REG - Creightons PLC - Interim Financial Report
Creightons plc Group
Unaudited interim financial report
for the six months ended 30 September 2019
Financial highlights
· Revenue increased by 6.3% to £23.75m (2018: £22.34m).
· Gross margin percentage improved by 3.7% to 42.0% (2018: 38.3%).
· Profit before tax increased by 28.0% to £1.77m (2018: £1.38m).
· Operating profit margin of 7.7% (2018: 6.3%).
· Diluted EPS 2.06p (2018: 1.80p).
· Net cash inflow from operating activities of £3.26m (2018: net cash outflow of £1.35m).
· Net cash on hand £1.75m (2018: net borrowing £1.96m).
· Paid final dividend of 0.40p per ordinary share in September 2019 (2018: 0.23p).
· Interim dividend of 0.15p per ordinary share to be paid in December 2019 (2018: 0.15p).
Operational highlights
· Overall sales growth maintained.
· Acquired the Balance Active Formula skincare brand for £500,000 plus legal costs on 21 June 2019. This brand has contributed £304,000 of sales in the period to September 2019.
· Completed the purchase of the property in Peterborough on 16th October 2019 for £3.80m plus stamp duty and professional costs. The purchase was partly funded by a 15 year term loan of £3.04m with the balance funded from working capital.
Chairman's statement
The Group has continued to drive sales and profit growth in the first half of the year and the impact of the continuing growth can be seen in the results for the period ending 30 September 2019.
Sales and margin
Group sales were £23.75m for the six months ended 30 September 2019 (2018: £22.34m) an increase of 6.3%. Driven in the main by the private label division due to the current demands and agendas by key retailers, UK and global, to have differentiation in their product offers. Sales through e-commerce doubled in the period, albeit from a low base.
Our gross margin was 42.0% in the six months to 30 September 2019 (2018: 38.3%). The improvement came from our review of all low margin business and putting action in place to improve contribution, which included targeted price increases, product re-engineering and a focus on sourcing alternate suppliers. This is in addition to an improved sales mix within our contract and branded division. In the branded division we have focused on higher margin equity brand sales which have substituted a low margin sales at the value end of the market, particularly with single price retailers. There will be a continued focus on cost reduction through all areas of the business from sourcing, to manufacturing and investment in plant and machinery.
Overheads
Distribution costs have increased by 13.3% to £1.17m (2018: £1.04m) and now represent 4.9% of sales (2018: 4.6%). Partly driven by organic growth but also due to the decision to outsource the warehousing and distribution of the majority of our finished goods to a third party logistics provider. We are continuing to review the warehousing operation to make targeted reductions in cost in this area.
Administration costs have increased by 13.9% to £6.97m (2018: £6.12m) with increased staff costs accounting for 49% of this increase, partly driven by a decision to reward staff with stepped pay rises accumulating to 7.5% compared to the previous 6 months. We are continuing to strengthen the management structure to position the Group for future growth.
We will continue to manage our overhead cost base to ensure they are aligned with the anticipated growth of the Group, recruiting and retaining the skills necessary to meet opportunities as they arise.
Acquisition and disposal
On 21 June 2019, the company acquired the skincare brand equity interest, goodwill and intellectual property, of Balance Active Formula for £500,000 as well as their existing stocks. The acquisition adds to the Group's growing range of beauty and well-being products contributing £304,000 to sales for this period. On 13 August 2019 the Group sold its 55% interest in the equity of Amie Skincare Ltd with negligible impact on sales and profit.
Profit before tax
Profit before tax was £1.77m (2018: £1.38m), which represents an increase of 28.0%. The increased sales together with the improvement in gross margin results in an operating profit margin of 7.7% (2018: 6.3%).
Tax
The tax charge provided in the accounts of £0.26m (2018: £0.19m) represents a rate of 14.7% (2018: 13.5%).
Earnings per share
I am pleased to report that the result of the above is an improved diluted earnings per share of 2.06p (2018: 1.80p) an increase of 14.4%.
Dividend Payments
The Board confirms that it will be paying an interim dividend of 0.15 pence per ordinary share (2018: 0.15 pence per ordinary share), reflecting the continued strong performance the Group to 30 September 2019. This will be paid in December 2019. This is in addition to the dividend of 0.40 pence per ordinary share we paid in September 2019 (2018: 0.23 pence per ordinary share), the charge for which is shown in the accounts to 30 September 2019. The total payment in relation to the dividend paid in September was £0.25m (2018: £0.14m).
Working capital
Net cash on hand (cash and cash equivalents less short term borrowings and loans) is £1.75m (2018: net borrowing of £1.96m) after the payment of £0.5m for the acquisition of the Balance Active Formula skincare brand.
IFRS 16 - Operating leases
The Group has adopted IFRS 16 which requires operating leases to be recognised on the balance sheet as an asset and a finance lease obligation. The impact on profit is £27,000 with additional finance costs of £68,000 and depreciation of £69,000 compared to operating rental costs of £110,000. The balance sheet recognition resulted in an increase in property, plant and equipment of £819,000 and obligations under finance lease (short and long term) of £846,000.
Peterborough Property
On 16 October 2019, following shareholder approval at Creightons plc Extraordinary General Meeting, the Group acquired the freehold property at Peterborough having occupied the property as a tenant since March 2003 for £3.80m plus stamp duty and professional costs. The purchase was partly funded by a 15 year term loan of £3.04m secured on the property. The interest rate on the first 10 years of this loan is fixed at 3.04%.
The Board and I believe that this half year's results including investments in resources and capabilities places the Group in an excellent 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 to successfully and profitably deliver such a significant increase in sales. I would also like to thank our customers, shareholders and suppliers for their support and loyalty to the Group.
W O McIlroy
Executive Chairman 20 November 2019
Creightons plc Group
Unaudited interim financial report
for the six months ended 30 September 2019
Responsibility statement
The names and functions of the Directors of the Company are as follows:
William O McIlroy Executive Chairman
Bernard Johnson Executive Managing Director
Mary T Carney Non-executive Director
Nicholas O'Shea Non-executive Director
William Glencross Non-executive Director
Martin Stevens Deputy Managing Director
Pippa Clark Group Sales and Marketing Director
Paul Forster Group Finance and Commercial Director
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 20 November 2019
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
The business is funded using retained earnings and invoice discounting, with a bank facility secured against its assets.
Brexit
As the UK Government continues its negotiations, uncertainty remains as to the extent to which our operations and financial performance will be affected in the longer term. At a Group and business level, we have continued to prepare for changes in legislation, trade agreements and working practices in order to take advantage of any opportunities arising and to mitigate risk. The Group operates globally and may be affected by Brexit developments, which could provide a number of challenges. The Group is continuously monitoring events and putting mitigating actions in place including the registration of a new subsidiary Potter & Moore Ltd based in Ireland to be used as an EU base for recording regulatory information. Trading with our EU customers and suppliers could be more complex. Any actual or perceived barriers to free trade are an obvious area of concern for us. As a result of Brexit, the Group is exposed to potential currency fluctuations. Brexit and trade barriers continue to be an integral part of the Group's ongoing risk management and review process, for which solutions to address the risks are identified and implemented. Although there is still uncertainty surrounding the outcome of Brexit, we do not expect the direct consequences of Brexit to have a material impact on the Group.
Creightons plc
Unaudited interim financial report
for the six months ended 30 September 2019
Consolidated income statement - unaudited
Six months ended
30 September (Unaudited)
Year ended
31 March (Audited)
2019
2018
2019
Note
£000
£000
£000
Revenue
7
23,751
22,338
44,030
Cost of sales
(13,776)
(13,777)
(26,690)
Gross profit
9,975
8,561
17,340
Distribution costs
(1,174)
(1,036)
(2,204)
Administrative expenses
(6,969)
(6,119)
(12,236)
Operating profit
1,832
1,406
2,900
Disposal of investment
11
-
-
Finance costs
6
(77)
(26)
(31)
Profit before tax
1,766
1,380
2,869
Taxation
4
(259)
(186)
22
Profit for the period from continuing operations attributable to the equity shareholders of the parent company
1,507
1,194
2,891
Dividends
Six months ended 30 September (Unaudited)
Year ended
31 March (Audited)
2019
2018
2019
Paid in period (£'000)
253
140
233
Paid in period (pence per share)
0.40p
0.23p
0.38p
Proposed (£'000)
95
94
253
Proposed (pence per share)
0.15p
0.15p
0.40p
Creightons plc
Unaudited interim financial report
for the six months ended 30 September 2019
Earnings per share
Six months ended 30 September (Unaudited)
Year ended 31 March (Audited)
Note
2019
2018
2019
Basic
3
2.40p
1.97p
4.69p
Diluted
3
2.06p
1.80p
4.16p
Consolidated statement of comprehensive income - Unaudited
Six months ended 30 September (Unaudited)
Year ended 31 March (Audited)
2019
2018
2019
£000
£000
£000
Profit for the year
1,507
1,194
2,891
Items that may be subsequently reclassified to profit and loss:
Exchange differences on translating of foreign operations
(5)
2
-
Other comprehensive income for the year
(5)
2
-
Total comprehensive income for the period attributable to the equity holders of the company
1,502
1,196
2,891
Creightons plc
Unaudited interim financial report
30 September 2019
Consolidated balance sheet - unaudited
30 September
31 March
2019
(Unaudited)
2018 (Unaudited)
2019 (Audited)
£000
£000
£000
Non-current assets
Goodwill
837
331
331
Other intangible assets
435
365
418
Property, plant and equipment
3,211
2,058
2,363
4,483
2,754
3,112
Current assets
Inventories
7,373
7,332
8,015
Trade and other receivables
8,660
9,603
8,280
Cash and cash equivalents
2,405
716
349
18,438
17,651
16,644
Total assets
22,921
20,405
19,756
Current liabilities
Trade and other payables
7,152
6,951
6,339
Obligations under finance leases
179
-
40
Short term borrowings
660
2,679
732
7,991
9,630
7,111
Net current assets
10,447
8,021
9,533
Non-current liabilities
Deferred tax liability
27
6
25
Obligations under finance leases
1,068
-
154
1,095
6
179
Total liabilities
9,086
9,636
7,290
Net assets
13,835
10,769
12,466
Equity
Share capital
631
617
625
Share premium account
1,350
1,298
1,329
Other reserves
25
25
25
Translation reserve
(5)
2
-
Retained earnings
11,834
8,827
10,487
Total equity attributable to the equity shareholders of the parent company
13,835
10,769
12,466
Creightons plc
Unaudited interim financial report
for the six months ended 30 September 2019
Statement of changes in shareholders' equity - unaudited
Share capital
Share premium account
Other reserves
Translation reserve
Retained earnings
Total
£000
£000
£000
£000
£000
£000
Balance at 1 April 2018
607
1,262
25
-
7,711
9,605
Profit for six months ended 30 September 2018
-
-
-
-
1,194
1,194
Share based payments
-
-
-
-
26
26
Exchange differences on translation of foreign operations
-
-
-
2
-
2
Exercise of options
10
36
-
-
-
46
Deferred tax through Equity
-
-
-
-
36
36
Payment of dividend
-
-
-
-
(140)
(140)
Balance at 30 September 2018
617
1,298
25
2
8,827
10,769
Profit for six months ended 31 March 2019
-
-
-
-
1,697
1,697
Share based payments
-
-
-
-
43
43
Exchange differences on translation of foreign operations
-
-
-
(2)
-
(2)
Exercise of options
8
31
-
-
-
39
Deferred tax through Equity
-
-
-
-
13
13
Payment of dividend
-
-
-
-
(93)
(93)
Balance at 31 March 2019
625
1,329
25
-
10,487
12,466
Profit for six months ended 30 September 2019
-
-
-
-
1,507
1,507
Share based payments
-
-
-
-
67
67
Exchange differences on translation of foreign operations
-
-
-
(5)
-
(5)
Exercise of options
6
21
-
-
-
27
Deferred tax through Equity
-
-
-
-
26
26
Payment of dividend
-
-
-
-
(253)
(253)
Balance at 30 September 2019
631
1,350
25
(5)
11,834
13,835
Creightons plc
Unaudited interim financial report
for the six months ended 30 September 2019
Consolidated cash flow statement - unaudited
Note
Six months ended 30 September (Unaudited)
Year ended
31 March (Audited)
2019
2018
2019
£000
£000
£000
Net cash inflow/(outflow) operating activities
5
3,258
(1,350)
958
Cash flow from investing activities
Purchase of property, plant and equipment
(320)
(452)
(1,026)
Expenditure on intangible assets
(250)
(286)
(583)
Purchase of goodwill on Balance Active Formula skincare brand
(506)
-
-
Disposal of investment
11
-
-
Net cash used in investing activities
(1,065)
(738)
(1,609)
Cash flow from financing activities
Proceeds from new finance leases
232
-
198
Repayment of finance lease obligations
(66)
-
(5)
Proceeds on issue of shares
27
46
85
(Decease)/increase in invoice financing facilities
(398)
2,095
398
Increase/(decrease) of borrowings
326
(163)
(413)
Payment of dividend
(253)
(140)
(233)
Net cash (used in)/generated from financing activities
(132)
1,838
30
Net increase/(decrease) in cash and cash equivalents
2,061
(250)
(621)
Cash and cash equivalents at start of period
349
968
968
Effect of foreign exchange rate changes
(5)
(2)
2
Cash and cash equivalents at end of period
2,405
716
349
Creightons plc
Unaudited interim financial report
for the six months ended 30 September 2019
Notes to the unaudited interim financial report
1. Basis of preparation
The interim financial statements for the six months ended 30 September 2018 and 30 September 2019 and for the twelve months ended 31 March 2019 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 2019 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 2019 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 2019 statements were approved by the Board of Directors on 20 November 2019. 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 2019, 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 2019 and the comparative figures for the six months ended 30 September 2018 are unaudited. The figures for the year ended 31 March 2019 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. Changes in significant accounting policies
With exception of IFRS16 for leases (IFRS 16) as described below, the accounting policies applied in these interim financial statements are the same as those applied to the Group's audited consolidated financial statements for the year ended 31 March 2019. IFRS 16 will be applied to the Group's audited financial statements for March 2020.
IFRS 16
The Group has adopted the modified retrospective approach to IFRS 16 from 1 April 2019 and therefore has not restated comparatives for previous reporting periods as permitted under the specific transitional provisions in the standard.
IFRS 16 replaces IAS 17 in providing a one lease accounting model requiring the recognition of assets and liabilities for all leases with the option to exclude leases where the underlying asset is of low value or the lease term is 12 months or less. The Group has elected to use this option. IFRS 16 substantially carries forward the lessor accounting in IAS 17 with the operating and finance lease distinction still applying. During this period the Group had no lessor activities. However following the acquisition of the Peterborough property the Company will lease the property to one of its subsidiaries and two other small tenants.
The Group elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under IAS 17 and IFRIC4 were not reassessed. The definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 April 2019. Also the Group applied other practical expedients of:
● using a single discount rate to a portfolio of leases with reasonably similar characteristics;
● excluding initial direct costs for the measurement of right of use assets at the date of initial application;
● reliance on previous assessments on whether the leases are onerous and
● accounting for operating leases with a remaining lease term of less than 12 months as at 1 April 2019 as short-term leases.
With the adoption of IFRS 16 the Group has recognised right of use assets and lease liability in relation to the property leased in Devon and the Group's forklift trucks previously identified as operating leases. As the Peterborough property lease ceased in October 2019 it has been accounted as an operating lease.
The leases now recognised under IFRS 16 were measured at present value of the remaining lease payments, discounted using the Group's incremental borrowing rate as at 1 April 2019. This is the rate at which a similar borrowing could be obtained from an independent financial provider. The weighted average rate applied was 3.04%.
Until March 2019 the Devon properties and forklift trucks that were classified as operating leases all the payments under the leases were charged to the profit or loss on a straight-line basis over the term of the lease.
From 1 April 2019 the value of the right of use assets included within property, plant and equipment on the Balance Sheet and the lease liability included within obligations under finance liabilities (short and long term) both increased by £888,000. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss for the period of the lease to produce a constant periodic rate of interest on the remaining liability. The right of use asset is depreciated over the shorter of the asset's useful economic life and the lease period on a straight line basis and the cost is included within administrative expenses.
At 30 September 2019 the values in relation to right of use assets included in property, plant and equipment were £819,000. The obligations under finance leases in relation to the right of use assets were recognised as £97,000 of current liabilities and £749,000 recognised in obligations under finance leases within non-current liabilities.
The impact on the income statement is £27,000 with additional finance costs of £68,000 and depreciation of £69,000 compared to operating rental costs of £110,000.
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 (Unaudited)
Year ended
31 March (Audited)
2019
2018
2019
£000
£000
£000
Earnings
Net profit attributable to the equity holders of the parent company
1,507
1,194
2,891
Six months ended
30 September (Unaudited)
Year ended
31 March (Audited)
2019
2018
2019
Number
Number
Number
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share
62,808,438
60,645,066
61,587,535
Effect of dilutive potential ordinary shares relating to share options
10,308,825
5,834,849
7,888,968
Weighted average number of ordinary shares for the purposes of diluted earnings per share
73,117,263
66,479,915
69,476,503
3. Taxation
Six months ended
30 September (Unaudited)
Year ended
31 March (Audited)
2019
2018
2019
£000
£000
£000
Current tax
(231)
(178)
62
Deferred tax
(28)
(8)
(40)
Total
(259)
(186)
22
4. Notes to cash flow statement
Six months ended
30 September (Unaudited)
Year ended 31 March (Audited)
2019
2018
2019
£000
£000
£000
Profit from operations
1,832
1,406
2,900
Adjustments for:
Depreciation on property, plant and equipment
353
226
489
Amortisation of intangible assets
238
269
514
Loss on disposal of property, plant and equipment
2
-
6
Share based payment charge
67
26
69
2,492
1,927
3,978
Decrease/(increase) in inventories
642
(1,832)
(2,516)
Increase in trade and other receivables
(550)
(1,936)
(442)
Increase in trade and other payables
474
770
297
Cash generated/(utilised) in operations
3,058
(1,071)
1,317
Interest paid
(78)
(26)
(31)
Taxation refund/(paid)
278
(253)
(328)
Net cash inflow/(outflow) from operating activities
3,258
(1,350)
958
Analysis of changes in net debt
At 1 April 2019
Cash flow
Non-cash movements
At 30 September 2019
£000
£000
£000
£000
Cash and bank balances
349
2,061
(5)
2,405
Borrowings
(732)
72
-
(660)
Net debt
(383)
2,133
(5)
1,745
At 1 April 2018
Cash flow
Non-cash movements
At 30 September 2018
£000
£000
£000
£000
Cash and bank balances
968
(250)
(2)
716
Borrowings
(747)
(1,932)
-
(2,679)
Net debt
221
(2,182)
(2)
(1,963)
At 1 April 2018
Cash flow
Non-cash movements
At 31 March 2019
£000
£000
£000
£000
Cash and bank balances
968
(621)
2
349
Borrowings
(747)
15
-
(732)
Net debt
221
(606)
2
(383)
5. Finance costs
Six months ended
30 September (Unaudited)
Year ended
31 March (Audited)
2019
2018
2019
£000
£000
£000
Interest on bank overdrafts and loans
5
26
30
Interest on obligations under finance leases
4
-
1
Interest on right of use assets
68
-
-
Total
77
26
31
6. Revenue
The disaggregation of the Group's revenue.
Six months ended
30 September (Unaudited)
Year ended
31 March
(Audited)
2019
2018
2019
£000
£000
£000
Sales of goods
24,078
22,384
44,601
Settlement discounts
(39)
(46)
(85)
Contracted retailer commitments
(127)
-
(181)
Royalties & commissions
(22)
-
(81)
Retailer promotional support
(139)
-
(224)
Revenue
23,751
22,338
44,030
7. Related party transactions
The related party transactions that occurred in the six months ended 30 September 2019 are not materially different in size or nature to those reported in the Company's Annual Report for the year ended 31 March 2019. On 16 October 2019 Oratorio Developments Limited, a company of which Mr W Mcllroy who is a Director and controlling shareholder, sold the freehold property at Peterborough to the Group for £3,800,000.
8. 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.
Interim Dividend Declaration
Creightons plc wishes to confirm that the Company has declared and will pay an interim dividend of 0.15p per ordinary share as per the timetable below:
Ex-dividend date Thursday 28 November 2019
Record date Friday 29 November 2019
Payment date Wednesday 18 December 2019
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014
For more information:
Nicholas O'Shea, Director, Creightons plc 01733 281000
Roland Cornish, Beaumont Cornish Limited 0207 628 3396
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDIR EAPFNFFANFFF
Recent news on Creightons
See all newsREG - Creightons PLC - Director/PDMR Shareholding
AnnouncementREG - Creightons PLC - Director/PDMR Shareholding
AnnouncementREG - Creightons PLC - Promotion of CFO to the Board of Directors
AnnouncementREG - Creightons PLC - Notification of transactions by PDMR
AnnouncementREG - Creightons PLC - Notification of transactions by PDMR
Announcement