11th Sep 2007 07:02
French Connection Group PLC11 September 2007 11th September 2007 FRENCH CONNECTION GROUP PLC Half-Year Statement for the six months ended 31 July 2007 French Connection Group PLC today announces its interim results for the sixmonths ended 31st July 2007. • Turnover £109.4 million (2006: £111.2 million) • Loss before tax £(2.5) million (2006: £(3.6) million) • Closing cash £37.5 million (2006: £41.5 million) • Loss per share (2.0)p (2006: (3.3)p) • Interim dividend 1.7p (2006: 1.7p) Stephen Marks, Chairman, commented on the results: "Our business has made progress over the last six months with an improvedfinancial performance and continued growth in French Connection ladies' wearsales despite the widely-reported difficult trading environment in the UK. Otherareas of our business continue to receive close attention in order to replicatethis success." "The first few weeks of the second half of the financial year have seencontinued challenging trading conditions but we are pleased to see acontinuation of the sales growth in the French Connection ladies' range.However, other areas continue to be softer than last year resulting in anoverall decrease in like-for-like sales so far. In Wholesale the Summer 2008season should mark a return to growth in sales and profit, however turnover inthe second half of this financial year will be below that reported last year." "The growth in sales of ladies' wear in our retail stores and the increase inwholesale orders for Summer 2008 confirm the strength of our brand and providesconfidence that our design-led strategy is appropriate. We will continue todrive our business based on these fundamentals, working steadily to buildmomentum on the progress so far and to create improvements in all areas of ourbusiness." Enquiries: Stephen Marks/Neil Williams/Roy Naismith French Connection +44(0)20 7036 7063Tom Buchanan/Deborah Spencer Brunswick +44(0)20 7404 5959 CHAIRMAN'S STATEMENT Dear shareholders, Our business has made progress over the last six months with an improvedfinancial performance and continued growth in French Connection ladies' wearsales despite the widely-reported difficult trading environment in the UK. In the six months to 31 July 2007, Group revenue was £109.4 million, just belowthe equivalent period last year. The Group gross margin was broadly similar at53.7% and with operating costs at £63.3 million (2006: £65.3 million) the lossbefore taxation improved by £1.1 million to £2.5 million (2006: loss of £3.6million). In our retail business it is encouraging that French Connection ladies' wear hasshown good growth. I am expecting that French Connection men's wear will alsoimprove following changes we have made in our men's wear team. Toast remainsprofitable, even though the Summer catalogue and ranges did not generate theenthusiastic responses seen in previous seasons. Our wholesale customers experienced good sales from their French Connectionproducts in the first half and their confidence is returning. This hastranslated into forward orders for Summer 2008 being ahead of last yearproviding more evidence that the changes we have implemented are resulting inpositive outcomes. Further, in North America our retail business has benefited from strong salesand the wholesale business is showing good underlying growth, partially makingup for the one-off own-label business reported for the first half of last year.Our businesses in Asia also continue to expand and improve. In licensing we have recently refreshed and re-launched our ladies' toiletriesproducts in the UK resulting in a good increase in volumes. The men's groomingproducts are to be similarly refreshed early next year. We have also finalisednew licences for shoes, watches and jewellery. Our other brands, Nicole Farhi, Great Plains and YMC, have performed reasonablywell through the Summer season. Looking to the second half we are pleased to see like-for-like sales growth inthe French Connection ladies' range in the first few weeks despite the continuedchallenging trading environment during August. However, men's wear and Toastcontinue to be softer than last year resulting in an overall decrease inlike-for-like sales so far. While the Summer 2008 season should mark a return togrowth in wholesale turnover, as previously reported, the Winter wholesaleorders for UK/Europe are a little below last year. Conversely, in North America,the forward orders for Autumn 2007 are well ahead of last year, reflecting goodsell-through in our customers' stores during the Spring season. The growth we have seen in the French Connection ladies' wear sales and increasein wholesale orders for Summer 2008 confirm the strength of our brand andprovides confidence that our design-led strategy is appropriate. We willcontinue to drive our business based on these fundamentals, working steadily tobuild momentum on the progress so far and to create improvements in all areas ofour business. Stephen MarksChairman and Chief Executive10 September 2007 BUSINESS REVIEW Segmental Analysis ----------------------- ----------------------- ------------------------- Six months UK/Europe North America Rest of Intra Total31 July 2007 World Group ----------------------- ----------------------- ------------------------- Whole- Whole- Whole- Retail sale Total Retail sale Total sale £m £m £m £m £m £m £m £m £m ------ ------ ------ ------ ------ ------ ------ ------ ------Revenue 53.1 27.1 80.2 16.0 6.4 22.4 6.8 109.4Gross profit 34.2 9.4 43.6 9.6 2.4 12.0 1.5 1.7 58.8Gross margin 64.4% 34.7% 54.4% 60.0% 37.5% 53.6% 22.1% 53.7%Tradingoverheads (36.5) (6.4) (42.9) (11.0) (1.5) (12.5) (0.6) (56.0) ------ ------ ------ ------ ------ ------ ------ ------ ------Operatingcontribution (2.3) 3.0 0.7 (1.4) 0.9 (0.5) 0.9 1.7 2.8 ------ ------ ------ ------Commonoverhead costs (2.7) (1.8) (4.5)Other income 2.0 1.0 (1.7) 1.3 ------ ------ ------ ------ ------Divisionaloperatingprofit/(loss) - (2.3) 1.9 - (0.4) ------ ------ ------ ------Groupmanagementoverheads (2.8) ------Operating lossbeforefinancingcosts (3.2)Net financingincome 0.8 ------Operating loss (2.4)Share oflosses ofJoint Ventures (0.1) ------Loss beforetaxation (2.5) ------ ----------------------- ----------------------- ------------------------- Six months UK/Europe North America Rest of Intra Total31 July 2006 World Group ----------------------- ----------------------- ------------------------- Whole- Whole- Whole- Retail sale Total Retail sale Total sale £m £m £m £m £m £m £m £m £m ------ ------ ------ ------ ------ ------ ------ ------ ------Revenue 52.4 29.8 82.2 16.7 8.3 25.0 4.0 111.2Gross profit 33.7 10.2 43.9 10.1 3.0 13.1 0.8 2.1 59.9Gross margin 64.3% 34.2% 53.4% 60.5% 36.1% 52.4% 20.0% 53.9%Tradingoverheads (36.2) (6.1) (42.3) (12.0) (1.9) (13.9) (0.7) (56.9) ------ ------ ------ ------ ------ ------ ------ ------ ------Operatingcontribution (2.5) 4.1 1.6 (1.9) 1.1 (0.8) 0.1 2.1 3.0 ------ ------ ------ ------Commonoverhead costs (3.7) (1.9) (5.6)Other income 2.5 1.1 (2.1) 1.5 ------ ------ ------ ------ ------Divisionaloperatingprofit/(loss) 0.4 (2.7) 1.2 - (1.1) ------ ------ ------ ------Group managementoverheads (2.8) ------Operating lossbeforefinancingcosts (3.9)Net financingincome 0.7 ------Operating loss (3.2)Share oflosses ofJoint Ventures (0.4) ------Loss beforetaxation (3.6) ------ Overview In the six months to 31 July 2007 the Group improved its reported pre-taxresults by £1.1 million despite the challenging conditions in the UK retailmarket, the impact of the previously reported decline in UK/Europe wholesaleorders and a disappointing sales season in men's wear and Toast. The evidence indicating that the changes we are making result in improvements inour core business has continued to build. This includes good growth in FrenchConnection ladies' wear sales, good growth in retail sales in North America andindications of a return to growth in our wholesale forward orders for next year. Although progress in the second half of the year is likely to be impacted by theon-going difficult trading conditions in the UK, we are aiming to build momentumbehind the successes seen in the first half and to ensure that all areas of thebusiness receive appropriate attention and development. Performance in the first six months of the financial year and implications forthe second half are discussed in more detail in the sections below. United Kingdom and Europe - Retail Retail revenue in UK/Europe was marginally ahead at £53.1 million (2006: £52.4million) including the impact of an increase of 6% in average space traded and asmall decline in like-for-like sales over the period. Given the good initial responses to our Summer ranges, we were confident ofreasonable growth in retail turnover at the outset of the season. In our FrenchConnection stores this was borne out with an increase in ladies' wear sales of6% on a like-for-like basis. However, men's wear was weaker, Toast had a poorseason in sales terms and generally business was impacted by the well-reporteddifficult trading conditions for the fashion sector particularly in the secondquarter. These elements combined to result in a 1.6% decline in like-for-likesales over the period. The growth in French Connection ladies' wear sales gives us confidence that ourstrategy of focusing on the design and quality of our products is the correctroute. As a further element of this strategy we have refreshed the men's wearteam and are aiming to develop the men's ranges to more closely match ourfashion credentials. At Toast the lessons learned from the Summer ranges have been used in a fullreview of the Autumn ranges and the styling of the catalogue. While changes havebeen implemented for Autumn, it is not expected that the volumes willimmediately recover as it will take time to regain the confidence of ourcustomers. Next year's Summer collection and catalogue is the focus of effortsto ensure that lost ground will be recovered as soon as possible. Despite theseissues, the Toast business remains profitable. During the period we opened an additional French Connection outlet store inBridgend, Wales and two new Toast stores in Bath and Islington, London. The gross margin for the period of 64.4% was broadly flat on last year,reflecting similar levels of discounting during the sale periods. Core marginsimproved as a result of the weakening Dollar, however these gains were offset bya higher allocation to the Retail channel of the fixed costs of design,production and warehousing following a decline in Wholesale volumes in theperiod. Trading overheads increased only marginally despite the additional space,leaving a net operating loss of £2.3 million, a small improvement over lastyear's loss of £2.5 million. Looking forward, we expect that the challenging trading conditions will continuethrough the second half. Early indications are that the French Connectionladies' wear ranges should show reasonable growth over last year, but across theportfolio the first six weeks have seen a decline in like-for-like sales of 5%on last year. United Kingdom and Europe - Wholesale As expected, Wholesale revenue fell to £27.1 million in the year (2006: £29.8million). Of this 9% decline, over 4% arose from Wholesale business beingtransferred into the Retail channel or to our Hong Kong office. The remainingdecline reflects the previously reported subdued forward orders for Summer andWinter 2007 offset by a small increase from in-season orders. The Summer 2008 forward orders, which are still in the process of finalisation,should mark a return to growth. Orders received so far are ahead of last year's.This reflects the success which our customers achieved with the Summer 2007ranges and their confidence in the new products for 2008. While the Summer 2008orders will support turnover in the second half, the growth will not offset thedeclines in the Winter 2007 forward orders and wholesale turnover in the secondhalf will be below the level reported last year. The gross margin has improved a little to 34.7% from 34.2% with improvementsarising from a weaker US Dollar. Overheads are slightly ahead of last year despite the reduction in turnover,reflecting the fixed nature of the cost base plus additional investment in ournewer, smaller brands. The net operating contribution from UK/Europe Wholesale was £3.0 million (2006:£4.1 million). UK/Europe division Together, the retail and wholesale businesses in UK/Europe generated anoperating contribution of £0.7 million (2006: £1.6 million). Common overheadcosts for the division were tightly controlled resulting in a saving of £1.0million to give a total of £2.7 million in the period. Other income in the UK/Europe division of £2.0 million (2006: £2.5 million)includes both licence receipts from external licensees and royalties charged toGroup companies which are purely internal. The licence income from externalsources amounted to £1.3 million (2006: £1.5 million). The net decline reflectsincreases in income from our Asia and Australia licences offset by declines fromsome of the product licences, most notably the toiletries as highlighted in ourAnnual Report. The ladies' range of toiletries has recently been re-launched andsales in the first few weeks have been significantly ahead of last year. Themen's grooming range will be similarly re-launched at the beginning of nextyear. In addition, we have finalised terms of a new shoe licence with KurtGeiger, a replacement licensee for watches and a new licence category,jewellery. The resulting operating result for the UK/Europe division was break-even for theperiod (2006: profit of £0.4 million). North America - Retail The North America retail business has had a good first half-year. On alike-for-like basis, retail sales increased by 8% in the period and, taking intoaccount one store closure, the total revenue increased by 5% in Dollar terms.Allowing for the 9% variation in exchange rates, the Sterling results show a 4%decline. Gross margin was 60.0% (2006: 60.5%) as a result of slightly higherpromotional mark-downs. The changes in retail management in our New York office have now settled downand focus is on improving sales densities in our stores and maintaining thegross margin. The new period has started in a similar vein to the first halfwith a good growth in sales. Overheads were broadly flat in Dollar terms and the net result improved by $0.7million to a loss of $2.7 million. In Sterling the trading result was a loss of£1.4 million (2006: loss of £1.9 million). North America - Wholesale As previously reported, the New York based wholesale business benefited from aone-off own-label supply arrangement during last year which has resulted in adecline in sales in this period. However some of the lost business has beenreplaced by branded sales which have seen a 5% increase in the period, limitingthe decline in turnover to 15% in Dollar terms. Conversely the gross margin hasimproved 1.4% to 37.5% due to the better margins on branded products. Further, the forward orders received so far for the Autumn season are well aheadof last year. There was a small decrease in overheads in Dollar terms, resulting in only asmall decrease in operating contribution, despite the decline in turnover. InSterling terms the operating contribution declined by only £0.2 million to £0.9million. North America division Together, the retail and wholesale operations in North America generated anoperating loss of £0.5 million (2006: loss of £0.8 million). Common overheadcosts were broadly flat resulting in an improved net divisional operating lossof £2.3 million (2006: loss of £2.7 million). Rest of the World Revenue in our business based in Hong Kong increased by £2.8 million to £6.8million (2006: £4.0 million) reflecting good increases in sales to our licenseesin Australia, Japan and China as each of those businesses expands. Additionally,the business now supplies to Middle-Eastern customers previously serviced fromthe UK accounting for £0.4 million of the increase. The gross margin generated by this business is affected by the mix of sales andwhile core margins were unchanged, the blended gross margin increased to 22.1%(2006: 20.0%). Overheads were broadly static but benefited in Sterling terms from the change inexchange rate. The business also earns commission income from Group companies on shipments fromHong Kong to the UK and North America. Total income from this channel was £1.0million (2006: £1.1 million). Net divisional operating profit was £1.9 million(2006: £1.2 million). Group Management The overheads associated with the central Group management amounted to £2.8million in the period, no change on last year, previous savings having beenmaintained and inflation absorbed. Operating profit and financing income The operating loss before finance costs for the period improved to £3.2 million(2006: loss of £3.9 million). Net financing income of £0.8 million (2006: £0.7 million) was generated in theperiod with average net funds over the year marginally lower than the previousyear and interest rates a little higher. Group operating loss in the period amounted to £2.4 million (2006: loss of £3.2million), an improvement of £0.8 million. Joint Ventures The Group's share of net losses generated by the joint ventures during theperiod was £0.1 million (2006: loss of £0.4 million) with all of the businessesreporting improved results. Both Hong Kong and China are profitable while Japanimproved its net result by 20%, albeit still a loss. In addition to the share of losses reported in the income statement, the jointventures generated over £0.5 million of licence income and gross margincombined. Pre-tax result The Group loss before tax in the six months to 31 July 2007 was £2.5 millioncompared to a loss of £3.6 million in the comparable period. The business has a strong seasonal fluctuation due to the level of sales in thepre-Christmas period and also the heavier weight and consequent higher price ofWinter clothing compared to Spring. In the financial year ended 31 January 2007the profit before tax in the second half of the financial year amounted to £7.6million compared to a loss of £3.6 million in the first half. Taxation The tax credit for the period of £0.6 million (2006: credit of £0.5 million) isbased on the expected full-year effective rates in each of the Group's taxjurisdictions. It is expected that the full year tax rate will be in the regionof 50%, however this is very sensitive to changes in levels of profit generatedin the different regions. Minority interest The minority interest of £nil (2006: £0.1 million) represents the net share ofresults attributable to the 25% ownerships held by local management in ourCanada business, Toast and YMC. Earnings and dividends Net loss for the period attributable to equity shareholders was £1.9 million(2006: loss of £3.2 million). Loss per share was 2.0 pence (2006: loss of 3.3pence per share). Working capital and net funds The business traditionally utilises cash in the first half of the year but thecash utilisation has reduced significantly this year to £11.5 million from £15.2million in the comparable period. The seasonal increase in stock over the six months to 31 July 2007 was at asimilar level to that seen in the first half of 2006 at £8.7 million. Otherchanges to working capital were only minor and along with cash generated fromtrading resulted in cash utilised by operations amounting to £7.0 million in theperiod (2006: £5.9 million). Further cash of £4.5 million was utilised by thepayment of tax, dividends and fixed asset investments offset by interest income. Closing net funds were £37.5 million (2006: £41.5 million). Dividend The interim dividend is 1.7 pence per share, the same as last year. The dividendis payable on 16 October 2007 to shareholders on the register at 21 September2007 (ex-dividend date 19 September 2007). Related party transactions There have been no additional related party transactions to those disclosed inthe Group's Annual Report & Accounts for the year ended 31 January 2007. French Connection Group PLCRegistered Number: 1410568, EnglandRegistered Office: 20-22 Bedford Row, London WC1R 4JS RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEARLYFINANCIAL REPORT We confirm that to the best of our knowledge: • the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; • the interim management report includes a fair review of the information required by: (a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indicationof important events that have occurred during the first six months of thefinancial year and their impact on the condensed set of financial statements;and a description of the principal risks and uncertainties for the remaining sixmonths of the year; and (b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related partytransactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position orperformance of the entity during that period; and any changes in the relatedparty transactions described in the last annual report that could do so. Stephen Marks Roy NaismithChairman and Chief Executive Finance Director10 September 2007 CONDENSED GROUP INCOME STATEMENT Six Six Year months months ended 31 July 31 July 31 Jan 2007 2006 2007 Note £m £m £m £m £m £m---------------------- ---- ----- ------- ------ ------- ----- ------Revenue 1 109.4 111.2 241.3 Cost of sales (50.6) (51.3) (113.6)---------------------- ---- ----- ------- ------ ------- ----- ------Gross profit 1 58.8 59.9 127.7 Operating expenses (63.3) (65.3) (128.0)Other operating income 1.3 1.5 3.6---------------------- ---- ----- ------- ------ ------- ----- ------Operating (loss)/ profit beforefinancing costs 1 (3.2) (3.9) 3.3 Finance income 1.0 0.9 1.8Finance expenses (0.2) (0.2) (0.5)Net financing costs 0.8 0.7 1.3---------------------- ---- ----- ------- ------ ------- ----- ------Operating (loss)/ profit (2.4) (3.2) 4.6 Share of loss of joint ventures (0.1) (0.4) (0.6)---------------------- ---- ----- ------- ------ ------- ----- ------(Loss)/profit before taxation (2.5) (3.6) 4.0 Income tax credit - UK 1.0 0.7 1.2Income tax expense - overseas (0.4) (0.2) (4.8)Total income tax credit/(expense) 0.6 0.5 (3.6)---------------------- ---- ----- ------- ------ ------- ----- ------Attributable to:Equity holders of the parent 2 (1.9) (3.2) 0.1Minority interest - 0.1 0.3---------------------- ---- ----- ------- ------ ------- ----- ------(Loss)/profit for the period (1.9) (3.1) 0.4---------------------- ---- ----- ------- ------ ------- ----- ------Basic (losses)/ earnings per share 2 (2.0)p (3.3)p 0.1p---------------------- ---- ----- ------- ------ ------- ----- ------Diluted (losses)/ earnings per share 2 (2.0)p (3.3)p 0.1p---------------------- ---- ----- ------- ------ ------- ----- ------ CONDENSED GROUP BALANCE SHEET 31 July 31 July 31 Jan 2007 2006 2007 Note £m £m £m------------------------------------ ------ -------- -------- --------AssetsNon-current assetsIntangible assets 14.1 13.0 14.1Property, plant and equipment 17.9 24.9 20.6Investments in joint ventures 3.4 2.8 3.1Deferred tax assets 2.1 6.2 2.1------------------------------------ ------ -------- -------- --------Total non-current assets 37.5 46.9 39.9------------------------------------ ------ -------- -------- --------Current assetsInventories 60.4 56.2 51.7Trade and other receivables 30.0 26.9 30.5Current tax receivable 0.9 - -Cash and cash equivalents 3 40.5 47.1 56.3------------------------------------ ------ -------- -------- --------Total current assets 131.8 130.2 138.5------------------------------------ ------ -------- -------- --------Total assets 169.3 177.1 178.4------------------------------------ ------ -------- -------- --------Non-current liabilitiesDeferred tax liabilities 0.9 1.4 0.9------------------------------------ ------ -------- -------- --------Total non-current liabilities 0.9 1.4 0.9------------------------------------ ------ -------- -------- --------Current liabilitiesBank loans and overdraft 3 3.0 5.6 7.4Trade and other payables 49.9 49.2 49.2Current tax payable 0.4 1.3 0.4------------------------------------ ------ -------- -------- --------Total current liabilities 53.3 56.1 57.0------------------------------------ ------ -------- -------- --------Total liabilities 54.2 57.5 57.9------------------------------------ ------ -------- -------- --------Net assets 115.1 119.6 120.5------------------------------------ ------ -------- -------- --------EquityCalled-up share capital 1.0 1.0 1.0Share premium account 9.4 9.3 9.4Other reserves (1.7) (0.4) (1.4)Retained earnings 105.6 109.1 110.7------------------------------------ ------ -------- -------- --------Total equity attributable to equityholders of the parent 114.3 119.0 119.7 Minority interests 0.8 0.6 0.8------------------------------------ ------ -------- -------- --------Total equity 115.1 119.6 120.5------------------------------------ ------ -------- -------- -------- CONDENSED GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE Six Six Year months months ended 31 July 31 July 31 Jan 2007 2006 2007 £m £m £m £m £m £m---------------------- ----- ------- ------ ------- ----- ------(Loss)/profitattributable to equity (1.9) (3.2) 0.1shareholders Minority interest - 0.1 0.3---------------------- ----- ------- ------ ------- ----- ------Total income and expenserecognised in theincome statement (1.9) (3.1) 0.4---------------------- ----- ------- ------ ------- ----- ------Currency translationdifferences on foreign currency net investments net of tax (0.5) (0.6) (1.1)Currency translationdifferences on foreign currency loans 0.2 - (0.7)Income tax on income andexpense recognised in equity - - 0.2---------------------- ----- ------- ------ ------- ----- ------Total income and expenserecognised in equity (0.3) (0.6) (1.6)---------------------- ----- ------- ------ ------- ----- ------Total income and expenserecognised for the period (2.2) (3.7) (1.2)---------------------- ----- ------- ------ ------- ----- ------Attributable to:Equity holders of the parent (2.2) (3.8) (1.5)Minority interest - 0.1 0.3---------------------- ----- ------- ------ ------- ----- ------Total income and expenserecognised for the period (2.2) (3.7) (1.2)---------------------- ----- ------- ------ ------- ----- ------ CONDENSED GROUP STATEMENT OF CASH FLOWS Six Six Year months months ended 31 July 31 July 31 Jan 2007 2006 2007 Note £m £m £m------------------------------------ ------ --------- ---------- ----------Operating activities(Loss)/profit for the period (1.9) (3.1) 0.4Adjustments for:Depreciation 4.0 4.8 9.8Foreign exchange losses - - 0.1Finance income (1.0) (0.9) (1.8)Finance expense 0.2 0.2 0.4Share of loss of joint ventures 0.1 0.4 0.6Operating loss on property, plant and equipment - 0.3 -Income tax (credit)/expense (0.6) (0.5) 3.6------------------------------------ ------ --------- ---------- ----------Operating profit before changes inworkingcapital and provisions 0.8 1.2 13.1Increase in inventories (8.7) (8.5) (3.6)Decrease/(increase) in trade andother receivables 0.5 3.2 (0.4)Increase/(decrease) in trade and other payables 0.4 (1.8) (3.4)------------------------------------ ------ --------- ---------- ----------Cash flows from operations (7.0) (5.9) 5.7 Interest paid (0.2) (0.1) (0.4)Income tax paid (0.4) (2.9) (4.3)------------------------------------ ------ --------- ---------- ----------Cash flows from operating activities (7.6) (8.9) 1.0------------------------------------ ------ --------- ---------- ----------Investing activitiesInterest received 0.9 0.8 1.8Investment in joint ventures (0.4) - (0.5)Acquisition of franchises - - (1.5)Acquisition of property, plant and equipment (1.2) (3.7) (4.6)------------------------------------ ------ --------- ---------- ----------Cash flows from investing activities (0.7) (2.9) (4.8)------------------------------------ ------ --------- ---------- ----------Financing activitiesProceeds from the issue of share capital - - 0.1Payment of finance lease liabilities - (0.2) (0.2)Dividends paid (3.2) (3.2) (4.8)------------------------------------ ------ --------- ---------- ----------Cash flows from financing activities (3.2) (3.4) (4.9)------------------------------------ ------ --------- ---------- ----------Net decrease in cash and cash equivalents 3 (11.5) (15.2) (8.7)Cash and cash equivalents at 1 February 48.9 57.0 57.0Exchange rate fluctuations on cash held 0.1 (0.3) 0.6------------------------------------ ------ --------- ---------- ----------Cash and cash equivalents at period end 3 37.5 41.5 48.9------------------------------------ ------ --------- ---------- ---------- NOTES TO THE HALF-YEAR STATEMENT 1. Segmental analysis ----------------------- ----------------------- ------------------------- Six months UK/Europe North America Rest of Intra Total31 July 2007 World Group ----------------------- ----------------------- ------------------------- Whole- Whole- Whole- Retail sale Total Retail sale Total sale £m £m £m £m £m £m £m £m £m ------ ------ ------ ------ ------ ------ ------ ------ ------Revenue 53.1 27.1 80.2 16.0 6.4 22.4 6.8 109.4Gross profit 34.2 9.4 43.6 9.6 2.4 12.0 1.5 1.7 58.8Gross margin 64.4% 34.7% 54.4% 60.0% 37.5% 53.6% 22.1% 53.7%Tradingoverheads (36.5) (6.4) (42.9) (11.0) (1.5) (12.5) (0.6) (56.0) ------ ------ ------ ------ ------ ------ ------ ------ ------Operatingcontribution (2.3) 3.0 0.7 (1.4) 0.9 (0.5) 0.9 1.7 2.8 ------ ------ ------ ------Commonoverhead costs (2.7) (1.8) (4.5)Other income 2.0 1.0 (1.7) 1.3 ------ ------ ------ ------ ------Divisionaloperatingprofit/(loss) - (2.3) 1.9 - (0.4) ------ ------ ------ ------Groupmanagementoverheads (2.8) ------Operating lossbeforefinancingcosts (3.2) ------ ----------------------- ----------------------- ------------------------- Six months UK/Europe North America Rest of Intra Total31 July 2006 World Group ----------------------- ----------------------- ------------------------- Whole- Whole- Whole- Retail sale Total Retail sale Total sale £m £m £m £m £m £m £m £m £m ------ ------ ------ ------ ------ ------ ------ ------ ------Revenue 52.4 29.8 82.2 16.7 8.3 25.0 4.0 111.2Gross profit 33.7 10.2 43.9 10.1 3.0 13.1 0.8 2.1 59.9Gross margin 64.3% 34.2% 53.4% 60.5% 36.1% 52.4% 20.0% 53.9%Tradingoverheads (36.2) (6.1) (42.3) (12.0) (1.9) (13.9) (0.7) (56.9) ------ ------ ------ ------ ------ ------ ------ ------ ------Operatingcontribution (2.5) 4.1 1.6 (1.9) 1.1 (0.8) 0.1 2.1 3.0 ------ ------ ------ ------Commonoverhead costs (3.7) (1.9) (5.6)Other income 2.5 1.1 (2.1) 1.5 ------ ------ ------ ------ ------Divisionaloperatingprofit/(loss) 0.4 (2.7) 1.2 - (1.1) ------ ------ ------ ------Groupmanagementoverheads (2.8) ------Operating lossbeforefinancingcosts (3.9) ------ 2. Losses/earnings per share Losses per share of (2.0) pence (2006: (3.3) pence) is based on 95,878,902shares (2006: 95,835,318) being the weighted average number of ordinary sharesin issue throughout the period, and £(1.9) million (2006: £(3.2) million) beingthe loss attributable to equity shareholders. Diluted losses per share of (2.0)pence (2006: (3.3) pence) is based on 96,083,865 shares (2006: 96,134,768) beingthe weighted average number of ordinary shares adjusted to assume the exerciseof dilutive options. The reconciliation to adjusted (losses)/earnings per share which is based on95,878,902 shares (2006: 95,835,318) is as follows: Six months Pence Six months Pence Year ended Pence 31 July per 31 July per 31 Jan per 2007 share 2006 share 2007 share £m £m £m------------------- --------- ------ -------- ------ -------- ------(Loss)/profitattributable toequity shareholders (1.9) (2.0)p (3.2) (3.3)p 0.1 0.1pTax impact ofwrite-off of USdeferred tax asset - - - - 4.1 4.2pTax impact ofprovisionrelease - - - - (2.1) (2.1)p------------------- --------- ------ -------- ------ -------- ------Adjusted(losses)/earnings (1.9) (2.0)p (3.2) (3.3)p 2.1 2.2p------------------- --------- ------ -------- ------ -------- ------ 3. Analysis of net funds 31 January Cash Non cash 31 July 31 July 2007 flow changes 2007 2006 £m £m £m £m £m----------------------- -------- ------- -------- ------- -------Cash and cash equivalentsin the balance sheet 56.3 (15.8) - 40.5 47.1Bank overdraft (7.4) 4.3 0.1 (3.0) (5.6)----------------------- -------- ------- -------- ------- -------Net funds 48.9 (11.5) 0.1 37.5 41.5----------------------- -------- ------- -------- ------- ------- 4. Statutory accounts and basis of preparation This condensed set of financial statements has been prepared in accordance withthe requirements of IAS 34 'Interim Financial Reporting' as adopted by the EU. As required by the Disclosure and Transparency Rules ("the DTR") of the UK'sFinancial Services Authority ("the UK FSA"), the condensed set of financialstatements has been prepared applying the accounting policies and presentationthat were applied in the preparation of the Company's published consolidatedfinancial statements for the year ended 31 January 2007, which are prepared inaccordance with IFRS as adopted by the EU. These half-year condensed financial statements are unaudited and do notconstitute statutory accounts within the meaning of Section 240 of the CompaniesAct 1985. The comparative figures for year ended 31 January 2007 are not theCompany's statutory accounts for that period. Those accounts have been reportedon by the Company's auditors and have been delivered to the Registrar ofCompanies. The report of the auditors was (i) unqualified, (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and (iii) did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. A copy of this interim statement is being sent to all shareholders and will beavailable for inspection at the Company's registered office. 5. Retail locations 31 July 2007 31 January 2007 Locations sq ft Locations sq ft----------------------------- ---------- -------- -------- -------- -------Operated locationsUK/EuropeFrench Connection Stores 76 238,481 75 237,743French Connection Concessions 19 13,918 19 13,918Nicole Farhi Stores 9 22,627 9 22,627Nicole Farhi Concessions 12 10,148 12 10,148Toast Stores 5 5,798 3 2,770Toast Concessions 4 2,279 4 1,725Great Plains Stores 2 2,109 2 2,109----------------------------- ---------- -------- -------- -------- ------- 127 295,360 124 291,040----------------------------- ---------- -------- -------- -------- -------North AmericaFrench Connection Stores 37 148,821 38 153,021Nicole Farhi Stores 2 12,960 2 12,960----------------------------- ---------- -------- -------- -------- ------- 39 161,781 40 165,981----------------------------- ---------- -------- -------- -------- ------- 166 457,141 164 457,021----------------------------- ---------- -------- -------- -------- -------French Connection licensed and franchisedUK/Europe 20 29,710 21 32,110North America 1 2,000 1 2,000Middle East 10 18,847 9 15,847Australia 33 53,781 26 42,046Japan 23 45,900 22 44,450Hong Kong 6 11,921 7 14,536China 23 30,544 19 26,747Other 46 45,361 44 41,730----------------------------- ---------- -------- -------- -------- ------- 162 238,064 149 219,466----------------------------- ---------- -------- -------- -------- -------Total 328 695,205 313 676,487----------------------------- ---------- -------- -------- -------- ------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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