Supply chain leader Li & Fung Limited announced its 2017 financial results Thursday, and so far progress seems to be on track for its Three-Year Plan focused on speed, innovation and digitization.
The company reported positive results for the year ended Dec. 31, with improvements to its operating practices and productivity—like more efficient inventory management, increased sell-through and reduced markdowns—led to a 21.8% increase in core operating profit for its core services segment of supply chain solutions and logistics businesses.
“Our new Three-Year Plan had a strong start in its first year. And we are on track to meet our financial targets and strategic goals,” Spencer Fung, Group CEO of Li & Fung, said. “Customers are embracing our supply chain solutions and digital tools to help them improve the speed of their supply chain…At the same time, our logistics business, which completes our end-to-end supply chain solutions, continues to grow its COP [core operating profit] by 23.8%, driven by e-logistics, deeper penetration of our core customers supported by cross-selling with our supply chain solutions business and entry to new markets such as India and Vietnam.”
Core operating profit, on a like-for-like basis, (excluding the impact of divesting three of its product verticals and its Asia consumer and health care distribution business) core operating profit increased 13.3% to $356 million. Turnover stabilized as a result of Li & Fung’s enhanced service offerings, with a decrease of 4.6% to $13.5 billion, compared to an 8.3% decrease in 2016. Total margin as a percentage of turnover increased from 9.9% to 10.2%. Continuing steps to improve operations resulted in an operating cost decrease of 5.8%.
Li & Fung also kept a strong balance sheet and furthered the goal of maximizing flexibility in its capital structure in 2017. The strategic divestment of the businesses for the three product verticals (furniture, beauty and sweaters) will earn $1.1 billion to strengthen the capital structure, and shareholders will see a cash return through a special dividend. The company also disposed of its Asia consumer and health care distribution business in 2016.
“Our strategy to further simplify the business and focus on our core supply chain solutions business is in turn helping our customers to revamp their business model and counter disruptions in other markets,” William Fung, the company’s group chairman, said. “We are on track to deliver a fully integrated digital platform that connects our suppliers and customers with end-to-end visibility to enhance decision making.”