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. This information is provided by RNS The company news service from the London Stock Exchange

Companies

Cranswick (CWK)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today