Good morning. I added 3 more companies to yesterday's report last night, so to review that full report, please click on this link. Lots of results today in smaller caps, so let's get stuck in!


French Connection (LON:FCCN)

Share price: 51.0p (down 16% today)
No. shares: 95.9m
Market Cap: £48.9m

(at the time of writing, I hold a long position in this share)

Preliminary results - for the year ended 31 Jan 2015 are out today. It has to be said that it's really not acceptable for shareholders to be kept waiting until 17 Mar 2015 to find out how Christmas trading went! The last trading update from the company was on 26 Nov 2014, when the company reported trading in line with expectations.

The same trading pattern as reported in Nov 2014 has continued - i.e. weak retail performance, but good performances from the wholesaling and brand licensing divisions.

Full year results are in line with market expectations, at an underlying (excluding costs of store closures) loss of £0.8m. That's a good improvement on last year's loss of £4.4m, and a loss of £7.2m the year before that. So the trend is now established of a gradual recovery. Note that the latest results also show it becoming cashflow positive (before working capital movements) for the first time in quite a while.

Given that the 2014/15 results were in line with expectations, and showed a good improvement against prior year, why has the market reacted with a hefty 16% drop in share price this morning? Force of habit, I'm tempted to say, as we are used to being disappointed by this company. But it's actually more about the Directorspeak on current trading;

Outlook comments - these sound a bit wobbly, on the retail side of the business, which is the problem area;

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Divisional analysis - as you can see from the table below, and as I have commented here many times before, French Connection is actually a very poorly performing retail business, weighing down a successful wholesale and brand licensing business. As you can see, the retail business hasn't really improved much at all, but the brand licensing & wholesale parts have done well;

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Note that the retail division has shrunk, which is due to 9 loss-making stores being closed, although the benefit of that has been…

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