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 chain’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.
Maplin, Toys R Us and Jacques Vert have all collapsed in recent weeks, but a raft of retailers and restaurant groups are facing financial problems and are trying to close stores or negotiate rent cuts.
Cau: Owner the Gaucho steakhouse group is considering closing all 22 Cau restaurants, with loss of 750 jobs. This could be done through a a form of insolvency procedure known as company voluntary agreement (CVA).
House of Fraser: The department store chain is expected to close about 20 of its 60 outlets via a CVA. It has already tried to offload up to 30% of its space by downsizing stores. In May, it unveiled an annual loss of £44m.
New Look: The fashion chain obtained a CVA in March to cut rents and close 60 stores, with the loss of nearly 1,000 jobs. The rent cuts - on 363 stores - were between 15 and 55%.
Byron: The troubled upmarket burger chain is closing up to 20 of its 67 restaurants after a CVA was agreed in January. Rent cuts have been agreed at a number of other locations.
Carpetright: The retailer obtained a CVA in April to close 92 of its 409 UK stores in September with the loss of about 300 jobs.
Jamie’s Italian: The chain closed six locations in 2017 and this year agreed a CVA to close about a third of its 35 loss-making outlets.
Poundworld: The discount retailer is planning to close about 100 of its 355 stores, with the loss of about 1,500 jobs.
Prezzo: In March the Italian-themed restaurant group secured a CVA to close 94 of its 300 restaurants, with the loss of 500 jobs. The closures should be completed by the end of May. Rent cuts were agreed on a further 57 locations.
Debenhams: The under-pressure department store chain wants to get rid of space at 30 of its 165 stores by bringing in gyms and other services.
Mothercare: The chain plans to close a third of its 143 outlets. It is in talks with its banks to secure new funding and rumoured to be considering a CVA to fast-track the store closures.
Homebase: The DIY chain is in talks with potential buyers and also thought to be considering a CVA after a botched takeover by Australia’s Bunnings.
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 the Chinese conglomerate Sanpower, 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.
