A Parkson outlet in Beijing, China *** Local Caption *** The Parkson outlet in Beijing, China. Parkson group's China operation is an important contributor to Lion Diversified’s earnings. Parkson buys 2 stores in China’s Yunnan A Parkson outlet in Beijing 20061118 StarBiz Pg3 - Shazrin
KUALA LUMPUR: Parkson Holdings Bhd
’s retail subsidiary in China has lost its final appeal to revoke an arbitral award made in favour of its former landlord and must pay about 141 million yuan (RM93.2mil).
The department store operator told Bursa Malaysia on Monday that a Beijing court on Dec 25 rejected the application by Hong Kong-listed Parkson Retail Group Ltd (PRGL), a 53.07% owned subsidiary, to revoke the award issued by China International Economic and Trade Arbitration Commission in March.
“The ruling given by the court is final and no further appeal can be made by either the landlord or the tenant under China law,” it said.
The company’s board feels the ruling does not have a material impact on the earnings of the Parkson Holdings group for this financial year ending June 30, 2016 or the group’s net assets based on the audited consolidated statement of financial position as at June 30, 2015.
However, in a statement on April 1 regarding the profit warning issued by its Hong Kong subsidiary, Parkson Holdings said the earnings of the group for the financial year ended June 30, 2015, would be lower by about RM45mil or 4 sen per share.
To recap, PRGL, which was a tenant at 25,140 sq m in Metro City Shopping Plaza, Beijing, had been asked by its landlord in April 2012 and repeatedly afterwards to reduce the total area of the premises under their tenancy agreement or alternatively end the agreement in return for compensation from the landlord equalling to three months’ rental payments.
In December 2012, the landlord issued a notice of breach of contract to PRGL, asking it to vacate the premises within 30 days.
On March 25 this year, the China International Economic and Trade Arbitration Commission made an award in favour of the landlord, saying that the 20-year tenancy agreement had been terminated on Dec 6, 2012.
Among others, PRGL, the tenant, must pay the landlord 36.758 million yuan (RM24.36mil) in lump sum and a daily fee calculated at 3.46 yuan (RM2.29) per sq m for the period from Nov 1, 2014 up to the date on which the premises was surrendered to the landlord (March 26, 2015), totalling 12.613 million yuan (RM8.36mil).
In addition, it must pay rental of 89.923 million yuan (RM59.57mil) and an arbitration fee of 1.102 million yuan (RM729,890) to the landlord.
Based on the arbitral award, which represented about 57% of the PRGL group’s audited net profit for the year ended Dec 31, 2014, PRGL issued a profit warning that initially said its profit for the first quarter ended March 31, 2015, would “decline significantly” but was later revised to saying the group would record a loss for the quarter.
However, on April 22, PRGL submitted an application for revocation of the award to the Second Intermediate Court of Beijing, which led to the enforcement of the arbotral award being suspended.
Parkson Holdings shares closed unchanged at RM1.02 on Monday.
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