REG - Creightons PLC - Results for year to end 31 March 2022
12/07/2022 07:00
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RNS Number : 0878S Creightons PLC 12 July 2022
12 July 2022
Creightons Plc
Preliminary results
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 2022.
The Company's annual report and financial statements for the year ended 31
March 2022 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)
Financial highlights
· Revenue from core business excluding hygiene and acquisitions
increased by £10.3m (21.8%) to £57.3m (2021: £47.0m).
· Total revenue decreased by only 0.7% to £61.2m (2021: £61.6m).
· EBITDA of £5.9m (2021: £6.9m).
· Operating profit decreased by 19.1% to £4.37m (2021: £5.39m).
· Operating profit margin of 7.1% (2021: 8.8%).
· A tax charge of £0.3m (2021 - £0.8m) equates to an effective
tax rate of 10.0% (2021: 16.2%).
· The profit after tax for the year has decreased by £1.2m to
£3.1m (2021: £4.3m).
· The profit reduction together with the issue of shares has
reduced the fully diluted earnings per share to 3.98p (2021: 5.89p).
· Balance sheet remains strong and includes new intangible assets
of £10.1m arising from acquisitions. We have continued to invest in working
capital, product development and fixed assets to support the growth and
efficiency of the business.
· Net cash on hand (cash and cash equivalents less short-term
element of obligations under finance leases and borrowings) is negative £2.1m
(2021: positive £6.2m).
· The Directors do not propose a final dividend for the year ended
31 March 2022 (2021: 0.50p per ordinary share).
Operational highlights
· We have successfully replaced the previous year's "one off"
hygiene sales generated by the Covid-19 pandemic which were a total of £14.6m
with growth across each of the branded, private label and contract
manufacturing business units.
· Sales growth momentum maintained in the core business despite the
impact of Covid-19:
· Our own branded sales (excluding hygiene products) have grown by
37.7%.
· Sales of retailer own label products increased by 9.5%.
· Contract manufacturing sales increased by 29.3%.
· Total overseas sales have increased by 45.6% to £10.0m (2021:
£6.9m).
· Successfully completed acquisition of two businesses; Emma Hardie
and Brodie & Stone. Their integration is progressing well and the full
benefits will emerge in the new financial year.
· Combined sales from acquisitions during the year amounted to
£3.6m. Emma Hardie revenue £2.3m from 28 July 2021 and Brodie and Stone
£1.3m from 24 September 2021.
· Cash on hand at March 2021 has been invested in the acquisitions
of Emma Hardie and Brodie & Stone in the year as well as increased
investment in working capital, product development and plant & equipment
to support the business growth.
· In common with most manufacturing businesses we have had to deal
with unprecedented increases in our input and energy prices together with
significant disruption in the global supply chain. We have developed a
detailed cost indexing system which monitors all cost increases and have
engaged proactively with our customers.
· Brexit - Impact of Brexit on operations has not been significant.
· Costs of Covid-19 defences were significantly reduced compared to
previous year. Sales of hygiene products which were a significant feature of
last years activities with a turnover of £14.6m have reduced to £0.3m and
are not expected to recur in the future. Most of our customers have returned
to pre-Covid-19 activities. We have removed Covid-19 restrictions at both our
manufacturing sites but remain vigilant in the face of the ongoing Covid-19
threat.
Commenting on the results, William McIlroy, Chairman of Creightons Plc, said:
"The Group has successfully maintained revenue during the year. We have
replaced the one-off hygiene sales in the previous year and have delivered
growth across all areas of the core business. We have completed two business
acquisitions which leave us well placed to continue to grow the branded
business of the Group. We will continue to respond proactively to the
challenging market conditions but remain open to further business
opportunities."
Commenting on the results, Bernard Johnson, Managing Director, said:
"The team across the Group has performed exceptionally well in the face of
challenges presented by Covid-19 and the global supply chain and inflationary
pressures. We will continue to work closely with our customers while robustly
embarking on a programme of overhead cost reduction and improving
manufacturing efficiencies. We are confident that our vertically integrated
model continues to give us a competitive advantage."
This announcement contains inside information for the purposes of Article 7
of EU Regulation 596/2014 which is part of UK law by virtue of the European
Union (Withdrawal) Act 2018.
Enquiries - Analysts and Investors:
Nicholas O'Shea, Director, Creightons Plc
01733 281000
Roland Cornish / Felicity Geidt, Beaumont Cornish Limited
0207 628 3396
Press Nigel Szembel, Anagallis Communications Limited
07802 362088 nigelszembel@anagallis.co.uk
(mailto:nigelszembel@anagallis.co.uk)
Overview
The Group has made excellent progress in maintaining revenue during the year
ended March 2022. Core sales have increased by £10.3m (21.8%), which together
with the £3.6m of sales from new acquisitions, has substantially replaced the
Covid-19 related hygiene sales of £14.6m which were a one-off feature of the
previous year. The Group's performance reflects management's ability to take
advantage of available opportunities and manage potential risks.
The Group's vertically integrated model continues to give it competitive
advantage allowing it to respond quickly and effectively to customer
requirements. It provided for a rapid pivot in production to meet market
demand for sanitant product at the beginning of the Covid outbreak, and
likewise allowed it to respond to the post-covid demand for more output. It
also provides a competitive advantage with post-acquisition integration by
providing synergies not available to all market participants. Over the
reporting period the Group continued to invest in its manufacturing, and in
its research and development capabilities, which underpin this vertical model.
Acquisitions
During the year the Group completed two acquisitions - Emma Hardie and Brodie
& Stone. These acquisitions significantly extend the branded offering of
the business and provide opportunity for further growth in the UK and
internationally. The acquisitions provide opportunities for manufacturing and
other synergies (see Note 8 for further details).
Emma Hardie provides the opportunity to move into more premium skincare with a
higher end group of consumers, retailers and digital platforms.
The Brodie & Stone acquisition included the T-Zone, Natural World and
Janina brands. These brands complement our existing customer and product range
and we see opportunities to drive growth through our existing customer
network.
Revenue
Revenue from core business excluding hygiene and acquisitions increased by
£10.3m (21.8%) to £57.3m (2021: £47.0m). Overall Group sales were £61.2m
for the year ended March 2022 (2021: £61.6m) a reduction of £0.4m. Sales of
hygiene products which were a short term feature of the previous year declined
by £14.3m to £0.3m (2021: £14.6m). We have been successful in substantially
replacing the one-off hygiene sales by growth in each of the three business
units. Branded sales (excluding hygiene and acquisitions) increased by 37.7%
from £12.0m to £16.5m with a strong performance from Feather & Down and
Balance Active brands. Private label sales have increased from £22.8m to
£24.9m with the re-opening of the High Street and the addition of a large
contract with a key grocer. Contract manufacturing sales have increased from
£12.3m to £15.9m with all major customers responding to increased consumer
demand. Sales of Emma Hardie of £2.3m and Brodie & Stone of £1.3m have
been included from the dates of acquisition of 28(th) July 2021 and 24(th)
September 2021 respectively.
The Group's total overseas business, including the Australian subsidiary and
non-own branded customers, increased by 45.6% to £10.0m (2021: £6.9m).
Margin and cost of sales
Our gross margin was 42.8% for the year ended 31 March 2022 (2021 40.6%).
Whilst sales mix has been a contributor to the margin increase, last year
included additional Covid-19 related costs which have not repeated in the
current year.
Distribution costs and Administrative expenses
Distribution costs have increased by 5.4% to £3.5m (2021: £3.4m), driven by
increased operational charges at third-party logistics providers and also
growth in the core business and the required investment in inventory.
Administrative expenses have increased by 12.4% to £18.3m in the year (2021:
£16.2m) as the Group has seen a general rise in overhead costs in particular
in energy prices and insurance costs. Prior year costs included £0.8m of
Covid-19 costs which were not repeated as the impact of the virus reduces. We
will continue to manage our overhead cost base requirements to ensure they are
aligned with the anticipated sales levels of the Group.
Research and Development
The Group invests significant resources in research and product development.
As the Group has developed its business towards more leading-edge products,
the nature of the research and development has become more sophisticated.
EBITDA
The Group has generated Earnings before Interest, Tax, Depreciation and
Amortisation (EBITDA) of £5,944,000 (2021: £6,942,000). This represents a
reduction of £998,000 (14.4%).
Tax
The Group's tax charge for the year was £345,000 (2021: £837,000) which
equates to a rate of 10.0% (2021: 16.2%). The effective rate of tax is
significantly less than the standard rate of 19.0% (2021: 19.0%). The main
reason for this reduction is the R&D relief claims for the current year of
£213,000 (2021: £206,000) and the reduction due to the tax charge associated
with share options exercised in the period of £49,000 (2021: £66,000).
Exceptional items
The Group incurred acquisition costs of £218,000 on the purchase of Emma
Hardie and Brodie & Stone. Provision has also been made for a further
£384,000 of cost in relation to the share price agreement on the acquisition
of Emma Hardie (see Note 8).
Profit after tax
The Group's profit after tax has reduced by 28.2% to £3,110,000 for the year
ended 31 March 2022 (2021: £4,334,000).
Earnings per share
The diluted earnings per share of 3.98p (2021: 5.89p) is a decrease of 32.4%.
The EPS has been adversely impacted by the reduction in profit after tax
including the exceptional costs of £0.6m and also by the increase in the
number of shares in issue (acquisition related shares of 2.6m and share
options).
Cash on hand and working capital
The Group acquired 2 brands during the year with a total cash outflow of
£8.9m, these acquisitions were funded using cash resources and bank
facilities. Net cash on hand (cash and cash equivalents less short-term
element of obligations under finance leases and borrowings) is negative £2.1m
(2021: positive £6.2m). The reduction in cash is mainly attributable to
business acquisitions and related increase in working capital. The Group
generated £2.0m (2021: £6.2m) from operating activities.
Return on Capital Employed
The Group has invested in two businesses in the year through acquiring their
share capital as part of the Group's strategic goals of increasing its branded
business. This has increased capital employed, which has not yet had a
corresponding increase in operating profit leading to a decrease in Return on
Capital Employed from 22.4% to 12.9%. The expected improvement on the returns
on acquisitions in the year will commence in the year to March 2023. The Group
continues to look for opportunities to invest in brands that will help drive
faster growth in profits.
Net gearing
Net gearing of 28.7% (2021: negative 13.0%) has increased by 41.7 percentage
points in the year following the new loan of £3.0m and invoice finance
utilisation to fund the investment in the two acquisitions and in working
capital.
Dividend
The Directors do not propose a final dividend for the year ended 31 March
2022, (2021: 0.50 pence per ordinary share) due to the challenging and
volatile economic conditions facing the Group and the need to be prudent about
utilisation of cash resources. 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 for the year
ended 31 March 2022 is 0.15 pence (2021: 0.65 pence).
Covid-19 statement
Covid-19 had a reduced impact on the operations of the Group during the year
ended 31 March 2022 compared to the previous year although we continued to
take appropriate measures to protect the safety of all employees. Costs of
Covid-19 defences were significantly reduced compared to previous year. We
have now removed Covid-19 restrictions at both our manufacturing sites but
remain vigilant in the face of the ongoing Covid-19 threat.
Brexit
Brexit has resulted in some increased long-term costs associated with the
regulatory management, and import and export administration. These have not
materially impacted the Group's performance and are not expected to have a
material impact in the future.
Supply chain
In common with many UK manufacturing businesses, we have experienced global
supply chain and inflationary pressures during the second half of the
financial year. These pressures have manifested in the form of delayed
deliveries from suppliers, higher input, energy and overhead costs. These
pressures are expected to continue. We will continue to be proactive in our
response to these challenges and in particular we will seek out new
opportunities and endeavour to mitigate any price increases through price
recovery, product reengineering, alternative sourcing and other cost control
measures.
Conclusion
This has been a transformational year for the Group with the successful
acquisition of two brand-based companies strengthening our branded offering
and giving a firm foothold in premium skincare which we can build on very
quickly given our global distribution, development and manufacturing
capabilities.
However, the last six months of the financial year have been extremely
challenging.
Our response has therefore been urgent and robust. The Group's senior managers
have all experienced changes in the macro-economic environment and understand
the need and how to adjust the business in response to rapid change in the
economic cycle. Accordingly, we have embarked on a programme of overhead cost
reduction and of improving manufacturing efficiencies which should
significantly reduce operational costs by the end of the year ended 31 March
2023, a lot of which will be delivered and be adding to the bottom line by the
end of September 2022.
Manufacturing efficiency improvements are the planned result of significant
investment in higher grade machinery and equipment within the last 18 months.
It will enable us to move towards one shift across the group. Already the
underlying throughput rates and efficiencies have improved by more than 10% in
the last three months and will continue to do so.
In summary the Board believes that good management, strong customer
relationships and financial position will continue to enable the Group to
manage the current crisis and that the Group is well placed to proactively
manage new challenges and take advantage of any new opportunities that may
arise.
We are still keen to expand but will only do so when the infrastructure is
fully repositioned to deal with the volatile conditions we are facing.
I would like to take this opportunity to thank every one of our employees who
as always give of their best with hard work and expertise. All have responded
very commendably to the speed of change required and pressures associated with
these exceptional times.
Thanks also to our customers and suppliers, especially those who have
responded so positively through this challenging period.
Directors' responsibilities statement
The directors whose names and functions are set out on in the full report are
responsible for preparing the Annual Report and the Financial Statements in
accordance 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 86 to 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 Covid-19 business risks facing the
business, the impact of Brexit, the economic situation and potential emerging
risks, and their impact on costs and consumer purchases.
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. Acquisitions during the year were
financed by internal cash resources and bank funding. 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.
At 31 March 2022 the invoicing financing is in a utilised position of
£1,267,000 as this facility has been utilised to fund the acquisitions during
the year (2021: surplus of £1,232,000, due to cash received from customers
immediately before the year end and not yet transferred to the bank account).
At 31 March 2022 the Group had utilised £495,000 (2021: £Nil) of its
overdraft facility.
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.
Quality
The Group treats quality as its key requirement for all products and strives
to deliver quality 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.
Brexit
Whilst the Brexit outcome did not result in any increase in duty costs, the
resulting increased paperwork associated with importing and exporting to the
EU incurred, by ourselves and our partners, has increased costs but the impact
has been minimal. At a Group and business level we continue to monitor
changes in legislation, trade agreements and working practices to take
advantage of any opportunities that may arise and to mitigate any risks
associated with Brexit. The Group operates globally with significant direct
and indirect trading relationships within the EU. The Group put mitigating
actions in place including the registration in December 2018 of Potter &
Moore Ltd based in Ireland as an EU base for recording regulatory information
and a new subsidiary Creightons GmbH in June 2020 to trade directly with EU
customers as required. 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.
Global economic environment
On 24 February 2022 Russian forces entered Ukraine, resulting in Western
nations reactions including announcements of sanctions against Russia and
Russian interests worldwide and an economic ripple effect on the global
economy. The directors have carried out an assessment of the potential impact
of Russian forces entering Ukraine on the business, including the impact of
mitigation measures and uncertainties, and have concluded that the greatest
impact on the business expected to be from price increases.
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.
Credit risk
Our credit risk is that our customers are unable to pay and we believe this
risk is elevated currently due to 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.
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. Global supply chains
are stretched and face significant upwards price pressures. 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 has
responded by a significant investment 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.
Covid-19
Covid-19 had a reduced impact on the operations of the Group during the year
ended 31 March 2022 compared to the previous year although we continued to
take appropriate measures to protect the safety of all employees. Costs of
Covid-19 defences were significantly reduced compared to previous year. We
have now removed Covid-19 restrictions at both our manufacturing sites but
remain vigilant in the face of the ongoing Covid-19 threat.
No further Government schemes were used in the year ended March 2022. During
the previous year the Group utilised the Government's Furlough scheme for
shielding employees. It also deferred paying approximately £990,000 of VAT in
relation to March 2020, which has been repaid over the 10 months commencing
March 2021. No further Government schemes were used.
Consolidated income statement
Year ended 31 March 2022 Year ended 31 March 2021
Note £000 £000
Revenue 61,157 61,605
Cost of sales (35,001) (36,623)
Gross profit 26,156 24,982
Distribution costs (3,535) (3,353)
Administrative expenses (18,256) (16,236)
Operating profit 4,365 5,393
Exceptional items 8 (602) -
Finance costs (308) (222)
Profit before tax 3,455 5,171
Taxation (345) (837)
Profit for the year from operations attributable to the equity shareholders 3,110 4,334
Consolidated statement of comprehensive income
Year ended Year ended
31-Mar 31-Mar
2022 2021
£000 £000
Profit for the year 3,110 4,334
Items that may be subsequently reclassified to profit and loss:
Exchange differences on translating foreign operations (7) 9
Other comprehensive income for the year (7) 9
Total comprehensive income for the year attributable to the equity 3,103 4,343
shareholders
Earnings per share
Year ended 31 March Year ended 31 March
Note 2022 2021
Basic 5 4.62p 6.69p
Diluted 5 3.98p 5.89p
Dividends
Year ended 31-Mar Year ended
31-Mar
2022 2021
£000 £000
Final dividend paid - 0.50p (2021: 0.50p) per share 324 324
Interim dividend paid - 0.15p (2021: 0.15p) per share 104 97
Total dividend paid in year - 0.65p (2021: 0.65p) per share 428 421
Proposed - 0.00p (2021: 0.50p) per share - 324
Consolidated balance sheet
31-Mar 31-Mar
2022 2021
Note £000 £000
Non-current assets
Goodwill 2,853 331
Other intangible assets 10,867 818
Property, plant and equipment 6,065 5,857
Right-of-use assets 1,120 1,090
Deferred tax Asset - 339
20,905 8,435
Current assets
Inventories 12,479 8,318
Trade and other receivables 13,624 10,236
Cash and cash equivalents 840 6,558
26,943 25,112
Total assets 47,848 33,547
Current liabilities
Trade and other payables 10,127 9,177
Corporation tax payable - 329
Lease liabilities 303 237
Borrowings 2,663 166
Deferred and contingent consideration 1,187 -
14,280 9,909
Net current assets 12,663 15,203
Non-current liabilities
Deferred tax liability 2,640 -
Lease liabilities 864 906
Borrowings 4,386 2,646
7,890 3,552
Total liabilities 22,170 13,461
Net assets 25,678 20,086
Equity
Share capital 6 697 648
Share premium account 4,427 1,410
Other reserves (211) 25
Translation reserve 23 30
Retained earnings 20,742 17,973
Total equity attributable to the equity shareholders of the parent Company 25,678 20,086
Consolidated statement of changes in equity
Share capital (note 6) Share premium account Other reserves Translation reserve
Retained Total
earnings equity
£000 £000 £000 £000 £000 £000
At 1 April 2020 647 1,406 25 21 13,467 15,566
Comprehensive income for the year
Profit for the year - - - - 4,334 4,334
Exchange differences on translation of foreign operations
- - - 9 - 9
Total comprehensive income for the year - - - 9 4,334 4,343
Contributions by and distributions to owners
Exercise of options 1 4 - - - 5
Share-based payment charge - - - - 195 195
Deferred tax through Equity - - - - 398 398
Dividends - - - - (421) (421)
Total contributions by and distributions to owners 1 4 - - 172 177
At 31 March 2021 648 1,410 25 30 17,973 20,086
Comprehensive income for the year
Profit for the year - - - - 3,110 3,110
Exchange differences on translation of foreign operations - - - (7) - (7)
Total comprehensive income for the year - - - (7) 3,110 3,103
Contributions by and distributions to owners
Exercise of options 23 541 - - - 564
Shares issued on acquisitions 26 2,476 - - - 2,502
Purchase of own shares by EBT - - (236) - - (236)
Share-based payment charge - - - - 330 330
Deferred tax through Equity - - - - (243) (243)
Dividends - - - - (428) (428)
Total contributions by and distributions to owners 49 3,017 (236) - (341) 2,489
At 31 March 2022 697 4,427 (211) 23 20,742 25,678
Consolidated cash flow statement
Note Year ended 31 March Year ended 31 March
2022 2021
£000 £000
Profit from operations 4,365 5,393
Adjustments for:
Depreciation on property, plant and equipment 888 846
Depreciation on right of use assets 256 206
Amortisation of intangible assets 435 497
(Profit)/Loss on disposal of property, plant and equipment (10) 4
Loss on disposal of Right-of-use assets - 5
Share based payment charge 330 195
6,264 7,146
(Increase) in inventories (2,515) (924)
(Increase) in trade and other receivables (1,820) (1,369)
Increase in trade and other payables 59 1,337
Cash generated from operations 1,988 6,190
Taxation paid (575) (684)
Net cash generated from operating activities 1,413 5,506
Investing activities
Purchase of property, plant and equipment (1,106) (869)
Purchase of right-of-use assets (286) (34)
Proceeds from sale and lease back 264 174
Purchase of intangible assets (338) (344)
Acquisition of Brodie & Stone 8 (3,507) -
Acquisition of Emma Hardie 8 (2,775) -
Exceptional costs in relation to acquisitions 8 (343) -
Net cash used in investing activities (8,091) (1,073)
Financing activities
Proceeds on issue of shares 564 5
Principal paid on lease liabilities (240) (188)
Interest on lease liabilities (117) (139)
Interest paid on mortgage loan (83) (89)
Interest paid on overdrafts and loans (108) (4)
Increase in invoice financing facilities 1,267 -
Increase / (decrease) of borrowings 495 (554)
Draw down of loan facility 3,000 -
Repayment on term loan (314) -
Repayment on mortgage loan facility (169) (164)
Repayment of debt - Emma Hardie 8 (2,201) -
Repayment of debt - Brodie & Stone 8 (463) -
Dividends paid to owners of the parent (428) (421)
Purchase of own shares via EBT (236) -
Net cash generated from/(used in) financing activities 967 (1,554)
Net increase in cash and cash equivalents (5,711) 2,879
Cash and cash equivalents at start of year 6,558 3,670
Effect of foreign exchange rate changes (7) 9
Cash and cash equivalents at end of year 840 6,558
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 2022 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.
Adoption of new and revised accounting standards
No new standards impacting on the Group have been adopted in its financial
statements for the year ended 31 March 2022.
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.
Exposures to market, credit, interest and currency risks arise in the normal
course of the Group's business. Risk management policies and hedging
activities are outlined below.
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.
The contingent consideration on the issue of shares on the acquisition of Emma
Hardie can only ultimately be determined on 28 July 2022 as it is dependent on
the share price at that date. The charge reflected in the consolidated income
statement for the year ended March 2022 amounts to £384,000 based on the
share price of 60.5p at 31 March 2022. A movement of 10p in the share price
will give rise to an additional charge / credit in the income statement of
£160,000 for the year ended March 2023.
Market risk for the 31 March 2021 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 2022 all trade debtors
(2021: 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 to
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.
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, 12.5 years
remaining, secured on the property with an interest rate of 3.04% fixed for
the first 10 years, 7.5 years remaining, of the loan, therefore reducing the
interest rate risk. The interest charge on the mortgage for the year ended 31
March 2022 was £83,000.
On 3 September 2021, the Company took out a term loan of £3,000,000 to fund
part of the purchase of the acquisitions in the 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 2022 was £43,000. A 1% increase in the interest rate
would have resulted in an additional charge of £13,000.
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
£75,000 (2021: £5,000). A 1% decrease would have the opposite effect. The
Group's sensitivity to interest rates has changed during the current year due
to the new 4 year term loan on acquisitions.
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 0% (2021: 0%) of the
Group's income is denominated in US dollars and 2% (2021: 2%) in Euros.
Approximately 4% (2021: 5%) of the Group's expenditure is denominated in US
dollars and 5% (2021: 4%) in Euros.
Foreign currency sensitivity
A 5% strengthening of sterling would result in a £163,000 (2021: £158,000)
increase in profits and equity. A 5% weakening in sterling would result in a
£180,000 (2021: £174,000) 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 2022 or 31 March 2021.
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 2022 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 2022 the Group had available £6,288,000 (2021:
£6,406,000) 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 7.5 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 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
2022 2021
£000 £000
Trade and other receivables 12,819 9,772
Cash and cash equivalents 840 6,558
Total 13,659 16,330
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 2022
Group
Less than 6 months Between 6 months and 1 year Between 1 and 5 years More than 5 years Total
£000 £000 £000 £000 £000
Trade payables 6,211 - - - 6,211
Accruals 3,016 - - - 3,016
Obligations under leases 153 150 864 - 1,167
Overdraft and invoice financing 1,762 - - - 1,762
Loans 447 454 2,670 1,716 5,287
Deferred consideration 159 - - - 159
Total 11,748 604 3,534 1,716 17,602
At 31 March 2022 contingent consideration of £1,028,000 is held at FVTPL
within financial liabilities. The contingent consideration is based on quoted
investments and is therefore designated as level 1 in the fair value
hierarchy. For those held at amortised cost, the carrying value approximates
the fair value (see Note 8).
At 31 March 2021
Group
Less than 6 months Between 6 months and 1 year Between 1 and 5 years More than 5 years Total
£000 £000 £000 £000 £000
Trade payables 5,003 - - - 5,003
Accruals 2,480 - - - 2,480
Obligations under leases 119 118 906 - 1,143
Overdraft and invoice financing - - - - -
Loan 82 84 729 1,917 2,812
Total 7,684 202 1,635 1,917 11,438
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
2022 2021
£000 £000
Earnings
Net profit attributable to the equity holders of the parent company 3,110 4,334
Year ended 31-Mar Year ended
31-Mar
2022 2021
Number Number
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings 67,372,553 64,757,807
per share
Effect of dilutive potential ordinary shares relating to share options 10,681,836 8,788,756
Weighted average number of ordinary shares for the purposes of diluted 78,054,389 73,546,563
earnings per share
Basic 4.62p 6.69p
Diluted 3.98p 5.89p
6. Share capital
Ordinary shares of 1p each
£000 Number
At 1 April 2020 647 64,746,143
Issued in the year 1 106,100
At 31 March 2021 648 64,852,243
Issued in the year 49 4,903,940
At 31 March 2022 697 69,756,183
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
£564,000 (2021: £5,000).
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 2021 - - 2,812 - 2,812
Cash flows 495 1,267 (253) 2,603 4,112
Interest accruing - - 83 42 125
At 31 March 2022 495 1,267 2,642 2,645 7,049
Overdraft Mortgage Total
£000 £000 £000
At 1 April 2020 554 2,975 3,529
Cash flows (554) (252) (806)
Interest accruing - 89 89
At 31 March 2021 - 2,812 2,812
8. Business combinations
Emma Hardie
On 28th July 2021, the Group acquired 100% of the issued share capital of Emma
Hardie Limited. Total consideration was £4.86m, of which £2.77m was paid in
cash, £1.36m was settled by the issue of 1,600,000 shares in Creightons PLC
at a price of £0.8478 per share, and there was £0.084m of deferred
consideration and a further £0.644m in contingent consideration. There was
cash acquired of £0.08m and debt acquired at fair value of £2.20m.
The contingent consideration of £0.644m relates to the share issue on
acquisition of Emma Hardie Limited. The company has guaranteed to the sellers
of Emma Hardie Limited a share price for Creightons PLC at £1.25 per share as
at 28th July 2022. The contingent consideration was accrued based on the
difference between £1.25 and £0.848, the market price on date of
acquisition. The liability has been reassessed based on the share price at 31
March 2022 and the related liabilty has been recognised through exceptional
items in the income statement for the period. The ultimate liability can only
be assessed 12 months after the acquisition date on 28(th) July 2022.
The fair value of acquired intangible assets is £5.11m and relates to the
Emma Hardie brand acquired. The intangible asset is deemed to have an
indefinite useful life so no amortisation is charged but will be subject to an
annual impairment review.
Brodie & Stone
On 24th September 2021, the Group acquired 100% of the issued share capital of
Brodie and Stone Holdings Limited, and its wholly owned subsidiary Brodie and
Stone International Limited. Total consideration was £4.85m, of which £2.81m
was paid in cash, £1.15m was settled by the issue of 1,000,000 shares in
Creightons PLC at a price of £1.146 per share, £0.70m in relation to a
property retention payment paid in October 2021, and there was £0.20m of
deferred consideration. There was no cash acquired and debt acquired at fair
value of £0.71m.
The fair value of acquired intangible assets is £4.98m and relates to various
brands acquired. The intangible asset is deemed to have an indefinite useful
life so no amortisation is charged but will be subject to an annual impairment
review.
The amounts recognised in respect of the fair value of identifiable assets and
liabilities for the acquisitions made during the year to March 2022 was:
Brodie and Stone Limited Emma Hardie Limited Total
Fair value Fair value Fair value
£000 £000 £000
Property, plant and equipment - 1 1
Intangible assets - 58 58
Inventory 304 1,342 1,646
Trade receivable 434 752 1,186
Other debtors - 267 267
Cash at bank - 83 83
Borrowings (463) (475) (938)
Trade payables (141) (422) (563)
Taxation and social security (19) (60) (79)
Other creditor (242) (68) (310)
Redemption of C shares - (544) (544)
Liabilities to be paid on completion - (1,182) (1,182)
Total net assets (127) (248) (375)
Intangible assets on business combination - Brand value 4,980 5,108 10,088
Total consideration due 4,853 4,860 9,713
The consideration was satisfied as follows:
Cash consideration 2,807 2,775 5,582
Property retention 700 - 700
Deferred consideration 200 84 284
Contingent consideration - 644 644
Share issue 1,146 1,357 2,503
4,853 4,860 9,713
The performance of the acquisitions for the period since acquisition for Emma
Hardie and Brodie & Stone is summarised in the below table:
Emma Hardie Brodie & Stone
£000 £000
Revenue 2,309 1,322
Profit before tax 4 485
On a pro rata basis this would represent an annual turnover of £3.5m for Emma
Hardie and £2.6m on Brodie & Stone. It is difficult to assess the full
year profit due to a change in commercial and operating environment.
Exceptional costs
Exceptional costs arising from the acquisitions total £602,000. Legal &
Professional costs of £218,000 and a further £384,000 charge in relation to
the additional liability in respect of the Emma Hardie share issue at a
guaranteed price of £1.25 per share. The additional charge is based on the
difference between the original recorded estimate of 84.8p, the market price
on date of issue, and the share price at 31 March 2022 of 60.5p.
Deferred and contingent consideration
The position at year end 31 March 2022 is as follows:
Brodie and Stone Limited Emma Hardie Limited Total
Fair value Fair value Fair value
£000 £000 £000
Deferred consideration at point of acquisition 200 84 284
Settled during period (125) - (125)
Deferred consideration at 31 March 2022 75 84 159
Contingent consideration at point of acquisition - 644 644
Additional provision in period - 384 384
Contingent consideration at 31 March 2022 - 1,028 1,028
Total deferred and contingent consideration at 31 March 2022 75 1,112 1,187
Deferred tax
The valuation of intangibles on acquisition gives rise to a deferred tax
liability. The deferred tax liability is measured using the value of the
intangible asset at the deferred tax rate. This deferred tax liability creates
a corresponding asset which has been included in goodwill.
9. 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 2022 or 2021, but is derived from these financial statements. The
financial statements for the year ended 31 March 2021 have been delivered to
the Registrar of Companies. The financial statements for the year ended 31
March 2022 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 2022 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 2022 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 2022 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 24 August 2022 at
12:00 noon subject to prevailing Government Covid guidelines.
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