Interim Results

13th Oct 2009 07:00



13th October 2009

Crawshaw Group PLC 

 

Interim Results

Crawshaw Group PLC ( "the Company"), the meat focussed retailer, today reports its interim results for the 6 months ended 31 July, 2009.

Highlights

Sales for the first half increased by over 32% to £9.5m (2008 : £7.2m) as a result of new shop openings.

Like-for-like sales down 3% due to reduced footfall, continued high input prices and poor weather in the last few weeks of the half.

Gross margins have improved after a difficult start to the year and are now in line with expectations.

Operating profit of £0.1m for the half year (2008 : £0.3m).

Net debt reduces to £2.0m versus £2.7m at the year end (January 2009)

New stores now total 7 with two further stores opened in Doncaster (April) and Bramley, Leeds (May).

The results for the first half reflect a period of low consumer confidence as people are finding that their available spend has reduced, which when coupled with the ongoing issue of high input cost inflation means that consumers are being forced to compromise. 

Our surveys show that customers' satisfaction remains very high with regard to Crawshaws quality and value for money but that the recession has currently affected their meat buying habits.

Customers are buying more lower priced goods for the same level of spend and are, as a result visiting the shop less frequently - this has resulted in average spend remaining relatively flat whilst transaction volumes are down. We are seeing that sales of higher value products are significantly down as compared to the previous year.

This had a particular impact on our sales in the last few weeks of the period, not helped of course by the poor summer BBQ weather.

In the 6 months to 31st July, 2009 sales were £9.5m (£7.2m for the 6 months to 31st July 2008), a 32% increase. This is wholly driven by the successful opening of 7 new stores between July, 2008 and May, 2009. Despite a good start to the year, like for like sales are down 3% over the period with the impact spread evenly across most stores. In comparison, a leading grocery market research company is showing independent butcher's sales to 9th August, 2009 to be 14% down over 4 weeks, 7% down over 12 weeks and 5% down over 52 weeks.

Our new stores are suffering in line with our existing stores although we are pleased to report that our two largest new stores, in city centre locations, are trading very well and are ahead of initial expectations.

Margins over the six months were lower than expected as a consequence of much higher input prices and promotional activity at new stores earlier in the year. However, margins have been improving across all outlets over the period, despite high input prices, as we have taken steps to improve our operational efficiency and extend our product offering to suit all pockets. Margin performance in the new stores improved significantly in the 2nd quarter such that over the period to 31st July, they were in line with those achieved at our existing stores. 

Our retail pricing remains competitive versus the supermarkets and we continue to offer our customers exceptional value for money.

Operating profit decreased to £0.1m (2008:£0.3m) for the half year as a result of the trading issues described above and because of the operational impact of opening 7 new stores. The new stores are spending proportionately more on rent, rates and operational services without, in some cases, the benefit of fully established revenues. Also new store wage costs are relatively high as we invest in and develop new staff. We are working hard to drive efficiency and expect further improvements in the second half of the year. Moving from 13 stores to 20 stores has not increased our central overhead.

In line with the group's original expansion plans cash has been utilised on the opening of new retail outlets (£0.6m) and on the repayment of the outstanding loan notes (£1.25m).

Cash has also been generated from the recent share subscription (£0.9m). 

Net debt at £2.0m has reduced from £2.7m at the year end. This has been achieved by generating cash from operating activities £0.2m and raising £1.9m of new share capital (of which £1m was by way of conversion of loan notes), this is partly offset by working capital changes of £0.8m and capital expenditure of £0.6m. We expect net debt will reduce significantly over the next 12 months as we remain cash generative, even at current sales levels.

We believe the recession will affect our customers' spending habits for some time to come and therefore the board feels that it is appropriate to continue to delay new shop openings going forward until a time when we feel confidence is restored.

We are improving and extending our hot food offer in our stores since this is a product area that has been relatively unaffected. Initial customer reaction in the first three stores is very positive.

Looking to the second half of the year, I have already indicated that sales in July and August are down, with like for likes 12% below last year. This trend has continued through September and we face a challenging October as the comparatives for last year are very strong.

However, performance in the weeks prior to Christmas is key to our year end out turn and we are focussing our efforts on maximising the value of our product offer and attracting new customers via various marketing initiatives over the coming weeks.

Richard Rose

Chairman

13th October, 2009

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTHS ENDED 31/7/2009 Unaudited Audited Unaudited 6 Months 12 Months 6 Months 31.7.09 31.1.09 31.7.08 Note £ £ £  Revenue  2 9,473,997 16,044,771 7,169,315 Cost of sales (5,535,363) (9,221,902) (4,131,979)   Gross profit  3,938,634 6,822,869 3,037,336 Other operating income  7,742 12,420  6,000 Administrative expenses 3,948,105 7,501,617 4,132,281 Operating profit before one-off costs 85,126 854,349 360,929 Exceptional Items 3 (86,855) (1,306,430) (1,235,627) Intangible impairment 3 - (214,247) (214,247) Operating loss (1,729) (666,328) (1,088,945) Finance income 513 42,883  36,066  Finance expenses (42,673) (235,715) (125,439) Net finance expense (42,160) (192,832) (89,373) Share of profit of equity accounted investees (net of tax) - 13,414 -  Loss before income tax (43,889) (845,746) (1,178,318) Income tax expense 4 (41,963) (118,977) (4,854) Loss for the period (85,852) (964,723) (1,183,172) Attributable to: Equity holders of the Company (85,852) (964,723)  (1,183,172)   Basic and diluted loss per ordinary share  5 (0.16p) (2.21p) (2.9p)

  

CONDENSED CONSOLIDATED BALANCE SHEET AT 31 JULY 2009
		Unaudited	Audited	Unaudited
		31.7.09	31.1.09	31.7.08
ASSETS	Note	£	£	£
Non Current Assets
Property, plant and equipment		4,617,240	4,231,603	2,516,669
Intangible assets - goodwill and related Acquisition intangibles		7,702,744	7,720,084	7,737,423
Investment in equity accounted investees		109,746	109,746	96,332
Total Non Current Assets		12,429,730	12,061,433	10,350,424
Current Assets
Inventories		497,281	461,521	490,766
Trade and other receivables		659,099	447,528	622,703
Tax receivable		5,137	-	13,613
Cash and cash equivalents		-	1,463,545	1,881,663
Total Current Assets		1,161,517	2,372,594	3,008,745
Total Assets		13,591,247	14,434,027	13,359,169
SHAREHOLDERS' EQUITY
Share capital		2,890,940	2,334,009	4,500,096
Share premium		6,317,618	4,981,049	19,364,637
Reverse acquisition reserve		446,563	446,563	(16,103,112)
Capital contribution reserve		149,311	149,311	119,696
Retained earnings		(662,499)	(613,232)	(849,977)
Total Shareholders' Equity	6	9,141,933	7,297,700	7,031,340
LIABILITIES
Non Current Liabilities
Other payables		127,987	100,289	-
Interest bearing loans and borrowings		2,040,000	1,950,000	840,000
Deferred tax liabilities		499,196	457,233	396,671
Total Non Current Liabilities		2,667,183	2,507,522	1,236,671
Current Liabilities
Trade and other payables		1,766,772	2,376,787	2,088,468
Interest bearing loans and borrowings		15,359	2,252,018	3,002,690
Total Current Liabilities		1,782,131	4,628,805	5,091,158
Total Liabilities		4,449,314	7,136,327	6,327,829
Total Equity and Liabilities		13,591,247	14,434,027	13,359,169
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Share Capital £ Share Premium £ Rev Acq Reserve £ Capital Cont'n Reserve £ Retained Earnings £ Total Equity £ Balance at 1 February 2008 2,406,763 15,981,764 (18,175,942) 119,696 296,599 628,880 Loss for the Period - - - - (1,183,172) (1,183,172) Share Based Payments - - - - 36,596 36,596 Issue of shares to effect reverse acquisition 1,316,000 - 489,263 - - 1,805,263 Issue of shares for Crawshaw HoldingsLtd preference shares 244,000 - 1,583,567 - - 1,827,567 Proceeds of listing 533,333 3,382,873 - - - 3,916,206 Balance at 31 July 2008 4,500,096 19,364,637 (16,103,112) 119,696 (849,977) 7,031,340 Balance at 1 August 2008 4,500,096 19,364,637 (16,103,112) 119,696 (849,977) 7,031,340 Profit for the period - - - - 218,449 218,449 Cancellation of 0.9p deferred shares (2,166,087) (14,383,588) 16,549,675 - - - Capital contribution - - - 29,615 - 29,615 Share based payment - - - - 18,296 18,296 Balance at 31 January 2009 2,334,009 4,981,049 446,563 149,311 (613,232) 7,297,700 Balance at 1 February 2009 2,334,009 4,981,049 446,563 149,311 (613,232) 7,297,700 Loss for the period - - - - (85,852) (85,852) Share based payment - - - - 36,585 36,585 Loan note conversion 294,118 705,882 - - - 1,000,000 Issue of Shares 262,813 630,687 - - - 893,500 Balance at 31 July 2009 2,890,940 6,317,618 446,563 149,311 (662,499) 9,141,933 CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE 6 MONTHS ENDED 31 JULY 2009  Unaudited   Audited   Unaudited 6 Months 12 Months 6 Months  31.7.09  31.1.09   31.7.08 Cash flows from operating activities  £  £   £ Loss for the period (85,852) (964,723) (1,183,172) Adjustments for: Share based payments charge 36,585 54,892 36,596  Depreciation and amortisation 185,517 259,570 117,656  Impairment of intangibles - 214,247 214,247   Loss on sale of property, plant and equipment  11,845 12,817 13,146   Net financial charges  43,265 192,832 89,373  Share of profit of equity accounted investees (net of tax)  - (13,414) - Taxation 41,963 118,977 4,854 Operating cashflow before movements in working capital 233,323 (124,802) (707,300)  Movement in trade and other receivables  (211,833) (212,376) (387,813)  Movement in trade and other payables  (582,372) 1,019,066 612,653  Movement in inventories  (35,760) (184,295) (213,540)  Tax paid  (4,875) (172,806) (132,596)  Net cash (used in)/ generated from operating activities  (601,517) 324,787 (828,596)   Cash flows from investing activities   Purchase of property, plant and equipment  (570,505) (2,154,564) (311,522) Proceeds from sale of property,plant & equipment 4,900 3,860 -   Acquisition of subsidiary, net of cash acquired  - - 1,583,567   Net cash recognised on reverse acquisition - 1,666,899 - Interest received 513 42,883 36,066 Interest paid (43,778) (206,100) (105,488)   Net cash (used in)/ generated by investing activities  (608,870) (647,022) 1,202,623   Cash flows from financing activities   Proceeds from issue of share capital(net of issue costs)  893,500 3,916,206 4,000,000   Repayment of loans  (1,252,017) (3,771,869) (3,023,807) Bank Loan 90,000 1,110,000 -   Net cash (used in)/ generated from financing activities  (268,517) 1,254,337 976,193 Net change in cash and cash equivalents (1,478,904) 932,102 1,350,220 Cash and cash equivalents at start of period 1,463,545 531,443 531,443   Cash and cash equivalents at end of period  (15,359) 1,463,545 1,881,663

NOTES 

 1. BASIS OF PREPARATION 

 BASIS OF PREPARATION 

This unaudited interim financial information is for the 6 month period ended 31 July 2009 and is prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the EU and under the historical cost convention.

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 January 2009, as described in those annual financial statements. 

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 February 2009:

INTERIM FINANCIAL INFORMATION 

The interim financial information for the 6 month period ended 31 July 2009 has not been audited but has been reviewed by the auditors. Their review report for the 6 month period ended 31 July 2009 is set out on page 14. 

The comparative figures for the financial year ended 31 January 2009 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

 SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATION UNCERTAINTY 

 The preparation of interim financial statements in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities. Actual results may differ from these estimates. 

GOING CONCERN 

The Group has in place borrowing facilities up to a maximum of £3,340,000. These facilities are subject to financial performance covenants. They consist of a mortgage of £840,000 and a revolving credit facility of £2,500,000. 

 The revolving credit facility is due for renewal on 30th June 2010. The Directors have reviewed the banking facilities available to the Group plus the profit and cash forecasts of the Group with appropriate sensitivities around operational performance. The Directors have concluded that the Group will (i) meet the financial performance covenants to June 2010 and (ii) thereafter, be in a position to pay back the revolving credit facility in full and negotiate a significantly reduced working capital facility for use as and when required. Crawshaw Group PLC will open negotiations with its bank in due course and has not at this stage sought any written commitment. However, the Directors are not aware of any indications that facilities will not be made available at that time. Accordingly the Directors consider that these statements should be prepared on a going concern basis.

BASIS OF CONSOLIDATION 

The consolidated financial information includes the financial information of the company and its subsidiary undertakings made up to 31 July 2009 (together referred to as the 'Group').

On 11 April 2008,the Company, then named Felix Group PLC, became the legal parent company of Crawshaw Group Limited (which subsequently changed its name to Crawshaw Holdings Limited) in a share for share exchange. Due to the relative sizes of the companies, the former Crawshaw Holdings Limited became the majority shareholders of the enlarged group. Following the transaction the Company's continuing operations and executive management were predominantly those of Crawshaw Holdings Ltd. Accordingly the substance of the combination was that Crawshaw Holdings Ltd acquired Felix Group PLC in a reverse acquisition. Felix Group PLC subsequently changed its name to Crawshaw Group PLC.

 As a consequence of applying reverse acquisition accounting, the results of the Group at 31 January 2009 comprise the results of Crawshaw Holdings Limited for the year ended 31 January 2009 and those of Crawshaw Group PLC from 11 April 2008. However the equity structure appearing in these condensed interim financial statements reflects the equity structure of the legal parent, including the equity instruments issued by the legal parent to effect the combination.

 2. REVENUE 

 The directors have undertaken a review of the Group's continuing operations and its associated business risks and consider that the continuing operations should be reported as a single business segment. The directors consider that the continuing operations represent one product offering with similar risks and rewards and should be reported as a single business segment in line with the Group's internal reporting framework. All revenue received during the period was received from customers within the United Kingdom. 

	Unaudited	Audited	Unaudited
	6 Months	12 Months	6 Months
3. EXCEPTIONAL ITEMS	31.7.09	31.1.09	31.7.08
	£	£	£
Refinancing costs	-	254,908	184,105
Acquisition costs	-	1,051,522	1,051,522
Directors Loss of Office	86,855	-	-
Intangible impairment related to reverse acquisition	-	214,247	214,247
Refinancing costs are in relation to fees incurred on a change in the Company's bankers. Acquisition costs and intangible impairment relate to the reverse acquisition of Felix Group PLC. A.Richardson resigned as a director of the Company on 8th May 2009, compensation for loss of office and associated legal costs total £86,855.

	Unaudited	Audited	Unaudited
	6 Months	12 Months	6 Months
4. INCOME TAX EXPENSE	31.7.09	31.1.09	31.7.08
	£	£	£
The income tax expense is based on the estimated effective rate of taxation on trading for the period and represents:
Current tax	-	53,560	-
Deferred tax:
Origination and reversal of timing differences	41,963	65,417	4,854
Income tax expense	41,963	118,977	4,854

5. EARNINGS PER ORDINARY SHARE 

Basic earnings per ordinary share is calculated by dividing the earnings attributable to the ordinary shareholders by the weighted average number of ordinary shares outstanding during the period of 53,518,778 (31/1/09: 43,711,390)

(31/07/08: 40,693,377). 

Diluted EPS is not calculated as in accordance with IAS33 potential ordinary shares are only dilutive when their conversion to ordinary shares would decrease earnings per share or increase the loss per share from continuing operations. 

6. CAPITAL AND RESERVES

Share Share Rev. Acq. Capital Retained Total Capital Premium Reserve Cont. Res. Earnings Equity £ £ £ £ £ £ Balance at 1 February 2008 2,406,763 15,981,764 (18,175,942) 119,696 296,599 628,880  Loss for the period  - - - - (964,723) (964,723)  Share based payment - - - - 54,892 54,892 Issue of shares to effect reverse acquisition 1,316,000 - 489,263 - - 1,805,263 Issue of shares for Crawshaw Holdings Ltd preference shares 244,000 - 1,583,567 - - 1,827,567 Proceeds from share issue 533,333 3,382,873 - - - 3,916,206 Cancellation of 0.9p deferred shares (2,166,087) (14,383,588) 16,549,675 - - - Capital contribution - - 29,615 - 29,615 Balance at 31 January 2009 2,334,009 4,981,049 446,563 149,311 (613,232) 7,297,700 Loss for the period - - - - (85,852) (85,852) Share based payment - - - - 36,585 36,585 Loan note conversion 294,118 705,882 - - - 1,000,000 Issue of shares 262,813 630,687 - - - 893,500 Balance at 31 July 2009 2,890,940 6,317,618 446,563 149,311 (662,499) 9,141,933 Reverse acquisition  On 11 April 2008, the Company acquired in a share for share exchange the whole of the ordinary share capital of Crawshaw Holdings Limited. The reverse acquisition reserve arises on the accounting for the share for share exchange. Reverse acquisition accounting requires that Crawshaw Holdings Limited is treated as the acquirer and the Company the acquired. A reverse acquisition reserve arises which represents the difference between the issued equity   instruments of Crawshaw Holdings Limited immediately before the share for share exchange and the equity instruments of the Company along with the shares issued to effect the share for share exchange.  The intention of reverse acquisition accounting is to present the Group as having always existed except that the capital and reserves presented in the Group balance sheet are those of the Company in all years and not Crawshaw Holdings Limited. As a result the reverse acquisition reserve arises at February 2007, that being the start of the earliest comparable period. Within the Condensed Consolidated Statement of Changes in Shareholders' Equity the capital and reserves at 1 February 2008 represent those presented in the financial statements for the year ended 31 January 2009.During the preparation of the accounts for the year ended 31 January 2009, the complex disclosure aspects of the reverse acquisition were revised to separately identify the issue of shares to acquire the Crawshaw Holdings Limited preference shares. The comparative financial information has hence been revised to a basis consistent with the audited financial statements for the year ended 31 January 2009.The net asset position did not change. The capital contribution reserve arose in relation to the waiver of shareholder loan note interest prior to the reverse acquisition. Share Issues On 10th February 2009 the directors and key employees of the Company converted £1,000,000 loan notes into 5,882,353 ordinary shares increasing the issued share capital by £294,118. On 19th June 2009 ISIS Equity Partners LLP subscribed for 5,256,254 ordinary shares at 17p per share raising £893,500 to support the Company's store rollout strategy. 7. SHARE CAPITAL  31.7.09   31.1.09   31.7.08  Authorised  £   £   £  96,678,257 ordinary shares of 5p each 4,833,913  4,833,913 4,833,913 Allotted, called up and fully paid  £   £   £  57,818,801 ordinary shares of 5p each 2,890,940  2,334,009 2,334,009

 8. RELATED PARTY TRANSACTIONS 

Crawshaw Butchers Limited, a subsidiary of Crawshaw Holdings Limited, holds a 50% share in a partnership which trades under the name of RGV Refrigeration. The operations of the partnership comprise of the maintenance and repair of refrigeration machinery for a variety of customers. The Group received management charges of £4,000 in the period from RGV Refrigeration. 

INDEPENDENT REVIEW REPORT TO CRAWSHAW GROUP PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 31 July 2009 which comprises the Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Balance Sheet, Condensed Consolidated Cashflow Statement, Condensed Consolidated Statement of Changes in Shareholders' Equity and the related explanatory notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly report for the six months ended 31 July 2009 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and AIM Rules.

A J Stone (Senior Statutory Auditor)

For and behalf of KPMG Audit Plc (Statutory Auditor)

Chartered Accountants

Leeds

13 October 2009

The interim financial information for the 6 month period ended 31 July 2009 has not been audited but has been reviewed by the auditors. 

The comparative figures for the financial year ended 31 January 2009 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. This announcement has been agreed with the company's auditors for release.

A copy of the full interim report will be sent to all shareholders shortly and will be available from the company's registered office : Unit 15 Bradmarsh Business Park, Bow Bridge Close, Rotherham, S60 1BY, next week. It will also be published on the Company's website www.crawshawgroupplc.com.

For further information please contact:

Crawshaw Group PLC

Lynda Sherratt, Finance Director and Company Secretary,

01709 369 602

Investec Investment Banking

James Grace/Martin Smith

0207 597 5970

ENDIR FFIFMESUSEIS

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Crawshaw Group