Fraspens, China’s third largest domestic outdoor brand, announced Monday its intention to raise funds and seek admission of its shares to trading on the AIM Market of the London Stock Exchange (“AIM”). 

Trading in the company’s shares is expected to commence on AIM in August 2014.  Daniel Stewart & Company Plc is the Nominated Adviser and Broker to the Group.


Based in Na'an City, Quanzhou, Fujian province in South East China, Fraspens (PRC), the Group's operating entity was established in 2007 as a designer of outdoor sports products.  Fraspens began designing its own products under its proprietary “Fraspens” brand, and outsourcing the manufacture of its products in 2007 and appointed its first distributors in 2008. 


The Group now designs and wholesales Fraspens branded outdoor clothing, footwear and related accessories in China.  A recent Euromonitor International Limited (“Euromonitor”) report ranked Fraspens as the 3rd largest local outdoor clothing brand by revenue in China in a market that grew by 28 percent in 2013.  Including international brands which operate in China, such as The North Face, Columbia and Jack Wolfskin, Euromonitor reported that Fraspens ranked as the 7th largest outdoor wear brand by revenue.


The Group currently wholesales its Fraspens branded products to 16 independent and exclusive regional distributors in China at two seasonal sales fairs held in spring and autumn annually giving the Company the benefit of visibility of sales.  Products are predominately made to order, therefore there is minimal exposure to unsold inventory.  The distributors then retail Fraspens' branded products to end consumers in China via 580 Fraspens branded retail outlets across 14 out of 23 provinces and 3 out of 4 municipalities in China.  Such retail outlets are managed and operated by the Group's distributors and sub-distributors.


The retail outlets are predominately concessions within department stores.  The Directors believe that the Group's existing business model enables it to leverage the retail sales network and geographical reach of its distributors and sub-distributors without having to allocate resources to operate and maintain its own retail sales network.  This in turn allows the Group to allocate more of its resources and focus on R&D and promoting the awareness and image of the Fraspens brand.


The Group outsources the manufacture of all of its Fraspens branded outdoor clothing, footwear and related accessories to various OEM manufacturers in local areas where there is a large concentration of textile businesses. This results in competitive pricing from OEMs and the Company avoids supply chain difficulties.  In relation to the production of outdoor wear, the Group maintains its margins by sourcing the raw materials (predominantly shell fabrics) for its products which it then supplies to the relevant OEM manufacturer.


For the year to 31 December 2013, the Group generated revenues of RMB 413 million ($66 mm), with a gross margin of 32 percent, EBITDA of RMB 98 million ($16 mm) and an EBITDA margin of 24 percent and net profit of RMB 70 million ($11 mm).


Fraspens branded products are targeted at the mass-market in China, particularly urban consumers aged between 18 and 45.  In 2013, the Group sold 3.8 million products from 434 product lines, with the majority of products sold consisting of outdoor clothing.  Other products sold consisted of footwear (33 percent) and outdoor accessories (2 percent).


Fraspens branded products typically fall into at least one of the following ranges: Fra-sweat garments (which absorb and wick away sweat), Fra-sun garments (which provide UV protection), Easy Fold, Organic, Waterproof and Breathable garments.  The Group's three main product areas are:


•     Outdoor Clothing: Fleece coats, quick dry garments, outdoor shirts, T-shirts, down jackets, padded outerwear, ski wear, and leisure clothing, body warmers, trousers, jeans, and thermal underwear;

•     Footwear: Climbing boots, hiking boots, waterproof shoes, sandals, casual and other outdoor leisure shoes; and

•     Related Accessories: Socks, hats, rucksacks, torches, camping knives, trenching tools, walking sticks, camping equipment, binoculars, water flasks and barbeque kits.


The rapid growth in the Chinese economy has led to a higher disposable income for many Chinese households.  According to research issued by Euromonitor, the outdoor wear market in China has been growing rapidly over the past few years.  Per capita expenditure on outdoor wear in China has increased by nearly four times over the past five years.  Consumers' changing lifestyles and increased purchasing power have contributed to this rapid growth.


The main outdoor wear brands have also been accelerating their expansion with aggressive marketing efforts.  The sector's growth rate in China in 2013 was 28.9 percent, compared to that of the overall apparel market which grew 8.5 percent.  Outdoor clothing accounted for retail sales in China of RMB11.1 billion in 2013, (RMB8.5 billion in 2012) whilst outdoor footwear reached RMB4.3billion (RMB3.4 billion in 2012).


The Euromonitor report also noted that China is expected to see its market size in outdoor wear grow steadily from RMB19.6 billion in 2014 to RMB48.5 billion by 2018, representing a compound annual growth rate of 25.4 percent.  The outdoor clothing and outdoor footwear markets are expected to continue to experience strong growth at a CAGR of 26.3 percent and 23.0 percent respectively for the forecast period driven by urbanisation which leads to more disposable income, especially for residents in lower tier cities.


The Chinese outdoor product market is highly concentrated with the top 10 outdoor wear brands contributing a combined share of 90.3 percent by retail sales value in 2013.  Fraspens enjoyed a market share of over 6.8 percent by the end of 2013.


The Group intends to implement a progressive dividend policy.  An interim dividend is expected to be announced with the results for the six months to 30 June 2014 and a final dividend is expected to be announced with the publication of the 2014 audited results.


“We are delighted to be announcing our intention to join the London AIM market,” said Fraspens CEO John Bautista.  “This fundraise will enable the Group to capitalise on the high growth Chinese outdoor wear market by exploiting demand in cities and rural areas of China which have not historically been the target market of international and larger domestic brands. Funds raised will contribute to sustained marketing and advertising campaigns to push the Group into unrepresented areas, grow the number of distributor outlets by developing the distributor network, as well as increasing R&D.”