CRAW - operational gearing ...13 Aug 2013 08:33
According to its admission doc, CRAW achieved profit before tax of over £1m per annum. In 2011, EBITDA was over £1m. A now dividend paying CRAW, who have turned a £900k net debt position to net cash through operational cashflow over the past 3 years whilst investing in a new Derby store, should surely be worth much more than the current £3.5m market cap.
It has a growing net asset value around 4.5p to 5p per share at the last results ... and a forward dividend yield of .25p per share. But the opportunity is earnings growth ...
ISIS partners converted their loan notes at 17p per share, so presumably saw good value at that price.
A few factors decimated the SP over the last couple of years. Pasty tax fears, Schroders selling which has now clearly stopped, and poor results in q3 2011. That's 2 years ago, and trends in LFL sales have been positive since. Recent trading statements were very positive too. I'm very excited about where the business and shareprice could be headed ...
The horsemeat scandal and excellent BBQ weather and improving high street footfall should all be boosting sales. Last summer was a total washout, the wettest for decades. So it'll be interesting to see how results compare.
On fundamentals, a 5% increase in full year turnover adds nearly £1m to revenues, around £420K to the bottom line at current margins if 43.7%. Yet we heard in the outlook statement that margins are improved. Those projections assume central admin costs are stable (the same outlook statement highlights improving costs too). Such a performance would take full year profit before tax up to around £0.7m.
A 10% revenue increase ought to take pre-tax profit over £1m and EBITDA close to £1.5m. That's 1 extra person through the door for every 10 customers served. Or average spend up by 5% and footfall up by 5%. I'm not saying it'll happen - just illustrating how on good margins and high turnover, a small % trading improvement can make a huge difference to the bottom line.
Apply an sector average PE of 12 on £800k earnings, and we're looking at the SP around 17-18p. If the market starts to factor in further growth to the store footprint then we start to look at a higher SP still.
That kind of money could see CRAW open a new store every six months and deliver substantial dividend growth, all from positive cashflow.
A fair bit of hypothesising on my part in this post ... but all within reason IMO. With results due in a few weeks we should get a good sense of how things are progressing. DYOR.
Sign In
Follow the stocks
