CFX

26 January 2015

COLEFAX GROUP PLC

(“Colefax” or the “Group”)

 

Half Year Results

for the six months ended 31 October 2014

 

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

 

  • Sales down 4% at £37.44m (2013: £39.17m) but flat on a constant currency basis

 

  • Core Fabric Division sales up 5% on a constant currency basis

 

  • Pre-tax profit down 6% at £2.88m (2013: £3.07m) – mainly reflecting a weak performance from the Interior Decorating Division

 

  • Earnings per share up 6% to 18.1p (2013: 17.0p)

 

  • Net cash of £4.72m (2013: £7.58m)

 

  • Interim dividend increased by 5% to 2.10p per share (2013: 2.0p per share)

 

 

 

David Green, Chairman, said

 

“In the core Fabric Division sales increased by 5% on a constant currency basis reflecting a good performance in the US and the UK but challenging trading conditions in Europe.

 

We are optimistic about the ongoing recovery in the US and believe that trading conditions will remain favourable in this market. In addition, the recent strengthening of the US Dollar is a welcome development.

 

In the Decorating Division activity levels are well below the exceptional performance of last year and this will offset some of the progress in the core Fabric Division.

 

 

Enquiries:

 

Colefax Group plc

David Green, Chairman

Tel: 020 3178 6378 (today)

 

Robert Barker, Finance Director

 

 

 

 

Biddicks

Katie Tzouliadis

Tel: 020 3178 6378

 

Deborah Walter

 

 

 

 

Peel Hunt LLP

Dan Webster

Tel: 020 7418 8900

(NOMAD & Broker)

George Sellar

 

 

Richard Brown

 


COLEFAX GROUP PLC

 

CHAIRMAN’S STATEMENT

 

 

Financial Results

 

The Group’s pre-tax profit for the six months to 31 October 2014 decreased by 6% to £2.88 million (2013: £3.07 million) on sales down by 4% at £37.44 million (2013: £39.17 million) and flat on a constant currency basis.  Earnings per share increased by 6% to 18.1p (2013: 17.0p) with the increase primarily due to the impact of share buybacks over the last 12 months.  The Group ended the half year with net cash of £4.72 million (2013: £7.58 million).

 

The principal reason for the decline in the Group’s pre-tax profit for the first six months was a weak performance from the Decorating Division which produced a first half loss of £365,000 compared to a profit of £365,000 in the prior year. In the core Fabric Division sales increased by 5% on a constant currency basis reflecting a good performance in the US and the UK but challenging trading conditions in Europe.

 

The Board has decided to increase the interim dividend by 5% to 2.10p per share (2013: 2.00p). The interim dividend will be paid on 10 April 2015 to shareholders on the register at the close of business on 6 March 2015.

 

During the period the Group continued its policy of returning surplus cash to shareholders through an annual share buyback program by purchasing for cancellation a total of 168,982 shares at a total cost of £626,000 and amounting to 1.5% of the total issued share capital.

 

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, were flat at £33.05 million (2013: £33.09 million) reflecting a weaker US and Euro exchange rate during the period but were up by 5% on a constant currency basis.

 

Sales in the US, which represent 56% of the Fabric Division’s sales, increased by 2% and by 9% on a constant currency basis. The US market has continued to grow in line with the wider economy although sales are still 12% below the peak level of sales achieved in 2007. The improvement in trading was apparent across the US with nearly all territories showing positive sales growth. We have continued to invest in our showroom network and in September we moved to our new and larger showroom in Washington DC.   

 

Sales in the UK, which represent 20% of the Fabric Division’s sales, were up by 7% compared to last year. We attribute this improvement to a much stronger UK housing market especially in London. Typically our trading performance tends to lag changes in the high end housing market.

 

Sales in Continental Europe, which represent 21% of the Fabric Division’s sales, were down by 10% reflecting a much weaker Euro during the period but down by 4% on a constant currency basis. Overall trading in Europe has been very challenging although there are significant variations between countries. In France which is our largest market sales during the period were down by 9%. In Germany which is our second largest market sales were up by 13%. In Italy which is our third largest market sales were down by 13%. All these figures are quoted on a constant currency basis. In September we opened our new showroom in Milan and we believe that this will help to stabilise and grow sales in this important market.

 

Sales in the Rest of the World, which represent just 3% of the Fabric Division’s sales, increased by 1%. The main markets in the Rest of the World are the Middle East, China and Hong Kong, Russia and Australia and of these the Middle East was the strongest performer during the period. We will continue to invest in these markets according to their growth potential.

 

·         Furniture – Kingcome Sofas

 

Sales for the six months to October 2014 were up by 14% at £1.20 million (2013: £1.05 million). Operating profit was £64,000 compared to a loss of £29,000 in the prior year. As with the Fabric Division we attribute the improvement in trading to the strengthening of the UK housing market. Approximately 87% of Kingcome sales are in the UK especially London.

 

Interior Decorating Division

 

Decorating sales decreased by 37% to £3.18 million (2013: £5.03 million) and the Division made a first half loss of £365,000 compared to a profit of £365,000 last year. Sales in the first half of last year were exceptional due to several projects delayed from the prior year and as result the full year Decorating Division performance was exceptionally strong last year. Decorating sales will be significantly lower this year compared to last year and combined with a difficult trading environment for antiques this Division is currently not expected to make a contribution to the Group’s profit this year. 

 

Prospects

 

We are optimistic about the ongoing recovery in the US and believe that trading conditions will remain favourable in this market. In addition, the recent strengthening of the US Dollar is a welcome development. The UK market is performing well but the outlook is more uncertain. The recent change to stamp duty will negatively impact the high end housing market and there is also the potential adverse impact of the mansion tax dependent upon the outcome of the election. Trading conditions in Europe are likely to remain very challenging for the foreseeable future. In the Decorating Division activity levels are well below the exceptional performance of last year and this will offset some of the progress in the core Fabric Division. Our strategy is to continue investing in our brands and our distribution network, particularly in the US market, whilst keeping tight control of costs and working capital.

 

 

 

 

David Green

Chairman

 

26 January 2015

 


  COLEFAX GROUP PLC

 

INTERIM GROUP INCOME STATEMENT

 

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

Six months to 31 Oct 2014

Six months to 31 Oct 2013

Year to  30 April 2014

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Revenue

       37,440

     39,172

     78,035

 

 

 

 

 

 

 

 

Profit from operations

         2,886

       3,093

       4,922

Finance income

              2

            2             

            4

Finance expense

           (4)

(21)

(41)

 

        (2)

          (19)

          (37)

 

 

 

 

 

 

 

 

Profit before taxation

         2,884

       3,074

       4,885

Tax expense

(870)

(990)

(1,532)

 

 

 

 

 

 

 

 

Profit for the period attributable to equity holders of the parent

         2,014

       2,084

       3,353

 

 

 

 

 

 

 

 

Basic earnings per share

18.1p

17.0p

27.9p

Diluted earnings per share

18.1p

17.0p

27.9p

 

 

 

 

 

 

 

 

 

 

INTERIM GROUP STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

Six months to 31 Oct 2014

Six months to 31 Oct 2013

Year to  30 April 2014

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Profit for the period

         2,014

       2,084

       3,353

 

 

 

 

 

 

 

 

Other comprehensive income / (expense):

 

 

 

Currency translation differences on foreign currency net investments

240

(300)

(797)

 

 

 

 

Cash flow hedges:

 

 

 

(Losses) / gains recognised directly in equity

         (51)

       107

       135

Transferred to profit and loss for the period

14

(84)

(171)

 

 

 

 

Tax on components of other comprehensive income

(162)

          90

248

 

 

 

 

 

 

 

 

Total other comprehensive income / (expense)

         41

        (187)

        (585)

 

 

 

 

 

 

 

 

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

         2,055

       1,897

       2,768

 

 

 

 

 

 

COLEFAX GROUP PLC

 

INTERIM GROUP STATEMENT OF FINANCIAL POSITION

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

At 31 Oct 2014

At 31 Oct 2013

At 30 April 2014

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

Property, plant and equipment

7,215

7,313

6,810

Deferred tax asset

442

583

590

 

7,657

7,896

7,400

 

 

 

 

Current assets:

 

 

 

Inventories and work in progress

13,406

13,479

13,526

Trade and other receivables

9,625

10,319

10,055

Cash and cash equivalents

5,337

7,650

4,298

 

28,368

31,448

27,879

 

 

 

 

Current liabilities:

 

 

 

Trade and other payables

11,976

12,541

12,526

Current corporation tax

575

687

425

 

12,551

13,228

12,951

 

 

 

 

Net current assets

15,817

18,220

14,928

 

 

 

 

Total assets less current liabilities

23,474

26,116

22,328

 

 

 

 

Non-current liabilities:

 

 

 

Pension liability

79

193

117

 

 

 

 

Net assets

23,395

25,923

22,211

 

 

 

 

Capital and reserves attributable to equity holders of the Company:

 

 

 

Called up share capital

1,108

1,231

1,125

Share premium account

11,148

11,148

11,148

Capital redemption reserve

1,767

1,643

1,749

ESOP share reserve

(113)

(113)

(113)

Foreign exchange reserve

1,137

1,417

1,065

Cash flow hedge reserve

(29)

46

-

Retained earnings

8,377

10,551

7,237

 

 

 

 

Total equity

23,395

25,923

22,211

 

 

 


 

COLEFAX GROUP PLC

 

INTERIM GROUP STATEMENT OF CASH FLOWS

 

 

 

 

Unaudited

Unaudited

Audited

 

Six months to 31 Oct 2014

Six months to 31 Oct 2013

Year to 30 April 2014

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Operating activities

 

 

 

Profit before taxation

2,884

3,074

4,885

Finance income

(2)

(2)

(4)

Finance expense

4

21

41

Depreciation

988

1,078

2,078

Cash flows from operations before changes in working capital

3,874

4,171

7,000

Decrease / (increase) in inventories and work in progress

227

(368)

(503)

Decrease / (increase) in trade and other receivables

 

560

(393)

(380)

Decrease in trade and other payables

(1,143)

(1,249)

(1,250)

 

 

 

 

Cash generated from operations

3,518

2,161

4,867

 

 

 

 

 

 

 

 

Taxation paid

 

 

 

UK corporation tax paid

(382)

(241)

(660)

Overseas tax paid

(341)

(723)

(967)

 

(723)

(964)

(1,627)

 

 

 

 

Net cash inflow from operating activities

2,795

1,197

3,240

 

 

 

 

 

 

 

 

Investing activities

 

 

 

Payments to acquire property, plant and equipment

(1,213)

(837)

(1,583)

Receipts from sales of property, plant and equipment

-

11

17

Interest received

2

2

4

Net cash outflow from investing

(1,211)

(824)

(1,562)

 

 

 

 

 

 

 

 

Financing activities

 

 

 

Purchase of own shares

(626)

-

(4,362)

Interest paid

(4)

(21)

(29)

Equity dividends paid

(246)

(257)

(478)

Net cash outflow from financing

(876)

(278)

(4,869)

 

 

 

 

 

 

 

 

Net increase / (decrease) in cash and cash equivalents

708

95

(3,191)

Cash and cash equivalents at beginning of period

4,057

7,630

7,630

Exchange (losses) / gains on cash and cash equivalents

(48)

(141)

(382)

 

 

 

 

Cash and cash equivalents at end of period

4,717

7,584

4,057

 

 

 

 

 

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 2015.

 

 

 

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 2014, the Company paid a final dividend for the year ended 30 April 2014 of 2.20p per ordinary share amounting to £246,000.

 

 

 

The proposed interim dividend of 2.10p (2013: 2.00p) per share is payable on 10 April 2015 to qualifying shareholders on the register at the close of business on 6 March 2015.

 

 

3.

Basic earnings per share have been calculated on the basis of earnings of £2,014,000 (2013: £2,084,000) and on 11,148,571 (2013: 12,250,000) 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 £2,014,000 (2013: £2,084,000) and on 11,148,571 (2013: 12,250,000) ordinary shares being the weighted average number of ordinary shares in the period adjusted to assume conversion of all dilutive potential ordinary shares of nil (2013: nil).

 

 

5.

The financial information for the year ended 30 April 2014 does not constitute the full statutory accounts for that period.  The Annual Report and Financial Statements for the year ended 30 April 2014 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 2014 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.

 

 

6.

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.

 

 

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