REG - Colefax Group PLC - Final Results
09/08/2023 07:00
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RNS Number : 7106I Colefax Group PLC 09 August 2023
AIM: CFX
COLEFAX GROUP PLC
("Colefax" or the "Group")
Preliminary Results for the year ended 30 April 2023
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 increased by 3% to £104.80m (2022 - £101.8m) but down by 3%
on a constant currency basis due to lower Decorating Division sales
· Pre-tax profit decreased by 21% to £8.54m (2022 - £10.82m) -
mainly due to lower Decorating Division profits following an exceptional
performance in the prior year
· Earnings per share decreased by 13% to 89.7p (2022 - 102.5p)
· Share buyback returned £5.4m of surplus capital to shareholders
in September 2022.
· Cash at 30 April 2023 of £19.8m (2022 - £21.8m)
· Fabric Division sales increased by 9.5% to £92.51m (2022 - £84.51m)
and by 1.5% on a constant currency basis
- US sales down by 1%, UK sales up by 1% and Europe sales up by 7% (on
a constant currency basis)
· Decorating Division sales decreased by 35% to £9.52m (2022 -
£14.63m) following an exceptional prior year performance. Pre-tax loss of
£96,000 (2022 - £1.47m profit)
· Board is proposing a final dividend of 2.8p (2022 - 2.7p) making a
total for the year of 5.4p (2022 - 5.2p)
David Green, Chief Executive of Colefax Group plc, said:
"The Group has delivered another strong performance achieving record Fabric
Division sales against a record prior year. We benefitted from a strong US
Dollar and a continuation of the home decorating boom triggered by the
pandemic but have also had to deal with high levels of cost inflation in all
areas of the business.
"The performance of the Group lags activity in the high-end housing market and
we do expect trading conditions to become progressively more challenging as
steep interest rate increases start to have an impact in the US and the UK.
These expectations are factored into our current year market forecast."
Enquiries:
Colefax Group plc David Green, Chief Executive Tel: 020 7318 6021
Rob Barker, Finance Director
KTZ Communications Katie Tzouliadis, Robert Morton 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
Group sales increased by 3% to £104.82 million (2022 - £101.80 million) but
decreased by 3% on a constant currency basis. Pre-tax profits decreased by 21%
to £8.54 million (2022 - £10.82 million). Earnings per share decreased by
13% to 89.7p (2022 - 102.5p). The Group ended the year with net cash of £19.8
million (2022 - £21.8 million).
Trading conditions in the Group's core Fabric Division remained mostly
favourable throughout the year despite rising interest rates and a slowdown in
housing market activity. Sales increased by 2% on a constant currency basis
against record prior year sales but pre-tax profits declined by 9% due to cost
increases caused by high levels of inflation. The Group benefitted from a very
strong US Dollar average rate of $1.20 compared to $1.35 for the prior year
but the resulting margin boost was largely offset by above average increases
in operating expenses. Although Fabric Division profits decreased by 9% the
main reason for the 21% decrease in Group profit was a 35% reduction in
Decorating Division sales which resulted in a loss of £96,000 for the year
compared to a profit of £1.47 million in the prior year. Fluctuations in
Decorating Division sales are a feature of the business and depend on the
timing of project completions.
In September 2022 the Group returned £5.4 million of surplus cash to
shareholders by way of a share buyback. The Group purchased and cancelled
700,000 shares representing 8.8% of the issued ordinary share capital at a
price of 765p per share.
The Board is proposing to pay a final dividend of 2.8p (2022 - 2.7p) making a
total for the year of 5.4p (2022 - 5.2p). This will be paid on 12 October 2023
to shareholders on the register at the close of business on 15 September 2023.
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 Group turnover, increased
by 10% to £92.51 million (2022 - £84.51 million) and by 1.5% on a constant
currency basis. Pre-tax profit decreased by 9% to £8.40 million (2022 -
£9.29 million). All our major markets performed well against strong prior
year comparatives. Sales in the Fabric Division are linked to the level of
housing market activity but there is a time lag of up to a year or more
between customers moving house and spending on home improvement. Housing
transactions in the US and the UK peaked during the Covid pandemic and we
believe this has been the main driver of sales over the last two years.
During the first eight months of the year we experienced significant increases
in the cost of goods mainly driven by unprecedented increases in energy
prices. Managing cost inflation was the biggest challenge for the business
during the year but in recent months energy prices have fallen and the
inflation outlook has improved.
Sales in the US, which represent 63% of the Fabric Division's turnover,
increased by 11% but decreased by 1% on a constant currency basis. Sales in
the US are around 28% higher than they were prior to the start of the Covid
pandemic demonstrating the strength of the home decorating boom that has taken
place as a result. Rising interest rates in the US have inevitably led to a
sharp decline in housing transactions and as expected trading conditions
started to get more challenging towards the end of the year. We continue to
look for opportunities to strengthen our US distribution network and in the
autumn we will be opening a new showroom in Dallas to take advantage of growth
opportunities in this territory.
Sales in the UK, which represent 16% of the Fabric Division's turnover,
increased by 1% against record prior year sales. The UK market at the high end
has been reasonably resilient although as in the US rising interest rates are
starting to have an adverse impact on housing transactions which are a key
driver of sales. Sales in the second half of the year were flat following a 4%
increase in the first half of the year.
Sales in Continental Europe, which represent 19% of the Fabric Division's
turnover, increased by 9% and by 7% on a constant currency basis. In terms of
sales growth Europe was the best performing market during the year. This is
partly due to an increase in contract orders linked to a strong post covid
recovery in the high-end hotels sector. Although Brexit does not appear to
have adversely impacted sales in Europe it has resulted in increased
bureaucracy and costs which have reduced the profitability of sales in Europe.
In particular, fabrics purchased from EU manufacturers are now subject to
import duty when shipped from our UK warehouse to EU customers. France remains
our largest market in Europe and together with Germany and Italy these three
countries accounted for 52% of European sales.
Sales in the Rest of the World, which represent just 2% of the Fabric
Division's turnover, increased by 31% during the year mainly due to a
significant recovery in Middle East sales. Our major markets in the Rest of
the World are the Middle East, China and Australia and whilst we will continue
to pursue growth opportunities in specific countries, the Rest of the World
will 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 £2.78 million (2022 - £2.66 million). Pre-tax profit
increased by £160,000 to £240,000 (2022 - £80,000) The improved profit
partly reflects the absence of one-off marketing costs in the prior year but
also demonstrates the high level of operational gearing in this business where
relatively small changes in sales can have a significant impact on profits.
During the year we completed a major investment in our freehold factory in
Devon which has increased operational and energy efficiency. In September we
opened a new trade showroom adjoining our Colefax showroom in Chelsea Harbour
and are starting to see the benefits of this investment.
Interior Decorating Division
Decorating sales, which represent 9% of Group turnover, decreased by 35% to
£9.52 million (2022 - £14.63 million) resulting in a pre-tax loss for the
year of £96,000 (2022 - £1.47 million profit). The reduction in sales was in
line with expectations and follows an exceptional performance in the prior
year. The profit on decorating projects is recognised on invoicing and as a
result sales and profits can fluctuate significantly depending on the timing
of completion of projects. Lead times increased markedly during the pandemic
and labour shortages continue to impact the duration and timing of projects.
The Decorating Division is starting the new year with a high level of deposits
which are up by 90% compared to the prior year.
Prospects
The Group has delivered another strong performance achieving record Fabric
Division sales against a record prior year comparative. We benefitted from a
strong US Dollar and a continuation of the home decorating boom triggered by
the pandemic but have also had to deal with high levels of cost inflation in
all areas of the business. The performance of our core Fabric Division lags
activity in the high-end housing market and we do expect trading conditions to
become progressively more challenging as steep interest rate increases start
to have an impact in the US and the UK. These expectations are factored into
our current year market forecast. The Group has a very strong balance sheet
with cash of £19.8 million and we will continue to invest with confidence in
our portfolio of brands.
The Group's performance over the last year reflects the talent and hard work
of all our staff and I would like to thank them for their loyalty and support.
David Green
Chairman
8 August 2023
GROUP INCOME STATEMENT
For the year ended 30 April 2023
2023 2022
£'000 £'000
Revenue 104,818 101,796
Cost of sales (45,085) (47,237)
Gross profit 59,733 54,559
Operating expenses (50,214) (42,665)
Other income - -
Profit from operations 9,519 11,894
Finance income 26 -
Finance expense (1,001) (1,071)
Profit before taxation 8,544 10,823
Tax expense (1,857) (2,330)
Profit for the year attributable to equity holders of the parent 6,687 8,493
Basic and diluted earnings per share 89.7p 102.5p
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 April 2023
2023 2022
£'000 £'000
Profit for the year 6,687 8,493
Other comprehensive (expense) / income:
Items that will or may be reclassified to profit and loss:
Exchange differences on translation of foreign operations (93) 522
Tax relating to items that will or may be reclassified to profit and loss - -
Total other comprehensive (expense) / income (93) 522
Total comprehensive income for the year attributable to 6,594 9,015
equity holders of the parent
GROUP STATEMENT OF FINANCIAL POSITION
At 30 April 2023
Notes 2023 2022
£'000 £'000
Non-current assets:
Property, plant and equipment 8,231 7,423
Right of use asset 23,464 25,621
Deferred tax asset 23 22
31,718 33,066
Current assets:
Inventories and work in progress 2 19,487 17,031
Trade and other receivables 3 9,153 6,976
Cash and cash equivalents 4 19,746 21,785
Current corporation tax 144 115
48,530 45,907
Current liabilities:
Trade and other payables 5 20,003 17,582
Lease liabilities 3,085 4,176
23,088 21,758
Net current assets 25,442 24,149
Total assets less current liabilities 57,160 57,215
Non-current liabilities:
Lease liabilities 22,977 23,807
Deferred tax liability 223 261
Net assets 33,960 33,147
Capital and reserves attributable to equity holders of the
Company:
Called up share capital 724 794
Share premium account 11,148 11,148
Capital redemption reserve 2,150 2,080
ESOP share reserve (113) (113)
Foreign exchange reserve 1,619 1,712
Retained earnings 18,432 17,526
Total equity 33,960 33,147
GROUP STATEMENT OF CASH FLOWS
For the year ended 30 April 2023
2023 2022
£'000 £'000
Operating activities
Profit before taxation 8,544 10,823
Finance income (26) -
Finance expense 1,001 1,071
Loss/(Profit) on disposal of property, plant and equipment 47 (9)
Depreciation 2,748 2,274
Depreciation on right of use assets 4,952 4,609
Cash flows from operations before changes in working capital 17,266 18,768
Increase in inventories and work in progress (2,462) (898)
(Increase) / decrease in trade and other receivables (2,099) 1,789
Increase / (decrease) in trade and other payables 2,239 (1,736)
Cash generated from operations 14,944 17,923
Taxation paid
UK corporation tax paid (699) (1,595)
Overseas tax paid (1,103) (488)
(1,802) (2,083)
Net cash inflow from operating activities 13,142 15,840
Investing activities
Payments to acquire property, plant and equipment (3,580) (2,255)
Receipts from sales of property, plant and equipment - 13
Net cash outflow from investing (3,580) (2,242)
Financing activities
Purchase of own shares (5,382) (6,779)
Principal paid on lease liabilities (4,846) (4,061)
Interest paid on lease liabilities (999) (1,073)
Interest paid - 3
Equity dividends paid (399) (197)
Net cash outflow from financing (11,626) (12,107)
Net (decrease)/increase in cash and cash equivalents (2,064) 1,491
Cash and cash equivalents at beginning of year 21,785 19,344
Exchange gains/(losses) on cash and cash equivalents 25 950
Cash and cash equivalents at end of year 19,746 21,785
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 30 April 2023
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 2022 794 11,148 2,080 (113) 1,712 17,526 33,147
Profit for the year - - - - - 6,687 6,687
Foreign exchange - - - - (93) - (93)
Tax on other comprehensive income - - - - - -
- - - - (93) 6,687 6,594
Total comprehensive income for the year
Share buybacks (70) - 70 - - (5,382) (5,382)
Dividends paid - - - - - (399) (399)
At 30 April 2023 724 11,148 2,150 (113) 1,619 18,432 33,960
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 - - - - - - -
Total comprehensive income for the year - - - - 522 8,493 9,015
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
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 £6,687,000 (2022 - £8,493,000) and on
7,457,535 (2022 - 8,284,746) 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 2023.
2. Inventories and work in progress
2023 2022
£'000 £'000
Finished goods for resale 16,508 14,961
Work in progress 2,979 2,070
19,487 17,031
3. Trade and other receivables
2023 2022
£'000 £'000
Trade receivables 6,129 5,096
Less: provision for impairment of trade receivables (516) (374)
Other receivables 1,403 607
Prepayments and accrued income 2,137 1,647
9,153 6,976
4. Cash and cash equivalents
2023 2022
£'000 £'000
Cash at bank and in hand 19,746 21,785
The fair value of cash and cash equivalents are
considered to be their book value.
5. Trade and other payables
2023 2022
£'000 £'000
Trade payables 5,525 5,933
Accruals 7,167 6,402
Payments received on account 5,272 3,360
Other taxes and social security costs 609 704
Other payables 1,430 1,183
20,003 17,582
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 2023 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 2022 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
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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