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AIMprospector

Butcher chain fattens up with successful roll out Crawshaw is a meat retail business, retailing in Yorkshire, Derbyshire, Lincolnshire, Humberside and around Greater Manchester/ Merseyside. Shares in Crawshaw Group have been traded on AIM since 2008 and today the company runs 39 shops. Management ambition is to reach 200 stores. In the last five years, turnover has increased 25% as Crawshaw has successfully increased its store portfolio. Net profit raced ahead in that period, from £0.2m for 2010, to £0.9m for the year ending January 2015. Crawshaw began paying a dividend of 0.2p for 2013, increasing each year to reach 0.57p for 2015.

cash of £6m, receivables of £1m and total liabilities of £6m In July 2014, Crawshaw successfully completed an £8.8m placing at 42p, an approximate 25% discount to the share price at the time. Around £4m of this was used to purchase Gabbotts Farm, an 11 store butcher chain and meat mart in the North West. Gabbotts was purchased on a cash-free, debt-free basis and was www.aimprospector.co.uk

forecast to become immediately earnings enhancing for Crawshaw. At the end of July 2015, the Crawshaw balance sheet showed cash of £6m, receivables of £1m and total liabilities of £6m.

6.7% like-for-like increase on the same period last year Two new stores were opened in the first half of the financial year (Crawshaw has a January year end). Bolton and Worskop were added and both reported trading ahead of expectations. Management announced that these new stores were trading ahead of ‘base case’ profitability assumptions for the group. Like any roll out, profits are depressed as new sites are opened. Crawshaw addressed this effect with their last results. The legacy business delivered a 14% increase in adjusted EBITDA and adjusted earnings per share was 27% ahead. Gross profit increased by 44%, assisted by the acquisition of Gabbotts. Impressively, management reported that sales in the first seven weeks of H2 2016 showed a 6.7% like-for-like increase on the same period last year. Despite these positives, it is a struggle to look at the shares and regard them as anything other than overpriced. My first area of concern is the business itself. Other than niche premium firms, the consumer seems

to have moved meat purchasing to the supermarket twenty years ago. The only other listed meat chain that I recall was Dewhurst, which entered administration in 2006. It also appears from the balance sheet that further fundraisings will be required if management is to succeed in expanding the chain to 200 stores. Much of the forecast growth for 2016 will come from a full year’s contribution from Gabbotts.

every one of its stores trades profitably I’m reluctant to go against what is already a successful format, led by experienced retailers. Crawshaw is proud of the fact that every one of its stores trades profitably but the valuation is extremely demanding and could respond nastily to any setback. Crawshaw Group (LON:CRAW) FOR Proven format Distinct offering AGAINST High valuation Competitive environment Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high

£73m 91p:94p 221.3 0.6% 36p:96p

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December 2015 AIM Prospector  
December 2015 AIM Prospector  

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