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Interim Results 2016/17 Investor Presentation September 2016

Interim Results 2016/17 Investor Presentation September 2016 · Investor Presentation September 2016. 2 ... (Picture: New Store in Bolton –Opened July 2015) 5 ... P4 P5 P6 +22%

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Page 1: Interim Results 2016/17 Investor Presentation September 2016 · Investor Presentation September 2016. 2 ... (Picture: New Store in Bolton –Opened July 2015) 5 ... P4 P5 P6 +22%

Interim Results 2016/17Investor Presentation

September 2016

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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.

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BUSINESS OVERVIEW

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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)

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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)

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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

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• 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)

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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

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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:

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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

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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

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• 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

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FINANCIAL HIGHLIGHTS

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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

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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

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*

• 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

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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%

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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

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OPERATIONAL HIGHLIGHTS

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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

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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

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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

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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

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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

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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

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£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

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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

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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

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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

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£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

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£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

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GROWTH STRATEGY

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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)

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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

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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

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APPENDIX

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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

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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

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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

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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%