half year results to 31st july 2017 h i g h l i g h t s
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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 offset by the reduced store portfolio Growth in the wholesale business with revenue up


  1. HALF YEAR RESULTS TO 31ST JULY 2017

  2. 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 offset by the reduced store portfolio • Growth in the wholesale business with revenue up 7.2% (up 2.6% CCY ¹ ) 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 2

  3. R E S U L T S S U M M A R Y Constant 6 months to 6 months to Variance currency 31 Jul 17 31 Jul 16 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 3

  4. W H O L E S A L E 17/18 16/17 Wholesale £m £m Revenue Revenue 7.2 %  29.6 27.6 • Revenue up 7.2% (up 2.6% CCY ) as Gross Margin 31.4% 30.4% UK/Europe (up 11.1% CCY ) and North Operating Profit 3.9 3.0 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 O P E R A T I N G P R O F I T V A R I A N C E Gross margin 2016/17 UK/EU NAM ROW Currency 2017/18 4.0 • Gross margin 31.4% (2016: 30.4%), with the (0.1) 0.1 0.3 growth in revenue being driven through full 3.6 price sales 0.6 3.2 3.9 Selling and distribution expenses 2.8 • Costs flat when compared to last year (down 3.0 2.4 2.1% CCY ) with continued focus on cost control 2.0 4

  5. R E T A I L 17/18 16/17 Retail £m £m Revenue (7.5) %  Revenue 38.5 41.6 • Overall revenue 7.5% down on reduced Gross Margin 56.6% 56.3% store portfolio (8.7% lower CCY ) • UK/EU LFL broadly flat as a result of Operating Loss (6.7) (8.2) 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% O P E R A T I N G L O S S V A R I A N C E Continuing Currency Gross Margin 2016/17 Store Closures Stores Impact 2017/18 (4.0) • Margin rate 56.6% (2016: 56.3%) due to lower levels of promotional activity in full price stores & higher outlet margin as a (5.0) result of lower levels of old season stock (6.7) (6.0) (8.2) Selling and distribution expenses (0.1) 0.6 • Overall overheads down 9.8% as we 1.0 continue to rationalise the store portfolio (7.0) • Underlying overheads adjusted for store closures and currency down 2.9% (8.0) reflecting continued focus on cost control despite increases in rent, rates and salary costs (9.0) 5

  6. 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 6

  7. R E T A I L S T O R E E S T A T E • 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 0 0 (1) (1,495) Total Full Price Stores 41 127,900 (4) (12,388) (7) (21,199) Outlets 12 20,006 0 0 (1) (1,748) Concessions 52 36,190 (1) (461) 0 1,882 Total FC 105 184,096 (5) (12,849) (8) (21,065) Toast 12 13,546 0 0 1 593 YMC 2 1,355 0 0 0 0 Total Operated Locations 119 198,997 (5) (12,849) (7) (20,472) 7

  8. L I C E N C E I N C O M E • Licence income up 8.3% (up 6.5% CCY ) 17/18 16/17 despite closure of footwear licensee £m £m • New global fragrance licensee Inter Parfums Licence Income 8.3%  2.6 2.4 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 8

  9. O P E R A T I N G E X P E N S E R E V I E W 17/18 16/17 £m £m • Total Group overheads reduced by 6.7 %  Operating Expenses 39.0 41.8 £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 O P E R A T I N G E X P E N S E V A R I A N C E currency impact predominantly from our Currency 2016/17 Store Closures LFL Impact 2017/18 North American business 45 Underlying reduction was achieved • 40 2.8 despite upward cost pressures from 0.8 0.8 35 rent, rates and living wage, but with reduced space in the London head 41.8 30 39.0 office 25 20 9

  10. 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 Jul Jul £0.4m in the first half despite higher 2017 2016 levels of Winter 17 stock to support £m £m Wholesale growth Group operating loss (5.7) (7.9) • Store disposal costs of £1.5m from the Depreciation 0.6 0.6 Share of JV loss 0.4 0.3 closure of four non-contributing stores in Operating result before changes in working capital (4.7) (7.0) the current year compared to a £1.7m Movement in working capital 0.4 (0.6) income last year due to the compensation Cash flows from operations (4.3) (7.6) payment for exiting Regent Street store Capital expenditure (0.7) (0.3) Store disposal costs (1.5) 1.7 Investment in joint ventures (0.3) 0.0 • Capital expenditure of £0.7m made up of Income tax paid 0.0 (0.1) IT costs, investment in improving Movement in cash (6.8) (6.3) ecommerce CRM platform and retail Opening net cash 13.5 14.0 improvements Closing net cash 6.7 7.7 • Year end cash balance £6.7m (2016: £7.7m) 10

  11. O U T L O O K • 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 11

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