TIDMCFX

RNS Number : 3625I

Colefax Group PLC

12 August 2021

AIM: CFX

COLEFAX GROUP PLC

("Colefax" or the "Group")

Preliminary Results for the year ended 30 April 2021

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 decreased by 1% to GBP77.91m (2020 - GBP78.36m) but on 
       a constant currency basis, sales increased by 2% 
 --   Pre-tax profit increased by 149% to GBP5.42m (2020 - GBP2.18m) 
       - mainly driven by a strong recovery in core Fabric Division 
       sales, and also lower new product investment 
      -   profit included a prior year US CARES loan of GBP922,000 
           approved as a grant in the financial year under review 
 --   Earnings per share increased by 111% to 45.1p (2020 - 21.4p) 
 --   Cash at 30 April 2021 increased to GBP19.3m (2020 - GBP11.5m) 
 --   Fabric Division sales increased by 3.8% to GBP69.58m (2020 
       - GBP67.03m) and by 6.7% on a constant currency basis 
      -   US sales up by 8%, UK sales up by 1% and Europe sales up 
           by 9% (on a constant currency basis) 
 --   Decorating Division sales decreased by 35% to GBP5.79m (2020 
       - GBP8.96m) resulting in a pre-tax loss of GBP680,000 (2020 
       - GBP121,000 profit) 
      -   project delays and travel restrictions caused by the pandemic 
           impacted activity 
 --   Board is not proposing a final dividend but intends to restart 
       dividends in the new financial year 
 

David Green, Chief Executive of Colefax Group plc, said:

"Results for this financial year and the prior year were significantly impacted by emergency lockdowns across the world. However, with the easing of restrictions, sales in the Fabric Division, our core operation, recovered strongly. This was fuelled by a buoyant housing market and surge in home-related spending.

" Demand is currently strong across all areas of the business, and we are therefore optimistic about sales prospects. However, it is not yet clear how long these favourable conditions will last, and two factors will weigh on profits. First, the strength of Sterling against the US Dollar, the US being our dominant marketplace, and secondly the additional costs of selling in EU markets following Brexit. In our Decorating Division, we are expecting an exceptional year, but this is partly due to the delay of projects from the prior year."

Enquiries:

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

COLEFAX GROUP PLC

CHAIRMAN'S STATEMENT

Financial Results

Group sales for the year to 30 April 2021 decreased by 1% to GBP77.91 million (2020 - GBP78.36 million) but increased by 2% on a constant currency basis. Pre-tax profits increased by 149% to GBP5.42 million (2020 - GBP2.18 million) and earnings per share increased by 111% to 45.1p (2020 - 21.4p). The Group ended the year with cash of GBP19.3 million (2020 - GBP11.5 million).

The Board is not proposing the payment of a final dividend for the year ended 30 April 2021 but intends to restart dividend payments in respect of the year ended 30 April 2022. Going forward it is the Board's intention to return to a progressive dividend policy. The Board will continue to review options for returning surplus cash to shareholders in line with the Group's long running share buyback strategy.

The financial year started in the middle of the first worldwide lockdowns and the timing of our year end on 30 April means that our results for both the current and prior year have been significantly impacted. The principal reason for the increase in profit was a strong recovery in Fabric Division sales which ended the year up by 6.7% on a constant currency basis. This recovery started after the first lockdowns ended and continued through the remainder of the year. In contrast our Decorating Division made a pre-tax loss of GBP680,000 due to project delays and travel restrictions caused by the pandemic. Group profit includes furlough income of GBP540,000 (2020 - GBP280,000) and GBP922,000 from a prior year coronavirus related US CARES loan which was approved as a grant and recognised as income in April 2021.

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 89% of Group turnover, increased by 3.8% to GBP69.58 million (2020 - GBP67.03 million) and by 6.7% on a constant currency basis. Pre-tax profit increased by 197% to GBP5.81 million (2020 - GBP2.0 million). Prior year profit included exceptional costs of GBP714,000 relating to the move of our US Fabric Division operations to the UK.

The improvement in Fabric Division profit was partly due to cost reductions resulting from lower levels of new product investment during the year. Furlough income amounted to GBP427,000 with the majority of this amount claimed in the peak lockdown months of May, June and July 2020. In addition a prior year US CARES loan of GBP922,000 was only approved as a grant and recognised as income in April 2021, hence distorting profits between the current and prior year.

The financial year began with the majority of our customers and suppliers closed or partially closed due to the first lockdowns. Sales were significantly down in the first quarter but started to recover as soon as the lockdowns ended and continued to recover for the remainder of the financial year despite subsequent lockdowns. We attribute this recovery to a significant increase in housing market activity and home related spending.

Sales in the US, which represent 61% of the Fabric Division's turnover, increased by 3% and by 8% on a constant currency basis. The US has been our strongest market throughout the pandemic with a lower decline in sales during the initial lockdown and a stronger recovery post lockdown.

During the year we completed the transfer of the majority of our US warehouse operations to the UK and moved our US headquarters out of New York City to smaller office and warehouse premises in Brooklyn. Going forward this will reduce costs and improve efficiency. In March we moved to a new showroom in the Chicago Design Center and we are pleased with the positive reaction from customers.

Sales in the UK, which represent 16% of the Fabric Division's turnover, increased by 1%. The UK market recovered quickly after the first national lockdown ended in June 2020 and the impact of subsequent lockdowns in the second half of the year was much less significant than the first lockdown due to more customers managing to continue trading and strong demand for home related products.

Sales in Continental Europe, which represent 21% of the Fabric Division's turnover, increased by 11% and by 9% on a constant currency basis. The increase is due to the fact that the first European lockdowns started earlier and had a bigger impact in the prior year than they did in the UK and the US.

Brexit appears to have had a relatively modest impact on our European sales but it has had a significant impact on costs and complexity. An unexpected twist in the free trade agreement means that fabrics sourced from EU manufacturers are subject to import duty when re-exported from the UK to EU customers. Together with higher freight and administration charges the result is that costs have increased by approximately GBP900,000 per year as a result of Brexit.

Sales in the Rest of the World, which represent just 2% of the Fabric Division's turnover, decreased by 4% during the year. Our major markets in the Rest of the World are the Middle East, China and Australia and these are likely to remain a small proportion of total Fabric Division sales.

   --                         Furniture - Kingcome Sofas 

Sales of Kingcome furniture, which represent 4% of Product Division sales, increased by 7% to GBP2.53 million (2020 - GBP2.37 million) but were 6% lower than pre-pandemic sales for the year ended 30 April 2019. Pre-tax profit increased by 188% to GBP288,000 (2020 - GBP100,000). The increase in sales and profit was partly due to the fact that relatively few deliveries were possible in April of the prior year during the first national lockdown and took place in the current year. Furniture sales recovered very quickly when our Fulham Road showroom re-opened after the first lockdown. However, subsequent lockdowns and showroom closures starting in November and December did have an adverse impact on orders because most customers like to visit the showroom before making a buying decision. The order book at the year end was down 25% on the prior year but has subsequently increased to above prior year levels reflecting strong pent up demand for furniture.

Interior Decorating Division

Decorating sales, which account for 7% of Group turnover, decreased by 35% to GBP5.79 million (2020 - GBP8.96 million) resulting in a pre-tax loss for the year of GBP680,000 (2020 - GBP121,000 profit). In a normal year around 40% of sales would come from overseas projects but for much of the year it was not possible to travel overseas to visit new and existing customer's premises. The UK lockdowns also adversely impacted sales and profit by slowing the rate of progress on domestic projects. Despite these challenges, demand for decorating work has remained strong and partly due to delays to existing projects, customer deposits ended the year at a record level of GBP5.8 million.

Prospects

We are currently experiencing strong demand in all areas of the business and believe this is a direct consequence of the lockdowns with end customers either moving house or re-decorating their existing home. Although we are optimistic about sales prospects, it is not yet clear how long these favourable conditions will last. In addition, two factors will weigh on profits in the current year. Firstly, Sterling has strengthened significantly against the US Dollar since a Brexit trade deal was announced in January and Group profits are very sensitive to the US Dollar exchange rate. Secondly, Brexit has resulted in a significant increase in the cost of selling in EU markets. In our Decorating Division we are expecting an exceptional year but this is partly due to the completion of projects delayed from the prior year.

The last year has been unprecedented and uniquely challenging for all our customers, suppliers and staff. I am extremely grateful to our staff who have worked tirelessly to respond to new situations and new ways of working which prioritise health and safety. They have kept the business running smoothly in constantly changing circumstances and I would like to thank them for their hard work, loyalty and support.

David Green

Chairman

12 August 2021

 
 GROUP INCOME STATEMENT 
 For the year ended 30 April 2021 
 
                                                                         2021       2020 
                                                                      GBP'000    GBP'000 
 
 
 Revenue                                                               77,908     78,364 
 Cost of sales                                                       (33,971)   (34,602) 
 
 
 Gross profit                                                          43,937     43,762 
 Operating expenses                                                  (38,910)   (40,655) 
 Other income                                                           1,462        280 
------------------------------------------------------------------  ---------  --------- 
 
 Profit from operations                                                 6,489      3,387 
 
 Finance income                                                             -         20 
 Finance expense                                                      (1,067)    (1,231) 
 
 
 Profit before taxation                                                 5,422      2,176 
 
 
 Tax expense                                                          (1,376)      (256) 
 
 
 Profit for the year attributable to equity holders of the parent       4,046      1,920 
 
 
 Basic earnings per share                                               45.1p      21.4p 
 Diluted earnings per share                                             45.1p      21.4p 
 
 
 
 GROUP STATEMENT OF COMPREHENSIVE INCOME 
 For the year ended 30 April 2021 
 
                                                                                 2021      2020 
                                                                              GBP'000   GBP'000 
 
 
 Profit for the year                                                            4,046     1,920 
 
 
 Other comprehensive income / (expense): 
 
 Items that will or may be reclassified to profit and loss: 
 
 Exchange differences on translation of foreign operations                    (1,251)       121 
 Cash flow hedges: 
 Gains/(losses) recognised directly in equity                                       -      (84) 
 Transferred to profit and loss for the year                                        -       104 
 Tax relating to items that will or may be reclassified to profit and loss        103      (54) 
---------------------------------------------------------------------------  -------- 
                                                                              (1,148)        87 
 
 
 Total other comprehensive income / (expense)                                 (1,148)        87 
 
 
 Total comprehensive income for the year attributable to                        2,898     2,007 
 equity holders of the parent 
---------------------------------------------------------------------------  --------  -------- 
 
 
 GROUP STATEMENT OF FINANCIAL POSITION 
 At 30 April 2021 
                                                   2021      2020 
                                                GBP'000   GBP'000 
 
 
 Non-current assets: 
 Property, plant and equipment                    7,029     8,524 
 Right of use asset                              28,506    26,057 
 Deferred tax asset                                  35       118 
                                                 35,570    34,699 
 Current assets: 
 Inventories and work in progress                16,025    15,518 
 Trade and other receivables                      8,631     6,499 
 Cash and cash equivalents                       19,344    11,538 
 Current corporation tax                            513       332 
                                                 44,513    33,887 
---------------------------------------------  --------  -------- 
 
 Current liabilities: 
 Trade and other payables                        18,343    11,007 
 Lease liabilities                                3,992     4,612 
 Other loans                                          -       977 
                                                 22,335    16,596 
                                               --------  -------- 
 
 Net current assets                              22,178    17,291 
                                               --------  -------- 
 
 Total assets less current liabilities           57,748    51,990 
---------------------------------------------  --------  -------- 
 
 Non-current liabilities: 
 Lease liabilities                               26,323    23,780 
 Deferred tax liability                             317         - 
 
 Net assets                                      31,108    28,210 
---------------------------------------------  --------  -------- 
 
 Capital and reserves attributable to equity 
  holders of the 
 Company: 
 Called up share capital                            902       902 
 Share premium account                           11,148    11,148 
 Capital redemption reserve                       1,972     1,972 
 ESOP share reserve                               (113)     (113) 
 Foreign exchange reserve                         1,190     2,338 
 Cash flow hedge reserve                              0         0 
 Retained earnings                               16,009    11,963 
 Total equity                                    31,108    28,210 
---------------------------------------------  --------  -------- 
 
 
 GROUP STATEMENT OF CASH FLOWS 
 For the year ended 30 April 2021 
                                                    2021      2020 
                                                 GBP'000   GBP'000 
 
 Operating activities 
 Profit before taxation                            5,422     2,176 
 Finance income                                        -      (20) 
 Finance expense                                   1,067     1,231 
 Profit on disposal of property, plant and 
  equipment                                         (30)      (28) 
 Non-cash profit arising from loan waiver          (922)         - 
 Depreciation                                      2,912     3,071 
 Rent concessions                                   (77)         - 
 Impairment of right of use asset                    312         - 
 Depreciation on right of use assets               4,329     4,193 
                                                --------  -------- 
 Cash flows from operations before changes 
  in working capital                              13,013    10,623 
----------------------------------------------  --------  -------- 
 
 Increase in inventories and work in progress      (678)     (497) 
 (Increase) / decrease in trade and other 
  receivables                                    (2,366)     4,914 
 Increase / (decrease) in trade and other 
  payables                                         7,378   (4,461) 
 Cash generated from operations                   17,347    10,579 
----------------------------------------------  --------  -------- 
 
 Taxation paid 
 UK corporation tax paid                           (224)     (602) 
 Overseas tax paid                                 (877)     (748) 
                                                 (1,101)   (1,350) 
                                                --------  -------- 
 
 Net cash inflow from operating activities        16,246     9,229 
----------------------------------------------  --------  -------- 
 
 Investing activities 
 Payments to acquire property, plant and 
  equipment                                      (1,888)   (3,183) 
 Receipts from sales of property, plant and 
  equipment                                           34        39 
 Interest received                                     -        20 
 Net cash outflow from investing                 (1,854)   (3,124) 
----------------------------------------------  --------  -------- 
 
 Financing activities 
 Proceeds from loans and borrowings                    -       968 
 Principal paid on lease liabilities             (4,853)   (3,646) 
 Interest paid on lease liabilities              (1,061)   (1,231) 
 Interest paid                                       (6)         - 
 Equity dividends paid                                 -     (242) 
                                                --------  -------- 
 Net cash outflow from financing                 (5,920)   (4,151) 
----------------------------------------------  --------  -------- 
 
 Net increase in cash and cash equivalents         8,472     1,954 
 Cash and cash equivalents at beginning of 
  year                                            11,538     9,458 
 Exchange (losses)/gains on cash and cash 
  equivalents                                      (666)       126 
----------------------------------------------  -------- 
 Cash and cash equivalents at end of year         19,344    11,538 
----------------------------------------------  --------  -------- 
 
 
 
 
 
   GROUP STATEMENT OF CHANGES IN EQUITY 
 For the year ended 30 April 
  2021 
                                                                                            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 2020                    902     11,148         1,972      (113)       2,338          0      11,963    28,210 
 Profit for the year                -          -             -          -           -          -       4,046     4,046 
 Foreign exchange                   -          -             -          -     (1,251)          -           -   (1,251) 
 Tax on other 
  comprehensive 
  income                            -          -             -          -         103          -           -       103 
 Total comprehensive 
  income for the year               -          -             -          -     (1,148)          -       4,046     2,898 
 
 At 30 April 2021                 902     11,148         1,972      (113)       1,190          0      16,009    31,108 
 
 
 At 1 May 2019                    902     11,148         1,972      (113)       2,267       (16)      10,279    26,439 
 Profit for the year                -          -             -          -           -          -       1,920     1,920 
 Foreign exchange                   -          -             -          -         121          -           -       121 
 Cash flow hedges: 
 Losses                             -          -             -          -           -       (84)           -      (84) 
 Transfers                          -          -             -          -           -        104           -       104 
 Tax on other 
  comprehensive 
  income                            -          -             -          -        (50)        (4)           -      (54) 
 Total comprehensive 
  income for the year               -          -             -          -          71         16       1,920     2,007 
 Share buybacks                     -          -             -          -           -          -           6         6 
 Dividends paid                     -          -             -          -           -          -       (242)     (242) 
 
 At 30 April 2020                 902     11,148         1,972      (113)       2,338          0      11,963    28,210 
 
 
 
 COLEFAX GROUP PLC 
 
  NOTES TO THE FINANCIAL INFORMATION 
 
 
1.   Earnings per share 
      Basic earnings per share have been calculated on the basis of 
      profit on ordinary activities after tax of GBP4,046,000 (2019 
      - GBP1,920,000) and on 8,962,440 (2020 - 8,962.440) 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 are the same as basic earnings per 
      share as there are no outstanding share options in force at 30 
      April 2021. 
2.   Cash and cash equivalents 
      For the purposes of the consolidated statement of cash flows, 
      cash and cash equivalents comprise the following:                                2021      2020 
                                   GBP'000   GBP'000 
                                  --------  -------- 
       Cash at bank and in hand     19,344    11,538 
                                  --------  -------- 
 
 
      The fair value of cash and cash equivalents are considered to 
      be their book value. 
3.    Trade and other receivables 
                                                                 2021      2020 
                                                              GBP'000   GBP'000 
                                                             --------  -------- 
       Trade receivables                                        5,216     4,892 
       Less: provision for impairment of trade receivables      (348)     (454) 
       Other receivables                                        2,558       701 
       Prepayments and accrued income                           1,205     1,360 
                                                                8,631     6,499 
                                                             --------  -------- 
4.    Trade and other payables 
                                             2021      2020 
                                          GBP'000   GBP'000 
                                         --------  -------- 
       Trade payables                       4,718     4,411 
       Accruals                             5,890     2,759 
       Payments received on account         6,004     2,105 
       Other taxes and social security 
        costs                                 559       515 
       Other payables                       1,172     1,217 
                                           18,343    11,007 
                                         --------  -------- 
5.   Financial Information 
      The above financial information, which has been prepared in accordance 
      with international accounting standards in conformity with the 
      Companies Act 2006, does not constitute statutory accounts as 
      defined in Section 435 of the Companies Act 2006. 
 
      The financial information for the year ended 30 April 2021 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 
      2020 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. 
 
      Copies of the Annual Report and full Financial Statements will 
      be posted to shareholders during the week commencing 16 August 
      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. 
 
6.   Annual General Meeting 
     The Annual General Meeting of Colefax Group Plc will be held 
      at 19-23 Grosvenor Hill London W1K 3QD on 23 September 2021 at 
      11.00am. 
 

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