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Finals are due Next week…..FCUK

French Connection (LSE: FCCN)

19.5p (19-19.75p)
Market Cap: £19m

Next Results Finals 28th April 

FCUK is known for its woman’s, men’s and kids’ clothes but over recent years the brand has been stretched to cover home furnishings, from glass to furniture to rugs. The Finals to January 2021 will be  reported on Wednesday 28th April. At the Interims the chairman stated that, ‘this has undoubtedly been the most difficult trading period that the Group has ever faced’…..but then it got worse with the second closure in November as this was followed by the January to March shutdowns.

Finance challenges have been solved but are they just kicked into the future and could post-covid be a day of reckoning? As suppliers extended payment terms and increased discounts, its landlords agreed to rent holidays and deferred payments, factories reduced quantities and cut costs to reflect the expected lower level of trade and HMRC payments rescheduled.

At the interims, revenue fell 51.3% to £23.9m predominantly due to Covid. The underlying loss of £12.2m compared to £3.6m in 2019, as the  sales declined resulting in additional one-off stock provisions, mitigated by cost savings across all areas. Its wholesale revenues were £13.8m, down (49.3%), reflecting the closure of customers’ stores in all regions although some deliveries continued to on-line operators. Retail revenues were £10.1m, down (57.6%) (2019: £23.8m), reflecting both the lockdown period but also the permanent closure of nine retail locations in the first half. Despite this the company has been able to secure the financing required to hopefully bridge the extended period of uncertain consumer demand.

The shares rallied from 11p in February when the company started a formal process to find a buyer, but led to no formal offers as maybe the potential buyers, perhaps after looking at the books, concluded they could wait and get it cheaper.

Financials 

Arguably there could be sufficient funding in place particularly if sales start to surge. As a US$6.5m loan was recently added with the Flushing Bank, NY USA which  is for a period of 5 years with repayments commencing from the end of the 3rd year. The NAV is £16.2m of which £14m is a ‘right of use’ licence and the stock holdings have built up to £26m but there is  £25m that  is  soon  payable to creditors.

Trading Strategy 

Avoid for now as sadly, there are too many ways for shareholders to make a loss during a restructuring.

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