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RNS Number : 2222W Colefax Group PLC 17 August 2022
AIM: CFX
17 August 2022
COLEFAX GROUP PLC
("Colefax" or the "Group")
Preliminary Results for the year ended 30 April 2022
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
· Record sales and profits for the year reflecting favourable market
conditions especially in the US and the UK
· Sales increased by 31% to £101.80m (2021 - £77.91m) and by 33%
on a constant currency basis
· Pre-tax profit increased by 100% to £10.82m (2021 - £5.42m) -
reflecting operational gearing in the Fabric Division sales and an exceptional
performance by the Decorating Division
· Earnings per share increased by 127% to 102.5p (2021 - 45.1p)
· Tender Offer and share buyback returned £6.7 million of surplus
capital to shareholders in September 2021
· Cash at 30 April 2022 increased to £21.8m (2021 - £19.3m)
· Fabric Division sales increased by 21.5% to £84.51m (2021 -
£69.58m) and by 23.7% on a constant currency basis
- US sales up by 25%, UK sales up by 33% and Europe sales up by 14%
(on a constant currency basis)
· Decorating Division sales increased by 152% to £14.63m (2021 -
£5.79m) partly due to the completion of projects delayed from the prior year.
Pre-tax profit of £1.48 million (2021 - £680,000 loss)
· Board is proposing a final dividend of 2.7p (2021 Nil) making a
total for the year of 5.2p (2021- Nil)
David Green, Chief Executive of Colefax Group plc, said:
"Over the past year we have benefitted from the very strong housing market
conditions which emerged after the first lockdowns in 2020 and this is the
main reason for the Group's record results for the year ended April 30 2022.
"Rising interest rates and high levels of inflation have already started to
slow housing market activity and we are therefore cautious about prospects for
the coming year especially as we tend to lag changes in the housing market. We
are also experiencing high levels of cost inflation especially from our fabric
suppliers whose manufacturing operations are being impacted by large increases
in energy and raw materials costs. Against this backdrop we believe it is
unrealistic to expect continued sales growth in the current year especially
against such strong prior year comparatives. The fact that the Group operates
at the premium end of the market should provide some protection from high
levels of inflation. In addition we are benefitting from the recent
strengthening of the US Dollar as over 60% of our Fabric Division revenues are
in the US. The Group has a very strong balance sheet including cash in excess
of £21 million and is well placed to deal with more challenging trading
conditions"
Enquiries:
Colefax Group plc David Green, Chief Executive Tel: 020 7318 6021
Rob Barker, Finance Director
KTZ Communications Katie Tzouliadis, Dan Mahoney Tel: 020 3178 6378
Peel Hunt LLP Adrian Trimmings, Andrew Clark Tel: 020 7418 8900
(Nominated Advisor and Broker)
COLEFAX GROUP PLC
CHAIRMAN'S STATEMENT
Financial Results
I am pleased to report record sales and profits for the year ended 30 April
2022. Group sales increased by 30.8% to £101.80 million (2021 - £77.91
million) and by 32.8% on a constant currency basis. Pre-tax profits increased
by 100% to £10.82 million (2021 - £5.42 million). Earnings per share
increased by 127% to 102.5p (2021 - 45.1p). The Group ended the year with net
cash of £21.8 million (2021 - £19.3 million).
The Group's performance over the last year has been exceptional and reflects
extremely favourable market conditions in the US and the UK. One of the
consequences of the pandemic was a surge in housing transactions and home
related spending and this has been the main driver of our business over the
last financial year. The 100% increase in Group profit relative to a 30.8%
increase in Group sales is a reflection of the high level of operational
gearing in our core Fabric Division. In addition our Decorating Division
delivered an exceptional performance as projects delayed by the pandemic were
completed during the year.
In September 2021 the Group returned £6.7 million of surplus cash to
shareholders by way of a Tender Offer and share buyback. The Group purchased
and cancelled 1,084,905 shares representing 12% of the issued ordinary share
capital at a price of 615p per share.
The Board is proposing to pay a final dividend of 2.7p (2021-nil) making a
total for the year of 5.2p (2021 - nil). This will be paid on 13 October 2022
to shareholders on the register at the close of business on 16 September 2022
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 83% of Group turnover, increased
by 21.5% to £84.51 million (2021 - £69.58 million) and by 23.7% on a
constant currency basis. Pre-tax profit increased by 60% to £9.29 million
(2021 - £5.81 million). In the first half of the prior year, sales were
adversely impacted by the pandemic but recovered strongly in the second half
and this sales momentum continued throughout the current year. Compared to
2018-19, which was the last normal year of sales prior to the pandemic, sales
in 2021-22 were up by 22.2% on a constant currency basis clearly demonstrating
the strength of home spending during the year. Fabric Division profits are
highly operationally geared and therefore sensitive to relatively small
changes in sales. This is the main reason for the record profits achieved
during the year.
Sales in the US, which represent 62% of the Fabric Division's turnover,
increased by 23% and by 25% on a constant currency basis. The strong sales
performance was broad based with all major territories performing well and
reflects the most favourable US housing market conditions since 2006. Last
year we simplified our US business by moving the majority of our warehouse
operations to the UK and this has increased our sales focus and improved
efficiency. Our US business is responsible for sales in Canada and we have
recently signed a lease for a showroom in Toronto to capitalise on sales
opportunities in this market.
Sales in the UK, which represent 18% of the Fabric Division's turnover,
increased by 33%. As with the US market we attribute this exceptional increase
to very strong housing market conditions throughout 2021 and increased
spending on existing homes at a time when alternative spending opportunities
such as travel were significantly curtailed by pandemic restrictions. Trading
in the first half of the prior year was adversely affected by the initial
pandemic lockdowns and part of the sales increase in the current financial
year is likely to be catch-up expenditure deferred from that time.
Sales in Continental Europe, which represent 18% of the Fabric Division's
turnover, increased by 10% and by 14% on a constant currency basis. This is
the first full year of sales since Brexit in January 2021 and whilst we do not
believe it has had an adverse impact on sales it has significantly increased
the cost and complexity of doing business in Europe. The European economy is
less focussed on the residential housing market than the US and the UK, and we
believe this is the main reason for the slower growth rate. Our three largest
markets in Europe are France, Germany and Italy and together these account for
approximately 45% of total sales. From June 2022 we have started selling
direct to trade customers in Spain rather than via a distributor and we expect
this change to have a beneficial impact on sales in this market.
Sales in the Rest of the World, which represent just 2% of the Fabric
Division's turnover, increased by 3% during the year reflecting relatively
challenging market conditions caused by the pandemic. Our major markets in the
Rest of the World are the Middle East, China and Australia and whilst there
are growth opportunities in specific countries, the Rest of the World is
expected to remain a small proportion of total Fabric Division sales.
• Furniture - Kingcome
Sofas
Sales of Kingcome furniture, which represent 3% of Product Division sales,
increased by 5% to £2.66 million (2021 - £2.54 million). Pre-tax profit
decreased by 72% to £80,000 (2021 - £288,000) reflecting significant
increases in the cost of raw materials and energy and some one-off marketing
and website costs during the year. The order book ended the year close to
record levels and up by 116% compared to the start of the year when the
showroom had only just reopened from lockdown. Factory production remains
challenging due to labour and materials shortages and lead times have
increased. We have just started a major investment in our freehold factory in
Devon which will increase capacity and improve productivity and energy
efficiency.
Interior Decorating Division
Decorating sales, which represent 14% of Group turnover, increased by 152% to
£14.63 million (2021 - £5.79 million) resulting in a pre-tax profit for the
year of £1.47 million (2021 - £680,000 loss). The profit on decorating
projects is recognised on invoicing and can fluctuate significantly depending
on the timing of completion of projects. During the first year of the pandemic
progress on projects was severely curtailed by lockdowns and travel
restrictions and the exceptional performance for the year partly reflects the
completion of projects delayed by the pandemic, This included one very large
UK project and as result the Decorating Division is expected to return to more
normal levels of activity.
Prospects
The performance of the Group is closely linked to the high-end housing market
especially in the US and the UK. Over the past year we have benefitted from
the very strong housing market conditions that emerged after the first
lockdowns in 2020 and this is the main reason for the Group's record results
for the year ended April 30 2022. Rising interest rates and high levels of
inflation have already started to slow housing market activity and we are
therefore cautious about prospects for the coming year especially as we tend
to lag changes in the housing market. We are also experiencing high levels of
cost inflation especially from our fabric suppliers whose manufacturing
operations are being impacted by exceptional increases in energy and raw
materials costs. Against this backdrop we believe it is unrealistic to expect
sales growth in the current year, especially against such strong prior year
comparatives. The fact that the Group operates at the premium end of the
market should provide some protection from high levels of inflation. In
addition we are benefitting from the recent strengthening of the US Dollar as
over 60% of our Fabric Division revenues are in the US. The Group has a very
strong balance sheet including cash in excess of £21 million and is well
placed to deal with more challenging trading conditions.
The Group's record performance over the last year is a reflection of
exceptionally favourable market conditions but also the talent and dedication
of our loyal and extremely hard working staff. I would like to thank them for
their contribution to our performance and for their resilience in a
challenging operational environment.
David Green
Chairman
17 August 2022
GROUP INCOME STATEMENT
For the year ended 30 April 2022
2022 2021
£'000 £'000
Revenue 101,796 77,908
Cost of sales (47,237) (33,971)
Gross profit 54,559 43,937
Operating expenses (42,665) (38,910)
Other income - 1,462
Profit from operations 11,894 6,489
Finance expense (1,071) (1,067)
Profit before taxation 10,823 5,422
Tax expense (2,330) (1,376)
Profit for the year attributable to equity holders of the parent 8,493 4,046
Basic and diluted earnings per share 102.5p 45.1p
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 April 2022
2022 2021
£'000 £'000
Profit for the year 8,493 4,046
Other comprehensive income / (expense):
Items that will or may be reclassified to profit and loss:
Exchange differences on translation of foreign operations 522 (1,251)
Tax relating to items that will or may be reclassified to profit and loss - 103
Total other comprehensive income / (expense) 522 (1,148)
Total comprehensive income for the year attributable to 9,015 2,898
equity holders of the parent
GROUP STATEMENT OF FINANCIAL POSITION
At 30 April 2022
Notes 2022 2021
£'000 £'000
Non-current assets:
Property, plant and equipment 7,423 7,029
Right of use asset 25,621 28,506
Deferred tax asset 22 35
33,066 35,570
Current assets:
Inventories and work in progress 2 17,031 16,025
Trade and other receivables 3 6,976 8,631
Cash and cash equivalents 4 21,785 19,344
Current corporation tax 115 513
45,907 44,513
Current liabilities:
Trade and other payables 5 17,582 18,343
Lease liabilities 4,176 3,992
21,758 22,335
Net current assets 24,149 22,178
Total assets less current liabilities 57,215 57,748
Non-current liabilities:
Lease liabilities 23,807 26,323
Deferred tax liability 261 317
Net assets 33,147 31,108
Capital and reserves attributable to equity holders of the
Company:
Called up share capital 794 902
Share premium account 11,148 11,148
Capital redemption reserve 2,080 1,972
ESOP share reserve (113) (113)
Foreign exchange reserve 1,712 1,190
Retained earnings 17,526 16,009
Total equity 33,147 31,108
GROUP STATEMENT OF CASH FLOWS
For the year ended 30 April 2022
2022 2021
£'000 £'000
Operating activities
Profit before taxation 10,823 5,422
Finance expense 1,071 1,067
Profit on disposal of property, plant and equipment (9) (30)
Non-cash movement arising from loan waiver - (922)
Depreciation 2,274 2,912
Rent concessions - (77)
Impairment of right of use asset - 312
Depreciation on right of use assets 4,609 4,329
Cash flows from operations before changes in working capital 18,768 13,013
Increase in inventories and work in progress (898) (678)
(Increase) / decrease in trade and other receivables 1,789 (2,366)
Increase / (decrease) in trade and other payables (1,736) 7,378
Cash generated from operations 17,923 17,347
Taxation paid
UK corporation tax paid (1,595) (224)
Overseas tax paid (488) (877)
(2,083) (1,101)
Net cash inflow from operating activities 15,840 16,246
Investing activities
Payments to acquire property, plant and equipment (2,255) (1,888)
Receipts from sales of property, plant and equipment 13 34
Interest received - -
Net cash outflow from investing (2,242) (1,854)
Financing activities
Purchase of own shares (6,779) -
Principal paid on lease liabilities (4,061) (4,853)
Interest paid on lease liabilities (1,073) (1,061)
Interest paid 3 (6)
Equity dividends paid (197) -
Net cash outflow from financing (12,107) (5,920)
Net increase in cash and cash equivalents 1,491 8,472
Cash and cash equivalents at beginning of year 19,344 11,538
Exchange gains/(losses) on cash and cash equivalents 950 (666)
Cash and cash equivalents at end of year 21,785 19,344
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 30 April 2022
Share capital Share premium account Capital redemption reserve ESOP share reserve Foreign exchange reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 30 April 2021 902 11,148 1,972 (113) 1,190 16,009 31,108
Profit for the year - - - - - 8,493 8,493
Foreign exchange - - - - 522 - 522
Tax on other comprehensive income - - - - - -
- - - - 522 8,493 9,015
Total comprehensive income for the year
Share buybacks (108) - -108 - - (6,779) (6,779)
Dividends paid - - - - - (197) (197)
At 30 April 2022 794 11,148 2,080 (113) 1,712 17,526 33,147
At 30 April 2020 902 11,148 1,972 (113) 2,338 11,963 28,210
Profit for the year - - - - - 4,046 4,046
Foreign exchange - - - - (1,251) - (1,251)
Tax on other comprehensive income - - - - 103 - 103
Total comprehensive income for the year - - - - (1,148) 4,046 2,898
At 30 April 2021 902 11,148 1,972 (113) 1,190 16,009 31,108
COLEFAX GROUP PLC
NOTES TO THE FINANCIAL INFORMATION
1. Earnings per share
Basic earnings per share have been calculated on the basis of profit on
ordinary activities after tax of £8,493,000 (2021 - £4,046,000) and on
8,284,746 (2021 - 8,962,440) 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 are the same as basic earnings per share as there
are no outstanding share options in force at 30 April 2022.
2. Inventories and work in progress
2022 2021
£'000 £'000
Finished goods for resale 14,961 12,982
Work in progress 2,070 3,043
17,031 16,025
3. Trade and other receivables
2022 2021
£'000 £'000
Trade receivables 5,096 5,216
Less: provision for impairment of trade receivables (374) (348)
Other receivables 607 2,558
Prepayments and accrued income 1,647 1,205
6,976 8,631
4. Cash and cash equivalents
2022 2021
£'000 £'000
Cash at bank and in hand 21,785 19,344
The fair value of cash and cash equivalents are
considered to be their book value.
5. Trade and other payables
2022 2021
£'000 £'000
Trade payables 5,933 4,718
Accruals 6,402 5,890
Payments received on account 3,360 6,004
Other taxes and social security costs 704 559
Other payables 1,183 1,172
17,582 18,343
6. Financial Information
The above financial information, which has been prepared in accordance with
international accounting standards in conformity with the Companies Act 2006,
does not constitute statutory accounts as defined in Section 435 of the
Companies Act 2006.
The financial information for the year ended 30 April 2022 has been extracted
from the statutory accounts which will be delivered to the Registrar of
Companies following the Company's annual general meeting. The comparative
financial information is based on the statutory accounts for the financial
year ended 30 April 2021 which have been delivered to the Registrar of
Companies. The Independent Auditors' Report on both of those financial
statements was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under Section 498(2) and Section
498(3) of the Companies Act 2006.
7. Copies of the Annual Report and full Financial Statements will be
posted to shareholders during the week commencing 22 August 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.
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