Final Results
Cranswick PLC
23 May 2006
Embargoed 7am Tuesday May 23 2006
CRANSWICK plc: RECORD BREAKING YEAR
Cranswick plc, the Yorkshire-based food producer, announces its preliminary
audited results for the year ended March 31 2006.
Highlights:
• Turnover rose 38 per cent to £441m (2005: £319m)
• Pre-tax profit up 44 per cent at £31.1m (2005: £21.6m) after exceptional
gain
• Underlying pre-tax profit up 23 per cent at 29.0m (2005: £23.5m)
• Underlying earnings per share 15 per cent higher at 47.8p (2005: 41.6p)
• Proposed final dividend of 11.1p per share - 13 per cent increase
• Cottingham site sold
• Perkins acquisition fully integrated and performing well
Cranswick Chairman, Martin Davey, said: 'Cranswick has once again raised profits
to record levels. This is a tremendous compliment to the operational teams and
their staff.
'The Company has continued to progress despite the challenges posed by increased
costs and the general trading environment. Whilst these challenges continue into
the current year, trading in the opening weeks is in line with management's
expectations and we look forward with cautious optimism.
'The business has evolved by way of acquisitions and subsequent organic growth.
We will continue to seek opportunities to maintain this pattern of growth'
-ends-
For further information:
Martin Davey, Chairman 07775 576426
John Lindop, Finance Director 07768 362592
Bernard Hoggarth, Chief Executive, Food 07836 703434
Cranswick plc
Paul Quade 020 7248 8010
CityRoad Communications 07947 186694
CHAIRMAN'S STATEMENT
It is with great pride that I am able to report to Shareholders that Cranswick
has once again raised profits to record levels. In the year to March 2006 profit
before tax, benefiting from the gain on the disposal of the surplus Cottingham
site, was up 44 per cent on last year at £31.1 million. Coupled with a
substantial increase in sales, strong cash generation and a good underlying
performance this gives the Board the confidence to propose an increase in the
final dividend of 13 per cent.
Results
As outlined above the Company performed particularly well during the year and
this is a tremendous compliment to the operational teams and their staff
operating in a tough trading environment. Turnover in the year rose 38 per cent
to £441 million, partially due to the inclusion for a full year of Perkins
Chilled Foods, acquired in January 2005, compared to three months in the
previous period. Perkins had a successful year and has been fully integrated
into the Company. Strong organic growth was achieved elsewhere in the business
in particular in sales of fresh pork, charcuterie and sandwiches.
Profit before tax and exceptionals (principally the Cottingham gain on disposal)
increased by 23 per cent from £23.5 million to £29.0 million. Earnings per share
on a similar basis, after taking into account additional shares in issue, rose
15 per cent to 47.8p (2005 41.6p).
The results are considered in more detail in the review of activities.
Cash Flow
The cash flow was very strong in the year with cash generated from operations of
£41.8 million compared with £25.6 million the previous year. The cash outflow on
capital expenditure was £14.1 million but this was offset by disposal proceeds
of £3.9 million and proceeds arising on the sale of the pig production business
of £3.1 million. Borrowings reduced by £15.4 million to £77.0 million over the
course of the year, representing 68 per cent of total equity. Interest cover for
the year was 6.7 times underlying profits.
Dividend
The Board is proposing an increase in the final dividend of 13 per cent to 11.1p
per ordinary share. Along with the interim dividend of 5.4p per ordinary share
paid in January 2006 this makes a total dividend for the year of 16.5p per
ordinary share, an increase of 14 per cent on last year's 14.5p. The final
dividend, if approved by Shareholders, will be paid on 9 September 2006 to
Shareholders on the register at the close of business on 29 July 2006.
Shareholders will again have the option to receive the dividend by way of scrip
issue.
Employees
One of the key features of the business is the alignment of a devolved
operational culture with the benefits of strategic coordination in certain key
areas such as sales and marketing, buying and technical. For this culture to
lead to the continued successful growth of the business, in a sector that is not
without its challenges, it is reliant on the expertise of management at each of
the business units and for them to have the commitment of all staff working
alongside them.
On behalf of the Board I would like to say thank you to them for their
unstinting efforts in driving the business forward.
Outlook
In the year to March the performance of the business continued to benefit from
the underlying strength of the management teams at the Company's operational
activities. This attribute has enabled the Company to continue its progress
despite the challenges posed by increased costs and the general trading
environment. Whilst these challenges continue into the current year, trading in
the opening weeks is in line with management's expectations and we look forward
with cautious optimism.
Looking further ahead the strategy for the continued growth of the Company
remains unchanged.
The business has evolved by way of acquisitions and subsequent organic growth
into one focussed predominantly on the supply of a range of complementary fresh
and processed food products to the UK food retail, food manufacturing and
foodservice sectors. We will continue to seek opportunities to maintain this
pattern of growth.
Martin Davey
Chairman
23 May 2006
Review of Activities
Food - by the Chief Executive Bernard Hoggarth
The food activities turned in a robust performance with the strong sales growth
seen in recent years being maintained this year. Turnover rose from £286.6
million to £409.1 million, representing almost 93 per cent of total Company
sales and reflects both acquisitive and organic growth. Further opportunities
for sales growth are being pursued in most of the categories in which we
operate. The focus for sales is the premium categories with the vast majority of
our products going to the retail sector, although foodservice is of growing
importance.
The substantial investment over the last two years is paying dividends.
Customers recognise the advantages derived from having some of the most modern
and well invested facilities in the food industry and I am pleased to say that 8
production sites have recently achieved BRC (British Retail Consortium) Grade
'A' technical status which we understand to be a unique achievement in our
sector. With over 275 technical compliances to be passed to achieve this rating
in such complex food production businesses we feel this is a great achievement
and that the technical teams deserve well earned congratulations. This, coupled
with our excellent quality focused people in NPD (new product development) gives
our customers the confidence that Cranswick will be at the forefront of
development and innovation, food safety and cost efficient production. Being
named UK Meat Manufacturer of the Year in December gave further recognition to
these quality attributes.
During the year we sold the pig breeding and rearing herds. Contracts were put
in place for the continued supply of both the pigs to Cranswick Country Foods
and the feed by Cranswick Mill which enables ongoing control over this supply of
raw material for use in our specialist pork products. The disposal freed up
working capital and management time and allowed the production system to be
managed by a specialist producer whose core competency is pig breeding and
production.
At Cranswick Mill, our agribusiness activity, profitability was restored
although feed volumes were 9 per cent lower, as anticipated, following the site
rationalisation undertaken during the previous year. Export sales of specialist
piglet starter feeds were up substantially with new business wins in Eastern
Europe including Slovakia, Czech Republic, Latvia and Lithuania. Complementing
the turnround in the feed milling business the livestock marketing activity also
performed well. Sales in the agri business totalled £32 million.
The UK fresh pork market experienced modest annual growth of almost 2 per cent
though external sales in our own fresh pork business, including the summer
eating and barbecue products, were up a healthy 13 per cent to £97 million.
Including internal sales, to the sausage and cooked meat activities, sales were
19 per cent ahead. It was a strong year for 'retail packed' pork. We produced
almost 14 million packs, a rise of 20 per cent over the previous year.
Investment in recent years enabled these additional volumes to be achieved
which, along with enhanced efficiencies, partially offset the impact of a
competitive trading environment.
Annual growth in sales of sausages in the premium categories in the UK was over
14 per cent. However, our own sales were down 4 per cent to £32 million as a
result of not fully recovering the business lost during the previous year
following the fire at the Cottingham site. Despite this, the business benefited
from the relocation from two separate production plants to a more modern and
efficient single site to turn in a performance ahead of last year. As the
licensee for Duchy Originals sausages it was most encouraging to see year on
year sales growth of over 42 per cent across this product range. Sales to our
largest sausage customer, Sainbury's, for own label premium sausage grew by 38
per cent. This gives them a significant share of the premium category. An
accolade to the quality, consistency and value of the product. Towards the end
of the year we commenced production on behalf of the 'Black Farmer'. We believe
this original and innovative brand to have an extremely promising future with a
unique story creating strong brand loyalty.
The continued development of our 'Jack Scaife' traditional dry cured bacon
business has been excellent. Turnover in this its second year of operation
reached £8 million, compared to over £1 million previously, driven by new
listings and new customers. We expect the growth to continue. The quality of
this superb range of bacon products was recognised in the year in the winning of
four awards including two from The Guild of Fine Food Retailers.
Cranswick Convenience Foods, our cooked meats business, saw sales increase from
£57 million last year to £150 million reflecting the inclusion of Perkins
Chilled Foods for a full year compared to three months previously. Considering
the UK delicatessen market is showing signs of decline with annual sales down
just over 1 per cent compared to sales of pre-pack cooked meats growing at
almost 7 per cent the decision to move into slicing and consumer packs with the
Perkins acquisition makes sound commercial sense. Continued investment in state
of the art technology and excellent premises has enabled us to achieve
additional quality business during the course of the year. We now supply most of
the high street multiples and are in discussion with several leading retailers
for an increased allocation of their cooked meat business. This, coupled with
the continued expansion in the premium tiers, gives us reason to believe we are
well positioned for further growth.
The sandwich business saw a 19 per cent increase in sales to £34 million. Sales
by The Sandwich Factory under the Brian Turner and Antony Worrall Thompson
celebrity chef labels have developed well with a presence amongst airline, rail
and roadside operators. A range of 'healthy eating options' has been developed
to meet consumer trends and at the retail end our own 'Deliciously' brand has
gained a listing. During the year we produced approximately 40 million
sandwiches! The new sandwich fillings business has got off to a good start with
first year sales of £2 million being achieved. In addition the company is
trialling the production of bulk pre-packaged salads. The Sandwich Factory won a
prestigious accolade at the British Sandwich Awards being named, in conjunction
with BP, as 'En-route Retailer of the Year' for a range of sandwiches and hot
eat products. The company has now won the award in two of the past three years.
With the continued growth and development of the business we plan to acquire
additional premises and are in discussions to acquire the lease on an adjacent
property. The North Wales Foods division successfully completed its move into a
new chilled warehouse and distribution centre during the year.
Continental Fine Foods, based at Trafford Park in Manchester, saw an 8 per cent
increase in sales to £56 million. This was made possible after acquiring
additional premises during 2004. Major growth has been achieved with the 'Simply
Italian' range which was taken on during the previous year. Sales of these
products rose by over 40 per cent to £11 million. With the increase in cookery
programmes on television, people dining out more and the rise in exotic holidays
we see no end to the consumers desire for new flavours and food experiences.
Through our team at Continental we are able to procure new and exciting products
from around Europe and will endeavour to be 'first to market' for our customers.
The trend towards more meals being eaten away from the home (53 per cent of
adults in Britain eat out more than once a week) is reason for foodservice being
a focused area of future growth for the business. Sausage sales into this sector
are increasing and we won the BPEX Award for 'Foodservice Sausage of the Year'.
The Foodservice division, a sales and marketing function for all of the food
activities, has been strengthened by the recent addition of specialist account
management.
Pet - by the Chief Executive Derek Black
Total sales were marginally ahead of last year at £32.1 million (2005 £31.9
million) with sales of food slightly up and aquatics showing a small reduction.
In Pet Products, mainly bird and small animal food, turnover at over £22 million
was up by 3 per cent which was pleasing after experiencing some technical issues
with the commissioning of the new production facility which adversely impacted
the business. These problems have now been resolved. We are confident that we
are now in a position to drive sales forward supported by substantial capacity
availability in contrast to the two old sites from which we previously operated
that were being run at full capacity. The newly centralised facility will enable
us to expand sales into our targeted markets which are predominantly high street
retail chains, wholesale and retail membership groups, mail order and discount
multiples. The smaller of the two surplus sites has since been sold leaving just
the East Yorkshire site to be disposed of.
There is strong growth in garden bird food and accessories which now represents
about half our turnover in the Pet Products division. We have developed in
excess of 50 new products under our 'Nature's Feast' brand including a range of
premium 'high energy' foods and innovative bird feeders. This reflects
continuing public awareness of the native wild bird population along with
changing lifestyle trends where the garden is now classed as an 'outdoor room'
and leisure area. This compensates for the trend away from sales of pigeon and
indoor bird food.
Sales in the aquatic business at Tropical Marine Centre were slightly down
compared to last year at almost £10 million, despite higher sales at the
branches in Manchester and Bristol, primarily due to a poor pond season in the
home market. We developed and launched a number of new products ranging from
'true to life' synthetic marine corals and replica rock plus a range of water
sterilisers and protein skimmers for the indoor marine enthusiast.
During the year TMC supplied a number of high profile projects including marine
livestock to a public aquarium in Alicante, a central feature display in a large
shopping mall in Lithuania, a range of water purification systems to
universities in Zurich and Cork and to an aquaculture project in southern Spain.
Export sales increased by 20 per cent, representing almost a quarter of TMC's
sales, and will continue to be a focus of our future expansion plans.
CRANSWICK plc: AUDITED GROUP INCOME STATEMENT
Year ended 31 March 2006
2006 2005
--------- --------- -------- -------- -------- --------
Before Exceptionals Total Before Exceptionals Total
exceptionals exceptionals
Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 441,178 - 441,178 318,538 - 318,538
Cost of (364,388) - (364,388) (259,275) (2,642) (261,917)
sales --------- --------- -------- -------- -------- --------
Gross profit 76,790 76,790 59,263 (2,642) 56,621
Operating
expenses (42,720) - (42,720) (33,766) - (33,766)
--------- --------- -------- -------- -------- --------
Operating
profit 2 34,070 - 34,070 25,497 (2,642) 22,855
Profit on
disposal of
property,
plant and
equipment - 2,079 2,079 - 707 707
--------- --------- -------- -------- -------- --------
Profit
before
finance and
taxation 34,070 2,079 36,149 25,497 (1,935) 23,562
Finance 25 - 25 14 - 14
income
Finance (5,076) - (5,076) (1,986) - (1,986)
costs --------- --------- -------- -------- -------- --------
Profit
before
tax 29,019 2,079 31,098 23,525 (1,935) 21,590
Taxation (7,716) (562) (8,278) (6,017) 657 (5,360)
--------- --------- -------- -------- -------- --------
Profit for
the 21,303 1,517 22,820 17,508 (1,278) 16,230
year --------- --------- -------- -------- -------- --------
Profit for
the year
attributable
to:
Equity
holders 22,784 16,230
of the
parent
Minority
interest 36 -
-------- --------
22,820 16,230
-------- --------
Earnings per
share:
Basic 3 47.8p 3.4p 51.2p 41.6p (3.0p) 38.6p
Diluted 3 47.4p 3.4p 50.8p 41.4p (3.1p) 38.3p
CRANSWICK plc: AUDITED CONSOLIDATED BALANCE SHEET
31 March 2006
Notes 2006 2005
£'000 £'000
Assets
Goodwill 111,921 111,921
Property, plant and equipment 67,725 63,156
-------- --------
179,646 175,077
-------- --------
Current assets
Biological assets 157 2,238
Inventories 18,398 17,442
Trade and other receivables 54,027 48,127
Other financial assets 106 -
Cash at bank and in hand 5,000 5,025
-------- --------
Total current assets 77,688 72,832
-------- --------
Non-current assets classified as held for sale 688 891
Total assets 258,022 248,800
Current liabilities
Trade and other payables (53,376) (47,940)
Other financial liabilities (19,422) (13,559)
Income tax payable (3,138) (2,634)
Provisions (334) (907)
-------- --------
Total current liabilities (76,270) (65,040)
-------- --------
Non-current liabilities
Other financial liabilities (62,720) (83,862)
Deferred tax liabilities (4,657) (4,790)
Deferred income (76) (112)
Provisions (1,877) (2,151)
-------- --------
Total non-current liabilities (69,330) (90,915)
-------- --------
Total liabilities (145,600) (155,955)
-------- --------
Net assets 112,422 92,845
-------- --------
Equity
Called-up share capital 6 4,467 4,405
Share premium account 6 40,797 38,250
Share based payments 6 531 247
Hedging and translation reserves 6 (13) 21
Profit and loss account 6 66,604 49,922
-------- --------
Equity attributable to members of the 112,386 92,845
parent company
Minority interest 36 -
-------- --------
Total equity 112,422 92,845
-------- --------
CRANSWICK plc: AUDITED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2006
Notes 2006 2005
£'000 £'000
Operating activities
Profit before finance and taxation 36,149 23,562
Adjustments to reconcile group operating profit to
net cash inflows from operating activities
Depreciation 8,087 5,786
Impairments - 1,619
Share based payments 284 133
Release of government grants (36) (36)
Profit on sale of property, plant and equipment (2,220) (928)
Decrease/(increase) in inventories 1,125 (510)
Increase in trade and other receivables (5,751) (3,141)
Increase/(decrease) in trade and other payables 4,200 (920)
------- --------
Cash generated from operations 41,838 25,565
Tax paid (6,954) (6,864)
------- --------
Net cash from operating activities 34,884 18,701
------- --------
Cash flows from investing activities
Acquisition of subsidiaries - (83,321)
Purchase of property, plant and equipment (14,064) (18,682)
Proceeds from sale of equipment 3,929 1,806
------- --------
Net cash used in investing activities (10,135) (100,197)
------- --------
Cash flows from financing activities
Net interest paid (5,094) (1,793)
Proceeds from issue of share capital 1,691 9,834
Proceeds from borrowings - 95,000
Issue costs of long-term borrowings - (540)
Repayment of borrowings (18,753) (808)
Payment of finance lease liabilities - (49)
Dividends paid (5,847) (4,815)
------- --------
Net cash used in financing activities (28,003) 96,829
------- --------
Net (decrease)/increase in cash and cash (3,254) 15,333
equivalents
Cash and cash equivalents at beginning of period 3,291 (12,042)
Effect of foreign exchange rates 9 -
------- --------
Cash and cash equivalents at end of period 5 46 3,291
------- --------
Notes to the preliminary announcement
1. Basis of preparation
The group's income statements for the years ended 31 March 2006 and 2005 are not
statutory accounts within the meaning of Section 240 (5) of the Companies Act
1985. The auditors of Cranswick, Ernst & Young LLP, have made a report under
Section 235 of the Act on the statutory accounts of Cranswick for the financial
year ended 31 March 2005. Such report was unqualified and did not contain a
statement under 237(2), (3) or (4) of the Act and such accounts have been
delivered to the Registrar of Companies. The statutory accounts for the year
ended 31 March 2006 incorporate an unqualified audit report (which does not
contain a statement under Section 237 (2), (3) or (4) of the Act) and which will
be delivered to the Registrar of Companies following the Annual General Meeting
of Cranswick.
This is the first year in which Cranswick has prepared financial statements
under International Financial Reporting Standards ('IFRS'), and the comparatives
have been restated from UK Generally Accepted Accounting Principles ('UK GAAP')
to comply with IFRS. The company's accounting policies can be found in the
statutory accounts.
2. Segmental analysis
Turnover Operating profit
-------- -------- -------- --------
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Food 409,119 286,634 35,433 26,020
Pet 32,059 31,904 796 1,188
-------- -------- -------- --------
441,178 318,538 36,229 27,208
Exceptionals - - 2,079 (1,935)
Central costs - - (2,159) (1,711)
-------- -------- -------- --------
Group total 441,178 318,538 36,149 23,562
Finance costs - - (5,051) (1,972)
-------- -------- -------- --------
Profit before tax 441,178 318,538 31,098 21,590
-------- -------- -------- --------
3. Earnings per share: Basic earnings per share are based on profit attributable
to shareholders and on the weighted average number of shares in issue during the
year of 44.5 million shares (2005: 42.1 million shares). The calculation of
diluted earnings per share is based on 44.8 million shares (2005: 42.3 million
shares).
4. Dividends: subject to shareholders' approval the final dividend will be paid
on 9 September 2006 to shareholders on the register on 29 July 2006.
5. Analysis of changes in net debt
At Adoption of IAS Cash Other At
31 March 32 and flow non cash 31 March
2005 39 changes 2006
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 5,025 - (34) 9 5,000
Bank overdrafts (1,734) - (3,220) - (4,954)
-------- --------- ------- -------- --------
Cash and cash 3,291 - (3,254) 9 46
equivalents
Other financial assets - 45 - 61 106
Other financial
liabilities - - - (146) (146)
Loan notes (1,200) - 128 - (1,072)
Bank loans (94,487) - 18,625 (108) (75,970)
-------- --------- ------- -------- --------
Net debt (92,396) 45 15,499 (184) (77,036)
-------- --------- ------- -------- --------
6. Reconciliation of movements in equity
Attributable to equity holders of the parent Minority Total
company interest
---------------------------------------------------------------------------
Share Share Share Hedging Profit and loss Total £'000 £'000
capital premium based and translation Account £'000
£'000 £'000 payments reserves £'000
£'000 £'000
As at 1
April 4,405 38,250 247 21 49,922 92,845 - 92,845
2005
Impact of
adoption of
IAS 32 and
IAS - - - 45 (14) 31 - 31
39
Profit for
the - - - - 22,784 22,784 36 22,820
period
Corporation
tax
credited
directly to - - - - 529 529 - 529
equity
Share based
payments - - 284 - 98 382 - 382
Cash flow
hedges - - - (85) 26 (59) - (59)
Scrip 15 903 - - - 918 - 918
dividend
Share
options 47 1,644 - - - 1,691 - 1,691
exercised
Dividends - - - - (6,741) (6,741) - (6,741)
Exchange
differences - - - 6 - 6 - 6
------- ------- ------- -------- ------- ------ ------- -------
At 31 March
2006 4,467 40,797 531 (13) 66,604 112,386 36 112,422
------- ------- ------- -------- ------- ------ ------- -------
The Group has taken the exemption provided under IFRS 1: First-time adoption of
International Financial Reporting Standards not to restate comparatives in
respect of IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39
Financial Instruments: Recognition and Measurement and accordingly these
standards have been adopted from 1 April 2005. On adoption of IAS 32 and IAS 39
at 1 April 2005, interest rate swaps held by the Group have been recognised as a
financial asset at their fair value of £45,000 with a corresponding deferred tax
provision of £14,000. These swaps meet the special cash flow hedge criteria of
IAS 39 and accordingly gains and losses have been recognised directly in equity.
7. The Company intends to post the Report and Accounts to shareholders on 7 July
2006. Further copies will be available upon request from the Company Secretary,
Cranswick plc, 74 Helsinki Road, Sutton Fields, Hull, HU7 0YW.
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