Creightons Regulatory News (CRL)

Creightons Plc

Preliminary announcement

For the year ended 31 March 2012

Review of the year

I am pleased to report a consolidated Group pre-tax profit of £223,000 for the year ended 31 March 2012 (2011: £135,000). This improved profit has been achieved despite trading conditions remaining depressed due to the on-going economic situation and continued reduction in our Christmas gift business as customers continue to source gifts directly from the Far East.

We have successfully introduced new customers and developed new brands to offset loss of the Christmas gift business with sales growth for new business. This new business is more evenly spread through the year, virtually eliminating the seasonality that characterised the business in previous years.

Margins remain under pressure with raw material prices increasing, particularly in the first half of the year and we are facing customer resistance to increasing prices. We will continue our programme of managing costs and our product offering to improve this position.

Our focus on all year round sales and developing new products has therefore resulted in the sales and earnings growth in the year.

Financial results

Consolidated Group sales this year at £16,333,000 are £2,203,000 (16%) higher than last (2011: £14,130,000). The underlying sales growth excluding the impact of the reduced Christmas gifts is £2,709,000 (21%), an increase of £1,772,000 (13%) over 2011.

Increased raw material prices and an adverse product mix have been more than offset by savings from our on-going product re-engineering programme. This has resulted in a slightly improved gross margin percentage of 42.1%, an increase of 0.1% on last year (2011: 42.0%). Favourable changes in the sales mix have also resulted in distribution costs decreasing as a percentage of sales from 4.6% in 2011 to 4.2%. Administration costs, which include product research and development as well as sales promotion, have risen as we invest in product development and sales resources to drive new sales opportunities.

Profit before tax and interest for the year of £257,000 (2011: £167,000) represents an increase of 54%. Higher average borrowings than in the previous period, as the Group has invested in working capital to support the sales growth, resulted in slightly higher interest costs of £34,000 (2011: £32,000).

Group profit after tax of £223,000 (2011: £135,000) therefore shows a good and improving performance given the trading environment during the past year. Diluted earnings per share rose from 0.23p in 2011 to 0.37p for 2012 as a result of the increased earnings. The directors do not consider it is in the best interests of the Group or its shareholders to declare a dividend at the moment, instead using the funds generated from this year's successful trading to fund future working capital requirements.

Net borrowings (bank overdraft and loans less cash at bank and in hand) at the year-end have increased by £217,000 to £732,000 (2011: £515,000). 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 but also because debtor days have increased as a result of changes in customer mix. Inventories have increased, albeit at a lower rate than the expansion in business, representing an improving stock turn.

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, often through investing in existing brands when opportunities arise.

We are continuing to work hard to manage cost pressure through a combination of measures including increasing customer prices, product re-engineering and enhancing our product portfolio with higher margin products. The Christmas gift business has decreased as customers in this sector increasingly source gifts direct from the Far East. We have been successful in developing new sales opportunities to compensate for the decline in this business.

We expect our main private label customers to respond to the pressures in the current economic climate to continue with value strategies resulting in sales opportunities through lower priced products offsetting lower sales levels on higher priced products. This may adversely affect 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. We are undertaking a major review of our planning and purchasing procedures in order to continue to improve our stock turn and reduce 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.

The Board has reviewed the Group's funding requirements and dividend policy in light of consistent profits for a number of years. However, given the on-going pressure to fund the growth of the business and relatively modest annual profits, it feels that it is 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.

William McIlroy

Chairman, 28 June 2012

Consolidated income statement

Earnings per share

The profit of the parent company was nil (2011 - nil).

Consolidated statement of comprehensive income

There are no movements to be recognised through the parent company statement of comprehensive income in 2012 or 2011.

Consolidated balance sheet

Consolidated statement of changes in equity

Consolidated cash flow statement

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

Profit by segment

The profit reported by each segment represents the profit earned before central management costs, including directors' remuneration, and finance costs.

Segment assets

Segment liabilities

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 in the Group's financial statements for the year ended 31 March 2011.

2 Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

3. Share capital

The Company has one class of ordinary shares which carry no right to fixed income.

On 11 July 2011 the Company issued 203,000 Ordinary shares of 1p each.

4. Notes to consolidated cash flow statement

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 28 June 2012, 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 2011. The full financial statements for the year ended 31 March 2011, 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 2012 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.creightonscom/results.