I enjoy meeting companies and the management are crucial to their potential so always worth getting to see them if you have an opportunity to do so IMO. There are a few meetings coming up....
Firstly I have a lunch and results presentation to offer at leasttwo of you for this week with Cambria CAMB who have their final results and are offering an investor lunch presentation on Wednesday 13th May so just email me if you want to join....It will be in London at their PR company Tavistock at noon.
Secondly I have just done the first one in a series of small cap review radio programmes which was aired live on Share Radio https://audioboom.com/boos/3155920-we-talk-smallcaps-with-da... Do listen in your own time using the audioboom link. There will be different guests each fortnight initially but hopefully it will be popular so do let Share Radio know about it if you think it is worth continuing.
Next Monday we have our monthly Mello dinner in Beckenham on 18th May and it is already proving to be very popular so please email me to reserve a place. This month we will be hosting the first presentation by Noel Collett who is the newly appointed CEO at Crawshaws CRAW and he came to that role having been the COO at the 500 times larger Lidl UK who are a success story themselves.
So...How did Crawshaws attract a rising talent like Noel who is still under 40 and clearly sees a great future at Crawshaws ? Come and join us to find out by emailing me. More on the monthly dinners at Mellomeeting.co.uk
Finally you can check which events are coming up on the ShareSoc website under the Events tab http://www.sharesoc.org/events.html
Hope to see a few of you soon.
David
Twitter @carmensfella
My write-up of Monday night's Mello meeting with new Crawshaw CEO Noel Collett
Crawshaw Group (Aim All Share, Market capitalisation: £43m, 55.25p and 4.9% of JIC Portfolio): Last night I attended a presentation by Noel Collett, who is 12 weeks into his new job as CEO at Crawshaw Group.
His background: He joined Lidl straight from university 17 years ago and at 27 became its youngest Board member as COO of the UK business. He oversaw a decade of double digit store growth during which it went from 200 stores to 615 and annual turnover grew from £700m to £4.5bn. More recently Lidl had focused on its fresh food offering with meat and poultry growing from £63m to £330m in a few years.
His move to Crawshaw came about because of a “mid-life crisis”; he was approaching 40 and started to think about where he would be in 10 to 15 years and came to the conclusion he was in need of a new challenge. He was approached about the Crawshaw vacancy and initially thought it did not fit the bill but after spending a day out in the business, visiting a number of stores and meeting Richard Rose, Chairman of Crawshaw, his mind was made up. He came to the conclusion that “Crawshaw was the most exciting, scalable retail project out there”.
The key initiatives in his first year or so will be to reappraise and invest in the store portfolio. It currently has 23 existing Crawshaw outlets and 11 stores that came with the Gabbotts acquisition. It will be opening 6 new Crawshaw stores this financial year taking it up to 39 in total followed by 15 next. After that the store opening programme will accelerate to 20 and then 25 per year. It has converted three Gabbotts stores to Crawshaws to see what effect it had on business and thus far has seen the best like-for-like sales of any of its stores so I guess the remainder will be converted over time. He emphasised the importance of getting the HR function right as undergoing a step change in the growth of the business puts all sorts of strains on management; maintaining the culture of the business is key. Systems will also need to be upgraded; “they are okay at the moment but 18 months out will need development”.
Acquisitions do not feature in its growth plans: “there will be no more Gabbotts with future growth being organic, store by store”. He sees the potential to get top around 70 stores without “spreading its wings” too much outside its traditional heartland. Once it gets to around 70 stores its current distribution centre will be “sweating” so it will look to open a new centre, probably opening up a new geographic region. It would have a factory outlet attached which would hopefully emulate the success of the factory outlet attached to its Hallaby centre which runs at 2.5x the sales of its other outlets.
On financing he believed that it had a strong enough balance sheet to see it through to 200 stores. Capex per store currently runs at £250,000, down from AMUNDI SP 500 ETF (LON:500),000 two years ago and heading to £220,000. Payback is within two years and stores are immediately profitable, “generating loads of cash from day one”. Given the cash flow characteristics of the business he believes that it can fund all the growth internally, moving into debt for only a short period of time and that they “do not see a share placing at any point in the future”.
I liked his answer to a question on the recent fall in like-for like sales growth; he said that as a business you had to decide when to push for margins or for sales growth and that when up against like-for-likes of up to 35% the year before and whilst the cost of meat was currently advantageous, it was better on balance to push for maximising cash margin.
He was asked about his access to Richard Rose, given Rose is currently chairman of 6 listed companies. He meets him once a month at management meetings but has found him accessible by phone and email whenever he’s needed it. In an answer to a question on the share price/value he said that he did not have a lot of experience in a plc environment. I reckon he could teach a lot of FTSE 100 CEOs a thing or two on clear and concise presentation style; he was most impressive.
Valuation: Looking at the current valuation it is very difficult to argue it is cheap. On January 2016 earnings forecasts the shares are valued at 92x falling to 39x January 2017, (although I think both those forecasts are likely to be upgraded). It has an enterprise value, (market capitalisation plus debt) of £34.5m which is about 1.1x forecast January 2016 sales. To hold the stock you have to believe that it will achieve the rapid growth to 200 plus stores over the next 7-8 years and that in a few years’ time the growth will have more than caught up with the valuation.
Conclusion; I thought Noel Collett was a most impressive individual and that Crawshaw is very lucky to have lured him away from Lidl. He has the experience of overseeing the rapid expansion of a retail business, in one year Lidl opened 80 new stores, and fully understands the risks and pitfalls involved. If anyone can help Crawshaw succeed in achieving its target of 200+ stores he can. I mentioned valuation earlier on and to hold the stock I think you have to believe that by 2022 it will be approaching 200 stores with turnover in the ball park of £200m per annum. Conceivably the market capitalisation might at that stage be approaching £200m giving an annualised return from the current share price of around 20%. The problem in the short term is that the price seems to be up with events and despite the skillset of the new CEO, there are no guarantees that it will achieve its goal. I am happy I have a holding and am excited about the potential over the next five years or so but as with all share prices they can get overdone both on the upside and the downside. I currently have a 4.9% holding and when setting a 12 month target price a few weeks ago I set it at 60p. Above that level I will be tempted to lock in some profits, at least selling the stock I bought at 42p in January, reducing the holding down to 3.5-4.0% but I definitely want to continue having exposure given the longer term potential. Happy Holder!
