CRAWSHAW GROUP PLC. Interim Results 26 weeks to 30 July Company Number

Transcription

1 CRAWSHAW GROUP PLC Interim Results 26 weeks to 30 July 2017 Company Number Registered Office: Unit 4, Sandbeck Way, Hellaby Industrial Estate, Rotherham, S66 8QL 1

2 27 th September 2017 Crawshaw Group Plc DELIVERY AGAINST VALUE-LED STRATEGY DRIVING PROGRESS Strategic plan strengthened by factory shop rollout and transformational deal with 2Sisters Crawshaw Group Plc ("Crawshaw", the "Company" or the Group ), the UK s leading value butcher, announces its results for the 26 weeks ended 30 July H1 Financial Highlights: Group revenue up 2.3% to 22.1m (2016: 21.6m) Gross margin of 42.9% (2016: 45.2%) EBITDA 1 ( 0.2m) (2016: 0.3m) Adjusted EBITDA 2 0.0m (2016: 1.1m) Underlying Operating Loss 3 of 0.8m (2016: loss of 0.4m) Loss Before Tax of 1.2m (2016: loss of 0.4m), including ( 0.4m) exceptional costs Cash of 6.8m at 30 July 2017 (29 January 2017: 2.1m) H1 Operational Highlights: Progress made against strategy to position Crawshaws as Britain s leading value butcher, delivering great quality fresh meat at the lowest possible price: Strong customer response to improved offer, enhanced value and broader product ranges; o Group LFL 4 sales -4.2% (2016: -4.4%); momentum build in H1 (Q1: -5.1%; Q2-3.2%) o Customer numbers -3.5%; momentum build in H1 (Q1: -5.6%; Q2-1.1%) o Food to go sales back in growth post H2 FY17 recovery actions o Fresh meat customer numbers improving with average transaction values lower as customers trade into re-based value H1 profitability impacted by sterling weakness and shape of sales recovery; o Sterling depreciation of 10% caused a 1.5% gross margin impact o Strategic investment in value reduced margin as expected by 1% o Customer and sales recovery trajectory robust. Work ongoing to increase fresh meat average transaction values Transformative partnership with 2Sisters Food Group progressing (commenced 25 th May 2017): o Core supply routes now well established o Over 20% of fresh meat product now sourced from 2Sisters and expected to increase 2

3 o Framework in place delivering continuous change in our selection of top quality product to our customers at a significant discount Fresh meat factory shops are now proven with accelerated growth fully funded: o Factory shops trading in the period delivered circa 20% of Group sales o One new factory shop opened in H1 with four more planned by year end o Customers attracted to new levels of progressive value, with the excellent site economics allowing us to offer best market value o Cash of 6.8m to facilitate accelerated factory shop roll-out H2 Current Trading: The positive customer and sales momentum from Q1 into Q2 has continued post period end into Q3. Customer numbers for the first 6 weeks of H2 have returned to growth, up 5.4% on the prior year, while LFL sales for the same period are now tracking at -1.1%. Having made good progress on recovering customer numbers, our current marketing and promotional plans are targeting improvements in fresh meat average transaction value as we look to trade new and returning customers across the full breadth of our winter/seasonal range. We are experiencing further margin pressure from the continued weakness in sterling. This has impacted our current margin performance as we consciously chose not to pass on the resulting price increases to protect our recovery momentum. Having reestablished a strong and growing customer base, we will now revert as planned to managing price inflation on a business as usual basis with the appropriate pricing and promotional changes being made to balance sales growth and margin. Strategic Update: Our strategy of investing in value is working, with our improved retail proposition attracting more customers to Crawshaws. The Group s immediate focus is to accelerate the rollout of our successful factory shop format. These destination sites are particularly attractive as they allow us to offer even greater value to customers through larger pack sizes and value progression. Factory shops are a simpler model to implement and operate, have lower rents and require significantly lower CAPEX. Including the three new shops opened in the year, we now have eight standalone factory shop units which are trading above expectation and above our base model. The learnings of our latest openings have allowed us to reduce CAPEX requirements by up to 25% which underpins a circa one-year cash payback on investment. At our target rate of ten new shops per year, we expect our factory shops to account for well over half of Group revenue by the end of FY We are confident that our value-led strategy and factory shop rollout, underpinned by our unique supply agreement with 2Sisters, will leave us well placed to achieve a stepchange in long term profitability. 3

4 Noel Collett, CEO, commented: These results demonstrate progress in ensuring we have high quality products at the lowest possible prices. The improvements to the breadth, depth and price of our ranges are driving the significantly improving trend in customer numbers, which is a key metric of loyalty and success in preparation for the important winter and festive season ahead. As part of our focus on achieving unbeatable value, we are prioritising and accelerating the rollout of our proven factory shop format. The economics of these sites are hugely attractive, and they allow us to offer a wider range of fresh meat and associated products at a price not possible in our high street shops. We remain excited by our 2Sisters supply agreement and believe this partnership will be transformational for the long-term growth of the Group. Market conditions remain challenging, but we are confident that our focus on value leaves us well placed for the long-term. Jim McCarthy, Chairman, said: Since joining Crawshaws earlier this year, I have been impressed by the progress that Noel and the team are making. The accelerated roll out of the successful factory shop format is strengthening the business s reputation for delivering amazing value, which is underpinned by the transformational supply agreement with 2Sisters. Crawshaws is one of the most exciting businesses in the value sector and the Board is confident that all the work done this year means the business is well set to create value for investors. 1. EBITDA is defined by the Group as profit/loss before tax, exceptional items, depreciation, amortisation, profit/(loss) on disposal of assets, net finance costs and shared based payment charge attributable to the LTIP Growth Share Scheme. 2. Adjusted EBITDA is defined by Group as profit/loss before tax, exceptional items, depreciation, amortisation, profit/(loss) on disposal of assets, net finance costs, share based payment charges attributable to the LTIP Growth Share Scheme and Accelerated Opening Costs. Accelerated opening costs are defined by the Group as the overhead investment in people, processes, systems and new store pre-opening costs i.e. costs directly associated with our accelerated store opening programme. In the period these costs amounted to 0.2m (2016: 0.7m) resulting in an adjusted EBITDA of 0.0m (2016: 1.1m). 3. Underlying Operating Loss is defined by the Group as Operating Profit before exceptional items and share based payment charges attributable to the LTIP Growth Share Scheme. 4. LFL stores are defined as stores which have been trading for 2 full years at the start of the financial year under review The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations. Enquiries: Tulchan Communications LLP Susanna Voyle, Will Smith Crawshaw Group plc Noel Collett, Alan Richardson Peel Hunt LLP Dan Webster, Adrian Trimmings, George Sellar

5 Condensed Consolidated Statement of Comprehensive Income For the 26 weeks ended 30 July 2017 Unaudited Audited Unaudited 26 Weeks 52 Weeks 26 Weeks Notes Revenue 2 22,056 44,228 21,591 Cost of sales (12,595) (24,983) (11,839) Gross profit 9,461 19,245 9,752 Other operating income Administrative expenses (10,723) (20,715) (10,185) Operating Loss (1,247) (1,413) (418) Finance income Finance expenses (2) (4) (3) Net Finance Income/(Expense) Share of profit of equity accounted investees (net of tax) Loss before income tax (1,241) (1,382) (398) Income tax credit/(charge) Total recognised loss for the period (1,065) (1,215) (394) Attributable to: Equity holders of the Company (1,065) (1,215) (394) Operating loss analysed as: EBITDA 1 (172) Exceptional Costs 3 (388) (63) - Share Based Payment Charge 8 (92) (217) (168) Depreciation and amortization (596) (1,237) (587) Profit/(loss) on disposal of fixed assets 1 - (11) Operating loss (1,247) (1,413) (418) Basic loss per ordinary share 5 (1.163)p (1.535)p (0.50)p Diluted loss per ordinary share 5 (1.163)p (1.535)p (0.50)p 1. EBITDA is defined by the Group as profit/loss before tax, exceptional items, depreciation, amortisation, profit/(loss) on disposal of assets, net finance costs and shared based payment charge attributable to the LTIP Growth Share Scheme. 5

6 Condensed Consolidated Balance Sheet As at 30 July 2017 Unaudited Audited Unaudited Notes Property, plant and equipment 8,717 8,847 9,095 Intangible assets - goodwill and related acquisition intangibles 10,926 10,969 10,986 Investment in equity accounted investees Total Non-Current Assets 19,768 19,941 20,187 Inventories 1,343 1,469 1,128 Trade and other receivables 1, ,458 Cash and cash equivalents 6,788 2,147 4,016 Total Current Assets 9,482 4,403 6,602 Total Assets 29,250 24,344 26,789 Share capital 6 5,651 3,962 3,962 Share premium 17,498 14,051 14,051 Reverse acquisition reserve Retained earnings (1,054) (81) 1,101 Total Shareholders Equity 22,542 18,379 19,561 Other payables Deferred tax liabilities Interest bearing loans and borrowings Total Non-Current Liabilities 970 1,089 1,237 Trade and other payables 5,699 4,812 5,935 Interest bearing loans and borrowings Total Current Liabilities 5,738 4,876 5,991 Total Liabilities 6,708 5,965 7,228 Total Equity and Liabilities 29,250 24,344 26,789 6

7 Condensed Consolidated statement of changes in shareholders equity For the 26 weeks ended 30 July 2017 Share Capital 000 Share Premium 000 Rev Acq Reserve 000 Retained Earnings 000 Total Equity Balance at 31 January ,947 13, ,327 19, Loss for the Period (394) (394) Share Based Payment Charge Share Options 241,470 shares Balance at 31 July ,962 14, ,101 19,561 Loss for the period (821) (821) Share Based Payment Charge Dividend on Equity Shares (372) (372) Long term incentive plan options exercised (38) (38) Balance at 29 January ,962 14, (81) 18,379 Loss for the period (1,065) (1,065) Share Based Payment Charge Share Placing 33,794,490 shares 1,689 3, ,137 Balance at 30 July ,651 17, (1,054) 22,542 7

8 Condensed Consolidated statement of cash flows For the 26 weeks ended 30 July 2017 Unaudited Audited Unaudited 26 Weeks 52 Weeks 26 Weeks Cash flows from operating activities (Loss)/Profit for the period (1,065) (1,215) (394) Adjustments for: Depreciation and amortization 596 1, Share Based Payment Charge Loss /(Profit) on sale of property, plant and equipment (1) Net finance (income)/charges (6) (19) (20) Share of (profit) of equity accounted investees - (12) - Taxation (176) (167) (4) Operating cash flow before movements in working capital (560) Movement in trade and other receivables (563) (196) (641) Movement in trade and other payables 1, ,657 Movement in inventories 127 (455) (114) Tax Paid/(received) (64) Net cash generated from operating activities (50) 318 1,418 Cash flows from investing activities Purchase of property, plant and equipment (435) (2,947) (2,551) Proceeds from sale of property, plant & equipment Interest Received Interest paid (2) (4) (3) Equity Investees Dividend paid - (372) - Net cash (used in) investing activities (418) (3,225) (2,490) Cash flows from financing activities HP Financing (28) Share Capital Raised 5, Net cash generated from financing activities 5, Net change in cash and cash equivalents 4,641 (2,733) (864) Cash and cash equivalents at start of period 2,147 4,880 4,880 Cash and cash equivalents at end of period 6,788 2,147 4,016 8

9 Notes to the condensed consolidated financial statements 1. BASIS OF PREPARATION Reporting Entity Crawshaw Group Plc (the Company ) is a company incorporated and domiciled in the UK. The condensed consolidated interim financial statements of the Company as at and for the 26 weeks ended 30 July 2017 comprise the Company and its subsidiaries (together referred to as the Group ) and equity account the Group s interest in jointly controlled entities. Basis of Preparation These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the EU and do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 29 January The annual financial statements of the Group are available upon request from the Company s registered office. The comparative figures for the financial year ended 29 January 2017 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act The condensed consolidated interim financial statements have not been audited but have been reviewed by the Company s auditors. Their review report for the 26 week period ended 30 July 2017 is set out on page 14. These condensed consolidated interim financial statements were approved by the Board of Directors on 26 September Significant Accounting Policies The accounting policies applied are consistent with those of the annual financial statements for the 52 weeks ended 29 January 2017, as described in those annual financial statements, which were prepared in accordance with IFRS as adopted by the EU. Significant Judgements, Key Assumptions and Estimation Uncertainty The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable at the time the estimate is made. Actual results may differ from these estimates. 9

10 In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the 52 weeks ended 29 January Going Concern The Group meets its day to day working capital requirements through cash on hand and cash generated from operations. Current cash balance is 6.8m with HP commitments of 0.1m. The Group has cancelled its 4m, 5 year Revolving Credit Facility. The Directors have reviewed the profit and cash forecasts of the Group with appropriate sensitivities around operational performance. The Directors have concluded that the Group will have sufficient cash to meet its obligations and to pursue its existing strategy. Accordingly, the Directors consider that these statements should be prepared on a going concern basis. Basis of Consolidation The consolidated financial information includes the financial information of the Company and its subsidiary undertakings made up to 30 July 2017 (together referred to as the Group ). 2. REVENUE The Directors have undertaken a review of the Group's continuing operations and their associated business risks. The Directors consider that the continuing operations represent one product offering with similar risks and rewards and should be reported as a single business segment in line with the Group s internal reporting framework. All revenue received during the period was received from customers within the United Kingdom. Unaudited Audited Unaudited 26 Weeks 52 Weeks 26 Weeks 3. EXCEPTIONAL ITEMS Exceptional costs in the period relate to: Supply chain partnership and subscription agreement Bank facility arrangement fees and non-utilisation Charges Other costs Total exceptional items

11 Unaudited Audited Unaudited 26 Weeks 52 Weeks 26 Weeks 4. INCOME TAX EXPENSE Recognised in the Income Statement The income tax expense is based on the estimated effective rate of taxation on trading for the period and represents: Current tax Adjustments for prior year (22) Deferred tax: Origination and reversal of timing differences (176) (168) (4) Adjustments for prior year - (1) - (176) (169) (4) Income Tax (Credit) (176) (167) (4) Reconciliation of effective tax rate Loss for the period (1,065) (1,215) (394) Total Tax Expense (176) (167) (4) Loss excluding taxation (1,241) (1,382) (398) Tax using UK Corporation tax rate of % (240) (276) (80) Non-Deductible Expenses Adjustment in respect of prior years - (23) 35 Tax not at standard rate Group relief Total tax credit (176) (167) (4) 5. EARNINGS PER ORDINARY SHARE Basic earnings per ordinary share is calculated by dividing the earnings attributable to the ordinary shareholders by the weighted average number of ordinary shares outstanding during the period of 91,553,412 (31/01/17: 79,140,309) (31/07/16: 79,043,100). There were no dilutive potential ordinary shares. In the period under review the share options were anti-dilutive as the Group reported a loss. There is an outstanding warrant which, if executed, would result in a further 45,436,069 shares being issued (note 6) which would dilute earnings per ordinary share. 11

12 6. SHARE CAPITAL Unaudited Audited Unaudited Allotted, called up and fully paid ,025,049 ordinary shares of 5p each 5,651 3,962 3,962 In May 2017, Invest Co 1 Limited and a concert party acquired an aggregate of 33,794,490 new shares in the Group for 5.1m. These investments reflect a price per ordinary share of 15.2p being the market price of the Company as the share purchase was being structured. A warrant is in place for a further 45,436,069 shares to be issued to Invest Co 1 Limited, subject to certain conditions being met. Should the conditions be met and the warrant executed, Invest Co 1 Limited and the concert party would hold 50% of the Group s issued share capital. 7. RELATED PARTY TRANSACTIONS Crawshaw Butchers Limited, a subsidiary of Crawshaw Group Plc, holds a 50% share in a partnership which trades under the name of RGV Refrigeration. The operations of the partnership comprise of the maintenance and repair of refrigeration machinery for a variety of customers. In May 2017 Crawshaw Group Plc entered into a supply chain partnership with the 2 Sisters Food Group. Crawshaw Group Plc subsequently entered into a subscription agreement with Invest Co 1 in which they acquired 29.72% of the issued share capital of Crawshaw Group Plc. 2 Sisters Food Group and Invest Co 1 are controlled by Ranjit and Baljinder Boparan. 2 Sisters Food Group are therefore considered to be a related party of Crawshaw Group Plc. Since the start of the agreement, the value of purchases from 2 Sister Food Group to 30 July 2017 was 442k and a balance of 233k was owed by Crawshaws Group Plc to 2 Sisters Food Group at the end of the period. There were no sales made by Crawshaw Group Plc to 2 Sisters Food Group from the start of the agreement. 8. SHARE BASED PAYMENTS Shares were granted under the Crawshaw Group plc Long-Term Incentive Plan on 24 th April, The shares are growth shares in a subsidiary, Crawshaw Butchers Ltd, but have value linked to the market capitalisation of Crawshaw Group plc. Shareholders are entitled to a maximum pool of 10% of the growth in value of the market capitalisation of Crawshaw Group plc over the hurdle rate, where the hurdle rate is set as a premium of 15% to market capitalisation immediately prior to the award of the shares. Shareholders have the option to put their Eligible Put Shares on the occurrence of the following events: The First and Second Put Dates: Shareholders can put 1/6th of their Shares from the first anniversary of the date of grant and a further 1/6th of their Shares from the second anniversary of the date of grant. The achievement of the Performance Conditions: Shareholders can put 1/3rd of their Shares once the market capitalisation of Crawshaw Butchers has increased by 50% since the date of grant. In addition, shareholders can put a further 1/3rd of their Shares once the market capitalisation of Crawshaw Butchers has increased by 100% since the date of grant. On a voluntary winding up or change of control of Crawshaw Group plc. 12

13 The fair value of the awards is determined by using the Monte Carlo model and allowance has been made for the following assumptions: Expected exercise date, expected volatility of total shareholder return, expected future dividends and the risk free rate of interest. 100,000 simulations were used in the Monte Carlo model and set out below is a summary of the key data. Date of Grant 24 th April, 2015 Ave Share price in period prior to grant Volatility of TSR for the Company Dividend Yield Risk Free rate of Interest Exercise pattern 53.1p 60% pa 1% pa 1.75% pa Expected exercise between 0 and 10 years The expected Volatility is wholly based on the historic volatility simulated over differing time periods to the date of grant. The fair value of the liability is re-measured at each balance sheet date to take into account nonmarket related changes. The total expense for the period between 30 January and 30 July, 2017 is 92,000 (31/07/2016: 168,000). 13

14 INDEPENDENT REVIEW REPORT TO CRAWSHAW GROUP PLC Conclusion We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the 26 week period ended 30 July 2017 which comprises the Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Changes in Shareholders Equity, Condensed Consolidated Statement of cash flows and the related explanatory notes. Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the 26 week period ended 30 July 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the AIM Rules. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Directors responsibilities The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU. Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review The purpose of our review work and to whom we owe our responsibilities This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 14

15 Frances Simpson for and on behalf of KPMG LLP Chartered Accountants 1 Sovereign Square Sovereign Street Leeds LS1 4DA 26 September

16 Directors and Advisors Directors J McCarthy N N J Collett A Richardson M Naughton-Rumbo S Henderson Company Secretary A Richardson Company Number Registered Office Unit 4 Sandbeck Way Hellaby Industrial Estate Rotherham S66 8QL Auditors KPMG LLP 1 Sovereign Square Sovereign Street Leeds LS1 4DA Bankers Royal Bank of Scotland plc Yorkshire Corporate Banking 3rd Floor 2 Whitehall Quay Leeds LS1 4HR Nominated Adviser and Broker Peel Hunt Moor House 120 London Wall London EC2Y 5ET Registrars and Receiving Agents Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Solicitors Beyond Corporate (formerly Atticus Legal) Castlefield House Liverpool Road Castlefield Manchester M3 4SB 16