LON:CRL | Multibaggers With 10 Bagger Potential - Creightons - 10 Years Of Growth At An Average Of 14% Is It Time To Rerate As A Growth Stock?

21st Jul '21 by Bluesky Ventura

34 comments 2327 reads

30th DEC 2022

Creightons -mitigation of Covid related hygiene Sales

Creightons (LON:CRL) released a half-year result today, demonstrating a return to its traditional growth profile. The company states 'Core sales have increased by GBP8.37m (40.2%) which has substantially replaced the Covid-19 related hygiene sales which were a once-off feature of the previous half-year. Like many company's it has invested in working capital to overcome supplier chain delays.

It is one of a few companies I'd be willing to pay up for the growth. a PE of 20-24 seems closer to fair value.

The company also successfully completed two acquisitions in the period - Emma Hardie and Brodie & Stone - which will further strengthen the underlying branded business and should add substantially to underlying profitability.

Anyway I have updated my forecast. (see below)

Sales Estimate 2022-2026

My valuation model suggests plenty of upsides. (see below)

My fair valuation for year-end is close to 202p for year-end 2020 and could be as high as 661p by 2026

As always please DYOR and don't trust vlogs and blogs including this one.

BSV

6th Aug 2021

Creightons -Emma Hardie Acquisition.

Creightons (LON:CRL) released a video on the Emma Hardie acquisition. The link is provided below.

https://bit.ly/CRL_EmmaHardie_acquisition

The main takeaways I took is that,

Emma Hardie, with cost and market synergies, should see sales of £5M with £1M EBITDA in the near term, with plenty of growth for the future also. It feels like a well-thought acquisition by a team that understands the market and opportunity very well.
Significant confidence in reach £100M top-line revenue by 2024/25, £30M organic growth, £20M M&A, and margins to improve with top-line growth.

Without knowing the specifics of the Emma Hardie business it is difficult to know if a fair price is paid. I am assured, Creightons (LON:CRL) has brought a business with excellent growth, high margins, and access to new distributions channels, with Creightons (LON:CRL) have the resources to make the most of the opportunities available.

As always DYOR, watch the video and comes to your own conclusion.

BSV

21st JUL 2021

Creightons - 10 years of growth at an…

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MiserableJacktPotato

21st Jul '21

Marketing is a muscle that can be developed.

Pippa seems to understand the product market, getting her some support in reaching customers shouldn't be too difficult and I'm sure this part of the business will see investment going forward. I mean, who buys soap from the manufacturers website anyway

Bluesky Ventura

Well, typically consumer defensive has operating margins from 10%-38%. My expectation is that Creightons (LON:CRL) will get to net margins in the high teens at some point.

Yeah, sorry, should've been more clear. I was talking about gross margins. Anything over 10% would be a stellar performance.

29th Jul '21

Interesting acquisition announced. Anyone have thoughts good/bad/meh.

Personally I’m not sure there’s enough information for me to come to a firm conclusion. I’ve decided to trust the management who I think are excellent and done a cracking job over the last couple of years - this will be a good test of that faith.
Edit: looking at the Emma Hardie website, it’s certainly premium. Could be some very good gross margins and a decent addition to the bottom line if they’re able to grow this brand. More execution risk than I expected, they’re going to be out their comfort zone here for sure. Doesn’t mean they won’t rise to the challenge though.

gus 1065

As you say, not much info given. Not a huge bite in the context of the rest of the Creightons‘ business. At face value it looks earnings dilutive (paying £6.4m in cash and shares for about £50k PBIT) in the first instance so it depends what the business adds by way of product, markets and personnel as to whether it’s a good deal or not. Creightons (LON:CRL) have a pretty good acquisitions track record so happy to give them the benefit of the doubt.

https://www.investegate.co.uk/...

Gus.

It seems margins will drop straight to the bottom line. I guess this is the first of the £12M acquisition eluded to in the recent presentation. if this all leads to £100M revenues in 2024 as suggested by the presentation I hope for a great outcome for the share price.

I am pretty positive about the management team adding the right acquisitions to the £CRL.

5th Aug '21

released a video on the Emma Hardie acquisition. The link is provided below.

Creightons (LON:CRL) released a video for its new acquisition. Link https://bit.ly/CRL_EmmaHardie_acquisition

The main takeaway I took is that;

Emma Harde, with cost and market synergies, should see sales of £5M with an EBITDA of £1M in the near term, with plenty of runway for growth.
Significant confidence in reach £100M top-line revenues by 2024/25, £30M organic growth, £20M M&A, and margin improvement with top-line growth.

Price now 105p, possible I get to my 140p end of year price target.

CamRaid

I was really impressed with the report in Creightons (LON:CRL) and the acquisition of Emma Hardie provided added interest as it is a business I am aware of. I have just watched the video on PI World about the acquisition.

Am I missing something? Creightons (LON:CRL) have paid £6.5m for a business that made a £40k net profit and £200k EBITDA. Their justification is what they may be able to do with it.

The deputy MD is their Sales and Marketing director. She chatted on with buzz word laden chat that was far from convincing.

My worry is market positioning. Creightons (LON:CRL) are a mass market company looking to buy their way in to the premium brand space. They believe they can expand Emma Hardie by using their existing sales network and also their in house manufacturing. Their is a big risk hear of damaging that 'premium' brand.

Emma Hardie simply has not performed. Yet Barry Cooke the MD has been kept on as MD. That doesn't really make much sense to me either.

To me it seems like they have paid well over the odds and the acquisition is high risk in terms of integration.

I like Creightons (LON:CRL) in terms of revenue growth, EPS growth and ROC.

However, this acquisition concerns me. Am I missing something?

6th Aug '21

Agree. I wasn’t impressed with Barry Cooke’s responses. He came across as someone who’s run out of ideas and didn’t know what to do next.

The other thing I didn’t like was him saying, constantly “we need a partner”. Newsflash Barry, Creightons aren’t a partner, they’re the boss, and you’re now an employee not an owner.

Certainly an acquisition that has a lot to prove and will be a benchmark for us to judge their growth and expansion plans against.

He's just sold his business for £6m, and received a decent stake in £CRL. respect to the man.

jonno

The acquisition of Emma Hardie has certainly lit a fire under the share price. I don't know how the coming year will play out, but I have met Bernard Johnson and the management team who in my view are very capable and despite what appears to be the full price paid, I would not bet against them making a success of Emma Hardie.

I have been a holder of the shares for sometime and found the recent PIWorld presentation of the rationale behind the acquisition convincing. I need to crunch the numbers, but a forward PE of 15/16 looks more than reasonable for a company that is performing well, with competent management. To paraphrase Warren Buffet the return on retained earnings is an important factor in determining the the quality of a company's management. Having spent £5m of retained earnings, the team at Creightons have the opportunity to impress, fingers crossed they will do so.

Beermonster

9th Aug '21

Bernard Johnson feels that there is value in the acquisition, and that they have managed to outmanoeuvre their competitors in getting the deal done, and I am prepared to give him the benefit of the doubt, but there is a risk that the acquisition of Emma Hardie has set a precedent for the price that they are prepared to pay.

Eamon Murphy does to fill me with as much confidence tough. In the video on the previous day they set out their stall in terms of acquisition expectations, but then the following day they have completed a deal that is not in the valuation range that they outlined - surely he should have set the groundwork in the results presentation. To then justify the price based upon the expected integration benefits does not feel correct.

It will be interesting to see how long Barry Cook remains with Creightons (LON:CRL) I would expect him to leave in a couple of years once the earn out part of his deal is complete.

Hopefully the next acquisition that Creightons (LON:CRL) do will be at a better valuation.

MGinvestor

15th Aug '21

Beermonster,

I think you are a bit harsh with your comments. I watched the initial presentation again AFTER the acqusition and I came away satisfied that they didn't mislead us. Bernard does state clearly that the 5x EBITDA max that they will pay for acqs can only be confirmed AFTER the synergies have been realised which I think is fair.

We will know within a year how well this acq has been and whether they did pay too high a price. I am confident that they have at least paid a good price for a good business.

@MGinvestor

rhomboid1

I think there is a point to be made here about the EH acquisition….if I was the seller I’d be delighted at the metrics of the deal…as buyers Creightons (LON:CRL) are having to do some serious post purchase furniture rearranging to justify the price

I’d be inclined to give Creighton’s mgt the benefit of the doubt…but I’m more inclined to congratulate the vendors on doing a great deal without needing synergies to make it great for them

I’m an ex holder of Creightons (LON:CRL) & have a high regard for them BTW

30th Dec '21

I updated the forecast on half-year results

'Creightons -mitigation of Covid related hygiene Sales'

2022 fair value estimated at 202p.

As always DYOR.

Multibaggers with 10 Bagger Potential - Creightons - 10 years of growth at an average of 14% is it time to rerate as a growth stock?

Creightons -mitigation of Covid related hygiene Sales

Creightons -Emma Hardie Acquisition.

Creightons - 10 years of growth at an…

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Bluesky Ventura

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