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Crawshaw Group PLC (CRAW)

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Wednesday 25 April, 2018

Crawshaw Group PLC

Final Results

RNS Number : 9941L
Crawshaw Group PLC
25 April 2018
 

25 April 2018

Crawshaw Group Plc

Operational progress against challenging market conditions

Crawshaw Group Plc ("Crawshaw", the "Company" or the "Group"), the UK's leading value butcher, announces its results for the 52 weeks ended 28 January 2018.

Financial Highlights

 

·      Group revenue up 1% to £44.6m (2017: £44.2m)

·      Gross margin of 42.0% (2017: 43.5%)

·      EBITDA1 loss of -£0.8m (2017: profit of £0.1m)

·      Adjusted EBITDA2 -£0.4m (2017: £1.3m)

·      Underlying operating loss3 of £2.0m (2017: £1.1m underlying operating loss)

·      Statutory loss before tax of £13.5m (2016: loss before tax £1.4m), due to a one off non cash impairment charge of £10.6m and £0.8m exceptional costs

·      Cash of £4.7m at 28 January 2018 (£2.1m at 29 January 2017)

 

 

Operational Highlights

 

Operational focus on positioning Crawshaws as Britain's leading value butcher, delivering great quality fresh meat at the lowest possible price:

 

·      Group sales increase as retail portfolio rebalanced towards unique factory shops; challenging trading conditions and sterling weakness impacted profitability

Sales from new factory shops offsetting 5.4% LFL sales4 reduction in high street estate

Customer numbers -3%; momentum build across H1 impacted by more challenging market conditions in Q4 (Q1 -5.6%, Q2 -1.1%, Q3 +1.2%, Q4 -5.9%)

Margin impacted by 1.5% from sterling depreciation.  Investment in value partially offset by benefits from strategic partnership with 2Sisters Food Group entered into in May 2017

 

·      Rollout of successful factory shop format to underpin long-term profitability

5 new factory shops opened in the period; on course to deliver 1 year payback on capital expenditure

Factory shops trading in the period delivered c.22% of Group sales (up from 15% in 2016)

Total number of factory shops at 10. Further openings expected at 5-10 per year

 

·      Review of high street shop estate undertaken; focus on improving productivity

Full year high street performance impacted by consumer headwinds and inflationary pressures

Two unprofitable shops closed during the period

High street efficiencies targeted through creation of central production capability at Hellaby factory

 

·      The Company is well advanced in recruiting a new CEO and CFO following the announcement on 23 March 2018 that Noel Collett (CEO) and Alan Richardson (CFO) are to leave the business later this year.

 

 

Current trading and outlook

Trading in our high street shops for the first 12 weeks of the new financial year has remained challenging, exacerbated by recent poor weather and continued high street pressures. However, our factory shop format continues to perform well.

 

We believe our strategy to build factory shops and reduce the dependence on the legacy high street business is the right one, whilst reducing costs and improving revenue through the exceptional value for money we offer.  We expect a new leadership team to support this strategy and bring new ideas and energy in its execution.

 

 

Noel Collett, Chief Executive, said:

"This has been a disappointing year for Group sales. Whilst we have been pleased with the strong performance of our factory shop outlets, sales across our high street estate have proven more challenging, exacerbated by the well documented high street pressures.

 

"Against this, however, we have made operational progress to strengthen the business. We are confident that the rollout of our unique factory shops format and improvements in profitability across the high street estate will leave the Group well-placed for future growth."

 

 

Jim McCarthy, Chairman, said:

"While sales for the year have been challenging, I am confident that the repositioning of the Group towards our successful factory shop model will improve long-term profitability.

 

"I expect to provide an update on a new management team in due course, who I am confident will help further develop Crawshaws' market leading value and drive improved performance in both factory shops and high street stores."

 

 

1EBITDA is defined by the Group as Operating profit/loss before impairment charge, tax, exceptional items, depreciation, amortisation, profit/(loss) on disposal of assets, net finance costs and shared based payment charge attributable to the LTIP Growth Share Scheme.

2Adjusted EBITDA is defined by the Group as Operating profit/loss before impairment charge, tax, exceptional items, depreciation, amortisation, profit/(loss) on disposal of assets, net finance costs, share based payment charges attributable to the LTIP Growth Share Scheme and Accelerated Opening Costs.  Accelerated opening costs are defined by the Group as the overhead investment in people, processes, systems and new store pre-opening costs i.e. costs directly associated with our accelerated store opening programme. In the period these costs amounted to £0.4m (2017: £1.2m) resulting in an adjusted EBITDA of -£0.4m (2017:  £1.3m).

3Underlying Operating Loss is defined by the Group as Operating profit/loss before impairment change, exceptional items and share based payment charges attributable to the LTIP Growth Share Scheme.

4LFL stores are defined as stores which have been trading for 2 full years at the start of the financial year under review.

 

 

 

Enquiries:

 

Tulchan Communications LLP

Susanna Voyle, Will Smith                                                                020 7353 4200

 

Crawshaw Group plc

Noel Collett, Alan Richardson                                                          01709 369 600

 

Peel Hunt LLP

Adrian Trimmings, George Sellar                                                   020 7418 8900

 

 

Chairman's Statement

 

Trading Performance Highlights

·   Group revenue up 1% to £44.6m (2017: £44.2m)

·   Gross margin of 42.0% (2017: 43.5%)

·   EBITDA1 loss of -£0.8m (2017: profit of £0.1m)

·   Adjusted EBITDA2 -£0.4m (2017: £1.3m)

·   Underlying Operating Loss3 of £2.0m (2017: £1.1m underlying operating loss)

·   Statutory loss before tax of £13.5m (2017: loss before tax £1.4m) due to a one off non cash impairment charge of £10.6m and £0.8m exceptional costs

·   Cash balances of £4.7m at 28 January 2018 (£2.1m at 29 January 2017)

 

Results and Strategy

This was a challenging period for the Group, with initial sales momentum in H1 subsiding in a more challenging consumer environment in H2 with sterling devaluation driving increases to buying prices impacting the profitability of the business.

 

Group revenue increased by 1%, with £3.6m of additional sales from new and annualising factory shops offsetting the -5.4% reduction in LFL sales4 and lower sales from high street stores which are not yet included within our LFL definition. 

 

Group margin of 42.0% (2017: 43.5%) was impacted by 1.5% from sterling devaluation.  The investment in value of 1% we noted in our half year results was partially offset by the benefits from our strategic partnership with 2Sisters Food Group.

 

As a consequence of the impact from sterling devaluation noted above and the costs of operating more stores, adjusted EBITDA reduced to -£0.4m (2017: £1.3m).  The EBITDA performance for the group was -£0.8m (2017: £0.1m) reflecting spend on pre-opening costs of £0.4m (2017: £1.2m).  This spend was reduced significantly year on year in line with fewer new store openings and the simpler opening requirements of factory shops with a lower headcount dedicated to the new store openings programme.

 

We finished the year with 52 trading stores, opening 5 new factory shops in the period and closing 2 underperforming high street units.  The factory shop rollout continues to perform well, with further improvements in the capital investment5 per unit further reduced from £150k to an average of £130k per unit, and operating performance giving a cash payback on investment of c.1-year. 

 

The business recorded an underlying operating loss before tax of £2.0m (2017: underlying operating loss of £1.1m) as a result of the decline in EBITDA performance.  We report a statutory loss before tax of £13.5m, which includes a one off non cash goodwill impairment charge of £10.6m (2017: NIL) and exceptional costs of £0.8m (2017: £0.1m).  The impairment was recognised following our annual goodwill assessment where, when the impact on future cash flows of sterling depreciation and wage inflation are taken into account, the goodwill balance was no longer supported.  It is worth noting that this assessment specifically excludes the expected growth from new stores, in line with the relevant accounting standard. 

 

Cash

 

The business continues to have sufficient headroom in its cash balances following the share placement in the year, with no debt and cash on hand of £4.7m at the balance sheet date.  The primary purpose of the funding is to continue the successful factory shop rollout, but we will of course balance our investment in growth with maintaining a strong balance sheet.

 

1EBITDA is defined by the Group as Operating profit/loss before impairment charge, tax, exceptional items, depreciation, amortisation, profit/(loss) on disposal of assets, net finance costs and shared based payment charge attributable to the LTIP Growth Share Scheme.

2Adjusted EBITDA is defined by the Group as Operating profit/loss before impairment charge, tax, exceptional items, depreciation, amortisation, profit/(loss) on disposal of assets, net finance costs, share based payment charges attributable to the LTIP Growth Share Scheme and Accelerated Opening Costs.  Accelerated opening costs are defined by the Group as the overhead investment in people, processes, systems and new store pre-opening costs i.e. costs directly associated with our accelerated store opening programme. In the period these costs amounted to £0.4m (2017: £1.2m) resulting in an adjusted EBITDA of -£0.4m (2017:  £1.3m).

3Underlying Operating Loss is defined by the Group as Operating profit/loss before impairment change, exceptional items and share based payment charges attributable to the LTIP Growth Share Scheme.

4LFL stores are defined as stores which have been trading for 2 full years at the start of the financial year under review.

5 Capital investment is defined the by Group as fixed asset additions

 

Outlook

We continue to work through a period of transition as we re-balance the portfolio away from its historical dependence on high streets and towards the factory shop model which, as we have noted in previous updates, underpins the long-term profitability of the business.  Our focus during this transitional period is two-fold; 1) continuing to rollout our successful factory shop; and 2) increasing the profitability of the high street stores.

 

We have a number of opportunities and initiatives currently in trial in our high street stores which we believe will improve the performance of this estate and we have a robust pipeline of factory shop opportunities from which we expect to deliver 5-10 new stores openings in the next 12 months.

 

In addition, we expect a new leadership team to bring new ideas and energy which will help us to drive improved performance in both factory shop and high street store profitability in this challenging environment.

 

 

 

 

 

Jim McCarthy

Chairman

 

 



 

Chief Executive Officer's Review

 

Performance & Operational Review

We have come to the end of what was a very challenging year on the high street, with sales coming in below our expectations.  We have seen a further deterioration in the performance of our high street stores, but have made some significant steps forward on our plans to transition our retail model away from the high streets and towards our successful factory shop concept. As expected, we have seen a further deterioration in the performance of our legacy high street stores.

 

Revenue

Group revenue for the year under review increased by 1% to £44.6m, an increase of £0.4m.  Within that, the 7 new factory shops opened across FY 17 and FY 18 contributed an additional £3.6m year on year whilst the 5.4% decline experienced by the LFL stores and a reduction in sales in the non-LFL high street stores lead to a £3.1m sales reduction.


The trading activities and initiatives started in FY 17 as part of our recovery plan were continued into this financial year and continued to show positive results, with LFL performance improving from -5.2% in Q1 to -3.2% Q2.  Our trading momentum slowed through Q3 and into Q4 with LFL sales of -4.0% and -9.0% respectively as we were unable to achieve the same level of customer number increases than in the previous year when our recovery plan actions were initially launched.  As a result, we re-based our promotional plan to offer a smaller selection of deeper discounted products and introduced a lower priced multibuy range into a number of test stores.  Whilst these initiatives were well received by existing store customers and have been an integral part of the successful launch of the new factory shops in the year, they are yet to gain sufficient traction by attracting new customers in our high street stores.

 

Strategic Partnership

During the year, we entered into a Strategic Supply Partnership with 2Sisters Food Group (2S) which enabled the business to access significant volumes of poultry products at a cost advantage to previous supply routes.  The relationship has continued to progress with the product assortment allowing us to mitigate some of the impact of sterling devaluation on buying prices and offer customers new products at fantastic price points. There have been some operational challenges in recent months as 2S addressed some well-documented internal challenges, we remain convinced of the strategic rational of the partnership with the business benefitting from UK supply of whole birds, drumsticks and added value breaded chicken product.

 

Growth Plan - Factory Shops

Our growth plan re-started part way through the financial year with 5 new factory shop units opening between May and November 2017.  We continue to be very pleased with the performance of these units which, following further reductions in capital investment requirements to an average of £130k per store, deliver a cash payback on investment of c.1-year. 

 

As we have previously noted, the new factory shops continue to perform well despite the weak consumer environment through a combination of the value offered to customers and their ease of access.  We have also had some success on new store launches following social media campaigns which have promoted the stores with targeted competitions and offers.  As a result, the new factory shops have an average of 4,000 followers on Facebook with whom we are able to directly communicate new deals and offers.  In addition, the bigger footprint of these stores has allowed us to increase the number of fresh meat products we present to customers, with a new 'Lean Protein' range and 'Easy Meals for 2' range being the latest innovations introduced into these stores.  We are also in the process of trialling new products within the meal-solutions category.

 

Factory shops are becoming an increasingly important part of the business, contributing 22% of sales for the full year, increasing to 26% through Q4 when the 5 new shops were all trading.

 

 

High Street

Despite the success of the new factory shops, the performance of the business overall has been behind our expectations as a result of the deterioration in high street store sales and profitability.  As noted above, we have sought to trade our way to an improved performance through changes to the offer which are yet to gain the required traction.  As a result, our focus has evolved to reviewing the productivity of the estate overall through a combination of sales driving and cost saving initiatives.

 

As part of this review, we have identified 2 stores where we took the decision to close as they were making a trading loss which was greater than their fixed property costs. 

 

We believe that the majority of our high street stores are capable of generating a significantly improved return by changing the balance of where certain tasks are carried out across the business.  Following the central investment in automated cutting and packing lines, we have created a central production capability at our Hellaby Factory. 

 

Central Production - Strategic Development

The strategic development of our central production is enabling us to re-engineer the store labour model to reduce store-based headcount and re-focus the remaining work content from production to customer service.  This activity is currently being trialled across 8 stores in Q1 FY 19 with an expectation of rollout across the full estate from Q2 onwards.  In addition to providing a boost to high street profitability, this development in our business model will also allow us to improve the economics of our factory shops.  Furthermore, this central investment provides the capability to service the wholesale and catering butchery supply routes in the future.

 

Summary

Whilst we are disappointed with the financial results for FY 18, we are pleased with the continued success of the factory shops strategy and firmly believe the significant productivity improvements across the business will improve profitability.  We remain fully committed to the business and the strategic initiatives that are currently in flight and will support the new leadership team during the smooth transition to ensure business continuity.  I would like to take this opportunity to thank all colleagues, customers, suppliers and shareholders for their support during my three years as CEO and wish the business much success in the future.

 

 

 

 

Noel Collett

Chief Executive Officer

 


 

Chief Financial Officer's Review

 

Presentation of Results

To present a clear view of performance of the Group, we present an Underlying Operating (Loss)/Profit number and an Adjusted EBITDA number.  The Underlying Operating (Loss)/Profit number adds back share based payment charges, exceptional costs and any asset impairment charges to give a clear view of underlying Group performance.  The Adjusted EBITDA number further excludes depreciation, amortisation and accelerated opening costs to give a clear view on the underlying trading performance of the Group.

 

We define accelerated opening costs as the investments in people, processes and systems in the year to provide direct support for our accelerated opening programme. In the year, these costs amounted to £0.4m (2017: £1.2m) and are analysed by component of spend in the table below.

 

The management team historically used Adjusted EBITDA as the primary performance measure to understand business performance without the distortive impact of costs being incurred to facilitate store rollout.  As the growth plan has transitioned to factory shops which are capable of being opened with a lower dedicated central cost, this measure will no longer be used in assessing performance in future accounting periods with EBITDA becoming the primary internal performance measure.

 

Underlying Operating Loss and Adjusted EBITDA

 

2018

2017

 

£'000

£'000

Operating Loss after impairment charge

(13,535)

(1,413)

Share Based Payment Charge

92

217

Exceptional Items

819

63

Impairment of Goodwill

10,590

-

Underlying Operating Loss

(2,034)

(1,133)

Depreciation and Amortisation

1,186

1,237

Accelerated Opening Costs

399

1,171

Adjusted EBITDA

(449)

1,275

 

The operating loss in the year of £13.5m includes exceptional items of £0.8m and an impairment of goodwill of £10.6m.  The exceptional items are made up of deal fees relating to the share placing and the supply agreement with 2Sisters and a provision to cover the cost of closing 2 underperforming High Street units.  As part of our annual goodwill assessment, forecast future cash flows were adjusted to take into account the impacts of sterling depreciation on buying prices and expected wage inflation.  This assessment specifically excludes any future new stores (as required by IAS 36) and as a result the goodwill balance was found to be impaired which has been reflected in these financial statements.

 

Accelerated Opening Costs

 

2018

2017

 

£'000

£'000

Salaries

290

878

New store pre-opening costs

109

189

Consultancy (property / recruitment / other)

-

45

Other

-

59

Total

399

1,171

 

 

The level of accelerated opening costs has reduced significantly year on year in line with fewer stores being opened in the financial year under review (5 new stores opened FY 18, 11 new stores opened FY 17) and the simpler opening requirements of factory shop stores allowing us to reduce the number of dedicated central roles.

 

We now expect the level of accelerated opening costs to remain at this run rate and therefore, as these costs will no longer distort the performance of the Group, we will no longer present accelerated opening cost numbers in future reporting periods.

 

 

 

 

Loss Before Tax "PBT" and Earnings Per Share "EPS"

The Group delivered a loss before tax of £13.5m (2017: £1.4m loss) as a result of the goodwill impairment charge.  The Loss Before Tax number includes an IFRS 2 shared based payment charge of £0.1m (2017: £0.2m). This translated to a negative EPS at (12.950) pence per share (2017: negative 1.535 pence per share).

 

Operational Overheads

Operational overheads are defined as the administrative expenses of the Group less accelerated opening costs, exceptional costs, impairment, depreciation, amortisation and share based payments as this gives a clearer reflection on the underlying operational costs performance of the Group. On this basis, the ratio of overhead costs as a % of sales has increased to 43% (2017: 41%). This reflects the impact of specific cost inflation on wages and the impact of lower sales on a relatively fixed overhead cost base.

 

 

2018

2017

 

£'000

£'000

Administrative expenses

21,710

20,715

Accelerated opening costs

(399)

(1,171)

Depreciation and amortisation

(1,186)

(1,237)

Share based payment

(92)

(217)

Exceptional costs

(819)

(63)

Operational overheads

19,214

18,027

Operation overheads % of sales

43%

41%

 

Cashflow

We have closed the year with £4.7m of cash on the balance sheet (2017: £2.1m) following raising new share capital in the early part of the financial year which was used to re-start the growth programme and funded the operating cash outflow experienced by the business in the period.  The Board has re-iterated its commitment to a strong balance sheet with priority being given to improving cash generation of the core business.

 

Summary

It has been a year another year of considerable change and challenge with a recovery in trading momentum in H1 and the transformational supply agreement and share placing allowing us to re-start a factory shop based opening programme.  Despite challenging trading conditions and deterioration in trading performance in H2, the share capital raised in the period resulted in a year end cash on hand position of £4.7m.  The Board are committed to maintaining a strong balance sheet and are appropriately balancing productivity improvements and further investments in growth.

 

 

 

 

Alan Richardson

Chief Financial Officer

 

 


 

Strategy and Business Model

 

Our Mission

 

To use our expertise to source, prepare, produce and retail quality fresh meat products at a price and a service level that continues to delight our customers.

 

Principal Activities

 

The principal activity of the Group continues to be the operation of a chain of meat focused retail food stores.   The Group operates from a head office and distribution centre in Rotherham, plus 52 retail locations across Yorkshire, Lincolnshire, Nottinghamshire, Derbyshire, the North West and the Midlands.

 

Business Model

 

Our management team have extensive experience in sourcing quality meat products from tried and tested local and international suppliers at the lowest possible prices.  Whilst we do buy longer term to ensure that we have a core range of products, we pride ourselves on identifying key lines in the spot market that offer value to our customers.

 

We have our own distribution centres where we control additional processing and logistics as well as the production of our own award winning sausages, beef burgers, beef mince and grill sticks.

 

Our retail outlets are manned with skilled butchers who are happy to help customers with advice on choosing the right product, in the right quantities as well as how to cook it.

 

Our product range is split into 2 distinct areas:

·      Traditional raw meat - we have a wide range of products sold either (i) loose in a serve over counter for the traditional experience or (ii) as multi buy packs on supermarket style multi deck counters which have all been cut and packaged in store.

·      Hot and cold cooked food - Freshly prepared roast chickens, gammon and pork joints, hot roast sandwiches, shop cooked curries and casseroles, chicken and chips as well as other traditional deli products.

 

Operational Strategy

 

The Board is focussed on growing the business through identifying new profitable store locations and investing resources in a controlled expansion programme, whilst ensuring the core business continues to deliver quality products and excellent customer service at competitive prices.

 

·      New store locations are regularly reviewed for suitability to grow/replace our existing retail estate.

·      New products are researched, tested and trialled frequently.

·      Customer feedback is sought and reviewed on an ongoing basis.

·      Key price points from competitors are monitored regularly.

·      Our food safety management systems are continually reviewed and updated to ensure our procedures are in line with the highest standards.

 

As raw meat is a traded commodity, the business operates in an environment where input prices can fluctuate based on worldwide natural and economic factors such as a growing world population, climate change, exchange rates and changing dietary habits.

 

The Company's purchasing and sales strategy is designed to minimise these risks by ensuring (i) we sell a broad range of products and (ii) we use a broad range of tried and tested suppliers across the globe rather than relying on any specific supplier or region.

 

Food Safety

 

We protect our customers and our brand by sourcing quality products with full traceability.  Further to this we invest continually to ensure our food safety management systems are implemented, delivered and audited at every location.

 

As the only independent retail butchers chain in England to have Primary Authority, we continue to work with the Environmental Health department at Wakefield Council. This gives each of our locations, our staff and our customers a level of consistency in food safety matters as we are all working to the same standards and interpretations of the regulations.

 

Crawshaws continue to recognise the importance of food safety and positive consistent progress has continued and our Hygiene Ratings. 62% of the business are on 5 stars (Very good) and 23% on 4 (Good). Our factories have also consistently maintained standards whilst increasing throughput to match the increases in sales.

 

There continues to be ongoing investment in training which has not only provided legal compliance but has equipped Managers with further knowledge and confidence to maintain food safety. Customer feedback also indicates consistent quality control and that they are happy that their needs are being met. 

 

The maintenance and continued development of the company Food Safety Management System has been fundamental in maintaining standards across the company. Whilst the Company will continue to face challenges, including changes in legislation, we are focused on maintaining food safety on a consistent basis.

 

The focus on origin and traceability of products will continue to be managed as we recognise this as being essential if we are to meet the requirements of our customers and continue to supply safe and legal products.

 

KPIs and Risk Management

The performance of the business is regularly monitored against Key Performance Indicators (KPIs). Most of the KPIs identified below are discussed in more detail in the Chairman's Statement.

 

KPI

2018

2017

Notes

Revenue

£44.6m

£44.2m

After trade discounts and excluding VAT

Gross profit

42.0%

43.5%

Gross profit as a percentage of revenue

Adjusted EBITDA1

(£0.4m)

£1.3m

Adjusted pre tax (loss)/profit before interest, taxation, depreciation and amortisation

EBITDA2

(£0.8m)

£0.1m

Pre tax profit/(loss) before interest, taxation, depreciation and amortisation

Underlying operating (loss)/profit 3

(£2.0m)

(£1.1m)

Operating (Loss)/profit before exceptional costs and share based payments

EPS

(12.950)p

(1.535)p

Loss after tax divided by the average number of shares in issue

Operational Overheads %5

43%

41%

Total operational overheads as a percentage of revenue

 

1Adjusted EBITDA is defined by Group as profit/loss before tax, exceptional items, depreciation, amortisation, profit/(loss) on disposal of assets, net finance costs, share based payment charges attributable to the LTIP Growth Share Scheme and Accelerated Opening Costs.  Accelerated opening costs are defined by the Group as the overhead investment in people, processes, systems and new store pre-opening costs i.e. costs directly associated with our accelerated store opening programme. In the period these costs amounted to £0.4m (2017: £1.2m) resulting in an adjusted EBITDA of -£0.4m (2017:  £1.3m).

2EBITDA is defined by the Group as profit/loss before tax, exceptional items, depreciation, amortisation, profit/(loss) on disposal of assets, net finance costs and shared based payment charge attributable to the LTIP Growth Share Scheme.

3Underlying Operating Loss is defined by the Group as Operating Profit before exceptional items and share based payment charges attributable to the LTIP Growth Share Scheme.

4LFL stores are defined as stores which have been trading for 2 full years at the start of the financial year under review.

5Operational overheads are defined as the administrative expenses of the Group less accelerated opening costs, exceptional costs, asset impairments, depreciation and amortisation and share based payments which give a clearer reflection on the underlying operational costs performance of the Group.

 

The principal risks and uncertainties affecting the Group include the following:

 

·      EU trade deals and exchange rates post BREXIT: the Group sources approximately half of the meat volumes sold through the business from the EU.  Any changes to the tariff free trade across current members of the EU will require us to review our sourcing model.  All purchases of goods are made in sterling.  Both short term volatility and long term re-basing of international currency markets will have an impact on raw material prices.  The flexibility to source globally provides a level of mitigation to this risk.

 

·      Raw material availability and prices: the Group monitors raw material sources on a global basis and either contracts to buy a set volume of goods for a set price for delivering on a specific date or contracts to buy a set volume of goods at a set price over a short time period, typically from 2 to 4 weeks. 

 

·      Customer loss and Competition - There is an ongoing risk of customer loss from enhanced competition.  The Groups strategy is to maintain customer loyalty through: 1) offering consistently high quality products at consistently low prices, 2) offering customers even greater value through a rolling cycle of deeply discounted promotional offers and; 3) delivering superior service and product expertise at all times.  Competitor price points are reviewed regularly to make sure customers can rely on us to be significantly cheaper than our competitors.

 

·      Food Safety: compliance with legislation is continually assessed with a rolling monthly internal Food Safety compliance audit in each store augmenting the annual Environmental Health Office inspections.  Any performance exceptions are discussed as a matter of course at the Monthly PLC Board meeting.

 

·      Environmental risks: the Group places considerable emphasis upon environmental compliance in its business and not only seeks to ensure ongoing compliance with relevant legislation but also strives to ensure that environmental best practice is incorporated into its key processes.

 

·      Major disruption/disaster: business continuity planning is reviewed regularly.

 

·      The effect of legislation or other regulatory activities: the Group monitors forthcoming and current legislation.

 

·      Shrinkage: All retailers are exposed to customer and employee theft.  The Group has a zero tolerance to theft and we continually review internal systems and controls.  We maximise the use of CCTV surveillance in store and aim to prosecute where relevant.

 

Our 2018 Strategic Report has been reviewed and approved by the Board of Directors.

 

 

 

Alan Richardson

Chief Financial Officer

GOVERNANCE

 

Board Of Directors

 

Jim McCarthy, Chairman (Age: 61)

Jim has more than forty years of retail experience. He is currently Chairman of discount retailer UP Global Sourcing Holdings plc and Chairman of Wynnstay Group Plc, an AIM listed company. He was previously CEO of T&S Stores Plc for eight years before selling the business to Tesco Plc for c.£500m, then became the Managing Director of Convenience at Sainsbury's, and most recently was the CEO of leading value retailer Poundland Group plc for ten years. Under Jim's leadership, Poundland's EBITDA grew from c.£7m in 2006 to c.£57m in 2016, before the business was sold to Steinhoff International in the same year for c.£750m.

 

 

Noel Collett, Chief Executive Officer (Age: 43)

Noel Collett joined Crawshaws as CEO in March 2015 having spent over 16 years with Lidl, the German Discounter. Noel has held a number of key senior leadership roles in the UK and Germany, and for the 12 years before joining Crawshaws served as Lidl's Chief Operating Officer for the UK business. He has been widely credited as an instrumental figure in transforming Lidl from a low-cost brand to a high-quality retailer during a decade of rapid sales growth.

 

 

Alan Richardson, Chief Financial Officer (Age: 41)

Alan joined Crawshaws as the Chief Financial Officer in September 2015 having spent 5 years at Morrisons, most recently as Finance Director Retail & Logistics. Previous to that, Alan spent 8 years at Asda in various senior finance roles following his qualification as a Chartered Accountant at KPMG.

 

Mark Naughton-Rumbo, Non-Executive Director (Age: 57)

Mark qualified as a Chartered Accountant with Ernst & Whinney in 1984 and since that time has held a number of key directorships in public and private SME companies in the retail sector. He has achievements in strategic development and implementation, experience of managing businesses in extremely challenging economic circumstances, delivering business turnaround and profitable growth. He is currently Group CFO of Anthony Nicholas Group, an Irish based fine jewellery and watch business operating in the UK and Ireland retail sectors.

 

 

 

Stephen Henderson, Non-Executive Director (Age: 59)

Stephen is currently the CFO for Boparan Private Office and a director or Invest Co 1. He was previously CFO of Boparan Holdings Limited until 2014 and prior to that held a number of senior finance roles at Northern Foods plc, including acting as CFO of Northern Foods when it was acquired by Boparan Holdings Limited in 2011.              

 

 

Noel Collett and Alan Richardson have notified the Board of their intention to step down from their positions of Chief Executive Officer and Chief Financial Officer respectively.  A process is underway to identify their replacements.

 

 

 

 

Directors' Report

 

The Directors present their Annual Report on the affairs of the Group together with audited financial statements for the 52 weeks ended 28 January (2017: 52 week period).

Crawshaw Group Plc ('the Company') is a public limited company incorporated and domiciled in the United Kingdom and under the Companies Act 2006.

The address of the Company's registered office is Crawshaw Group Plc, Unit 4, Sandbeck Way, Hellaby Industrial Estate, Rotherham S66 8QL.

The Company has its primary listing on AIM, part of the London Stock Exchange.

The Group financial statements were authorised for issue by the Board of Directors on 24 April, 2018.

Further information on the activities of the business, the Group strategy and an indication of the outlook for the business are presented in the Chairman's Statement, the CEO's Statement and the Strategy and Business Model sections of the report.

 

Results and Dividends

 

Reported under IFRS the Group loss before taxation is (£13.5m) (2017: £1.4m loss).  After a taxation credit of £0.3m (2017 credit: £0.2m) the Group loss for the year is £13.2m (2017: £1.2m loss).

The directors do not propose payment of a final dividend.

 

 

Substantial Shareholdings

 

At 12 March 2018, the directors had been notified of the following interests, of 3% and over, in the Company's issued ordinary share capital:

 

Unaudited





 

 

                   

Shareholder




Number of Ordinary Shares

 

 

                  %

Invest Co 1 Limited




33,594,490

29.72

Schroder Investment Management




15,000,000

13.27

Columbia Threadneedle Investment




7,849,523

6.94

Unicorn Asset Management

Hargreave Hale

D Rose, J Rose & J Rose Scudamore

Living Bridge

Hargreaves Lansdown Asset Mgt

Mr John Kelly

Ruffer

 




7,276,875

6,731,071

5,241,547

4,461,015

3,698,225

3,571,762

3,500,000

 

6.44

5.96

4.64

3.95

3.27

3.16

3.10

 

 

 







 

 

 

 

Directors and their interests

The following Directors held office during the Year ended 28 January 2018 and subsequently:

 

Noel J Collett

Mark Naughton-Rumbo

Alan Richardson

Richard S Rose (resigned 28 June 2017)

Kennedy McMeikan (resigned 28 June 2017)

Jim McCarthy (appointed 26 April 2017)

Stephen Henderson (appointed 26 May 2017)

 

The interests of the directors in the ordinary shares of the Company are shown below:

 

Unaudited




 1 March, 2018 Number of 5p Ordinary Shares

1 March, 2017 Number of 5p Ordinary Shares

Noel J Collett




-

-

Mark Naughton-Rumbo




54,456

54,456

Alan Richardson

Richard S Rose




-

-

-

5,241,547

Kennedy McMeikan




330,000

180,000

Jim McCarthy

Stephen Henderson




     190,000

     200,000

-

-

                                                                               

 

 

The interests of the Directors in options to acquire shares are shown below:

 

Unaudited




 1 March, 2018

Number of 5p Ordinary Shares

1 March, 2017 Number of 5p Ordinary Shares

Noel J Collett




-

-

Mark Naughton-Rumbo




-

-

Alan Richardson

Richard S  Rose




-

-

-

-

Jim McCarthy




-

               -

Kennedy McMeikan




-

-

 

Financial Instruments

 

The Company's financial risk management objectives can be found in notes 19 and 20 to the financial statements

 

Creditor payment policy

 

The Group agrees payment with its trade creditors and other suppliers on an individual contract basis at the time the goods and services are ordered rather than following a standard code.  The policy is to abide by the agreed terms once satisfied that the goods or services have been provided in accordance with the contract terms and conditions. The Group's average creditor payment period at 28 January 2018 was 47 days (2017: 58 days).

 

Employee involvement

 

The Board recognises that the Group's performance and success is directly related to our ability to attract, train and motivate high calibre employees.  We place considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various financial and economic factors affecting the performance of the Group.

 

Key risks of material misstatement

The directors believe that the key risks of material misstatement in relation to these financial statements are the recoverability of the Group's non-current assets and the recoverability of the parent company's investment in subsidiaries.  These risks are considered in Note 1, 'Critical accounting judgements and key sources of estimation uncertainty' section.

 

Going concern

 

The principal risks and uncertainties facing the Group are set out above.  For the purposes of their assessment of the preparation of the Group's accounts on a going concern basis, the Directors have considered the current cash position, current trading and forecasts of future trading including working capital and investment requirements.  These have been sensitised to take account potential risks and uncertainties.

 

This assessment showed the group to have a headroom throughout the forecast period which the Directors believe is sufficient to manage the Group's business risks and successfully execute the growth strategy for at least the next 12 months.

 

During the year the Group met its day-to-day general corporate and working capital requirements through existing cash resources. At 28 January 2018 the Group had cash on hand of £4.7m (2017: £2.1m).

 

Accordingly, the adoption of the going concern basis in preparing the financial statements remains appropriate.

 

Disclosure of information to auditors

 

The directors who held office at the date of approval of this Directors' report confirm that, so far as they are each aware, there is no relevant audit information of which the Group's auditor is unaware; and each Director has taken all the steps that he/she ought to have taken as a director to make himself/herself aware of any relevant audit information and to establish that the Group's auditor is aware of that information.

 

Auditor

 

A resolution to re-appoint KPMG LLP as auditors and to authorise the Directors to determine their remuneration will be put to the members at the forthcoming Annual General Meeting.

 

By order of the board

 

Alan Richardson

Company Secretary

 

 

Company Number: 04755803

 

Unit 4, Sandbeck way

Hellaby Industrial Estate

Rotherham

South Yorkshire

S66 8QL

 

  

Report of the Remuneration Committee

 

Compliance

 

This report by the Remuneration Committee, on behalf of the Board, contains full details of the remuneration of each Director during the period under review.

               

Directors' remuneration policy

 

The Committee aims to ensure that the remuneration packages offered are competitive and are designed to attract, retain and motivate executives of the right calibre. 

 

Emoluments of the directors

For the 52 weeks to 28th January 2018


 

 

 

 

Salaries and fees

£'000

 

 

 

Benefits excluding pension

£'000

 

 

 

 

 

Pension Contributions

£'000

 

 

 

Compensation for loss of office

£'000

 

 

 

 

 

Total

 £'000

N J Collett

326

8

-

-

334

M Naughton-Rumbo

20

-

-

-

20

A Richardson

137

-

-

-

137

R S Rose (resigned 28 June 2017)1

25

3

-

-

28

K McMeikan (resigned 28 June 2017)1

10

-

-

-

10

J McCarthy2

58

-

-

-

58

S Henderson2

16

-

-

-

16


592

11

-

-

603

 

1From start of year until date of resignation

2From date of appointment until 28 January 2018

 

 

Emoluments of the directors

For the 52 weeks to 29th January 2017

 


 

 

 

 

Salaries and fees

£'000

 

 

 

Benefits excluding pension

£'000

 

 

 

 

 

Pension Contributions

£'000

 

 

 

Compensation for loss of office

£'000 

 

 

 

 

 

Total

£'000 

K P Boyd (resigned 6 January 2017)

104

3

7

17

131

N J Collett

326

8

-

-

334

M Naughton-Rumbo

20

-

-

-

20

A Richardson

137

-

-

-

137

R S Rose (resigned 28 June 2017)

60

6

-

-

66

K McMeikan (resigned 28 June 2017)

14

           -

-

-

14


661

17

7

17

702

 

 

 

Pensions

 

No pension contributions are made on behalf of the Executive Directors.  The Non-Executive Directors' emoluments are not pensionable.

 

 

 

Directors' service contracts

 

All Director service contracts are terminable on six months notice.

 

 

Directors' share options

 

As at 28 January 2018, the Directors hold no shares under option.

 

Long Term Incentive Plan (LTIP)

 

Shares were granted under the Crawshaw Group plc Long-Term Incentive Plan on 24 April 2015.  The shares are 'growth shares' in a subsidiary, Crawshaw Butchers Ltd, but have value linked to the market capitalisation of Crawshaw Group plc.  Shareholders are entitled to a maximum pool of 10% of the growth in value of the market capitalisation of Crawshaw Group over the hurdle rate, where the hurdle rate is set as a premium of 15% to market capitalisation immediately prior to the award of the shares.

 

The Directors participating in the scheme at the date of this report and their respective entitlement to the growth in value of market capitalisation of Crawshaw Group plc above the hurdle rate are as follows;

 

·      Noel Collett, 5.00%

·      Alan Richardson, 0.49%

 

There are specific trigger points governing when the participants can exercise their options and how the fair value of the awards have been calculated which are set out in Note 17 of the accounts.

 

Noel Collett and Alan Richardson have notified the Board of their intention to step down from their positions of Chief Executive Officer and Chief Financial Officer respectively.   Their participation in this scheme will end when their employment terminates.

 

 

This report was approved by the Board and signed on its behalf by

 

 

 

 

Mark Naughton-Rumbo
Chairman of the Remuneration Committee

 

 

 

 

 

Statement of Directors' responsibilities in respect of the Annual Report.

 

The directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations. 

Company law requires the directors to prepare Group and parent Company financial statements for each financial year.  As required by the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the EU (IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent Company financial statements on the same basis.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period.  In preparing each of the Group and parent Company financial statements, the directors are required to: 

·      select suitable accounting policies and then apply them consistently; 

·      make judgements and estimates that are reasonable, relevant and reliable; 

·      state whether they have been prepared in accordance with IFRSs as adopted by the EU; 

·      assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and 

·      use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006.  They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. 

Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report and a Directors' Report that complies with that law and those regulations. 

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website.  Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 

 

 


 

Consolidated Statement of Comprehensive Income

For the 52 weeks ended 28 January 2018

 

 


28 January

29 January

 


2018

2017

 

Note

£'000

£'000

Revenue


44,559

44,228

Cost of sales


(25,825)

(24,983)

Gross profit


18,734

19,245

 

Other operating income

 

2

 

31

 

57

Administration expenses


(21,710)

(20,715)

Operating loss before impairment charge


(2,945)

(1,413)





Operating loss before impairment charge analysed as:

EBITDA1

Exceptional items

Depreciation and amortisation

Share based payment charge

Operating loss before impairment charge

 

 

24

3

 

(848)

(819)

(1,186)

(92)

(2,945)

 

104

(63)

(1,237)

(217)

(1,413)





Impairment charge


(10,590)

-

Operating loss after impairment charge


(13,535)

(1,413)

 

Finance income

 

6

 

                 9

 

23

Finance expenses

6

(4)

(4)

Net finance income


               5

 19

Share of profit of equity accounted investees (net of tax)

11

               9

12

 

Loss before income tax


 

(13,521)

 

(1,382)

Income tax credit

7

279

167

Total recognised loss for the period


(13,242)

(1,215)





Comprehensive loss for the period


(13,242)

(1,215)

 

Attributable to:


 

 


Equity holders of the Company


(13,242)

(1,215)

Basic loss per ordinary share


   (12.950) p

(1.535) p

Diluted loss per ordinary share


(12.950) p

(1.535) p

 

1EBITDA is defined by the Group as the Operating profit/(loss) before impairment charge, tax, exceptional items, depreciation, amortisation, profit/(loss) on disposal of assets, net finance costs and share based payment charge attributable to the LTIP growth share scheme.

 

The Company is taking advantage of the exemption in section 408 of the Companies Act 2006 not to present its individual income statement.



 

Balance Sheets

At 28 January 2018

 



Group

Group

Company

Company



 2018

2017

2018

2017


Note

 £'000

£'000

 £ '000

 £ '000

ASSETS






Non current assets






Property, plant and equipment

9

8,338

8,847

-

-

Intangible assets - goodwill and related acquisition intangibles

10

319

10,969

-

-

Investment in equity accounted investees

11

125

125

-

-

Investments in subsidiaries

12

-

-

10,549

16,789

Total non current assets


8,782

19,941

10,549

16,789

Current assets






Inventories

14

1,375

1,469

-

-

Trade and other receivables

15

780

787

7,015

2,373

Cash and cash equivalents


4,675

2,147

-

-

Total current assets


6,830

4,403

7,015

2,373

Total assets


15,612

24,344

17,564

19,162

SHAREHOLDERS' EQUITY






Share capital


5,651

3,962

5,651

3,962

Share premium


17,499

14,051

17,498

14,051

Reverse acquisition reserve


447

447

-

-

Merger reserve


-

-

508

508

Retained earnings


(13,231)

(81)

(6,241)

539

Total shareholders' equity


10,366

18,379

17,416

19,060

LIABILITIES






Non current liabilities






Other payables

16

666

559

-

-

Interest bearing loans and borrowings

18

41

58

-

-

Deferred tax liabilities

13

141

472

-

-

Total non current liabilities


848

1,089

-

-

Current liabilities






Trade and other payables

16

4,375

4,812

148

102

Interest bearing loans and borrowings

 18

23

64

-

-

Total current liabilities


4,398

4,876

148

102

Total liabilities


5,246

5,965

148

102

Total equity and liabilities


15,612

24,344

17,564

19,162

 

These financial statements were approved by the Board of Directors and were signed on its behalf by:

 

 

Alan Richardson

Director and Company Secretary

 

Company registered number: 04755803



 

Statements of Changes in Shareholders' Equity

 




Reverse




Share

Share

Acquisition

Retained

Total


capital

Premium

Reserve

Earnings

equity


£'000

£'000

£'000

£'000

£'000

Group






Balance at 31 January 2016

3,947

13,941

447

1,327

19,662

Loss for the period

-

-

-

(1,215)

(1,215)

Transactions with owners:

Share based payment charge

 

-

 

-

 

-

 

217

 

217

Dividend on equity Shares

Long term incentive plan options exercised

-

-

-

(372)

(38)

(372)

(38)

Share options exercised (241,470 Shares)

15

110

-

-

125

Balance at 29 January 2017

3,962

14,051

447

(81)

18,379

Loss for the period                                                                                                                       

-

-

-

(13,242)

(13,242)

Transactions with owners:

Share based payment charge

 

-

 

-

 

-

 

92

                 

92

Dividend on equity Shares

-

-

-

-

-

Share placing (33,794,490 shares)

1,690

3,447

-

-

5,137

Balance at 28 January 2018

5,651

17,498

447

(13,231)

10,366

 

The reverse acquisition reserve was established under IFRS 3 'Business Combinations' following the deemed acquisition of Crawshaw Group Plc by Crawshaw Holdings Limited on 11 April 2008.

 

 








Share

Share

Merger

Retained

Total


capital

Premium

reserve

Earnings

Equity


£'000

£'000

£'000

£'000

£'000

Company






Balance at 31 January 2016

3,947

13,941

508

863

19,259

Loss for the period

-

-

-

(169)

(169)

Transactions with owners:

Share based payment charge

 

-

 

-

 

-

 

217

 

217

Dividend on equity Shares

-

-

-

(372)

(372)

Share options exercised (241,470 Shares)

15

110

-

-

125

Balance at 29 January 2017

3,962

14,051

508

539

19,060

Loss for the period                                                                                                                       

-

-

-

(6,873)

(6,873)

Transactions with owners:

Share based payment charge

 

-

 

-

 

-

 

92

                 

92

Dividend on equity Shares

-

-

-

-

-

Shares placing (33,794,490 shares)

1,690

3,447

-

-

5,137

Balance at 28 January 2018

5,651

17,498

508

(6,242)

17,416

 

The merger reserve was established on 11 April 2008 following a share for share exchange between the Company and Crawshaw Holdings Limited (CHL) as part of a reverse acquisition. As a result of this transaction the Company acquired CHL which in turn owned 100% of the share capital of Crawshaw Butchers Limited (CBL).

 

In 2012 CHL transferred its investment in CBL to the Company at book value.

 



 

Cash Flow Statements

For the 52 week period ended 28 January 2018

 


Group

Group

Company

Company


 28 January

29 January

28 January

29 January


2018

2017

2018

2017


£'000

£'000

£'000

£'000

Cash flows from operating activities





Loss  for the period

(13,242)

(1,215)

(6,873)

(169)

Adjustments for:





Depreciation and amortization

1,184

1,211

-

-

Loss on sale of property, plant and equipment

2

37

-

-

Impairment of goodwill/Investment write down

10,590

-

6,332

-

Store closure provision

428

-

-

-

Share placing and supply partnership deal fees

391

-

391

-

Net financial income

(5)

(19)

-

-

Share based payment charges

92

217

-

-

Share of profit of equity accounted investees (net of tax)

(9)

(12)

-

-

Taxation

(279)

(167)

-

-

Dividend received

-

-

-

-

Operating cashflow before movements in working capital

(848)

52

(150)

(169)

Movement in trade and other receivables

7

(196)

-

394

Movement in trade and other payables

(470)

749

80

14

Movement in inventories

94

(455)

-

-

Tax (paid)/received

             (64)

168

-

-

Net cash (used in)/generated from operating activities

(1,281)

318

(70)

239

Cash flows from investing activities





Purchase of property, plant and equipment

(905)

(2,947)

-

-

Proceeds from sale of property, plant & equipment

12

63

-

-

Received from equity accounted investees

9

12

-

-

Interest received

9

23

-

-

Interest paid

(4)

(4)

-

-

Dividend received

-

-

-

-

Dividend paid

-

(372)

-

(372)

Net cash (used in) investing activities

(879)

(3,225)

-

(372)

Cash flows from financing activities





Repayment of loans

-

-

-

-

Share capital raised

5,137

125

5,137

125

Share placing costs

(391)


(391)

-

HP financing

(58)

49

-

-

Movements in amounts owed by group companies

-

-

  (4,676)

-

Net cash generated from financing activities

4,688

174

70

125

Net change in cash and cash equivalents

2,528

 (2,733)

-

(8)

Cash and cash equivalents at start of period

2,147

4,880

-

8

Cash and cash equivalents at end of period

4,675

2,147

-

-

 



 

Notes to the financial statements

(forming part of the financial statements)

52 Weeks ended 28 January 2018

 

1. Accounting policies

Crawshaw Group Plc (the "Company") is a company incorporated and domiciled in the UK.

 

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group") and equity account the Group's interest in associates and joint ventures. The parent company financial statements present information about the Company as a separate entity and not about its group.

 

Both the parent company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"). On publishing the parent company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income statement and related notes that form a part of these approved financial statements.

 

The current financial period is a 52 week period to 28 January 2018.  The prior year was also a 52 week period.

 

New IFRS and amendments to IAS and interpretations

There have been no significant changes to accounting under IFRS which have affected the Group's results.  The Group has considered the following amendments to published standards that are effective for the first time for the 52 weeks ended 28 January 2018 and concluded that they are either not relevant to the Group or they do not have a significant impact on the Group's financial statements.  These amendments are:

 

·      Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12;

·      Disclosure Initiative - Amendments to IAS 7; and

·      Annual improvements to IFRSs - 2014-2016 Cycle.

 

There are a number of standards and interpretations issued by the IASB that are effective for financial statements after this reporting period.

These are:

 

·      IFRS 9 'Financial Instruments' was published in July 2014 and will be effective for the Group from the period beginning 1st February 2018.  The standard is applicable to financial assets and financial liabilities, and covers the classification, measurement, impairment and de-recognition of financial assets and financial liabilities together with a new hedge accounting model.  This standard is not expected to have a material impact on the consolidated financial statements.

·      IFRS 15 'Revenue from Contracts with Customers' will be effective or the Group from the period beginning 1st February 2018, replacing IAS 18 'Revenue,' IAS 11 'Construction contracts' and related interpretations.  The standard establishes a principles based approach for revenue recognition and is based on the concept of recognising revenue when a customer obtains control of a good or service and has the ability to direct the use and obtain the benefits from the goods or services.  It applies to all contracts with customers, except those in the scope of other standards.  It replaces the separate models for goods, services and construction contracts under the current accounting standards. As the Group's revenue is based on the sale of product in a retail unit to an end customer, with consideration for the sale being received at the point of sale, the Group believes that the adoption of IFRS 15 will not have a material impact on the consolidated financial statements

·      IFRS 16 'Leases' was published in January 2016 and will be effective for the Group from the period beginning 1 February 2019, replacing IAS 17 'Leases,' subject to EU endorsement.  The standard requires lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset is of low value.  IFRS 16 represents a significant change in the accounting and reporting of leases and it will primarily change the balance sheet as well as impacting the income statement and lessee reporting as disclosed in note 22.  The Group is in the process of quantifying the impact of the new standard and expects to adopt the 'modified retrospective approach' on transition.  The new standard is likely to have an impact on the Group's results and a material impact on the balance sheet, as the majority of arrangements that are currently accounted for as operating leases will come onto the Group's balance sheet.  However, it is not yet practicable to fully quantify the effect of IFRS 16 on these consolidated financial statements.

 

 

 

Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

 

Change in subsidiary ownership and loss of control

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

 

Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along with any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

 

Joint arrangements

A joint arrangement is an arrangement over which the Group and one or more third parties have joint control. These joint arrangement are in turn classified as:

 

-    Joint ventures whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities; and

-    Joint operations whereby the Group has rights to the assets and obligations for the liabilities relating to the arrangement.

 

Associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity.

 

Application of the equity method to associates and joint ventures

Associates and joint ventures are accounted for using the equity method (equity accounted investees) and are initially recognised at cost. The Group's investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group's share of the total comprehensive income and equity movements of equity accounted investees, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the Group's share of losses exceeds its interest in an equity accounted investee, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an investee.

 

Joint operations

Where the Group is a party to a joint operation, the consolidated financial statements include the Group's share of the joint operations assets and liabilities, as well as the Group's share of the entity's profit or loss and other comprehensive income, on a line-by-line basis.

 

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements.                

 

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategy and Business Model. In addition, notes 19 and 20 set out the Group's objectives, policies and processes for managing its capital and exposures to credit and liquidity risk.

 

As highlighted in note 20, the Group meets its day to day working capital requirements through cash on hand and an overdraft facility. Current cash headroom totals £5.2m.

 

For the purposes of their assessment of the preparation of the Group's accounts on a going concern basis, the Directors have considered the current cash position, current trading and forecasts of future trading including working capital and investment requirements.  These include consideration of the loss making position of Group in recent periods and the cash outflows incurred.  These have been sensitised to take account potential risks and uncertainties.  These sensitivities and cash flow forecasts show that the Group should be able to operate within its cash reserves.

 

Classification of financial instruments issued by the Group

 

In applying policies consistent with IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

 

(a)     they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and

(b)     where the instrument will or may be settled in the Group's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Group's own equity instruments or is a derivative that will be settled by the Group's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

 

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Group's own shares, the amounts presented in this financial information for called up share capital and share premium account exclude amounts in relation to those shares.

 

Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the Company's option, and any dividends are discretionary. Dividends thereon are recognised as distributions within equity upon approval by the Group's shareholders.

 

Preference share capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary. Dividends thereon are recognised as interest expense in profit or loss as accrued.

 

Finance payments associated with financial liabilities are dealt with as part of finance expenses. Finance payments associated with financial instruments that are classified in equity are treated as distributions and are recorded directly in equity.

 

Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity securities, trade and other receivables, cash and cash equivalents and trade and other payables.

 

Trade and other receivables are recognised at stated cost less impairment losses. It is the Company's policy to review trade and other receivable balances for evidence of impairment at each reporting date. Any receivables which give significant cause for concern are written down to the best estimate of the recoverable amount.

 

Cash and cash equivalents comprise cash-in-hand and cash-at-bank.

 

Trade and other payables are recognised at stated cost.

 

Property, plant and equipment

 

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

 

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Residual values of property, plant and equipment is assumed to be nil. Land is not depreciated. The estimated useful lives are as follows:

 

·   Freehold property                                       5%-10%

·   Leasehold improvements                        in accordance with the lease term

·   Plant, equipment and vehicles                3-15 Years Straight Line Basis

 

 

 

 

 

 

 

Intangible assets and goodwill

Goodwill represents amounts arising on acquisition of businesses. In respect of business acquisitions that have occurred since 11 December 2006, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.

 

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment. Any impairment is then recognised immediately in profit or loss and is not subsequently reversed.

 

Intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.

 

IFRS 1 grants certain exemptions from the full requirements of Adopted IFRSs in the transition period. The Company elected not to restate business combinations in Crawshaw Butchers Limited that took place prior to 1 February 2006. In respect of acquisitions prior to 1 February 2006, goodwill is included at 1 February 2006 on the basis of its deemed cost, which represents the amount recorded under UK GAAP which was broadly comparable save that only separable intangibles were recognised and goodwill was amortised.

 

Amortisation

Amortisation is recognised in the statement of comprehensive income on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

 

·   Brand                                                            20 years

 

Impairment

The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.

 

For goodwill and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.

 

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income.

 

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

 

Calculation of recoverable amount

The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

 



 

Reversals of impairment

An impairment loss in respect of goodwill is not reversed.

 

In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount.

 

An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

 

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected, risk adjusted, future cash flows at a pre-tax risk-free rate.

 

Trade and other receivables

Trade and other receivables are recognised at their fair value and thereafter at amortised cost less impairment charges.

 

Inventories

Inventories are stated at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. Cost comprises purchase price and an allocation of production overheads. Net realisable value is estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

 

Inventories are primarily goods for resale.

 

Cash and cash equivalents

Cash and cash equivalents comprise cash-in-hand and cash-at bank. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose only of the statement of cash flows.

 

Employee benefits

Defined contribution plans

The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.

 

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably

 

Revenue

Revenue is mainly derived from retail butcher activities, stated after trade discounts, VAT and any other sales taxes. Revenue from the sale of goods is recognised in the statement of comprehensive income when the significant risks and rewards of ownership have been transferred to the buyer, which is the time of retail sale to the customer.

 



 

Expenses

Operating lease payments

Payments made under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. Lease incentives are recognised in the income statement on a straight-line basis over the term of the associated lease.   

 

Net financing costs

Net financing costs comprise interest payable, finance charges on shares classified as liabilities, interest receivable on funds invested and dividend income.

 

Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity's right to receive payments is established.

 

Borrowing costs

Borrowing costs are expensed in the consolidated statement of comprehensive income as incurred.

 

Taxation

Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

 

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.

 

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

 

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

 

Bank loans, overdrafts and loan notes

Interest-bearing bank loans, overdrafts and loan notes are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in profit or loss using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

 

Segmental reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. Operating segments' operating results are reviewed regularly by the Chief Executive Officer to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The Directors considers retail stores with the same supply chain and operating model in aggregate to be an operating segment. The Group's business operations are conducted exclusively in the UK so geographical segment reporting is not required.

 



 

Critical accounting judgements and key sources of estimation uncertainty

The preparation of the financial information in conformity with IFRS required management to make judgements, estimated and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expense. The estimates and underlying assumptions are reviewed on an ongoing basis.

 

The estimates associated with the assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised in the period in which the estimate is revised if the revision only affects that period, or in the period of revision and future periods if the revision affects both current and future periods.

 

During the current year, the Group experienced a reduction in profitability as a result of challenging trading conditions which led to a reappraisal of the group's expectation of future cash flows and an impairment review was carried out in relation to both the non-current assets held at Group level and the parent company investments in subsidiaries.

 

The estimated recoverable amount of Group's non-current assets and parent's investment in the associated subsidiaries is based on the discounted cash flow model and is subjective due to the inherent uncertainty involved in forecasting and discounting future cash flows.

 

The key sources of estimation uncertainty at the balance sheet date are:

 

·   Recoverability of non-current assets (note 10)

·   Recoverability of parent company investments in subsidiaries (note 12)

 

There are no judgments to be disclosed.

 

2. Other operating income





2017

2017





£'000

£'000

RGV management charge




12

12

Other




19

45

Total




31

57

 

The Group charges RGV Refrigeration a management charge each period for administration services. The Group has an investment in RGV Refrigeration, which is described further in note 11.

 

3. Expenses and auditor's remuneration

Included in operating loss are the following:





 2018

2017





£'000

£'000

Depreciation of property, plant and equipment (owned) (note 9)




1,124

1,151

Amortisation of intangible assets (note 10)




               60

60

Loss on sale of property, plant and equipment




                 2

26





1,186

1,237

Impairment Charge




 10,590

-







Auditor's remuneration:










 2018

2017





£'000

£'000

Audit of these financial statements




7

7

Half year review




9

9

Amounts receivable by the auditors and their associates in respect of:






 Audit of financial statements of subsidiaries pursuant to legislation




44

44

 Other services relating to taxation




9

12

 VAT related and other Advisory services




12

10

Total auditors' remuneration




81

82

 

4. Staff numbers and costs

The average number of persons employed by the Company (including Directors) during the period, analysed by category, was as follows:





Number of employees





2018

2017

Management




5

6

Other




657

643





662

649

 

The aggregate payroll costs of these persons were as follows:





2018

2017





£'000

£'000

Wages and salaries




11,094

10,822

Social security costs




778

691

Other pension costs




-

7





11,872

11,520

 

 

5. Key management compensation

For the 52 weeks to 28th January 2018


 

 

 

 

Salaries and fees

£'000

 

 

 

Benefits excluding pension

£'000

 

 

 

 

 

Pension Contributions

£'000

 

 

 

Compensation for loss of office

£'000

 

 

 

 

 

Total

 £'000

N J Collett

326

8

-

-

334

M Naughton-Rumbo

20

-

-

-

20

A Richardson

137

-

-

-

137

R S Rose (resigned 28 June 2017)1

25

3

-

-

28

K McMeikan (resigned 28 June 2017)1

10

-

-

-

10

J McCarthy2

58

-

-

-

58

S Henderson2

16

-

-

-

16


592

11

-

-

603

 

1From start of year until date of resignation

2From date of appointment until 28 January 2018

For the 52 weeks to 29th January 2017

 


 

 

 

 

Salaries and fees

£'000

 

 

 

Benefits excluding pension

£'000

 

 

 

 

 

Pension Contributions

£'000

 

 

 

Compensation for loss of office

£'000 

 

 

 

 

 

Total

£'000 

K P Boyd (resigned 6 January 2017)

104

3

7

17

131

N J Collett

326

8

-

-

334

M Naughton-Rumbo

20

-

-

-

20

A Richardson

137

-

-

-

137

R S Rose (resigned 28 June 2017)

60

6

-

-

66

K McMeikan (resigned 28 June 2017)

14

           -

-

-

14


661

17

7

17

702

 

 

The Group considers key management personnel as defined in IAS24 'Related Party Disclosures' to be the Directors of the Group. The aggregate of emoluments and amounts receivable under long term incentive schemes of the highest paid Director was £334k (2017: £334k). No company pension contributions were made on his behalf (2017: £nil).

 

 

6. Finance and income expense





2018

2017





£'000

£'000

Bank interest received




9

23

Finance income




9

23

Bank interest paid




      4

4

Finance expenses




4

4

 

7. Income tax expense

Recognised in the income statement

The income tax expense is based on the estimated effective rate of taxation on trading for the period and represents:





2018

2017





£'000

£'000

Current tax




-

24

Adjustments for prior year




52

(22)





52

2

Deferred tax:






Origination and reversal of timing differences




(354)

(193)

Adjustments for prior year




        23

24

Effect of rate change




-

-





(331)

(169)

Income tax (credit)




(279)

(167)

 

Reconciliation of effective tax rate





2018

2017





£'000

£'000

Loss for the period




(13,242)

(1,215)

Impairment




10,590

-

Total tax credit




(279)

(167)

Loss excluding taxation




(2,931)

(1,382)

Tax using UK Corporation tax rate of 19.16%




(562)

(276)

Non-deductible expenses




68

78

Current year losses not recognised




94

-

Adjustment in respect of prior years - CT




52

(23)

Tax not at standard rate




46

30

Adjustment in respect of prior years - DT




23

24

Total tax credit




(279)

(167)

 

Reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015. A further rate reduction to 17% (to be effective from 1 April 2020) was substantively enacted on 6 September 2016.

 

This will reduce the Company's future current tax charge accordingly and reduce the deferred tax asset at 28 January 2018 which has been calculated based on the rate of 17% in line with the above.

 

 

 

8. Earnings per ordinary share

Basic earnings per ordinary share is calculated by dividing the earnings attributable to the ordinary shareholders by the weighted average number of ordinary shares outstanding during the year of 102,255,376 (29 January 2017: 79,140,309).

 

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

 





2018

2017

Earnings




£'000

£'000

Loss attributable to shareholders




(13,242)

(1,215)











2018

2017

Number of shares




No.

No.

Basic weighted average number of shares




102,255,376

79,140,309

Dilutive potential ordinary shares




-

-

Total




102,255,376

79,140,309







Loss per share




2018

Pence

2017

Pence

Basic




(12.950)

(1.535)

 

In both years the share options were anti-dilutive as the Group reported a loss in each period.

 

9. Property, plant and equipment



Land and Buildings







Plant,



Assets under


Leasehold

equipment



construction

Freehold

improvements

and vehicles

Total


£'000

£'000

£'000

£'000

£'000

Cost






Balance at 30 January 2017

51

815

5,266

7,230

13,362

Additions at cost

1

-

47

857

905

Disposals

-

-

(3)

(28)

(31)

Balance at 29 January 2017

52

815

5,310

8,059

            14,236

Depreciation and impairment






Balance at 30 January 2017

-

265

1,994

2,256

4,515

Depreciation charge for the year

-

40

294

790

1,124

Accelerated depreciation

-

-

272

-

272

Disposals

-

                   -

-

(13)

(13)

Balance at 29 January 2017

-

305

2,560

3,032

5,898

Net book value






At 28 January 2018

52

510

2,750

5,027

8,338

At 29 January 2017

51

550

3,272

4,974

8,847

 

There are no items of property, plant and equipment in the Company.

 

 



 

9. Property, plant and equipment continued

Prior year



Land and Buildings







Plant,



Assets under


Leasehold

equipment



construction

Freehold

improvements

and vehicles

Total


£'000

£'000

£'000

£'000

£'000

Cost






Balance at 1 February 2016

345

815

5,063

4,406

10,629

Additions at cost

51

-

269

2,627

2,947

Disposals

-

-

(66)

(148)

(214)

Transfer

(345)

-

-

345

-

Balance at 29 January 2017

51

815

5,266

7,230

13,362

Depreciation and impairment






Balance at 1 February 2016

-

208

1,688

1,549

3,445

Depreciation charge for the year

-

57

310

784

1,151

Disposals

-

-

(4)

(77)

(81)

Balance at 29 January 2017

-

265

1,994

2,256

4,515

Net book value






At 29 January 2017

51

550

3,272

4,974

8,847

At 31 January 2016

345

607

3,375

2,857

7,184

 

 

10. Intangible assets



Other






intangibles

Goodwill

Brand

Total



£'000

£'000

£'000

£'000

Group






Cost or deemed cost






At 30 January 2017


365

10,590

694

11,649







Balance at 28 January 2018


365

10,590

694

11,649

Amortisation and impairment






At 30 January 2017


340

-

340

680

Amortisation charge for the year


25

-

35

60

Impairment Charge


-

10,590

-

10,590

Balance at 29 January 2017


365

10,590

375

11,330

Net book value






At 28 January 2018


-

-

319

319

At 29 January 2017


25

10,590

354

10,969

 

Prior year



Other






intangibles

Goodwill

Brand

Total



£'000

£'000

£'000

£'000

Group






Cost or deemed cost






At 1 February 2016


365

10,590

694

11,649







Balance at 29 January 2017


365

10,590

694

11,649

Amortisation and impairment






At 1 February 2016


315

-

305

620

Amortisation charge for the year


25

-

35

60

Balance at 29 January 2017


340

-

340

680

Net book value






At 29 January 2017


25

10,590

354

10,969

At 31 January 2016


50

10,590

389

11,029

 

There are no intangible assets within the Company.  Goodwill is tested for impairment annually.

 

Acquired brand values were calculated using the royalty relief approach and are amortised over 20 years. The remaining amortisation period is nine years and one month.

 

The amortisation and impairment charge is recognised in the following line items in the consolidated statement of comprehensive income:

 





2018

2017





£'000

£'000

Administrative expenses




60

60

 

Impairment testing

Goodwill is allocated to the Group's cash-generating units as follows:





2018

2017





£'000

£'000

Crawshaw Butchers Limited




-

10,413

East Yorkshire Beef Limited




-

177







 

Cash-generating units are defined as the aggregate of the retail stores which have the same supply chain and operating model.

 

Each allocation is tested annually for impairment and, to confirm whether an impairment of the goodwill is necessary, management compares the carrying value to the recoverable amount.  These calculations require the use of estimates to enable the calculation of value in use.  The key estimates are noted below.

 

The recoverable amount of Crawshaw Butchers Limited and East Yorkshire Beef Limited has been calculated with reference to their value in use. The value in use for each allocation of the existing goodwill has been calculated using internal Group budgets and projections for the next 5 years to forecast pre-tax cash flows from each CGU (with the key assumptions being in relation to sales, gross margin and wages - these budgets and projections are based on cash flows from existing assets as per IAS 36 and therefore exclude any contribution from new stores).  The cash flows have been extrapolated for a further 5 years assuming an annual average growth rate of 0% to 2028 (2017: 2%) and then 0% into perpetuity (2017: 2%).  The pre-tax cash flows have been discounted back to 28 January 2018 using a discount rate of 11.5% (2017: 8.8%).

 

As a result of this exercise a £10.4m impairment of goodwill allocated to Crawshaw Butchers Limited and a £0.2m impairment of goodwill allocated to East Yorkshire Beef Limited has been recognised, reflecting the reduced cash flows expected following sterling devaluation impact on buying costs and regulatory increases to wage spend.

 

Sensitivity analysis has been performed on the key assumptions which indicated that no reasonably possible change to key assumptions would change the result of the annual intangible asset impairment assessment.

 

11. Investments in equity accounted investees





Group

Group





2017

2017





£'000

£'000

Non-current






Investment in equity accounted investees




125

125

 

Other investments comprise a 50% share in RGV Refrigeration, a joint venture between Crawshaw Butchers Limited and Mr M Hornsby. The principal place of business for RGV Refrigeration is Unit 4, Sandbeck Way, Hellaby Industrial Estate, Rotherham S66 8QL. The last year end being 30 September 2017. The Group does not exert control over the entity.

 

The carrying value of investments in equity accounted investees includes £nil (2017: £nil) of outstanding dividend declared by RGV Refrigeration.

 

The share of profit recognised in the statement of comprehensive income was received in cash in the year.

 

 

12. Other investments





Company

Company





2018

2017





£'000

£'000

Non-current






Investment in Crawshaw Butchers Ltd




9,308

15,548

Investment in East Yorkshire Beef Ltd




             247

247

Investment in Gabbotts Farm Ltd




             994

994

Total




10,549

16,789

 

 

Movement in Other Investments

                                                                                                                                                                     £'000

2017 balance carried forward












16,789

Share based payment












(92)

Impairment charge












(6,148)













10,549

 

During the current year, the Group experienced a reduction in profitability as a result of challenging trading conditions which led to a reappraisal of the group's expectation of future cash flows and an impairment review was carried out in relation to both the non-current assets held at Group level and the parent company investments in subsidiaries. 

 

In assessing the carrying value of parent company investment in subsidiaries, management compares the carrying value to the recoverable amount.

 

The recoverable amount of the parent company investments in subsidiaries have been calculated with reference to their value in use. These calculations require the use of estimates to enable the calculation of value in use.  The key estimates are noted below.  The value in use has been calculated using internal Group budgets and projections for the next 5 years to forecast pre-tax cash flows (with the key assumptions being in relation to sales, gross margin and wages - these budgets and projections are based on cash flows from existing assets as per IAS 36 and therefore exclude any contribution from new stores).  The cash flows have been extrapolated for a further 5 years assuming an annual average growth rate of 0% to 2028 (2017: 2%) and then 0% into perpetuity (2017: 2%).  The pre-tax cash flows have been discounted back to 28 January 2018 using a discount rate of 11.5% (2017: 8.8%).

 

As a result of this exercise a £6.2m impairment has been recognised on the parent company's investment in Crawshaw Butchers Limited.

 

Sensitivity analysis has been performed on the key assumptions which indicated that no reasonably possible change to key assumptions would materially change the result of the impairment assessment.

 

13. Deferred tax liabilities

Recognised deferred tax liabilities

Deferred tax liabilities are attributable to the following:





Group

Group





liabilities

Liabilities





2018

2017





£'000

£'000

Plant and equipment




232

414

Intangible assets - brand




53

58

Temporary Differences




(144)

-





141

472

Movement in deferred tax during the year





Recognised




29 January

Acquired in

in income

28 January



2017

the period

current year

2018



£'000

£'000

£'000

£'000

Plant and equipment


420

-

(188)

232

Deferred tax relating to intangible assets - brand


58

-

(5)

53

Temporary differences


(6)

-

(138)

(144)



472

-

(331)

141

 

14. Inventories





Group

Group





2018

2017





£'000

£'000

Finished goods




1,375

1,469

 

Finished goods recognised as cost of sales in the year amounted to £25,825k (2017: £24,983k).

 

15. Trade and other receivables



Group

Group

Company

Company



2018

2017

2018

2017



£'000

£'000

£'000

£'000

Trade receivables


96

126

-

-

Other tax and social security


-

-

-

-

Prepayments and accrued income


684

661

13

10

Amounts owed from group undertakings


-

-

7,002

2,328

Corporation tax recoverable


-

-

-

35



780

787

7,015

2,373

 

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

 

The balance owing to the Company represents cash belonging to Crawshaw Group Plc which is held by Crawshaw Butchers Limited to facilitate the day to day running of the business.

 

Aged analysis of trade receivables


28 January 2018

29 January 2017



Provision



Provision



Gross

for doubtful

Net trade

Gross

for doubtful

Net trade


receivables

Debt

receivables

receivables

debt

receivables


£'000

£'000

£'000

£'000

£'000

£'000

Not past due

76

-

76

104

-

104

Up to 1 month past due

25

(5)

20

21

-

21

Over 1 month past due

2

(2)

-

3

(2)

1


103

       (7)

96

128

(2)

126

 

Provision for doubtful debt





£'000

Provision at 31 January 2017





(2)

Created during the year





(7)

Utilised during the year





-

Released during the year





2

Provision at 31 January 2017





(7)

 

The release of the provision in the year was credited to the administration expense line in the Income Statement.

 

16. Trade and other payables



Group

Group

Company

Company



2018

2017

2018

2017



£'000

£'000

£'000

£'000

Current:






Trade payables


3,315

3,864

23

31

Other creditors and accruals


1,060

936

125

71

Corporation Tax


-

12

-

-



4,375

4,812

148

102

Non-current:






Accruals


              666


559

-

                 -



666

559

-

-

 

Trade payables and other creditors comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider that the carrying amount of trade payables approximates to their fair value.

 

Non-current accruals relate to reverse lease premiums and rent free periods, which are credited to the income statement on a straight-line basis over the lease term.

 

17. Employee benefits

Pension plans

Defined contribution plans

The Group operates a defined contribution pension plan. The assets of the scheme are held separately from those of the Group in an independently administered fund. The amount charged to the income statement represents the contributions payable to the scheme in respect of the accounting period. Pension costs for the defined contribution scheme are as follows:

 





2018

2017





£'000

£'000

Defined contribution scheme




-

-

 

Share based payments

The Group issues equity settled share based payments 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 the grant. The fair value determined at the grant date of such 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 (with a corresponding movement in equity).

 

Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

 

The fair value of the shares issued under the new Long Term Incentive Plan were valued on a discounted cash flow basis in conjunction with a third party valuation specialist.

 

Share Options

Share options were granted post reverse acquisition on 14 April 2008 to key employees of the enlarged group, Crawshaw Group Plc. In line with the scheme rules, options for employees who leave the business lapse after six months.

 

The share options in issue all relate to ordinary shares of 5p and are to be settled by the physical delivery of shares are as follows:

 

Date granted

Exercise

price

Number of options at

1 Feb 2016

Granted

in period

Exercised

in period

Lapsed

in period

Number of

options at

29 Jan 2017

Exercise period

14 April 2008

42.5p

705,881

-

(294,117)

(411,764)

-

14 April 2008
to 14 April 2018

 

9 July 2015

59.5p

140,335

-

-

-

140,335

9 July 2015 to 9 July 2025

 

4 January 2016

82.5p

72,727

-

-

-

72,727

4 January 2016
to 4 January 2026

 

 

During the year the Group recognised a charge of £Nil (2017: £Nil) in relation to equity settled share options in the income statement.

 

Long term incentive plan

Shares were granted under the Crawshaw Group Plc Long-Term Incentive Plan on 24 April 2015 which entitles employees to equity instruments in Crawshaw Butchers Limited. The shares are 'growth shares' in a subsidiary, Crawshaw Butchers Ltd, but have value linked to the market capitalisation of Crawshaw Group Plc. Shareholders are entitled to a maximum pool of 10% of the growth in value of the market capitalisation of Crawshaw Group Plc over the hurdle rate, where the hurdle rate is set as a premium of 15% to market capitalisation immediately prior to the award of the shares.

 

Shareholders have the option to "put" their Eligible Put Shares on the occurrence of the following events:

 

-    The First and Second Put Dates: Shareholders can put 1/6th of their Shares from the first anniversary of the date of grant and a further 1/6th of their Shares from the second anniversary of the date of grant.

-    The achievement of the Performance Conditions: Shareholders can put 1/3rd of their Shares once the market capitalisation of Crawshaw Butchers has increased by 50% since the date of grant. In addition, shareholders can put a further 1/3rd of their Shares once the market capitalisation of Crawshaw Butchers has increased by 100% since the date of grant.

-    On a voluntary winding up or change of control of Crawshaw Group Plc.

 

 

The fair value of the awards is determined by using the Monte Carlo model and allowance has been made for the following assumptions: Expected exercise date, expected volatility of total shareholder return, expected future dividends and the risk free rate of interest. 100,000 simulations were used in the Monte Carlo model and set out below is a summary of the key data.

 

Date of Grant





24 April 2015

Ave Share price in period prior to grant





53.1p

Volatility of TSR for the Company





60% pa

Dividend Yield





1% pa

Risk Free rate of Interest





1.75% pa

Exercise pattern





Expected exercise between 0 and 10 years

 

The expected Volatility is wholly based on the historic volatility simulated over differing time periods to the date of grant.

 

The share based payment charge will be adjusted each financial year to reflect expected and actual achievement of non-market based vesting conditions. The total expense recognised in the Statement of Comprehensive Income is £92,000 (2017: £217,000).

 

18. Loans and borrowings - Group





2018

2017





£'000

£'000

Current Hire Purchase




23

64

Non-current Hire Purchase




41

58

 

 

19. Financial instruments

The Group's principal financial instruments comprise cash and trade creditors. The main purpose of these financial instruments is to raise finance for the Group's operations.

 

The main risks arising from the Group's financial instruments are interest rate risk, liquidity risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below.

 

Interest rate risk

The Group has paid all bank facilities mitigating any risk in interest rate variability.

 

Credit risk

The Group's principal financial assets are cash and receivables. The Group's credit risk is primarily attributable to trade receivables. Trade receivables are included in the balance sheet net of a provision for doubtful receivables, estimated by the Group's management based on prior experience and their assessment of current economic conditions.

 

At the balance sheet date, the Directors consider there to be no significant credit risk.

 

 

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of cash and bank facilities. The cash generative nature of the business is forecast to continue and the bank facilities have been paid in full. The Directors are confident that there will continue to be sufficient headroom to cover liquidity risk.

 

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effect of netting agreements:

 

 

Contractual Cash Flows  



2018

2017



1 year or less

1 year or more

1 year or less

1 year or more



£'000

£'000

£'000

£'000

Non-derivative financial liabilities






Finance lease liabilities


23

41

64

58

Trade and other payables


4,386

666

4,812

559

Total


4,409

707

4,876

617

 

Effective interest rates

In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they mature or, if earlier, are repriced.

 






5 years


Effective

< 1 year

1 to < 2 years

2 to < 5 years

and over

Financial Instrument

interest rate

£

£

£

£

Cash

0.3%

4,675

-

-

-

 

 

20. Capital management

The capital structure of the Group is a mixture of (i) net cash made up of cash balances and (ii) equity comprising issued share capital and reserves as detailed in the Statements of Changes in Shareholders Equity.

 

The Group's primary objective is to safeguard its ability to continue as a going concern, through the optimisation of the debt and equity balance, and to maintain a strong credit rating and headroom. The Group manages its capital structure through detailed management forecasts and clear authorisation procedures for significant capital expenditure. The Board makes appropriate decisions in light of the current economic conditions and strategic objectives of the Group.

 

There has been no change in the objectives, policies or processes with regards to capital management during the periods ended 28 January 2018 and 29 January 2017.

 

 

21. Capital commitments

The Group had no capital commitments at the current and preceding year ends.

 

 

22. Operating leases

Non-cancellable operating lease rentals are payable as follows:

 



Group

Group

Company

Company



2018

2017

2018

2017



£'000

£'000

£'000

£'000

Less than one year


1,731

1,676

-

-

Between one and five years


5,421

5,495

-

-

More than five years


3,145

3,786

-

-

Total


10,297

10,957

-

-

 

The Company leases a number of retail outlets, warehouse and factory facilities under operating leases. Land and buildings have been considered separately for lease classification. During the year £1,896k (2017: £1,646k) was recognised as an expense in the income statement in respect of operating leases.

 

 

23. Related party transactions

Transactions with key management personnel

The Board and certain members of senior management are related parties within the definition of IAS 24 (Related Party Disclosures). Summary information of the transactions with key management personnel is provided in note 5 and the Remuneration Report.There is no difference between transactions with key management personnel of the Company and the Group.

 

Transactions with subsidiaries

The Company has entered into transactions with its subsidiary undertakings in respect of the following: provision of Group services (including senior management, IT, accounting, purchasing and legal services). Recharges are made to subsidiary undertakings for intra- group balances, based on their amount and interest rates set by Group management. In addition, cash belonging to Crawshaw Group Plc is held by subsidiary companies to facilitate the day to day running of the business.  The amount outstanding from subsidiary undertakings to the Company at 28 January 2018 is £7.0m (2017: £2.4m). Amounts owed to subsidiary undertakings by the Company at 28 January 2018 totalled £nil (2017: £nil).

 

The Company has suffered no expense in respect of bad or doubtful debts of subsidiary undertakings in the year (2017: £nil).

 

Transactions with jointly controlled entities

Crawshaw Butchers Limited, a subsidiary of the Company, holds a 50% share in a partnership which trades under the name of RGV Refrigeration. The operations of the partnership comprise of the maintenance and repair of refrigeration machinery for a variety of customers.

 

During the year the transactions amounted to:

 





2018

2017





£'000

£'000

Amounts received in respect of management charges




12

12

Amounts paid in respect of repair and maintenance services




138

130

 

The amount outstanding from jointly controlled entities to the Group at 28 January 2018 totalled £4,963 (2017: £5,053). Amounts owed joint ventures by the Group at 28 January 2018 totalled £17,412 (2017: £9,363).

 

The Group has suffered no expense in respect of bad or doubtful debts of jointly controlled entities in the year (2017: £nil).

 

Transaction with other related parties

In May 2017 Crawshaw Group Plc entered into a supply chain partnership with the 2 Sisters Food Group. Crawshaw Group Plc subsequently entered into a subscription agreement with Invest Co 1 in which they acquired 29.72% of the issued share capital of Crawshaw Group Plc. 2 Sisters Food Group and Invest Co 1 are controlled by Ranjit and Baljinder Boparan. 2 Sisters Food Group are therefore considered to be a related party of Crawshaw Group Plc.  Since the start of the agreement, the value of purchases from 2 Sister Food Group to 30 July 2017 was £1,323k and a balance of £118k was owed by Crawshaws Group Plc to 2 Sisters Food Group at the end of the period. There were no sales made by Crawshaw Group Plc to 2 Sisters Food Group from the start of the agreement.

 

 

24. Exceptional costs in relation to unusual items of expenditure

Exceptional costs are defined as one off costs incurred in the year which are of a non-recurring nature.

Exceptional costs incurred:

 





2018

2017





£'000

£'000

Bank facility arrangement fees and non-utilisation charges




-

40

Share placing




391

-

Store closure provision

Accelerated depreciation in relation to store closures




156

272

-

Other




-

23

                                                                                                                                                                     819                    63

 

All of these costs are included within administration expenses in the statement of comprehensive income.

 

25. Subsidiary undertakings

At 28 January 2018 Crawshaw Group PLC had the following subsidiary undertakings:

 

Crawshaw Holdings Limited - United Kingdom - Non-trading subsidiary

Crawshaw Butchers Limited - United Kingdom - Retail Butchers

East Yorkshire Beef Limited - United Kingdom - Retail Butchers

Gabbotts Farm (Retail) Limited - United Kingdom - Retail Butchers

Gabbotts Farm Ltd - United Kingdom - Non-trading subsidiary

MeatMart Ltd - United Kingdom - Non-trading subsidiary

 

All the above subsidiary undertakings have the the following registered office:

 

Unit 4, Sandbeck Way, Hellaby Industrial Estate, Rotherham, S66 8QL

 

The shareholdings were 100% of the subsidiary undertakings' ordinary and preference shares. Each of the subsidiaries is included in the consolidated financial statements.

 

 

26. Ultimate parent company

The Company is the ultimate parent company of the Group.

 

No other group financial statements include the results of the Company.

 

 

27. Statutory Accounts

 

The financial information set out above does not constitute the company's statutory accounts for the years ended 28 January 2018 or 29 January 2017 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the registrar of companies, and those for 2018 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

28. Annual Report

 

The Group's Annual Report and Financial Statements for the 52 weeks ended 28 January 2018 were approved

on 24 April 2018 and are expected to be posted to shareholders, along with the Group's Notice of Annual

General Meeting ("AGM") and related form of proxy, in due course.  The AGM will be held at 12 noon on

Wednesday 27 June at the Company's registered offices, Unit 4, Hellaby Industrial Estate, Sandbeck Way,

Rotherham, S66 8QL.

 

Further copies will be available to download from the Company's website at: www.crawshawbutchers.com and

will also be available from the companies office address, as above.

 

 

 


This information is provided by RNS
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