CFX

27 January 2009

 

COLEFAX GROUP PLC

(“Colefax” or the “Group”)

 

Half Year Results

for the six months ended 31 October 2008

 

Colefax is an international designer and distributor of furnishing fabrics & wallpapers and owns a leading interior decorating business.

 

The Group trades under five brand names, serving different segments of the soft furnishings marketplace; these are Colefax and Fowler, Cowtan & Tout, Jane Churchill, Manuel Canovas and Larsen.

 

 

Key Points

 

  • Results in line with expectations

 

  • Sales of £36.72m (2007: £38.61m)

 

  • Pre-tax profit of £2.48m (2007: £3.32m)

 

  • Earnings per share of 11.65p (2007: 15.02p)

 

  • Net cash of £2.24m (2007: net debt of £0.74m)

 

  • Interim dividend of 1.55p (2007: 1.55p)

 

  • Trading environment expected to worsen although stronger dollar is beneficial

 

  • Well placed to weather economic downturn

 

 

 

David Green, Chairman, commenting, said:

 

“Our principal market, the US, started to deteriorate significantly in August 2008 whereas, in the UK, conditions remained relatively robust throughout 2008. As anticipated, all our major markets are now seeing the impact of the global economic downturn and current trading is best described as ‘tough, getting tougher’.

 

The Group has a broad geographical spread of business and strong balance sheet including net cash of £2.2 million. It is well placed to weather the economic downturn and take advantage of any opportunities that may arise.”  

 

Enquiries:

 

Colefax Group plc

David Green, Chairman

Tel: 020 7493 2231

 

 

 

KBC Peel Hunt

(Nominated Adviser & Broker)

David Anderson

Tel: 020 7418 8900

 

 

 

Biddicks

Katie Tzouliadis

Tel: 020 7448 1000

 


COLEFAX GROUP PLC

 

CHAIRMAN’S STATEMENT

 

Financial Results

 

The Group’s pre-tax profit for the six months to 31 October 2008 decreased by 25% to £2.48 million (2007: £3.32 million) on sales down 5% at £36.72 million (2007: £38.61 million).  Earnings per share decreased by 22% to 11.65p (2007: 15.02p).  The Group ended the six months with net cash of £2.24 million (2007: net debt of £745,000). 

 

During the period, the Group purchased for cancellation 550,000 shares at an average price of £1.63 per share, representing 3.6% of the Group’s issued share capital at the start of the year. 

 

The Board has decided to hold the interim dividend at 1.55p per share (2007: 1.55p per share).  The interim dividend will be paid on 14 April 2009 to shareholders on the register at the close of business on 13 March 2009.   In the current volatile economic climate, we will keep our dividend policy under review, dependent upon our results.

 

Trading conditions in our principal market, the US, started to deteriorate significantly in August 2008, whereas the UK remained relatively robust throughout the whole of 2008.  Market conditions in Europe are varied but all our major markets are trending lower.  The 25% reduction in our interim profits is mainly due to a lower profit contribution from our Decorating Division, where sales were down 37% compared to a strong first half last year. 

 

Product Division

 

·         Fabric - Portfolio of Five Brands: “Colefax and Fowler”, “Cowtan and Tout”, “Jane Churchill”, “Manuel Canovas” and “Larsen”

 

Sales in the Fabric Division, which represent 86% of the Group’s sales, increased by 1% to £31.40 million (2007: £30.97 million) but decreased by 6% on a constant currency basis. 

 

Sales in the US, which represent 51% of the Fabric Division’s turnover, decreased by 9% on a constant currency basis (2007: increase of 12%).  The decline in sales started in August 2008 and deteriorated towards the end of the year, with sales down by 18% in the eight weeks to the end of December.

 

Sales in the UK, which represent 21% of the Fabric Division's turnover, were flat through to the end of October.  For the eight weeks to the end of December, sales were down by 6%.  We are concerned by the lack of transaction activity in the high end housing market as historically our trading performance lags this economic indicator.

 

Sales in Continental Europe, which represent 25% of the Fabric Division’s turnover, increased by 8% due to the appreciation in the Euro. On a constant currency basis, sales decreased by 6% in the period. 

 

Sales in the rest of the world, which represent 3% of the Fabric Division’s turnover, increased by 2% although growth prospects appear limited given current market conditions.

 

·         Furniture – Kingcome Sofas

 

Sales of furniture, which account for 4% of Group sales, decreased by 5% during the period.  The majority of furniture sales are in the UK and we believe that the reasonable first half performance does not yet reflect the impact of the downturn in the high end housing market.  Furniture sales are now starting to see increasingly significant decreases on a month by month basis and we believe that 2009 will be extremely challenging. 

 

·         Accessories - Manuel Canovas

 

Accessories comprise sales of beachwear and scented candles and the majority of sales occur in the second half of the year.  Our new management team has made significant improvements to both the range and the distribution of the product line but we expect the difficult retail environment to hold back progress for at least the next twelve months.

 

Interior Decorating Division

 

Decorating sales decreased by 37% compared to a very strong first six months last year. Part of the sales decrease is due to the timing of contract completions although the full year result will be down on last year’s exceptional performance.

 

Prospects

 

Current trading is best described as ‘tough, getting tougher’ and it is difficult to forecast accurately the level of sales over the coming months. However, I would expect to see a significant like-for-like sales decline next year.  The renewed strength of the US Dollar benefits the Group and should off-set some of the decline in trading activity although, this year, we will not benefit fully due to hedging contracts in place for the second half of the year. Next year there will be a significant margin improvement from the stronger US Dollar.

 

The Group has a broad geographical spread of business and strong balance sheet including net cash of £2.2 million. It is well placed to weather the economic downturn and take advantage of any opportunities that may arise.

 

 

 

David Green

Chairman


COLEFAX GROUP PLC

 

INTERIM GROUP INCOME STATEMENT

 

 

 

 

For the six months ended 31 October 2008

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

Six Months

 

Six Months

 

Year

 

to 31 Oct

 

to 31 Oct

 

to 30 April

 

2008

 

2007

 

2008

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Revenue

36,723

 

38,608

 

78,181

 

 

 

 

 

 

Profit from operations

2,486

 

3,373

 

6,081

 

 

 

 

 

 

Finance income

41

 

76

 

127

Finance expense

(46)

 

(127)

 

(266)

 

(5)

 

(51)

 

(139)

 

 

 

 

 

 

Profit before taxation

2,481

 

3,322

 

5,942

 

 

 

 

 

 

Tax expense

(819)

 

(1,096)

 

(1,877)

 

 

 

 

 

 

Profit for the period attributable to the equity holders of the parent

1,662

 

2,226

 

4,065

 

 

 

 

 

 

Basic earnings per share

11.65p

 

15.02p

 

27.50p

Diluted earnings per share

11.06p

 

14.44p

 

26.10p

 


 

COLEFAX GROUP PLC

 

INTERIM GROUP BALANCE SHEET

 

 

 

 

As at 31 October 2008

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

at 31 Oct

 

at 31 Oct

 

at 30 April

 

 

 

2008

 

2007

 

2008

 

 

 

£'000

 

£'000

 

£'000

Non-current assets:

 

 

 

 

 

Property, plant and equipment

5,296

 

5,056

 

4,960

Deferred tax asset

 

2,079

 

2,091

 

1,991

 

 

 

7,375

 

7,147

 

6,951

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Inventories and work in progress

14,918

 

13,118

 

13,357

Trade and other receivables

10,149

 

11,034

 

10,561

Cash and cash equivalents

2,668

 

5,623

 

3,862

 

 

 

27,735

 

29,775

 

27,780

 

 

 

 

 

 

 

 

Trade and other payables:

 

 

 

 

 

Current corporation tax

1,017

 

1,308

 

995

Derivative financial instruments

822

 

-

 

-

Other amounts falling due in one year

12,733

 

18,277

 

14,152

 

 

 

14,572

 

19,585

 

15,147

 

 

 

 

 

 

 

 

Net current assets

 

13,163

 

10,190

 

12,633

 

 

 

 

 

 

 

 

Total assets less current liabilities

20,538

 

17,337

 

19,584

 

 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

Deferred tax liability

284

 

130

 

123

Pensions liability

 

247

 

195

 

232

 

 

 

531

 

325

 

355

 

 

 

 

 

 

 

 

Net assets

 

20,007

 

17,012

 

19,229

 

 

 

 

 

 

 

 

Capital and reserves attributable to

equity holders of the Company:

Called up share capital

1,481

 

1,565

 

1,536

Share premium account

11,148

 

11,141

 

11,148

Capital redemption reserve

1,393

 

1,308

 

1,338

ESOP share reserve

(20)

 

(287)

 

(20)

Share based payment reserve

664

 

228

 

664

Foreign exchange reserve

1,098

 

(105)

 

124

Cash flow hedge reserve

(592)

 

-

 

-

Retained earnings

 

4,835

 

3,162

 

4,439

Total equity

 

20,007

 

17,012

 

19,229

 


COLEFAX GROUP PLC

 

INTERIM GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSES

For the six months ended 31 October 2008

 

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

Six Months

 

Six Months

 

Year

 

to 31 Oct

 

to 31 Oct

 

to 30 April

 

2008

 

2007

 

2008

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Profit for the period

1,313

 

2,226

 

               4,065

 

 

 

 

 

 

Currency translation differences on foreign currency net investments

1,590

 

(226)

 

704

 

 

 

 

 

 

Deferred tax on long-term loan foreign currency movements

(616)

 

121

 

(41)

 

 

 

 

 

 

Unrealised losses on cash flow hedges

(822)

 

-

 

-

 

 

 

 

 

 

Deferred tax on unrealised losses on cash flow hedges

230

 

-

 

-

 

 

 

 

 

 

Total recognised income and expenses relating to the period

1,695

 

2,121

 

4,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


COLEFAX GROUP PLC

 

INTERIM GROUP CASH FLOW STATEMENT

For the six months ended 31 October 2008

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

Six months

 

Six months

 

Year

 

 

 

 

 

to 31 Oct

 

to 31 Oct

 

to 30 April

 

 

 

 

 

2008

 

2007

 

2007

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

 

Profit before taxation

 

 

2,481

 

3,322

 

5,942

Finance income

(41)

 

(76)

 

(127)

Finance expense

46

 

127

 

266

Depreciation

 

 

 

847

 

814

 

1,690

Cash flows from operations before  changes in working capital

3,333

 

4,187

 

7,771

 

 

 

 

 

 

 

 

 

 

Increase in inventories and work in progress

(903)

 

(1,156)

 

(1,215)

Decrease/(increase) in trade and other receivables

732

 

(1,510)

 

(672)

(Decrease)/increase in trade and other payables

(991)

 

(157)

 

1,143

Cash generated from operations

2,171

 

1,364

 

7,027

 

 

 

 

 

 

 

 

 

 

Taxation paid

 

 

 

 

 

UK corporation tax paid

(907)

 

(955)

 

(2,002)

Overseas tax received/(paid)

128

 

(127)

 

(307)

 

 

 

 

 

(779)

 

(1,082)

 

(2,309)

Net cash inflow from operating activities

1,392

 

282

 

4,718

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

Payments to acquire property, plant and equipment

(693)

 

(828)

 

(1,448)

Receipts from sales of property, plant and equipment

7

 

10

 

10

Interest received

33

 

76

 

125

Net cash outflow from investing

(653)

 

(742)

 

(1,313)

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

Purchase of own shares

(895)

 

-

 

(465)

Interest paid

 

 

 

(46)

 

(100)

 

(280)

Equity dividends paid

 

 

(373)

 

(378)

 

(604)

Net cash outflow from financing

(1,314)

 

(478)

 

(1,349)

 

 

 

 

 

 

 

 

 

 

(Decrease)/increase in cash in the period

(575)

 

(938)

 

2,056

 

 

 

 

 

 

 

 

 

 

 


COLEFAX GROUP PLC

 

NOTES

 

 

1.

The interim results have been prepared in accordance with the accounting policies of the Group under International Financial Reporting Standards (IFRS) and on the basis of the accounting policies set out in the annual report and accounts for the year ended 30 April 2008, which have remained unchanged with the exception of the adoption of hedge accounting as detailed in note 5 below.

 

 

 

These standards and interpretations are subject to ongoing review and endorsement by the EU or possible amendment by interpretive guidance from the International Financial Reporting Interpretations Committee ('IFRIC') and are therefore still subject to change.

 

 

2.

During the financial period ended 31 October 2008, the Company paid a final dividend for the year ended 30 April 2008 of 2.65p per ordinary share giving a total dividend of £372,666.

 

 

 

The proposed interim dividend of 1.55p (2007: 1.55p) per share is payable on 14 April 2009 to qualifying shareholders on the register at the close of business on 13 March 2009.

 

 

3.

Basic earnings per share have been calculated on the basis of earnings of £1,662,000 (2007: £2,226,000) and on 14,268,557 (2007: 14,816,510) ordinary shares being the weighted average number of ordinary shares in issue during the period.

 

 

4.

Diluted earnings per share have been calculated on the basis of earnings of £1,662,000 (2007: £2,226,000) and on 15,035,512 (2007: 15,408,152) ordinary shares being the weighted average number of ordinary shares in the period adjusted to assume conversion of all dilutive potential ordinary shares of 766,955 (2007: 591,642).

 

 

5.

Due to the international nature of its operations, the Group faces currency exposures in respect of exchange rate fluctuations against sterling. The Group minimises this currency translation exchange risk by the use of forward contracts.

 

 

 

From 1 May 2008, the Group has elected to adopt hedge accounting as permitted under IAS 39 (Financial instruments: recognition and measurement) and account for unrealised gains and losses on forward exchange contracts through a cash flow hedge reserve, when the conditions for hedge accounting are met. When gains and losses on these hedges are realised the gain or loss is transferred to the profit and loss account.

 

 

6.

The interim accounts are unaudited.  The above financial information does not comprise full accounts within the meaning of Section 240 of the Companies Act 1985 (as amended).

 

 

 

A copy of the statutory accounts for the year ended 30 April 2008, which were prepared under IFRS, has been delivered to the Registrar of Companies.  The auditor's report on those accounts was unqualified and did not contain a statement under section 237 (2)-(3) of the Companies Act 1985 (as amended).

 

 

7.

Copies of the interim report are being sent to shareholders and will be available from the Company's website on www.colefaxgroupplc.com.  Copies will also be made available on request to members of the public at the Company's registered office at 39 Brook Street, London W1K 4JE.

 

 

END

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