REG - Colefax Group PLC - Interim Results
23/01/2023 07:00
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RNS Number : 4504N Colefax Group PLC 23 January 2023
AIM: CFX
23 January 2023
COLEFAX GROUP PLC
("Colefax" or the "Group")
Half Year Results
for the six months ended 31 October 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.
Highlights
· Group sales up 12% to £51.66 million (2021: £46.12 million) and
up 2.5% on a constant currency basis reflecting generally favourable market
conditions in all the Group's major markets and a favourable US dollar
exchange rate
· Group profit before tax up 16% to £5.2 million (2021: £4.49
million)
· Earnings per share increased by 30% to 51.3p (2021: 39.6p) helped
by share buybacks in the prior year
· Share Buyback Programme returned £5.4 million of surplus capital
to shareholders in September 2022
· Fabric Division sales up 14% to £47.17 million (2021: £41.25
million) and by 3.5% on a constant currency basis
o US up by 1%, UK up by 4%, Europe up by 11%
· Decorating Division sales of £3.13 million (2021: £3.57
million) with project completions weighted to the second half of the financial
year
o loss of £596,000 (2021: loss of £378,000)
· Cash generation of £2.9 million excluding share buybacks and
dividend payments
· Interim dividend of 2.6p (2021: 2.5p) up 4% in line with a
progressive dividend policy
David Green, Chairman, said:
"Our performance over the last six months reflects generally favourable
trading conditions in all our major markets, in line with our expectations at
the start of the year. In addition we benefitted from a very strong US Dollar
exchange rate and as a result, we now expect our full year performance to 30
April 2023 to be ahead of previous expectations.
"Over the last six months we are aware that housing transactions have slowed
significantly in the US and the UK and we therefore expect trading in these
markets to become progressively more challenging in the year ahead. We have
experienced significant cost inflation over the last year, mainly driven by
increased energy costs in our supply chain but there are tentative signs that
the worst might be over.
"The Group has a strong balance sheet and we will continue to invest in our
distribution network and our portfolio of brands."
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
Enquiries:
Colefax Group plc David Green, Chief
Executive Tel 020 7318 6021
KTZ Communications Katie Tzouliadis, Dan
Mahoney Tel 020 3178 6378
Peel Hunt LLP Adrian
Trimmings, Andrew Clarke Tel 020 7418 8900
CHAIRMAN'S STATEMENT
Financial Results
Group sales for the six months to 31 October 2022 increased by 12% to £51.66
million (2021: £46.12 million) and by 2.5% on a constant currency basis.
Pre-tax profits increased by 16% to £5.20 million (2021: £4.49 million).
Earnings per share increased by 30% to 51.3p (2021: 39.6p) with the increase
partly reflecting the benefit of share buybacks in the prior year. The Group
ended the half year with cash of £19.95 million (April 30 2022: £21.79
million).
In September 2022 the Group returned £5.4 million of surplus capital to
shareholders by way of a Share Buyback Programme. The Group purchased and
cancelled 700,000 shares, representing 8.8% of the issued ordinary share
capital. This will enhance earnings per share in future periods.
Trading conditions during the first half of the year have been generally
favourable in all our major markets. This is reflected in our interim results
and is in line with our expectations when we announced our full year results
in August 2022. Although rising interest rates have inevitably resulted in a
slowdown in housing transactions our sales tend to lag these changes by up to
twelve months and as a result we do not believe they had a significant impact
on trading in the period. During the first half of the financial year the
Group benefitted from the strength of the US Dollar against Sterling. Over 60%
of core Fabric Division sales are in the US and invoiced in US Dollars. The
average US exchange rate for the first six months was $1.18 compared to $1.38
for the prior year and the closing rate was $1.15 compared to $1.37 last year.
The Group's first half results include a loss of £596,000 (2021: - loss of
£378,000) by our Decorating Division. This was due to the timing of project
completions which are weighted to the second half of the year.
In line with the Group's progressive dividend policy the Board has decided to
propose a 4% increase in the interim dividend to 2.6p (2021: 2.5p). This will
be paid on 12 April 2023 to shareholders on the register at 10 March 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 91% of the Group's sales,
increased by 14% to £47.17 million (2021: £41.25 million) and by 3.5% on a
constant currency basis. Profits increased by 16% to £5.65 (2021: £4.88
million). During the period we continued to experience significant cost
inflation from our suppliers mainly driven by substantial increases in factory
energy costs. These cost increases are initially reflected in inventory and do
not immediately impact our gross profit margins.
Sales in the US, which represent 64% of the Fabric Division's turnover,
increased by 18% in reported terms and by 1% on a constant currency basis
against very strong prior year comparatives. Last year our first half sales
increased by 33% on a constant currency basis and the flattening in sales this
year was not unexpected in a period of sharply rising interest rates. US sales
remain significantly ahead of pre-pandemic levels. There have been some
significant variations in sales by territory in the US reflecting regional
variations in housing activity. Our focus in the US is to continue to develop
our showroom network to maximise sales opportunities. In April 2023 we will be
opening new showrooms in Dallas and Toronto which we expect to have a positive
impact on our sales in those markets.
Sales in the UK, which represent 17% of the Fabric Division's turnover,
increased by 4% during the period. Sales during the period were 29% higher
than the equivalent period prior to the pandemic and reflect a continuation of
the post pandemic boom in home decoration driven by changes in lifestyles. As
with the US market we have not yet seen a significant slowdown in sales
activity as a result of rising interest rates and attribute this to the lag
between home spending and housing market activity.
Sales in Continental Europe, which represent 17% of the Fabric Division's
turnover, increased by 11% on both a reported basis and a constant currency
basis. Despite significantly increased costs and complexity as a result of
Brexit our sales in Europe have continued the recovery which started after the
first lockdowns. There are significant variations in sales performance between
countries. Our three largest markets in Europe are France, Germany and Italy
and together these account for just over 50% of European sales. France has
been the best performing of these three markets mainly due an increase in
contract orders and we expect this to continue in the run up to the Olympics
in 2024. In June we switched from a distributor to a direct selling approach
in Spain and so far the results have been extremely positive with sales in
this market up by 34% on a constant currency basis.
Sales in the Rest of the World, which represent just 2% of the Fabric
Division's turnover, increased by 24% on a constant currency basis. Our major
markets comprise the Middle East, China and Australia. Sales in the Middle
East are mainly focussed on contract orders and continue to offer good
opportunities for growth. In contrast trading in China and Australia remained
challenging during the first half of the year reflecting the long duration of
pandemic lockdowns in these markets.
· Furniture - Kingcome Sofas
Sales for the six months to October 2022 increased by 5% to £1.36 million
(2021: £1.30 million) and the Company made an operating profit of £130,000
compared to an operating loss of £11,000 in 2021. Almost 90% of Kingcome
sales are made in the UK and trading conditions became progressively more
challenging during the period especially during October. Despite this the
order book at the end of October was just below record levels and up by 37%
compared to the prior year although this was partly due to longer factory lead
times caused by labour and raw material shortages. During the period we
completed a major investment in our freehold factory in Devon which will
significantly improve operational and energy efficiency. In October we opened
a new showroom in the Chelsea Harbour Design Centre and we expect this to have
a positive impact on sales in the medium term.
Interior Decorating Division
Decorating sales, which account for just over 6% of Group turnover, decreased
by 12% in the period to £3.13 million (2021: £3.57 million) resulting in a
first half loss of £596,000 compared to a loss of £378,000 for the same
period last year. The profit on decorating projects is recognised on invoicing
and the losses incurred in the first half are mainly due to the timing of
project completion dates. Most major decorating projects are preceded by
significant building work which is outside of our control and since the
pandemic many building projects have suffered from delays caused by labour and
materials shortages. During the first half we have seen an increase in
overseas projects especially in the US and the Middle East. Overseas projects
typically account for around 40% of total sales.
Prospects
Our performance over the last six months reflects generally favourable trading
conditions in all our major markets, in line with our expectations at the
start of the year. In addition we benefitted from a very strong US Dollar
exchange rate and as a result, we now expect our full year performance to 30
April 2023 to be ahead of previous expectations.
Our business is closely tied to high end housing market activity but with a
time lag of six to twelve months. Over the last six months we are aware that
housing transactions have slowed significantly in the US and the UK and we
therefore expect trading in these markets to become progressively more
challenging in the year ahead. We have experienced significant cost inflation
over the last year, mainly driven by increased energy costs in our supply
chain but there are tentative signs that the worst might be over.
The Group has a strong balance sheet and we will continue to invest in our
distribution network and our portfolio of brands. Our performance over the
last six months has involved a tremendous amount of hard work by all our staff
and I would like to thank them for their loyalty and support.
David Green
Chairman
COLEFAX GROUP PLC
INTERIM GROUP INCOME STATEMENT
Unaudited Unaudited Audited
Six months to Six months to Year
31 Oct 2022 31 Oct 2021 to
30 April 2022
£'000 £'000 £'000
Revenue 51,657 46,122 101,796
Cost of sales (22,229) (21,302) (47,237)
Gross profit 29,428 24,820 54,559
Operating expenses (23,733) (19,784) (42,665)
Profit from operations 5,695 5,036 11,894
Finance expense (506) (545) (1,071)
Profit before taxation 5,189 4,491 10,823
Tax expense (1,219) (1,056) (2,330)
Profit for the period attributable to equity holders of the parent 3,970 3,435 8,493
Basic earnings per share 51.3p 39.6p 102.5p
Diluted earnings per share 51.3p 39.6p 102.5p
INTERIM GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months to Six months to Year
31 Oct 2022 31 Oct 2021 to
30 April 2022
£'000 £'000 £'000
Profit for the period 3,970 3,435 8,493
Other comprehensive income / (expense):
Items that will or may be reclassified to profit and loss:
Exchange differences on translation of foreign operations 760 (167) 522
Tax relating to items that will or may be reclassified to profit and loss (12) (12) -
Total other comprehensive income / (expense) 748 (179) 522
Total comprehensive income for the period attributable to equity holders of 4,718 3,256 9,015
the parent
COLEFAX GROUP PLC
INTERIM GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
As at 31 Oct 2022 As at 31 Oct 2021 As at 30 April 2022
Notes £'000 £'000 £'000
Non-current assets:
Right of use assets 25,881 26,276 25,621
Property, plant and equipment 8,447 6,762 7,423
Deferred tax asset 23 34 22
34,351 33,072 33,066
Current assets:
Inventories and work in progress 6 16,993 17,766 17,031
Trade and other receivables 4 7,992 8,123 6,976
Current corporation tax - 427 115
Cash and cash equivalents 19,950 17,539 21,785
44,935 43,855 45,907
Current liabilities:
Trade and other payables 5 17,923 20,568 17,582
Lease liabilities 3,332 4,760 4,176
Current corporation tax 304 - -
21,559 25,328 21,758
Net current assets 23,376 18,527 24,149
Total assets less current liabilities 57,727 51,599 57,215
Non-current liabilities:
Lease liabilities 25,174 23,681 23,807
Deferred tax liability 282 333 261
Net assets 32,271 27,585 33,147
Capital and reserves attributable to equity holders of the Company:
Called up share capital 724 794 794
Share premium account 11,148 11,148 11,148
Capital redemption reserve 2,151 2,081 2,080
ESOP share reserve (113) (113) (113)
Foreign exchange reserve 2,460 1,010 1,712
Retained earnings 15,901 12,665 17,526
Total equity 32,271 27,585 33,147
COLEFAX GROUP PLC
INTERIM GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
Six months to 31 Oct 2022 Six months to 31 Oct 2021 Year
to 30 April
2022
£'000 £'000 £'000
Operating activities
Profit before taxation 5,189 4,491 10,823
Finance expense 506 545 1,071
Loss /(profit) on disposal of property, plant and equipment 37 (12) (9)
Depreciation on right of use assets 2,426 2,293 4,609
Depreciation 1,259 1,121 2,274
Cash flows from operations before changes in working capital 9,417 8,438 18,768
Decrease / (increase) in inventories and work in progress 273 (1,654) (898)
(Increase) / decrease in trade and other receivables (762) 475 1,789
(Decrease) / increase in trade and other payables (418) 1,790 (1,736)
Cash generated from operations 8,510 9,049 17,923
Taxation paid
UK corporation tax paid (431) (902) (1,595)
Overseas tax paid (387) (60) (488)
(818) (962) (2,083)
Net cash inflow from operating activities 7,692 8,087 15,840
Investing activities
Payments to acquire property, plant and equipment (1,914) (812) (2,255)
Receipts from sales of property, plant and equipment - 13 13
Net cash outflow from investing (1,914) (799) (2,242)
Financing activities
Purchase of own shares (5,382) (6,779) (6,779)
Payment of lease liabilities (2,896) (2,418) (5,134)
Other interest paid (0) (1) 3
Equity dividends paid (213) - (197)
Net cash outflow from financing (8,491) (9,198) (12,107)
Net increase in cash and cash equivalents (2,713) (1,910) 1,491
Cash and cash equivalents at beginning of period 21,785 19,344 19,344
Exchange gains on cash and cash equivalents 878 105 950
Cash and cash equivalents at end of period 19,950 17,539 21,785
COLEFAX GROUP PLC
NOTES
1. Basis of Preparation
The condensed group financial statements for the 6 months ended 31 October
2022 have been prepared in accordance with UK-adopted international accounting
standards in accordance with the requirements of the Companies Act 2006.
These unaudited group interim financial statements have been prepared in
accordance with AIM Rules. In preparing this report, the group has adopted the
guidance in the AIM Rules for interim accounts which do not require that the
interim condensed group financial statements are prepared in accordance with
IAS 34 "Interim financial reporting".
Going concern
The interim Financial Statements have been prepared on a going concern basis.
The Directors, having made appropriate enquiries, consider that adequate
resources exist for the Group to continue in operational existence for the
foreseeable future and that, therefore, it is appropriate to adopt the going
concern basis in preparing the condensed group interim financial statements
for the period ended 31 October 2022.
Risks and uncertainties
The Board continuously assesses and monitors the key risks of the business.
The key risks that could affect the Company's medium term performance and the
factors that mitigate those risks have not substantially changed from those
set out in the Group's 30 April 2022 Annual Report and Financial Statements, a
copy of which is available on the Company's website: www.colefaxgroupplc.com
(http://www.colefaxgroupplc.com) .
Critical accounting estimates
The preparation of condensed group interim financial statements requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the end of the reporting period. Significant
items subject to such estimates are set out in Note 2 of the Group's 30 April
2022 Annual Report and Financial Statements. The nature and amounts of such
estimates have not changed significantly during the interim period.
2. Accounting Policies
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 2023.
3. Basic earnings per share have been calculated on the basis of earnings of
£3,970,000 (2021: £3,435,000) and on 7,732,000 (2021: 8,685,000) 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
£3,970,000 (2021: £3,435,000) and on 7,732,000 (2021: 8,685,000) ordinary
shares being the weighted average number of ordinary shares in the period.
5. Trade and other receivables As at 31 Oct 2022 As at 31 Oct 2021 As at 30 Apr 2022
£'000 £'000 £'000
Trade debtors 3,368 5,198 4,722
Other debtors 2,921 1,559 607
Prepayments and accrued income 1,703 1,366 1,647
7,992 8,123 6,976
NOTES (CONTINUED)
6. Trade and other payables As at 31 Oct 2022 As at 31 Oct 2021 As at 30 Apr 2022
£'000 £'000 £'000
Trade creditors 6,034 5,773 5,933
Payments received on account 5,119 8,604 3,360
Other taxes and social security costs 480 322 704
Other creditors 1,213 1,266 1,183
Accruals 5,077 4,603 6,402
17,923 20,568 17,582
Inventories and work in progress As at 31 Oct 2022 As at 31 Oct 2021 As at 30 Apr 2022
7. £'000 £'000 £'000
Finished goods for resale 14,482 12,033 14,961
Work in progress 2,511 5,733 2,070
16,993 17,766 17,031
8. The financial information for the year ended 30 April 2022 does not constitute
the full statutory accounts for that period. The Annual Report and Financial
Statements for the year ended 30 April 2022 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 2022 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.
9. 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.
10. Approval of interim financial statements
The interim financial statements were approved by the Board on 20 January
2023.
NOTES (CONTINUED)
6.
Trade and other payables As at 31 Oct 2022 As at 31 Oct 2021 As at 30 Apr 2022
£'000 £'000 £'000
Trade creditors 6,034 5,773 5,933
Payments received on account 5,119 8,604 3,360
Other taxes and social security costs 480 322 704
Other creditors 1,213 1,266 1,183
Accruals 5,077 4,603 6,402
17,923 20,568 17,582
7.
Inventories and work in progress As at 31 Oct 2022 As at 31 Oct 2021 As at 30 Apr 2022
£'000 £'000 £'000
Finished goods for resale 14,482 12,033 14,961
Work in progress 2,511 5,733 2,070
16,993 17,766 17,031
8.
The financial information for the year ended 30 April 2022 does not constitute
the full statutory accounts for that period. The Annual Report and Financial
Statements for the year ended 30 April 2022 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 2022 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.
9.
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.
10.
Approval of interim financial statements
The interim financial statements were approved by the Board on 20 January
2023.
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