HALF YEAR RESULTS TO 31ST JULY 2017 H I G H L I G H T S Group - - PowerPoint PPT Presentation

HALF YEAR RESULTS TO 31ST JULY 2017

H I G H L I G H T S

• Group revenue of £68.1m, down 1.6% (2016: £69.2m) with the improved wholesale performance
• ffset by the reduced store portfolio
• Growth in the wholesale business with revenue up 7.2% (up 2.6% CCY¹) and contribution up 30.0%
• Improved contribution in retail with operating loss reduced by 18.3%
• Return to growth in licence income, up 8.3%, predominantly through the new fragrance agreement
• UK/Europe LFL broadly flat for the first half at an improved margin rate due to lower levels of

promotional sales

• Store portfolio rationalisation continued with benefits being seen in retail divisional performance
• Composite gross margin of 45.7% (2016: 46.0%) due to wholesale being a larger proportion of

Group sales

• Continued close control of costs with head office space reduction during the period
• Group operating loss of £5.7m (2016: £7.9m)
• Closing net cash of £6.7m (2016: £7.7m)

¹ Constant currency

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

6 months to 31 Jul 17 6 months to 31 Jul 16 Variance Constant currency variance Revenue £68.1m £69.2m (1.6%) (4.2%) Gross margin 45.7% 46.0% Operating expenses £39.0m £41.8m (6.7%) (8.6%) Licence income £2.6m £2.4m 8.3% 6.5% Share of loss from JV's £(0.4)m £(0.3)m Group operating loss £(5.7)m £(7.9)m 27.8% 28.9% Closing net cash £6.7m £7.7m £(1.0)m

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W H O L E S A L E

O P E R A T I N G P R O F I T V A R I A N C E

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17/18 16/17 Wholesale £m £m Revenue 7.2 %  29.6 27.6 Gross Margin 31.4% 30.4% Operating Profit 3.9 3.0

Revenue

• Revenue up 7.2% (up 2.6% CCY) as

UK/Europe (up 11.1% CCY) and North America (up 4.2% CCY) returned to growth. This was partially offset by reduced low margin sales to our partner in Australia due to a reorganisation of their business Gross margin

• Gross margin 31.4% (2016: 30.4%), with the

growth in revenue being driven through full price sales Selling and distribution expenses

• Costs flat when compared to last year (down

2.1% CCY) with continued focus on cost control

3.0 0.6 0.3 (0.1) 0.1 3.9 2.0 2.4 2.8 3.2 3.6 4.0 2016/17 UK/EU NAM ROW Currency 2017/18

R E T A I L

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

17/18 16/17 Retail £m £m Revenue (7.5) %  38.5 41.6 Gross Margin 56.6% 56.3% Operating Loss (6.7) (8.2)

Revenue

• Overall revenue 7.5% down on reduced

store portfolio (8.7% lower CCY)

• UK/EU LFL broadly flat as a result of

lower levels of promotional sales activity in the period

• An additional four non-contributing stores

closed during the period

• Over the last 12 months, the average

trading space has reduced by 10.2% Gross Margin

• Margin rate 56.6% (2016: 56.3%) due to

lower levels of promotional activity in full price stores & higher outlet margin as a result of lower levels of old season stock Selling and distribution expenses

• Overall overheads down 9.8% as we

continue to rationalise the store portfolio

• Underlying overheads adjusted for store

closures and currency down 2.9% reflecting continued focus on cost control despite increases in rent, rates and salary costs

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(6.7) (8.2) 1.0 0.6 (0.1) (9.0) (8.0) (7.0) (6.0) (5.0) (4.0) 2016/17 Store Closures Continuing Stores Currency Impact 2017/18

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

• UK/EU Retail LFL broadly flat during the period at an improved margin rate with lower levels of

promotional sales

• Sell-through of Spring 17 up on the year reflecting improved design and buying
• Ecommerce represented 29.2% of retail revenue (2016: 26.5%)
• Mobile now constitutes 45.4% of online traffic (2016: 36.4%)
• Online sales growth has been held back to some extent as we have reduced the level of sale and

clearance product available to promote full price sales

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

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• Four non-contributing stores closed in the period as the store estate continues to be rationalised
• Net seven stores closed over the last 12 months
• One concession closed in the period, but over the last 12 months existing concessions have

increased space

• In November, we will be opening our first new French Connection store for a number of years in

Manchester

• Average lease length remaining of the UK/EU retail estate 2.6 years (Full Year: 3.2 years)

31 July 2017 Change on Jan 17 Change on Jul 16 Locations sq ft Locations sq ft Locations sq ft FC Full Price Stores UK/ Europe 37 114,148 (4) (12,388) (6) (19,704) North America 4 13,752 (1) (1,495) Total Full Price Stores 41 127,900 (4) (12,388) (7) (21,199) Outlets 12 20,006 (1) (1,748) Concessions 52 36,190 (1) (461) 1,882 Total FC 105 184,096 (5) (12,849) (8) (21,065) Toast 12 13,546 1 593 YMC 2 1,355 Total Operated Locations 119 198,997 (5) (12,849) (7) (20,472)

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

17/18 16/17 £m £m Licence Income 8.3%  2.6 2.4

• Licence income up 8.3% (up 6.5% CCY)

despite closure of footwear licensee

• New global fragrance licensee Inter Parfums

performing well with significant growth potential in the future

• DFS continues to grow our business, with

French Connection being their most productive third party brand

• New US homeware and jewellery licenses

signed in the period

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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

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

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17/18 16/17 £m £m Operating Expenses 6.7 %  39.0 41.8

• Total Group overheads reduced by

£2.8m due to a combination of store closures, resulting in a £2.8m reduction, and LFL overhead savings of £0.8m, partially offset by £0.8m of negative currency impact predominantly from our North American business

• Underlying reduction was achieved

despite upward cost pressures from rent, rates and living wage, but with reduced space in the London head

• ffice

39.0 41.8 2.8 0.8 0.8 20 25 30 35 40 45 2016/17 Store Closures LFL Currency Impact 2017/18

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

• Slight improvement in working capital of

£0.4m in the first half despite higher levels of Winter 17 stock to support Wholesale growth

• Store disposal costs of £1.5m from the

closure of four non-contributing stores in the current year compared to a £1.7m income last year due to the compensation payment for exiting Regent Street store

• Capital expenditure of £0.7m made up of

IT costs, investment in improving ecommerce CRM platform and retail improvements

• Year end cash balance £6.7m (2016:

£7.7m)

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Jul Jul 2017 2016 £m £m Group operating loss (5.7) (7.9) Depreciation 0.6 0.6 Share of JV loss 0.4 0.3 Operating result before changes in working capital (4.7) (7.0) Movement in working capital 0.4 (0.6) Cash flows from operations (4.3) (7.6) Capital expenditure (0.7) (0.3) Store disposal costs (1.5) 1.7 Investment in joint ventures (0.3) 0.0 Income tax paid 0.0 (0.1) Movement in cash (6.8) (6.3) Opening net cash 13.5 14.0 Closing net cash 6.7 7.7

• Continuing improvement in retail contribution through both increased trading and portfolio rationalisation
• Three further stores expected to close in H2 with a target of 30 full price French Connection stores by January 2019
• Wholesale growth to continue with strong order books in place for both the Winter 17 and Spring 18 seasons
• Licence income to continue to grow with new US licence agreements to start next year
• Maintain close control of overheads to mitigate inflationary pressures
• In November, we will be opening our first new French Connection store in a number of years in Manchester
• Further investment in Ecommerce marketing and site functionality to further enhance customer experience
• Maintain focus to continue positive momentum and return to profitability

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O U T L O O K