TIDMCWK
RNS Number : 2764H
Cranswick PLC
30 November 2015
CRANSWICK plc: INTERIM RESULTS
Further strong commercial and strategic progress
Cranswick plc ("Cranswick" or "the Company" or "the Group"), a
leading UK food producer, today announces its unaudited results for
the six months ended 30 September 2015.
Financial Highlights:
-- Revenue ahead by 9.9% at GBP529.1m (2014: GBP481.5m)
-- Underlying(1) revenue up 6.5%
-- Adjusted Group operating margin(2) up 60 basis points to 6.0% (2014: 5.4%)
-- Adjusted profit before tax(2) increased 22.0% to GBP31.5m (2014: GBP25.8m)
-- Adjusted earnings per share(2) 25.3% higher at 51.5p (2014: 41.1p)
-- Dividend per share increased by 9.4% to 11.6p (2014: 10.6p)
-- Net debt 78.5% lower at GBP4.8m (2014: GBP22.4m)
-- Statutory profit before tax up 3.6% to GBP25.5m (2014: GBP24.6m)
-- Statutory earnings per share 2.0% higher at 40.0p (2014: 39.2p)
-- GBP4.6 million non-cash impairment of Sandwiches goodwill
Strategic progress:
-- Significant ongoing capital investment across the Group's
asset base to support future growth
-- Full and successful integration of Benson Park
-- Successful completion of Benson Park extension which doubles
capacity and improves efficiencies
-- Phase 2 upgrade to Norfolk primary processing facility, which
underpins drive for USDA accreditation, underway
-- Export sales to the Far East up 17%
Martin Davey, Cranswick's Chairman commented:
"The business performed strongly during the first half of the
year and recorded revenue slightly ahead of the Board's original
expectations.
"Alongside record first-half sales it is pleasing to report to
Shareholders that adjusted profit before tax for the period
increased 22.0 per cent to GBP31.5 million from GBP25.8 million in
the corresponding period last year. Adjusted earnings per share
rose 25.3 per cent to 51.5 pence compared to 41.1 pence
previously.
"The interim dividend is being increased by 9.4 per cent to 11.6
pence per share from 10.6 pence previously.
"The Company continues to work closely with its customers and to
maintain its focus on service, quality and innovation to deliver
attractive, competitively priced products in market conditions that
are expected to remain competitive through the second half of the
year. This approach, allied to a broadening product portfolio and
an anticipated strong Christmas trading period, means the business
remains very well placed to deliver further growth in this
financial year.
"With experienced management at all levels of the Group, a
strong range of products, a well invested asset base and a robust
financial position, the Board remains confident in the continued
long term success and development of the business."
-ends-
(1) underlying revenue excludes the contribution from Benson
Park in the current period and revenue from pig breeding, rearing
and trading activities in both the current and prior period.
(2) adjusted Group operating margin, adjusted profit before tax
and adjusted earnings per share exclude net IAS 41 valuation
movement on biological assets in both the current and prior period,
and the amortisation of customer relationship intangible assets and
the impairment of goodwill in the current period. These are the
measures used by the Board to assess the Group's underlying
performance.
Enquiries:
Cranswick plc
Mark Bottomley, Finance Director 01482 372 000
Powerscourt
Nick Dibden/ Sophie Moate/ Samantha Trillwood 020 7250 1446
Note to Editors:
Cranswick was formed in the early 1970s by farmers in East
Yorkshire to produce animal feed and has since evolved into a
business focused on the supply of food products to the UK food
retail and food service sectors. Well known for the production of
gourmet sausages the Company is involved in the breeding and
rearing of premium British pigs and also supplies fresh pork,
cooked meats, premium cooked poultry, air-dried bacon and gammon,
continental products, sandwiches and pastry products. Products are
sold primarily under retailers own labels including Sainsbury's
'Taste The Difference' and Tesco's 'Finest' as well as under a
number of brands such as 'Simply Sausages', 'The Black Farmer',
'Bodega' and 'Woodall's'. Sales in the year to March 2015 were
GBP1,003 million and have grown more than 200 per cent over ten
years.
Chairman's statement
The business performed strongly during the first half of the
year and recorded revenue slightly ahead of the Board's original
expectations.
Results
Total revenue in the period to 30 September 2015 of GBP529.1
million was 10 per cent ahead of the same period last year driven
by strong volume growth across most product categories and included
a positive contribution from Benson Park, acquired in October
2014.
Benson Park, based in Hull, is a leading producer of premium
British cooked poultry products serving the fast growing 'food to
go' sector. It has been fully and successfully integrated and
recently commissioned a major capital investment programme
significantly raising production capacity ahead of the peak
Christmas trading period.
Underlying sales were 7 per cent higher than the same period
last year, with corresponding volumes up 10 per cent as the Group's
customers and UK consumers continue to see the benefit of the
Group's lower input prices.
Alongside record first-half sales it is pleasing to report to
Shareholders that adjusted profit before tax for the period
increased 22.0 per cent to GBP31.5 million from GBP25.8 million in
the corresponding period last year. This reflects the contribution
from Benson Park, the focus on improved efficiencies across the
Group plus the returns from investments made in recent years to
increase capacity and broaden the product base.
Adjusted earnings per share rose 25.3 per cent to 51.5 pence
compared to 41.1 pence previously. Details of trading are covered
more fully in the Operational and Financial reviews.
Investments
During the period GBP13.4 million was invested in the asset base
of the business. Specific projects included redevelopment of the
Kingston Foods cooked meats facility, the Benson Park project and
various other initiatives across the Group to increase capacity and
drive further operating efficiencies. In addition, there are a
number of projects either underway or planned in the near term as
the Board seeks to maintain the quality of the Group's production
facilities, the efficiencies of its operations and its level of new
product development.
Financial position
Operating cash inflow increased to GBP35.5 million from GBP17.1
million in the same period last year and at the end of the period
net debt stood at GBP4.8 million, which compared to GBP22.4 million
a year earlier. The Company is in a sound financial position and
further details are provided in the Financial review.
Dividend
The interim dividend is being increased by 9.4 per cent to 11.6
pence per share from 10.6 pence previously. The dividend will be
paid on 29 January 2016 to Shareholders on the register at the
close of business on 11 December 2015. Shareholders will again have
the opportunity to receive the dividend by way of scrip issue.
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
Cranswick has made further commercial and strategic progress
during the period.
The Company continues to work closely with its customers and to
maintain its focus on service, quality and innovation to deliver
attractive, competitively priced products in market conditions that
are expected to remain competitive through the second half of the
year. This approach, allied to a broadening product portfolio and
an anticipated strong Christmas trading period, means the business
remains very well placed to deliver further growth in this
financial year.
With experienced management at all levels of the Group, a strong
range of products, a well invested asset base and a robust
financial position, the Board remains confident in the continued
long term success and development of the business.
Martin Davey
Chairman
30 November 2015
Operating review
Reported revenue increased by 10 per cent to GBP529.1 million.
Growth was supported by the contribution from Benson Park which was
acquired in the second half of the last financial year. Underlying
revenue grew by 7 per cent, with corresponding volumes ahead 10 per
cent as the benefit of lower input prices continues to be passed on
to the Group's customers.
Adjusted Group operating profit increased by 21.4 per cent to
GBP31.8 million in the first half of the financial year and
adjusted Group operating margin improved by 60 basis points to 6.0
per cent of revenue. The improvement in Group operating margin
reflected the positive contribution from Benson Park, an improved
performance from the Pastry business and a tight focus on cost
control and operational efficiencies across the Group.
Pig prices remained relatively stable during the period compared
to the volatility experienced in the previous three years. The UK
pig price fell 2 per cent during the period and was on average 18
per cent lower than during the same period last year. Despite this
reduction, the UK price remains approximately 30 per cent higher
than its European equivalent reflecting on going high demand for
British pig meat.
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The Wayland and Wold farming businesses supply approximately 20
per cent of the Group's British pig requirements. Cranswick is the
third largest pig producer in the UK and represents 6 per cent of
the total UK pig herd. More than 80 per cent of the pigs produced
from the two herds are bred outdoors providing a complete farm to
fork solution for the premium pork ranges of the Group's two
largest retail customers. Provenance and end-to-end supply chain
integrity are key differentiators enabling the Group to lock in key
long-term retail relationships. Improvements in productivity and
prolificacy together with lower feed costs helped offset the impact
of lower pig prices during the period.
Total export volumes grew by 18 per cent during the period.
Volume growth in Far Eastern markets of 31 per cent offset lower
volumes into the US and flat volumes into European markets. 1,000
tonnes of product are being shipped to the Far East each week with
Cranswick accounting for over 50 per cent of all pig meat exports
from the UK to this strategically important market. Further
opportunities are being explored and the range of products being
exported is continually being developed and broadened.
Fresh pork sales grew by 15 per cent in the period driven by the
recovery of business with one of the Group's principal retail
customers. Market data for the 52 weeks to 13 September shows UK
retail fresh pork sales have fallen 10 per cent year on year due
primarily to the fall in UK pig prices over the same period. We are
keen to see that the versatility and price competiveness of pork
compared to other meat proteins is advanced. The recent, hugely
successful AHDB pulled pork advertising campaign highlights the way
in which innovative and focused marketing can deliver positive
results. This initiative resulted in a 19 per cent year on year
increase in shoulder joint sales during the campaign. The next
phase of redevelopment of our Norfolk facility is now underway.
This GBP6 million investment to replace the existing abattoir will
increase capacity, improve efficiencies and will facilitate the
site's push for USDA accreditation.
Sausage sales were 5 per cent higher supported by strong volume
growth. The premium sector of the market is the main driver of
category growth as consumers are prepared to pay a modest premium
for a step change in quality and taste. Sales of premium beef
burgers were 24 per cent higher year on year. Further substantial
capital investment to upgrade mixing and filling equipment is
planned at the Lazenby's facility in Hull to support anticipated
growth in the sausage category.
Bacon sales were 21 per cent ahead as continued development of
the business' hand-cured, air-dried bacon was supported by strong
premium gammon sales. This growth was underpinned by gaining sole
supply status for premium bacon and gammon with one of the Group's
lead retail customers shortly before the previous half year end.
With further new product launches planned for both existing and new
customers in the run up to the peak Christmas trading period, the
business is well placed moving into the second half of the year.
The redevelopment and conversion of the former Kingston Foods site
in Milton Keynes into a gammon facility was recently completed.
This facility will enable the business to target a new sector of
the bacon and gammon market.
Cooked meat sales fell 6 per cent reflecting overall category
deflation and lower volumes to one retail customer. Further
substantial capital investment at the Sutton Fields facility will
upgrade staff amenities and refurbish both high and low risk
production areas to enable expansion into new categories with
existing customers and develop further capability to supply 'slow
cook' and 'food to go' ranges to manufacturing and food service
customers. A significant three year capital investment programme at
the Valley Park facility will refurbish the fabric of the site and
upgrade chilling and storage facilities to support future
growth.
Sales of premium poultry from Benson Park made a positive
contribution to overall Group performance in the first half. New
business wins during the period, both with existing and new
customers, leave the business well placed moving into the second
half of the year. The capital investment programme which was
underway when the business was acquired in October 2014, is now
complete. The enlarged factory footprint and new in-line spiral
cooking and cooling equipment was fully and successfully
commissioned ahead of the peak Christmas trading period. This GBP9
million investment programme has substantially increased capacity
and will improve operational efficiencies as well as enabling the
business to offer a broader product range.
Pastry sales were 45 per cent ahead of the prior year continuing
the positive development since this category was introduced.
Operational performance at the site continued the marked
improvement seen in the second half of the last financial year and
the category made a positive contribution to the overall Group
result. New product lines have recently been launched which,
coupled with a strong Christmas and seasonal promotional programme,
leaves the pastry business well placed to deliver further growth
during the remainder of the financial year.
Sales of continental products increased by 12 per cent
reflecting the UK consumer's growing appetite for speciality
continental products including charcuterie, cheeses, pasta and
olives. Category growth was supported by new product launches and
new retail contracts together with a continued focus on sourcing
new artisan products from across Europe. The extension of the
Guinness Circle facility to produce British cured meat products was
completed during the period, and will produce a range of premium
cured meats under both the Woodall's brand and retail customer own
label.
Sandwich sales grew by 5 per cent, supported by new contract
wins brought on stream part way through the first half of the last
financial year. Top line growth was supported by an improved
operational performance as the business continued to strip out
underperforming accounts and rationalise the product range.
However, the business has recently received confirmation that a key
account will not be extended beyond its current term and
consequently the outlook for the Sandwich category beyond the
current financial year end will be more challenging.
Cranswick is committed to delivering everyday great food
experiences to the UK consumer. This commitment is underpinned by a
constant focus on quality, value and a drive to innovate and bring
new and exciting products to market. The ongoing growth and
development of the Group is a testament to the continued efforts of
the highly skilled and committed people across the business.
Adam Couch
Chief Executive
30 November 2015
Financial review
The Group is presenting its interim financial information for
the six months to 30 September 2015 with comparative information
for the six months to 30 September 2014 and the year to 31 March
2015.
Revenue
Reported revenue at GBP529.1 million was 9.9 per cent ahead of
the same period last year, driven by strong volume growth across
most product categories and a positive contribution from Benson
Park, acquired in October 2014. Underlying revenue* was 6.5 per
cent higher than the prior year, with corresponding volumes up 10
per cent as the Group's customers and UK consumers continue to see
the benefit of the Group's lower input prices. Export sales to key
Far East markets increased by 17 per cent.
Adjusted Group operating profit
Adjusted Group operating profit of GBP31.8 million, including
the contribution from Benson Park, increased by 21.4 per cent.
Adjusted Group operating margin at 6.0 per cent of sales was 60
basis points higher than the 5.4 per cent reported in the same
period last year with the improvement underpinned by strong revenue
growth, the positive contributions from Benson Park and the Group's
pastry business along with an unstinting focus on product quality,
innovation and operational efficiency.
Finance costs
Net financing costs at GBP0.3 million were GBP0.1 million lower
than reported in the first half of the prior year, reflecting lower
average bank borrowings.
Adjusted profit before tax
Adjusted profit before tax was 22.0 per cent higher at GBP31.5
million (2014: GBP25.8 million).
Taxation
The tax charge as a percentage of profit before tax was 22.5 per
cent (2014: 22.0 per cent). The standard rate of corporation tax
was 20 per cent (2014: 21 per cent). The charge was higher than the
standard rate of corporation tax for both periods due to the impact
of disallowable expenses, including a goodwill impairment charge in
the current year, as referred to below.
Adjusted earnings per share
Adjusted earnings per share rose by 25.3 per cent to 51.5 pence
(2014: 41.1 pence) in the six months to 30 September 2015. The
average number of shares in issue was 49,464,000 (2014:
49,023,000).
Adjusted profit measures
The Group monitors performance principally through the adjusted
profit measures which exclude certain non-cash items including the
net IAS 41 valuation charge of GBP0.6 million on biological assets
(2014: GBP1.2 million), amortisation of acquired intangible assets
of GBP0.7 million (2014: GBPnil) and a goodwill impairment charge
of GBP4.6 million (2014: GBPnil). The statutory results, including
these items, show a 3.6 per cent increase in profit before tax to
GBP25.5 million (2014: GBP24.6 million), a 3.3 per cent increase in
Group operating profit to GBP25.8 million (2014: GBP25.0 million)
and a 2.0 per cent increase in earnings per share to 40.0 pence
(2014: 39.2 pence).
Goodwill impairment
Following a change in the customer base of the Sandwiches
category, an impairment review was performed on the Sandwiches cash
generating unit as at 30 September 2015. This resulted in the
recognition of a goodwill impairment charge of GBP4.6 million (note
8).
Cash flow and net debt
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The net cash inflow from operating activities in the period was
GBP35.5 million (2014: GBP17.1 million) reflecting higher Group
operating profit and a working capital inflow of GBP0.9 million
(2014: outflow of GBP12.0 million). Net debt fell by GBP12.5
million in the six month period to GBP4.8 million, and was GBP17.6
million lower than at the previous half year end. Net debt was just
1 per cent of Shareholders' funds (2014: 7 per cent) as the Group's
balance sheet continues to be conservatively managed. The Group's
current bank facility of GBP120 million extends to July 2018 and
provides the business with generous headroom.
Pensions
The Group operates defined contribution pension schemes whereby
contributions are made to schemes administered by major insurance
companies. Contributions to these schemes are determined 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 deficit on this scheme at 30
September 2015 was GBP5.0 million which compared to GBP5.6 million
at 31 March 2015. Cash contributions to the scheme during the
period, as part of the programme to reduce the deficit, were GBP0.7
million. The present value of funded obligations was GBP29.1
million and the fair value of plan assets was GBP24.1 million.
The valuation of the defined benefit pension liability is
dependent upon market conditions and actuarial methods and
assumptions (including mortality assumptions). Such changes in
actuarial assumptions and the performance of the funds may result
in changes to amounts charged or released through the income
statement and the Group may be required to pay increased pension
contributions in the future. The Board regularly reviews its
pension strategy with reference to the value of assets and
liabilities under the pension scheme as well as the potential
impact of changes in actuarial assumptions.
Principal risks and uncertainties
There are a number of risks and uncertainties facing the
business in the second half of the financial year. The Board
considers these risks and uncertainties to be the same as those
described in the Report & Accounts for the year ended 31 March
2015, dated 18 May 2015, a copy of which is available on the
Group's website at www.cranswick.plc.uk. The principal risks and
uncertainties which are set out in detail on pages 31 to 33 of the
Report & Accounts for the year ended 31 March 2015 are:
Strategic Commercial Financial risks Operational
risks risks * Interest rate, curren risks
* Consumer demand * Reliance on key customers cy, liquidity and credit ri * Business continuity
sks
* Competitor activity * Pig meat - pricing and availability of supply * Recruitment and retention of workforce
* Business acquisitions
* Health and safety
* Disease and infection within pig herd / poultry flock
* Food scares / product contamination
Forward looking information
This interim report contains certain forward looking statements.
These statements are made by the Directors in good faith based on
the information available to them at the time of their approval of
this report and such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward looking information.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the 'Operating review'. The financial position of
the Group, its cash flows, liquidity position and borrowing
facilities are described above. The Group has considerable
financial resources together with strong trading relationships with
its key customers and suppliers. As a consequence, the Directors
believe that the Group is well placed to manage its business risk
successfully.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
condensed consolidated interim financial statements.
Mark Bottomley
Finance Director
30 November 2015
* Underlying revenue excludes the contribution from Benson Park
in the current period and revenue from the pig breeding, rearing
and trading activities in both the current and prior period
Cranswick plc: Group income statement (unaudited)
for the six months ended 30 September 2015
Half year Year to
------------------
31 March
2015 2014 2015
Notes GBP'000 GBP'000 GBP'000
Revenue 529,148 481,540 1,003,336
------------------------------- -------- -------- ----------
Adjusted Group operating
profit 31,799 26,192 58,653
Net IAS 41 valuation movement
on biological assets (637) (1,182) (4,245)
Amortisation of customer
relationship intangible
assets (698) - (671)
Impairment of goodwill 8 (4,635) - -
------------------------------- -------- -------- ----------
Group operating profit 4 25,829 25,010 53,737
Finance revenue - 1 -
Finance costs (301) (378) (901)
Profit before tax 25,528 24,633 52,836
Taxation 5 (5,752) (5,429) (11,584)
Profit for the period 19,776 19,204 41,252
------------------------------- -------- -------- ----------
Earnings per share (pence)
On profit for the period:
Basic 6 40.0p 39.2p 84.1p
Diluted 6 39.8p 39.0p 83.8p
------------------------------- -------- -------- ----------
On adjusted profit for
the period:
Basic 6 51.5p 41.1p 92.1p
Diluted 6 51.3p 40.9p 91.8p
------------------------------- -------- -------- ----------
Cranswick plc: Group statement of comprehensive income
(unaudited)
for the six months ended 30 September 2015
Year to
Half year 31 March
--------------------
Notes 2015 2014 2015
GBP'000 GBP'000 GBP'000
Profit for the period 19,776 19,204 41,252
----------------------------------------------------------------- --------- --------- ----------
Other comprehensive income
Other comprehensive income to
be reclassified to profit or loss
in subsequent periods:
Cash flow hedges
Losses arising in the period 9 (169) (163) (210)
Reclassification adjustments
for losses included in the income
statement 210 18 18
Income tax effect (8) 29 38
------------------------------------------------ --------------- --------- --------- ----------
Net other comprehensive income
to be reclassified to profit
or loss in subsequent periods 33 (116) (154)
------------------------------------------------ --------------- --------- --------- ----------
Items not to be reclassified
to profit or loss in subsequent
periods:
Actuarial gains/ (losses) on
defined benefit pension scheme 44 (148) (307)
Income tax effect (9) 29 61
------------------------------------------------ --------------- --------- --------- ----------
Net other comprehensive income
not being reclassified to profit
or loss in subsequent periods 35 (119) (246)
------------------------------------------------ --------------- --------- --------- ----------
Other comprehensive income, net
of tax 68 (235) (400)
------------------------------------------------ --------------- --------- --------- ----------
Total comprehensive income, net
of tax 19,844 18,969 40,852
------------------------------------------------ --------------- --------- --------- ----------
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Cranswick plc: Group balance sheet (unaudited)
at 30 September 2015
As at
Half year 31 March
----------------------
Notes 2015 2014 2015
GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 8 140,372 130,754 145,705
Property, plant and equipment 168,751 159,931 166,087
Biological assets 526 924 592
Total non-current assets 309,649 291,609 312,384
-------------------------------------- ------ ---------- ---------- ----------
Current assets
Biological assets 13,074 15,300 11,197
Inventories 50,616 54,041 49,125
Trade and other receivables 120,757 95,474 116,905
Cash and short-term deposits 10 14,623 11,720 3,941
-------------------------------------- ------ ---------- ---------- ----------
Total current assets 199,070 176,535 181,168
-------------------------------------- ------ ---------- ---------- ----------
Total assets 508,719 468,144 493,552
-------------------------------------- ------ ---------- ---------- ----------
Current liabilities
Trade and other payables (123,962) (104,238) (117,792)
Financial liabilities (169) (207) (210)
Provisions (60) - (196)
Income tax payable (4,848) (6,056) (7,046)
Total current liabilities (129,039) (110,501) (125,244)
-------------------------------------- ------ ---------- ---------- ----------
Non-current liabilities
Other payables (1,443) (426) (1,278)
Financial liabilities (23,657) (34,082) (25,427)
Deferred tax liabilities (3,837) (3,892) (3,457)
Provisions (1,395) (346) (150)
Defined benefit pension
scheme deficit (5,004) (6,078) (5,623)
-------------------------------------- ------ ---------- ---------- ----------
Total non-current liabilities (35,336) (44,824) (35,935)
-------------------------------------- ------ ---------- ---------- ----------
Total liabilities (164,375) (155,325) (161,179)
Net assets 344,344 312,819 332,373
-------------------------------------- ------ ---------- ---------- ----------
Equity
Called-up share capital 4,971 4,909 4,926
Share premium account 67,660 64,650 65,689
Share-based payments 11,415 8,939 10,242
Hedging reserve (136) (131) (169)
Retained earnings 260,434 234,452 251,685
-------------------------------------- ------ ---------- ---------- ----------
Equity attributable to owners
of the parent 344,344 312,819 332,373
-------------------------------------- ------ ---------- ---------- ----------
Cranswick plc: Group statement of cash flows (unaudited)
for the six months ended 30 September 2015
Year
Half year to 31
March
--------------------
Notes 2015 2014 2015
GBP'000 GBP'000 GBP'000
Operating activities
Profit for the period 19,776 19,204 41,252
Adjustments to reconcile Group
profit for the period to net
cash inflows from operating
activities:
Income tax expense 5,752 5,429 11,584
Net finance costs 301 377 901
(Gain)/loss on sale of property,
plant and equipment (113) (49) 149
Depreciation of property, plant
and equipment 9,435 8,753 18,349
Amortisation of intangibles 8 698 78 671
Impairment of goodwill 8 4,635 - -
Share-based payments 1,173 1,160 2,463
Difference between pension contributions
paid and amounts recognised
in the income statement (575) (598) (1,212)
Release of government grants (56) (18) (74)
Net IAS 41 valuation movement
on biological assets 637 1,182 4,245
Increase in biological assets (2,448) (2,689) (1,317)
(Increase)/decrease in inventories (1,491) (6,615) 491
(Increase)/decrease in trade
and other receivables (3,669) 2,485 (12,586)
Increase/(decrease) in trade
and other payables 8,486 (5,218) 2,226
------------------------------------------ ------ --------- --------- ---------
Cash generated from operations 42,541 23,481 67,142
Tax paid (7,045) (6,374) (12,750)
------------------------------------------ ------ --------- --------- ---------
Net cash from operating activities 35,496 17,107 54,392
------------------------------------------ ------ --------- --------- ---------
Cash flows from investing activities
Interest received - 1 -
Acquisition of subsidiary, net
of cash acquired - - (17,692)
Purchase of property, plant
and equipment (13,392) (11,022) (21,144)
Receipt of government grants 228 - 542
Proceeds from sale of property,
plant and equipment 193 198 244
Net cash used in investing activities (12,971) (10,823) (38,050)
------------------------------------------ ------ --------- --------- ---------
Cash flows from financing activities
Interest paid (255) (369) (880)
Proceeds from issue of share
capital 63 60 901
Proceeds from borrowings - 5,000 -
Issue costs of long term borrowings - (851) (851)
Repayment of borrowings 10 (2,000) - (8,000)
Dividends paid (9,651) (10,362) (15,350)
Repayment of capital element
of finance leases - (265) (444)
------------------------------------------ ------ --------- --------- ---------
Net cash used in financing activities (11,843) (6,787) (24,624)
------------------------------------------ ------ --------- --------- ---------
Net increase/(decrease) in cash
and cash equivalents 10 10,682 (503) (8,282)
Cash and cash equivalents at
beginning of period 10 3,941 12,223 12,223
------------------------------------------ ------ --------- --------- ---------
Cash and cash equivalents at
end of period 10 14,623 11,720 3,941
------------------------------------------ ------ --------- --------- ---------
Cranswick plc: Group statement of changes in equity
(unaudited)
for the six months ended 30 September 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 1 April 2015 4,926 65,689 10,242 (169) 251,685 332,373
-------------------------- --------- --------- ---------- --------- ---------- ---------
Profit for the period - - - - 19,776 19,776
Other comprehensive
income - - - 33 35 68
-------------------------- --------- --------- ---------- --------- ---------- ---------
Total comprehensive
income - - - 33 19,811 19,844
Share-based payments - - 1,206 - - 1,206
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Scrip dividend 12 1,941 - - - 1,953
Share options exercised 33 30 (33) - - 30
Dividends - - - - (11,604) (11,604)
Deferred tax relating
to changes in equity - - - - (161) (161)
Corporation tax relating
to changes in equity - - - - 703 703
-------------------------- --------- --------- ---------- --------- ---------- ---------
At 30 September 2015 4,971 67,660 11,415 (136) 260,434 344,344
-------------------------- --------- --------- ---------- --------- ---------- ---------
At 1 April 2014 4,896 64,173 7,779 (15) 225,878 302,711
-------------------------- --------- --------- ---------- --------- ---------- ---------
Profit for the period - - - - 19,204 19,204
Other comprehensive
income - - - (116) (119) (235)
-------------------------- --------- --------- ---------- --------- ---------- ---------
Total comprehensive
income - - - (116) 19,085 18,969
Share-based payments - - 1,160 - - 1,160
Scrip dividend 3 427 - - - 430
Share options exercised 10 50 - - - 60
Dividends - - - - (10,792) (10,792)
Deferred tax relating
to changes in equity - - - - 113 113
Corporation tax relating
to changes in equity - - - - 168 168
-------------------------- --------- --------- ---------- --------- ---------- ---------
At 30 September 2014 4,909 64,650 8,939 (131) 234,452 312,819
-------------------------- --------- --------- ---------- --------- ---------- ---------
At 1 April 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 25 876 - - - 901
Dividends - - - - (15,995) (15,995)
Deferred tax relating
to changes in equity - - - - 437 437
Corporation tax relating
to changes in equity - - - - 359 359
-------------------------- --------- --------- ---------- --------- ---------- ---------
At 31 March 2015 4,926 65,689 10,242 (169) 251,685 332,373
-------------------------- --------- --------- ---------- --------- ---------- ---------
Responsibility statement
The Directors confirm that to the best of their knowledge the
condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting and includes a
fair review of the information required by DTR 4.2.7R (an
indication of important events during the first six months and a
description of the principal risks and uncertainties for the
remaining six months of the year) and by DTR 4.2.8R (a disclosure
of related party transactions and changes therein) of the
Disclosure and Transparency Rules. The Board of Directors that
served during the six months ended 30 September 2015, and their
respective responsibilities, can be found on pages 44 and 45 of the
2015 Annual Report & Accounts.
On behalf of the Board
Martin Davey Mark Bottomley
Chairman Finance Director
30 November 2015
Notes to the interim accounts
1. Basis of preparation
This interim report was approved by the Directors on 30 November
2015 and has been prepared in accordance with the Disclosure and
Transparency Rules of the UK's Financial Conduct Authority and the
requirements of IAS 34 Interim Financial Reporting as adopted by
the European Union. The information does not constitute statutory
accounts within the meaning of Section 435 of the Companies Act
2006. The statutory accounts for the year ended 31 March 2015
prepared under IFRS as adopted by the European Union have been
filed with the Registrar of Companies. The report of the auditors
on the statutory accounts was not qualified and did not contain a
statement under Section 498(2) or (3) of the Companies Act 2006.
The interim report is unaudited but has been subject to an
independent review by Ernst & Young LLP pursuant to the
Auditing Practices Board guidance contained in ISRE 2410 (UK and
Ireland) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity".
2. Accounting policies
The accounting policies applied by the Group in this interim
report are the same as those applied by the Group in the financial
statements for the year ended 31 March 2015.
Non-GAAP measures - Adjusted Group operating profit, adjusted
profit before tax and adjusted earnings per share
Adjusted Group operating profit, adjusted profit before tax and
adjusted earnings per share are defined as being before net IAS 41
valuation movement on biological assets, impairment charges and
other significant non-trading items (being amortisation of acquired
customer relationship intangibles, which became significant for the
first time during the year ended 31 March 2015 following the
acquisition of Benson Park Limited). These additional non-GAAP
measures of performance are included as the Directors believe that
they provide a useful alternative measure for Shareholders of the
trading performance of the Group. The reconciliation between Group
operating profit and adjusted Group operating profit is shown on
the face of the Group income statement.
The following accounting standards and interpretations became
effective, and were adopted by the Group, for the current reporting
period:
International Accounting Standards (IAS / Effective
IFRSs) date
Annual Improvements to IFRSs 2010-2012 Cycle 1 July
2014
Annual Improvements to IFRSs 2011-2013 Cycle 1 July
2014
The application of these standards has not had a material effect
on the net assets, results and disclosures of the Group.
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
3. Segmental analysis
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 adjusted profit
before taxation measured on a basis consistent with the disclosure
in the Group accounts.
The Group reported on just one reportable segment during the
period and the preceding financial year. The revenues of the Group
are not significantly impacted by seasonality.
Additions to property, plant and equipment during the period
totalled GBP12.2 million (2014: GBP12.3 million). Future capital
expenditure under contract at 30 September 2015 was GBP4.3 million
(2014: GBP3.1 million).
4. Group operating profit
Group operating costs comprise:
Year
Half year to
31 March
----------------------
2015 2014 2015
GBP'000 GBP'000 GBP'000
----------------------------------------- ---------- ---------- ----------
Cost of sales excluding net IAS
41 valuation movement on biological
assets 458,454 425,580 878,968
Net IAS 41 valuation movement
on biological assets* 637 1,182 4,245
------------------------------------------ ---------- ---------- ----------
Cost of sales 459,091 426,762 883,213
------------------------------------------ ---------- ---------- ----------
Gross profit 70,057 54,778 120,123
----------------------------------------- ---------- ---------- ----------
Selling and distribution costs 21,523 18,035 38,418
----------------------------------------- ---------- ---------- ----------
Administrative expenses excluding
amortisation of customer relationship
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intangible assets and impairment
of goodwill 17,372 11,733 27,297
Amortisation of customer relationship
intangible assets 698 - 671
Impairment of goodwill 4,635 - -
----------------------------------------- ---------- ---------- ----------
Administrative expenses 22,705 11,733 27,968
----------------------------------------- ---------- ---------- ----------
Total operating costs 503,319 456,530 949,599
----------------------------------------- ---------- ---------- ----------
* 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
of adjusted operating profit.
5. Taxation
The tax charge for the period was GBP5.8 million (2014: GBP5.4
million) and represents an effective rate of 22.5 per cent (2014:
22.0 per cent). The charge for the period was higher than the
standard rate of corporation tax due to the impact of disallowable
expenses including impairment of goodwill in the current
period.
Reductions to the standard rate of corporation tax were proposed
in the July 2015 Budget statement to reduce the rate from 20 per
cent to 19 per cent by 1 April 2017 and to 18 per cent by 1 April
2020. These changes had not been substantively enacted at the
balance sheet date and, therefore, are not included in this interim
consolidated financial information.
6. Earnings per share
Basic earnings per share are based on profit for the period
attributable to Shareholders and on the weighted average number of
shares in issue during the period of 49,464,032 (2014: 49,022,524).
The calculation of diluted earnings per share is based on
49,666,112 shares (2014: 49,223,926).
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 impairment of goodwill, 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, and gains and losses from the
IAS 41 valuation movement on biological assets due to the
volatility of pig prices.
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 period is derived as follows:
Year
Half year to
31 March
--------------------
2015 2014 2015
GBP'000 GBP'000 GBP'000
Profit for the period 19,776 19,204 41,252
Net IAS 41 valuation movement
on biological assets 637 1,182 4,245
Tax on net IAS 41 valuation movement
on biological assets (127) (236) (849)
Amortisation of customer relationship
intangible assets 698 - 671
Tax on amortisation of customer
relationship intangible assets (140) - (134)
Impairment of goodwill 4,635 - -
---------------------------------------- --------- --------- ----------
Adjusted profit for the period 25,479 20,150 45,185
---------------------------------------- --------- --------- ----------
7. Dividends - half year ended 30 September
Year
Half year to
31 March
--------------------
2015 2014 2015
GBP'000 GBP'000 GBP'000
---------------------------------------- --------- --------- ----------
Interim dividend for year ended
31 March 2015 of 10.6p per share - - 5,203
Final dividend for year ended
31 March 2015 of 23.4p (2014:
22.0p)
per share 11,604 10,792 10,792
11,604 10,792 15,995
---- ----------------------------------- --------- --------- ----------
The interim dividend for the year ending 31 March 2016 of 11.6
pence per share was approved by the Board on 30 November 2015 for
payment to Shareholders on 29 January 2016 and therefore has not
been included as a liability as at 30 September 2015.
8. Intangible fixed assets
Customer
Goodwill relationships Total
GBP'000 GBP'000 GBP'000
Cost
At 30 September 2014 135,239 795 136,034
On acquisition 9,359 6,185 15,544
----------------------------- --------- -------------- --------
At 31 March 2015 and at 30
September 2015 144,598 6,980 151,578
----------------------------- --------- -------------- --------
Amortisation and impairment
At 30 September 2014 4,924 356 5,280
Amortisation - 593 593
----------------------------- --------- -------------- --------
At 31 March 2015 4,924 949 5,873
Amortisation - 698 698
Impairment 4,635 - 4,635
----------------------------- --------- -------------- --------
At 30 September 2015 9,559 1,647 11,206
----------------------------- --------- -------------- --------
Net book value
----------------------------- --------- -------------- --------
At 30 September 2014 130,315 439 130,754
----------------------------- --------- -------------- --------
At 31 March 2015 139,674 6,031 145,705
----------------------------- --------- -------------- --------
At 30 September 2015 135,039 5,333 140,372
----------------------------- --------- -------------- --------
Impairment testing
Goodwill is subject to annual impairment testing. Goodwill
acquired through business combinations has been allocated for
impairment testing purposes to the following principal cash
generating units:
Year
Cash generating Half year to 31
unit March
------------------
2015 2014 2015
GBP'000 GBP'000 GBP'000
Fresh pork 12,231 12,231 12,231
Livestock 1,691 1,691 1,691
Cooked meats 90,167 90,167 90,167
Sandwiches 6,967 11,602 11,602
Continental Fine
Foods 10,968 10,968 10,968
Premium cooked
poultry 9,259 - 9,259
Other 3,756 3,656 3,756
-------------------- -------- -------- --------
135,039 130,315 139,674
------------------- -------- -------- --------
Following a change in the customer base of the Sandwiches
category, an impairment review was performed on the Sandwiches cash
generating unit as at 30 September 2015. This cash generating unit
has historically been the most sensitive to a reasonably possible
change in assumptions.
The recoverable amount for the Sandwiches cash generating unit
has been determined based on value in use calculations. The
projected cash flows were updated to reflect the latest Sandwiches
forecasts for the years ending 31 March 2016 and 31 March 2017 and
cash flow projections for the next three years. Forecast
replacement capital expenditure is included from forecasts and
thereafter capital spend is assumed to represent 100 per cent of
depreciation.
Subsequent cash flows are forecast to grow in line with an
assumed long-term industry growth rate of 3 per cent derived from
third party market information, including Kantar Worldpanel data. A
pre-tax discount rate of 7.7 per cent has been used (31 March 2015:
6.5 per cent) being management's estimate of the weighted average
cost of capital.
The calculation is most sensitive to the following
assumptions:
Sales volumes
Sales volumes are influenced by the growth of the underlying
food segment, the market shares of our customers, selling prices,
and the quality of our products and service. Historical volumes are
used as the base and adjusted over the projection period in line
with current growth rates.
Gross margin
Gross margin depends upon average selling prices, the cost of
raw materials and changes in the cost of production overheads.
Historical margins are used as the base, adjusted for management's
expectations derived from experience and with reference to
forecasts.
Discount rates
All calculations of this nature are sensitive to the discount
rate used. Management's estimate of the weighted average cost of
capital has been used.
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