visit us at ...
corporate :
www.creightonsplc.com
retail :
www.beautyatcreightons.com
business to business :
www.pm-innovations.com
brands :
www.ashworthandclaire.com
www.beautiful-brunette.com
www.bronze-ambition.com
www.miamoo.co.uk
www.amieskincare.com
www.naturalgroomingco.com
www.perfect-hair.org
www.potterandmoore.com
www.realshaving.com
www.stjamesoflondon.com
www.groomed.uk.com
www.sunshine-blonde.com
www.twistedsista.com
2011 ANNUAL REPORT
award winning
fresh ideas
talented innovation
marketing excellence
pro-active
technical expertise
dynamic passion
leading-edge brands
cross-category
credibility
full service
multi-faceted
global
Job No: 8226
Customer: Creightons
Proof Event: 3
Project Title: Annual Report
Black Line Level: 0
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
NB : PINK DOTTED LINE DOES NOT PRINT.
IT IS TO INDICATE CUT AND FOLD LINES
NB2 : THERE ARE CIRCLES OF WHITE
BEHIND THE ‘just blond’ / ‘twisted sista’
and ‘natural grooming’ images -
WITH TINTS OF COLOUR CIRCLES ON TOP
TO CREATE A CLEAN BACKGROUND
COLOUR TO THE PHOTOS -
DO NOT OMIT THE WHITE LAYER OR
THE TINTED COLOURS WILL GO VERY
DIRTY ON TOP OF THE GREY BACKGROUND
ALL IMAGES WILL NEED TO BE CLIPPED
ACCURATELY IN ORDER TO PRINT WELL
HI RES IMAGES ARE IN A SEPARATE
FOLDER IN ORDER TO DO THIS
PLEASE CALL JULIE ON :
07722170910 WITH ANY QUESTIONS
giving you the control to style
The
naturally perfect
Shave
Job No: 8226
Customer: Creightons
Proof Event: 3
Project Title: Annual Report
Black Line Level: 0
Park Communications Ltd Alpine Way London E6 6LA
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8226 Creightons A&R Text:8226 Creightons A&R Text 20/7/11 14:58 Page 1
Contents
Directors, advisers and bankers
Notice of meeting
Chairman’s statement
Corporate governance report
Directors’ report
Directors’ remuneration report
Statement of directors’ responsibilities
Independent auditor’s report to the shareholders of Creightons plc
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Company balance sheet
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated cash flow statement
Company cash flow statement
Notes to the financial statements
Creightons Plc
Page
2
3
6
8
11
18
21
23
25
25
26
27
28
28
29
29
30
Group Financial Statements 2011
1
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Creightons Plc
Directors, advisers and bankers
Directors
William O McIlroy Executive Chairman and Chief Executive
Bernard JM Johnson Managing Director
William T Glencross Non-executive Director
Mary T Carney Non-executive Director
Nicholas DJ O’Shea Non-executive Director
Company Secretary
Nicholas DJ O’Shea, BSc ACMA
Registered Office
Auditor
Registrars
Bankers
Solicitors
1210 Lincoln Road
Peterborough
PE4 6ND
Registered in England & Wales No 1227964
Chantrey Vellacott DFK LLP
Russell Square House
10-12 Russell Square
London
WC1B 5LF
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0GA
HSBC Bank Plc
Cathedral Square
Peterborough
PE1 1XL
Coole & Haddock
5 The Steyne
Worthing
West Sussex
BN11 3DT
Financial Advisers
Cairn Financial Advisers LLP
61 Cheapside
London
EC2V 6AX
2
Group Financial Statements 2011
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Notice of meeting
Creightons Plc
Notice is hereby given that the Annual General Meeting of the Company will be held at the offices of Potter &
Moore Innovations Ltd, 1210 Lincoln Road, Peterborough, PE4 6ND on 24 August 2011 at 12:00 noon in order
to consider and, if thought fit, pass the following resolutions:
1. To receive and consider the Company’s financial statements and reports of the directors and auditor for the
year ended 31 March 2011.
2. To receive and approve the Directors’ remuneration report for the year ended 31 March 2011.
3. To reappoint Mr N O’Shea retiring by rotation under the provisions of Article 103 of the Articles of
Association, as a director of the Company.
4. To reappoint Ms M Carney retiring by rotation under the provisions of Article 103 of the Articles of
Association, as a director of the Company.
5. To reappoint Chantrey Vellacott DFK LLP as auditor and to authorise the directors to determine their
remuneration.
6. As an ordinary resolution:
“That, in terms of Article 20 of the Company’s Articles of Association, the directors of the Company be and
they are hereby generally and unconditionally authorised for the purposes of Section 551 of the Companies
Act 2006 to exercise all the powers of the Company to allot relevant securities (within the meaning of the
said Section 551) of the Company up to an aggregate nominal value of £181,596.25 (representing
approximately 33.3% of the current issued ordinary share capital) provided that this authority shall expire on
the date of the next annual general meeting of the Company after the passing of this resolution or, if earlier,
fifteen months after the passing of this resolution unless previously renewed, varied or revoked by the
Company in general meeting and provided that the Company may before such expiry make an offer or
agreement which would or might require relevant securities to be allotted after such expiry and the directors
may allot relevant securities in pursuance of such an offer or agreement as if the authority conferred hereby
had not expired, this authority to replace any existing like authority given prior to the date hereof which is
hereby revoked with immediate effect.”
7. As a special resolution:
“That, without prejudice to any existing powers in terms of Article 21 of the Company’s Articles of
Association, the directors of the Company be and they are hereby empowered pursuant to Section 570 of the
Companies Act 2006 to allot equity securities (within the meaning of Section 560 of the said Act) for cash
pursuant to the authority conferred upon them by Section 551 of the said Act by resolution 6 above as if
Section 561(I) of the said Act did not apply to any such allotment provided that this power shall be limited:
(a) to the allotment of equity securities in connection with an offer or issue to or in favour of ordinary
shareholders on the register on a date fixed by the directors where the equity securities respectively
attributable to the interest of all ordinary shareholders are proportionate (as nearly as may be) to the
respective numbers of ordinary shares held by them on that date but the directors may make such
exclusions or other arrangements as they consider expedient in relation to fractional entitlements, legal or
practical problems under the laws in any territory or the requirements of any regulatory body or stock
exchange; and
Group Financial Statements 2011
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Creightons Plc
Notice of meeting
(b) to the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an
aggregate nominal value of £27,239.44 (representing approximately 5% of the current issued ordinary
share capital);
and shall expire on the earlier of the date which is fifteen months after the date of the passing of this
resolution and the date of the next annual general meeting of the Company after the passing of this resolution
save that the Company may before such expiry make an offer or agreement which would or might require
securities to be allotted after such expiry and the directors may allot equity securities in pursuance of such an
offer or agreement as if the powers conferred hereby had not expired and so that all previous authorities of
the directors pursuant to Section 95 of the said Act be and are hereby revoked.”
8. As a special resolution:
“That the Company be and is hereby generally and unconditionally authorised pursuant to Section 701 of
the Companies Act 2006 to make market purchase (as defined in Section 693(4) of the said Act) of its own
ordinary shares of 1p each (“Ordinary Shares”) in such a manner and on such terms as the directors may from
time to time determine provided that:
(a) the authority hereby conferred shall expire on the earlier of the date which is fifteen months after the date
of the passing of this resolution and the conclusion of the next Annual General Meeting of the Company
after the passing of this resolution unless renewed or extended prior to or at such meeting, except that the
Company may before the expiry of such authority make any contract of purchase of Ordinary Shares
which will or might be completed wholly or partly after such expiry and to purchase Ordinary Shares in
pursuance of such contract as if the authority conferred hereby had not expired;
(b) the maximum number of Ordinary Shares hereby authorised to be purchased shall not exceed 2,723,944
Ordinary Shares (representing 5% of the Company’s issued share capital as at 12 July 2011); and
(c) the maximum price which may be paid for each Ordinary Share pursuant to this authority hereby
conferred is an amount equal to 105% of the average of the middle market quotations for Ordinary Shares
(derived from The London Stock Exchange Daily Official List) for the five business days prior to the date
of purchase and the minimum price of 1p.
By order of the board
Nicholas O’Shea
Company Secretary
1210 Lincoln Road
Peterborough PE4 6ND
21 July 2011
4
Group Financial Statements 2011
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Creightons Plc
Notice of meeting
Notes
1. Holders of ordinary shares, or their duly appointed representatives, are entitled to attend and vote at the AGM. Shareholders are entitled to appoint a proxy to
exercise all or any of their rights to attend and speak and vote on their behalf at the meeting. A shareholder can appoint the Chairman of the meeting or
anyone else to be his/her proxy at the meeting. A proxy need not be a shareholder. More than one proxy can be appointed in relation to the AGM provided
that each proxy is appointed to exercise the rights attached to a different ordinary share or shares held by that shareholder.To appoint more than one proxy,
the Proxy Form should be photocopied and completed for each proxy holder.The proxy holder’s name should be written on the Proxy Form together with
the number of shares in relation to which the proxy is authorised to act.The box on the Proxy Form must also be ticked to indicate that the proxy
instruction is one of multiple instructions being given. All Proxy Forms must be signed and, to be effective, must be lodged with the company’s registrar so as
to arrive not later than 48 hours before the time of the meeting, or in the case of an adjournment 48 hours before the adjourned time.
2. The return of a completed Proxy Form will not prevent a shareholder attending the AGM and voting in person if he/she wishes to do so.
3. Nominated persons (a) Any person to whom this Notice is sent who is a person nominated under Section 146 of the Companies Act 2006 to enjoy
information rights (a Nominated Person) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to
be appointed (or to have someone else appointed) as a proxy for the General Meeting. If a Nominated Person has no such proxy appointment right or does
not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights. (b) The
statement of the rights of shareholders in relation to the appointment of proxies in paragraph (1) above does not apply to Nominated Persons.The rights
described in that paragraph can only be exercised by the shareholders of the Company.
4. Only shareholders whose names appear on the register of members of the Company as at 48 hours before the time of the meeting shall be entitled to attend
the AGM either in person or by proxy and the number of ordinary shares then registered in their respective names shall determine the number of votes such
persons are entitled to cast on a poll at the AGM.
5. The statement of the rights of shareholders in relation to the appointment of proxies in note 1 does not apply to Nominated Persons.The rights described in
that note can only be exercised by shareholders of the Company.
6. As at 19 July 2011, being the latest practicable date prior to the publication of this document, the Company’s issued share capital consists of 54,478,876
ordinary shares, carrying one vote each.Therefore the total voting rights in the Company as at 19 July 2011 are 54,478,876.
7.
In Accordance with Regulation 41 of the Uncertificated Securities Regulations 2001, only those members entered on the Company’s register of members at
6:00pm on the day which is two days before the day of the meeting or, if the meeting is adjourned, shareholders entered on the Company’s register of
members at 6:00pm on the day two days before the date of any adjournment shall be entitled to attend and vote at the meeting.
8. Any member attending the meeting has the right to ask questions.The Company has to answer any questions raised by members at the meeting which relate
to the business being dealt with at the meeting unless:
•
•
•
to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information;
the answer has already been given on a website in the form of an answer to a question, or;
it is undesirable in the interests of the Company or the good order of the meeting to answer the question.
9. Copies of the director’s service contracts and letters of appointment are available for inspection at the registered office of the Company during normal
business hours on any business day and will be available for inspection at the place where the meeting is being held from 15 minutes prior to and during the
meeting.
10. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member
provided they do not do so in relation to the same shares.
11.
If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.
12. To be valid any proxy form or other instrument appointing a proxy must be:
•
•
•
completed and signed;
sent or delivered to Capita Registrars, PXS,The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, and;
received by Capita Registrars no later than 12:00 noon on 22 August 2011.
A copy of this notice, and other information required by S311A of the Companies Act 2006, can be found at www.creightonsplc.com
Group Financial Statements 2011
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Creightons Plc
Chairman’s statement
Review of the year
I am pleased to report a consolidated Group pre-tax profit of £135,000 for the year ended 31 March 2011
(2010 – £303,000).This profit has been achieved in a difficult trading year with continued reduction in
Christmas gift sales as retail customers have bought product direct from China, increased margin pressure arising
from increases in raw material costs and the disruption caused by the fire in a warehouse on 14 December 2010.
We have been successful in introducing new customers and developing new brands to offset the loss of Christmas
gift business with sales growth for new business more than offsetting the loss of Christmas gift sales.This new
business is more evenly spread through the year which will reduce the seasonality of the Group’s trade.
Margins have continued to remain under pressure with raw material prices increasing on a regular basis and have
been much more pronounced in the last quarter of the year.We have continued our programme of cost
engineering and managing our product offering to improve this position.
We have continued our focused effort on sales and development that I reported last year as this has been
successful in introducing new customers and brands.
Financial results
Consolidated Group sales this year were £540,000 higher than last year (an increase of 4%) at £14,130,000
(2010 – £13,590,000).The underlying sales growth excluding the impact of the reduced Christmas gifts is
£1,772,000 (an increase of 13%).
Increased raw material prices and an adverse product mix which have been offset by savings from our ongoing
product re-engineering programme have resulted in a slight erosion in gross margin percentage by 0.3% to 42.0%
(2010 – 42.3%). Increased transport costs and changes in the sales mix have resulted in higher distribution costs as
a percentage of sales, which have therefore increased to 4.6% from 3.8% in 2010. Administration costs have risen
as we continue to invest in product development and sales resources to drive new sales opportunities.
Profit before tax for the year of £167,000 (2010 – £334,000) represents a reduction of 50%.
Lower average borrowings and continued low interest rates ensured that interest costs have remained relatively
low at £32,000 (2010 – £31,000).
Group Profit after tax of £135,000 (2010 – £303,000) therefore shows a satisfactory performance given the
trading environment the Group has operated in during the past year. Diluted earnings per share fell to 0.23p from
0.51p in 2010 as a result of the reduced earnings.The directors do not consider it is in the best interests of the
Company to declare a dividend at the moment, instead using the funds generated from this year’s successful
trading to manage future working capital requirements.
Net borrowings (bank overdraft and loans less bank and cash on hand) have increased by £348,000 to £515,000
(2010 – £167,000).The main reason for the increase in borrowing is the higher working capital requirement at
the end of the year.The increase in trade debtors is primarily due to higher sales in the final quarter of the year
although debtor days have increased as a result of changes in customer mix. Stock levels, particularly in North
America, have increased in the main to support the new ranges launched in the final quarter of the year.
6
Group Financial Statements 2011
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Chairman’s statement
Creightons Plc
Current year developments
The Group continues to develop and strengthen its branded portfolio.This is being achieved through developing
our existing brand offering and developing relationships with the owners of existing brands, often through
investing in existing brands when opportunities arise.
We have faced intense price pressures with significant increases in key raw materials over the past six months.
We are working hard to pass these on to our customers with some degree of success.Whilst the price pressure has
recently abated we are continuing our efforts to recover lost margin.
The levels of Christmas gift business will continue to decrease as our major customer is now sourcing the
majority of gifts direct from the Far East.We are continuing to drive new sales opportunities to compensate for
this business.
We also expect our main private label customers to continue to adopt value strategies with sales opportunities in
lower priced products offsetting lower sales levels on higher priced products.This too is likely to adversely affect
our turnover and margins in the current year.
We will continue to manage our overhead cost base and working capital requirements to ensure they are aligned
with the anticipated sales levels of the Group whilst retaining the skills necessary to meet growth opportunities as
they arise.
As in previous years, your board is continuing to seek opportunities to acquire brands or companies that would
complement the existing businesses by offering synergies in manufacturing, sourcing and marketing due to
similarities in product alignment, sourcing or outlets.
The Board has reviewed the Group’s funding requirements and the Company’s dividend policy in light of
consistent profits for a number of years. However, given the on-going pressure on cash flow and liquidity and
relatively modest annual profits, it feels that it is more appropriate to retain profits to help fund the continued
investment in growth than reduce available funds through dividend distribution.
I would like to take this opportunity to thank each and every one of the Group’s employees for the hard work
and effort they have put in over what has been a challenging year.
William McIlroy
Chairman
27 June 2011
Group Financial Statements 2011
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Creightons Plc
Corporate governance report
Compliance
The Listing Rules of the Financial Services Authority require listed companies to disclose how they have applied
the principles set out in Section 1 of the Combined Code prepared by the Committee on Corporate
Governance and whether or not they have complied with its provisions.
The Board is committed to the principles set out in the Combined Code but judges that some of the processes
are disproportionate or less relevant to the Company, given the relative small size and minimal complexity of the
business.
The Company has not complied with the Combined Code as regards the following:
• No formal training programme is in place for non-executive directors.
• The role of the Chairman and Chief Executive is combined.
The Board
Details of all the directors are set out below:
William McIlroy
Bernard Johnson
Nick O’Shea
Mary Carney
William Glencross
Executive Chairman and Chief Executive
Managing Director
Company Secretary and Independent non-executive Director
Senior Independent non-executive Director
Independent non-executive Director
The Board’s principal task is to set the Group’s strategy, which is devised to deliver optimum value for
shareholders. Other matters reserved for decision by the full Board include approval of the annual report and
financial statements, authorisation of all acquisitions and disposals, sanction of all major capital expenditure, the
raising of equity or debt finance and investor relations.
The Board does not operate a formal process of performance evaluation; however the Chairman regularly reviews
the performance of all members of the Board.
Both William McIlroy and Bernard Johnson have continued with their roles with their management companies
and Mr McIlroy has continued with his role with Oratorio Developments Ltd.There has been no change in
these commitments over the past year.
The directors have met as a full board on 11 occasions throughout the year, including meetings by telephone.
The attendance at meetings held during the year to 31 March 2011 for each of the Directors is as follows:
Board
Meetings
Remuneration
Committee
Audit
Committee
9
10
11
7
6
0
0
2
2
0
0
0
2
2
0
Director
William McIlroy
Bernard Johnson
Nick O’Shea
Mary Carney
William Glencross
8
Group Financial Statements 2011
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Corporate governance report
Creightons Plc
Procedures are in place to enable the directors to take appropriate independent professional advice at the
Company’s expense if that is necessary for the furtherance of their duties. All directors have access to the advice
and services of the Company Secretary.
The Articles of Association require one third of the Board to retire by rotation each year and for those directors
appointed during the year to stand for re-election at the following Annual General Meeting.
Nomination Committee
The Board as a whole has undertaken the duties of the Nomination Committee.The Committee is responsible
for proposing candidates for the Board having regard to the balance and structure of the Board.There were no
appointments made during the year.
Remuneration Committee
The Remuneration Committee consisted of Mary Carney and Nick O’Shea. In determining policy for the
executive directors, the Committee has given due consideration to the Combined Code.The remuneration
packages are designed to attract, retain and motivate executive directors of the required calibre.The Committee
reviews the appropriateness of all aspects of directors’ pay and benefits by taking into account the remuneration
packages of similar businesses.
Directors’ remuneration
The executive directors are salaried in their capacity as directors.Their management and operational services are
provided via management companies on a basic fee basis. Additional fees are contingent on the bottom line
performance of the Group.
In addition the executive directors participate in a share option scheme.The Board believes that in accordance
with the best practice provisions, this approach aligns the interests of shareholders and executive directors.The
Company has a policy that share options may not be granted to non-executive directors.
Full details of directors’ remuneration and share options are noted in the Directors’ remuneration report on
page 18. Details of the directors’ shareholdings are shown in the Directors’ report on page 15.
The directors are responsible for the Company’s systems of internal control and for reviewing its effectiveness
whilst the role of management is to implement Board policies on risk management and control. It should be
recognised that the Company’s system of internal control is designed to manage rather than eliminate risk of
failure to achieve the Company’s business objectives and can only provide reasonable and not absolute assurance
against material misstatement or loss.
There is an ongoing process for managing the significant risks faced by the Company.This process is ongoing and
is reviewed by the Board and accords with the internal control guidance issued by the Turnbull Committee.
The key procedures designed to provide effective internal controls are:
• A clearly defined organisational structure with the appropriate delegation of authority to operational
management;
• A comprehensive planning and budgeting process which requires the Chief Executive’s approval;
• Management information systems to monitor financial and other operating statistics;
• Aspects of internal control are regularly reviewed and where circumstances dictate new procedures are instigated.
Group Financial Statements 2011
9
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Creightons Plc
Corporate governance report
The Group does not have an internal audit function. However the Board periodically reviews the need for such a
function.The current conclusion is that this is not necessary given the scale and complexity of the Group’s
activities.
The Board has reviewed the effectiveness of the internal controls in operation and this process will continue.
Audit Committee
The Audit Committee consists of Mary Carney and Nick O’Shea. Its role is to:
• Monitor the integrity of the financial statements of the group and any formal announcements relating to the
group’s financial performance and reviewing significant financial reporting judgements contained therein;
• Review the group’s internal financial controls and the group’s internal control and risk management systems;
• Review whether it is appropriate to introduce an internal audit function;
• Make recommendations to the Board, for a resolution to be put to the shareholders for their approval in
general meeting, on the appointment of the external auditor and the approval of the remuneration and terms
of engagement of the external auditor;
• Review and monitor the external auditors independence and objectivity and the effectiveness of the audit
process, taking into consideration relevant UK professional and regulatory requirements;
• Develop and implement policy on the engagement of the external auditors to supply non-audit services,
taking into account relevant guidance regarding provision of non-audit services by the external audit firm.
The terms of reference of the Audit Committee are not set out in writing.
The Group receives non-audit taxation advice from the Group’s auditor.The Audit Committee assesses the
independence of the external auditor by means of an internal review of the relationship with the auditor.
Shareholder Relations
The objective of the Board is to create increased shareholder value by growing the business in a way that delivers
sustainable improvements in earnings over the medium to long term.
The Board considers the Annual General Meeting as an important opportunity to communicate with private
investors in particular. Directors make themselves available to shareholders at the Annual General Meeting and on
an ad hoc basis, subject to normal disclosure rules.
10 Group Financial Statements 2011
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Directors’ report
Creightons Plc
The directors present their annual report on the affairs of the group, together with the financial statements for the
year ended 31 March 2011.
Principal activities
The principal activity of the group continued to be the creation and manufacture of toiletries and fragrances.
A review of the operations of the group during the year and future developments are referred to in the
Chairman’s statement on page 6.
The principal subsidiary undertakings affecting the results of the group in the year are detailed in note 13 to the
financial statements.
Business Review
History
Creightons plc was first established in 1975, manufacturing and marketing toiletries made exclusively from natural
products. It created a number of proprietary brands, although it focused mainly on private label and contract
manufacturing. It was first listed on the London Stock Exchange in 1987. By 2003 it was seeking to expand both
organically and by acquisition, and launched several of its new range of brands, including The Real Shaving
Company. In March 2003 it purchased the mainly private label and contract filling business of Potter & Moore out
of administration. Since then, the Group has gradually consolidated its manufacturing at the more modern and
efficient Potter & Moore Innovations plant in Peterborough.
By March 2006, the Group had closed and disposed of its operations in Storrington, transferring Creightons’
manufacturing to the Potter & Moore Innovations factory in Peterborough. Part of the Storrington site originally in
the Company’s ownership had been disposed of several years previously, the remaining manufacturing and office
facilities were disposed of in 2005. In March 2007 the group established a sales and distribution operation in New
York in order to market the Group’s branded products in North America.
The Group consolidated its ongoing manufacturing at the Potter & Moore Innovations factory in Peterborough
some years ago, although it continues to spend modest amounts of capital on improving the filling lines and
mixing facilities to improve efficiency and flexibility to handle a wider range of products.
Having previously experienced a number of years with major losses, the years since the acquisition of Potter &
Moore Innovations have seen Creightons plc return to sustained profitability.
Operating Environment
The toiletries sector encompasses products ranging from haircare to footcare, excluding medical and therapeutical
products.There has been a significant fragmentation of the individual markets in the sector in recent years, with
for example shampoos and conditioners for different coloured hair and different preparations addressing various
perceived consumer needs such as frizziness.
Consumers purchase these through a range of retail outlets, from high quality department stores to low-cost
discounters, with the high street supermarkets and drug stores somewhere in the middle.The majority of the
Group’s production is sold into the UK and North America.
Group Financial Statements 2011
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Creightons Plc
Directors’ report
Producers and manufacturers providing products in this market place range from major multinational
corporations to small businesses, such as Creightons. Also, production and manufacturing in the toiletries market is
now world-wide, with many competitors sourcing a significant proportion of their products from outside the UK
or EU, either due to greater efficiency of scale or due to a lower cost base, although the cost advantage some Far
Eastern producers enjoyed previously has been deteriorating in the past few years.
The Group does not operate in a ‘regulated’ market in the sense that pharmaceutical product manufacturers do,
but there has been increasing regulation covering the use, handling and transportation of potentially hazardous
substances, of consumer protection as well as increasing restrictions and regulations on waste and disposal of
potentially environmentally hazardous products and packaging materials.
Objectives
The principal objectives of the business are to supply high quality personal care products to its customers,
meeting high levels of product quality and consumer satisfaction. Clearly, a critical goal for the Board over the
past few years has been to maintain the Group’s profitability in the difficult trading environment created by the
recession.The main private label manufacturing business operates in a market which is comparatively
low-margin, and susceptible to changes in consumer purchasing, loss of major contracts and increases in primary
raw material prices, especially for oil-based products.The unprecedented economic situation of the last three
years has made trading conditions far more challenging than at any time in the past decade. In the short term,
until the economy recovers with consumer and customer purchasing and confidence returning to historic levels,
the Board has made sustaining profitability a key objective.
Strategy
The Board’s strategy to achieve its objectives and goals whilst guarding against commercial risks has been to
ensure high quality and efficiency in all manufactured and bought-in products, to continuously develop and
enhance its product ranges, both branded and for its private label customers, to seek to source its raw materials as
cost-effectively as possible, and to ensure its manufacturing processes are constantly being improved both in terms
of quality and efficiency.The Board is particularly aware that over reliance upon a small number of contract
customers could put the business into jeopardy, and so is seeking to develop the branded business, whilst of
course recognising the continuing importance of, and still looking after and expanding, the core private label and
contract manufacturing side.
Recent Developments
The Group has broadly organised its operations into three business streams:
•
•
•
private label business which focuses on high quality private label products for major High Street retailers and
supermarket chains;
contract manufacturing business, which develops and manufactures products on behalf of third party brand
owners; and
branded sales business which markets, sells and distributes our branded products.This business includes the
North American operation which was established in 2007.
All of these business streams use the central creative, research and development, sourcing, manufacturing and
distribution operations based in Peterborough, and each is pro-active in the development of new sales and
product development opportunities for their respective customers.
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Directors’ report
Creightons Plc
Over the past year, the Group has established a number of joint-venture type operations with existing brand
owners, although these actually operate as subsidiaries within the existing branded products business stream.We
are currently exploring further opportunities of this nature, which enable the Group to benefit from existing,
established or developed brands, and the brand owners to benefit from the Group’s wide range of trade outlets
and our low-cost quality manufacturing and sourcing strengths.
Current Operations
The Group therefore operates through the three main business streams described above, utilising its extensive
brand management, product development and manufacturing capabilities encompassing toiletries, skincare, hair
care and fragrances.The Group has extended its research and development and sales expertise to maximise the
opportunities afforded by these capabilities. Some of this work has been capitalised and is being amortised over
the estimated life of the products in accordance with IFRS requirements.
The Group has continued its aggressive development programme of new ranges of branded toiletries, hair care
and skincare products and continues to extend those already successfully launched such as The Real Shave
Company, St James’s Perfumery and Natural Grooming.
Management and monitoring of performance
Your directors are mindful that although Creightons plc is a UK Listing Authority listed Company, in size it is
really only medium sized and therefore many of the ‘big business’ features common in listed companies are
inappropriate.This year’s profitable result has been achieved only as a result of considerable hard work over several
years in focusing management, staff and production workers’ efforts on more productive product ranges,
improving production and stock holding efficiencies, ensuring high levels of customer service and eliminating
overhead inefficiencies. Consequently, they have continued the ‘minimalist’ approach to micro-management of the
business that would otherwise add significantly to costs whilst delivering at best minimal added benefits to
shareholders.
The Group does not operate a formal personal performance appraisal process, but individual managers and
supervisors undertake continuous performance monitoring and appraisal for their subordinates, and routinely
report the results of these to their own managers. Part of this monitoring and appraisal includes assessment of
training required for personal development as well as succession planning within the Group, and all employees are
encouraged to undertake appropriate training to develop their skills and enhance their career opportunities.The
group therefore has no formal personnel or other non-financial Key Performance Indicators (KPIs) or targets, and
each position that becomes vacant is reviewed for necessity and criticality before authorisation is given for it to
be filled through either recruitment or promotion.The Group has a formal Staff Handbook which covers all
major aspects of staff discipline and grievance procedure, Health and Safety regulations, and the Group’s
non-discrimination policy. One incident involving employees or contractors on the Group’s sites was required to
be reported to the Health & Safety Executive during the year (2010 – 2)
The Group is mindful of its wider responsibilities as a significant local employer and of the contribution it makes
to the local economy both where it and its suppliers are based.The Group has a formally adopted Environmental
Policy which requires management to work closely with the local environmental protection authorities and
agencies, and as a minimum to meet all environmental legislation.
The Board regularly monitors performance against several key financial indicators, including gross margin,
production efficiency, overhead cost control, cash/borrowing and stocking levels. Performance is monitored
monthly against both budget and prior year.
Group Financial Statements 2011
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Creightons Plc
Directors’ report
Financial Key Performance Indicators
Sales
Gross Margin as a % of Revenue
Operating profit excluding one off costs
Operating Profit – as a % of Revenue
Return on net assets
Bank overdraft and loans
2010/11
£14,130,000
42.0%
£167,000
1.2%
3.5%
£611,000
Risks
2009/10
£13,590,000
42.3%
£334,000
2.5%
8.3%
£216,000
Movement
Increase of 4.0%
Decrease of 0.3%
Decrease of £167,000
Decrease of 1.3%
Reduced by 4.8%
Increased by £395,000
The board regularly monitors exposure to key risks, such as those related to a drop in production efficiencies,
worsening cash position, decline in sales both related to contract and private label manufactured products and
branded lines. It has also taken account of the worsening economic situation over the past 12 months, and the
impact that has had on costs and consumer purchases.
It also monitors those not directly or specifically financial, but capable of having a major impact on the business’s
financial performance if there is any failure, such as product contamination and manufacture outside specification,
maintenance of satisfactory levels of customer and consumer service, or failure to meet environmental protection
standards or any of the areas of regulation mentioned above. Further details are set out in Note 17.
Capital structure, cash flow and liquidity
Having achieved profitability after a number of years of substantial losses, and repaid loans used at the time of the
purchase of the Potter & Moore business, the Group’s cash flow has improved substantially since the Potter & Moore
acquisition in the mid 2000s.The business is funded using invoice financing, a bank facility secured against its
assets. Further details are set out in Note 20.
Financial
The profit for the year is shown in the attached consolidated income statement.The directors do not recommend
the payment of a dividend (2010 – nil).
Research and development
The Group has a policy of continual product development.The costs associated with the development of ranges
where the Group can identify probable future economic benefit are treated as intangible assets and are amortised
over the period over which those economic benefits are expected to arise.
Directors
The directors who held office during the year were as follows:
William O McIlroy
Mary T Carney
Nicholas DJ O’Shea
Bernard JM Johnson
William T Glencross
(Executive Chairman and Chief Executive)
(Non-executive)
(Non-executive)
(Managing Director)
(Non-executive)
The directors retiring by rotation are Nick O’Shea and Mary Carney.
14 Group Financial Statements 2011
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Creightons Plc
Directors’ report
Directors’ interests
The directors who held office at 31 March 2011 had the following beneficial interests in the shares of the company:
William McIlroy
Bernard Johnson
Nick O’Shea
William Glencross
31 March 2011
1p ordinary shares
1 April 2010
1p ordinary shares
Shares
14,916,000
3,344,569
31,000
–
Options
1,303,275
1,303,275
–
–
Shares
14,916,000
3,344,569
31,000
–
Options
1,628,275
1,628,275
–
300,000
Mr McIlroy’s holding noted above includes 14,450,000 (2010 – 14,450,000) shares held in the name of Oratorio
Developments Ltd, a private company of which Mr McIlroy is a director and controlling shareholder.
On 11 July 2011 Mr William Glencross acquired 67,500 Ordinary shares of 1p each.There were no other
changes between 31 March 2011 and 19 July 2011.
The share options detailed above as at 31 March 2011 were granted on 18 February 2011 to Messrs McIlroy and
Johnson in accordance with the rules of the share option scheme, following the expiry of options which had
been granted in 2004 to them and to William Glencross when he was also an executive director of the Company.
The Company does not make grants of share options to non-executive directors. See note 23 for further detail
Directors’ insurance
The Company has purchased insurance cover for the directors against liabilities arising in relation to the Group.
Substantial interests
At 21 July 2011 the following substantial interests, being 3% or more of the ordinary shares in issue, had been
notified to the Company:
Mr WO McIlroy (including Oratorio Developments Ltd)
Mr D Abell
Mr BJM Johnson
Mr T Amies
Mr B Dale
Number of shares
14,916,000
3,807,150
3,344,569
2,955,000
2,451,740
% held
27.38%
7.00%
6.14%
5.42%
4.50%
Mr McIlroy’s holding includes 14,450,000 (26.54%) shares held by Oratorio Developments Ltd, a company of
which he is a director and controlling shareholder of which 3,700,000 (6.79%) shares are registered in the name
of Hargreave Hale Nominees Ltd.
Mr Abell’s holding represents his beneficial ownership of 3,307,150 (7.00%) shares registered in the names of
Ferlim Nominees Ltd and Rensburg Sheppards Investment Management Ltd, and of 500,000 (0.92%) shares
registered in the name of Rock (Nominees) Ltd.
Mr Johnson’s holding includes 3,184,569 (5.85%) shares of which he is the beneficial owner and which are
registered in the name of Hargreave Hale Nominees Ltd.
Share structure and rights are included in Note 21.
Group Financial Statements 2011
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Creightons Plc
Directors’ report
Going concern
The Directors are pleased to report that the Group has significant unused borrowing facilities, continues to meet
its debt obligations and expects to operate comfortably within its available borrowing facilities.The Directors
have therefore formed a judgement, at the time of approving the financial statements, that there is a reasonable
expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.
For this reason the Directors continue to adopt the going concern basis in preparing the financial statements.
Creditor payment policy
The Group does not follow any code or standard on payment practice as it is the Group’s policy to settle
creditors promptly on mutually agreed terms.The number of days’ billings from suppliers outstanding at
31 March 2011 was 42 (2010 – 41).
Resolutions to be proposed at the Annual General Meeting
The Board will be proposing the following resolutions at the AGM.The detailed wording of the resolutions is
contained within the notice of the AGM.They have the support of all board members, who will vote in favour of
them with all their own shareholdings and those under their control, and with any discretionary proxies granted
to them personally or in the capacity of chairman of the meeting.
1. To receive and consider the Company’s financial statements and reports of the directors and auditor for the
year ended 31 March 2011.
2. To receive and approve the Directors’ remuneration report for the year ended 31 March 2011.
3. To reappoint Mr N O’Shea retiring by rotation under the provisions of Article 103 of the Articles of
Association, as a director of the Company.
4. To reappoint Ms M Carney retiring by rotation under the provisions of Article 103 of the Articles of
Association, as a director of the Company.
5. To reappoint Chantrey Vellacott DFK LLP as auditor and to authorise the directors to determine their
remuneration.
6. To give authority to the directors to allot shares pursuant to Section 551 of the Companies Act 2006.
This authorises the Company for a period of up to 15 months, or until the next AGM if sooner, to allot
1p Ordinary Shares up to an aggregate nominal value of £181,596.25, being a further one third of the
Company’s present issued share capital as a rights issue.
7. As a special resolution, to grant a limited disapplication of the statutory pre-emption rights contained in
Section 570 of the Companies Act 2006.This authorises the Company for a period of up to 15 months, or
until the next AGM if sooner, to allot 1p Ordinary Shares up to an aggregate nominal value of £27,239.44,
being 5% of the Company’s present issued share capital, without first offering them as a rights issue to existing
share holders;
8. As a special resolution, to give a limited power to the Company to purchase its own shares.This authorises the
Company for a period of up to 15 months, or until the next AGM if sooner, to purchase 1p Ordinary Shares
up to a maximum aggregate nominal value of £27,239.44, being 5% of the Company’s present issued share
capital, at a no more than 105% of the average of the middle market quotations for Ordinary Shares for the
five business days prior to the date of purchase and the minimum price of 1p.
16 Group Financial Statements 2011
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Directors’ report
Creightons Plc
Directors standing for re-election
Mr Nicholas DJ O’Shea, BSc ACMA has been the company secretary for nearly 14 years and a director since
2001. He is a CIMA qualified management accountant, and works with a number of private companies and
public bodies in various financial, management or advisory capacities.
Mary Carney is a freelance tax consultant and a former senior tax partner with Grant Thornton, Chartered
Accountants, Belfast. She is also a member of the Chartered Institute of Taxation, and prior to joining Grant
Thornton, was a tax inspector. Ms Carney has been a director of the Company since November 1999.
Directors’ confirmations
In the case of each of the persons who are acting as directors of the Company at the date this is report was
approved:
•
•
so far as each of the directors is aware, there is no relevant audit information (as defined in the Companies Act
2006) of which the Company’s auditor is not aware; and
each of the directors has taken all the steps that he/she ought to have taken as a director to make
himself/herself aware of any relevant audit information (as defined) and to establish that the company’s auditor
is aware of that information.
Auditor
Chantrey Vellacott DFK LLP have expressed their willingness to continue in office as auditor and a resolution to
reappoint them will be proposed at the forthcoming Annual General Meeting.
By order of the Board
Nicholas O’Shea
Company Secretary
21 July 2011
1210 Lincoln Road
Peterborough PE4 6ND
Group Financial Statements 2011
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Creightons Plc
Directors’ remuneration report
This report has been prepared in accordance with Schedule 8 to the Accounting Regulations under the
Companies Act 2006. A resolution to approve this report will be proposed at the Annual General Meeting of the
company at which the annual accounts for the year are approved.
The above regulations also require that the auditor shall report to the company’s members on the auditable part
of the directors’ remuneration report and state whether in their opinion that part of the directors’ remuneration
report has been properly prepared in accordance with the Accounting Regulations.This report has therefore been
divided into separate sections for audited and unaudited information.
In the opinion of the Remuneration Committee, the company has complied with Section B of the Combined
Code, and in forming the remuneration policy, the Committee has given full consideration to that section of the
Combined Code.
Unaudited information
Remuneration Committee
The Board has established a Remuneration Committee to determine the remuneration of directors of the
Company.The members of the Committee were Nick O’Shea and Mary Carney. In determining the directors’
remuneration the committee consulted the Executive Chairman,William McIlroy.There have been two meetings
of the committee during the period, attended by both Ms Carney and Mr O’Shea.
Policy on directors’ remuneration
The policy of the Company on executive remuneration is to reward individual performance and motivate and
retain existing executive directors so as to promote the best interests of the company and enhance shareholder
value.The remuneration packages for executive directors include a basic annual salary, performance related bonus
and a share option programme.
Salary and benefits
Executive directors’ salary and benefits packages are determined by the committee on appointment or when
responsibilities or duties change substantially, and are reviewed annually.The last review was undertaken during
the first quarter of this year, but no changes were proposed to the executive directors’ remuneration packages.
The Committee considers that improved performance should be recognised by achievement of performance bonuses.
Directors’ performance bonus
Both executive directors’ contracts provide for performance bonuses should the group achieve profitability, and
Mr McIlroy’s also provides for a bonus should a successful sale of the group’s toiletries business be achieved.
The profit criterion was met in 2011, and as a consequence, provision for payment of the profit related
performance bonus has been made in the financial statements, and will be made as required by the contracts
within one month of the approval and publication of these financial statements.
The contract for Mr McIlroy’s services as a director provides for a performance bonus payment to Mr McIlroy’s
employer (Lesmac Securities Ltd) should the Group achieve profitability, on a scale of 12½% of the pre-tax
audited profits up to £50,000, 7½% of pre-tax audited profits between £50,001 and £100,000 and 5% of pre-tax
audited profits in excess of £100,000.The contract also provides for a success bonus payment to Mr McIlroy’s
employer should the Group dispose of the toiletries business.This bonus is 10% of the proceeds of a complete
disposal should the sale price exceed £1.5m, or of a partial disposal should the sale price exceed £0.5m and be
for not more than one third of the book value of the net assets of the group so disposed.
18 Group Financial Statements 2011
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Directors’ remuneration report
Creightons Plc
The contract for Mr Johnson’s services as a manager provides for a performance bonus payment to Mr Johnson’s
employer (Carty Johnson Ltd) should the group achieve profitability, on a scale of 12½% of the pre-tax audited
profits up to £50,000, 7½% of pre-tax audited profits between £50,001 and £100,000 and 5% of pre-tax audited
profits in excess of £100,000.
Executive share option scheme
The policy of the company is to grant options to executive directors and other senior managers as an incentive to
enhance shareholder value.Those options held by members of the Board are exercisable at 2p per share, between
23 February 2014 and 22 February 2021.
Further detail of share options held by directors is given below, and of all options granted by the Company in
note 23 (Share Based Payments).
Pension arrangements
The Company does not make any pension arrangements or contributions for the directors.
Benefits
William Glencross is a member of the Group’s medical scheme.
Service contracts
It is the Company’s policy that service contracts for the executive directors are for an indefinite period,
terminable by either party with a maximum period of notice of 12 months. Any payments in lieu of notice
should not exceed the director’s salary or fees for the unexpired term of the notice period.Within that policy,
information relating to individual directors is scheduled below:
Name of Director
WO McIlroy
(executive contract)
WO McIlroy
(director’s contract with employer)
BJM Johnson
(director’s contract)
BJM Johnson
(manager’s contract with employer)
MT Carney
(non-executive)
NDJ O’Shea
(non-executive)
WT Glencross
(non-executive)
Date of
service contract
Date contract
last amended
6 Feb 2003
16 Jan 2002
16 Jan 2002
Notice
period
12 months
12 months
12 months
16 Jan 2002
20 Mar 2003
12 months
29 Nov 1999
1 Jan 2002
5 Jul 2001
31 Jul 2005
1 Sep 2006
None
None
None
Group Financial Statements 2011
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Creightons Plc
Directors’ remuneration report
Non-executive directors
The remuneration for non-executive directors is determined by the executive chairman. Non-executive directors
may not be granted share options nor participate in any performance bonus, and are not eligible for pension
contributions.
Performance graph
The following graph shows the company’s performance, measured by total shareholder return, compared with the
FTSE All-Share index.
Creightons Plc – Total Shareholder Return compared to FTSE All-Share Index
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
p
/
e
c
i
r
P
e
r
a
h
S
c
l
P
s
n
o
t
h
g
i
e
r
C
x
e
d
n
I
e
r
a
h
S
-
l
l
A
E
S
T
F
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
31-Mar-07
31-Mar-08
31-Mar-09
31-Mar-10
31-Mar-11
Creightons Plc Share price – pence
FTSE All-Share Index
The market price at 31 March 2011 was 2.5p.
20 Group Financial Statements 2011
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Creightons Plc
Directors’ remuneration report
Audited Information
Directors’ emoluments
WO McIlroy
MT Carney
BJM Johnson
NDJ O’Shea
WT Glencross
Total
Share Options
Salaries/Fees
£000
Bonus
£000
Benefits
£000
Total 2011
£000
Total 2010
£000
–
8
88
13
12
121
12
–
12
–
–
24
–
–
–
–
1
1
12
8
100
13
13
146
20
8
108
10
13
159
New share options were issued to the executive directors to replace those that lapsed on 8 January 2011.The
Board decided that it would be beneficial to incentivise members of the senior management team resulting in
fewer options being issued to the executive directors.
As at 31 March 2011
WO McIlroy
BJM Johnson
As at 31 March 2010
WO McIlroy
BJM Johnson
W T Glencross
Pension entitlements
Number
of shares
1,303,275
1,303,275
Number
of shares
1,628,275
1,628,275
300,000
Exercise
price
Date from
which exercisable
Expiry
Date
2.0p
2.0p
23 February 2014
23 February 2014
22 February 2021
22 February 2021
Exercise
price
2.75p
2.75p
2.75p
Date from
which exercisable
9 January 2007
9 January 2007
9 January 2007
Expiry
Date
8 January 2011
8 January 2011
8 January 2011
No pension contributions are made in respect of directors.
Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report and the financial statements.The directors are
required to prepare financial statements for the group in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and have also elected to prepare financial statements for the
company in accordance with IFRS. Company law requires the directors to prepare such financial statements in
accordance with the Companies Act 2006 and Article 4 of the IAS Regulation. Under company law the directors
must not approve the financial statements unless they are satisfied that they give a true and fair view of the state
of affairs of the company for that period.
International Accounting Standard 1 requires that the financial statements present fairly for each financial year the
company’s financial position, financial performance and cash flows.This requires the faithful representation of the
effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for
Group Financial Statements 2011
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Creightons Plc
Directors’ remuneration report
assets, liabilities, income and expenses set out in the International Accounting Standard Board’s Framework for
the Preparation and Presentation of Financial Statements. In virtually all circumstances, a fair presentation will be
achieved by compliance with all applicable IFRS.The directors are also required to:
•
•
•
properly select then apply accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
provide additional disclosure when compliance with the specific requirements in IFRS is insufficient to enable
users to understand the impact of particular transactions, other events and conditions on the group’s financial
position and financial performance; and
• make an assessment of the company’s ability to continue as a going concern.
The directors are responsible for maintaining proper accounting records that are sufficient to show and explain
the company’s transactions and disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that its financial statements comply with the Companies Act 2006.They are
also responsible for safeguarding the assets of the company and hence for taking such steps as are reasonably open
to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Directors’ Report,
Directors’ Remuneration Report and a Corporate Governance Statement that comply with that law and those
regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information
included on the company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Directors’ responsibility statement pursuant to DTR4
Each of the directors confirms to the best of their knowledge that:
• The Group and Company financial statements in this report have been prepared in accordance with IFRS as
adopted by the EU, IFRIC interpretations, the Companies Act 2006 applicable to companies reporting under
IFRS and give a true and fair view of the assets, liabilities, financial position and profit or loss of the
Company and the Group; and
• The contents of this report include a fair review of the development and performance of the business and the
position of the Company and the Group taken as a whole, together with a description of the principal risks
and uncertainties that they face.
Approval
This report was approved by the Board of Directors on 21 July 2011 and signed on its behalf by:
Nicholas O’Shea
Company Secretary
Remuneration Committee
22 Group Financial Statements 2011
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Independent Auditor’s Report to the members of Creightons Plc
Creightons Plc
We have audited the financial statements of Creightons plc for the year ended 31 March 2011 which comprise
the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and
parent company balance sheets, the consolidated and parent company statements of changes in equity, the
consolidated and company cash flow statements and the related notes.The financial reporting framework that has
been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS) as
adopted by the European Union and as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose.To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland).Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements are free from material misstatement, whether caused by
fraud or error.This includes an assessment of: whether the accounting policies are appropriate to the group’s and
the parent company’s circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the overall presentation of the
financial statements.
In addition, we read all the financial and non financial information in the Annual Report to identify material
inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements
or inconstancies we consider the implications for our report.
Opinion on financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs
as at 31 March 2011 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006
and, as regards the group financial statements, Article 4 of the IAS Regulation.
Group Financial Statements 2011
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Creightons Plc
Independent Auditor’s Report to the members of Creightons Plc
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
•
•
the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006; and
the information given in the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following where the Companies Act 2006 requires us to report to
you if, in our opinion:
•
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
the parent company financial statements and the part of the directors’ remuneration report to be audited are
not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
•
•
•
the directors’ statement in relation to going concern;
the part of the Corporate Governance Statement relating to the company’s compliance with the nine
provisions of June 2008 Combined Code specified for our review; and
certain elements of the report to shareholders by the Board on directors’ remuneration.
DAVID JAMES (Senior Statutory Auditor)
for and on behalf of CHANTREY VELLACOTT DFK LLP
Chartered Accountants and Statutory Auditor
London
21 July 2011
24 Group Financial Statements 2011
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Consolidated income statement
for the year ended 31 March 2011
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit
Finance costs
Profit before tax
Taxation
Profit for the period from continuing operations
Earnings per share
Basic
Diluted
The profit of the parent company was nil (2010 – nil).
Creightons Plc
Year ended
Year ended
31 March 2011
£000
31 March 2010
£000
14,130
(8,202)
5,928
(654)
13,590
(7,837)
5,753
(511)
(5,107)
(4,908)
167
(32)
135
–
135
334
(31)
303
–
303
0.25p
0.23p
0.56p
0.51p
Note
4
5
7
8
9
9
Consolidated statement of comprehensive income
Profit for the period from continuing operations
Exchange differences on translating foreign operations
Release of cash flow hedge
Total comprehensive income for the period attributable
to the equity shareholders of the company
Year ended
Year ended
31 March 2011
31 March 2010
£000
135
23
–
158
£000
303
18
(179)
142
There are no movements to be recognised through the parent company statement of comprehensive income in
2011 or 2010.
Group Financial Statements 2011
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Creightons Plc
Consolidated balance sheet
at 31 March 2011
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Obligations under finance leases
Bank overdrafts and loans
Net current assets
Non-current liabilities
Obligations under finance leases
Total liabilities
Net assets
Equity
Share capital
Share premium account
Other reserves
Share-based payment reserve
Translation reserve
Retained earnings
Total equity attributable to the equity shareholders
of the parent company
Note
31 March 2011
£000
31 March 2010
£000
10
11
12
14
15
16
18
19
20
19
21
22
343
168
376
887
3,025
2,578
96
5,699
6,586
331
154
394
879
2,770
2,013
49
4,832
5,711
2,155
1,822
6
611
2,772
2,927
1
2,773
3,813
543
1,229
38
30
(32)
16
216
2,054
2,778
7
2,061
3,650
543
1,229
38
69
(53)
2,005
1,824
3,813
3,650
These financial statements were approved by the board of directors and authorised for issue on 21 July 2011.
They were signed on its behalf by:
Nicholas O’Shea
Director
Company registration number 1227964
26 Group Financial Statements 2011
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Company balance sheet
at 31 March 2011
Non-current assets
Investment in subsidiaries
Current assets
Trade and other receivables
Total assets
Current liabilities
Trade and other payables
Net current assets
Total liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Special reserve
Share-based payment reserve
Retained earnings
Total equity attributable to the equity shareholders
of the parent company
Creightons Plc
Note
13
15
18
21
31 March 2011
£000
31 March 2010
£000
72
72
2,024
2,024
2,096
35
35
1,989
35
2,061
543
1,229
18
1,441
30
60
60
2,031
2,031
2,091
35
35
1,996
35
2,056
543
1,229
18
1,441
69
(1,200)
(1,244)
2,061
2,056
These financial statements were approved by the board of directors and authorised for issue on 21 July 2011.
They were signed on its behalf by:
Nicholas O’Shea
Director
Company registration number 1227964
Group Financial Statements 2011
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Creightons Plc
Consolidated statement of changes in equity
for the year ended 31 March 2011
Other
Share-based
payment
Hedging
Translation
At 1 April 2009
Release of cash flow hedge
Exchange differences on
translation of foreign operations
Additional provision
Net profit for the year
Share
capital
£000
543
Share
premium
account
£000
1,229
–
–
–
–
–
–
–
–
reserves
(note 22)
£000
38
–
–
–
–
reserve
£000
63
–
–
6
–
At 31 March 2010
543
1,229
38
69
Release of share based payment
reserve to income statement
Exchange differences on
translation of foreign operations
Additional provision
Net profit for the year
–
–
–
–
–
–
–
–
–
–
–
–
At 31 March 2011
543
1,229
38
(44)
–
5
–
30
Company statement of changes in equity
reserve
£000
179
(179)
–
–
–
–
–
–
–
–
–
reserve
£000
Retained
earnings
£000
Total
equity
£000
(71)
1,521
3,502
–
18
–
–
–
–
–
303
(179)
18
6
303
(53)
1,824
3,650
–
21
–
–
44
2
–
135
_
23
5
135
(32)
2,005
3,813
At 1 April 2009
Additional provision
At 31 March 2010
Additional provision
Release of share based payment
reserve to retained earnings
Share
Capital
premium
redemption
Share
capital
£000
543
–
account
£000
1,229
–
543
1,229
–
–
–
–
Special
reserve
£000
1,441
–
1,441
–
–
Share-based
payment
reserve
£000
63
6
69
5
(44)
Retained
earnings
£000
Total
equity
£000
(1,244)
2,050
–
6
(1,244)
2,056
–
44
5
–
reserve
£000
18
–
18
–
–
At 31 March 2011
543
1,229
18
1,441
30
(1,200)
2,061
28 Group Financial Statements 2011
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Consolidated cash flow statement
for the year ended 31 March 2011
Net cash (outflow)/inflow from operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Expenditure on intangible assets and goodwill
Proceeds of disposal of plant and equipment
Net cash used in investing activities
Cash flow from financing activities
Repayment of finance lease obligations
Increase/(decrease) in bank loans
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of period
Effect of foreign exchange rate changes
Cash and cash equivalents at end of period
Company cash flow statement
Net cash inflow from operating activities
Cash flow from investing activities
Investment in subsidiary
Net cash used in investing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of period
Cash and cash equivalents at end of period
Creightons Plc
Note
29
Note
29
Year ended
Year ended
31 March 2011
31 March 2010
£000
(160)
(108)
(174)
114
(168)
(16)
395
379
51
49
(4)
96
£000
151
(77)
(182)
–
(259)
(15)
(18)
(33)
(141)
194
(4)
49
Year ended
Year ended
31 March 2011
31 March 2010
£000
12
(12)
(12)
–
–
–
£000
–
–
–
–
–
–
Group Financial Statements 2011
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
1 General information
Creightons Plc (the Company) was incorporated on 29 September 1975 in England; it is a public company, listed
on the London Stock Exchange and domiciled in the United Kingdom.
These Financial Statements are presented in pounds sterling because that is the currency of the primary
economic environment in which the group operates. Foreign operations are included in accordance with the
policies set out in note 2.
2 Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards
adopted for use in the European Union and therefore comply with Article 4 of the IAS regulation, and the
Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared on a going concern basis and there are no concerns for the
foreseeable future that would change the basis on which the financial statements have been prepared.
The financial statements have also been prepared on the historical cost basis, except for the revaluation of
financial instruments.The principal accounting policies adopted are set out below.These policies have been
applied consistently to all years presented unless otherwise stated.
Initial application of new IFRS and International Financial Reporting Interpretations Committee (IFRIC)
interpretations effective for current reporting period or any amendments to such standards have been reflected in
these financial statements. Application of these did not have a material impact on the financial statements and did
not require a change in any significant accounting policies.
At the date of authorisation of the financial information there were Standards and Interpretations, which have not
been applied in the financial information, that were in issue but not yet effective.The directors anticipate that the
adoption of these Standards and Interpretations in future periods will have no material impact on the financial
statements of the group or company, except for additional disclosures when the relevant Standards and
Interpretations come into effect
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled
by the Company (its subsidiaries), made up to the 31 March each year. Control is achieved where the company
has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its
activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated comprehensive
income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies
into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
30 Group Financial Statements 2011
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Notes to the financial statements
for the year ended 31 March 2011
Creightons Plc
2 Significant accounting policies (continued)
A separate income statement for the Company has not been presented as permitted by section 408 of the
Companies Act 2006.
Goodwill
Goodwill on consolidation represents the excess of the purchase price over the fair value of the identifiable assets
and liabilities of a business acquired at the date of acquisition. Goodwill is initially recognised as an asset at cost
and is subsequently measured at cost less any accumulated impairment losses. Goodwill is tested at least annually
for impairment and is carried at cost less accumulated impairment losses. Any impairment is recognised
immediately in the income statement and is not subsequently reversed. No amortisation is charged.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units
expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been
allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the
impairment loss is first allocated to reduce the carrying amount of the goodwill allocated to the unit and then to
the other assets of the unit on a pro-rata basis of the carrying amount of each asset in the unit.
On disposal of an acquired business the attributable amount of goodwill is included in the determination of the
profit or loss on disposal.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts
receivable for goods provided in the normal course of business, net of discounts,VAT and other sales related taxes.
Sales of goods are recognised when goods are delivered and title has passed.
Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate
applicable.
Dividend income from investments is recognised when shareholder’s rights to receive payment has been
established.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at the fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease.The corresponding liability
to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned
between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are charged directly against income.
Rentals under operating leases are charged against income on a straight-line basis over the term of the relevant
lease.
Group Financial Statements 2011
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
2 Significant accounting policies (continued)
Benefits received and receivable as an incentive to enter into operating leases are spread on a straight-line basis
over the term of the lease.
Foreign currencies
The individual financial statements of each group company are presented in the currency of the primary
economic environment in which it operates (its functional currency). For the purposes of consolidated financial
statements, the results and financial position of each group company are presented in pound sterling, which are
the functional currency of the Company, and the presentation currency for the consolidated financial statements.
In preparing the financial statements of individual companies, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies
are retranslated at the rates ruling at the balance sheet date.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are
included in the income statement in the period they arise, except when deferred in equity as qualifying cash flow
hedges.
For the purposes of presenting consolidated financial statements, the assets and liabilities of the group’s foreign
operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are
translated at the average exchange rate for the period, unless exchange rates fluctuate significantly during that
period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any,
are classified as equity and recognised in the group’s foreign currency translation reserve. Such translation
differences are recognised as income or as an expense in the period in which the operation is disposed of.
In order to hedge its exposure to certain foreign exchange risks the Group enters into forward exchange
contracts and options when appropriate to do so – see below for the Group’s accounting policies in respect of
such derivative financial instruments.
Operating profit
Operating profit is stated after charging restructuring costs and other exceptional items but before investment
income and finance costs.
Retirement benefit costs
The Group companies contribute to a defined contribution retirement benefit scheme.
Payments to the defined contribution retirement benefit scheme are charged as an expense as they fall due.
Payments to state-managed retirement benefit schemes are dealt with as payments to defined contribution
schemes where the Group’s obligations under the schemes are equivalent to those arising in a defined
contribution retirement benefit scheme.
32 Group Financial Statements 2011
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Notes to the financial statements
for the year ended 31 March 2011
Creightons Plc
2 Significant accounting policies (continued)
Taxation
The tax expense represents the sum of tax currently payable and deferred tax.
The tax currently payable is based on the taxable profit for the year.Taxable profit differs from net profit as
reported in the income statement because it excludes items of income or expenditure that are taxable or
deductible in other years and it further excludes items of income or expenditure that are never taxable or
allowable.The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally
recognised for all temporary differences and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary timing differences can be utilised. Such assets
and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or
from the initial recognition of other assets and liabilities in a transaction that affects neither taxable profit nor
accounting profit.
Deferred tax is calculated using tax rates and laws that have been enacted or substantially enacted by the balance
sheet date and that are expected to apply in the period when the liability is settled or the asset is realised.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment
loss.
Depreciation is charged so as to write off the cost of the assets less any residual values over their estimated useful
lives using the straight line method on the following basis:
Plant and machinery
Fixtures and fittings
Computers
% per annum
10 – 20
10 – 33
25 – 33
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets
or, where shorter, over the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in the income statement.
Group Financial Statements 2011
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
2 Significant accounting policies (continued)
Research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally generated intangible asset arising from the Group’s product development is recognised only if the
following conditions are met:
•
•
•
an asset is created that can be identified with a specific product or range of products;
it is probable that the asset created will generate future economic benefits; and
the development cost of the asset can be measured reliably.
Internally generated intangible assets are amortised on a straight-line basis over their useful lives.Where no
internally generated intangible assets can be recognised, development expenditure is recognised as an expense in
the period in which it is incurred.
Other intangible assets
Other intangible assets are carried at cost less accumulated amortisation and accumulated annual impairment.
Amortisation begins when an asset is available for use and is calculated on a straight-line basis over their estimated
useful lives as follows:
Acquired licences
Computer software
– Over three years
– Over three to four years
Impairment of assets (excluding goodwill)
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired.Where
an indicator of impairment exists, the Group makes an estimate of the recoverable amount. Recoverable amount
is the higher of the fair value less cost to sell and value in use and is determined for an individual asset. If the
asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, the
recoverable amount of the cash generating unit to which the asset belongs is determined. Discount rates reflecting
the asset specific risks and the time value of money are used for the value in use calculation.
Investments
Investments in subsidiary companies are stated at cost less any provision for impairment.
Inventories
Inventories are stated at the lower of cost or net realisable value.The standard cost comprises direct materials and
where applicable direct labour costs and those overheads that have been incurred in bringing the inventories to
their present location and condition. Net realisable value represents the estimated selling price less all estimated
costs to completion and costs to be incurred in marketing, selling and distribution.
Trade receivables
Trade receivables are initially recognised at fair value. Appropriate allowances for estimated irrecoverable amounts
are recognised in the income statement when there is objective evidence that the asset is impaired.The allowance
recognised is measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows discounted at the effective interest rate computed at initial recognition.
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Notes to the financial statements
for the year ended 31 March 2011
Creightons Plc
2 Significant accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short term highly liquid
investments that are readily convertible to a known amount of cash and are subject to insignificant risk of change
of value.
Trade payables and loans
Trade payables and loans are initially measured at fair value and are subsequently measured at amortisation cost,
using the effective interest rate method.
Derivative financial instruments
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates.The
Group uses foreign exchange forward contracts to hedge against foreign exchange rate risk where considered
appropriate.The Group does not use derivative financial instruments for speculative purposes. Further details of
derivative financial instruments are disclosed in note 17 to the financial statements.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are
subsequently re-measured to their fair value at each balance sheet date.The resulting gain or loss is recognised in
profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event
the timing of the recognition in profit or loss depends upon the nature of the hedge relationship.The group
designates certain derivatives as either hedges of the fair value of the recognised assets or liabilities or firm
commitments (fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency
risk of firm commitments (cash flow hedges), or hedges of net investment in foreign operations.
A derivative is presented as a non-current asset or non-current liability if the remaining maturity of the
instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other
derivatives are treated as current assets or liabilities.
Share based payments
The Group issues equity-settled share based payments to certain employees. Equity-settled share-based payments
are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant.The
fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the group’s estimate of shares that will eventually vest and adjusted for the
effect of non market-based vesting conditions.
Fair value is calculated using the Black-Scholes model.The expected life used in the model has been adjusted,
based on management’s best estimate, for the non-transferability, exercise restrictions and behavioural
considerations.
Group Financial Statements 2011
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
3 Critical accounting judgements and sources of estimation uncertainty
Critical judgements in applying the group’s accounting policies
In the process of applying the Group’s accounting policies, which are described in note 2, management have
made the following judgements that have the most significant effect on the amounts recognised in the financial
statements.
Taxation
A judgement is required in determining the provision for Corporation tax.There are some calculations for which
the ultimate tax determination is uncertain in the ordinary course of business.The group recognises tax liabilities
on the best estimate of whether tax liabilities will be due.Where the final tax outcome is different from the
amounts that were initially recorded, such differences will impact the income and deferred tax provisions in the
period in which such determination is made.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are discussed below.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit
to which goodwill is allocated.The value in use requires the entity to estimate the future. No impairment
provision was considered necessary against this carrying value.
Impairment of product development costs
Management review the recoverability of capitalised product development costs throughout the year and will
charge amortisation to reflect any impairment arising from a reduction in the anticipated lifecycle of the
products. At the balance sheet date all products were considered to have product lifecycles which were in line
with the accounting policies noted in 2 above.
Provisions
As described in the accounting policies in note 2 above the Group assesses provisions as the Directors’ best
estimate of the expenditure required to settle obligations at the balance sheet date.These estimates are made
taking account of information available and different possible outcomes. Estimates relating to the net realisable
value of inventories and recoverability of trade receivables are areas where the Directors’ best estimates have been
applied in the current financial year.
4 Business and geographic segments
For management purposes the Group is organised into one operating division which operates in one business
segment.The Group commenced trading in North America in May 2007.The level of activity in this market is
below the quantitative thresholds under IFRS 8 and therefore no geographic segmental information is presented
in these financial statements.
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Notes to the financial statements
for the year ended 31 March 2011
5 Operating profit
Net foreign exchange profit
Cost of inventories recognised as expense
Write downs of inventories recognised as an expense
Research and development costs
Depreciation of property, plant and equipment
– owned assets
– leased assets
Amortisation of intangible assets
Staff costs
Auditor’s remuneration for audit services
Operating lease rental expense
– Land & buildings
– Other
The analysis of auditor’s remuneration is as follows:
Audit services
Fees payable to the company’s auditor for the audit of
the parent company and the group financial statements
Fees payable to the company’s auditor for other services:
The audit of the company’s subsidiaries, pursuant to legislation
Tax services
Creightons Plc
Year ended
Year ended
31 March 2011
31 March 2010
£000
53
8,463
69
224
106
8
148
3,709
26
350
36
£000
115
8,057
161
210
106
12
140
3,647
26
350
35
Year ended
Year ended
31 March 2011
31 March 2010
£000
£000
21
5
1
21
5
1
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
6 Staff costs
The average number of employees (including directors) was:
Management
Administration
Production
Total
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension contributions
Total
Details of directors’ emoluments are set out in the directors’ remuneration report.
7 Finance costs
Interest on bank overdrafts and loans
Interest on obligations under finance leases
Total
8 Taxation
Current tax
Deferred tax
Total
38 Group Financial Statements 2011
Year ended
Year ended
31 March 2011
31 March 2010
Number
Number
9
44
104
157
8
41
101
150
Year ended
Year ended
31 March 2011
31 March 2010
£000
3,432
314
24
£000
3,328
295
24
3,770
3,647
Year ended
Year ended
31 March 2011
31 March 2010
£000
£000
31
1
32
29
2
31
Year ended
Year ended
31 March 2011
31 March 2010
£000
£000
–
–
–
–
–
–
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Notes to the financial statements
for the year ended 31 March 2011
Creightons Plc
8 Taxation (continued)
The charge for the year can be reconciled to the profit per the income statement as follows:
Profit before tax
Tax charge at the UK corporation tax rate of 28%
(2010 – 28%)
Tax effect of expenses that are not deductible
in determining taxable profit
Tax effect of utilisation of brought forward tax losses
Total expense and effective rate for the year
Year ended
Year ended
Year ended
Year ended
31 March 2011
31 March 2011
31 March 2010
31 March 2010
£000
135
%
–
£000
303
%
–
(38)
(28.0)
(85)
(28.0)
(1)
39
–
(0.7)
28.7
–
(2)
87
–
(0.7)
28.7
–
There is no charge to deferred tax for the group or the company.
At the balance sheet date, the Group has unused tax losses of £2,933,000 (2010 – £2,977,000) available for offset
against future profits. No deferred tax asset has been recognised in respect of these losses due to the
unpredictability of future profit streams. All losses may be carried forward indefinitely and utilised against profits
of the same trade.
9 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Year ended
Year ended
31 March 2011
31 March 2010
£000
£000
Earnings
Net profit attributable to the equity shareholders of the parent company
135
303
Number of shares
Weighted average number of ordinary shares for the purposes of
basic earnings per share
Effect of dilutive potential ordinary shares relating to share options
Weighted average number of ordinary shares for the purposes of
diluted earnings per share
Year ended
Year ended
31 March 2011
31 March 2010
Number
Number
54,275,876
54,275,876
5,426,550
5,426,550
59,702,426
59,702,426
Group Financial Statements 2011
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
10 Goodwill
Cost
At 1 April 2009 and 31 March 2010
Additions
At 31 March 2011
Accumulated impairment losses
At 1 April 2009, 31 March 2010 and at 31 March 2011
Carrying Amount
At 1 April 2008 and 31 March 2009
At 31 March 2011
Year ended
31 March 2011
£000
364
12
376
33
331
343
Goodwill relates to the Potter & Moore business acquired in March 2003 and the costs associated with setting up
TS Ventures Ltd in August 2010.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill
might be impaired.
The recoverable amount is determined from a value in use calculation.The key assumptions used for the value in
use calculation are the discount rate, sales and margin projections, expected changes in direct and indirect costs
during the five year forecast, a growth rate of 0% and a discount rate of 6.0%. No reasonably possible change in
these assumptions would give rise to impairment.
The growth rates are based on the average growth rate experienced by the cash generating unit which is in line
with historical growth rates for the business sector.The pre tax discount rate is based upon the group’s weighted
average cost of capital adjusted for specific risks relating to the sector and country, as this is believed to be the
most appropriate to be used.
No goodwill impairment charges arose during the current or prior year.
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Notes to the financial statements
for the year ended 31 March 2011
11 Other intangible assets
Group
Cost
At 1 April 2009
Additions
Disposals
At 31 March 2010
Additions
Disposals
At 31 March 2011
Accumulated amortisation
At 1 April 2009
Amortisation for the year
Disposals
At 31 March 2010
Amortisation for the year
Disposals
At 31 March 2011
Carrying value
At 1 April 2009
At 31 March 2010
At 31 March 2011
Creightons Plc
Total
£000
271
182
(53)
400
162
(179)
383
159
140
(53)
246
148
(179)
215
112
154
168
Acquired
computer
software
£000
Product
development
costs
£000
42
23
–
65
17
–
82
20
10
–
30
13
–
43
22
35
39
229
159
(53)
335
145
(179)
301
139
130
(53)
216
135
(179)
172
90
119
129
Group Financial Statements 2011
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
12 Property, plant and equipment
Group
Cost
At 1 April 2009
Additions
At 31 March 2010
Additions
Disposals
At 31 March 2011
Accumulated depreciation
At 1 April 2009
Depreciation for the year
At 31 March 2010
Depreciation for the year
Disposals
At 31 March 2011
Carrying value
At 1 April 2009
At 31 March 2010
At 31 March 2011
Property,
plant and
equipment
£000
1,734
77
1,811
108
(85)
1,834
1,299
118
1,417
114
(73)
1,458
435
394
376
Included within plant and equipment are assets held under finance leases with a carrying value of £37,000
(2010 – £49,000) on which depreciation of £8,000 (2010 – £12,000) has been charged during the year.
42 Group Financial Statements 2011
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
13 Investments in subsidiaries
Details of the Company’s subsidiaries at 31 March 2011 are as follows:
Name
Potter & Moore Innovations Limited
Potter and Moore International Inc
The Real Shaving Company Limited
The Natural Grooming Company Limited
St James Perfumery Co Limited
Ashworth & Claire Limited
The Haircare Studio Limited
The Hair Design Studio Limited
The Sensual Secrets Company Limited
Creightons Naturally Limited
Groomed Limited
TS Ventures Limited
Twisted Sista Limited
Mother Goose Limited
Proportion of ownership
Place of incorporation
interest and voting
and operation
power held
England
United States of America
England
England
England
England
England
England
England
England
England
England
England
England
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
55%
100%
75%
The activity of Potter & Moore Innovations Ltd is the creation and manufacture of toiletries and fragrances.
The activity of Potter and Moore International Inc is a distribution of personal care products.TS Ventures Ltd
and Mother Goose Ltd were set up during the period and acquired the intellectual property rights of the
Twisted Sista and Mother Goose brands and no trading activities took place during the period. All other
subsidiaries were dormant throughout the years ended 31 March 2011 and 31 March 2010.
14 Inventories
Raw materials
Work in progress
Finished goods
Group
Company
2011
£000
782
186
2,057
3,025
2010
£000
837
191
1,742
2,770
2011
£000
2010
£000
–
–
–
–
–
–
–
–
Inventories with a carrying value of £3,025,000 (2010 – £2,770,000) have been pledged as security for the
Group’s bank overdrafts. Management believe that net realisable value approximates to fair value.
Group Financial Statements 2011
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
15 Trade and other receivables
Trade receivables
Amounts receivable from subsidiaries
Other debtors
Prepayments and other receivables
2011
£000
2,249
–
144
185
Group
Company
2010
£000
1,940
–
–
73
2011
£000
–
2010
£000
–
2,024
2,031
–
–
–
–
2,578
2,013
2,024
2,031
Trade receivables have been pledged as security for the Group’s borrowings under invoice finance facilities and
the Group’s bank overdrafts.
Other debtors relate to a reasonable assessment of the amounts receivable in respect of outstanding insurance
claims as a result of the fire affecting one of the Group’s warehouses on 14 December 2010. Insurance receipts
since the year end support this assessment.
The carrying value of trade and other receivables represents their fair value.
Trade receivables have been reported in the balance sheet net of provisions as follows:
Trade receivables
Less impairment provision
Group
Company
2011
£000
2,264
(15)
2,249
2010
£000
1,976
(36)
1,940
2011
£000
–
–
–
The movement in the trade receivables impairment provision is as follows:
At 1 April
Charge in current year income statement
At 31 March
Group
Company
2011
£000
36
(21)
15
2010
£000
12
24
36
2011
£000
–
–
–
2010
£000
–
–
–
2010
£000
–
–
–
There were £15,000 (2010 – £75,000) trade receivables that were overdue at the balance sheet date that have
not been provided against.There are no indications as at 31 March 2011 that the debtors will not meet their
payment obligations in respect of the amount of trade receivables recognised in the balance sheet that are overdue
and not provided.The proportion of trade receivables at 31 March 2011 that were overdue for payment was 0.7%
(2010 – 3.9%).
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Notes to the financial statements
for the year ended 31 March 2011
Creightons Plc
16 Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short term bank deposits with an original
maturity rate of three months or less.The carrying amounts of these assets approximates to their fair value.
An analysis of the amounts at the year end is as follows:
Cash at bank and in hand
Sterling equivalent of deposit denominated in US dollars
Group
Company
2011
£000
30
66
96
2010
£000
25
24
49
2011
£000
–
–
–
2010
£000
–
–
–
17 Financial instruments and treasury risk management
Exposures to credit, interest and currency risks arise in the normal course of the Group’s business. Risk
management policies and hedging activities are outlined below. Derivative financial instruments were used to
hedge exposure to significant foreign exchange fluctuations in accordance with the Groups’ policies which are set
out in the accounting policies in note 2.
Credit risk
Trading exposures are monitored by the operational companies against agreed policy levels. Credit insurance is
employed where it is considered to be cost effective. Non-trading financial exposures are incurred only with the
Group’s bankers or other institutions with prior approval of the Board of directors.
The majority of trade receivables in the UK and North America is with retail customers.The maximum exposure
to credit risk is represented by the carrying amount of each financial asset, including derivative financial
instruments, in the balance sheet.
Impairment provisions on trade receivables have been disclosed in note 15.
Interest rate risk
The Group finances its operations through a mixture of debt associated with working capital facilities and equity.
The Group is exposed to changes in interest rates on its floating rate working capital facilities.The variability and
scale of these facilities is such that the Group does not consider it cost effective to hedge against this risk.
Interest rate sensitivity
The interest rate sensitivity is based upon the Group’s weighted average borrowings over the year assuming a 1%
increase or decrease which is used when reporting interest rate risk internally to key management personnel.
If interest rates had been 1% higher/lower and all other variables were held constant, the Group’s profit for the
year ended 31 March 2011 would increase/decrease by £8,000 (2010 – £11,000).The Group’s sensitivity to
interest rates has reduced during the current year mainly due to the reduction in the average working capital
facilities used in the year.
Group Financial Statements 2011
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
17 Financial instruments and treasury risk management (continued)
Foreign currency risks
The Group is exposed to foreign currency transaction and translation risks.
Transaction risk arises on income and expenditure in currencies other than the functional currency of each
Group Company.The magnitude of this risk is relatively low as the majority of the Group’s income and
expenditure are denominated in the functional currency. Approximately 11% of the Group’s income is
denominated in US dollars and 0.1% in Euros. Approximately 16% of the Group’s expenditure is denominated in
dollars and 4% denominated in Euros.
Foreign currency sensitivity
A 5% strengthening of sterling would result in a £62,000 (2010 – £51,000) increase profits and equity. A 5%
weakening in Sterling would result in a £68,000 (2010 – £56,000) decrease in profits and equity.
When appropriate the Group utilises currency derivatives to hedge against significant future transactions and cash
flows.The Group is not party to foreign currency forward contracts in the management of its exchange risk
exposure at 31 March 2011.The instruments purchased are in the currency used by the Group’s principal
overseas suppliers.
Liquidity risk
The Group has no long term borrowing requirements and manages its working capital requirements through
overdrafts and invoice finance facilities.These facilities are due to be renewed in March 2012.The maturity
profile of the committed bank facilities is reviewed regularly and such facilities are extended or replaced well in
advance of their expiry.The Group has complied with all of the terms of these facilities. At 31 March 2011 the
group had available £1,536,000 (2010 – £2,063,000) of undrawn committed borrowing facilities in respect of
which all conditions precedent had been met.
18 Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses
Amounts payable to subsidiary undertakings
Group
Company
2011
£000
1,502
242
411
–
2010
£000
1,032
350
440
–
2,155
1,822
2011
£000
–
–
–
35
35
2010
£000
–
–
–
35
35
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Notes to the financial statements
for the year ended 31 March 2011
19 Obligations under finance leases
Group
Amounts payable under finance leases
Within one year
Between two to five years
Total minimum lease payments
Creightons Plc
Minimum Lease payments
2011
£000
6
1
7
2010
£000
16
7
23
All lease obligations are denominated in sterling and the fair value of the Group’s lease obligations approximate to
their carrying value.
The Group’s obligations under finance leases are secured by the lessors’ rights over the leased assets.
20 Bank overdrafts and loans
Bank overdraft
Borrowings under invoice finance facilities
Group
Company
2011
£000
1
610
611
2010
£000
–
216
216
2011
£000
–
–
–
2010
£000
–
–
–
The borrowings are repayable on demand or within one year.
All borrowings are denominated in sterling. The directors estimate that the fair value of the Group’s borrowings
approximates to the carrying value.
The weighted interest rates paid were as follows:
Bank overdrafts
Borrowings under invoice finance facilities
2011
£000
3.2
2.7
Group
Company
2010
£000
3.2
2.7
2011
£000
–
–
2010
£000
–
–
The bank overdraft is secured by fixed and floating charges over all the assets of the company and its subsidiaries.
The invoice finance facility is secured on the trade receivables and a floating charge on all of the assets of the
Group.
Group Financial Statements 2011
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
21 Share capital
Authorised
Issued and fully paid
Ordinary shares of 1p each
2011
2010
£000
Number
£000
Number
1,223 122,346,000
1,223 122,346,000
543
54,275,876
543
54,275,876
The Company has one class of ordinary shares which carries no right to fixed income.
On 11 July 2011 the Company issued 203,000 Ordinary shares of 1p each – see note 27.
22 Other reserves
Group
At 1 April 2009, 31 March 2010 and 31 March 2011
Capital
reserve
£000
7
Special
reserve
£000
13
Capital
redemption
reserve
£000
18
Total
other
reserves
£000
38
The Company obtained a court ruling dated 19 March 1997 under which the reduction in share premium was
credited to a special reserve.The special reserve was first used to write off the deficit on the company profit and
loss account and then to write off the goodwill arising on the acquisition of Crestol Limited to the Group profit
and loss account. At 31 March 2011 goodwill written off amounts to £2,575,000 (2010 – £2,575,000).
Under the court ruling, the special reserve may be used to write-off goodwill on any further acquisition.To the
extent that there shall remain any sum standing to the credit of the reserve, it shall be treated as unrealised profit
and as a non-distributable reserve, until such time as the creditors existing at the date of the ruling have been
satisfied or consent to its distribution.
48 Group Financial Statements 2011
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Notes to the financial statements
for the year ended 31 March 2011
Creightons Plc
23 Share-based payments
The Company has a share option scheme which is open to any employee of the Group. Options granted under
the scheme are for nil consideration and are exercisable at a price equal to the quoted market price of the
Company’s shares on the date of the grant.The vesting period is 3 years. If the options remain unexercised after a
period of 7 years from the date of grant, the option expires. Options are forfeited if the employee leaves the
group before options vest.
Outstanding at the beginning of the period
Granted in the period
Lapsed in the period
Outstanding at the end of the period
Ordinary shares of 1p each
2011
2010
Weighted average
Weighted average
Number
exercise price
Number
exercise price
5,426,550
4,256,550
(4,256,550)
5,426,550
2.52p
5,426,550
2.52p
2.0p
2.75p
1.93p
–
–
–
–
5,426,550
2.52p
Out of the 5,426,550 outstanding options at 31 March 2011, no options were exercisable under current
circumstances.
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Granted
January 2007
December 2008
February 2011
Outstanding at the end of the period
Exercise period
Number
Exercise price
2010 – 2014
100,000
2011 – 2015
1,070,000
2014 – 2021
4,256,550
5,426,550
4.75p
1.38p
2.00p
The share options granted during the year (2010 – none issued) have been valued using a Black-Scholes model.
The inputs to the Black-Scholes model are as follows:
Weighted average share price (pence)
Weighted average exercise price (pence)
Expected volatility (%)
Expected life (years)
Risk free rate (%)
Expected dividends (pence)
Year ended
31 March 2011
2.13p
2.00p
22.9%
3
5.8%
–
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the
previous year.The expected life used in the model has been adjusted, based on management’s best estimate, for
the effects of non-transferability, exercise restrictions, and behavioural considerations.
The Group recognised total expenses of £5,000 (2010 – £6,000) related to share-based payments.
Group Financial Statements 2011
49
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Customer:
8226
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
24 Retirement benefit scheme
The Group operates a defined contribution scheme for certain employees.The assets of the scheme are held
separately from the Group.The charge in the consolidated income statement in the year was £24,000
(2010 – £24,000) and cash contributions were £20,000 (2010 – £14,000).
25 Operating lease arrangements
The Group leases property, plant and equipment under non-cancellable operating lease agreements.These leases
have varying terms, escalation clauses and renewal rights.
Group
Company
Year ended
Year ended
Year ended
Year ended
31 March 2011
31 March 2010
31 March 2011
31 March 2010
£000
£000
£000
£000
Minimum lease payments under operating leases
recognised as an expense in the year
386
385
–
–
An analysis of the total minimum lease payments under non-cancellable operating leases is set out below:
Group
Company
Within one year
In the second to fifth years inclusive
After five years
Total
26 Capital commitments
Contracts placed for future capital expenditure
not provided for in the financial statements
27 Post balance sheet event
2011
£000
385
1,431
1,395
3,211
2011
£000
144
2011
£000
2010
£000
2010
£000
385
1,438
1,745
3,568
–
–
–
–
Group
Company
2010
£000
–
2011
£000
–
–
–
–
–
2010
£000
–
On 11 July 2011 the Company issued 203,000 Ordinary shares of 1p each fully paid for cash at 2p per share
which was the average mid market price of the previous three days.The net effect would be to increase net assets
and reduce borrowings by £4k.
28 Related party transactions
Transactions between the parent company and its subsidiary
During the year the company entered into the following transactions with its subsidiaries:
Charges for management services
50 Group Financial Statements 2011
Year ended
Year ended
31 March 2011
31 March 2010
£000
5
£000
6
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Notes to the financial statements
for the year ended 31 March 2011
28 Related party transactions (continued)
The amounts owed by and to subsidiary companies are:
Amounts receivable from subsidiary undertakings
Amounts payable to subsidiary undertakings
Oratorio Developments Limited
Creightons Plc
Year ended
Year ended
31 March 2011
31 March 2010
£000
2,036
(35)
£000
2,031
(35)
On 24 July 2006 Oratorio Developments Limited, a company of which Mr McIlroy is a director and controlling
shareholder, acquired the premises occupied by Potter & Moore Innovations Limited.The following amounts
were charged under the terms of the lease:
Rental charges
Re-imbursement of property insurance costs
Re-imbursement of costs incurred on behalf of the landlord
Utility charges
Total
Amounts owed to Oratorio Developments Ltd
Amounts payable
Amounts owed by Oratorio Developments Ltd
Amounts receivable
Remuneration of key management personnel
Year ended
Year ended
31 March 2011
31 March 2010
£000
350
24
(42)
–
332
£000
350
12
–
2
364
Year ended
Year ended
31 March 2011
31 March 2010
£000
105
£000
99
Year ended
Year ended
31 March 2011
31 March 2010
£000
5
£000
–
The remuneration of the directors, who are the key management personnel of the Group, is set out below in
aggregate for each of the categories specified in IAS 24, ‘Related Party Disclosure’. Further information about the
remuneration of individual directors is provided in the audited part of the Directors’ Remuneration Report on
pages 18 to 22.
Salaries and other short term benefits
Total
Year ended
Year ended
31 March 2011
31 March 2010
£000
146
146
£000
159
159
Group Financial Statements 2011
51
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Creightons Plc
Notes to the financial statements
for the year ended 31 March 2011
29 Notes to cash flow statement
Group
Profit from operations
Adjustments for:
Depreciation on property, plant and equipment
(Gain) on disposal of property, plant & equipment
Amortisation of intangible assets
Share-based payment charge
Other non cash items
(Increase) in inventories
(Increase) in trade and other receivables
Increase in trade and other payables
Cash (utilised in)/generated from operations
Interest paid
Cash (outflow)/inflow from operating activities
Year ended
Year ended
31 March 2011
31 March 2010
£000
167
114
(102)
148
5
–
332
(277)
(582)
399
(128)
(32)
(160)
£000
334
118
–
140
6
12
610
(224)
(483)
279
182
(31)
151
Cash and cash equivalents (which are presented as a single asset on the face of the balance sheet) comprise cash at
bank and in hand and short term deposits.
Company
Profit from operations
Adjustments for:
Share-based payment charge
Increase/(decrease) in trade and other receivables
Cash inflow from operating activities
Year ended
Year ended
31 March 2011
31 March 2010
£000
£000
–
5
5
7
12
–
6
6
(6)
–
Cash and cash equivalents (which are presented as a single asset on the face of the balance sheet) comprise cash at
bank and in hand and short term deposits.
52 Group Financial Statements 2011
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Job No: 8226
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