TIDMCWK
RNS Number : 5108M
Cranswick PLC
24 May 2022
CRANSWICK plc: PRELIMINARY RESULTS
Strong commercial and strategic progress
24 May 2022
Cranswick plc ("Cranswick" or "the Company" or "the Group"), a
leading UK food producer, todaynounces its audited preliminary
results for the 52 weeks ended 26 March 2022.
Commercial and strategic progress:
-- Revenue above GBP2bn, with adjusted Group operating margin maintained at 7.0%
-- Unprecedented industry wide labour and supply chain
challenges being well managed with excellent customer service
levels maintained
-- Ongoing cost inflation being proactively managed and recovered
-- Total capital expenditure of GBP93.7m across the Group's
asset base to support continued strong growth plans
o Significant uplift in Poultry sales following the successful
capacity expansion at Eye
o GBP26m Hull Cooked Bacon facility successfully commissioned at
the beginning of the year and performing to plan
o New GBP32m Hull Breaded Poultry facility successfully
commissioned shortly after year end
-- Strong M&A pipeline with three businesses acquired during the year
o Expansion of Convenience category following two complementary
bolt-on acquisitions, further strengthening our non-meat range
o Entry into fast growing and complementary UK pet food market
through acquisition of Grove Pet Foods
Sustainability highlights:
-- All 14 eligible(Yen) manufacturing sites now certified carbon neutral
-- Science Based Targets (SBTi) aligned with efforts to limit
global warming to 1.5 degrees under the Paris Agreement now
validated, with a commitment to halve Scope 1, 2 and 3 emissions by
2030 and achieve Net Zero status by 2040
-- Sustainability linked refinancing of the Group's bank
facility successfully completed during the year
-- Commitment to purchasing 100% certified deforestation-free soya(+/-)
Financial highlights*:
Change Change
(Reported) (Like-for-like
2022 2021 )
--------------------------------- ------------ ------------ ------------ ----------------
Revenue GBP2,008.5m GBP1,898.4m +5.8% +5.3%
Adjusted Group operating profit GBP140.6m GBP132.5m +6.1%
Adjusted Group operating margin 7.0% 7.0% +2bps
Adjusted profit before tax GBP136.9m GBP129.7m +5.6%
Adjusted earnings per share 205.4p 199.3p +3.1%
-- Statutory profit before tax 13.2% higher at GBP129.9m (2021: GBP114.8m)
-- Statutory earnings per share up 10.9% to 195.7p (2021: 176.4p)
-- Full year dividend increased by 8.0% to 75.6p (2021: 70.0p);
32 years of unbroken dividend growth
-- Return on capital employed(++) of 16.9% (2021: 17.2%)
-- Net debt (excluding IFRS 16 lease liabilities) of GBP36.2m (2021: GBP20.8m)
-- Robust balance sheet with new GBP250m bank facility providing
significant headroom following refinancing
Adam Couch, Cranswick's Chief Executive Officer, commented:
"In a year which has been unprecedented in terms of the scale
and breadth of challenges we have faced, we have delivered our
strategy at pace and our long-term growth plan remains firmly on
track.
"We have worked tirelessly to support our customers while
continuing to prioritise the safety and wellbeing of our colleagues
across the business. We have consistently delivered exemplary
service levels to our customers, supported our local communities
and made great strides toward delivering many of our Second Nature
sustainability targets.
"It is at times like this that partnerships and cooperation come
to the fore, and I would like to thank our stakeholders and all our
colleagues for their ongoing support, resilience and understanding
during this very demanding period.
"The terrible events in Ukraine continue to profoundly impact
our sector both at a humanitarian and an economic level. We are
proactively supporting colleagues whose families may be affected by
the conflict, including making donations, offers of employment and
resettlement packages.
" Trading in the new financial year has been in line with the
Board's expectations. Notwithstanding the challenging operating
conditions we continue to experience , our outlook for the Group
for the current year is unchanged. We have a solid platform from
which to continue Cranswick's successful long-term development.
"
Yen Eligible sites exclude new sites commissioned or acquired in the financial
year. These sites will receive certification during the next financial
year.
(+/-) Cranswick has committed to switching to a full mass balance soya purchasing
system. This covers 50% of the soya used by the business. The remaining
50% of the soya is purchased from deforestation-free sources in North
America.
* 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.
Like-for-like revenues exclude the contribution from current year
acquisitions.
++ 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 (surplus)/deficit and deferred tax.
Presentation
A presentation of the results will be made to analysts and
institutional investors today at 9.45am at Investec Bank plc, 30
Gresham Street, London EC2V 7QP. Analysts and institutional
investors will also be able to join the presentation via a
conference call facility. The slides will be made available on the
company website. For the dial-in details please contact Powerscourt
on the details below.
Enquiries:
Cranswick plc
Mark Bottomley, Chief Financial
Officer 01482 275 000
Powerscourt
Nick Dibden / Nick Hayns / Chloe
Retief 020 7250 1446
cranswick@powerscourt-group.com
Note to Editors:
Cranswick is a leading and innovative supplier of premium, fresh
and added value food products. The business employs over 13,300
people and operates from 20 well invested, highly efficient
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, gourmet
products and pet food. 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 substantial export business. For more information go to:
www.cranswick.plc.uk
Cranswick is committed to ensuring that its business activities
are sustainable from farm-to-fork. Its ambitious sustainability
strategy Second Nature has been developed to deliver the Group's
vision to become the world's most sustainable meat business.
Cranswick has committed to be a Net Zero business across its
operations by 2040. Notable achievements to date include:
a. All 14 eligible (Yen) manufacturing sites certified carbon neutral
b. Meeting the Champions 12.3 target to halve edible food loss
and waste 10 years ahead of the 2030 deadline
c. Removing over 1,500 tonnes of plastic from the business,
including the removal of black plastic and PVC, and increasing the
recycled content of plastic packaging to up to 80%
d. Committing to purchase 100% certified deforestation-free soya (+/-)
e. All production facilities are now powered by renewable grid supplied electricity
f. Donating over 500,000 meals to local communities
g. Over 1,500 colleagues volunteering as Second Nature 'Changemakers' to help meet the Group's sustainability goals
h. Sustainability Award Winner in 2022: Food Manufacture Excellence Awards
Find out more at: www.thisissecondnature.co.uk
Chairman's Statement
This is my first statement as Chairman following my appointment
at Cranswick's Annual General Meeting in July 2021. I am delighted
and proud to have taken on this important role.
During the last nine months I have visited most parts of the
Group meeting many Cranswick colleagues. I have been incredibly
impressed by the resilience and fortitude of the teams at each
site, by their operational excellence, unwavering support and
commitment to the business.
We have a highly skilled and experienced management team. In the
last few years they have had to cope with the severe challenges
arising from COVID-19, labour shortages, ongoing inflation and
supply chain disruption. I would like to thank Adam and the
executive team for their leadership, guidance and support during
this incredibly eventful year.
The terrible humanitarian crisis in Ukraine is at the forefront
of all our minds. Our teams across the business have shown their
support through generous fundraising efforts. The business has also
donated GBP500,000 to the Cranswick Charitable Trust to provide
financial assistance to the Ukrainian people.
We made further positive and sustainable progress during the
year delivering revenue and earnings growth in a relentlessly
challenging operating environment. The character and tenacity of
all our colleagues has again been ably demonstrated and we thank
them, along with our customers and suppliers, for their ongoing
support, understanding and resilience.
The positive progress we have made highlights the robust and
sustainable nature of our business model. Growth has continued in
our domestic market, with elevated retail demand offsetting lower
revenue from our Far East export market. The unprecedented,
well-publicised, industry wide labour and supply chain challenges
have been well managed with excellent customer service levels
maintained. The cost inflation we continue to experience, a global
phenomenon, is being proactively managed and recovered.
I'm always struck by the high quality of the Group's asset base
and recognise the need to continue to invest at pace to add
capacity and capability, maintain quality and drive ongoing
efficiency gains. The Hull Cooked Bacon facility was successfully
commissioned at the beginning of the period and is performing to
plan. Our new Breaded Poultry facility in Hull was commissioned
shortly after the year end and in so doing, became the fourth
new-build production facility that we have commissioned in the past
five years with a combined total investment exceeding GBP180
million.
We strengthened our Convenience category during the year with
the acquisition of Ramona's Kitchen, a supplier of authentic
Mediterranean plant-based foods, and Atlantica UK, a supplier of
Spanish tortillas. Collectively, these acquisitions broaden our
product offering in this fast-growing market sector. In January, we
acquired Lincolnshire and Nottinghamshire based Grove Pet Foods as
the entry point to the exciting and fast-growing pet food sector
which sits adjacent to our core food business. I warmly welcome the
new teams to the Cranswick family.
Results
Total revenue in the 52 weeks to 26 March 2022 was GBP2,008.5
million, 5.8 per cent higher than the GBP1,898.4 million reported
in the corresponding period last year. Adjusting for the
contribution from the acquisitions, revenue increased by 5.3 per
cent on a like-for-like basis.
Adjusted profit before tax for the period at GBP136.9 million
was 5.6 per cent higher than the GBP129.7 million reported last
year. Adjusted earnings per share on the same basis were up 3.1 per
cent at 205.4p compared to 199.3p last year.
Cash flow and financial position
Net debt, including IFRS 16 lease liabilities, at the end of the
year increased to GBP106.0 million (2021: GBP92.4 million),
primarily reflecting the cash spent on the three acquisitions
during the year. Net debt, excluding IFRS 16 lease liabilities, was
GBP36.2 million compared to GBP20.8 million previously. The Group
refinanced its banking facilities in November 2021 with a new
GBP250 million facility providing significant headroom.
Dividend
The Board is proposing a final dividend of 55.6 pence per share,
an increase of 8.4 per cent on the 51.3 pence paid previously.
Together with the interim dividend of 20.0 pence per share this is
a total dividend for the year of 75.6 pence per share. That
compares to 70.0 pence per share previously, an increase of 8.0 per
cent, and extends the period of consecutive years of dividend
growth to 32.
The final dividend, if approved by Shareholders, will be paid on
2 September 2022 to Shareholders on the register at the close of
business on 22 July 2022. Shares will go ex-dividend on 21 July
2022. Shareholders will again have the option to receive the
dividend by way of scrip issue.
Sustainability
We have made further meaningful progress during the year in
delivering our Second Nature sustainability strategy which reflects
our ambition to be the world's most sustainable meat business. This
means responsibly managing our operations throughout our value
chain and acting transparently to produce high quality food with
integrity.
During the year we formed our new ESG Committee, which I will
initially chair, to oversee progress in this crucial area.
We have set validated, 1.5 degree aligned, Science Based Target
initiatives to reduce emissions, achieved carbon neutral status
across all our eligible manufacturing facilities and have committed
to purchasing 100 per cent deforestation-free soya, which we expect
will result in a 20 per cent reduction in Scope 3 carbon emissions
compared to the previous system. These are crucial milestones on
our journey to achieve net zero greenhouse gas emissions across all
our operations by 2040.
Board
Kate Allum will step down as a Non-Executive Director and Chair
of the Remuneration Committee at the forthcoming AGM at the end of
her final three-year term. On behalf of the Board, I thank Kate for
her positive contribution to Cranswick's successful development
over the last nine years. Pam Powell will succeed Kate as Chair of
the Remuneration Committee. A recruitment process for Kate's
replacement is underway.
Also, at this year's AGM, Mark Reckitt will step down as Chair
of the Audit Committee. Mark will continue in his role as our
Senior Independent Director. Liz Barber, who joined the Board in
May 2021, will take on the role of Audit Committee Chair as
planned.
Outlook
The start to the current year has been in line with the Board's
expectations. Notwithstanding the challenging operating conditions
we continue to experience, the Board is encouraged by the continued
strong commercial and strategic progress of the business. Our
outlook for the current financial year is unchanged and we have a
solid platform from which to continue Cranswick's successful
long-term development.
Tim Smith CBE
Chairman
24 May 2022
Chief Executive's Review
Last year, I referred to FY21 being a year of unparalleled
challenge and complexity. FY22 has, in many ways, been even more
difficult. We continued to live with ongoing effects of the
COVID-19 pandemic throughout this financial year. We also faced the
combined challenges of more severe labour shortages, particularly
skilled butchers, further broad-based and rapid cost inflation, a
shortage of CO(2) and the social and economic impact of the Ukraine
conflict. We have worked tirelessly to support our customers while
continuing to prioritise the safety and wellbeing of our colleagues
across the business. It is at times like this that partnerships and
cooperation come to the fore, and I would like to thank our
stakeholders and all of our colleagues for their ongoing support,
resilience and understanding during this very demanding period.
Our unwavering focus on quality, value, innovation and our
people is the bedrock on which our business model is based. We have
developed and further embedded our key strategic customer
relationships over the last 12 months. These relationships are
underpinned by a relentless drive to deliver iconic and relevant
products, developed in the best invested production facilities in
the food manufacturing sector, with raw materials and ingredients
sourced from our transparent and sustainable supply chain.
The terrible events in Ukraine continue to profoundly impact our
sector, both at a humanitarian and an economic level. We are
proactively supporting colleagues whose families may be affected by
the conflict, including making donations, offers of employment and
resettlement packages.
We donated GBP500,000 to the Cranswick Charitable Trust in March
to help with ongoing relief and aid efforts in Ukraine. The Trust
is currently evaluating the best use of these funds and the
trustees will report back to the business in due course.
Alongside the humanitarian crisis, we have also responded to the
economic impact of the conflict on our sector. The rapid escalation
in soft commodity prices and wheat in particular, left unmitigated,
would have been unsustainable for the pig farming industry. The
price of cereals, which represent between 60 per cent and 70 per
cent of the cost of growing an animal, increased by over 50 per
cent in the immediate aftermath of the start of the conflict. With
the support of our customers, we have partially reflected these
higher input costs in the price we pay to both our own farming
operations and our third-party producers.
I am, though, disappointed that the Government's response to our
sector's calls for support has been so muted. The rapid escalation
in feed costs, together with other inflationary pressures and the
well-publicised shortage of skilled butchers resulting directly
from the Government's post-Brexit immigration policy, has put the
pig producer sector under severe and unsustainable strain. We have
suggested ways to mitigate these challenges, including reducing
exports of soft commodities and their use in bioethanol production,
which have not been acted on. More needs to be done by Government
in the coming months to ensure that we have a viable long-term pig
farming industry.
In a year which has been unprecedented in terms of the scale and
breadth of challenges we have faced, we have delivered our strategy
at pace and our long-term growth plan remains firmly on track. We
have delivered record results, breaking the GBP2 billion revenue
barrier for the first time. It was only seven years ago that we
surpassed the GBP1 billion revenue threshold. Our compound annual
growth in revenue across this period is over 10 per cent. We
successfully commissioned our Hull Cooked Bacon facility, completed
three acquisitions and invested at pace across our asset base,
including building a new Breaded Poultry facility, again, in Hull.
We have invested further in our pig and poultry farming operations
and we continue to expand our product range through investment and
innovation. We have also consistently delivered exemplary service
levels to our customers, supported our local communities and made
great strides toward delivering many of our Second Nature
sustainability targets.
We increased adjusted profit before tax by 5.6 per cent to
GBP136.9 million with reported revenue ahead by 5.8 per cent at
GBP2,008.5 million. Our business model continues to be extremely
resilient and sustainable. After a strong start to the year,
volumes and pricing in our key Far East export market fell away.
Reinstatement of our Norfolk China export licence would have gone
some way to mitigating the slowdown in Chinese demand. It is
frustrating that 18 months after we temporarily self-suspended our
Norfolk licence we have not, despite intense lobbying, managed to
secure reinstatement. The shortfall in our export revenue compared
to a year earlier was more than compensated for by strong growth in
our poultry businesses and value-added pork operations.
Our business model is now a more resilient and broader based one
compared to when we entered the COVID-19 pandemic two years ago.
Poultry revenue now represents 20 per cent of Group revenue and
grew by 30.8 per cent compared to the previous year. Our investment
in breaded poultry will help consolidate our position as a 'dual
protein' provider of pork and poultry as we continue to diversify
our product range.
We invested GBP93.7 million during the year across our asset
base following on from the GBP71.9 million we spent in FY21. We
successfully commissioned our new GBP26 million Hull Cooked Bacon
facility. We have also spent GBP32 million on our premium Breaded
Poultry facility, again, in Hull. The Breaded Poultry facility was
commissioned shortly after year end and can serve the retail, food
service and food-to-go sectors. We now operate from 20
well-invested, highly efficient facilities in the UK. We will
continue to lift capacity, improve efficiencies and add capability
to ensure we serve our customers from high quality, efficient, safe
and technically compliant facilities.
We also continue to invest across our farming operations to
maintain our 100 per cent vertical integration in poultry and keep
our self-sufficiency in British pig production at over 30 per cent
of our total requirements. In recent decades the UK has grown
accustomed to food in abundance. Following the UK's exit from the
European Union, the COVID-19 pandemic and the ongoing Ukraine
conflict, the issue of food security has come sharply into focus.
Looking ahead, even under the most optimistic of scenarios, climate
change will inevitably play its part here too. It is essential that
we reflect this challenge in our strategic plans and, where
necessary, invest further in our vertical integration to secure our
supply chain.
M&A continues to be an important part of our Group strategy
and we purchased three complementary businesses in the year. We
expanded our range of authentic Mediterranean products with the
acquisitions of Ramona's Kitchen and Atlantica UK in the first half
of the year. In January, we completed the acquisition of Grove Pet
Foods. Grove specialises in dry dog and other dry animal food and
provides the ideal entry point into this fast-growing and
complementary sector.
Our industry leading animal welfare standards are supported by
our vertical supply chain model, which gives us greater control
over the health and wellbeing of our animals. We have now adopted
the NestBorn system for all of our eggs. This system allows chicks
to be born in natural stress-free conditions with immediate access
to space, feed and water as soon as they hatch. We will continue to
invest in technical capability, sustainability initiatives and our
farming infrastructure to ensure that we remain at the forefront of
animal welfare developments and demonstrate continued industry
leadership in this area.
We have made further progress in our quest to become the world's
most sustainable meat business, with all our eligible UK
manufacturing sites now certified carbon neutral. This is a key
milestone in our drive to achieve net zero greenhouse gas emissions
across all sites by 2040. We have also targeted all of our farming
operations becoming carbon neutral by 2030. This will require
scaling up our regenerative agriculture and soil health programmes.
We also need to reduce our direct impact if we are to achieve our
Science Based Target of halving emissions across our entire value
chain by 2030. A big step on this journey has been our commitment
to switch to 100 per cent deforestation free Soya. This initiative
alone will reduce our indirect carbon impact by almost
one-fifth.
Cranswick is first and foremost a people business and our people
are what makes Cranswick the business that it is. We remain focused
on building a diverse, talented and engaged workforce that will
maintain our competitive advantage and be a driving force for
change throughout our business, in the communities in which we
operate and in wider society. We want to be an employer of choice
in the areas in which we operate and will do so by taking a sector
leading position on pay, working conditions, professional
development, inclusivity and wellbeing. I continue to be immensely
proud of the rich vein of talent that runs through our business,
and our performance and results are a reflection of the capability,
commitment and dedication of our colleagues across the
business.
Adam Couch
Chief Executive
24 May 2022
Operating and Financial Review
Operating review
Revenue and Adjusted operating profit
Change Change
2022 2021 (Reported) (Like-for-like*)
--------------------------------- ----------- ----------- ----------- -----------------
Revenue GBP2,008.5m GBP1,898.4m +5.8% +5.3%
Adjusted Group Operating Profit* GBP140.6m GBP132.5m +6.1%
Adjusted Group Operating Margin* 7.0% 7.0% +2bps
--------------------------------- ----------- ----------- ----------- -----------------
*See Note 10
Revenue
Reported revenue increased by 5.8 per cent to GBP2,008.5
million. Like-for-like revenue which excludes the contribution from
acquisitions in the current year increased by 5.3 per cent, with
corresponding volumes ahead by 2.3 per cent. This builds on the
strong growth in the prior year with like-for-like revenue 18.4 per
cent ahead, on a two year basis, of the year to March 2020.
Poultry volumes grew strongly following the successful capacity
expansion at Eye. Convenience and Gourmet Products revenues, which
included a full year contribution from the new Hull Cooked Bacon
facility, were also ahead. Fresh Pork revenue was lower, despite
more pigs being processed during the year, primarily reflecting
lower Far East export sales and more volume being sold internally
to add greater value.
Customer service levels remained consistently high throughout
the year, including during a record Christmas trading period, which
was executed exceptionally well against a backdrop of national
labour shortages and ongoing supply chain challenges.
Adjusted Group operating profit
Adjusted Group operating profit increased by 6.1 per cent to
GBP140.6 million, with adjusted Group operating margin at 7.0 per
cent in line with the prior year despite high input cost inflation,
lower Far East export margins and start-up costs for the new Cooked
Bacon facility. Cost inflation, together with, at times, acute
labour shortages and ongoing supply chain disruption is being
proactively managed and recovered.
Category review
FOOD SEGMENT
Fresh Pork
Fresh Pork includes the three primary processing facilities and
associated farming operations and represented 26 per cent of Group
revenue.
Fresh Pork revenue was 7.9 per cent lower reflecting the pass
through of lower average UK pig prices during the year, softer
export prices and reduced Far East export volumes. Fresh Pork
retail sales were modestly lower year-on-year as more meat was
transferred internally into our added-value convenience and gourmet
product ranges.
Far East export revenue was 25 per cent behind the prior year
reflecting reduced demand from China due to renewed Covid lockdown
restrictions and the ongoing inability to export to China from our
Norfolk facility due to the voluntary suspension of the site's
China export licence in October 2020. Further progress has been
made in developing alternative pork export markets in Asia and
South Africa where demand for British Outdoor Bred higher welfare
pork remains high.
Despite reporting lower Fresh Pork revenue, weekly average pig
numbers processed during the year increased by 1.5 per cent to
62,300, peaking at 67,200 in February 2022 with the additional
volumes supporting increased demand from the Group's Convenience
and Gourmet Product businesses. With ongoing investment in our
farming operations, we maintained our self-sufficiency in UK pigs
at over 30 per cent despite the uplift in numbers processed.
We invested GBP26 million across the three primary processing
facilities and our farming infrastructure in the year. Investment
in primary processing includes automated leg deboning at the
Preston site and purchasing the Ballymena site, which was
previously leased, to facilitate its future expansion. We also
invested further to add capacity, automation and capability across
the three sites. We continue to invest in our farming
infrastructure to add capacity and improve our already industry
leading animal welfare standards.
The average UK standard pig price ("SPP") for the year was 4.8
per cent lower than the prior year average at 148p/kg. The SPP
increased from 141p/kg to 161p/kg in mid-August, falling back to
137p/kg in February, before rising again to close the year at
147p/kg. The increase in the first half of the year reflected tight
supply and strong UK and export demand. Prices then fell back
through the autumn due to the combined effect of lower EU pig
prices and oversupply in the UK market resulting from the shortage
of skilled butchers.
The increased SPP in March 2022 reflected a rapid response to
the sharp rises in soft commodity prices. Wheat and Soya prices
were already at all-time highs. Russia's invasion of Ukraine, which
accounts for around 12 per cent of global wheat production and
around 20 per cent of global wheat exports, has pushed up cereal
prices to unsustainable highs.
The sharp increase in feed prices incurred by producers,
alongside high levels of UK cost inflation, has accelerated the
need to introduce new compensation mechanisms for farmers. These
measures mark a short-term move away from prices linked to the SPP
as processors work with retailers to establish greater use of cost
of production models. These models provide greater certainty and
speed of cost recovery to producers, in turn creating security of
supply for consumers.
African Swine Fever ("ASF") continues to affect large parts of
China and, to a lesser extent, Eastern Europe. In China, efforts to
rebuild herds have been slowed by the strict Covid restrictions
imposed in many parts of the country. In Europe, most ASF cases
continue to be detected in Romania and Poland however a case was
recently detected in a domestic pig in Italy, over 800km from the
nearest case in Germany.
In the UK, we remain acutely aware of the impact an outbreak of
ASF would have on the UK pig industry and its ability to continue
exporting, however we are reassured by the recent agreement between
France and China which will allow exports from France to continue
should ASF be found in the country. The UK industry remains on high
alert with intensive bio-security protocols in place.
Convenience
Convenience, which comprises Cooked Meats and Continental
Products, represented 38 per cent of Group revenue. Convenience
revenue was 5.9 per cent ahead on a reported basis. Like-for-like
revenue, excluding the contributions from the Atlantica UK
acquisition in June 2021 and the Ramona's Kitchen acquisition in
August 2021, increased by 5.2 per cent. Growth reflected the
ongoing consumer trend of enjoying quality convenience foods in the
home.
Cooked Meats revenue grew with the introduction of new ranges to
support sustained levels of in-home consumption. Slow cook and Sous
vide products continue to drive category growth with a strong
pipeline of new products being developed. Innovation included the
introduction of a sliced rare roast beef product for a premium
retail customer together with a new 'street food' style product
range. In more traditional product ranges, a number of key business
wins were secured, including meaningful volume with the anchor
customer of one of the three cooked meats sites.
Over GBP9 million was invested in the three cooked meats sites
during the year. This included the start of a major expansion
programme at the Milton Keynes facility and investment in
automation and new slicing capability across all three sites.
The Continental Products facility in Bury reported double digit
revenue growth, which was well ahead of the market, across all
product ranges. This performance was delivered through category
leadership and launching innovative new products, including
platters, mixed products and tapas boxes for sharing occasions
which have grown in popularity as consumers look to recreate
restaurant quality experiences in the home. Alongside this
innovation, ongoing investment in the Bury facility, which was
commissioned in April 2018, has enabled premium artisanal products
to be created efficiently at scale. This capability has resulted in
several major olive and charcuterie business wins being secured
during the year, including the full Olive and Antipasti range with
a major retailer. This level of business growth has accelerated
plans for further development of the site, with GBP5 million spent
during the year on new highly efficient olive and charcuterie lines
and the initial phase of a capacity expansion programme.
Katsouris Brothers revenue was modestly ahead year-on-year,
helped by the contribution from Ramona's Kitchen and Atlantica UK.
Sales of 'Grab and Go' products, which were introduced following
the closure of retailer deli counters during the pandemic, have
remained resilient. Ramona's Kitchen has been successfully
integrated, with products now listed in two major retailers.
Gourmet Products
Gourmet Products, which comprise Sausage, Bacon, Pastry and the
new Hull, Cooked Bacon facility, represented 16 per cent of Group
revenue. Gourmet Products revenue increased 4.9 per cent reflecting
the ramp up in production at the new Cooked Bacon facility and the
recovery of sales into the food service and food-to-go sectors
allied to ongoing strong retail demand for premium Bacon and Pastry
products.
Sausage revenue modestly declined year-on-year with strong sales
of Christmas garnishes unable to fully offset the tough
comparatives of an exceptionally strong summer barbecue season in
2020 during the first lock-down. Product innovation continued to
drive new sales, including gourmet hot dogs, breakfast boxes,
flavoured pigs in blankets and new summer inspired flavours across
premium ranges. The positive contribution from this new product
development was constrained due to lower retailer promotional
activity. Food service volumes continued to recover over the course
of the year with more breakfasts being consumed out of the home.
Future category growth will be facilitated by GBP5 million spent on
the Hull site during the year which includes investment in new
sausage casing capability.
Growth in Bacon reflected the recovery in food service volumes
underpinned by robust retail volume growth, including the full
contribution from new business wins secured during the first half
of the previous financial year. The volume uplift was augmented by
increased sales of premium products, including air dried hams and
premium sliced bacon which more than offset lower volumes of
traditional gammon and bacon joints. Christmas trading boosted
sales in the second half of the year with continued product
innovation also driving retail growth. GBP4 million of capital
investment in the year in enhanced automation and new slicing lines
will improve efficiency and add capacity.
Robust year-on-year growth resulted in record Pastry sales.
Growth in the popularity of luxury convenience foods boosted sales
to the site's anchor customer and resulted in a highly successful
Christmas campaign. New retail product launches bolstered sales
growth with the launch of new innovative pie products and premium
meal solutions. Sales into national coffee shop chains and
food-to-go outlets remained strong and were complemented, in the
final quarter, by the tie up between the site's anchor premium
retail customer and a leading coffee shop chain.
Sales of cooked bacon and sausage launched at the outset of the
year following the successful commissioning of the new Gourmet
Kitchen facility in April 2021. Focus in the first half of the year
was on delivering high quality cooked bacon to the site's anchor
customer. Following the successful ramp up in production,
additional premium retail cooked bacon and sausage volumes have
been secured, as well as supply of cooked sausage to a leading
coffee shop chain. Further planned investment in the site, in
addition to GBP5 million spent in the year, will introduce new
innovative cooking methods and support anticipated growth in demand
from the site's lead customer.
Poultry
Poultry, which includes Fresh and Cooked Poultry, represented 20
per cent of Group revenue. Poultry revenue increased by 30.8 per
cent in the year following the successful capacity uplift in Fresh
Poultry at Eye and the recovery of food service revenues at Cooked
Poultry.
Fresh Poultry revenue was substantially ahead of the prior year
following the successful uplift in capacity to 1.4 million birds
per week supporting strong demand from the site's anchor customer.
This increase in birds processed has been enabled through further
investment in our farming operations where GBP3 million has been
spent to increase capacity and improve efficiency. A further GBP3
million was spent on further processing automation, including
additional deboning and portioning capability. This investment has
enabled improved carcass utilisation with additional sales of
wings, drumstick and deboned thigh meat supporting whole bird and
white meat sales.
Avian Influenza ("AI") represents a heightened risk to the Fresh
Poultry business with several cases found in wild birds in the UK.
Although the risk to consumers is very low, controlling the spread
of AI remains a priority. The impact on the business to date has
been limited, but outbreaks close to the Eye facility resulted in
the area being designated a disease control zone which impacted the
ability to export product from the facility. The overall risk to
production remains low with enhanced bio-security controls in
place.
Cooked Poultry volumes were strongly ahead of the prior year and
comfortably ahead of pre-pandemic levels. Growth in cooked poultry
revenue was driven by the rapid recovery of the food service
industry and, in particular, the food-to-go sector which benefited
from strong demand over the festive period and the easing of
lockdown restrictions. Sales to the business's major food service
customer are now fully recovered and retail demand remains
resilient following new product launches resulting from continued
product innovation. GBP2 million was also invested at the site to
reduce odour emissions and upgrade refrigeration. In early May
2022, a routine internal inspection identified the presence of
Salmonella in a limited number of cooked chicken products prepared
at our cooked poultry facility in Hull. As a precautionary measure,
we asked our customers to withdraw any of their products containing
our Ready-to-Eat chicken produced during the affected period. The
cost of this event cannot yet be reasonably estimated, however,
post mitigation, it is expected that the impact will not be
material to the Group.
Shortly before year end, pre-production trials started at our
new GBP32 million Breaded Poultry facility in Hull, with full
commercial roll-out starting in the first weeks of FY23. This
state-of-the-art facility produces Ready-to-Cook and Ready-to-Eat
products using a range of innovative production processes,
including the use of air frying. This method of cooking is far
healthier than traditional cooking methods. Initial interest from
retail, food service and Quick Service Restaurant customers has
been strong.
OTHER SEGMENT
Pet food
The new Pet Food category incorporates Grove Pet Foods which was
acquired on 28 January 2022. Grove is a producer of dry dog food
for several leading brands under private label relationships
alongside its own brands, including Vitalin (natural) and Alpha
Feeds (working dog).
The business operates predominantly from a purpose-built
freehold facility in Lincolnshire that has a footprint for further
expansion as a significant proportion of the freehold site is not
currently utilised. Across this site and a second production site
in Nottinghamshire, Grove Pet Foods has a total workforce of
approximately 100 people.
This acquisition represents a platform for future growth in this
attractive and rapidly expanding sector. Grove complements our
farm-to-fork integration strategy for poultry and pigs and enhances
our sustainability strategy through improved carcass
utilisation.
Grove Pet Foods made a modest contribution to reported Group
revenue in the first two months of ownership prior to year-end.
Finance review
Revenue
Reported revenue increased by 5.8 per cent to GBP2,008.5 million
(2021: GBP1,898.4 million). On a like-for-like basis, excluding the
contribution from acquisitions in the year, revenues increased by
5.3 per cent, with volumes 2.3 per cent higher.
Adjusted gross profit and adjusted EBITDA
Adjusted gross profit of GBP281.0 million (2021: GBP269.2
million) increased by 4.4 per cent with adjusted gross profit
margin falling marginally to 14.0 per cent (2021: 14.2 per cent).
Adjusted EBITDA increased by 2.5 per cent to GBP201.7 million
(2021: GBP196.7 million) and adjusted EBITDA margin decreased to
10.0 per cent (2021: 10.4 per cent).
Adjusted Group operating profit
Adjusted Group operating profit of GBP140.6 million (2021:
GBP132.5 million) increased by 6.1 per cent and adjusted Group
operating margin was 7.0 per cent of sales, in line with last
year.
Full reconciliations of adjusted measures to statutory results
can be found in Note 10. The net IAS 41 movement on biological
assets results in a GBP2.8 million charge (2021: GBP11.4 million
charge) on a statutory basis reflecting the fall in the UK pig
price during the year.
Finance costs and funding
On 22 November 2021, the Group refinanced its banking facility,
taking out a new Sustainability Linked Revolving Credit Facility
with Lloyds Bank plc, National Westminster Bank plc, HSBC UK Bank
plc, Rabobank London and Bank of China Limited.
The new facility, which runs to November 2025 with the potential
to extend for a further year, comprises a revolving credit facility
of GBP250 million, including a committed overdraft facility of
GBP20 million, with an option to extend the facility by a further
GBP50 million on the same terms.
This facility provides the business with over GBP200 million of
headroom at 26 March 2022. The adequacy of this facility has been
confirmed as part of robust scenario testing performed over the
three-year viability period for the Group. Net financing costs of
GBP3.7 million included GBP2.2 million of IFRS 16 lease interest.
Bank finance costs were GBP0.9 million higher than the prior year
at GBP1.6 million due to higher bank interest rates and costs
relating to refinancing the Group's banking facility in November
2021.
Adjusted profit before tax
Adjusted profit before tax was 5.6 per cent higher at GBP136.9
million (2021: GBP129.7 million).
Taxation
The tax charge of GBP26.4 million (2021: GBP22.3 million) was
20.3 per cent of profit before tax (2021: 19.4 per cent). The
standard rate of UK corporation tax was 19.0 per cent (2021: 19.0
per cent). The effective corporation tax rate was higher than the
standard rate due to non-qualifying depreciation, disallowable
expenses and a deferred tax charge resulting from the future,
enacted increase in the UK corporation tax rate to 25 per cent,
partially offset by the benefit of the-super deduction on eligible
capital investment.
Adjusted earnings per share
Adjusted earnings per share increased by 3.1 per cent to 205.4
pence (2021: 199.3 pence). The average number of shares in issue
was 52,923,00 (2021: 52,469,000).
Statutory profit measures
Statutory profit before tax was GBP129.9 million (2021: GBP114.8
million), with statutory Group operating profit at GBP133.6 million
(2021: GBP117.6 million) and statutory earnings per share of 195.7
pence (2021: 176.4 pence). Statutory gross profit was GBP278.2
million (2021: GBP257.8 million).
Segmental reporting
Following the acquisition of Grove Pet Foods Limited, the Group
has a new operating segment resulting in the need for a new
reporting segment 'Other' as the aggregation criteria for the
'Food' reporting segment is not met for the new operating segment.
Refer to note 3 for further information.
Cash flow and net debt
The net cash inflow from operating activities in the year was
GBP160.0 million (2021: GBP181.4 million). This reduction is
primarily due to an increase in working capital due to growth in
the business, cost inflation and strategic purchasing of inventory.
Net debt at the end of the year was GBP106.0 million (2021: GBP92.4
million) with the inflow from operating activities offset by the
payment of GBP38.5 million of consideration on acquisitions,
GBP14.3 million of IFRS 16 lease charges, GBP92.4 million invested
in the Group's asset base, net of disposal proceeds and GBP32.8
million of dividends paid to the Group's Shareholders.
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 surplus on this scheme at 26 March
2022 was GBP8.3 million, compared to GBP5.7 million at 27 March
2021. Cash contributions to the scheme during the year, as part of
the programme to fully fund the scheme, were GBP1.8 million. The
present value of funded obligations was GBP30.1 million, and the
fair value of plan assets was GBP38.4 million.
Group income statement
For the 52 weeks ended 26 March 2022
2022 2021
Notes GBP'm GBP'm
Revenue 2,008.5 1,898.4
---------------------------------------------------- ------ --------- ----------
Adjusted Group operating profit 140.6 132.5
Net IAS 41 valuation movement on biological assets (2.8) (11.4)
Amortisation of intangible assets (4.2) (3.5)
Group operating profit 4 133.6 117.6
Finance costs (3.7) (2.8)
---------------------------------------------------- ------ --------- ----------
Profit before tax 129.9 114.8
Taxation (26.4) (22.3)
---------------------------------------------------- ------ --------- ----------
Profit for the year 103.5 92.5
---------------------------------------------------- ------ --------- ----------
Earnings per share (pence)
On profit for the year:
Basic 5 195.7p 176.4p
Diluted 5 194.8p 175.6p
------------------------- ------- -------
Group statement of comprehensive income
For the 52 weeks ended 26 March 2022
2022 2021
GBP'm GBP'm
------------------------------------------------------------------------------------------ -------- --------
Profit for the year 103.5 92.5
-------------------------------------------------------------------------------------------- -------- --------
Other comprehensive income/(expense)
Other comprehensive income/(expense) to be reclassified to profit or loss in subsequent
periods:
Cash flow hedges
(Losses)/gains arising in the year (0.3) 0.2
Reclassification adjustments for gains included in the income statement - (0.4)
Income tax effect 0.1 -
------------------------------------------------------------------------------------------ -------- --------
Net other comprehensive expense to be reclassified to profit or loss in subsequent periods (0.2) (0.2)
-------------------------------------------------------------------------------------------- -------- --------
Items not to be reclassified to profit or loss in subsequent periods:
Actuarial gains/(losses) on defined benefit pension scheme 0.7 (3.4)
Income tax effect (0.5) 0.6
-------------------------------------------------------------------------------------------- -------- --------
Net other comprehensive income/(expense) not to be reclassified to profit or loss in
subsequent
periods 0.2 (2.8)
-------------------------------------------------------------------------------------------- -------- --------
Other comprehensive income/(expense), net of tax - (3.0)
-------------------------------------------------------------------------------------------- -------- --------
Total comprehensive income, net of tax 103.5 89.5
-------------------------------------------------------------------------------------------- -------- --------
Group balance sheet
At 26 March 2022
2022 2021
Notes GBP'm GBP'm
--------------------------------------------- -------- -------- --------
Non-current assets
Intangible assets 231.3 203.8
Defined benefit pension scheme surplus 8.3 5.7
Property, plant and equipment 434.8 376.7
Right-of-use assets 65.5 68.8
Biological assets 2.7 2.4
Total non-current assets 742.6 657.4
--------------------------------------------- -------- -------- --------
Current assets
Biological assets 50.7 41.1
Inventories 105.2 81.8
Trade and other receivables 244.4 221.7
Financial assets - 0.9
Cash and short-term deposits 7 0.2 39.0
--------------------------------------------- -------- -------- --------
Total current assets 400.5 384.5
--------------------------------------------- -------- -------- --------
Total assets 1,143.1 1,041.9
--------------------------------------------- -------- -------- --------
Current liabilities
Trade and other payables (238.7) (217.2)
Financial liabilities (3.1) (1.0)
Lease Liabilities (13.8) (12.5)
Provisions (1.8) (0.1)
Income tax payable (2.4) (1.4)
Total current liabilities (259.8) (232.2)
--------------------------------------------- -------- -------- --------
Non-current liabilities
Other payables (0.6) (0.8)
Financial liabilities 7 (36.4) (59.8)
Lease liabilities (56.0) (59.1)
Deferred tax liabilities (19.7) (2.7)
Provisions (1.7) (1.2)
Total non-current liabilities (114.4) (123.6)
--------------------------------------------- -------- -------- --------
Total liabilities (374.2) (355.8)
--------------------------------------------- -------- -------- --------
Net assets 768.9 686.1
--------------------------------------------- -------- -------- --------
Equity
Called-up share capital 5.3 5.3
Share premium account 115.9 106.4
Share-based payments 44.3 37.4
Hedging reserve (0.3) (0.1)
Retained earnings 603.7 537.1
--------------------------------------------- -------- -------- --------
Equity attributable to owners of the parent 768.9 686.1
--------------------------------------------- -------- -------- --------
Group statement of cash flows
For the 52 weeks ended 26 March 2022
Notes 2022 2021
GBP'm GBP'm
Operating activities
Profit for the year 103.5 92.5
Adjustments to reconcile Group profit for the year to net cash inflows from operating
activities:
Income tax expense 26.4 22.3
Net finance costs 3.7 2.8
(Gain)/loss on sale of property, plant and equipment (0.1) 0.1
Depreciation of property, plant and equipment 47.9 51.9
Depreciation of right-of-use assets 13.2 12.3
Amortisation of intangible assets 4.2 3.5
Share-based payments 6.9 6.0
Difference between pension contributions paid and amounts recognised in the income
statement (1.9) (2.0)
Release of government grants (0.2) (0.2)
Net IAS 41 valuation movement on biological assets 2.8 11.4
Increase in biological assets (12.7) (9.2)
Increase in inventories (21.3) (6.3)
Increase in trade and other receivables (20.1) (7.8)
Increase in trade and other payables 17.5 26.2
---------------------------------------------------------------------------------------- ------ -------- --------
Cash generated from operations 169.8 203.5
Tax paid (9.8) (22.1)
---------------------------------------------------------------------------------------- ------ -------- --------
Net cash from operating activities 160.0 181.4
---------------------------------------------------------------------------------------- ------ -------- --------
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 9 (38.5) (10.7)
Purchase of property, plant and equipment (93.7) (71.9)
Proceeds from sale of property, plant and equipment 1.3 0.6
Receipt of government grants - 0.2
Net cash used in investing activities (130.9) (81.8)
---------------------------------------------------------------------------------------- ------ -------- --------
Cash flows from financing activities
Interest paid (1.6) (0.5)
Proceeds from issue of share capital 4.6 3.0
Issue costs of long-term borrowings (1.8) -
Repayment of borrowings (22.0) (43.0)
Dividends paid (32.8) (27.9)
Payment of lease capital (12.1) (11.4)
Payment of lease interest (2.2) (2.3)
---------------------------------------------------------------------------------------- ------ -------- --------
Net cash used in financing activities (67.9) (82.1)
---------------------------------------------------------------------------------------- ------ -------- --------
Net (decrease)/increase in cash and cash equivalents 7 (38.8) 17.5
Cash and cash equivalents at beginning of year 7 39.0 21.5
---------------------------------------------------------------------------------------- ------ -------- --------
Cash and cash equivalents at end of year 7 0.2 39.0
---------------------------------------------------------------------------------------- ------ -------- --------
Group statement of changes in equity
For the 52 weeks ended 26 March 2022
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 28 March 2020 5.2 98.5 31.6 0.1 479.1 614.5
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
Profit for the year - - - - 92.5 92.5
Other comprehensive income - - - (0.2) (2.8) (3.0)
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
Total comprehensive income - - - (0.2) 89.7 89.5
Share-based payments - - 6.0 - - 6.0
Scrip dividend - 4.8 - - - 4.8
Share options exercised 0.1 2.9 - - - 3.0
Share transfer - 0.2 (0.2) - - -
Dividends - - - - (32.7) (32.7)
Deferred tax related to
changes in equity - - - - 0.4 0.4
Current tax related to
changes in equity - - - - 0.6 0.6
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
At 27 March 2021 5.3 106.4 37.4 (0.1) 537.1 686.1
Profit for the year - - - - 103.5 103.5
Other comprehensive income - - - (0.2) 0.2 -
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
Total comprehensive income - - - (0.2) 103.7 103.5
Share-based payments - - 6.9 - - 6.9
Scrip dividend - 4.9 - - - 4.9
Share options exercised - 4.6 - - - 4.6
Dividends - - - - (37.7) (37.7)
Deferred tax related to
changes in equity - - - - (0.1) (0.1)
Current tax related to
changes in equity - - - - 0.7 0.7
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
At 26 March 2022 5.3 115.9 44.3 (0.3) 603.7 768.9
------------------------------- ---------- ---------- ---------- ---------- ----------- ---------
Notes to the accounts
1. Basis of preparation
The results comprise those of Cranswick plc and its subsidiaries
for the 52 weeks ended 26 March 2022. This preliminary announcement
has been prepared on the basis of accounting policies as set out in
the statutory accounts for the 52 weeks ended 27 March 2021 (except
as detailed below and in note 2). This announcement does not
constitute the Company's statutory accounts within the meaning of
Section 435 of the Companies Act 2006.
The Group and Company's financial statements have been prepared
in accordance with UK-Adopted International Accounting Standards
('UK-Adopted IAS') and with the requirements of the Companies Act
2006 as applicable to companies reporting under those standards.
The change in basis of preparation is required by UK Company Law
for the purposes of financial reporting as a result of the UK's
exit from the EU on 31 January 2020 and cessation of the transition
period on 31 December 2020, with future changes being subject to
endorsement by the UK Endorsement Board. The change does not
constitute a change in accounting policy but rather a change in
framework which is required to ground the use of IFRS in Company
Law. There is no impact on recognition, measurement or disclosures
in the period as a result of the change in the framework.
The Financial Statements of the Group are prepared to the last
Saturday in March. Accordingly, these Financial Statements are
prepared for the 52 week period ended 26 March 2022. Comparatives
are for the 52 week period ended 27 March 2021. The Balance Sheet
for 2022 and 2021 have been prepared as at 26 March 2022 and 27
March 2021 respectively.
Statutory accounts for the 52 weeks ended 26 March 2022 and 27
March 2021 have been reported on by the auditors who issued an
unqualified opinion in respect of both years and the auditors'
reports for 2022 and 2021 did not contain statements under 498(2)
or 498(3) of the Companies Act 2006. Statutory accounts for the 52
weeks ended 27 March 2021 have been filed with the Registrar of
Companies. The statutory accounts for the 52 weeks ended 26 March
2022, which were approved by the Board on 24 May 2022, will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting.
Viability and Going Concern
In accordance with the provisions of the UK Corporate Governance
Code, the Board has assessed the viability of the Group over an
appropriate time period, taking into account the current position,
future prospects and the potential impact of the principal risks to
the Group's business model and ability to deliver its strategy.
The Board has determined that a three-year period to March 2025
is an appropriate period over which to provide its Viability
Statement. This timeframe has been specifically chosen due to the
fast moving nature of the food industry and the current financial
and operational forecasting cycles of the Group.
In making this assessment of viability, the Board carried out a
robust assessment of the principal risks and uncertainties facing
the Group as well as considering material macroeconomic conditions
and geopolitical challenges including the consideration of an
outbreak of Avian Influenza impacting our chicken flock and a
widespread outbreak of African Swine Fever in the UK and Europe.
Focus was also placed on the emerging risks of the impact of the
conflict in Ukraine.
The sensitivity analysis utilised the Group's robust 3 year
budget and forecasting process to quantify the financial impact on
the strategic plan and on the Group's viability against specific
measures including liquidity, credit rating and bank covenants.
This process also incorporated reverse stress testing.
Given the strong liquidity of the Group; the committed banking
facilities which are now in place beyond the viability period; and
the diversity of operations; the results of the sensitivity
analysis highlighted that the Group would, over the three-year
period, be able to withstand the impact of the most severe
combination of the risks modelled by making adjustments to its
strategic plan and discretionary expenditure, with strong headroom
against current available facilities and full covenant compliance
in all modelled scenarios.
Based on the results of this analysis, the Board has a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period
to 29 March 2025.
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 52 weeks ended 27 March 2021, 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 9, IAS 39 and IFRS 7 (amendments) 1 January 2021
IFRS 7, IFRS 4 & IFRS 16 Interest rate benchmark reform
(amendments) 1 January 2021
IFRS 16 Leases - Covid-19 related rent concessions (amendments) 1 April 2021
The application of these standards has not had a material effect
on the net assets, results and disclosures of the Group.
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:
International Accounting Standards (IAS/IFRSs) Effective date
Annual improvements to IFRSs 2018-20 cycle 1 January 2022
IFRS 3 Business combinations (amendment) 1 January 2022
IAS 16 Property plant and equipment (amendment) 1 January 2022
IAS 37 Provisions, contingent liabilities and contingent
assets 1 January 2022
Narrow scope amendments to IAS 1 and IAS 8 1 January 2023
IFRS 17 Insurance contracts 1 January 2023
IAS 12 Deferred tax (amendment) 1 January 2023
IAS 1 Presentation of Financial Statements (amendment) 1 January 2024
None of these are expected to have a significant effect on the
Financial Statements of the Group.
3. Business and geographical segments
IFRS 8 requires operating segments to be identified on the basis
of the internal financial information reported to the Chief
Operating Decision Maker (CODM). The Group's CODM is deemed to be
the Executive Directors on the Board, who are primarily responsible
for the allocation of resources to segments and the assessment of
performance of the segments.
The CODM assesses profit performance principally through
adjusted profit measures consistent with those disclosed in the
Annual Report and Accounts.
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. 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.
Following the acquisition of Grove Pet Foods Limited, the Group
has a new operating segment resulting in the need for a new
reporting segment 'Other' as the aggregation criteria for the
'Food' reporting segment is not met for the new operating
segment.
The reporting segments are organised based on the nature of the
end markets served. The 'Food' reporting segment entails
manufacture and supply of food products to UK grocery retailers,
the food service sector and other UK and global food producers. The
'Other' segment represents all other activities which do not meet
the above criteria, principally Grove Pet Foods Limited.
2022 GBP'm 2022 GBP'm 2022 GBP'm 2021 GBP'm 2021 GBP'm 2021 GBP'm
Food Other Total Food Other Total
---------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Revenue 2,004.6 3.9 2,008.5 1,898.4 - 1,898.4
---------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Adjusted operating profit 140.7 (0.1) 140.6 132.5 - 132.5
Finance costs (3.7) - (3.7) (2.8) - (2.8)
---------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Adjusted profit before tax 137.0 (0.1) 136.9 129.7 - 129.7
---------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Assets 1,132.2 10.9 1,143.1 1,041.9 - 1,041.9
Liabilities (368.3) (5.9) (374.2) (355.8) - (355.8)
----------------------------- -------- ------ -------- -------- --------
Net assets 763.9 5.0 768.9 686.1 - 686.1
----------------------------- -------- ------ -------- -------- --------
Depreciation 60.9 0.2 61.1 64.2 - 64.2
Non-current asset additions 139.5 0.2 139.7 89.2 - 89.2
----------------------------- -------- ------ -------- -------- --------
4. Group operating profit
Group operating costs comprise:
2022 2021
GBP'm GBP'm
----------------------------------------------------------------------------- -------- --------
Cost of sales excluding net IAS 41 valuation movement on biological assets 1,727.5 1,629.2
Net IAS 41 valuation movement on biological assets* 2.8 11.4
------------------------------------------------------------------------------ -------- --------
Cost of sales 1,730.3 1,640.6
------------------------------------------------------------------------------ -------- --------
Gross profit 278.2 257.8
----------------------------------------------------------------------------- -------- --------
Selling and distribution costs 80.3 69.0
----------------------------------------------------------------------------- -------- --------
Administrative expenses excluding amortisation of intangible assets 60.1 67.7
Amortisation of intangible assets 4.2 3.5
Administrative expenses 64.3 71.2
----------------------------------------------------------------------------- -------- --------
Total operating costs 1,874.9 1,780.8
----------------------------------------------------------------------------- -------- --------
* 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 GBP103.5 million (2021: GBP92.5 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:
2022 2021
Thousands Thousands
---------------------------------------------------- ---------- ----------
Basic weighted average number of shares 52,923 52,469
Dilutive potential ordinary shares - share options 246 244
---------------------------------------------------- ---------- ----------
53,169 52,713
---------------------------------------------------- ---------- ----------
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 2 September 2022 to Shareholders on the register at the
close of business on 22 July 2022.
7. Analysis of changes in net debt
At Other At
27 March Cash non-cash 26 March
2021 flow changes 2022
Group GBP'm GBP'm GBP'm GBP'm
--------------------------- ---------- ------- ---------- ----------
Cash and cash equivalents 39.0 (38.8) - 0.2
Revolving credit (59.8) 22.0 1.4 (36.4)
Lease liabilities (71.6) 14.3 (12.5) (69.8)
Net debt (92.4) (2.5) (11.1) (106.0)
--------------------------- ---------- ------- ---------- ----------
Net (debt)/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
During the year, the following acquisitions were completed:
i) On 18 June 2021, the Group acquired 100 per cent of the
issued share capital of Atlantica UK Limited, an importer of
Continental foods. On 3 August 2021, the Group acquired 100 per
cent of the share capital of Ramona's Kitchen Limited, a producer
of dips and Mediterranean foods. The two businesses were acquired
for a combined initial net cash consideration of GBP5.5
million.
ii) On 28 January 2022, the Group acquired 100 per cent of the
share capital of a holding entity Holdco Alpha Limited and its
subsidiary Grove Pet Foods Limited (Grove), a producer of dried pet
foods for several leading brands under private label relationships
alongside its own brands, together with associated freehold land
and buildings, for an initial net cash consideration of GBP33.0
million.
Ramona's Kitchen Limited and Atlantica UK Limited
The following table sets out the fair values of the identifiable
assets and liabilities acquired by the Group in relation to
Atlantica UK Limited and Ramona's Kitchen Limited. The fair values
have been provisionally determined at the balance sheet date.
Provisional fair value
GBP'm
Net assets acquired:
Customer relationships 2.6
Trademark 1.0
Property, plant and equipment 0.3
Right-of-use assets 0.2
Inventories 0.2
Trade and other receivables 0.9
Bank and cash balances 0.9
Trade and other payables (0.5)
Lease liability (0.2)
Corporation tax liability (0.1)
Deferred tax liability (0.9)
------------------------------------------- ------
4.4
Goodwill arising on acquisition 4.7
------------------------------------------- ------
Total consideration 9.1
------------------------------------------- ------
Satisfied by:
Initial cash consideration 6.4
Deferred contingent consideration 2.7
------------------------------------------- ------
9.1
------------------------------------------- ------
Net cash outflow arising on acquisition:
Cash consideration paid 6.4
Cash and cash equivalents acquired (0.9)
------------------------------------------- ------
5.5
------------------------------------------- ------
Included in the GBP4.7 million of goodwill recognised above are
certain intangible assets that cannot be individually separated and
reliably measured due to their nature. These items include the
expected value of synergies and an assembled workforce.
Transaction costs in relation to the acquisitions of GBP0.2
million have been expensed within administrative expenses.
All of the trade receivables acquired are expected to be
collected in full.
From the date of acquisition to 26 March 2022, the combined
external revenues of Atlantica UK Limited and Ramona's Kitchen
Limited were GBP5.4 million and the businesses contributed net
profit after tax of GBP0.4 million to the Group. Had the
acquisition taken place at the beginning of the year, revenue in
the year would have been GBP2.2 million higher and profit in the
year would have been GBP0.3m higher.
Contingent Consideration
The agreement includes contingent consideration payable in cash
to the previous owners of Atlantica UK Limited and Ramona's Kitchen
Limited based on the performance of the businesses in the period to
30 June 2024. The amount payable will be between GBPnil and
GBP2.8m.
The fair value of the contingent consideration on acquisition
was estimated at GBP2.7 million and was estimated calculating the
present value of the future expected cashflows.
Holdco Alpha Ltd (Grove Pet Foods)
The following table sets out the fair values of the identifiable
assets and liabilities acquired by the Group in relation to Grove.
The fair values have been provisionally determined at the balance
sheet date.
Provisional fair value
GBP'm
----------------------------------------------------------------------------- ------
Net assets acquired:
Customer relationships 5.3
Trademark 2.2
Property, plant and equipment 10.1
Inventories 2.0
Trade and other receivables 2.5
Right of use assets 0.3
Bank and cash balances (0.5)
Trade and other payables (3.0)
Hire purchase leases (0.3)
Lease liabilities (0.3)
Corporation tax liability (0.7)
Deferred tax liability (1.8)
----------------------------------------------------------------------------- ------
15.8
Goodwill arising on acquisition 15.9
----------------------------------------------------------------------------- ------
Total consideration 31.7
----------------------------------------------------------------------------- ------
Satisfied by:
Initial cash consideration 32.5
Completion accounts adjustment (0.8)
----------------------------------------------------------------------------- ------
31.7
----------------------------------------------------------------------------- ------
Net cash outflow arising on acquisition:
Cash consideration paid (included in cash flows from investing activities) 32.5
Cash and cash equivalents acquired 0.5
----------------------------------------------------------------------------- ------
33.0
----------------------------------------------------------------------------- ------
Included in the GBP15.9 million of goodwill recognised above are
certain intangible assets that cannot be individually separated and
reliably measured due to their nature. These items include the
expected value of synergies and an assembled workforce.
Transaction costs in relation to the acquisitions of GBP0.4
million have been expensed within administrative expenses.
All of the trade receivables acquired are expected to be
collected in full.
A review of the completion accounts has been undertaken in line
with the Sale and Purchase Agreement. This has resulted in an
adjustment of GBP0.8 million receivable from the seller, referred
to as the 'completion accounts adjustment' above.
Post-acquisition Grove has contributed GBP3.9 million revenue
and GBP0.1 million operating loss which is included in the Group
income statement. Had the acquisition taken place at the beginning
of the year, revenue in the year would have been GBP19.0 million
higher and profit in the year would have been GBP0.8 million
higher.
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 benefit of acquisitions in the current
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
2022 2021 Change
GBP'm GBP'm
------------------------------------------- -------- -------- -------
Revenue 2,008.5 1,898.4 +5.8%
Ramona's Kitchen and Atlantica UK Limited (5.4) -
Grove Pet Foods (3.9) -
------------------------------------------- -------- -------- -------
Like-for-like revenue 1,999.2 1,898.4 +5.3%
------------------------------------------- -------- -------- -------
Adjusted gross profit
2022 2021 Change
GBP'm GBP'm
------------------------------- ------- ------- -------
Gross profit 278.2 257.8 +7.9%
Net IAS 41 valuation movement 2.8 11.4
Adjusted gross profit 281.0 269.2 +4.4%
------------------------------- ------- ------- -------
Adjusted Group operating profit and adjusted EBITDA
2022 2021 Change
GBP'm GBP'm
----------------------------------------------- ------- ------- -------
Group operating profit 133.6 117.6 +13.6%
Net IAS 41 valuation movement 2.8 11.4
Amortisation of intangible assets 4.2 3.5
Adjusted Group operating profit 140.6 132.5 +6.1%
Depreciation of property, plant and equipment 47.9 51.9
Depreciation of right-of-use assets 13.2 12.3
=============================================== ======= ======= =======
Adjusted EBITDA 201.7 196.7 +2.5%
----------------------------------------------- ------- ------- -------
Adjusted profit before tax
2022 2021 Change
GBP'm GBP'm
----------------------------------- ------- ------- -------
Profit before tax 129.9 114.8 +13.2%
Net IAS 41 valuation movement 2.8 11.4
Amortisation of intangible assets 4.2 3.5
Adjusted profit before tax 136.9 129.7 +5.6%
----------------------------------- ------- ------- -------
Adjusted earnings per share
2022 2022 2022 2021 2021 2021
Basic Diluted Basic Diluted
GBP'm pence pence GBP'm pence pence
-------------------------------------- ------- ------- --------- ------- ------- ---------
On profit for the year 103.5 195.7 194.8 92.5 176.4 175.6
Amortisation of intangible assets 4.2 7.9 7.9 3.5 6.6 6.6
Tax on amortisation of intangible
assets (0.5) (1.0) (1.0) (0.7) (1.3) (1.3)
Net IAS 41 valuation movement 2.8 5.2 5.2 11.4 21.7 21.7
Tax on net IAS 41 valuation movement (1.3) (2.4) (2.4) (2.2) (4.1) (4.1)
On adjusted profit for the year 108.7 205.4 204.5 104.5 199.3 198.5
-------------------------------------- ------- ------- --------- ------- ------- ---------
Free cash flow
2022 2021 Change
GBP'm GBP'm
------------------------------------ ------- ------- -------
Net cash from operating activities 160.0 181.4 -11.8%
Net interest paid (1.6) (0.5)
==================================== ======= ======= =======
Free cash flow 158.4 180.9 -12.4%
------------------------------------ ------- ------- -------
11. Principal risks and uncertainties
The Group has a structured and mature approach to risk
management which facilitates the identification, evaluation and
mitigation of key risks facing the business. The principal risks
and uncertainties facing the Group are set out in detail on pages
60 to 63 of the Report & Accounts for the 52 weeks ended 27
March 2021, dated 18 May 2021 a copy of which is available on the
Group's website.
These risks include: competitor activity, climate change, growth
and change, consumer demand, reliance on key customers &
exports, pig meat availability & price, health & safety,
Brexit disruption, IT systems & cyber security, food scares
& product contamination, disease & infection within
livestock, disruption to Group operations, recruitment &
retention of senior management, labour availability & cost,
COVID-19 pandemic; and interest rate, currency, liquidity &
credit risk.
Whilst the Board considers the principal risks and uncertainties
as at 26 March 2022 to be the same as those described in the Report
& Accounts for the 52 weeks ended 27 March 2021, during the
latter part of February 2022 the emerging risks associated with the
Ukraine conflict were captured and discussed at an extra ordinary
Group Risk Committee meeting in March 2022, together with the
significant inflationary pressures and 'cost of living crisis'
within the UK economy. In addition, given the unique exposure that
the Group faces regarding animal rights campaigners and other
activists, the associated risks in this area have now been
consolidated into a new principal risk - Adverse Media Attention as
summarised below:
Potential risk Impact Risk mitigation strategies
--------------------------- ---------------------------- -----------------------------------------------------------
The Group may be The Group closely monitor
subject to reputational media attention relating * Social media monitoring has been put in place to
damage from adverse to both our business allow for the early identification of potential
media and or social and the industry we issues.
media coverage, operate in. We have
as a result of alleged arrangements in place
animal welfare incidents, to identify, escalate * We have proactively engaged within key external
protests, vigils and respond to media stakeholders, including friendly activist groups to
or other operational coverage in a consistent support peaceful activity.
challenges. and appropriate manner.
* Site security arrangements and visitor access and
vetting procedures have been reviewed.
--------------------------- -------------------------- -------------------------------------------------------------
12. Report and accounts
The Report and Accounts will be available on the Company's
website at www.cranswick.plc.uk on 24 June 2022. Further copies
will be available upon request from the Company Secretary,
Cranswick plc, Crane Court, Hesslewood Country Office Park, Ferriby
Road, Hessle, HU13 0PA.
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