TIDMCWK
RNS Number : 4060N
Cranswick PLC
18 May 2015
CRANSWICK plc: PRELIMINARY RESULTS
Strategic and Commercial Progress
Cranswick plc ("Cranswick" or "the Company" or "the Group"), a
leading UK food producer, announces its audited preliminary results
for the year ended 31 March 2015.
FINANCIAL HIGHLIGHTS
-- Revenue up 0.8 per cent to GBP1,003.3m (2014: GBP994.9m)
-- Adjusted Group operating margin(1) of 5.8 per cent (2014: 5.4 per cent)
-- Adjusted profit before tax (1) up 10.6 per cent to GBP57.8m (2014: GBP52.2m)
-- Adjusted earnings per share(1) up 9.5 per cent to 92.1p (2014: 84.1p)
-- Recommended final dividend up 6.4 per cent to 23.4p (2014: 22.0p)
-- Net debt at GBP17.3m (2014: GBP17.0m)
-- Statutory profit before tax of GBP52.8m (2014: GBP54.8m)
-- Statutory earnings per share of 84.1p (2014: 88.7p)
STRATEGIC AND OPERATIONAL HIGHLIGHTS
-- Acquired Benson Park Limited, a leading producer of premium British cooked poultry
-- GBP21 million investment in the Group's asset base
-- Extension of the Delico cooked meats facility in Milton
Keynes completed on time and to budget
-- Major upgrade to the Norfolk fresh pork site
-- 23 per cent growth in non-EU export sales
Cranswick Chairman Martin Davey said:
"I am pleased to report that Cranswick has made excellent
strategic and commercial progress in the last year.
"Sales have exceeded GBP1 billion for the first time, an
achievement in which all at the Company can be rightfully
proud.
"The Board's strategy for the development of the protein base
and customer profile of the business was illustrated by the
acquisition, in October 2014, of Benson Park, a leading producer of
premium British cooked poultry products serving the fast growing
'food to go' sector.
"Adjusted profit before tax was GBP57.8 million, an increase of
10.6 per cent on the previous year. Adjusted earnings per share
rose 9.5 per cent to 92.1 pence.
"The Board is proposing to increase the final dividend by 6.4
per cent to 23.4 pence per share.
"Following a year of significant commercial and strategic
progress for Cranswick, the Board looks forward to the
opportunities that lie ahead. Cranswick benefits from some of the
most efficient and well-invested production facilities in the UK
food producer sector. This, in conjunction with our growing
international export channels and strategy of diversifying our
product portfolio, leaves the Board confident that Cranswick is
well positioned to continue its successful long term
development."
(1) adjusted Group operating margin, adjusted profit
before tax and adjusted earnings per share exclude
net IAS 41 valuation movement on biological assets
in 2014 and 2015, amortisation of customer relationship
intangible assets in 2015 and release of contingent
consideration in 2014. These are the measures used
by the Board to assess the Group's underlying performance.
Presentation
A presentation of the results will be made to analysts and
institutional investors today at 9.30am at Investec Bank plc, 2
Gresham Street, London EC2V 7QP.
Enquiries:
Cranswick plc
Mark Bottomley, Finance Director 01482 372 000
Powerscourt
Nick Dibden/Sophie Moate 020 7250 1446
CHAIRMAN'S STATEMENT
I am pleased to report that Cranswick has made excellent
strategic and commercial progress in the last year. This has come
at a time of a significant shift in the dynamics of UK food
retailing against a backdrop of food price deflation.
Sales have exceeded GBP1 billion for the first time, an
achievement in which all at the Company can be rightfully proud.
This underlines Cranswick's strong relationship with its customer
base and its continued supply of quality food at affordable prices
for today's consumer.
The Board's strategy for the development of the protein base and
customer profile of the business was illustrated by the
acquisition, in October 2014, of Benson Park, a leading producer of
premium British cooked poultry products serving the fast growing
'food to go' sector.
Results
Total sales of GBP1.0 billion were slightly ahead of last year
and reflect the impact of lower input prices being passed on to
customers. Volumes were 3 per cent ahead with growth strongest in
the second half, particularly during the final quarter of the year.
Continental, Bacon and Sausage were the product areas which saw
particularly good increases. Underlying sales for the year were
comparable to the previous year. Export sales to non-European
markets continued to grow with full year volumes increasing
strongly compared to the previous year. Adjusted operating profit
rose 10.1 per cent to GBP58.7 million.
Reported profit before taxation was GBP52.8 million and earnings
per share were 84.1 pence. Adjusted profit before tax was GBP57.8
million, an increase of 10.6 per cent on the previous year.
Adjusted earnings per share rose 9.5 per cent to 92.1 pence.
Details of trading are covered more fully in the Operating
Review.
Investments
Cranswick invested GBP21.1 million in its asset base during the
year. This provided additional capacity, the upgrade of equipment,
improved operational efficiencies and new product development
resources. The principal areas of expenditure were the Delico
cooked meats facility in Milton Keynes, and the Hull and Norfolk
fresh pork sites.
The strategy for the development of the business to date has
been to complement organic growth with appropriate acquisitions.
Benson Park is an important acquisition in meeting strategic
objectives and we welcome David Park, Managing Director, and his
colleagues to Cranswick and look forward to working with them to
develop the business further. The business has traded in line with
expectations since joining the Group and the major capital
expenditure programme envisaged at the time of the acquisition has
commenced with commissioning anticipated towards the end of
2015.
Cash Flow
The borrowings of the business are conservatively structured and
the Company's banking facility is in place through to July 2018.
This GBP120 million unsecured facility provides generous headroom
for the future. Net finance costs were covered 60 times by Group
operating profit. Operating cash flow in the period remained
strong, notwithstanding the investment in the Group's asset base
and GBP17.7 million spent on acquisitions. Net debt at the end of
the year stood at GBP17.3 million compared to GBP17.0 million a
year earlier.
Dividend
The Board is proposing to increase the final dividend by 6.4 per
cent to 23.4 pence per share. Together with the interim dividend,
which was raised 6.0 per cent to 10.6 pence per share, this makes a
total dividend for the year of 34 pence per share. Compared to the
32 pence per share paid last year this is an increase of 6.3 per
cent. The final dividend, if approved by Shareholders, will be paid
on 4 September 2015 to Shareholders on the register at the close of
business on 3 July 2015. Shareholders will again have the option to
receive the dividend by way of scrip issue.
Corporate Governance
The Board is mindful of the UK Corporate Governance Code and
embraces this as part of its culture. A statement relating to
compliance with the Code will be included within the Corporate
Governance Statement in the Group's annual Report and Accounts.
Environmental initiatives
Managing and reducing the impact that the business has on the
environment is an integral part of the Company's activities and has
been the focus of attention for some years under a dedicated
project team. Areas covered include waste, water, energy, packaging
and carbon footprint and for the second successive year the Group
was successful in winning the industry's "Environmental Initiative
of The Year" award.
Staff
The Group operates on a decentralised basis across product
categories supported by business-wide collaboration in key areas.
The Board considers this to be the most appropriate format for the
Company and acknowledges that the continued success of Cranswick
would not be possible without talented and motivated management
teams supported by skilful and enthusiastic colleagues at each
site. On behalf of the Board I thank all our colleagues for their
commitment and contribution.
Outlook
Following a year of significant commercial and strategic
progress for Cranswick, the Board looks forward to the
opportunities that lie ahead. Cranswick benefits from some of the
most efficient and well-invested production facilities in the UK
food producer sector. This, in conjunction with our growing
international export channels and strategy of diversifying our
product portfolio, leaves the Board confident that Cranswick is
well positioned to continue its successful long term
development.
Martin Davey
Chairman
18 May 2015
OPERATIONAL REVIEW
Adjusted Group operating profit increased by 10.1 per cent to
GBP58.7 million in the financial year on revenues of GBP1,003
million which were 1 per cent ahead of the previous year. Strong
revenue growth in several of the Group's product categories offset
lower fresh pork sales and a decision to use all of Cranswick's own
pigs internally. Revenue growth was also supported by the
contribution from Benson Park, which was acquired on 22 October
2014. Group operating margin at 5.8 per cent of sales was 0.4 per
cent ahead of the previous financial year, reflecting an unstinting
focus on improving operational efficiencies across the Group and
the benefit of lower pig prices in the current financial year
compared to the previous year when prices had risen rapidly to
record levels.
Acquisition of Benson Park
On 22 October 2014 Cranswick acquired Benson Park, a leading
producer of premium British cooked poultry. It supplies ingredients
to customers which operate in the fast growing food to go sector of
the retail multi-channel, convenience and foodservice markets. This
strategic acquisition moves Cranswick into a new protein sector
broadening both the Group's product range and its customer base.
The integration of Benson Park is progressing as anticipated and
the positive performance of the business continues to be in line
with the Board's expectations. The major investment programme at
the site, which will substantially increase capacity, improve
efficiencies and allow the business to offer a broader product
range, remains on track and is expected to complete in the autumn
of 2015.
Pig herd
Following the substantial investment in the Group's pig breeding
and rearing activities during the previous financial year, the
business this year has focused on improving the quality of the herd
and the performance of the breeding, rearing and finishing units.
There is now capacity to provide more than 20 per cent of the
Group's overall British pig requirements and there will be ongoing
investment to improve productivity and efficiencies.
Export trade
Exports to non-European markets were 23 per cent ahead of the
same period last year, as the business continues to make positive
progress in developing its export trade. The business is now
exporting to a number of countries in the Far East and has recently
sent shipments to West Africa and Australia. One-third of the
tonnage being processed through the Group's two primary processing
facilities is being shipped overseas each week. Cranswick now has a
dedicated business development manager based in Shanghai and is
working with the China British Business Council to expand its
knowledge of the Chinese market. Exports to Europe were lower than
in the same period last year as more product was sold into the UK
market where prices were more attractive.
Infrastructure investment
A further GBP21 million was invested in the Group's
infrastructure during the year to increase capacity, improve
operating efficiencies and improve the quality of its asset base.
This brings our total investment over the last five years to GBP137
million, resulting in the business having some of the most
efficient and well-invested production facilities in the UK food
manufacturing sector.
Category review
Fresh Pork (Down 10 per cent)
Fresh pork sales were 10 per cent lower than the prior year.
This was due, in part, to the loss of business with one customer at
the start of the year, which has now been recovered in full. The
fall in sales was also partly attributable to a 9 per cent year on
year fall in the average pig price, with this reduction being
reflected in lower selling prices. Fresh pork sales were supported
by a strong barbecue season in the first half of the year allied to
a buoyant Christmas trading period. During the year work on the new
rapid chill system at the Norfolk abattoir was completed. This
investment which is part of an ongoing upgrade to the East Anglian
facility has made the plant more energy efficient as well as
improving yields and throughput speeds.
Sausage (Up 6 per cent)
Sausage sales increased by 6 per cent with growth in premium
sausage and beef burgers partly countered by lower sales of frozen
and mid-tier ranges. According to the latest Kantar market research
data, retail sales of super-premium sausages, which Cranswick
produces predominantly, continue to grow ahead of the overall
category both in volume and value terms. The price differential
between the premium and standard tiers is relatively modest which
makes trading up an attractive option for consumers.
Bacon (Up 4 per cent)
Bacon sales were 4 per cent ahead as continued growth of the
business' hand-cured, air-dried bacon was supported by a
substantial uplift in sales of premium gammons. The latest Kantar
data also confirmed that the super-premium bacon category grew
strongly during the year to March 2015. This is a tier in which
Cranswick has a strong market position and where the barriers to
entry are high. During the year, the business moved to sole supply
status for premium bacon and gammons with one of the Group's
leading retail customers. Sales over the key Christmas trading
period were particularly strong, with volumes well ahead of the
same period last year.
Cooked meat (Up 2 per cent)
Cooked meat sales grew by 2 per cent supported by new product
launches and a strong promotional calendar as well as increased
business with a key retail customer after securing a long term
supply agreement in the previous financial year. The project to
extend the Milton Keynes facility was completed during the year, on
time and to budget. This investment has substantially increased
capacity at the site and will deliver further efficiency gains as
well as improving product quality. During the final quarter of the
year, all production at the Kingston Foods site in Milton Keynes
was transferred to the Group's Sutton Fields facility in Hull. The
consolidation of production at one site will allow the business to
better serve its customers and to deliver cost savings for the
Group. All Kingston employees were given the opportunity to
transfer to the Group's Delico facility, also in Milton Keynes,
with the vast majority taking up this offer. The Board has recently
agreed further investment at the Kingston site which will see it
used as a satellite gammon production facility.
Pastry (Up 72 per cent)
Pastry sales were well ahead of the prior year, continuing the
positive development since this category was introduced. The rapid
growth of the business initially added complexity and cost
resulting in the return from the investment being below initial
expectations; however the performance of the Malton facility
improved markedly during the second half. During the year several
new products were listed with this category's lead customer and
further products will shortly be launched for the coming
spring/summer season. Good progress was made during the year in
broadening the customer base for these products both through food
service, forecourt and food to go channels, including some existing
customers of the Group's sandwich business.
Continental products (Up 8 per cent)
Sales of continental products increased by 8 per cent reflecting
the UK consumer's growing taste for speciality continental products
including charcuterie, cheeses, pasta and olives. Category growth
was supported by new product launches and new retail contracts in
the second half of the previous financial year together with a
renewed focus on sourcing high quality, artisan products across
Europe. During the final quarter of the year, a range of fresh
olives was launched with a new premium grocery customer. The
business increased sales of its British charcuterie range and is
investing GBP0.6 million in a new salami production facility at its
Guinness Circle site in Manchester to provide capability and
capacity to support future development of this fast growing
category.
Sandwiches (Up 15 per cent)
Sandwich sales grew by 15 per cent, driven partly by new
contract wins at the start of the period and by additional sales to
existing customers. The new contracts brought additional complexity
to the business through an increased product range which adversely
impacted operational efficiencies; however a clear improvement was
seen during the second half of the year leaving the business well
placed as it starts the new financial year. This improvement was
achieved by both a relentless focus on labour efficiencies and
yields and by streamlining the customer base and product range.
Cranswick has performed positively during a period in which the
UK grocery market has remained highly competitive. The business
continues to focus on delivering high quality premium products
which deliver real value to the UK consumer. This focus on quality
and value is underpinned by a constant drive to innovate and bring
new, exciting and relevant products to market. The ongoing growth
and development of the Company is underpinned by the continued
efforts of the highly skilled and committed people across the
business.
Cranswick remains highly cash generative allowing for attractive
returns to Shareholders, continued investment in the Group's
infrastructure and complementary acquisitions. Cranswick's
facilities are amongst the very best in the industry and ongoing
investment, both in these assets and the teams which make them run
so effectively, will support the Group's future successful
development.
Adam Couch
Chief Executive
18 May 2015
FINANCIAL REVIEW
Revenue
Reported revenue at GBP1,003.3 million increased by 0.8 per cent
with volumes 3 per cent higher. Underlying revenue* was in line
with the prior year with growth across most product categories
offset by lower fresh pork sales. Underlying volume growth was
countered by lower input prices being passed on to the Group's
customers, particularly in the final quarter of the year. Export
sales to key non-European markets increased by 23 per cent.
Adjusted Group operating profit
Adjusted Group operating profit of GBP58.7 million, including
the post-acquisition contribution from Benson Park, increased by
10.1 per cent. Adjusted Group operating margin at 5.8 per cent of
sales was 0.4 per cent higher than last year's level, reflecting
lower input costs, operating efficiency improvements and the
benefit of product innovation. Operating margin in the second half
of the year improved to 6.2 per cent from 5.4 per cent reported at
the interim stage.
Finance costs
Net financing costs at GBP0.9 million were GBP0.1 million lower
than last year, reflecting lower average bank borrowings and
improved terms following the extension of the Group's banking
facilities at the end of the previous financial year. Interest
cover was 59.6 times compared to 54.4 times a year earlier.
Adjusted profit before tax
Adjusted profit before tax at GBP57.8 million increased by 10.6
per cent from GBP52.2 million.
Taxation
The tax charge of GBP11.6 million was 21.9 per cent of profit
before tax (2014: 21.1 per cent). The standard rate of UK
corporation tax was 21 per cent (2014: 23 per cent). The effective
tax rate for the year was higher than the standard rate of
corporation tax due to disallowable expenses of GBP0.5 million. The
prior year charge included a GBP1.0 million deferred tax credit
following the 3 per cent enacted reduction in the UK corporation
tax rate. In addition, last year's GBP1.1 million contingent
consideration provision release was not chargeable to tax.
Adjusted earnings per share
Adjusted earnings per share increased by 9.5 per cent from 84.1
to 92.1 pence reflecting the underlying profitability increase. The
weighted average number of shares in issue was 49,071,000 (2014:
48,734,000).
Adjusted profit measures
Following investment in its pig breeding and rearing activities
last year, the Group now monitors performance principally through
adjusted profit measures which exclude certain non-cash items
including: the net IAS 41 biological assets valuation charge of
GBP4.2 million (2014: GBP1.4 million credit); amortisation of
acquired intangible assets of GBP0.7 million; and, in the prior
year, the release of a GBP1.1 million provision for contingent
consideration payable to the previous owners of Kingston Foods.
Statutory profit before tax fell by 3.5 per cent to GBP52.8 million
(2014: GBP54.8 million). Operating profit on the same basis was 3.7
per cent lower at GBP53.7 million (2014: GBP55.8 million) and
earnings per share were 84.1 pence (2014: 88.7 pence).
Cash flow and net debt
Cash generated from operating activities was GBP54.4 million
(2014: GBP60.1 million), with higher Group operating profit partly
offsetting increased working capital of GBP11.2 million (2014:
decrease of GBP2.1 million), GBP4.9 million of which related to
Benson Park. Net debt at GBP17.3 million was in line with the prior
year end notwithstanding the GBP17.7 million net cash outflow on
the acquisition of Benson Park, GBP21.1 million of capital
expenditure and a GBP15.4 million dividend payment. Gearing fell
from 5.6 per cent to 5.2 per cent as the Group's balance sheet
continues to be conservatively managed. The Group's unsecured bank
facility of GBP120 million extends to July 2018 and provides the
business with generous headroom.
Acquisitions
On 22 October 2014, the Group acquired 100 per cent of the
issued share capital of Benson Park Limited, a leading producer of
premium British cooked poultry, for an initial consideration of
GBP17.7 million, net of cash acquired of GBP2.3 million. A further
GBP4.0 million of consideration may become payable contingent on
the performance of the business during a two-and-a-half year period
from the date of acquisition. The acquisition moves the Group into
a new protein sector and broadens its product range and customer
base. Benson Park has performed in line with the Board's
expectations in the period since acquisition. Further details are
set out in note 7.
Pensions
The Group operates defined contribution pension schemes with
contributions made to schemes administered by major insurance
companies. Contributions to these schemes are set as a percentage
of employees' earnings. The Group also operates a defined benefit
pension scheme which has been closed to further benefit accrual
since 2004. The scheme deficit at 31 March 2015 was GBP5.6 million
(2014: GBP6.5 million). Cash contributed to the scheme during the
year, as part of the programme to reduce the deficit, was GBP1.3
million. The present value of funded obligations was GBP30.2
million and the fair value of plan assets was GBP24.6 million.
Mark Bottomley
Finance Director
18 May 2015
* excluding the contribution from the Benson Park acquisition in
the current year and sales from the pig breeding, rearing and
trading activities in both the current and comparative financial
years
PRINCIPAL RISKS AND UNCERTAINTIES
As a leading UK food producer, the Group faces a variety of
risks and uncertainties. Operating in a highly competitive
industry, it is critical that the Group identifies, assesses and
prioritises its risks. This, along with the development of
appropriate mitigating actions, enables the Group to achieve its
strategic objectives and protect its reputation.
The Group has a formal risk management process in place to
support the identification and effective management of risks across
the business. It is regularly reviewed and updated for changes
within the Group, the industry and the wider economy.
Following the recently announced changes to the UK Corporate
Governance Code, which introduced two new Board statements and a
requirement for enhanced reporting on risk management and internal
control for accounting periods beginning on or after 1 October
2014, the Group confirms that it is compliant with the required
changes from 1 April 2015.
Risk management framework
Board
'Responsible for the Group's system of risk management
and internal control and for setting the Group's overall
risk appetite'
------------------------------------------------------------
Audit Committee
'Reviews the systems of internal control that are
in place and provides assurance to the Board that
the processes of risk management and internal control
are operating effectively'
------------------------------------------------------------
Group Risk Committee
'Provides oversight and advice to the Audit Committee
and Board in relation to current and future risk exposures
and risk strategies'
------------------------------------------------------------
Operational Management
'Operate site level risk management processes to ensure
that risks are adequately identified and controlled'
------------------------------------------------------------
Principal risks and uncertainties
The principal risks and uncertainties facing the Group are
summarised below. However, these are not intended to be an
exhaustive analysis of all risks currently facing the Group.
Risk Impact Mitigation
---------------------- ------------------------------ -------------------------------
Strategic
Risks
---------------------- ------------------------------ -------------------------------
Consumer demand Deterioration in the The Group offers a
UK economy may adversely range of products
affect the activity across premium, standard
levels of consumers and value tiers which
and the Group's immediate it is able to flex
customers, leading in response to customer
to a fall in demand and market demands.
for the Group's products Pork remains an extremely
and ultimately adversely competitively priced
impacting on the Group's and sought after product.
financial performance.
---------------------- ------------------------------ -------------------------------
Competitor The Group trades in The Group maintains
activity highly competitive and develops strong
markets which tend working relationships
to operate without with its customers.
long term contracts. This is supported
Product innovation by delivering high
and changing consumer levels of service
trends provide a constant and quality products
challenge to the future and by the continued
success of the Group focus on product development
and its ability to and innovation.
compete effectively.
---------------------- ------------------------------ -------------------------------
Commercial
risks
---------------------- ------------------------------ -------------------------------
Reliance on A significant proportion The Group continually
key customers of the Group's revenues looks for opportunities
are generated from to expand its customer
a small number of major base across all product
customers. Loss of categories and works
all or part of the closely with customers
Group's business with to ensure service,
one or more of these quality and new product
customers would adversely developments are of
impact on the Group's the highest standard.
financial performance.
---------------------- ------------------------------ -------------------------------
Risk Impact Mitigation
---------------------- ------------------------------ -------------------------------
Pig meat - The Group is exposed The Group has a trusted
pricing and to risks associated long-standing farming
availability with the pricing and supply base which
of supply availability of pig is complemented by
meat. An increase in supply from the Group's
pig prices, or a lack sites - Wayland Farms
of availability of and Wold Farms. These
pig meat would adversely arrangements help
impact on the Group's to mitigate the risks
financial performance. associated with pig
price volatility and
supply.
---------------------- ------------------------------ -------------------------------
Operational
risks
---------------------- ------------------------------ -------------------------------
Business continuity The Group faces the Robust business continuity
risk of significant plans are deployed
incidents such as fire, across the Group's
flood or loss of key sites and appropriate
utilities, which could insurance arrangements
result in prolonged are in place to mitigate
disruption to its sites, any resulting financial
adversely impacting loss. Potential business
the Group's financial disruption is minimised
performance. through multi-site
operations across
many of the Group's
key product lines.
---------------------- ------------------------------ -------------------------------
Recruitment The success of the Across the Group,
and retention Group is dependent strong recruitment
of workforce on attracting and retaining processes, competitive
quality, skilled and remuneration packages
experienced labour, and ongoing training
staff and Senior Management. and development plans
are in place. Specifically
for Senior Management,
robust succession
planning is also in
place.
---------------------- ------------------------------ -------------------------------
Health and A breach of health The Group conforms
Safety and safety legislation to all relevant standards
may lead to reputational and regulations, and
damage and regulatory adopts industry best
penalties, including practice across its
restrictions on operations, sites. All sites are
damages or fines. subject to frequent
audits by internal
teams, customers and
regulatory authorities
to ensure standards
are being adhered
to.
---------------------- ------------------------------ -------------------------------
Disease and A significant infection The Group's pig farming
infection or disease outbreak activities, and other
within pig may result in the loss farms from which third
herd / poultry of supply of both pig party pig and poultry
flock or poultry meat, or meat is ultimately
the inability to move sourced, have a broad
animals freely, impacting geographical spread
on the supply of key to avoid reliance
raw materials into on a single production
the Group's sites. area. In addition,
robust vaccination
and pig herd operating
procedures mitigate
the risk of common
diseases and infections.
---------------------- ------------------------------ -------------------------------
Food scares The Group is subject The Group ensures
/ product to the risks of product that all raw materials
contamination and/or raw material are traceable to original
contamination and potential source and that the
health related industry-wide manufacturing, storage
food scares and issues. and distribution systems
Such incidents may of both our sites
lead to product recall and our suppliers
costs, reputational are continually monitored
damage and regulatory by experienced and
penalties. well trained technical
teams.
---------------------- ------------------------------ -------------------------------
Financial
risks
---------------------- ------------------------------ -------------------------------
Interest rate, The Group is exposed The Group deploys
currency, to interest rate risk effective currency
liquidity on borrowings and to hedging arrangements
and credit foreign currency risk to mitigate risks
risks on purchases particularly associated with foreign
of charcuterie products currency movements.
from the European Union. Each site has access
In addition, the Group to the Group's overdraft
needs continued access facility and bank
to funding for both balances are monitored
current business and on a daily basis.
future growth. All term debt is arranged
centrally and appropriate
headroom is maintained.
---------------------- ------------------------------ -------------------------------
Business acquisitions As the Group grows Rigorous due diligence
businesses may be acquired reviews are carried
based on inaccurate out in advance of
information, unachievable any new business acquisition,
forecasts or without using internal and
appropriate consideration specialised external
being given to the resources where required.
terms of the purchase.
---------------------- ------------------------------ -------------------------------
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2015
2015 2014
Notes GBP'000 GBP'000
Revenue 1,003,336 994,905
------------------------------------- ------ ---------- ------------
Adjusted Group operating
profit 58,653 53,255
Release of contingent consideration - 1,086
Net IAS 41 valuation movement
on biological assets (4,245) 1,441
Amortisation of customer (671) -
relationship intangible
assets
------------------------------------- ------ ---------- ------------
Group operating profit 4 53,737 55,782
Finance revenue - 32
Finance costs (901) (1,057)
------------------------------------- ------ ---------- ------------
Profit before tax 52,836 54,757
Taxation (11,584) (11,550)
------------------------------------- ------ ---------- ------------
Profit for the year 41,252 43,207
------------------------------------- ------ ---------- ------------
Earnings per share (pence)
On profit for the year:
Basic 5 84.1p 88.7p
Diluted 5 83.8p 88.3p
------------------------------------- ------ ---------- ------------
On adjusted profit for the
year:
Basic 5 92.1p 84.1p
Diluted 5 91.8p 83.7p
------------------------------------- ------ ---------- ------------
.
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2015
2015 2014
GBP'000 GBP'000
----------------------------------------------- --------- ----------
Profit for the year 41,252 43,207
------------------------------------------------- --------- ----------
Other comprehensive income
Other comprehensive income to
be reclassified to profit or
loss in subsequent periods:
Cash flow hedges
Losses arising in the year (210) (18)
Reclassification adjustments
for losses included in the income
statement 18 4
Income tax effect 38 3
------------------------------------------------- --------- ----------
Net other comprehensive income
to be reclassified to profit
or loss in subsequent periods (154) (11)
------------------------------------------------- --------- ----------
Items not to be reclassified
to profit or loss in subsequent
periods:
Actuarial losses on defined
benefit pension scheme (307) (4,177)
Income tax effect 61 735
------------------------------------------------- --------- ----------
Net other comprehensive income
not to be reclassified to profit
or loss in subsequent periods (246) (3,442)
------------------------------------------------- --------- ----------
Other comprehensive income,
net of tax (400) (3,453)
------------------------------------------------- --------- ----------
Total comprehensive income,
net of tax 40,852 39,754
------------------------------------------------- --------- ----------
GROUP BALANCE SHEET
AT 31 MARCH 2015
2015 2014
Notes GBP'000 GBP'000
---------------------------------------- -------- ---------- ----------
Non-current assets
Intangible assets 145,705 130,535
Property, plant and equipment 166,087 156,578
Biological assets 592 1,174
Total non-current assets 312,384 288,287
---------------------------------------- -------- ---------- ----------
Current assets
Biological assets 11,197 13,543
Inventories 49,125 47,426
Trade and other receivables 116,905 97,775
Financial assets - -
Cash and short-term deposits 8 3,941 12,223
---------------------------------------- -------- ---------- ----------
Total current assets 181,168 170,967
---------------------------------------- -------- ---------- ----------
Total assets 493,552 459,254
---------------------------------------- -------- ---------- ----------
Current liabilities
Trade and other payables (117,792) (108,806)
Financial liabilities (210) (327)
Provisions (196) -
Income tax payable (7,046) (6,495)
Total current liabilities (125,244) (115,628)
---------------------------------------- -------- ---------- ----------
Non-current liabilities
Other payables (1,278) (409)
Financial liabilities (25,427) (28,898)
Deferred tax liabilities (3,457) (4,737)
Provisions (150) (343)
Defined benefit pension scheme deficit (5,623) (6,528)
---------------------------------------- -------- ---------- ----------
Total non-current liabilities (35,935) (40,915)
---------------------------------------- -------- ---------- ----------
Total liabilities (161,179) (156,543)
Net assets 332,373 302,711
---------------------------------------- -------- ---------- ----------
Equity
Called-up share capital 4,926 4,896
Share premium account 65,689 64,173
Share-based payments 10,242 7,779
Hedging reserve (169) (15)
Retained earnings 251,685 225,878
---------------------------------------- -------- ---------- ----------
Equity attributable to owners of
the parent 332,373 302,711
---------------------------------------- -------- ---------- ----------
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2015
Notes 2015 2014
GBP'000 GBP'000
Operating activities
Profit for the year 41,252 43,207
Adjustments to reconcile Group profit
for the year to net cash inflows
from operating activities:
Income tax expense 11,584 11,550
Net finance costs 901 1,025
Loss/ (gain) on sale of property,
plant and equipment 149 (100)
Depreciation of property, plant
and equipment 18,349 17,831
Amortisation of intangible assets 671 159
Share-based payments 2,463 1,014
Difference between pension contributions
paid and amounts recognised in the
income statement (1,212) (1,006)
Release of government grants (74) (85)
Release of contingent consideration - (1,086)
Net IAS 41 valuation movement on
biological assets 4,245 (1,441)
Increase in biological assets (1,317) (176)
Decrease in inventories 491 1,497
Increase in trade and other receivables (12,586) (3,910)
Increase in trade and other payables 2,226 4,702
------------------------------------------ ------ ---------- ----------
Cash generated from operations 67,142 73,181
Tax paid (12,750) (13,050)
------------------------------------------ ------ ---------- ----------
Net cash from operating activities 54,392 60,131
------------------------------------------ ------ ---------- ----------
Cash flows from investing activities
Interest received - 28
Principal amounts received in relation
to loans advanced - 1,002
Acquisition of subsidiaries, net
of cash acquired 7 (17,692) (14,402)
Purchase of property, plant and
equipment (21,144) (27,684)
Receipt of government grants 542 100
Proceeds from sale of property,
plant and equipment 244 197
Net cash used in investing activities (38,050) (40,759)
------------------------------------------ ------ ---------- ----------
Cash flows from financing activities
Interest paid (880) (1,094)
Proceeds from issue of share capital 901 410
Proceeds from borrowings - 30,000
Issue costs of long term borrowings (851) -
Repayment of borrowings (8,000) (30,500)
Dividends paid (15,350) (12,700)
Repayment of capital element of
finance leases and hire purchase
contracts (444) (349)
------------------------------------------ ------ ---------- ----------
Net cash used in financing activities (24,624) (14,233)
------------------------------------------ ------ ---------- ----------
Net (decrease)/ increase in cash
and cash equivalents 8 (8,282) 5,139
Cash and cash equivalents at beginning
of year 8 12,223 7,084
------------------------------------------ ------ ---------- ----------
Cash and cash equivalents at end
of year 8 3,941 12,223
------------------------------------------ ------ ---------- ----------
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2015
Share Share Share- Hedging Retained Total
capital premium based reserve earnings equity
payments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- --------- ---------- ---------
At 31 March 2013 4,853 61,603 6,765 (4) 200,447 273,664
------------------------- --------- --------- ---------- --------- ---------- ---------
Profit for the
year - - - - 43,207 43,207
Other comprehensive
income - - - (11) (3,442) (3,453)
------------------------- --------- --------- ---------- --------- ---------- ---------
Total comprehensive
income - - - (11) 39,765 39,754
Share-based payments - - 1,014 - - 1,014
Scrip dividend 19 2,184 - - - 2,203
Share options exercised
(proceeds) 24 386 - - - 410
Dividends - - - - (14,903) (14,903)
Deferred tax related
to changes in equity - - - - 246 246
Corporation tax
related to changes
in equity - - - - 323 323
------------------------- --------- --------- ---------- --------- ---------- ---------
At 31 March 2014 4,896 64,173 7,779 (15) 225,878 302,711
Profit for the
year - - - - 41,252 41,252
Other comprehensive
income - - - (154) (246) (400)
------------------------- --------- --------- ---------- --------- ---------- ---------
Total comprehensive
income - - - (154) 41,006 40,852
Share-based payments - - 2,463 - - 2,463
Scrip dividend 5 640 - - - 645
Share options exercised
(proceeds) 25 876 - - - 901
Dividends - - - - (15,995) (15,995)
Deferred tax related
to changes in equity - - - - 437 437
Corporation tax
related to changes
in equity - - - - 359 359
------------------------- --------- --------- ---------- --------- ---------- ---------
At 31 March 2015 4,926 65,689 10,242 (169) 251,685 332,373
------------------------- --------- --------- ---------- --------- ---------- ---------
NOTES TO THE ACCOUNTS
1. Basis of preparation
The results comprise those of Cranswick plc and its subsidiaries
for the year ended 31 March 2015. This preliminary announcement has
been prepared on the basis of accounting policies as set out in the
statutory accounts for the year ended 31 March 2014 (except as
detailed below) and International Financial Reporting Standards and
interpretations issued by the International Accounting Standards
Board as adopted by the European Union ("IFRS") and does not
constitute the Company's statutory accounts within the meaning of
Section 435 of the Companies Act 2006.
Statutory accounts for the years ended 31 March 2015 and 31
March 2014 have been reported on by the auditors who issued an
unqualified opinion in respect of both periods and the auditors'
reports for 2015 and 2014 did not contain statements under 498(2)
or 498(3) of the Companies Act 2006. Statutory accounts for the
year ended 31 March 2014 have been filed with the Registrar of
Companies. The statutory accounts for the year ended 31 March 2015,
which were approved by the Board on 18 May 2015, will be delivered
to the Registrar of Companies following the Company's Annual
General Meeting.
2. Accounting policies
The accounting policies applied by the Group in this preliminary
announcement are the same as those applied by the Group in the
financial statements for the year ended 31 March 2014.
New standards and interpretations applied
The application of other new and revised standards and
interpretations has not had a material effect on the net assets,
results and disclosures of the Group.
3. Business and geographical segments
IFRS 8 requires operating segments to be identified on the basis
of the internal financial information reported to the Chief
Operating Decision Maker ('CODM'). The Group's CODM is deemed to be
the Executive Directors on the Board, who are primarily responsible
for the allocation of resources to segments and the assessment of
performance of the segments.
The CODM assesses profit performance using profit before
taxation measured on a basis consistent with the disclosure in the
Group accounts.
The Group reports on one reportable segment:
-- Food - manufacture and supply of food products to UK grocery
retailers, the food service sector and other food producers.
All Group revenues are received for the provision of goods; no
revenues are received from the provision of services.
4. Group operating profit
Group operating costs comprise:
2015 2014
GBP'000 GBP'000
----------------------------------------------- --------- ---------
Cost of sales excluding net IAS 41 valuation
movement on biological assets 878,968 877,012
Net IAS 41 valuation movement on biological
assets* 4,245 (1,441)
------------------------------------------------ --------- ---------
Cost of sales 883,213 875,571
------------------------------------------------ --------- ---------
Gross profit 120,123 119,334
----------------------------------------------- --------- ---------
Selling and distribution costs 38,418 35,995
----------------------------------------------- --------- ---------
Administrative expenses excluding
amortisation of customer relationship
intangible assets and release of
contingent consideration 27,297 28,643
Amortisation of customer relationship 671 -
intangible assets
Release of contingent consideration - (1,086)
----------------------------------------------- --------- ---------
Administrative expenses 27,968 27,557
----------------------------------------------- --------- ---------
Total operating costs 949,599 939,123
----------------------------------------------- --------- ---------
* This represents the difference between operating profit
prepared under IAS 41 and operating profit prepared under
historical cost accounting, which forms part of the reconciliation
to adjusted operating profit.
5. Earnings per share
Basic earnings per share amounts are calculated by dividing net
profit for the year attributable to members of the parent company
of GBP41,252,000 (2014: GBP43,207,000) by the weighted average
number of shares outstanding during the year. In calculating
diluted earnings per share amounts, the weighted average number of
shares is adjusted for the weighted average number of ordinary
shares that would be issued on the conversion of all dilutive
potential ordinary shares into ordinary shares.
The weighted average number of ordinary shares for both basic
and diluted amounts was as per the table below:
2015 2014
Thousands Thousands
----------------------------------------- ---------- ----------
Basic weighted average number of shares 49,071 48,734
Dilutive potential ordinary shares -
share options 151 191
----------------------------------------- ---------- ----------
49,222 48,925
----------------------------------------- ---------- ----------
Adjusted earnings per share
The Directors consider it appropriate to present an adjusted
measure of earnings per share on the face of the income statement
which excludes certain non-cash items to provide a more meaningful
measure of the underlying performance of the business. These items
include the amortisation of customer relationship intangible assets
which became significant for the first time during the year ended
31 March 2015 following the acquisition of Benson Park Limited
(note 7), gains and losses from the IAS 41 valuation movement on
biological assets due to the volatility of pig prices and in the
prior year the release of contingent consideration in relation to
the acquisition of Kingston Foods Limited in 2012.
Adjusted earnings per share are calculated using the weighted
average number of shares for both basic and diluted amounts as
detailed above.
Adjusted profit for the year is derived as follows:
2015 2014
GBP'000 GBP'000
--------------------------------------- -------- --------
Profit for the year 41,252 43,207
Release of contingent consideration - (1,086)
Amortisation of customer relationship 671 -
intangible assets
Tax on amortisation of customer (134) -
relationship intangible assets
Net IAS 41 valuation movement
on biological assets 4,245 (1,441)
Tax on net IAS 41 valuation
movement on biological assets (849) 288
---------------------------------------- -------- --------
Adjusted profit for the year 45,185 40,968
---------------------------------------- -------- --------
6. Dividends
Subject to Shareholders' approval the final dividend will be
paid on 4 September 2015 to Shareholders on the register at the
close of business on 3 July 2015.
7. Acquisitions
Benson Park Limited
On 22 October 2014, the Group acquired 100 per cent of the
issued share capital of Benson Park Limited for a total
consideration of GBP23.8 million. The principal activity of Benson
Park Limited is the production of premium British cooked poultry.
The acquisition moves the Group into a new protein sector and
further broadens its product range and customer base.
Fair values of the net assets at the date of acquisition were as
follows:
Fair
value
GBP'000
--------------------------------- ----- ---------
Net assets acquired:
Customer relationships 6,185
Property, plant and
equipment 4,931
Inventories 2,190
Trade receivables 6,224
Bank and cash balances 2,308
Trade payables (5,013)
Government grants (465)
Corporation tax liability (373)
Deferred tax liability (1,339)
Finance lease obligations (135)
----------------------------------------- ---------
14,513
Goodwill arising on acquisition 9,259
---------------------------------- ---------
Total consideration 23,772
---------------------------------- ---------
Satisfied by:
Cash 20,000
Contingent consideration 3,772
----------------------------------------- ---------
23,772
---------------------------------- ---------
Analysis of cash flows
on acquisition:
Included within cash flows from
investing activities
Cash consideration
paid 20,000
Cash and cash equivalents
acquired (2,308)
----------------------------------------- ---------
17,692
Included within net cash from
operating activities
Transaction costs
of the acquisition 203
----------------------------------------- ---------
Net cash outflow arising
on acquisition 17,895
---------------------------------- ---------
From the date of acquisition to 31 March 2015, the external
revenues of Benson Park Limited were GBP18.1 million and the
company contributed a net profit after tax of GBP1.1 million to the
Group. If Benson Park Limited had been acquired at the beginning of
the year, the Group's profit after tax for the year would have been
GBP42.8 million and revenues would have been GBP1,026.6
million.
Included in the GBP9.3 million of goodwill recognised are
certain intangible assets that cannot be individually separated
from the acquiree and reliably measured due to their nature. These
items include the expected value of synergies and the assembled
workforce.
Transaction costs of GBP0.2 million have been expensed in
relation to the acquisition and were included in administrative
expenses.
All of the trade receivables acquired were collected in
full.
Contingent Consideration
The agreement includes contingent consideration payable in cash
to the previous owners of Benson Park Limited based on the
performance of the business over a 2.5 year period. The amount
payable will be between GBPnil and GBP4.0 million dependant on the
average profit before interest and tax of the business during the
2.5 year period versus an agreed target level.
The fair value of the contingent consideration on acquisition
was estimated at GBP4.0 million, discounted to GBP3.8 million in
the table above.
Yorkshire Baker
On 2 April 2014, the Group acquired the goodwill associated with
the Yorkshire Baker business in exchange for certain property,
plant and equipment and 10 per cent of the issued share capital of
Cranswick Gourmet Pastry Company Limited. Goodwill of GBP397,000
was recognised on acquisition representing certain intangible
assets that cannot be individually separated from the acquiree and
reliably measured due to their nature. These items include the
expected value of synergies and the assembled workforce.
Transaction costs were GBPnil. There is a put and call option in
place over the 10 per cent shareholding, exercisable at fixed
points over the next three years. The value paid for the shares
will be based on the results of Cranswick Gourmet Pastry Company
Limited during that period. Contingent consideration of GBP0.4
million has been recognised in relation to the option.
8. Analysis of changes in net debt
At Cash Other At
31 March flow non-cash 31 March
2014 changes 2015
Group GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- -------- ---------- ----------
Cash and cash equivalents 12,223 (8,282) - 3,941
Revolving credit (28,898) 8,000 (367) (21,265)
Finance leases and hire
purchase contracts (309) 444 (135) -
--------------------------- ---------- -------- ---------- ----------
Net debt (16,984) 162 (502) (17,324)
--------------------------- ---------- -------- ---------- ----------
Net debt is defined as cash and cash equivalents and loans
receivable less interest-bearing liabilities (net of unamortised
issue costs).
9. Related party transactions
During the year the Group and Company entered into transactions,
in the ordinary course of business, with related parties, including
transactions between the Company and its subsidiary undertakings.
In the Group accounts transactions between the Company and its
subsidiaries are eliminated on consolidation but these transactions
are reported for the Company below:
Services Interest Dividends
rendered paid to received
Company to related related from related
party party party
GBP'000 GBP'000 GBP'000
------------------------------ ------------ --------- --------------
Related party - Subsidiaries
2015 12,103 3,125 15,350
2014 17,560 2,724 12,700
Amounts owed by or to subsidiary undertakings are unsecured and
repayable on demand.
10. Report and accounts
The Report and Accounts will be available on the Company's
website at www.cranswick.plc.uk on 26 June 2015. Further copies
will be available upon request from the Company Secretary,
Cranswick plc, 74 Helsinki Road, Sutton Fields, Hull, HU7 0YW.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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