CREIGHTONS PLC — Earnings Release 2014

Jun 30, 2014

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RNS Number : 8271K

Creightons PLC

30 June 2014

Creightons Plc

Preliminary announcement

For the year ended 31 March 2014

Chairman's statement

I am pleased to report another year of growth and improved profitability. The Group's profit before taxation for the year ended 31 March 2014 was £471,000 (2013: £302,000). This continued improvement in profits has been achieved despite the on-going tough trading environment with our customers seeking to improve the value of the offer to their end consumer.  Our private label ranges have faced increased price and promotion pressure from the big brands and the growth of the value market, which has eroded their market share and adversely affected sales volumes. 

To combat the effects of lower underlying demand we have successfully generated sales growth by introducing new customers and developing new product ranges.  Much of this growth has come from developing ranges to meet the needs of customers in the value market. Profit margins remain under pressure with customers seeking to recover lost margin and with sales growth coming from lower margin products. We continue to manage costs and our product offering in order to be in a position to respond to customer pressure whilst maintaining our own profitability.

Financial results

Group sales this year of £19,352,000 are £2,026,000 (12%) higher than last year (2013: £17,326,000), increasing the upward growth in sales volumes we have been recording over the past three years. This year's growth has come from a combination of our own UK branded ranges, private label and contract manufacturing with all three strands of our business showing growth in excess of 10% as against last year. Much of this growth has been driven by new ranges and new customer listings for existing ranges. In addition a planned programme to de-list poor performing ranges was also completed in the period under review.

Changes in product and customer mix resulted in a reduced gross margin percentage of 40.8%, a reduction of 2.0% on last year (2013: 42.8%).  Winning business with a lower than average margin has helped deliver the 12% sales growth noted above. Administration costs, which include product research and development as well as sales promotion and product support, have risen as we invest resources to support the growth of the business, with savings in promotional support for discontinued ranges reducing the impact of this increase to 4.1%.

Profit before taxation and interest for the year of £503,000 (2013: £333,000) represents an increase of 51%. Group profit after tax of £471,000 (2013: £302,000) therefore shows a further improved performance especially given the trading environment of the past year.  Diluted earnings per share rose from 0.51p in 2013 to 0.79p for 2014 as a result of the increased earnings. 

Net borrowings (bank overdraft and loans less cash at bank and in hand) at the year-end have reduced by £272,000 to £602,000 (2013: £874,000). Cash generated by the business, together with £72,000 generated from employees exercising share options, has been partly utilised to fund the increase in working capital required to support the expansion of the business.

Current year developments

The Group continues to develop and strengthen its branded portfolio.  This is being achieved through developing our own brand offering and developing relationships with the owners of existing brands.

We are continuing to work hard to manage cost pressure through managing customer prices, product re-engineering and enhancing our product portfolio with higher margin products.  We continue to develop new sales opportunities and ranges to further expand our sales opportunities.

We expect our main private label customers to respond to the pressures in the current economic climate with value strategies resulting in sales opportunities, which we intend to exploit with lower priced products to offset lower sales levels on higher priced products. We will continue to manage our overhead cost base and working capital requirements to ensure they are aligned with the anticipated sales levels of the Group, whilst retaining the skills necessary to meet growth opportunities as they arise. We are undertaking a major review of our planning and purchasing procedures in order to continue to improve our stock turn whilst maintaining customer service levels and reducing investment in working capital.

As in previous years, your Board is continuing to seek opportunities to acquire brands or companies that would complement the existing businesses by offering synergies in manufacturing, sourcing and marketing due to similarities in product alignment, sourcing or outlets.

On 23 May 2014 the Group completed the sale of its share in one of our partner brands, Twisted Sista, for an approximate profit of £375,000. The Group will utilise the proceeds of this disposal to invest in the development of new ranges.

The Board has considered whether to declare a dividend this year but, although we have seen a further increase in annual profits, it feels that it continues to be more appropriate to retain profits to help fund the continued investment in growth than to reduce available funds through dividend distribution.

I would like to take this opportunity to thank each and every one of the Group's employees for the hard work and effort they have put in over what has been a challenging year. I would also like to thank our customers, shareholders and suppliers for their support and loyalty to the Group.

William McIlroy

Chairman, 30 June 2014

Consolidated income statement

		Year ended 31 March	Year ended 31 March
		2014	2013
	Note	£000	£000
Revenue		19,352	17,326
Cost of sales		(11,460)	(9,902)
Gross profit		7,892	7,424
Distribution costs		(802)	(763)
Administrative expenses		(6,587)	(6,328)
Operating profit		503	333
Finance costs		(32)	(31)
Profit before tax		471	302
Taxation		-	-
Profit for the year from continuing operations		471	302

Earnings per share

##### Basic	2	0.81p	0.55p
Diluted	2	0.79p	0.51p

Consolidated statement of comprehensive income

		Year ended 31 March	Year ended 31 March
		2014	2013
		£000	£000
##### Profit for the year from continuing operations		471	302
Exchange differences on translating foreign operations		42	(22)
Total  comprehensive income  for the year attributable to the equity holders of the parent		513	280

Company statement of comprehensive income

		Year ended 31 March	Year ended 31 March
		2014	2013
		£000	£000
##### Loss for the year from continuing operations		-	(3)
Total  comprehensive expense  for the year		-	(3)

Consolidated balance sheet

		31 March	31 March
		2014	2013
	Note	£000	£000
##### Non-current assets
Goodwill		343	343
Other intangible assets		259	295
Property, plant and equipment		590	525
		1,192	1,163
##### Current assets
Inventories		3,704	3,526
Trade and other receivables		3,464	2,811
Cash and cash equivalents		11	18
		7,179	6,355
Total assets		8,371	7,518
Current liabilities
##### Trade and other payables		2,777	2,219
Obligations under finance leases		20	19
Borrowings		613	892
		3,410	3,130
Net current assets		3,769	3,225
Non-current liabilities
Obligations under finance leases		28	48
		28	48
Total liabilities		3,438	3,178
Net assets		4,933	4,340
Equity
##### Share capital	3	584	545
Share premium account		1,264	1,231
Other reserves		38	38
Share-based payment reserve		-	51
Translation reserve		(13)	(55)
Retained earnings		3,060	2,530
Total equity attributable to the equity shareholders of the parent company		4,933	4,340

Consolidated statement of changes in equity

	Share capital	Share premium account	Other reserves	Share-based payment reserve	Translation reserve	Retained earnings	Total equity
	£000	£000	£000	£000	£000	£000	£000
At 1 April 2012	545	1,231	38	44	(33)	2,228	4,053
Exchange differences on translation of foreign operations	-	-	-	-	(22)	-	(22)
Share-based payment charge	-	-	-	7	-	-	7
Profit for the year	-	-	-	-	-	302	302
At 31 March 2013	545	1,231	38	51	(55)	2,530	4,340
Issue of share options	39	33	-	-	-	-	72
Exchange differences on translation of foreign operations	-	-	-	-	42	-	42
Share based payment charge	-	-	-	8	-	-	8
Transfer - see note below	-	-	-	(59)		59
Profit for the year	-	-	-	-		471	471
At 31 March 2014	584	1,264	38	-	(13)	3,060	4,933

Consolidated cash flow statement

		Year ended 31 March	Year ended 31 March
		2014	2013
	Note	£000	£000
Net cash from operating activities	4	689	306
##### Investing activities
Purchase of property, plant and equipment		(211)	(97)
Purchase of intangible assets		(258)	(334)
##### Net cash used in investing activities		(469)	(431)
##### Financing activities
Repayment of finance lease obligations		(19)	(19)
Proceeds on issue of shares		72	-
(Decrease)/increase in bank loans and invoice finance facilities		(279)	54
##### Net cash (used in)/ generated from financing activities		(226)	35
Net (decrease) in cash and cash equivalents		(6)	(90)
Cash and cash equivalents at start of year		18	106
Effect of foreign exchange rate changes		(1)	2
Cash and cash equivalents at end of year		11	18

Notes to preliminary announcement

1    Business and geographic segments

For management purposes the Group reports operations from two operations one based in the United Kingdom and one based in North America. The Group's reportable segments under IFRS 8 are therefore as follows:

Revenue by segment

	Year ended 31 March 2014			Year ended 31 March 2013
	External revenue	Inter- segment revenue	Total segment revenue	External revenue	Inter- segment revenue	Total segment revenue
	£000	£000	£000	£000	£000	£000
United Kingdom	18,236	142	18,378	15,782	346	16,128
North America	1,116	-	1,116	1,544	-	1,544
Total	19,352	142	19,494	17,326	346	17,672

Profit by segment

	Year ended 31 March 2014			Year ended 31 March 2013
	United Kingdom	North America	Group	United Kingdom	North America	Group
	£000	£000	£000	£000	£000	£000
Segment results	1,337	(2)	1,335	1,017	129	1,146
Central costs			(832)			(813)
Operating profit			503			333
Finance costs			(32)			(31)
Profit for the year			471			302

Segmental operating profit is stated after charging:

	Year ended 31 March 2014			Year ended 31 March 2013
	United Kingdom	North America	Group	United Kingdom	North America	Group
	£000	£000	£000	£000	£000	£000
Depreciation	146	-	146	128	-	128
Amortisation	293	-	293	301	-	301
Write-downs of inventory recognised as an expense	107	69	176	174	14	188

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

Segment assets

		Year ended 31 March	Year ended 31 March
		2014	2013
		£000	£000
Non-current assets
United Kingdom		1,192	1,163
North America		-	-
Total non-current assets		1,192	1,163
Current assets
United Kingdom		6,855	5,874
North America		324	481
Total current assets		7,179	6,355
Total assets
United Kingdom		8,047	7,037
North America		324	481
Total assets		8,371	7,518

Segment liabilities

		Year ended 31 March	Year ended 31 March
		2014	2013
		£000	£000
United Kingdom		3,346	3,124
North America		92	54
Total liabilities		3,438	3,178

All of the Group's capital expenditure, depreciation and amortisation is within the United Kingdom segment.

The accounting policies for the reportable segment are the same as the Group's accounting policies described in the Group's financial statements for the year ended 31 March 2013.

2    Earnings per share

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

		Year ended 31 March	Year ended 31 March
		2014	2013
		£000	£000
Earnings
Net profit attributable to the equity holders of the parent company		471	302

		Year ended 31 March	Year ended 31 March
		2014	2013
		Number	Number
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share		58,355,426	54,478,876
Effect of dilutive potential ordinary shares relating to share options		1,570,000	5,126,550
Weighted average number of ordinary shares for the purposes of diluted earnings per share		59,925,426	59,605,426

3.   Share capital

		Ordinary shares of 1p each
		£000	Number
##### At 1 April 2012 and 31 March 2013		545	54,478,876
##### Issued in the year		39	3,876,550
##### At 31 March 2014		584	58,355,426

The Company has one class of ordinary shares which carry no right to fixed income. All of the share are issued and fully paid. The total proceeds from the issue of shares in the year was £72,000 (2013 - nil).

4. Notes to consolidated cash flow statement

		Year ended 31 March	Year ended 31 March
		2014	2013
		£000	£000
##### Profit from operations		503	333
Adjustments for:
Depreciation on property, plant and equipment		146	128
Goodwill impairment charge		-	3
Amortisation of intangible assets		293	301
Share based payment charge		8	7
		950	772
(Increase)  in inventories		(210)	(230)
(Increase)/decrease in trade and other receivables		(661)	235
Increase/(decrease) in trade and other payables		642	(440)
Cash generated from operations		721	337
Interest paid		(32)	(31)
Net cash from operating activities		689	306

Cash and cash equivalents (which are presented as a single asset on the face of the balance sheet) comprise cash at bank and in hand.

5. Status of information

The financial information above, which was approved by the Board of Directors on 30 June 2014, does not constitute full accounts within the meaning of section 434 of the Companies Act 2006. The financial information presented above has been prepared in accordance with the accounting policies published in the financial statements for the year ended 31 March 2013.  The full financial statements for the year ended 31 March 2013, which contained an unqualified audit report under section 475 of the Companies Act 2006 and which did not make any statement under section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies in accordance with section 441 of the Companies Act 2006.

The preliminary statement of results has been reviewed and agreed with the Company's auditor, Chantrey Vellacott DFK LLP, who have indicated that they will be giving an unqualified opinion in their report on the statutory financial statements.

Copies of the annual report and consolidated financial statements for the year ended 31 March 2014 will be made available to shareholders in due course.   Further copies will be available from the Company's registered office at 1210 Lincoln Road, Peterborough, PE4 6ND and on the company's website at www.creightons.com.

This information is provided by RNS

The company news service from the London Stock Exchange

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