Colefax Group plc

CFX

20th July 2009

COLEFAX GROUP PLC

 

(“Colefax” or “the Group”)

 

Preliminary Results for the year ended 30th April 2009

 

Colefax is an international designer and distributor of luxury furnishing fabrics & wallpapers and owns a leading interior decorating business. The Group trades under five brand names, which serve different segments of the soft furnishings marketplace; these are Colefax and Fowler, Cowtan & Tout, Jane Churchill, Manuel Canovas and Larsen.

 

Highlights

 

 

·                Sales down 3% to £75.56m (2008 - £78.18m) and down by 14% on a constant currency basis

 

·                Pre-tax profit decreased by 55% to £2.65m (2008 - £5.94m)

 

·                Earnings per share fell by 53% to 12.9p (2008 – 27.5p)

 

·                Strong cash generation of £1.87m before dividends and share buybacks (2008 - £3.05m)

 

·                Net funds at year end of £3.08m (2008 - £2.42m)

 

·                Proposed final dividend of 1.33p (2008 – 2.65p), giving a total dividend of 2.88p (2008 – 4.20p), an decrease of 31% on last year

 

·                Market conditions remain extremely challenging

 

David Green, Chairman of Colefax, commented,

 

“The Group has a strong balance sheet, with no debt, and is well placed to deal with the current recession and capitalise on any opportunities which may arise in the future.”

 

 

Enquiries:

 

Colefax Group plc

David Green, Chairman

Tel: 020 7448 1000 (today)

 

Robert Barker, Finance Director

 

 

 

 

Biddicks

Katie Tzouliadis

Tel: 020 7448 1000

 

 

 

KBC Peel Hunt Ltd

David Anderson

Tel: 020 7418 8900

(Nominated Adviser & Broker)

Matthew Tyler

 

 

 

 

 


COLEFAX GROUP PLC

CHAIRMAN’S STATEMENT

 

Financial Results

 

The Group’s pre-tax profit for the year to 30th April 2009 decreased by 55% to £2.65 million (2008 - £5.94 million) on sales down 3% at £75.56 million (2008 - £78.18 million).  Earnings per share decreased by 53% to 12.9p (2008 – 27.5p) and the Group ended the year with net funds of £3.08 million (2008 - £2.42 million).

 

During the year, 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.

 

Due to the current economic climate, the Board has decided to recommend that the final dividend is halved to 1.33p per share (2008 - 2.65p), making a total for the year of 2.88p (2008 – 4.20p), a decrease of 31%.  The final dividend will be paid on 9th October 2009 to shareholders on the register at the close of business on 11th September 2009.

 

The principal reason for the reduction in this year’s results has been the significant decrease in sales in our largest market, the US, from August 2008.  In addition, a number of European markets, together with the UK, started to deteriorate from January 2009. In response to the downturn, the Group incurred reorganisation and redundancy costs of £876,000.  Profits were also adversely affected by hedging contracts put in place in the early part of the year which meant that the Group did not fully benefit from the subsequent dramatic strengthening of the US dollar. 

 

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 81% of Group sales, decreased by 2% to £61.08 million (2008 - £62.15 million) and by 14% on a constant currency basis.

 

Sales in the US, which represent 51% of the Fabric Division’s sales, decreased by 18% on a constant currency basis.  The reduction in sales started in August 2008 and has significantly escalated since January 2009 and we are now experiencing monthly decreases of over 30% compared to the previous year.  The most important market for us has always been New York and this area has been particularly badly hit.  We currently have two showrooms in New York, which we propose to amalgamate into one at the end of this year. Whilst this will produce only limited cost savings, there are significant sales synergies to be gained once the market recovers.  During the year we expanded our Florida showroom and made improvements to our LA showroom.

 

UK sales, which represent 20% of the Fabric Division's sales, decreased by 8% during the year.  The Group benefited from a strong performance during the first six months of the year as the decline in sales did not start until October, and then only moderately.  However, since February 2009 the rate of decline has become much more significant and is currently running at around 20% per month compared to the previous year.  My view is that the UK housing market will experience a long period of decline and that it may be the latter part of 2010, at the earliest, before there is any real recovery. 

 

Sales in Continental Europe, which represent 26% of the Fabric Division’s sales, declined by 13% on a constant currency basis, with a very mixed performance between countries. Our principal market of France has held up reasonably well, although we are now starting to see greater reductions in sales each month. The well publicised problems of Spain and Eire have resulted in a substantial sales decline in those markets compared to the previous year.  My view is that Europe will not escape the economic problems which are currently facing the UK and the US and the current rate of decline, which is around 20% per month compared to the previous year, will remain for at least the next 12 months. 

 

Sales in the rest of the world, which represent just 3% of the Fabric Division’s sales, increased by 3% in the year. As there is no major market, it is difficult to predict future trends in this region, but it is relatively unimportant to the Group.

 

·         Furniture – Kingcome Sofas

 

Sales of Kingcome furniture, which account for 3% of Group sales, decreased by 15% to £2.47 million (2008 - £2.92 million) but this activity remained profitable in the year.  Since January 2009, we have started to see a more significant decrease in sales and have made a number of redundancies in our manufacturing facility.  We are concerned about the short-term performance of this area of the Group as it is dependent upon the London property market.  We have however secured a number of significant contract projects which will help to cushion the shortfall. 

 

·         Accessories - Manuel Canovas

 

Sales in our Accessories Division, which account for 3% of Group sales, increased by 2% to £2.51 million (2008 - £2.47 million) but decreased by 13% on a like-for-like basis.  The new management team have worked hard to put together an exciting new range for this year but I am concerned that in the current economic climate any real progress will be hard to achieve.

 

Interior Decorating Division

 

Interior decorating sales, which account for 13% of Group sales, decreased by 11% to £9.50 million (2008 - £10.64 million) following an exceptional performance in 2008.  The current order book remains relatively strong and we are reasonably confident that this year’s results will be similar to last year’s. Sales of antiques decreased by 20% in the year to £1.13 million and we expect this area to remain challenging.

 

Prospects

 

In my Chairman’s Statement in July last year, I stated that, in my opinion, recessions are usually deeper and last longer than everyone forecasts.  Despite this, I believe that I may have still underestimated the seriousness of this recession and its affect on our business.

 

The US and most of our other major markets are in deep recession and, whilst we have taken action to reduce costs, these will not in any way off-set the level of sales decline that we are currently experiencing.  We anticipate that trading conditions will remain very challenging for the current year and our principal focus will continue to be on conserving cash and maintaining tight control over our cost base. The Group has a strong balance sheet, with no debt, and is well placed to deal with the current recession and capitalise on any opportunities which may arise in the future.

 

David Green

Chairman

20th July 2009

 

 

 


COLEFAX GROUP PLC

GROUP INCOME STATEMENT

For the year ended 30th April 2009

 

 

2009

2008

 

£'000

£'000

 

 

 

 

 

 

Revenue

75,562

78,181

Cost of sales

35,555

36,467

 

 

 

Gross profit

40,007

41,714

Operating expenses

37,351

35,633

 

 

 

Profit from operations

2,656

6,081

 

 

 

Finance income

45

127

Finance expense

(52)

(266)

 

(7)

(139)

 

 

 

Profit before taxation

2,649

5,942

 

 

 

Tax expense

 

 

-UK

(535)

(1,899)

-Overseas

(284)

22

 

 

 

 

(819)

(1,877)

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

1,830

4,065

 

 

 

Basic earnings per share

           12.9p

           27.5p

Diluted earnings per share

           12.4p

           26.1p

 

 

All activity has arisen from continuing operations.

 

 

 

 

 

 


COLEFAX GROUP PLC

GROUP BALANCE SHEET

At 30th April 2009

 

 

2009

2008

 

£'000

£'000

 

 

 

 

 

 

Non-current assets:

 

 

Property, plant and equipment

5,718

4,960

Deferred tax asset

1,590

1,991

 

7,308

6,951

 

 

 

Current assets:

 

 

Inventories and work in progress

13,255

13,357

Trade and other receivables

11,661

10,561

Cash and cash equivalents

3,079

3,862

 

27,995

27,780

 

 

 

Trade and other payables:

 

 

Current corporation tax

387

995

Other amounts falling due in one year

13,298

14,152

 

13,685

15,147

 

 

 

Net current assets

14,310

12,633

 

 

 

Total assets less current liabilities

21,618

19,584

 

 

 

Non-current liabilities:

 

 

Deferred tax liability

-

123

Pensions liability

485

232

 

485

355

 

 

 

Net assets

21,133

19,229

 

 

 

Capital and reserves attributable to equity holders of the Company:

 

 

Called up share capital

1,481

1,536

Share premium account

11,148

11,148

Capital redemption reserve

1,393

1,338

ESOP share reserve

(30)

(20)

Share based payment reserve

475

664

Foreign exchange reserve

2,055

124

Cash flow hedge reserve

(370)

-

Retained earnings

4,981

4,439

Total equity

21,133

19,229

 

The financial statements were approved by the board of directors and authorised for issue on 20th July 2009.

 

D. B. Green Director

R. M. Barker Director


COLEFAX GROUP PLC

GROUP CASHFLOW STATEMENT

For the year ended 30th April 2009

 

 

2009

2008

 

£'000

£'000

 

 

 

 

 

 

Operating activites

 

 

Profit before taxation

2,649

5,942

Finance income

(45)

(127)

Finance expense

52

266

Depreciation

1,795

1,690

 

 

 

Cash flows from operations before changes in working capital

4,451

7,771

 

 

 

Decrease / (increase) in inventories and work in progress

1,032

(1,215)

Increase in trade and other receivables

(310)

(672)

Increase in trade and other payables

3

1,072

 

 

 

Cash generated from operations

5,176

6,956

 

 

 

 

 

 

Taxation paid

 

 

UK corporation tax paid

(1,343)

(2,002)

Overseas tax paid

(237)

(307)

 

(1,580)

(2,309)

 

 

 

Net cash inflow from operating activities

3,596

4,647

 

 

 

Investing activities

 

 

Payments to acquire property, plant and equipment

(1,729)

(1,448)

Receipts from sales of property, plant and equipment

33

10

Interest received

38

125

 

 

 

Net cash outflow from investing

(1,658)

(1,313)

 

 

 

Financing activities

 

 

Purchase of own shares

(895)

(465)

Interest paid

(72)

(280)

Equity dividends paid

(592)

(604)

 

 

 

Net cash outflow from financing

(1,559)

(1,349)

 

 

 

Net increase in cash and cash equivalents

379

1,985

Cash and cash equivalents at beginning of year

2,419

363

Exchange gains / (losses) on cash and cash equivalents

280

71

Cash and cash equivalents at end of year

3,078

2,419

 

 

 

 

 

COLEFAX GROUP PLC

GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSES

For the year ended 30th April 2009

 

 

2009

2008

 

£'000

£'000

 

 

 

Currency translation differences on foreign currency net investments

2,961

704

Deferred tax on long-term loan foreign currency movements

(1,030)

(41)

Unrealised losses on cash flow hedges

(514)

-

Deferred tax on unrealised losses on cash flow hedges

144

-

Net income recognised directly in equity

 1,561

663

Profit for the year

1,830

4,065

Total recognised income and expense for the year

3,391

4,728

 

 

 

 

 

 

 

COLEFAX GROUP PLC

NOTES TO THE FINANCIAL INFORMATION

At 30th April 2009

 

1. Earnings Per Share

Basic earnings per share have been calculated on the basis of profit on ordinary activities after tax of £1,830,000 (2008 – £4,065,000) and on 14,215,866 (2008 – 14,784,331) ordinary shares, being the weighted average number of ordinary shares in issue during the year. Shares owned by the Colefax Group Plc Employees’ Share Ownership Plan (ESOP) Trust are excluded from the basic earnings per share calculation.

 

Diluted earnings per share have been calculated on the basis of profit on ordinary activities after tax of £1,830,000 (2008 – £4,065,000) and on 14,810,866 (2008 – 15,553,508) being the weighted average number of shares in issue during the year, calculated as follows:

 

 

2009

2008

Basic weighted average number of shares

14,215,866

14,784,331

Dilutive potential ordinary shares, including shares under option owned by the Colefax Group Plc ESOP Trust

 

595,000

 

769,177

 

14,810,866

15,553,508

 

 

2. Cash and Cash Equivalents

For the purposes of the consolidated cash flow statement, cash and cash equivalents comprise the following:

 

 

 

2009

2008

 

£’000

£’000

Cash at bank and in hand

3,079

3,862

Bank overdrafts

(1)

(1,443)

 

3,078

2,419

 

Cash at bank earns interest at floating rates based on daily bank deposit rates.  The fair value of cash and cash equivalents are considered to be their book value.

 

3.  The above financial information, which has been prepared in accordance with International Financial Reporting Standards as endorsed by the European Union, does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.

 

The financial information for the year ended 30th April 2009 has been extracted from the statutory accounts which will be delivered to the Registrar of Companies following the company’s annual general meeting. The Independent Auditors’ Report on those financial statements was unqualified and did not contain a statement under Section 498(2) and Section 498(3) of the Companies Act 2006. The comparative financial information is based on the statutory accounts for the financial year ended 30th April 2008 which have been delivered to the Registrar of Companies.

 

 

4. Annual General Meeting

The Annual General Meeting of Colefax Group plc will be held at 19-23 Grosvenor Hill, London W1K 3QD on 15th September 2009 at 11.00 a.m.