Interim Results 2016/17 Investor Presentation September 2016 ?· Investor Presentation September 2016.…

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Interim Results 2016/17Investor PresentationSeptember 20162DISCLAIMERNo reliance may be placed for any purpose whatsoever on the information or opinions contained in this Presentation or its completeness. Neither Crawshaws nor Peel Hunt LLP nor any of their respective directors, employees, agents or advisers give, have given or have authority to give any representation or warranty express or implied, as to the accuracy, completeness or fairness of the information or opinions contained in this Presentation, or any revision thereof, or as to any other written or oral information relating to Crawshaws to be made available to any interested party and/or its advisors (all such information and opinions the Information) and save in the case of fraud, no such person accepts any responsibility or liability (and all such liability is hereby excluded to the extent permitted by law) for any loss, cost, damage of expense suffered as a result of reliance on any such Information.This Presentation may not be reproduced or further distributed to any other person or published, in whole or in part, for any purpose. Neither this Presentation (or any copy of it) nor the information contained in this Presentation may be sent or taken into the United States, Canada, Australia or Japan, nor may it be distributed to any US person (within the meaning of regulation S under the US Securities Act of 1933, as amended) or to any national, resident or citizen of Canada, Australia or Japan or to any person in any other country outside the United Kingdom where such distribution may lead to a breach of any legal or regulatory requirement.Furthermore, this Presentation is being made only in the United Kingdom and is directed only at (i) persons who are investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529), as amended, (the FPO); (ii) persons falling within paragraph 49 of the FPO (high net worth companies, unincorporated associations etc.); and (iii) persons to whom it is otherwise lawful to communicate this Presentation (Permitted Recipients). Any persons who are not Permitted Recipients should not stay for the remainder of this presentation and, in any event, must not act or rely upon the information contained in this Presentation. By staying for the remainder of this presentation and/or receiving this Presentation, each participant is deemed to confirm that they are a Permitted Recipient.BUSINESS OVERVIEW4WHO ARE CRAWSHAWS? Fresh meat and food-to-go value retailer Delighting customers by selling a wide variety of quality fresh meats and food-to-go products at value prices(Picture: New Store in Bolton Opened July 2015)5WHERE ARE CRAWSHAWS? Currently 49 stores in the North of England and the Midlands Areas of Representation:(a) shopping centres 34%, (b) high st. 48%, (c) markets 10%, (d) factory shops 8% Ability to have a high density of stores in smaller catchments (within 10 miles) Key:22 stores in FY15+17 stores in FY16+10 stores in FY17 (so far)FRESH MEAT (62% SALES)6THE RETAIL PROPOSITION - QUALITY, VALUE, VARIETY In-house prepared and packed quality fresh meat sold from multi-deck displays Fixed price points of 2.50 and 5 (plus Mix & Match multi-buy offers) Weekly value-led promotions offering even greater value (hero lines) Product and pack size varieties to satisfy all customer needs Market trader fresh meat proposition and experience on the high street7 In-house prepared and cooked quality fresh meals displayed in hot serve-over counters Fixed price points for individual meals (plus meal-deal /combi / daily special offers) The breakfast, lunch, teatime menus are promoted under The Butchers Kitchen brand A key opportunity to showcase the quality of fresh meat through cooked food-to-go The combination of the fresh meat & food-to-go allows almost zero stock wastageTHE RETAIL PROPOSITION - QUALITY, VALUE, VARIETYFOOD-TO-GO (38% SALES)8Sourcing Sufficient Volumes:In 2014, globally 312m tonnes and in the UK 5.3m tonnes PRODUCT SOURCING VOLUME & QUALITYSourcing Great Quality:(Food & Agriculture Organisation Meat Production Figures)CRAWSHAWS COMPETITIVE ADVANTAGESFarms / Producers Packers / Importers Wholesalers RetailersFlexibility to source directly from producers and importers:Sourcing direct within the UK and International markets (effectively cutting out the middle-man)Slaughter / Abattoir91. Flexibility in species size / weight: 2. Flexibility to efficiently handle imbalanced primal cuts:Example - Chickens: Complete flexibility on product specification (size, calibration, weight, volume)Example - Beef:Ability to handle volumes of primal cuts from the carcass due to imbalanced sales patterns (e.g. sirloin, rump, fillet, topside, silverside) CRAWSHAWS COMPETITIVE ADVANTAGESPRODUCT SOURCING - UNLOCKING TRUE QUALITY / VALUEOffers a great opportunity to undertake additional short-term promotional activity3. Flexibility to access the residuals market for short-term promotions: 10Central Production(In-house Factory)CRAWSHAWS COMPETITIVE ADVANTAGESStore Handling(Boxed Primals)85%5,876 tonnes(annually)15%1,040 tonnes(annually)Unique Handling & Production Capability:VERTICALLY INTEGRATED CONCEPT11In-house factory production of premium award winning rangeSupplier Factory Production Distribution StoresCRAWSHAWS COMPETITIVE ADVANTAGESVERTICALLY INTEGRATED CONCEPTCentral preparation, packaging and handling capability Own transportation fleet to undertake all deliveries internallyKey Benefits: VOLUME Cost effective method with full control over availability and store service QUALITY Full control and traceability over product handling and production integrity 12 On average, Crawshaws is c.35% cheaper than the Supermarkets and c.20% cheaper than the Discounters Flexible product sourcing combined with our unique vertically integrated concept provides volume control, production integrity and quality assurance Passionate, knowledgeable and friendly store colleagues delivering personal customer service. The latest customer survey results indicate that our customers highly rate product quality, value for money and customer service. Our customers are very loyal(*survey c.300 customers 2009,2011,2013,2015)CRAWSHAWS COMPETITIVE ADVANTAGESMARKET LEADING ON PRICE, QUALITY & SERVICEExceptionally high Net Promoter Score (NPS) of 94 confirms customer confidence and loyalty in our price, quality and serviceFINANCIAL HIGHLIGHTS14INCOME & PROFITABILITY STATEMENT Group sales increase of +29% year-on-year Gross profit increase higher than sales growth due to margin rate development from 44.8% to 45.2% Adjusted EBTIDA in line with last year No dividend proposed, cash to be retained for future growth* Adjusted EBITDA is defined by the Group as profit/(loss) before tax, exceptional items, depreciation, amortisation, net finance costs, accelerated opening costs and share based payments. Acceleration opening costs are defined by the Group as investments in people, processes and systems in the year to provide the building blocks for future growth.Half Year Half Year Half Year2015 Growth 2016 Growth 2017m % m % mRevenue 11.8 41% 16.7 29% 21.6Gross Profit 5.2 44% 7.5 31% 9.8Adjusted EBITDA* 0.9 41% 1.2 -14% 1.1Adjusted Profit Before Tax* 0.7 27% 0.9 -43% 0.5Adjusted Earnings per Share* 0.874p 26% 1.102p -44% 0.618pProposed Dividend per Share 0.10p 0% 0.10p -100% 0.00p15CASH FLOW STATEMENT Asset additions in line with growth plan 9 new stores and 4 x 26T trucks H1 position includes 1.4m of timing difference. Underlying cash 2.6m 4m, 5-Year RCF in place with RBSHalf Year Full Year Half Year2016 2016 2017m m mProfit Before Tax (adjusted for non-cash items) 0.4 0.9 0.3Changes in Working Capital 1.2 1.3 1.0Asset Additions (0.9) (2.3) (2.5)Acquisitions (3.4) (3.4) 0.0Dividend (0.4) (0.4) 0.0Tax (Paid)/Received 0.0 (0.3) 0.2Share Placing/Asset Finance 0.0 0.0 0.1Net Cash Movement (3.1) (4.2) (0.9)Cash & Equivalents (at the end of the year) 6.0 4.9 4.016* Revised investment in CAPEX and REVEX in line with costs associated with opening up to 12 new stores (instead of 15) and assisted by some internal efficienciesBudgeted Investment:Capital ExpenditureCommentsRevenue ExpenditureCommentsm m1. Strategic investment in existng portfolio 0.2 Shop Refit, Single Brand 0.2 Store Personnel Cost2. Rapid Expansion programme 3.8 New Stores (15 at 250k) 0.6 Property, pre-opening costs3. Further supply chain developments 0.4 Factory Plant, Vehicles 0.0 --4. Personnel recruitment ahead of expansion 0.2 HO, Furniture, Equip 1.2 Salaries, Agency, RecruitmentTotal 4.6 2.0Revised Investment:H1 - Actual 2.5 0.7H2 - Planned 1.0 0.5Total FY - Planned 3.5 1.2CAPITAL & REVENUE EXPENDITURE11.816.721.610152025HY 2015 HY 2016 HY 2017Group Sales m17SALES TOTAL GROUP REVIEWQ1+49%P1 P2 P360% 64% 33%Q2+16%H2 2017 (First 7 Weeks)+11%P4 P5 P6+22% +14% +14%H1-2017+29%18SALES LFL REVIEWH1-2017(4.4%)Q1(0.8%)Q2(7.8%)Q1(2.2%)P1 P2 P3(0.6%) (0.1%) (1.5%)Q2+3.5%H2 2017 (First 7 Weeks)(15.8%)H1-2016+1.0%P4 P5 P6(0.5%) (9.9%) (11.8%)H1(1.5%)H2(15.3%)LFL Cash Margin OPERATIONAL HIGHLIGHTS20SALES GROWTH RESTORATION PLAN Recognised and balanced the centralised decision making process while maintaining the flexibility for our managers to serve their customers Rebuilding some of the core decision making processes at store level and empowering the store staff to respond to changes in customer needs for both the fresh meat and food-to-go categories Increased the number and depth of value-led promotions (hero lines) for managers to choose the promotions that resonate most with customers A heightened focus on delivering a great butchers customer service Continue to rebuild more local supplier relationships, particularly within the food-to-go category Development of the store level framework in preparation for the next phase of new store openingsA Flexible Commercial Framework Store Managers21SALES GROWTH RESTORATION PLANFresh Meat Sales Momentum Initiatives: Local management input on price-point requirements Freedom on the range and merchandising to satisfy local customer needs Introduction of more weekly store specific value-led promotions Local management to balance the bigger packs, better value with small packs, great value specific to customer needs Trial in test store of even lower fixed price points/smaller packse.g. 2 (3 for 5), 4 (3 for 10) and 5 single packs22SALES GROWTH RESTORATION PLANFood-To-Go Sales Momentum Initiatives: Flexible principles applied to the Butchers Kitchen food-to-go menu Reintroduce the local old favourites specific to customer needs Introduction of more value-led promotions (e.g. cooked chickens/portions) Price roll-back and flexibility for managers to price menu items locally Local supplier flexibility to maximise choice, quality and value 23NEW STORES High Street & Shopping CentreBurnley (Opened 19th August 2016) Combination of the fresh meat and food-to-go proposition New store population contributing a 60% fresh meat / 40% FTG ratio24Burnley (FRESH MEAT - Promotion-led Opening Offers) Fresh meat focus to reinforce the freshness, quality, range and value proposition Value-led promotions to entice customers to try the great quality Offering a mix of price points and pack sizes to satisfy customer needs Management flexibility to adapt promotions to build loyaltyNEW STORES High Street & Shopping Centre25Burnley (FOOD-TO-GO New Butchers Kitchen Menu)NEW STORES High Street & Shopping Centre A Butchers Kitchen menu that compliments the quality, range and value m m m mTurnover 0.97 1.04 0.83 0.92Margin 0.46 (47%) 0.47 (45%) 0.37 (44%) 0.42 (46%)Direct Personnel Costs 0.18 (19%) 0.20 (19%) 0.17 (21%) 0.18 (20%)Overheads 0.14 (14%) 0.15 (14%) 0.12 (14%) 0.13 (14%)EBITDA (store level) 0.14 (14%) 0.12 (12%) 0.07 (9%) 0.11 (12%)Capex 0.25 0.25 0.25Payback*calculation excludes any rent-free period 2.1 Yrs* 3.5 Yrs 2.3 YrsLegacy Estate (exc l. Fac tory Shops & Market Stalls)Actual New Stores (x13) Yr 1 Indicative Yr 2 MatureBase Model Yr 1 Indicative26Base Model & High Street/Shopping Centre New Stores Comparative Analysis Current high street and shopping centre stores are trading profitably All new stores will benefit from the local value-led promotional strategy to build sales momentumNEW STORES High Street & Shopping CentreActual H1 201727NEW STORES Factory Outlet ShopWest Bromwich (Opened 8th June 2016) Fresh meat factory shop (no food-to-go offer) A prominent destination location with customer parking for convenience The format is not dependent on upon localised footfall28NEW STORES Factory Outlet ShopWest Bromwich (FRESH MEAT - Promotion-led Opening Offers) Branded as a fresh meat factory shop (differentiation from the high street format) A fresh-meat-only focus to promoting freshness, quality, range and value proposition Offering every cut of every size for every occasion satisfying a wider customer base Selling higher volumes of fresh meat as customers recognise the great value Local management flexibility to adapt promotions to build loyalty29m m m mTurnover 2.94 1.04 1.30 1.46Margin 1.15 (39%) 0.47 (45%) 0.51 (39%) 0.58 (40%)Direct Personnel Costs 0.35 (12%) 0.20 (19%) 0.20 (15%) 0.20 (13%)Overheads 0.21 (7%) 0.15 (14%) 0.13 (10%) 0.14 (10%)EBITDA (store level) 0.59 (20%) 0.12 (12%) 0.18 (14%) 0.25 (17%)Capex 0.25 0.20 0.20Payback*calculation excludes any rent-free period 2.1 Yrs* 1.1 Yrs 0.8 YrsFactory Shops (x3)Base Model West Bromwich Factory ShopYr 1 Indicative Yr 1 Indicative Yr 2 MatureBase Model & Factory Shop Performance Comparative Analysis Current factory shops performing significantly above the base model economics West Bromwich exceeding expectations at 25k sales pw and 14% EBITDA Up to 2 further factory shops are in advance stages to potentially open in H2NEW STORES Factory Outlet ShopActual H1 201730m m mTurnover 1.04 1.07 1.19Margin 0.47 (45%) 0.44 (41%) 0.50 (42%)Direct Personnel Costs 0.20 (19%) 0.18 (17%) 0.19 (16%)Overheads 0.15 (14%) 0.12 (11%) 0.13 (11%)EBITDA (store level) 0.12 (12%) 0.13 (12%) 0.18 (15%)Capex 0.25 0.23 0.23Payback*calculation excludes any rent-free period 2.1 Yrs* 1.8 Yrs 1.3 YrsBase Model Blended Mix (High St/Fact Shop)Yr 1 Indicative Yr 1 Indicative Yr 2 MatureBase Model & Blended Mix of New Stores (50% High St & 50% Factory Shops)Comparative Analysis A blended mix of high street stores and factory shops have very attractive economics The blended mix contributes higher sales, lower capex and quicker payback Pipeline being reviewed to include more options for factory outlet shopsNEW STORES Blended MixGROWTH STRATEGY32Planned new store openings per year22 2239546989109134164194171515202025303030223954698910913416419422402856841121401681962242522802015 2016 2017 2018 2019 2020 2021 2022 2023 2024(*11 Gabbotts & 6 New Openings)*NEW STORE OPENING STRATEGYUp to 12 openings for FY2017 (51 Stores)33Opportunities for each store format present within existing geographical regionNorth West7.1mEast Midlands4.6mYorkshire / Humber5.4mWest Midlands5.7mNEW STORE OPENING STRATEGY34SUMMARY WHY CRAWSHAWS?A unique and powerful quality-value retail concept with clear competitive advantagesConcept has UK Scalability and potential to be a National BrandA proven concept where all stores are profitable and non-seasonal profit dependentNew stores are profitable from day one and reach sales/profit maturity end of year 2Cash generative business, working capital benefits and short payback on investmentNo direct or comparable competition effectively operating in our own marketAmbitious and realistic accelerated growth strategy which is progressing wellLeadership team with a proven track record in the quality-value sectorAPPENDIX36DIRECTORSRichard Rose Chairman- Purchased Crawshaws in 2007, Crawshaws IPO in 2008- Chairman: Anpario plc, Watchstone Group Plc, Blue Inc Ltd, CurrencyFair and Dorcaster plcMark Naughton-Rumbo Non Exec Director- CEO AIWear Ltd- Previously CEO Whittards of Chelsea plc Ken McMeiken Non Exec Director (appointed 8 July 2016)- CEO of Brakes Ltd - Previously CEO Greggs PlcNoel Collett Chief Executive Officer- Previously COO Lidl UK Ltd 2002-2015 started on 01.03.15Alan Richardson Chief Financial Officer- Previously Finance Director Retail & Logistics, Morrisons started on 07.09.15Kevin Boyd Chief Commercial Officer- Previously Managing Director & Ops Director, Crawshaws 25 years service37STATEMENT OF FINANCIAL POSITION Property, Plant, Equipment investments in line with Growth Plan Lease liabilities increased through new store rent free periodsBalance SheetHalf Year Full Year Half Year2016 2016 2017m m mIntangible Assets 11.2 11.0 11.0Property, Plant, Equipment 6.3 7.3 9.2Working Capital (2.9) (2.6) (3.4)Net Cash 5.9 4.9 4.0Borrowings / Lease Liabilities (0.3) (0.3) (0.6)Taxes (0.6) (0.6) (0.6)Net Shareholders Equity 19.6 19.7 19.638COMPETITIVE ADVANTAGE - PRICEPrice comparison to the supermarkets (prices per kg)On average, Crawshaws is c.30-35% cheaper than the Supermarkets and 15-20% cheaper than the DiscountersAverage(Big 4)Chicken Breast Fillets 6.90 5.95 6.41 6.25 6.38 4.99 22%Chicken Portions 2.50 2.50 2.50 2.10 2.40 2.22 7%Bacon (smoked back) 6.67 6.67 6.67 4.00 6.00 4.00 33%Sausages (butchers) 3.31 3.30 3.30 4.06 3.49 2.50 29%Burgers (95% beef) 5.48 4.70 5.51 5.88 5.39 4.35 19%Silverside / Topside 11.00 12.96 10.00 10.00 10.99 4.99 55%Braising / Stewing Steak 8.75 10.00 8.89 8.34 9.00 4.99 45%Sirloin Steak 15.50 16.26 17.78 17.78 16.83 13.33 21%Rump Steak 15.38 13.85 17.78 15.18 15.55 7.49 52%Ribeye Steak 17.50 16.26 17.78 17.78 17.33 13.33 23%33%Product% CheaperNote: Prices checked Tuesday 30.08.16, selected lines only, includes all active promotional & multibuy prices at point of price check, compared to supermarket own-brand, nearest comparable weight packs used39AIM LISTED PLC APRIL 2008Shareholder Register (as at 26.08.2016)Top 10 Shareholders: 74.9%Hargreave Hale 12.7%Directors 11.0%Unicorn 9.4%Schroder 9.0%Blackrock 7.7%Hargreaves Lansdown 6.0%Livingbridge 5.6%Mr John Kelly 4.5%Ruffer 4.0%Deutsche Bank 2.5%Arrowgrass 2.5%