Last checked at 30 Jun 2014 07:00
Creightons Plc
Preliminary announcement
For the year ended 31 March 2014
Chairman's statement
I am pleased to report another year of growth and improved profitability. The Group's profit before taxation for the year ended 31 March 2014 was £471,000 (2013: £302,000). This continued improvement in profits has been achieved despite the on-going tough trading environment with our customers seeking to improve the value of the offer to their end consumer. Our private label ranges have faced increased price and promotion pressure from the big brands and the growth of the value market, which has eroded their market share and adversely affected sales volumes.
To combat the effects of lower underlying demand we have successfully generated sales growth by introducing new customers and developing new product ranges. Much of this growth has come from developing ranges to meet the needs of customers in the value market. Profit margins remain under pressure with customers seeking to recover lost margin and with sales growth coming from lower margin products. We continue to manage costs and our product offering in order to be in a position to respond to customer pressure whilst maintaining our own profitability.
Financial results
Group sales this year of £19,352,000 are £2,026,000 (12%) higher than last year (2013: £17,326,000), increasing the upward growth in sales volumes we have been recording over the past three years. This year's growth has come from a combination of our own UK branded ranges, private label and contract manufacturing with all three strands of our business showing growth in excess of 10% as against last year. Much of this growth has been driven by new ranges and new customer listings for existing ranges. In addition a planned programme to de-list poor performing ranges was also completed in the period under review.
Changes in product and customer mix resulted in a reduced gross margin percentage of 40.8%, a reduction of 2.0% on last year (2013: 42.8%). Winning business with a lower than average margin has helped deliver the 12% sales growth noted above. Administration costs, which include product research and development as well as sales promotion and product support, have risen as we invest resources to support the growth of the business, with savings in promotional support for discontinued ranges reducing the impact of this increase to 4.1%.
Profit before taxation and interest for the year of £503,000 (2013: £333,000) represents an increase of 51%. Group profit after tax of £471,000 (2013: £302,000) therefore shows a further improved performance especially given the trading environment of the past year. Diluted earnings per share rose from 0.51p in 2013 to 0.79p for 2014 as a result of the increased earnings.
Net borrowings (bank overdraft and loans less cash at bank and in hand) at the year-end have reduced by £272,000 to £602,000 (2013: £874,000). Cash generated by the business, together with £72,000 generated from employees exercising share options, has been partly utilised to fund the increase in working capital required to support the expansion of the business.
Current year developments
The Group continues to develop and strengthen its branded portfolio. This is being achieved through developing our own brand offering and developing relationships with the owners of existing brands.
We are continuing to work hard to manage cost pressure through managing customer prices, product re-engineering and enhancing our product portfolio with higher margin products. We continue to develop new sales opportunities and ranges to further expand our sales opportunities.
We expect our main private label customers to respond to the pressures in the current economic climate with value strategies resulting in sales opportunities, which we intend to exploit with lower priced products to offset lower sales levels on higher priced products. We will continue to manage our overhead cost base and working capital requirements to ensure they are aligned with the anticipated sales levels of the Group, whilst retaining the skills necessary to meet growth opportunities as they arise. We are undertaking a major review of our planning and purchasing procedures in order to continue to improve our stock turn whilst maintaining customer service levels and reducing investment in working capital.
As in previous years, your Board is continuing to seek opportunities to acquire brands or companies that would complement the existing businesses by offering synergies in manufacturing, sourcing and marketing due to similarities in product alignment, sourcing or outlets.
On 23 May 2014 the Group completed the sale of its share in one of our partner brands, Twisted Sista, for an approximate profit of £375,000. The Group will utilise the proceeds of this disposal to invest in the development of new ranges.
The Board has considered whether to declare a dividend this year but, although we have seen a further increase in annual profits, it feels that it continues to be more appropriate to retain profits to help fund the continued investment in growth than to reduce available funds through dividend distribution.
I would like to take this opportunity to thank each and every one of the Group's employees for the hard work and effort they have put in over what has been a challenging year. I would also like to thank our customers, shareholders and suppliers for their support and loyalty to the Group.
William McIlroy
Chairman, 30 June 2014
Consolidated income statement
Year ended 31 March | Year ended 31 March | ||
2014 | 2013 | ||
Note | £000 | £000 | |
Revenue | 19,352 | 17,326 | |
Cost of sales | (11,460) | (9,902) | |
Gross profit | 7,892 | 7,424 | |
Distribution costs | (802) | (763) | |
Administrative expenses | (6,587) | (6,328) | |
Operating profit | 503 | 333 | |
Finance costs | (32) | (31) | |
Profit before tax | 471 | 302 | |
Taxation | - | - | |
Profit for the year from continuing operations | 471 | 302 |
Earnings per share
| Basic | 2 | 0.81p | 0.55p |
Diluted | 2 | 0.79p | 0.51p |
Consolidated statement of comprehensive income
Year ended 31 March | Year ended 31 March | ||
2014 | 2013 | ||
£000 | £000 | ||
| Profit for the year from continuing operations | 471 | 302
| |
Exchange differences on translating foreign operations | 42 | (22) | |
Total comprehensive income for the year attributable to the equity holders of the parent | 513 | 280 |
Company statement of comprehensive income
Year ended 31 March | Year ended 31 March | ||
2014 | 2013 | ||
£000 | £000 | ||
| Loss for the year from continuing operations | - | (3)
| |
Total comprehensive expense for the year | - | (3) |
Consolidated balance sheet
31 March | 31 March | ||
2014 | 2013 | ||
Note | £000 | £000 | |
| Non-current assets | |||
Goodwill | 343 | 343 | |
Other intangible assets | 259 | 295 | |
Property, plant and equipment | 590 | 525 | |
1,192 | 1,163 | ||
| Current assets | |||
Inventories | 3,704 | 3,526 | |
Trade and other receivables | 3,464 | 2,811 | |
Cash and cash equivalents | 11 | 18 | |
7,179 | 6,355 | ||
Total assets | 8,371 | 7,518 | |
Current liabilities | |||
| Trade and other payables | 2,777 | 2,219 | |
Obligations under finance leases | 20 | 19 | |
Borrowings | 613 | 892 | |
3,410 | 3,130 | ||
Net current assets | 3,769 | 3,225 | |
Non-current liabilities | |||
Obligations under finance leases | 28 | 48 | |
28 | 48 | ||
Total liabilities | 3,438 | 3,178 | |
Net assets | 4,933 | 4,340 | |
Equity | |||
| Share capital | 3 | 584 | 545 |
Share premium account | 1,264 | 1,231 | |
Other reserves | 38 | 38 | |
Share-based payment reserve | - | 51 | |
Translation reserve | (13) | (55) | |
Retained earnings | 3,060 | 2,530 | |
Total equity attributable to the equity shareholders of the parent company | 4,933 | 4,340 |
Consolidated statement of changes in equity
Share capital | Share premium account | Other reserves
| Share-based payment reserve | Translation reserve | Retained earnings | Total equity | |
£000 | £000 | £000 | £000 | £000 | £000 | £000 | |
At 1 April 2012 | 545 | 1,231 | 38 | 44 | (33) | 2,228 | 4,053 |
Exchange differences on translation of foreign operations | - | - | - | - | (22) | - | (22) |
Share-based payment charge | - | - | - | 7 | - | - | 7 |
Profit for the year | - | - | - | - | - | 302 | 302 |
At 31 March 2013 | 545 | 1,231 | 38 | 51 | (55) | 2,530 | 4,340 |
Issue of share options | 39 | 33 | - | - | - | - | 72 |
Exchange differences on translation of foreign operations | - | - | - | - | 42 | - | 42 |
Share based payment charge | - | - | - | 8 | - | - | 8 |
Transfer - see note below | - | - | - | (59) | 59 | ||
Profit for the year | - | - | - | - | 471 | 471 | |
At 31 March 2014 | 584 | 1,264 | 38 | - | (13) | 3,060 | 4,933 |
Consolidated cash flow statement
Year ended 31 March | Year ended 31 March | ||
2014 | 2013 | ||
Note | £000 | £000 | |
Net cash from operating activities | 4 | 689 | 306 |
| Investing activities | |||
Purchase of property, plant and equipment | (211) | (97) | |
Purchase of intangible assets | (258) | (334) | |
| Net cash used in investing activities | (469) | (431) | |
| Financing activities | |||
Repayment of finance lease obligations | (19) | (19) | |
Proceeds on issue of shares | 72 | - | |
(Decrease)/increase in bank loans and invoice finance facilities | (279) | 54 | |
| Net cash (used in)/ generated from financing activities | (226) | 35 | |
Net (decrease) in cash and cash equivalents | (6) | (90) | |
Cash and cash equivalents at start of year | 18 | 106 | |
Effect of foreign exchange rate changes | (1) | 2 | |
Cash and cash equivalents at end of year | 11 | 18 |
Notes to preliminary announcement
1 Business and geographic segments
For management purposes the Group reports operations from two operations one based in the United Kingdom and one based in North America. The Group's reportable segments under IFRS 8 are therefore as follows:
Revenue by segment
Year ended 31 March 2014 | Year ended 31 March 2013 | |||||
External revenue | Inter- segment revenue | Total segment revenue | External revenue | Inter- segment revenue | Total segment revenue | |
£000 | £000 | £000 | £000 | £000 | £000 | |
United Kingdom | 18,236 | 142 | 18,378 | 15,782 | 346 | 16,128 |
North America | 1,116 | - | 1,116 | 1,544 | - | 1,544 |
Total | 19,352 | 142 | 19,494 | 17,326 | 346 | 17,672 |
Profit by segment
Year ended 31 March 2014 | Year ended 31 March 2013 | |||||
United Kingdom | North America | Group | United Kingdom | North America | Group | |
£000 | £000 | £000 | £000 | £000 | £000 | |
Segment results | 1,337 | (2) | 1,335 | 1,017 | 129 | 1,146 |
Central costs | (832) | (813) | ||||
Operating profit | 503 | 333 | ||||
Finance costs | (32) | (31) | ||||
Profit for the year | 471 | 302 | ||||
Segmental operating profit is stated after charging:
Year ended 31 March 2014 | Year ended 31 March 2013 | |||||
United Kingdom | North America | Group | United Kingdom | North America | Group | |
£000 | £000 | £000 | £000 | £000 | £000 | |
Depreciation | 146 | - | 146 | 128 | - | 128 |
Amortisation | 293 | - | 293 | 301 | - | 301 |
Write-downs of inventory recognised as an expense | 107 | 69 | 176 | 174 | 14 | 188 |
The profit reported by each segment represents the profit earned before central management costs, including directors' remuneration, and finance costs.
Segment assets
Year ended 31 March | Year ended 31 March | ||
2014 | 2013 | ||
£000 | £000 | ||
Non-current assets | |||
United Kingdom | 1,192 | 1,163 | |
North America | - | - | |
Total non-current assets | 1,192 | 1,163 | |
Current assets | |||
United Kingdom | 6,855 | 5,874 | |
North America | 324 | 481 | |
Total current assets | 7,179 | 6,355 | |
Total assets | |||
United Kingdom | 8,047 | 7,037 | |
North America | 324 | 481 | |
Total assets | 8,371 | 7,518 |
Segment liabilities
Year ended 31 March | Year ended 31 March | ||
2014 | 2013 | ||
£000 | £000 | ||
United Kingdom | 3,346 | 3,124 | |
North America | 92 | 54 | |
Total liabilities | 3,438 | 3,178 |
All of the Group's capital expenditure, depreciation and amortisation is within the United Kingdom segment.
The accounting policies for the reportable segment are the same as the Group's accounting policies described in the Group's financial statements for the year ended 31 March 2013.
2 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Year ended 31 March | Year ended 31 March | ||
2014 | 2013 | ||
£000 | £000 | ||
Earnings | |||
Net profit attributable to the equity holders of the parent company | 471 | 302 |
Year ended 31 March | Year ended 31 March | ||
2014 | 2013 | ||
Number | Number | ||
Number of shares | |||
Weighted average number of ordinary shares for the purposes of basic earnings per share | 58,355,426 | 54,478,876 | |
Effect of dilutive potential ordinary shares relating to share options | 1,570,000 | 5,126,550 | |
Weighted average number of ordinary shares for the purposes of diluted earnings per share | 59,925,426 | 59,605,426 |
3. Share capital
Ordinary shares of 1p each | |||
£000 | Number | ||
| At 1 April 2012 and 31 March 2013 | 545 | 54,478,876 | |
| Issued in the year | 39 | 3,876,550 | |
| At 31 March 2014 | 584 | 58,355,426 | |
The Company has one class of ordinary shares which carry no right to fixed income. All of the share are issued and fully paid. The total proceeds from the issue of shares in the year was £72,000 (2013 - nil).
4. Notes to consolidated cash flow statement
Year ended 31 March | Year ended 31 March | ||
2014 | 2013 | ||
£000 | £000 | ||
| Profit from operations | 503 | 333 | |
Adjustments for: | |||
Depreciation on property, plant and equipment | 146 | 128 | |
Goodwill impairment charge | - | 3 | |
Amortisation of intangible assets | 293 | 301 | |
Share based payment charge | 8 | 7 | |
950 | 772 | ||
(Increase) in inventories | (210) | (230) | |
(Increase)/decrease in trade and other receivables | (661) | 235 | |
Increase/(decrease) in trade and other payables | 642 | (440) | |
Cash generated from operations | 721 | 337 | |
Interest paid | (32) | (31) | |
Net cash from operating activities | 689 | 306 |
Cash and cash equivalents (which are presented as a single asset on the face of the balance sheet) comprise cash at bank and in hand.
5. Status of information
The financial information above, which was approved by the Board of Directors on 30 June 2014, does not constitute full accounts within the meaning of section 434 of the Companies Act 2006. The financial information presented above has been prepared in accordance with the accounting policies published in the financial statements for the year ended 31 March 2013. The full financial statements for the year ended 31 March 2013, which contained an unqualified audit report under section 475 of the Companies Act 2006 and which did not make any statement under section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies in accordance with section 441 of the Companies Act 2006.
The preliminary statement of results has been reviewed and agreed with the Company's auditor, Chantrey Vellacott DFK LLP, who have indicated that they will be giving an unqualified opinion in their report on the statutory financial statements.
Copies of the annual report and consolidated financial statements for the year ended 31 March 2014 will be made available to shareholders in due course. Further copies will be available from the Company's registered office at 1210 Lincoln Road, Peterborough, PE4 6ND and on the company's website at www.creightons.com.