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Is a French Connection turnaround in sight?

Is a French Connection turnaround in sight?

Are things finally turning around for fashion chain French Connection (FCCN)? If these full-year results are anything to go by, the answer is yes. Second-half profit of £4.2m reflected a £1m improvement year on year, pointed out analysts at Numis, although progress on the retail side was still counterbalanced by the wholesale and licensing divisions.

Like-for-like retail sales across the UK and Europe rose 4.4 per cent over the reported period, although the closure of nine stores in that time (including two in North America) dragged total retail revenue down 4.9 per cent. Wholesale revenue crashed by more than 9 per cent due to a poor sell-through performance in the first half, but trends here are improving thanks to the changed timing of certain deliveries to clients and better trading in the second half. Licence income also fell by £1m to £6.3m following the transition of the group's perfume licence to global group Interparfums, and the declared bankruptcy of a shoe licensee in the US.

Analysts at Numis expect the company to move back into profitability in FY2019, expecting initial pre-tax profit of £0.8m, giving EPS of 0.9p (from losses of £3.7m and 3.8p in FY2017).

FRENCH CONNECTION (FCCN)
ORD PRICE:37pMARKET VALUE:£36m
TOUCH:34-37p12-MONTH HIGH:52pLOW: 30p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:51pNET CASH:£13.5m

Year to 31 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2013197-10.5-10.7nil
2014189-6.1-6.4nil
2015179-1.6-1.6nil
2016164-3.5-3.4nil
2017153-5.3-5.8nil
% change-7---

Ex-div: na

Payment: na

IC VIEW:

Trading into the new financial year has continued to improve, prompting a positive reaction from the company's investors. But the lack of earnings makes valuing the shares difficult, so we'd want to see tangible evidence of progress before turning bullish here. Move to hold.

Last IC View: Sell, 41p, 20 Sep 2016

visible-status-Standard story-url-French Connection_FY results_15_3_17.xml

By Harriet Russell,
15 March 2017

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