Final Results

Colefax Group PLC 22 July 2004 COLEFAX GROUP PLC FINAL RESULTS FOR THE YEAR TO 30 APRIL 2004 Colefax Group designs and distributes furnishing fabrics & wallpaper 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 of £2.9 million •Earnings per share of 10.4p •Sales of £63.4 million •Proposed final dividend of 2.06p, making a total of 3.40p for the year David Green, Chairman and Chief Executive, commented, 'Trading conditions in our principal market, the US, have continued to improve and we are confident of achieving further growth. The UK and Continental Europe remain challenging, however the continued weakness of the US dollar affects gross margins in our US subsidiary. We will continue to invest in our brands and services and the company is well placed to benefit from any improvement in market conditions.' Enquiries: Colefax Group plc David Green, Chairman Tel: 020 7448 1000 Biddicks Katie Tzouliadis Tel: 020 7448 1000 Kathryn van der Kroft CHAIRMAN'S STATEMENT Financial Results The Group's pre-tax profit for the year to 30th April 2004 increased by 4% to £2.9 million (2003 - £2.8 million) on sales down 2% at £63.4 million (2003 - £64.4 million). Earnings per share increased by 17% to 10.4p (2003 - 8.9p). Group net borrowings at the year end were reduced by 44% to £2.8 million (2003 - £5.0 million), which represents gearing of 21% to net assets. The Board has decided to recommend that the final dividend is maintained at 2.06p (2003 - 2.06p) making a total for the year of 3.40p (2003 - 3.40p). The final dividend will be paid on 12th October 2004 to shareholders on the register at the close of business on 10th September 2004. Our results this year are slightly better than we expected at the time of our interim results. The principal reason was an improvement in trading in the US, our major market, during the last quarter. Furthermore, we are seeing the benefits of the cost savings that we have implemented over the last two years. Although we are seeing growth in the US, the UK market has remained flat and Continental Europe is still weak. Product Division •Fabric - Portfolio of Brands: 'Colefax and Fowler', 'Cowtan & Tout', 'Jane Churchill', 'Manuel Canovas', and 'Larsen'. Sales in the US, which represent 53% of the Fabric Division's sales, increased by 4% on a constant currency basis. This market has steadily improved from February and we anticipate that these improved conditions will remain, at least until the Presidential elections. We are planning to open a showroom in Washington DC towards the end of the year and are confident it will increase sales in this important market. UK sales, which represent 21% of the Fabric Division's turnover, were flat and currently there are no signs of any improvement. We have maintained our investment in new collections and are well placed to benefit from any improvement in market conditions. Sales in Continental Europe, which represent 23% of the Fabric Division's turnover, decreased by 5% during the year on a constant currency basis. France, our largest market, was particularly weak in the first three months of the year and whilst there has been some recovery, there is still no sign of any return to growth. Italy, our second largest market, grew by 7% in like for like terms and remains our strongest market in Europe. In contrast trading in Germany is difficult and there is no sign of improvement. Continental Europe generally remains a challenge but should provide the Group with good growth opportunities under favourable economic conditions. Sales in the rest of the world, which represent 3% of the Fabric Division's sales, decreased by 11% during the year. Australia is the most significant market in this region and is still difficult. We are continuing to invest in marketing initiatives in the Middle East which we view as a growth area. •Furniture - Kingcome Sofas Sales of furniture which account for 3% of Group sales, increased by 21% during the year and the division returned to profitability. The majority of growth came during the early part of the year with market conditions becoming more difficult towards the year end. In September, we will launch a new range of modern upholstered furniture and dining chairs and we are confident that the collection will be well received. Although market conditions are currently tough, we are optimistic about this division's activity in the future. •Accessories - Manuel Canovas Manuel Canovas accessories, which mainly comprise sales of beachwear and scented candles and account for 5% of Group sales, were adversely affected by the increase in the value of the euro against the dollar and reported a small operating loss for the year. We have reduced overheads in this division and expect a return to profit in the current year. Decorating Division Interior decorating and antique sales which together account for 12% of Group sales, were down by 2% during the year. The division has suffered from the weak US dollar which has deterred US customers. Antiques sales have also been affected by fewer American visitors to the London showroom. The current level of decorating deposits is healthy but generally market conditions are difficult. AIM The Board believes that the Alternative Investment Market, with its greater flexibility and lower costs is more appropriate for a company the size of Colefax Group Plc. Accordingly, we have today released an announcement of our intention to move to the Alternative Investment Market after the required twenty days notice period. Prospects Trading conditions in our principal market, the US, have continued to improve and we are confident of achieving further growth. The UK and Continental Europe remain challenging. The most significant problem facing the company is the continued weakness of the US dollar which affects gross margins in our US subsidiary. Whilst we have a reasonable level of forward cover in place for the current year, any future hedging is likely to be at much weaker levels than we have historically achieved. We will continue to invest in our brands and services and the company is well placed to benefit from any improvement in market conditions. DAVID B GREEN Chairman GROUP PROFIT AND LOSS ACCOUNT For the year ended 30th April 2004 Notes 2004 2003 £'000 £'000 Turnover 63,381 64,422 Cost of sales 28,187 28,088 -------- ----------- Gross profit 35,194 36,334 Operating expenses 32,007 33,297 -------- ----------- Operating profit 3,187 3,037 Interest (277) (236) -------- ----------- Profit on ordinary activities before 2,910 2,801 taxation Tax on profit on ordinary activities UK (987) (445) Overseas 10 (562) -------- ----------- (977) (1,007) -------- ----------- Profit on ordinary activities after 1,933 1,794 taxation Dividends on equity shares (596) (594) -------- ----------- Retained profit for the year 1,337 1,200 -------- ----------- Basic earnings per share 1 10.4p 8.9p Diluted earnings per share 1 10.2p 8.8p All activity has arisen from continuing operations. GROUP BALANCE SHEET At 30th April 2004 Notes 2004 2003 £'000 £'000 Fixed assets: Tangible assets 6,113 7,068 Investments 687 687 ----------- ----------- 6,800 7,755 ----------- ----------- Current assets: Stocks and contracts in progress 11,470 13,039 Debtors 8,697 9,211 Cash at bank and in hand 3 1,769 1,639 ----------- ----------- 21,936 23,889 ----------- ----------- Creditors: amounts falling due within 14,419 16,683 one year ----------- ----------- Net current assets 7,517 7,206 ----------- ----------- Total assets less current liabilities 14,317 14,961 ----------- ----------- Creditors: amounts falling due after 1,000 1,500 more than one year Provision for liabilities and charges: Deferred taxation 106 130 ----------- ----------- 13,211 13,331 ----------- ----------- Capital and reserves: Called up share capital 1,909 2,009 Share premium account 11,087 11,087 Capital redemption reserve 957 857 Profit and loss account (742) (622) ----------- ----------- Equity shareholders' funds 13,211 13,331 ----------- ----------- GROUP CASH FLOW STATEMENT For the year ended 30th April 2004 Notes 2004 2003 £'000 £'000 Net cash inflow from operating activities 2 6,499 6,191 --------- -------- Returns on investments and servicing of finance: Interest received 9 40 Interest paid (273) (262) --------- -------- (264) (222) --------- -------- Taxation: UK Corporation tax paid (679) (572) Overseas tax paid (141) (668) --------- -------- (820) (1,240) --------- -------- Capital expenditure and financial investment: Payments to acquire tangible fixed assets (1,771) (2,106) Receipts from sales of tangible fixed 96 93 assets --------- -------- (1,675) (2,013) --------- -------- Equity dividends paid (634) (661) --------- -------- Cash inflow before financing 3,106 2,055 --------- -------- Financing: Purchase of own shares (782) (2,414) New long-term loan - 2,000 Repayment of long-term loans (1,371) (957) --------- -------- Net cash outflow from financing (2,153) (1,371) --------- -------- Increase in cash in the period 3 953 684 --------- -------- GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 30th April 2004 2004 2003 £'000 £'000 Profit for the financial year 1,933 1,794 Currency translation differences on foreign currency net (238) 258 investments Currency translation differences on foreign currency (756) (674) loans Deferred tax on long-term loan foreign currency 319 276 movements -------- -------- Total recognised gains and losses relating to the 1,258 1,654 year -------- -------- NOTES TO THE ACCOUNTS At 30th April 2004 1. Earnings per share Basic earnings per share have been calculated on the basis of profit on ordinary activities after tax of £1,933,000 (2003 - £1,794,000) and on 18,630,756 (2003 - 20,176,029) 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 £1,933,000 (2003 - £1,794,000) and on 18,960,402 (2003 - 20,476,029) being the weighted average number of shares in issue during the year, calculated as follows: 2004 2003 Basic weighted average number of shares 18,630,756 20,176,029 Dilutive potential ordinary shares, including 329,646 300,000 shares under option owned by the Colefax Group Plc ESOP Trust --------- --------- 18,960,402 20,476,029 --------- --------- 2. Operating profit Cash flow statement Reconciliation of operating profit to net cash inflow from operating activities: 2004 2003 £'000 £'000 Operating profit 3,187 3,037 Depreciation charges 2,315 2,454 (Profit) on sale of tangible fixed assets (24) (22) Decrease in stocks 1,206 171 Decrease/(increase) in debtors 646 (200) (Decrease)/increase in creditors (831) 751 --------- --------- Net cash inflow from operating activities 6,499 6,191 --------- --------- 3. Reconciliation of net cash flow to movement in net debt 2004 2003 £000 £000 Increase in cash 953 684 New bank loan - (2,000) Repayment of bank loans 1,371 957 --------- --------- Movement in net debt resulting from cash 2,324 (359) flows Exchange differences (55) 78 --------- --------- Movement in net debt in the period 2,269 (281) Net debt at 1st May (5,042) (4,761) --------- --------- Net debt at 30th April (2,773) (5,042) --------- --------- At 1st May Cash flow Other Exchange At 30th April 2003 differences 2004 £'000 £'000 £'000 £'000 £'000 Analysis of net debt Cash at bank 1,639 253 - (123) 1,769 and in hand Overdrafts (3,742) 700 - - (3,042) ------- ------- ------ --------- ------- (2,103) 953 - (123) (1,273) ------- ------- ------ --------- ------- Debt due (1,439) 1,371 (500) 68 (500) within one ------- ------- ------ --------- ------- year Debt due (1,500) - 500 - (1,000) after one ------- ------- ------ --------- ------- year Net debt (5,042) 2,324 - (55) (2,773) ------- ------- ------ --------- ------- 4. The above financial information, which has been prepared on the same basis as set out in the 2003 annual accounts, does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the year ended 30th April 2004 has been extracted from the statutory accounts on which an unqualified audit opinion has been issued. Statutory accounts for the year ended 30th April 2004 will be delivered to the Registrar in due course. The comparative financial information is based on the statutory accounts for the financial year ended 30th April 2003. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. 5. The Annual General Meeting of Colefax Group plc will be held at 39 Brook Street, London W1K 4JE on 14th September 2004 at 11.00 a.m. This information is provided by RNS The company news service from the London Stock Exchange

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