TIDMCWK
RNS Number : 6216Z
Cranswick PLC
21 May 2019
CRANSWICK plc: PRELIMINARY RESULTS
A platform for future growth
21 May 2019
Cranswick plc ("Cranswick" or "the Company" or "the Group"), a
leading UK food producer, today announces its audited preliminary
results for the year ended 31 March 2019.
Commercial and strategic progress:
-- Record capital expenditure of GBP79 million to add capacity,
extend capability and drive efficiencies
-- Construction of the new world-class poultry primary
processing facility in Eye, Suffolk is progressing to plan
-- New long term supply agreement secured to supply fresh poultry from the new Eye facility
-- New Continental Foods facility in Bury, Lancashire completed and commissioned
-- Like-for-like Far East export volumes 16.1% ahead
Financial highlights*:
Change Change
2019 2018 52 weeks
(Reported) (Like-for-like
52 weeks 53 weeks )
--------------------------------- ------------ ------------ ------------- -----------------
Revenue GBP1,437.1m GBP1,464.5m -1.9% -0.2%
Adjusted Group Operating Profit GBP92.3m GBP92.8m -0.5% +1.8%
Adjusted Group Operating Margin 6.4% 6.3% +9bps +12bps
Adjusted Profit before tax GBP92.0m GBP92.4m * 0.4% +2.0%
Adjusted earnings per share 144.3p 145.0p * 0.5% +1.9%
-- Statutory profit before tax at GBP86.5m (2018: GBP88.0m)
-- Statutory earnings per share of 135.5p (2018: 137.8p)
-- Return on capital employed(++) of 18.4% (2018: 20.3%)
-- Full year dividend increased by 4.1% to 55.9p (2018: 53.7p)
-- Net funds of GBP6.3m (2018: GBP20.6m)
Adam Couch, Cranswick's Chief Executive Officer commented:
"The last year was one of consolidation following three years of
very strong growth. We delivered this year's results against a
backdrop of highly competitive market conditions and ongoing,
Brexit related, political and economic uncertainty.
"We invested at record levels across our asset base and made
further strong progress against our strategic objectives. We
continue to build a platform and lay down the pipeline for future
growth.
"I am confident that continued focus on the strengths of our
business, which include its long-standing customer relationships,
breadth and quality of products, robust financial position and
industry leading infrastructure, will support the further
successful development of Cranswick over the longer term".
* Adjusted and like-for-like references throughout this statement refer
to non-IFRS measures or Alternative Performance Measures ('APMs').
Definitions and reconciliations of the APMs to IFRS measures are provided
in Note 10.
2018 was a 53 week accounting period. For comparative purposes, like-for-like
references exclude the 53(rd) week in the prior year.
++ Return on capital employed is defined as adjusted operating profit
divided by the sum of average opening and closing net assets, net
(debt)/funds, pension liabilities and deferred tax.
Presentation
A presentation of the results will be made to analysts and
institutional investors today at 10.00am at The Lincoln Centre, 18
Lincoln's Inn Fields, London, WC2A 3ED.
Enquiries:
Cranswick plc
Mark Bottomley, Finance Director 01482 275 000
Powerscourt
Nick Dibden / Lisa Kavanagh
020 7250 1446
Note to Editors:
Cranswick is a leading and innovative supplier of premium, fresh
and added value food products. The business employs over 10,000
people and operates from fifteen well invested, highly efficient
production facilities in the UK.
Cranswick was formed in the early 1970s by farmers in East
Yorkshire to produce animal feed and has since evolved into a
business which produces a range of high quality, predominantly
fresh food, including fresh pork, poultry, convenience and gourmet
products. Through the Group's four primary processing and eleven
added value processing facilities the business develops innovative,
great tasting food products to the highest standards of food safety
and traceability. The Group supplies the major grocery multiples as
well as the growing premium and discounter retail channels.
Cranswick also has a strong presence in the 'food-to-go' sector and
a rapidly growing export business.
Summary
The past year was particularly encouraging considering the
competitive trading environment. Cranswick showed resilience
against the changeable economic and political background and is
strongly positioned both financially and commercially to continue
its long-term success.
Results
Revenue at GBP1.44 billion was in line with the prior year after
adjusting for the 53(rd) week.
Adjusted profit before tax came in at GBP92.0 million which,
when compared on a like-for-like basis with the previous year,
indicates further progress in what was a challenging trading
environment.
Adjusted earnings per share were 144.3 pence compared to 145.0
pence previously. On a comparable 52-week period, adjusted earnings
per share were 1.9 per cent ahead.
A record level of investment was made in the asset base. The
year saw the commissioning of the new Continental Foods site at
Bury and commencement of the construction of the new Poultry
facility at Eye in Suffolk. Other projects were undertaken
elsewhere in the business to improve efficiency, expand capacity
and enhance the resources available for product development.
Cranswick has a significant unsecured banking facility and the
balance sheet remains in robust shape. At the year end, after a
year of record investment, the Group was in a net funds position of
GBP6.3 million.
Dividend
The Board is proposing an increase in the final dividend to 40.0
pence per share from 38.6 pence previously, an increase of 3.6 per
cent. Together with the interim dividend of 15.9 pence per share
this gives a total dividend for the year of 55.9 pence per share,
an increase of 4.1 per cent on the 53.7 pence per share paid
previously. This is the 29(th) consecutive year of dividend
growth.
The final dividend, if approved by Shareholders, will be paid on
6 September 2019 to Shareholders on the register at the close of
business on 19 July 2019. Shareholders will again have the option
to receive the dividend by way of scrip issue.
Outlook
The past year has seen the business make further strategic and
commercial progress which has strengthened the base from which to
deliver the ongoing plans of the Group.
Over the longer term, success has been achieved despite
occasional periods of more intense commercial challenges. The new
financial year is expected to be such a period as outlined in the
announcement released on 7 February 2019. This highlighted that the
Group's operating margin is likely to decline, reflecting the
potentially challenging commercial landscape, together with
start-up and commissioning costs associated with the new Eye
Facility, only partly offset by management actions.
Trading since then has been as anticipated and the Board's
expectations for the Group's performance in the new financial year
remain unchanged.
Notwithstanding these short-term challenges, the new Eye and
existing added value, poultry facilities and the Group's broadening
customer base, provide a solid platform to further develop the
poultry business and drive future growth in this attractive and
expanding protein category.
Longer term, the Group is well positioned to continue its
successful record of development.
Operating and Financial review
Operating review
Revenue and Adjusted operating profit
Change Change
2019 2018 52 weeks
52 weeks 53 weeks (Reported) (Like-for-like*)
--------------------------------- ----------- ----------- ----------- -----------------
Revenue GBP1,437.1m GBP1,464.5m -1.9% -0.2%
Adjusted Group Operating Profit* GBP92.3m GBP92.8m -0.5% +1.8%
Adjusted Group Operating Margin* 6.4% 6.3% +9bps +12bps
--------------------------------- ----------- ----------- ----------- -----------------
* See Note 10
Revenue
Reported revenue decreased by 1.9 per cent to GBP1,437.1
million.
Like-for-like revenues were 0.2 per cent lower, with
corresponding volumes down 0.5 per cent. Strong revenue growth from
poultry, sausages and continental products partly offset lower
year-on-year revenue in other pork related categories. Poultry and
continental products significantly outperformed overall category
market growth throughout the year.
Like-for-like export revenues increased by 3.1 per cent year on
year, with Far East export volumes 16.1 per cent ahead on an
equivalent basis.
Adjusted Group operating profit
Like-for-like adjusted Group operating profit increased by 1.8
per cent to GBP92.3 million and like-for-like adjusted Group
operating margin at 6.4 per cent was 12 basis points higher than in
the prior year.
Category Review
Fresh Pork
Fresh Pork includes our three primary processing facilities and
associated farming operations and represented 32 per cent of Group
revenue. Like-for-like Fresh Pork revenue fell by 3.8 per cent
reflecting lower wholesale and export demand through the first half
of the year, with the average number of pigs processed during the
year falling to 56,000 per week, from 59,000 in the prior year.
However, retail volumes increased by 0.7 per cent, as the World Cup
and summer weather combined to deliver a strong barbecue season as
well as growth in added value convenience ranges launched with our
key customers. This growth was offset by lower sales of roasting
joints and other more traditional products. Overall our retail
sales growth was ahead of the wider Fresh Pork retail market
performance.
We invested GBP11 million across the three pork primary
processing facilities during the year, including GBP3 million spent
on phase 1 of the extension to the Hull facility, which included
increasing lairage capacity from 600 to 1,600 pigs and chiller
capacity from 4,800 to 7,000 carcases. We are upgrading the
refrigeration systems at our Hull facility and we have commissioned
a combined heat and power plant which provides 40 per cent of the
site's electricity requirements. The plant has improved energy
efficiency and reduced the site's environmental impact. Following
the successful implementation of the Deboflex shoulder deboning
system in the previous financial year we are now working with the
same equipment provider to develop further automated deboning
capability.
Like-for-like export revenues increased by 3.1 per cent. Export
volumes to our key Far Eastern markets were 16.1 per cent higher as
we continue to build our e-commerce business and strong, direct
relationships with large scale processing customers in China
through our Shanghai office. We secured approval for direct export
to China from our Ballymena site, plus additional product lines
from our Hull processing facility in the second half of the prior
year and we now export in excess of 50 product lines to the Far
East. Softer prices for Far East exports in the early part of the
year gradually improved as the year progressed moving ahead of the
prior year in the final quarter. Stronger pricing towards the end
of the year reflected supply tightening in the Chinese market due
to a material contraction in the local herd resulting from the
developing African Swine Fever (ASF) epidemic. Prices are expected
to stabilise over the coming months before firming in advance of
the Chinese New Year. We are also continuing to increase sales into
our other export markets, with sales of prime cuts to Japan,
Australia and Canada delivering particularly strong growth.
ASF has now spread to every province in China and throughout
Southeast Asia, disrupting the local pork industry. It is estimated
that between 10 and 35 per cent of the Chinese herd has been lost,
resulting in a potential pork supply shortfall of 16 million tonnes
per year, with export prices strengthening considerably in the
second half of the year as a direct result. It is anticipated that
the impact of ASF on China and surrounding countries may extend
beyond three years due to limited biosecurity and the slow
replenishment of pig herds in the region. ASF was also detected in
the feral pig population in Belgium in mid-September. The region
was quarantined and intensive efforts to eradicate ASF sources have
so far been successful. However, the UK pork industry remains
vigilant with increased levels of biosecurity in place.
During the year we invested GBP8 million in our farming
infrastructure, mainly through the Wayland Farms operation in East
Anglia. This included the purchase of the assets of Woodlark Farms
and expansion of existing operations to increase breeding and
finishing capacity. We invested a further GBP2 million in a joint
venture with one of our key commercial pig producers to increase
capability in this sector. In addition, our Wold Farms operation in
Yorkshire has more than doubled the size of its outdoor reared,
RSPCA Freedom Foods assured herd during the year through organic
growth.
The average UK pig price (EU-spec SPP) was 7 per cent lower
year-on-year. The UK pig price ended the year 6 per cent lower than
at the start of the year, rising steadily through to the end of
July before falling back consistently through to the end of the
year. The EU reference pig price increased by 1 per cent during the
year, but with the average price down 11 per cent year-on-year.
During April 2019 the EU price increased by 14 per cent to 147p/kg,
lifting it above the equivalent UK price, driven by a significant
uplift in demand from China. It is anticipated that the UK price
may start to rise as a consequence of this shift.
Convenience
Convenience, which comprises Cooked Meats and Continental
Products, represented 35 per cent of Group revenue. Like-for-like
Convenience revenue decreased by 1.2 per cent reflecting strong
growth in Continental Products offset by lower Cooked Meats
sales.
Cooked Meats sales were lower than the prior year due primarily
to reduced promotional activity. The premium tier, which is our key
area of focus, continues to outperform the wider category, with
discount customers continuing to develop and broaden their premium
ranges. We have further developed our "Sous Vide" and "Slow Cook"
ranges and, looking forward, we anticipate further growth and
penetration in this attractive sector. We spent a further GBP17
million across the three Cooked Meats facilities during the year on
cooking, cooling and slicing equipment to add capacity and further
improve efficiencies. An energy efficient combined heat and power
(CHP) plant was commissioned at the Milton Keynes facility early in
the year with the site spearheading the Group's 'Second Nature'
sustainability initiative. Following the successful commissioning
of CHP plants at Milton Keynes and Hull we plan to replicate this
capability at other Group sites, including the new Eye facility,
during this next financial year.
Continental Products revenue grew strongly, with the new
facility providing additional capacity for new olive business,
sales growth with our discount retail customers and increased sales
of pre-pack corned beef. The new facility in Bury, which increased
capacity by approximately 70 per cent, was commissioned in May, as
planned, with capital expenditure of GBP3 million during the year
to complete the GBP27 million project. Although commissioning costs
were higher than anticipated and expected efficiency improvements
were not delivered immediately, the business is now making good
progress towards achieving planned returns and revenue growth is
ahead of expectations.
Gourmet Products
Gourmet Products, which comprise Sausage, Bacon and Pastry,
represented 19 per cent of Group revenue. Like-for-like Gourmet
Products revenue fell 3.3 per cent compared to the prior year.
Sausage sales growth was offset by lower sales of bacon and pastry
products.
The improvement in sausage sales reflected a strong promotional
pipeline and extended summer barbecue season. We secured additional
business with our discount retail customers as they continue to
expand their premium ranges and we also secured a long-term supply
agreement with our largest food service customer. The peak
Christmas trading period was well executed with strong sales of
premium festive products.
Lower bacon sales reflected reduced levels of promotional
activity by one of our key retail customers, particularly during
the first half, and the effect of the hot summer when customers
tend to switch to alternative protein formats. Stronger second half
revenues reflected improving levels of promotional activity and a
Christmas trading period boosted by seasonal gammon sales and
strong growth in premium festive ranges.
Pastry sales were lower than the prior year reflecting a range
review by the anchor customer for this category. However, new
listings with two of the business' forecourt operators highlight
the potential for our Pastry business to participate in the growing
"food-to-go" market. A strong Christmas and new product listings
with the anchor customer from November delivered an improved second
half performance. A robust growth pipeline for the Pastry business
leaves it well placed heading into the new financial year.
Poultry
Poultry, which includes Fresh and Cooked Poultry, represented 14
per cent of Group revenue. Like-for-like poultry revenue increased
by 18.0 per cent year-on-year. The "Ready to Eat" chicken category
continues to grow ahead of the wider UK meat protein sector and
Fresh Chicken also continues to outperform, with market volumes
ahead by 2.7 and 3.9 per cent respectively over the last year.
Our Fresh Chicken business operated at full capacity during the
year, processing approximately 500,000 birds per week. The business
was affected during the exceptionally warm summer by reduced bird
growth and increased mortality. In addition, higher soft commodity
prices resulting in increased feed costs and lower wholesale
chicken prices impacted the overall performance of the business,
reflecting the challenging conditions faced by the wider
industry.
The GBP75 million investment in a new poultry processing
facility in Eye, Suffolk, is progressing to plan as is the
additional investment in the business' downstream agricultural
operations, including the leasing and development of a second
milling operation in Hoxne, Suffolk. Capital expenditure of GBP31
million across the category included GBP29 million on the new
processing facility, with the building works now nearing completion
and the fit out underway. The factory, which will be capable of
processing 1.2 million birds per week, is expected to be
operational towards the end of the new financial year, with the
project being fast-tracked to support the anchor customer for the
new site (Wm Morrison Supermarkets plc (Morrison's)). The facility
will be the first new primary poultry plant to be constructed in
the UK for almost 30 years and will, when fully commissioned, be
the most technologically advanced and efficient facility in the UK
industry. Ahead of the move, we are recruiting and upskilling
additional staff and we have started supplying Morrison's with a
limited range of products from the existing Weybread operation.
Sales of premium Cooked Poultry grew strongly reflecting the
full year contribution from business wins with two of the Group's
principal retail customers in the prior year and the launch of new
lateral sliced products with one of those customers during the
year. The site continues to expand its retail business with a new
range being launched with a third major retail customer from the
start of the new financial year.
Finance review
Revenue
Reported revenue at GBP1,437.1 million (2018: GBP1,464.5
million) decreased by 1.9 per cent compared to the previous year.
On a like-for-like basis revenues were 0.2 per cent lower.
Adjusted Group operating profit
Adjusted Group operating profit of GBP92.3 million (2018:
GBP92.8 million), decreased by 0.5 per cent, but was 1.8 per cent
ahead like-for-like. Adjusted Group operating margin was 6.4 per
cent of sales compared to 6.3 per cent last year.
Share of loss of joint venture
Share of loss of joint venture of GBP0.1m (2018: GBPnil)
represents the start up losses of White Rose Farms during the year.
The business is part of the Group's longer term strategy to secure
commercial pig supply and current year losses are in line with the
business plan.
Finance costs
Net financing costs at GBP0.2 million were GBP0.2 million lower
than the prior year, reflecting lower average year on year
borrowings and capitalisation of bank interest incurred on funding
the investment in the new Eye poultry processing facility.
The Group's banking facility is unsecured, runs to November 2023
and comprises a revolving credit facility of GBP160 million
(falling to GBP120 million from November 2022), including a
committed overdraft of GBP20 million. It also includes the option
to access a further GBP40 million on the same terms at any point
during the term of the agreement. The facility provides the
business with generous headroom for the future.
Adjusted profit before tax
Adjusted profit before tax was 0.4 per cent lower at GBP92.0
million (2018: GBP92.4 million), but was 2.0 per cent ahead on a
like-for-like basis.
Taxation
The tax charge of GBP16.9 million (2018: GBP18.0m) was 19.5 per
cent of profit before tax (2018: 20.5 per cent). The standard rate
of UK corporation tax was 19.0 per cent (2018: 19.0 per cent). The
effective corporation tax rate in both years was higher than the
standard rate due to disallowable expenses.
Adjusted earnings per share
Adjusted earnings per share fell by 0.5 per cent to 144.3 pence
(2018: 145.0 pence), but were 1.9 per cent higher on a comparable
52 week basis. The average number of shares in issue was 51,385,000
(2018: 50,787,000).
Statutory profit measures
Statutory profit before tax was GBP86.5 million (2018: GBP88.0
million), with statutory Group operating profit at GBP86.8 million
(2018: GBP88.4 million) and statutory earnings per share of 135.5
pence (2018: 137.8 pence). Full reconciliations of these results to
the adjusted measures can be found in Note 10.
Cash flow and net debt
The net cash inflow from operating activities in the year was
GBP87.7 million (2018: GBP112.1 million) reflecting a higher
working capital outflow of GBP17.8 million (2018: GBP4.0 million)
due to the Group's significant investment in biological assets
during the year and strategic holdings of inventory at the year
end. Net funds at the end of the year were GBP6.3 million (2018:
GBP20.6 million) with the inflow from operating activities offset
by a net GBP78.0 million invested in our asset base and GBP22.1
million of dividends paid to our Shareholders.
IFRS 16: 'Leases'
The Group has evaluated the effect of IFRS 16 on its current
lease arrangements and does not expect it to have a material impact
on the net assets or profit before tax of the Group. Further
details are provided in Note 2.
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 31 March 2019 was GBP6.5 million, compared to
GBP8.1 million at 31 March 2018, reflecting our commitment to
increased funding for the scheme. Cash contributions to the scheme
during the year, as part of the programme to reduce the deficit,
were GBP1.8 million. The present value of funded obligations was
GBP39.7 million, and the fair value of plan assets was GBP33.2
million.
During the year, the High Court ruled on the case of Lloyds
Banking Group Pensions Trustees Ltd v Lloyds Bank plc and others.
The ruling that Lloyds Bank plc must amend its three defined
benefit pension schemes in order to equalise Guaranteed Minimum
Pensions (GMPs) between males and females impacts how companies
account for pension schemes under IAS 19. The Group's year end
pension valuation under IAS 19 includes the impact of equalising
GMPs, resulting in a GBP0.4 million past service cost which has
been recognised in the income statement within staff costs.
UK Referendum on EU Membership
The continued uncertainty over the nature of the UK's exit from
the EU drives volatility in currency markets and uncertainty within
the European labour market. The Group therefore continues to
monitor and manage its business risks in these areas with the key
issues facing the Group being: access to and cost of labour; the
potential for import tariffs on EU pork and continental food
products; and the valuation of Sterling versus the Euro and other
world currencies.
In response to these business risks the Group set up a Brexit
taskforce made up of key internal stakeholders who have met
regularly to review Brexit related risks and develop mitigating
plans. In February 2019 an external review of the Group's Brexit
plan was completed which has helped to further inform the Group's
strategy in this area.
As political negotiations continue, the Board will monitor
outcomes, seek to assess the possible impact on its stakeholders
and implement appropriate responses.
Group income statement
For the year ended 31 March 2019
2019 2018
Notes GBP'm GBP'm
Revenue 1,437.1 1,464.5
--------------------------------------------- ------ --------- ----------
Adjusted Group operating profit 92.3 92.8
Net IAS 41 valuation movement on biological
assets (2.8) (2.2)
Amortisation of customer relationship
intangible assets (2.7) (2.2)
Group operating profit 4 86.8 88.4
Share of loss of joint venture (0.1) -
Finance costs (0.2) (0.4)
--------------------------------------------- ------ --------- ----------
Profit before tax 86.5 88.0
Taxation (16.9) (18.0)
--------------------------------------------- ------ --------- ----------
Profit for the year 69.6 70.0
--------------------------------------------- ------ --------- ----------
Earnings per share (pence)
On profit for the year:
Basic 5 135.5p 137.8p
Diluted 5 134.9p 137.1p
------------------------- ------- -------
Group statement of comprehensive income
For the year ended 31 March 2019
2019 2018
GBP'm GBP'm
--------------------------------------------------- -------- --------
Profit for the year 69.6 70.0
----------------------------------------------------- -------- --------
Other comprehensive income
Other comprehensive income to be reclassified
to profit or loss in subsequent periods:
Cash flow hedges
Gains arising in the year - 0.1
Reclassification adjustments for gains
included in the income statement (0.5) (0.3)
Income tax effect 0.1 -
--------------------------------------------------- -------- --------
Net other comprehensive income to be reclassified
to profit or loss in subsequent periods (0.4) (0.2)
----------------------------------------------------- -------- --------
Items not to be reclassified to profit
or loss in subsequent periods:
Actuarial gains/(losses) on defined benefit
pension scheme 0.3 (0.2)
Income tax effect 0.4 0.1
----------------------------------------------------- -------- --------
Net other comprehensive income not to
be reclassified to profit or loss in subsequent
periods 0.7 (0.1)
----------------------------------------------------- -------- --------
Other comprehensive income, net of tax 0.3 (0.3)
----------------------------------------------------- -------- --------
Total comprehensive income, net of tax 69.9 69.7
----------------------------------------------------- -------- --------
Group balance sheet
At 31 March 2019
2019 2018
Notes GBP'm GBP'm
---------------------------------------------------- -------- -------- --------
Non-current assets
Intangible assets 153.5 156.2
Property, plant and equipment 291.2 237.3
Biological assets 0.7 0.8
Total non-current assets 445.4 394.3
---------------------------------------------------- -------- -------- --------
Current assets
Biological assets 20.6 17.0
Inventories 67.4 59.2
Trade and other receivables 161.7 160.1
Financial assets 2.3 0.1
Cash and short-term deposits 7 20.5 20.6
---------------------------------------------------- -------- -------- --------
Total current assets 272.5 257.0
---------------------------------------------------- -------- -------- --------
Total assets 717.9 651.3
---------------------------------------------------- -------- -------- --------
Current liabilities
Trade and other payables (150.2) (147.8)
Financial liabilities (0.6) (0.9)
Provisions (0.2) (0.2)
Income tax payable (7.7) (10.2)
Total current liabilities (158.7) (159.1)
---------------------------------------------------- -------- -------- --------
Non-current liabilities
Other payables (0.7) (0.9)
Financial liabilities 7 (14.2) -
Deferred tax liabilities (0.8) (1.0)
Provisions (2.0) (2.3)
Share of joint venture (0.1) -
Defined benefit pension scheme deficit (6.5) (8.1)
---------------------------------------------------- -------- -------- --------
Total non-current liabilities (24.3) (12.3)
---------------------------------------------------- -------- -------- --------
Total liabilities (183.0) (171.4)
---------------------------------------------------- -------- -------- --------
Net assets 534.9 479.9
---------------------------------------------------- -------- -------- --------
Equity
Called-up share capital 5.2 5.1
Share premium account 89.1 81.5
Share-based payments 25.8 21.0
Hedging reserve (0.4) -
Retained earnings 415.2 372.3
---------------------------------------------------- -------- -------- --------
Equity attributable to owners of the parent 534.9 479.9
---------------------------------------------------- -------- -------- --------
Group statement of cash flows
For the year ended 31 March 2019
Notes 2019 2018
GBP'm GBP'm
Operating activities
Profit for the year 69.6 70.0
Adjustments to reconcile Group profit for the
year to net cash inflows from operating activities:
Share of loss of joint venture 0.1 -
Income tax expense 16.9 18.0
Net finance costs 0.2 0.4
(Gain)/loss on sale of property, plant and
equipment (0.2) 0.8
Depreciation of property, plant and equipment 28.9 35.7
Amortisation of intangible assets 2.7 2.2
Share-based payments 4.8 4.3
Difference between pension contributions paid
and amounts recognised in the income statement (1.3) (1.7)
Release of government grants (0.2) (0.2)
Net IAS 41 valuation movement on biological
assets 2.8 2.2
Increase in biological assets (6.3) (0.4)
(Increase)/decrease in inventories (8.2) 3.0
Increase in trade and other receivables (1.1) (9.0)
(Decrease)/increase in trade and other payables (2.2) 2.4
------------------------------------------------------ ------ -------- --------
Cash generated from operations 106.5 127.7
Tax paid (18.8) (15.6)
------------------------------------------------------ ------ -------- --------
Net cash from operating activities 87.7 112.1
------------------------------------------------------ ------ -------- --------
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 9 (0.8) (5.3)
Loan to joint venture (2.2) -
Purchase of property, plant and equipment (79.2) (58.7)
Proceeds from sale of property, plant and equipment 0.8 0.7
Receipt of government grants 0.4 -
Net cash used in investing activities (81.0) (63.3)
------------------------------------------------------ ------ -------- --------
Cash flows from financing activities
Interest paid (0.4) (0.4)
Proceeds from issue of share capital 1.8 1.6
Issue costs of long-term borrowings (0.1) (0.2)
Proceeds from/(repayment of) borrowings 14.0 (15.0)
Dividends paid (22.1) (18.2)
Repayment of capital element of finance leases
and hire purchase contracts - (0.1)
------------------------------------------------------ ------ -------- --------
Net cash used in financing activities (6.8) (32.3)
------------------------------------------------------ ------ -------- --------
Net (decrease)/increase in cash and cash equivalents 7 (0.1) 16.5
Cash and cash equivalents at beginning of year 7 20.6 4.1
------------------------------------------------------ ------ -------- --------
Cash and cash equivalents at end of year 7 20.5 20.6
------------------------------------------------------ ------ -------- --------
Group statement of changes in equity
For the year ended 31 March 2019
Share-
Share Share based Hedging Retained Total
capital premium payments reserve earnings equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
At 31 March 2017 5.0 74.8 16.7 0.2 324.7 421.4
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
Profit for the year - - - - 70.0 70.0
Other comprehensive income - - - (0.2) (0.1) (0.3)
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
Total comprehensive income - - - (0.2) 69.9 69.7
Share-based payments - - 4.3 - - 4.3
Scrip dividend - 5.2 - - - 5.2
Share options exercised
(proceeds) 0.1 1.5 - - - 1.6
Dividends - - - - (23.4) (23.4)
Deferred tax related to
changes in equity - - - - (0.3) (0.3)
Current tax related to
changes in equity - - - - 1.4 1.4
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
At 31 March 2018 5.1 81.5 21.0 - 372.3 479.9
Profit for the year - - - - 69.6 69.6
Other comprehensive income - - - (0.4) 0.7 0.3
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
Total comprehensive income - - - (0.4) 70.3 69.9
Share-based payments - - 4.8 - - 4.8
Scrip dividend - 5.9 - - - 5.9
Share options exercised
(proceeds) 0.1 1.7 - - - 1.8
Dividends - - - - (28.0) (28.0)
Deferred tax related to
changes in equity - - - - (0.7) (0.7)
Current tax related to
changes in equity - - - - 1.3 1.3
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
At 31 March 2019 5.2 89.1 25.8 (0.4) 415.2 534.9
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
Notes to the accounts
1. Basis of preparation
The results comprise those of Cranswick plc and its subsidiaries
for the year ended 31 March 2019. 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 2018 (except as
detailed in note 2) 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 2019 and 31
March 2018 have been reported on by the auditors who issued an
unqualified opinion in respect of both years and the auditors'
reports for 2019 and 2018 did not contain statements under 498(2)
or 498(3) of the Companies Act 2006. Statutory accounts for the
year ended 31 March 2018 have been filed with the Registrar of
Companies. The statutory accounts for the year ended 31 March 2019,
which were approved by the Board on 21 May 2019, will be delivered
to the Registrar of Companies following the Company's Annual
General Meeting.
Principal risks and uncertainties
There are a number of risks and uncertainties which could impact
the business in the future. The Board considers, with the exception
of the additional risk detailed below, these risks and
uncertainties to be the same as those described in the Report &
Accounts for the year ended 31 March 2018, dated 22 May 2018, a
copy of which is available on the Group's website at
www.cranswick.plc.uk. The principal risks and uncertainties
are:
Strategic risks Commercial risks Financial risks Operational risks
* Competitor activity * Consumer demand * Interest rate, curre * Disruption to Group operations
ncy, liquidity and credit
risk
* Growth and change * Reliance on key customers and exports * Recruitment and retention of workforce
* Pig meat - availability and price * Health and safety
* Disease and infection within livestock
* Food scares and product contamination
* IT systems and cyber security
Additional risk
Labour availability and cost
Description of risk Mitigation and net risk rating Risk level and risk trend
Due to political and economic The Group is continually reviewing Given the on-going uncertainty
pressures, including those associated and improving its recruitment associated with Brexit, the risk has
with Brexit, there is processes and relationships increased as the availability
a risk that the Group's operations with third party agency providers to and cost of agency labour becomes
could be adversely impacted by either reflect changing market conditions. impacted.
the lack of availability Regarding Brexit,
of labour or the associated increased the Group has used a specialist
cost. The issue is particularly advisor to support the actions of the
prevalent with lower Brexit Taskforce to
skilled agency labour or specialist understand and mitigate risks related
skill sets e.g. butchery. to Brexit and develop our overarching
Brexit plan. In
addition, the Group is actively
progressing options to employ more
permanent members of staff
and to consider alternative methods
of production which embrace emerging
technological developments.
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 2018, except for
the new standards and interpretations explained below.
New standards and interpretations applied
The following accounting standards and interpretations became
effective for the current reporting period:
International Accounting Standards (IAS/IFRSs) Effective date
IFRS
15 Revenue from Contracts with Customers 1 January 2018
IFRS
9 Financial Instruments 1 January 2018
The application of these standards has not had a material effect
on the net assets, results and disclosures of the Group.
-- 'IFRS 15: Revenue from Contracts with Customers' supersedes
IAS 18 Revenue and IAS 11 Construction Contracts and related
interpretations, and was effective for annual periods beginning on
or after 1 January 2018. The standard deals with revenue
recognition and establishes principles for reporting useful
information about the nature, amount, timing and uncertainty of
revenues and cash flows arising from the Group's contracts with its
customers. The standard provides clarification about when control
of goods is passed to customers and contains more guidance about
the measurement of revenue contracts which include discounts,
rebates and other payments to customers. During the prior year, the
Group completed a review of the requirements of IFRS 15 against
previous accounting policies. The areas considered by the Group
included payments to customers and the timing of revenue
recognition based on control of goods. Adoption of IFRS 15 for the
year ended 31 March 2019 has not resulted in a material impact to
the financial statements of the Group. The Group has adopted IFRS
15 using the cumulative effective method. Accordingly, the
information presented for 2018 has not been restated and is
therefore presented as previously reported under IAS 18, IAS 11 and
related interpretations. Following the adoption of IFRS 15, the
Group has also reviewed its accounting practice in respect of
commercial accruals and has introduced a maximum holding period for
aged balances, under normal circumstances, of three years.
-- 'IFRS 9: Financial Instruments' was effective for annual
periods beginning on or after 1 January 2018. The standard includes
requirements for classification and measurement, impairment and
hedge accounting. The Group has evaluated the impact of IFRS 9 and
concluded that the impact on the recognition and measurement of
income and costs in the Income Statement or of assets and
liabilities in the Balance Sheet is not material. The Group has
assessed the classification and measurement of certain financial
assets on the Balance Sheet and concluded that there is no
significant change as a result of this. Further, the nature of the
Group's current hedging activities and the quantum of its bad debt
risk means that the impact of IFRS 9 is immaterial in respect of
these items. The Group has calculated its impairment provision on
financial assets measured at amortised costs (such as trade and
other receivables) under the expected credit loss model in
accordance with IFRS 9. The difference in provision between that
determined by this model compared to that calculated by the
incurred loss model required by IAS 39 is not material and
therefore, there is no change to the opening balances within
equity.
New and revised standards and interpretations not applied
In these Financial Statements, the Group has not applied the
following new and revised IFRSs that have been issued but are not
yet effective:
-- 'IFRS 16: Leases' will be effective for annual periods
beginning on or after 1 January 2019. The standard changes the
principles for the recognition, measurement, presentation and
disclosure of leases. It eliminates the classification of leases as
either operating leases or finance leases and introduces a single
lessee accounting model where the lessee is required to recognise
lease liabilities and 'right of use' assets on the Balance Sheet,
with exemptions for low value and short-term leases. The Group has
evaluated the impact of IFRS 16 on its current lease arrangements,
which mainly consist of agricultural properties, and concluded that
there will not be a material effect on the net assets of the Group
or the Company. The Group intends to adopt the modified
retrospective approach. The estimated impact on the Group's
financial statements for the year ended 31 March 2020 is as
follows:
GBPm
------------------
Decrease in operating lease cost 7.8
------------------
Effect on EBITDA 7.8
------------------
Increase in depreciation (7.0)
------------------
Effect on operating profit 0.8
------------------
Increase in interest charge (1.0)
------------------
Effect on PBT (0.2)
------------------
Increase in assets at transition date 40.0
------------------
Increase in liabilities at transition date (40.0)
------------------
Overall effect on net assets -
------------------
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 principally through
adjusted profit measures consistent with those disclosed in the
Annual Report and Accounts.
For the purposes of managing the business, the Group is
organised into one reportable segment, being Food: manufacture and
supply of food products to UK grocery retailers, the food service
sector and other UK and global food producers.
The reportable segment 'Food' represents the aggregation of four
operating segments which are aligned to the product categories of
the Group; Fresh Pork, Convenience, Gourmet Products and Poultry,
all of which manufacture and supply food products through the
channels described above. These operating segments have been
aggregated into one reportable segment as they share similar
economic characteristics. The economic indicators which have been
assessed in concluding that these operating segments should be
aggregated include the similarity of long-term average margins;
expected future financial performance; and operating and
competitive risks. In addition, the operating segments are similar
with regard to the nature of the products and production process,
the type and class of customer, the method of distribution and the
regulatory environment.
4. Group operating profit
Group operating costs comprise:
2019 2018
GBP'm GBP'm
-------------------------------------------------------------------------------------------- -------- --------
Cost of sales excluding net IAS 41 valuation movement on biological assets 1,250.6 1,277.7
Net IAS 41 valuation movement on biological assets* 2.8 2.2
--------------------------------------------------------------------------------------------- -------- --------
Cost of sales 1,253.4 1,279.9
--------------------------------------------------------------------------------------------- -------- --------
Gross profit 183.7 184.6
-------------------------------------------------------------------------------------------- -------- --------
Selling and distribution costs 55.4 55.7
-------------------------------------------------------------------------------------------- -------- --------
Administrative expenses excluding amortisation of customer relationship intangible assets 38.8 38.3
Amortisation of customer relationship intangible assets 2.7 2.2
Administrative expenses 41.5 40.5
-------------------------------------------------------------------------------------------- -------- --------
Total operating costs 1,350.3 1,376.1
-------------------------------------------------------------------------------------------- -------- --------
* 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 GBP69.6 million (2018: GBP70.0 million) 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:
2019 2018
Thousands Thousands
---------------------------------------------------- ---------- ----------
Basic weighted average number of shares 51,385 50,787
Dilutive potential ordinary shares - share options 222 238
---------------------------------------------------- ---------- ----------
51,607 51,025
---------------------------------------------------- ---------- ----------
Adjusted earnings per share are calculated using the weighted
average number of shares for both basic and diluted amounts as
detailed above (see Note 10).
6. Dividends
Subject to Shareholders' approval the final dividend will be
paid on 6 September 2019 to Shareholders on the register at the
close of business on 19 July 2019.
7. Analysis of changes in net funds
At Other At
31 March Cash non-cash 31 March
2018 flow changes 2019
Group GBP'm GBP'm GBP'm GBP'm
--------------------------- ---------- ------- ---------- ----------
Cash and cash equivalents 20.6 (0.1) - 20.5
Revolving credit - (13.9) (0.3) (14.2)
Net funds 20.6 (14.0) (0.3) 6.3
--------------------------- ---------- ------- ---------- ----------
Net funds are defined as cash and cash equivalents less
interest-bearing liabilities net of unamortised issue costs.
8. 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.
9. Acquisitions
Contingent consideration
During the year GBP0.8 million of contingent consideration was
paid in relation to previous acquisitions. This amount was provided
in full at 31 March 2018.
10. Alternative performance measures
The Board monitors performance principally through adjusted and
like-for-like performance measures. Adjusted profit and earnings
per share measures exclude certain non-cash items including the net
IAS 41 valuation movement on biological assets, amortisation of
acquired intangible assets, profit on sale of a business and
goodwill impairment charges. Free cash flow is defined as net cash
from operating activities less net interest paid and like-for-like
revenue excludes the impact of the 53(rd) week in the prior
year.
The Board believes that such alternative measures are useful as
they exclude volatile (net IAS 41 valuation movement on biological
assets), one-off (impairment of goodwill and profit on sale of a
business) and non-cash (amortisation of intangible assets) items
which are normally disregarded by investors, analysts and brokers
in gaining a clearer understanding of the underlying performance of
the Group when making investment and other decisions. Equally,
like-for-like revenue provides these same stakeholders with a
clearer understanding of the organic sales growth of the
business.
Like-for-like revenue
2019 2018 Change
GBP'm GBP'm
----------------------- -------- -------- -------
Revenue 1,437.1 1,464.5 -1.9%
Impact of 53(rd) week - (24.5)
Like-for-like revenue 1,437.1 1,440.0 -0.2%
----------------------- -------- -------- -------
Adjusted operating profit
2019 2018 Change
GBP'm GBP'm
-------------------------------------------------- ------- ------- -------
Group operating profit 86.8 88.4 -1.8%
Net IAS 41 valuation movement 2.8 2.2
Amortisation of customer relationship intangible
assets 2.7 2.2
Adjusted Group operating profit 92.3 92.8 -0.5%
-------------------------------------------------- ------- ------- -------
Adjusted profit before tax
2019 2018 Change
GBP'm GBP'm
-------------------------------------------------- ------- ------- -------
Profit before tax 86.5 88.0 -1.7%
Net IAS 41 valuation movement 2.8 2.2
Amortisation of customer relationship intangible
assets 2.7 2.2
Adjusted profit before tax 92.0 92.4 -0.4%
-------------------------------------------------- ------- ------- -------
Adjusted earnings per share
2019 2019 2019 2018 2018 2018
Basic Diluted Basic Diluted
GBP'm pence pence GBP'm Pence pence
--------------------------------------- ------- ------- --------- ------- ------- ---------
On profit for the year 69.6 135.5 134.9 70.0 137.8 137.1
Amortisation of customer relationship
intangible assets 2.7 5.4 5.4 2.2 4.3 4.3
Tax on amortisation of customer
relationship intangible assets (0.5) (1.0) (1.0) (0.4) (0.7) (0.7)
Net IAS 41 valuation movement 2.8 5.4 5.4 2.2 4.3 4.3
Tax on net IAS 41 valuation movement (0.5) (1.0) (1.0) (0.4) (0.7) (0.7)
On adjusted profit for the year 74.1 144.3 143.7 73.6 145.0 144.3
--------------------------------------- ------- ------- --------- ------- ------- ---------
Free cash flow
2019 2018 Change
GBP'm GBP'm
------------------------------------ ------- ------- -------
Net cash from operating activities 87.7 112.1 -21.8%
Net interest paid (0.4) (0.4)
==================================== ======= ======= =======
Free cash flow 87.3 111.7 -21.8%
------------------------------------ ------- ------- -------
11. Report and accounts
The Report and Accounts will be available on the Company's
website at www.cranswick.plc.uk on 28 June 2019. Further copies
will be available upon request from the Company Secretary,
Cranswick plc, Crane Court, Hesslewood Country Office Park, Ferriby
Road, Hessle, HU13 0PA.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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