Colefax Group PLC on Wednesday cited inflation and energy prices as operating costs outpacing revenue growth led to a decline in annual profit.

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.

The company said in the financial year ended April 30, pretax profit fell 21% to £8.5 million from £10.8 million a year prior.

Revenue grew 3.0% to £104.8 million from £101.8 million.

The company noted that decorating sales, which represent 9% of group sales, fell by 35% to £9.5 million from £14.6 million a year prior, resulting in a pre-tax loss of £96,000 compared to a £1.5 million profit. Colefax said this was in line with expectations amid ‘an exceptional performance in the prior year.’

Operating expenses increased 18% to £50.2 million from £42.7 million a year ago. Cost of sales decreased by 4.6% to £45.1 million from £47.2 million.

Chief Executive Officer and Chair David Green said: ‘The performance of the group lags activity in the high-end housing market and we do expect trading conditions to become progressively more challenging as steep interest rate increases start to have an impact in the US and the UK. These expectations are factored into our current year market forecast.’

The company proposed a final dividend of 2.8 pence per share, up from 2.7p a year prior. This brings the total dividend to 5.4p, up 3.8% from 5.2p a year ago.

Looking ahead, Colefax said the inflation outlook has improved amid falling energy prices in recent months.

Colefax shares were flat at 700 pence each on Wednesday morning in London.

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