REG - Creightons PLC - Preliminary Results, Notice of AGM
18/07/2024 07:00
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RNS Number : 8431W Creightons PLC 18 July 2024
18 July 2024
Creightons Plc
Audited Preliminary results
Annual General Meeting
Creightons Plc (the "Group" or "Creightons") brand owners and manufacturers of
personal care, beauty, and fragrance products, is pleased to announce its
preliminary results for the year ended 31 March 2024.
The Company's annual report and financial statements for the year ended 31
March 2024 will be made available from the Company's website at:
https://www.creightonsplc.com (https://www.creightonsplc.com)
In addition, the document will be uploaded to the National Storage Mechanism
and will be available for viewing at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://linkprotect.cudasvc.com/url?a=https%3a%2f%2fdata.fca.org.uk%2f%23%2fnsm%2fnationalstoragemechanism&c=E,1,woUdg3DF9ohL3Kfk-PqkqwXc_ntYFf6fwo9IjhUsxZrwQBDrn2FGiVoGLiB8UGBYNh6vWfmNBySxuOKuQ31G16P4DtD1WLkIw6aUHGRcjDY,&typo=1)
The Company's Annual General Meeting will take place at the offices of Potter
& Moore Innovations Ltd, 1210 Lincoln Road, Peterborough, PE4 6ND on 28
August 2024 at 12:00 noon.
We are pleased to announce an in-person presentation for analysts and
investors scheduled for Wednesday 24(th) July at 11:00 AM. If you wish to
attend, please email us at creightons@piworld.co.uk
(mailto:creightons@piworld.co.uk) for further instructions and details.
We look forward to your participation.
Financial highlights
· Improved gross margin performance on lower revenue of £53.2m
(2023: £58.6m) a reduction of 9.2%, as a result of cost reduction and product
portfolio rationalisation.
· Gross profit margin increased by 1.3% to 42.9% from 41.6%.
· Full year operating profit margin (before exceptional items) of
2.9% (2023: 2.7%).
· EBITDA for the year was £3.2m (2023: £3.0m).
· Exceptional items included Emma Hardie brand intangible asset
impairment of £4.4m (2023:£Nil).
· Adjusted diluted earnings per share excluding exceptional items,
was positive 1.42p (2023:1.05p).
· Stock held on hand reduced by £2.0m to £8.2m (2023: £10.2m).
· Net cash on hand (cash and cash equivalents less short-term
element of obligations under finance leases and borrowings) is positive £2.2m
(2023: negative £1.2m).
· The Directors propose a final dividend of 0.45 pence per ordinary
share for the year ended 31 March 2024 (2023: Nil).
Operational highlights
· Private label saw growth in revenue whilst Branded and Contracts
sales saw a downturn in revenue activity:
o Sales of retailer own label products increased by 7.9% to £23.7m.
o Overall branded sales have decreased by 7.6% to £21.0m.
o Contract manufacturing sales decreased by 38.9% to £8.4m.
o The Group's total overseas business decreased by 20.1% to £8.5m (2023:
£10.6m).
· The Group has continued to successfully implement the six-point
plan. The remedial measures were intended to restore profitability, reduce
costs and inventory and to return to positive cash flow. The resulting actions
and their impact are summarised in the following six areas:
o Increase in selling prices to our customers
§ Sales teams continued the process of Cost Price Increase (C.P.I)
monitoring across all categories of supply. This was used as the basis to
negotiate sales price increases with customers. This has proved successful as
indicated by the improvement in gross margin.
o Reduction in overheads
§ Cost rationalisation has seen Administrative costs decrease by 5.6% to
£17.8m (2023: £18.9m).
o Increase efficiency and capacity in each factory so as to maximise the
benefit of single shift working
§ Manufacturing team reducing to one shift at both Peterborough (September
2022) and Devon (September 2023).
o Relocating the customer facing side of the business, warehousing, picking
and packing and logistics back to the Peterborough site
§ Restructuring warehousing and logistics has seen Distribution costs
decrease by 10.6% to £3.5m (2023: £3.9m).
o Reduction in stock levels, targeting £2m reduction against prior year
§ We have achieved stock reductions of £2.0m to the end of March 2024,
achieving a closing stock balance of £8.2m (2023: £10.2m) without any
reduction in effective service levels to customers.
o New and non-critical capital expenditure cancelled unless payback less
than 9 months
§ Purchase of property, plant and equipment has reduced to £0.3m (2023:
£0.8m).
The combined effect of these measures, carried out over the course of the year
and in particular the second half of the year, has been to improve
profitability and generate positive cashflow.
Enquiries - Analysts and Investors:
Philippa Clark, Director, Creightons Plc info@creightons.com
(mailto:info@creightons.com) 01733 281058
Roland Cornish / Felicity Geidt, Beaumont Cornish Limited
0207 628 3396
Chairman's statement
I take pleasure in presenting my first statement following my appointment as
Chair of the Board on 7 March 2024. The structure of this report will be
different to previous years with a top-level overview of the Group's
performance in the past year, changes to the board and senior management team
and an overview of the direction of the business over the next few years.
Our new Managing Director, Philippa Clark will provide a more detailed review
of the performance including a review of revenue and brand performance. This
will be followed by a report on the Group's financial results.
Overview of performance
In common with many UK manufacturing businesses, we have been operating during
a period of significant inflationary pressures, challenging supply chains and
weakening consumer demand. The objective remains to meet our customer
expectations and to deliver top line revenue growth whilst also relentlessly
focusing on the areas within our control to recover margins following the
erosion over the past two years and, matching our overhead costs to revenue
and reducing stock levels.
Whilst results show revenue falling to £53.2m (2023: £58.6m), EBITDA has
increased to £3.2m (2023: £3.0m) and operating profit before exceptional
items has decreased marginally to £1.54m (2023: £1.58m). The operating
margin percentage before exceptional items has improved to 2.9% in the year
ended 31 March 2024 compared to 2.7% for the year ended 31 March 2023. A
significant feature of this has been a gradual improvement throughout the year
with margins significantly improved in the second half of the year. This is
covered in more detail by Philippa Clark in her report as Managing Director.
Revenue performance across the three revenue streams has been mixed with:
· growth of £1.7m in the Private label revenue,
· decreased revenue through Brands of £1.7m, with some brands
unperforming and lower revenue from reducing the tail of underperforming
products and
· decreased revenue from contract manufacturing. Most of this
reduction arose from our decision to curtail sales to businesses where
credit insurance cover was removed, and the group considered it advisable to
manage credit risks. Also, two key customers reduced orders due to declining
consumer demand and overstocks.
Gross margins have continued to improve throughout the year and by the end of
March were ahead of those achieved before they were adversely impacted by the
inflationary pressures of the past two years. These improved margins have been
achieved through a combination of increased selling prices, removing low
margin products from sales mix, product cost engineering and improvements in
production efficiencies. We are now seeing an easing of supplier price
pressure in most areas although not all.
Overheads have been reduced to ensure they match the underlying activity
levels of the Group. Manufacturing operations are now on a single shift basis
across both sites. There have also been benefits arising from lower utility
costs as wholesale prices have fallen. Warehousing costs have reduced due to
the stock reduction programme and relocating most finished goods distribution
back in-house. The impact of these changes has been to reduce the breakeven
sales level on a month-by-month basis which will enable the business to
leverage pre-tax profit growth from existing revenue and future growth.
Improved output levels in manufacturing operations are helping to increase
capacity.
One area of underperformance relates to the Emma Hardie business which was
acquired on 28 July 2021 for a total consideration of £6.2m. The annual
review of the value-in-use of the Emma Hardie brand, which considers the
ability to generate growth in revenue and a review of the likely cash
generation from future revenue, in accordance with the requirements of IAS 36,
resulted in an exceptional impairment charge of £4.45m. This non-cash
exceptional charge, in the current year, has materially adversely impacted the
reported pre-tax profit. The remaining associated intangible brand value of
£0.66m reflects an accounting assessment of discounted future cash flows from
the Emma Hardie brand, based upon current performance and an estimate of
future sales and costs.
This impairment will also result in a derecognition of the goodwill value of
£1.28m, relating to the deferred tax associated with the Emma Hardie brand,
with consequential adjustments to the deferred tax accrual. The net effect of
these is a tax charge of £0.17m.
The underlying profit generation together with the significant reduction in
stock levels has resulted in a dramatic improvement in the cash position with
net borrowings falling by £4.8m to £0.8m (2023: £5.6m). The Group chose to
repay 50% of the outstanding loan balance of the term loan used to partly fund
the acquisitions in 2021.
Building a team for the future
Following Bernard Johnson's departure in November 2023, the Board asked the
two Executive Directors, Philippa Clark and Martin Stevens to manage the
routine operations of the business for an interim period and complete ongoing
internal improvement programmes. In addition, they reviewed the Emma Hardie
business and integrated it within the Group's operations, significantly
reducing the overheads attributable to the brand and further reducing staffing
levels to align with planned activity. This allowed the Board time to evaluate
the various options for the organisation of the Board and the Senior
Management Team. On completion of this review the Board announced the
following changes on 7 March 2024.
· Philippa Clark was appointed as Group Managing Director. She will
continue to be supported by Martin Stevens in his Executive Director role as
Group Deputy Managing Director.
· William McIlroy retired from his Executive roles as Chairman and
CEO and will remain on the Board as a Non-Executive Director.
· Paul Forster was appointed Non-Executive Chair of the Board.
· Brian Geary has joined the board as a Non-Executive Director.
I would like to take this opportunity to thank Bernard Johnson for his
contribution to the business, which would not be where it is today without his
vision and drive. I would also like to thank William McIlroy for his
contribution and support over his tenure in his Executive roles and look
forward to his support and guidance as I settle into my new role.
I believe the new Board provides a good balance of experience to support the
management team as they evolve the strategy to grow the business to meet the
needs of stakeholders.
I am pleased to report that Philippa Clark has settled into her role and is
being actively supported by Martins Stevens and the other senior Executives.
The Executive team, under the leadership of our new Managing Director is
actively engaged in developing plans to grow sales, protect and improve
margins and leverage our infrastructure to grow pre-tax profits and margins.
The Board recognises the importance of maintaining stability and focus as we
come out of this transitional period, and our collective efforts are geared
towards sustaining and advancing the positive trajectory of our organisation.
Looking forward
The Group's focus will be to pursue new growth opportunities, growing revenues
organically by using our in-depth market knowledge, product development
expertise and brand marketing skills to:
· identify new products ranges for our brands and customers.
· extending the distribution of our brands, both within the UK and
internationally.
· increase penetration into the private label sector, where we have
range launches with two new customers in the coming year.
· targeting contract business where customers' requirements align
with our core strengths and flexible manufacturing capabilities.
The Group will continue to invest in the research and development of new
brands to address changing market opportunities.
The work of the past year in improving margins, aligning cost to match
activity and throughput levels, along with the significant spare capacity
available by introducing additional shifts, if required, places the Group in a
strong position to generate profits from additional revenue. The Group is
generating positive EBITDA and cash flows from its core operations which
underlines the ability to generate profitable growth. There are still
opportunities to grow revenue and the sales team is being strengthened to
deliver those opportunities with a Director of Global Sales (non-statutory
Director) joining the group in May 2024.
The Group is committed to recovering our underlying operating profits (before
exceptional items) levels, currently standing at 4.0% of revenue in the second
half of the year to March 2024, to levels enjoyed in the past.
The Group's dynamic structure continues to give it a competitive advantage
allowing it to respond quickly and effectively to customer requirements. It
also provides a competitive advantage with post-acquisition integration by
providing synergies not available to all market participants. The Group will
continue to look for acquisitions for brands that can generate long term
growth in revenue, profits and cash generation. However, it will be much more
focused on ensuring a good return can be delivered on its investments.
Dividend
The Board proposes a final dividend of 0.45 pence per ordinary share, subject
to approval at the Annual General Meeting (2023: Nil). This is in line with
the Directors' intention to reinstate paying dividends and to align future
payments with the underlying profits and positive cash flow of the business.
Conclusion
I would like to take this opportunity to thank every one of the Group's
employees who have continued to work together to enable us to deliver an
improving trading performance. I would also like to thank our customers,
shareholders and suppliers for their support and loyalty to the Group.
Paul Forster
Non-Executive Chair of the Board
16 July 2024
Managing Director's statement
A Challenging Year
This year's results represent a strong internally focussed strategy to ensure
we tackled and conquered the challenges bought on by the tough economic
conditions of the past two years, coupled with the ongoing macroeconomic and
geopolitical pressures. Therefore, we have ensured that the key business
fundamentals have been at the core of our activities during the year to ensure
the Group continues to deliver a sustainable and stable business.
The difference in operating performance between H1 and H2 of the year ended 31
March 2024 demonstrate the impact of this focus. Despite the sales downturn in
H2 against H1, gross profit margins were up by 1.5% (H1 2024: 42.2%), with
full year margin of 42.9% being up 1.3% (2023: 41.6%). Key cost reductions in
administration and distribution also provided significant gains in operating
performance overall.
H1 (Unaudited) H2 (Unaudited) Year ended 31 March 2024
£000 £000 £000
Revenue 27,555 25,639 53,194
Gross profit 11,632 11,198 22,830
Gross profit % 42.2% 43.7% 42.9%
Operating profit before exceptional items 506 1,032 1,538
Operating profit before exceptional items % 1.8% 4.0% 2.9%
Exceptional items - (4,466) (4,466)
Finance Costs (204) (145) (349)
EBITDA before exceptional items 1,358 1,881 3,239
Profit / (Loss) before tax 302 (3,579) (3,277)
Profit / (Loss) after tax 285 (3,812) (3,527)
Key achievements have been made in margin improvement, overhead and stock
reduction, restructuring supply chain and positive cash generation. However,
the drive to ensure a strong core business has come at the expense of sales
growth in the contract manufacturing division and a softening of growth in our
brands where a refocussing of the product portfolio has been a priority to
ensure margins are protected and enhanced where possible.
The strategy of pursuing a multi-channel approach to the market and a broad
multi-category product offering continues to serve us well during times when
consumer demand is impacted by a cost of living crisis.
Revenue stream performance
Private Label
Private label sales have increased sales by 7.9% to £23.7m (2023: £22.0m) as
consumers continue to seek performance products at value prices. Creightons
continues to be the leading supplier in the UK for private label supply
achieved through exceptional product development, quality manufacturing and
both consistency and speed of supply. This is evidenced by the fact that the
Group has achieved the number one position as a key supplier with a major UK
retailer. This is in addition to a good solid performance across the customer
base resulting in sales growth.
This position is achieved via the Groups' ability to develop products that
deliver relevant, consumer focussed, performance all whilst successfully
managing customer forecasts, stock and service levels into a demanding mass
retailer customer base.
Margin performance in this area has also delivered through successfully
implementing cost price increases to customers but also taking the decision to
exit products or ranges which no longer meet our contribution margin
requirements.
Category expertise and Research and Development are both key measures of
success in this division and these both continue to be a priority for
investment.
Contract Manufacturing
Conversely, the contract sales have experienced a downturn during the period
of 38.9% to £8.4m (2023: £13.8m). In the main this is due to masstige and
premium brands either reducing order books due to declining consumer demand
and overstocking, or are no longer covered by credit insurance and we have
chosen to exit as this is a key requirement in managing our business risk.
Brands
Overall Brands have seen a reduction of 7.6% to £21.0m (2023: £22.8m). This
decline is due to two key exceptional factors in the year.
1. A £1.8m loss in one international market with Balance Active where a
distributor lost significant distribution by diversifying their business too
quickly at the expense of the Balance Active brand.
2. The internal decision to discontinue 45% of the brand portfolio product
offering from 334 products to 184 products. This accounted for a reduction of
£1.1m sales of products that had either poor margin, low sales volumes or a
combination of both. This repositioning and focus of the brand offer have had
positive impacts on stocks, margin and sales team focus.
Brands have performed where the price point and offer continues to engage the
consumer, resulting in gains in both store distribution numbers and new
customer listings in a very challenging UK market specifically for Balance
Active Formula, TZone, Feather & Down, The Curl Company and the Creightons
range of branded products.
· TZone achieved a new key grocery launch in the UK into 135 stores
and gained an additional 557 stores in an existing Grocery listing.
· Feather & Down has an additional 341 stores with extra
distribution in the UK.
· Balance Active is already listed in a leading UK grocer but has
an additional 557 stores with the launch of new product development (NPD)
serums from June 2024. A new listing for the brand was also secured in another
major UK retailer in the period into 102 stores.
· The Curl Company extended into an additional 100 stores in
Scandinavia and launched for the first time into 182 stores in the UAE.
· Creightons Frizz No More launched into a major retailer in Spain
as the Group enters the Spanish market for the first time.
Margins are performing well through negotiated customer price increases and
product cost engineering initiatives. This is despite a strong discontinuation
programme initiated across all brands, exiting products where margins and
volume combinations were no longer meeting expectations.
Emma Hardie
The gross sales contribution of the brand has been flat this year at £3.2m.
The autonomous, independent approach in managing the brand for the past two
years has been a factor. In addition, entering the Chinese market has been the
dominant strategy and whilst it showed initial signs of positive sales at the
end of 2022 and the early part of 2023, this quickly reversed during 2023. The
landscape changed significantly during the year in China proving the chosen
sales model to be ineffective and unprofitable. A decision to put activities
in China on hold was made in December 2023.
The Emma Hardie brand and its team are now fully incorporated into the wider
business. This ensures full control of costs, sales strategy and team
management. A revised sales strategy is being executed into 2024 including:
· a full review and potential new approach in China
· refocused efforts on digital platforms including The Hut Group,
Sephora and Amazon
· investment in EmmaHardie.com
· positioning the brand into the travel sector.
Recent launches on EasyJet inflight in May 2024 and a 6 month trial launch
into Luton Airport Duty Free in the summer of 2024 are both being progressed.
The brand continues to perform well in its original retail home at Marks &
Spencer (M&S) in the UK, with an increase in end consumer sales of 19% in
2023/2024 against the previous year. This demonstrates continued consumer
demand for the brand. Plans are in place during 2024/2025 with M&S for
additional investment in the brand including dual siting in key performing
stores, pop-up opportunities, in-store events and improved positioning in the
beauty hall. All with the objective of giving more exposure to the brand and
engaging more consumers.
Digital and Social
This year has seen an increase in our efforts with both digital and social
platforms.
Feather & Down and Emma Hardie total brand sales both have considerable
contributions from digital sales at 48% and 52% respectively of their total
brand sales. This includes Amazon Vendor UK and the pure beauty platform
players.
· A key distribution channel for brands which have higher price
points and more limited bricks and mortar distribution.
· Two higher price point brands, Emma Hardie and Janina, have
recently been transferred to Amazon Seller UK with initial positive results on
both sales and margin - improving from the original listings on Amazon Vendor.
· Feather & Down and Emma Hardie launches onto Amazon Germany
and Amazon USA which have taken longer than originally planned due to
unanticipated protracted set up issues with Amazon. It is anticipated that the
growth in these new markets will be slow and steady initially as brand
awareness campaigns in these new markets also need to be activated.
· Social activities are live and growing across all key platforms
such as Instagram, Facebook and TikTok with a focus on Balance Active,
TZone, Feather & Down and Emma Hardie.
· TikTok shop strategies are being implemented for select brands
during 2024.
Research and Development
As we continue to develop the business, the nature of the research and
development (R&D) has become more sophisticated, including additional time
and investment in trend monitoring, consumer research, consumer testing,
independent validation and claims substantiation.
These activities have continued throughout the year ended 31 March 2024 to
expand our portfolio of product offering and capabilities, with key areas of
focus being the development of unique and technically challenging formulations
across Facial and Body Skincare. This requires a constant monitoring of key
trend materials to ensure that we are meeting the consumers evolving needs and
delivering new product development quickly and efficaciously.
Looking forward, the team continue to invest time and resource into exploring
new categories and technologies. As highlighted last year, the importance of
SPF in the skincare and suncare categories is a key growth area of the sector.
We are continuing to invest in delivering futureproofed SPF formulations,
delivering high UV protection in formats that offer improved performance and
product aesthetics. Textures have also become key in this category requiring
additional R&D development. This work and investment will be an ongoing
and continuing piece of investment over the coming years.
A continuing and critical role of our R&D team is responding to the
challenges of increasing raw material costs and availability. Therefore, cost
mitigation through resourcing and finding alternative materials in conjunction
with our procurement team, is a necessary activity that requires significant
lab time to validate alternatives to help avoid excessive cost increases and
maintain margins.
One of the drivers of growth in the Private Label division is extending into
new categories. As highlighted, this would include SPF skincare and the Sun
Protection category. Other categories including non-licenced Healthcare and
Sexual Health products and new developments in skincare including products
supporting the skin's microbiome, probiotics and fermented ingredients.
Continual developments in new formats and textures are also a key development
area. This work also benefits new product development (NPD) and development of
our brands.
Manufacturing and Operations
Operationally one of the key goals has been to reduce warehousing costs. By
reducing stock and improving the management of space this goal has been
achieved. The benefit being the considerable reduction on relying on a 3PL
solution. Maximising procurement savings and reducing overheads have been
equally important. The team continue to reduce buying costs of both packaging
and key materials and we have succeeded in reducing our cost base to be in
line with our revenue footprint.
The key drivers in the period in manufacturing have been centred around
improving efficiencies to realise maximum benefit from reducing to one-shift
last year. Targeted machinery investments, improved training programmes of key
production staff and working towards improving change-over times are all
contributing positively to achieving improved outputs and efficiencies.
There is more work to be done in all areas as we move into the coming year and
the team remain determined in ensuring gains continue to be made.
The Future and Our Strategy
A continual review of the market, our customers strategies, category and
product opportunities coupled with our experience and knowledge is undertaken
throughout the year in order to ensure that our key strategic objectives are
relevant and achievable. These are reviewed and monitored with the main board
and senior team to ensure consistency in approach. The goal is to deliver a
consistent, stable business that delivers increasing value for all
stakeholders.
Develop and Cultivate the Core Private Label Business
· Retain the dominant position in UK supply.
· Focus on margin positive products.
· Work with the best in class retailers.
· Ensure Research and Development (R&D) category development
drives new sales opportunities.
Build and Develop the Groups' Brands
· Expand UK distribution footprint - there are additional
distribution gains to be had.
· Invest in additional resource to grow and expand international
markets.
· Ensure Brands fill the 'white space' where possible and the
propositions are clear.
· Ensure Brands have clear customer need states.
Expand with New Brands - Developed or acquired
· Where the fit is right and adds value to the Group's total Brand
portfolio.
· Where the opportunity and positioning fill the 'white space' or
unfulfilled consumer need.
· Where the sales and margin enhancement deliver additional
business value.
Build on Digital Platform Brand Sales
· Ongoing development of Amazon Vendor and Amazon Seller including
developing selected international markets.
· Investment into our own .com sites where the brand positioning
will succeed.
· Grow relationships with key pure beauty players where the brand
fit makes sense.
Investment in Research and Development (R&D) and Product Category
Expertise
· Essential for growing the Private Label business by entering new
product types and related categories.
· Speed to Market focus.
· Meeting and anticipating consumer needs - for both Brand and
Private Label divisions.
· Remain at the cutting edge of trend, ingredients, product
textures and formats.
· Evaluation of materials with low carbon footprint for more
sustainable products.
Focus on Operational Efficiencies & Cost Control
· Output and capacity focussed capital investment.
· Structured training programmes throughout the operational
functions.
· Continual review of ensuring our cost footprint fits our sales
and profit profiles.
· Review the manufacturing strategy and utilise IT to enhance our
productivity and manufacturing investments.
· Ensure the Group's costs and asset base match demand,
environmental and safety requirements.
Meet Environmental and Sustainable Targets
· The business has committed to SBTi validated emissions reduction
targets. Please see further detail outlined in the TCFD report per page 24 to
32 of the full accounts.
· Scope 1 and 2 emissions will reduce by 42% and Scope 3 emissions
by 25% by 2030.
· For FY23/24 we have seen a decrease in scope 1 and 2 emissions of
7.8%.
· We have just completed the tenth year of holding the RSPO supply
chain accreditation.
· Now sourcing 99.9% of our palm derivatives from RSPO sustainable
sources.
· For FY23/24 the amount of recycled plastic in our packaging has
increased by 5.3% to 203.9 tonnes.
· We will be completing the climate related module for CDP in
FY24/25.
Summary
Despite a challenging year the Group's strong focused strategy on ensuring the
business continues to successfully navigate market pressures and challenges is
beginning to produce positive results. We have been determined in our efforts
in delivering operational profitability, positive cash generation and reducing
the overall cost base to be in line with our revenue performance. The result
for the second half of the year provides evidence that we are on the right
track.
The Board believes that the restructured management team, ongoing positive
customer relationships and strong business fundamentals will enable the Group
to proactively manage new challenges and take advantage of any new
opportunities that may arise.
The Management Team remains focussed on delivering the Group's strategic and
financial aims. Immediate priorities include increasing the awareness and
distribution of our brands, accelerating organic sales in all divisions,
nurturing customer relationships and keeping R&D central to driving the
business forward.
Finally, I would like to thank our valued team of employees, customers,
suppliers and all stakeholders, especially those who have responded so
positively through this challenging period.
Philippa Clark
Managing Director
Financial Report
Overview of Financial performance
The Group has exhibited significant improvements in its operating performance.
Despite a reduction in revenue year on year of 9.2% operating profit margin
before exceptional costs increased to 2.9% (2023: 2.7%). The decrease in sales
activity has been due to a combination of factors, these include, but are not
limited to, a challenging market within the Contract and Branded sales
divisions as well as the Group's own decision to divest from non-profitable
product offerings that do not achieve a commercially viable contribution
margin.
Year ended Year ended
31 March 2024 31 March 2023
£000 £000
Revenue 53,194 58,567
Gross profit 22,830 24,348
Gross profit % 42.9% 41.6%
Operating profit before exceptional items 1,538 1,584
Operating profit margin % before exceptional items 2.9% 2.7%
Exceptional items (4,466) (477)
Finance Costs (349) (420)
(Loss) / Profit before tax (3,277) 687
(Loss) / Profit after tax (3,527) 514
EBITDA 3,239 3,001
Adjusted Diluted EPS - excluding exceptional items 1.42 pence 1.05 pence
Cash and cash equivalents 3,138 1,653
Inventories 8,225 10,228
The on-going challenging macro-economic environment, within which the business
operates, resulted in inflationary pressures across the cost of labour, raw
materials, componentry, and commodity prices. This had the impact of eroding
Gross profit margins. The Group has responded well to managing these external
pressures by adopting processes to monitor Cost Price Increase (C.P.I) across
all categories of supply. This allowed the Group to be pro-active and combat
areas of eroding margins. Actions taken included product re-engineering,
re-formulating, and increasing customer selling prices. The impact of this has
led to the Group improving its Gross profit margin by 1.3% to 42.9% (2023:
41.6%).
As the sales activity and in turn the manufacturing output across the Group
has reduced year on year, the Group has had to implement a strategy of cost
rationalisation to allow it to re-align its overhead base with the current
level of activity. This had the impact of reducing direct and in-direct labour
costs, administrative expenses and warehousing and distributions costs.
Manufacturing efficiencies have also aided with the streamlining of both cost
of sales and overhead costs. As a result of this, the operating profit before
exceptional items decreased marginally £0.1m from the previous year despite a
revenue reduction of £5.4m.
As a direct result of the strong operating performance, the business has been
able to generate £3.2m of EBITDA ( before exceptional items - Impairment) in
the year to March 2024 (2023: £3.0m). This has equated to an increase in cash
generated from operating activities by £0.2m to £6.1m from £5.9m. The Group
has utilised the cash to reduce its debt exposure with net gearing reducing by
18.6% to 3.5% (2023: 22.1%). Net cash on hand has increased by £3.4m to
positive £2.2m (2023: negative £1.2m). Please refer to the section on Key
Performance Indicators on page 17 of the full accounts where they are defined.
Revenue
Overall Group sales were £53.2m for the year ended March 2024 (2023: £58.6m)
a reduction of £5.4m.
The sales generated by each revenue stream are;
2024 2023 Movement
£000's £000's
Branded products 21,020 22,757 Decrease of 7.6%
Private label 23,727 21,997 Increase of 7.9%
Contract manufacturing 8,431 13,795 Decrease of 38.9%
Other 16 18 Decrease of 11.1%
Total 53,194 58,567 Decrease of 9.2%
Please refer to the Managing Director's statement on Revenue movements.
Margin and cost of sales
The Group implemented systems and processes to monitor Cost Price Increase
(C.P.I) across all categories of supply. These included but were not limited
to; plastics, raw materials, energy, wage inflation and transport (global and
domestic) costs. Gross margin was 42.9% for the year ended 31 March 2024
(2023: 41.6%). Gross margin has improved in the second half of the year to
43.7%, compared to the first half 42.2% due to proactive measures taken by
management in the areas of customer price increases, cost mitigation and
product re-engineering and reduced labour costs due to shift rationalisation
and efficiency improvements. Additionally, the business has reviewed its
product portfolio and ensured SKU's not achieving the desired level of
contribution margin were exited.
Distribution costs and Administrative expenses
Distribution costs have decreased by 10.6% to £3.5m (2023: £3.9m) at a
faster rate than the reduction in revenue. This is due to a combination of
factors, primarily as a result of the reduction in manufacturing volumes and
complimented by the decision to exit third-party logistics providers and
bringing picking and packing of finished goods in house. Underlying net costs
associated with outsourcing the warehousing and third-party storage have
decreased by £0.4m year on year. A phased approach was undertaken to ensure
consistency of supply and service levels with the majority of the savings
being realised in the second half of the year. This has had a positive impact
on both costs and the efficiencies of the business going forward.
Administrative expenses have decreased by 5.6% to £17.8m in the year (2023:
£18.9m). The reduction in costs have largely been driven by a combination of
cost rationalisation and reduced business activity. Manufacturing efficiencies
have been enhanced whilst not compromising on customer delivery. The efficient
utilisation of the factory along with the decrease in units sold has meant
that utility costs have reduced by £0.3m to £0.7m (2023: £1.0m). Overhead
savings have been achieved across most cost headings including indirect
payroll. A huge driver of the decrease in overheads was the full year impact
of the decision made to move to a single shift. This has not had an impact on
the output of the factory and thus has not impacted on the ability to meet
customer demand.
Operating profit before exceptional costs
Operating profit before exceptional costs was marginally reduced year on year
to £1.5m (2023: £1.6m). The small reduction is a direct result of the
improvement in the gross profit margin despite the decline in revenue.
Strategic sales price increases that balance competitiveness with
profitability have positively impacted the operating profit margin. Customer
price increases have improved the gross profit margin. Additionally, the Group
has been efficient in the management of its operating costs relative to its
revenue. As a result, a greater percentage of revenue is translated into
profit after covering operating expenses. Operating profit margin before
exceptional costs increased to 2.9% (2023: 2.7%).
Exceptional items
Redundancy costs of £0.02m have been incurred in the year to March 2024. In
the previous year, redundancy costs incurred of £0.17m were in respect of the
closure of the second shift at Peterborough.
As reported in September 2022 there was an additional charge in respect of the
acquisition of the Emma Hardie business should the Company's share price fail
to attain £1.25 on the first anniversary of the sale. The excess over the
amount paid at 31 March 2022 amounted to £0.31m and was treated as an
exceptional cost in the year to March 2023. No additional costs in relation to
this have been incurred in the year to March 2024.
As required by IAS 36, the Group reassesses its capitalised intangible assets
for impairment on an annual basis. Following the difficult trading years of
the Emma Hardie subsidiary, management have assessed that the brand value
acquired on acquisition in relation to Emma Hardie has been impaired by
£4.4m. This is shown as a separate line item in the Consolidated profit and
loss account as it is an expense that is not in line with the normal trading
operations of the Group. The impact of this impairment is not cash impacting
and is an entry that reduces the intangible assets (Brand value for Emma
Hardie) on the balance sheet with a corresponding entry in the Consolidated
income statement. The associated goodwill and deferred tax liability was
derecognised from the balance sheet. Please refer to notes 3, 8, 13 and note
14 of the full accounts.
EBITDA before exceptional items
The Group has generated Earnings before Interest, Tax, Depreciation and
Amortisation (EBITDA) of £3.2m (2023: £3.0m). This represents an increase of
£0.2m despite lower revenue achieved in the year to March 2024.
Tax
The Group has a corporation tax charge of £0.3m (2023: £0.2m). The Group
finalised an over provision of the tax charge in the previous year in relation
to an under provision of the enhanced R&D relief.
(Loss) / Profit after tax
The Group reported a loss after tax of £3.5m for the year ended 31 March 2024
(2023: Profit £0.5m).
Earnings per share
The diluted earnings per share decreased to negative 5.15p (2023: positive
0.65p). Share options are excluded from the earnings per share calculation in
the consolidated income statement due to their anti-dilutive effect on the
loss after tax attributable to equity holders. The EPS has been adversely
impacted by the reduction in profit after tax including the exceptional costs
of £4.4m (2023: £0.5m). The main exceptional item in the current year
pertaining to the brand impairment of Emma Hardie is a non-cash impacting
item. Adjusted diluted earnings per share excluding exceptional items for the
year were positive 1.42p (2023: 1.05p).
Research and development
The Group undertakes significant research and development (R&D) to
identify new brands, proprietary products and improved formulations to
existing products that address expected market trends to maximise the Group's
market share and deliver new opportunities for growth. The spend in the year
on research and development was £753,000 (2023: £923,000).
The Group's principal focus in R&D is maintenance and development of
brands and products in its existing markets and product ranges. As our brands
evolve the Group now develops ranges which involve greater innovative
development and claims substantiation which has changed the nature of our
research and development over recent years. One impact of this development is
improved claims for research and development tax relief.
Cash on hand and working capital
Net cash on hand (cash and cash equivalents less short-term element of
obligations under finance leases and borrowings) is positive £2.2m (2023:
negative £1.2m). The improvement in cash of £3.4m year on year is mainly
attributable to continued improvements in profit from operations, reduction in
inventory and working capital.
Stock
Stock reductions of £2.0m were achieved during the year to March 2024. This
was achieved by a targeted reduction in purchasing quantities and
manufacturing batch sizes to reduce stock holding on both raw materials and
finished goods. The reduction in stock levels was a key factor in enabling the
transfer of finished goods from third-party warehousing to the main site in
Peterborough.
Return on Capital Employed
The small increase in operating profit before exceptional items coupled with
the decrease in net equity and the substantial reduction in borrowings has
improved return on capital employed by 1.6% from 4.3% to 5.9% (see page 17 of
the full accounts). This is in line with the Group's objective to provide a
stable base for growth. The Group continues to look for opportunities to
invest in brands that will help drive faster growth in profits.
Net gearing
With the increase in cash generation and reduction in cash outflow the
business was able to utilise the cash generated to improve its liquidity by
reducing its reliance on short term borrowings. Additionally, the Group has
reduced its gearing by making an overpayment in March 2024 to pay down half of
the term loan outstanding at the year end. The Net gearing of 3.5% (2023:
22.1%) has decreased by 18.6% percentage points in the year.
Dividend
The Director's propose a final dividend for the year ended 31 March 2024 of
0.45 pence per ordinary share (2023: nil). The Group has exhibited strong
operational performance and generated cash which in turn has improved the
Group's liquidity and reduced its gearing. This is consistent with the
Directors' objective to align future dividend payments to the future
underlying earnings and cash requirements of the business. The total dividend
paid in the year ended 31 March 2024 was nil (2023: nil) per ordinary share.
Directors' responsibilities statement
The Directors whose names and functions are set out on page 112 of the full
accounts are responsible for preparing the Annual Report and the Financial
Statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group financial
statements in accordance with UK-adopted international accounting standards
and parent Company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 'Reduced Disclosure Framework', and applicable law).
Under Company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and the Group and of the profit or loss of the Group
for that period. In preparing these financial statements, the Directors are
required to:
· select suitable accounting policies and then apply them
consistently;
· state whether UK-adopted international accounting standards have
been followed for the group financial statements and United Kingdom Accounting
Standards, comprising FRS 101, have been followed for the Company financial
statements, subject to any material departures disclosed and explained in the
financial statements;
· make judgements and accounting estimates that are reasonable and
prudent; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for safeguarding the assets of the Group and
parent Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group and parent Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and parent Company and enable them to ensure that the financial
statements and the Directors' Remuneration Report comply with the Companies
Act 2006.
The Directors are responsible for the maintenance and integrity of the parent
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' confirmations
The Directors consider that the Annual Report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the group and parent Company's position and
performance, business model and strategy. Each of the Directors, whose names
and functions are listed in Directors and Advisers on page 112 of the full
accounts confirm that to the best of their knowledge:
1. the parent Company financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101 'Reduced Disclosure
Framework', and applicable law), give a true and fair view of the assets,
liabilities, financial position and profit of the Company; and
2. the group financial statements, which have been prepared in accordance
with UK-adopted international accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit of the group; and
3. the strategic report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with the
description of the principal risks and uncertainties that they face; and
4. the report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Group's position and performance, business model
and strategy.
Principal risks and uncertainties
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 risks facing the business from the
challenging economic environment including inflationary pressures, higher
interest rates and their impact on consumer demand. Further details of
mitigating measures taken by management are set out on page 2 of the full
accounts.
It also monitors risks not directly or specifically financial, but capable of
having a major impact on the business's financial performance if there is any
failure. The key risks and the measures taken to manage these risks are noted
below.
Capital structure, cash flow and liquidity
The Group has a strong balance sheet. The business is funded using; retained
earnings, a long term mortgage, term loan and sale and lease back arrangements
to support investments in fixed assets, invoice financing and overdraft
facilities for working capital. Further details are set out in notes 23 and 24
of the full accounts.
At 31 March 2024 the invoicing financing is in a surplus position of £6,100
as the facility is not being utilised. The operations have generated
sufficient cash to improve its liquidity. In the year to 31 March 2023 the
facility was utilised to fund the activities during the year (2023:
£1,557,000). At 31 March 2024 the Group has utilised its overdraft facility
by £37,000 (2023: £26,000). Further details are set out in note 21 in
relation to cashflow and liquidity risk of the full accounts.
Competitive environment
The Group operates in a highly competitive environment in which demand for
products can vary and customers have the opportunity to transfer business to
other suppliers. The Group works to minimise this risk by developing close
relationships with customers offering quality, service and innovation
throughout the business. This risk is also further reduced through the
development of its branded product portfolio and by the diversity of customers
and products offered. All customers are credit insured or pay on proforma
basis before supply.
Quality and Safety
The Group treats quality as its key requirement for all products and strives
to deliver performance products for every price point. Failure to achieve the
required quality and safety standards would have severe consequences for the
Group, from financial penalties to the damage to customer relationships. The
Group has a robust product development process to mitigate risk wherever
possible and to ensure all products are safe and fit for purpose. The Group is
subject to frequent internal and external safety, environmental, ethical and
quality audits covering both accreditations held and a number of specific
operating standards our customers require us to comply with.
Global economic environment
The cost-of-living crisis in the U.K. continues to abate consumer demand. The
Group strategy of pursuing a multi-channel approach to the market and a broad
multi-category product offering continues to serve us well during times when
consumer demand is impacted by a cost-of-living crisis.
The BOE base interest rates have increased by 1.25% to 5.25% in response to
inflationary pressures. This has had a negative impact on consumer demand and
the viability of many businesses. The rate of increase in commodities has
eased in the second half of the current financial year but core domestic
inflation and the prospect of prolonged higher interest rates remains a cause
for concern. The rate of domestic inflation has reduced but not to the levels
expected which has meant the BOE have held their base rate. Please see note 21
of the full accounts for impact of interest sensitivity on our current level
of gearing.
The global supply chain continues to be impacted by the war in Ukraine and the
Red Sea issues due to the ongoing conflict in the Middle East. The cost of
importation of goods has increased as well as delivery lead times. These
continue to be closely managed by working collaboratively with our supply
base.
The Group monitors C.P.I's across all categories of supply. Mitigation
measures included product re-engineering, re-formulating, and increasing
customer selling prices where appropriate.
The Directors have taken account of these potential impacts in their going
concern assessments and have concluded that the direct impact is not
significant to the business, with the indirect impact of price increases being
reviewed on a regular basis. In the face of these challenges the focus of the
business will be on positive cash generation and restoration of profitability.
Credit risk
Our credit risk is that our customers are unable to pay, and we believe this
risk is elevated currently due to the current global economic climate. We
proactively manage the risks faced by our customers by working closely with
them and by increasing debtor management and expanding our credit insurance.
All customers' debtor balances, are within insured credit limits or they pay
on a pro-forma basis. Credit control processes are in place to manage credit
risk including setting appropriate credit limits and the enforcement of credit
terms and ongoing dialogue with all customers. We minimise the risk from
concentration of customers through implementation of these credit processes
and this risk is mitigated through the diversity of our customer base both by
channel and geography. We remain vigilant to the credit risks in light of the
challenging economic environment.
Supplier sourcing and costs
Cost increases as a result of inflation together with pressures on supply of
materials globally are our key supplier-related risks. The pressure on global
supply chains has eased but there remains uncertainty around future commodity
pricing. We continue to work closely with suppliers and have used our improved
sourcing capabilities to expand our supply base to ensure that we can meet the
demand from our existing and new customers and minimise the impact of cost
price increases. We have an ongoing dialogue and communication with our
customers to mitigate the impact on the business.
Environmental protection standards and sustainability
The Group's technical department continues to monitor all relevant
environmental regulations that the Group must adhere to, to ensure continued
compliance. We have successfully operated at both manufacturing sites without
a cessation in production due to an environmental incident. The risk of
cessation of production from an environmental breach is considered to be low
but in such an event we would be able to move production to the other site or
to outsource to third party manufacturers in the short term.
The Group's objective is to keep ahead of the move towards more sustainable
products and processes. There is a risk that if we do not take action we will
be left behind and unable to meet our customers' requirements. However, the
Group sees the move towards sustainability as an opportunity for business
growth.
Cyber security
Cyber Security remains a significant threat to all businesses. The Group is
exposed to the risk of sophisticated cyber-attacks aimed at causing direct
financial loss from theft of funds, ransom payments, and costs associated with
system recovery and data restoration. Such attacks also lead to business
interruption, causing lost productivity and revenue. There is also a
heightened risk of theft and encryption of confidential data for financial
gain and reputational damage.
The Group has continued to invest in new software and resources to minimise
the risk of anyone accessing our systems and information. We have enhanced our
ongoing training programme for employees to ensure that they are constantly
aware of their role in protecting the business from all cyber security
threats. The Group has an insurance policy in place to minimise its exposure
to cybercrime.
Consolidated income statement
Year ended 31 March 2024 Year ended 31 March 2023
£000 £000
Revenue 53,194 58,567
Cost of sales (30,364) (34,219)
Gross profit 22,830 24,348
Distribution costs (3,488) (3,902)
Administrative expenses (17,804) (18,862)
Operating profit before exceptional items 1,538 1,584
Exceptional items - Redundancy costs (17) (165)
Exceptional items - Impairment (4,449) -
Operating profit (2,928) 1,419
Exceptional items - Acquisition costs - (312)
Finance costs (349) (420)
Profit before tax (3,277) 687
Taxation (250) (173)
(Loss) / Profit for the year attributable to the equity shareholders (3,527) 514
Consolidated statement of comprehensive income
Year ended Year ended
31 March 2024 31 March 2023
£000 £000
(Loss) / Profit for the year (3,527) 514
Items that may be subsequently reclassified to profit and loss:
Exchange differences on translating foreign operations 13 (9)
Other comprehensive income for the year 13 (9)
Total comprehensive income for the year attributable to the equity (3,514) 505
shareholders
Earnings per share
Year ended 31 March Year ended 31 March
Note 2024 2023
Basic 5 (5.15p) 0.74p
Diluted * 5 (5.15p) 0.65p
* Share options are excluded from the earnings per share calculation for the
year ended 31 March 2024 due to their anti-dilutive effect on the loss after
tax attributable to equity holders.
Adjusted Earnings per share - alternate performance measure
The following calculation of the basic and diluted earnings per share
excluding exceptional items has been calculated based on adding back the
following deductions from (loss) / profit after tax:
Year ended 31-Mar Year ended 31-Mar
2024 2023
£000 £000
(Loss) / Profit for the period from operations attributable to the equity (3,527) 514
shareholders of the parent Company
Exceptional items - Impairment 4,449 -
Exceptional items - Deferred tax charge not previously recognised 165 -
Exceptional items - Acquisition costs (disallowed for tax provision) - 312
Adjusted Earnings excluding exceptional items 1,087 826
Adjusted Basic earnings per share - excluding exceptional items 1.59p 1.19p
Adjusted Diluted earnings per share - excluding exceptional items 1.42p 1.05p
Dividends
Year ended Year ended
31-Mar
31-Mar
2024 2023
£000 £000
Final dividend paid - £Nil (2023: £Nil) per share - -
Interim dividend paid £Nil (2023: £Nil) per share - -
Total dividend paid in year - £Nil (2023: £Nil) per share - -
Proposed - 0.45 pence (2023: Nil) per share 315 -
Consolidated balance sheet
31 March 31 March
2024 2023
Note £000 £000
Non-current assets
Goodwill 1,575 2,857
Other intangible assets 6,374 10,894
Property, plant and equipment 5,219 5,890
Right-of-use assets 1,093 1,285
14,261 20,926
Current assets
Inventories 8,225 10,228
Trade and other receivables 10,518 12,733
Cash and cash equivalents 3,138 1,653
21,881 24,614
Total assets 36,142 45,540
Current liabilities
Trade and other payables 8,265 9,836
Corporation tax payable 105 3
Lease liabilities 351 373
Borrowings 620 2,502
9,341 12,714
Net current assets 12,540 11,900
Non-current liabilities
Deferred tax liability 1,798 2,942
Lease liabilities 633 917
Borrowings 2,315 3,488
4,746 7,347
Total liabilities 14,087 20,061
Net assets 22,055 25,479
Equity
Share capital 700 700
Share premium account 2,024 2,022
Merger reserve 2,476 2,476
Treasury shares (576) (576)
Other reserves (211) (211)
Translation reserve 27 14
Retained earnings 17,615 21,054
Total equity attributable to the equity shareholders of the parent Company 22,055 25,479
Consolidated statement of changes in equity
Share capital (note 6) Share premium account Merger reserve Treasury Shares Other reserves Translation reserve Retained
earnings Total
equity
£000 £000 £000 £000 £000 £000 £000 £000
At 1 April 2022 697 1,951 2,476 - (211) 23 20,742 25,678
Comprehensive income for the year
Profit for the year - - - - - - 514 514
Exchange differences on translation of foreign operations - - - - - (9) - (9)
Total comprehensive income for the year - - - - - (9) 514 505
Contributions by and distributions to owners
Exercise of options 3 71 - - - - - 74
Purchase of own shares - - - (576) - - - (576)
Share-based payment charge - - - - - -
101 101
Deferred tax through Equity - - - - - - (303) (303)
Total contributions by and distributions to owners
3 71 - (576) - - (202) (704)
At 31 March 2023 700 2,022 2,476 (576) (211) 14 21,054 25,479
Comprehensive income for the year
Loss for the year - - - - - - (3,527) (3,527)
Exchange differences on translation of foreign operations - - - - - 13 - 13
Total comprehensive loss for the year - - - - - 13 (3,527) (3,514)
Contributions by and distributions to owners
Exercise of options - 2 - - - - - 2
Share-based payment charge - - - - - - 111 111
Deferred tax through Equity - - - - - - (23) (23)
Total contributions by and distributions to owners - 2 - - - - 88 90
At 31 March 2024 700 2,024 2,476 (576) (211) 27 17,615 22,055
Consolidated cash flow statement
Year ended 31 March Year ended 31 March
2024 2023
Note £000 £000
Profit from operations including redundancy costs 1,521 1,419
Adjustments for:
Depreciation on property, plant and equipment 992 1,000
Depreciation on right of use assets 368 294
Amortisation of intangible assets 358 288
Loss/(Profit) on disposal of Right of Use assets 59 34
Share based payment charge 111 101
3,409 3,136
Decrease in inventories 2,003 2,250
Decrease in trade and other receivables 2,215 776
(Decrease) in trade and other payables (1,570) (288)
Cash generated from operations 6,057 5,874
Taxation paid (30) (62)
Net cash generated from operating activities 6,027 5,812
Investing activities
Purchase of property, plant and equipment (321) (825)
Purchase of intangible assets (287) (315)
Acquisition of Brodie & Stone - (75)
Acquisition of Emma Hardie - (1,424)
Net cash used in investing activities (608) (2,639)
Financing activities
Proceeds on issue of shares 2 74
Cancellation of leases (59) (35)
Principal paid on lease liabilities (568) (436)
Utilisation of invoice financing facilities - 290
Repayment of invoice financing facilities 7 (1,557) -
Repayment of amounts borrowed 7 (61) (600)
Repayment on term loan 7 (1,329) (816)
Interest paid on term loan 7 (123) -
Repayment on mortgage loan facility 7 (180) (252)
Interest paid on mortgage loan facility 7 (72) -
Purchase of shares - Share buy back - (576)
Net cash generated (used in) financing activities (3,947) (2,351)
Net increase in cash and cash equivalents 1,472 822
Cash and cash equivalents at start of year 1,653 840
Effect of foreign exchange rate changes 13 (9)
Cash and cash equivalents at end of year 3,138 1,653
Notes to preliminary announcement
1. Significant accounting policies
Basis of accounting
The Group financial statements have been prepared in accordance with
UK-adopted international accounting standard in conformity with the
requirements of the Companies Act 2006.
The IFRSs applied in the Group financial statements are subject to ongoing
amendment by the IASB and therefore subject to possible change in the future.
Further standards and interpretations may be issued that will be applicable
for financial years beginning on or after 1 April 2024 or later accounting
periods but may be adopted early.
The preparation of financial statements in accordance with IFRS requires the
use of certain accounting estimates. It also requires management to exercise
its judgement in the process of applying the Group's accounting policies.
The primary statements within the financial information contained in this
document have been presented in accordance with IAS1 Presentation of Financial
Statements.
The financial statements have been prepared on the historical cost basis as
modified for the fair value of business combinations. Historical cost is
generally based on the fair value of the consideration given in exchange for
goods and services. The principal accounting policies adopted are set out
below.
The Company has taken advantage of the exemption allowed under section 408 of
the Companies Act 2006 and has not presented its own Statement of
Comprehensive Income in these financial statements.
Adoption of new and revised accounting standards
None of the standards adopted during the year had a material impact on the
Group's financial statements for the year ended 31 March 2024.
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early. The Group does not
expect any of the standards issued by the IASB, but not yet effective, to have
a material impact on the Group.
2. Financial instruments and treasury risk management
Market risk
Market risk is the risk that arises from movements in stock prices, interest
rates, exchange rates, and commodity prices.
Market risk for the 31 March 2024 year end is reflected within the interest
rate and foreign currency risk which are discussed further below.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer fails to
meet its contractual obligations.
Trading exposures are monitored by the operational companies against agreed
policy levels. Credit insurance with a world leading insurer is employed
across the majority of our trade debtors. At 31 March 2024 all trade debtors
(2023: all) are covered by credit insurance with a cover of 90% of the debtor
balances. Non-trading financial exposures are incurred only with the Group's
bankers or other institutions with prior approval of the Board of Directors.
The majority of trade receivables are with retail customers. The maximum
exposure to credit risk is represented by the carrying amount of those
financial assets in the balance sheet.
Impairment provisions on trade receivables have been disclosed in note 19 of
the full accounts.
The credit risk on liquid funds such as cash and cash equivalents is limited
because the counterparties are banks
with high credit-ratings assigned by international credit-rating agencies.
All trade debtors are credit insured, therefore the maximum write off balance
on any customer default would be 10% of the invoiced value (net of VAT).
Interest rate risk
The Group's interest rate exposure arises mainly from its interest-bearing
borrowings.
The Group finances its operations through a mixture of debt associated with
working capital facilities and equity. The Group is exposed to changes in
interest rates on its floating rate working capital facilities. The
variability and scale of these facilities is such that the Group does not
consider it cost effective to hedge against this risk.
The Group also secured a fixed rate mortgage for a 15 year term, 10.5 years
remaining, secured on the property with an interest rate of 3.04% fixed for
the first 10 years, 5.5 years remaining, of the loan, therefore reducing the
interest rate risk. The interest charge on the mortgage for the year ended 31
March 2024 was £72,000 (2023: £77,000).
On 3 September 2021, the Group took out a term loan of £3,000,000 to fund
part of the purchase of the acquisitions in the prior year. The term loan is
for a 4 year term secured on the assets of the Group with an interest rate of
2.70% above the Bank of England base rate. The interest charge on the term
loan for the period to 31 March 2024 was £123,000 (2023: £111,000). A 1%
increase in the interest rate would have resulted in an additional charge of
£41,000 (2023: £22,000).
Interest rate sensitivity
The interest rate sensitivity is based upon the Group's borrowings over the
year assuming a 1% increase or decrease which is used when reporting interest
rate risk internally to key management personnel.
A 1% increase in bank base rates would reduce Group pre-tax profits by
£36,000 (2023: £114,000). A 1% decrease would have the opposite effect. The
Group's sensitivity to interest rates has changed during the current year due
to the current economic climate, which has had the impact of increasing BOE
base rates.
Foreign currency risks
The Group operates in a number of markets across the world and is exposed to
foreign currency transaction and translation risks arising on the purchase and
sales of goods in particular with respect to the US dollar and Euro.
Transaction risk arises on income and expenditure in currencies other than the
functional currency of each Group Company. The magnitude of this
risk is relatively low as the majority of the Group's income and expenditure
are denominated in the functional currency. Approximately 1% (2023: 0%) of the
Group's income is denominated in US dollars and 4% (2023: 2%) in Euros.
Approximately 7% (2023: 4%) of the Group's expenditure is denominated in US
dollars and 8% (2023: 4%) in Euros.
Foreign currency sensitivity
A 5% strengthening of sterling would result in a £258,000 (2023: £145,000)
increase in profits and equity. A 5% weakening in sterling would result in a
£285,000 (2023: £161,000) reduction in profits and equity.
When appropriate the Group utilises currency derivatives to hedge against
significant future transactions and cash flow. There were no outstanding
contracts as at 31 March 2024 or 31 March 2023.
Cash flow and liquidity risk
Liquidity risk arises from the Group's management of working capital. It is
the risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
The Group manages its working capital requirements through overdrafts and
invoice finance facilities. These facilities were renewed in March 2024 for a
further 12 months. The maturity profile of the committed bank facilities is
reviewed regularly and such facilities are extended or replaced well in
advance of their expiry. The Group has complied with the terms of these
facilities. At 31 March 2024 the Group had available £5,616,000 (2023:
£4,327,000) of undrawn committed borrowing facilities in respect of which all
conditions precedent had been met. The Group has a fixed rate mortgage for a
15 year term secured on the property with an interest rate of 3.04% fixed for
the next 5.5 years of the loan. The Company also took out a term loan of
£3,000,000 to fund part of the purchase of the acquisitions in the prior
year. The term loan is for a 4 year term secured on the assets of the Group
with an interest rate of 2.70% above the Bank of England base rate.
3. Financial assets
Financial assets are included in the Statement of financial position within
the following headings. These are valued at amortised cost and are detailed
below.
Group
2024 2023
£000 £000
Trade and other receivables 10,172 12,220
Cash and cash equivalents 3,138 1,653
Total 13,310 13,873
4. Financial liabilities
Financial liabilities are included in the Statement of financial position
within the following headings. These are valued at amortised cost and are
detailed below.
At 31 March 2024
Group
Less than 6 months Between 6 months and 1 year Between 1 and 5 years Over 5 years Total
£000 £000 £000 £000 £'000
Trade payables 4,976 - - - 4,976
Accruals 2,235 - - - 2,235
Obligations under leases 182 169 633 - 984
Overdraft and invoice financing 37 - - - 37
Loan 286 297 1,017 1,298 2,898
Total 7,716 466 1,650 1,298 11,130
At 31 March 2023
Group
Less than 6 months Between 6 months and 1 year Between 1 and 5 years Over 5 years Total
£000 £000 £000 £000 £'000
Trade payables 5,974 - - - 5,974
Accruals 2,723 - - - 2,723
Obligations under leases 194 179 874 43 1,290
Overdraft and invoice financing 1,583 - - - 1,583
Loan 453 466 1,977 1,511 4,407
Total 10,927 645 2,851 1,554 15,977
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Year ended 31-Mar Year ended
31-Mar
2024 2023
£000 £000
Earnings
(Loss) / profit attributable to the equity holders of the parent Company (3,527) 514
Year ended 31-Mar Year ended
31-Mar
2024 2023
Number Number
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings 68,433,858 69,166,461
per share
Effect of dilutive potential ordinary shares relating to share options * 8,310,548 9,534,475
Weighted average number of ordinary shares for the purposes of Adjusted 76,744,406 78,700,936
Earnings per share (2023: for the purpose of Diluted Earnings per share)
Basic earnings per share - including exceptional items (5.15p) 0.74p
Diluted earnings per share - including exceptional items * (5.15p) 0.65p
* Share options are excluded from the earnings per share calculation for the
year ended 31 March 2024 due to their anti-dilutive effect on the loss after
tax attributable to equity holders.
Adjusted Earnings per share - alternate performance measure
The following calculation of the basic and diluted earnings per share
excluding exceptional items has been calculated based on adding back the
following deductions from (loss) / profit after tax:
Year ended 31-Mar Year ended 31-Mar
2024 2023
£000 £000
(Loss) / Profit for the period from operations attributable to the equity (3,527) 514
shareholders of the parent Company
Exceptional items - Impairment 4,449 -
Exceptional items - Deferred tax charge in relation to the Impairment 165 -
Exceptional items - Acquisition costs (disallowed for tax provision) - 312
Adjusted Earnings excluding exceptional items 1,087 826
Adjusted Basic earnings per share - excluding exceptional items 1.59p 1.19p
Adjusted Diluted earnings per share - excluding exceptional items 1.42p 1.05p
6. Share capital
Ordinary shares of 1p each
£000 Number
At 1 April 2022 697 69,756,183
Issued in the year 3 273,400
At 31 March 2023 700 70,029,583
Issued in the year 0 5,800
At 31 March 2024 700 70,035,383
The Company has one class of ordinary shares which carry no right to fixed
income. All of the shares are issued and fully paid. The total proceeds from
the issue of shares from the exercise of share options in the year was £2,000
(2023: £74,000).
During the prior year, the Company agreed a buy back of 1,600,000
Consideration Shares for an aggregate consideration of £576,000. The
consideration was based on the price of 36p per ordinary share being the
on-market price at the time of the transaction. All purchases are for the
purpose of the finalisation of the Emma Hardie acquisition.
7. Notes to cash flow statement
Analysis of changes in net debt
Overdraft Invoice Financing Mortgage Loan Total
£000 £000 £000 £000 £000
At 1 April 2023 26 1,557 2,467 1,940 5,990
Cash outflow - principal (61) (1,557) (180) (1,329) (3,127)
Cash outflow - interest - - (72) (123) (195)
Interest accruing 72 - 72 123 267
At 31 March 2024 37 - 2,287 611 2,935
Overdraft Invoice Financing Mortgage Loan Total
£000 £000 £000 £000 £000
At 1 April 2022 495 1,267 2,642 2,645 7,049
Cash flows (600) 290 (252) (816) (1,378)
Interest accruing 131 - 77 111 319
At 31 March 2023 26 1,557 2,467 1,940 5,990
8. Status of information
In accordance with section 435 of the Companies Act 2006, the directors advise
that the financial information set out in this announcement does not
constitute the Group's statutory financial statements for the year ended 31
March 2024 or 2023, but is derived from these financial statements. The
financial statements for the year ended 31 March 2023 have been delivered to
the Registrar of Companies. The financial statements for the year ended 31
March 2024 have been prepared in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union. The financial statements for the year ended 31
March 2024 will be forwarded to the Registrar of Companies following the
Company's Annual General Meeting. The Auditors have reported on these
financial statements; their reports were unqualified and did not contain
statements under Section 498(2) or (3) of the Companies Act 2006.
The consolidated statement of financial position at 31 March 2024 and the
consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then
ended have been extracted from the Group's financial statements. Those
financial statements have not yet been delivered to the Registrar.
The strategic report with supplementary material is expected to be posted to
Shareholders shortly. The annual report and accounts will also be available on
the Company's website at: www.creightonsplc.com and in hard copy to
shareholders upon request from the Company's registered office at 1210 Lincoln
Road, Peterborough, PE4 6ND.
The annual report and accounts for the period ended 31 March 2024 will be
uploaded to the National Storage Mechanism and will be available for viewing
shortly at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://linkprotect.cudasvc.com/url?a=https%3a%2f%2fdata.fca.org.uk%2f%23%2fnsm%2fnationalstoragemechanism&c=E,1,woUdg3DF9ohL3Kfk-PqkqwXc_ntYFf6fwo9IjhUsxZrwQBDrn2FGiVoGLiB8UGBYNh6vWfmNBySxuOKuQ31G16P4DtD1WLkIw6aUHGRcjDY,&typo=1)
The Directors will notify shareholders when the accounts are posted and have
been uploaded to the website and to the NSM.
The Company's AGM will take place at the offices of Potter & Moore
Innovations Ltd, 1210 Lincoln Road, Peterborough, PE4 6ND on 28 August 2024 at
12:00 noon.
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