26th Jan 2015 09:11
LONDON (Alliance News) - Fabrics and wallpaper company Colefax Group PLC saw its shares slide Monday after it reported a fall in both profit and sales for the first half of its financial year, largely on the back of a weaker trading performance from its interior decorating business.
The company, which operates under five brand names, reported a 6% fall in its pretax profit for the six months to end-October, down to GBP2.9 million from GBP3.1 million the year before. Colefax said the decline in profit was mainly due to weakness in its interior decorating business, which led to a 4% decline in revenue for the period to GBP37.4 million. It said that if exchange rates had stayed the same, revenue would have been flat.
Colefax's five brand names are Colefax and Fowler, Cowtan and Tout, Jane Churchill, Manuel Canovas and Larsen.
"In the decorating division activity levels are well below the exceptional performance of last year, and this will offset some of the progress in the core fabric division. In the core fabric division, sales increased by 5% on a constant currency basis reflecting a good performance in the US and the UK but challenging trading conditions in Europe," said Colefax Chairman David Green in a statement.
Despite the fall in earnings, the group declared a 5% increase in its interim dividend to 2.10 pence per share.
Colefax shares were trading 6.6% lower at 350.12 pence Monday morning on the back of the company's disappointing half-year report.
"We are optimistic about the ongoing recovery in the US and believe that trading conditions will remain favourable in this market. In addition, the recent strengthening of the US dollar is a welcome development," said Green.
The company's decorating division was the primary growth driver behind profits in the group's previous financial year, as the division benefited from the completion of projects delayed from the prior year.
However, Colefax said Monday that its decorating division produced a first half loss of GBP365,000 this year, compared to a profit of GBP365,000 in the prior year. The company said that low activity levels in the decorating division will offset some of the growth in its main fabric division this year.
Commenting on the group's outlook, Green said that whilst it is optimistic about the ongoing recovery in the US, the UK market outlook is more uncertain.
"The recent change to stamp duty will negatively impact the high-end housing market, and there is also the potential adverse impact of the mansion tax dependent upon the outcome of the election. Trading conditions in Europe are likely to remain very challenging for the foreseeable future," he said.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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