French Connection Group revenue decreased on 5.8% in 2015 while EBITDA Margin increased on 2.1 pp from -1.7% to 0.39%

17 Mar 2015 • About French Connection Group ($FCCN) • By InTwits

French Connection Group reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

• French Connection Group is a company in decline: FY2015 revenue growth was -5.8%, 5 years revenue CAGR was -3.4%
• EBITDA Margin is quite volatile: 0.4% in FY2015, -1.7% in FY2014, -4.1% in FY2013, 2.8% in FY2012, 5.1% in FY2011
• French Connection Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.6%.
• The company has unprofitable business model: ROIC is at -1.7%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

French Connection Group ($FCCN) key annual financial indicators

mln. £	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	213.8	215.4	197.3	189.4	178.5	-5.8%
Gross Profit	110.6	103.6	94.6	90.2	83.4	-7.5%
SG&A	112.7	108.8	108.9	101.4	90.8	-10.5%
EBITDA	10.9	6.1	-8.0	-3.2	0.7	-121.9%
Net Income	-2.3	5.3	-10.3	-6.0	-1.5	-75.0%
Balance Sheet
Cash	34.1	34.2	28.5	28.2	23.2	-17.7%
Short Term Debt	0.0	0.0	0.0	0.0	0.0
Long Term Debt	0.0	0.0	0.0	0.0	0.0
Cash flow
Capex	1.0	1.6	1.9	0.8	1.1	37.5%
Ratios
Revenue growth	0.6%	0.7%	-8.4%	-4.0%	-5.8%
EBITDA growth	-372.5%	-44.0%	-231.1%	-60.0%	-121.9%
Gross Margin	51.7%	48.1%	47.9%	47.6%	46.7%	-0.9%
EBITDA Margin	5.1%	2.8%	-4.1%	-1.7%	0.4%	2.1%
Net Income Margin	-1.1%	2.5%	-5.2%	-3.2%	-0.8%	2.3%
SG&A, % of revenue	52.7%	50.5%	55.2%	53.5%	50.9%	-2.7%
CAPEX, % of revenue	0.5%	0.7%	1.0%	0.4%	0.6%	0.2%
ROIC	10.5%	4.7%	-16.9%	-9.1%	-1.7%	7.4%
ROE	-3.2%	7.3%	-15.1%	-10.1%	-2.7%	7.5%
Net Debt/EBITDA	-3.1x	-5.6x			-33.1x	-33.1x

Revenue and profitability

French Connection Group's Revenue decreased on 5.8% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.1 pp from -1.7% to 0.39% in FY2015.

Gross Margin decreased slightly on 0.90 pp from 47.6% to 46.7% in FY2015. SG&A as a % of Revenue decreased on 2.7 pp from 53.5% to 50.9% in FY2015.

Net Income marign increased on 2.3 pp from -3.2% to -0.84% in FY2015.

Capital expenditures (CAPEX) and working capital investments

French Connection Group's CAPEX/Revenue was 0.62% in FY2015. French Connection Group showed almost no change in CAPEX/Revenue from FY2012 to FY2015. For the last three years the average CAPEX/Revenue was 0.67%.Battling declining revenue the company made large investments to CAPEX (157% of EBITDA) but that didn't help at least in this year.

Return on investment

The company operates at negative ROIC (-1.72%) and ROE (-2.69%). ROIC increased on 7.4 pp from -9.1% to -1.7% in FY2015. ROE increased on 7.5 pp from -10.1% to -2.7% in FY2015.

Leverage (Debt)

The company has no debt. Cash dropped on 17.7% in FY2015.

Appendix 1: Peers in General Retailers

Below you can find French Connection Group benchmarking vs. other companies in General Retailers industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top	FY2011	FY2012	FY2013	FY2014	FY2015
Caffyns ($78GL)			-3.1%	17.1%	8.9%
Signet Jewelers Ltd ($SIG)	5.0%	9.1%	6.2%	5.7%
Just Eat ($JE.)					57.7%
Lotte Shopping Co Ltd ($LOTS)	17.0%	12.5%	12.6%	-0.4%
Median (4 companies)	17.0%	9.1%	9.4%	5.7%	33.3%
French Connection Group ($FCCN)		0.7%	-8.4%	-4.0%	-5.8%

Top companies by Gross margin, %

Top	FY2011	FY2012	FY2013	FY2014	FY2015
Just Eat ($JE.)				89.7%	90.2%
Signet Jewelers Ltd ($SIG)	36.2%	38.3%	38.6%	37.5%
Lotte Shopping Co Ltd ($LOTS)	31.5%	30.5%	30.7%	31.2%
Caffyns ($78GL)		29.2%	12.7%	12.1%	11.9%
Median (4 companies)	36.2%	34.4%	34.7%	34.4%	51.1%
French Connection Group ($FCCN)	51.7%	48.1%	47.9%	47.6%	46.7%

Top companies by EBITDA margin, %

Top	FY2011	FY2012	FY2013	FY2014	FY2015
Just Eat ($JE.)				16.3%	21.0%
Signet Jewelers Ltd ($SIG)	13.7%	16.0%	16.6%	16.2%
Lotte Shopping Co Ltd ($LOTS)	10.7%	8.8%	8.2%	7.4%
Caffyns ($78GL)		10.8%	3.0%	2.0%	6.5%
Median (4 companies)	13.7%	13.4%	11.0%	11.8%	13.8%
French Connection Group ($FCCN)	5.1%	2.8%	-4.1%	-1.7%	0.4%

Top companies by CAPEX/Revenue, %

Top	FY2011	FY2012	FY2013	FY2014	FY2015
Lotte Shopping Co Ltd ($LOTS)	7.2%	7.1%	6.5%	6.6%
Caffyns ($78GL)		1.6%	2.2%	3.9%	1.4%
Signet Jewelers Ltd ($SIG)	1.7%	2.6%	3.4%	3.6%
Just Eat ($JE.)				3.4%	2.3%
Median (4 companies)	1.7%	2.1%	2.8%	3.7%	1.9%
French Connection Group ($FCCN)	0.5%	0.7%	1.0%	0.4%	0.6%

Top companies by ROIC, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Signet Jewelers Ltd ($SIG)	17.2%	21.6%	21.5%	20.4%
Just Eat ($JE.)				16.4%	9.1%
Caffyns ($78GL)		60.8%	15.4%	11.1%	37.3%
Lotte Shopping Co Ltd ($LOTS)	7.3%	5.3%	4.9%	3.8%
Stanley Gibbons Group ($SGI)	23.3%	21.3%	8.9%	0.0%
Median (5 companies)	17.2%	21.4%	12.1%	11.1%	23.2%
French Connection Group ($FCCN)	10.5%	4.7%	-16.9%	-9.1%	-1.7%

Top companies by Net Debt / EBITDA

Top	FY2011	FY2012	FY2013	FY2014	FY2015
Lotte Shopping Co Ltd ($LOTS)	3.5x	5.1x	4.9x	5.2x
Caffyns ($78GL)		0.5x	2.0x	3.0x	0.7x
Signet Jewelers Ltd ($SIG)	-0.6x	-0.8x	-0.5x	-0.3x
Just Eat ($JE.)				-6.4x	-3.7x
Median (4 companies)	-0.5x	-0.2x	0.8x	1.4x	-1.5x