REG - Colefax Group PLC - Half-year Results <Origin Href="QuoteRef">CFX.L</Origin>

ColefaxAnnouncement

29/01/2018 07:05

RNS Number : 1254D
Colefax Group PLC
29 January 2018
AIM: CFX
29 January 2018
COLEFAX GROUP PLC
("Colefax" or the "Group")
Half Year Results
for the six months ended 31 October 2017
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 up 6.5% to 42.08m (2016: 39.53m); up by 5.1% on a constant currency basis


 
Group pre-tax profit up 35% to 2.56m (2016: 1.90m)

 improving conditions in core US market

 better performance from Decorating Division


 
Earnings per share increased by 44% to 18.0p (2015: 12.5p)


 
Net cash increased to 9.5m (2016: 8.0m)


 
Interim dividend up by 4% to 2.40p per share (2016: 2.30p)


 
Core Fabric Division sales up 4.6% to 36.47m 

 up by 3.1% on constant currency basis, reflecting improved trading in the US


 
Decorating Division performing well in new premises with first half profits up by 297,000 and a strong order book for the second half of the year
David Green, Chairman, said:
"The Group has made good progress over the last six months helped by improving trading conditions in our core US market and an encouraging performance by our Decorating Division. With a strong order book for the second half, we now expect the Decorating Division to exceed our original expectations for the full year.
"The Group has a strong balance sheet with cash of 9.5 million and we will continue to invest with confidence in our portfolio of brands and worldwide distribution network."
Enquiries:
Colefax Group plc
David Green, Chief Executive
Tel: 020 7318 6021

Rob Barker, Finance Director

KTZ Communications
Katie Tzouliadis, Emma Pearson, Irene Bermont-Penn
Tel: 020 3178 6378
Peel Hunt LLP 
Adrian Trimmings, George Sellar
Tel: 020 7418 8900
The information contained in this announcement is inside information for the purposes of article 7 of Regulation 596/2014.


CHAIRMAN'S STATEMENT
Financial Results 
Group sales for the six months to 31 October 2017 increased by 6.5% to 42.08 million (2016: 39.53 million) and increased by 5.1% on a constant currency basis. Pre-tax profits increased by 35% to 2.56 million (2016: 1.90 million). Earnings per share increased to 18.0p (2016: 12.5p). The Group ended the first half of the year with net cash of 9.5 million (2016: 8.0 million).
The main reason for the increase in profits in the first six months was an improvement in trading conditions in our core US market where Fabric Division sales increased by 4.5.% on a constant currency basis. In contrast trading conditions in the UK and Europe remained challenging. Sales in the UK were flat during the period and sales in Europe increased by 6.5% but by 1.5% on a constant currency basis. The increase in profit was also due to an improved contribution from the Decorating Division which made a first half profit of 213,000 compared to a loss of 84,000 last year.
Hedging losses arising from US Dollar cover put in place prior to the Brexit vote were 595,000 (2016 755,000) and, excluding these, the Group's pre-tax profit increased by 18.5% to 3.15 million (2016: 2.66 million). 
In line with our progressive dividend policy the Board has decided to increase the interim dividend by 4% to 2.40p per share (2016: 2.30p). The interim dividend will be paid on 9 April 2018 to shareholders on the register at the close of business on 2 March 2018.
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 87% of the Group's sales, increased by 4.6% to 36.47 million (2016: 34.87 million) and by 3.1% on a constant currency basis. Excluding hedging losses of 595,000 (2016: 755,000) operating profits increased by 7% to 2.92 million (2016: 2.73 million) reflecting improved trading conditions in our core US market. 
Sales in the US, which represent 60% of the Fabric Division's turnover, increased by 5.4% in reported terms and by 4.5% on a constant currency basis. The improvement was broadly based with sales in most territories ahead of last year, reflecting favourable market conditions. In recent years we have invested heavily in our US distribution network and our own showrooms now account for over 75% of US sales. 
Sales in the UK, which represent just under 18% of the Fabric Division's turnover, were flat during the period reflecting challenging market conditions. We attribute this to the very weak high end housing market which continues to be adversely affected by high rates of stamp duty as well as economic uncertainty over the outcome of Brexit negotiations. Our business tends to lag changes in the high end housing market and as a result we believe market conditions could become more difficult over the next twelve months.
Sales in Continental Europe, which represent 20% of the Fabric Division's turnover, increased by 6.5% on a reported basis but were up by 1.5% on a constant currency basis. There is more optimism in Europe than we have seen for some years although the performance by country remains mixed. Sales in France, which is our largest market, were down by 9% in the period but this was mainly due to a significant contract order in the prior year. In Germany, sales increased by 1% on a constant currency basis and, in Italy, sales increased by 3%. Together these three markets account for 56% of our sales in Europe.
Sales in the rest of the world, which represent less than 3% of the Fabric Division's turnover, increased by 7% on a constant currency basis. The focus of our sales efforts in the rest of the world remain on our major territories, namely the Middle East, China and Russia. .
 Furniture - Kingcome Sofas
Sales for the six months to October 2017 increased by 4% to 1.19 million (2016: 1.15 million) and the Company made a small operating profit of 22,000 compared to 9,000 in 2016. At the half year end the order book was up by 18% compared to last year and ahead of our expectations based on market conditions. The majority of furniture sales are in the UK, centred on London and we expect future trading to be challenging due to the slowdown in the high end housing market. 
Interior Decorating Division
Decorating sales, which account for just over 10% of Group turnover, increased by 26% in the period to 4.4 million (2016: 3.5 million) and the Division made a first half profit of 213,000 compared to a loss of 84,000 for the same period last year.
In December 2016 the Decorating business moved to new office and showroom premises at 89-91 Pimlico Road in Belgravia. The new location is well suited to the needs of the business and trading has been encouraging since the move. Sales and profits in the Decorating Division can vary significantly from year to year depending on the timing of contract completions. We have a number of major projects scheduled for completion in the second half of the year and therefore anticipate a stronger than expected overall performance for the year. Although the high end market in London has been challenging the weakness of Sterling is favourable for the business and we have seen an increase in the proportion of overseas contracts.
Prospects
The Group has made good progress over the last six months helped by improving trading conditions in our core US market. Trading conditions in the UK look challenging due to a weak high end housing market caused by high rates of stamp duty and continuing uncertainty over Brexit. However, our exposure to the UK is limited by the fact that over 82% of Fabric Division sales are made overseas. There is also increased optimism in Europe but this follows two years of sales decline and it is too early to assess the extent of any recovery. 
Our Decorating Division delivered an encouraging first half contribution and we expect it to exceed our original expectations for the full year.
The Group has a strong balance sheet with net cash of 9.5 million and we will continue to invest with confidence in our portfolio of brands and worldwide distribution network.
David Green, Chairman
 COLEFAX GROUP PLC
INTERIM GROUP INCOME STATEMENT








Unaudited
Unaudited
Audited

Six months to 31 Oct 2017
Six months to 31 Oct 2016
Year to
30 April 2017

'000
'000
'000








Revenue
42,083 
 39,529 
 80,475 








Profit from operations
2,559 
1,903
2,937 
Finance income
 - 
- 
1 
Finance expense
 (2) 
-
(1)

 (2)
- 
- 








Profit before taxation
2,557
1,903
2,937
Tax expense
(729)
(628)
(1,042)








Profit for the period attributable to equity holders of the parent
1,828 
1,275
1,895 








Basic earnings per share
18.0p
12.5p
18.6p
Diluted earnings per share
18.0p
12.5p
18.6p








 COLEFAX GROUP PLC
INTERIM GROUP STATEMENT OF COMPREHENSIVE INCOME








Unaudited
Unaudited
Audited

Six months to 31 Oct 2017
Six months to 31 Oct 2016
Year to
30 April 2017

'000
'000
'000








Profit for the year
1,828
1,275
1,895 








Other comprehensive income / (expense):







Items that will not be reclassified to profit and loss:







Exchange differences on translation of foreign operations
335
2,543
1,628
Remeasurement of defined benefit pension scheme
-
-
101
Tax relating to items that will not be reclassified to profit and loss
(411)
(617)
(449)

(76)
1,926
1,280
Items that will or may be reclassified to profit and loss:







Cash flow hedges:



Gains / (losses) recognised directly in equity
108
(3,309)
(2,611) 
Transferred to profit and loss for the year
595
755
2,006
Tax relating to items that will or may be reclassified to profit and loss
(133)
511
109

570
(2,043)
(496)




Total other comprehensive income / (expense) 
494
(117)
784




Total comprehensive income for the period attributable to equity holders of the parent
2,322
1,158
2,679
 COLEFAX GROUP PLC
INTERIM GROUP STATEMENT OF FINANCIAL POSITION







Unaudited
Unaudited
Audited

At 31 Oct 2017
At 31 Oct 2016
At 30 April 2017

'000
'000
'000








Non-current assets:



Property, plant and equipment
9,771
9,135
9,669
Deferred tax asset
257
839
386

10,028
9,974
10,055




Current assets:



Inventories and work in progress
14,203
13,825
13,938
Trade and other receivables
12,056
12,604
11,805
Current corporation tax
-
-
170
Cash and cash equivalents
9,499
8,024
6,710

35,758
34,453
32,623




Current liabilities:



Trade and other payables
15,054
16,617
13,961
Current corporation tax
184
27
-

15,238
16,644
13,961




Net current assets
20,520
17,809
18,662




Total assets less current liabilities
30,548
27,783
28,717




Non-current liabilities:



Deferred rent
1,905
2,003
1,992
Pension liability
3
177
55
Deferred tax liability
636
954
734




Net assets
28,004
24,649
25,936




Capital and reserves attributable to equity holders of the Company:



Called up share capital
1,022
1,022
1,022
Share premium account
11,148
11,148
11,148
Capital redemption reserve
1,852
1,852
1,852
ESOP share reserve
(113)
(113)
(113)
Foreign exchange reserve
2,703
3,485
2,779
Cash flow hedge reserve
(409)
(2,526)
(979)
Retained earnings
11,801
9,781
10,227




Total equity
28,004
24,649
25,936
 COLEFAX GROUP PLC
INTERIM GROUP STATEMENT OF CASH FLOWS




Unaudited
Unaudited
Audited

Six months to 31 Oct 2017
Six months to 31 Oct 2016
Year to 30 April 2017

'000
'000
'000








Operating activities



Profit before taxation
2,557
1,903
2,937
Finance income 
-
-
(1)
Finance expense
2
-
1
Depreciation
1,382
1,279
2,720
Cash flows from operations before changes in working capital
3,941
3,182
5,657
Increase in inventories and work in progress
(330)
(862)
(1,140)
Increase in trade and other receivables
(322)
(2,672)
(2,172)
Increase in trade and other payables
1,880
2,547
1,835




Cash generated from operations
5,169
2,195
4,180








Taxation paid



UK corporation tax paid
(14)
(132)
(224)
Overseas tax paid
(358)
(623)
(1,141)

(372)
(755)
(1,365)




Net cash inflow from operating activities
4,797
1,440
2,815








Investing activities



Payments to acquire property, plant and equipment
(1,614)
(1,705)
(4,126)
Receipts from sales of property, plant and equipment
-
27
40
Interest received
-
-
1
Net cash outflow from investing
(1,614)
(1,678)
(4,085)








Financing activities



Purchase of own shares
-
(2,583)
(2,583)
Interest paid
(2)
-
(1)
Equity dividends paid
(254)
(244)
(478)
Net cash outflow from financing
(256)
(2,827)
(3,062)








Net increase / (decrease) in cash and cash equivalents
2,927
(3,065)
(4,332)
Cash and cash equivalents at beginning of period
6,710
10,085
10,085
Exchange (losses) / gains on cash and cash equivalents
(138)
1,004
957




Cash and cash equivalents at end of period
9,499
8,024
6,710
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 2018.



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 2017, the Company paid a final dividend for the year ended 30 April 2017 of 2.50p per ordinary share amounting to 254,000.



The proposed interim dividend of 2.40p (2016: 2.30p) per share is payable on 9 April 2018 to qualifying shareholders on the register at the close of business on 2 March 2018.


3.
Basic earnings per share have been calculated on the basis of earnings of 1,828,000 (2016: 1,275,000) and on 10,160,000 (2016: 10,207,315) 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 1,828,000 (2016: 1,275,000) and on 10,160,000 (2016: 10,207,315) 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 (2016: nil).


5.
The financial information for the year ended 30 April 2017 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 30 April 2017 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 2017 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 19-23 Grosvenor Hill, London W1K 3QD.

This information is provided by RNS
The company news service from the London Stock Exchange
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