Final Results
Creightons PLC
27 July 2007
CREIGHTONS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2007
Chairman's Statement
Review of the year.
The integration of our manufacturing facilities onto the one - Potter & Moore
Innovations - site at Peterborough was completed during the year, and I am
pleased to be able to report to you that the consequential cost savings we
anticipated have now begun to flow through into the Group income statement.
All production has therefore now been very successfully consolidated onto the
Peterborough site, with retention of all significant customers who had
previously been sourced from Storrington. Our customer service levels have
remained consistently high, and we are also seeing the effect of improved
efficiencies now that the bedding in of the transferred products has been
achieved.
We have continued with our policy of investment in and development of our ranges
of branded products, and believe this investment is paying-off in the increase
in sales and profits for our branded businesses, as well as enabling us to be
extremely competitive in formulating new and aspirational products for our
private label customers.
Financial Results
Consolidated Group sales this year were up £349,000 (an increase of 2.8%) at
£12,917,000 (2006: £12,568,000). This improvement over last year's result has
been due in particular to increased sales to our branded and contract products.
Sales and gross profit were again both higher in the second half due to the
seasonal contract business at Christmas. As in previous years, the Group has
continued to strive for low cost producer status, without compromising on
product or service level quality. We have also continued to make further
investment in marketing, sales, and technical R&D support.
I reported to you in the interim statement that the board took the decision at
the beginning of the year to make a significant investment in resources to cope
with the high level of new product development associated with the branded
development programme and a major re-launch with a key private label customer.
It was hoped that the benefit of this investment will be seen in the next year
with a full year of sales of the new products. I am pleased to say that we are
already seeing the first benefits of this investment, as sales of the new
products came on stream after Christmas, and contributed to this year's
increased sales level. This investment has however resulted in increased
overhead costs. Interest costs have fallen as borrowings have been repaid.
Operating profit before tax and interest for the year was £461,000 (2006:
£926,000). Last year's result includes the net profit from the closure and
disposal of the Storrington operation and resultant restructuring costs, a
one-off net income of £393,000. Significant overhead and operational cost
savings are now flowing through to profits from the closure of the Storrington
site.
Financing costs are reduced further due to the lower borrowings levels, the
proceeds from the site disposal and the improved profitability of the business,
providing the group with the significant amount of the working capital required
for the Christmas stock build.
Profit after tax was £383,000 (2006: £823,000), with diluted earnings per share
from continuing operations of 0.65p (2006: 1.40p). At this stage, the directors
do not believe a dividend would be in the best interests of the Group since
these earnings have been applied to consolidate the Group's financial position.
Current year developments
The Group continues to develop and strengthen its branded portfolio, with new
brands that have been launched into the premium and middle markets. We have
recently established a wholly-owned subsidiary in the US to facilitate expansion
of our branded product portfolio in the highly strategic North American market.
As in previous years, your board is continuing to seek opportunities to acquire
brands or companies that would complement the existing businesses by offering
synergies in manufacturing, sourcing and marketing due to similarities in
product alignment, sourcing or outlets.
I would like to take this opportunity to thank each and every one of the Group's
employees for the hard work and effort they have put in over the past year.
William McIlroy
Chairman, 27 July 2007
Consolidated income statement
Year ended 31 Year ended 31 March
March
2007 2006
Note £000 £000
Revenue 12,917 12,568
Cost of sales (7,789) (7,686)
Gross Profit 5,128 4,882
Distribution costs (378) (299)
Administrative expenses (4,289) (4,099)
Profit on disposal of property - 442
Operating profit 461 926
Investment revenues 1 3
Finance costs (79) (121)
Profit before tax 383 808
Tax - 15
Profit for the period from continuing operations attributable 383 823
to the equity holders of the parent company
Earnings per share from continuing operations
Basic 1 0.71p 1.52p
Diluted 1 0.65p 1.40p
The company has elected to take exemption under S230 of the Companies act 1985
not to present the parent company's income statement.
The loss of the parent company was £5,000.
Consolidated statement of recognised income and expense
Year ended Year ended
31 March 31 March
2007 2006
Note £000 £000
Net income recognised directly in equity
Profit for the period 4 383 823
Total recognised income and expense for the period wholly 383 823
attributable to the equity holders of the parent
Consolidated balance sheet - at 31 March 2007
31 March 31 March
2007 2006
As restated
Note £000 £000
Non-current assets
Goodwill 331 331
Other intangible assets 136 84
Property, plant and equipment 517 336
984 751
Current assets
Inventories 3,813 1,805
Trade and other receivables 2,056 1,328
Cash and cash equivalents 14 77
5,883 3,210
Total assets 6,867 3,961
Current liabilities
Trade and other payables 2,359 1,491
Obligations under finance leases 11 3
Bank overdrafts and loans 1,951 340
Derivative financial instruments 4 -
4,325 1,834
Net current assets 1,558 1,376
Non-current liabilities
Obligations under finance leases 40 13
40 13
Total liabilities 4,365 1,847
Net assets 2,502 2,114
Equity
Share capital 2 543 543
Share premium account 4 1,229 1,229
Capital redemption reserve 4 18 18
Capital reserve 4 7 7
Special reserve 4 13 13
Share-based payment reserve 4 52 47
Retained earnings 4 640 257
Total equity available to the holders of the parent company 2,502 2,114
Company balance sheet - at 31 March 2007
31 March 31 March
2007 2006
Note £000 £000
Non-current assets
Investment in subsidiaries 60 60
60 60
Current assets
Trade and other receivables 2,014 2,103
2,014 2,103
Total assets 2,074 2,163
Current liabilities
Trade and other payables 35 124
35 124
Net current assets 1,979 1,979
Total liabilities 35 124
Net assets 2,039 2,039
Equity
Share capital 2 543 543
Share premium account 4 1,229 1,229
Capital redemption reserve 4 18 18
Special reserve 4 1,441 1,441
Share-based payment reserve 4 52 47
Retained earnings 4 (1,244) (1,239)
Total equity available to the holders of the parent company 2,039 2,039
Consolidated cash flow statement
Year ended Year ended
31 March 31 March
2007 2006
Note £000 £000
Net cash (outflow)/inflow from operating activities 7 (1,310) 580
Cash flow from investing activities
Proceeds on disposal of property, plant and equipment 8 1,596
Purchase of property, plant and equipment (251) (152)
Expenditure on intangible assets (107) (86)
Net cash (used in)/from investing activities (350) 1,358
Cash flow from financing activities
Repayment of borrowings - (1,534)
Repayment of finance lease obligations (14) (47)
Increase /(decrease) in bank overdrafts 1,611 (281)
Net cash from/(used in) used in financing activities 1,597 (1,862)
Net (decrease)/increase in cash and cash equivalents (63) 76
Cash and cash equivalents at start of period 77 1
Cash and cash equivalents at end of period 14 77
Company cash flow statement
Year ended Year ended
31 March 31 March
2007 2006
Note £000 £000
Net cash outflow from operating activities 7 - (649)
Cash flow from investing activities
Interest received - 113
Proceeds on disposal of property, plant and equipment - 1,667
Purchase of property, plant and equipment - (20)
Net cash from investing activities 1,760
Cash flow from financing activities
Repayment of borrowings - (881)
Decrease in bank overdrafts - (230)
Net cash used in financing activities - (1,111)
Net increase in cash and cash equivalents - -
Cash and cash equivalents at start of period - -
Cash and cash equivalents at end of period - -
1 Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Year ended 31 Year ended
March 31 March
2007 2006
£000 £000
Earnings
Net profit attributable to the equity holders of the parent 383 823
company
Year ended 31 Year ended
March 31 March
2007 2006
Number Number
Number of shares
Weighted average number of ordinary shares for the purposes of 54,275,876 54,275,876
basic earnings per share
Effect of dilutive potential ordinary shares relating to Share 4,256,550 4,582,203
options
Weighted average number of ordinary shares for the purposes of 58,532,426 58,858,079
diluted earnings per share
2. Share capital
Ordinary shares of 1p each
2007 2006
£000 Number £000 Number
Authorised 1,223 122,346,000 1,223 122,346,000
Issued and fully paid 543 54,275,876 543 54,275,876
The Company has one class of ordinary shares which carry no right to fixed
income.
3 Prior year adjustment
An adjustment has been made reducing the value of the Goodwill disclosed in the
financial statements. The introduction of IFRS allowed for the carrying value
at the transition date to form the basis of the ongoing valuation, which would
then be subject to impairment tests. The value originally used at the
transition date incorrectly excluded the accumulated depreciation of £33,000 at
that date. This error has been corrected in the financial statements by
adjusting the carrying value of Goodwill and retained earnings.
4. Reserves and changes in equity
Group
Share Share Capital Capital Special Share-based Retained Total
capital premium redemption reserve payment
account reserve reserve reserve reserve equity
£000 £000 £000 £000 £000 £000 £000 £000
At 1 April 2005 543 1,229 18 7 13 26 (533) 1,303
Prior year - - - - - - (33) (33)
adjustment
At 1 April 2005 543 1,229 18 7 13 26 (566) 1.270
(restated)
Additional - - - - - 21 - 21
provision
Net profit for - - - - - - 823 823
the year
At 31 March 543 1,229 18 7 13 47 257 2,114
2006
Additional - - - - - 5 - 5
provision
Net profit for - - - - - - 383 383
the year
At 31 March 543 1,229 18 7 13 52 640 2,502
2007
Company
Share Share premium Capital Special Share-based Retained Total
capital account redemption payment
reserve reserve reserve reserve equity
£000 £000 £000 £000 £000 £000 £000
At 1 April 2005 543 1,229 18 1,441 26 (2,035) 1,222
Additional provision - - - - 21 - 21
Net profit for the year - - - - - 796 796
At 31 March 2006 543 1,229 18 1,441 47 (1,239) 2,039
Additional provision - - - - 5 - 5
Net (loss) for the year - - - - - (5) (5)
At 31 March 2007 543 1,229 18 1,441 52 (1,244) 2,039
The Company obtained a court ruling dated 19 March 1997 under which the
reduction in share premium was credited to a special reserve. The special
reserve was first used to write off the deficit on the company profit and loss
account and then to write off the goodwill arising on the acquisition of Crestol
Limited to the Group profit and loss account. At 31 March 2007 goodwill written
off amounts to £2,575,000 (2006: £2,575,000).
Under the court ruling, the special reserve may be used to write-off goodwill on
any further acquisition. To the extent that there shall remain any sum standing
to the credit of the reserve, it shall be treated as unrealised profit and as a
non-distributable reserve, until such time as the creditors existing at the date
of the ruling have been satisfied or consent to its distribution.
5. Share-based payments
The Company has a share option scheme which is open to any employee of the
Group. Options granted under the scheme are for nil consideration and are
exercisable at a price equal to the quoted market price of the Company's shares
on the date of the grant. The vesting period is 3 years. If the options remain
unexercised after a period of 7 years from the date of grant, the option
expires. Options are forfeited if the employee leaves the group before options
vest.
Ordinary shares of 1p each
2007 2006
Number Weighted Number Weighted
average average
exercise price exercise price
Outstanding at the beginning of the 4,682,203 2.75p 5,182,203 2.75p
period
Forfeited in the period (425,653) 2.75p (500,000) 2.75p
Outstanding at the end of the period 4,256,550 2.75p 4,682,203 2.75p
The options were granted on 9 January 2004 and are exercisable between 9 January
2007 and 8 January 2011.
The inputs into the Black-Scholes model are as follows:
Year ended
31 March
2006 & 2007
Weighted average share price (pence) 3.00P
Weighted average exercise price (pence) 2.75p
Expected volatility (%) 41.8%
Expected life (years) 1.3
Risk free rate (%) 4.5%
Expected dividends (pence) -
Expected volatility was determined by calculating the historical volatility of
the Group's share price over the previous year. The expected life used in the
model has been adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions, and behavioural considerations.
The Group recognised total expenses of £5,000 (2006 - £21,000) related to share
based payments.
6. Related party transactions
Transactions between the parent company and its subsidiary
During the year group entered into the following transactions with its
subsidiaries: -
Year ended 31 Year ended
March 31 March
2007 2006
£000 £000
Sale of assets on transfer of business - 613
Charges for management services 40 -
Interest charged on inter company financing - 113
The assets and trade formerly undertaken by Creightons Plc was transferred to
its wholly owned subsidiary, Potter & Moore Innovations Ltd, on 31 March 2006.
The amounts owed by and to subsidiary companies are:
Year ended 31 Year ended
March 31 March
2007 2006
£000 £000
Amounts receivable from subsidiary undertakings 2,014 2,088
Amounts payable to subsidiary undertakings (35) (35)
Whiskin Limited
Group companies entered into the following transactions with Whiskin Limited, a
company of which Mr McIlroy is a director and controlling shareholder:
Year ended 31 Year ended
March 31 March
2007 2006
£000 £000
Loan payable to Whiskin Limited
Start of period - 653
Interest charged - 32
Repayments of interest and capital - (685)
End of period - -
Oratorio Developments limited
On 24 July 2006 Oratorio Developments Limited, a company of which Mr McIlroy is
a director and controlling shareholder, acquired the premises occupied by the
Potter & Moore Innovations Limited. The following amounts were charged under
the terms of the lease:
Year ended 31 Year ended
March 31 March
2007 2006
£000 £000
Rental charges 84 -
Re-imbursement of utility charges. 5 -
Total 89 -
Remuneration of key management personnel
The remuneration of the directors', who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in IAS
24, 'Related Party Disclosure'. Further information about the remuneration of
individual directors is provided in the audited part of the Director'
Remuneration Report .
Year ended 31 Year ended 31
March March
2007 2006
£000 £000
Salaries and other short term benefits 208 196
Post employment benefits 3 4
Share based payments 12 16
Total 223 216
7. Notes to cash flow statement
Group
Year ended 31 Year ended
March 31 March
2007 2006
£000 £000
Profit from operations 461 926
Adjustments for:
Investment revenues 1 3
Depreciation on property plant and equipment 117 267
Amortisation of intangible assets 55 5
(Gain) on disposal of property, plant and equipment (6) (442)
Share based payment charge 5 21
Other non cash items 4 -
637 780
Decrease /(Increase) in inventories (2,008) 283
Decrease / (Increase) in trade and other receivables (728) 278
(Decrease) / Increase in trade and other payables 868 (640)
Cash generated from operations (1,231) 701
Interest paid (79) (121)
Net cash (outflow)/inflow from operating activities (1,310) 580
Additions to plant and equipment during the year amounting to £ 49,000 (2006 -
16,000) were financed by new finance leases.
Cash and cash equivalents (which are presented as a single asset on the face of
the balance sheet) comprise cash at bank and in hand.
Company
Year ended 31 Year ended
March 31 March
2007 2006
£000 £000
(Loss)/profit from operations (5) 719
Adjustments for:
Depreciation on property plant and equipment - 185
Amortisation of intangible assets - 3
(Gain)/loss on disposal of property, plant and equipment - (442)
Share based payment charge 5 21
- 486
Decrease in inventories - 611
Decrease /(increase) in trade and other receivables 89 (861)
(Decrease) in trade and other payables (89) (849)
Cash generated from operations - (613)
Interest paid - (36)
Net cash (outflow) from operating activities - (649)
Cash and cash equivalents (which are presented as a single asset on the face of
the balance sheet) comprise cash at bank and in hand.
The preliminary statement of results has been reviewed and agreed with the
Company's auditors, Chantrey Vellacott DFK LLP, who have indicated that they
will be giving an unqualified opinion in their report on the statutory financial
statements.
Copies of the annual report and consolidated financial statements for the year
ended 31 March 2007 will be sent to shareholders in due course. Further copies
will be available from the Company's registered office, at 1210 Lincoln Road,
Peterborough, PE4 6ND.
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