2nd September 2017
REPORT AND ACCOUNTS FOR THE 6 MONTHS ENDING 2nd SEPTEMBER 2017 - PROFIT & LOSS ACCOUNT
Following a half year stock take on 1st September 2017 carried out by external professionals, we now know the shop has traded profitably in its first 6 months. A pre-tax profit of £955 was generated.
Sales started slowly in March but improved from April onwards after the official opening, re-stocking and expansion of the product range and supplier base. Average spend per visit (excluding lottery and VAT) has settled at around £4.15. The expected seasonal upturn in weekly footfall occurred in the June to August period, historically the best quarter for the business.
Sales in the second half of the year are likely to be lower than the first half out-turn of £93,611 because of this seasonal effect and slightly less trading days. Sales are forecast at £88,389 for the second half giving £182,000 for the 51 week trading period to 28th February 2018. Allowing for March’s slow start up and in a full 52 week year, sales are currently running at an annualised level of about £188,000. This is some 6% below the Business Plan. The average level of sales for a community shop across the UK is £155,000 (Plunkett Foundation).
Now that a full stock count and evaluation has been undertaken, the gross margin (on non-lottery sales) for the first half is 15.7%. This is higher than the provisional figure of 13% used in the Business Plan and for internal reporting purposes for the first 5 months. It is supported by an analysis of estimated gross margin by product line based on purchases. It is however well below the average achieved by UK Community Shops of 26% (Plunkett Foundation) so there is scope for improvement.
First half gross profit from sales of £14,717 was £1,717 higher than the Business Plan due to the higher margin. The gross margin in the second half has been forecast at 15%. This is lower than the first half partly because donations of locally grown produce are expected to be lower.
Lottery commission fell below expectations however, in combination with the fees received for running the Post Office out-reach service, the contribution from these sources of £2,039 is slightly above the Business Plan for the half year and this is expected to continue.
First half rent of £3,000 and basic salaries of £7,438 are fixed costs. Other overheads of £3,872 were £590 lower than in the Business Plan. This reflected a combination of volunteers undertaking many tasks free of charge, some re-sourcing of services and tight control. A grant of £1,084 made by Week St Mary Parish Council and a donation of £200 by the “Meet and Eat” group will cover all of the “once off” start up expenditure incurred e.g. new sign, licensee training and alarm system.
Total overheads for the second half year are forecast at £15,318, £1,008 higher than in the first half. This is mainly because of an increased allowance for staff holiday cover. To maintain Post Office and banking services as much as possible, Anna and Caroline are sometimes able to work overtime when the other is on holiday.
After providing for the salaried staff bonus programme (20% of final trading profit for the year) and additional rent payable under the terms of the lease, pre-tax profit was £955 compared to break-even in the Business Plan. A small additional profit is forecast for the second half. Corporation Tax will be payable at 20% on the full year’s profit and “founder donations” (see below).
BALANCE SHEET AND CASH FLOW:
111 members of the local community subscribed for £20,130 of share capital in Week St Mary Community Shop Limited and a further 5 made founder donations of £670. £6,879 was spent on stock at acquisition on 5 March 2017, leaving £13,921 of cash.
Capital expenditure totalling £1,782 (new chiller, fruit & veg display unit and laptop/printer) has been made, fully financed by a grant from the Cornwall Community Foundation and Stockholding has almost doubled to c£12,800 in line with Business Plan projections to provide a better shopping experience and improve the business.
Trade creditors were £6,594 at 2nd September 2017. Virtually all were paid within 10 days of the period end as wholesalers’ direct debits were applied and local suppliers’ accounts are settled promptly. Deducting these liabilities and other net accruals of £914 from the cash at bank balance of £16,078 leaves £8,570 of cash.
It is pleasing to be able to present such a positive report after 6 months of trading. This is of course the result of the collective efforts of a considerable number of community members.
On-going support on both the customer and organisational fronts is a pre-requisite but, providing this is forthcoming, there appears no reason why the community of Week St Mary cannot continue to own and operate a modestly profitable shop and Post Office for the benefit of the community. Tangible evidence of this was the primary objective of Phase 1 as set out in the Share Issue Prospectus of January 2017 and the accompanying Business Plan.
Phase 2 involves securing a long-term home for the enterprise as the present lease expires in 3 and a half years’ time i.e. March 2021.
The Management Committee will start to address this over the coming months.
Stephen Smith, Treasurer, Week St Mary Community Shop Limited - September 2017
Any member/shareholder of Week St Mary Community Shop Ltd who would like to request a copy of the half year Profit & Loss Account and Balance Sheet should contact me on firstname.lastname@example.org.