TIDMCFX
RNS Number : 7962V
Colefax Group PLC
26 July 2018
AIM: CFX
26 July 2018
COLEFAX GROUP PLC
("Colefax" or the "Group")
Preliminary Results for the year ended 30 April 2018
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 increased by 6.9% to GBP86.05m (2017: GBP80.48m)
-- Pre-tax profit increased by 60.7% to GBP4.72m (2017:
GBP2.94m), mainly reflecting reduced hedging losses
and an exceptional performance from the Decorating Division
-- Earnings per share up by 105% to 38.1p (2017: 18.6p),
reflecting increased profitability and lower corporate
tax rate
-- Strong operating cash flow of GBP8.91m (2017: GBP4.18m)
-- GBP2.2m returned to shareholders via share buybacks
(2017: GBP2.6m)
-- Net cash at year end increased to GBP9.2m (2017: GBP6.7m)
-- Proposed increased final dividend of 2.60p per share
(2017: 2.50p), taking total for the year to 5.00p (2017:
4.80p), a rise of 4%
-- Fabric Division sales of GBP71.11m (2017 GBP70.05m),
up 1.5% and by 3.3% on constant currency basis. US sales
up 6.2%, UK sales up 1.0% and European sales flat.
-- Decorating Division sales increased by 53% to GBP12.33m
(2017: GBP8.06m), due to a number of major projects
completing during the year
-- Continued growth in the core US market should underpin
the Group's expected performance in the current year
David Green, Chief Executive, said:
"The Group has made good progress over the last twelve months
despite generally difficult trading conditions in most of our major
markets. Our largest market, the US, is showing signs of continued
growth and this should underpin our performance in the current
year. In addition we no longer have any hedging contracts put in
place prior to the Brexit referendum and will benefit from the
current weakness of Sterling.
"In our other major markets, the UK and Europe, we are
experiencing increasingly difficult trading conditions and we
expect this to offset some of the anticipated growth in the US. In
addition we expect our Decorating Division to return to a more
normal level of activity following an exceptional performance last
year.
"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, Emma Tel: 020 3178 6378
Pearson
Peel Hunt LLP Adrian Trimmings, George Tel: 020 7418 8900
(Nominated Advisor Sellar
And Broker)
COLEFAX GROUP PLC
CHAIRMAN'S STATEMENT
Financial Results
Group sales for the year to 30 April 2018 increased by 6.9% to
GBP86.05 million (2017: GBP80.48 million) and by 8.6% on a constant
currency basis. Pre-tax profits increased by 60.7% to GBP4.72
million (2017: GBP2.94 million) and earnings per share increased by
105% to 38.1p (2017: 18.6p). The Group ended the year with net cash
of GBP9.2 million (2017: GBP6.7 million).
The Board is proposing to increase the final dividend by 4% to
2.60p per share (2017: 2.50p) making a total for the year of 5.00p
(2017: 4.80p), an increase of 4%. This increase is in line with the
Group's progressive dividend policy and preferred strategy of
returning surplus cash to shareholders via share buybacks. The
final dividend, which is subject to shareholder approval, will be
paid on 10th October 2018 to shareholders on the register at the
close of business on 7th September 2018.
During the year the Group returned GBP2.17 million (2017:
GBP2.58 million) to shareholders through the purchase of 413,000
shares at an average price of GBP5.25 per share and representing
4.2% of the issued share capital of the Company.
The improvement in our profit was for three main reasons.
Firstly, losses on hedging put in place prior to the Brexit vote
reduced to GBP959,000 from GBP2.0 million last year and have now
come to an end. Secondly, our Decorating Division delivered an
exceptional performance making a profit before tax of GBP901,000
compared to a profit of GBP108,000 last year. Thirdly, in our core
Fabric Division, sales in our main US market increased by 6.2% on a
constant currency basis.
Excluding share buybacks and dividend payments the Group
generated cash of GBP5.5 million during the year (2017: GBP1.3
million outflow). This improvement was due to a combination of
increased profitability, significantly lower capital expenditure
and tight control of working capital.
Capital expenditure during the year was GBP2.38 million compared
to an exceptional GBP4.1 million last year when we opened our own
US showrooms in Atlanta and Boston and moved our UK based
Decorating Division to a new showroom and offices in Belgravia. The
benefit of these investments is reflected in our current year
performance.
The 105% increase in earnings per share compared to the 60.7%
increase in pre-tax profits is mainly due to a lower Group tax
charge of 19% compared to 35% last year. This includes a one off
deferred tax benefit of GBP350,000 relating to a reduction in the
US corporate tax rate. From January 2018 the US federal corporate
tax rate reduced from 35% to 21% and the Group will realise the
full benefit of this change in future years.
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 83% of Group
turnover, were up by 1.5% to GBP71.11 million (2017: GBP70.05
million) and up by 3.3% on a constant currency basis. Operating
profit increased by 31.8% to GBP3.69 million (2017: GBP2.80
million) but excluding hedging losses was down by 3.1% to GBP4.65
million (2017: GBP4.80 million) reflecting a weaker US Dollar
average rate of $1.34 compared to $1.29 last year.
The main reason for the increase in Fabric Division sales on a
constant currency basis was an improvement in trading conditions in
our core US market, which represents 59% of the Fabric Division's
turnover. US sales increased by 6.2% compared to a decline of 7.7%
last year. Sales in the second half of the year increased by 7.8%
compared to 4.3% for the first half. The improving trend reflects
the strength of the US economy and in particular the housing
market. Following the opening of our own showrooms in Atlanta and
Boston last year, over 75% of US sales come from territories where
we lease our own showroom as opposed to showrooms operated by
agents. We believe this is the right balance for our business at
the present time. In the current year we are planning the
refurbishment of our existing Los Angeles showroom. As our largest
and most important market the US will remain our main focus for
future capital investment.
Sales in the UK, which represent 18% of the Fabric Division's
turnover, increased by 1% during the year despite increasingly
challenging trading conditions at the top end of the market. High
rates of stamp duty continue to weigh on the number of housing
transactions and the situation is not being helped by Brexit
uncertainty. We believe that our sales are closely correlated with
the health of the high end housing market and would like to see the
top rates of stamp duty reduced to levels where they are not
depressing the market. We are currently refurbishing our trade
showroom in Chelsea Harbour and this project will be completed at
the end of August.
Sales in Continental Europe, which represent 21% of the Fabric
Division's turnover, increased by 3.5% in reported terms but were
flat on a constant currency basis. Despite increased optimism in
the first half of the year, overall market conditions in Europe
have remained difficult and seem unlikely to improve in the short
term. This is especially true in our major markets, France, Germany
and Italy, and despite some improvement in the wider economy caused
by significant monetary stimulus. In France, which is our largest
market, sales decreased by 2%. In Germany sales were flat and in
Italy sales declined by 1%. Each country in Europe has its own
economic and political issues and our strategy will be to tailor
our approach to each market and focus our investment on countries
with the most potential.
Sales in the Rest of the World, which represent just under 3% of
the Fabric Division's turnover, decreased by 8% during the year.
The main markets are the Middle East, Australia, China and Russia.
The decline in sales was mainly due to the Middle East where
contract orders can cause significant sales fluctuations from year
to year
Furniture - Kingcome Sofas
Sales of Kingcome furniture, which represent 3% of Product
Division sales, increased by 11% to GBP2.62 million (2017: GBP2.35
million). Operating profit was GBP130,000 compared to GBP23,000
last year. This business is the Group's only manufacturing activity
and profits are particularly sensitive to fluctuations in sales due
to the relatively high fixed cost base. The increase in sales and
profit was achieved despite challenging market conditions in the UK
and the order book at the year end was significantly ahead of the
prior year. Export sales account for just 13% of total furniture
sales and this represents a growth opportunity especially given the
current weakness of Sterling.
Interior Decorating Division
Decorating sales, which account for 14% of Group turnover,
increased by 53% to GBP12.33 million (2017: GBP8.06 million) and
profits before tax increased to GBP901,000 compared to a profit of
GBP108,000 for the prior year. Last year the Decorating Division
moved from 39 Brook Street to a new showroom and offices at 89-91
Pimlico Road in Belgravia. This is the first full year of operation
at the new premises and we are very pleased with the overall
performance. The new showroom is popular with customers and
although we have less space for antiques a more selective approach
means that antique sales have exceeded expectations. Sales and
profits in the Decorating Division can vary significantly according
to the timing of contracts. Several major projects were completed
during the year and although customer deposits remain healthy we
expect activity to return to more normal levels next year. The
business continues to benefit from the weakness of Sterling and we
have seen an increase in the proportion of overseas work.
Prospects
The Group has made good progress over the last twelve months
despite generally difficult trading conditions in most of our major
markets. Our largest market the US is showing signs of continued
growth and this should underpin our performance in the current
year. In addition we no longer have any hedging contracts put in
place prior to the Brexit referendum and will benefit from the
current weakness of Sterling. However, any significant fluctuations
in the Sterling US Dollar exchange rate are likely to have a
material effect on Group profits. In our other major markets, the
UK and Europe, we are experiencing increasingly difficult trading
conditions and we expect this to offset some of the anticipated
growth in the US. In addition we expect our Decorating Division to
return to a more normal level of activity following an exceptional
performance last year.
The Group has a strong balance sheet with net cash of GBP9.2
million and we will continue to invest with confidence in our
portfolio of luxury brands and our worldwide distribution
network.
David Green
Chairman
26 July 2018
COLEFAX GROUP PLC
GROUP INCOME STATEMENT
For the year ended 30 April 2018
2018 2017
GBP'000 GBP'000
Revenue 86,052 80,475
Cost of sales 39,811 36,119
Gross profit 46,241 44,356
Operating expenses 41,520 41,419
Profit from operations 4,721 2,937
Finance income 1 1
Finance expense (3) (1)
(2) -
Profit before taxation 4,719 2,937
Tax expense
- UK (508) 39
- Overseas (379) (1,081)
(887) (1,042)
Profit for the year attributable to equity
holders of the parent 3,832 1,895
Basic earnings per share 38.1 p 18.6 p
Diluted earnings per share 38.1 p 18.6 p
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 April 2018
2018 2017
GBP'000 GBP'000
Profit for the year 3,832 1,895
Other comprehensive income / (expense):
Items that will not be reclassified to profit
and loss:
Exchange differences on translation of foreign
operations (743) 1,628
Remeasurement of defined benefit pension scheme 31 101
Tax relating to items that will not be reclassified
to profit and loss 76 (449)
(636) 1,280
Items that will or may be reclassified to profit
and loss:
Cash flow hedges:
Gains/(losses) recognised directly in equity 210 (2,611)
Transferred to profit and loss for the year 959 2,006
Tax relating to items that will or may be reclassified
to profit and loss (222) 109
------------ -------------
947 (496)
Total other comprehensive income 311 784
Total comprehensive income for the year attributable
to equity holders of the parent 4,143 2,679
COLEFAX GROUP PLC
GROUP STATEMENT OF FINANCIAL POSITION
At 30 April 2018
2018 2017
GBP'000 GBP'000
Non-current assets:
Property, plant and equipment 8,692 9,669
Deferred tax asset 173 386
Pension asset 34 -
-------------- -----------------
8,899 10,055
Current assets:
Inventories and work in progress 14,086 13,938
Trade and other receivables 11,130 11,805
Current corporation tax - 170
Cash and cash equivalents 9,177 6,710
34,393 32,623
--------------------------------------------- -------------- -----------------
Current liabilities:
Trade and other payables 13,678 13,961
Current corporation tax 306 -
13,984 13,961
-------------- -----------------
Net current assets 20,409 18,662
-------------- -----------------
Total assets less current liabilities 29,308 28,717
--------------------------------------------- -------------- -----------------
Non-current liabilities:
Deferred rent 1,878 1,992
Deferred tax 11 734
Pension liability - 55
Net assets 27,419 25,936
============================================= ============== =================
Capital and reserves attributable to equity
holders of the Company:
Called up share capital 981 1,022
Share premium account 11,148 11,148
Capital redemption reserve 1,893 1,852
ESOP share reserve (113) (113)
Foreign exchange reserve 2,158 2,779
Cash flow hedge reserve (32) (979)
Retained earnings 11,384 10,227
Total equity 27,419 25,936
============================================= ============== =================
COLEFAX GROUP PLC
GROUP STATEMENT OF CASH FLOWS
For the year ended 30 April 2018
2018 2017
GBP'000 GBP'000
Operating activities
Profit before taxation 4,719 2,937
Finance income (1) (1)
Finance expense 3 1
Loss on disposal of property, plant and equipment 235 -
Depreciation 2,735 2,720
Cash flows from operations before changes in
working capital 7,691 5,657
Increase in inventories and work in progress (301) (1,140)
Decrease / (Increase) in trade and other receivables 463 (2,172)
Increase in trade and other payables 1,056 1,835
Cash generated from operations 8,909 4,180
--------------- ----------------
Taxation paid
UK corporation tax paid (350) (224)
Overseas tax paid (679) (1,141)
(1,029) (1,365)
--------------- ----------------
Net cash inflow from operating activities 7,880 2,815
--------------- ----------------
Investing activities
Payments to acquire property, plant and equipment (2,382) (4,126)
Receipts from sales of property, plant and equipment 49 40
Interest received - 1
Net cash outflow from investing (2,333) (4,085)
--------------- ----------------
Financing activities
Purchase of own shares (2,172) (2,583)
Interest paid (3) (1)
Equity dividends paid (488) (478)
Net cash outflow from financing (2,663) (3,062)
--------------- ----------------
Net increase/ (decrease) in cash and cash equivalents 2,884 (4,332)
Cash and cash equivalents at beginning of year 6,710 10,085
Exchange gains on cash and cash equivalents (417) 957
Cash and cash equivalents at end of year 9,177 6,710
======================================================= =============== ================
COLEFAX GROUP PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 30 April 2018
Cash
Share Capital ESOP Foreign flow
Share premium redemption share exchange hedge Retained Total
capital account reserve reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 May 2017 1,022 11,148 1,852 (113) 2,779 (979) 10,227 25,936
Profit for
the year - - - - - - 3,832 3,832
Foreign exchange - - - - (743) - - (743)
Re-measurement
of defined
benefit
pension
scheme - - - - - - 31 31
Cash flow
hedges:
Gains - - - - - 210 - 210
Transfers - - - - - 959 - 959
Tax on other
comprehensive
income - - - - 122 (222) (46) (146)
Total
comprehensive
income for
the year - - - - (621) 947 3,817 4,143
Share buybacks (41) - 41 - - - (2,172) (2,172)
Dividends
paid - - - - - - (488) (488)
At 30 April
2018 981 11,148 1,893 (113) 2,158 (32) 11,384 27,419
At 1 May 2016 1,076 11,148 1,798 (113) 1,559 (483) 11,333 26,318
Profit for
the year - - - - - - 1,895 1,895
Foreign exchange - - - - 1,628 - - 1,628
Re-measurement
of defined
benefit
pension
scheme - - - - - - 101 101
Cash flow
hedges:
Losses - - - - - (2,611) - (2,611)
Transfers - - - - - 2,006 - 2,006
Tax on other
comprehensive
income - - - - (408) 109 (41) (340)
----------------- ------------ ------------ --------------- ------------ --------------- -------------- --------- --------
Total
comprehensive
income for
the year - - - - 1220 (496) 1,955 2,679
Share buybacks (54) - 54 - - - (2,583) (2,583)
Dividends
paid - - - - - - (478) (478)
At 30 April
2017 1,022 11,148 1,852 (113) 2,779 (979) 10,227 25,936
COLEFAX GROUP PLC
NOTES TO THE FINANCIAL INFORMATION
At 30 April 2018
1. Earnings per share
Basic earnings per share have been calculated on the basis of
profit on ordinary activities after tax of GBP3,832,000 (2017:
GBP1,895,000) and on 10,067,216 (2017: 10,185,206) ordinary shares,
being the weighted average number of ordinary shares in issue
during the year. Shares owned by the Colefax Group Plc Employees'
Share Ownership Plan (ESOP) Trust are excluded from the basic
earnings per share calculation.
Diluted earnings per share have been calculated on the basis of
profit on ordinary activities after tax of GBP3,832,000 (2017:
GBP1,895,000) and on 10,067,216 (2017: 10,185,206) ordinary shares,
being the weighted average number of ordinary shares in issue
during the year.
2. Cash and cash equivalents
For the purposes of the consolidated statement of cash flows,
cash and cash equivalents comprise the following:
2018 2017
GBP'000 GBP'000
Cash at bank and in hand 9,177 6,710
Bank overdrafts - -
9,177 6,710
-------- --------
The fair value of cash and cash equivalents are considered to be
their book value.
3. The above financial information, which has been prepared in
accordance with International Financial Reporting Standards as
endorsed by the European Union, does not constitute statutory
accounts as defined in Section 435 of the Companies Act 2006.
The financial information for the year ended 30 April 2018 has
been extracted from the statutory accounts which will be delivered
to the Registrar of Companies following the Company's annual
general meeting. The comparative financial information is based on
the statutory accounts for the financial year ended 30 April 2017
which have been delivered to the Registrar of Companies. The
Independent Auditors' Report on both of those financial statements
was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under Section 498(2) and
Section 498(3) of the Companies Act 2006.
4. Annual General Meeting
The Annual General Meeting of Colefax Group plc will be held at
19-23 Grosvenor Hill, London W1K 3QD on 13 September 2018 at 11.00
a.m.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR BRGDRXXDBGIU
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