Li & Fung Spins Off Global Brands Group as Separate Licensing Unit

Li & Fung Limited announced annual results for 2013 and also outlined its next three-year plan covering 2014 through 2016.

Dr. William K. Fung, chairman of Li & Fung Limited. described 2013 as a pivotal year. "We proved successful against uncertain external conditions, achieved strong growth, and finished the year by delivering on the promise to return to 2011 operating levels."

Overview of 2013 annual results
Core operating profit increased by 70 percent to $871million and net profit increased by 21 percent to $755 million. This solid performance was driven by the positive performance in the Distribution Network, following the turnaround of LF USA, as well as continued growth momentum in the Logistics Network. Moreover, the Trading Network achieved solid results and demonstrated the company's continued dominance and resilience in its core business.

Profit attributable to shareholders increased by 17 percent to $725 million. Basic earnings per share was 67.7 HK cents (equivalent to 8.68 US cents), an increase of 17 percent compared to 58.1 HK cents (equivalent to 7.45 US cents) in 2012.

The Board of Directors has proposed a final dividend of 34 HK cents (equivalent to 4.4 US cents) per share (2012: 16 HK cents – equivalent to 2.1 US cents).

Bruce Rockowitz, group president & CEO of Li & Fung Limited said, "Overall, 2013 was a year of substantive progress and created an even stronger foundation to support our position as a global leader in our industry for years to come. We created many positive changes at LF USA which have put that part of the business back on track and we drove improvement in the group's overall margins and profitability even while continuing to invest in select strategic areas."

Rockowitz added, "I am pleased with what we accomplished over the past three years. We firmly established our Business Networks, expanded product offerings to give our customers much more
choice and variety, and broadened our geographic focus largely to gain a strong foothold in Asia to capture the increasing Asia consumer spend. Today we help customers create as well as produce what they need, we manufacture it wherever they would like, and help them make purchases however it is easiest for them. We are set up to continue to play this role heading into our next three-year plan."

Overview of the three-year plan (2014 – 2016)
Li & Fung's new three-year plan is designed to solidify the group's position as a competitive and relevant industry leader able to deliver solid growth well into the future.

"Over the past three years we have navigated through an uncertain macroeconomic environment and changing global landscape," continued Rockowitz. "Important 'mega trends' have been emerging, such as a rapidly-changing retail environment which relies increasingly on multi-channel sourcing, the movement of production out of China to lower cost countries, and the need to manage risks associated with sourcing in less mature production markets. We are paying careful attention to all of this and believe we have an exciting three-year plan that will enable us drive growth for the Group in both the near- and long-term."

The new three-year plan is designed to accelerate organic growth across all areas of the business and leverage the Group's multi-channel sourcing platform across its Trading Network. In light of the focus on accelerating growth and providing multi-channel sourcing to customers, the company reaffirmed the
importance of the new Vendor Support Services unit (VSS) previously announced in January 2014. As part of its core sourcing platform, the VSS unit will seek to improve operational efficiencies in the Group's global vendor base enabling the company to better serve customers and strengthen their
global supply chain.

The company further announced the acquisition of China Container Line (CCL), one of the largest sea freight forwarding companies in China. This major addition will enable LF Logistics to further expand its freight forwarding capabilities globally and accelerate its strong growth momentum by providing end-to-end logistics services to customers.

"This is an important development for our logistics business," noted Rockowitz. "Along with our very strong Asian in-country logistics business, the acquisition of CCL puts LF Logistics in a leadership position in the freight forwarding space."

The company also announced the reorganization of its Distribution Network, aligning its private label businesses which rely more on sourcing skills with the Trading Network, as well as the creation of the stand alone Global Brands Group, comprised of its brands and licensing businesses. Li & Fung sees a great opportunity to distinguish and further develop its global brands business with the reorganization.

The company also announced its decision to proceed with an application for a possible spin-off and separate listing of its Global Brands Group on the Hong Kong Stock Exchange.
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