TIDMCFX

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 GBP51.66 million (2021: GBP46.12 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 GBP5.2 million (2021: GBP4.49 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 GBP5.4 million of surplus capital to shareholders in September 2022

-- Fabric Division sales up 14% to GBP47.17 million (2021: GBP41.25 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 GBP3.13 million (2021: GBP3.57 million) with project completions weighted to the second half of the financial year

o loss of GBP596,000 (2021: loss of GBP378,000)

   --      Cash generation of GBP2.9 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 GBP51.66 million (2021: GBP46.12 million) and by 2.5% on a constant currency basis. Pre-tax profits increased by 16% to GBP5.20 million (2021: GBP4.49 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 GBP19.95 million (April 30 2022: GBP21.79 million).

In September 2022 the Group returned GBP5.4 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 GBP596,000 (2021: - loss of GBP378,000) 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 GBP47.17 million (2021: GBP41.25 million) and by 3.5% on a constant currency basis. Profits increased by 16% to GBP5.65 (2021: GBP4.88 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 GBP1.36 million (2021: GBP1.30 million) and the Company made an operating profit of GBP130,000 compared to an operating loss of GBP11,000 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 GBP3.13 million (2021: GBP3.57 million) resulting in a first half loss of GBP596,000 compared to a loss of GBP378,000 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  Six months       Year 
                                             to          to         to 
                                         31 Oct      31 Oct   30 April 
                                           2022        2021       2022 
                                        GBP'000     GBP'000    GBP'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          Six months        Year 
                                                    to                  to          to 
                                                31 Oct              31 Oct    30 April 
                                                  2022                2021        2022 
                                               GBP'000             GBP'000     GBP'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 the parent                                  4,718               3,256       9,015 
-----------------------------------------  -----------  ------------------  ---------- 
 

COLEFAX GROUP PLC

INTERIM GROUP STATEMENT OF FINANCIAL POSITION

 
                                                       Unaudited   Unaudited     Audited 
                                                           As at       As at       As at 
                                                          31 Oct      31 Oct    30 April 
                                                            2022        2021        2022 
                                          Notes          GBP'000     GBP'000     GBP'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   Six months       Year 
                                                 to 31 Oct    to 31 Oct      to 30 
                                                      2022         2021      April 
                                                                              2022 
                                                   GBP'000      GBP'000    GBP'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 
         . 
         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 GBP3,970,000 (2021: GBP3,435,000) 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 GBP3,970,000 (2021: GBP3,435,000) 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     As at     As at 
                                              31 Oct    31 Oct    30 Apr 
                                                2022      2021      2022 
                                             GBP'000   GBP'000   GBP'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     As at     As at 
                                               31 Oct    31 Oct    30 Apr 
                                                 2022      2021      2022 
                                              GBP'000   GBP'000   GBP'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     As at     As at 
   7.                                            31 Oct    31 Oct    30 Apr 
                                                   2022      2021      2022 
                                                GBP'000   GBP'000   GBP'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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