Half Year Results

RNS Number : 2776M

Colefax Group PLC

27 January 2009

 



CFX

COLEFAX GROUP PLC

('Colefax' or the 'Group')

Half Year Results

for the six months ended 31 October 2008

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

• Results in line with expectations

• Sales of £36.72m (2007: £38.61m)

• Pre-tax profit of £2.48m (2007: £3.32m)

• Earnings per share of 11.65p (2007: 15.02p)

• Net cash of £2.24m (2007: net debt of £0.74m) 
  
  

• Interim dividend of 1.55p (2007: 1.55p)

• Trading environment expected to worsen although stronger dollar is beneficial 

• Well placed to weather economic downturn

David Green, Chairman, commenting, said:

'Our principal market, the US, started to deteriorate significantly in August 2008 whereas, in the UK, conditions remained relatively robust throughout 2008. As anticipated, all our major markets are now seeing the impact of the global economic downturn and current trading is best described as 'tough, getting tougher'. 

The Group has a broad geographical spread of business and strong balance sheet including net cash of £2.2 million. It is well placed to weather the economic downturn and take advantage of any opportunities that may arise.'  

Enquiries:

Colefax Group plc	David Green, Chairman	Tel: [phone]
KBC Peel Hunt (Nominated Adviser & Broker)	David Anderson	Tel: [phone]
Biddicks	Katie Tzouliadis	Tel: [phone]

  COLEFAX GROUP PLC

CHAIRMAN'S STATEMENT 

Financial Results 

The Group's pre-tax profit for the six months to 31 October 2008 decreased by 25% to £2.48 million (2007: £3.32 million) on sales down 5% at £36.72 million (2007: £38.61 million). Earnings per share decreased by 22% to 11.65p (2007: 15.02p). The Group ended the six months with net cash of £2.24 million (2007: net debt of £745,000).  

During the period, the Group purchased for cancellation 550,000 shares at an average price of £1.63 per share, representing 3.6% of the Group's issued share capital at the start of the year.  

The Board has decided to hold the interim dividend at 1.55p per share (2007: 1.55p per share). The interim dividend will be paid on 14 April 2009 to shareholders on the register at the close of business on 13 March 2009.   In the current volatile economic climate, we will keep our dividend policy under review, dependent upon our results.

Trading conditions in our principal market, the US, started to deteriorate significantly in August 2008, whereas the UK remained relatively robust throughout the whole of 2008. Market conditions in Europe are varied but all our major markets are trending lower. The 25% reduction in our interim profits is mainly due to a lower profit contribution from our Decorating Division, where sales were down 37% compared to a strong first half last year. 

Product Division

• Fabric - Portfolio of Five Brands: 'Colefax and Fowler', 'Cowtan and Tout', 'Jane Churchill', 'Manuel Canovas' and 'Larsen'

Sales in the Fabric Division, which represent 86% of the Group's sales, increased by 1% to £31.40 million (2007: £30.97 million) but decreased by 6% on a constant currency basis.  

Sales in the US, which represent 51% of the Fabric Division's turnover, decreased by 9% on a constant currency basis (2007: increase of 12%). The decline in sales started in August 2008 and deteriorated towards the end of the year, with sales down by 18% in the eight weeks to the end of December. 

Sales in the UK, which represent 21% of the Fabric Division's turnover, were flat through to the end of October. For the eight weeks to the end of December, sales were down by 6%. We are concerned by the lack of transaction activity in the high end housing market as historically our trading performance lags this economic indicator. 

Sales in Continental Europe, which represent 25% of the Fabric Division's turnover, increased by 8% due to the appreciation in the Euro. On a constant currency basis, sales decreased by 6% in the period.  

Sales in the rest of the world, which represent 3% of the Fabric Division's turnover, increased by 2% although growth prospects appear limited given current market conditions.

• Furniture - Kingcome Sofas

Sales of furniture, which account for 4% of Group sales, decreased by 5% during the period. The majority of furniture sales are in the UK and we believe that the reasonable first half performance does not yet reflect the impact of the downturn in the high end housing market. Furniture sales are now starting to see increasingly significant decreases on a month by month basis and we believe that 2009 will be extremely challenging.  

• Accessories - Manuel Canovas 

Accessories comprise sales of beachwear and scented candles and the majority of sales occur in the second half of the year. Our new management team has made significant improvements to both the range and the distribution of the product line but we expect the difficult retail environment to hold back progress for at least the next twelve months.

Interior Decorating Division

Decorating sales decreased by 37% compared to a very strong first six months last year. Part of the sales decrease is due to the timing of contract completions although the full year result will be down on last year's exceptional performance. 

Prospects

Current trading is best described as 'tough, getting tougher' and it is difficult to forecast accurately the level of sales over the coming months. However, I would expect to see a significant like-for-like sales decline next year. The renewed strength of the US Dollar benefits the Group and should off-set some of the decline in trading activity although, this year, we will not benefit fully due to hedging contracts in place for the second half of the year. Next year there will be a significant margin improvement from the stronger US Dollar.

The Group has a broad geographical spread of business and strong balance sheet including net cash of £2.2 million. It is well placed to weather the economic downturn and take advantage of any opportunities that may arise.

David Green

Chairman

    COLEFAX GROUP PLC

INTERIM GROUP INCOME STATEMENT
For the six months ended 31 October 2008
	Unaudited		Unaudited		Audited
	Six Months		Six Months		Year
	to 31 Oct		to 31 Oct		to 30 April
	2008		2007		2008
	£'000		£'000		£'000
Revenue	36,723		38,608		78,181
Profit from operations	2,486		3,373		6,081
Finance income	41		76		127
Finance expense	(46)		(127)		(266)
	(5)		(51)		(139)
Profit before taxation	2,481		3,322		5,942
Tax expense	(819)		(1,096)		(1,877)
Profit for the period attributable to the equity holders of the parent	1,662		2,226		4,065
Basic earnings per share	11.65p		15.02p		27.50p
Diluted earnings per share	11.06p		14.44p		26.10p

    COLEFAX GROUP PLC

INTERIM GROUP BALANCE SHEET
As at 31 October 2008
			Unaudited			Unaudited		Audited
			at 31 Oct			at 31 Oct		at 30 April
			2008			2007		2008
			£'000			£'000		£'000
Non-current assets:
Property, plant and equipment			5,296			5,056		4,960
Deferred tax asset			2,079			2,091		1,991
			7,375			7,147		6,951
Current assets:
Inventories and work in progress			14,918			13,118		13,357
Trade and other receivables			10,149			11,034		10,561
Cash and cash equivalents			2,668			5,623		3,862
			27,735			29,775		27,780
Trade and other payables:
Current corporation tax			1,017			1,308		995
Derivative financial instruments			822			-		-
Other amounts falling due in one year			12,733			18,277		14,152
			14,572			19,585		15,147
Net current assets			13,163			10,190		12,633
Total assets less current liabilities			20,538			17,337		19,584
Non-current liabilities:
Deferred tax liability			284			130		123
Pensions liability			247			195		232
			531			325		355
Net assets			20,007			17,012		19,229
Capital and reserves attributable to equity holders of the Company:
Called up share capital			1,481		1,565			1,536
Share premium account			11,148		11,141			11,148
Capital redemption reserve			1,393		1,308			1,338
ESOP share reserve			(20)		(287)			(20)
Share based payment reserve			664		228			664
Foreign exchange reserve			1,098		(105)			124
Cash flow hedge reserve			(592)		-			-
Retained earnings			4,835		3,162			4,439
Total equity			20,007		17,012			19,229

    COLEFAX GROUP PLC

INTERIM GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSES
For the six months ended 31 October 2008
	Unaudited		Unaudited		Audited
	Six Months		Six Months		Year
	to 31 Oct		to 31 Oct		to 30 April
	2008		2007		2008
	£'000		£'000		£'000
Profit for the period	1,313		2,226		4,065
Currency translation differences on foreign currency net investments	1,590		(226)		704
Deferred tax on long-term loan foreign currency movements	(616)		121		(41)
Unrealised losses on cash flow hedges	(822)		-		-
Deferred tax on unrealised losses on cash flow hedges	230		-		-
Total recognised income and expenses relating to the period	1,695		2,121		4,728

  COLEFAX GROUP PLC

INTERIM GROUP CASH FLOW STATEMENT
For the six months ended 31 October 2008
					Unaudited		Unaudited		Audited
					Six months		Six months		Year
					to 31 Oct		to 31 Oct		to 30 April
					2008		2007		2007
					£'000		£'000		£'000
Operating activities:
Profit before taxation					2,481		3,322		5,942
Finance income					(41)		(76)		(127)
Finance expense					46		127		266
Depreciation					847		814		1,690
Cash flows from operations before changes in working capital					3,333		4,187		7,771
Increase in inventories and work in progress					(903)		(1,156)		(1,215)
Decrease/(increase) in trade and other receivables					732		(1,510)		(672)
(Decrease)/increase in trade and other payables					(991)		(157)		1,143
Cash generated from operations					2,171		1,364		7,027
Taxation paid
UK corporation tax paid					(907)		(955)		(2,002)
Overseas tax received/(paid)					128		(127)		(307)
					(779)		(1,082)		(2,309)
Net cash inflow from operating activities					1,392		282		4,718
Investing activities:
Payments to acquire property, plant and equipment					(693)		(828)		(1,448)
Receipts from sales of property, plant and equipment					7		10		10
Interest received					33		76		125
Net cash outflow from investing					(653)		(742)		(1,313)
Financing activities:
Purchase of own shares					(895)		-		(465)
Interest paid					(46)		(100)		(280)
Equity dividends paid					(373)		(378)		(604)
Net cash outflow from financing					(1,314)		(478)		(1,349)
(Decrease)/increase in cash in the period					(575)		(938)		2,056

    COLEFAX GROUP PLC

NOTES
1.	The interim results have been prepared in accordance with the accounting policies of the Group under International Financial Reporting Standards (IFRS) and on the basis of the accounting policies set out in the annual report and accounts for the year ended 30 April 2008, which have remained unchanged with the exception of the adoption of hedge accounting as detailed in note 5 below.
	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.	During the financial period ended 31 October 2008, the Company paid a final dividend for the year ended 30 April 2008 of 2.65p per ordinary share giving a total dividend of £372,666.
	The proposed interim dividend of 1.55p (2007: 1.55p) per share is payable on 14 April 2009 to qualifying shareholders on the register at the close of business on 13 March 2009.
3.	Basic earnings per share have been calculated on the basis of earnings of £1,662,000 (2007: £2,226,000) and on 14,268,557 (2007: 14,816,510) 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 £1,662,000 (2007: £2,226,000) and on 15,035,512 (2007: 15,408,152) ordinary shares being the weighted average number of ordinary shares in the period adjusted to assume conversion of all dilutive potential ordinary shares of 766,955 (2007: 591,642).
5.	Due to the international nature of its operations, the Group faces currency exposures in respect of exchange rate fluctuations against sterling. The Group minimises this currency translation exchange risk by the use of forward contracts.
	From 1 May 2008, the Group has elected to adopt hedge accounting as permitted under IAS 39 (Financial instruments: recognition and measurement) and account for unrealised gains and losses on forward exchange contracts through a cash flow hedge reserve, when the conditions for hedge accounting are met. When gains and losses on these hedges are realised the gain or loss is transferred to the profit and loss account.
6.	The interim accounts are unaudited. The above financial information does not comprise full accounts within the meaning of Section 240 of the Companies Act 1985 (as amended).
	A copy of the statutory accounts for the year ended 30 April 2008, which were prepared under IFRS, has been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain a statement under section 237 (2)-(3) of the Companies Act 1985 (as amended).
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.

 

END

 

 

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