TIDMCFX

RNS Number : 9762M

Colefax Group PLC

27 January 2021

AIM: CFX

COLEFAX GROUP PLC

("Colefax" or the "Group")

Half Year Results

for the six months ended 31 October 2020

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

-- Strong recovery in core Fabric Division sales following the lockdowns in force at the start of the period

-- Group sales down 14.0% to GBP36.97 million (2019: GBP42.98 million) and by 12.8% on a constant currency basis

-- Group profit before tax up 17% to GBP3.37 million (2019: GBP2.88 million) mainly due to costs deferred by delayed new product launches

   --      Earnings per share increased by 18% to 28.2p (2019: 23.9p) 

-- Fabric Division sales down 7.8% to GBP33.60 million (2019: GBP36.50 million) and by 6.3% on a constant currency basis

o US down by 5.9%, UK down by 11.7%, Europe down by 2.0%

-- Decorating Division sales down 60% to GBP2.1 million (2019: GBP5.2 million) due to coronavirus restrictions

o loss of GBP687,000 (2019: profit of GBP255,000)

-- Cash increased by GBP8.4m to GBP19.9 million (30 April 2020: GBP11.5 million) partly due to delayed investment in new product

David Green, Chairman, said:

" The Group's performance over the last six months has shown resilience in a trading environment where most of our major markets were emerging from varying degrees of lockdown. The easing of lockdowns resulted in renewed interest in home related spending and we believe this is the reason for a sales recovery which has exceeded our initial expectations.

"In the last two months, restrictions have been re-imposed to varying degrees in both the UK and our export markets but so far, the impact on sales is much less than we experienced during the first lockdown. Brexit has added an additional layer of cost and complexity to our European business which we will try to mitigate as far as possible. We are cautiously optimistic about future prospects especially as 62% of our sales in the Fabric Division are in the US, where sales have been very resilient during the pandemic".

" The Group has a strong balance sheet and we will continue to invest with confidence in our portfolio of luxury brands and our worldwide distribution network".

Enquiries:

 
 Colefax Group plc    David Green, Chief         Tel: 020 7318 6021 
                       Executive 
                      Rob Barker, Finance 
                       Director 
 KTZ Communications   Katie Tzouliadis, Dan      Tel: 020 3178 6378 
                       Mahoney 
 Peel Hunt LLP        Adrian Trimmings, Andrew   Tel: 020 7418 8900 
                       Clark 
 

CHAIRMAN'S STATEMENT

Financial Results

Group sales for the six months to 31 October 2019 decreased by 14.0% to GBP36.97 million (2019: GBP42.98 million) and decreased by 12.8% on a constant currency basis. Pre-tax profits increased by 17% to GBP3.37 million (2019: GBP2.88 million). Earnings per share increased by 13% to 28.2p (2019: 23.9p). The Group ended the first half of the year with cash of GBP19.9 million (2019: GBP11.1 million).

The current year started with most of our customers, suppliers and showrooms closed due to worldwide lockdowns. As the lockdowns slowly eased, we experienced a strong recovery in our core Fabric Division sales, which ended the six months down by just 6.3% on a constant currency basis. We attribute this to an increase in housing market activity and renewed interest in home related spending. One consequence of the pandemic has been the delay of our normal autumn product launches to the second half of the year and this timing difference is a major reason for the increase in profit and cash during the period. In addition, the Group received furlough support of GBP539,000, mostly relating to the months of May and June.

In contrast to the Fabric Division, activity levels in our Decorating Division have been adversely affected by the lockdowns and this has slowed the rate of progress on domestic projects and temporarily curtailed the possibility of overseas work.

The Group has a strong balance sheet and significant cash resources but most of our major markets are currently in varying degrees of lockdown. As a result the Board has decided not to restart dividend payments until there is more certainty about the easing of restrictions and future trading conditions. We anticipate that this will be apparent by our financial year end.

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, decreased by 7.8% to GBP33.6 million (2019: GBP36.50 million) and by 6.3% on a constant currency basis. Profits increased by 47% to GBP3.89 million (2019: GBP2.64 million). The increase in profit is mainly due to timing differences resulting from delays to new product launches caused by the pandemic. These launches and related costs will now take place in the second half of the year.

Sales in the US, which represent 62% of the Fabric Division's turnover, decreased by 8.8% in reported terms and by 5.9% on a constant currency basis. The US market experienced a much lower initial decline in sales than the UK and Europe. During the period we made further progress with the integration of our US warehouse operations into the UK. This process will conclude in March with the move of our US operations out of Manhattan to much smaller premises in Brooklyn and will generate some significant efficiency improvements.

Sales in the UK, which represent 16% of the Fabric Division's turnover, declined by 11.7% during the period. The current lockdown in the UK is starting to have an impact on sales, but as with previous lockdowns, we believe that sales will recover quickly when the lockdowns are eased. Although Brexit has major implications for our European business, the last minute free trade deal means that we expect our UK business to be largely unaffected by the UK's departure from the EU.

Sales in Continental Europe, which represent 20% of the Fabric Division's turnover, decreased by 0.8% on a reported basis and by 2.0% on a constant currency basis. The lower rate of overall decline compared to the US and the UK reflects the fact that our main European markets went into lockdown earlier. Despite the announcement of a free trade deal, the UK's departure from the EU has added an additional layer of cost and complexity when selling to EU customers. Apart from a significant increase in red tape, there are some unavoidable duty costs and custom clearance costs which will reduce the profitability of our European activities.

Sales in the Rest of the World, which represent 2% of the Fabric Division's turnover, decreased by 13% on a constant currency basis. Our major markets comprise the Middle East, China and Australia. Trading in these markets is challenging and we expect them to remain a relatively small proportion of total Fabric Division sales.

   --      Furniture - Kingcome Sofas 

Sales for the six months to October 2020 were level with last year at GBP1.25 million (2019: GBP1.25 million) and the Company made an operating profit of GBP166,000 compared to GBP51,000 in 2019. The Company started the year in lockdown with a skeleton staff but as the UK lockdown eased there was a strong recovery in demand for upholstered furniture. Although the current UK lockdown has closed our showroom and significantly reduced the order intake, the order book is still up by 20% compared to the prior year.

Interior Decorating Division

Decorating sales, which account for just under 6% of Group turnover, decreased by 60% in the period to GBP2.1 million (2019: GBP5.2 million) resulting in a first half loss of GBP687,000 compared to a profit of GBP255,000 for the same period last year. The Decorating Division has been the part of the business most affected by the coronavirus pandemic. Travel restrictions have limited the amount of overseas work and typically this accounts for around 40% of total sales. In addition the rate of progress on existing projects has been slowed or delayed especially where prior construction work is involved. Decorating sales are recognised on completion of projects and this explains the low level of billing during the first half. The current level of lockdown means that this situation is continuing in the second half of the year. During the period, customer deposits increased from GBP2.1 million to GBP4.6 million reflecting a healthy level of demand, despite the challenges of the current situation.

Prospects

The Group's performance over the last six months has shown resilience in a trading environment where most of our major markets were emerging from varying degrees of lockdown. The easing of lockdowns resulted in renewed interest in home related spending and we believe that this is the reason for a sales recovery that has exceeded our initial expectations.

Our results for the first six months are distorted by minimal new product investment and related launch costs, which have been delayed until the second half of the year. The US continues to perform strongly although the weaker US Dollar will have an impact on profit margins. In the last two months restrictions have been re-imposed to varying degrees in the both the UK and our export markets but, so far the impact on sales is much less than we experienced during the first lockdown. Brexit has added an additional layer of cost and complexity to our European business which we will try to mitigate as far as possible. We are cautiously optimistic about future prospects especially as 62% of our Fabric Division sales are in the US where sales have been very resilient during the pandemic. However, our Decorating Division will take time to return to more normal levels of activity.

The Group has a strong balance sheet and we will continue to invest with confidence in our portfolio of luxury brands and our worldwide distribution network. The last six months have been immensely challenging for all our staff, customers and suppliers and I would like to thank them for their extraordinary contribution during this difficult period.

David Green

Chairman

COLEFAX GROUP PLC

INTERIM GROUP INCOME STATEMENT

 
                                            Unaudited         Unaudited        Audited 
                                           Six months        Six months           Year 
                                                   to                to             to 
                                          31 Oct 2020       31 Oct 2019       30 April 
                                                                                  2020 
                                              GBP'000           GBP'000        GBP'000 
-----------------------------------  ----------------  ----------------  ------------- 
Revenue                                        36,968            42,979         78,364 
Cost of sales                                (15,777)          (19,129)       (34,602) 
-----------------------------------  ----------------  ----------------  ------------- 
Gross profit                                   21,191            23,850         43,762 
Operating expenses                           (17,816)          (20,335)       (40,655) 
Other income                                      539                 -            280 
-----------------------------------  ----------------  ----------------  ------------- 
Profit from operations                          3,914             3,515          3,387 
Finance income                                      -                14             20 
Finance expense                                 (544)             (647)        (1,231) 
-----------------------------------  ----------------  ----------------  ------------- 
                                                (544)             (633)        (1,211) 
-----------------------------------  ----------------  ----------------  ------------- 
Profit before taxation                          3,370             2,882          2,176 
Tax expense                                     (842)             (740)          (256) 
-----------------------------------  ----------------  ----------------  ------------- 
Profit for the period attributable 
 to equity holders of the parent                2,528             2,142          1,920 
-----------------------------------  ----------------  ----------------  ------------- 
Basic earnings per share                        28.2p             23.9p          21.4p 
Diluted earnings per share                      28.2p             23.9p          21.4p 
-----------------------------------  ----------------  ----------------  ------------- 
 

INTERIM GROUP STATEMENT OF COMPREHENSIVE INCOME

 
                                                    Unaudited        Unaudited          Audited 
                                                                                           Year 
                                                   Six months       Six months               to 
                                                           to               to         30 April 
                                                  31 Oct 2020      31 Oct 2019             2020 
                                                      GBP'000          GBP'000          GBP'000 
-----------------------------------------  ------------------  ---------------  --------------- 
 Profit for the period                                  2,528            2,142            1,920 
-----------------------------------------  ------------------  ---------------  --------------- 
 Other comprehensive income / (expense): 
 Items that will or may be reclassified 
  to profit and loss: 
 Exchange differences on translation 
  of foreign operations                                 (535)            (269)              121 
 Cash flow hedges: 
 (Losses) / gains recognised directly 
  in equity                                                 -             (84)             (84) 
 Transferred to profit and loss for 
  the period                                                -              104              104 
 Tax relating to items that will or 
  may be reclassified to profit and 
  loss                                                     38             (13)             (54) 
-----------------------------------------  ------------------  ---------------  --------------- 
 Total other comprehensive income / 
  (expense)                                             (497)            (262)               87 
-----------------------------------------  ------------------  ---------------  --------------- 
 Total comprehensive income for the 
  period attributable to equity holders 
  of the parent                                         2,031            1,880            2,007 
-----------------------------------------  ------------------  ---------------  --------------- 
 

INTERIM GROUP STATEMENT OF FINANCIAL POSITION

 
                                                          Unaudited           Unaudited           Audited 
                                                              As at               As at             As at 
                                                             31 Oct              31 Oct          30 April 
                                                               2020                2019              2020 
                                          Notes             GBP'000             GBP'000           GBP'000 
---------------------------------------  ------  ------------------  ------------------  ---------------- 
 Non-current assets: 
 Right of use assets                                         24,170              27,665            26,057 
 Property, plant and equipment                                7,334               8,102             8,524 
 Deferred tax asset                                             165                 110               118 
---------------------------------------  ------  ------------------  ------------------  ---------------- 
                                                             31,669              35,877            34,699 
---------------------------------------  ------  ------------------  ------------------  ---------------- 
 Current assets: 
 Inventories and work in progress                            12,527              14,554            15,518 
 Trade and other receivables                4                 7,560              10,378             6,499 
 Current corporation tax                                          -                   -               332 
 Cash and cash equivalents                                   19,940              11,086            11,538 
---------------------------------------  ------ 
                                                             40,027              36,018            33,887 
---------------------------------------  ------  ------------------  ------------------  ---------------- 
 Current liabilities: 
 Trade and other payables                   5                14,309              13,405            11,007 
 Lease liabilities                                            3,896               4,399             4,612 
 Other loans                                                    947                   -               977 
 Current corporation tax                                        459                 639                 - 
---------------------------------------  ------  ------------------ 
                                                             19,611              18,443            16,596 
---------------------------------------  ------  ------------------  ------------------  ---------------- 
 Net current assets                                          20,416              17,575            17,291 
---------------------------------------  ------  ------------------  ------------------  ---------------- 
 Total assets less current liabilities                       52,085              53,452            51,990 
---------------------------------------  ------  ------------------  ------------------  ---------------- 
 Non-current liabilities: 
 Lease liabilities                                           21,834              25,339            23,780 
 Deferred tax liability                                          11                  35                 - 
 Pension liability                                                -                   1                 - 
---------------------------------------  ------  ------------------  ------------------  ---------------- 
 Net assets                                                  30,240              28,077            28,210 
=======================================  ======  ==================  ==================  ================ 
 Capital and reserves attributable 
  to equity holders of the Company: 
 Called up share capital                                        902                 902               902 
 Share premium account                                       11,148              11,148            11,148 
 Capital redemption reserve                                   1,972               1,972             1,972 
 ESOP share reserve                                           (114)               (114)             (113) 
 Foreign exchange reserve                                     1,841               1,990             2,338 
 Retained earnings                                           14,491              12,179            11,963 
 Total equity                                                30,240              28,077            28,210 
=======================================  ======  ==================  ==================  ================ 
 

INTERIM GROUP STATEMENT OF CASH FLOWS

 
                                                      Unaudited           Unaudited           Audited 
                                                     Six months          Six months           Year to 
                                                      to 31 Oct           to 31 Oct          30 April 
                                                           2020                2019              2020 
                                                        GBP'000             GBP'000           GBP'000 
-------------------------------------------  ------------------  ------------------  ---------------- 
 Operating activities 
 Profit before taxation                                   3,370               2,882             2,176 
 Finance income                                               -                (14)              (20) 
 Finance expense                                            544                 647             1,231 
 (Profit) / loss on disposal of property, 
  plant and equipment                                      (13)                (17)              (28) 
 Depreciation on right of use assets                      2,153               2,127             3,071 
 Depreciation                                             1,557               1,353             4,193 
-------------------------------------------  ------------------  ------------------  ---------------- 
 Cash flows from operations before 
  changes in working capital                              7,611               6,978            10,623 
 Decrease / (increase) in inventories 
  and work in progress                                    2,927                 377             (497) 
 (Increase) / decrease in trade and 
  other receivables                                     (1,105)                 929             4,914 
 Increase / (decrease) in trade and 
  other payables                                          2,998             (2,035)           (4,461) 
------------------------------------------- 
 Cash generated from operations                          12,431               6,249            10,579 
-------------------------------------------  ------------------  ------------------  ---------------- 
 Taxation paid 
 UK corporation tax paid                                     24               (351)             (602) 
 Overseas tax paid                                         (83)               (427)             (748) 
-------------------------------------------  ------------------  ------------------ 
                                                           (59)               (778)           (1,350) 
-------------------------------------------  ------------------  ------------------  ---------------- 
 Net cash inflow from operating activities               12,372               5,471             9,229 
-------------------------------------------  ------------------  ------------------  ---------------- 
 Investing activities 
 Payments to acquire property, plant 
  and equipment                                           (514)             (1,203)           (3,183) 
 Receipts from sales of property, plant 
  and equipment                                              13                  27                39 
 Interest received                                            -                  14                20 
------------------------------------------- 
 Net cash outflow from investing                          (501)             (1,162)           (3,124) 
-------------------------------------------  ------------------  ------------------  ---------------- 
 Financing activities 
 Proceeds from loans and borrowings                           -                   -               968 
 Principal paid on lease liabilities                    (2,749)             (1,879)           (3,646) 
 Interest paid on lease liabilities                       (538)               (647)           (1,231) 
 Other interest paid                                        (6)                   -                 - 
 Equity dividends paid                                        0               (242)             (242) 
------------------------------------------- 
 Net cash outflow from financing                        (3,293)             (2,768)           (4,151) 
-------------------------------------------  ------------------  ------------------  ---------------- 
 Net increase in cash and cash equivalents                8,578               1,541             1,954 
 Cash and cash equivalents at beginning 
  of period                                              11,538               9,458             9,458 
 Exchange (losses) / gains on cash 
  and cash equivalents                                    (176)                  87               126 
 Cash and cash equivalents at end of 
  period                                                 19,940              11,086            11,538 
-------------------------------------------  ------------------  ------------------  ---------------- 
 

COLEFAX GROUP PLC

 
 NOTES 
 
 1.   The Group prepares its annual financial statements in accordance 
       with International Accounting Standards (IFRS) in conformity 
       with the requirements of the Companies Act 2006. 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 2021. 
 
 2.   Basic earnings per share have been calculated on the basis of 
       earnings of GBP2,528,000 (2019: GBP2,142,000) and on 8,962,440 
       (2019: 8,962,440) ordinary shares being the weighted average 
       number of ordinary shares in issue during the period. 
 
 3.   Diluted earnings per share have been calculated on the basis 
       of earnings of GBP2,528,000 (2019: GBP2,142,000) and on 8,962,000 
       (2019: 8,962,000) 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 (2019: nil). 
 
 4     Trade and other receivables          As at     As at     As at 
                                            31 Oct    31 Oct    30 Apr 
                                              2020      2019      2020 
                                           GBP'000   GBP'000   GBP'000 
 
        Trade debtors                        5,144     4,969     4,438 
        Other debtors                          994     2,733       701 
        Prepayments and accrued income       1,422     2,676     1,360 
                                             7,560    10,378     6,499 
        ================================  ========  ========  ======== 
 
 5     Trade and other payables              As at     As at     As at 
                                             31 Oct    31 Oct    30 Apr 
                                               2020      2019      2020 
                                            GBP'000   GBP'000   GBP'000 
 
        Trade creditors                       4,102     3,625     4,411 
        Payments received on account          4,263     2,603     2,105 
        Other taxes and social security 
         costs                                  720       679       515 
        Other creditors                       1,207     2,985     1,217 
        Accruals                              4,017     3,513     2,759 
                                             14,309    13,405    11,007 
        =================================  ========  ========  ======== 
 
 6.   The financial information for the year ended 30 April 2020 does 
       not constitute the full statutory accounts for that period. The 
       Annual Report and Financial Statements for the year ended 30 
       April 2020 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 2020 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. 
 
 7.   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. 
 

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