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Crawshaw Group PLC (CRAW)

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Wednesday 26 September, 2018

Crawshaw Group PLC

Interim Results

RNS Number : 9247B
Crawshaw Group PLC
26 September 2018
 

26 September 2018

 

Crawshaw Group Plc

 

Britain's best value fresh meat and food to go retailer

 

Crawshaw Group Plc ("Crawshaw", the "Company" or the "Group"), the UK's leading value butcher, announces its interim results for the 26 weeks ended 29 July 2018 and strategic update.

 

 

H1 Financial Highlights:

Group revenue down 1.9% to £21.6m (2017: £22.1m)

Gross margin of 39.6% (2017: 42.9%)

EBITDA1 (£1.1m) (2017: -£0.2m)

Underlying Operating Loss2 of £1.7m (2017: loss of £0.8m)

Loss Before Tax of £1.7m (2017: loss of £1.2m)

Cash of £3.3m at 29 July 2018 (28 January 2018: £4.7m)

 

 

H1 Operational Highlights:

Group LFL3 sales -13.2% (2017: -4.2%); (Q1: -14.0%; Q2 -12.4%)

Customer numbers -9.1%; (Q1: -9.5%; Q2 -8.8%)

12 Factory shops producing 30% of Group sales from a total number of 54 stores

Two new factory shops opened in first half, with another 1 new store opening  early in the second half

We remain focused on cost and continue to maximize our collaborative relationship with 2Sisters

New CEO appointed late May 2018 with new CFO appointed late July 2018 to reinvigorate the business and restore growth and profitability. Both join with a significant amount of experience working in the meat industry

 

 

Strategic Update:

Management has completed its review of the business and is implementing its change programme to restore growth and profitability.

 

Factory Shops are central to future profitable growth

3 new factory shops opened in current year

10 more planned in 2019/2020 and a further 10 in 2020/2021

Cash payback for new stores estimated to be 12 to 18 months

The Board believe the UK offers significant future growth within this immature Factory store format

 

Franchise

Three-store trial agreed with A.F. Blakemore, the UK's leading Spar wholesaler and retailer

The trial is expected to commence in early October 2018

Subject to trial results, a further 12 stores per annum could be opened delivering 15 stores by full year 2019/2020

This initiative takes the Crawshaw value meat offer into the growing convenience market

 

Online

New route to market with farm to fork marketable point of difference

Website expected to go live in early October 2018 delivered direct to the doorstep

The online brand will be WF Burtons, which is a traditional, high quality butchers owned and operated by Crawshaw in Pocklington, Yorkshire

Working in partnership with Givendale British Beef Society

 

High Street

42 stores trading

UK High Streets under increasing pressure which is unlikely to change given market dynamics

Crawshaw is reviewing its structure and investment in traditional high street locations

 

Commenting on the results, Crawshaw CEO Jim Viggars, said:

"Clearly the results for H1 are disappointing, but not entirely a surprise given market conditions and the issues that face a retail estate that has too many high street stores and currently not enough factory stores.  However, the important issue is the future growth and profitably of Crawshaw.  The new management team has identified what it considers to be the key issues and are moving at pace to remedy them on a sustainable basis.  This is achievable over the medium term, despite market conditions which include declining high street shopper numbers, increasing convenience and online shopping and retail pricing that is more competitive. 

 

"Our factory stores continue to produce good returns and have substantial room to improve as we get to grips with the supply chain and operational standards.  Factory stores are our priority for growth and this is reflected in our plans to open a further 20 stores over the next two years.

 

"Our strategic partnership with A.F. Blakemore, with 3 trial sites due to open in October, will deliver an enhanced shopping experience for Spar customers as they purchase quality Crawshaw branded product at low prices.  This should generate new customers for the trial Spar stores and provide existing customers with an improved value shopping basket.  Convenience shopping is growing significantly and this route to market will complement our own Factory store rollout.

 

"Taking Crawshaw online by utilising our bespoke butchers' shop WF Burtons of Pocklington provides another new route to market. This will enable us to reach many more consumers who choose online shopping as part of their shopping repertoire.  Our key point of difference will be providing a farm to fork Givendale British beef range of high-quality cuts at market leading prices."

 

Crawshaw Chairman Jim McCarthy, added:

"The new leadership team has a significant amount of experience working in the meat industry. They have identified the core issues affecting the business and are actively implementing a programme of change.

 

"We recognise that some of our existing High Street stores are not core to our future growth.  Our Factory store format is attractive to consumers and we intend to accelerate the growth of this proven model, constantly refining value, operational standards and the overall shopping experience that is key in driving sales and profitability. We are also trialling initiatives in both convenience and online channels in order to meet changing customer shopping requirements. We believe we will be able to achieve this at relatively low cost and that over time these channels will support the factory store format in delivering sustainable growth and profitability.

 

"I am confident with the operational actions now being undertaken and new personnel joining to deliver the change we need, we have a programme in place that will, over time, restore shareholder value."

 

Outlook

The new management team have undertaken a strategic review of Crawshaw and have identified what they consider to be the key issues affecting the business; previously expanding the Group too quickly, not addressing the decline in High Street store performance, and over investment in certain areas of labour in the Group impacting on store standards and labour scheduling. These issues are now being addressed with timely remedial actions that will, over time, reinvigorate and restore Crawshaw and prepare the business for future growth.

 

As previously announced, the retail trading environment remains tough with rising shop rents and high business rates, along with lower high street footfall and increased discounter competition directly impacting sales and profitability which presents a number of financial challenges.  

 

Trading since the start of the second half is in line with management's expectations and the Board expect full year Group sales to January 2019 to be flat on the previous year and an underlying operating loss of approximately £3m, whilst the business delivers its change programme and improves operational efficiency. 

 

1. EBITDA 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.

2. Underlying 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.

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

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 ("MAR").

 

Enquiries:

Citigate Dewe Rogerson

 

Angharad Couch

020 7282 1093

 

 

Crawshaw Group plc

 

Jim Viggars, Nick Taylor

01709 369 600

 

 

Peel Hunt LLP

 

Adrian Trimmings, George Sellar 

020 7418 8900

 

 

 

 Condensed Consolidated Statement of Comprehensive Income

For the 26 weeks ended 29 July 2018

 

 

Unaudited

Audited

Unaudited

 

 

26 Weeks

52 Weeks

26 Weeks

 

 

29.7.18

28.1.18

30.7.17

 

Notes

£'000

£'000

£'000

 

Revenue

 

2

 

21,633

 

44,559

 

 

22,056

Cost of sales

 

(13,074)

(25,825)

(12,595)

 

Gross profit

 

 

8,559

 

18,734

 

9,461

 

Other operating income

 

 

13

31

15

Administrative expenses

 

(10,262)

(21,710)

(10,723)

Operating Loss

 

(1,690)

(2,945)

(1,247)

Finance income

 

3

9

8

Finance expenses

 

(2)

(4)

(2)

Net Finance Income/(Expense)

 

1

5

6

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

 

-

9

-

Loss before income tax

 

(1,689)

(2,931)

(1,241)

Income tax credit/(charge)

4

253

279

176

 

Total recognised loss for the period

 

 

(1,436)

(2,652)

(1,065)

Impairment Charge

 

 

(10,590)

-

Total recognised loss after Impairment Charge

 

(1,436)

(13,242)

(1,065)

 

Attributable to:

 

 

 

 

Equity holders of the Company

 

(1,436)

(13,242)

(1,065)

Operating loss analysed as:

 

 

 

 

EBITDA1

 

(1,127)

(848)

(172)

Exceptional Costs

3

-

(819)

(388)

Share Based Payment Charge

8

-

(92)

(92)

Depreciation and amortization

 

(563)

(1,186)

(596)

Profit/(loss) on disposal of fixed assets

 

1

-

1

Operating loss

 

(1,689)

(2,945)

(1,247)

 

Basic loss per ordinary share

 

5

 

(1.495)p

 

(12.950)p

 

(1.163)p

Diluted loss per ordinary share

5

(1.495)p

(12.950)p

(1.163)p

 

 

 

 

 

1. EBITDA 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.

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheet

As at 29 July 2018

 

 

 

 

Unaudited

Audited

Unaudited

 

 

 

 

 29.7.18

28.1.18

 30.7.17

 

 

 

Notes

 £000

 £000

 £000

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

8,123

8,338

8,717

 

 

Intangible assets - goodwill and related

acquisition intangibles

 

 

 

302

 

319

 

10,926

 

 

Investment in equity accounted investees

 

125

125

125

 

 

Total Non-Current Assets

 

8,550

8,782

19,768

 

 

 

 

 

 

 

 

 

Inventories

 

1,101

1,375

1,343

 

 

Trade and other receivables

 

1,289

780

1,351

 

 

Cash and cash equivalents

 

3,271

4,675

6,788 

 

 

Total Current Assets

 

5,661

6,830

9,482

 

 

Total Assets

 

14,211

15,612

29,250

 

 

 

 

 

 

 

 

 

Share capital

6

5,651

5,651

5,651

 

 

Share premium

 

17,498

17,499

17,498

 

 

Reverse acquisition reserve

 

447

447

447

 

 

Retained earnings

 

(14,667)

(13,231)

(1,054)

 

 

Total Shareholders' Equity

 

8,929

10,366

22,542

 

 

 

 

 

 

 

 

 

Other payables

 

611

666

619  

 

 

Deferred tax liabilities

 

(112)

41

297

 

 

Interest bearing loans and borrowings

 

52

141

54

 

 

Total Non-Current Liabilities

 

499

848

970

 

 

 

 

 

 

 

 

 

Trade and other payables

 

4,661

4,375

5,699

 

 

Interest bearing loans and borrowings

 

70

23

39

 

 

Total Current Liabilities

 

4,783

4,398

5,738

 

 

 

 

 

 

 

 

 

Total Liabilities

 

5,282

5,246

6,708  

 

 

 

 

 

 

 

 

 

Total Equity and Liabilities

 

8,929

15,612

29,250

 

 

 

 

 

 

 

 

Condensed Consolidated statement of changes in shareholders' equity

For the 26 weeks ended 29 July 2018

 

 

 

Share Capital

£000

 

Share Premium

£000

 

Rev Acq Reserve

£000

 

Retained Earnings

£000

Total Equity

£000

 

Balance at 29 January 2017

3,962

14,051

447

(81)

18,379

 

 

 

 

 

 

 

 

Loss for the period

-

-

-

(1,065)

(1,065)

 

Share Based Payment Charge

-

-

-

92

92

 

Share Placing 33,794,490 shares

1,689

3,447

-

-

5,137

 

Balance at 30 July 2017

5,651

17,498

447

(1,054)

22,542

 

 

 

 

 

 

 

 

Loss for the period

-

-

-

(12,177)

(12,177)

 

Share Based Payment Charge

-

-

-

-

-

 

Dividend on Equity Shares

-

-

-

-

-

 

Balance at 28 January 2018

5,651

17,498

447

(13,231)

10,365

 

 

 

 

 

 

 

 

Loss for the period

-

-

-

(1,436)

(1,436)

 

Share Based Payment Charge

-

-

-

-

-

 

Share Placing

-

-

-

-

-

 

Balance at 29 July 2018

5,651

17,498

447

(14,667)

8,929

 

 

 

 

 

 

 

 

 

Condensed Consolidated statement of cash flows

For the 26 weeks ended 29 July 2018

 

 

Unaudited

Audited

Unaudited

 

 

26 Weeks

52 Weeks

26 Weeks

 

 

29.7.18

28.1.18

30.7.17

 

Cash flows from operating activities

 £000

 £000

£000

 

 

(Loss)/Profit for the period

(1,436)

(13,242)

(1,065)

 

Adjustments for:

 

 

 

 

Depreciation and amortization

563

1,184

596

 

Share Based Payment Charge

-

92

92

 

Loss / (Profit) on sale of property, plant and equipment

(1)

2

(1)

 

Impairment on goodwill/investment write down

-

10,590

-

 

Store Closure Provision

-

428

-

 

Share Placing & Supply Partnership Deal Fees

-

391

-

 

Net finance (income)/charges

(1)

(5)

(6)

 

Share of (profit) of equity accounted investees

-

(9)

-

 

Taxation

(253)

(279)

(176)

 

Operating cash flow before movements in working capital

(1,128)

(848)

(560)

 

 

Movement in trade and other receivables

(508)

7

(563)

 

Movement in trade and other payables

231

(470)

1,010

 

Movement in inventories

274

94

127

 

Tax Paid/(received)

-

(64)

(64)

 

Net cash generated from operating activities

(1,131)

(1,281)

(50)

 

 

Cash flows from investing activities

 

 

 

 

Purchase of property, plant and equipment

(340)

(905)

(435)

 

Proceeds from sale of property, plant & equipment

10

12

11

 

Interest Received

3

9

8

 

Interest paid

(2)

(4)

(2)

 

Equity Investees

-

9

-

 

Dividend paid

-

-

-

 

Net cash (used in) investing activities

(329)

(879)

 (418)

 

 

Cash flows from financing activities

 

 

 

 

HP Financing

57

(58)

(28)

 

Share Capital Raised

-

5,137

5,137

 

Share Placing Costs

-

(391)

-

 

Net cash generated from financing activities

57

4,688

5,109

 

 

Net change in cash and cash equivalents

(1,404)

2,528

4,641

 

Cash and cash equivalents at start of period

4,675

2,147

2,147

 

Cash and cash equivalents at end of period

3,271

4,675

6,788

 

                                           

 

 

 

Notes to the condensed consolidated financial statements

 

1. BASIS OF PREPARATION

Reporting Entity

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

The condensed consolidated interim financial statements of the Company as at and for the 26 weeks ended 29 July 2018 comprise the Company and its subsidiaries (together referred to as the "Group") and equity account the Group's interest in jointly controlled entities.

Basis of Preparation

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the EU and do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 28 January 2018.  The annual financial statements of the Group are available upon request from the Company's registered office.

The comparative figures for the financial year ended 28 January 2018 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors 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.

The condensed consolidated interim financial statements have not been audited by the Company's auditors.

These condensed consolidated interim financial statements were approved by the Board of Directors on 25 September 2018.

Significant Accounting Policies

The accounting policies applied are consistent with those of the annual financial statements for the 52 weeks ended 28 January 2018, as described in those annual financial statements, which were prepared in accordance with IFRS as adopted by the EU.

Significant Judgements, Key Assumptions and Estimation Uncertainty

The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable at the time the estimate is made. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the 52 weeks ended 28 January 2018.

Going Concern

The Group meets its day to day working capital requirements through cash on hand and cash generated from operations. Current cash balance is £3.3m.

 

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.

 

Basis of Consolidation

The consolidated financial information includes the financial information of the Company and its subsidiary undertakings made up to 29 July 2018 (together referred to as the 'Group').

 

 

 2. REVENUE

 

The following standard has been adopted by the Group for the first time for the financial year commencing

29 January 2018:

 

IFRS 15 'Revenue from Contracts with Customers' has been adopted in the preparation of these

Financial statements. 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 previous accounting standards.

The Group's revenue is based on the sale of product in a retail unit directly to an end

customer therefore there is no impact on adoption of IFRS 15. Accordingly, the group has not restated prior

year comparators and no adjustment has been recognised in the opening balance of equity at the date of

initial application.

 

 

3. FINANCIAL INSTRUMENTS

 

The following standard has been adopted by the Group for the first time for the financial year commencing

29 January 2018:

 IFRS 9 'Financial Instruments' replaces the classification and measurement models for financial instruments

in IAS 39 with three classification categories: amortised cost, fair value through profit or loss and fair value

through other comprehensive income. Consistent with the non-complex nature of the Group's financial

instruments, the impact of the new standard is not material and therefore the Group has not restated prior

year comparators. The Group has amended its accounting policy for the establishment of provisions against

trade receivables to reflect the lifetime expected loss model (consistent with the simplified approach under

IFRS 9), however, given the low level of receivables within the business this has not had a material impact.

 

 

4. EXCEPTIONAL ITEMS

 

Unaudited

Audited

Unaudited

 

 26 Weeks

52 Weeks

26 Weeks

 

 

 29.7.18

 28.1.18

30.7.17

 

 

£000

£000

£000

 

Exceptional costs in the period relate to:

 

 

 

 

Supply chain partnership and subscription agreement

-

383

380

 

Store Closure Provision

-

156

-

 

Accelerated Depreciation in relation to store closures

-

272

-

 

Bank facility arrangement fees and non-utilisation

 

-

-

 

Charges

-

8

8

 

Other costs

-

 

-

 

Total exceptional items

-

819

388

 

 

5. INCOME TAX EXPENSE

 

 Unaudited

 Audited

Unaudited

 

 

26 Weeks

52 Weeks

26 Weeks

 

 

 29.7.18

 28.1.18

 30.7.17

 

 

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:

£000

£000

£000

 

 

 

 

 

 

Current tax

-

-

-

 

 

Adjustments for prior year

 

-

52

-

 

 

-

52

-

 

 

 

 

 

 

Deferred tax:

 

 

 

 

Origination and reversal of timing differences

(253)

(354)

(176)

 

Adjustments for prior year

-

23

-

 

 

 

(331)

(176)

 

 

Income Tax (Credit)

(253)

(279)

(176)

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of effective tax rate

 

 

 

 

 

 

Loss for the period

(1,436)

(13,242)

(1,065)

 

Impairment

-

10,590

-

 

Total Tax Expense

(253)

(279)

(176)

 

Loss excluding taxation

(1,689)

(2,931)

(1,241)

 

 

 

Tax using UK Corporation tax rate of 19%

(321)

(562)

(240)

 

 

 

Non-Deductible Expenses

21

68

40

 

 

 

Current Year losses not recognized

18

94

-

 

 

 

Adjustment in respect of prior years

-

75

-

 

 

 

Tax not at standard rate

30

46

24

 

 

 

Group relief

-

-

-

 

 

 

Total tax credit

(253)

(279)

(176)

 

 

 

 

 

 

 

 

 

 

6. 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 period of 102,255,376 (28/01/18: 102,255,376) (30/07/17: 91,553,412). There were no dilutive potential ordinary shares. In the period under review the share options were anti-dilutive as the Group reported a loss.

 

7. SHARE CAPITAL

 

Unaudited

Audited

Unaudited

 

29.7.18

28.1.18

30.7.17

Allotted, called up and fully paid

£000

£000

£000

113,025,049 ordinary shares of 5p each

5,651

5,651

5,651

 

 

8. RELATED PARTY TRANSACTIONS

 

Crawshaw Butchers Limited, a subsidiary of Crawshaw Group Plc, 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.

 

2 Sisters Food Group are considered to be a related party of Crawshaw Group Plc.  The value of purchases from 2 Sisters Food Group to 29 July 2018 was £446k and a balance of £171k was owed by Crawshaw 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 during this period.

9. SHARE BASED PAYMENTS

Shares that were granted under the Crawshaw Group plc Long-Term Incentive Plan have lapsed due to Noel Collett and Alan Richardson stepping down as Chief Executive Office and Chief Financial Officer respectively.

 

 


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