I wonder if there is any value in this business? The high st shops appear to lose money but they claim the factory shops are performing well. I don't know how much of that cash is left but unless results have got a lot worse since they last reported then they are trading at quite a steep discount to TNAV.
At this stage I don't think i'll bother but i'll keep an eye on them.
Made 20% in 2 days, i.e. £2k. Don't like this company: directors pay themselves too much; the results are heavily manipulated and opaque; company directors happy to pursue deals without consulting shareholders; business failing. Yes it's a recovery play, but there seems to be little reason for the current market optimism.
Bottom line: results show a company in big trouble (CEO's pay of £328k for presiding over the incineration of company profits is absolutely disgraceful), so he thinks that the link up with 2Sisters will provide new low-cost supply and accelerate the rollout of factory stores. He is a buyer.
Final results - for the 52 weeks ended 29 Jan 2017.
This is a chain of butchers + hot takeaway food, mainly based in the North and Midlands. The company added 11 new sites in the year, taking the total to 49 sites at year end.
As is clear from the figures today, this is a roll-out that has gone wrong. We already knew that though, as a series of poor trading updates have already crashed the share price from a peak of about 95p 18 months ago, to just 24p today. It's been even lower too - I sold mine near recent lows and only got something like 16-18p for them, from memory. Poor timing, as usual on sells! It's just so difficult to decide when to sell, I'm hopeless at that aspect of investing.
A few key figures from today's results;
Revenue up 19.3% to £44.2m
Operating loss of £1.4m (prior year £0.4m loss)
EBITDA of £0.1m positive (prior year £1.0m positive)
So a clear deterioration in performance - which isn't what's supposed to happen when you're doing a roll-out. Each new store is supposed to bring additional profit, so clearly things are not working out very well here.
New sites - opening 11 new sites will definitely create additional pre-opening costs, and so the company does what Tasty (LON:TAST) did recently, and massages the figures to report a supposedly higher underlying EBITDA performance.
I think it's fine in principle to flag up genuine pre-opening costs (e.g. wages for staff being trained, before the site actually opens), and perhaps some Head Office costs related to new site openings. However, the same as with Tasty, I think Crawshaws has been way too aggressive with this process, and hence the numbers lack credibility.
Crawshaws says today;
*Adjusted EBITDA is defined by Group as profit/loss before tax, exceptional items, depreciation, amortisation, profit/(loss) on disposal of assets, net finance costs, share based payment charges attributable to the LTIP Growth Share Scheme and Accelerated Opening Costs.
Accelerated opening costs are defined by the Group as the overhead investment in people, processes, systems and new store pre-opening costs i.e. costs directly associated with our accelerated store opening programme.
In the period these costs amounted to £1.2m (2016: £1.6m) resulting in an adjusted EBITDA of £1.3m (2016: £2.6m).
Those figures look daft to me. Claiming accelerated opening costs of £1.2m, for 11 relatively small sites, is £109k per site! That's ridiculous. A credible figure, for this type of business, would in my view be about £20k per site. So I am just treating the adjusted EBITDA figure with the contempt it deserves.
Also, given the dismal share price performance, why are there any share based payment charges at all?
Director remuneration - shareholders may well question why the CEO is being paid so much? A salary of £326k for Noel Collett, looks ridiculous to me - given that he's made a complete hash of the job so far. This seems a good example of how a bigger company executive can often flounder in a smaller, more entrepreneurial business.
He's made basic mistakes - including not understanding that Crawshaws is a discounter, and instead alienating customers by pushing up prices, to drive higher gross margins. That strategy has failed - as demonstrated by these poor figures.
LFL sales were significantly negative for the year, at minus 7.3%. The company can however point to an improving (but still negative) trend;
Like-for-like sales have improved from -13.0% in Q3 to -7.4% in Q4 further progressing to -4.5% in the first 10 weeks of the F
Well it seems as if the Directors could be buying to support the sp and perhaps trying to justify the appalling way they have administered the deal. I still feel this will end in tears and would certainly look to exit at double the deal price of 15.2p
I tend to think that without this deal the company would in due course run out of cash,looks like a rescue to me 2 Sisters should earn the money back via the sale of meat.
There are some oddities in the accounts like charging £1.2m pre opening costs for 11 new shops seems an improbable allocation of costs.......These are all small rented butchers shops!
I don't carry a lot of weight and even less knowledge but I feel in this instance the transaction has not been done in the best interest of existing shareholders and a higher authority should take a look. I am sure that many existing shareholders would have been happy to subscribe for additional shares in any placing at say 25p, and for the company to pursue its existing development program which they tell us was working. I have not seen the sp graph but management should have stepped in to stop a false market developing and that false market may be continuing if their broker and even directors and friends are buying in to prop up the sp
The Board has effectively agreed to sell the company (29.9% + 20.1% warrants = 50%) to 2 Sisters at what appears to be a look-back call price of 15.2p. This is lowest the shares have been for three years, half what the shares were selling at yesterday and 1/6th of what they were a year ago.
I find it hard to understand why they have agreed to this. Was the company going out of business without another infusion of cash? Not according to what Noel Collett says in the final results. So why do they apparently think that 15p is the best price shareholders can reasonably expect in the long term?
Unless the Board can explain to shareholders why they think 15.2p is a good price to sell the company for, I shall be voting against this deal at the AGM in June.
Actually, my maths was wrong, the SP has not fallen more than the cash injection. Still, this deal has still been highly dilutative for shareholders. I agree with Bowood that the shares should have been suspended pending a material transaction, in the mean time a false market was created in the shares.
I agree and I can see no good reason to pay more than 20p or even more than the 15p paid for the new issuance. Long term perhaps good, but it will be long term and I rule out any RTO because that could have been done at the time. I feel the board and advisers have behaved badly here and should have put a halt to dealings at the time of the agreement as it was very material. The recovery of the sp - or the doubling of it since the agreement has lost a lot of new investors a lot of money. Poor advice or lack of it perhaps from their advisers and shareholders should consider voting against the deal IMO.
I had a limit order on Crawshaw at 25p and find myself bought in after the company has just announced a highly dilutative deal. Not pleased.
Am I right in thinking that 2Sisters have bought 33,794,490 of newly issued shares? In which case the number of shares has gone from approximately 79m to 113m, and the market cap from around £23.9m last night (79m * 30.25p) to £27.1m now (113m * 24p). Hence, the market cap has fallen more than the cash injection.
Not impressed with the issue of warrants, which will put an effective cap on the share price of 40p, but otherwise this deal is clearly a vote of confidence in the business. Wait and see.
Operating loss of about £1m for the second half. Looks as if we will see the sp sub 20p today which I have always (recently) thought to be a fair value. Sorry for those who pumped the sp up beyond the 20p level.
I suspect the increase in business rates will further burden the recovery in earnings. I still feel that even at 10p we will struggle to provides earnings to justify it. A loss for the year to be reported on in April will hit the sp and we will be lucky to show a reasonable profit for the current year.
Margins are under pressure but the real problem is the increasing competition from the major supermarkets and with the competition they have amongst themselves. Even at 10p they would need to be making a good eps of 1p to justify an acceptable PE and I cannot see that in the medium term.
Turnover decrease improved a little but still down on last year. But this was at the expense of lower margins which for us will translate into lower gross profits and perhaps a net loss. The bigger boys will be pushing for market share this coming year and will be taking custom. Still a long way to go to justify even 20p. HNY to all.
Results will get a lot worse before they get better. People are more cost conscious than they are loyal and the supermarkets will put a lot of pressure on Crawshaw. They will need to earn an annual 3p a share to justify the current sp - not a hope for at least a couple of years.
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