CREIGHTONS PLC — Interim / Quarterly Report 2017

Sep 30, 2016

Chairman's statement

The Group has continued to make progress against a background of increasing competition in the first half of the year recording an operating profit (before exceptional items and tax) of £799,000 in the six months to 30 September 2016 (2015: £208,000). The Group is reporting a profit after tax for the six months to 30 September 2016 of £671,000 (2015: £1,050,000 including an exceptional item of £844,000 on the disposal of "The Real Shaving Company" business which was completed on 28 May 2015).

Sales

The Group has increased sales for the period through growth of the core business and by capitalising on the assets acquired from the administrators of Broad Oak Toiletries in February 2016. This has been achieved by capturing the customer base of the previous Broad Oak Toiletries business and developing relationships with new customers, employing a team with the skill set required to meet these demands and focussing on driving efficiencies across the wider business. Sales were £15,600,000 for the six months ended 30 September 2016 (2015: £10,752,000) an increase of 45.1% for the period including sales from the base continuing business of £11,480,000 (2015: £10,604,000, +8.3%). Sales by discontinued businesses which were reported in 2015 were £148,000. Sales of our branded products have increased by 16.7% in the period. This growth has been driven by the relaunch of key brands in order to improve the product offering to consumers and by further expanding our reach into export markets. Our private label ranges continue to face increased price and promotion pressure from big brands and the growth of the value market, which has eroded their market share and adversely affected sales volumes. Contract sales have increased by over 200% with 32% organic growth from the Peterborough business and the balance from the new Devon contract manufacturing site.

Margin and overheads

Our gross margin was 41.0% in the six months to 30 September 2016 (2015 from continuing operations: 40.6%). We are continuing to focus efforts to improve our margins through product re-engineering and targeted investment in plant and machinery which will improve output at lower costs. This will be key to our success especially in the current economic climate as we continue to see the trend of consumers in the UK focussing on value. Like many UK manufacturers we are facing increased prices on imported raw materials following the fall in the value of Sterling. We are in the process of implementing plans to minimise the impact on the margins of the Group whilst not detracting from the quality of the offering to our consumers.

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.

Operating profit

Operating profit from continuing businesses was £483,000 (2015: £208,000), while operating profit generated from the acquired activities was £316,000. Consequently, consolidated operating profit for the period was £799,000 (2015: £208,000), which represents an increase of 284%. The increased sales together with the tight control on costs results in an operating profit margin of 5.1% (2015 from continuing operations: 2.0%).

Tax

It should be noted that the Group expects to have utilised all of its historic tax losses in the financial year to 31 March 2017 and therefore we have provided a tax charge within these results of £119,000 (2015: £nil).

Earnings per share

I am pleased to report that the impact of the above is a diluted earnings per share pre-exceptional items of 1.00p (2015: 0.31p), an increase of 226%.

Working capital and loans

We refinanced the initial investment in plant and equipment at the Devon site with a 5 year term loan of £600,000 in the period.

Net cash on hand (cash and cash equivalents less short term borrowings) is £546,000 (2015: £946,000). The main reason for the decrease in net cash on hand is the higher working capital requirement to support the sales growth during the period.

I believe that this half year's sales of £15,600,000 and profit after tax of £671,000 continues to place the Company in a good position to take advantage of any opportunities that may arise.

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 period. I would also like to thank our customers, shareholders and suppliers for their support and loyalty to the Group.

W O McIlroy Executive Chairman 23 November 2016

Responsibility statement

The names and functions of the Directors of the Company are as follows:

William O McIlroy Executive Chairman Bernard JohnsonExecutive Managing Director Mary T Carney Non-executive Director Nicholas O'Shea Non-executive Director & Company Secretary William Glencross Non-executive Director Martin Stevens Deputy Managing Director Pippa Clark Group Sales and Marketing Director Paul Forster Director of UK Operations

The Board confirms that to the best of its knowledge the condensed set of financial statements gives a true and fair view of the assets and liabilities, financial position and profit of the Group and has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by the Disclosure and Transparency Rules as issued by the Financial Conduct Authority, namely:

· DTR 4.2.7: An indication of important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year.

· DTR 4.2.8: Details of related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the enterprise during that period. Together with any changes in the related parties transactions described in the last annual report that could have a material effect on the enterprise in the first six months of the current financial year.

By order of the Board

Nicholas O'Shea Company Secretary and Director 23 November 2016

Principal risks and uncertainties

Risks

The Board regularly monitors exposure to key risks, such as those related to production efficiencies, cash position and competitive position relating to sales. It has also taken account of the economic situation over the past 12 months, and the impact that has had on costs and consumer purchases.

It also monitors those risks not directly or specifically financial, but capable of having a major impact on the business's financial performance if there is any failure, such as product contamination and manufacture outside specification, maintenance of satisfactory levels of customer and consumer service, accident ratios, failure to meet environmental protection standards or any of the areas of regulation mentioned above.

Capital structure, cash flow and liquidity

Having achieved profitability after a number of years of substantial losses and repaid loans used at the time of the purchase of the Potter & Moore business, the Group's cash flow has improved substantially since the Potter and Moore acquisition in 2003. The business is funded using retained earnings and invoice discounting, with a bank facility secured against its assets. In the period to 30 September 2016 the Group has refinanced part of the initial investment in Potter and Moore (Devon) with a bank loan of £600,000.

Consolidated income statement – unaudited

		Six months ended 30 September 2016 (Unaudited)	Six months ended 30 September 2015 (Unaudited)			Year ended 31 March 2016 (Audited)
		Group total	Continuing operations	Discontinued operations	Group total	Continuing operations	Discontinued operations	Group total
	Note	£000	£000	£000	£000	£000	£000	£000
Revenue		15,600	10,604	148	10,752	21,005	148	21,153
Cost of sales		(9,201)	(6,296)	(72)	(6,368)	(12,151)	(72)	(12,223)
Gross profit		6,399	4,308	76	4,384	8,854	76	8,930
Distribution costs		(605)	(464)	(13)	(477)	(911)	(13)	(924)
Administrative expenses		(4,995)	(3,636)	(63)	(3,699)	(7,385)	(63)	(7,448)
Operating profit		799	208	-	208	558	-	558
Profit on disposal of "the Real Shaving Company"	4	-	-	844	844	-	768	768
Other operating income – gain on bargain purchase	5	-	-	-	-	227	-	227
Other operating expense – costs in relation to acquisition		-	-	-	-	(225)	-	(225)
Profit after exceptional items		799	208	844	1,052	560	768	1,328
Finance income		-	-	-	-	2	-	2
Finance costs		(9)	(2)	-	(2)	(1)	-	(1)
Profit after exceptional items and before tax		790	206	844	1,050	561	768	1,329
Taxation		(119)	-	-	-	-	-	-
Profit for the period from continuing operations attributable to the equity shareholders of the parent company		671	206	844	1,050	561	768	1,329

Earnings per share

	Note	30 Sep 16	30 Sep 15	31 Mar 16
Basic	2	1.12p	1.76p	2.23p
Diluted	2	1.00p	1.57p	1.99p

Earnings per share on continuing operations

Basic	2	1.12p	0.35p	0.94p
Diluted	2	1.00p	0.31p	0.84p

Consolidated statement of comprehensive income - Unaudited

	September (Unaudited)	Six months ended 30	Year ended 31 March (Audited)
	2016	2015	2016
	£000	£000	£000
Profit for the year	671	1,050	1,329
Exchange differences on translating of foreign operations	-	(4)	3
Exercise of derivatives	-	-	(5)
Total comprehensive income for the period attributable to the equity holders of the company	671	1,046	1,327

Creightons plc Unaudited interim financial report 30 September 2016

Consolidated balance sheet – unaudited

	30 September		31 March
	2016	2015	2016
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
Non-current assets
Goodwill	331	331	331
Other intangible assets	180	292	239
Property, plant and equipment	1,582	559	1,374
	2,093	1,182	1,944
Current assets
Inventories	4,554	3,754	3,912
Trade and other receivables	6,373	4,049	4,048
Cash and cash equivalents	1,001	983	814
Derivative financial instruments	14	5	25
	11,942	8,791	8,799
Total assets	14,035	9,973	10,743
Current liabilities
Trade and other payables	5,097	3,068	3,543
Obligations under finance leases	-	18	7
Short term borrowings	455	37	-
Bank loan – under 12 months	132	-	-
Derivative financial instruments	40	18	51
	5,724	3,141	3,601
Net current assets	6,218	5,650	5,198
Non-current liabilities
Bank loan	457	-	-
	457	-	-
Total liabilities	6,181	3,141	3,601
Net assets	7,854	6,832	7,142
Equity
Share capital	599	596	599
Share premium account	1,249	1,248	1,249
Other reserves	25	25	25
Translation reserve	(12)	(31)	(12)
Cash flow hedge reserve	(26)	-	(26)
Retained earnings	6,019	4,994	5,307
Total equity attributable to the equity shareholders	7,854	6,832	7,142

Statement of changes in shareholders' equity – unaudited

	Share capital	Share premium account	Other reserves	Translation reserve	Cash flow hedge reserve	Retained earnings	Total
	£000	£000	£000	£000	£000	£000	£000
Balance at 1 April 2015	596	1,248	25	(15)	5	3,938	5,797
Profit for six months ended 30 September 2015	-	-	-	-	-	1,050	1,050
Share based payments	-	-	-	-	-	6	6
Charge in relation to derivative financial instruments	-	-	-	-	(17)	-	(17)
Exchange differences on translation of foreign operations	-	-	-	(4)	-	-	(4)
Balance at 30 September 2015	596	1,248	25	(19)	(12)	4,994	6,832
Profit for six months ended 31 March 2016	-	-	-	-	-	279	279
Share based payments	-	-	-	-	-	34	34
Employee share options	3	1	-	-	-	-	4
Exercise of derivatives	-	-	-	-	(5)	-	(5)
Charge in relation to derivative financial instruments	-	-	-	-	(9)	-	(9)
Exchange differences on translation of foreign operations	-	-	-	7	-	-	7
Balance at 31 March 2016	599	1,249	25	(12)	(26)	5,307	7,142
Profit for six months ended 30 September 2016	-	-	-	-	-	671	671
Share based payments	-	-	-	-	-	41	41
Exercise of derivatives	-	-	-	-	26	-	26
Charge in relation to derivative financial instruments	-	-	-	-	(26)	-	(26)
Balance at 30 September 2016	599	1,249	25	(12)	(26)	6,019	7,854

Consolidated cash flow statement – unaudited

	Six months ended 30 September 2016 (Unaudited)	Six months ended 30 September 2015 (Unaudited)			Year ended 31 March 16 (Audited)
	Group total £000	Continuing operations	Discontinued operations	Group total £000	Continuing operations £000	Discontinued operations £000	Group total £000
Net cash inflow / (outflow) from operating activities	(403)	365	(72)	293	1,052	(72)	980
Cash flow from investing activities
Purchase of property, plant and equipment	(350)	(79)	-	(79)	(769)	-	(769)
Expenditure on intangible assets	(98)	(183)	-	(183)	(302)	-	(302)
Proceeds from sale of Real Shaving Company brand	-	-	1,000	1,000	-	1,000	1,000
Net cash generated from / (used in) investing activities	(448)	(262)	1,000	738	(1,071)	1,000	(71)
Cash flow from financing activities
Repayment of finance lease obligations	(7)	(10)	-	(10)	(22)	-	(22)
Proceeds on issue of shares	-	-	-	-	4	-	4
Increase / (repayment) of bank loans and invoice finance facilities	1,044	(47)	-	(47)	(84)	-	(84)
Net cash used in financing activities	1,037	(57)	-	(57)	(102)	-	(102)
Net increase /(decrease) in cash and cash equivalents	186	46	928	974	(121)	928	807
Cash and cash equivalents at start of period	814	9	-	9	9	-	9
Effect of foreign exchange rate changes	1	-	-	-	(2)	-	(2)
Cash and cash equivalents at end of period	1,001	55	928	983	(114)	928	814

Notes to the unaudited interim financial report

1. Basis of preparation

The interim financial statements for the six months ended 30 September 2015 and 30 September 2016 and for the twelve months ended 31 March 2016 do not constitute statutory accounts for the purposes of Section 434 of the Companies Act 2006. The Annual Report and Financial Statements for the year ended 31 March 2016 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements for the year ended 31 March 2016 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006. The 30 September 2016 statements were approved by the Board of Directors on [23] November 2016. This unaudited interim report has not been audited or reviewed by auditors pursuant to the Financial Reporting Council guidance on Review of Interim Financial Information.

The condensed financial statements in this Interim Report have been prepared in accordance with the requirements of IAS 34 'Interim Financial Reporting' as adopted by the European Union.

As required by the Disclosure and Transparency Rules of the UK's Financial Conduct Authority, the condensed set of financial statements has been prepared by applying the accounting policies and presentation that were applied in the preparation on the Company's published consolidated financial statements for the year ended 31 March 2015, which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

The condensed interim financial statements for the six months ended 30 September 2016 and the comparative figures for the six months ended 30 September 2015 are unaudited. The figures for the year ended 31 March 2016 have been extracted from the Annual Report on which the Auditors issued an unqualified audit report and which have been filed with the Registrar of Companies.

2. Earnings per share

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

	Six months ended 30 September 2016 2015 (Unaudited) £000 £000 671		Year ended 31 March
		(Unaudited)	2016 (Audited)
			£000
Earnings
Net profit from continuing operations before tax attributable to the equity holders of the parent company		1,050	1,329
Net profit before disposals attributable to the equity holders of the parent company	671	206	561

	Six months ended 30 September		Year ended 31 March
	2016 (Unaudited)	2015 (Unaudited)	2016 (Audited)
	Number	Number	Number
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share	59,837,243	59,537,243	59,649,743
Effect of dilutive potential ordinary shares relating to Share options	7,005,000	7,405,000	7,005,000
Weighted average number of ordinary shares for the purposes of diluted earnings per share	66,842,243	66,942,243	66,654,743

3. Related party transactions

The related party transactions that occurred in the six months ended 30 September 2016 are not materially different in size or nature to those reported in the Company's Annual Report for the year ended 31 March 2016.

4. Exceptional item – Sale of The Real Shaving Company (2015)

On 28 May 2015 the Group completed the sale of the business and assets of The Real Shaving Company brand including the trademark and associated intellectual property. The consideration comprised £1,000,000, which was paid on completion and £150,000 for stock which was paid subsequently.

The Company reported a profit of £844,000 in the interim financial report for the six months ended 30 September 2015 in relation to the disposal.

5. Other operating income – gain on bargain purchase

	Note	Six months ended 30 September 2016 (Unaudited)	Six months ended 30 September 2015 (Unaudited)	Year ended 31 March 2016 (Audited)
		£000	£000	£000
Gain on Bargain Purchase	6	-	-	227
Total		-	-	227

6. Business combinations

On 16 February 2016 Potter and Moore (Devon) Limited, a subsidiary of Creightons PLC, acquired some of the assets of Broad Oak Toiletries Limited from the administrator for a consideration of £600,002, consisting of cash of £600,002. There was no consideration in the form of shares.

The Group decided to acquire the assets of Broad Oak Toiletries Limited for the purpose of expansion into a new premium sector of contract manufacturing which complements the Company's existing production capabilities and will add to the Company's sales by enabling us to produce and supply new product ranges such as soap, candles and powder products to an enlarged customer base who will benefit from our supply chain management. The net assets of the assets acquired during the period, as extracted from the seller's accounting records, and the fair value adjustments ascribed thereto, are set out below:

	Group
	Consideration paid	Fair value alignments	Accounting policy alignments	Fair values acquired
	£000	£000	£000	£000
Plant and equipment	540	227	-	767
Intellectual property	10	-	-	10
Inventories	50	-	-	50
Total fair value of net assets acquired				827
Gain on bargain purchase				(227)
Total consideration				600
Total consideration comprises:
Cash				600

The gain on the bargain purchase of £227,000 was recognised in other operating income, in the year ended 31 March 2016. The gain resulted from the external revaluation of plant and equipment to market values.

Acquisition related costs of £225,000 were recognised within administrative expenses in the statement of comprehensive income for the year ended 31 March 2016. These relate to provisions for reorganisation costs, professional, legal and valuation services associated with the business combination.

7. Availability of Interim Report

The Interim Report is being made available to shareholders on the company website www.creightonsplc.com. Further copies can be obtained from the Company's Registered Office, 1210 Lincoln Road, Peterborough, PE4 6ND.