FCCN.L Regulatory News (FCCN)

25 Nov 2009 07:00



FRENCH CONNECTION GROUP PLC

Interim Management Statement

25 November 2009

French Connection Group PLC is announcing its Interim Management Statement covering the sixteen week period from 1 August 2009 to 24 November 2009. 

During this period, our businesses continued to perform in line with the performance which we saw in the first half of the year. French Connection ladies' wear continues to show growth in UK/Europe retail, Toast has performed very well and all of our ecommerce businesses have shown encouraging increases in revenue. However, men's wear continues to be challenging and markets in North America and Japan remain soft. Overall Group turnover in the three months to 30 October 2009 is 8% ahead of the same period last year, most of which arises from the change in exchange rates since last year.

Sales in the UK/Europe retail division (accounting for 51% of Group turnover) in the period grew by 0.6% in total and 0.3% on a like-for-like basis compared with growth of 1.0% in the same period last year. Growth in French Connection ladies' wear and Toast were stronger, while our men's wear ranges have performed less well, continuing the trend experienced earlier in the year. As in the first half of the financial year the gross margin continues to be impacted by both the strength of the US Dollar causing an increase in product costs and the three additional outlet stores.

As expected, revenue in our wholesale business in UK/Europe (accounting for 16% of Group turnover) is below the level seen last year, showing an 11% decline.  As in the first half of the financial year the gross margin continues to be affected by the strength of the US Dollar. Forward orders for Spring/Summer 2010 are lower than the levels achieved last year.

Our retail business in North America (accounting for 10% of Group turnover) has shown some further deterioration in line with many retailers in the market. Retail sales in Dollar terms have declined by 7.0% in total and 4.7% on a like-for-like basis in the sixteen week period. The gross margin has also been affected by the continuing need to compete in a highly promotional market.  In Sterling terms the sales decline has been entirely offset by the appreciation in the value of the US Dollar compared with last year. 

Second-half revenue in our North America wholesale business (accounting for 8% of Group turnover) is level with last year in Dollar terms so far, although this includes some substantial sales of old-season inventory. 

As previously announced, our business in Japan is in the process of termination and we expect that the stores will be closed by the end of February 2010. This business was forecast to generate a loss of £2.5 million in the year to 31 January 2010 and the cash cost of the closure is expected to be less than £0.5 million. Further initiatives resulting from the Board's on-going strategic review are in the process of development. The Board remains focused on improving both the profitability and cash flow of the business.

The Group's balance sheet remains healthy with £15.4 million of net cash at the end of October 2009 (2008: £20.0 million). The reduction in cash levels reflects the impact of the trading results over the previous twelve months offset by a reduction in the working capital requirement as we focus on ensuring efficient cash utilisation. The cyclicality in our business means that October is one of the low-points for cash in the year and we will build cash reserves through the Christmas period.

Other than as detailed above in this Interim Management Statement, there have been no material events or transactions in the period from 1 August 2009 to 24 November 2009.

Enquiries:

Roy Naismith French Connection +44(0)20 7036 7206

Tom Buchanan/Deborah Spencer Brunswick +44(0)20 7404 5959