Last checked at 28 Jun 2011 07:00
Creightons Plc
Preliminary Results
for the year ended 31 March 2011
Review of the year
I am pleased to report a consolidated Group pre-tax profit of £135,000 for the year ended 31 March 2011 (2010: £303,000). This profit has been achieved in a difficult trading year with continued reduction in Christmas gift sales as retail customers have bought product direct from China, increased margin pressure arising from increases in raw material costs and the disruption caused by the fire in a warehouse on 14 December 2010.
We have been successful in introducing new customers and developing new brands to offset the loss of Christmas gift business with sales growth for new business more than offsetting the loss of Christmas gift sales. This new business is more evenly spread through the year which will reduce the seasonality of the Group's trade.
Margins have continued to remain under pressure with raw material prices increasing on a regular basis and have been much more pronounced in the last quarter of the year. We have continued our programme of cost engineering and managing our product offering to improve this position.
We have continued our focused effort on sales and development that I reported last year as this has been successful in introducing new customers and brands.
Financial results
Consolidated Group sales this year were £540,000 higher than last year (an increase of 4%) at £14,130,000 (2010: £13,590,000). The underlying sales growth excluding the impact of the reduced Christmas gifts is £1,772,000 (an increase of 13%).
Increased raw material prices and an adverse product mix which have been offset by savings from our ongoing product re-engineering programme have resulted in a slight erosion in gross margin percentage by 0.3% to 42.0% (2010 - 42.3%). Increased transport costs and changes in the sales mix have resulted in higher distribution costs as a percentage of sales, which have therefore increased to 4.6% from 3.8% in 2010. Administration costs have risen as we continue to invest in product development and sales resources to drive new sales opportunities.
Profit before tax for the year of £167,000 (2010: £334,000) represents a reduction of 50%.
Lower average borrowings and continued low interest rates ensured that interest costs have remained relatively low at £32,000 (2010: £31,000).
Group Profit after tax of £135,000 (2010: £303,000) therefore shows a satisfactory performance given the trading environment the Group has operated in during the past year. Diluted earnings per share fell to 0.23p from 0.51p in 2010 as a result of the reduced earnings. The directors do not consider it is in the best interests of the Company to declare a dividend at the moment, instead using the funds generated from this year's successful trading to manage future working capital requirements.
Net borrowings (bank overdraft and loans less bank and cash on hand) have increased by £388,000 to £515,000 (2010 £167,000). The main reason for the increase in borrowing is the higher working capital requirement at the end of the year. The increase in trade debtors is primarily due to higher sales in the final quarter of the year although debtor days have increased as a result of changes in customer mix. Stock levels, particularly in North America, have increased in the main to support the new ranges launched in the final quarter of the year.
Current year developments
The Group continues to develop and strengthen its branded portfolio. This is being achieved through developing our existing brand offering and developing relationships with the owners of existing brands, often through investing in existing brands when opportunities arise.
We have faced intense price pressures with significant increases in key raw materials over the past six months. We are working hard to pass these on to our customers with some degree of success. Whilst the price pressure has recently abated we are continuing our efforts to recover lost margin.
The levels of Christmas gift business will continue to decrease as our major customer is now sourcing the majority of gifts direct from the Far East. We are continuing to drive new sales opportunities to compensate for this business.
We also expect our main private label customers to continue to adopt value strategies with sales opportunities in lower priced products offsetting lower sales levels on higher priced products. This too is likely to adversely affect our turnover and margins in the current year.
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.
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.
The Board has reviewed the Group's funding requirements and the Company's dividend policy in light of consistent profits for a number of years. However, given the on-going pressure on cash flow and liquidity and relatively modest annual profits, it feels that it is more appropriate to retain profits to help fund the continued investment in growth than 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.
William McIlroy
Chairman, 27 June 2011
Consolidated income statement
Year ended 31 March | Year ended 31 March | ||
2011 | 2010 | ||
Note | £000 | £000 | |
Revenue | 14,130 | 13,590 | |
Cost of sales | (8,202) | (7,837) | |
Gross profit | 5,928 | 5,753 | |
Distribution costs | (654) | (511) | |
Administrative expenses | (5,107) | (4,908) | |
Operating profit | 167 | 334 | |
Finance costs | (32) | (31) | |
Profit before tax | 135 | 303 | |
Income tax expense | - | - | |
Profit for the period from continuing operations | 135 | 303 |
Earnings per share
| Basic | 0.25p | 0.56p | |
Diluted | 0.23p | 0.51p |
The profit of the parent company was nil (2010 - nil).
Consolidated statement of comprehensive income
Year ended 31 March | Year ended 31 March | ||
2011 | 2010 | ||
£000 | £000 | ||
| Profit for the period from continuing operations | 135 | 303 | |
Exchange differences on translating foreign operations | 23 | 18 | |
Release of cash flow hedge to income statement | - | (179) | |
Total comprehensive income for the period attributable to the equity holders of the parent | 158 | 142 |
There are no movements to be recognised through the parent company statement of comprehensive income in 2011 or 2010.
Consolidated balance sheet - at 31 March 2011
31 March | 31 March | ||
2011 | 2010 | ||
Note | £000 | £000 | |
| Non-current assets | |||
Goodwill | 343 | 331 | |
Other intangible assets | 168 | 154 | |
Property, plant and equipment | 376 | 394 | |
887 | 879 | ||
| Current assets | |||
Inventories | 3,025 | 2,770 | |
Trade and other receivables | 2,578 | 2,013 | |
Cash and cash equivalents | 96 | 49 | |
5,699 | 4,832 | ||
Total assets | 6,586 | 5,711 | |
| Current liabilities | |||
Trade and other payables | 2,155 | 1,822 | |
Obligations under finance leases | 6 | 16 | |
Bank overdrafts and loans | 611 | 216 | |
2,772 | 2,054 | ||
Net current assets | 2,927 | 2,778 | |
Non-current liabilities | |||
Obligations under finance leases | 1 | 7 | |
1 | 7 | ||
Total liabilities | 2,773 | 2,061 | |
Net assets | 3,813 | 3,650 | |
| Equity | |||
Share capital | 543 | 543 | |
Share premium account | 1,229 | 1,229 | |
Other reserves | 38 | 38 | |
Share-based payment reserve | 30 | 69 | |
Translation reserve | (32) | (53) | |
Retained earnings | 2,005 | 1,824 | |
Total equity attributable to the equity shareholders of the parent company | 3,813 | 3,650 |
Consolidated statement of changes in equity
Share capital | Share premium account | Other reserves (note 22) | Share-based payment reserve | Hedging reserve | Translation reserve | Retained earnings | Total equity | |
£000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
At 1 April 2009 | 543 | 1,229 | 38 | 63 | 179 | (71) | 1,521 | 3,502 |
Release of cash flow hedge to income statement | - | - | - | - | (179) | - | - | (179) |
Exchange differences on translation of foreign operations | - | - | - | - | - | 18 | - | 18 |
Additional provision | - | - | - | 6 | - | - | - | 6 |
Net profit for the year | - | - | - | - | - | - | 303 | 303 |
At 31 March 2010 | 543 | 1,229 | 38 | 69 | - | (53) | 1,824 | 3,650 |
Release of share based payment reserve to retained earnings | - | - | - | (44) | - | - | 44 | 0 |
Exchange differences on translation of foreign operations | - | - | - | - | - | 21 | 2 | 23 |
Additional provision | - | - | - | 5 | - | - | 5 | |
Net profit for the year | - | - | - | 135 | 135 | |||
At 31 March 2011 | 543 | 1,229 | 38 | 30 | - | (32) | 2,005 | 3,813 |
Consolidated cash flow statement
Year ended 31 March | Year ended 31 March | ||
2011 | 2010 | ||
Note | £000 | £000 | |
Net cash (outflow)/inflow from operating activities | 3 | (160) | 151 |
| Cash flow from investing activities | |||
Purchase of property, plant and equipment | (108) | (77) | |
Expenditure on intangible assets and goodwill | (174) | (182) | |
Proceeds of disposal of plant & equipment | 114 | - | |
| Net cash used in investing activities | (168) | (259) | |
| Cash flow from financing activities | |||
Repayment of finance lease obligations | (16) | (15) | |
Increase/(decrease) in bank loans | 395 | (18) | |
| Net cash used in financing activities | 379 | (33) | |
Net increase/(decrease) in cash and cash equivalents | 51 | (141) | |
Cash and cash equivalents at start of period | 49 | 194 | |
Effect of foreign exchange rate changes | (4) | (4) | |
Cash and cash equivalents at end of period | 96 | 49 |
Notes to preliminary announcement
1 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 | ||
2011 | 2010 | ||
£000 | £000 | ||
Earnings | |||
Net profit attributable to the equity holders of the parent company | 135 | 303 |
Year ended 31 March | Year ended 31 March | ||
2011 | 2010 | ||
Number | Number | ||
Number of shares | |||
Weighted average number of ordinary shares for the purposes of basic earnings per share | 54,275,876 | 54,275,876 | |
Effect of dilutive potential ordinary shares relating to share options | 5,426,550 | 5,426,550 | |
Weighted average number of ordinary shares for the purposes of diluted earnings per share | 59,702,426 | 59,702,426 |
2. Share capital
Ordinary shares of 1p each | |||||
2011 | 2010 | ||||
£000 | Number | £000 | Number | ||
| Authorised | 1,223 | 122,346,000 | 1,223 | 122,346,000 | |
| Issued and fully paid | 543 | 54,275,876 | 543 | 54,275,876 | |
The Company has one class of ordinary shares which carry no right to fixed income.
3. Notes to consolidated cash flow statement
Year ended 31 March | Year ended 31 March | ||
2011 | 2010 | ||
£000 | £000 | ||
| Profit from operations | 167 | 334 | |
Adjustments for: | |||
Depreciation on property, plant and equipment | 114 | 118 | |
(Gain) on disposal of property, plant & equipment | (102) | - | |
Amortisation of intangible assets | 148 | 140 | |
Share based payment charge | 5 | 6 | |
Other non cash items | - | 12 | |
332 | 610 | ||
(Increase) in inventories | (277) | (224) | |
(Increase) in trade and other receivables | (582) | (483) | |
Increase in trade and other payables | 399 | 279 | |
Cash (utilised in)/ generated from operations | (128) | 182 | |
Interest paid | (32) | (31) | |
Cash (outflow)/inflow from operating activity | (160) | 151 |
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.
4. Status of information
The financial information above, which was approved by the Board of Directors on 27 June 2011, 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 2010. The full financial statements for the year ended 31 March 2010, 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 2011 will be sent to shareholders in due course. Further copies will be available from the Company's registered office at 1210 Lincoln Road, Peterborough, PE4 6ND.