Colefax Group PLC on Monday attributed its strong interim performance to favourable trading conditions over the past six months, but warned of challenges in the year ahead on significant cost inflation.

Colefax is a London-based designer and distributor of furnishing fabrics and wallpapers that also owns an interior decorating business. The group trades under five brand names: Colefax and Fowler; Cowan & Tout, Jane Churchill, Manuel Canovas, and Larsen.

For the six months ended October 31, the group reported pretax profit of £5.2 million, up 16% from £4.5 million a year prior.

Revenue also rose, up 12% to £51.7 million from £46.1 million the previous year.

During the period, Colefax reaped the rewards from a ‘very strong’ US dollar exchange rate, as well as ‘generally favourable’ trading conditions. As a result, it now expects its full year performance to April 30 to be ahead of previous expectations.

However, the company also said that housing transactions have slowed significantly in both the US and the UK over the past six months. It subsequently expects trading in these markets ‘to become progressively more challenging’ in the year ahead.

Chair David Green similarly noted the impacts of ‘significant cost inflation’ over the last year, but reassured investors that ‘there are tentative signs that the worst might be over’.

Colefax declared an interim dividend of 2.6 pence per share, up 4% from 2.5p year-on-year.

Colefax shares were trading 6.2% higher at 690.00p each in London on Monday morning.

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