Final Results

RNS Number : 6153G

Cranswick PLC

16 May 2011

 



CRANSWICK PLC:  A VERY POSITIVE YEAR

Cranswick plc ("Cranswick" or "the Company"), the food producer, announces its audited preliminary results for the year ended 31 March 2011.

Highlights:

·    Underlying sales ahead by 4 per cent at £758m on volumes 6 per cent higher

·    Reported revenues up 2 per cent to £758m (2010: £740m)

·    Pre-tax profit rose 8 per cent to £47.1m (2010: £43.8m)

·    Earnings per share up 7 per cent at 74.5p (2010: 69.7p)

·    Recommended final dividend of 18.7p - up 10 per cent

·    Interest cover 30 times (2010: 21 times)

·    Net debt reduced by £6.4m to £48.3m

Cranswick Chairman Martin Davey said:  "This has been a very positive year for Cranswick. Record levels of sales and profitability have been achieved and substantial investment has been made in the asset base to improve efficiency and to provide the capacity for continued growth.

"The borrowings of the business are conservatively structured and the Company has recently put in place a new four year bank facility which provides appropriate headroom going forward. Interest costs were covered 30 times compared to 21 times a year ago and at the year-end net debt was lower at £48.3 million.

"Today it is being announced that Adam Couch has been appointed Chief Operating Officer.  He was appointed to the Board in 2003 and is currently managing director of the Fresh Pork activity.

"The Board anticipates that with the Company's well invested asset base, strong range of products, experienced management team and robust financial position it is well positioned to continue the long-term development of the Company."

Chief Executive Bernard Hoggarth commented: "The major capital project at the Preston site (near Hull) has been completed.  As part of the plant's on-going development United States Department of Agriculture (USDA) accreditation has been achieved and will allow the export of specific products to the USA."

-ends-

For further information:

Paul Quade                                                                  020 7248 8010

CityRoad Communications                                            07947 186694

Chairman's statement

Cranswick's performance in the past year was particularly pleasing and continued the Company's record of unbroken growth with increases in both sales and profitability. This generated the funds for further investment in the Company's asset base to improve efficiency and to provide the production capacity required to maintain growth in the years ahead.

Results

Underlying sales rose 4 per cent in the year on volumes that were 6 per cent higher although sales in the final quarter of the year were flat reflecting the difficulties facing UK consumers. The Deeside cooked meat business was transferred into the Farmers Boy (Deeside) associate "FBD" in July 2010 and from this date onwards sales are excluded from Group total sales which for the full year were 2 per cent higher than last year at £758 million.

The operating margin was slightly ahead of last year and after a financing cost of £1.6 million and the Company's share of the FBD result, profit before taxation was 8 per cent higher than last year at £47.1 million. The financing cost was lower than a year ago which was attributable to the strong cash flow of the business notwithstanding the investment made in the asset base.  Earnings per share at 74.5 pence were 7 per cent higher than the 69.7 pence per share achieved last year.

The outcome at FBD was after absorbing costs associated with the set-up, reorganisation and factory extension.  Other capital projects undertaken in the Group over the past year include the abattoir development in fresh pork, the expansion of the air-dried bacon facility at Sherburn and investment in sausage production in Norfolk.

The borrowings of the business are conservatively structured and the Company has recently put in place a new four year bank facility which provides appropriate headroom going forward. Interest costs were covered 30 times compared to 21 times a year ago and at the year-end net debt was lower at £48.3 million.

There is further information on trading and finance in the Reviews by the Chief Executive and Finance Director which follow.

Dividend

The Board is proposing an increase in the final dividend of 10 per cent to 18.7 pence per ordinary share. Along with the interim dividend of 8.8 pence per ordinary share paid in January 2011 this makes a total for the year of 27.5 pence per ordinary share, an increase of 10 per cent on last year's 25 pence. The final dividend, if approved by Shareholders, will be paid on 2 September 2011 to Shareholders on the register at the close of business on 1 July 2011.  Shareholders will again have the option to receive the dividend by way of scrip issue.

Board

A number of executive appointments have been made in recognition of the important roles played in developing the business to where it is today and in acknowledging the roles to be played in continuing to drive the business forward over the years ahead.

Today it is being announced that Adam Couch has been appointed Chief Operating Officer. Adam joined the operational side of the fresh pork business in 1991 after graduating with a degree in finance and accountancy from the University of Hull. He was appointed to the Board in 2003 and is currently managing director of the Fresh Pork activity.

Jim Brisby was appointed to the Board as Sales and Marketing Director during the year.  Jim joined Cranswick 16 years ago after graduating in Business Management from UMIST, was appointed sales and marketing director of Cranswick Country Foods in 2004 and has been an integral part of the team that has grown the business over the years.

In addition a number of internal appointments have been made to the boards of the product focused teams throughout the business.

Staff

The successful development of the business over the years would not have been possible without the expertise and commitment of the management teams and their colleagues throughout the business and on behalf of the Board I express our sincere thanks and appreciation for their contribution.

Outlook

This has been a very positive year for Cranswick. Record levels of sales and profitability have been achieved and substantial investment has been made in the asset base to improve efficiency and to provide the capacity for continued growth. That said, the difficulties facing the UK consumer, along with rising raw material prices and the dynamics of the competitive market in which the Company operates suggests that the year to 31 March 2012 may be more demanding than usual. However, the Board anticipates that with the Company's well invested asset base, strong range of products, experienced management team and robust financial position it is well positioned to continue the successful long-term development of the Company.

Martin Davey

Chairman

16 May 2011

Review of activities

by the Chief Executive, Bernard Hoggarth

It is pleasing to report underlying sales growth of 4 per cent, given the slowdown in consumer food expenditure experienced by the majority of our multiple retailer customers, particularly in the post-Christmas trading period.  Total external sales which were ahead 2 per cent at £758 million reflected the transfer of the Deeside cooked meats business to  Farmers Boy (Deeside) Limited in July 2010.  Internal sales, which include the supply of fresh pork to the further processing sites, for production of bacon, ham and sausages, increased strongly by 10 per cent.

There have been several major developments during the year.  One of the most interesting is the Group's move into pastry and in particular sausage rolls. These gourmet style, hand crafted sausage rolls will be marketed as both private label products and under the 'Yorkshire Baker' brand. With the product already launched with one customer and a listing agreed with a second, Cranswick has again raised the bar in a new category into which it has entered. This initiative will inevitably lead to the development of a range of pastry based products.

Cranswick is well known as a major private label supplier to the multiple food retailers but during the year a brand marketing manager was appointed to drive the sales of branded products.  This new role embraces all brands, whether produced under license, or Cranswick's own. The impact of taking 'Jamie Oliver' products to market, alongside those of  'Weight Watchers', 'Black Farmer', 'Red Lion' and now 'Yorkshire Baker' gives a real focus to this development. The 'Red Lion' brand, launched in October, generated sales of almost £12 million during the year. These sales generated a significant contribution to Red Lion Foods which donates 100 per cent of its post-tax profits to forces charities and causes.  Consumer interest in the 'Red Lion' brand, coupled with the high level of media attention, should drive continued sales growth.

Fresh pork sales from the Group's two primary processing facilities based in East Yorkshire and Norfolk grew strongly with the combined revenues rising by 17 per cent.  The major capital project at the Preston site near Hull was completed during the year and capacity has been increased by over 50 per cent.  In addition, the introduction of robotics, technology used for the first time in a UK fresh pork facility, has delivered significant efficiency benefits.  As part of the plant's on-going development United States Department of Agriculture (USDA) accreditation has been achieved and will allow the export of specific product groups to the USA and enable the business to take advantage of substantial price differentials compared to those available in Europe.

It is pleasing to report that a growing proportion of our livestock producers are now supplying Cranswick under the terms of 'Freedom Food Farm Accreditation'. This premier welfare standard which is operated and managed by the RSPCA is increasingly recognised by the consumer and now accounts for approximately 40 per cent of the Group's livestock purchases. An ever increasing volume of British pork produced to this standard is required by the UK food retailers to satisfy growing consumer demand.  There has been financial pressure on the British pig farming sector, following a significant and sustained rise in the price of feed on the back of higher ingredient prices.  Pig prices are currently rising and further increases cannot be ruled out.  That said, pork still remains extremely price competitive and much more versatile when compared to other major proteins including beef and lamb.

Bacon sales grew by 17 per cent, maintaining the impressive growth record seen in recent years. The gourmet bacon facility near Leeds completed phase two of its development during the last quarter of the financial year.  The site now boasts a totally unique factory for the production of dry-cured, air-dried bacon. The freehold facility now extends to almost 10,000 square metres.  Even though the extension and development work continued over the peak Christmas trading period 99 per cent service levels were achieved. Further expenditure is planned in the coming financial year, including investment in additional packing equipment and a new fully automated lardon line.   A new retail customer will be added to utilise some of the additional capacity and there are also real opportunities to develop existing client's ranges even further over the coming year.

Sausage sales increased by 7 per cent.  The extension to the Lazenby's production facility was completed in the autumn increasing capacity by 50 per cent and enabling the business to better manage the peak Christmas trading period. Weekly production during the barbecue season and at Christmas can now approach 700 tonnes. During the year investment of £2 million was made in a second sausage production facility at the Group's pork plant in Norfolk providing additional weekly capacity of 200 tonnes. This second facility allows the business to offer a wider range of premium products, target new customers and at the same time be extremely competitive, offering excellent value to the price conscious consumer.

There were several developments in the cooked meat business during the year, not least the transfer of assets of the Deeside facility in North Wales to Farmers Boy (Deeside) Limited, part of the manufacturing division of Wm Morrison Supermarkets PLC.  Allowing for this, underlying sales of cooked meats increased by 8 per cent.  The business recently entered into a licensing agreement with 'Weight Watchers' to produce cooked meats and other products and has already achieved four separate retail listings in what is an important growth category. There have also been other major business wins across the Group's product categories during the second half of the year, leading to some exceptional growth in the 'Standard Plus' category.

Sales of Continental products were 14 per cent lower following one customer's move to a direct sourcing policy.  That said, the customer base for core continental products has been significantly widened during the year and it looks like the record of underlying organic growth is back on track with new customers for cooking ingredients and snacking foods and several new listings with the UK's largest retailer. The majority of the categories under the continental umbrella are in significant growth giving rise to some exciting opportunities as the business moves into the new financial year.  A less glamorous, but still important, part of the continental portfolio is corned beef which is sliced and packed at Continental Fine Foods in Manchester. This category has performed extremely well despite being faced with severe raw material shortages during the year. These shortages led to substantial input cost inflation for this product which Cranswick successfully passed on in full to its retail customers.  Following investment in olive packing equipment and the on-going development of this category, olive sales increased by a very healthy 28 per cent.  Moving forward, the olive category continues to be an area of focus for the business, both into the retail and food service sectors.

Sandwich sales increased by 13 per cent in a competitive sector, where certain manufacturers were not chasing recovery of raw material price inflation. The sandwich business was also more affected by the fuel price increase during the year than other parts of the Group being focused on the food service sector, with direct daily deliveries to many customers. The airline business continued to grow with both sandwiches and snack foods performing strongly and there was also further growth in the consolidation and picking of products for several airlines, not only for European destinations, but long haul to South America too.

Supply to the convenience sector grew as did sandwich supply to the majority of train operators, with the emphasis being on the first class offering. Lower margin business, where price increases could not be achieved, has been exited and at the same time longer term supply agreements have been secured with key customers. The new product development teams are working hard creating specific products for the launch of a new range of 'Red Lion' sandwiches in the summer.  The sandwich sector is a very competitive one, but the sandwich business' focus on food service will be the platform for the launch of several new products from other parts of the Group and is an ideal route to market.

In summary, the Group has had several issues to manage during the year; some specific to individual business units, and some of a more general nature. There is no sign that, in the short term, the general economic climate will change for the better, so the business remains focused on meeting the consumer's needs with best value offerings. Whether it is premium quality for dining at home, value meal solutions, or even ham for the sandwich box, Cranswick must remain competitive. There is no doubt that in the categories in which the business operates, it has industry leading facilities following a £100 million capital investment programme over the past 5 years. The Group's product development teams are 'best in class' as the Group's product portfolio clearly demonstrates. With the track record of its teams, the on-going development of and entry into new categories and continued organic growth, Cranswick is in a strong position to meet the challenges which lay ahead.

Bernard Hoggarth

Chief Executive

16 May 2011

Financial review

Business development and performance

The key features of the year have been the record profit before tax for the Group, record levels of capital investment and the continuing strong cash generation from operating activities. The trading environment in which the Group operates has remained challenging. The Group has experienced continuing competitor pressure although the efficiencies achieved through on-going capital investment and as extra volumes are put through its factories have mitigated to some extent against those pressures.

Revenue

Reported sales were 2 per cent ahead of last year.  The Deeside cooked meats business was transferred into Farmers Boy (Deeside) Limited (FBD) on 9 July 2010 and from this date onwards sales from FBD have been excluded from Group total sales.  Adjusting for this and the benefit of a full year contribution from CCF Norfolk compared to nine months in the previous year, underlying like-for-like sales increased by 4 per cent.  Sales of fresh pork, which benefited from the additional contribution from CCF Norfolk, increased by 17 per cent.  Sausage sales grew by 7 per cent, bacon by 17 per cent and sandwiches by 13 per cent.  Sales of charcuterie products were 14 per cent lower, following the decision by one retail customer to move to a direct sourcing policy.  Reported cooked meat sales were 8 per cent lower reflecting the transfer of the Deeside cooked meats business into FBD.  Adjusting for this cooked meats sales were 8 per cent ahead on a comparable basis.

Operating profit 

Operating profit at £48.7 million increased by 6 per cent and at 6.4 per cent of sales was 0.2 per cent ahead of the level achieved last year.  The increase in operating profit is attributable to a combination of sales growth and improved operational efficiency, particularly at CCF Norfolk where significant improvements have been made in the period since acquisition.

Finance costs

Finance costs of £1.6 million (2010: £2.1 million) were lower than the previous year reflecting the strong cash generation in the year.  Interest cover improved from 21.3 times to 30.0 times.

Taxation

The tax charge as a percentage of profit from continuing operations before taxation was 25.0 per cent in the current year and 25.8 per cent in 2010. The standard rate of UK Corporation Tax was 28 per cent for 2011 and 2010. The lower than standard rate of tax in the current year primarily relates to a deferred tax credit of £1.0 million on the transfer of assets from the Deeside cooked meats business to FBD and a further deferred tax credit of £0.7 million following the substantial enactment of the Finance Act 2011 which reduces the Corporation tax rate from 28 per cent to 26 per cent in the year to 31 March 2012.

Earnings per share

Basic earnings per share increased by 7 per cent to 74.5 pence, reflecting the increase in profit before tax and slightly lower effective tax rate, offset by an increase in the average number of shares in issue during the year to 47,408,000 (2010: 46,534,000).  

Cash flow and net debt

The Group has continued to generate strong operational cash flows.  Cash generated from operating activities was £51.6 million (2010: £32.2 million) reflecting higher Group profit, a reduction in working capital and lower tax payments.  The net cash outflow from investing activities of £36.3 million reflects capital additions, net of fixed asset sale proceeds and grants received, of £33.9 million.  The previous year's outflow was £11.8 million and comprised of capital additions, net of fixed asset sale proceeds, of £19.9 million together with the net inflow from acquisitions and disposals of £8.1 million.  The £21.9 million of net cash used in financing activities in 2011 is largely due to interest paid of £1.7 million, dividends paid of £10.5 million, loan repayments of £10.0 million and proceeds from issue of share capital of £0.6 million. The prior year cash outflow from financing of £8.4 million was largely due to interest paid of £2.7 million, dividends paid of £8.8 million and proceeds from issue of share capital of £2.9 million.  The overall result is a net decrease in cash and cash equivalents of £6.6 million (2010: increase of £12.0 million).  Net debt reduced by £6.4 million to £48.3 million (2010: £54.7 million) at the year end, and gearing reduced from 28 per cent to 22 per cent.

The Company replaced its existing bank facilities during the year.  The new facility runs to July 2015 and comprises a revolving credit facility of £100 million including a committed overdraft facility of £20 million.  This unsecured facility provides the business with appropriate headroom going forward.

Pensions

The Group operates a number of defined contribution schemes, whereby contributions are made to schemes operated by major insurance companies.  Contributions to these schemes are determined as a percentage of employees' basic salary.  CCF Norfolk operates a defined benefit scheme which has been closed to further accrual since 2004. Under International Accounting Standard (IAS) 19, the deficit at 31 March 2011 was £2.9 million (2010: £5.3 million).  The present value of funded obligations was £16.5 million (2010: £17.1 million) and the fair value of plan assets was £13.6 million (2010: £11.8 million).

Investment in associate

On 9 July 2010, the principal assets and trade of the Deeside cooked meats facility were transferred to Farmers Boy (Deeside) Limited, a company within the Wm Morrison Supermarkets PLC group, to provide them with a dedicated facility in return for a 49 per cent stake in that company.  The transaction gave rise to a profit before tax in the period of £0.3 million, together with an associated deferred tax credit of £1.0 million.  The Group's share of the post-tax results of the business in the period to 31 March 2011 was a loss of £0.4 million.  Further details are set out in note 7. 

Principal risks and uncertainties

There are a number of potential risks and uncertainties, which could have a material impact on the Group's long-term performance and could cause actual results to differ materially from expected and historical results.  The Group annually carries out a formal exercise to identify and assess the impact of risks on its businesses.  The principal risks and uncertainties facing Cranswick and the actions taken to mitigate their impact are set out below:

Risk area	Nature of risk and potential impact	Risk mitigation
Industry risks
State of the economy	A deterioration in the world and, in particular, UK economies may adversely affect the activity levels of consumers and the Group's immediate customers, leading to a fall in demand for the Group's products and ultimately lower profitability and cash flow.	Although Cranswick is unable to influence general economic conditions, the business offers a range of products across premium, standard and value tiers which it is able to flex in response to consumer and market trends.
Competition and customer retention	The Group trades in highly competitive markets which tend to operate without long term contracts.  Product innovation and changing consumer trends provide a constant challenge to the future success of the Group and its ability to compete effectively.	The Group manages the risk of operating in a consolidated sector by maintaining strong customer relationships. This process is supported by delivering high levels of service and quality and by continued focus on product development and technical innovation.
Raw material price fluctuations	The major exposure the Group has to raw material price fluctuations is pig meat, part of which is as a result of currency movements.  An increase in raw material input costs may impact Group profitability.	Purchasing of pigs and pig meat is co-ordinated centrally and whilst the Group does not generally seek to hedge against pig price movements because of the downside risk, longer term contracts have been negotiated in certain instances with key pig suppliers.
Environmental matters	The industry is subject to a range of UK and EU legislation. Environmental standards are being tightened on a regular basis and require increasing levels of investment. Compliance imposes costs and prolonged failure to comply could materially affect the Group's ability to operate.	The Directors believe that good environmental practices support the Board's strategy by enhancing the reputation of the Group, the efficiency of production and the quality of products. Further details of these initiatives are set out in the Group's Corporate Social Responsibility report and on the Group's website under the 'Greenthinking' banner.
Food scares and product contamination	As a food producer, Cranswick is subject to industry related risks of contamination of products and/or raw materials. Such an incident may lead to product recall costs, reputational damage and regulatory penalties.	The risk of such events is mitigated by ensuring that all raw materials are traceable to source and that the manufacturing, storage and distribution systems of both Group sites and those of suppliers are continually audited and monitored by experienced and well qualified site based and Group technical teams.
Operational risks
Food safety	A breach of food safety legislation or the introduction of more stringent regulations may lead to reputational damage and regulatory penalties including restrictions on operations, damages or fines.	Cranswick conforms to all relevant food safety regulations and adopts best practice across its production facilities.
Business continuity	The Group faces the risk of incidents such as a major fire, which may result in significant and prolonged disruption to its operating facilities and ensuing loss of sales and reduced profitability.	Business continuity plans are in place across the Group's manufacturing facilities and appropriate insurance cover is in place to mitigate any financial loss.  Business continuity has been further enhanced by the acquisition of a second pork processing site in Norfolk.
Legislation	Legislation in all the markets the Group serves changes on a regular basis, and interpretation of existing laws can also change to create ever tightening standards, often requiring additional human resources and the provision of new assets and systems.  Failure to comply with existing or new legislation may adversely affect the Group's results.	Cranswick is committed to responding positively to new regulation and ensuring that the Group's views are expressed during consultation exercises.
Risk area	Nature of risk and potential impact	Risk mitigation
HR risks
Health & Safety	A breach of health & safety regulations would leave the Group exposed to reputational damage and regulatory penalties.	A dedicated Group health & safety team supported by site based co-ordinators proactively monitor, manage and improve performance.  All team members receive continual training to industry approved standards.  Quarterly reports on performance against KPIs are issued to site management and the Group Board.
Staff recruitment and retention	The success of the Group is dependent on attracting and retaining high quality senior management and staff.	The Group mitigates the risk associated with loss of key personnel through robust succession planning, strong recruitment processes, effective incentives and retention initiatives and on-going training and development.
Financial risks
Interest rates, currency, liquidity and credit	The Group is exposed to interest rate risk on borrowings and foreign currency risk on purchases, particularly of charcuterie products.  In addition the Group needs access to funding for current business and future growth.	Interest rate and foreign currency risks are managed using effective hedging policies, which are coordinated and controlled by the Group's treasury function.  Each business has access to the Group's overdraft facility and bank positions are monitored on a daily basis.  All term debt is arranged centrally and appropriate headroom is maintained.

Going concern

After reviewing the available information, including business plans and making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

On behalf of the Board

Mark Bottomley

Finance Director

16 May 2011

Group income statement

for the year ended 31 March 2011

					2011		2010
			Notes		£'000		£'000
Revenue			3		758,442		740,338
Cost of sales					(657,166)		(643,535)
Gross profit					101,276		96,803
Operating expenses					(52,125)		(50,895)
Share of results of associate					(434)		-
Operating profit from continuing operations			3		48,717		45,908
Finance revenue					106		48
Finance costs					(1,729)		(2,204)
Profit  from continuing operations before tax					47,094		43,752
Taxation					(11,768)		(11,295)
Profit for the year from continuing operations					35,326		32,457
Discontinued operations:
Profit for the year from discontinued operations					-		125
Profit for the year attributable to owners of the parent					35,326		32,582
Earnings per share (pence)
From continuing operations:
Basic			4		74.5p		69.7p
Diluted			4		74.3p		69.6p
On profit for the year:
Basic			4		74.5p		70.0p
Diluted			4		74.3p		69.8p

Group statement of comprehensive income

for the year ended 31 March 2011

					2011 £'000		2010 £'000
Profit for the year					35,326		32,582
Other comprehensive income
Movement on hedging items:
Gains arising in the year					22		186
Reclassification adjustment for losses/ (gains) included in the income statement					248		(573)
Exchange differences on retranslation of foreign operations					-		24
Actuarial gains/ (losses) on defined benefit pension scheme					624		(87)
Deferred tax relating to components of other comprehensive income					(234)		132
Other comprehensive income for the year, net of tax					660		(318)
Total comprehensive income for the year attributable to owners of the parent					35,986		32,264

Group balance sheet

at 31 March 2011

	Notes	2011 £'000		2010 £'000
Non-current assets
Goodwill		127,763		128,739
Property, plant and equipment		123,262		106,137
Investment in associate	7	5,791		-
Financial assets		4,722		1,500
Total non-current assets		261,538		236,376
Current assets
Inventories		35,694		35,960
Trade and other receivables		78,665		84,066
Financial assets		496		263
Cash and short-term deposits		1,302		5,922
Total current assets		116,157		126,211
Total assets		377,695		362,587
Current liabilities
Trade and other payables		(84,941)		(86,745)
Financial liabilities		(4,356)		(12,487)
Income tax payable		(5,954)		(3,509)
Provisions		(59)		(149)
Total current liabilities		(95,310)		(102,890)
Non-current liabilities
Other payables		(354)		(82)
Financial liabilities		(49,286)		(49,866)
Deferred tax liabilities		(8,490)		(9,829)
Provisions		(409)		(982)
Defined benefit pension scheme deficit		(2,914)		(5,353)
Total non-current liabilities		(61,453)		(66,112)
Total liabilities		(156,763)		(169,002)
Net assets		220,932		193,585
Equity
Called-up share capital		4,764		4,733
Share premium account		56,609		54,322
Share-based payments		4,102		3,449
Hedging and translation reserves		146		(124)
Retained earnings		155,311		131,205
Equity attributable to owners of the parent		220,932		193,585

Group statement of cash flows

for the year ended 31 March 2011

	Notes	2011		2010
		£'000		£'000
Operating activities
Profit for the year		35,326		32,582
Adjustments to reconcile Group profit for the year to net cash inflows from operating activities
Tax on discontinued operations		-		(95)
Tax on continuing operations		11,768		11,295
Net finance costs		1,623		2,166
Non-cash items on transfer of business to associate		(465)		-
Fair value adjustment on put option in relation to associate		55		-
Share of result of associate		434		-
Gain on sale of property, plant and equipment		(96)		(189)
Depreciation of property plant and equipment		12,440		11,852
Share-based payments		1,013		510
Difference between pension contributions paid and amounts recognised in the income statement		(1,815)		(512)
Release of government grants		(12)		(6)
Decrease/ (increase) in inventories		266		(5,817)
Decrease/ (increase) in trade and other receivables		4,858		(1,954)
Increase in assets held for sale		-		(2,589)
Decrease in trade and other payables		(3,172)		(1,356)
Cash generated from operations		62,223		45,887
Tax paid		(10,639)		(13,683)
Net cash from operating activities		51,584		32,204
Cash flows from investing activities
Interest received		90		48
Reimbursement of consideration paid in prior years		-		1,248
Acquisition of subsidiaries		-		(11,233)
New loans advanced		(2,500)		-
Purchase of property, plant and equipment		(34,759)		(20,294)
Receipt of government grants		350		-
Proceeds from sale of property, plant and equipment		498		376
Proceeds from sale of discontinued operations		-		18,067
Net cash used in investing activities		(36,321)		(11,788)
Cash flows from financing activities
Interest paid		(1,683)		(2,670)
Proceeds from issue of share capital		599		2,924
Proceeds from borrowings		50,000		20,000
Repayment of borrowings		(60,000)		(19,762)
Dividends paid		(10,508)		(8,808)
Repayment of capital element of finance leases and hire purchase contracts		(260)		(120)
Net cash used in financing activities		(21,852)		(8,436)
Net (decrease)/ increase in cash and cash equivalents		(6,589)		11,980
Cash and cash equivalents at beginning of year		3,966		(8,038)
Effect of foreign exchange rates		-		24
Cash and cash equivalents at end of year	6	(2,623)		3,966

Group statement of changes in equity

for the year ended 31 March 2011

	Share capital £'000	Share premium £'000	Share- based payments £'000	Hedging reserve £'000	Translation reserve £'000	Retained earnings £'000	Total equity £'000
As at 1 April 2009	4,646	49,760	2,939	263	(24)	108,898	166,482
Profit for the year	-	-	-	-	-	32,582	32,582
Other comprehensive income	-	-	-	(387)	24	45	(318)
Total comprehensive income	-	-	-	(387)	24	32,627	32,264
Share-based payments	-	-	510	-	-	-	510
Scrip dividend	27	1,698	-	-	-	-	1,725
Share options exercised	60	2,864	-	-	-	-	2,924
Dividends	-	-	-	-	-	(10,533)	(10,533)
Deferred tax related to changes in equity	-	-	-	-	-	78	78
Corporation tax related to changes in equity	-	-	-	-	-	135	135
At 31 March 2010	4,733	54,322	3,449	(124)	-	131,205	193,585
Profit for the year	-	-	-	-	-	35,326	35,326
Other comprehensive income	-	-	-	270	-	390	660
Total comprehensive income	-	-	-	270	-	35,716	35,986
Share-based payments	-	-	1,013	-	-	-	1,013
Scrip dividend	20	1,699	-	-	-	-	1,719
Share options exercised	11	588	-	-	-	-	599
Dividends	-	-	-	-	-	(12,227)	(12,227)
Transfers between categories	-	-	(360)	-	-	360	-
Deferred tax related to changes in equity	-	-	-	-	-	180	180
Corporation tax related to changes in equity	-	-	-	-	-	77	77
At 31 March 2011	4,764	56,609	4,102	146	-	155,311	220,932

1. Basis of preparation

The results comprise those of Cranswick plc and its subsidiaries for the year ended 31 March 2011.  This preliminary announcement has been prepared on the basis of accounting policies as set out in the statutory accounts for the year ended 31 March 2010 (except as detailed below) and International Financial Reporting Standards and interpretations issued by the International Accounting Standards Board as adopted by the European Union ("IFRS") and does not constitute the Company's statutory accounts within the meaning of Section 435 of the Companies Act 2006. 

Statutory accounts for the years ended 31 March 2011 and 31 March 2010 have been reported on by the auditors who issued an unqualified opinion in respect of both periods and the auditors' reports for 2011 and 2010 did not contain statements under 498(2) or 498(3) of the Companies Act 2006.  Statutory accounts for the year ended 31 March 2010 have been filed with the Registrar of Companies.  The statutory accounts for the year ended 31 March 2011, which were approved by the Board on 16 May 2011, will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

2. Accounting policies

The accounting policies applied by the Group in this preliminary announcement are the same as those applied by the Group in the financial statements for the year ended 31 March 2010 except for the following policies which have been adopted during the year ended 31 March 2011.

Interest in associates

The Group's investment in its associate is accounted for using the equity method, initially recognised at fair value.  An associate is an entity in which the Group has significant influence.  Under the equity method, the investment in the associate is carried in the Group balance sheet at deemed cost (being its fair value on initial recognition) plus post acquisition changes in the Group's share of net assets of the associate.  Under the equity method, the investment in an associate is carried in the balance sheet at cost plus post-acquisition changes in the Group's share of net assets of the associate, less distributions received and less any impairment in value of individual investments. Any goodwill arising on the acquisition of an associate is included within the carrying amount of the associate and is neither amortised nor tested for impairment.

The share of profit or loss of the associate is shown on the face of the income statement.  This is the profit attributable to equity holders of the associate and therefore is profit after tax.  Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the Group Statement of Changes in Equity.  Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The financial statements of the associate were prepared for the period to 30 January 2011 and have been updated to 31 March 2011 with reference to management accounts.  Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

New and revised standards

The application of new and revised standards and interpretations has not had a material effect on the net assets, results and disclosures of the Group.

3. Segment revenues and results

Segment revenues and results			2011			2010
			Food		Food	Pet	Total
			Total		Continuing	Discontinued
			£'000		£'000	£'000	£'000
Revenue			758,442		740,338	3,620	743,958
Operating profit			48,717		45,908	40	45,948
Net finance costs			(1,623)		(2,156)	(10)	(2,166)
Profit before tax (Segment results)			47,094		43,752	30	43,782
Income taxes			(11,768)		(11,295)	95	(11,200)
Profit for the year			35,326		32,457	125	32,582

4. 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 47.4 million shares (2010: 46.5 million shares). The calculation of diluted earnings per share is based on 47.6 million shares (2010: 46.6 million shares).

5. Dividends

Subject to Shareholders' approval the final dividend will be paid on 2 September 2010 to Shareholders on the register at the close of business on 1 July 2011.

6. Analysis of changes in net debt

	At 31 March 2010		Cash flow		Other non cash changes		At 31 March 2011
	£'000		£'000		£'000		£'000
Cash and cash equivalents	5,922		(4,620)		-		1,302
Overdrafts	(1,956)		(1,969)		-		(3,925)
	3,966		(6,589)		-		(2,623)
Other financial assets	1,763		2,500		(263)		4,000
	5,729		(4,089)		(263)		1,377
Other financial liabilities	(387)		-		227		(160)
Revolving credit	-		(50,000)		1,013		(48,987)
Bank loans	(59,530)		60,000		(470)		-
Finance leases and hire purchase contracts	(480)		260		(350)		(570)
Net debt	(54,668)		6,171		157		(48,340)

7. Investment in associate

On 9 July 2010, the principal assets and trade of the Group's Deeside cooked meats facility were transferred to Farmers Boy (Deeside) Limited, a company within the Wm Morrison Supermarkets PLC group, with 49 per cent of the shares in Farmers Boy (Deeside) Limited being received as consideration.  The Group has treated its 49 per cent shareholding in Farmers Boy (Deeside) Limited, over which it has significant influence, as an associate and has accounted for it using the equity method, initially recognising the associate at its fair value.  As a result of the Deeside cooked meats facility leaving the Group a proportionate amount of goodwill relating to the cooked meats cash generating unit was disposed of.  The transaction also included a put and call option over the Group's 49 per cent shareholding exercisable during a six month period commencing three years from the date of the transaction.  The Group's put option has been recognised at its fair value at the balance sheet date.

The transaction gave rise to the following (expenses)/ income during the year:

				2011 £'000
Book value of assets disposed				(5,911)
Fair value of 49 per cent shareholding acquired				6,225
Difference between acquisition fair value and cost of associate				314
Goodwill impairment loss				(976)
Recognition of put option at fair value				1,127
Non-cash total				465
Legal expenses				(168)
				297
Related deferred tax credit				1,019
Cash flow impact				(168)

The results of the Deeside cooked meats facility for the period prior to the transfer are presented below:

						2011
						£'000
Revenue						16,466
Expenses						(15,952)
Operating profit						514
Finance income						41
Profit before tax						555
Taxation						(155)
Profit for the period						400

The following table illustrates the summarised financial information of the Group's investment in Farmer's Boy (Deeside) Limited:

		2011 £'000
Share of the associate's balance sheet:
	Non-current assets				15,070
	Current assets				6,573
	Current liabilities				(6,427)
	Non-current liabilities				(9,425)
	Share of net assets				5,791
	Share of the associate's results: Revenue				17,684
	Loss for the period				(434)

8. Report and accounts

The Report and Accounts will be available on the Company's website at www.cranswick.co.uk on 1 July 2011.  Further copies will be available upon request from the Company Secretary, Cranswick plc, 74 Helsinki Road, Sutton Fields, Hull,  HU7 0YW.

 

END

 

 

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