Colefax Group PLC 25 January 2006 COLEFAX GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2005 Colefax Group designs and distributes furnishing fabrics & wallpapers and owns a leading interior decorating business. The Group's five major fabric brands are Colefax and Fowler, Cowtan & Tout, Jane Churchill, Manuel Canovas and Larsen. Key Points • Pre-tax profits increased by 11% to £2.012 million (2004: £1.816 million) • Earnings per share rose by 18% to 8.09p (2004: 6.87p) • Sales up by 2% to £32.194 million (2004: £31.701 million) • Proposed interim dividend of 1.38p, a rise of 3% David Green, Chairman and Chief Executive, commenting on prospects, said, " Current trading conditions in our major market, the US, are not as strong as they were at the start of the financial year and therefore we are cautious about future growth prospects. Although we have seen a modest strengthening of the US dollar against sterling, there is considerable uncertainty over future exchange rates, which have a major impact on our gross profit margin. We continue to invest in our core fabric brands and believe we are well placed to take advantage of any improvement in market conditions." Enquiries: Colefax Group plc David B. Green, Chairman Tel: 020 7448 1000 (today) Biddicks Katie Tzouliadis Tel: 020 7448 1000 CHAIRMAN'S STATEMENT Financial Results The Group's pre-tax profit for the six months to 31st October 2005 increased by 11% to £2.012 million (2004: £1.816 million) on sales up 2% at £32.194 million (2004: £31.701 million). Earnings per share increased by 18% to 8.09p (2004: 6.87p) partly due to the effect of share buybacks in the prior period. Group net borrowings decreased by £1.063 million to £2.988 million, which represents gearing of 22% to net tangible assets. The Board has decided to recommend that the interim dividend be increased by 3% to 1.38p per share (2004: 1.34p). The interim dividend will be paid on 12th April 2006 to shareholders on the register at the close of business on 10th March 2006. During the period, trading conditions in the US remained strong and are the p rimary reason for the improvement in profitability. The US dollar strengthened slightly during the period although there is considerable uncertainty about its future direction. Trading conditions in most of our other major markets were challenging, particularly in France. Product Division • Fabric - Portfolio of Five Brands: "Colefax and Fowler", "Cowtan and Tout", "Jane Churchill", "Manuel Canovas" and "Larsen" Sales in the US, which represent 59% of the fabric division's turnover, increased by 8% on a constant currency basis. Sales throughout the US were strong and with a significant new product launch planned for this year, we would normally be optimistic. However, the rate of growth has slowed in the last quarter of the calendar year, and we therefore expect future growth to be at a slower pace. Sales in the UK, which represent 18% of the fabric division's turnover, remained flat and currently there are no signs of any improvement. We do not expect the UK market to show any significant growth until there is a pickup in the high end housing market. Sales in Europe and the rest of the world, which represent 23% of the fabric division's turnover, decreased by 1% on a constant currency basis. The decrease was mainly due to difficult trading in France, where sales were down by 14%, although we have seen an improvement in sales in the last quarter of the calendar year. Certain European markets are more encouraging, particularly Germany which is growing again after several difficult years. • Furniture - Kingcome Sofas Sales of furniture, which account for 3% of Group sales, decreased by 1% during the period. After a difficult start to the year, we opened our new Fulham Road showroom in July and this is proving to be popular with both our retail and trade customers. As a result, our current order book is significantly ahead of last year. We have decided to close our trade showroom in Chelsea Harbour, which will lead to cost savings next year. • Accessories - Manuel Canovas The majority of accessories sales, which represent approximately 2% of the Group total, take place in the second half of the year. Currently forward orders are slightly up on last year. Over one third of accessories sales are invoiced in US dollars so recent strengthening of the dollar against the Euro will benefit margins in the second half of the year. Interior Decorating Division Interior decorating sales for the first six months decreased by 14%, although this is mainly due to the timing of contract completions and the order book is currently healthy. Sales of antiques are still difficult and we expect trading conditions to remain challenging. Prospects Current trading conditions in our major market, the US, are not as strong as they were at the start of the financial year and therefore we are cautious about future growth prospects. Although we have seen a modest strengthening of the US dollar against sterling, there is considerable uncertainty over future exchange rates, which have a major impact on our gross profit margin. We continue to invest in our core fabric brands and believe we are well placed to take advantage of any improvement in market conditions. David Green Chairman 25th January 2006 INTERIM GROUP PROFIT AND LOSS ACCOUNT Six Months Six Months Year to 31st Oct to 31st Oct to 30th April 2005 2004 2005 £'000 £'000 £'000 (Restated) (Restated) Turnover 32,194 31,701 64,455 Operating profit 2,103 1,984 3,439 Interest (91) (168) (292) ---------------- ------------- ------------ ------------- Profit before taxation 2,012 1,816 3,147 Taxation (702) (627) (938) ---------------- ------------- ------------ ------------- Profit after taxation 1,310 1,189 2,209 Dividends (350) (354) (571) ---------------- ------------- ------------ ------------- Retained profit for the period 960 835 1,638 ================ ============= ============ ============= Earnings per share 8.09p 6.87p 13.1p Diluted earnings per share 8.00p 6.80p 13.0p INTERIM GROUP BALANCE SHEET At 31st Oct At 31st Oct At 30th April 2005 2004 2005 £'000 £'000 £'000 (Restated) (Restated) Fixed assets 5,881 5,978 5,792 Current assets: Stocks and contracts in progress 12,314 13,117 12,167 Debtors 9,477 8,266 9,559 Cash at bank and in hand 3,870 2,944 1,736 -------------------------- -------- -------- -------- 25,661 24,327 23,462 -------------------------- -------- -------- -------- Creditors: amounts falling due within one year 17,436 16,594 16,264 Net current assets 8,225 7,733 7,198 -------------------------- -------- -------- -------- Total assets less current liabilities 14,106 13,711 12,990 -------------------------- -------- -------- -------- Creditors: amounts falling due after one year 250 750 500 Provision for liabilities and charges 64 106 64 -------------------------- -------- -------- -------- 13,792 12,855 12,426 ========================== ======== ======== ======== Capital and reserves: Called up share capital 1,709 1,809 1,709 Share premium account 11,087 11,087 11,087 Capital redemption reserve 1,157 1,057 1,157 ESOP share reserve (499) (466) (499) Profit and loss account 338 (632) (1,028) -------------------------- -------- -------- -------- 13,792 12,855 12,426 ========================== ======== ======== ======== INTERIM GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Six Months Six Months Year to 31st Oct to 31st Oct to 30th April 2005 2004 2005 £'000 £'000 £'000 Profit for the period 1,310 1,189 2,209 Currency translation differences on foreign currency net investments 61 53 (62) Currency translation differences on foreign currency loans 583 (290) (546) Deferred tax on long-term loan foreign currency movements (238) 121 230 --------- --------- --------- Total recognised gains and losses relating to the period 1,716 1,073 1,831 ========= ========= ========= INTERIM GROUP CASH FLOW STATEMENT Six months Six months Year to 31st Oct to 31st Oct to 30th April 2005 2004 2005 £'000 £'000 £'000 Net cash inflow from operating activities 2,921 1,778 4,786 Returns on investments and servicing of finance Interest received 26 8 20 Interest paid (135) (170) (311) ---------- --------- ---------- (109) (162) (291) Taxation UK corporation tax paid (536) (593) (1,074) Overseas tax (paid)/refunded (77) 13 - ---------- --------- ---------- (613) (580) (1,074) Capital expenditure and financial investment Payments to acquire tangible fixed assets (889) (1,057) (2,179) Receipts from sales of tangible fixed assets 16 4 32 ---------- --------- ---------- (873) (1,053) (2,147) Equity dividends paid (350) (354) (571) ---------- --------- ---------- Cash inflow/(outflow) before financing 976 (371) 703 Financing Purchase of own shares - (930) (1,900) Repayment of long-term loan (250) (250) (500) ---------- --------- ---------- Net cash outflow from financing (250) (1,180) (2,400) ---------- --------- ---------- ---------- --------- ---------- Increase/(decrease) in cash in the period 726 (1,551) (1,697) ========== ========= ========== NOTES 1. Cash flow statement Six months Six months Year to 31st Oct to 31st Oct to 30th April 2005 2004 2005 £'000 £'000 £'000 Reconciliation of operating profit to net cash inflow from operating activities Operating profit before interest and tax 2,103 1,984 3,439 Depreciation charges 1,018 1,095 2,271 Profit on sale of tangible fixed assets (16) (2) (12) Decrease/(increase) in stocks 95 (1,564) (918) Decrease/(increase) in debtors 264 392 (547) (Decrease)/increase in creditors (543) (127) 553 ---------- --------- --------- Net cash inflow from operating activities 2,921 1,778 4,786 ---------- --------- --------- 2. Adoption of new accounting requirement The Company has adopted FRS 21 'Events after the balance sheet date' at 1st May 2005, which removes the requirement to report dividends proposed after the balance sheet date in the profit and loss account and instead requires disclosures in the notes to the financial statements. Therefore, dividends declared after the balance sheet date are not being recognised in the interim financial information at 31st October 2005 and the comparative figures have been restated accordingly. This has had the effect of increasing shareholders' funds by £350,000 at 30th April 2005 and £127,000 at 31st October 2004. 3. The proposed interim dividend of 1.38p (2004: 1.34p) per share is payable on 12th April 2006 to qualifying shareholders on the register at the close of business on 10th March 2006. 4. Earnings per share have been calculated on the basis of earnings of £1,310,000 (2004: £1,189,000) and on 16,197,578 (2004: 17,311,708) 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 £1,310,000 (2004: £1,189,000) and on 16,386,128 (2004: 17,490,129) ordinary shares being the weighted average number of ordinary shares in the period adjusted to assume conversion of all dilutive potential ordinary shares 188,550 (2004: 178,421). 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). 7. Copies of the interim report are being sent to shareholders and 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. This information is provided by RNS The company news service from the London Stock Exchange