New Business Agreement in North Asia

RNS Number : 2569R

Mulberry Group PLC

08 December 2016

 

Mulberry Group plc ("Mulberry" or "the Group")

New Business Agreement in North Asia

Mulberry Group plc, the English luxury brand, today announces the signing of an agreement with Challice Limited ("Challice") to form a new entity to operate the Group's business in China, Hong Kong and Taiwan.  Challice, which owns c. 56% of the Group's share capital, is under the same ultimate shareholder control as Mulberry's existing distributor in the region, Club 21.

·      The Group will own 60% of the share capital of the new company, Mulberry (Asia) Limited ("Mulberry Asia")

·      Mulberry Asia will develop the Group's offer to customers in the region, benefitting regional and global sales

·      Initial platform to consist of four stores, wholesale and omni-channel, including Chinese language mulberry.com site

·      Mulberry Asia is expected to be loss-making during its first two years before moving into profit

THIERRY ANDRETTA, CHIEF EXECUTIVE OFFICER, COMMENTED:

"We are pleased to reach a new business agreement to participate directly in the North Asia region.  The new company will progress the Group's international strategy of developing its retail and omni-channel model in a key luxury market where we see significant growth opportunity."

New Business Structure

The new business will combine the Group's digital and brand building capabilities with the partner's operational strength and enable greater flexibility and dynamism in merchandising.  Mulberry Asia will locate its head office in Hong Kong and will manage all retail, digital fulfillment and wholesale distribution for the region.

The Group will have a 60% share in the new business with the remaining 40% owned by Challice.   Mulberry Asia will be funded by a mix of equity and debt with the initial share capital totalling c. £3.2 million, of which the Group's share will amount to £2.0 million.  Mulberry Asia will be consolidated in the Group's financial statements.

The current distribution agreement with Club 21 will terminate.  Mulberry Asia will initially consist of four stores (two in China, one in Hong Kong and one in Taiwan) and wholesale, and will be supported by the Group's Chinese language mulberry.com site, with local FX and payment options.  A general manager has been appointed to build a local team.

Subject to a number of practical issues, including obtaining Chinese trading licenses, Mulberry Asia is expected to be operational from Spring 2017.   The Group anticipates incremental costs of c. £2.0 million during the current financial year, representing the re-purchase of stock by Mulberry Asia from the existing distributor, Club 21 and set up expenses.   Mulberry Asia is expected to be loss-making in its first two years before moving into profit in the medium term.  The losses of Mulberry Asia in the start-up period will be partly offset on consolidation as a result of the Group's manufacturing profit generated on the sale of goods to the new business.

The Group expects to directly invest c. £3.0 million in additional regional marketing support over the next two years to build brand awareness in the region and capitalise on international tourist flows to the UK and Europe.

FOR FURTHER DETAILS PLEASE CONTACT:

Bell Pottinger
Daniel de Belder / Anna Legge	020 3772 2559
Mulberry Investor Relations
Allegra Perry	020 7605 6795
GCA Altium
Sam Fuller / Tim Richardson	020 7484 4040
Barclays
Nicola Tennent	020 3134 9801

 

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