CFX

25 January 2012

COLEFAX GROUP PLC

(“Colefax” or the “Group”)

 

Half Year Results

for the six months ended 31 October 2011

 

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

 

 

 

 

 

 

 

 

David Green, Chairman, said

 

The principal reason for the decline in our pre-tax profit for the six months to 31 October 2011 was a weak performance from the Decorating Division which made a loss of £248,000 for the first half compared to an exceptional profit of £625,000 in the same period last year. In addition, sales in the Product Division’s principal markets were weaker than we expected.

 

Since the half year end trading conditions in the UK and Europe have deteriorated and we expect trading to become more difficult. In the US, which is our major market, we expect the recovery to continue but at a slower pace than we previously anticipated. There are still three important sales months left in this financial year but, as a result of current trading conditions, the Board now believes that this year’s pre-tax profits will be significantly below current market expectations.

 

The Group has a strong balance sheet and we continue to invest in our portfolio of brands but until we have evidence of a return to growth our focus will remain on managing cash flow and controlling costs.”

 

Enquiries:

 

Colefax Group plc

David Green, Chairman

Tel: 020 3178 6378 (today)

 

Robert Barker, Finance Director

 

 

 

 

Biddicks

Katie Tzouliadis

Tel: 020 3178 6378

 

Sophie McNulty

 

 

 

 

Peel Hunt LLP

Dan Webster

Tel: 020 7418 8900

(NOMAD & Broker)

Matthew Armitt

 

 

Richard Brown

 


COLEFAX GROUP PLC

 

CHAIRMAN’S STATEMENT

 

Financial Results

 

The Group’s pre-tax profit for the six months to 31 October 2011 was £1.98 million (2010: £2.98 million) on sales down by 4% at £35.14 million (2010: £36.69 million).  Earnings per share decreased to 9.9p (2010: 12.4p).  The Group ended the six months with net cash of £5.30 million (2010: £7.26 million).

 

During the period, the Group purchased for cancellation 110,000 shares at an average price of £2.46 per share, representing 0.78% of the Group’s issued share capital at the start of the year.

 

The Board has decided to maintain the interim dividend at 1.85p per share. The interim dividend will be paid on 10 April 2012 to shareholders on the register at the close of business on 9 March 2012.

 

The principal reason for the decline in our pre-tax profit for the six months to 31 October 2011 was a weak performance from the Decorating Division which made a loss of £248,000 for the first half compared to an exceptional profit of £625,000 in the same period last year. In addition, sales in the Product Division’s principal markets were weaker than we expected. 

 

 

Product Division

 

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

 

Sales in the Fabric Division, which represent 88% of the Group’s sales, increased by 1% to £30.95 million (2010: £30.69 million) and by 2% on a constant currency basis.

 

Sales in the US, which represent 50% of the Fabric Division’s turnover, increased by 7% on a constant currency basis.  The improvement has been slower than we expected and sales are still 26% below the peak sales we achieved in 2007. Although there are encouraging signs of a pick up in the wider US economy we believe the pace of recovery will remain slow.  During the period we successfully moved our US operations to new premises in Manhattan resulting in significant capital expenditure during the period.

 

Sales in the UK, which represent 21% of the Fabric Division’s turnover, were flat during the period. This compares to an increase of 16% for the same period last year. The UK market has been more resilient than we expected, especially in London, but there are signs that demand is weakening and we do not anticipate growth over the remainder of the year.

 

Sales in Continental Europe, which represent 26% of the Fabric Division’s turnover, were down 6% on a constant currency basis with some significant variations between countries. Sales in France, our largest European market, were flat during the period whereas in Italy, our second largest market, sales were down by 14%.  The performance in Europe clearly reflects the impact of the ongoing Eurozone crisis and current trends suggest that market conditions are likely to deteriorate further.

 

Sales in the rest of the world, which represent just 3% of the Fabric Division’s turnover, increased by 4% during the period. We have continued to invest in particular markets, especially Russia, the Middle East and China but they are still a relatively small proportion of overall sales.

 

 

 

 

·         Furniture – Kingcome Sofas

 

Sales for the six months to 31 October 2011 were down by 8% to £1.12 million (2010: £1.22 million). The majority of furniture sales are made in the UK and the decline in sales reflects difficult trading conditions in this market. The forward order book is currently at a similar level to last year.

 

Interior Decorating Division

 

Decorating sales in the first six months decreased by 36% to £3.06 million (2010: £4.77 million). These sales reflect a more normal level of activity following an exceptional performance last year. Decorating Division sales can fluctuate significantly from year to year according to the size and timing of projects. A number of major decorating projects have been delayed until next year and as a result we do not expect this division to make a profit for the current year.

 

Prospects

 

Since the half year end trading conditions in the UK and Europe have deteriorated and we expect trading to become more difficult. In the US, which is our major market, we expect the recovery to continue but at a slower pace than we previously anticipated. There are still three important sales months left in this financial year but, as a result of current trading conditions, the Board now believes that this year’s pre-tax profits will be significantly below current market expectations. The Group has a strong balance sheet and we continue to invest in our portfolio of brands but until we have evidence of a return to growth our focus will remain on managing cash flow and controlling costs. 

 

 

David Green

Chairman

 

25 January 2012


      COLEFAX GROUP PLC

 

INTERIM GROUP INCOME STATEMENT

 

 

 

 

 

Restated

 

 

Unaudited

Unaudited

Audited

 

Six months to 31 Oct 2011

Six months to 31 Oct 2010

Year to  30 April 2011

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Continuing operations:

 

 

 

Revenue

       35,140

     36,685

     77,722

 

 

 

 

 

 

 

 

Profit from operations

         1,978

       2,908

       6,448

Finance income

              4

            72

            74

Finance expense

             (1)

-

(1)

 

              3

            72

            73

 

 

 

 

 

 

 

 

Profit before taxation

         1,981

       2,980

       6,521

Tax expense

(595)

(956)

(1,765)

 

 

 

 

 

 

 

 

Profit from continuing operations

         1,386

       2,024

       4,756

 

 

 

 

 

 

 

 

Trading loss on discontinued operations, net of tax

-

(136)

(111)

Loss on disposal, net of tax

-

        (104)

(72)

 

 

 

 

 

 

 

 

Loss on discontinued operations, net of tax

-

(240)

(183)

 

 

 

 

 

 

 

 

Profit for the period attributable to equity holders of the parent

         1,386

       1,784

       4,573

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

9.9p

12.4p

31.8p

Diluted earnings per share

9.9p

12.2p

31.5p

 

 

 

 

 

 

 

 

Continuing operations:

 

 

 

Basic earnings per share

 9.9p

 14.0p

 33.0p

Diluted earnings per share

 9.9p

 13.8p

 32.8p

 

 

 

 

 

 

 

 


 

COLEFAX GROUP PLC

 

INTERIM GROUP STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

Six months to 31 Oct 2011

Six months to 31 Oct 2010

Year to  30 April 2011

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Profit for the period

         1,386

       1,784

       4,573

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

Currency translation differences on foreign currency net investments

202

(399)

(610)

 

 

 

 

Cash flow hedges:

 

 

 

(Losses) / gains recognised directly in equity

         (198)

       664

       1,012

Transferred to profit and loss for the period

(156)

(65)

(235)

 

 

 

 

Tax on components of other comprehensive income

(10)

          (37)

50

 

 

 

 

 

 

 

 

Total other comprehensive income

         (162)

          163

          217

 

 

 

 

 

 

 

 

Total comprehensive income for the period attributable to equity holders of the parent

         1,224

       1,947

       4,790

 

 

 

 

 

 

 

 

 


 

COLEFAX GROUP PLC

 

INTERIM GROUP STATEMENT OF FINANCIAL POSITION

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

As at 31 Oct 2011

As at 31 Oct 2010

As at 30 April 2011

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

Property, plant and equipment

7,506

5,395

5,909

Deferred tax asset

1,343

1,349

1,372

 

8,849

6,744

7,281

 

 

 

 

Current assets:

 

 

 

Inventories and work in progress

13,481

11,300

12,283

Trade and other receivables

11,886

12,561

12,640

Cash and cash equivalents

5,661

7,260

7,132

 

31,028

31,121

32,055

 

 

 

 

Current liabilities:

 

 

 

Trade and other payables

13,013

12,423

13,042

Current corporation tax

502

476

388

Provisions

-

-

205

 

13,515

12,899

13,635

 

 

 

 

Net current assets

17,513

18,222

18,420

 

 

 

 

Total assets less current liabilities

26,362

24,966

25,701

 

 

 

 

Non-current liabilities:

 

 

 

Pension liability

228

306

241

 

 

 

 

Net assets

26,134

24,660

25,460

 

 

 

 

Capital and reserves attributable to equity holders of the Company:

 

 

 

Called up share capital

1,394

1,464

1,405

Share premium account

11,148

11,148

11,148

Capital redemption reserve

1,480

1,411

1,469

ESOP share reserve

(96)

(18)

(96)

Share based payment reserve

19

126

94

Foreign exchange reserve

1,483

1,472

1,383

Cash flow hedge reserve

320

439

583

Retained earnings

10,386

8,618

9,474

 

 

 

 

Total equity

26,134

24,660

25,460

 

 

 


COLEFAX GROUP PLC

 

INTERIM GROUP STATEMENT OF CASH FLOWS

 

 

 

 

Unaudited

Unaudited

Audited

 

Six months to 31 Oct 2011

Six months to 31 Oct 2010

Year to 30 April 2011

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Operating activities

 

 

 

Profit before taxation - continuing operations

1,981

2,980

6,521

Loss before taxation - discontinued operations

-

(363)

(278)

Finance income

(4)

(72)

(74)

Finance expense

1

-

1

Depreciation

1,026

922

2,044

Cash flows from operations before changes in working capital

3,004

3,467

8,214

(Increase) / decrease in inventories and work in progress

(1,139)

484

(566)

Decrease in trade and other receivables

447

307

316

Increase / (decrease) in trade and other payables

127

(219)

(205)

 

 

 

 

Cash generated from operations

2,439

4,039

7,759

 

 

 

 

 

 

 

 

Taxation paid

 

 

 

UK corporation tax paid

(649)

(426)

(1,280)

Overseas tax received / (paid)

208

(249)

(279)

 

(441)

(675)

(1,559)

 

 

 

 

Net cash inflow from operating activities

1,998

3,364

6,200

 

 

 

 

 

 

 

 

Investing activities

 

 

 

Payments to acquire property, plant and equipment

(2,571)

(1,118)

(2,885)

Receipts from sales of property, plant and equipment

17

14

29

Interest received

4

72

74

Purchase of ESOP shares

-

-

(95)

Net cash outflow from investing

(2,550)

(1,032)

(2,877)

 

 

 

 

 

 

 

 

Financing activities

 

 

 

Purchase of own shares

(270)

(119)

(1,840)

Interest paid

(1)

-

(1)

Equity dividends paid

(277)

(224)

(486)

Net cash outflow from financing

(548)

(343)

(2,327)

 

 

 

 

 

 

 

 

Net (decrease) / increase in cash and cash equivalents

(1,100)

1,989

996

Cash and cash equivalents at beginning of period

6,298

5,472

5,472

Exchange gains / (losses) on cash and cash equivalents

97

(201)

(170)

 

 

 

 

Cash and cash equivalents at end of period

5,295

7,260

6,298

 

 

 

COLEFAX GROUP PLC

 

NOTES

 

 

1.

The Group prepares its annual financial statements in accordance with International Financial Reporting Standards (IFRS). These interim results have been prepared in accordance with the accounting policies expected to be applied in the next annual financial statements for the year ending 30 April 2012.

 

 

 

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.

Revenue has been restated in 2010 to reclassify sampling and freight income which was previously reported within cost of sales and operating expenses. Profit from operations is not affected by this change.

 

 

3.

During the financial period ended 31 October 2011, the Company paid a final dividend for the year ended 30 April 2011 of 2.00p per ordinary share amounting to £277,000.

 

 

 

The proposed interim dividend of 1.85p (2010: 1.85p) per share is payable on 10 April 2012 to qualifying shareholders on the register at the close of business on 9 March 2012.

 

 

4.

Basic earnings per share have been calculated on the basis of earnings of £1,386,000 (2010: £1,784,000) and on 13,959,892 (2010: 14,448,476) ordinary shares being the weighted average number of ordinary shares in issue during the period.

 

 

5.

Diluted earnings per share have been calculated on the basis of earnings of £1,386,000 (2010: £1,784,000) and on 13,974,892 (2010: 14,633,476) ordinary shares being the weighted average number of ordinary shares in the period adjusted to assume conversion of all dilutive potential ordinary shares of 15,000 (2010: 185,000).

 

 

6.

The financial information for the year ended 30 April 2011 does not constitute the full statutory accounts for that period.  The Annual Report and Financial Statements for the year ended 30 April 2011 have been filed with the Registrar of Companies.  The Independent Auditors' Report on the Annual Report and Financial Statements for the year ended 30 April 2011 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

 

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.