French Connection plunges to 8m pounds loss

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The Independent Online
Connection, the struggling fashion group, has successfully extended its banking facilities despite crashing to an annual pre- tax loss of pounds 8m and reporting an additional extraordinary loss of pounds 2.2m.

The results for the year to 31 January show the troubled retailer continued to haemorrhage in the second half. Bank borrowings of pounds 6.7m were more than twice shareholders' funds of pounds 3m.

Bankers, led by Barclays, agreed on 29 May to continue to support the business after seeing an independent report from consultants KPMG Peat Marwick, which concluded that it could be made to work. Stephen Marks, chief executive and controlling shareholder, has injected pounds 2m in the form of a subordinated loan.

There was no dividend. George Wardale, chairman, warned that he did not expect an interim payment to be made for the current period. He said the results were entirely unsatisfactory.

He blamed difficult trading conditions and 'exceptionally poor management and operational controls, particularly in the first half'. He declined to identify the offending managers.

The pounds 8m loss, which follows a pounds 57,000 profit last time, includes pounds 2.9m of exceptional losses. Most of these were due to stock losses at the Bukta Connection sportswear subsidiary and losses at discontinued operations that were announced at the interim stage. But professional advice on the restructuring cost an extra pounds 200,000.

At the operating level, sales fell from pounds 57.6m to pounds 49.9m and the group swung from profits of pounds 1.3m to losses of pounds 3.9m: these ballooned from pounds 1.4m in the first half to pounds 2.5m in the second.

However, Mr Wardale, who was appointed in April, said the core businesses - the wholesaling division and the French Connection and Nicole Farhi shops - were now trading profitably.

'The board is united in its determination to restore French Connection to profitability and I have no doubt that you will see in the coming months the emergence of a very different picture from that of the recent past.'

He promised less delay in the reporting of future results. The interims will be out 'probably in early October'.

Last month Bukta was sold to its management for pounds 364,000. Bukta's trading losses together with other write-offs contributed the bulk of the pounds 2.2m extraordinary loss. A German subsidiary that ceased trading two and a half years ago also continued to generate small costs.

The shares, which are quoted on the Unlisted Securities Market, shed 1p to 6p.

(Photograph omitted)