French Connection (FCCN) demonstrated solid progress with its turnaround strategy at the half-year stage after reporting a much reduced pre-tax loss. Moreover - and following two years of self-help measures - finance director Adam Castleton told us that the retailer was now tentatively eyeing growth opportunities. He added that the group was "investing carefully", including through "selective" store openings.
But French Connection continued to cut costs and close unprofitable stores in the first half. The closures largely explain the decline in group revenue, but they also improved profitability. Indeed, the retail loss fell by £1m to £7.5m, thanks to like-for-like sales growth of 6 per cent in the UK and European business, which also delivered a 200 basis point gross margin improvement. That offset a weaker performance in North America, where heavy discounting pushed profits down by £0.2m to £0.9m.
The wholesale order book for Winter 2014 is running ahead of last year, too, although the second half faces tougher comparatives and includes the all-important Christmas trading period. Still, French Connection should be on track to breakeven in the year to the end of January 2016.
For the full-year, however, broker Numis Securities expects a pre-tax loss of £1.6m and a loss per share of 1.6p (from a 4.6p loss per share in 2014).
| FRENCH CONNECTION (FCCN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 60p | MARKET VALUE: | £58m | |
| TOUCH: | 59-63p | 12-MONTH HIGH: | 93p | LOW: 29p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 54p | NET CASH: | £19.4m | |
| Half-year to 31 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 89.9 | -6.1 | -6.4 | nil |
| 2014 | 84.0 | -3.9 | -4.0 | nil |
| % change | -7 | - | - | - |
Ex-div: na Payment: na | ||||
