1 H I G H L I G H T S Group revenue of 69.2m, down 8.7% with five - - PowerPoint PPT Presentation

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H A L F Y E A R R E S U L T T O 3 1 S T J U L Y 2 0 1 6

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H I G H L I G H T S

• Group revenue of £69.2m, down 8.7% with five non-contributing stores closed during the

period

• Strong LFL performance with UK/Europe stores up 6.5%. Overall retail revenue down

2.3% on a square footage reduction of 15.8%

• Composite gross margin of 46.0% (2015: 45.5%) reflecting the higher proportion of retail

sales within Group revenue

• Loss before taxation of £7.9m, flat on last year with an improved retail performance offset

by tougher trading in wholesale and licensing

• Closing net cash of £7.7m (2015: £15.0m) and no debt
• Continued strong performance in the first six weeks of the second half with improvement

in wholesale being seen

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3 6 months to 31 July 2016 6 months to 31 July 2015 Variance Constant currency variance Revenue £69.2m £75.8m (8.7)% (10.7)% Gross margin 46.0% 45.5% Operating expenses £41.8m £45.3m (7.7)% (9.2)% Other operating income £2.4m £3.0m (20.0)% (20.9)% Loss before tax £(7.9)m £(7.9)m 0.0% +1.1% Closing net cash £7.7m £15.0m

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R E S U L T S S U M M A R Y

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R E T A I L

Revenue

• UK/Europe LFL up 6.5% following a strong

reaction to the Spring 16 collection (H1 2015

• 10.7%)
• Concessions LFL up 13.9% as a result of

improved merchandising mix

• Overall revenue 2.3% lower due to store

closures offset by a positive LFL

• Closure of five non-contributing stores during the

period (four UK/EU, one NAM) Gross margin

• Margin rate flat overall with Spring 16 margin up

as we reduced in-season discounting and pushed sale back by three days, but impacted by higher stock clearance through outlets Selling and distribution expenses

• Trading overheads reduced due to store
• closures. LFL overheads down 0.9% due to

continued focus on cost management offset by pressure of ongoing rent and rates rises and the impact of the living wage increases

O P E R A T I N G L O S S V A R I A N C E

(2.3)% ↓

16/17 15/16 Retail £m £m Revenue 41.6 42.6 Gross Margin 56.3% 56.3% Operating Loss (8.2) (11.1)

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R E T A I L T R A D I N G

• Positive UK/EU Retail LFL of 6.5% in H1 with indicators* showing a tough High Street environment
• Positive reaction to the Spring 16 collection from consumers
• Ecommerce as a percentage of retail revenue increased by 420bps on the year to 26.5% as a result
• f targeting our customers better with an improved CRM system and increased social media activity
• Mobile and tablet sales constitute 50% of UK/EU ecommerce revenue (2015: 47%)
• Margin rate maintained flat on the year even though liquidating old season stock in the outlets

* W E E K L Y B D O H I G H S T R E E T S A L E S T R A C K E R R E P O R T

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R E T A I L S T O R E E S T A T E

• Five non-contributing stores closed in the period as the store estate continues to be rationalised
• Four stores in UK/EU and one store in North America
• Two net concession closures in the period
• Average lease length remaining of the UK/EU retail estate 3.5 years (Full Year: 4.0 years )
• Around five stores are targeted for closure in the second half
• Plan to have approximately 40 French Connection stores/outlets by January 2020 in UK/Europe

31 July 2016 Change on Jan 16 Change on Jul 15 Locations sq ft Locations sq ft Locations sq ft UK/Europe Stores 55 146,868 (4) (13,701) (7) (27,292) Outlets 14 23,046 (215) 2 2,530 Concessions 52 34,308 (2) (1,183) (4) (2,000) Total UK/Europe 121 204,222 (6) (15,099) (9) (26,762) North America Stores 5 15,247 (1) (3,424) (5) (14,425) Total North America 5 15,247 (1) (3,424) (5) (14,425) Total Operated Locations 126 219,469 (7) (18,523) (14) (41,187)

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W H O L E S A L E

Revenue

• Revenue overall down 16.9%, reflecting the

difficult retail market conditions in both major territories throughout the period

• Some revenue pushed into the second half of

the year due to phasing of deliveries Gross margin

• Full Price reorders lower than planned,

additional discounting was required to clear excess stock, with gross margins impacted Selling and distribution expenses

• Costs tightly controlled with LFL overheads

down 2.8%

R E V E N U E V A R I A N C E

(16.9) %

16/17 15/16 Wholesale £m £m Revenue 27.6 33.2 Gross Margin 30.4% 31.6% Operating Profit 3.0 5.5

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L I C E N C E I N C O M E

• Net income received from global licensing was

down £0.6m to £2.4m, a decline of 20.0%

• Furniture licence with DFS continues to perform

particularly well. Range has been extended as of September, driving further growth

• Global fragrance licence has moved to Inter

Parfums, causing a short term shortfall in income but long term benefit

• US based shoe licensee filed for bankruptcy,

requiring us to be conservative in our income recognition in the period

(20.0) % 16/17 15/16 £m £m Other Operating Income 2.4 3.0

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O P E R A T I N G E X P E N S E R E V I E W

• Continued focus on reducing overheads

across the Group

• Total Group operating expenses were

reduced by 7.7% in the first six months on a reported basis (9.2% at constant currency)

• After adjusting for currency and store

closures, underlying reduction of 1.3%

• Overheads under review to ensure our

cost base is right for the size of business

O P E R A T I N G E X P E N S E V A R I A N C E 7.7%

16/17 15/16 £m £m Operating Expenses 41.8 45.3

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F I N A N C I A L P O S I T I O N

C A S H F L O W S U M M A R Y

• Positive cash position throughout the period
• Group remains debt free and ended the half

with a cash position of £7.7m (2015: £15.0m)

• Available undrawn working capital facilities

amounting to circa £5.5m

• Capital expenditure mainly on IT investment,

with two new store openings planned for end

• f year

16/17 15/16 £m £m Underlying Operating Loss (7.9) (7.9) Depreciation & store disposals 0.6 0.8 Share of JV loss 0.3 0.1 Operating Result before changes in working capital (7.0) (7.0) (Increase) in inventory (1.0) (2.0) Decrease/(increase) in trade and other receivables 1.1 (0.6) (Decrease)/increase in trade and other payables (0.7) 1.7 Movement in working capital (0.6) (0.9) Cash flows from operations (7.6) (7.9) Capital expenditure (0.3) (0.4) Store disposal net proceeds 1.7 0.2 Income tax paid (0.1) (0.1) Other 0.0 0.0 Movement in Cash (6.3) (8.2) Opening net cash 14.0 23.2 Closing net cash 7.7 15.0 16/17 15/16 £m £m Cash High 7.7 15.0 Cash Low 4.7 10.4 Average 6.3 12.7

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O U T L O O K

• The performance of the Spring 16 collections is clear evidence that the focus on

design led product is working to move the business in the right direction

• The trend in retail has continued at the beginning of the second half of the year but

more importantly the wholesale business has returned to a positive position with sell through and orders improving

• Still much work to do in the rest of the year to move the business forward significantly

and the overall result will be dependent on the Christmas trading period but the second half of the year has started well

• Continued investment in ecommerce initiatives on the back of the growth we have

seen following the implementation of CRM and enhanced social media activity in the first half

• Targeted retail investment – 5 stores planned for closure but new store openings

planned in Manchester and London Liverpool Street for the beginning of 2017

• Continued strong performance expected from DFS together with an increase in

income from the new fragrance licensee

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