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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