Hong Kong-based global consumer goods exporter Li & Fung
Limited announced robust turnover and profit growth for the first half of 2005 on the back of a challenging market landscape. The strong results are in line with the groups Three-Year Plan 2005-2007 target.
Li & Fungs new acquisition strategy has generated solid results with a number of opportunities on the horizon. Outlook for the group for the remainder of the year is positive. For the six months ended June 30, 2005, the groups Core Operating Profit increased 21% while
profit attributable to shareholders reached HK$618 million ($79.3 million), an increase of 23% over the HK$502
million ($64.5 million) for the same period in 2004.
Group turnover increased by 19% to HK$23.5 billion ($3.0 billion), compared with HK$19.7 billion ($2.5 billion) for the
corresponding period last year. Earnings per share were 21.2 HK cents, representing a 23%
increase from 17.3 HK cents for the first half of 2004. The Board of Directors has resolved to
declare an interim dividend of 14.5 HK cents per share (2004 interim: 12 HK cents).
Mr William Fung, group managing director of Li & Fung Limited, said, “2005 is the first year of
the Groups Three-Year Plan 2005-2007. The Group is pleased to report a strong start to the plan
with an increase in turnover in line with the annual growth rate required to reach our turnover goal
in 2007.
“The strength and resilience of our business model has enabled the Group to continue to flourish
amidst a backdrop of uncertainties in the market with threats posted by rising interest and energy
costs. Uncertainties such as changes to the global trade regulatory environment for textile products
and the delinking of renminbi and US dollar proved to be positive for the Groups business
as more and more retailers and brands look to adopt a flexible approach to product sourcing
by using our services.”
The strong increase in turnover was also partially attributable to sales contributions from several
businesses that were acquired at the end of 2004 and the first half of 2005. Excluding these,
turnover still enjoyed a healthy growth of approximately 16%.
Since the end of 2004, the Group has launched shipments for two more brands under license: Royal
Velvet and Levis Red Tab. Despite some initial startup operational challenges, the business saw
generally good response with leading retailers.
Mr Bruce Rockowitz, president of Li & Fung (Trading) Limited, commented, “The removal of
textile quotas as of January 2005 has caused changes and created uncertainties in sourcing, such as
the anti-surge safeguard measures and embargoes imposed on Chinese exports by United States and
the European Union. These developments were fully anticipated by the Group and we have been
well prepared. The Groups diversified sourcing and comprehensive global sourcing network
proved invaluable to our customers in these situations.”
The Group has also just announced the acquisition of Briefly Stated, Inc. for a total
consideration of US$ 124 million. Briefly Stated is a licensed apparel company based in the United
States, focusing on sleepwear, underwear, T-shirt and jackets.
Mr Rockowitz said, “This acquisition will provide a strong boost to the Groups brand licensing
strategy. After becoming part of the Group, good growth prospects are anticipated for this business
through synergies in marketing and management of the Groups portfolio of licensed brands in the
United States.”
Li & Fung has also announced forming an important strategic alliance with Daymon Worldwide
Inc., the worlds largest private label food sales and marketing company. Through Daymons
leading position and strong relationship with major grocery and drugstore retail chains, the Group
will have access to Daymons more than 100 major retail customers.
Going forward, the strong momentum in the first half is expected to continue into the remainder of
2005.
Mr Fung said, “Our core sourcing business should continue to do well, especially amidst changes
and uncertainties in the trade arena. In particular, many retailers who had traditionally relied on
their in-house buying organizations are rethinking their strategy at this juncture, and we are well
positioned to gain new customers from this front. Growth will also be aided by our acquisition
strategy, as well as the development of the licensed brand business.
“With a strong start to the Three-Year Plan 2005-2007, and encouraging global trends, we are
committed to the Plan Target of reaching US$10 billion turnover by 2007,” Mr Fung concluded.
