CFX

26 January 2016

COLEFAX GROUP PLC

(“Colefax” or the “Group”)

 

Half Year Results

for the six months ended 31 October 2015

 

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

 

  • Pre-tax profit increased 13% to £3.27m (2014: £2.89m)

 

  • Sales up 1.5% at £37.98m (2014: £37.44m) but flat on a constant currency basis

 

  • Earnings per share up 19% to 21.6p (2014: 18.1p)

 

  • Net cash of £7.8m (2014: £4.7m)

 

  • Interim dividend increased by 5% to 2.20p per share (2014: 2.10p per share)

 

  • Fabric Division – operating profit up 5% to £3.35m on sales up 0.8% to £33.33m

-       core US sales decreased by 1%, UK sales decreased by 4%, Europe decreased by 3% (on constant currency basis)

 

·         Trading conditions in H2 are expected to be more challenging

 

 

David Green, Chairman, said:

 

“The Group’s pre-tax profits for the first half have increased by 13% to £3.27m on sales up 1.5% to £37.98m with results helped by a stronger dollar against the pound.  

 

The recent trends in our two major markets, the US and the UK, suggest we are entering a period of more challenging market conditions. Together with the turbulence in global markets that has marked the start of 2016, we are cautious about prospects for the remainder of the year.  The Group has a strong balance sheet with net cash of £7.8m and we will continue to invest with confidence in our diverse portfolio of brands.”

 

 

Enquiries:

 

Colefax Group plc

David Green, Chairman

Tel: 020 3178 6378 (today)

 

Robert Barker, Finance Director

Tel: 020 7318 6021

 

 

 

KTZ Communications

Katie Tzouliadis

Tel: 020 3178 6378

 

 

 

 

 

 

Peel Hunt LLP

Dan Webster

Tel: 020 7418 8900

(NOMAD & Broker)

Adrian Trimmings

 

 

George Sellar

 


COLEFAX GROUP PLC

 

CHAIRMAN’S STATEMENT

 

Financial Results

 

The Group’s pre-tax profit for the six months to 31 October 2015 increased by 13% to £3.27 million (2014: £2.89 million) on sales up by 1.5% at £37.98 million (2014: £37.44 million).  Earnings per share increased by 19% to 21.6p (2014: 18.1p).  The Group ended the half year with net cash of £7.8 million (2014: £4.7 million).

 

The Board has decided to increase the interim dividend by 5% to 2.20p per share (2014: 2.10p). The interim dividend will be paid on 11 April 2016 to shareholders on the register at the close of business on 4 March 2016.

 

Trading conditions in the Group’s core Fabric Division became progressively more challenging during the first six months. Overall Fabric Division sales increased by 0.8% but decreased by 1.5% on a constant currency basis. The 13% improvement in the Group’s operating profits was partly due to lower first half losses in the Decorating Division which reduced from £365,000 to £148,000 and partly due to the strength of the US Dollar which averaged $1.54 compared to $1.66 for the prior year.

 

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 0.8% to £33.33 million (2014: £33.05 million) but decreased by 1.5% on a constant currency basis. Operating profits increased by 5% to £3.35 million (2014: £3.19 million) helped by a stronger dollar which benefits margins in the US market. The major market trends during the period have been a levelling off in US sales against strong prior year comparatives, a larger than expected decline in UK sales and the first tentative signs of a recovery in Europe.

 

Sales in the US, which represent 59% of the Fabric Division’s turnover, increased by 7% in reported terms but decreased by 1% on a constant currency basis. The decline in sales follows strong growth of 8% in the same period last year and whilst the general economy remains healthy it is not yet clear how higher interest rates will affect housing market activity. We are continuing to invest in the US market and over the next 18 months we will be opening our own showrooms in Atlanta and Boston. These are the last two major US territories where we have historically sold through agents rather than direct to customers. 

 

Sales in the UK, which represent 19% of the Fabric Division’s turnover, were down by 4% compared to last year. Trading has been more challenging than we expected at the start of the year and we believe that the high end housing market is being affected by the substantial increase in stamp duty in December 2014, with a rate of 12% on values in excess of £1.5 million. This has substantially reduced the number of high end housing transactions which we have always regarded as a key driver of sales.

 

Sales in Continental Europe, which represent 19% of the Fabric Division’s turnover, were down by 11% on a reported basis but 3% on a constant currency basis.  Trading improved slightly during the period and there are signs of recovery in a number of markets suggesting that the weak Euro coupled with quantitative easing is starting to have a positive impact on the economy. The performance by country remains very mixed. France is our largest market in Europe and sales were down by 1% which was better than we expected in a challenging trading environment.

 

Sales in the rest of the world, which represent just 3% of the Fabric Division’s turnover, increased by 7%. Weak sales in Russia and China were offset by a strong performance in the Middle East but overall these markets remain a small part of total sales.

 

·         Furniture – Kingcome Sofas

 

Sales for the six months to October 2015 increased by 4% to £1.26 million (2014: £1.21 million). Operating profit increased by 16% to £74,000 (2014: £64,000). Although market conditions are competitive we believe that there are opportunities to grow sales and profits from a relatively low base. At the half year end the forward order book was 8% ahead of last year. 

 

Interior Decorating Division

 

Decorating sales increased by 7% to £3.40 million (2014: £3.18 million) and the division made a reduced first half loss of £148,000 (2014: loss of £365,000). Decorating profits have been impacted by an increasingly difficult market for antiques which form part of this division. Antique sales during the first six months were down by 29% at £458,000 compared to £643,000 last year.

 

For over 80 years our Decorating Division has been based at our flagship showroom at 39 Brook Street, Mayfair. The long lease of these premises is coming to the end in December 2016 and our landlord has indicated that it will not be renewed. We have identified suitable new premises in Pimlico and intend to relocate the Decorating Division in the latter part of 2016. The premises are smaller than 39 Brook Street and we will use the move to significantly reduce the scale of our unprofitable antiques operation.

 

Prospects

 

The recent trends in our two major markets the US and the UK suggest that we are entering a period of more challenging trading conditions. Together with the turbulence in global markets that has marked the start of 2016 we are cautious about prospects for the remainder of the current financial year and next financial year. We are seeing the first signs of a recovery in Europe but it is unlikely to have a significant positive impact on our overall results. Although the recent strengthening of the US Dollar is positive for our Fabric Division, this has to be balanced against the impact of rising interest rates on the US housing market and wider economy. The Group has a strong balance sheet with cash of £7.8 million and we will continue to invest with confidence in our diverse portfolio of brands.

 

 

 

 

 

David Green

Chairman

 

26 January 2016

 


  COLEFAX GROUP PLC

 

INTERIM GROUP INCOME STATEMENT

 

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

Six months to 31 Oct 2015

Six months to 31 Oct 2014

Year to  30 April 2015

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Revenue

       37,985

     37,440

     76,796

 

 

 

 

 

 

 

 

Profit from operations

         3,273

       2,886

       5,037

Finance income

              3

2             

            4

Finance expense

           -

(4)

(12)

 

        3

            (2)

            (8)

 

 

 

 

 

 

 

 

Profit before taxation

         3,276

       2,884

       5,029

Tax expense

(949)

(870)

(1,487)

 

 

 

 

 

 

 

 

Profit for the period attributable to equity holders of the parent

         2,327

       2,014

       3,542

 

 

 

 

 

 

 

 

Basic earnings per share

21.6p

18.1p

32.2p

Diluted earnings per share

21.6p

18.1p

32.2p

 

 

 

 

 

 

 

 

 

 

INTERIM GROUP STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

Six months to 31 Oct 2015

Six months to 31 Oct 2014

Year to  30 April 2015

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Profit for the period

         2,327

       2,014

       3,542

 

 

 

 

 

 

 

 

Other comprehensive income / (expense):

 

 

 

Currency translation differences on foreign currency net investments

(61)

240

299

 

 

 

 

Cash flow hedges:

 

 

 

Gains / (losses) recognised directly in equity

78         

       (51)

       (103)

Transferred to profit and loss for the period

(120)

14

160

 

 

 

 

Tax on components of other comprehensive income

(7)

       (162)

(313)

 

 

 

 

 

 

 

 

Total other comprehensive income / (expense)

         (110)

        41

        43

 

 

 

 

 

 

 

 

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

         2,217

       2,055

       3,585

 

 

 

 

 

 

  COLEFAX GROUP PLC

 

INTERIM GROUP STATEMENT OF FINANCIAL POSITION

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

At 31 Oct 2015

At 31 Oct 2014

At 30 April 2015

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

Property, plant and equipment

7,264

7,215

7,257

Deferred tax asset

307

442

285

 

7,571

7,657

7,542

 

 

 

 

Current assets:

 

 

 

Inventories and work in progress

13,333

13,406

12,296

Trade and other receivables

9,630

9,625

9,681

Cash and cash equivalents

7,777

5,337

6,861

 

30,740

28,368

28,838

 

 

 

 

Current liabilities:

 

 

 

Trade and other payables

10,631

10,708

10,812

Current corporation tax

424

575

230

 

11,055

11,283

11,042

 

 

 

 

Net current assets

19,685

17,085

17,796

 

 

 

 

Total assets less current liabilities

27,256

24,742

25,338

 

 

 

 

Non-current liabilities:

 

 

 

Deferred rent

1,426

1,268

1,433

Pension liability

104

79

148

 

 

 

 

Net assets

25,726

23,395

23,757

 

 

 

 

Capital and reserves attributable to equity holders of the Company:

 

 

 

Called up share capital

1,083

1,108

1,083

Share premium account

11,148

11,148

11,148

Capital redemption reserve

1,791

1,767

1,791

ESOP share reserve

(113)

(113)

(113)

Foreign exchange reserve

987

1,137

1,062

Cash flow hedge reserve

12

(29)

46

Retained earnings

10,818

8,377

8,740

 

 

 

 

Total equity

25,726

23,395

23,757

 

 

 


 

  COLEFAX GROUP PLC

 

INTERIM GROUP STATEMENT OF CASH FLOWS

 

 

 

 

Unaudited

Unaudited

Audited

 

Six months to 31 Oct 2015

Six months to 31 Oct 2014

Year to 30 April 2015

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Operating activities

 

 

 

Profit before taxation

3,276

2,884

5,029

Finance income

(3)

(2)

(4)

Finance expense

-

4

12

Depreciation

1,040

988

2,028

Cash flows from operations before changes in working capital

4,313

3,874

7,065

(Increase) / decrease in inventories and work in progress

(1,047)

227

1,409

(Increase) / decrease in trade and other receivables

(21)

560

655

Decrease in trade and other payables

(191)

(1,143)

(388)

 

 

 

 

Cash generated from operations

3,054

3,518

8,741

 

 

 

 

 

 

 

 

Taxation paid

 

 

 

UK corporation tax paid

(232)

(382)

(765)

Overseas tax paid

(525)

(341)

(894)

 

(757)

(723)

(1,659)

 

 

 

 

Net cash inflow from operating activities

2,297

2,795

7,082

 

 

 

 

 

 

 

 

Investing activities

 

 

 

Payments to acquire property, plant and equipment

(1,090)

(1,213)

(2,213)

Receipts from sales of property, plant and equipment

23

-

32

Interest received

3

2

4

Net cash outflow from investing

(1,064)

(1,211)

(2,177)

 

 

 

 

 

 

 

 

Financing activities

 

 

 

Purchase of own shares

-

(626)

(1,567)

Interest paid

-

(4)

(10)

Equity dividends paid

(248)

(246)

(472)

Net cash outflow from financing

(248)

(876)

(2,049)

 

 

 

 

 

 

 

 

Net increase / (decrease) in cash and cash equivalents

985

708

2,856

Cash and cash equivalents at beginning of period

6,861

4,057

4,057

Exchange (losses) / gains on cash and cash equivalents

(69)

(48)

(52)

 

 

 

 

Cash and cash equivalents at end of period

7,777

4,717

6,861

 

 

 

 

 

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 2016.

 

 

 

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 2015, the Company paid a final dividend for the year ended 30 April 2015 of 2.30p per ordinary share amounting to £248,000.

 

 

 

The proposed interim dividend of 2.20p (2014: 2.10p) per share is payable on 11 April 2016 to qualifying shareholders on the register at the close of business on 4 March 2016.

 

 

3.

Basic earnings per share have been calculated on the basis of earnings of £2,327,000 (2014: £2,014,000) and on 10,767,500 (2014: 11,148,571) 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 £2,327,000 (2014: £2,014,000) and on 10,767,500 (2014: 11,148,571) 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 (2014: nil).

 

 

5.

The financial information for the year ended 30 April 2015 does not constitute the full statutory accounts for that period.  The Annual Report and Financial Statements for the year ended 30 April 2015 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 2015 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.

 

 

<< back