French Connection steps back on the path to growth

“With the business on a stronger footing, we are in a good position to expand operations internationally.

“We see great opportunities to grow revenues from both franchising and licensing,” said chairman and chief executive Stephen Marks.

“We do not anticipate any easing in the retail environment during the second half of the year. However...we remain confident in achieving our expectations for the full year.”

In its second-half the firm will open in 16 locations across China, Hong Kong, India, Russia, Korea, Lebanon and Jordan, taking the total of franchised stores to over 200 in more than 20 countries.

Over the next three years the firm plans to open up to 25 more stores in China through its joint venture as well as additional franchise stores in Russia, India and Turkey.

French Connection, which has sold off or closed a string of underperforming businesses, including Nicole Farhi, made pre-tax profits of £0.7m in the six months to July 31, up from £0.2m in the same period last year.

The 40-year-old firm, which has been fighting to reposition itself after the popularity of its FCUK brand waned even before the recession started, said revenues rose seven per cent to £102.8m.

That reflected a 4.6 per cent rise in UK/Europe like-for-like retail sales as well as strong growth in wholesale and licensing income. Operations director Neil Williams said he was comfortable with analysts’ year to end-January 2012 consensus pre-tax profit forecasts of about £8.9m.

Shares in the group, 42 per cent of which are owned by Mr Marks, have more than doubled over the last year as its turnaround plan has gathered pace.

Its shares jumped 23 per cent last week as investors anticipated the improved results.

However, they closed down 11.75p at 91.25p yesterday, an 11.4 per cent fall, on the company’s gloomy outlook for the sector.

“Although the trading environment in the UK is tough, we see French Connection as a solid business with a growing global footprint,” said Numis analyst Andrew Wade.

French Connection, which ended the period with net cash of £30.9m and no debt, is paying an interim dividend of 0.6p per share, up 20 per cent.