Description
The French Connection Group designs, produces and distributes branded fashion clothing for men and women to more than 50 countries around the world.
ANNUAL REPORT 2015
French Connection Group PLC
The French Connection Group designs, produces and
distributes branded fashion clothing for men and women
to more than 50 countries around the world
French Connection Group PLC
FRENCH CONNECTION • GREAT PLAINS • TOAST • YMC
CONTENTS
STRATEGIC REPORT
Chairman’s Statement 2
Our Business 3
Corporate Social Responsibilty 7
Financial Review 9
GOVERNANCE
Board of Directors 11
Directors’ Report 12
Corporate Governance Statement 14
Audit Committee Report 16
Directors’ Remuneration Report 18
Statement of Directors’ Responsibilities 25
Independent Auditor’s Report 26
FINANCIAL STATEMENTS
Consolidated Statement
of Comprehensive Income 28
Consolidated Statement
of Financial Position 29
Consolidated Statement
of Changes in Equity 30
Consolidated Statement
of Cash Flows 31
Notes to the Group Accounts 32
Company Balance Sheet 51
Notes to the Company Accounts 52
SHAREHOLDER INFORMATION
Five Year Record 57
Advisers 58
Financial Calendar 58
Notice of Meeting 59
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 2
Dear Shareholders,
CHAIRMAN’S STATEMENT
I am pleased to report that following the initiatives we put in
place to turnaround our trading performance, the Group has
delivered another improved financial result this year. In line
with market expectations, we have reported an underlying
operating loss* for the year of £(0.8) m compared to a loss
of £(4.4) m in 2014 and a loss of £(7.2) m in 2013 and have
made another step towards returning French Connection
to profitability.
This improved performance was driven by a number of
factors, notably encouraging performances in both wholesale
and licensing, coupled with the exiting of non-contributing
retail stores and tight cost controls across the business.
This performance was delivered against the backdrop of
what has been a difficult year for the high street generally.
Retail
After a good first half, I was disappointed with the second
half UK/Europe retail performance. In Q3 and into November,
we were trading against stronger prior year comparatives
and un-seasonally warm weather. In Q4 we went into the
winter sale period with lower stock levels which impacted
LFL sales more than expected. Overall UK/Europe LFL
retail gross sales were -3% over the full year.
We saw slight margin progression from lower mark down
activity on revenue that reduced by 12.1% to £103.3m (-11%
at constant currency). This reduction was primarily the result
of the closure of a further 9 non-contributing stores in line
with our plan to rationalise our retail store estate which will
continue this year, with 3-4 store closures expected. The
average lease length of the UK/Europe retail estate is 4.4
years (2014: 4.9 years). Adjusting for currency and store
closures, underlying retail selling and distribution expenses
were broadly flat.
We opened a store in Berlin during the second half, with
sales exceeding expectations. Our Amsterdam franchise
store was taken over, delivering improved performance since
converting to owned and operated. The year saw 2 new
El Corte Inglés concessions open with plans for further
openings in the year.
Ecommerce represented 23% of retail revenue with 24% of
orders serviced through Click and Collect, and mobile and
tablet sales making up 47% of ecommerce revenue.
Despite the difficult trading conditions in the second half
of this year, which caused a decline in like-for-like sales,
we ended the year with a reduced stock position against
the prior year.
Wholesale
We saw a strong performance in Wholesale, with 4.6%
growth in revenue (+7.3% at constant currency) and an
improvement of 25% in Operating Profit attributable to
this division. The revenue growth was achieved across
UK/Europe, Rest of World and notably North America
which returned to growth in 2015. Gross margins were
broadly flat with strong cost control notably in trade-show
and promotional expenses.
I am pleased to report the signing of a new country licensee
in Mexico which will generate income in the second half of
the year. Wholesale orders for Spring 15 show an
improvement in year-on-year ordering levels.
Licensing
Licence income of £6.5m was generated during the period,
an improvement of 6.6% (+7.4% at constant currency).
Newer licensees performed strongly. The shoe licence saw
the successful launch during the year of the first standalone
store in Nanjing, with 8 locations now open in China. The
furniture licence with DFS benefited from the successful
launch of new lines, with further launches planned during
the year. Within the retail segment, in 2015, homeware
delivered over £1m in sales in the first year of operations.
Taken together with the furniture licence income, I am
pleased to see a new product category emerging for
the Group.
After adjusting for currency and store closures, underlying
operating expense savings were 3% compared to prior year.
We will continue to focus on cost control.
The Group remains debt free and ended the year with a
strong cash position of £23.2m (2014: £28.2m). To conserve
working capital the Board has decided that no dividend shall
be paid for the year (2014: £Nil). The shareholder distribution
policy will be kept under close review during the year.
Although we are encouraged by forward orders in our
Wholesale business, as in the second half of the year, trading
on the high street remains challenging and we are planning
accordingly.
It’s been a tough year but I am pleased to say that we
have responded accordingly, and I would like to take this
opportunity to recognise the hard work of our talented staff
across the Group.
Stephen Marks
Chairman and Chief Executive
17 March 2015
*Excludes loss on store disposals and closures.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 3
OUR BUSINESS
Business objectives, strategy,
and business model
At the heart of our business is a passion for the clothes. In 1972,
when French Connection was conceived, we set out to create
well-designed, stylish clothing that appealed to a broad market.
We have since worked hard to build on that vision and as a
result, French Connection is synonymous with fashion and style.
It remains our prime goal to create distinctiveness in a crowded
market place through focus on design. The brand’s strength
lies in balancing new, exciting ideas with consistent quality and
affordability and in a world of “fast fashion” we are proud of our
commitment to the creative process.
With a passionate focus on fashion underpinning the business
our aim is to generate increased shareholder value through the
sale of fashion products and the extension of our brands into
other lucrative markets through licensing. We continually assess
markets and relationships for new opportunities to broaden our
customer reach.
Founded by Chairman and Chief Executive Stephen Marks,
French Connection’s long history of success has been based
on design quality and innovative fashion, supported by a strong
market presence resulting in one of the most highly recognised
and respected clothing brands in the UK and across the world.
We seek to ensure that products are presented for sale in
contemporary surroundings by knowledgeable and friendly
staff who are in-tune with our customers. We recognise that
our products are the core element of our business and that our
ability to produce fashionable clothing to match our customers’
expectation has been, and continues to be, the key to our
continued success.
We seek to ensure that our resources are deployed effectively
and efficiently to support our business. Design and production
of the ranges and maintenance of our operating standards are
paramount for all our business managers who have broad
responsibility for their area of operations.
Brands
Our principal brand is French Connection which accounts
for 86% of the Group’s revenues.
The French Connection brand operates in the fashion-
orientated market place offering a fashion-forward range of
quality products at affordable prices. Our customers, typically
aged 18-35, appreciate that the brand is at the leading edge of
high street fashion and offers quality and style in its products.
French Connection designs, produces and distributes branded
fashion clothing, accessories and homeware for men, women,
and children to more than 50 countries around the world
through its main distribution channels: retail stores,
e-commerce, wholesale and licensing.
Our other brands include:
TOAST: a range of beautifully crafted ladies’ and men’s clothing
and unique homeware, available on-line, in selected John Lewis
stores and through branded high-street stores;
Great Plains: a fashion basics range designed in-house and
supplied through wholesale to multi-brand retailers and
available on-line mainly in the UK; and
YMC: a fledgling, edgy, contemporary fashion brand for men
and women with two stores in London, a growing wholesale
base and available on-line.
Each brand targets a different audience and has achieved high
levels of recognition for style and design reflecting the creative
passion and skill poured into the design and manufacture of
their products.
Our operations
We design, produce and distribute branded fashion clothing
and homeware from our business premises in London, New
York, Paris, Dusseldorf, Hong Kong and Toronto. We operate
retail stores and concessions in the UK, Europe, US and
Canada and also operate ecommerce businesses in each of
those territories. Further, we wholesale our products to retailers
operating in over 50 countries around the world and have
licensed partners operating French Connection stores
across Asia, Australia and the Middle East.
Our design teams are based in London and we arrange for the
products to be manufactured in specialist third party factories
in Europe and Asia supervised by local buying offices. The
main countries where manufacturing takes place are China,
India and Turkey.
The Group retails garments through a network of stores on high
streets and in shopping malls across the UK, Europe and North
America and through concessions within leading department
stores such as House of Fraser. We also operate ecommerce
channels in the UK, Europe and North America.
The product ranges are also offered for sale at wholesale
through our showrooms in London, New York, Paris, Dusseldorf
and Hong Kong to selected customers operating department
stores, multi-brand fashion stores or ecommerce sites around
the world.
To further extend retail distribution we have granted franchises
and licences to quality retailers allowing them to operate French
Connection branded retail stores in Europe, the Middle East,
Asia and Australia. These customers are supplied through our
wholesale channels in the UK and Hong Kong. Our licensees
operating stores in Hong Kong and China are 50% Joint
Venture businesses operated by our local partners in those
territories.
Brand extensions
Our globally recognised French Connection brand has been
extended successfully into complementary licensed products
including men’s and women’s toiletries and fragrances, shoes,
watches, jewellery, eyewear and furniture. Our Design and
Licensing teams work closely with branded partners to
develop and enhance product for sale.
Current trends
The continued growth of multi-channel retailing is a clear
focus for French Connection. We will continue to invest in
the people and systems to support this growth opportunity
to ensure our customers can shop with us however they
wish and get the very best multi-channel experience.
The success of our click and collect program is an
example of this investment.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 4
Principal risks and uncertainties
Our success depends on our ability to produce ranges of
garments which are attractive to potential customers. We seek
to achieve this through retention of experienced and skilled
designers and merchandisers and by remaining as operationally
flexible as possible particularly in relation to our supply chain
and up front commitments.
The nature of fashion retail, however, means that it is not always
possible to predict customers’ reactions to each season’s new
ranges. Our customers’ propensity to spend on clothing is also
affected by their personal financial situation and other macro-
economic factors which impact the total size of the retail
markets in which we operate.
We consider however, that as a small operator at the upper
end of the middle market the impact on our business of macro-
economic elements is considerably smaller than the impact of
the success of our designers in producing attractive products.
Each year the brands produce two main seasonal fashion
ranges and the success of each of these is largely dependent
on the ability of our designers to reflect attractively the
emerging trends in fashion. We utilise a mix of experience
and fresh thinking in our design studios under the consistent
guidance of the senior management to ensure continuity
of the brand attitudes.
We have mitigated and smoothed fluctuations in demand by
developing our licensing businesses which provide a more
stable and predictable income stream.
The design process and our retail businesses in particular have
a significant proportion of fixed costs giving rise to operational
gearing and this is exacerbated by upward-only rent reviews.
To mitigate cost pressures we are constantly focused on
store operating costs efficiency, and have already achieved
considerable savings by optimising our rostering timetables in
store and actively managing our store estate, and exiting stores
where the opportunity is economically available to us.
Our brands and the way they are perceived in their respective
markets is very important to us. We are therefore very
protective of the brands and work to ensure that they are
presented in appropriate ways and that they are not misused.
A main driver for brand perception is the products themselves
and therefore our reputational risk is closely linked to our
sales success.
As a wholesaler we also face the risk of default from our
customers and manage this through active relationship
management by our dedicated customer accounts team.
Our experience of bad debts has been very low over many
years due to this close management. We also insure certain
overseas debt risk.
The Group maintains a positive net cash balance throughout
the year and we are conscious to manage the Group’s working
capital effectively.
The principal treasury risks to the Group arise from exchange
rate fluctuations. The Board has approved policies for
managing these risks, which are reviewed on a regular basis,
including the use of financial instruments, principally forward
foreign exchange contracts.
The most significant exposure to foreign exchange fluctuations
relates to purchases made in foreign currencies, principally
the Hong Kong Dollar. The Group’s policy is to reduce the risk
associated with purchases denominated in currencies other
than Sterling by using forward fixed rate currency purchase
contracts. There has been no change since the year end to
the major treasury risks faced by the Group or the Group’s
approach to the management of these risks.
The Group is dependent on reliable IT systems for managing
and controlling its business and for providing efficiency and
speed in the supply chain. Our IT function oversees all the
systems and has policies and procedures to protect the
software, hardware and data and to prevent unauthorised
access to the systems.
The Group’s approach to the management of risks is further
discussed in the Corporate Governance Statement.
Key Performance Indicators
The Board considers that the key performance indicators
for the businesses are:
• UK retail LFL sales growth;
• Sales achieved in the wholesale channels;
• Sales by geography;
• Gross margin %;
• Underlying operating profit/loss;
• Inventory levels.
Each of the above is discussed in more detail in the
Financial Review.
OUR BUSINESS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 5
WORLDWIDE OPERATIONS
UK/Europe North America Rest of the World
LOCATI ON LOCATI ON LOCATI ON
London,
Paris, Dusseldorf
New York Toronto Hong Kong
TERRI TORI ES TERRI TORI ES TERRI TORI ES
UK,
Europe,
Middle East
USA Canada Hong Kong,
China
Australia, Asia,
South Africa
RETAI L OPERATI ONS RETAI L OPERATI ONS RETAI L OPERATI ONS
Retail stores
and concessions,
ecommerce
Retail stores,
ecommerce
Retail stores,
ecommerce
Retail
stores and
concessions
through joint
ventures
WHOLESALE CUSTOMERS WHOLESALE CUSTOMERS WHOLESALE CUSTOMERS
Department stores,
multi-brand stores,
franchise operators
Department
stores,
multi-brand
stores
Department
stores,
multi-brand
stores
Brand licensees,
concessions,
department
stores
LI CENSI NG LI CENSI NG LI CENSI NG
Product and country licensing Product
licensing
Product
licensing
Product
licensing
BRANDS BRANDS BRANDS
French Connection,
Great Plains,
Toast, YMC
French
Connection,
YMC
French
Connection
French
Connection
French
Connection
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 6
RETAIL LOCATIONS
31 January 2015 31 January 2014
Locations sq ft Locations sq ft
Operated locations
UK/Europe
French Connection Stores
French Connection/Great Plains Concessions
Toast Stores
YMC Stores
62
55
11
2
183,358
35,363
13,425
1,355
66
51
12
2
202,770
33,560
15,384
1,355
130 233,501 131 253,069
North America
French Connection US Stores
French Connection Canada Stores
6
7
19,719
18,125
7
9
22,841
24,325
13 37,844 16 47,166
Total operated locations 143 271,345 147 300,235
French Connection licensed and franchised
UK/Europe
North America
Middle East
Australia
Hong Kong
China
India
Other
7
1
9
74
8
27
89
35
8,527
2,000
17,895
75,544
12,892
31,959
47,712
32,347
7
1
6
72
5
23
110
48
7,994
2,000
9,805
72,112
6,062
34,960
60,782
44,516
Total licensed and franchised locations 250 228,876 272 238,231
Total branded locations 393 500,221 419 538,466
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 7
CORPORATE SOCIAL RESPONSIBILITY
The Board recognises that the long term profitability of the
business depends, amongst other things, on appropriate
protection of the Group’s assets, reputation and brand names
and is subject to the long-term sustainability of the supply chain.
Impact on the environment
The use of resources to manufacture and supply our products
utilise finite global resources. The source of the raw materials and
the manufacture of the finished products is spread globally and
provides employment, income and personal security at many
different points in the process. We recognise, however, that
our products utilise global resources some of which are limited
in their nature.
Some of the initiatives we have implemented include:
• In the UK, the business meets its responsibilities under the
packaging waste regulations through membership of Valpak;
• Wooden hangers are sourced from sustainable sources
and we do not give them away with the products;
• Reduction in packaging materials for finished goods
i.e. no plastic banding, no inner cartons;
• Plastic returnable tote bins for shipping to our own
UK stores to reduce cardboard;
• Plastic and cardboard waste is collected from our
UK stores for recycling;
• At Toast packaging is recyclable, and catalogues are
printed on FSC paper with vegetable based inks;
• In our US operations, corrugated cartons are re-used
whenever possible and ultimately recycled using a band
machine so they are crushed into bails for collection; and
• In Canada we are participants in ‘Stewardship Ontario’,
paying a fee for all point of sale materials to be recycled.
All lighting has been replaced with LED’s.
Carbon emissions
Tonnes of CO
2
e
2015
Tonnes of CO
2
e
2014
Emissions from
Scope 1 (vehicles, fugitive emissions, gas) 236 428
Scope 2 (electricity) 4,688 5,139
Total footprint 4,924 5,567
Group chosen intensity measurement £m £m
Turnover 178.5 189.4
Emissions reported above
per £m of turnover 28 29
This is our second year greenhouse gas (GHG) emissions
report in line with UK mandatory reporting requirements, set
out by the Department for Environment, Food and Rural Affairs
(DEFRA).
The mandatory requirement is for the disclosure of scope 1
and 2 emissions only. We have captured all material qualifying
emissions from around the Group. Some extrapolation and
estimation techniques have been used to calculate the Group
CO
2
e in respect of less than 5% of our stores and the final
month of our data.
The reported sources fall within our consolidated financial
statements. We do not have responsibility for any emission
sources that are not included in our consolidated financial
statements. We have computed our emissions using the
DEFRA Environmental Reporting Guidelines: Including
mandatory greenhouse gas emissions reporting guidance
issued in June 2013.
Our total GHG footprint in line with these guidelines 4,924
tonnes CO
2
e (2014: 5,567 tonnes).
Supply chain
The Group has used third party manufacturing facilities around
the world for over thirty years but has specifically avoided
suppliers or regions where the employment or environmental
practices are known to be below acceptable standards. The
Group requires all of its product suppliers to abide by its
guidelines contained in the Supplier Guide. Our staff visit the
factories we use for garment production on a regular basis and
consider the environment and work practices during those visits,
however currently our ability to formally audit the facilities is
limited. Our Supplier Guide and the employment standards
required of our suppliers accord with industry standards including
inter alia that employees should: be given a safe and healthy
environment to work in; be given the right to free
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 8
CORPORATE SOCIAL RESPONSIBILITY
Continued
association; be paid a fair wage; not be forced or bonded
labour; be of an appropriate age; and work only reasonable
hours.
The Board recognises that it is not possible to provide absolute
assurance that standards expected of our suppliers are adhered
to. Where transgressions are identified we would work with the
supplier to develop an appropriate remediation programme.
However we will not hesitate to stop using any supplier who
we identify is persistently operating in contravention of our
standards or failing to implement agreed remediation
programmes.
In October 2014 French Connection ended the use of angora
in the production of its clothing and accessories following
customer feedback.
Toast supports the non-use of animals in testing and challenge
our suppliers on this matter – our glycerine soaps as an
example, do not contain any animal derived ingredients
and are suitable for use by vegetarian and vegans.
Tax
The Board is committed to ensuring full compliance with the
law and making all tax payments on a timely basis.
The Board are committed to ensuring that openness, honesty
and transparency will be paramount in all dealings with the tax
authorities and other relevant bodies.
We run cycle to work and childcare voucher schemes in the
UK for our employees.
People
We are committed to providing equal opportunities for all
of our employees.
We ensure that every employee, without exception, is treated
equally and fairly and that all employees are aware of their
responsibilities.
The breakdown of the gender of Directors and employees at
the end of the financial year is as follows:
Men
Number
2015
Women
Number
2015
Company Directors 4 1
Other senior managers 7 7
All other employees 500 1,583
Total 511 1,591
Notes
Company Directors consist of the Company’s Board.
Other senior managers is as defined in The Companies Act
2006 (Strategic Report and Directors’ Report) Regulations
2013, and includes: i) persons responsible for planning,
directing or controlling the activities of the Company, or
a strategically significant part of the Company, other than
Company Directors; and ii) any other Directors of undertakings
included in the consolidated accounts.
The business complies with locally applicable health and safety
regulations in the countries in which it operates. This includes
the provision and maintenance of safe environments for our
employees, appropriate design of our stores, health and safety
training for appropriate personnel, electrical installation reviews,
risk assessments and risk monitoring in our offices, stores and
warehouses.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 9
FINANCIAL REVIEW
Financial results overview
Following the initiatives put in place two years ago to
turnaround trading performance, the Group has delivered a
second consecutive year of strengthened financial performance.
Each half year reported during this period has shown year on
year financial improvement.
For the full year ended 31 January 2015 underlying Group
operating loss was reduced to £(0.8)m (2014: loss of £(4.4)m,
2013: loss of £(7.2)m). After taking into account the cost of
store disposals and closures the total loss before tax was
£(1.6)m (2014: loss of £(6.1)m).
Revenue overview
Total 2015 revenue was 5.8% lower than 2014 (-4.1%
at constant currency) with the growth in wholesale
being offset by the impact of store closures and
LFL’s in Retail.
Gross margin
Composite gross margin was slightly reduced at 46.7%
(2014: 47.6%) reflecting the higher mix of wholesale sales
within Group revenue. Within this UK/Europe retail gross
margin was up 50 basis points on lower discounting, and
UK/Europe wholesale gross margin up 170 basis points.
Segment revenue and results
2015
£m
2014
£m
Revenue
Retail 103.3 117.5
Wholesale 75.2 71.9
Group revenue 178.5 189.4
Gross profit 83.4 90.2
Retail 57.2% 56.9%
Wholesale 32.3% 32.5%
Group gross margin 46.7% 47.6%
Underlying operating (loss)/profit
Retail (11.3) (11.6)
Wholesale 14.6 11.7
Licence income 6.5 6.1
Common and Group overheads (10.7) (11.3)
Finance income 0.1 0.1
Share of pro?t from joint ventures – 0.6
Underlying Group operating loss* (0.8) (4.4)
Underlying operating margin
Retail (10.9)% (9.9)%
Wholesale 19.4% 16.3%
Underlying Group operating margin (0.4)% (2.3)%
Geographical information
2015
£m
2014
£m
Revenue
UK/Europe 72% 71%
North America 23% 24%
Rest of the World 5% 5%
Divisional operating (loss)/pro?t
UK/Europe (0.4) (3.9)
North America 2.5 2.4
Rest of the World 0.9 1.6
Group overheads and finance income (3.8) (4.5)
Underlying Group operating loss* (0.8) (4.4)
*Excludes net loss on store disposals and closures.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 10
FINANCIAL REVIEW
Continued
Retail
Group retail revenues of £103.3m were 12.1% lower than
the prior year (-11% at constant currency). The decline in
revenue was primarily due to the closure of 9 UK/Europe
non-contributing stores and negative LFL’s in H2.
In Q3 and into November, UK/Europe retail had been trading
against stronger prior year comparatives and un-seasonally
warm weather impacting LFL sales, as reported at the
November IMS. In Q4 we traded through the sale period
with lower stock levels which impacted LFL sales. Overall
UK/Europe LFL retail gross sales for the full year were -3%
(H1 +1.1%, H2 -6.5%).
The retail gross margin of 57.2% (2014: 56.9%) reflected
a good performance in UK/Europe with an improvement in
margin of 50 basis points partly offset by higher discounting
to clear inventory in North America.
The retail underlying loss of £(11.3)m was an improvement of
£0.3m compared to prior year. This improvement was driven
out of UK/Europe through the closure of non-contributing
stores.
Ecommerce sales represent 23% of total Group retail sales
(2014: 20%).
Wholesale
Group wholesale revenues of £75.2m were 4.6% higher than
prior year (+7.3% at constant currency), with growth in both
UK/Europe, North America and Rest of World. The wholesale
gross margin of 32.3% was broadly flat reflecting a good
performance in UK/Europe with an improvement in margin of
170 basis points offset by higher discounting to clear inventory
in North America. Combined with tight cost control, particularly
trade show and promotional expenses, overall wholesale
underlying operating performance was a £14.6m profit,
an increase of £2.9m.
Geographical analysis
The geographical revenue break-down is largely unchanged
with UK/Europe representing 72% of Group revenues (2014:
71%). The combination of Retail and Wholesale in UK/Europe
led to an improvement of £3.5m in divisional operating
contribution with North America delivering an improvement
off the back of a recovery in wholesale. Rest of the World
wholesale revenues were +2.1% at constant currency and the
lower profit from JV’s was due to the timing of Chinese New
Year and the disruption to retail in Hong Kong during the widely
publicised demonstrations.
Other Income
The net income received from Global licensing was £6.5m
in the year (2014: £6.1m) with strong growth from furniture
and shoes.
Operating expenses
Total Group operating expenses of £90.8m were 10.5% lower
than last year. After adjusting for store closures and currency,
operating expenses were 3% lower than last year thanks
to close monitoring and control. We will continue the focus
on costs, and will seek to absorb cost pressure from rent
reviews due in the current year.
Balance sheet and cash flow
The Group balance sheet at 31 January 2015 remains strong
with £23.2m of cash (2014: £28.2m), no bank borrowings and a
minimum cash position during the year of £7.6m (2014: £9.9m).
The trading operations of the Group consumed cash of £3.0m
(2014: cash generated £1.6m) with a reduction in trade and
other payables due largely to the timing of Chinese New Year,
lower stock purchases, and smaller retail store estate. This was
compensated for in part by a further decrease in inventory of
£3.3m reflecting the continued improvements in the efficiency
of merchandising and buying.
Capital expenditure increased to £1.1m (2014: £0.8m)
with increased expenditure on new retail locations, website
platform investment, and warehouse capabilities. In the year
the restructuring costs of closing under-performing stores was
£1.4m. We continue to target the closure of non-contributing
stores and expect 3–4 more to close in the current year in
UK/Europe and we will also review closely our North America
store portfolio. Since certain of the non-performing stores are
coming to the end of their leases, we expect to spend less in
store closure costs going forwards.
Taxation
The tax charge for the year of £Nil (2014: tax credit of £0.1m)
represents the net impact of a reduction in the tax potentially
payable on deferred capital gains less the tax payable on
current profits generated in Hong Kong and the US (as reduced
by past losses). The Group has unused tax trading losses with
a potential value of £13.8m. As the Group returns to profit,
these tax losses should be utilised.
Dividends
The Board of Directors remain of the view that the business is
best served by retaining current cash reserves to support the
turnaround of the business, and therefore do not recommend
the payment of a dividend. The Board intend to keep the
shareholder distribution policy under close review during
the year.
Going concern
Having reviewed the cash forecasts and the sources of cash
funding available to the Group, the Board has concluded that
it is appropriate to prepare the Group financial statements on
a going concern basis.
The strategic report, from pages 2 to 10, has been reviewed
and approved by the Board on 17 March 2015.
By order of the Board
Adam Castleton
Group Finance Director
17 March 2015
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 11
BOARD OF DIRECTORS
Stephen Marks
Chairman and
Chief Executive
Stephen (aged 68) founded the Company in 1969 and has managed the Group’s
development since then in the position of Chairman and Chief Executive.
Adam Castleton A.C.A.
Group Finance Director
Adam (aged 51) was appointed to the Board on 12 August 2013. He is a chartered
accountant having qualified at Price Waterhouse, Manchester. He holds a bachelor's
degree in Economics from Manchester University. He has over 25 years of financial
experience and has held leadership roles at a number of international consumer-facing
companies, including eBay, Shopping.com, Polo Ralph Lauren (Europe), and The Walt
Disney Company. He joined French Connection from O2 UK, where he was Finance
Director of the O2 Business Division, and previously acting CFO of O2 UK.
Neil Williams A.C.A.
Operations Director
Neil (aged 50) joined the Group from KPMG in 1992 and was appointed to the Board
in May 1994.
Dean Murray A.C.A.
Independent
Non-Executive
Director
Dean (aged 52) was appointed to the Board on 6 February 2008. He qualified as a
chartered accountant with KPMG and was Chief Executive of Myriad Childrenswear
Group Limited. Myriad was the leading UK specialist multi-brand and multi-channel
childrenswear business with over 1,000 distribution outlets including the Adams
Kidswear brand. He is currently Chairman of Neville Johnson Limited, a UK based
bespoke furniture designer, and Gear4music, an online retailer of musical instruments.
Claire Kent
Independent
Non-Executive
Director
Claire (aged 51) was appointed to the Board on 3 October 2008. She was formerly a
Managing Director with Morgan Stanley where she was ranked number one in luxury
goods European retailing analysis for nine consecutive years. Working in the sector
since the early 1990s she has accumulated an in-depth understanding of the operation
of luxury and apparel brands and has worked very closely with some of the most
respected brands in the sector. Since leaving Morgan Stanley, Claire has focused on
advising companies on their IPOs (Prada in 2011; Pandora in 2010) and playing a role in
the sale of private equity-owned companies (Cath Kidston, Original Additions). She is
also an advisory Director of Investcorp, a consultant for Prada and a Board member
of Georg Jensen. Claire is a co-founder of the British crafted runwear brand, Iffley Road.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 12
The Directors of French Connection Group PLC (“the
Company”) present their Annual Report for the year
ended 31 January 2015.
Principal activity
The Group designs and supplies branded fashion clothing
and accessories as more fully described in the section
entitled Our Business.
Business review
The principal operating subsidiaries of the Group for the
period under review were French Connection Limited, French
Connection UK Limited, French Connection (London) Limited,
Contracts Limited, French Connection Group Inc, French
Connection (Hong Kong) Limited, Toast (Mail Order) Limited,
French Connection (Canada) Limited and YMC Limited.
The Companies Act requires that the Directors’ Report contains
a fair review of the business and a description of the principal
risks and uncertainties facing the Group. A review of the
business strategy and a commentary on the performance of
the business is set out in the Strategic Report. The principal
risks facing the business are detailed in the section entitled
Our Business and the corporate and social responsibilities of
the Group are outlined in the Corporate Social Responsibility
Statement. The Corporate Governance Statement may
be found on page 14. The disclosures contained in those
reports form part of this Directors’ Report.
Fair, balanced and understandable
The Board has considered the regulatory changes impacting
corporate reporting and Executive remuneration and believes
this Annual report and Accounts complies with these changes
taking into account emerging best practice. Notably the Board
has determined that the 2015 Annual Report and Accounts,
taken as a whole is fair, balanced and understandable. It
provides the information necessary for shareholders to assess
the performance, strategy and operating model of the Group
and Company in accordance with the Code requirements.
Dividend
The Directors are recommending that no dividend should
be paid for the year.
Directors
The Directors of the Company are set out in the Board of
Directors on page 11.
Stephen Marks and Dean Murray, Directors, retire by rotation
in accordance with the Articles of Association and offer
themselves for re-election at the AGM. The Board considers
that Mr Marks and Mr Murray continue to make a major
contribution to the strategy and operations of the Group and
therefore recommend their re-election as Directors. Details
of Mr Marks’ and Mr Murray’s remuneration and contracts
are set out in the Directors' Remuneration Report.
The Board has considered whether there are any factors which
might compromise the independent judgement of either of the
non-Executive Directors and concluded there was none. The
Board therefore considers both Mr Murray and Ms Kent to be
independent of the Company.
At 31 January 2015, none of the Directors or their families held
any beneficial interests in the issued capital of the Company
other than Stephen Marks whose shareholding is disclosed
below and Adam Castleton whose shareholding is disclosed
in the Directors’ Remuneration Report.
The details of share options held by Directors are set out in the
Directors’ Remuneration Report. There have been no changes
in the Directors’ interests in the shares of the Company since
the end of the financial year.
Significant shareholdings
As at 17 March 2015 the Company is aware of the following
substantial interests in its ordinary shares:
Shares
Percentage
of Issued
Share
Capital
Stephen Marks 40,094,190 41.7%
of which:
– held in family trusts 1,506,500
– held by family members 775,000
Schroder Investment Management 12,111,207 12.6%
OTK Holding 6,000,000 6.2%
Liad Meidar 4,837,000 5.0%
Contractual arrangements
The Company has no contractual or other arrangements which
are essential to the business of the Company nor any key
customers or major suppliers on which it is dependent.
Supplier payment
The majority of the Group's creditors are suppliers with whom
payment terms and conditions are agreed in advance. Where
the supply of goods and services is satisfactory, it is the policy
of the Group to pay creditors when they fall due for payment.
For the year ended 31 January 2015, the Group’s average trade
creditors represented 34 days purchases (2014: 33 days). The
Company has minimal third party creditors.
Employees
It is the Group's established practice that all employees have
access to their immediate superiors and ultimately to the Chief
Executive to discuss matters of concern to them as employees
and that the views of employees are sought and taken into
account in making decisions which are likely to affect their
interests.
Furthermore the Group seeks to encourage both the involvement
of employees in its performance and a common awareness on
the part of all employees of factors affecting its performance.
The Group provides equal opportunities to all employees and
prospective employees including those who are disabled.
Carbon emissions
The Group has disclosed carbon emissions data within the
Corporate Social Responsibility Report.
Property, plant and equipment
The changes in intangible and tangible fixed assets during the
year are set out in Notes 11 and 12 to the Group accounts.
Financial instruments
The financial instrument policies are set out in Note 26 to the
Group accounts.
DIRECTORS’ REPORT
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 13
Joint Ventures
The Group is a member of two 50:50 Joint Ventures operating
retail stores in China and Hong Kong. Both joint ventures are
managed by committees with equal representation from the
members. The Group’s share of the results of these businesses
is included in these accounts for the whole of the financial year.
Charitable and political donations
Charitable donations of £11,305 (2014: £14,051) were made
during the year. No political donations were made in either
2015 or 2014.
Share capital and control
The share capital of the Company comprises ordinary shares
of 1p each; each share carries the right to one vote at general
meetings of the Company. The issued share capital of the
Company, together with movements in the Company’s issued
share capital during the year, are shown in Note 21.
The rights and obligations attached to the Company’s shares,
in addition to those conferred on their holders by law, are
set out in the Articles of Association. The holders of ordinary
shares are entitled to receive all shareholder documents, attend
and speak at general meetings of the Company, exercise all
voting rights and to receive dividends and participate in other
distributions of assets.
The Company is not aware of any agreements between
shareholders restricting the voting rights or the right to transfer
shares in the Company.
The rules about the appointment and replacement of Directors
are contained in the Company’s Articles of Association.
Changes to the Articles of Association must be approved by
the shareholders in accordance with the legislation in force
from time to time. The powers of the Directors are determined
by legislation and the Articles of Association of the Company
in force from time to time. Powers relating to the issuing and
buying back of shares are included in the Company’s Articles
of Association and shareholder approval of such authorities
may be sought, if considered appropriate by Directors, at the
Annual General Meeting.
The Company does not have agreements with any Director or
employee that would provide compensation for loss of office or
employment resulting from a takeover, save that the Company’s
share schemes contain provisions which may cause options
and awards granted to employees to vest on a takeover.
Takeovers directive
Section 992 of the Companies Act 2006, which implements
the EU Takeovers Directive, requires the Company to disclose
certain information. Most of these requirements are dealt with
elsewhere in the Annual Report, however the following
additional disclosures are required:
The Company’s Articles of Association may be amended by
special resolution of the shareholders.
The Board of Directors is responsible for the management
of the business of the Company and may exercise all the
powers of the Company subject to the provisions of the
relevant statutes, the Company’s Memorandum and Articles
of Association. The Articles contain specific provisions and
restrictions regarding the Company’s power to borrow money.
Powers relating to the issuing of shares are also included in the
Articles and such authorities are renewed by shareholders each
year at the AGM.
There are a small number of agreements that take effect, alter
or terminate upon a change of control of the Group following
a takeover, such as shareholder agreements with the minority
shareholders in certain subsidiaries and the Company share
option schemes. None of these is deemed to be significant in
terms of their potential impact on the business of the Group
as a whole.
Going concern
The Group has considerable cash resources, ending the year
with £23.2m (2014: £28.2m) and with a minimum Group cash
balance during the year of £7.6m (2014: £9.9m). The Group
has no debt.
Having reviewed the cash forecasts and the sources of
cash funding available to the Group, the Board has concluded
that the Group has a reasonable expectation to continue in
operational existence for the foreseeable future. For this reason,
the Board continues to adopt the going concern basis in
preparing the accounts.
Controlling shareholder
In order to comply with changes to the Listing Rules relating
to controlling shareholders, a relationship agreement was
executed during the year between French Connection Group
PLC and Stephen Marks. The Company has complied with
all of the independence provisions of the Listing Rules.
Disclosure of information to auditors
The Directors who were members of the Board on the date the
Directors’ Report was approved have confirmed the following:
• to the best of each Director’s knowledge and belief there is
no information relevant to their report of which the auditor
is unaware; and
• each Director has taken all the steps a Director might
reasonably be expected to take to be aware of relevant audit
information and to establish that it has been communicated
to the auditor.
Auditors
KPMG LLP were appointed at the last AGM and have indicated
their willingness to continue as Auditors. Resolutions to
reappoint them and to authorise the Directors to determine
their remuneration will be proposed at the 2015 AGM.
AGM
The AGM of the Company will be held at 10.00 am on 14 May
2015 and a Notice of Meeting has been sent to shareholders
setting out details of the business to be conducted.
Explanatory notes on all the business to be considered at this
year’s AGM appear on pages 60 to 61 of this document.
By order of the Board
Adam Castleton
Company Secretary
17 March 2015
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 14
Compliance with the UK Corporate
Governance Code
The Board is responsible for ensuring compliance with the
new edition of UK Corporate Governance Code (the ‘Code’),
which was published by the Financial Reporting Council in
September 2012 and applies to reporting periods beginning
before 1 October 2014. The code is available at www.frc.org.uk.
Except as referred to below, the Company has complied with
all relevant provisions of the 2012 Code throughout the year
ended 31 January 2015 and from that date up to the date of
publication of this Annual Report.
Mr Marks is both Chairman and Chief Executive and is also the
founder and the major shareholder (provision A2.1). The culture
of the business, led by the Chief Executive, is one of detailed
involvement and a need for speedy reaction times. Mr Marks
has led this culture and defined the character of the business
throughout its existence.
Constructive challenge by the independent non-Executive
Directors, as well as the effective functioning of the committees
ensures that authority is suitably balanced.
The Board contains two non-Executive Directors, each of which
chairs one of the three committees of the Board and therefore
has specific responsibilities. The Board has concluded that
there would be no benefit in nominating a senior non-Executive
Director (provision A4.1). Both are utilised as sounding boards
for the Chairman and both are available to other Executive
Directors or shareholders as necessary.
There were no non-Executive Board appointments made
or contemplated during the year. It is our intention to form a
Nominations Committee comprising the two non-Executive
Directors when any appointment is contemplated (provision B2.1).
The Chairman believes that the Board and its Committees
functioned well during the year and supported the strategy and
development of the Company. A detailed and formal evaluation
was therefore not carried out during the year (provision B6.1).
The Board and its composition
The Board reserves to itself certain key matters to approve or
monitor on behalf of the shareholders the strategic direction,
development and control of the Group. It approves strategic
plans and annual capital and revenue budgets. It reviews
significant investment proposals and the performance of past
investments and maintains an overview and control of the
Group’s operating and financial performance. It monitors the
Group’s overall system of internal controls, governance and
compliance and ensures that the necessary financial and
human resources are in place for the Company to meet its
objectives.
The Board delegates responsibility for the day-to-day operation
of the business to the Executive Directors within the framework
of agreed prudent and effective controls.
The Company Secretary’s responsibilities include ensuring good
information flows to the Board and between senior management
and the non-Executive Directors. The appointment and removal
of the Company Secretary is a matter reserved for the Board.
The Company Secretary is responsible, through the Chairman,
for advising the Board on all corporate governance matters
and for assisting the Directors with their professional
development.
All Directors are briefed by the use of comprehensive papers
circulated in advance of Board meetings and by presentations
at the meetings in addition to receiving minutes of previous
meetings.
The training needs of Directors are formally considered on an
annual basis and are also monitored throughout the year with
appropriate training being provided if required.
Any member of the Board may take independent professional
advice at the Company’s expense. All Directors have access to
the advice and services of the Company Secretary. All Directors
of the Company are covered by a comprehensive Directors and
Officers insurance policy.
The Company’s Articles of Association give power to the Board
to appoint Directors, but require Directors to submit themselves
for election at the first AGM following their appointment. One
third of the Board is subject to re-election annually.
The Board of Directors at the date of this report comprises
three Executive Directors and two independent non-Executive
Directors. The biographical details of each Board member
are set out in the Board of Directors, including their main
commitments outside the Company.
During FY 2015 there were nine scheduled Board meetings.
Neil Williams was unable to attend two of the meetings. All the
other meetings were fully attended.
The non-Executive Directors are considered to be independent
in that they remain free from any business or other relationship
which could materially influence their judgement and represent
a strong source of advice and independent challenge.
Stephen Marks and Dean Murray are required to stand for
annual re-election in accordance with B.71 of the Code and
the Company’s Articles of Association.
Committees
Each Board Committee has written terms of reference approved
by the Board, which are available on the Company’s website.
Audit Committee
The Audit Committee comprises Dean Murray who is Chair
and Claire Kent, the two independent non-Executive Directors.
The Committee met three times during the year and each
meeting was fully attended.
Details of the Audit Committee are included in the Audit
Committee Report.
Remuneration Committee
The Remuneration Committee comprises Claire Kent who is
Chair and Dean Murray. The Group Finance Director attends
by invitation.
The Committee met three times during the year and each
meeting was fully attended.
Details of the Remuneration Committee are included in the
Directors’ Remuneration Report.
CORPORATE GOVERNANCE STATEMENT
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 15
The Disclosure Committee
The Disclosure Committee was established in October 2013
to assist and inform the Chief Executive in his decisions
concerning the identification of inside information and its
disclosure. The Disclosure Committee comprises the Chief
Executive, Group Finance Director and Chief Operating Officer.
The Disclosure Committee met once during the year and
was fully attended.
Code of ethics
The Group operates under the detailed and entrepreneurial
guidance of Stephen Marks (the founder of the business), the
Executive Directors and a broad range of operational managers.
As noted above the Board includes two non-Executive Directors
who provide independent challenge and input into the overall
governance of the Group.
The culture established by Mr Marks and the senior management
is to expect a high standard of behaviour from everybody
working for the Company.
The Board has considered the risks associated with the issues
raised by the Bribery Act 2010 as part of the broader review of
risks faced by the Group and has reviewed the processes and
controls in place to prevent offences under the Act.
The Company also offers a confidential, whistle blowing hotline
for any employee wishing to report any concern that they feel is
inappropriate to raise with their line manager. All whistle blowing
allegations are reported to and considered by the Executive
Committee and Board. No instances occurred during the
financial year.
Tax
Board level oversight of tax matters is part of the Company’s
tax risk governance process.
All significant tax matters are reported to the Board by the
Group Finance Director and tax matters are governed by
the Group tax strategy.
Internal control and risk management
The Board supported by the Audit Committee confirms that
there are ongoing procedures in place for identifying, evaluating
and managing significant risks faced by the Group and that
these have been in place for the year under review and up
to the date of approval of the Annual Report and Accounts.
The procedures have been reviewed on an ongoing basis
throughout the year by the Audit Committee and accord with
the requirements of the UK Corporate Governance Code.
The Board conducts an annual review of the major risks
affecting the business and the effectiveness of the system
of internal control. The culture of the business results in the
Executive Directors being closely involved in managing the
business at a detailed level. This provides a high degree of
direct monitoring of risks and control processes, conducted
against the background of a culture of integrity, quality and high
levels of communication. This is supported by reviews of daily,
weekly and monthly detailed analyses of the performance of
the business, the key performance indicators associated with
the trading risks facing the Company and the detailed
operational results.
The Group does not have a separate internal audit function
although during the year the Board considered whether there
is a need for such a function, concluding that the benefits,
when compared to the potential benefits of deploying additional
resources in other areas, are not sufficiently clear. Certain
elements of internal audit work are conducted or coordinated
by the existing finance and accounting functions. These include
reviews of financial controls internationally, externally facilitated
reviews of procurement transactions and support for system
developments between the separate accounting functions.
Communication with shareholders
Communication with shareholders is generally conducted
through one-to-one meetings with the Executive Directors
(and the non-Executive Directors if requested) for which there
is an open invitation to all shareholders and proactive invitation
made to shareholders with more than 1% of the share capital.
Meetings typically occur shortly after the announcements
of half-year and full year results. The opinions expressed by
shareholders are gathered by the Company Broker and passed
directly to the Board.
The AGM and the resolutions proposed for consideration at the
meeting are another focus of communication with shareholders.
Discussions are held prior to the meeting with shareholders
where they have views on the resolutions. The level of proxy votes
received is considered carefully by the Board and published on
the Group’s website with details of any proposed Board action
where significant votes were cast against a specific resolution.
By order of the Board
Adam Castleton
Company Secretary
17 March 2015
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 16
AUDIT COMMITTEE REPORT
Introduction from the Audit Committee Chair
I am pleased to present the Audit Committee Report for the
year ended 31 January 2015.
The Audit Committee is responsible for ensuring that the
financial integrity of the Group is effective, through the regular
review of its financial performance. It is also responsible for
ensuring that the Group has appropriate risk management
processes and internal controls, and that the external audit
process is robust. I explain in more detail the Committee’s
activities in this report.
The Audit Committee provides effective governance over
external financial reporting, risk management and internal
controls and reports its findings and recommendations to the
Board. In my capacity as Chairman of the Audit Committee,
I am pleased to report on the operations of the Committee
during the past year, with emphasis on the specific matters we
have considered, including compliance with the UK Corporate
Governance (the Code) and associated Guidance on Audit
Committees. I confirm that we have fully complied with the
requirements of the Code.
Robert Brent completed his final year of the Audit Partner’s five
year rotation. I would like to formally welcome Jeremy Hall as
our new Audit Partner.
I thank my fellow Committee member Claire Kent for her
work and input to the Committee and have welcomed the
openness of KPMG and French Connection personnel
throughout the year.
Dean Murray
Chair of the Audit Committee
Membership and remit of the Audit Committee
The Committee considers financial reporting and reviews
the Group’s accounting policies and annual statements.
In particular, any major accounting issues of a subjective
nature are discussed by the Committee.
The Committee also reviews audit activity including the
recommendation to the Board regarding the appointment
of the external auditor, their remuneration and scope of work,
including non-audit services.
The Audit Committee is also responsible for considering the
independence, objectivity and effectiveness of the external
auditor, for monitoring the level of non-audit services provided
by the external auditor and for assessing the effectiveness of
the risk management process.
At the date of the 2015 Annual Report, the Audit Committee
comprises two independent non-Executive Directors: Dean
Murray (Chair) and Claire Kent. In accordance with Code provision
C.3.1, the Board considers that Dean Murray has significant,
recent and relevant financial experience. Biographies of all of the
members of the Audit Committee, including a summary of their
experience, appear within the Board of Directors.
The Audit Committee normally meets at least three times
a year. Audit Committee meetings are also attended by the
Group Finance Director, who is Secretary to the Committee and
by invitation members of the Group Finance team and Partner
and other senior staff of the external auditor. The Committee
met three times during the financial year and each meeting
was fully attended.
Terms of reference
Significant risk issues identified are referred to the Board
for further consideration. The terms of reference of the Audit
Committee are available on the Company’s website.
The Audit Committee is authorised by the Board to review
any activity within the business. It is authorised to seek any
information it requires from, and require the attendance at any
of its meetings of, any Director or member of management,
and all employees are expected to co-operate with any
request made by the Audit Committee.
The Audit Committee is authorised by the Board to obtain, at
the Company’s expense, outside legal or other independent
professional advice and secure the attendance of outsiders
with relevant experience and expertise if it considers this
necessary.
The Chair of the Audit Committee reports to the subsequent
Board meeting on the Committee’s work and the Board
receives a copy of the minutes of each meeting.
Significant issues considered by
the Audit and Risk Committee
The Committee considered the significant accounting issues,
matters and judgements in relation to the Group’s financial
statements and disclosures for the year ended 31 January
2015. As part of the half-year and full year reporting process,
management present a Financial Review to the Committee, and
the external auditors are asked to also comment on the key
areas of accounting judgement and disclosure. The information
presented is used by the Committee to critically review and
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 17
assess the key policies and judgements that have been applied,
the consistency of policy application from year to year and
the appropriateness of key disclosures made, together with
compliance with the applicable accounting standards.
After discussion with both management and the external
auditor, the Committee determined that the key risks of
misstatement of the Group’s financial statements related to:
Net realisable value of inventories (NRV)
Net realisable value was discussed with management during
the year and with the auditor at the time the Committee
reviewed and agreed the auditors’ Group audit plan, and also
at the conclusion of the audit of the financial statements.
The Audit Committee required the Head of Business Planning and
the Stock Controller to present a detailed summary of inventory
and to describe the methodology for calculating the inventory
provision which was considered in detail by the Committee. They
were also required to describe the stock taking procedures.
The Committee interrogated management’s key assumptions
made regarding net realisable value and was satisfied that
the significant assumptions had been appropriately scrutinised,
challenged and were sufficiently robust.
The auditor explained their audit procedures to test
management’s assumptions and calculations and considered
the Group’s disclosures on the subject. On the basis of their
audit work, the auditor considered that the carrying value of
inventory was materially appropriate in the context of the
financial statements as a whole.
Risk management framework
The risk management framework is considered by the Board
during the year, and was discussed on an ongoing basis in the
Audit Committee.
The Audit Committee also considered a report presented by
the Head of IT which set out in detail for all business systems
the IT risk register, risk ranking, risk mitigation and investment
plans. The Audit Committee supported the approach taken by
management to identify and mitigate IT risks.
The Group did not have a separate internal audit function
during the year. The Audit Committee considered whether there
was a need for such a function, concluding that the benefits,
when compared to the potential benefits of deploying additional
resources in other areas, were not sufficiently clear.
Confidential reporting
The Group’s whistle blowing policy enables staff, in confidence,
to raise concerns about possible improprieties in financial and
other matters and to do so without fear of reprisal.
The Audit Committee receives quarterly reports on whistle
blowing incidents and remains satisfied that the procedures
in place are satisfactory to enable independent investigation
and follow up action of all matters reported.
No issues have been reported in the current year.
Other matters considered
Changes to the UK Corporate Governance Code were
considered by the Committee.
The Audit Committee strategy and timetable was considered
and agreed.
Reporting of other matters
All significant insurance claims and incidents of fraud or theft
are reported to the Committee.
There have been no significant incidents during the year.
External auditor appointment
KPMG LLP were appointed as auditors at the AGM on
15 May 2014 and the Directors were authorised to agree
their remuneration for the 2014/2015 audit.
The Audit Committee has considered the new Code, and
recognises the Competition Commission’s proposal that
FTSE350 Companies must tender the external audit at least
every ten years. While this is not applicable to French Connection,
the Committee nevertheless recognises this to be best practice.
The Committee is also aware of the EU proposals that have
come into force during 2014 and that will be relevant for all
listed companies from 2016.
The Audit Committee understands that local enactment of
the law is still being finalised and will continue to monitor these
developments during the coming year. The Committee is aware
that KPMG LLP’s last possible year of engagement is currently
2021 and will therefore develop an appropriate Audit tendering
policy when applicable.
External auditor’s independence
The Committee has adopted a policy in relation to the
appointment of the external auditors to conduct non-audit
services for the Group.
The policy identifies three categories of work: that which is
closely related to the statutory audit work, such as tax planning
and compliance, and which is therefore pre-approved by the
committee, that which it is inappropriate for the auditors to
conduct, such as internal accounting work, IT services, or
internal auditing, and from which the auditors are therefore
excluded and all other types of work for which prior approval is
required from the Audit Committee where the costs are greater
than £5,000.
The objective of this policy is to protect the independence
of the auditors while retaining the benefits to be gained from
synergies with existing work areas.
In 2014/2015 the ratio of audit to non-audit fees was 1:0.47.
The Audit Committee has considered the independence of the
external auditor, including the non-audit services performed,
and has concluded that those non-audit services provided
do not impair the auditor’s independence.
External audit annual assessment
The Group Finance Director, and the Audit Committee meet
with the external auditors to discuss the audit strategy and any
key issues included on the Audit Committee’s agenda during
the year.
After formal discussion, the Audit Committee considers that the
relationship with the auditors is working well and is satisfied with
their effectiveness.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 18
DIRECTORS’ REMUNERATION REPORT
Annual Statement by the Chairman
of the Remuneration Committee
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 31 January 2015.
In my report as Chairman of the Remuneration Committee,
I set out the Committee’s approach to Directors’ remuneration.
The Committee’s objective is to set a remuneration policy
that is clearly understood by our shareholders and employees,
and that drives the right behaviour in terms of incentivising
Executive Directors to deliver growing long-term shareholder
value.
There were no substantial changes relating to Directors’
remuneration made during the year.
Following the approval of the Directors’ Remuneration Policy
at the last AGM we are seeking shareholders’ approval of the
Directors’ Remuneration Report, as set out in the next section
of this report, at the 2015 AGM.
We are happy to discuss any remuneration matters with
shareholders and hope that we can enjoy your support
on the remuneration-related resolutions at the 2015 AGM.
Claire Kent
Chairman, Remuneration Committee
Directors’ Remuneration Report
The Directors’ Remuneration Report sets out details of the
remuneration policy (Section 1) for Executive and non-Executive
Directors, describes the implementation of that policy (Section
2) and discloses the amounts paid relating to the year ended
31 January 2015.
The report complies with the provisions of the Companies
Act 2006 and Schedule 8 of The Large and Medium-sized
companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013. The report has been prepared in line with the
recommendations of the UK Corporate Governance Code and
the requirements of the UKLA Listing Rules, as well as the
GC100 and Investor Group.
The Remuneration Committee comprises Claire Kent as Chair
and Dean Murray. Adam Castleton acts as Secretary to the
Committee. The Committee met three times during the year
to consider the Directors’ and senior managers’ remuneration.
All meetings were fully attended.
When setting the policy for Executive Directors’ remuneration,
the Committee takes into account total remuneration levels
operating in companies of a similar size and complexity, the
responsibilities of each individual role, individual performance
and an individual’s experience. Our overall policy, having had
due regard to the factors noted, is to weight remuneration
towards variable pay. This is typically achieved through setting
base pay, pension and benefits up to market median levels,
with a variable pay opportunity linked to the achievement of
company and personal performance targets.
In setting remuneration for the Executive Directors, the
Committee does take note of the overall approach to reward
for employees in the Group and salary increases will ordinarily
be (in percentage of salary terms) in line with those of the wider
workforce.
We remain committed to shareholder dialogue and take
an active interest in voting outcomes. There have been no
significant policy changes or other substantial matters which
required dialogue with shareholders during the year. If any
of the shareholders are opposed to our policy we would
endeavour to meet with them to understand and respond
to any issues they may have.
The Committee considers developments in institutional
investors’ best practice expectations and the views expressed
by shareholders during any dialogue. The Committee does not
formally consult directly with employees on Executive pay.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 19
Terms of reference for the Remuneration Committee
The terms of reference can be found on the Company’s website.
Section 1: Remuneration Policy
The objective of the policy is to ensure it is appropriate to the Group’s needs and reward Executives for creating shareholder value.
It is the Remuneration Committee’s intention to maintain incentive arrangements which are subject to challenging performance
targets, reflect the Company’s objectives and which motivate executives to focus on both annual and longer term performance.
The Company’s policy is:
• to provide remuneration packages for the Executive Directors and other senior managers in the Group which are appropriate
to the size and nature of the Group’s business and which will attract, retain and motivate high calibre Executives; and
• to balance the fixed and performance-related elements of remuneration appropriately and to provide both short-term and
longer-term incentives to achieve the strategic aims of the Group.
Structure of remuneration
Element
Purpose and link
to strategy
Operation
(including maximum levels)
Framework used to assess performance and
provisions for the recovery of sums paid
Salary
and fees
To provide the core reward
for the role
Sufficient to attract, retain
and motivate high calibre
Executives
Basic salaries are reviewed annually, with changes
effective from 1 February
Salaries are typically set having regard to competitive
market practice, each Director’s contribution to the
business, general inflation rates and the conditions
within the Group
Salaries may be adjusted and any increase will ordinarily
be (in percentage of salary terms) in line with those of the
wider workforce
Increases beyond those granted to the wider workforce
(in percentage of salary terms) may be awarded in
certain circumstances such as where there is a change
in responsibility, progression in the role, experience or a
significant increase in the scale of the role and/or size,
value and/or complexity of the Group
Salary levels for current incumbents for the 2015 financial
year are as follows:
Chairman/CEO: £308,461
Group Finance Director: £215,000
Operations Director: £232,989
The Committee considers individual salaries at
the appropriate Committee meeting each year
after having due regard to the factors noted in
operating the salary policy
No recovery provisions apply to salary
Benefits
in kind
In line with the Company’s
strategy to keep
remuneration simple and
consistent with practices
in the market
Executive Directors receive car benefit, medical cover and
life cover in line with other senior management
Executive Directors also receive personal accident and
sickness cover
The cost to the Company of providing these benefits may
vary from year to year depending on the cost of insuring
the benefit
Not applicable
No recovery provisions apply to benefits
Pension To provide post-retirement
remuneration and market
typical benefits to ensure
that the overall remuneration
package is competitive
Defined contribution plan with up to 10% monthly
employer contributions
A cash alternative may be considered
For tax and wealth planning, the Company may make
payments of pension benefits due in advance for
Executive Directors
Not applicable
No recovery provisions apply to pension benefits
Annual
Bonus
To incentivise and recognise
execution of the business
strategy on an annual basis
Rewards the achievement
of annual financial,
operational and individual
goals
Bonuses are capped at 100% of basic salary
Bonus payments are proposed to the Board after
the end of each financial year and approved by the
Committee for payment in March
The bonus is calculated using pro-rata base salary
if the Director joined the Company during the year
If the Director resigns or has his/her employment
terminated before the payment date, no bonus will
normally be payable
The annual grant of bonuses is based on the
financial performance of the Group in relation to
initial budgets, prior year performance and market
conditions, as well as operational and individual
goals
No recovery provisions apply to the Annual
Bonus. Any provisions will be considered in 15/16
in line with D1.1 of the Corporate Governance
code
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 20
DIRECTORS’ REMUNERATION REPORT
Continued
Structure of remuneration continued
Element
Purpose and link
to strategy
Operation
(including maximum levels)
Framework used to assess performance and
provisions for the recovery of sums paid
Long-
term
incentive
plans
(LTIPs)
To align the interests of
the Executive Directors
with the performance of the
business and the interests
of the shareholders through
the use of share option
schemes
To incentivise and recognise
execution of the business
strategy over the longer
term
Rewards strong financial
performance
At the discretion of the Board and approval of the
Remuneration Committee the Company may issue share
options to Directors up to a maximum of two times salary
in each year
In exceptional circumstances the Board has the discretion
to issue options up to four times salary although this
power has not been used in the last ten years
Options will normally be granted at market value on
the date of grant unless otherwise stated in a Service
Agreement
Options may be granted at a discount to the market
value only in circumstances where the grant of options
is agreed as part of a recruitment package in which case
the exercise price of the option may be determined by
reference to the market value on the date on which the
individual’s employment commenced
The share option schemes include an upper limit on the
number of shares which can be issued of 10% of the total
share capital in any ten year period
Share Awards vest based on three year
performance against a challenging range
of financial targets
No recovery provisions apply to the LTIP. Any
provisions will be considered in 15/16 in line with
D1.1 of the Corporate Governance code
The Committee has not been required to apply any discretion
during 2015 outside the stated Remuneration Policy.
Any use of the above discretions would, where relevant, be
explained in the Annual Directors’ Remuneration Report and
may, as appropriate, be the subject of consultation with the
Company’s major shareholders.
The performance metrics that are used for our annual bonus
and LTIP are to reflect the Group’s key performance indicators,
notably ‘Profit before Tax’.
The Executive remuneration policy is broadly in line with other
French Connection employees, with the main difference that
there is no share scheme below senior Executive level and
some variation of benefits offered.
Any loss of office payment will be approved by the Group
Board and Remuneration Committee. Any payment will be
made at discretion and on a case-by-case basis. Any
payments made beyond contractual and statutory obligations
would be exceptional in nature either due to additional
obligations taken on by the departing Director or due to
specific circumstance and always benchmarked against
market practice.
Illustration of application of policy
The bar charts below represents the variations in
remuneration at different levels of performance for FY15
for the Executive Directors. Long-term incentive plans have
been excluded from the illustrations below because options
are normally granted at market value on the date of grant
and therefore have no immediate intrinsic value.
700,000
600,000
500,000
400,000
200,000
300,000
100,000
0
Fixed On-target Maximum
100% 70% 54%
30%
46%
Stephen Marks
Annual incentives
Fixed only
Base Benefit Pension Total
Fixed (£) 308,461 23,102 29,948 361,511
On-target On-target is assumed to be an annual
bonus equal to 50% of maximum
Maximum Full payout of annual variable pay
i.e. 100% of base salary
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 21
600,000
500,000
400,000
200,000
300,000
100,000
0
Fixed On-target Maximum
100% 70% 54%
30%
46%
Neil Williams
Annual incentives
Fixed only
Base Benefit Pension Total
Fixed (£) 232,989 17,182 21,962 272,133
On-target On-target is assumed to be an annual
bonus equal to 50% of maximum
Maximum Full payout of annual variable pay
i.e. 100% of base salary
500,000
400,000
200,000
300,000
100,000
0
Fixed On-target Maximum
100% 70% 54%
30%
46%
Adam Castleton
Annual incentives
Fixed only
Base Benefit Pension Total
Fixed (£) 215,000 18,513 21,500 255,013
On-target On-target is assumed to be an annual
bonus equal to 50% of maximum
Maximum Full payout of annual variable pay
i.e. 100% of base salary
Executive Director’s terms of employment
Neil Williams’ service contract is dated 17 April 1996, has an
indefinite term, and includes provision for a notice period of
twelve months by either party.
Adam Castleton’s service contract is dated 26 April 2013, has
an indefinite term, and includes provision for a notice period
of six months by either party.
The service agreements can be inspected at the Group
registered office.
Stephen Marks has no service contract.
Non-Executive Directors
Non-Executive Directors have specific terms of engagement
and the Board determines their remuneration.
Dean Murray’s terms of engagement are dated 7 March 2008,
have an indefinite term and allow for a notice period of one month.
Claire Kent’s terms of engagement are dated 3 October 2008,
have an indefinite term and allow for a notice period of one
month.
The non-Executive Directors each receive total annual fees
of £30,000.
No detailed disclosures have been provided for non-Executive
Directors other than for that relating to their fees, as this is the
only form of remuneration the non-Executive Directors receive.
Section 2: Application of the remuneration
policy for 2015
The Executive Directors’ salaries will be reviewed on 1 April
2015 and will be increased as follows:
Stephen Marks +2%
Neil Williams +2%
Adam Castleton +2%
The annual bonus for the 2016 financial year will operate on the
same basis as for the 2015 financial year and will be consistent
with the policy detailed in the Remuneration policy section of
this report in terms of the maximum bonus opportunity. The
measures have been selected to reflect goals that support the
key strategic objectives of the Company.
The Remuneration Committee will exercise their discretion to
grant share options according to the Remuneration Policy during
the Financial Year 2016 dependent upon the financial position
of the Group and the personal contribution of each Executive
Director. Currently no share grant is contemplated for the
forthcoming year.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 22
DIRECTORS’ REMUNERATION REPORT
Continued
Directors’ single figure of total remuneration (audited)
The following table sets out the single figure of total remuneration for Directors for the financial years ended 31 January 2015
and 2014:
Director’s earnings
Directors’ emoluments
Year ended 31 January 2015
Salary
& fees
£000
Benefits
in kind
£000
Annual
bonus
£000
Pension
£000
Total
£000
Executive Directors
Stephen Marks 308 23 – 30* 361
Neil Williams 233 17 – 22 272
Adam Castleton 215 19 – 21 255
Non-Executive Directors
Dean Murray 30 – – – 30
Claire Kent 30 – – – 30
816 59 – 73 948
* In accordance with the Directors’ Remuneration Policy for tax and wealth planning the Group made a payment of £99,523 for pension
benefits due in advance for Stephen Marks.
Year ended 31 January 2014
Salary
& fees
£000
Benefits
in kind
£000
Annual
bonus
£000
Loss of
office
£000
Pension
£000
Total
£000
Executive Directors
Stephen Marks 299 23 50 – 30 402
Neil Williams 226 17 40 – 22 305
Adam Castleton 102 9 45 – 10 166
Roy Naismith 50 4 – 188 5 247
Non-Executive Directors
Dean Murray 30 – – – – 30
Claire Kent 30 – – – – 30
737 53 135 188 67 1,180
The annual bonus shown above was accrued in respect of the performance for the year ended 31 January 2014.
Percentage change in remuneration of Chief Executive
The Chief Executive received a 3% pay increase in 2015 in line with the rest of the eligible Group employees. There was no
Group increase in benefits in kind or pension contributions. No annual bonus was paid to the Chief Executive in 2015 (2014:
£50,000). Employee annual incentives have not been finalised at the signing date of the Annual Report.
Relative importance of spend on pay
Remuneration paid to all employees of the Group during 2015 was £37.8m which represented 42% of the total overheads
of the Group (2014: £38.9m (38%)).
The table below shows the total pay for all of the Group’s employees compared to distributions.
2015
£m
2014
£m % change
Employee costs 37.8 38.9 (3)%
Dividends – – –
Payments for loss of office (audited)
Roy Naismith ceased to be an Executive Director and the Group Finance Director of the Company on 26 April 2013.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 23
Directors’ shareholding and share interests (audited)
Directors’ share options
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire shares in the Company
granted to or held by the Directors. Details of options to subscribe for ordinary shares of 1p each in the Company held by
Directors who served during the year are as follows:
1 February
2014
No. of
options
Issued/
(lapsed)
during the
year
31 January
2015
No. of
options
Exercise
price (p)
Dates of
grant
Dates from
which
exercisable
Dates of
expiry
Stephen Marks 376,700 – 376,700 56.2
29 Oct
2008
29 Oct
2011
29 Oct
2018
Neil Williams 284,500 – 284,500 56.2
29 Oct
2008
29 Oct
2011
29 Oct
2018
Adam Castleton 600,000 – 600,000 29.25
4 Nov
2013
4 Nov
2016
4 Nov
2023
No options were exercised during the year.
The market price of the shares at 31 January 2015 was 58.5p and the range during the year was 36.0p to 92.0p. The average market
share price during the year was 60.8p. The options granted are exercisable between three and ten years after the date of grant and
were subject to performance conditions described above.
Statement of Directors’ shareholding and share interests (audited)
Share
options* with
performance
conditions
No.
Vested but
unexercised
No.
Shares
beneficially
owned
No.
Total interest
in shares
No.
Stephen Marks – 376,700 40,094,190 40,470,890
Neil Williams – 284,500 – 284,500
Adam Castleton 600,000 – 81,600 681,600
600,000 661,200 40,175,790 41,436,990
*Outstanding service conditions.
Statement of shareholding voting
The results of the vote on the Remuneration Report and the Remuneration Policy at the 2014 AGM are set out in the table below.
Votes for Discretion Votes against Votes witheld
Number % Number % Number % Number
Remuneration Report 55,819,919 99.00 11,900 0.02 554,673 0.98 –
Remuneration Policy 55,814,919 98.99 11,900 0.02 559,473 0.99 200
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 24
DIRECTORS’ REMUNERATION REPORT
Continued
Review of past performance and total shareholder return
This graph below demonstrates the Company’s performance, measured by total shareholder return, compared with the performance
of the FTSE Small Cap Index also measured by total shareholder return. This index has been selected for the comparison because it
reflects the market sector in which the Company is reported. The graph has been compiled on annual data at 31 January of each year.
350
300
250
200
100
150
50
0
31 Jan-09 31 Jan-10 31 Jan-11 31 Jan-12 31 Jan-13 31 Jan-14 31 Jan-15
Total cumulative shareholder return for the six-year period to 31 January 2015 French Connection
FTSE Small Cap
2010
£000
2011
£000
2012
£000
2013
£000
2014
£000
2015
£000
Total CEO remuneration 330 505 342 352 402 361
Annual variable element award rates
against maximum opportunity 0% 62% 0% 0% 17% 0%
Approval
This report was approved by the Board of Directors on 17 March 2015 and signed on its behalf by:
Adam Castleton
Company Secretary
17 March 2015
Company Number: 1410568
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 25
The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable
law and have elected to prepare the parent Company financial statements in accordance with UK Accounting Standards.
Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of
the Group and parent Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
• for the parent Company financial statements, state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the parent Company financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the
parent Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent
Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and
enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for
taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, a Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
These Reports were all approved by the Board of Directors.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation
as a whole; and
• the Strategic report, including content contained by reference, includes a fair review of the development and performance
of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face.
The Board confirms that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the performance, strategy and business model of the Company.
By order of the Board
Stephen Marks Adam Castleton
Chairman and Chief Executive Group Finance Director
17 March 2015
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
In respect of the Annual Report and the Financial Statements
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 26
INDEPENDENT AUDITOR’S REPORT
To the members of French Connection Group plc
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements is unmodified
We have audited the financial statements of French Connection Group PLC for the year ended 31 January 2015 set out on pages
28 to 56. In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at
31 January 2015 and of the Group’s loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards
as adopted by the European Union;
• the parent Company financial statements have been properly prepared in accordance with UK Accounting Standards; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards
the Group financial statements, Article 4 of the IAS Regulation.
2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the risk of material misstatement that had the greatest effect
on our audit was as follows:
Carrying value of inventory (£35.5m)
Refer to page 17 (Audit Committee Report), page 34 (accounting policy) and page 49 (financial disclosures).
• The risk – Inventory is carried in the financial statements at the lower of cost and net realisable value. The net realisable value of
inventory in the fashion industry is difficult to estimate, in particular due to uncertain consumer demand. As a result there is a
risk that the cost of inventory exceeds its net realisable value due to the significant degree of judgement involved
in determining the inventory provision.
• Our response – In this area of our audit procedures included:
• We tested the Group’s controls over inventory by attending inventory counts at both warehouse and retail sites and testing
controls over the calculation of inventory loss allowances, inventory provisions and standard costs.
• We challenged the adequacy of the Group's provisions against inventory by corroborating on a sample basis that items
on the stock ageing listing by season were classified in the relevant ageing bracket and assessing the reasonableness of
the provision percentages applied to each season. We challenged the Directors' assumptions when making judgements
regarding the net realisable value of inventory, in particular on the extent to which old inventory can be sold through various
channels, taking into account our knowledge of the industry and of current performance of the Group. We also considered
the historical accuracy of provisioning as a tool for evaluating the adequacy of the control environment in setting the current
provisions.
• We considered the adequacy of the Group's disclosures about the degree of estimation involved in arriving at the provision.
3 Our application of materiality and an overview of the scope of our audit
The materiality for the Group financial statements as a whole was set at £2.775m. This has been determined with reference to
a benchmark of Group revenue (of which it represents 1.6%), which we consider to be one of the principal considerations for
members of the Company in assessing the financial performance of the Group, and is a less volatile measure than profit or loss.
We agreed with the audit committee to report to it all corrected and uncorrected misstatements we identified through our audit with
a value in excess of £0.135m, in addition to other audit misstatements below that threshold that we believe warranted reporting on
qualitative grounds.
Of the Group’s fifteen reporting components we subjected seven to audit for Group reporting purposes and one to specified risk
focused audit procedures. The latter was not individually financially significant enough to require an audit for group reporting
purposes, but did present specific individual risks that needed to be addressed.
The components within the scope of our work accounted for the following percentages of the Group’s results:
Number of
components
Group
revenue
Group
profit and
losses
before tax
Group
total assets
Audits for group reporting purposes 7 70% 79% 76%
Speci?ed risk-focused audit procedures 1 19% 8% 15%
Total 8 89% 87% 91%
For the remaining components, we performed analysis at an aggregated Group level to re-examine our assessment that there were
no significant risks of material misstatement within these.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 27
The Group audit team instructed the component auditor in the USA as to the significant areas to be covered, including the relevant
risks detailed above and the information to be reported back. The Group audit team approved the component materiality which was
set at £1.2m, having regard to the size and risk profile of the USA component. The work on the USA component was performed by
the component auditor and the remainder of the components by the Group audit team.
The Group audit team held telephone meetings with the component auditor in the USA. At these meetings, the findings reported to
the Group audit team were discussed in more detail, and any further work required by the Group audit team was then performed by
the component auditor.
4 Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006;
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the information given in the Corporate Governance Statement set out on pages 14 to 15 with respect to internal control and
risk management systems in relation to financial reporting processes and about share capital structures is consistent with the
financial statements.
5 We have nothing to report in respect of the matters on which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have
identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial
statements, a material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
• we have identified material inconsistencies between the knowledge we acquired during our audit and the Directors’ statement
that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Group’s performance, business model and strategy; or
• the Audit Committee Report does not appropriately address matters communicated by us to the Audit Committee.
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a Corporate Governance Statement has not been prepared by the Company.
Under the Listing Rules we are required to review:
• the Directors’ statement, set out on page 13, in relation to going concern; and
• the part of the Corporate Governance Statement on pages 14 to 15 relating to the Company’s compliance with
the ten provisions of the 2012 UK Corporate Governance Code specified for our review.
We have nothing to report in respect of the above responsibilities.
Scope of report and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set out on page 25, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of
an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the Company’s members as a body and is subject to important explanations and disclaimers
regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated
into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we
have undertaken and the basis of our opinions.
Jeremy Hall (Senior Statutory Auditor)
for and on behalf of KPMG Audit LLP, Statutory Auditor
Chartered Accountants
15 Canada Square, London E14 5GL
17 March 2015
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 28
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 January 2015
Note
2015
£m
2014
£m
Revenue 2 178.5 189.4
Cost of sales (95.1) (99.2)
Gross profit 2 83.4 90.2
Operating expenses 3 (90.8) (101.4)
Other operating income 4 6.5 6.1
Finance income 6 0.1 0.1
Share of pro?t of joint ventures, net of tax 13 – 0.6
Underlying operating loss (0.8) (4.4)
Net loss on store disposals and closures (0.8) (1.7)
Loss before taxation 7 (1.6) (6.1)
Taxation 8 – 0.1
Loss for the year (1.6) (6.0)
The Group’s results were entirely from continuing operations.
Note
2015
£m
2014
£m
Loss for the year (1.6) (6.0)
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Currency translation differences for overseas operations 2.0 0.3
Currency translation differences on foreign currency loans, net of tax (0.6) (1.0)
Currency translation differences transferred to profit and loss, net of tax (0.2) –
Effective portion of changes in fair value of cash flow hedges 0.5 (0.3)
Other comprehensive income for the year, net of tax 1.7 (1.0)
Total comprehensive income for the year 0.1 (7.0)
Loss attributable to:
Equity holders of the Company (1.5) (6.1)
Non-controlling interests (0.1) 0.1
Loss for the year (1.6) (6.0)
Total comprehensive income attributable to:
Equity holders of the Company 0.2 (7.1)
Non-controlling interests (0.1) 0.1
Total income and expense recognised for the year 0.1 (7.0)
Losses per share
Basic and diluted losses per share 10 (1.6)p (6.4)p
The notes on pages 32 to 50 form part of these accounts.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 29
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 January 2015
Note
2015
£m
2014
£m
Assets
Non-current assets
Intangible assets 11 0.4 0.4
Property, plant and equipment 12 3.9 4.5
Investments in joint ventures 13 3.1 3.1
Deferred tax assets 20 4.8 4.8
Total non-current assets 12.2 12.8
Current assets
Inventories 14 35.5 38.5
Trade and other receivables 15 23.5 22.7
Cash and cash equivalents 16 23.2 28.2
Derivative ?nancial instruments 26 0.3 –
Total current assets 82.5 89.4
Total assets 94.7 102.2
Non-current liabilities
Deferred tax liabilities 20 0.2 0.5
Total non-current liabilities 0.2 0.5
Current liabilities
Trade and other payables 17 36.5 43.1
Current tax payable 19 0.2 0.2
Provisions 18 1.0 1.7
Derivative ?nancial instruments 26 – 0.2
Total current liabilities 37.7 45.2
Total liabilities 37.9 45.7
Net assets 56.8 56.5
Equity
Called-up share capital 21 1.0 1.0
Share premium account 9.6 9.4
Other reserves 6.0 4.3
Retained earnings 39.4 40.9
Total equity attributable to equity holders of the Company 56.0 55.6
Non-controlling interests 0.8 0.9
Total equity 56.8 56.5
The notes on pages 32 to 50 form part of these accounts.
These accounts were approved by the Board of Directors on 17 March 2015 and were signed on its behalf by:
Stephen Marks Adam Castleton
Director Director
Company Number: 1410568
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 30
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
capital
£m
Share
premium
£m
Hedging
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Total
£m
Non-
controlling
interests
£m
Total
equity
£m
Balance at 31 January 2013 1.0 9.4 0.1 5.2 47.0 62.7 0.8 63.5
Loss for the year ended 31 January 2014 (6.1) (6.1) 0.1 (6.0)
Other comprehensive income
Currency translation differences for
overseas operations 0.3 0.3 0.3
Currency translation differences
on foreign currency loans, net of tax (1.0) (1.0) (1.0)
Effective portion of changes in fair
value of cash ?ow hedges (0.3) (0.3) (0.3)
Balance at 31 January 2014 1.0 9.4 (0.2) 4.5 40.9 55.6 0.9 56.5
Loss for the year ended 31 January 2015 (1.5) (1.5) (0.1) (1.6)
Other comprehensive income
Currency translation differences for
overseas operations 2.0 2.0 2.0
Currency translation differences
on foreign currency loans, net of tax (0.6) (0.6) (0.6)
Currency translation differences
transferred to pro?t and loss, net of tax (0.2) (0.2) (0.2)
Effective portion of changes in fair
value of cash ?ow hedges 0.5 0.5 0.5
Transactions with owners
recorded directly in equity
Share options exercised 0.2 0.2 0.2
Balance at 31 January 2015 1.0 9.6 0.3 5.7 39.4 56.0 0.8 56.8
Translation reserve
The translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign
operations as well as from the translation of foreign currency loans.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
related to hedged transactions that have not yet occurred.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 31
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 January 2015
Note
2015
£m
2014
£m
Operating activities
Loss for the period (1.6) (6.0)
Adjustments for:
Depreciation and impairment 1.6 1.9
Finance income (0.1) (0.1)
Share of pro?t of joint ventures – (0.6)
Non-operating loss on store disposals and closures 0.8 1.7
Income tax credit – (0.1)
Operating cash flows before changes in working capital and provisions 0.7 (3.2)
Decrease in inventories 3.3 2.3
(Increase)/decrease in trade and other receivables (0.5) 0.8
(Decrease)/increase in trade and other payables (6.2) 1.9
Cash flows from operations (2.7) 1.8
Income tax paid (0.3) (0.2)
Cash flows from operating activities (3.0) 1.6
Investing activities
Interest received 0.1 0.1
Proceeds from investment in joint ventures 0.2 0.4
Acquisition of property, plant and equipment (1.1) (0.8)
Net costs from store closures (1.4) (1.7)
Cash flows from investing activities (2.2) (2.0)
Financing activities
Proceeds from exercise of share options 0.2 –
Cash flows from financing activities 0.2 –
Net decrease in cash and cash equivalents 23 (5.0) (0.4)
Cash and cash equivalents at 1 February 23 28.2 28.5
Exchange rate ?uctuations on cash held 23 – 0.1
Cash and cash equivalents at 31 January 23 23.2 28.2
The notes on pages 32 to 50 form part of these accounts.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 32
NOTES TO THE GROUP ACCOUNTS
1 Accounting policies
a) Basis of preparation
French Connection Group PLC (the “Company”) is a Company domiciled in the United Kingdom, whose shares are publicly traded
on the London Stock Exchange. These financial statements are presented in millions of pounds sterling rounded to the nearest
one decimal place.
The consolidated financial statements have been prepared and approved by the Directors in accordance with International
Financial Reporting Standards as adopted by the European Union (“adopted IFRS”). The Company has elected to prepare its
parent Company financial statements in accordance with UK Generally Accepted Accounting Practice; these are presented
on pages 51 to 56.
The consolidated financial statements have been prepared under the historical cost accounting rules, except for derivative financial
instruments measured at fair value.
The Group’s business activities, together with the factors likely to affect its future development, performance and position are
set out in the Financial Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are
described in the Financial Review. In addition Note 26 to the financial statements includes the Group’s objectives, policies and
processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging
activities and its exposures to credit risk and liquidity risk.
The Group has considerable cash resources and as a consequence, the Directors believe that the Group is well placed to manage
its business risks successfully.
The Group ended the year with £23.2m of net cash and no borrowings. Over the cycle of the year the Group had minimum
net cash of £7.6m. Based on this and the forecast performance for the Group over the next 18 months, the Directors have a
reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.
For this reason, the Board continues to adopt the going concern basis in preparing the accounts.
The preparation of the financial statements in conformity with adopted IFRS requires management to make judgements, estimates
and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual
results may differ from these assumptions. The estimates and assumptions are based on historical experience and are reviewed
on an ongoing basis and are disclosed in Note 29. Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both
current and future periods.
The accounting policies set out below have been applied consistently to all periods in the consolidated financial statements.
There is no significant financial impact on the Group financial statements of the following new standards, amendments and
interpretations that are in issue and mandatory for the financial year ending 31 January 2015:
• IFRS 10, ‘Consolidated financial statements’, IFRS 11, ‘Joint arrangements’, IFRS 12, ‘Disclosure of interests in other entities’,
Amendments to IAS 27, ‘Separate financial statements’, Amendments to IAS 28, ‘Investments in associates and joint ventures’,
Amendments to IAS 32, ‘Financial instruments: Presentation’, Amendments to IAS 36, ‘Impairment of assets’, Amendments
to IAS 39, ‘Financial instruments: Recognition and measurement’.
The Group does not consider that there are any standards, amendments or interpretations issued by the IASB, but not yet
applicable, that will have a significant impact on the financial statements.
b) Basis of consolidation
The consolidated financial statements of the Group comprise the accounts of the Company and all its subsidiary undertakings, the
accounts of which are all made up to 31 January each year end. The results of companies acquired or disposed of in the year are
dealt with from or up to the date control commences or ceases. The net assets of companies acquired are incorporated in the
consolidated accounts at their fair values to the Group at the date of acquisition. Intra-group balances and any unrealised gains or
losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until
the date on which control ceases.
Joint ventures are those entities over whose activities the Group has joint control, whereby the Group has rights to the net assets
of the arrangement, rather than rights to its assets and obligations for its liabilities. Joint ventures are accounted for using the
equity method. The consolidated financial statements include the Group’s share of the income and expenses of joint ventures, after
adjustments to align the accounting policies with those of the Group, from the date that joint control commences until the date that
joint control ceases. When the Group’s share of losses exceeds its interest in a joint venture, the carrying amount of that interest
(including any long-term investments) is reduced to £Nil and the recognition of further losses is discontinued except to the extent
that the Group has an obligation or has made payments on behalf of the investee. Unrealised gains arising from transactions with
joint ventures are eliminated against the investment to the extent of the Group’s interest in the entity.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 33
1 Accounting policies continued
c) Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill arising on business combinations
represents the difference between the cost of the acquisition and the fair value of the identifiable assets, liabilities and contingent
liabilities acquired. In respect of acquisitions prior to the IFRS transition date, 1 February 2004, goodwill is included on the basis
of its deemed cost based on the amount recognised under UK GAAP.
Goodwill is stated at cost less any accumulated impairment losses as discussed in Note j) below. Goodwill is tested annually
for impairment. Negative goodwill arising on an acquisition is recognised directly in the income statement.
The impairment calculations use cash flow projections based on actual operating results extrapolated forward for five years.
An appropriate pre-tax discount rate has been used in discounting the projected cash flows based on the weighted average
cost of capital applicable to the cash generating units concerned. For the purpose of impairment testing, goodwill is allocated to
the lowest level of cash generating unit within the Group at which the goodwill is monitored for internal management purposes.
Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or
loss on disposal. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation
disposed of and the portion of the cash generating unit retained.
d) Foreign currency
Transactions effected by companies in foreign currencies are translated into their functional currency at the foreign exchange rate
ruling at the date of transaction. Monetary assets and liabilities of companies denominated in currencies other than the functional
currency of the Company are translated at the foreign exchange rate ruling at the balance sheet date. Foreign exchange differences
arising on translation are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies
that are measured in terms of historical cost are translated using the exchange rate at the date of transaction. Non-monetary
assets and liabilities denominated in foreign currencies that are stated at fair value are translated at the foreign exchange rates
ruling at the dates the fair value was determined.
Long term monetary assets and liabilities receivable from or payable to a foreign operation, the settlement of which is not planned or
expected to occur in the foreseeable future, are considered to represent part of the Group’s net investment in a foreign operation.
Therefore, exchange gains and losses arising from these amounts are included in equity in the foreign currency translation reserve.
On consolidation, the assets and liabilities of foreign operations which have a functional currency other than Sterling are translated
into Sterling at foreign exchange rates ruling at the balance sheet date. The income and expenses of these subsidiary undertakings
are translated into Sterling at the average rates applicable to the period. All resulting exchange differences are taken to reserves.
Any exchange differences that have arisen since 1 February 2004 are presented as a separate component of equity within a
translation reserve. Such exchange differences taken to reserves as from the date of transition to IFRS are recognised in the
income statement upon disposal of the subsidiary.
e) Derivative financial instruments
Derivative financial instruments in the form of forward foreign exchange contracts are used to manage the risk associated with
purchases denominated in foreign currencies as described in the section entitled Our Business.
Derivative financial instruments are initially measured at fair value. Any changes in the fair value of the forward contracts during
the period in which the hedge is in effect are reflected as a component of equity within the hedging reserve to the extent that
the hedge is effective. The ineffective part of the hedge is recognised in the income statement immediately.
f) Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity, trade and other receivables, cash and cash equivalents,
loans and borrowings and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value including any directly attributable transaction costs.
Subsequent to initial recognition non-derivative financial instruments are measured at amortised cost less any impairment losses.
A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets
are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the
financial asset. Purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself
to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are
discharged or cancelled.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form
an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose
of the statement of cash flows.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 34
1 Accounting policies continued
g) Property, plant and equipment
Property, plant and equipment is stated at cost (which from 1 February 2009 includes capitalised borrowing costs where appropriate)
less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition
of the asset.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of the assets. Residual values
are reviewed at each reporting date. The estimated useful lives are as follows:
Leasehold improvements : period of the lease
Plant, equipment, fixtures and fittings : 3 to 10 years
h) Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases.
Finance lease assets are stated at an amount equal to the lower of its fair value and the present value of the minimum lease
payments at inception of the lease, less accumulated depreciation and impairment losses. Leased assets are depreciated over
the shorter of the lease term and their estimated useful lives unless it is reasonably certain that the Group will obtain ownership
by the end of the lease term. Operating leases are leases where substantially all of the risks and rewards of ownership have not
been transferred.
i) Inventories
Inventories and work in progress are stated at the lower of cost and net realisable value. Cost includes the purchase price of
manufactured products, materials, direct labour, transport costs and a proportion of attributable design and production overheads
calculated on a first in, first out basis. Net realisable value is the estimated selling price in the ordinary course of business.
Provision is made for obsolete, slow moving or defective items where appropriate.
j) Impairment
The carrying amount of the Group’s assets, other than inventories and deferred tax assets, are reviewed each balance sheet
date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount
is estimated. An impairment loss is recognised in the income statement whenever the carrying amount of an asset exceeds its
recoverable amount. For tangible fixed assets, the recoverable amount is determined with reference to the cash generating unit to
which the asset belongs. The impairment calculations use cash flow projections based on actual operating results extrapolated
forward for five years. An appropriate pre-tax discount rate has been used in discounting the projected cash flows based on the
weighted average cost of capital applicable to the individual assets concerned. Further details are provided in Note 11.
Impairment policy relating to goodwill is referred to in Note 1c).
k) Revenue
Revenue is measured at the fair value of the consideration received or receivable for goods sold to external customers, less returns
and value added tax. The revenue arises from the sale of fashion clothing and accessories. Revenue from the sale of goods is
recognised in the statement of income when the significant risks and rewards of ownership have been transferred. For retail sales,
this occurs at the time the sale is recorded at the store. For wholesale and ecommerce sales, this normally occurs at the time the
goods are shipped from the warehouse.
l) Other operating income
Licensing revenue is included within other operating income. Licence income receivable from licensees are accrued as earned on
the basis of the terms of the relevant licence agreement, which is typically on the basis of a variable amount based on turnover.
m) Lease payments
Operating lease rentals are charged to the income statement on a straight-line basis over the term of the lease. Lease incentives
received are recognised in the income statement on a straight-line basis over the term of the lease.
Rentals receivable under operating leases are included in the income statement on a straight-line basis.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the
outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic
rate of interest on the remaining balance of the liability.
n) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted, or substantively enacted
at the balance sheet date, plus any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 35
for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither accounting nor taxable profit and differences relating to investments in
subsidiaries and jointly controlled entities to the extent that they will probably not reverse in the foreseeable future. Deferred tax is
measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that
have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.
o) Pensions
The Group only has defined contribution pension schemes. Pension costs charged to the income statement represent the amount
of contributions payable to defined contribution and personal pension schemes in respect of the period.
p) Share-based payment
The Group operates share option incentive schemes for Directors and key employees. The fair value of options granted is recognised
as an employee expense in the income statement with a corresponding increase in equity. The fair value is measured at grant
date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the
options is measured using the “Black-Scholes” option valuation model, taking into account the terms and conditions upon which
the options were granted. The amount recognised in the income statement is adjusted at each balance sheet date to reflect the
number of share options that are expected to vest revised for expected leavers and estimated achievement of non-market based
vesting conditions. The Group has adopted the exemption to apply IFRS 2 only to equity instruments granted after 7 November 2002.
q) Segment reporting
An operating segment is a distinguishable component of the Group that is engaged in business activities from which it may earn
revenues and incur expenses and whose operating results are reviewed regularly by the Chief Operating Decision Maker to make
decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information
is available.
Reportable segments are operating segments that either meet the thresholds and conditions set out in IFRS 8 or are considered
by the Board to be appropriately designated as reportable segments. Segment results represent the underlying operating profits
of each division and exclude store disposal and closure costs, tax and financing items. Overheads represent the direct costs of the
divisional operations, common overheads shared between the divisions within geographic locations, in particular, the costs of local
management, advertising, finance and accounting and Group management overheads including the costs of Group management,
legal, insurance and IT costs.
r) Capital management
Details of capital risk management are set out in Note 26 to the Group accounts.
s) Financial risk management
Details of financial risk management are set out in Note 26 to the Group accounts.
t) Guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of fellow subsidiaries or of third
parties, the Company considers these to be insurance arrangements and accounts for them as such. In this respect, the Company
treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required
to make a payment under the guarantee.
u) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past
event and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognised at
an amount equal to the best estimate of the expenditure required to settle the Group’s liability. Obligations arising from restructuring
plans are recognised when detailed formal plans have been established and when there is a valid expectation that such a plan
will be carried out.
2 Operating segments
a) Segment reporting
The Group’s operating segments have been determined based on the key monthly information reviewed by the Board of Directors
(deemed to be the Chief Operating Decision Maker). The key metric reviewed cover the Retail and Wholesale sectors in totality,
with the performance by key geographies also reviewed.
In addition to the information provided below, detailed commentary on the results of Retail and Wholesale, together with an analysis
of the geographical performance, can be found in the Financial Review.
1 Accounting policies continued
n) Income tax continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 36
2 Operating segments continued
b) Segment revenue and results
Income statement
2015
£m
2014
£m
Revenue
Retail 103.3 117.5
Wholesale 75.2 71.9
Group revenue 178.5 189.4
Gross pro?t 83.4 90.2
Retail 57.2% 56.9%
Wholesale 32.3% 32.5%
Group gross margin 46.7% 47.6%
Underlying operating (loss)/pro?t
Retail (11.3) (11.6)
Wholesale 14.6 11.7
Licence income 6.5 6.1
Common and Group overheads (10.7) (11.3)
Finance income 0.1 0.1
Share of profit from joint ventures – 0.6
Underlying Group operating loss* (0.8) (4.4)
Underlying operating margin
Retail (10.9)% (9.9)%
Wholesale 19.4% 16.3%
Underlying Group operating margin (0.4)% (2.3)%
*Excludes loss on store disposals and closures
c) Geographical information
2015
£m
2014
£m
Revenue
UK/Europe 72% 71%
North America 23% 24%
Rest of the World 5% 5%
Divisional operating (loss)/pro?t
UK/Europe (0.4) (3.9)
North America 2.5 2.4
Rest of the World 0.9 1.6
Group overheads and finance income (3.8) (4.5)
Underlying Group operating loss* (0.8) (4.4)
*Excludes loss on store disposals and closures
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 37
2 Operating segments continued
d) Revenue from external customers
2015
£m
2014
£m
UK 112.6 119.5
US 33.8 34.6
Canada 8.2 10.8
Other 23.9 24.5
178.5 189.4
e) Non-current assets
2015
£m
2014
£m
UK 8.0 8.9
US 0.4 0.4
Canada 0.1 –
Other 3.7 3.5
12.2 12.8
No single customer represents more than 10% of the Group’s total revenue.
3 Operating expenses
2015
£m
2014
£m
Selling and distribution costs 82.7 92.8
Administration costs 8.1 8.6
90.8 101.4
4 Other operating income
2015
£m
2014
£m
Licensing income 6.5 6.1
5 Staff numbers and costs
The average number of people employed by the Group during the year, including Directors, was as follows:
2015
Number
2014
Number
Selling, distribution and retail 1,786 1,909
Design, development and production management 201 211
Administration 137 138
2,124 2,258
The aggregate payroll costs of these people were as follows:
2015
£m
2014
£m
Wages and salaries 34.4 35.4
Social security costs 2.9 3.0
De?ned contribution pension costs 0.5 0.5
37.8 38.9
Included within the total staff cost above is the remuneration of the Directors totalling £0.9m (2014: £1.2m). Details of Directors’
remuneration, share options and pension entitlements are disclosed in the Directors’ Remuneration Report. Details of pension
costs are disclosed in Note 28 to the Group accounts.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 38
6 Finance income and expense
Recognised in the income statement
2015
£m
2014
£m
Finance income 0.1 0.1
7 Loss before taxation
The Group’s loss before taxation is stated after charging/(crediting) the following:
2015
£m
2014
£m
Fees payable to the Company’s auditors and its associates in respect of
the audit of the Group’s annual accounts 0.1 0.1
the audit of the Company’s subsidiaries, pursuant to legislation 0.1 0.1
tax and other assurance services 0.1 0.2
Depreciation and impairment of owned assets 1.6 1.9
Store closure provisions 0.8 1.7
Operating lease rentals
Plant and machinery 0.3 0.3
Leasehold properties 23.9 26.6
Rent receivable (1.6) (1.5)
The auditor’s remuneration in respect of the audit of the Company was £37,000 (2014: £37,000).
During the year, the fees payable to the auditors and their associates for non-audit services was £99,000 (2014: £168,000) in
respect of tax compliance and advisory services (£56,000 (2014: £146,000)), royalty and turnover reviews (£29,000 (2014: £15,000))
and other services (£14,000 (2014: £7,000)).
8 Taxation
a) Recognised in the statement of comprehensive income
2015
£m
2014
£m
Current tax
Overseas tax 0.4 0.3
Deferred tax
Adjustment in respect of previous periods (0.4) (0.4)
Tax on loss (Note 8b) – (0.1)
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 39
8 Taxation continued
b) Factors affecting tax charge/(credit) for year
The tax charged/(credited) for the year is different to the standard 21.33% (2014: 23.17%) rate of corporation tax in the UK.
The differences are explained below:
2015
£m
2014
£m
Loss before taxation (1.6) (6.1)
Loss multiplied by the standard rate of corporation tax in the UK of 21.33% (2014: 23.17%) (0.3) (1.4)
Effects of:
Expenses not deductible 0.2 0.2
Trading losses carried forward 0.5 1.6
Difference in effective tax rates on overseas earnings (0.2) (0.3)
Share of joint venture tax charge which has been netted off within share of pro?t of joint ventures – (0.1)
Reduction in deferred tax asset relating to reduction in UK tax rate (21% to 20% effective from
1 April 2015) 0.2 0.3
Adjustments in respect of previous periods (0.4) (0.4)
Total tax charge/(credit) for the year (Note 8a) – (0.1)
The effective tax rate in the future will be affected by the proportion of any profits or losses generated in the different tax jurisdictions
and the ability to utilise past tax losses.
c) Income tax recognised in other comprehensive income
Before
tax
2015
£m
Tax
credit
2015
£m
Net of
tax
2015
£m
Before
tax
2014
£m
Tax
credit
2014
£m
Net of
tax
2014
£m
Currency translation differences
on foreign overseas operations 2.0 – 2.0 0.3 – 0.3
Currency translation differences
on foreign currency loans (0.7) 0.1 (0.6) (1.4) 0.4 (1.0)
Currency translation differences
transferred to pro?t and loss (0.2) – (0.2) – – –
Effective portion of changes in fair
value of cash ?ow hedges 0.5 – 0.5 (0.3) – (0.3)
1.6 0.1 1.7 (1.4) 0.4 (1.0)
9 Dividends – equity
The Board is proposing that no dividend should be paid for the year (2014: £Nil). No dividends were paid during the year to the minority
shareholders of a subsidiary undertaking of the Group (2014: £Nil).
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 40
10 Losses per share
Basic and diluted losses per share are calculated on 96,119,892 (2014: 95,899,754) shares being the weighted average number
of ordinary shares during the year.
Basic and diluted losses per share of (1.6) pence per share (2014: losses of (6.4) pence) is based on losses of £(1.5)m (2014: losses
of £(6.1)m) attributable to equity shareholders.
The reconciliation from basic and diluted losses per share to adjusted earnings per share is as follows:
2015
£m
2015
pence
per share
2014
£m
2014
pence
per share
Loss attributable to equity shareholders (1.5) (1.6)p (6.1) (6.4)p
Net loss on store disposals and closures 0.8 0.9p 1.7 1.8p
Adjusted loss (0.7) (0.7)p (4.4) (4.6)p
The adjusted losses per share relates to the underlying operations and in the opinion of the Directors, gives a better measure of the
Group's underlying performance than the basic losses per share.
11 Intangible assets
Goodwill
2015
£m
2014
£m
Cost
At 1 February and 31 January 14.3 14.3
Impairment
At 1 February and 31 January 13.9 13.9
Net book value at 31 January 0.4 0.4
Given the similar nature of the activities of each cash generating unit, a consistent methodology is applied across the Group in
assessing cash generating unit recoverable amounts. The recoverable amount is the higher of the value in use and the fair value
less the costs to sell. The value in use is the present value of the cash flows expected to be generated by the cash generating
unit over a projection period together with a terminal value. Cash flows are projected based on actual operating results and the
Directors’ five year forward forecasts which are based on Directors’ knowledge, historical experience and economic growth
forecasts for the fashion industry, including maximum sales growth forecasts of 2% per annum. A pre-tax discount rate of 15%
(2014: 15%) has been applied to the value in use calculations reflecting market assessments of the time value of money at the
balance sheet date. A terminal growth rate of 2% (2014: 2%) has been used based on industry growth rates. As discussed in
Our Business, like all retailers, the Group is susceptible to volatility in the propensity of consumers to spend, which is affected
by macro-economic issues. Further, both the Group’s retail and wholesale businesses have largely inflexible cost bases giving
rise to substantial operational gearing. Accordingly the key sensitivity with regard to future cash flows and value in use relates
to the assumed sales growth. As noted above this has been set at a maximum of 2% per annum.
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 41
12 Property, plant and equipment
2015
Short
leasehold
property
£m
Plant
equipment
fixtures and
fittings
£m
Total
£m
Cost
At 1 February 2014 7.9 57.7 65.6
Currency movements 0.3 – 0.3
Additions 0.1 1.0 1.1
Disposals (0.4) (3.9) (4.3)
At 31 January 2015 7.9 54.8 62.7
Depreciation
At 1 February 2014 7.2 53.9 61.1
Currency movements 0.3 – 0.3
Charge for year 0.2 1.4 1.6
Disposals (0.4) (3.8) (4.2)
At 31 January 2015 7.3 51.5 58.8
Net book value
At 31 January 2015 0.6 3.3 3.9
At 31 January 2014 0.7 3.8 4.5
The Group has no plant and equipment held under finance leases in both the current and prior years and no depreciation was
charged during either year.
Property, plant and equipment with a net book value of £0.1m (2014: £0.1m) was disposed of during the year. Net costs incurred
on disposal were £Nil (2014: £Nil) resulting in a loss on disposal of £(0.1)m (2014: £(0.1)m) which was charged to the store closures
provision during the year.
The Group has £46.1m (2014: £48.6m) of gross assets with a £Nil net book value.
13 Investments
The Group’s investments in joint ventures are as follows:
2015
£m
2014
£m
Share of current assets 3.7 3.9
Share of non-current assets 0.6 0.5
Share of current liabilities (1.2) (1.3)
3.1 3.1
Share of revenue 5.2 6.4
Share of expense (5.2) (5.7)
Share of income tax expense – (0.1)
– 0.6
The investments are accounted for using the equity method of accounting.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 42
14 Inventories
2015
£m
2014
£m
Raw materials and consumables 0.1 0.1
Work in progress 0.2 0.2
Finished goods 35.2 38.2
35.5 38.5
During the year, inventory write-downs of £3.6m (2014: £2.9m) were expensed within cost of sales. The amount of inventory
recognised as an expense with cost of sales during the current year is £84.9m (2014: £92.3m).
All inventory is valued at the lower of cost and net realisable value. There is no inventory carried at fair value less costs to sell either
in the current or prior year.
15 Trade and other receivables
2015
£m
2014
£m
Trade receivables 13.0 13.7
Other receivables 1.4 1.1
Prepayments and accrued income 9.1 7.9
23.5 22.7
No receivables are due in more than one year and are non-interest bearing. Standard credit terms provided to customers differ, but
are typically between 30 and 60 days. Included within trade receivables is a bad debt provision of £0.2m (2014: £0.3m). During the
year, £0.1m (2014: £0.2m) of bad debt write-offs were incurred.
The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables is disclosed in Note 26.
16 Cash and cash equivalents
2015
£m
2014
£m
Cash and cash equivalents in the balance sheet and cash flow 23.2 28.2
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is disclosed in Note 26.
17 Current trade and other payables
2015
£m
2014
£m
Trade payables 17.5 21.7
Bills of exchange payable 1.4 1.6
Other taxation and social security 3.9 4.2
Accruals and deferred income 13.7 15.6
36.5 43.1
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 26.
18 Provisions
Store disposals and closures
2015
£m
2014
£m
Balance at 1 February 1.7 1.7
Utilised during the year (1.5) (1.7)
Increase during the year 0.8 1.7
Balance at 31 January 1.0 1.7
Provisions are recorded to reflect the estimated committed closure costs of identified underperforming retail stores and other
restructuring. The associated costs are forecast to be incurred over a period of two years.
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 43
19 Current tax payable
2015
£m
2014
£m
Overseas tax 0.2 0.2
20 Deferred tax
Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities
2015
£m
2014
£m
2015
£m
2014
£m
Trading losses 1.1 0.7 – –
Property, plant and equipment 3.3 3.3 – –
Other timing differences 0.4 0.8 – –
Deferred capital gains – – 0.2 0.5
4.8 4.8 0.2 0.5
The Group has unused tax trading losses with a potential value of £12.7m (2014: £13.1m), which have not been recognised
as a deferred tax asset. As the Group returns to profit, these tax losses should be utilised.
2015
£m
2014
£m
Trading losses 12.7 13.1
Property, plant and equipment 0.5 1.1
Other timing differences 0.5 0.7
13.7 14.9
21 Share capital
Ordinary shares of 1 pence each
2015
Number
2015
£m
2014
Number
2014
£m
Allotted, called up and fully paid shares at the beginning of the year 95,899,754 1.0 95,899,754 1.0
Shares issued during the year in respect of share options 278,380 – – –
Allotted, called up and fully paid shares at the end of the year 96,178,134 1.0 95,899,754 1.0
At 31 January 2015, the following equity settled options have been granted and remain outstanding in respect of ordinary shares
of 1p each in the Company:
Date of grant Options Option price
Contractual
life of
options
29 October 2008 (vested 29 October 2011) 1,557,620 56.20p 10 years
1 November 2012 400,000 24.50p 10 years
4 November 2014 600,000 29.25p 10 years
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 44
21 Share capital continued
Share options granted are subject to detailed performance conditions. The performance conditions for the outstanding option
grants are based on a target profit before tax and hurdles are set in order to reward strong financial performance. Options which
do not vest following the application of the performance conditions lapse and become unavailable for exercise.
Weighted
average
exercise
price
Number of
options
2015
Weighted
average
exercise
price
Number of
options
2014
Outstanding at the beginning of the period 47.00p 2,886,000 52.61p 2,886,500
Forfeited during the period 102.30p (50,000) 56.20p (600,500)
Exercised during the period 56.20p (278,380) – –
Granted during the period – – 29.25p 600,000
Outstanding at the end of the period 44.92p 2,557,620 47.00p 2,886,000
The number of share options exercisable at the year end is 1,557,620 (2014: 1,836,000).
The fair value of the share options granted is not considered to be material to the accounts in the current and prior years.
22 Reconciliation of decrease in cash to movement in net funds
2015
£m
2014
£m
Change in net funds from cash ?ows (5.0) (0.4)
Translation differences – 0.1
Movement in net funds (5.0) (0.3)
Net funds at beginning of year 28.2 28.5
Net funds at end of year 23.2 28.2
23 Analysis of net funds
1 February
2014
£m
Cash
flow
£m
Non cash
changes
£m
31 January
2015
£m
Cash and cash equivalents in the balance sheet and cash ?ow 28.2 (5.0) – 23.2
Net funds 28.2 (5.0) – 23.2
24 Commitments
Aggregate future rental commitments payable under non-cancellable operating leases at 31 January 2015 for which no provision
has been made in these accounts, were as follows:
Leasehold property Other
2015
£m
Restated
2014
£m
2015
£m
Restated
2014
£m
Within one year 23.6 23.9 0.2 0.2
Within two to ?ve years 76.1 77.4 0.1 0.1
After ?ve years 45.3 59.0 – –
145.0 160.3 0.3 0.3
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 45
24 Commitments continued
Aggregate future rentals receivable under non-cancellable operating leases at 31 January 2015 for which no accrual has been
made in these accounts were as follows:
Leasehold property
2015
£m
Restated
2014
£m
Within one year 1.2 1.3
Within two to ?ve years 3.8 0.9
After ?ve years 4.4 0.1
9.4 2.3
The comparatives have been restated to present a clearer representation of future rental commitments payable and receivable.
There is no net impact on the total balance.
At 31 January 2015 the Group had contracted capital commitments not provided for in the accounts of £0.3m (2014: £0.2m).
At 31 January 2015 the Group had commitments on foreign exchange contracts amounting to £3.5m (2014: £4.5m). In addition,
the Group had commitments in respect of letters of credit of £1.0m (2014: £1.4m).
25 Contingent liabilities
The Group has a number of sublet and assigned properties. In the event that the tenants of these properties default, the Group
may be liable. At the year end, the total annual commitment amounted to £Nil (2014: £Nil).
26 Financial instruments
Details of financial risk management, treasury policies and use of financial instruments are set out in the section entitled
‘Principal risks and uncertainties’ within Our Business.
Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. Derivative financial
instruments are used to hedge exposure to fluctuations in foreign exchange rates.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due,
under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group monitors its cash position on a regular basis through the use of regularly updated cash flow forecasts, and believes
that it has sufficient and appropriate net funds and facilities available.
Interest rate risk
The Group does not use interest rate financial instruments. The Group regularly monitors and reacts accordingly to any exposure
to fluctuations in interest rates and the impact on its monetary assets and liabilities.
Foreign currency risk
The Group is exposed to foreign currency risks on sales, purchases and cash holdings that are denominated in a currency
other than Sterling. The currency giving rise to this risk is primarily the Hong Kong Dollar. The Group’s policy is to reduce the
risk associated with purchases denominated in foreign currencies, by using forward fixed rate currency purchase contracts
up to a maximum of one year forward, taking into account any forecast foreign currency cash flows.
In respect of other monetary assets and liabilities held in currencies other than the Hong Kong Dollar, the Group ensures that
the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address
short-term imbalances.
The Group’s policy is not to hedge the translational exposure that arises on consolidation of the statement of income at overseas
subsidiaries.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 46
26 Financial instruments continued
Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group’s main
credit risk is primarily attributable to its trade receivables. Credit evaluations are performed on all customers requiring credit over
a certain amount. The Group does not require collateral in respect of financial assets. The amounts recognised in the balance
sheet are net of appropriate allowances for doubtful receivables, estimated by the Group’s management based on prior experience
and their assessment of the current economic environment. At the balance sheet date, there were no significant concentrations
of credit risk by customer or by geography. Quantitative analysis of credit risk to receivables is presented below.
Credit risk associated with cash balances and derivative financial instruments is managed by transacting with an existing relationship
bank with strong investment grade rating. The maximum exposure to credit risk is represented by the carrying amount of each
financial asset, including derivative financial instruments, in the balance sheet.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the
reporting date was:
Carrying amount
2015
£m
2014
£m
Trade and other receivables 14.4 14.8
Cash and cash equivalents 23.2 28.2
37.6 43.0
The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:
Carrying amount
2015
£m
2014
£m
UK/Europe 8.4 8.8
North America 3.1 2.4
Hong Kong 2.9 3.6
14.4 14.8
The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:
2015
£m
2014
£m
Wholesale customers 13.0 13.7
The ageing of gross trade receivables at the reporting date was:
Gross
2015
£m
Impairment
2015
£m
Gross
2014
£m
Impairment
2014
£m
Current 9.9 – 10.1 –
30 days 1.5 – 1.7 –
60 days 0.4 – 0.3 –
More than 60 days 1.4 (0.2) 1.9 (0.3)
13.2 (0.2) 14.0 (0.3)
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 47
26 Financial instruments continued
Exposure to credit risk continued
An impairment has been recorded against the trade receivables that the Group believes may not be recoverable. Based on
past experience, the Group believes that no impairment allowance is necessary in respect of trade receivables not past due.
The movement in impairment in respect of trade receivables during the year was as follows:
2015
£m
2014
£m
At 1 February 0.3 0.3
Movement during year (0.1) –
At 31 January 0.2 0.3
Interest rate profile of financial assets
The interest rate profile of the financial assets of the Group at 31 January 2015 was as follows:
Financial assets
on which no
interest is received
Floating rate
financial assets Total
2015
£m
2014
£m
2015
£m
2014
£m
2015
£m
2014
£m
Sterling 0.1 0.1 13.9 16.3 14.0 16.4
US Dollar – – 5.5 7.8 5.5 7.8
Hong Kong Dollar – – 1.1 1.4 1.1 1.4
Other – – 2.6 2.6 2.6 2.6
Total 0.1 0.1 23.1 28.1 23.2 28.2
Financial assets comprise cash and short term deposits. The effective interest rate on floating rate financial assets during the year
was 0.7% (2014: 0.5%).
There were no fixed rate or floating rate financial liabilities at the end of the current or prior year.
Currency exposure
Net monetary assets and liabilities of the Group that are not denominated in the local functional currency were as follows:
At 31 January 2015
Net foreign currency
monetary assets/(liabilities)
Sterling
£m
US
Dollar
£m
Canadian
Dollar
£m
Hong Kong
Dollar
£m
Euro
£m
Other
£m
Total
£m
Trade and other receivables 1.2 0.3 – – 0.8 0.1 2.4
Cash and overdraft 1.0 0.4 – – 1.4 – 2.8
Trade and other payables (0.6) (1.8) – – (1.1) – (3.5)
Intercompany balances (1.1) (3.7) 9.7 (2.7) 7.4 – 9.6
Total 0.5 (4.8) 9.7 (2.7) 8.5 0.1 11.3
At 31 January 2014
Net foreign currency
monetary assets/(liabilities)
Sterling
£m
US
Dollar
£m
Canadian
Dollar
£m
Hong Kong
Dollar
£m
Euro
£m
Other
£m
Total
£m
Trade and other receivables 2.0 0.3 – – 0.7 0.1 3.1
Cash and overdraft 0.5 5.0 – – 1.9 0.1 7.5
Trade and other payables (1.2) (1.7) – – (0.9) – (3.8)
Intercompany balances – (1.8) 9.9 (11.0) 10.2 – 7.3
Total 1.3 1.8 9.9 (11.0) 11.9 0.2 14.1
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 48
26 Financial instruments continued
Currency exposure continued
Forward foreign exchange contracts have not been taken into consideration above. As at 31 January 2015, the Group has committed
forward foreign exchange contracts of £3.5m (2014: £4.5m).
The following significant exchange rates applied during the year:
Average rate
Reporting date
spot rate
2015 2014 2015 2014
US Dollar 1.636 1.568 1.501 1.644
Canadian Dollar 1.822 1.629 1.904 1.832
Hong Kong Dollar 12.686 12.166 11.644 12.761
Euro 1.249 1.179 1.330 1.219
Sensitivity analysis
A 10% strengthening of Sterling against the following currencies at 31 January would have increased/(decreased) equity and profit
and loss by the amounts shown below. This analysis assumes that all other variables, in particular, interest rates, remain constant.
This analysis is performed on the same basis for the prior year.
Equity
2015
£m
Profit
and loss
2015
£m
Equity
2014
£m
Profit
and loss
2014
£m
US Dollar – 0.5 – (0.1)
Canadian Dollar (0.7) (0.2) (0.8) (0.2)
Hong Kong Dollar – 0.2 – 1.0
Euro (0.3) (0.6) (0.3) (0.9)
(1.0) (0.1) (1.1) (0.2)
Borrowing facilities
Working capital and letter of credit facilities of £4.5m were available to the Group at 31 January 2015 (31 January 2014: £4.2m).
The facilities are subject to an annual review and were most recently renewed in July 2013.
Fair values
The fair value of the Group’s financial instruments at 31 January 2015 were as follows:
31 January 2015 31 January 2014
Carrying
amount
£m
Estimated
fair value
£m
Carrying
amount
£m
Estimated
fair value
£m
Primary financial instruments used to finance the Group’s operations:
Cash and cash equivalents 23.2 23.2 28.2 28.2
Trade receivables 13.0 13.0 13.7 13.7
Trade payables (17.5) (17.5) (21.7) (21.7)
Derivative financial instruments 0.3 0.3 (0.2) (0.2)
The fair value of forward exchange contracts outstanding as at 31 January 2015 is an asset of £0.3m (2014: liability of £0.2m).
£0.5m has been credited to the hedging reserve (2014: debited £0.3m).
These contracts mature in the next 12 months, therefore the cash flows and resulting effect on profit and loss are expected
to occur within the next 12 months.
The fair value of derivative financial instruments is determined using discounted cash flow techniques based on readily available
market data and represent a Level 2 measurement in the fair value hierarchy under IFRS 7. Level 2 is defined as inputs other
than quoted prices in active markets that are observable for the asset or liability.
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 49
26 Financial instruments continued
Capital management
The capital structure of the Group consists of net funds and equity attributable to the equity holders of the parent Company,
comprising issued share capital, reserves and retained earnings. The Group manages its capital with the objective that all
entities within the Group continue as going concerns. The Group is not subject to any externally imposed capital management.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business. To achieve this the Board of Directors monitors the balance sheet, the working capital, the
cash flows and the level of dividends paid to shareholders.
The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and
the advantages and security afforded by a sound capital position.
At present employees, including the Chairman, hold 41.8% (2014: 41.8%) of ordinary shares. Share options have been issued
amounting to 2.7% (2014: 3.0%) of the issued share capital.
The Company will request permission from shareholders if deemed necessary to purchase its own shares.
There were no changes in the Group’s approach to capital management during the year.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
27 Directors’ interests and related party transactions
The Group made sales of £1.7m (2014: £1.5m) to FCUK IT Company and £1.0m (2014: £0.8m) to FCIT China Limited during the
year, both of which are joint ventures. The closing liabilities due from the respective joint ventures are £0.7m (2014: £0.3m) and
£0.5m (2014: £0.3m).
There are no related party transactions between French Connection Group PLC and the non-controlling interest subsidiary undertakings.
French Connection Group was invoiced directly for property costs relating to 202 Westbourne Grove, London and recharged these
costs to SAM Corporation Limited. Stephen Marks, Chairman and Chief Executive of French Connection Group PLC is a Director
of French Connection Group PLC and is the sole shareholder of SAM Corporation Limited. The total costs invoiced and recharged
during the year was £476,877 and was conducted at arm’s length.
At 31 January 2015, Stephen Marks, Chairman and Chief Executive had an interest in 40,094,190 ordinary shares (2014: 40,094,190) of
which 2,281,500 shares (2014: 2,281,500) were held by family members or in family trusts, representing in aggregate 41.7% (2014: 41.8%)
of the total issued ordinary share capital of the Company. At 31 January 2015, Adam Castleton, Group Finance Director, had an interest
in 81,600 ordinary shares (2014: 33,000) representing 0.08% (2014: 0.03%) of total issued ordinary share capital of the Company.
Details of the Directors’ remuneration, being the key management personnel, are disclosed in the Directors’ Remuneration Report.
28 Pension costs
The Group operates a Group defined contribution scheme and contributes towards a number of personal pension plans. The assets
of these schemes are held separately from those of the Group in independently administered funds.
The pension cost charge for the year was £0.5m (2014: £0.5m). At 31 January 2015 and 31 January 2014 there were no outstanding
amounts payable to the schemes.
29 Accounting estimates and judgements
The Directors have made significant accounting estimates and judgements in applying the Group’s accounting policies in the
following area:
Inventory valuation – the Directors have used their knowledge and experience of the fashion industry in determining the level and
rates of provisioning required to calculate the appropriate inventory carrying values. Inventory is carried in the financial statements
at the lower of cost and net realisable value. Sales in the fashion industry can be extremely volatile and consumer demand
changing significantly based on current trends. As a result there is a risk that the cost of inventory exceeds its net realisable value.
Provision is made for obsolete, slow moving or defective items where appropriate. Provisions are considered on a seasonal basis
taking into consideration the various channels that are available to the Group to sell existing inventory and the estimated prices
that can be achieved.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 50
30 Principal subsidiary undertakings
Details of the principal subsidiary undertakings at 31 January 2015 are set out below. Unless otherwise stated, the Company directly
owned all the issued ordinary shares.
Company
Country of Incorporation,
Registration and Operation Principal Activity
French Connection Limited England Brand management
French Connection UK Limited England Supply of fashion merchandise
French Connection (London) Limited England Supply of fashion merchandise
Contracts Limited England Supply of fashion merchandise
French Connection (Hong Kong) Limited British Virgin Islands
(operates in Hong Kong)
Supply of fashion merchandise
French Connection No 2 pour Hommes Sarl* France Supply of fashion merchandise
PreTex Textilhandels GmbH* Germany Supply of fashion merchandise
French Connection Holdings Inc USA Holding Company
French Connection Group Inc* USA Supply of fashion merchandise
Louisiana Connection Limited* USA Supply of fashion merchandise
Roosevelt Connection Limited* USA Supply of fashion merchandise
Soho Connection Limited* USA Supply of fashion merchandise
French Connection (Canada) Limited (75%) Canada Supply of fashion merchandise
Toast (Mail Order) Limited (75%) Wales Supply of fashion merchandise
YMC Limited (75%) England Supply of fashion merchandise
FCUK IT Company (50% partnership)*
+
Hong Kong Supply of fashion merchandise
FCIT China Limited (50%)*
+
Hong Kong Supply of fashion merchandise
* Shares are held by subsidiary undertakings.
+
Joint ventures accounted for using the equity method.
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 51
COMPANY BALANCE SHEET
At 31 January 2015
Note
2015
£m
2014
£m
Fixed assets
Tangible assets 3 0.4 0.5
Investments 4 42.5 24.5
42.9 25.0
Current assets
Debtors 5 0.8 47.5
Cash at bank and in hand – –
Derivative ?nancial instruments 0.3 –
1.1 47.5
Current liabilities
Creditors 6 (12.4) (2.5)
Derivative ?nancial instruments – (0.2)
(12.4) (2.7)
Net current (liabilities)/assets (11.3) 44.8
Total assets less current liabilities 31.6 69.8
Deferred tax liability 7 (0.2) (0.6)
Net assets 31.4 69.2
Capital and reserves
Called-up share capital 8 1.0 1.0
Share premium account 8 9.6 9.4
Pro?t and loss account 8 20.5 59.0
Other reserves 8 0.3 (0.2)
Equity shareholders’ funds 9 31.4 69.2
The notes on pages 52 to 56 form part of these accounts.
These accounts were approved by the Board of Directors on 17 March 2015 and were signed on its behalf by:
Stephen Marks Adam Castleton
Director Director
Company Number: 1410568
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 52
NOTES TO THE COMPANY ACCOUNTS
1 Accounting policies
a) Basis of preparation
The Company has elected to prepare its parent Company financial statements in accordance with UK GAAP and these are
presented on pages 51 to 56.
b) Basis of accounting
The accounts have been prepared under the historical cost accounting rules, except for derivative financial instruments measured
at fair value, and in accordance with applicable accounting standards. As permitted by Section 408 of the Companies Act 2006,
the profit and loss account under UK GAAP of the Company is not presented. No new standards have been adopted in this year’s
financial statements. The Company has taken the exemption granted by FRS 8 Related Party disclosures not to disclose transactions
with wholly owned subsidiaries of the Group.
c) Depreciation
Depreciation is provided to write off the cost less estimated residual value of fixed assets by equal annual instalments over their
useful lives, which are estimated to be as follows:
Plant, equipment, fixtures and fittings : 3 to 10 years
d) Taxation
The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences
between the treatment of certain items for taxation and accounting purposes. Full provision has been made for deferred taxation
arising from timing differences between the recognition of income and expenditure for taxation and accounting purposes.
Deferred tax amounts are not discounted.
e) Foreign exchange
Monetary assets and liabilities denominated in foreign currencies are translated into Sterling at rates of exchange ruling at
the balance sheet date. Transactions in the period are translated into Sterling at the rates of exchange ruling on the date of
transaction or at hedged rates. Resulting exchange differences are taken to the profit and loss account. Forward fixed rate
currency purchase contracts are used.
f) Leased assets
Operating lease rentals are charged to the profit and loss account in the period to which they relate. Rentals receivable under
operating leases are included in the profit and loss account on an accruals basis. There are no finance leases in the current year.
g) Pension cost
Pension costs charged to the profit and loss account represent the amount of contributions payable to defined contribution and
personal pension schemes in respect of the period.
h) Share-based payment
The Group operates share option incentive schemes for Directors and key employees. The fair value of options granted is recognised
as an employee expense in the income statement with a corresponding increase in equity. The fair value is measured at grant date
and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options
is measured using the “Black-Scholes” option valuation model, taking into account the terms and conditions upon which the options
were granted. The amount recognised in the income statement is adjusted at each balance sheet date to reflect the number of share
options that are expected to vest revised for expected leavers and estimated achievement of non-market based vesting conditions.
The Group has adopted the exemption to apply FRS 20 only to equity instruments granted after 7 November 2002. The fair value
of the share options granted is not considered to be material in the current or prior years.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 53
1 Accounting policies continued
i) Derivative financial instruments
Derivative financial instruments in the form of forward foreign exchange contracts are used to manage the risk associated with
purchases denominated in foreign currencies as described in the section entitled Our Business. Any changes in the fair value
of the forward contracts during the period in which the hedge is in effect will be reflected as a component of reserves within a
hedging reserve to the extent that the hedge is effective. The ineffective part of the hedge is recognised in the profit and loss
account.
Financial Reporting Standard 29 “Financial Instruments: Disclosures” (FRS 29) sets out the requirements for the presentation
of, and disclosures relating to, financial instruments and replaces the requirements of FRS 25 “Financial Instruments: Disclosure
and Presentation”. The Company is exempt from the requirements of FRS 29 as the financial statements for the Group include
disclosures that comply with IFRS 7, the equivalent International Financial Reporting Standard.
j) Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity trade and other receivables, cash and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value including any directly attributable transaction costs.
Subsequent to initial recognition non-derivative financial instruments are measured at amortised cost less any impairment losses.
A financial instrument is recognised if the Company becomes a party to the contractual provisions of the instrument. Financial assets
are derecognised if the Company’s contractual rights to the cash flows from the financial assets expire or if the Company transfers the
financial asset. Purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Company commits itself
to purchase or sell the asset. Financial liabilities are derecognised if the Company’s obligations specified in the contract expire or are
discharged or cancelled.
Cash comprises cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the
Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
k) Investments
Investments are stated at cost less provision for impairment.
l) Share capital
When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price over the par value
is recorded in the share premium reserve. The cost of own shares purchased to satisfy the exercise of employee share options is
charged to total equity and the proceeds of their reissue are credited to total equity.
m) Dividends on shares presented within shareholders’ funds
Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately
authorised and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed
in the notes to the financial statements.
n) Guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of fellow subsidiaries or of third parties,
the Company considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats
the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make
a payment under the guarantee.
2 Staff numbers and operating costs
All Directors and staff are employed by French Connection (London) Limited, a subsidiary undertaking. Details of staff numbers
and costs are shown in that Company’s accounts. Directors’ remuneration is disclosed in the Directors’ Remuneration Report.
The audit fee of the Company is disclosed in Note 7 to the Group accounts.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 54
3 Property, plant and equipment
Plant
equipment
fixtures
and fittings
£m
Cost or valuation
At 1 February 2014 3.1
Disposals (0.3)
At 31 January 2015 2.8
Depreciation
At 1 February 2014 2.6
Charge for year 0.1
Disposals (0.3)
At 31 January 2015 2.4
Net book value
At 31 January 2015 0.4
At 31 January 2014 0.5
4 Investments
The Company’s investments in subsidiary undertakings is as follows:
Total
£m
Cost
At 1 February 2014 70.8
Additions 86.0
At 31 January 2015 156.8
Provision
At 1 February 2014 46.3
Charge for year 68.0
At 31 January 2015 114.3
Carrying amount
At 31 January 2015 42.5
At 31 January 2014 24.5
During the year, the Company subscribed for additional share capital of £75.0m in its subsidiary undertaking, French
Connection UK Limited, £10.0m in its subsidiary undertaking, French Connection (London) Limited and £1.0m in its subsidiary
undertaking, Contracts Limited.
The Directors have conducted an impairment review comprising a comparison of the carrying amount of the investment with
its recoverable amount being the higher of net realisable value and value in use. The recoverable amount has been determined
as the net realisable value. To the extent that the carrying amount exceeds the recoverable amount, the investment is impaired
and has been provided against. The impairment loss has been recognised in the profit and loss account in the year.
Impairments of £68.0m (2014: £1.2m) relating to the Group’s investment in subsidiary companies, French Connection UK Limited,
French Connection (London) Limited and Contracts Limited have been provided in the current year. In accordance with its accounting
policy, the Company states its investments in subsidiaries at cost less provision for impairment. However, the underlying net asset
value of its subsidiaries is £50.7m (2014: £54.8m).
The principal subsidiaries of the Company are set out in Note 30 to the Group accounts.
NOTES TO THE COMPANY ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 55
5 Debtors
2015
£m
2014
£m
Amounts owed by subsidiary undertakings – 47.0
Other debtors 0.1 0.2
Prepayments and accrued income 0.3 0.1
Deferred tax (Note 7) 0.4 0.2
0.8 47.5
Included within debtors are amounts due within one year of £0.4m (2014: £0.3m).
6 Creditors: amounts falling due within one year
2015
£m
2014
£m
Trade creditors 0.3 0.2
Amounts owed to subsidiary undertakings 11.5 –
Accruals and deferred income 0.6 2.3
12.4 2.5
7 Deferred tax
Deferred tax asset (Note 5)
2015
£m
2014
£m
Deferred capital allowances and short-term timing differences 0.4 0.2
Deferred tax liability
2015
£m
2014
£m
Deferred capital gains 0.2 0.6
Any movement during the year has been processed entirely through the profit and loss account.
8 Reserves
Hedging
reserve
£m
Share
premium
account
£m
Profit
and loss
account
£m
At 1 February 2014 (0.2) 9.4 59.0
Loss for the ?nancial year (38.5)
Effective portion of changes in fair value of cash ?ow hedges 0.5
Share options exercised 0.2
At 31 January 2015 0.3 9.6 20.5
The loss for the year before taxation, intercompany dividends and provisions for impairment was £(4.7)m (2014: profit of £0.5m).
The loss before taxation dealt within the accounts of the Company was £(39.1)m (2014: profit of £4.8m).
Share capital and share option information is set out in Note 21 in the Group accounts.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 56
9 Reconciliation of movements in equity shareholders’ funds
2015
£m
2014
£m
(Loss)/pro?t for the ?nancial year (38.5) 4.8
Effective portion of changes in fair value of cash ?ow hedges 0.5 (0.3)
Share options exercised 0.2 –
Net movement in equity shareholders’ funds (37.8) 4.5
Opening equity shareholders’ funds 69.2 64.7
Closing equity shareholders’ funds 31.4 69.2
10 Commitments
Leasehold property Other
2015
£m
2014
£m
2015
£m
2014
£m
Operating leases which expire:
Within two to ?ve years – – 0.1 0.2
After ?ve years 0.9 0.9 – –
0.9 0.9 0.1 0.2
At 31 January 2015 the Company had commitments on foreign exchange contracts amounting to £3.5m (2014: £4.5m). The fair
value of forward exchange contracts outstanding as at 31 January 2015 is an asset of £0.3m (2014: liability of £0.2m). £0.5m has
been credited to the hedging reserve (2014: £0.3m debited).
11 Contingent liabilities
The Company raises finance for and guarantees the bank borrowings of certain subsidiary undertakings which, at 31 January 2015,
amounted to £Nil (2014: £Nil).
12 Related party disclosures
There are no related party transactions between the Company and the non-controlling interest subsidiary undertakings.
Details of Director related party transactions are disclosed in Note 27 to the Group accounts.
Management has identified the Directors of the Company as related parties for the purpose of FRS8 ‘Related Party Disclosures’.
Details of the relevant relationships with these individuals are disclosed in the Directors’ Remuneration Report as set out in the Group
financial statements.
NOTES TO THE COMPANY ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 57
FIVE YEAR RECORD
Years ended 31 January
2011
£
2012
£
2013
£
2014
£
2015
£
Revenue 223.8m 216.0m 197.3m 189.4m 178.5m
Pro?t/(loss) before taxation 8.9m 5.0m (10.5)m (6.1)m (1.6)m
Discontinued operations (11.1)m 0.8m – – –
Basic (losses)/earnings per share (2.4)p 5.5p (10.7)p (6.4)p (1.6)p
Adjusted earnings/(losses) per share 7.5p 4.3p (7.3)p (4.6)p (0.7)p
Dividends per share 1.5p 1.6p – – –
Net assets 71.8m 75.1m 63.5m 56.5m 56.8m
Operated retail trading space 000 sq ft 337 330 325 300 271
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 58
ADVISERS
FINANCIAL CALENDAR
HEAD OFFICE
Centro 1
39 Camden Street
London NW1 0DX
STOCKBROKERS
Numis Securities Ltd
10 Paternoster Square
London EC4M 7LT
PRINCIPAL BANKERS
Barclays Bank Plc
London Corporate Banking
1 Churchill Place
London E14 5HP
SECRETARY AND REGISTERED OFFICE
Adam Castleton
20-22 Bedford Row
London WC1R 4JS
AUDITORS
KPMG Audit LLP
15 Canada Square
Canary Wharf
London E14 5GL
REGISTRARS AND TRANSFER OFFICE
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
REGISTERED NUMBER
1410568, England
2015
14 May
AGM
17 September
(provisional)
Half-Year Statement
2016
31 January
Financial Year End
15 March
(provisional)
Preliminary Announcement of Results
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 59
NOTICE OF MEETING
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to the action you should take, you are recommended to seek your own personal advice from your stockbroker,
accountant or other independent professional adviser authorised under the Financial Services and Markets Act 2000.
If you have sold or otherwise transferred all of your ordinary shares in French Connection Group PLC, you should forward this document and other
documents enclosed (except the personalised form of proxy) as soon as possible to the stockbroker, bank or other agent through whom the sale
or transfer was effected for transmission to the purchaser or transferee.
Notice is hereby given that the Annual General Meeting of the Company will be held at 10.00 am on Thursday 14 May 2015 at the offices of French
Connection Group PLC, Centro 1, 39 Camden Street, London NW1 0DX to consider and, if thought fit, pass the following resolutions:
Ordinary Resolutions
1 To receive and adopt the audited accounts and the report of the Directors and of the auditors for the financial year ended 31 January 2015.
2 To approve the Directors’ Remuneration Report for the financial year ended 31 January 2015.
3 To re-elect Stephen Marks as a Director of the Company.
4 To re-elect Dean Murray as a Director of the Company.
5 To appoint KPMG LLP as auditors to hold office from the conclusion of this meeting until the conclusion of the next Annual General Meeting
at which accounts are laid and to authorise the Directors to determine their remuneration.
6 To adopt FRS101 in respect of the Company’s annual report and accounts for the year ended 31 January 2016.
7 THAT:
the Directors be and they are hereby generally and unconditionally authorised pursuant to Section 551, Companies Act 2006 (the “Act") to exercise
all powers of the Company to allot shares in the Company and grant rights to subscribe for or to convert any security into shares of the Company
(such shares and rights to subscribe for shares or to convert any security into shares of the Company being “relevant securities") up to an
aggregate nominal amount of £288,534 (being 30% of the issued share capital) PROVIDED THAT unless previously revoked, varied or extended,
this authority shall expire on the date of the next Annual General Meeting of the Company after the passing of this Resolution SAVE THAT the
Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry
and the Directors may allot relevant securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired
Special Resolutions
To consider and, if thought fit, pass resolutions 8 and 9 below as Special Resolutions of the Company:
8 THAT:
if resolution 7 is passed, the Directors be and they are hereby empowered pursuant to Section 570(1) of the Act to allot equity securities (as defined
in Section 560(1) of the Act) of the Company wholly for cash pursuant to the authority under Section 551 of the Act conferred by resolution 7 above
and/or by way of a sale of treasury shares for cash (by virtue of Section 573 of the Act) in each case as if Section 561(1) of the said Act did not
apply to any such allotment provided that:
(a) the power conferred by this resolution shall be limited to:
(i) the allotment of equity securities and sale of treasury shares for cash in connection with an offer of, or invitation to apply for, equity
securities:
(A) in favour of holders of ordinary shares in the capital of the Company, where the equity securities respectively attributable
to the interests of all such holders are proportionate (as nearly as practicable) to the respective number of ordinary shares
in the capital of the Company held by them; and
(B) to the holders of any other equity securities as required by the rights of those securities or as the Directors otherwise consider
necessary,
but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with treasury shares,
fractional entitlements or legal, regulatory or practical problems arising under the laws or requirements of any overseas territory or by
virtue of shares being represented by depository receipts or the requirements of any regulatory body or stock exchange or any other
matter whatsoever; and
(ii) the allotment (otherwise than under sub-paragraph (i) above) of equity securities or sale of treasury shares up to an aggregate nominal
value equal to £48,089 (representing 5% of the issued share capital for the time being); and
(b) unless previously revoked, varied or extended, this power shall expire on the date of the next Annual General Meeting of the Company after
the passing of this Resolution SAVE THAT the Company may before such expiry make an offer or agreement which would or might
require equity securities to be allotted (and treasury shares to be sold) after such expiry in pursuance of such an offer or agreement and
the Directors may allot relevant securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired.
9 THAT a general meeting other than an annual general meeting may be called on not less than 14 clear days’ notice, provided that this authority
shall expire at the end of the next annual general meeting of the Company.
By order of the Board
Adam Castleton
Secretary
20-22 Bedford Row
London WC1R 4JS
13 April 2015
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 60
NOTICE OF MEETING
continued
Explanatory notes to the AGM Notice
Resolution 1 – Approval of the annual report and accounts
The Directors are required by the Companies Act 2006 (the “Act”) to lay
before the Company at this Annual General Meeting the accounts of the
Company for the financial year ended 31 January 2015, the report of
the Directors, the Directors’ Remuneration Report and the report of the
Company’s auditor on those accounts.
Resolution 2 – Directors’ Remuneration Report
Resolution 2 is the ordinary resolution to approve the Directors’
Remuneration Report. The vote of this resolution is advisory and no
Director’s remuneration is conditional upon the passing of this resolution.
The Directors’ Remuneration Policy was approved by shareholders at
the AGM held on 15 May 2014. Accordingly, it had a binding effect on
the Company from that date. As no changes have been made to the
policy since its approval by shareholders, it is not proposed to submit
it to the AGM to be held on 2015.
Resolutions 3 to 4 – Re-election of Directors
The articles of association of the Company require the nearest number
to one third of the Directors to retire at each annual general meeting.
Stephen Marks and Dean Murray are subject to rotation and being
eligible, offer themselves for re-election.
Resolution 5 – Appointment of auditors
The Company is required to appoint an auditor at each general meeting
at which accounts are laid before the Company, to hold office until the
next such meeting. The Audit Committee has recommended and the
Board has approved the resolution to appoint KPMG LLP as auditor
of the Company.
Resolution 6 – Adoption of FRS101
The Board considers it is in the best interests of the Company to
adopt FRS101 “Reduced Disclosure Framework” in order to achieve
consistency with the Group financial statements.
Resolution 7 – Authority to allot shares
Under section 551 of the Act, Directors require shareholders’ authority
for the allotment of shares. Shareholders last granted such general
authority to the Directors at the annual general meeting of the Company
held in 2014. Such authority will expire at the end of this Annual General
Meeting and Resolution 7 seeks to renew it (although the Directors have
no current plans to utilise the authority, except in relation to the issue
of new shares pursuant to the Company’s share incentive schemes).
Accordingly, Resolution 7 would renew this authority until the next
annual general meeting by authorising the Directors to allot shares
up to an aggregate nominal amount equal to approximately one third
of the current issued share capital of the Company.
Resolution 8 – Disapplication of statutory pre-emption rights
This resolution seeks to disapply the pre-emption rights provisions of
section 561 of the Act, which requires Directors wishing to allot shares
to offer them in the first instance to existing ordinary shareholders in
proportion to their ordinary shareholding. There may be occasions,
however, when the Directors will need the flexibility to finance business
opportunities by the issue of ordinary shares without a pre-emptive
offer to existing ordinary shareholders. Shareholders last granted
authority to Directors to dis-apply pre-emptive rights at the annual
general meeting held in 2014. Such authority will expire at the end
of this Annual General Meeting and Resolution 8 seeks to renew it.
Except in relation to the issue of new ordinary shares pursuant to the
Company’s share incentive schemes, the Directors have no present
intention of issuing any shares pursuant to this disapplication.
Resolution 9 – Notice of general meetings
Under the Companies Act 2006 all general meetings must be held on
21 days’ notice unless shareholders approve a shorter period, which
cannot be less than 14 clear days (AGMs will continue to be held on
at least 21 clear days’ notice). The Directors believe it is in the best
interests of the shareholders of the Company to enable general
meetings to be called on 14 clear days’ notice. It is intended that
this flexibility will only be used for non-routine business and, where
merited, in the interests of shareholders as a whole. The approval
will be effective until the Company’s next annual general meeting,
when it is expected that a similar resolution will be proposed.
General notes to the AGM Notice
1. Holders of ordinary shares, or their duly appointed representatives,
are entitled to attend and vote at the AGM. Shareholders are
entitled to appoint a proxy to exercise all or any of their rights
to attend and speak and vote on their behalf at the meeting.
A shareholder can appoint the Chairman of the meeting or anyone
else to be his/her proxy at the meeting. A proxy need not be a
shareholder. More than one proxy can be appointed in relation
to the AGM provided that each proxy is appointed to exercise
the rights attached to a different ordinary share or shares held by
that shareholder. To appoint more than one proxy, the Proxy Form
enclosed should be photocopied and completed for each proxy
holder. The proxy holder’s name should be written on the Proxy
Form together with the number of shares in relation to which the
proxy is authorised to act. The box on the Proxy Form must also
be ticked to indicate that the proxy instruction is one of multiple
instructions being given. All Proxy Forms must be signed and, to
be effective, must be lodged with Capita so as to arrive no later
than 10 am on 12 May 2015.
2. The return of a completed Proxy Form, other such instrument
or any CREST Proxy Instruction (as described in Note 1) will not
prevent a shareholder attending the AGM and voting in person if
he/she wishes to do so (although voting in person at the AGM will
terminate the proxy appointment).
3. In order for a proxy appointment made by means of CREST to be
valid, the appropriate CREST message (a CREST Proxy Instruction)
must be properly authenticated in accordance with Euroclear UK
& Ireland Limited’s specifications and must contain the information
required for such instructions, as described in the CREST Manual.
The message must be transmitted so as to be received by Capita
(ID RA10) not later than 48 hours before the time fixed for the AGM.
For this purpose, the time of receipt will be taken to be the time
(as determined by the timestamp applied to the message by the
CREST Applications Host) from which Capita is able to retrieve
the message by enquiry to CREST. After this time any change
of instructions to proxies appointed through CREST should be
communicated to the appointee through other means. Euroclear
UK & Ireland Limited does not make available special procedures
in CREST for any particular messages and normal system timings
and limitations will apply in relation to the input of a CREST Proxy
Instruction. It is the responsibility of the CREST member concerned
to take such action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any particular
time. The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
4. Any person to whom this Notice is sent who is a person nominated
under Section 146 of the CA 2006 to enjoy information rights
(a Nominated Person) may, under an agreement between him/her
and the shareholder by whom he/she was nominated, have a right
to be appointed (or to have someone else appointed) as a proxy
for the AGM. If a Nominated Person has no such proxy appointment
right or does not wish to exercise it, he/she may, under any such
agreement, have a right to give instructions to the shareholder
as to the exercise of voting rights.
5. The statement of the rights of shareholders in relation to the
appointment of proxies in Note 1 does not apply to Nominated
Persons. The rights described in that note can only be exercised
by shareholders of the Company.
6. As at 12 April 2015, being the latest practicable date prior to
the publication of this document, the Company’s issued share
capital consists of 96,178,134 ordinary shares, carrying one vote
each. Therefore the total voting rights in the Company as at 12 April
2015 are 96,178,134.
7. In accordance with Regulation 41 of the Uncertificated Securities
Regulations 2001, only those members entered on the Company’s
register of members at 6 pm on 12 May 2015 or, if the meeting
is adjourned, shareholders entered on the Company’s register
of members at 6 pm on the day two days before the date of any
adjournment shall be entitled to attend and vote at the AGM.
61 FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015
8. Any member attending the meeting has the right to ask
questions. The Company has to answer any questions raised
by members at the meeting which relate to the business being
dealt with at the meeting unless:
• to do so would interfere unduly with the preparation for the
meeting or involve the disclosure of confidential information;
• the answer has already been given on a website in the form
of an answer to a question, or;
• it is undesirable in the interests of the Company or the good
order of the meeting to answer the question.
9. Copies of the Directors’ service contracts and letters of
appointment along with a copy of the Company’s articles of
association are available for inspection at the registered office of
the Company during normal business hours on any business day
and will be available for inspection at the place where the meeting
is being held from 15 minutes prior to and during the meeting.
10. A copy of this notice, and other information required by s311A of the
Companies Act 2006, can be found at www.frenchconnection.com.
11. In the case of a member which is a company, your proxy form
must be executed under its common seal or signed on its behalf
by a duly authorised officer of the company or an attorney for the
company.
12. Any power of attorney or any other authority under which your
proxy form is signed (or a duly certified copy of such power or
authority) must be included with your proxy form.
13. In the case of joint holders of shares, the vote of the first named in
the register of members who tenders a vote, whether in person or
by proxy, shall be accepted to the exclusion of the votes of other
joint holders.
14. It is possible that, pursuant to requests made by members of
the Company under section 527 of the Companies Act 2006, the
Company may be required to publish on a website a statement
setting out any matter relating to: (a) the audit of the Company's
accounts (including the auditor's report and the conduct of the
audit) that are to be laid before the AGM; or (b) any circumstance
connected with an auditor of the Company ceasing to hold office
since the previous meeting at which annual accounts and reports
were laid in accordance with section 437 of the Companies Act
2006. The Company may not require the members requesting any
such website publication to pay its expenses in complying with
sections 527 or 528 of the Companies Act 2006. Where the
Company is required to place a statement on a website under
section 527 of the Companies Act 2006, it must forward the
statement to the Company's auditor not later than the time when it
makes the statement available on the website. The business which
may be dealt with at the AGM includes any statement that the
Company has been required under section 527 of the Companies
Act 2006 to publish on a website.
15. In accordance with section 338 of the Companies Act 2006,
a member or members of the Company may (provided that the
criteria set out in section 338(3) of the Companies Act 2006 are
met) require the Company to give to members notice of a resolution
which may properly be moved and is intended to be moved at
the AGM, provided that: (a) the resolution must not be, if passed,
ineffective (whether by reason of inconsistency with any enactment
or the Company's constitution or otherwise); and (b) the resolution
must not be defamatory of any person, frivolous or vexatious. Such
a request may be in hard copy form or in electronic form, must be
authenticated by the person or persons making it, must identify the
resolution of which notice is to be given and must be received by
the Company not later than 6 weeks before the AGM, or, if later,
the time at which notice is given of the AGM. (In the foregoing
sentence, the terms “hard copy form", “electronic form” and
“authenticated” bear their respective meanings set out in the
Companies Act 2006 in relation to a communication, or a
document or information sent or supplied, to a company.)
16. In accordance with section 338A of the Companies Act 2006, a
member or members of the Company may (provided that the
criteria set out in section 338A(3) of the Companies Act 2006 are
met) require the Company to include in the business to be dealt
with at the AGM a matter (other than a proposed resolution) which
may properly be included in the business of the AGM, provided that
the matter is not defamatory of any person, frivolous or vexatious.
A request may be in hard copy form or electronic form, must
identify the matter to be included in the business, must be
accompanied by a statement setting out the grounds for the
request, must be authenticated by the person or persons making
it and must be received by the Company not later than 6 weeks
before the AGM, or, if later, the time at which notice is given of the
AGM. (In the foregoing sentence, the terms “hard copy form",
“electronic form” and “authenticated” bear the respective meanings
set out in the Companies Act 2006 in relation to a communication,
or a document or information sent or supplied, to a company.)
FrenchConnection.Com
doc_471026435.pdf
The French Connection Group designs, produces and distributes branded fashion clothing for men and women to more than 50 countries around the world.
ANNUAL REPORT 2015
French Connection Group PLC
The French Connection Group designs, produces and
distributes branded fashion clothing for men and women
to more than 50 countries around the world
French Connection Group PLC
FRENCH CONNECTION • GREAT PLAINS • TOAST • YMC
CONTENTS
STRATEGIC REPORT
Chairman’s Statement 2
Our Business 3
Corporate Social Responsibilty 7
Financial Review 9
GOVERNANCE
Board of Directors 11
Directors’ Report 12
Corporate Governance Statement 14
Audit Committee Report 16
Directors’ Remuneration Report 18
Statement of Directors’ Responsibilities 25
Independent Auditor’s Report 26
FINANCIAL STATEMENTS
Consolidated Statement
of Comprehensive Income 28
Consolidated Statement
of Financial Position 29
Consolidated Statement
of Changes in Equity 30
Consolidated Statement
of Cash Flows 31
Notes to the Group Accounts 32
Company Balance Sheet 51
Notes to the Company Accounts 52
SHAREHOLDER INFORMATION
Five Year Record 57
Advisers 58
Financial Calendar 58
Notice of Meeting 59
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 2
Dear Shareholders,
CHAIRMAN’S STATEMENT
I am pleased to report that following the initiatives we put in
place to turnaround our trading performance, the Group has
delivered another improved financial result this year. In line
with market expectations, we have reported an underlying
operating loss* for the year of £(0.8) m compared to a loss
of £(4.4) m in 2014 and a loss of £(7.2) m in 2013 and have
made another step towards returning French Connection
to profitability.
This improved performance was driven by a number of
factors, notably encouraging performances in both wholesale
and licensing, coupled with the exiting of non-contributing
retail stores and tight cost controls across the business.
This performance was delivered against the backdrop of
what has been a difficult year for the high street generally.
Retail
After a good first half, I was disappointed with the second
half UK/Europe retail performance. In Q3 and into November,
we were trading against stronger prior year comparatives
and un-seasonally warm weather. In Q4 we went into the
winter sale period with lower stock levels which impacted
LFL sales more than expected. Overall UK/Europe LFL
retail gross sales were -3% over the full year.
We saw slight margin progression from lower mark down
activity on revenue that reduced by 12.1% to £103.3m (-11%
at constant currency). This reduction was primarily the result
of the closure of a further 9 non-contributing stores in line
with our plan to rationalise our retail store estate which will
continue this year, with 3-4 store closures expected. The
average lease length of the UK/Europe retail estate is 4.4
years (2014: 4.9 years). Adjusting for currency and store
closures, underlying retail selling and distribution expenses
were broadly flat.
We opened a store in Berlin during the second half, with
sales exceeding expectations. Our Amsterdam franchise
store was taken over, delivering improved performance since
converting to owned and operated. The year saw 2 new
El Corte Inglés concessions open with plans for further
openings in the year.
Ecommerce represented 23% of retail revenue with 24% of
orders serviced through Click and Collect, and mobile and
tablet sales making up 47% of ecommerce revenue.
Despite the difficult trading conditions in the second half
of this year, which caused a decline in like-for-like sales,
we ended the year with a reduced stock position against
the prior year.
Wholesale
We saw a strong performance in Wholesale, with 4.6%
growth in revenue (+7.3% at constant currency) and an
improvement of 25% in Operating Profit attributable to
this division. The revenue growth was achieved across
UK/Europe, Rest of World and notably North America
which returned to growth in 2015. Gross margins were
broadly flat with strong cost control notably in trade-show
and promotional expenses.
I am pleased to report the signing of a new country licensee
in Mexico which will generate income in the second half of
the year. Wholesale orders for Spring 15 show an
improvement in year-on-year ordering levels.
Licensing
Licence income of £6.5m was generated during the period,
an improvement of 6.6% (+7.4% at constant currency).
Newer licensees performed strongly. The shoe licence saw
the successful launch during the year of the first standalone
store in Nanjing, with 8 locations now open in China. The
furniture licence with DFS benefited from the successful
launch of new lines, with further launches planned during
the year. Within the retail segment, in 2015, homeware
delivered over £1m in sales in the first year of operations.
Taken together with the furniture licence income, I am
pleased to see a new product category emerging for
the Group.
After adjusting for currency and store closures, underlying
operating expense savings were 3% compared to prior year.
We will continue to focus on cost control.
The Group remains debt free and ended the year with a
strong cash position of £23.2m (2014: £28.2m). To conserve
working capital the Board has decided that no dividend shall
be paid for the year (2014: £Nil). The shareholder distribution
policy will be kept under close review during the year.
Although we are encouraged by forward orders in our
Wholesale business, as in the second half of the year, trading
on the high street remains challenging and we are planning
accordingly.
It’s been a tough year but I am pleased to say that we
have responded accordingly, and I would like to take this
opportunity to recognise the hard work of our talented staff
across the Group.
Stephen Marks
Chairman and Chief Executive
17 March 2015
*Excludes loss on store disposals and closures.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 3
OUR BUSINESS
Business objectives, strategy,
and business model
At the heart of our business is a passion for the clothes. In 1972,
when French Connection was conceived, we set out to create
well-designed, stylish clothing that appealed to a broad market.
We have since worked hard to build on that vision and as a
result, French Connection is synonymous with fashion and style.
It remains our prime goal to create distinctiveness in a crowded
market place through focus on design. The brand’s strength
lies in balancing new, exciting ideas with consistent quality and
affordability and in a world of “fast fashion” we are proud of our
commitment to the creative process.
With a passionate focus on fashion underpinning the business
our aim is to generate increased shareholder value through the
sale of fashion products and the extension of our brands into
other lucrative markets through licensing. We continually assess
markets and relationships for new opportunities to broaden our
customer reach.
Founded by Chairman and Chief Executive Stephen Marks,
French Connection’s long history of success has been based
on design quality and innovative fashion, supported by a strong
market presence resulting in one of the most highly recognised
and respected clothing brands in the UK and across the world.
We seek to ensure that products are presented for sale in
contemporary surroundings by knowledgeable and friendly
staff who are in-tune with our customers. We recognise that
our products are the core element of our business and that our
ability to produce fashionable clothing to match our customers’
expectation has been, and continues to be, the key to our
continued success.
We seek to ensure that our resources are deployed effectively
and efficiently to support our business. Design and production
of the ranges and maintenance of our operating standards are
paramount for all our business managers who have broad
responsibility for their area of operations.
Brands
Our principal brand is French Connection which accounts
for 86% of the Group’s revenues.
The French Connection brand operates in the fashion-
orientated market place offering a fashion-forward range of
quality products at affordable prices. Our customers, typically
aged 18-35, appreciate that the brand is at the leading edge of
high street fashion and offers quality and style in its products.
French Connection designs, produces and distributes branded
fashion clothing, accessories and homeware for men, women,
and children to more than 50 countries around the world
through its main distribution channels: retail stores,
e-commerce, wholesale and licensing.
Our other brands include:
TOAST: a range of beautifully crafted ladies’ and men’s clothing
and unique homeware, available on-line, in selected John Lewis
stores and through branded high-street stores;
Great Plains: a fashion basics range designed in-house and
supplied through wholesale to multi-brand retailers and
available on-line mainly in the UK; and
YMC: a fledgling, edgy, contemporary fashion brand for men
and women with two stores in London, a growing wholesale
base and available on-line.
Each brand targets a different audience and has achieved high
levels of recognition for style and design reflecting the creative
passion and skill poured into the design and manufacture of
their products.
Our operations
We design, produce and distribute branded fashion clothing
and homeware from our business premises in London, New
York, Paris, Dusseldorf, Hong Kong and Toronto. We operate
retail stores and concessions in the UK, Europe, US and
Canada and also operate ecommerce businesses in each of
those territories. Further, we wholesale our products to retailers
operating in over 50 countries around the world and have
licensed partners operating French Connection stores
across Asia, Australia and the Middle East.
Our design teams are based in London and we arrange for the
products to be manufactured in specialist third party factories
in Europe and Asia supervised by local buying offices. The
main countries where manufacturing takes place are China,
India and Turkey.
The Group retails garments through a network of stores on high
streets and in shopping malls across the UK, Europe and North
America and through concessions within leading department
stores such as House of Fraser. We also operate ecommerce
channels in the UK, Europe and North America.
The product ranges are also offered for sale at wholesale
through our showrooms in London, New York, Paris, Dusseldorf
and Hong Kong to selected customers operating department
stores, multi-brand fashion stores or ecommerce sites around
the world.
To further extend retail distribution we have granted franchises
and licences to quality retailers allowing them to operate French
Connection branded retail stores in Europe, the Middle East,
Asia and Australia. These customers are supplied through our
wholesale channels in the UK and Hong Kong. Our licensees
operating stores in Hong Kong and China are 50% Joint
Venture businesses operated by our local partners in those
territories.
Brand extensions
Our globally recognised French Connection brand has been
extended successfully into complementary licensed products
including men’s and women’s toiletries and fragrances, shoes,
watches, jewellery, eyewear and furniture. Our Design and
Licensing teams work closely with branded partners to
develop and enhance product for sale.
Current trends
The continued growth of multi-channel retailing is a clear
focus for French Connection. We will continue to invest in
the people and systems to support this growth opportunity
to ensure our customers can shop with us however they
wish and get the very best multi-channel experience.
The success of our click and collect program is an
example of this investment.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 4
Principal risks and uncertainties
Our success depends on our ability to produce ranges of
garments which are attractive to potential customers. We seek
to achieve this through retention of experienced and skilled
designers and merchandisers and by remaining as operationally
flexible as possible particularly in relation to our supply chain
and up front commitments.
The nature of fashion retail, however, means that it is not always
possible to predict customers’ reactions to each season’s new
ranges. Our customers’ propensity to spend on clothing is also
affected by their personal financial situation and other macro-
economic factors which impact the total size of the retail
markets in which we operate.
We consider however, that as a small operator at the upper
end of the middle market the impact on our business of macro-
economic elements is considerably smaller than the impact of
the success of our designers in producing attractive products.
Each year the brands produce two main seasonal fashion
ranges and the success of each of these is largely dependent
on the ability of our designers to reflect attractively the
emerging trends in fashion. We utilise a mix of experience
and fresh thinking in our design studios under the consistent
guidance of the senior management to ensure continuity
of the brand attitudes.
We have mitigated and smoothed fluctuations in demand by
developing our licensing businesses which provide a more
stable and predictable income stream.
The design process and our retail businesses in particular have
a significant proportion of fixed costs giving rise to operational
gearing and this is exacerbated by upward-only rent reviews.
To mitigate cost pressures we are constantly focused on
store operating costs efficiency, and have already achieved
considerable savings by optimising our rostering timetables in
store and actively managing our store estate, and exiting stores
where the opportunity is economically available to us.
Our brands and the way they are perceived in their respective
markets is very important to us. We are therefore very
protective of the brands and work to ensure that they are
presented in appropriate ways and that they are not misused.
A main driver for brand perception is the products themselves
and therefore our reputational risk is closely linked to our
sales success.
As a wholesaler we also face the risk of default from our
customers and manage this through active relationship
management by our dedicated customer accounts team.
Our experience of bad debts has been very low over many
years due to this close management. We also insure certain
overseas debt risk.
The Group maintains a positive net cash balance throughout
the year and we are conscious to manage the Group’s working
capital effectively.
The principal treasury risks to the Group arise from exchange
rate fluctuations. The Board has approved policies for
managing these risks, which are reviewed on a regular basis,
including the use of financial instruments, principally forward
foreign exchange contracts.
The most significant exposure to foreign exchange fluctuations
relates to purchases made in foreign currencies, principally
the Hong Kong Dollar. The Group’s policy is to reduce the risk
associated with purchases denominated in currencies other
than Sterling by using forward fixed rate currency purchase
contracts. There has been no change since the year end to
the major treasury risks faced by the Group or the Group’s
approach to the management of these risks.
The Group is dependent on reliable IT systems for managing
and controlling its business and for providing efficiency and
speed in the supply chain. Our IT function oversees all the
systems and has policies and procedures to protect the
software, hardware and data and to prevent unauthorised
access to the systems.
The Group’s approach to the management of risks is further
discussed in the Corporate Governance Statement.
Key Performance Indicators
The Board considers that the key performance indicators
for the businesses are:
• UK retail LFL sales growth;
• Sales achieved in the wholesale channels;
• Sales by geography;
• Gross margin %;
• Underlying operating profit/loss;
• Inventory levels.
Each of the above is discussed in more detail in the
Financial Review.
OUR BUSINESS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 5
WORLDWIDE OPERATIONS
UK/Europe North America Rest of the World
LOCATI ON LOCATI ON LOCATI ON
London,
Paris, Dusseldorf
New York Toronto Hong Kong
TERRI TORI ES TERRI TORI ES TERRI TORI ES
UK,
Europe,
Middle East
USA Canada Hong Kong,
China
Australia, Asia,
South Africa
RETAI L OPERATI ONS RETAI L OPERATI ONS RETAI L OPERATI ONS
Retail stores
and concessions,
ecommerce
Retail stores,
ecommerce
Retail stores,
ecommerce
Retail
stores and
concessions
through joint
ventures
WHOLESALE CUSTOMERS WHOLESALE CUSTOMERS WHOLESALE CUSTOMERS
Department stores,
multi-brand stores,
franchise operators
Department
stores,
multi-brand
stores
Department
stores,
multi-brand
stores
Brand licensees,
concessions,
department
stores
LI CENSI NG LI CENSI NG LI CENSI NG
Product and country licensing Product
licensing
Product
licensing
Product
licensing
BRANDS BRANDS BRANDS
French Connection,
Great Plains,
Toast, YMC
French
Connection,
YMC
French
Connection
French
Connection
French
Connection
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 6
RETAIL LOCATIONS
31 January 2015 31 January 2014
Locations sq ft Locations sq ft
Operated locations
UK/Europe
French Connection Stores
French Connection/Great Plains Concessions
Toast Stores
YMC Stores
62
55
11
2
183,358
35,363
13,425
1,355
66
51
12
2
202,770
33,560
15,384
1,355
130 233,501 131 253,069
North America
French Connection US Stores
French Connection Canada Stores
6
7
19,719
18,125
7
9
22,841
24,325
13 37,844 16 47,166
Total operated locations 143 271,345 147 300,235
French Connection licensed and franchised
UK/Europe
North America
Middle East
Australia
Hong Kong
China
India
Other
7
1
9
74
8
27
89
35
8,527
2,000
17,895
75,544
12,892
31,959
47,712
32,347
7
1
6
72
5
23
110
48
7,994
2,000
9,805
72,112
6,062
34,960
60,782
44,516
Total licensed and franchised locations 250 228,876 272 238,231
Total branded locations 393 500,221 419 538,466
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 7
CORPORATE SOCIAL RESPONSIBILITY
The Board recognises that the long term profitability of the
business depends, amongst other things, on appropriate
protection of the Group’s assets, reputation and brand names
and is subject to the long-term sustainability of the supply chain.
Impact on the environment
The use of resources to manufacture and supply our products
utilise finite global resources. The source of the raw materials and
the manufacture of the finished products is spread globally and
provides employment, income and personal security at many
different points in the process. We recognise, however, that
our products utilise global resources some of which are limited
in their nature.
Some of the initiatives we have implemented include:
• In the UK, the business meets its responsibilities under the
packaging waste regulations through membership of Valpak;
• Wooden hangers are sourced from sustainable sources
and we do not give them away with the products;
• Reduction in packaging materials for finished goods
i.e. no plastic banding, no inner cartons;
• Plastic returnable tote bins for shipping to our own
UK stores to reduce cardboard;
• Plastic and cardboard waste is collected from our
UK stores for recycling;
• At Toast packaging is recyclable, and catalogues are
printed on FSC paper with vegetable based inks;
• In our US operations, corrugated cartons are re-used
whenever possible and ultimately recycled using a band
machine so they are crushed into bails for collection; and
• In Canada we are participants in ‘Stewardship Ontario’,
paying a fee for all point of sale materials to be recycled.
All lighting has been replaced with LED’s.
Carbon emissions
Tonnes of CO
2
e
2015
Tonnes of CO
2
e
2014
Emissions from
Scope 1 (vehicles, fugitive emissions, gas) 236 428
Scope 2 (electricity) 4,688 5,139
Total footprint 4,924 5,567
Group chosen intensity measurement £m £m
Turnover 178.5 189.4
Emissions reported above
per £m of turnover 28 29
This is our second year greenhouse gas (GHG) emissions
report in line with UK mandatory reporting requirements, set
out by the Department for Environment, Food and Rural Affairs
(DEFRA).
The mandatory requirement is for the disclosure of scope 1
and 2 emissions only. We have captured all material qualifying
emissions from around the Group. Some extrapolation and
estimation techniques have been used to calculate the Group
CO
2
e in respect of less than 5% of our stores and the final
month of our data.
The reported sources fall within our consolidated financial
statements. We do not have responsibility for any emission
sources that are not included in our consolidated financial
statements. We have computed our emissions using the
DEFRA Environmental Reporting Guidelines: Including
mandatory greenhouse gas emissions reporting guidance
issued in June 2013.
Our total GHG footprint in line with these guidelines 4,924
tonnes CO
2
e (2014: 5,567 tonnes).
Supply chain
The Group has used third party manufacturing facilities around
the world for over thirty years but has specifically avoided
suppliers or regions where the employment or environmental
practices are known to be below acceptable standards. The
Group requires all of its product suppliers to abide by its
guidelines contained in the Supplier Guide. Our staff visit the
factories we use for garment production on a regular basis and
consider the environment and work practices during those visits,
however currently our ability to formally audit the facilities is
limited. Our Supplier Guide and the employment standards
required of our suppliers accord with industry standards including
inter alia that employees should: be given a safe and healthy
environment to work in; be given the right to free
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 8
CORPORATE SOCIAL RESPONSIBILITY
Continued
association; be paid a fair wage; not be forced or bonded
labour; be of an appropriate age; and work only reasonable
hours.
The Board recognises that it is not possible to provide absolute
assurance that standards expected of our suppliers are adhered
to. Where transgressions are identified we would work with the
supplier to develop an appropriate remediation programme.
However we will not hesitate to stop using any supplier who
we identify is persistently operating in contravention of our
standards or failing to implement agreed remediation
programmes.
In October 2014 French Connection ended the use of angora
in the production of its clothing and accessories following
customer feedback.
Toast supports the non-use of animals in testing and challenge
our suppliers on this matter – our glycerine soaps as an
example, do not contain any animal derived ingredients
and are suitable for use by vegetarian and vegans.
Tax
The Board is committed to ensuring full compliance with the
law and making all tax payments on a timely basis.
The Board are committed to ensuring that openness, honesty
and transparency will be paramount in all dealings with the tax
authorities and other relevant bodies.
We run cycle to work and childcare voucher schemes in the
UK for our employees.
People
We are committed to providing equal opportunities for all
of our employees.
We ensure that every employee, without exception, is treated
equally and fairly and that all employees are aware of their
responsibilities.
The breakdown of the gender of Directors and employees at
the end of the financial year is as follows:
Men
Number
2015
Women
Number
2015
Company Directors 4 1
Other senior managers 7 7
All other employees 500 1,583
Total 511 1,591
Notes
Company Directors consist of the Company’s Board.
Other senior managers is as defined in The Companies Act
2006 (Strategic Report and Directors’ Report) Regulations
2013, and includes: i) persons responsible for planning,
directing or controlling the activities of the Company, or
a strategically significant part of the Company, other than
Company Directors; and ii) any other Directors of undertakings
included in the consolidated accounts.
The business complies with locally applicable health and safety
regulations in the countries in which it operates. This includes
the provision and maintenance of safe environments for our
employees, appropriate design of our stores, health and safety
training for appropriate personnel, electrical installation reviews,
risk assessments and risk monitoring in our offices, stores and
warehouses.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 9
FINANCIAL REVIEW
Financial results overview
Following the initiatives put in place two years ago to
turnaround trading performance, the Group has delivered a
second consecutive year of strengthened financial performance.
Each half year reported during this period has shown year on
year financial improvement.
For the full year ended 31 January 2015 underlying Group
operating loss was reduced to £(0.8)m (2014: loss of £(4.4)m,
2013: loss of £(7.2)m). After taking into account the cost of
store disposals and closures the total loss before tax was
£(1.6)m (2014: loss of £(6.1)m).
Revenue overview
Total 2015 revenue was 5.8% lower than 2014 (-4.1%
at constant currency) with the growth in wholesale
being offset by the impact of store closures and
LFL’s in Retail.
Gross margin
Composite gross margin was slightly reduced at 46.7%
(2014: 47.6%) reflecting the higher mix of wholesale sales
within Group revenue. Within this UK/Europe retail gross
margin was up 50 basis points on lower discounting, and
UK/Europe wholesale gross margin up 170 basis points.
Segment revenue and results
2015
£m
2014
£m
Revenue
Retail 103.3 117.5
Wholesale 75.2 71.9
Group revenue 178.5 189.4
Gross profit 83.4 90.2
Retail 57.2% 56.9%
Wholesale 32.3% 32.5%
Group gross margin 46.7% 47.6%
Underlying operating (loss)/profit
Retail (11.3) (11.6)
Wholesale 14.6 11.7
Licence income 6.5 6.1
Common and Group overheads (10.7) (11.3)
Finance income 0.1 0.1
Share of pro?t from joint ventures – 0.6
Underlying Group operating loss* (0.8) (4.4)
Underlying operating margin
Retail (10.9)% (9.9)%
Wholesale 19.4% 16.3%
Underlying Group operating margin (0.4)% (2.3)%
Geographical information
2015
£m
2014
£m
Revenue
UK/Europe 72% 71%
North America 23% 24%
Rest of the World 5% 5%
Divisional operating (loss)/pro?t
UK/Europe (0.4) (3.9)
North America 2.5 2.4
Rest of the World 0.9 1.6
Group overheads and finance income (3.8) (4.5)
Underlying Group operating loss* (0.8) (4.4)
*Excludes net loss on store disposals and closures.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 10
FINANCIAL REVIEW
Continued
Retail
Group retail revenues of £103.3m were 12.1% lower than
the prior year (-11% at constant currency). The decline in
revenue was primarily due to the closure of 9 UK/Europe
non-contributing stores and negative LFL’s in H2.
In Q3 and into November, UK/Europe retail had been trading
against stronger prior year comparatives and un-seasonally
warm weather impacting LFL sales, as reported at the
November IMS. In Q4 we traded through the sale period
with lower stock levels which impacted LFL sales. Overall
UK/Europe LFL retail gross sales for the full year were -3%
(H1 +1.1%, H2 -6.5%).
The retail gross margin of 57.2% (2014: 56.9%) reflected
a good performance in UK/Europe with an improvement in
margin of 50 basis points partly offset by higher discounting
to clear inventory in North America.
The retail underlying loss of £(11.3)m was an improvement of
£0.3m compared to prior year. This improvement was driven
out of UK/Europe through the closure of non-contributing
stores.
Ecommerce sales represent 23% of total Group retail sales
(2014: 20%).
Wholesale
Group wholesale revenues of £75.2m were 4.6% higher than
prior year (+7.3% at constant currency), with growth in both
UK/Europe, North America and Rest of World. The wholesale
gross margin of 32.3% was broadly flat reflecting a good
performance in UK/Europe with an improvement in margin of
170 basis points offset by higher discounting to clear inventory
in North America. Combined with tight cost control, particularly
trade show and promotional expenses, overall wholesale
underlying operating performance was a £14.6m profit,
an increase of £2.9m.
Geographical analysis
The geographical revenue break-down is largely unchanged
with UK/Europe representing 72% of Group revenues (2014:
71%). The combination of Retail and Wholesale in UK/Europe
led to an improvement of £3.5m in divisional operating
contribution with North America delivering an improvement
off the back of a recovery in wholesale. Rest of the World
wholesale revenues were +2.1% at constant currency and the
lower profit from JV’s was due to the timing of Chinese New
Year and the disruption to retail in Hong Kong during the widely
publicised demonstrations.
Other Income
The net income received from Global licensing was £6.5m
in the year (2014: £6.1m) with strong growth from furniture
and shoes.
Operating expenses
Total Group operating expenses of £90.8m were 10.5% lower
than last year. After adjusting for store closures and currency,
operating expenses were 3% lower than last year thanks
to close monitoring and control. We will continue the focus
on costs, and will seek to absorb cost pressure from rent
reviews due in the current year.
Balance sheet and cash flow
The Group balance sheet at 31 January 2015 remains strong
with £23.2m of cash (2014: £28.2m), no bank borrowings and a
minimum cash position during the year of £7.6m (2014: £9.9m).
The trading operations of the Group consumed cash of £3.0m
(2014: cash generated £1.6m) with a reduction in trade and
other payables due largely to the timing of Chinese New Year,
lower stock purchases, and smaller retail store estate. This was
compensated for in part by a further decrease in inventory of
£3.3m reflecting the continued improvements in the efficiency
of merchandising and buying.
Capital expenditure increased to £1.1m (2014: £0.8m)
with increased expenditure on new retail locations, website
platform investment, and warehouse capabilities. In the year
the restructuring costs of closing under-performing stores was
£1.4m. We continue to target the closure of non-contributing
stores and expect 3–4 more to close in the current year in
UK/Europe and we will also review closely our North America
store portfolio. Since certain of the non-performing stores are
coming to the end of their leases, we expect to spend less in
store closure costs going forwards.
Taxation
The tax charge for the year of £Nil (2014: tax credit of £0.1m)
represents the net impact of a reduction in the tax potentially
payable on deferred capital gains less the tax payable on
current profits generated in Hong Kong and the US (as reduced
by past losses). The Group has unused tax trading losses with
a potential value of £13.8m. As the Group returns to profit,
these tax losses should be utilised.
Dividends
The Board of Directors remain of the view that the business is
best served by retaining current cash reserves to support the
turnaround of the business, and therefore do not recommend
the payment of a dividend. The Board intend to keep the
shareholder distribution policy under close review during
the year.
Going concern
Having reviewed the cash forecasts and the sources of cash
funding available to the Group, the Board has concluded that
it is appropriate to prepare the Group financial statements on
a going concern basis.
The strategic report, from pages 2 to 10, has been reviewed
and approved by the Board on 17 March 2015.
By order of the Board
Adam Castleton
Group Finance Director
17 March 2015
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 11
BOARD OF DIRECTORS
Stephen Marks
Chairman and
Chief Executive
Stephen (aged 68) founded the Company in 1969 and has managed the Group’s
development since then in the position of Chairman and Chief Executive.
Adam Castleton A.C.A.
Group Finance Director
Adam (aged 51) was appointed to the Board on 12 August 2013. He is a chartered
accountant having qualified at Price Waterhouse, Manchester. He holds a bachelor's
degree in Economics from Manchester University. He has over 25 years of financial
experience and has held leadership roles at a number of international consumer-facing
companies, including eBay, Shopping.com, Polo Ralph Lauren (Europe), and The Walt
Disney Company. He joined French Connection from O2 UK, where he was Finance
Director of the O2 Business Division, and previously acting CFO of O2 UK.
Neil Williams A.C.A.
Operations Director
Neil (aged 50) joined the Group from KPMG in 1992 and was appointed to the Board
in May 1994.
Dean Murray A.C.A.
Independent
Non-Executive
Director
Dean (aged 52) was appointed to the Board on 6 February 2008. He qualified as a
chartered accountant with KPMG and was Chief Executive of Myriad Childrenswear
Group Limited. Myriad was the leading UK specialist multi-brand and multi-channel
childrenswear business with over 1,000 distribution outlets including the Adams
Kidswear brand. He is currently Chairman of Neville Johnson Limited, a UK based
bespoke furniture designer, and Gear4music, an online retailer of musical instruments.
Claire Kent
Independent
Non-Executive
Director
Claire (aged 51) was appointed to the Board on 3 October 2008. She was formerly a
Managing Director with Morgan Stanley where she was ranked number one in luxury
goods European retailing analysis for nine consecutive years. Working in the sector
since the early 1990s she has accumulated an in-depth understanding of the operation
of luxury and apparel brands and has worked very closely with some of the most
respected brands in the sector. Since leaving Morgan Stanley, Claire has focused on
advising companies on their IPOs (Prada in 2011; Pandora in 2010) and playing a role in
the sale of private equity-owned companies (Cath Kidston, Original Additions). She is
also an advisory Director of Investcorp, a consultant for Prada and a Board member
of Georg Jensen. Claire is a co-founder of the British crafted runwear brand, Iffley Road.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 12
The Directors of French Connection Group PLC (“the
Company”) present their Annual Report for the year
ended 31 January 2015.
Principal activity
The Group designs and supplies branded fashion clothing
and accessories as more fully described in the section
entitled Our Business.
Business review
The principal operating subsidiaries of the Group for the
period under review were French Connection Limited, French
Connection UK Limited, French Connection (London) Limited,
Contracts Limited, French Connection Group Inc, French
Connection (Hong Kong) Limited, Toast (Mail Order) Limited,
French Connection (Canada) Limited and YMC Limited.
The Companies Act requires that the Directors’ Report contains
a fair review of the business and a description of the principal
risks and uncertainties facing the Group. A review of the
business strategy and a commentary on the performance of
the business is set out in the Strategic Report. The principal
risks facing the business are detailed in the section entitled
Our Business and the corporate and social responsibilities of
the Group are outlined in the Corporate Social Responsibility
Statement. The Corporate Governance Statement may
be found on page 14. The disclosures contained in those
reports form part of this Directors’ Report.
Fair, balanced and understandable
The Board has considered the regulatory changes impacting
corporate reporting and Executive remuneration and believes
this Annual report and Accounts complies with these changes
taking into account emerging best practice. Notably the Board
has determined that the 2015 Annual Report and Accounts,
taken as a whole is fair, balanced and understandable. It
provides the information necessary for shareholders to assess
the performance, strategy and operating model of the Group
and Company in accordance with the Code requirements.
Dividend
The Directors are recommending that no dividend should
be paid for the year.
Directors
The Directors of the Company are set out in the Board of
Directors on page 11.
Stephen Marks and Dean Murray, Directors, retire by rotation
in accordance with the Articles of Association and offer
themselves for re-election at the AGM. The Board considers
that Mr Marks and Mr Murray continue to make a major
contribution to the strategy and operations of the Group and
therefore recommend their re-election as Directors. Details
of Mr Marks’ and Mr Murray’s remuneration and contracts
are set out in the Directors' Remuneration Report.
The Board has considered whether there are any factors which
might compromise the independent judgement of either of the
non-Executive Directors and concluded there was none. The
Board therefore considers both Mr Murray and Ms Kent to be
independent of the Company.
At 31 January 2015, none of the Directors or their families held
any beneficial interests in the issued capital of the Company
other than Stephen Marks whose shareholding is disclosed
below and Adam Castleton whose shareholding is disclosed
in the Directors’ Remuneration Report.
The details of share options held by Directors are set out in the
Directors’ Remuneration Report. There have been no changes
in the Directors’ interests in the shares of the Company since
the end of the financial year.
Significant shareholdings
As at 17 March 2015 the Company is aware of the following
substantial interests in its ordinary shares:
Shares
Percentage
of Issued
Share
Capital
Stephen Marks 40,094,190 41.7%
of which:
– held in family trusts 1,506,500
– held by family members 775,000
Schroder Investment Management 12,111,207 12.6%
OTK Holding 6,000,000 6.2%
Liad Meidar 4,837,000 5.0%
Contractual arrangements
The Company has no contractual or other arrangements which
are essential to the business of the Company nor any key
customers or major suppliers on which it is dependent.
Supplier payment
The majority of the Group's creditors are suppliers with whom
payment terms and conditions are agreed in advance. Where
the supply of goods and services is satisfactory, it is the policy
of the Group to pay creditors when they fall due for payment.
For the year ended 31 January 2015, the Group’s average trade
creditors represented 34 days purchases (2014: 33 days). The
Company has minimal third party creditors.
Employees
It is the Group's established practice that all employees have
access to their immediate superiors and ultimately to the Chief
Executive to discuss matters of concern to them as employees
and that the views of employees are sought and taken into
account in making decisions which are likely to affect their
interests.
Furthermore the Group seeks to encourage both the involvement
of employees in its performance and a common awareness on
the part of all employees of factors affecting its performance.
The Group provides equal opportunities to all employees and
prospective employees including those who are disabled.
Carbon emissions
The Group has disclosed carbon emissions data within the
Corporate Social Responsibility Report.
Property, plant and equipment
The changes in intangible and tangible fixed assets during the
year are set out in Notes 11 and 12 to the Group accounts.
Financial instruments
The financial instrument policies are set out in Note 26 to the
Group accounts.
DIRECTORS’ REPORT
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 13
Joint Ventures
The Group is a member of two 50:50 Joint Ventures operating
retail stores in China and Hong Kong. Both joint ventures are
managed by committees with equal representation from the
members. The Group’s share of the results of these businesses
is included in these accounts for the whole of the financial year.
Charitable and political donations
Charitable donations of £11,305 (2014: £14,051) were made
during the year. No political donations were made in either
2015 or 2014.
Share capital and control
The share capital of the Company comprises ordinary shares
of 1p each; each share carries the right to one vote at general
meetings of the Company. The issued share capital of the
Company, together with movements in the Company’s issued
share capital during the year, are shown in Note 21.
The rights and obligations attached to the Company’s shares,
in addition to those conferred on their holders by law, are
set out in the Articles of Association. The holders of ordinary
shares are entitled to receive all shareholder documents, attend
and speak at general meetings of the Company, exercise all
voting rights and to receive dividends and participate in other
distributions of assets.
The Company is not aware of any agreements between
shareholders restricting the voting rights or the right to transfer
shares in the Company.
The rules about the appointment and replacement of Directors
are contained in the Company’s Articles of Association.
Changes to the Articles of Association must be approved by
the shareholders in accordance with the legislation in force
from time to time. The powers of the Directors are determined
by legislation and the Articles of Association of the Company
in force from time to time. Powers relating to the issuing and
buying back of shares are included in the Company’s Articles
of Association and shareholder approval of such authorities
may be sought, if considered appropriate by Directors, at the
Annual General Meeting.
The Company does not have agreements with any Director or
employee that would provide compensation for loss of office or
employment resulting from a takeover, save that the Company’s
share schemes contain provisions which may cause options
and awards granted to employees to vest on a takeover.
Takeovers directive
Section 992 of the Companies Act 2006, which implements
the EU Takeovers Directive, requires the Company to disclose
certain information. Most of these requirements are dealt with
elsewhere in the Annual Report, however the following
additional disclosures are required:
The Company’s Articles of Association may be amended by
special resolution of the shareholders.
The Board of Directors is responsible for the management
of the business of the Company and may exercise all the
powers of the Company subject to the provisions of the
relevant statutes, the Company’s Memorandum and Articles
of Association. The Articles contain specific provisions and
restrictions regarding the Company’s power to borrow money.
Powers relating to the issuing of shares are also included in the
Articles and such authorities are renewed by shareholders each
year at the AGM.
There are a small number of agreements that take effect, alter
or terminate upon a change of control of the Group following
a takeover, such as shareholder agreements with the minority
shareholders in certain subsidiaries and the Company share
option schemes. None of these is deemed to be significant in
terms of their potential impact on the business of the Group
as a whole.
Going concern
The Group has considerable cash resources, ending the year
with £23.2m (2014: £28.2m) and with a minimum Group cash
balance during the year of £7.6m (2014: £9.9m). The Group
has no debt.
Having reviewed the cash forecasts and the sources of
cash funding available to the Group, the Board has concluded
that the Group has a reasonable expectation to continue in
operational existence for the foreseeable future. For this reason,
the Board continues to adopt the going concern basis in
preparing the accounts.
Controlling shareholder
In order to comply with changes to the Listing Rules relating
to controlling shareholders, a relationship agreement was
executed during the year between French Connection Group
PLC and Stephen Marks. The Company has complied with
all of the independence provisions of the Listing Rules.
Disclosure of information to auditors
The Directors who were members of the Board on the date the
Directors’ Report was approved have confirmed the following:
• to the best of each Director’s knowledge and belief there is
no information relevant to their report of which the auditor
is unaware; and
• each Director has taken all the steps a Director might
reasonably be expected to take to be aware of relevant audit
information and to establish that it has been communicated
to the auditor.
Auditors
KPMG LLP were appointed at the last AGM and have indicated
their willingness to continue as Auditors. Resolutions to
reappoint them and to authorise the Directors to determine
their remuneration will be proposed at the 2015 AGM.
AGM
The AGM of the Company will be held at 10.00 am on 14 May
2015 and a Notice of Meeting has been sent to shareholders
setting out details of the business to be conducted.
Explanatory notes on all the business to be considered at this
year’s AGM appear on pages 60 to 61 of this document.
By order of the Board
Adam Castleton
Company Secretary
17 March 2015
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 14
Compliance with the UK Corporate
Governance Code
The Board is responsible for ensuring compliance with the
new edition of UK Corporate Governance Code (the ‘Code’),
which was published by the Financial Reporting Council in
September 2012 and applies to reporting periods beginning
before 1 October 2014. The code is available at www.frc.org.uk.
Except as referred to below, the Company has complied with
all relevant provisions of the 2012 Code throughout the year
ended 31 January 2015 and from that date up to the date of
publication of this Annual Report.
Mr Marks is both Chairman and Chief Executive and is also the
founder and the major shareholder (provision A2.1). The culture
of the business, led by the Chief Executive, is one of detailed
involvement and a need for speedy reaction times. Mr Marks
has led this culture and defined the character of the business
throughout its existence.
Constructive challenge by the independent non-Executive
Directors, as well as the effective functioning of the committees
ensures that authority is suitably balanced.
The Board contains two non-Executive Directors, each of which
chairs one of the three committees of the Board and therefore
has specific responsibilities. The Board has concluded that
there would be no benefit in nominating a senior non-Executive
Director (provision A4.1). Both are utilised as sounding boards
for the Chairman and both are available to other Executive
Directors or shareholders as necessary.
There were no non-Executive Board appointments made
or contemplated during the year. It is our intention to form a
Nominations Committee comprising the two non-Executive
Directors when any appointment is contemplated (provision B2.1).
The Chairman believes that the Board and its Committees
functioned well during the year and supported the strategy and
development of the Company. A detailed and formal evaluation
was therefore not carried out during the year (provision B6.1).
The Board and its composition
The Board reserves to itself certain key matters to approve or
monitor on behalf of the shareholders the strategic direction,
development and control of the Group. It approves strategic
plans and annual capital and revenue budgets. It reviews
significant investment proposals and the performance of past
investments and maintains an overview and control of the
Group’s operating and financial performance. It monitors the
Group’s overall system of internal controls, governance and
compliance and ensures that the necessary financial and
human resources are in place for the Company to meet its
objectives.
The Board delegates responsibility for the day-to-day operation
of the business to the Executive Directors within the framework
of agreed prudent and effective controls.
The Company Secretary’s responsibilities include ensuring good
information flows to the Board and between senior management
and the non-Executive Directors. The appointment and removal
of the Company Secretary is a matter reserved for the Board.
The Company Secretary is responsible, through the Chairman,
for advising the Board on all corporate governance matters
and for assisting the Directors with their professional
development.
All Directors are briefed by the use of comprehensive papers
circulated in advance of Board meetings and by presentations
at the meetings in addition to receiving minutes of previous
meetings.
The training needs of Directors are formally considered on an
annual basis and are also monitored throughout the year with
appropriate training being provided if required.
Any member of the Board may take independent professional
advice at the Company’s expense. All Directors have access to
the advice and services of the Company Secretary. All Directors
of the Company are covered by a comprehensive Directors and
Officers insurance policy.
The Company’s Articles of Association give power to the Board
to appoint Directors, but require Directors to submit themselves
for election at the first AGM following their appointment. One
third of the Board is subject to re-election annually.
The Board of Directors at the date of this report comprises
three Executive Directors and two independent non-Executive
Directors. The biographical details of each Board member
are set out in the Board of Directors, including their main
commitments outside the Company.
During FY 2015 there were nine scheduled Board meetings.
Neil Williams was unable to attend two of the meetings. All the
other meetings were fully attended.
The non-Executive Directors are considered to be independent
in that they remain free from any business or other relationship
which could materially influence their judgement and represent
a strong source of advice and independent challenge.
Stephen Marks and Dean Murray are required to stand for
annual re-election in accordance with B.71 of the Code and
the Company’s Articles of Association.
Committees
Each Board Committee has written terms of reference approved
by the Board, which are available on the Company’s website.
Audit Committee
The Audit Committee comprises Dean Murray who is Chair
and Claire Kent, the two independent non-Executive Directors.
The Committee met three times during the year and each
meeting was fully attended.
Details of the Audit Committee are included in the Audit
Committee Report.
Remuneration Committee
The Remuneration Committee comprises Claire Kent who is
Chair and Dean Murray. The Group Finance Director attends
by invitation.
The Committee met three times during the year and each
meeting was fully attended.
Details of the Remuneration Committee are included in the
Directors’ Remuneration Report.
CORPORATE GOVERNANCE STATEMENT
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 15
The Disclosure Committee
The Disclosure Committee was established in October 2013
to assist and inform the Chief Executive in his decisions
concerning the identification of inside information and its
disclosure. The Disclosure Committee comprises the Chief
Executive, Group Finance Director and Chief Operating Officer.
The Disclosure Committee met once during the year and
was fully attended.
Code of ethics
The Group operates under the detailed and entrepreneurial
guidance of Stephen Marks (the founder of the business), the
Executive Directors and a broad range of operational managers.
As noted above the Board includes two non-Executive Directors
who provide independent challenge and input into the overall
governance of the Group.
The culture established by Mr Marks and the senior management
is to expect a high standard of behaviour from everybody
working for the Company.
The Board has considered the risks associated with the issues
raised by the Bribery Act 2010 as part of the broader review of
risks faced by the Group and has reviewed the processes and
controls in place to prevent offences under the Act.
The Company also offers a confidential, whistle blowing hotline
for any employee wishing to report any concern that they feel is
inappropriate to raise with their line manager. All whistle blowing
allegations are reported to and considered by the Executive
Committee and Board. No instances occurred during the
financial year.
Tax
Board level oversight of tax matters is part of the Company’s
tax risk governance process.
All significant tax matters are reported to the Board by the
Group Finance Director and tax matters are governed by
the Group tax strategy.
Internal control and risk management
The Board supported by the Audit Committee confirms that
there are ongoing procedures in place for identifying, evaluating
and managing significant risks faced by the Group and that
these have been in place for the year under review and up
to the date of approval of the Annual Report and Accounts.
The procedures have been reviewed on an ongoing basis
throughout the year by the Audit Committee and accord with
the requirements of the UK Corporate Governance Code.
The Board conducts an annual review of the major risks
affecting the business and the effectiveness of the system
of internal control. The culture of the business results in the
Executive Directors being closely involved in managing the
business at a detailed level. This provides a high degree of
direct monitoring of risks and control processes, conducted
against the background of a culture of integrity, quality and high
levels of communication. This is supported by reviews of daily,
weekly and monthly detailed analyses of the performance of
the business, the key performance indicators associated with
the trading risks facing the Company and the detailed
operational results.
The Group does not have a separate internal audit function
although during the year the Board considered whether there
is a need for such a function, concluding that the benefits,
when compared to the potential benefits of deploying additional
resources in other areas, are not sufficiently clear. Certain
elements of internal audit work are conducted or coordinated
by the existing finance and accounting functions. These include
reviews of financial controls internationally, externally facilitated
reviews of procurement transactions and support for system
developments between the separate accounting functions.
Communication with shareholders
Communication with shareholders is generally conducted
through one-to-one meetings with the Executive Directors
(and the non-Executive Directors if requested) for which there
is an open invitation to all shareholders and proactive invitation
made to shareholders with more than 1% of the share capital.
Meetings typically occur shortly after the announcements
of half-year and full year results. The opinions expressed by
shareholders are gathered by the Company Broker and passed
directly to the Board.
The AGM and the resolutions proposed for consideration at the
meeting are another focus of communication with shareholders.
Discussions are held prior to the meeting with shareholders
where they have views on the resolutions. The level of proxy votes
received is considered carefully by the Board and published on
the Group’s website with details of any proposed Board action
where significant votes were cast against a specific resolution.
By order of the Board
Adam Castleton
Company Secretary
17 March 2015
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 16
AUDIT COMMITTEE REPORT
Introduction from the Audit Committee Chair
I am pleased to present the Audit Committee Report for the
year ended 31 January 2015.
The Audit Committee is responsible for ensuring that the
financial integrity of the Group is effective, through the regular
review of its financial performance. It is also responsible for
ensuring that the Group has appropriate risk management
processes and internal controls, and that the external audit
process is robust. I explain in more detail the Committee’s
activities in this report.
The Audit Committee provides effective governance over
external financial reporting, risk management and internal
controls and reports its findings and recommendations to the
Board. In my capacity as Chairman of the Audit Committee,
I am pleased to report on the operations of the Committee
during the past year, with emphasis on the specific matters we
have considered, including compliance with the UK Corporate
Governance (the Code) and associated Guidance on Audit
Committees. I confirm that we have fully complied with the
requirements of the Code.
Robert Brent completed his final year of the Audit Partner’s five
year rotation. I would like to formally welcome Jeremy Hall as
our new Audit Partner.
I thank my fellow Committee member Claire Kent for her
work and input to the Committee and have welcomed the
openness of KPMG and French Connection personnel
throughout the year.
Dean Murray
Chair of the Audit Committee
Membership and remit of the Audit Committee
The Committee considers financial reporting and reviews
the Group’s accounting policies and annual statements.
In particular, any major accounting issues of a subjective
nature are discussed by the Committee.
The Committee also reviews audit activity including the
recommendation to the Board regarding the appointment
of the external auditor, their remuneration and scope of work,
including non-audit services.
The Audit Committee is also responsible for considering the
independence, objectivity and effectiveness of the external
auditor, for monitoring the level of non-audit services provided
by the external auditor and for assessing the effectiveness of
the risk management process.
At the date of the 2015 Annual Report, the Audit Committee
comprises two independent non-Executive Directors: Dean
Murray (Chair) and Claire Kent. In accordance with Code provision
C.3.1, the Board considers that Dean Murray has significant,
recent and relevant financial experience. Biographies of all of the
members of the Audit Committee, including a summary of their
experience, appear within the Board of Directors.
The Audit Committee normally meets at least three times
a year. Audit Committee meetings are also attended by the
Group Finance Director, who is Secretary to the Committee and
by invitation members of the Group Finance team and Partner
and other senior staff of the external auditor. The Committee
met three times during the financial year and each meeting
was fully attended.
Terms of reference
Significant risk issues identified are referred to the Board
for further consideration. The terms of reference of the Audit
Committee are available on the Company’s website.
The Audit Committee is authorised by the Board to review
any activity within the business. It is authorised to seek any
information it requires from, and require the attendance at any
of its meetings of, any Director or member of management,
and all employees are expected to co-operate with any
request made by the Audit Committee.
The Audit Committee is authorised by the Board to obtain, at
the Company’s expense, outside legal or other independent
professional advice and secure the attendance of outsiders
with relevant experience and expertise if it considers this
necessary.
The Chair of the Audit Committee reports to the subsequent
Board meeting on the Committee’s work and the Board
receives a copy of the minutes of each meeting.
Significant issues considered by
the Audit and Risk Committee
The Committee considered the significant accounting issues,
matters and judgements in relation to the Group’s financial
statements and disclosures for the year ended 31 January
2015. As part of the half-year and full year reporting process,
management present a Financial Review to the Committee, and
the external auditors are asked to also comment on the key
areas of accounting judgement and disclosure. The information
presented is used by the Committee to critically review and
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 17
assess the key policies and judgements that have been applied,
the consistency of policy application from year to year and
the appropriateness of key disclosures made, together with
compliance with the applicable accounting standards.
After discussion with both management and the external
auditor, the Committee determined that the key risks of
misstatement of the Group’s financial statements related to:
Net realisable value of inventories (NRV)
Net realisable value was discussed with management during
the year and with the auditor at the time the Committee
reviewed and agreed the auditors’ Group audit plan, and also
at the conclusion of the audit of the financial statements.
The Audit Committee required the Head of Business Planning and
the Stock Controller to present a detailed summary of inventory
and to describe the methodology for calculating the inventory
provision which was considered in detail by the Committee. They
were also required to describe the stock taking procedures.
The Committee interrogated management’s key assumptions
made regarding net realisable value and was satisfied that
the significant assumptions had been appropriately scrutinised,
challenged and were sufficiently robust.
The auditor explained their audit procedures to test
management’s assumptions and calculations and considered
the Group’s disclosures on the subject. On the basis of their
audit work, the auditor considered that the carrying value of
inventory was materially appropriate in the context of the
financial statements as a whole.
Risk management framework
The risk management framework is considered by the Board
during the year, and was discussed on an ongoing basis in the
Audit Committee.
The Audit Committee also considered a report presented by
the Head of IT which set out in detail for all business systems
the IT risk register, risk ranking, risk mitigation and investment
plans. The Audit Committee supported the approach taken by
management to identify and mitigate IT risks.
The Group did not have a separate internal audit function
during the year. The Audit Committee considered whether there
was a need for such a function, concluding that the benefits,
when compared to the potential benefits of deploying additional
resources in other areas, were not sufficiently clear.
Confidential reporting
The Group’s whistle blowing policy enables staff, in confidence,
to raise concerns about possible improprieties in financial and
other matters and to do so without fear of reprisal.
The Audit Committee receives quarterly reports on whistle
blowing incidents and remains satisfied that the procedures
in place are satisfactory to enable independent investigation
and follow up action of all matters reported.
No issues have been reported in the current year.
Other matters considered
Changes to the UK Corporate Governance Code were
considered by the Committee.
The Audit Committee strategy and timetable was considered
and agreed.
Reporting of other matters
All significant insurance claims and incidents of fraud or theft
are reported to the Committee.
There have been no significant incidents during the year.
External auditor appointment
KPMG LLP were appointed as auditors at the AGM on
15 May 2014 and the Directors were authorised to agree
their remuneration for the 2014/2015 audit.
The Audit Committee has considered the new Code, and
recognises the Competition Commission’s proposal that
FTSE350 Companies must tender the external audit at least
every ten years. While this is not applicable to French Connection,
the Committee nevertheless recognises this to be best practice.
The Committee is also aware of the EU proposals that have
come into force during 2014 and that will be relevant for all
listed companies from 2016.
The Audit Committee understands that local enactment of
the law is still being finalised and will continue to monitor these
developments during the coming year. The Committee is aware
that KPMG LLP’s last possible year of engagement is currently
2021 and will therefore develop an appropriate Audit tendering
policy when applicable.
External auditor’s independence
The Committee has adopted a policy in relation to the
appointment of the external auditors to conduct non-audit
services for the Group.
The policy identifies three categories of work: that which is
closely related to the statutory audit work, such as tax planning
and compliance, and which is therefore pre-approved by the
committee, that which it is inappropriate for the auditors to
conduct, such as internal accounting work, IT services, or
internal auditing, and from which the auditors are therefore
excluded and all other types of work for which prior approval is
required from the Audit Committee where the costs are greater
than £5,000.
The objective of this policy is to protect the independence
of the auditors while retaining the benefits to be gained from
synergies with existing work areas.
In 2014/2015 the ratio of audit to non-audit fees was 1:0.47.
The Audit Committee has considered the independence of the
external auditor, including the non-audit services performed,
and has concluded that those non-audit services provided
do not impair the auditor’s independence.
External audit annual assessment
The Group Finance Director, and the Audit Committee meet
with the external auditors to discuss the audit strategy and any
key issues included on the Audit Committee’s agenda during
the year.
After formal discussion, the Audit Committee considers that the
relationship with the auditors is working well and is satisfied with
their effectiveness.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 18
DIRECTORS’ REMUNERATION REPORT
Annual Statement by the Chairman
of the Remuneration Committee
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 31 January 2015.
In my report as Chairman of the Remuneration Committee,
I set out the Committee’s approach to Directors’ remuneration.
The Committee’s objective is to set a remuneration policy
that is clearly understood by our shareholders and employees,
and that drives the right behaviour in terms of incentivising
Executive Directors to deliver growing long-term shareholder
value.
There were no substantial changes relating to Directors’
remuneration made during the year.
Following the approval of the Directors’ Remuneration Policy
at the last AGM we are seeking shareholders’ approval of the
Directors’ Remuneration Report, as set out in the next section
of this report, at the 2015 AGM.
We are happy to discuss any remuneration matters with
shareholders and hope that we can enjoy your support
on the remuneration-related resolutions at the 2015 AGM.
Claire Kent
Chairman, Remuneration Committee
Directors’ Remuneration Report
The Directors’ Remuneration Report sets out details of the
remuneration policy (Section 1) for Executive and non-Executive
Directors, describes the implementation of that policy (Section
2) and discloses the amounts paid relating to the year ended
31 January 2015.
The report complies with the provisions of the Companies
Act 2006 and Schedule 8 of The Large and Medium-sized
companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013. The report has been prepared in line with the
recommendations of the UK Corporate Governance Code and
the requirements of the UKLA Listing Rules, as well as the
GC100 and Investor Group.
The Remuneration Committee comprises Claire Kent as Chair
and Dean Murray. Adam Castleton acts as Secretary to the
Committee. The Committee met three times during the year
to consider the Directors’ and senior managers’ remuneration.
All meetings were fully attended.
When setting the policy for Executive Directors’ remuneration,
the Committee takes into account total remuneration levels
operating in companies of a similar size and complexity, the
responsibilities of each individual role, individual performance
and an individual’s experience. Our overall policy, having had
due regard to the factors noted, is to weight remuneration
towards variable pay. This is typically achieved through setting
base pay, pension and benefits up to market median levels,
with a variable pay opportunity linked to the achievement of
company and personal performance targets.
In setting remuneration for the Executive Directors, the
Committee does take note of the overall approach to reward
for employees in the Group and salary increases will ordinarily
be (in percentage of salary terms) in line with those of the wider
workforce.
We remain committed to shareholder dialogue and take
an active interest in voting outcomes. There have been no
significant policy changes or other substantial matters which
required dialogue with shareholders during the year. If any
of the shareholders are opposed to our policy we would
endeavour to meet with them to understand and respond
to any issues they may have.
The Committee considers developments in institutional
investors’ best practice expectations and the views expressed
by shareholders during any dialogue. The Committee does not
formally consult directly with employees on Executive pay.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 19
Terms of reference for the Remuneration Committee
The terms of reference can be found on the Company’s website.
Section 1: Remuneration Policy
The objective of the policy is to ensure it is appropriate to the Group’s needs and reward Executives for creating shareholder value.
It is the Remuneration Committee’s intention to maintain incentive arrangements which are subject to challenging performance
targets, reflect the Company’s objectives and which motivate executives to focus on both annual and longer term performance.
The Company’s policy is:
• to provide remuneration packages for the Executive Directors and other senior managers in the Group which are appropriate
to the size and nature of the Group’s business and which will attract, retain and motivate high calibre Executives; and
• to balance the fixed and performance-related elements of remuneration appropriately and to provide both short-term and
longer-term incentives to achieve the strategic aims of the Group.
Structure of remuneration
Element
Purpose and link
to strategy
Operation
(including maximum levels)
Framework used to assess performance and
provisions for the recovery of sums paid
Salary
and fees
To provide the core reward
for the role
Sufficient to attract, retain
and motivate high calibre
Executives
Basic salaries are reviewed annually, with changes
effective from 1 February
Salaries are typically set having regard to competitive
market practice, each Director’s contribution to the
business, general inflation rates and the conditions
within the Group
Salaries may be adjusted and any increase will ordinarily
be (in percentage of salary terms) in line with those of the
wider workforce
Increases beyond those granted to the wider workforce
(in percentage of salary terms) may be awarded in
certain circumstances such as where there is a change
in responsibility, progression in the role, experience or a
significant increase in the scale of the role and/or size,
value and/or complexity of the Group
Salary levels for current incumbents for the 2015 financial
year are as follows:
Chairman/CEO: £308,461
Group Finance Director: £215,000
Operations Director: £232,989
The Committee considers individual salaries at
the appropriate Committee meeting each year
after having due regard to the factors noted in
operating the salary policy
No recovery provisions apply to salary
Benefits
in kind
In line with the Company’s
strategy to keep
remuneration simple and
consistent with practices
in the market
Executive Directors receive car benefit, medical cover and
life cover in line with other senior management
Executive Directors also receive personal accident and
sickness cover
The cost to the Company of providing these benefits may
vary from year to year depending on the cost of insuring
the benefit
Not applicable
No recovery provisions apply to benefits
Pension To provide post-retirement
remuneration and market
typical benefits to ensure
that the overall remuneration
package is competitive
Defined contribution plan with up to 10% monthly
employer contributions
A cash alternative may be considered
For tax and wealth planning, the Company may make
payments of pension benefits due in advance for
Executive Directors
Not applicable
No recovery provisions apply to pension benefits
Annual
Bonus
To incentivise and recognise
execution of the business
strategy on an annual basis
Rewards the achievement
of annual financial,
operational and individual
goals
Bonuses are capped at 100% of basic salary
Bonus payments are proposed to the Board after
the end of each financial year and approved by the
Committee for payment in March
The bonus is calculated using pro-rata base salary
if the Director joined the Company during the year
If the Director resigns or has his/her employment
terminated before the payment date, no bonus will
normally be payable
The annual grant of bonuses is based on the
financial performance of the Group in relation to
initial budgets, prior year performance and market
conditions, as well as operational and individual
goals
No recovery provisions apply to the Annual
Bonus. Any provisions will be considered in 15/16
in line with D1.1 of the Corporate Governance
code
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 20
DIRECTORS’ REMUNERATION REPORT
Continued
Structure of remuneration continued
Element
Purpose and link
to strategy
Operation
(including maximum levels)
Framework used to assess performance and
provisions for the recovery of sums paid
Long-
term
incentive
plans
(LTIPs)
To align the interests of
the Executive Directors
with the performance of the
business and the interests
of the shareholders through
the use of share option
schemes
To incentivise and recognise
execution of the business
strategy over the longer
term
Rewards strong financial
performance
At the discretion of the Board and approval of the
Remuneration Committee the Company may issue share
options to Directors up to a maximum of two times salary
in each year
In exceptional circumstances the Board has the discretion
to issue options up to four times salary although this
power has not been used in the last ten years
Options will normally be granted at market value on
the date of grant unless otherwise stated in a Service
Agreement
Options may be granted at a discount to the market
value only in circumstances where the grant of options
is agreed as part of a recruitment package in which case
the exercise price of the option may be determined by
reference to the market value on the date on which the
individual’s employment commenced
The share option schemes include an upper limit on the
number of shares which can be issued of 10% of the total
share capital in any ten year period
Share Awards vest based on three year
performance against a challenging range
of financial targets
No recovery provisions apply to the LTIP. Any
provisions will be considered in 15/16 in line with
D1.1 of the Corporate Governance code
The Committee has not been required to apply any discretion
during 2015 outside the stated Remuneration Policy.
Any use of the above discretions would, where relevant, be
explained in the Annual Directors’ Remuneration Report and
may, as appropriate, be the subject of consultation with the
Company’s major shareholders.
The performance metrics that are used for our annual bonus
and LTIP are to reflect the Group’s key performance indicators,
notably ‘Profit before Tax’.
The Executive remuneration policy is broadly in line with other
French Connection employees, with the main difference that
there is no share scheme below senior Executive level and
some variation of benefits offered.
Any loss of office payment will be approved by the Group
Board and Remuneration Committee. Any payment will be
made at discretion and on a case-by-case basis. Any
payments made beyond contractual and statutory obligations
would be exceptional in nature either due to additional
obligations taken on by the departing Director or due to
specific circumstance and always benchmarked against
market practice.
Illustration of application of policy
The bar charts below represents the variations in
remuneration at different levels of performance for FY15
for the Executive Directors. Long-term incentive plans have
been excluded from the illustrations below because options
are normally granted at market value on the date of grant
and therefore have no immediate intrinsic value.
700,000
600,000
500,000
400,000
200,000
300,000
100,000
0
Fixed On-target Maximum
100% 70% 54%
30%
46%
Stephen Marks
Annual incentives
Fixed only
Base Benefit Pension Total
Fixed (£) 308,461 23,102 29,948 361,511
On-target On-target is assumed to be an annual
bonus equal to 50% of maximum
Maximum Full payout of annual variable pay
i.e. 100% of base salary
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 21
600,000
500,000
400,000
200,000
300,000
100,000
0
Fixed On-target Maximum
100% 70% 54%
30%
46%
Neil Williams
Annual incentives
Fixed only
Base Benefit Pension Total
Fixed (£) 232,989 17,182 21,962 272,133
On-target On-target is assumed to be an annual
bonus equal to 50% of maximum
Maximum Full payout of annual variable pay
i.e. 100% of base salary
500,000
400,000
200,000
300,000
100,000
0
Fixed On-target Maximum
100% 70% 54%
30%
46%
Adam Castleton
Annual incentives
Fixed only
Base Benefit Pension Total
Fixed (£) 215,000 18,513 21,500 255,013
On-target On-target is assumed to be an annual
bonus equal to 50% of maximum
Maximum Full payout of annual variable pay
i.e. 100% of base salary
Executive Director’s terms of employment
Neil Williams’ service contract is dated 17 April 1996, has an
indefinite term, and includes provision for a notice period of
twelve months by either party.
Adam Castleton’s service contract is dated 26 April 2013, has
an indefinite term, and includes provision for a notice period
of six months by either party.
The service agreements can be inspected at the Group
registered office.
Stephen Marks has no service contract.
Non-Executive Directors
Non-Executive Directors have specific terms of engagement
and the Board determines their remuneration.
Dean Murray’s terms of engagement are dated 7 March 2008,
have an indefinite term and allow for a notice period of one month.
Claire Kent’s terms of engagement are dated 3 October 2008,
have an indefinite term and allow for a notice period of one
month.
The non-Executive Directors each receive total annual fees
of £30,000.
No detailed disclosures have been provided for non-Executive
Directors other than for that relating to their fees, as this is the
only form of remuneration the non-Executive Directors receive.
Section 2: Application of the remuneration
policy for 2015
The Executive Directors’ salaries will be reviewed on 1 April
2015 and will be increased as follows:
Stephen Marks +2%
Neil Williams +2%
Adam Castleton +2%
The annual bonus for the 2016 financial year will operate on the
same basis as for the 2015 financial year and will be consistent
with the policy detailed in the Remuneration policy section of
this report in terms of the maximum bonus opportunity. The
measures have been selected to reflect goals that support the
key strategic objectives of the Company.
The Remuneration Committee will exercise their discretion to
grant share options according to the Remuneration Policy during
the Financial Year 2016 dependent upon the financial position
of the Group and the personal contribution of each Executive
Director. Currently no share grant is contemplated for the
forthcoming year.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 22
DIRECTORS’ REMUNERATION REPORT
Continued
Directors’ single figure of total remuneration (audited)
The following table sets out the single figure of total remuneration for Directors for the financial years ended 31 January 2015
and 2014:
Director’s earnings
Directors’ emoluments
Year ended 31 January 2015
Salary
& fees
£000
Benefits
in kind
£000
Annual
bonus
£000
Pension
£000
Total
£000
Executive Directors
Stephen Marks 308 23 – 30* 361
Neil Williams 233 17 – 22 272
Adam Castleton 215 19 – 21 255
Non-Executive Directors
Dean Murray 30 – – – 30
Claire Kent 30 – – – 30
816 59 – 73 948
* In accordance with the Directors’ Remuneration Policy for tax and wealth planning the Group made a payment of £99,523 for pension
benefits due in advance for Stephen Marks.
Year ended 31 January 2014
Salary
& fees
£000
Benefits
in kind
£000
Annual
bonus
£000
Loss of
office
£000
Pension
£000
Total
£000
Executive Directors
Stephen Marks 299 23 50 – 30 402
Neil Williams 226 17 40 – 22 305
Adam Castleton 102 9 45 – 10 166
Roy Naismith 50 4 – 188 5 247
Non-Executive Directors
Dean Murray 30 – – – – 30
Claire Kent 30 – – – – 30
737 53 135 188 67 1,180
The annual bonus shown above was accrued in respect of the performance for the year ended 31 January 2014.
Percentage change in remuneration of Chief Executive
The Chief Executive received a 3% pay increase in 2015 in line with the rest of the eligible Group employees. There was no
Group increase in benefits in kind or pension contributions. No annual bonus was paid to the Chief Executive in 2015 (2014:
£50,000). Employee annual incentives have not been finalised at the signing date of the Annual Report.
Relative importance of spend on pay
Remuneration paid to all employees of the Group during 2015 was £37.8m which represented 42% of the total overheads
of the Group (2014: £38.9m (38%)).
The table below shows the total pay for all of the Group’s employees compared to distributions.
2015
£m
2014
£m % change
Employee costs 37.8 38.9 (3)%
Dividends – – –
Payments for loss of office (audited)
Roy Naismith ceased to be an Executive Director and the Group Finance Director of the Company on 26 April 2013.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 23
Directors’ shareholding and share interests (audited)
Directors’ share options
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire shares in the Company
granted to or held by the Directors. Details of options to subscribe for ordinary shares of 1p each in the Company held by
Directors who served during the year are as follows:
1 February
2014
No. of
options
Issued/
(lapsed)
during the
year
31 January
2015
No. of
options
Exercise
price (p)
Dates of
grant
Dates from
which
exercisable
Dates of
expiry
Stephen Marks 376,700 – 376,700 56.2
29 Oct
2008
29 Oct
2011
29 Oct
2018
Neil Williams 284,500 – 284,500 56.2
29 Oct
2008
29 Oct
2011
29 Oct
2018
Adam Castleton 600,000 – 600,000 29.25
4 Nov
2013
4 Nov
2016
4 Nov
2023
No options were exercised during the year.
The market price of the shares at 31 January 2015 was 58.5p and the range during the year was 36.0p to 92.0p. The average market
share price during the year was 60.8p. The options granted are exercisable between three and ten years after the date of grant and
were subject to performance conditions described above.
Statement of Directors’ shareholding and share interests (audited)
Share
options* with
performance
conditions
No.
Vested but
unexercised
No.
Shares
beneficially
owned
No.
Total interest
in shares
No.
Stephen Marks – 376,700 40,094,190 40,470,890
Neil Williams – 284,500 – 284,500
Adam Castleton 600,000 – 81,600 681,600
600,000 661,200 40,175,790 41,436,990
*Outstanding service conditions.
Statement of shareholding voting
The results of the vote on the Remuneration Report and the Remuneration Policy at the 2014 AGM are set out in the table below.
Votes for Discretion Votes against Votes witheld
Number % Number % Number % Number
Remuneration Report 55,819,919 99.00 11,900 0.02 554,673 0.98 –
Remuneration Policy 55,814,919 98.99 11,900 0.02 559,473 0.99 200
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 24
DIRECTORS’ REMUNERATION REPORT
Continued
Review of past performance and total shareholder return
This graph below demonstrates the Company’s performance, measured by total shareholder return, compared with the performance
of the FTSE Small Cap Index also measured by total shareholder return. This index has been selected for the comparison because it
reflects the market sector in which the Company is reported. The graph has been compiled on annual data at 31 January of each year.
350
300
250
200
100
150
50
0
31 Jan-09 31 Jan-10 31 Jan-11 31 Jan-12 31 Jan-13 31 Jan-14 31 Jan-15
Total cumulative shareholder return for the six-year period to 31 January 2015 French Connection
FTSE Small Cap
2010
£000
2011
£000
2012
£000
2013
£000
2014
£000
2015
£000
Total CEO remuneration 330 505 342 352 402 361
Annual variable element award rates
against maximum opportunity 0% 62% 0% 0% 17% 0%
Approval
This report was approved by the Board of Directors on 17 March 2015 and signed on its behalf by:
Adam Castleton
Company Secretary
17 March 2015
Company Number: 1410568
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 25
The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable
law and have elected to prepare the parent Company financial statements in accordance with UK Accounting Standards.
Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of
the Group and parent Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
• for the parent Company financial statements, state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the parent Company financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the
parent Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent
Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and
enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for
taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, a Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
These Reports were all approved by the Board of Directors.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation
as a whole; and
• the Strategic report, including content contained by reference, includes a fair review of the development and performance
of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face.
The Board confirms that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the performance, strategy and business model of the Company.
By order of the Board
Stephen Marks Adam Castleton
Chairman and Chief Executive Group Finance Director
17 March 2015
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
In respect of the Annual Report and the Financial Statements
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 26
INDEPENDENT AUDITOR’S REPORT
To the members of French Connection Group plc
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements is unmodified
We have audited the financial statements of French Connection Group PLC for the year ended 31 January 2015 set out on pages
28 to 56. In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at
31 January 2015 and of the Group’s loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards
as adopted by the European Union;
• the parent Company financial statements have been properly prepared in accordance with UK Accounting Standards; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards
the Group financial statements, Article 4 of the IAS Regulation.
2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the risk of material misstatement that had the greatest effect
on our audit was as follows:
Carrying value of inventory (£35.5m)
Refer to page 17 (Audit Committee Report), page 34 (accounting policy) and page 49 (financial disclosures).
• The risk – Inventory is carried in the financial statements at the lower of cost and net realisable value. The net realisable value of
inventory in the fashion industry is difficult to estimate, in particular due to uncertain consumer demand. As a result there is a
risk that the cost of inventory exceeds its net realisable value due to the significant degree of judgement involved
in determining the inventory provision.
• Our response – In this area of our audit procedures included:
• We tested the Group’s controls over inventory by attending inventory counts at both warehouse and retail sites and testing
controls over the calculation of inventory loss allowances, inventory provisions and standard costs.
• We challenged the adequacy of the Group's provisions against inventory by corroborating on a sample basis that items
on the stock ageing listing by season were classified in the relevant ageing bracket and assessing the reasonableness of
the provision percentages applied to each season. We challenged the Directors' assumptions when making judgements
regarding the net realisable value of inventory, in particular on the extent to which old inventory can be sold through various
channels, taking into account our knowledge of the industry and of current performance of the Group. We also considered
the historical accuracy of provisioning as a tool for evaluating the adequacy of the control environment in setting the current
provisions.
• We considered the adequacy of the Group's disclosures about the degree of estimation involved in arriving at the provision.
3 Our application of materiality and an overview of the scope of our audit
The materiality for the Group financial statements as a whole was set at £2.775m. This has been determined with reference to
a benchmark of Group revenue (of which it represents 1.6%), which we consider to be one of the principal considerations for
members of the Company in assessing the financial performance of the Group, and is a less volatile measure than profit or loss.
We agreed with the audit committee to report to it all corrected and uncorrected misstatements we identified through our audit with
a value in excess of £0.135m, in addition to other audit misstatements below that threshold that we believe warranted reporting on
qualitative grounds.
Of the Group’s fifteen reporting components we subjected seven to audit for Group reporting purposes and one to specified risk
focused audit procedures. The latter was not individually financially significant enough to require an audit for group reporting
purposes, but did present specific individual risks that needed to be addressed.
The components within the scope of our work accounted for the following percentages of the Group’s results:
Number of
components
Group
revenue
Group
profit and
losses
before tax
Group
total assets
Audits for group reporting purposes 7 70% 79% 76%
Speci?ed risk-focused audit procedures 1 19% 8% 15%
Total 8 89% 87% 91%
For the remaining components, we performed analysis at an aggregated Group level to re-examine our assessment that there were
no significant risks of material misstatement within these.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 27
The Group audit team instructed the component auditor in the USA as to the significant areas to be covered, including the relevant
risks detailed above and the information to be reported back. The Group audit team approved the component materiality which was
set at £1.2m, having regard to the size and risk profile of the USA component. The work on the USA component was performed by
the component auditor and the remainder of the components by the Group audit team.
The Group audit team held telephone meetings with the component auditor in the USA. At these meetings, the findings reported to
the Group audit team were discussed in more detail, and any further work required by the Group audit team was then performed by
the component auditor.
4 Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006;
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the information given in the Corporate Governance Statement set out on pages 14 to 15 with respect to internal control and
risk management systems in relation to financial reporting processes and about share capital structures is consistent with the
financial statements.
5 We have nothing to report in respect of the matters on which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have
identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial
statements, a material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
• we have identified material inconsistencies between the knowledge we acquired during our audit and the Directors’ statement
that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Group’s performance, business model and strategy; or
• the Audit Committee Report does not appropriately address matters communicated by us to the Audit Committee.
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a Corporate Governance Statement has not been prepared by the Company.
Under the Listing Rules we are required to review:
• the Directors’ statement, set out on page 13, in relation to going concern; and
• the part of the Corporate Governance Statement on pages 14 to 15 relating to the Company’s compliance with
the ten provisions of the 2012 UK Corporate Governance Code specified for our review.
We have nothing to report in respect of the above responsibilities.
Scope of report and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set out on page 25, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of
an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the Company’s members as a body and is subject to important explanations and disclaimers
regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated
into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we
have undertaken and the basis of our opinions.
Jeremy Hall (Senior Statutory Auditor)
for and on behalf of KPMG Audit LLP, Statutory Auditor
Chartered Accountants
15 Canada Square, London E14 5GL
17 March 2015
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 28
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 January 2015
Note
2015
£m
2014
£m
Revenue 2 178.5 189.4
Cost of sales (95.1) (99.2)
Gross profit 2 83.4 90.2
Operating expenses 3 (90.8) (101.4)
Other operating income 4 6.5 6.1
Finance income 6 0.1 0.1
Share of pro?t of joint ventures, net of tax 13 – 0.6
Underlying operating loss (0.8) (4.4)
Net loss on store disposals and closures (0.8) (1.7)
Loss before taxation 7 (1.6) (6.1)
Taxation 8 – 0.1
Loss for the year (1.6) (6.0)
The Group’s results were entirely from continuing operations.
Note
2015
£m
2014
£m
Loss for the year (1.6) (6.0)
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Currency translation differences for overseas operations 2.0 0.3
Currency translation differences on foreign currency loans, net of tax (0.6) (1.0)
Currency translation differences transferred to profit and loss, net of tax (0.2) –
Effective portion of changes in fair value of cash flow hedges 0.5 (0.3)
Other comprehensive income for the year, net of tax 1.7 (1.0)
Total comprehensive income for the year 0.1 (7.0)
Loss attributable to:
Equity holders of the Company (1.5) (6.1)
Non-controlling interests (0.1) 0.1
Loss for the year (1.6) (6.0)
Total comprehensive income attributable to:
Equity holders of the Company 0.2 (7.1)
Non-controlling interests (0.1) 0.1
Total income and expense recognised for the year 0.1 (7.0)
Losses per share
Basic and diluted losses per share 10 (1.6)p (6.4)p
The notes on pages 32 to 50 form part of these accounts.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 29
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 January 2015
Note
2015
£m
2014
£m
Assets
Non-current assets
Intangible assets 11 0.4 0.4
Property, plant and equipment 12 3.9 4.5
Investments in joint ventures 13 3.1 3.1
Deferred tax assets 20 4.8 4.8
Total non-current assets 12.2 12.8
Current assets
Inventories 14 35.5 38.5
Trade and other receivables 15 23.5 22.7
Cash and cash equivalents 16 23.2 28.2
Derivative ?nancial instruments 26 0.3 –
Total current assets 82.5 89.4
Total assets 94.7 102.2
Non-current liabilities
Deferred tax liabilities 20 0.2 0.5
Total non-current liabilities 0.2 0.5
Current liabilities
Trade and other payables 17 36.5 43.1
Current tax payable 19 0.2 0.2
Provisions 18 1.0 1.7
Derivative ?nancial instruments 26 – 0.2
Total current liabilities 37.7 45.2
Total liabilities 37.9 45.7
Net assets 56.8 56.5
Equity
Called-up share capital 21 1.0 1.0
Share premium account 9.6 9.4
Other reserves 6.0 4.3
Retained earnings 39.4 40.9
Total equity attributable to equity holders of the Company 56.0 55.6
Non-controlling interests 0.8 0.9
Total equity 56.8 56.5
The notes on pages 32 to 50 form part of these accounts.
These accounts were approved by the Board of Directors on 17 March 2015 and were signed on its behalf by:
Stephen Marks Adam Castleton
Director Director
Company Number: 1410568
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 30
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
capital
£m
Share
premium
£m
Hedging
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Total
£m
Non-
controlling
interests
£m
Total
equity
£m
Balance at 31 January 2013 1.0 9.4 0.1 5.2 47.0 62.7 0.8 63.5
Loss for the year ended 31 January 2014 (6.1) (6.1) 0.1 (6.0)
Other comprehensive income
Currency translation differences for
overseas operations 0.3 0.3 0.3
Currency translation differences
on foreign currency loans, net of tax (1.0) (1.0) (1.0)
Effective portion of changes in fair
value of cash ?ow hedges (0.3) (0.3) (0.3)
Balance at 31 January 2014 1.0 9.4 (0.2) 4.5 40.9 55.6 0.9 56.5
Loss for the year ended 31 January 2015 (1.5) (1.5) (0.1) (1.6)
Other comprehensive income
Currency translation differences for
overseas operations 2.0 2.0 2.0
Currency translation differences
on foreign currency loans, net of tax (0.6) (0.6) (0.6)
Currency translation differences
transferred to pro?t and loss, net of tax (0.2) (0.2) (0.2)
Effective portion of changes in fair
value of cash ?ow hedges 0.5 0.5 0.5
Transactions with owners
recorded directly in equity
Share options exercised 0.2 0.2 0.2
Balance at 31 January 2015 1.0 9.6 0.3 5.7 39.4 56.0 0.8 56.8
Translation reserve
The translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign
operations as well as from the translation of foreign currency loans.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
related to hedged transactions that have not yet occurred.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 31
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 January 2015
Note
2015
£m
2014
£m
Operating activities
Loss for the period (1.6) (6.0)
Adjustments for:
Depreciation and impairment 1.6 1.9
Finance income (0.1) (0.1)
Share of pro?t of joint ventures – (0.6)
Non-operating loss on store disposals and closures 0.8 1.7
Income tax credit – (0.1)
Operating cash flows before changes in working capital and provisions 0.7 (3.2)
Decrease in inventories 3.3 2.3
(Increase)/decrease in trade and other receivables (0.5) 0.8
(Decrease)/increase in trade and other payables (6.2) 1.9
Cash flows from operations (2.7) 1.8
Income tax paid (0.3) (0.2)
Cash flows from operating activities (3.0) 1.6
Investing activities
Interest received 0.1 0.1
Proceeds from investment in joint ventures 0.2 0.4
Acquisition of property, plant and equipment (1.1) (0.8)
Net costs from store closures (1.4) (1.7)
Cash flows from investing activities (2.2) (2.0)
Financing activities
Proceeds from exercise of share options 0.2 –
Cash flows from financing activities 0.2 –
Net decrease in cash and cash equivalents 23 (5.0) (0.4)
Cash and cash equivalents at 1 February 23 28.2 28.5
Exchange rate ?uctuations on cash held 23 – 0.1
Cash and cash equivalents at 31 January 23 23.2 28.2
The notes on pages 32 to 50 form part of these accounts.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 32
NOTES TO THE GROUP ACCOUNTS
1 Accounting policies
a) Basis of preparation
French Connection Group PLC (the “Company”) is a Company domiciled in the United Kingdom, whose shares are publicly traded
on the London Stock Exchange. These financial statements are presented in millions of pounds sterling rounded to the nearest
one decimal place.
The consolidated financial statements have been prepared and approved by the Directors in accordance with International
Financial Reporting Standards as adopted by the European Union (“adopted IFRS”). The Company has elected to prepare its
parent Company financial statements in accordance with UK Generally Accepted Accounting Practice; these are presented
on pages 51 to 56.
The consolidated financial statements have been prepared under the historical cost accounting rules, except for derivative financial
instruments measured at fair value.
The Group’s business activities, together with the factors likely to affect its future development, performance and position are
set out in the Financial Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are
described in the Financial Review. In addition Note 26 to the financial statements includes the Group’s objectives, policies and
processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging
activities and its exposures to credit risk and liquidity risk.
The Group has considerable cash resources and as a consequence, the Directors believe that the Group is well placed to manage
its business risks successfully.
The Group ended the year with £23.2m of net cash and no borrowings. Over the cycle of the year the Group had minimum
net cash of £7.6m. Based on this and the forecast performance for the Group over the next 18 months, the Directors have a
reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.
For this reason, the Board continues to adopt the going concern basis in preparing the accounts.
The preparation of the financial statements in conformity with adopted IFRS requires management to make judgements, estimates
and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual
results may differ from these assumptions. The estimates and assumptions are based on historical experience and are reviewed
on an ongoing basis and are disclosed in Note 29. Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both
current and future periods.
The accounting policies set out below have been applied consistently to all periods in the consolidated financial statements.
There is no significant financial impact on the Group financial statements of the following new standards, amendments and
interpretations that are in issue and mandatory for the financial year ending 31 January 2015:
• IFRS 10, ‘Consolidated financial statements’, IFRS 11, ‘Joint arrangements’, IFRS 12, ‘Disclosure of interests in other entities’,
Amendments to IAS 27, ‘Separate financial statements’, Amendments to IAS 28, ‘Investments in associates and joint ventures’,
Amendments to IAS 32, ‘Financial instruments: Presentation’, Amendments to IAS 36, ‘Impairment of assets’, Amendments
to IAS 39, ‘Financial instruments: Recognition and measurement’.
The Group does not consider that there are any standards, amendments or interpretations issued by the IASB, but not yet
applicable, that will have a significant impact on the financial statements.
b) Basis of consolidation
The consolidated financial statements of the Group comprise the accounts of the Company and all its subsidiary undertakings, the
accounts of which are all made up to 31 January each year end. The results of companies acquired or disposed of in the year are
dealt with from or up to the date control commences or ceases. The net assets of companies acquired are incorporated in the
consolidated accounts at their fair values to the Group at the date of acquisition. Intra-group balances and any unrealised gains or
losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until
the date on which control ceases.
Joint ventures are those entities over whose activities the Group has joint control, whereby the Group has rights to the net assets
of the arrangement, rather than rights to its assets and obligations for its liabilities. Joint ventures are accounted for using the
equity method. The consolidated financial statements include the Group’s share of the income and expenses of joint ventures, after
adjustments to align the accounting policies with those of the Group, from the date that joint control commences until the date that
joint control ceases. When the Group’s share of losses exceeds its interest in a joint venture, the carrying amount of that interest
(including any long-term investments) is reduced to £Nil and the recognition of further losses is discontinued except to the extent
that the Group has an obligation or has made payments on behalf of the investee. Unrealised gains arising from transactions with
joint ventures are eliminated against the investment to the extent of the Group’s interest in the entity.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 33
1 Accounting policies continued
c) Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill arising on business combinations
represents the difference between the cost of the acquisition and the fair value of the identifiable assets, liabilities and contingent
liabilities acquired. In respect of acquisitions prior to the IFRS transition date, 1 February 2004, goodwill is included on the basis
of its deemed cost based on the amount recognised under UK GAAP.
Goodwill is stated at cost less any accumulated impairment losses as discussed in Note j) below. Goodwill is tested annually
for impairment. Negative goodwill arising on an acquisition is recognised directly in the income statement.
The impairment calculations use cash flow projections based on actual operating results extrapolated forward for five years.
An appropriate pre-tax discount rate has been used in discounting the projected cash flows based on the weighted average
cost of capital applicable to the cash generating units concerned. For the purpose of impairment testing, goodwill is allocated to
the lowest level of cash generating unit within the Group at which the goodwill is monitored for internal management purposes.
Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or
loss on disposal. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation
disposed of and the portion of the cash generating unit retained.
d) Foreign currency
Transactions effected by companies in foreign currencies are translated into their functional currency at the foreign exchange rate
ruling at the date of transaction. Monetary assets and liabilities of companies denominated in currencies other than the functional
currency of the Company are translated at the foreign exchange rate ruling at the balance sheet date. Foreign exchange differences
arising on translation are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies
that are measured in terms of historical cost are translated using the exchange rate at the date of transaction. Non-monetary
assets and liabilities denominated in foreign currencies that are stated at fair value are translated at the foreign exchange rates
ruling at the dates the fair value was determined.
Long term monetary assets and liabilities receivable from or payable to a foreign operation, the settlement of which is not planned or
expected to occur in the foreseeable future, are considered to represent part of the Group’s net investment in a foreign operation.
Therefore, exchange gains and losses arising from these amounts are included in equity in the foreign currency translation reserve.
On consolidation, the assets and liabilities of foreign operations which have a functional currency other than Sterling are translated
into Sterling at foreign exchange rates ruling at the balance sheet date. The income and expenses of these subsidiary undertakings
are translated into Sterling at the average rates applicable to the period. All resulting exchange differences are taken to reserves.
Any exchange differences that have arisen since 1 February 2004 are presented as a separate component of equity within a
translation reserve. Such exchange differences taken to reserves as from the date of transition to IFRS are recognised in the
income statement upon disposal of the subsidiary.
e) Derivative financial instruments
Derivative financial instruments in the form of forward foreign exchange contracts are used to manage the risk associated with
purchases denominated in foreign currencies as described in the section entitled Our Business.
Derivative financial instruments are initially measured at fair value. Any changes in the fair value of the forward contracts during
the period in which the hedge is in effect are reflected as a component of equity within the hedging reserve to the extent that
the hedge is effective. The ineffective part of the hedge is recognised in the income statement immediately.
f) Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity, trade and other receivables, cash and cash equivalents,
loans and borrowings and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value including any directly attributable transaction costs.
Subsequent to initial recognition non-derivative financial instruments are measured at amortised cost less any impairment losses.
A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets
are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the
financial asset. Purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself
to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are
discharged or cancelled.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form
an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose
of the statement of cash flows.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 34
1 Accounting policies continued
g) Property, plant and equipment
Property, plant and equipment is stated at cost (which from 1 February 2009 includes capitalised borrowing costs where appropriate)
less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition
of the asset.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of the assets. Residual values
are reviewed at each reporting date. The estimated useful lives are as follows:
Leasehold improvements : period of the lease
Plant, equipment, fixtures and fittings : 3 to 10 years
h) Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases.
Finance lease assets are stated at an amount equal to the lower of its fair value and the present value of the minimum lease
payments at inception of the lease, less accumulated depreciation and impairment losses. Leased assets are depreciated over
the shorter of the lease term and their estimated useful lives unless it is reasonably certain that the Group will obtain ownership
by the end of the lease term. Operating leases are leases where substantially all of the risks and rewards of ownership have not
been transferred.
i) Inventories
Inventories and work in progress are stated at the lower of cost and net realisable value. Cost includes the purchase price of
manufactured products, materials, direct labour, transport costs and a proportion of attributable design and production overheads
calculated on a first in, first out basis. Net realisable value is the estimated selling price in the ordinary course of business.
Provision is made for obsolete, slow moving or defective items where appropriate.
j) Impairment
The carrying amount of the Group’s assets, other than inventories and deferred tax assets, are reviewed each balance sheet
date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount
is estimated. An impairment loss is recognised in the income statement whenever the carrying amount of an asset exceeds its
recoverable amount. For tangible fixed assets, the recoverable amount is determined with reference to the cash generating unit to
which the asset belongs. The impairment calculations use cash flow projections based on actual operating results extrapolated
forward for five years. An appropriate pre-tax discount rate has been used in discounting the projected cash flows based on the
weighted average cost of capital applicable to the individual assets concerned. Further details are provided in Note 11.
Impairment policy relating to goodwill is referred to in Note 1c).
k) Revenue
Revenue is measured at the fair value of the consideration received or receivable for goods sold to external customers, less returns
and value added tax. The revenue arises from the sale of fashion clothing and accessories. Revenue from the sale of goods is
recognised in the statement of income when the significant risks and rewards of ownership have been transferred. For retail sales,
this occurs at the time the sale is recorded at the store. For wholesale and ecommerce sales, this normally occurs at the time the
goods are shipped from the warehouse.
l) Other operating income
Licensing revenue is included within other operating income. Licence income receivable from licensees are accrued as earned on
the basis of the terms of the relevant licence agreement, which is typically on the basis of a variable amount based on turnover.
m) Lease payments
Operating lease rentals are charged to the income statement on a straight-line basis over the term of the lease. Lease incentives
received are recognised in the income statement on a straight-line basis over the term of the lease.
Rentals receivable under operating leases are included in the income statement on a straight-line basis.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the
outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic
rate of interest on the remaining balance of the liability.
n) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted, or substantively enacted
at the balance sheet date, plus any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 35
for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither accounting nor taxable profit and differences relating to investments in
subsidiaries and jointly controlled entities to the extent that they will probably not reverse in the foreseeable future. Deferred tax is
measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that
have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.
o) Pensions
The Group only has defined contribution pension schemes. Pension costs charged to the income statement represent the amount
of contributions payable to defined contribution and personal pension schemes in respect of the period.
p) Share-based payment
The Group operates share option incentive schemes for Directors and key employees. The fair value of options granted is recognised
as an employee expense in the income statement with a corresponding increase in equity. The fair value is measured at grant
date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the
options is measured using the “Black-Scholes” option valuation model, taking into account the terms and conditions upon which
the options were granted. The amount recognised in the income statement is adjusted at each balance sheet date to reflect the
number of share options that are expected to vest revised for expected leavers and estimated achievement of non-market based
vesting conditions. The Group has adopted the exemption to apply IFRS 2 only to equity instruments granted after 7 November 2002.
q) Segment reporting
An operating segment is a distinguishable component of the Group that is engaged in business activities from which it may earn
revenues and incur expenses and whose operating results are reviewed regularly by the Chief Operating Decision Maker to make
decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information
is available.
Reportable segments are operating segments that either meet the thresholds and conditions set out in IFRS 8 or are considered
by the Board to be appropriately designated as reportable segments. Segment results represent the underlying operating profits
of each division and exclude store disposal and closure costs, tax and financing items. Overheads represent the direct costs of the
divisional operations, common overheads shared between the divisions within geographic locations, in particular, the costs of local
management, advertising, finance and accounting and Group management overheads including the costs of Group management,
legal, insurance and IT costs.
r) Capital management
Details of capital risk management are set out in Note 26 to the Group accounts.
s) Financial risk management
Details of financial risk management are set out in Note 26 to the Group accounts.
t) Guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of fellow subsidiaries or of third
parties, the Company considers these to be insurance arrangements and accounts for them as such. In this respect, the Company
treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required
to make a payment under the guarantee.
u) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past
event and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognised at
an amount equal to the best estimate of the expenditure required to settle the Group’s liability. Obligations arising from restructuring
plans are recognised when detailed formal plans have been established and when there is a valid expectation that such a plan
will be carried out.
2 Operating segments
a) Segment reporting
The Group’s operating segments have been determined based on the key monthly information reviewed by the Board of Directors
(deemed to be the Chief Operating Decision Maker). The key metric reviewed cover the Retail and Wholesale sectors in totality,
with the performance by key geographies also reviewed.
In addition to the information provided below, detailed commentary on the results of Retail and Wholesale, together with an analysis
of the geographical performance, can be found in the Financial Review.
1 Accounting policies continued
n) Income tax continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 36
2 Operating segments continued
b) Segment revenue and results
Income statement
2015
£m
2014
£m
Revenue
Retail 103.3 117.5
Wholesale 75.2 71.9
Group revenue 178.5 189.4
Gross pro?t 83.4 90.2
Retail 57.2% 56.9%
Wholesale 32.3% 32.5%
Group gross margin 46.7% 47.6%
Underlying operating (loss)/pro?t
Retail (11.3) (11.6)
Wholesale 14.6 11.7
Licence income 6.5 6.1
Common and Group overheads (10.7) (11.3)
Finance income 0.1 0.1
Share of profit from joint ventures – 0.6
Underlying Group operating loss* (0.8) (4.4)
Underlying operating margin
Retail (10.9)% (9.9)%
Wholesale 19.4% 16.3%
Underlying Group operating margin (0.4)% (2.3)%
*Excludes loss on store disposals and closures
c) Geographical information
2015
£m
2014
£m
Revenue
UK/Europe 72% 71%
North America 23% 24%
Rest of the World 5% 5%
Divisional operating (loss)/pro?t
UK/Europe (0.4) (3.9)
North America 2.5 2.4
Rest of the World 0.9 1.6
Group overheads and finance income (3.8) (4.5)
Underlying Group operating loss* (0.8) (4.4)
*Excludes loss on store disposals and closures
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 37
2 Operating segments continued
d) Revenue from external customers
2015
£m
2014
£m
UK 112.6 119.5
US 33.8 34.6
Canada 8.2 10.8
Other 23.9 24.5
178.5 189.4
e) Non-current assets
2015
£m
2014
£m
UK 8.0 8.9
US 0.4 0.4
Canada 0.1 –
Other 3.7 3.5
12.2 12.8
No single customer represents more than 10% of the Group’s total revenue.
3 Operating expenses
2015
£m
2014
£m
Selling and distribution costs 82.7 92.8
Administration costs 8.1 8.6
90.8 101.4
4 Other operating income
2015
£m
2014
£m
Licensing income 6.5 6.1
5 Staff numbers and costs
The average number of people employed by the Group during the year, including Directors, was as follows:
2015
Number
2014
Number
Selling, distribution and retail 1,786 1,909
Design, development and production management 201 211
Administration 137 138
2,124 2,258
The aggregate payroll costs of these people were as follows:
2015
£m
2014
£m
Wages and salaries 34.4 35.4
Social security costs 2.9 3.0
De?ned contribution pension costs 0.5 0.5
37.8 38.9
Included within the total staff cost above is the remuneration of the Directors totalling £0.9m (2014: £1.2m). Details of Directors’
remuneration, share options and pension entitlements are disclosed in the Directors’ Remuneration Report. Details of pension
costs are disclosed in Note 28 to the Group accounts.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 38
6 Finance income and expense
Recognised in the income statement
2015
£m
2014
£m
Finance income 0.1 0.1
7 Loss before taxation
The Group’s loss before taxation is stated after charging/(crediting) the following:
2015
£m
2014
£m
Fees payable to the Company’s auditors and its associates in respect of
the audit of the Group’s annual accounts 0.1 0.1
the audit of the Company’s subsidiaries, pursuant to legislation 0.1 0.1
tax and other assurance services 0.1 0.2
Depreciation and impairment of owned assets 1.6 1.9
Store closure provisions 0.8 1.7
Operating lease rentals
Plant and machinery 0.3 0.3
Leasehold properties 23.9 26.6
Rent receivable (1.6) (1.5)
The auditor’s remuneration in respect of the audit of the Company was £37,000 (2014: £37,000).
During the year, the fees payable to the auditors and their associates for non-audit services was £99,000 (2014: £168,000) in
respect of tax compliance and advisory services (£56,000 (2014: £146,000)), royalty and turnover reviews (£29,000 (2014: £15,000))
and other services (£14,000 (2014: £7,000)).
8 Taxation
a) Recognised in the statement of comprehensive income
2015
£m
2014
£m
Current tax
Overseas tax 0.4 0.3
Deferred tax
Adjustment in respect of previous periods (0.4) (0.4)
Tax on loss (Note 8b) – (0.1)
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 39
8 Taxation continued
b) Factors affecting tax charge/(credit) for year
The tax charged/(credited) for the year is different to the standard 21.33% (2014: 23.17%) rate of corporation tax in the UK.
The differences are explained below:
2015
£m
2014
£m
Loss before taxation (1.6) (6.1)
Loss multiplied by the standard rate of corporation tax in the UK of 21.33% (2014: 23.17%) (0.3) (1.4)
Effects of:
Expenses not deductible 0.2 0.2
Trading losses carried forward 0.5 1.6
Difference in effective tax rates on overseas earnings (0.2) (0.3)
Share of joint venture tax charge which has been netted off within share of pro?t of joint ventures – (0.1)
Reduction in deferred tax asset relating to reduction in UK tax rate (21% to 20% effective from
1 April 2015) 0.2 0.3
Adjustments in respect of previous periods (0.4) (0.4)
Total tax charge/(credit) for the year (Note 8a) – (0.1)
The effective tax rate in the future will be affected by the proportion of any profits or losses generated in the different tax jurisdictions
and the ability to utilise past tax losses.
c) Income tax recognised in other comprehensive income
Before
tax
2015
£m
Tax
credit
2015
£m
Net of
tax
2015
£m
Before
tax
2014
£m
Tax
credit
2014
£m
Net of
tax
2014
£m
Currency translation differences
on foreign overseas operations 2.0 – 2.0 0.3 – 0.3
Currency translation differences
on foreign currency loans (0.7) 0.1 (0.6) (1.4) 0.4 (1.0)
Currency translation differences
transferred to pro?t and loss (0.2) – (0.2) – – –
Effective portion of changes in fair
value of cash ?ow hedges 0.5 – 0.5 (0.3) – (0.3)
1.6 0.1 1.7 (1.4) 0.4 (1.0)
9 Dividends – equity
The Board is proposing that no dividend should be paid for the year (2014: £Nil). No dividends were paid during the year to the minority
shareholders of a subsidiary undertaking of the Group (2014: £Nil).
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 40
10 Losses per share
Basic and diluted losses per share are calculated on 96,119,892 (2014: 95,899,754) shares being the weighted average number
of ordinary shares during the year.
Basic and diluted losses per share of (1.6) pence per share (2014: losses of (6.4) pence) is based on losses of £(1.5)m (2014: losses
of £(6.1)m) attributable to equity shareholders.
The reconciliation from basic and diluted losses per share to adjusted earnings per share is as follows:
2015
£m
2015
pence
per share
2014
£m
2014
pence
per share
Loss attributable to equity shareholders (1.5) (1.6)p (6.1) (6.4)p
Net loss on store disposals and closures 0.8 0.9p 1.7 1.8p
Adjusted loss (0.7) (0.7)p (4.4) (4.6)p
The adjusted losses per share relates to the underlying operations and in the opinion of the Directors, gives a better measure of the
Group's underlying performance than the basic losses per share.
11 Intangible assets
Goodwill
2015
£m
2014
£m
Cost
At 1 February and 31 January 14.3 14.3
Impairment
At 1 February and 31 January 13.9 13.9
Net book value at 31 January 0.4 0.4
Given the similar nature of the activities of each cash generating unit, a consistent methodology is applied across the Group in
assessing cash generating unit recoverable amounts. The recoverable amount is the higher of the value in use and the fair value
less the costs to sell. The value in use is the present value of the cash flows expected to be generated by the cash generating
unit over a projection period together with a terminal value. Cash flows are projected based on actual operating results and the
Directors’ five year forward forecasts which are based on Directors’ knowledge, historical experience and economic growth
forecasts for the fashion industry, including maximum sales growth forecasts of 2% per annum. A pre-tax discount rate of 15%
(2014: 15%) has been applied to the value in use calculations reflecting market assessments of the time value of money at the
balance sheet date. A terminal growth rate of 2% (2014: 2%) has been used based on industry growth rates. As discussed in
Our Business, like all retailers, the Group is susceptible to volatility in the propensity of consumers to spend, which is affected
by macro-economic issues. Further, both the Group’s retail and wholesale businesses have largely inflexible cost bases giving
rise to substantial operational gearing. Accordingly the key sensitivity with regard to future cash flows and value in use relates
to the assumed sales growth. As noted above this has been set at a maximum of 2% per annum.
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 41
12 Property, plant and equipment
2015
Short
leasehold
property
£m
Plant
equipment
fixtures and
fittings
£m
Total
£m
Cost
At 1 February 2014 7.9 57.7 65.6
Currency movements 0.3 – 0.3
Additions 0.1 1.0 1.1
Disposals (0.4) (3.9) (4.3)
At 31 January 2015 7.9 54.8 62.7
Depreciation
At 1 February 2014 7.2 53.9 61.1
Currency movements 0.3 – 0.3
Charge for year 0.2 1.4 1.6
Disposals (0.4) (3.8) (4.2)
At 31 January 2015 7.3 51.5 58.8
Net book value
At 31 January 2015 0.6 3.3 3.9
At 31 January 2014 0.7 3.8 4.5
The Group has no plant and equipment held under finance leases in both the current and prior years and no depreciation was
charged during either year.
Property, plant and equipment with a net book value of £0.1m (2014: £0.1m) was disposed of during the year. Net costs incurred
on disposal were £Nil (2014: £Nil) resulting in a loss on disposal of £(0.1)m (2014: £(0.1)m) which was charged to the store closures
provision during the year.
The Group has £46.1m (2014: £48.6m) of gross assets with a £Nil net book value.
13 Investments
The Group’s investments in joint ventures are as follows:
2015
£m
2014
£m
Share of current assets 3.7 3.9
Share of non-current assets 0.6 0.5
Share of current liabilities (1.2) (1.3)
3.1 3.1
Share of revenue 5.2 6.4
Share of expense (5.2) (5.7)
Share of income tax expense – (0.1)
– 0.6
The investments are accounted for using the equity method of accounting.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 42
14 Inventories
2015
£m
2014
£m
Raw materials and consumables 0.1 0.1
Work in progress 0.2 0.2
Finished goods 35.2 38.2
35.5 38.5
During the year, inventory write-downs of £3.6m (2014: £2.9m) were expensed within cost of sales. The amount of inventory
recognised as an expense with cost of sales during the current year is £84.9m (2014: £92.3m).
All inventory is valued at the lower of cost and net realisable value. There is no inventory carried at fair value less costs to sell either
in the current or prior year.
15 Trade and other receivables
2015
£m
2014
£m
Trade receivables 13.0 13.7
Other receivables 1.4 1.1
Prepayments and accrued income 9.1 7.9
23.5 22.7
No receivables are due in more than one year and are non-interest bearing. Standard credit terms provided to customers differ, but
are typically between 30 and 60 days. Included within trade receivables is a bad debt provision of £0.2m (2014: £0.3m). During the
year, £0.1m (2014: £0.2m) of bad debt write-offs were incurred.
The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables is disclosed in Note 26.
16 Cash and cash equivalents
2015
£m
2014
£m
Cash and cash equivalents in the balance sheet and cash flow 23.2 28.2
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is disclosed in Note 26.
17 Current trade and other payables
2015
£m
2014
£m
Trade payables 17.5 21.7
Bills of exchange payable 1.4 1.6
Other taxation and social security 3.9 4.2
Accruals and deferred income 13.7 15.6
36.5 43.1
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 26.
18 Provisions
Store disposals and closures
2015
£m
2014
£m
Balance at 1 February 1.7 1.7
Utilised during the year (1.5) (1.7)
Increase during the year 0.8 1.7
Balance at 31 January 1.0 1.7
Provisions are recorded to reflect the estimated committed closure costs of identified underperforming retail stores and other
restructuring. The associated costs are forecast to be incurred over a period of two years.
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 43
19 Current tax payable
2015
£m
2014
£m
Overseas tax 0.2 0.2
20 Deferred tax
Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities
2015
£m
2014
£m
2015
£m
2014
£m
Trading losses 1.1 0.7 – –
Property, plant and equipment 3.3 3.3 – –
Other timing differences 0.4 0.8 – –
Deferred capital gains – – 0.2 0.5
4.8 4.8 0.2 0.5
The Group has unused tax trading losses with a potential value of £12.7m (2014: £13.1m), which have not been recognised
as a deferred tax asset. As the Group returns to profit, these tax losses should be utilised.
2015
£m
2014
£m
Trading losses 12.7 13.1
Property, plant and equipment 0.5 1.1
Other timing differences 0.5 0.7
13.7 14.9
21 Share capital
Ordinary shares of 1 pence each
2015
Number
2015
£m
2014
Number
2014
£m
Allotted, called up and fully paid shares at the beginning of the year 95,899,754 1.0 95,899,754 1.0
Shares issued during the year in respect of share options 278,380 – – –
Allotted, called up and fully paid shares at the end of the year 96,178,134 1.0 95,899,754 1.0
At 31 January 2015, the following equity settled options have been granted and remain outstanding in respect of ordinary shares
of 1p each in the Company:
Date of grant Options Option price
Contractual
life of
options
29 October 2008 (vested 29 October 2011) 1,557,620 56.20p 10 years
1 November 2012 400,000 24.50p 10 years
4 November 2014 600,000 29.25p 10 years
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 44
21 Share capital continued
Share options granted are subject to detailed performance conditions. The performance conditions for the outstanding option
grants are based on a target profit before tax and hurdles are set in order to reward strong financial performance. Options which
do not vest following the application of the performance conditions lapse and become unavailable for exercise.
Weighted
average
exercise
price
Number of
options
2015
Weighted
average
exercise
price
Number of
options
2014
Outstanding at the beginning of the period 47.00p 2,886,000 52.61p 2,886,500
Forfeited during the period 102.30p (50,000) 56.20p (600,500)
Exercised during the period 56.20p (278,380) – –
Granted during the period – – 29.25p 600,000
Outstanding at the end of the period 44.92p 2,557,620 47.00p 2,886,000
The number of share options exercisable at the year end is 1,557,620 (2014: 1,836,000).
The fair value of the share options granted is not considered to be material to the accounts in the current and prior years.
22 Reconciliation of decrease in cash to movement in net funds
2015
£m
2014
£m
Change in net funds from cash ?ows (5.0) (0.4)
Translation differences – 0.1
Movement in net funds (5.0) (0.3)
Net funds at beginning of year 28.2 28.5
Net funds at end of year 23.2 28.2
23 Analysis of net funds
1 February
2014
£m
Cash
flow
£m
Non cash
changes
£m
31 January
2015
£m
Cash and cash equivalents in the balance sheet and cash ?ow 28.2 (5.0) – 23.2
Net funds 28.2 (5.0) – 23.2
24 Commitments
Aggregate future rental commitments payable under non-cancellable operating leases at 31 January 2015 for which no provision
has been made in these accounts, were as follows:
Leasehold property Other
2015
£m
Restated
2014
£m
2015
£m
Restated
2014
£m
Within one year 23.6 23.9 0.2 0.2
Within two to ?ve years 76.1 77.4 0.1 0.1
After ?ve years 45.3 59.0 – –
145.0 160.3 0.3 0.3
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 45
24 Commitments continued
Aggregate future rentals receivable under non-cancellable operating leases at 31 January 2015 for which no accrual has been
made in these accounts were as follows:
Leasehold property
2015
£m
Restated
2014
£m
Within one year 1.2 1.3
Within two to ?ve years 3.8 0.9
After ?ve years 4.4 0.1
9.4 2.3
The comparatives have been restated to present a clearer representation of future rental commitments payable and receivable.
There is no net impact on the total balance.
At 31 January 2015 the Group had contracted capital commitments not provided for in the accounts of £0.3m (2014: £0.2m).
At 31 January 2015 the Group had commitments on foreign exchange contracts amounting to £3.5m (2014: £4.5m). In addition,
the Group had commitments in respect of letters of credit of £1.0m (2014: £1.4m).
25 Contingent liabilities
The Group has a number of sublet and assigned properties. In the event that the tenants of these properties default, the Group
may be liable. At the year end, the total annual commitment amounted to £Nil (2014: £Nil).
26 Financial instruments
Details of financial risk management, treasury policies and use of financial instruments are set out in the section entitled
‘Principal risks and uncertainties’ within Our Business.
Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. Derivative financial
instruments are used to hedge exposure to fluctuations in foreign exchange rates.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due,
under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group monitors its cash position on a regular basis through the use of regularly updated cash flow forecasts, and believes
that it has sufficient and appropriate net funds and facilities available.
Interest rate risk
The Group does not use interest rate financial instruments. The Group regularly monitors and reacts accordingly to any exposure
to fluctuations in interest rates and the impact on its monetary assets and liabilities.
Foreign currency risk
The Group is exposed to foreign currency risks on sales, purchases and cash holdings that are denominated in a currency
other than Sterling. The currency giving rise to this risk is primarily the Hong Kong Dollar. The Group’s policy is to reduce the
risk associated with purchases denominated in foreign currencies, by using forward fixed rate currency purchase contracts
up to a maximum of one year forward, taking into account any forecast foreign currency cash flows.
In respect of other monetary assets and liabilities held in currencies other than the Hong Kong Dollar, the Group ensures that
the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address
short-term imbalances.
The Group’s policy is not to hedge the translational exposure that arises on consolidation of the statement of income at overseas
subsidiaries.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 46
26 Financial instruments continued
Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group’s main
credit risk is primarily attributable to its trade receivables. Credit evaluations are performed on all customers requiring credit over
a certain amount. The Group does not require collateral in respect of financial assets. The amounts recognised in the balance
sheet are net of appropriate allowances for doubtful receivables, estimated by the Group’s management based on prior experience
and their assessment of the current economic environment. At the balance sheet date, there were no significant concentrations
of credit risk by customer or by geography. Quantitative analysis of credit risk to receivables is presented below.
Credit risk associated with cash balances and derivative financial instruments is managed by transacting with an existing relationship
bank with strong investment grade rating. The maximum exposure to credit risk is represented by the carrying amount of each
financial asset, including derivative financial instruments, in the balance sheet.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the
reporting date was:
Carrying amount
2015
£m
2014
£m
Trade and other receivables 14.4 14.8
Cash and cash equivalents 23.2 28.2
37.6 43.0
The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:
Carrying amount
2015
£m
2014
£m
UK/Europe 8.4 8.8
North America 3.1 2.4
Hong Kong 2.9 3.6
14.4 14.8
The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:
2015
£m
2014
£m
Wholesale customers 13.0 13.7
The ageing of gross trade receivables at the reporting date was:
Gross
2015
£m
Impairment
2015
£m
Gross
2014
£m
Impairment
2014
£m
Current 9.9 – 10.1 –
30 days 1.5 – 1.7 –
60 days 0.4 – 0.3 –
More than 60 days 1.4 (0.2) 1.9 (0.3)
13.2 (0.2) 14.0 (0.3)
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 47
26 Financial instruments continued
Exposure to credit risk continued
An impairment has been recorded against the trade receivables that the Group believes may not be recoverable. Based on
past experience, the Group believes that no impairment allowance is necessary in respect of trade receivables not past due.
The movement in impairment in respect of trade receivables during the year was as follows:
2015
£m
2014
£m
At 1 February 0.3 0.3
Movement during year (0.1) –
At 31 January 0.2 0.3
Interest rate profile of financial assets
The interest rate profile of the financial assets of the Group at 31 January 2015 was as follows:
Financial assets
on which no
interest is received
Floating rate
financial assets Total
2015
£m
2014
£m
2015
£m
2014
£m
2015
£m
2014
£m
Sterling 0.1 0.1 13.9 16.3 14.0 16.4
US Dollar – – 5.5 7.8 5.5 7.8
Hong Kong Dollar – – 1.1 1.4 1.1 1.4
Other – – 2.6 2.6 2.6 2.6
Total 0.1 0.1 23.1 28.1 23.2 28.2
Financial assets comprise cash and short term deposits. The effective interest rate on floating rate financial assets during the year
was 0.7% (2014: 0.5%).
There were no fixed rate or floating rate financial liabilities at the end of the current or prior year.
Currency exposure
Net monetary assets and liabilities of the Group that are not denominated in the local functional currency were as follows:
At 31 January 2015
Net foreign currency
monetary assets/(liabilities)
Sterling
£m
US
Dollar
£m
Canadian
Dollar
£m
Hong Kong
Dollar
£m
Euro
£m
Other
£m
Total
£m
Trade and other receivables 1.2 0.3 – – 0.8 0.1 2.4
Cash and overdraft 1.0 0.4 – – 1.4 – 2.8
Trade and other payables (0.6) (1.8) – – (1.1) – (3.5)
Intercompany balances (1.1) (3.7) 9.7 (2.7) 7.4 – 9.6
Total 0.5 (4.8) 9.7 (2.7) 8.5 0.1 11.3
At 31 January 2014
Net foreign currency
monetary assets/(liabilities)
Sterling
£m
US
Dollar
£m
Canadian
Dollar
£m
Hong Kong
Dollar
£m
Euro
£m
Other
£m
Total
£m
Trade and other receivables 2.0 0.3 – – 0.7 0.1 3.1
Cash and overdraft 0.5 5.0 – – 1.9 0.1 7.5
Trade and other payables (1.2) (1.7) – – (0.9) – (3.8)
Intercompany balances – (1.8) 9.9 (11.0) 10.2 – 7.3
Total 1.3 1.8 9.9 (11.0) 11.9 0.2 14.1
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 48
26 Financial instruments continued
Currency exposure continued
Forward foreign exchange contracts have not been taken into consideration above. As at 31 January 2015, the Group has committed
forward foreign exchange contracts of £3.5m (2014: £4.5m).
The following significant exchange rates applied during the year:
Average rate
Reporting date
spot rate
2015 2014 2015 2014
US Dollar 1.636 1.568 1.501 1.644
Canadian Dollar 1.822 1.629 1.904 1.832
Hong Kong Dollar 12.686 12.166 11.644 12.761
Euro 1.249 1.179 1.330 1.219
Sensitivity analysis
A 10% strengthening of Sterling against the following currencies at 31 January would have increased/(decreased) equity and profit
and loss by the amounts shown below. This analysis assumes that all other variables, in particular, interest rates, remain constant.
This analysis is performed on the same basis for the prior year.
Equity
2015
£m
Profit
and loss
2015
£m
Equity
2014
£m
Profit
and loss
2014
£m
US Dollar – 0.5 – (0.1)
Canadian Dollar (0.7) (0.2) (0.8) (0.2)
Hong Kong Dollar – 0.2 – 1.0
Euro (0.3) (0.6) (0.3) (0.9)
(1.0) (0.1) (1.1) (0.2)
Borrowing facilities
Working capital and letter of credit facilities of £4.5m were available to the Group at 31 January 2015 (31 January 2014: £4.2m).
The facilities are subject to an annual review and were most recently renewed in July 2013.
Fair values
The fair value of the Group’s financial instruments at 31 January 2015 were as follows:
31 January 2015 31 January 2014
Carrying
amount
£m
Estimated
fair value
£m
Carrying
amount
£m
Estimated
fair value
£m
Primary financial instruments used to finance the Group’s operations:
Cash and cash equivalents 23.2 23.2 28.2 28.2
Trade receivables 13.0 13.0 13.7 13.7
Trade payables (17.5) (17.5) (21.7) (21.7)
Derivative financial instruments 0.3 0.3 (0.2) (0.2)
The fair value of forward exchange contracts outstanding as at 31 January 2015 is an asset of £0.3m (2014: liability of £0.2m).
£0.5m has been credited to the hedging reserve (2014: debited £0.3m).
These contracts mature in the next 12 months, therefore the cash flows and resulting effect on profit and loss are expected
to occur within the next 12 months.
The fair value of derivative financial instruments is determined using discounted cash flow techniques based on readily available
market data and represent a Level 2 measurement in the fair value hierarchy under IFRS 7. Level 2 is defined as inputs other
than quoted prices in active markets that are observable for the asset or liability.
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 49
26 Financial instruments continued
Capital management
The capital structure of the Group consists of net funds and equity attributable to the equity holders of the parent Company,
comprising issued share capital, reserves and retained earnings. The Group manages its capital with the objective that all
entities within the Group continue as going concerns. The Group is not subject to any externally imposed capital management.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business. To achieve this the Board of Directors monitors the balance sheet, the working capital, the
cash flows and the level of dividends paid to shareholders.
The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and
the advantages and security afforded by a sound capital position.
At present employees, including the Chairman, hold 41.8% (2014: 41.8%) of ordinary shares. Share options have been issued
amounting to 2.7% (2014: 3.0%) of the issued share capital.
The Company will request permission from shareholders if deemed necessary to purchase its own shares.
There were no changes in the Group’s approach to capital management during the year.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
27 Directors’ interests and related party transactions
The Group made sales of £1.7m (2014: £1.5m) to FCUK IT Company and £1.0m (2014: £0.8m) to FCIT China Limited during the
year, both of which are joint ventures. The closing liabilities due from the respective joint ventures are £0.7m (2014: £0.3m) and
£0.5m (2014: £0.3m).
There are no related party transactions between French Connection Group PLC and the non-controlling interest subsidiary undertakings.
French Connection Group was invoiced directly for property costs relating to 202 Westbourne Grove, London and recharged these
costs to SAM Corporation Limited. Stephen Marks, Chairman and Chief Executive of French Connection Group PLC is a Director
of French Connection Group PLC and is the sole shareholder of SAM Corporation Limited. The total costs invoiced and recharged
during the year was £476,877 and was conducted at arm’s length.
At 31 January 2015, Stephen Marks, Chairman and Chief Executive had an interest in 40,094,190 ordinary shares (2014: 40,094,190) of
which 2,281,500 shares (2014: 2,281,500) were held by family members or in family trusts, representing in aggregate 41.7% (2014: 41.8%)
of the total issued ordinary share capital of the Company. At 31 January 2015, Adam Castleton, Group Finance Director, had an interest
in 81,600 ordinary shares (2014: 33,000) representing 0.08% (2014: 0.03%) of total issued ordinary share capital of the Company.
Details of the Directors’ remuneration, being the key management personnel, are disclosed in the Directors’ Remuneration Report.
28 Pension costs
The Group operates a Group defined contribution scheme and contributes towards a number of personal pension plans. The assets
of these schemes are held separately from those of the Group in independently administered funds.
The pension cost charge for the year was £0.5m (2014: £0.5m). At 31 January 2015 and 31 January 2014 there were no outstanding
amounts payable to the schemes.
29 Accounting estimates and judgements
The Directors have made significant accounting estimates and judgements in applying the Group’s accounting policies in the
following area:
Inventory valuation – the Directors have used their knowledge and experience of the fashion industry in determining the level and
rates of provisioning required to calculate the appropriate inventory carrying values. Inventory is carried in the financial statements
at the lower of cost and net realisable value. Sales in the fashion industry can be extremely volatile and consumer demand
changing significantly based on current trends. As a result there is a risk that the cost of inventory exceeds its net realisable value.
Provision is made for obsolete, slow moving or defective items where appropriate. Provisions are considered on a seasonal basis
taking into consideration the various channels that are available to the Group to sell existing inventory and the estimated prices
that can be achieved.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 50
30 Principal subsidiary undertakings
Details of the principal subsidiary undertakings at 31 January 2015 are set out below. Unless otherwise stated, the Company directly
owned all the issued ordinary shares.
Company
Country of Incorporation,
Registration and Operation Principal Activity
French Connection Limited England Brand management
French Connection UK Limited England Supply of fashion merchandise
French Connection (London) Limited England Supply of fashion merchandise
Contracts Limited England Supply of fashion merchandise
French Connection (Hong Kong) Limited British Virgin Islands
(operates in Hong Kong)
Supply of fashion merchandise
French Connection No 2 pour Hommes Sarl* France Supply of fashion merchandise
PreTex Textilhandels GmbH* Germany Supply of fashion merchandise
French Connection Holdings Inc USA Holding Company
French Connection Group Inc* USA Supply of fashion merchandise
Louisiana Connection Limited* USA Supply of fashion merchandise
Roosevelt Connection Limited* USA Supply of fashion merchandise
Soho Connection Limited* USA Supply of fashion merchandise
French Connection (Canada) Limited (75%) Canada Supply of fashion merchandise
Toast (Mail Order) Limited (75%) Wales Supply of fashion merchandise
YMC Limited (75%) England Supply of fashion merchandise
FCUK IT Company (50% partnership)*
+
Hong Kong Supply of fashion merchandise
FCIT China Limited (50%)*
+
Hong Kong Supply of fashion merchandise
* Shares are held by subsidiary undertakings.
+
Joint ventures accounted for using the equity method.
NOTES TO THE GROUP ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 51
COMPANY BALANCE SHEET
At 31 January 2015
Note
2015
£m
2014
£m
Fixed assets
Tangible assets 3 0.4 0.5
Investments 4 42.5 24.5
42.9 25.0
Current assets
Debtors 5 0.8 47.5
Cash at bank and in hand – –
Derivative ?nancial instruments 0.3 –
1.1 47.5
Current liabilities
Creditors 6 (12.4) (2.5)
Derivative ?nancial instruments – (0.2)
(12.4) (2.7)
Net current (liabilities)/assets (11.3) 44.8
Total assets less current liabilities 31.6 69.8
Deferred tax liability 7 (0.2) (0.6)
Net assets 31.4 69.2
Capital and reserves
Called-up share capital 8 1.0 1.0
Share premium account 8 9.6 9.4
Pro?t and loss account 8 20.5 59.0
Other reserves 8 0.3 (0.2)
Equity shareholders’ funds 9 31.4 69.2
The notes on pages 52 to 56 form part of these accounts.
These accounts were approved by the Board of Directors on 17 March 2015 and were signed on its behalf by:
Stephen Marks Adam Castleton
Director Director
Company Number: 1410568
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 52
NOTES TO THE COMPANY ACCOUNTS
1 Accounting policies
a) Basis of preparation
The Company has elected to prepare its parent Company financial statements in accordance with UK GAAP and these are
presented on pages 51 to 56.
b) Basis of accounting
The accounts have been prepared under the historical cost accounting rules, except for derivative financial instruments measured
at fair value, and in accordance with applicable accounting standards. As permitted by Section 408 of the Companies Act 2006,
the profit and loss account under UK GAAP of the Company is not presented. No new standards have been adopted in this year’s
financial statements. The Company has taken the exemption granted by FRS 8 Related Party disclosures not to disclose transactions
with wholly owned subsidiaries of the Group.
c) Depreciation
Depreciation is provided to write off the cost less estimated residual value of fixed assets by equal annual instalments over their
useful lives, which are estimated to be as follows:
Plant, equipment, fixtures and fittings : 3 to 10 years
d) Taxation
The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences
between the treatment of certain items for taxation and accounting purposes. Full provision has been made for deferred taxation
arising from timing differences between the recognition of income and expenditure for taxation and accounting purposes.
Deferred tax amounts are not discounted.
e) Foreign exchange
Monetary assets and liabilities denominated in foreign currencies are translated into Sterling at rates of exchange ruling at
the balance sheet date. Transactions in the period are translated into Sterling at the rates of exchange ruling on the date of
transaction or at hedged rates. Resulting exchange differences are taken to the profit and loss account. Forward fixed rate
currency purchase contracts are used.
f) Leased assets
Operating lease rentals are charged to the profit and loss account in the period to which they relate. Rentals receivable under
operating leases are included in the profit and loss account on an accruals basis. There are no finance leases in the current year.
g) Pension cost
Pension costs charged to the profit and loss account represent the amount of contributions payable to defined contribution and
personal pension schemes in respect of the period.
h) Share-based payment
The Group operates share option incentive schemes for Directors and key employees. The fair value of options granted is recognised
as an employee expense in the income statement with a corresponding increase in equity. The fair value is measured at grant date
and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options
is measured using the “Black-Scholes” option valuation model, taking into account the terms and conditions upon which the options
were granted. The amount recognised in the income statement is adjusted at each balance sheet date to reflect the number of share
options that are expected to vest revised for expected leavers and estimated achievement of non-market based vesting conditions.
The Group has adopted the exemption to apply FRS 20 only to equity instruments granted after 7 November 2002. The fair value
of the share options granted is not considered to be material in the current or prior years.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 53
1 Accounting policies continued
i) Derivative financial instruments
Derivative financial instruments in the form of forward foreign exchange contracts are used to manage the risk associated with
purchases denominated in foreign currencies as described in the section entitled Our Business. Any changes in the fair value
of the forward contracts during the period in which the hedge is in effect will be reflected as a component of reserves within a
hedging reserve to the extent that the hedge is effective. The ineffective part of the hedge is recognised in the profit and loss
account.
Financial Reporting Standard 29 “Financial Instruments: Disclosures” (FRS 29) sets out the requirements for the presentation
of, and disclosures relating to, financial instruments and replaces the requirements of FRS 25 “Financial Instruments: Disclosure
and Presentation”. The Company is exempt from the requirements of FRS 29 as the financial statements for the Group include
disclosures that comply with IFRS 7, the equivalent International Financial Reporting Standard.
j) Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity trade and other receivables, cash and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value including any directly attributable transaction costs.
Subsequent to initial recognition non-derivative financial instruments are measured at amortised cost less any impairment losses.
A financial instrument is recognised if the Company becomes a party to the contractual provisions of the instrument. Financial assets
are derecognised if the Company’s contractual rights to the cash flows from the financial assets expire or if the Company transfers the
financial asset. Purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Company commits itself
to purchase or sell the asset. Financial liabilities are derecognised if the Company’s obligations specified in the contract expire or are
discharged or cancelled.
Cash comprises cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the
Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
k) Investments
Investments are stated at cost less provision for impairment.
l) Share capital
When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price over the par value
is recorded in the share premium reserve. The cost of own shares purchased to satisfy the exercise of employee share options is
charged to total equity and the proceeds of their reissue are credited to total equity.
m) Dividends on shares presented within shareholders’ funds
Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately
authorised and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed
in the notes to the financial statements.
n) Guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of fellow subsidiaries or of third parties,
the Company considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats
the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make
a payment under the guarantee.
2 Staff numbers and operating costs
All Directors and staff are employed by French Connection (London) Limited, a subsidiary undertaking. Details of staff numbers
and costs are shown in that Company’s accounts. Directors’ remuneration is disclosed in the Directors’ Remuneration Report.
The audit fee of the Company is disclosed in Note 7 to the Group accounts.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 54
3 Property, plant and equipment
Plant
equipment
fixtures
and fittings
£m
Cost or valuation
At 1 February 2014 3.1
Disposals (0.3)
At 31 January 2015 2.8
Depreciation
At 1 February 2014 2.6
Charge for year 0.1
Disposals (0.3)
At 31 January 2015 2.4
Net book value
At 31 January 2015 0.4
At 31 January 2014 0.5
4 Investments
The Company’s investments in subsidiary undertakings is as follows:
Total
£m
Cost
At 1 February 2014 70.8
Additions 86.0
At 31 January 2015 156.8
Provision
At 1 February 2014 46.3
Charge for year 68.0
At 31 January 2015 114.3
Carrying amount
At 31 January 2015 42.5
At 31 January 2014 24.5
During the year, the Company subscribed for additional share capital of £75.0m in its subsidiary undertaking, French
Connection UK Limited, £10.0m in its subsidiary undertaking, French Connection (London) Limited and £1.0m in its subsidiary
undertaking, Contracts Limited.
The Directors have conducted an impairment review comprising a comparison of the carrying amount of the investment with
its recoverable amount being the higher of net realisable value and value in use. The recoverable amount has been determined
as the net realisable value. To the extent that the carrying amount exceeds the recoverable amount, the investment is impaired
and has been provided against. The impairment loss has been recognised in the profit and loss account in the year.
Impairments of £68.0m (2014: £1.2m) relating to the Group’s investment in subsidiary companies, French Connection UK Limited,
French Connection (London) Limited and Contracts Limited have been provided in the current year. In accordance with its accounting
policy, the Company states its investments in subsidiaries at cost less provision for impairment. However, the underlying net asset
value of its subsidiaries is £50.7m (2014: £54.8m).
The principal subsidiaries of the Company are set out in Note 30 to the Group accounts.
NOTES TO THE COMPANY ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 55
5 Debtors
2015
£m
2014
£m
Amounts owed by subsidiary undertakings – 47.0
Other debtors 0.1 0.2
Prepayments and accrued income 0.3 0.1
Deferred tax (Note 7) 0.4 0.2
0.8 47.5
Included within debtors are amounts due within one year of £0.4m (2014: £0.3m).
6 Creditors: amounts falling due within one year
2015
£m
2014
£m
Trade creditors 0.3 0.2
Amounts owed to subsidiary undertakings 11.5 –
Accruals and deferred income 0.6 2.3
12.4 2.5
7 Deferred tax
Deferred tax asset (Note 5)
2015
£m
2014
£m
Deferred capital allowances and short-term timing differences 0.4 0.2
Deferred tax liability
2015
£m
2014
£m
Deferred capital gains 0.2 0.6
Any movement during the year has been processed entirely through the profit and loss account.
8 Reserves
Hedging
reserve
£m
Share
premium
account
£m
Profit
and loss
account
£m
At 1 February 2014 (0.2) 9.4 59.0
Loss for the ?nancial year (38.5)
Effective portion of changes in fair value of cash ?ow hedges 0.5
Share options exercised 0.2
At 31 January 2015 0.3 9.6 20.5
The loss for the year before taxation, intercompany dividends and provisions for impairment was £(4.7)m (2014: profit of £0.5m).
The loss before taxation dealt within the accounts of the Company was £(39.1)m (2014: profit of £4.8m).
Share capital and share option information is set out in Note 21 in the Group accounts.
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 56
9 Reconciliation of movements in equity shareholders’ funds
2015
£m
2014
£m
(Loss)/pro?t for the ?nancial year (38.5) 4.8
Effective portion of changes in fair value of cash ?ow hedges 0.5 (0.3)
Share options exercised 0.2 –
Net movement in equity shareholders’ funds (37.8) 4.5
Opening equity shareholders’ funds 69.2 64.7
Closing equity shareholders’ funds 31.4 69.2
10 Commitments
Leasehold property Other
2015
£m
2014
£m
2015
£m
2014
£m
Operating leases which expire:
Within two to ?ve years – – 0.1 0.2
After ?ve years 0.9 0.9 – –
0.9 0.9 0.1 0.2
At 31 January 2015 the Company had commitments on foreign exchange contracts amounting to £3.5m (2014: £4.5m). The fair
value of forward exchange contracts outstanding as at 31 January 2015 is an asset of £0.3m (2014: liability of £0.2m). £0.5m has
been credited to the hedging reserve (2014: £0.3m debited).
11 Contingent liabilities
The Company raises finance for and guarantees the bank borrowings of certain subsidiary undertakings which, at 31 January 2015,
amounted to £Nil (2014: £Nil).
12 Related party disclosures
There are no related party transactions between the Company and the non-controlling interest subsidiary undertakings.
Details of Director related party transactions are disclosed in Note 27 to the Group accounts.
Management has identified the Directors of the Company as related parties for the purpose of FRS8 ‘Related Party Disclosures’.
Details of the relevant relationships with these individuals are disclosed in the Directors’ Remuneration Report as set out in the Group
financial statements.
NOTES TO THE COMPANY ACCOUNTS
Continued
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 57
FIVE YEAR RECORD
Years ended 31 January
2011
£
2012
£
2013
£
2014
£
2015
£
Revenue 223.8m 216.0m 197.3m 189.4m 178.5m
Pro?t/(loss) before taxation 8.9m 5.0m (10.5)m (6.1)m (1.6)m
Discontinued operations (11.1)m 0.8m – – –
Basic (losses)/earnings per share (2.4)p 5.5p (10.7)p (6.4)p (1.6)p
Adjusted earnings/(losses) per share 7.5p 4.3p (7.3)p (4.6)p (0.7)p
Dividends per share 1.5p 1.6p – – –
Net assets 71.8m 75.1m 63.5m 56.5m 56.8m
Operated retail trading space 000 sq ft 337 330 325 300 271
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 58
ADVISERS
FINANCIAL CALENDAR
HEAD OFFICE
Centro 1
39 Camden Street
London NW1 0DX
STOCKBROKERS
Numis Securities Ltd
10 Paternoster Square
London EC4M 7LT
PRINCIPAL BANKERS
Barclays Bank Plc
London Corporate Banking
1 Churchill Place
London E14 5HP
SECRETARY AND REGISTERED OFFICE
Adam Castleton
20-22 Bedford Row
London WC1R 4JS
AUDITORS
KPMG Audit LLP
15 Canada Square
Canary Wharf
London E14 5GL
REGISTRARS AND TRANSFER OFFICE
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
REGISTERED NUMBER
1410568, England
2015
14 May
AGM
17 September
(provisional)
Half-Year Statement
2016
31 January
Financial Year End
15 March
(provisional)
Preliminary Announcement of Results
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 59
NOTICE OF MEETING
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to the action you should take, you are recommended to seek your own personal advice from your stockbroker,
accountant or other independent professional adviser authorised under the Financial Services and Markets Act 2000.
If you have sold or otherwise transferred all of your ordinary shares in French Connection Group PLC, you should forward this document and other
documents enclosed (except the personalised form of proxy) as soon as possible to the stockbroker, bank or other agent through whom the sale
or transfer was effected for transmission to the purchaser or transferee.
Notice is hereby given that the Annual General Meeting of the Company will be held at 10.00 am on Thursday 14 May 2015 at the offices of French
Connection Group PLC, Centro 1, 39 Camden Street, London NW1 0DX to consider and, if thought fit, pass the following resolutions:
Ordinary Resolutions
1 To receive and adopt the audited accounts and the report of the Directors and of the auditors for the financial year ended 31 January 2015.
2 To approve the Directors’ Remuneration Report for the financial year ended 31 January 2015.
3 To re-elect Stephen Marks as a Director of the Company.
4 To re-elect Dean Murray as a Director of the Company.
5 To appoint KPMG LLP as auditors to hold office from the conclusion of this meeting until the conclusion of the next Annual General Meeting
at which accounts are laid and to authorise the Directors to determine their remuneration.
6 To adopt FRS101 in respect of the Company’s annual report and accounts for the year ended 31 January 2016.
7 THAT:
the Directors be and they are hereby generally and unconditionally authorised pursuant to Section 551, Companies Act 2006 (the “Act") to exercise
all powers of the Company to allot shares in the Company and grant rights to subscribe for or to convert any security into shares of the Company
(such shares and rights to subscribe for shares or to convert any security into shares of the Company being “relevant securities") up to an
aggregate nominal amount of £288,534 (being 30% of the issued share capital) PROVIDED THAT unless previously revoked, varied or extended,
this authority shall expire on the date of the next Annual General Meeting of the Company after the passing of this Resolution SAVE THAT the
Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry
and the Directors may allot relevant securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired
Special Resolutions
To consider and, if thought fit, pass resolutions 8 and 9 below as Special Resolutions of the Company:
8 THAT:
if resolution 7 is passed, the Directors be and they are hereby empowered pursuant to Section 570(1) of the Act to allot equity securities (as defined
in Section 560(1) of the Act) of the Company wholly for cash pursuant to the authority under Section 551 of the Act conferred by resolution 7 above
and/or by way of a sale of treasury shares for cash (by virtue of Section 573 of the Act) in each case as if Section 561(1) of the said Act did not
apply to any such allotment provided that:
(a) the power conferred by this resolution shall be limited to:
(i) the allotment of equity securities and sale of treasury shares for cash in connection with an offer of, or invitation to apply for, equity
securities:
(A) in favour of holders of ordinary shares in the capital of the Company, where the equity securities respectively attributable
to the interests of all such holders are proportionate (as nearly as practicable) to the respective number of ordinary shares
in the capital of the Company held by them; and
(B) to the holders of any other equity securities as required by the rights of those securities or as the Directors otherwise consider
necessary,
but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with treasury shares,
fractional entitlements or legal, regulatory or practical problems arising under the laws or requirements of any overseas territory or by
virtue of shares being represented by depository receipts or the requirements of any regulatory body or stock exchange or any other
matter whatsoever; and
(ii) the allotment (otherwise than under sub-paragraph (i) above) of equity securities or sale of treasury shares up to an aggregate nominal
value equal to £48,089 (representing 5% of the issued share capital for the time being); and
(b) unless previously revoked, varied or extended, this power shall expire on the date of the next Annual General Meeting of the Company after
the passing of this Resolution SAVE THAT the Company may before such expiry make an offer or agreement which would or might
require equity securities to be allotted (and treasury shares to be sold) after such expiry in pursuance of such an offer or agreement and
the Directors may allot relevant securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired.
9 THAT a general meeting other than an annual general meeting may be called on not less than 14 clear days’ notice, provided that this authority
shall expire at the end of the next annual general meeting of the Company.
By order of the Board
Adam Castleton
Secretary
20-22 Bedford Row
London WC1R 4JS
13 April 2015
FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015 60
NOTICE OF MEETING
continued
Explanatory notes to the AGM Notice
Resolution 1 – Approval of the annual report and accounts
The Directors are required by the Companies Act 2006 (the “Act”) to lay
before the Company at this Annual General Meeting the accounts of the
Company for the financial year ended 31 January 2015, the report of
the Directors, the Directors’ Remuneration Report and the report of the
Company’s auditor on those accounts.
Resolution 2 – Directors’ Remuneration Report
Resolution 2 is the ordinary resolution to approve the Directors’
Remuneration Report. The vote of this resolution is advisory and no
Director’s remuneration is conditional upon the passing of this resolution.
The Directors’ Remuneration Policy was approved by shareholders at
the AGM held on 15 May 2014. Accordingly, it had a binding effect on
the Company from that date. As no changes have been made to the
policy since its approval by shareholders, it is not proposed to submit
it to the AGM to be held on 2015.
Resolutions 3 to 4 – Re-election of Directors
The articles of association of the Company require the nearest number
to one third of the Directors to retire at each annual general meeting.
Stephen Marks and Dean Murray are subject to rotation and being
eligible, offer themselves for re-election.
Resolution 5 – Appointment of auditors
The Company is required to appoint an auditor at each general meeting
at which accounts are laid before the Company, to hold office until the
next such meeting. The Audit Committee has recommended and the
Board has approved the resolution to appoint KPMG LLP as auditor
of the Company.
Resolution 6 – Adoption of FRS101
The Board considers it is in the best interests of the Company to
adopt FRS101 “Reduced Disclosure Framework” in order to achieve
consistency with the Group financial statements.
Resolution 7 – Authority to allot shares
Under section 551 of the Act, Directors require shareholders’ authority
for the allotment of shares. Shareholders last granted such general
authority to the Directors at the annual general meeting of the Company
held in 2014. Such authority will expire at the end of this Annual General
Meeting and Resolution 7 seeks to renew it (although the Directors have
no current plans to utilise the authority, except in relation to the issue
of new shares pursuant to the Company’s share incentive schemes).
Accordingly, Resolution 7 would renew this authority until the next
annual general meeting by authorising the Directors to allot shares
up to an aggregate nominal amount equal to approximately one third
of the current issued share capital of the Company.
Resolution 8 – Disapplication of statutory pre-emption rights
This resolution seeks to disapply the pre-emption rights provisions of
section 561 of the Act, which requires Directors wishing to allot shares
to offer them in the first instance to existing ordinary shareholders in
proportion to their ordinary shareholding. There may be occasions,
however, when the Directors will need the flexibility to finance business
opportunities by the issue of ordinary shares without a pre-emptive
offer to existing ordinary shareholders. Shareholders last granted
authority to Directors to dis-apply pre-emptive rights at the annual
general meeting held in 2014. Such authority will expire at the end
of this Annual General Meeting and Resolution 8 seeks to renew it.
Except in relation to the issue of new ordinary shares pursuant to the
Company’s share incentive schemes, the Directors have no present
intention of issuing any shares pursuant to this disapplication.
Resolution 9 – Notice of general meetings
Under the Companies Act 2006 all general meetings must be held on
21 days’ notice unless shareholders approve a shorter period, which
cannot be less than 14 clear days (AGMs will continue to be held on
at least 21 clear days’ notice). The Directors believe it is in the best
interests of the shareholders of the Company to enable general
meetings to be called on 14 clear days’ notice. It is intended that
this flexibility will only be used for non-routine business and, where
merited, in the interests of shareholders as a whole. The approval
will be effective until the Company’s next annual general meeting,
when it is expected that a similar resolution will be proposed.
General notes to the AGM Notice
1. Holders of ordinary shares, or their duly appointed representatives,
are entitled to attend and vote at the AGM. Shareholders are
entitled to appoint a proxy to exercise all or any of their rights
to attend and speak and vote on their behalf at the meeting.
A shareholder can appoint the Chairman of the meeting or anyone
else to be his/her proxy at the meeting. A proxy need not be a
shareholder. More than one proxy can be appointed in relation
to the AGM provided that each proxy is appointed to exercise
the rights attached to a different ordinary share or shares held by
that shareholder. To appoint more than one proxy, the Proxy Form
enclosed should be photocopied and completed for each proxy
holder. The proxy holder’s name should be written on the Proxy
Form together with the number of shares in relation to which the
proxy is authorised to act. The box on the Proxy Form must also
be ticked to indicate that the proxy instruction is one of multiple
instructions being given. All Proxy Forms must be signed and, to
be effective, must be lodged with Capita so as to arrive no later
than 10 am on 12 May 2015.
2. The return of a completed Proxy Form, other such instrument
or any CREST Proxy Instruction (as described in Note 1) will not
prevent a shareholder attending the AGM and voting in person if
he/she wishes to do so (although voting in person at the AGM will
terminate the proxy appointment).
3. In order for a proxy appointment made by means of CREST to be
valid, the appropriate CREST message (a CREST Proxy Instruction)
must be properly authenticated in accordance with Euroclear UK
& Ireland Limited’s specifications and must contain the information
required for such instructions, as described in the CREST Manual.
The message must be transmitted so as to be received by Capita
(ID RA10) not later than 48 hours before the time fixed for the AGM.
For this purpose, the time of receipt will be taken to be the time
(as determined by the timestamp applied to the message by the
CREST Applications Host) from which Capita is able to retrieve
the message by enquiry to CREST. After this time any change
of instructions to proxies appointed through CREST should be
communicated to the appointee through other means. Euroclear
UK & Ireland Limited does not make available special procedures
in CREST for any particular messages and normal system timings
and limitations will apply in relation to the input of a CREST Proxy
Instruction. It is the responsibility of the CREST member concerned
to take such action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any particular
time. The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
4. Any person to whom this Notice is sent who is a person nominated
under Section 146 of the CA 2006 to enjoy information rights
(a Nominated Person) may, under an agreement between him/her
and the shareholder by whom he/she was nominated, have a right
to be appointed (or to have someone else appointed) as a proxy
for the AGM. If a Nominated Person has no such proxy appointment
right or does not wish to exercise it, he/she may, under any such
agreement, have a right to give instructions to the shareholder
as to the exercise of voting rights.
5. The statement of the rights of shareholders in relation to the
appointment of proxies in Note 1 does not apply to Nominated
Persons. The rights described in that note can only be exercised
by shareholders of the Company.
6. As at 12 April 2015, being the latest practicable date prior to
the publication of this document, the Company’s issued share
capital consists of 96,178,134 ordinary shares, carrying one vote
each. Therefore the total voting rights in the Company as at 12 April
2015 are 96,178,134.
7. In accordance with Regulation 41 of the Uncertificated Securities
Regulations 2001, only those members entered on the Company’s
register of members at 6 pm on 12 May 2015 or, if the meeting
is adjourned, shareholders entered on the Company’s register
of members at 6 pm on the day two days before the date of any
adjournment shall be entitled to attend and vote at the AGM.
61 FRENCH CONNECTION GROUP PLC ANNUAL REPORT 2015
8. Any member attending the meeting has the right to ask
questions. The Company has to answer any questions raised
by members at the meeting which relate to the business being
dealt with at the meeting unless:
• to do so would interfere unduly with the preparation for the
meeting or involve the disclosure of confidential information;
• the answer has already been given on a website in the form
of an answer to a question, or;
• it is undesirable in the interests of the Company or the good
order of the meeting to answer the question.
9. Copies of the Directors’ service contracts and letters of
appointment along with a copy of the Company’s articles of
association are available for inspection at the registered office of
the Company during normal business hours on any business day
and will be available for inspection at the place where the meeting
is being held from 15 minutes prior to and during the meeting.
10. A copy of this notice, and other information required by s311A of the
Companies Act 2006, can be found at www.frenchconnection.com.
11. In the case of a member which is a company, your proxy form
must be executed under its common seal or signed on its behalf
by a duly authorised officer of the company or an attorney for the
company.
12. Any power of attorney or any other authority under which your
proxy form is signed (or a duly certified copy of such power or
authority) must be included with your proxy form.
13. In the case of joint holders of shares, the vote of the first named in
the register of members who tenders a vote, whether in person or
by proxy, shall be accepted to the exclusion of the votes of other
joint holders.
14. It is possible that, pursuant to requests made by members of
the Company under section 527 of the Companies Act 2006, the
Company may be required to publish on a website a statement
setting out any matter relating to: (a) the audit of the Company's
accounts (including the auditor's report and the conduct of the
audit) that are to be laid before the AGM; or (b) any circumstance
connected with an auditor of the Company ceasing to hold office
since the previous meeting at which annual accounts and reports
were laid in accordance with section 437 of the Companies Act
2006. The Company may not require the members requesting any
such website publication to pay its expenses in complying with
sections 527 or 528 of the Companies Act 2006. Where the
Company is required to place a statement on a website under
section 527 of the Companies Act 2006, it must forward the
statement to the Company's auditor not later than the time when it
makes the statement available on the website. The business which
may be dealt with at the AGM includes any statement that the
Company has been required under section 527 of the Companies
Act 2006 to publish on a website.
15. In accordance with section 338 of the Companies Act 2006,
a member or members of the Company may (provided that the
criteria set out in section 338(3) of the Companies Act 2006 are
met) require the Company to give to members notice of a resolution
which may properly be moved and is intended to be moved at
the AGM, provided that: (a) the resolution must not be, if passed,
ineffective (whether by reason of inconsistency with any enactment
or the Company's constitution or otherwise); and (b) the resolution
must not be defamatory of any person, frivolous or vexatious. Such
a request may be in hard copy form or in electronic form, must be
authenticated by the person or persons making it, must identify the
resolution of which notice is to be given and must be received by
the Company not later than 6 weeks before the AGM, or, if later,
the time at which notice is given of the AGM. (In the foregoing
sentence, the terms “hard copy form", “electronic form” and
“authenticated” bear their respective meanings set out in the
Companies Act 2006 in relation to a communication, or a
document or information sent or supplied, to a company.)
16. In accordance with section 338A of the Companies Act 2006, a
member or members of the Company may (provided that the
criteria set out in section 338A(3) of the Companies Act 2006 are
met) require the Company to include in the business to be dealt
with at the AGM a matter (other than a proposed resolution) which
may properly be included in the business of the AGM, provided that
the matter is not defamatory of any person, frivolous or vexatious.
A request may be in hard copy form or electronic form, must
identify the matter to be included in the business, must be
accompanied by a statement setting out the grounds for the
request, must be authenticated by the person or persons making
it and must be received by the Company not later than 6 weeks
before the AGM, or, if later, the time at which notice is given of the
AGM. (In the foregoing sentence, the terms “hard copy form",
“electronic form” and “authenticated” bear the respective meanings
set out in the Companies Act 2006 in relation to a communication,
or a document or information sent or supplied, to a company.)
FrenchConnection.Com
doc_471026435.pdf