name overseas. Separate annual accounts for House of Fraser’s UK business are expected to be released soon.
But the information filed by C.banner, which owns the Sundance and MIO footwear brands in China as well as Hamleys, also revealed that House of Fraser’s sales slid 6.3% to £787.8m amid a tough market in the UK.
C.banner told investors it agreed to buy a 51% stake in House of Fraser to “enhance the company’s presence in the retail market in [China] as well as to facilitate the company to lay a good foundation for a new brand and retail roadmap overseas”.
It said the deal would deliver cost savings and benefits by bringing together C.banner’s footwear business, Hamleys and House of Fraser. It plans to form a board of experts from each business to assess how they can work together.
The acquisition is structured via the buyout of a 34% stake from the current owner Nanjing Cenbest, part of China’s Sanpower conglomerate, for £71m and then the acquisition of £69m in new shares to be issued. The announcement reveals the full price paid by C.banner for the first time.
The deal relates to House of Fraser’s parent group, which owns an 89% stake in the UK business, with Sports Direct holding an 11% stake. Sports Direct has expressed concern about events, taking legal action to seek further information on the company’s business plan including a major restructuring.
The deal is subject to bondholder and shareholder agreement and the completion of a restructure in which about 20 stores are expected to close.