c.Banner said House of Fraser will be able to take advantage of its well-known brand to capture growth potential

c.Banner said House of Fraser will be able to take advantage of its well-known brand to capture growth potential

House of Fraser's new Chinese owner has reported the UK department store retailer booked a loss of GBP37m (US$50.2m) in 2017, in what it called a "challenging" year for the company.

In documents filed to the Hong Kong Stock Exchange (HKEX) this week, Chinese retail group C.banner said the loss for the year ended 31 December compared to a net profit of GBP5.5m in 2016.

Earnings before interest, tax, depreciation and amortisation (EBITDA) in the period totalled GBP24m, a 53% drop from GBP51.6m last year. Turnover, meanwhile, fell to GBP787.8m from GBP840.9m.

The figures are said to include start-up costs of two House of Fraser stores in China and fees paid to the UK business for use of the House of Fraser name overseas.

"The Brexit referendum and the UK's resultant decision to leave the European Union and the terrorist attacks in London, combined with a rapidly evolving retail market, produced a period of uncertainty and volatility that resulted in a difficult trading environment for the whole retail industry in the UK," C.Banner said. "Nevertheless, the directors believe that as a leading department store chain in UK, [House of Fraser] will be able to take advantage of its well-known brand to capture growth potential."

C.banner, which designs, manufacturers and sells branded women's footwear in China, and toys globally through its Hamleys chain, inked an agreement with House of Fraser owner Nanjing Cenbest, a Shanghai-listed department store chain controlled by Sanpower Group, last month.

Under the terms of the deal, C.Banner will become majority shareholder in House of Fraser, acquiring a 51% stake in the struggling UK department store retailer and will subscribe for new shares in the company, providing vital capital to accelerate the board's transformation plans. Nanjing Cenbest will remain a significant minority shareholder.

In the documents filed to HKEX, it said it entered into a Share Purchase Agreement with Nanjing Cenbest and House of Fraser on 2 May to purchase a 34% stake for GBP70.8m with an agreement to subscribe for an additional GBP69m worth.

It added upon completion of the retailer's restructuring plan, which will see it reduce its store portfolio, the business operation, profitability and cash flow of House of Fraser will further be improved, which in turn is expected to result in a more stable business model.