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Interim Results 2016/17Investor Presentation
September 2016
2
DISCLAIMERNo 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 OVERVIEW
4
WHO 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)
5
WHERE 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)
6
THE 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 street
7
• 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 wastage
THE RETAIL PROPOSITION - QUALITY, VALUE, VARIETY
FOOD-TO-GO (38% SALES)
8
Sourcing Sufficient Volumes:
In 2014, globally 312m tonnes and in the UK 5.3m tonnes
PRODUCT SOURCING – VOLUME & QUALITY
Sourcing Great Quality:
(Food & Agriculture Organisation Meat Production Figures)
CRAWSHAWS’ COMPETITIVE ADVANTAGES
Farms / Producers Packers / Importers Wholesalers Retailers
Flexibility to source directly from producers and importers:Sourcing direct within the UK and International markets (effectively cutting out the “middle-man”)
Slaughter / Abattoir
9
1. 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 / VALUE
Offers a great opportunity to undertake additional short-term promotional activity
3. Flexibility to access the “residuals” market for short-term promotions:
10
Central Production(In-house Factory)
CRAWSHAWS’ COMPETITIVE ADVANTAGES
Store Handling(Boxed Primals)
85%
5,876 tonnes(annually)
15%
1,040 tonnes(annually)
Unique Handling & Production Capability:
VERTICALLY INTEGRATED CONCEPT
11
In-house factory production of premium
award winning range
Supplier Factory Production Distribution Stores
CRAWSHAWS’ COMPETITIVE ADVANTAGESVERTICALLY INTEGRATED CONCEPT
Central preparation, packaging and handling
capability
Own transportation fleet to undertake all deliveries internally
Key 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 & SERVICE
Exceptionally high Net Promoter Score (NPS) of 94 confirms customer confidence and loyalty in our price, quality and service
FINANCIAL HIGHLIGHTS
14
INCOME & 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 Year
2015 Growth 2016 Growth 2017
£m % £m % £m
Revenue 11.8 41% 16.7 29% 21.6
Gross Profit 5.2 44% 7.5 31% 9.8
Adjusted EBITDA* 0.9 41% 1.2 -14% 1.1
Adjusted Profit Before Tax* 0.7 27% 0.9 -43% 0.5
Adjusted Earnings per Share* 0.874p 26% 1.102p -44% 0.618p
Proposed Dividend per Share 0.10p 0% 0.10p -100% 0.00p
15
CASH 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 RBS
Half Year Full Year Half Year
2016 2016 2017
£m £m £m
Profit Before Tax (adjusted for non-cash items) 0.4 0.9 0.3
Changes in Working Capital 1.2 1.3 1.0
Asset Additions (0.9) (2.3) (2.5)
Acquisitions (3.4) (3.4) 0.0
Dividend (0.4) (0.4) 0.0
Tax (Paid)/Received 0.0 (0.3) 0.2
Share Placing/Asset Finance 0.0 0.0 0.1
Net Cash Movement (3.1) (4.2) (0.9)
Cash & Equivalents (at the end of the year) 6.0 4.9 4.0
16
*
• 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 efficiencies
Budgeted Investment:Capital
ExpenditureComments
Revenue
ExpenditureComments
£m £m
1. Strategic investment in existng portfolio 0.2 Shop Refit, Single Brand 0.2 Store Personnel Cost
2. Rapid Expansion programme 3.8 New Stores (15 at £250k) 0.6 Property, pre-opening costs
3. 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, Recruitment
Total 4.6 2.0
Revised Investment:
H1 - Actual 2.5 0.7
H2 - Planned 1.0 0.5
Total FY - Planned 3.5 1.2
CAPITAL & REVENUE EXPENDITURE
11.8
16.7
21.6
10
15
20
25
HY 2015 HY 2016 HY 2017
Gro
up
Sal
es
£m
17
SALES – TOTAL GROUP REVIEW
Q1+49%
P1 P2 P360% 64% 33%
Q2+16%
H2 2017 (First 7 Weeks)+11%
P4 P5 P6+22% +14% +14%
H1-2017+29%
18
SALES – LFL REVIEW
H1-2017(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 HIGHLIGHTS
20
SALES 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 “butcher’s” 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 openings
A Flexible Commercial Framework – Store Managers
21
SALES 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 packs
e.g. £2 (3 for £5), £4 (3 for £10) and £5 single packs
22
SALES GROWTH RESTORATION PLANFood-To-Go – Sales Momentum Initiatives:
• Flexible principles applied to the Butcher’s 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
23
NEW 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 ratio
24
Burnley (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 loyalty
NEW STORES – High Street & Shopping Centre
25
Burnley (FOOD-TO-GO – New “Butchers Kitchen” Menu)
NEW STORES – High Street & Shopping Centre
• A “Butcher’s Kitchen” menu that compliments the quality, range and value
£m £m £m £m
Turnover 0.97 1.04 0.83 0.92
Margin 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 0.25
Payback*calculation excludes any rent-free period 2.1 Yrs* 3.5 Yrs 2.3 Yrs
Legacy
Estate (exc l. Fac tory Shops &
Market Stalls)
Actual New Stores (x13)
Yr 1 Indicative Yr 2 Mature
Base Model
Yr 1 Indicative
26
Base 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 momentum
NEW STORES – High Street & Shopping Centre
Actual H1 2017
27
NEW 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 footfall
28
NEW 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 loyalty
29
£m £m £m £m
Turnover 2.94 1.04 1.30 1.46
Margin 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 0.20
Payback*calculation excludes any rent-free period 2.1 Yrs* 1.1 Yrs 0.8 Yrs
Factory Shops
(x3)
Base Model West Bromwich Factory Shop
Yr 1 Indicative Yr 1 Indicative Yr 2 Mature
Base 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 H2
NEW STORES – Factory Outlet Shop
Actual H1 2017
30
£m £m £m
Turnover 1.04 1.07 1.19
Margin 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 0.23
Payback*calculation excludes any rent-free period 2.1 Yrs* 1.8 Yrs 1.3 Yrs
Base Model Blended Mix (High St/Fact Shop)
Yr 1 Indicative Yr 1 Indicative Yr 2 Mature
Base 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 shops
NEW STORES – Blended Mix
GROWTH STRATEGY
32
Planned new store openings per year
22 2239
5469
89109
134
164
194
1715
15
20
20
25
30
30
30
2239
5469
89
109
134
164
194
224
0
28
56
84
112
140
168
196
224
252
280
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
(*11 Gabbotts & 6 New Openings)
*
NEW STORE OPENING STRATEGY
Up to 12 openings
for FY2017 (51 Stores)
33
Opportunities for each store format present within existing geographical region
North West7.1m
East Midlands4.6m
Yorkshire / Humber5.4m
West Midlands5.7m
NEW STORE OPENING STRATEGY
34
SUMMARY – WHY CRAWSHAWS?
A unique and powerful quality-value retail concept with clear competitive advantages
Concept has UK Scalability and potential to be a National Brand
A proven concept where all stores are profitable and non-seasonal profit dependent
New stores are profitable from day one and reach sales/profit maturity end of year 2
Cash generative business, working capital benefits and short payback on investment
No direct or comparable competition – effectively operating in our own market
Ambitious and realistic accelerated growth strategy – which is progressing well
Leadership team with a proven track record in the “quality-value” sector
APPENDIX
36
DIRECTORSRichard Rose – Chairman
- Purchased Crawshaws in 2007, Crawshaws IPO in 2008- Chairman: Anpario plc, Watchstone Group Plc, Blue Inc Ltd,
CurrencyFair and Dorcaster plc
Mark 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 Plc
Noel Collett – Chief Executive Officer- Previously COO Lidl UK Ltd 2002-2015 – started on 01.03.15
Alan Richardson – Chief Financial Officer- Previously Finance Director – Retail & Logistics, Morrisons – started on 07.09.15
Kevin Boyd – Chief Commercial Officer- Previously Managing Director & Ops Director, Crawshaws – 25 years service
37
STATEMENT OF FINANCIAL POSITION
• Property, Plant, Equipment investments in line with Growth Plan
• Lease liabilities increased through new store rent free periods
Balance SheetHalf Year Full Year Half Year
2016 2016 2017
£m £m £m
Intangible Assets 11.2 11.0 11.0
Property, Plant, Equipment 6.3 7.3 9.2
Working Capital (2.9) (2.6) (3.4)
Net Cash 5.9 4.9 4.0
Borrowings / Lease Liabilities (0.3) (0.3) (0.6)
Taxes (0.6) (0.6) (0.6)
Net Shareholders Equity 19.6 19.7 19.6
38
COMPETITIVE 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 Discounters
Average
(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%
Cheaper
Note: 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 used
39
AIM 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%