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Share Name Share Symbol Market Type Share ISIN Share Description
Colefax Group Plc LSE:CFX London Ordinary Share GB0002090453 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.0% 335.00 320.00 350.00 335.00 335.00 335.00 900 08:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Household Goods & Home Construction 86.4 5.1 39.3 8.5 47

Colefax Group PLC Interim Results

28/01/2020 7:00am

UK Regulatory (RNS & others)


Colefax (LSE:CFX)
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TIDMCFX

RNS Number : 0694B

Colefax Group PLC

28 January 2020

AIM: CFX

28 January 2020

COLEFAX GROUP PLC

("Colefax" or the "Group")

Half Year Results

for the six months ended 31 October 2019

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.

Highlights

 
 --   Group sales down 5.3% to GBP42.98m (2018: GBP45.38m) 
       and by 7.4% on a constant currency basis 
 --   Core Fabric Division sales down 1.1% to GBP36.50m (2018: 
       GBP36.89m) and by 3.8% on a constant currency basis 
      --    US down by 3.0%, UK down by 5.8%, Europe down by 
             2.8% 
 --   Decorating Division sales down 26.8% to GBP5.23m (2018: 
       GBP7.14m) against a strong prior year comparative 
      --    profit before tax of GBP255,000 (2018: GBP738,000) 
 --   Group profit before tax down 20.4% to GBP2.88m (2018: 
       GBP3.62m) 
 --   Earnings per share decreased by 14.3% to 23.9p (2018: 
       27.9p) 
 --   Cash increased by GBP1.63m to GBP11.09m (30 April 2019: 
       GBP9.46m) 
 --   Interim dividend up by 4.0% to 2.6p per share (2018: 
       2.5p) 
 

David Green, Chairman, said:

"The Group's performance over the last six months reflects difficult trading conditions in most of our major markets. This was not entirely unexpected given Brexit uncertainty and the low level of high end housing transactions in the US and the UK. In addition our Decorating Division returned to more normal levels of activity following an exceptional performance last year.

"During the period we were able to benefit from the Brexit related weakness of Sterling against the Dollar which may not continue in the future. In the US a strong stock market is usually positively correlated with sales but we have yet to see a significant improvement in trading. Following the decisive UK election result we detect an improvement in business confidence but sales prospects in the UK and Europe are still linked to the outcome of trade deal negotiations with the EU.

"The Group has a strong balance sheet with cash of GBP11.09 million. Although we expect trading conditions to remain relatively challenging we are well placed to take advantage of any improvements in market conditions and will continue to invest with confidence in our portfolio of luxury brands and our worldwide distribution network."

This announcement contains inside information within the meaning of the Market Abuse Regulation. The person responsible for arranging release of this announcement on behalf of Colefax Group plc is Rob Barker, Finance Director.

Enquiries:

 
 Colefax Group plc    David Green, Chief         Tel: 020 7318 6021 
                       Executive 
                      Rob Barker, Finance 
                       Director 
 KTZ Communications   Katie Tzouliadis, Dan      Tel: 020 3178 6378 
                       Mahoney 
 Peel Hunt LLP        Adrian Trimmings, Andrew   Tel: 020 7418 8900 
                       Clark 
 

CHAIRMAN'S STATEMENT

Financial Results

Group sales for the six months to 31 October 2019 decreased by 5.3% to GBP42.98 million (2018: GBP45.38 million) and by 7.4% on a constant currency basis. Pre-tax profits decreased by 20.4% to GBP2.88 million (2018: GBP3.62 million). Earnings per share decreased by 14.3% to 23.9p (2018: 27.9p). The Group ended the first half of the year with cash of GBP11.09 million (30 April 2019: GBP9.46m).

The main reason for the decrease in profits in the first six months was a reduction in profit from our Decorating Division which made profits of GBP255,000 compared to GBP738,000 last year. In our core Fabric Division sales declined by 1.1% and by 3.8% on a constant currency basis reflecting challenging trading conditions in most of our major markets.

Our interim results for the current period reflect the adoption of IFRS 16 'Leases'. As permitted, prior year comparatives have not been restated. Although IFRS 16 has no impact on the Group's cash flow it does significantly alter the content of the Group's income statement and balance sheet. Property leases which were previously expensed as rent on a straight line basis over the life of the lease are now recorded in the balance sheet as a right of use asset and a corresponding lease liability. Rent expensed in the income statement has been replaced by an amortisation charge on the right of use asset and a notional finance charge on the lease liability. The impact of adopting IFRS 16 is an increase in operating profit of GBP514,000 but a decrease in profit before tax of GBP129,000.

In line with our progressive dividend policy the Board has decided to increase the interim dividend by 4.0% to 2.6p per share (2018: 2.5p). The interim dividend will be paid on 9 April 2020 to shareholders on the register at the close of business on 13 March 2020.

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 85% of the Group's sales, decreased by 1.1% to GBP36.50 million (2018: GBP36.89 million) and by 3.8% on a constant currency basis. Profits decreased by 5.4% to GBP2.64 million (2018: GBP2.79 million).

Sales in the US, which represent 62% of the Fabric Division's turnover, increased by 1.5% in reported terms but declined by 3.0% on a constant currency basis. The profit impact of the decline in sales was largely offset by a strong US Dollar versus Sterling exchange rate which averaged $1.25 compared to $1.30 for the prior year The overall US economy is healthy with a buoyant stock market and low unemployment. We believe that the relatively difficult trading conditions we have experienced are linked to a decline in luxury home transactions driven by reductions in mortgage interest relief and other property tax deductions. The impact varies by state and is reflected in greater regional variations in sales performance.

During the period we completed the main phase of our Los Angeles showroom refurbishment and expect the remaining work to be finished by February. Over the next year we will focus on moving the majority of our US warehouse operation into our new UK warehouse facility. Although this will involve some one-off costs it will improve our operational efficiency and result in significantly lower premises costs in New York.

Sales in the UK, which represent 17% of the Fabric Division's turnover, declined by 5.8% during the period. Trading conditions have been challenging and we mainly attribute this to a very subdued high end housing market caused by high rates of stamp duty and Brexit uncertainty. Whilst our business is not wholly linked to high end housing transactions it does tend to lag changes in activity levels. The result of the recent General Election has removed political uncertainty and improved confidence but it will take time for this to feed through to our business.

Sales in Continental Europe, which represent 19% of the Fabric Division's turnover, decreased by 2.6% on a reported basis and by 2.8% on a constant currency basis. Trading in most of our European markets has been weak and this reflects a lack of confidence in the wider economy. In France, which is our largest market in Europe, sales were down by 7.7% due to a significant contract order in the prior year. Sales in Germany declined by 2.7% but Italy increased by 4.3%. Overall sales in Europe have shown a gradual decline over the last three years and we think this trend is likely to continue in the short to medium term. Brexit uncertainty has not helped business confidence and a free trade deal with the UK is very important to the Group because there are no simple solutions for mitigating the effect of a hard Brexit.

Sales in the Rest of the World, which represent 2% of the Fabric Division's turnover, decreased by 14.4% on a constant currency basis. Our major markets comprise the Middle East, China and Australia and for different reasons all of these markets experienced difficult trading conditions. We expect the Rest of The World to remain a relatively small proportion of Fabric Division sales.

   --      Furniture - Kingcome Sofas 

Sales for the six months to October 2019 decreased by 8.1% to GBP1.25 million (2018: GBP1.36 million) and the Company made an operating profit of GBP51,000 compared to GBP102,000 in 2018. The majority of furniture sales are made in the UK, especially London and the decline in sales and profit reflects a weak high end housing market and Brexit uncertainty. Currently the order book is slightly ahead of last year and we believe that the decisive election result will have a positive impact on future trading.

Interior Decorating Division

Decorating sales, which account for just over 12% of Group turnover, decreased by 26.8% in the period to GBP5.23 million (2018: GBP7.14 million) and generated a first half profit of GBP255,000 compared to a profit of GBP738,000 for the same period last year. This performance was in line with expectations and follows an exceptionally strong performance by the Decorating Division last year. Decorating sales vary according to the timing of projects and can sometimes change for reasons beyond our control. Currently decorating deposits are significantly down against a strong prior year comparative and trading in the second half of the year is likely to be weaker than previously expected.

Prospects

The Group's performance over the last six months reflects difficult trading conditions in most of our major markets. This was not entirely unexpected given Brexit uncertainty and the low level of high end housing transactions in the US and the UK. In addition our Decorating Division has experienced lower levels of activity following an exceptional performance last year.

During the period we were able to benefit from the Brexit related weakness of Sterling against the Dollar which may not continue in the future. In the US a strong stock market is usually positively correlated with sales but we have yet to see a significant improvement in trading. Following the decisive UK election result we detect an improvement in business confidence but sales prospects in the UK and Europe are still linked to the outcome of trade deal negotiations with the EU. A free trade deal is particularly important to the Group because we have significant European imports and exports. Our business is highly operationally geared and needs modest sales growth to prosper. Our response to difficult trading conditions has been to focus on cash flow and run the business in a conservative manner. Over the next twelve months the consolidation of most of our US warehouse operations in the UK will help offset significant increases in premises costs and improve business efficiency.

The Group has a strong balance sheet with cash of GBP11.09 million. Although we expect trading conditions to remain relatively challenging we are well placed to take advantage of any improvements in market conditions and will continue to invest with confidence in our portfolio of luxury brands and our worldwide distribution network.

David Green

Chairman

 
 INTERIM GROUP INCOME STATEMENT 
 
                                                Unaudited        Unaudited         Audited 
                                               Six months       Six months         Year to 
                                                    to 31            to 31        30 April 
                                                 Oct 2019         Oct 2018            2019 
                                                  GBP'000          GBP'000         GBP'000 
 
 
 Revenue                                           42,979           45,384          86,355 
 
 
 Profit from operations                             3,515            3,623           5,070 
 
 Finance income                                        14                3              25 
 Finance expense *                                  (647)              (1)               - 
                                                    (633)                2              25 
 
 
 Profit before taxation                             2,882            3,625           5,095 
 Tax expense                                        (740)            (906)         (1,265) 
 
 
 Profit for the period attributable to 
  equity holders of the parent                      2,142            2,719           3,830 
 
 
 Basic earnings per share                           23.9p            27.9p           39.3p 
 Diluted earnings per share                         23.9p            27.9p           39.3p 
 
 
 

* The increase in finance expense is due to the adoption of IFRS 16 'Leases'. We have used the modified retrospective approach and as a result, the prior year comparatives have not been restated.

 
 INTERIM GROUP STATEMENT OF COMPREHENSIVE 
  INCOME 
 
                                                  Unaudited    Unaudited     Audited 
                                                 Six months   Six months     Year to 
                                                      to 31        to 31    30 April 
                                                   Oct 2019     Oct 2018        2019 
                                                    GBP'000      GBP'000     GBP'000 
 
 
 Profit for the year                                  2,142        2,719       3,830 
 
 
 Other comprehensive income / (expense): 
 
 Items that will not be reclassified to 
  profit and loss: 
 
 Remeasurement of defined benefit pension 
  scheme                                                  -            -        (28) 
 Tax relating to items that will not be 
  reclassified to profit and loss                         -            -          11 
                                                -----------  -----------  ---------- 
                                                          -            -        (17) 
 Items that will or may be reclassified 
  to profit and loss: 
 
 Exchange differences on translation of 
  foreign operations                                  (269)          838         209 
 Cash flow hedges: 
 Losses recognised directly in equity                  (84)        (145)       (157) 
 Transferred to profit and loss for the 
  year                                                  104           73         177 
 Tax relating to items that will or may 
  be reclassified to profit and loss                   (13)        (125)       (104) 
                                                -----------  -----------  ---------- 
                                                      (262)          641         125 
 
 Total other comprehensive income / (expense)         (262)          641         108 
 
 Total comprehensive income for the period 
  attributable to equity holders of the 
  parent                                              1,880        3,360       3,938 
----------------------------------------------  -----------  -----------  ---------- 
 
 
 INTERIM GROUP STATEMENT OF FINANCIAL POSITION 
 
                                          Unaudited   Unaudited       Audited 
                                          At 31 Oct       At 31   At 30 April 
                                               2019    Oct 2018          2019 
                                            GBP'000     GBP'000       GBP'000 
 
 
 Non-current assets: 
 Right of use assets*                        27,665           -             - 
 Property, plant and equipment                8,102       8,980         8,215 
 Deferred tax asset                             110         188           113 
 Pension asset                                    -          37             - 
                                             35,877       9,205         8,328 
 
 Current assets: 
 Inventories and work in progress            14,554      15,963        14,923 
 Trade and other receivables                 10,378      11,692        11,265 
 Cash and cash equivalents                   11,086      11,078         9,458 
                                             36,018      38,733        35,646 
---------------------------------------  ----------  ----------  ------------ 
 
 Current liabilities: 
 Trade and other payables                    17,804      14,576        14,847 
 Current corporation tax                        639         708           669 
                                             18,443      15,284        15,516 
                                         ----------  ----------  ------------ 
 
 Net current assets                          17,575      23,449        20,130 
                                         ----------  ----------  ------------ 
 
 Total assets less current liabilities       53,452      32,654        28,458 
---------------------------------------  ----------  ----------  ------------ 
 
 Non-current liabilities: 
 Lease liabilities*                          25,339           -             - 
 Deferred rent*                                   -       1,977         1,992 
 Deferred tax liability                          35         151            26 
 Pension liability                                1           -             1 
                                         ----------  ----------  ------------ 
 
 Net assets                                  28,077      30,526        26,439 
=======================================  ==========  ==========  ============ 
 
 Capital and reserves attributable to 
  equity holders of the Company: 
 Called up share capital                        902         981           902 
 Share premium account                       11,148      11,148        11,148 
 Capital redemption reserve                   1,972       1,893         1,972 
 ESOP share reserve                           (114)       (113)         (113) 
 Foreign exchange reserve                     1,990       2,857         2,267 
 Cash flow hedge reserve                          -        (90)          (16) 
 Retained earnings                           12,179      13,850        10,279 
 
 Total equity                                28,077      30,526        26,439 
=======================================  ==========  ==========  ============ 
 

* The figures for ROU assets, lease liabilities and the absence of deferred rent are due to the adoption of IFRS 16 'Leases'. We have used the modified retrospective approach and as a result the prior year comparatives have not been restated.

 
 INTERIM GROUP STATEMENT OF CASH FLOWS 
                                               Unaudited    Unaudited     Audited 
                                              Six months   Six months     Year to 
                                               to 31 Oct    to 31 Oct    30 April 
                                                    2019         2018        2019 
                                                 GBP'000      GBP'000     GBP'000 
 
 
 Operating activities 
 Profit before taxation                            2,882        3,625       5,095 
 Finance income                                     (14)          (3)        (25) 
 Finance expense                                     647            1           - 
 (Profit) / loss on disposal of property, 
  plant and equipment                               (17)          (7)           8 
 Amortisation of lease liabilities                 2,127            -           - 
 Depreciation                                      1,353        1,406       2,800 
                                             -----------  -----------  ---------- 
 Cash flows from operations before changes 
  in working capital                               6,978        5,022       7,878 
 Decrease / (increase) in inventories 
  and work in progress                               377      (1,687)       1,765 
 Decrease / (increase) in trade and other 
  receivables                                        929        (280)          47 
 (Decrease) / increase in trade and other 
  payables                                       (2,035)          535     (1,783) 
 
 Cash generated from operations                    6,249        3,590       7,907 
                                             -----------  -----------  ---------- 
 
 
 Taxation paid 
 UK corporation tax paid                           (351)         (20)       (374) 
 Overseas tax paid                                 (427)        (503)       (606) 
                                             ----------- 
                                                   (778)        (523)       (980) 
                                             -----------  -----------  ---------- 
 
 Net cash inflow from operating activities         5,471        3,067       6,927 
                                             -----------  -----------  ---------- 
 
 
 Investing activities 
 Payments to acquire property, plant 
  and equipment                                  (1,203)      (1,271)     (2,046) 
 Receipts from sales of property, plant 
  and equipment                                       27            7          14 
 Interest received                                    14            3          25 
 Net cash outflow from investing                 (1,162)      (1,261)     (2,007) 
                                             -----------  -----------  ---------- 
 
 
 Financing activities 
 Cash payment of lease liabilities               (2,526)            -           - 
 Purchase of own shares                                -            -     (4,421) 
 Interest paid                                         -          (1)           - 
 Equity dividends paid                             (242)        (253)       (497) 
 Net cash outflow from financing                 (2,768)        (254)     (4,918) 
                                             -----------  -----------  ---------- 
 
 
 Net increase in cash and cash equivalents         1,541        1,552           2 
 Cash and cash equivalents at beginning 
  of period                                        9,458        9,177       9,177 
 Exchange gains / (losses) on cash and 
  cash equivalents                                    87          349         279 
 
 Cash and cash equivalents at end of 
  period                                          11,086       11,078       9,458 
-------------------------------------------  -----------  -----------  ---------- 
 
 
 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 2020. 
 
      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 2019, the Company 
       paid a final dividend for the year ended 30 April 2019 of 2.70p 
       per ordinary share amounting to GBP242,000. 
 
      The proposed interim dividend of 2.60p (2018: 2.50p) per share 
       is payable on 9 April 2020 to qualifying shareholders on the 
       register at the close of business on 13 March 2020. 
 
 3.   Basic earnings per share have been calculated on the basis of 
       earnings of GBP2,142,000 (2018: GBP2,719,000) and on 8,962,000 
       (2018: 9,747,000) 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 GBP2,142,000 (2018: GBP2,719,000) and on 8,962,000 
       (2018: 9,747,000) 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 (2018: nil). 
 
 5.   The financial information for the year ended 30 April 2019 does 
       not constitute the full statutory accounts for that period. The 
       Annual Report and Financial Statements for the year ended 30 
       April 2019 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 2019 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 Group'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 19-23 Grosvenor 
       Hill, London W1K 3QD. 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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