French Connection PLC (LON:FCCN) said talks with several possible buyers of the business were “ongoing” as it made a modest return to annual profit despite weaker like-for-like sales.
The fashion retailer announced last October that it was reviewing its strategic options, including the potential sale of the business.
READ: French Connection shares surge as it confirms possible sale of the business
“We continue to expect this strategic review (including the formal sale process) to conclude during the first half of 2019 and will make further announcements when appropriate,” said chairman Stephen Marks, who is understood to be looking to offload his 42% stake in the company.
“Our initial goal has been to return the group to profitability which we have now achieved, however, we now must intensify our efforts to ensure that we build on the momentum that we have within the business and move to an appropriate level of profitability.”
Sports Direct's growing stake
Mike Ashley’s Sports Direct International PLC (LON:SPD) is a major shareholder in French Connection.
The sportswear retailer raised its stake in the business from 11% to 27% last July, taking it close to the 30% level at which it must launch a takeover bid.
French Connection made an underlying operating profit of £100,000 for the year ended 31 January 2019, compared to a loss of £2.1mln last year, led by strong wholesale demand.
Revenue edged up 0.2% to £135.3mln with 10.3% growth in wholesale and a 10.6% decline in retail.
Retail like-for-like sales dropped 6.8% with declines both in store and online amid tough trading conditions in the UK.
Net cash jumped 70.5% to £15.2mln but the company proposed no dividend for the year.
“While we still have a way to go to return the business to an appropriate level of profitability, I believe that we have made and continue to make significant progress,” Marks said.
In morning trading, shares rose 1.8% to 43.2p.
Hard slog ahead for French Connection, says anlayst
Sofie Willmott, senior retail analyst at GlobalData, said: "French Connection just returned to profit in FY2018/19, however including adjusted items the retailer made an operating loss of £9.3mln versus £3.8mln last year.
"With the business still up for sale and no takers as yet, despite ongoing conversations with interested parties, French Connection has got a hard slog ahead.
"As consumer confidence is expected to remain low in 2019, the retailer must better define its brand identity and point of difference to both convince a buyer it has future growth potential, and to attract shoppers back.''