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

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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, VARIETYFOOD-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 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 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 packse.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 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

  • 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 Butchers 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 eco...

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