Colefax Group

Hit by global recession, deeply damaged housing markets and significant restructuring costs, profits at fabrics and wallpapers specialist Colefax more than halved in the year to April.

The luxury furnishing fabrics and wallpapers distributor, whose brands include Colefax and Fowler and Jane Churchill, reported a pre-tax decline to £2.65m (2008: £5.94m), on lower turnover of £75.6m (2008: £78.2m). Earnings retreated 53% to 12.9p, forcing Colefax to halve the final dividend to 1.33p (2008: 2.65p), slashing the annual total 31% to 2.88p.

A serious slowdown in sales in the US, the group’s biggest market, from August onwards, was the key reason behind the poor financials. Trading subsequently worsened in a number of European markets and the UK too, as the global recession deepened.

Particularly hard hit was the core fabric division (roughly 80% of sales), where US revenues reversed by 18%, dented by downturn in the New York market. UK fabric sales remain in decline, badly damaged by inactivity in the UK housing market and in continental Europe, sales were 13% lower, with the French market holding up reasonably well and Spain and Eire feeling the pain.

Peering ahead, Colefax has a strong balance sheet and no debt, leaving it as well placed as many peers to cope with the recession. However, management concedes recent cost cutting ‘will not in any way off-set’ the levels of sales decline the company is currently seeing and therefore short-term, the shares, down from their 52-week peak of 165.5p, are best avoided.