Final Results
Creightons PLC
26 July 2006
CREIGHTONS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2006
Chairman's statement
Review of the year
This year has seen several successes for the group, including consolidating our
position as a profitable business during a difficult trading period, reducing
our outside debt, and increasing sales by more than 10% over last year.
As I reported at the half year, the first half saw the completion of the
disposal of Unit 6, Water Lane Trading Estate in Storrington and the sale of the
remaining part of the former Storrington site, Units 1-5a. All production has
now been very successfully consolidated onto the Peterborough site, with
retention of all significant customers who had previously been sourced from
Storrington. Our customer service levels have remained consistently high, and
there is no doubt that there will be improved efficiencies after the bedding in
of the transferred products
We have continued to invest in and develop our ranges of branded products, and
believe this investment is already beginning to pay-off in the increase in sales
and profits for our branded businesses, as well as enabling us to be extremely
competitive in formulating new and aspirational products for our private label
customers.
Financial Results
Consolidated Group sales this year were £12,568,000 (2005: £11,354,000). The 10%
improvement over last year's result has been due in particular to increased
sales to our private label customers. Sales and gross profit were both higher in
the second half due to this seasonal contract business at Christmas. As in
previous years, the Group has continued to strive for low cost producer status,
without compromising on product or service level quality. We have also continued
to make further investment in marketing, sales and technical R&D support.
Operating profit before tax and interest for the year was £926,000 (2005: loss
of £202,000). This year's result includes the net profit from the closure and
disposal of the Storrington operation and resultant restructuring costs (net
income of £393,000), whereas the prior year's result contained a significant
provision for restructuring (costs of £431,000). Significant overhead and
operational cost savings are now flowing through to profits from the closure of
the Storrington site, although this year only benefited partially from this.
Financing costs are significantly reduced due to the lower borrowings levels,
the proceeds from the site disposal and the improved profitability of the
business enabling the remaining related party loan and much of the bank debt to
be repaid and providing the group with a significant amount of the working
capital required for the Christmas stock build.
Profit after tax was £823,000 (2005: loss of £363,000), with basic earnings per
share from continuing operations of 1.5p (2005: loss of 0.67p). At this stage,
the directors do not believe a dividend would be in the best interests of the
Company since these earnings have been applied to reduce the Group's borrowings
and consolidate the financial position of the Group.
Current year developments
The Group continues to develop and strengthen its branded portfolio, and a
number of new brands have been launched in recent months into the premium and
middle markets,
As we announced on 30th May 2006, your board has decided to appoint Mr Glencross
as a non-executive director with effect from 31st August, following retirement
from his present executive position on the Company's main board, and from the
board of Potter & Moore Innovations Limited, the Company's wholly-owned
subsidiary, where he has served as Managing Director since 14th July 2005
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.
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 the past year. I
also appreciate the contribution of our customers and suppliers and we look
forward to developing our relationships as we build our business.
William McIlroy
Chairman, 26 July 2006
Consolidated income statement
Year ended 31 Year ended 31
March March
2006 2005
Note £000 £000
Revenue 12,568 11,354
Cost of sales (7,686) (7,040)
Gross Profit 4,882 4,314
Other operating income 0 7
Distribution costs (299) (277)
Administration costs (4,050) (3,815)
Restructuring costs 2 (49) (431)
Profit on disposal of property 442 -
Operating profit/(loss) 926 (202)
Investment revenues 3 1
Finance costs (121) (162)
Profit/(loss) before tax 808 (363)
Tax 15 -
Profit/(loss) for the period from continuing operations 823 (363)
attributable to the equity holders of the parent company
Earnings per share from continuing operations
Basic 3 1.5p (0.67)p
Diluted 3 1.4p (0.61)p
Consolidated balance sheet - at 31 March 2006
31 March 31 March
2006 2005
Note £000 £000
Non-current assets
Goodwill 364 364
Other intangible assets 84 3
Property, plant and equipment 336 1,589
784 1,956
Current assets
Inventories 1,805 2,088
Trade and other receivables 1,328 1,606
Cash and cash equivalents 77 1
3,210 3,695
Total assets 3,994 5,651
Current liabilities
Trade and other payables 1,491 2,131
Obligations under finance leases 3 36
Bank overdrafts and loans 340 1,274
1,834 3,441
Net current assets 1,376 254
Non-current liabilities
Bank loans - 881
Obligations under finance leases 13 11
Deferred tax - 15
13 907
Total liabilities 1,847 4,348
Net assets 2,147 1,303
Equity
Share capital 4 543 543
Share premium account 4 1,229 1,229
Capital redemption reserve 4 18 18
Capital reserve 4 7 7
Special reserve 4 13 13
Share-based payment reserve 4 47 26
Retained earnings 4 290 (533)
Total equity available to the holders of the parent company 2,147 1,303
Company balance sheet - at 31 March 2006
31 March 31 March
2006 2005
Note £000 £000
Non-current assets
Other intangible assets - 3
Property, plant and equipment - 1,390
Investment in subsidiaries 60 60
60 1,453
Current assets
Inventories - 611
Trade and other receivables 2,103 1,242
Cash and cash equivalents - -
2,103 1.853
Total assets 2,163 3,306
Current liabilities
Trade and other payables 124 973
Bank overdrafts and loans - 230
124 1,203
Net current assets 1,979 650
Non-current liabilities
Bank loans - 881
- 881
Total liabilities 124 2,084
Net assets 2,039 1,222
Equity
Share capital 543 543
Share premium account 1,229 1,229
Capital redemption reserve 18 18
Special reserve 1,441 1,441
Share-based payment reserve 47 26
Retained earnings (1,239) (2,035)
Total equity available to the holders of the parent company 2,039 1,222
Consolidated cash flow statement
Year ended Year ended
31 March 31 March
2006 2005
Note £000 £000
Net cash inflow from operating activities 5 577 117
Cash flow from investing activities
Interest received 3 1
Proceeds on disposal of property, plant and equipment 1,596 10
Purchase of property, plant and equipment (168) (96)
Expenditure on intangible assets (86) -
Net cash from/(used in) investing activities 1,345 (85)
Cash flow from financing activities
Repayment of borrowings (1,534) (258)
Repayment of finance lease obligations (47) -
New bank loans - 900
New Finance lease obligations 16 -
Decrease in bank overdrafts (281) (674)
Net cash used in financing activities (1,846) (32)
Net increase in cash and cash equivalents 76 0
Cash and cash equivalents at start of period 1 1
Cash and cash equivalents at end of period 77 1
Notes to the consolidated financial statements
1. Accounting policies
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs) for the first time. The disclosures
required by IFRS 1 concerning the transition from UK GAAP to IFRSs are given in
note 6. The financial statements have also been prepared in accordance with
IFRSs adopted for use in the European Union and therefore comply with Article 4
of the EU IAS.
The financial statements have been prepared on the historical cost basis, except
for the revaluation of certain properties and financial instruments. The
principal accounting policies adopted are set out below.
The principal accounting policies changed as a result of preparing financial
statements in accordance with IFRS are: -
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the
net assets of business acquired at the date of acquisition. Goodwill is tested
at least annually for impairment and is carried at cost less accumulated
impairment losses. No amortisation is charged.
Share based payments
The Group has applied the requirements of IFRS2 'Share Based Payment'. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of options after 7 November 2002 that were unvested at 1 January 2005.
The group issues equity-settled share based payment to certain employees.
Equity-settled share-based payments are measured at fair value (excluding the
effect of non market-based vesting conditions) at the date of grant. The fair
value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the group's
estimate of shares that will eventually vest and adjusted for the effect of non
market-based vesting conditions.
Fair value is calculated using the Black-Scholes model. The expected life used
in the model has been adjusted, based on management's best estimate, for the
non-transferability, exercise restrictions and behavioural considerations.
2. Restructuring costs
The exceptional costs relate to a provision to cover the anticipated costs of
relocating the operations carried out at Storrington following a decision to
dispose of the freehold property.
Year ended Year ended
31 March 31 March
2006 2005
£000 £000
Impairment loss recognised in respect of assets - 94
Increased cost of working - 252
Redundancy costs 49 85
Total 49 431
The exceptional costs relate to a provision to cover the anticipated costs of
relocating the operations carried out at Storrington following a decision to
dispose of the freehold property.
3 Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Year ended 31 Year ended
March 31 March
2006 2005
£000 £000
Earnings
Net profit/(loss) attributable to the equity holders of the 823 (363)
parent company
Year ended 31 Year ended
March 31 March
2006 2005
Number Number
Number of shares
Weighted average number of ordinary shares for the purposes 54,275,876 54,275,876
of basic earnings per share
Effect of dilutive potential ordinary shares relating to 4,582,203 5,182,203
Share options
Weighted average number of ordinary shares for the purposes 58,858,079 59,458,079
of diluted earnings per share
4 Statement of changes in equity
Share Share Capital Capital Special Share-based Retained Total
capital premium redemption reserve payment
account reserve reserve reserve reserve equity
£000 £000 £000 £000 £000 £000 £000 £000
At 1 April 2004 543 1,229 18 7 13 5 (170) 1,645
Additional provision - - - - - 21 - 21
Net (loss) for - - - - - - (363) (363)
the year
At 1 April 2005 543 1,229 18 7 13 26 (533) 1,303
Additional provision - - - - - 21 - 21
Net profit for - - - - - - 823 823
the year
At 31 March 2006 543 1,229 18 7 13 47 290 2,147
5 Note to cash flow statement
Year ended 31 Year ended
March 31 March
2006 2005
£000 £000
Profit/(loss) from operations 926 (202)
Adjustments for:
Depreciation on property plant and equipment 267 196
Amortisation of intangible assets 5 5
(Gain)/loss on disposal of property, plant and equipment (442) 1
Share based payment charge 21 21
Operating cash flows before movements in working capital 777 21
Decrease/(increase) in inventories 283 (551)
Decrease in trade and other receivables 278 340
(Decrease)/increase in trade and other payables (640) 469
Cash generated from operations 698 279
Interest paid (121) (162)
Net cash inflow from operating activities 577 117
Additions to plant and equipment during the year amounting to £16,000 (2005 -
nil) were financed by new finance leases.
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.
6 Explanation of transition to IFRS
This is the first year that the Group has presented its financial statements
under IFRS. The following disclosures are required in the year of transition.
Reconciliation of consolidated income statement for the year ended 31 March 2005
UK GAAP Goodwill Share based IFRS
Amortisation payments
£000 £000 £000 £000
Revenue 11,354 - - 11,354
Cost of sales (7,040) - - (7,040)
Gross Profit 4,314 - - 4,314
Other operating income 7 - - 7
Distribution costs (277) - - (277)
Administration costs (3,828) 34 (21) (3,815)
Restructuring costs (431) - - (431)
(Loss) from operations (215) 34 (21) (202)
Finance costs (161) - - (161)
(Loss) before tax (376) 34 (21) (363)
Tax - - - -
(Loss) for the period attributable to the (376) 34 (21) (363)
holders of the parent company
An explanation of the impact of the principal differences and resulting
adjustments between UK GAAP and IFRS as they apply to Creighton's consolidated
income statement for the year ended 31 March 2005 is set out below.
(i) Goodwill amortisation
Under UK GAAP, goodwill was amortised over its useful economic life, not
exceeding 20 years. Under IFRS, goodwill is not amortised but is tested at
least annually for impairment.
For the year to 31 March 2005 under IFRS, goodwill amortisation of £34,000
expensed under UK GAAP has been reversed.
(ii) Share based payments
Under UK GAAP, no expense was recognised for share options at the time of grant.
Under IFRS an expense is recognised for all equity options granted after
January 2004 based on the fair value of the options at the date of grant
calculated using the appropriate pricing model.
For the year ended 31 March 2005 under IFRS operating expenses increase by
£21,000.
Reconciliation of consolidated net assets at 31 March 2005
UK GAAP Goodwill Share base IFRS
Amortisation payments
£000 £000 £000 £000
Non-current assets
Goodwill 296 68 - 364
Other intangible assets 3 - - 3
Property, plant and equipment 1,589 - - 1,589
1,888 68 - 1,956
Current assets
Inventories 2,088 - - 2,088
Trade and other receivables 1,606 - - 1,606
Cash and cash equivalents 1 - - 1
3,695 - - 3,695
Total assets 5,583 68 - 5,651
Current liabilities
Trade and other payables 2,131 - - 2,131
Short term borrowings 1,310 - - 1,310
3,441 - - 3441
Non-current liabilities
Long term borrowings 892 - - 892
Deferred tax 15 - - 15
907 - - 907
Total liabilities 4,348 - - 4,348
Net assets 1,235 68 - 1,303
Equity
Share capital 543 - - 543
Share premium account 1,229 - - 1,229
Capital redemption reserve 18 - - 18
Capital reserve 7 - - 7
Special reserve 13 - - 13
Share-based payment reserve - - 26 26
Retained earnings (575) 68 (26) (533)
Total equity available to the holders of the 1,235 68 - 1,303
parent company
Reconciliation of consolidated net assets at 1 April 2004 (Transition date)
UK GAAP Goodwill Share base IFRS
Amortisation payments
£000 £000 £000 £000
Non-current assets
Goodwill 330 34 - 364
Other intangible assets 8 - - 8
Property, plant and equipment 1,700 - - 1,700
2,038 34 - 2,072
Current assets
Inventories 1,537 - - 1,537
Trade and other receivables 1,946 - - 1,946
Cash and cash equivalents 1 - - 1
3,484 - - 3,484
Total assets 5,522 34 - 5,556
Current liabilities
Trade and other payables 1,662 - - 1,662
Short term borrowings 2,188 - - 2,188
3,850 - - 3,850
Non-current liabilities
Long term borrowings 46 - - 46
Deferred tax 15 - - 15
61 - - 61
Total liabilities 3,911 - - 3,911
Net assets 1,611 34 - 1,645
Equity
Share capital 543 - - 543
Share premium account 1,229 - - 1,229
Capital redemption reserve 18 - - 18
Capital reserve 7 - - 7
Special reserve 13 - - 13
Share-based payment reserve - - 5 5
Retained earnings (199) 34 (5) (170)
Total equity available to the holders of the 1,611 34 - 1,645
parent
Reconciliation of consolidated cash flow statement for the year ended 31 March 2005
UK GAAP Goodwill Share base IFRS
Amortisation payments
£000 £000 £000 £000
Net cash from operating activities 117 - - 117
Cash flow from investing activities
Interest received 1 -- - 1
Proceeds on disposal of property, plant and 10 - - 10
equipment
Purchase of property, plant and equipment (96) - - (96)
Net cash used in investing activities (85) - - (85)
Cash flow from financing activities
Repayment of borrowings (258) - - (258)
New bank loans 900 - - 900
Increase/(decrease) in bank overdrafts (674) - - (674)
Net cash (used in)/ from financing (32) - - (32)
activities
Net increase/(decrease) in cash and cash 0 - - 0
equivalents
Cash and cash equivalents at start of period 1 - - 1
Net increase/(decrease) in cash and cash 0 - - 0
equivalents
Cash and cash equivalents at end of period 1 - - 1
Reconciliation of note to consolidated cash flow statement
UK GAAP Goodwill Share base IFRS
Amortisation payments
£000 £000 £000 £000
(Loss) from operations (215) 34 (21) (202)
Adjustments for:
Depreciation on property plant and equipment 196 - - 196
Amortisation of goodwill 34 (34) - -
Amortisation of intangible assets 5 - - 5
(Gain)/loss on disposal of property, plant and 1 - - 1
equipment
Share based payment charge 21 21
Operating cash flows before movements in 21 - - 21
working capital
Decrease/(increase) in inventories (551) - - (551)
Decrease/(increase) in receivables 340 - - 340
Increase/(decrease in payables 469 - - 469
Cash (utilised in)/generated from operations 279 - - 279
Interest paid (162) - - (162)
Net cash from operating activities 117 - - 117
The preliminary statement of results has been reviewed and agreed with the
Company's auditors, 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 2006 will be sent to shareholders in due course. Further copies
will be available from the Company's registered office, at 1210 Lincoln Road,
Peterborough, PE 4 6ND.
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