Last checked at 25 Jan 2012 07:00
CFX
COLEFAX GROUP PLC
("Colefax" or the "Group")
Half Year Results
for the six months ended 31 October 2011
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 of £35.14m (2010: £36.69m)
·; Pre-tax profit of £1.98m (2010: £2.98m)
·; Earnings per share of 9.9p (2010: 12.4p)
·; Net cash of £5.30m (2010: £7.26m)
·; Interim dividend held at 1.85p per share (2010: 1.85p per share)
·; Weak performance from the Decorating Division
·; Recovery in core US market slower than expected
David Green, Chairman, said
"The principal reason for the decline in our pre-tax profit for the six months to 31 October 2011 was a weak performance from the Decorating Division which made a loss of £248,000 for the first half compared to an exceptional profit of £625,000 in the same period last year. In addition, sales in the Product Division's principal markets were weaker than we expected.
Since the half year end trading conditions in the UK and Europe have deteriorated and we expect trading to become more difficult. In the US, which is our major market, we expect the recovery to continue but at a slower pace than we previously anticipated. There are still three important sales months left in this financial year but, as a result of current trading conditions, the Board now believes that this year's pre-tax profits will be significantly below current market expectations.
The Group has a strong balance sheet and we continue to invest in our portfolio of brands but until we have evidence of a return to growth our focus will remain on managing cash flow and controlling costs."
Enquiries:
Colefax Group plc | David Green, Chairman | Tel: 020 3178 6378 (today) |
Robert Barker, Finance Director | ||
Biddicks | Katie Tzouliadis | Tel: 020 3178 6378 |
Sophie McNulty | ||
Peel Hunt LLP | Dan Webster | Tel: 020 7418 8900 |
(NOMAD & Broker) | Matthew Armitt | |
Richard Brown |
COLEFAX GROUP PLC
CHAIRMAN'S STATEMENT
Financial Results
The Group's pre-tax profit for the six months to 31 October 2011 was £1.98 million (2010: £2.98 million) on sales down by 4% at £35.14 million (2010: £36.69 million). Earnings per share decreased to 9.9p (2010: 12.4p). The Group ended the six months with net cash of £5.30 million (2010: £7.26 million).
During the period, the Group purchased for cancellation 110,000 shares at an average price of £2.46 per share, representing 0.78% of the Group's issued share capital at the start of the year.
The Board has decided to maintain the interim dividend at 1.85p per share. The interim dividend will be paid on 10 April 2012 to shareholders on the register at the close of business on 9 March 2012.
The principal reason for the decline in our pre-tax profit for the six months to 31 October 2011 was a weak performance from the Decorating Division which made a loss of £248,000 for the first half compared to an exceptional profit of £625,000 in the same period last year. In addition, sales in the Product Division's principal markets were weaker than we expected.
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 88% of the Group's sales, increased by 1% to £30.95 million (2010: £30.69 million) and by 2% on a constant currency basis.
Sales in the US, which represent 50% of the Fabric Division's turnover, increased by 7% on a constant currency basis. The improvement has been slower than we expected and sales are still 26% below the peak sales we achieved in 2007. Although there are encouraging signs of a pick up in the wider US economy we believe the pace of recovery will remain slow. During the period we successfully moved our US operations to new premises in Manhattan resulting in significant capital expenditure during the period.
Sales in the UK, which represent 21% of the Fabric Division's turnover, were flat during the period. This compares to an increase of 16% for the same period last year. The UK market has been more resilient than we expected, especially in London, but there are signs that demand is weakening and we do not anticipate growth over the remainder of the year.
Sales in Continental Europe, which represent 26% of the Fabric Division's turnover, were down 6% on a constant currency basis with some significant variations between countries. Sales in France, our largest European market, were flat during the period whereas in Italy, our second largest market, sales were down by 14%. The performance in Europe clearly reflects the impact of the ongoing Eurozone crisis and current trends suggest that market conditions are likely to deteriorate further.
Sales in the rest of the world, which represent just 3% of the Fabric Division's turnover, increased by 4% during the period. We have continued to invest in particular markets, especially Russia, the Middle East and China but they are still a relatively small proportion of overall sales.
·; Furniture - Kingcome Sofas
Sales for the six months to 31 October 2011 were down by 8% to £1.12 million (2010: £1.22 million). The majority of furniture sales are made in the UK and the decline in sales reflects difficult trading conditions in this market. The forward order book is currently at a similar level to last year.
Interior Decorating Division
Decorating sales in the first six months decreased by 36% to £3.06 million (2010: £4.77 million). These sales reflect a more normal level of activity following an exceptional performance last year. Decorating Division sales can fluctuate significantly from year to year according to the size and timing of projects. A number of major decorating projects have been delayed until next year and as a result we do not expect this division to make a profit for the current year.
Prospects
Since the half year end trading conditions in the UK and Europe have deteriorated and we expect trading to become more difficult. In the US, which is our major market, we expect the recovery to continue but at a slower pace than we previously anticipated. There are still three important sales months left in this financial year but, as a result of current trading conditions, the Board now believes that this year's pre-tax profits will be significantly below current market expectations. The Group has a strong balance sheet and we continue to invest in our portfolio of brands but until we have evidence of a return to growth our focus will remain on managing cash flow and controlling costs.
David Green
Chairman
25 January 2012
COLEFAX GROUP PLC
INTERIM GROUP INCOME STATEMENT | |||
Restated | |||
Unaudited | Unaudited | Audited | |
Six months to 31 Oct 2011 | Six months to 31 Oct 2010 | Year to 30 April 2011 | |
£'000 | £'000 | £'000 | |
Continuing operations: | |||
Revenue | 35,140 | 36,685 | 77,722 |
Profit from operations | 1,978 | 2,908 | 6,448 |
Finance income | 4 | 72 | 74 |
Finance expense | (1) | - | (1) |
3 | 72 | 73 | |
Profit before taxation | 1,981 | 2,980 | 6,521 |
Tax expense | (595) | (956) | (1,765) |
Profit from continuing operations | 1,386 | 2,024 | 4,756 |
Trading loss on discontinued operations, net of tax | - | (136) | (111) |
Loss on disposal, net of tax | - | (104) | (72) |
Loss on discontinued operations, net of tax | - | (240) | (183) |
Profit for the period attributable to equity holders of the parent | 1,386 | 1,784 | 4,573 |
Basic earnings per share | 9.9p | 12.4p | 31.8p |
Diluted earnings per share | 9.9p | 12.2p | 31.5p |
Continuing operations: | |||
Basic earnings per share | 9.9p | 14.0p | 33.0p |
Diluted earnings per share | 9.9p | 13.8p | 32.8p |
COLEFAX GROUP PLC
INTERIM GROUP STATEMENT OF COMPREHENSIVE INCOME | |||
Unaudited | Unaudited | Audited | |
Six months to 31 Oct 2011 | Six months to 31 Oct 2010 | Year to 30 April 2011 | |
£'000 | £'000 | £'000 | |
Profit for the period | 1,386 | 1,784 | 4,573 |
Other comprehensive income: | |||
Currency translation differences on foreign currency net investments | 202 | (399) | (610) |
Cash flow hedges: | |||
(Losses) / gains recognised directly in equity | (198) | 664 | 1,012 |
Transferred to profit and loss for the period | (156) | (65) | (235) |
Tax on components of other comprehensive income | (10) | (37) | 50 |
Total other comprehensive income | (162) | 163 | 217 |
Total comprehensive income for the period attributable to equity holders of the parent | 1,224 | 1,947 | 4,790 |
COLEFAX GROUP PLC
INTERIM GROUP STATEMENT OF FINANCIAL POSITION | |||
Unaudited | Unaudited | Audited | |
As at 31 Oct 2011 | As at 31 Oct 2010 | As at 30 April 2011 | |
£'000 | £'000 | £'000 | |
Non-current assets: | |||
Property, plant and equipment | 7,506 | 5,395 | 5,909 |
Deferred tax asset | 1,343 | 1,349 | 1,372 |
8,849 | 6,744 | 7,281 | |
Current assets: | |||
Inventories and work in progress | 13,481 | 11,300 | 12,283 |
Trade and other receivables | 11,886 | 12,561 | 12,640 |
Cash and cash equivalents | 5,661 | 7,260 | 7,132 |
31,028 | 31,121 | 32,055 | |
Current liabilities: | |||
Trade and other payables | 13,013 | 12,423 | 13,042 |
Current corporation tax | 502 | 476 | 388 |
Provisions | - | - | 205 |
13,515 | 12,899 | 13,635 | |
Net current assets | 17,513 | 18,222 | 18,420 |
Total assets less current liabilities | 26,362 | 24,966 | 25,701 |
Non-current liabilities: | |||
Pension liability | 228 | 306 | 241 |
Net assets | 26,134 | 24,660 | 25,460 |
Capital and reserves attributable to equity holders of the Company: | |||
Called up share capital | 1,394 | 1,464 | 1,405 |
Share premium account | 11,148 | 11,148 | 11,148 |
Capital redemption reserve | 1,480 | 1,411 | 1,469 |
ESOP share reserve | (96) | (18) | (96) |
Share based payment reserve | 19 | 126 | 94 |
Foreign exchange reserve | 1,483 | 1,472 | 1,383 |
Cash flow hedge reserve | 320 | 439 | 583 |
Retained earnings | 10,386 | 8,618 | 9,474 |
Total equity | 26,134 | 24,660 | 25,460 |
COLEFAX GROUP PLC
INTERIM GROUP STATEMENT OF CASH FLOWS | |||
Unaudited | Unaudited | Audited | |
Six months to 31 Oct 2011 | Six months to 31 Oct 2010 | Year to 30 April 2011 | |
£'000 | £'000 | £'000 | |
Operating activities | |||
Profit before taxation - continuing operations | 1,981 | 2,980 | 6,521 |
Loss before taxation - discontinued operations | - | (363) | (278) |
Finance income | (4) | (72) | (74) |
Finance expense | 1 | - | 1 |
Depreciation | 1,026 | 922 | 2,044 |
Cash flows from operations before changes in working capital | 3,004 | 3,467 | 8,214 |
(Increase) / decrease in inventories and work in progress | (1,139) | 484 | (566) |
Decrease in trade and other receivables | 447 | 307 | 316 |
Increase / (decrease) in trade and other payables | 127 | (219) | (205) |
Cash generated from operations | 2,439 | 4,039 | 7,759 |
Taxation paid | |||
UK corporation tax paid | (649) | (426) | (1,280) |
Overseas tax received / (paid) | 208 | (249) | (279) |
(441) | (675) | (1,559) | |
Net cash inflow from operating activities | 1,998 | 3,364 | 6,200 |
Investing activities | |||
Payments to acquire property, plant and equipment | (2,571) | (1,118) | (2,885) |
Receipts from sales of property, plant and equipment | 17 | 14 | 29 |
Interest received | 4 | 72 | 74 |
Purchase of ESOP shares | - | - | (95) |
Net cash outflow from investing | (2,550) | (1,032) | (2,877) |
Financing activities | |||
Purchase of own shares | (270) | (119) | (1,840) |
Interest paid | (1) | - | (1) |
Equity dividends paid | (277) | (224) | (486) |
Net cash outflow from financing | (548) | (343) | (2,327) |
Net (decrease) / increase in cash and cash equivalents | (1,100) | 1,989 | 996 |
Cash and cash equivalents at beginning of period | 6,298 | 5,472 | 5,472 |
Exchange gains / (losses) on cash and cash equivalents | 97 | (201) | (170) |
Cash and cash equivalents at end of period | 5,295 | 7,260 | 6,298 |
COLEFAX GROUP PLC
NOTES | |
1. | The Group prepares its annual financial statements in accordance with International Financial Reporting Standards (IFRS). 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 2012. |
These standards and interpretations are subject to ongoing review and endorsement by the EU or possible amendment by interpretive guidance from the International Financial Reporting Interpretations Committee ('IFRIC') and are therefore still subject to change. | |
2. | Revenue has been restated in 2010 to reclassify sampling and freight income which was previously reported within cost of sales and operating expenses. Profit from operations is not affected by this change. |
3. | During the financial period ended 31 October 2011, the Company paid a final dividend for the year ended 30 April 2011 of 2.00p per ordinary share amounting to £277,000. |
The proposed interim dividend of 1.85p (2010: 1.85p) per share is payable on 10 April 2012 to qualifying shareholders on the register at the close of business on 9 March 2012. | |
4. | Basic earnings per share have been calculated on the basis of earnings of £1,386,000 (2010: £1,784,000) and on 13,959,892 (2010: 14,448,476) ordinary shares being the weighted average number of ordinary shares in issue during the period. |
5. | Diluted earnings per share have been calculated on the basis of earnings of £1,386,000 (2010: £1,784,000) and on 13,974,892 (2010: 14,633,476) ordinary shares being the weighted average number of ordinary shares in the period adjusted to assume conversion of all dilutive potential ordinary shares of 15,000 (2010: 185,000). |
6. | The financial information for the year ended 30 April 2011 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 30 April 2011 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 2011 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 Company'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 39 Brook Street, London W1K 4JE. |