Icelandic stakebuilders lift French Connection
BAUGUR, the Icelandic investment company, increased its stake in French Connection yesterday, sending the shares northwards despite the troubled retailer reporting a very poor set of half-year results.
Baugur bought 6m shares at 285p through brokers Teather & Greenwood, taking its share of the company from 3pc to 9.3pc. French Connection’s shares, after falling steadily over the past 12 months, jumped 40¼ to 285¼p as speculation mounted that it could become the latest target for the Icelandic investors.
Since Baugur’s chief executive Jon Asgeir Johannesson was charged with fraud and embezzlement in July, the company has kept a relatively low profi le. Sources close to Baugur were quick to rule out an immediate bid but admitted that the company wanted to increase its stake further. “They’ve been looking at this for some time. The FCUK slogan may have run its course but the locations that they have, the people there, all suggest that there is value if this business was run slightly differently,” one said.
Any takeover would have to secure the backing of Stephen Marks, French Connection’s founder and chairman, who owns 42pc of the shares. He said: “I’ve never spoken to Baugur. No one has contacted me.” Suggestions that he was a long-term seller of the business was dismissed as “pure tittle-tattle”.
Baugur’s move came as French Connection announced a substantial fall in interim profits, from £16.2m to £ 5.1m, as weak sales started to bite. The company extended its summer sale from four weeks to seven to sell unpopular clothes. Underlying retail sales during the six months to July fell 9pc. Mr Marks insisted sales had picked up as the company had introduced its new autumn ranges last week; he said tweed and cut- off trousers were especially popular.
However, City analysts were unimpressed. Mark Charnock, at Investec, said the 15pc fall in wholesale orders in recent weeks was particularly worrying. “I think the FCUK brand is going south. All the wholesale customers I speak to say that. There was a bubble on the back of smutty, mis-spelt expletives. That bubble has gone and there is nothing to bring back customers into the shops.”
Mr Marks retorted: “FCUK is the company’s name. Why would I change it?”
Separately, judges in an Icelandic court said they would rule next week as to whether they would throw out various charges against Mr Johannesson. They say some of the prosecution’s’ charges “may be flawed”.