COLEFAX GROUP PLC
(“Colefax” or the “Group”)
Half Year Results
for the six months ended 31 October 2024
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
| ● | Group sales up 1.8% to £52.79 million (2023: £51.84 million) and up 4.1% on a constant currency basis | |
| ● | Group profit before tax down 0.5% to £4.36 million (2023: £4.38 million) | |
| ● | Earnings per share up 12.5% to 53.2p (2023: 47.3p) | |
| ● | Share Buyback returned £2.4 million of surplus capital to shareholders in October 2024 | |
| ● | Fabric Division sales up 2.0% to £46.70 million (2023: £45.80 million) and up 4.5% on a constant currency basis | |
| – | US up by 7%, UK down by 8%, Europe up by 12% | |
| ● | Decorating Division sales of £4.65 million (2023: £4.55 million) with project completions weighted to the second half of the financial year | |
| – | loss of £63,000 (2023: loss of £221,000) | |
| ● | Cash generation of £3.6 million excluding share buybacks and dividend payments (2023: £4.2 million) | |
| ● | Interim dividend of 2.8p (2023: 2.7p) up 4% in line with a progressive dividend policy | |
David Green, Chairman, said:
“The Group has delivered a good performance in the first six months due to a strong Fabric Division performance in the US. Market conditions in the UK and Europe are currently challenging and we expect these conditions to continue through the second half of the year. Following the US election in November the US Dollar exchange rate has strengthened significantly and if sustained this will be beneficial for Fabric Division profits going forward. Although trading prospects in the US look favourable there is currently significant uncertainty around the possibility of higher US import tariffs and how they might impact our US business
“The Group has a strong balance sheet with cash of £18.6 million. We will continue to focus on investing in our US distribution network and our portfolio of Fabric Division brands and we are well placed to benefit from any improvement in market conditions”
Enquiries:
| Colefax Group plc | David Green, Chief Executive | Tel 020 7318 6021 |
| Rob Barker, Finance Director | ||
| KTZ Communications | Katie Tzouliadis, Robert Morton | Tel 020 3178 6378 |
| Peel Hunt LLP | Dan Webster, Andrew Clarke | Tel 020 7418 8900 |
CHAIRMAN’S STATEMENT
Financial Results
Group sales for the six months to 31 October 2024 increased by 1.8% to £52.79 million (2023: £51.84 million) and by 4.1% on a constant currency basis. Pre-tax profits decreased by 0.5% to £4.36 million (2023: £4.38 million). Earnings per share increased by 12.5% to 53.2p (2023: 47.3p). The Group ended the half year with cash of £18.60 million (30 April 2024: £17.76 million).
In October 2024 the Group returned £2.4 million of surplus capital to shareholders by way of a share buyback. The Group purchased and cancelled 307,043 shares at a price of £7.80 per share and representing just under 5.0% of the issued ordinary share capital. The share buyback will benefit earnings per share in the current and future financial years.
Sales in our core Fabric Division increased by 4.5% on a constant currency basis compared to a 0.3% constant currency increase in the first half of the prior year. This increase was ahead of expectations at the start of the year and was mainly due to a strong performance in the US where sales increased by 7% on a constant currency basis. In contrast market conditions in the UK remained challenging and were down by 8%. First half profits were adversely impacted by a weaker US Dollar average exchange rate of $1.29 compared to $1.25 for the prior year but this was largely offset by higher interest income of £232,000 compared to £40,000 last year and reduced first half Decorating Division losses of £63,000 compared to losses of £221,000 in the prior year.
The Group’s performance is linked to high end housing market activity and this has been on an upward trend in the US resulting in a better than expected sales performance in the first half of the year. In contrast market conditions remain subdued in the UK and Europe. Profitability in the Fabric Division is weighted to the first half of the year due to the timing of costs associated with new product launches which are mainly in the second half of the year.
In line with the Group’s progressive dividend policy the Board has decided to declare a 4% increase in the interim dividend to 2.8p (2023: 2.7p). This will be paid on 10 April 2025 to shareholders on the register at 7 March 2025.
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 2% to £46.70 million (2023: £45.8 million) and increased by 4.5% on a constant currency basis. Profits decreased by 6% to £4.21 million (2023: £4.48 million). The decrease in profit reflects a weaker US dollar exchange rate and higher operating costs. In particular our UK warehouse premises costs have increased at well above the average rate of inflation. Following the conclusion of rent reviews and lease renewals during the period, UK warehouse premises costs have increased by approximately £600,000 per annum from August 2024.
Sales in the US, which represent 62% of the Fabric Division’s turnover, increased by 3% in reported terms and 7% on a constant currency basis. This increase was ahead of expectations at the start of the year and compares to a constant currency decrease of 2% in the first half of the prior year. Market conditions strengthened throughout the period reflecting ongoing improvements in high end housing market activity and the positive impact of a very strong stock market performance. In November 2023 we opened new showrooms in Dallas and Toronto and these have both performed well during their first full year of operation.
Sales in the UK, which represent 16% of the Fabric Division’s turnover, decreased by 8% during the period compared to an increase of 4% in the first half of the prior year. Market conditions in the UK were challenging and reflect the impact of high interest rates on housing market activity and consumer spending. We believe that sales were also impacted by uncertainty in the run up to the General Election on 4 July 2024 and then the first post election budget on 30 October 2024. The proposed increase in UK employers national insurance will add approximately £270,000 to the Group’s UK employment costs from April 2025.
Sales in Continental Europe, which represent 20% of the Fabric Division’s turnover, increased by 9% on a reported basis and 12% on a constant currency basis. This follows a 3% increase in sales in the first half of the prior year. The strong performance in Europe was mainly due to a number of significant one-off contract orders during the period and underlying market conditions in Europe were challenging, especially in Germany. Interest rate cuts during the period should help housing market activity but it will take time for the benefits to be reflected in home spending. Our three largest markets in Europe are France, Germany and Italy and together these account for just under half of total European sales.
Sales in the Rest of the World, which represent just 2% of the Fabric Division’s turnover, decreased by 15% on a constant currency basis. The decrease in sales was mainly due to a reduction in contract orders which can vary significantly between reporting periods. Our largest market in the Rest of the World is the Middle East but it is expected to remain a small part of overall Fabric Division sales.
Furniture – Kingcome Sofas
Sales for the six months to October 2024 decreased by 1% to £1.48 million (2023: £1.50 million) and the Company made an operating profit of £216,000 (2023: £126,000). The improvement in profit reflects on-going efficiency improvements at our factory in Devon following a significant investment in 2023. Over 90% of furniture sales are to UK customers and market conditions have remained difficult. The order book at the end of October 2024 was down by 10% compared to October 2023. The business has a relatively high fixed cost base due to its skilled labour force. This means that profitability is highly operationally geared and the business is well placed to benefit from any pick up in sales.
Interior Decorating Division
Decorating sales, which account for just under 9% of Group turnover, increased by 2% in the period to £4.65 million (2023: £4.55 million) and the business made a reduced first half loss of £63,000 compared to a loss of £221,000 for the same period last year. The profit on decorating projects is recognised on completion and as with the previous two years, expected completions are weighted to the second half of the year. Decorating work in progress at the end of October was down by 20% compared to the prior year but still at a healthy level. The Decorating Division includes an antiques business which accounts for approximately 8% of sales. This activity will be significantly scaled back in the second half of the year following a decline in profitability in recent years.
Prospects
The Group has delivered a good performance in the first six months due to a strong Fabric Division performance in the US. Market conditions in the UK and Europe are currently challenging and we expect these conditions to continue through the second half of the year. Following the US election in November the US Dollar exchange rate has strengthened significantly and if sustained this will be beneficial for Fabric Division profits going forward. Although trading prospects in the US look favourable there is currently significant uncertainty around the possibility of higher US import tariffs and how they might impact our US business. The majority of the fabrics and wallpapers that we sell are manufactured outside of the US. In our Decorating Division we expect an improved performance in the second half of the year but the overall result will be below the exceptional level of the prior year.
The Group has a strong balance sheet with cash of £18.6 million. We will continue to focus on investing in our US distribution network and our portfolio of Fabric Division brands and we are well placed to benefit from any improvement in market conditions.
David Green
Chairman
22 January 2025