REG - Colefax Group PLC - Preliminary Results

ColefaxAnnouncement

12/08/2021 07:05

RNS Number : 3625I
  
Colefax Group PLC
  
12 August 2021
  
 

AIM: CFX
COLEFAX GROUP PLC
("Colefax" or the "Group")
 
Preliminary Results for the year ended 30 April 2021
 
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 decreased by 1% to £77.91m (2020 - £78.36m) but on a constant currency basis, sales increased by 2%
 


 




●


Pre-tax profit increased by 149% to £5.42m (2020 - £2.18m) - mainly driven by a strong recovery in core Fabric Division sales, and also lower new product investment 


 




 


-


profit included a prior year US CARES loan of £922,000 approved as a grant in the financial year under review
 


 




●


Earnings per share increased by 111% to 45.1p (2020 - 21.4p) 
 


 




●


Cash at 30 April 2021 increased to £19.3m (2020 - £11.5m)
 


 




●


Fabric Division sales increased by 3.8% to £69.58m (2020 - £67.03m) and by 6.7% on a constant currency basis 


 




 


-


US sales up by 8%, UK sales up by 1% and Europe sales up by 9% (on a constant currency basis)
 




●


Decorating Division sales decreased by 35% to £5.79m (2020 - £8.96m) resulting in a pre-tax loss of £680,000 (2020 - £121,000 profit)


 




 


-


project delays and travel restrictions caused by the pandemic impacted activity 
 


 




●


Board is not proposing a final dividend but intends to restart dividends in the new financial year
 


 




 
David Green, Chief Executive of Colefax Group plc, said:
 
"Results for this financial year and the prior year were significantly impacted by emergency lockdowns across the world. However, with the easing of restrictions, sales in the Fabric Division, our core operation, recovered strongly. This was fuelled by a buoyant housing market and surge in home-related spending. 
 
"Demand is currently strong across all areas of the business, and we are therefore optimistic about sales prospects. However, it is not yet clear how long these favourable conditions will last, and two factors will weigh on profits. First, the strength of Sterling against the US Dollar, the US being our dominant marketplace, and secondly the additional costs of selling in EU markets following Brexit. In our Decorating Division, we are expecting an exceptional year, but this is partly due to the delay of projects from the prior year."  
 
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   
(Nominated Advisor and Broker)


Adrian Trimmings, Andrew Clark 


Tel: 020 7418 8900




 
 
 
COLEFAX GROUP PLC
 
CHAIRMAN'S STATEMENT
 
Financial Results
 
Group sales for the year to 30 April 2021 decreased by 1% to £77.91 million (2020 - £78.36 million) but increased by 2% on a constant currency basis. Pre-tax profits increased by 149% to £5.42 million (2020 - £2.18 million) and earnings per share increased by 111% to 45.1p (2020 - 21.4p). The Group ended the year with cash of £19.3 million (2020 - £11.5 million).
 
The Board is not proposing the payment of a final dividend for the year ended 30 April 2021 but intends to restart dividend payments in respect of the year ended 30 April 2022. Going forward it is the Board's intention to return to a progressive dividend policy.  The Board will continue to review options for returning surplus cash to shareholders in line with the Group's long running share buyback strategy.
 
The financial year started in the middle of the first worldwide lockdowns and the timing of our year end on 30 April means that our results for both the current and prior year have been significantly impacted. The principal reason for the increase in profit was a strong recovery in Fabric Division sales which ended the year up by 6.7% on a constant currency basis. This recovery started after the first lockdowns ended and continued through the remainder of the year. In contrast our Decorating Division made a pre-tax loss of £680,000 due to project delays and travel restrictions caused by the pandemic. Group profit includes furlough income of £540,000 (2020 - £280,000) and £922,000 from a prior year coronavirus related US CARES loan which was approved as a grant and recognised as income in April 2021.   
 
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 89% of Group turnover, increased by 3.8% to £69.58 million (2020 - £67.03 million) and by 6.7% on a constant currency basis. Pre-tax profit increased by 197% to £5.81 million (2020 - £2.0 million). Prior year profit included exceptional costs of £714,000 relating to the move of our US Fabric Division operations to the UK.
 
The improvement in Fabric Division profit was partly due to cost reductions resulting from lower levels of new product investment during the year. Furlough income amounted to £427,000 with the majority of this amount claimed in the peak lockdown months of May, June and July 2020. In addition a prior year US CARES loan of £922,000 was only approved as a grant and recognised as income in April 2021, hence distorting profits between the current and prior year.
 
The financial year began with the majority of our customers and suppliers closed or partially closed due to the first lockdowns. Sales were significantly down in the first quarter but started to recover as soon as the lockdowns ended and continued to recover for the remainder of the financial year despite subsequent lockdowns. We attribute this recovery to a significant increase in housing market activity and home related spending. 
 
Sales in the US, which represent 61% of the Fabric Division's turnover, increased by 3% and by 8% on a constant currency basis. The US has been our strongest market throughout the pandemic with a lower decline in sales during the initial lockdown and a stronger recovery post lockdown. 
 
During the year we completed the transfer of the majority of our US warehouse operations to the UK and moved our US headquarters out of New York City to smaller office and warehouse premises in Brooklyn. Going forward this will reduce costs and improve efficiency. In March we moved to a new showroom in the Chicago Design Center and we are pleased with the positive reaction from customers.  
 
Sales in the UK, which represent 16% of the Fabric Division's turnover, increased by 1%. The UK market recovered quickly after the first national lockdown ended in June 2020 and the impact of subsequent lockdowns in the second half of the year was much less significant than the first lockdown due to more customers managing to continue trading and strong demand for home related products. 
 
Sales in Continental Europe, which represent 21% of the Fabric Division's turnover, increased by 11% and by 9% on a constant currency basis. The increase is due to the fact that the first European lockdowns started earlier and had a bigger impact in the prior year than they did in the UK and the US. 
 
Brexit appears to have had a relatively modest impact on our European sales but it has had a significant impact on costs and complexity. An unexpected twist in the free trade agreement means that fabrics sourced from EU manufacturers are subject to import duty when re-exported from the UK to EU customers. Together with higher freight and administration charges the result is that costs have increased by approximately £900,000 per year as a result of Brexit.
 
Sales in the Rest of the World, which represent just 2% of the Fabric Division's turnover, decreased by 4% during the year. Our major markets in the Rest of the World are the Middle East, China and Australia and these are likely to remain a small proportion of total Fabric Division sales. 
 
•                         Furniture - Kingcome Sofas
 
Sales of Kingcome furniture, which represent 4% of Product Division sales, increased by 7% to £2.53 million (2020 - £2.37 million) but were 6% lower than pre-pandemic sales for the year ended 30 April 2019. Pre-tax profit increased by 188% to £288,000 (2020 - £100,000). The increase in sales and profit was partly due to the fact that relatively few deliveries were possible in April of the prior year during the first national lockdown and took place in the current year. Furniture sales recovered very quickly when our Fulham Road showroom re-opened after the first lockdown. However, subsequent lockdowns and showroom closures starting in November and December did have an adverse impact on orders because most customers like to visit the showroom before making a buying decision. The order book at the year end was down 25% on the prior year but has subsequently increased to above prior year levels reflecting strong pent up demand for furniture.    
 
Interior Decorating Division
 
Decorating sales, which account for 7% of Group turnover, decreased by 35% to £5.79 million (2020 - £8.96 million) resulting in a pre-tax loss for the year of £680,000 (2020 - £121,000 profit). In a normal year around 40% of sales would come from overseas projects but for much of the year it was not possible to travel overseas to visit new and existing customer's premises. The UK lockdowns also adversely impacted sales and profit by slowing the rate of progress on domestic projects. Despite these challenges, demand for decorating work has remained strong and partly due to delays to existing projects, customer deposits ended the year at a record level of £5.8 million. 
 
Prospects
 
We are currently experiencing strong demand in all areas of the business and believe this is a direct consequence of the lockdowns with end customers either moving house or re-decorating their existing home. Although we are optimistic about sales prospects, it is not yet clear how long these favourable conditions will last. In addition, two factors will weigh on profits in the current year. Firstly, Sterling has strengthened significantly against the US Dollar since a Brexit trade deal was announced in January and Group profits are very sensitive to the US Dollar exchange rate. Secondly, Brexit has resulted in a significant increase in the cost of selling in EU markets. In our Decorating Division we are expecting an exceptional year but this is partly due to the completion of projects delayed from the prior year.
 
The last year has been unprecedented and uniquely challenging for all our customers, suppliers and staff. I am extremely grateful to our staff who have worked tirelessly to respond to new situations and new ways of working which prioritise health and safety. They have kept the business running smoothly in constantly changing circumstances and I would like to thank them for their hard work, loyalty and support.
 
 
 
David Green
Chairman
12 August 2021
 
 
 
 
 




GROUP INCOME STATEMENT


 


 


 




For the year ended 30 April 2021


 


 


 




 


 


 


 




 


2021


 


2020




 


£'000


 


£'000




 


 


 


 




 


 


 


 




Revenue


77,908 


 


78,364 




Cost of sales


(33,971)


 


(34,602)




 


 


 


 




 


 


 


 




Gross profit


43,937 


 


 43,762 




Operating expenses


(38,910)


 


(40,655)




Other income 


1,462 


 


280 




 


 


 


 




Profit from operations


6,489 


 


3,387 




 


 


 


 




Finance income


 - 


 


 20 




Finance expense


(1,067)


 


(1,231)




 


 


 


 




 


 


 


 




Profit before taxation


5,422 


 


2,176 




 


 


 


 




 


 


 


 




Tax expense


(1,376)


 


(256)




 


 


 


 




 


 


 


 




Profit for the year attributable to equity holders of the parent


4,046 


 


1,920 




 


 


 


 




 


 


 


 




Basic earnings per share


 45.1p 


 


 21.4p 




Diluted earnings per share


 45.1p 


 


 21.4p 




 


 


 


 




 
 
 
 




GROUP STATEMENT OF COMPREHENSIVE INCOME


 


 


 




For the year ended 30 April 2021


 


 


 




 


 


 


 




 


2021


 


2020




 


£'000


 


£'000




 


 


 


 




 


 


 


 




Profit for the year


4,046 


 


1,920 




 


 


 


 




 


 


 


 




Other comprehensive income / (expense):


 


 


 




 


 


 


 




Items that will or may be reclassified to profit and loss:


 


 


 




 


 


 


 




Exchange differences on translation of foreign operations


(1,251)


 


121 




Cash flow hedges:


 


 


 




Gains/(losses) recognised directly in equity


 - 


 


(84)




Transferred to profit and loss for the year


 - 


 


104 




Tax relating to items that will or may be reclassified to profit and loss


103 


 


(54)




 


(1,148)


 


 87 




 


 


 


 




 


 


 


 




Total other comprehensive income / (expense)


(1,148)


 


 87 




 


 


 


 




 


 


 


 




Total comprehensive income for the year attributable to


2,898 


 


2,007 




equity holders of the parent


 


 


 




 
 
 
 




GROUP STATEMENT OF FINANCIAL POSITION


 


 




At 30 April 2021


 


 




 


2021


2020




 


£'000


£'000




 


 


 




 


 


 




Non-current assets:


 


 




Property, plant and equipment


  7,029 


  8,524 




Right of use asset


 28,506 


 26,057 




Deferred tax asset


 35 


  118 




 


 35,570 


 34,699 




Current assets:


 


 




Inventories and work in progress


 16,025 


 15,518 




Trade and other receivables


  8,631 


  6,499 




Cash and cash equivalents


 19,344 


 11,538 




Current corporation tax


  513 


  332 




 


 44,513 


 33,887 




 


 


 




Current liabilities:


 


 




Trade and other payables


 18,343 


 11,007 




Lease liabilities


  3,992 


  4,612 




Other loans


-


977




 


 22,335 


 16,596 




 


 


 




Net current assets


 22,178 


 17,291 




 


 


 




Total assets less current liabilities


 57,748 


 51,990 




 


 


 




Non-current liabilities:


 


 




Lease liabilities


 26,323 


 23,780 




Deferred tax liability


  317 


- 




 


 


 




Net assets


 31,108 


 28,210 




 


 


 




Capital and reserves attributable to equity holders of the


 


 




Company:


 


 




Called up share capital


  902 


  902 




Share premium account


 11,148 


 11,148 




Capital redemption reserve


  1,972 


  1,972 




ESOP share reserve


(113)


(113)




Foreign exchange reserve


  1,190 


  2,338 




Cash flow hedge reserve


0 


0 




Retained earnings


 16,009 


 11,963 




Total equity


 31,108 


 28,210 




 
 
 




GROUP STATEMENT OF CASH FLOWS


 


 




For the year ended 30 April 2021


 


 




 


2021


2020




 


£'000


£'000




 


 


 




Operating activities


 


 




Profit before taxation


 5,422 


 2,176 




Finance income


  - 


(20)




Finance expense


 1,067 


 1,231 




Profit on disposal of property, plant and equipment


(30)


(28)




Non-cash profit arising from loan waiver


(922)


  - 




Depreciation


 2,912 


 3,071 




Rent concessions


(77)


  - 




Impairment of right of use asset


312


  -




Depreciation on right of use assets


 4,329 


 4,193 




Cash flows from operations before changes in working capital


  13,013 


  10,623 




 


 


 




Increase in inventories and work in progress


(678)


(497)




(Increase) / decrease in trade and other receivables


(2,366)


 4,914 




Increase / (decrease) in trade and other payables


 7,378 


(4,461)




Cash generated from operations


  17,347 


  10,579 




 


 


 




Taxation paid


 


 




UK corporation tax paid


(224)


(602)




Overseas tax paid


(877)


(748)




 


(1,101)


(1,350)




 


 


 




Net cash inflow from operating activities


  16,246 


 9,229 




 


 


 




Investing activities


 


 




Payments to acquire property, plant and equipment


(1,888)


(3,183)




Receipts from sales of property, plant and equipment


34 


39 




Interest received


  - 


20 




Net cash outflow from investing


(1,854)


(3,124)




 


 


 




Financing activities


 


 




Proceeds from loans and borrowings


  - 


 968 




Principal paid on lease liabilities


(4,853)


(3,646)




Interest paid on lease liabilities


(1,061)


(1,231)




Interest paid


(6)


  - 




Equity dividends paid


  - 


(242)




Net cash outflow from financing


(5,920)


(4,151)




 


 


 




Net increase in cash and cash equivalents


 8,472 


 1,954 




Cash and cash equivalents at beginning of year


  11,538 


 9,458 




Exchange (losses)/gains on cash and cash equivalents


(666)


 126 




Cash and cash equivalents at end of year


  19,344 


  11,538 




 




 
 
 
GROUP STATEMENT OF CHANGES IN EQUITY


 


 


 


 


 




For the year ended 30 April 2021


 


 


 


 


 


 


 




 


Share capital


Share premium account


Capital redemption reserve


ESOP share reserve


Foreign exchange reserve


Cash flow hedge reserve


Retained earnings


Total equity




 


£'000


£'000


£'000


£'000


£'000


£'000


£'000


£'000




 


 


 


 


 


 


 


 


 




At 1 May 2020


 902 


  11,148 


1,972 


(113)


 2,338 


 0 


  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 


 0 


  16,009 


  31,108 




 


 


 


 


 


 


 


 


 




 


 


 


 


 


 


 


 


 




At 1 May 2019


 902 


  11,148 


1,972 


(113)


 2,267 


(16)


  10,279 


  26,439 




Profit for the year


  - 


  - 


 - 


  - 


  - 


  - 


 1,920 


 1,920 




Foreign exchange


  - 


  - 


 - 


  - 


 121 


  - 


  - 


 121 




Cash flow hedges:


 


 


 


 


 


 


 


 




Losses


  - 


  - 


 - 


  - 


  - 


(84)


  - 


(84)




Transfers


  - 


  - 


 - 


  - 


  - 


 104 


  - 


 104 




Tax on other comprehensive income


  - 


  - 


 - 


  - 


(50)


(4)


  - 


(54)




Total comprehensive income for the year


  - 


  - 


 - 


  - 


  71 


  16 


 1,920 


 2,007 




Share buybacks


  - 


  - 


 - 


  - 


  - 


  - 


 6 


 6 




Dividends paid


  - 


  - 


 - 


  - 


  - 


  - 


(242)


(242)




 


 


 


 


 


 


 


 


 




At 30 April 2020


 902 


  11,148 


1,972 


(113)


 2,338 


 0 


  11,963 


  28,210 




 


 


 


 


 


 


 


 


 




 
 
 
 




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 £4,046,000 (2019 - £1,920,000) and on 8,962,440 (2020 - 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 2021.
  




2.


Cash and cash equivalents
For the purposes of the consolidated statement of cash flows, cash and cash equivalents comprise the following:




 


2021


2020




 


£'000


£'000




Cash at bank and in hand


19,344 


  11,538 




 
The fair value of cash and cash equivalents are considered to be their book value.  
 




3.






Trade and other receivables


 


 




 


2021


2020




 


£'000


£'000




Trade receivables


5,216 


 4,892 




Less: provision for impairment of trade receivables


(348)


(454)




Other receivables


  2,558 


 701 




Prepayments and accrued income


1,205 


 1,360 




 


  8,631 


 6,499 




 
 




4.






Trade and other payables


 




 


2021


2020




 


£'000


£'000




Trade payables


 4,718 


 4,411 




Accruals


5,890 


 2,759 




Payments received on account


  6,004 


2,105 




Other taxes and social security costs


  559 


 515 




Other payables


1,172 


  1,217 




 


18,343 


  11,007 




 
 




5.


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 2021 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 2020 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. 
 
Copies of the Annual Report and full Financial Statements will be posted to shareholders during the week commencing 16 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.




 


 




6.


Annual General Meeting




 


The Annual General Meeting of Colefax Group Plc will be held at 19-23 Grosvenor Hill London W1K 3QD on 23 September 2021 at 11.00am.




 

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