Final Results
Cranswick PLC
21 May 2007
Embargoed 7am Monday May 21 2007
CRANSWICK plc: RECORD PROFITS
Cranswick plc ('Cranswick' or 'the Company'), the Yorkshire-based food producer,
announces its audited results for the year ended March 31 2007.
Highlights:
• Sales increased by 19 per cent to £525m (2006: £441m)
• Profit before tax & exceptional gains up 12 per cent at £32.4m (2006:
£29.0m)
• Earnings per share pre exceptional gains rose 5 per cent to 50.1p
(2006: 47.8p)
• Recommended 10 per cent increase in final dividend to 12.2p per
ordinary share
• Feed milling business sold
• Encouraging start to current year
Martin Davey, Cranswick Chairman, said: 'Cranswick has continued its successful
development and is once again reporting record profits. Underlying sales growth
was particularly strong resulting in an increase in market share which was
further enhanced by the strategic acquisition of DeliCo on 1 November 2006.
'The past year has seen sales rise by 19 per cent and we anticipate further
increases over the next year.
'The Company today announces the sale of the feed milling business of Cranswick
Mill, the group's original activity. The trading environment has been
particularly challenging in recent years following the substantial reduction in
the UK pig herd.
'The Board is confident that the maintenance of an unchanged strategy will
continue the successful development of Cranswick. The current year has
commenced in an encouraging manner and the Board looks to the future with
confidence'.
-ends-
For further information:
Paul Quade 07947 186694
CityRoad Communications 020 7248 8010
CHAIRMAN'S STATEMENT
I am pleased to be able to report to Shareholders that Cranswick has continued
its successful development and is once again reporting record profits.
Underlying sales growth was particularly strong resulting in an increase in
market share which was further enhanced by the strategic acquisition of DeliCo
on 1 November 2006.
Results
The Company achieved an increase in sales of 19 per cent to £525 million.
Turnover in the food division was up by 21 per cent at £493 million and this
accounted for 94 per cent of total Company sales. The increase in sales largely
reflected organic growth although the DeliCo acquisition during the year added
£9 million. Strong sales increases were evident across most food categories
highlighting the success of the Company's strategy in positioning itself in a
number of growing, premium areas of the market. The Company's other activity
which is involved in the pet and aquatic sector saw a marginal reduction in
sales reflecting higher aquatic sales but a decline in bird food.
Profit before tax and exceptional gains increased by 12 per cent from £29.0
million to £32.4 million. Earnings per share on a similar basis rose to 50.1 p
(2006 47.8p). The increase of 5 per cent in earnings per share reflects a
normal tax charge this year compared to a lower charge previously following the
acquisition of Perkins, as well as additional shares in issue. Exceptional gains
in both this year and last year relate to profits on disposal of surplus
properties.
The results are considered in more detail in the review of activities section.
Cash Flow
Cash flow was again very strong with cash generated from operations of £41.8
million, the same as the previous year. This allowed the Company to purchase
DeliCo without increasing year-end borrowings. The net cash cost of the
acquisition was £13.4 million with a further £3.6 million satisfied by shares.
Capital expenditure net of disposal proceeds was slightly ahead of last year at
£10.8 million, resulting in borrowings of £75.9 million compared with £77.1
million a year ago. Interest cover pre exceptional gains was 7.9 times compared
with 6.7 times in 2006.
Dividend
The Board is proposing an increase in the final dividend of 10 per cent to 12.2p
per ordinary share. Along with the interim dividend of 5.9p per ordinary share
paid in January 2007 this makes a total dividend for the year of 18.1p per
ordinary share, an increase of 10 per cent on last year's 16.5p. The final
dividend, if approved by Shareholders, will be paid on 7 September 2007 to
Shareholders on the register at the close of business on 6 July 2007.
Shareholders will have the option to receive the dividend by way of scrip issue.
Strategic Development
The Company was formed by farmers in the early 1970's to produce pig feed. In
1998 the Board embarked on a strategy to broaden the base of the Company's
activities and to seek opportunities to develop into related areas offering
greater scope to add value to the Company's processes. Through a combination of
acquisitions and organic development the business has evolved into one focused
predominantly on the supply of premium food products.
As part of this strategy the Company today announces the sale of the feed
milling business of Cranswick Mill, the group's original activity. There will be
a cash inflow resulting from the sale and the reduction in working capital of
approximately £7 million. The trading environment for this business has been
particularly challenging in recent years following the substantial reduction in
the UK pig herd. Despite some rationalisation of milling capacity in the
industry there continues to be oversupply. Efforts to mitigate the impact of
this have included the further development of the starter feed business and
tight cost control. Feed sales in the year totalled £25 million and a small
profit was achieved. The opportunity to develop a solution to the challenges
facing the business was explored and successfully concluded with BOCM Pauls, a
leading supplier of animal feed. BOCM have plans for investment in the site and
for the further development of the business. The sale of the feed milling
business follows the sale of the pig production business in the previous
financial year. The pig marketing business of Cranswick Mill, the procurement
arm of Cranswick Country Foods, is to continue as an integral part of the Group.
We wish David Ball, managing director of Cranswick Mill, his colleagues and BOCM
every future success.
The food division was expanded in November with the acquisition of DeliCo,
producer of sliced cooked meats, a growing category in the food sector. The
business has been successfully integrated by the management team in the
Cranswick Convenience Foods division. At the time of acquisition there was
substantial unutilised capacity in the relatively new production facility. Our
plans for filling this capacity have been successful and the business is on
track for a substantial increase in sales over the next year.
Cranswick Gourmet Bacon, producer of traditional air-dried bacon, was
established by way of joint venture in 2004 with Cranswick holding 70 per cent
of the equity. This was increased to 85 per cent during the year and we
anticipate that this will be increased to 100 per cent in the near future. The
quality of the premium bacon produced by this business is underlined by the
numerous awards it continues to pick up.
The Company has recently received planning permission for the further
development of the primary pork processing site in East Yorkshire which secures
the longer term plans of this important part of the Company's activities.
Outlook
Compound annual growth in sales over the past five years has been 18 per cent
per annum and is a combination of both organic and acquisitive development. The
past year has seen sales rise by 19 per cent and we anticipate further sales
increases over the next year although, as reported previously, there are signs
that the Company is facing a more competitive trading environment. The Board is
confident that, with activities in a number of growing premium food categories
and strong operational management teams, the maintenance of an unchanged
strategy will continue the successful development of Cranswick. The current year
has commenced in an encouraging manner and the Board looks to the future with
confidence.
Martin Davey
Chairman
21 May 2007
Review of Activities
Food - by the Chief Executive Bernard Hoggarth
The strong sales growth continued, as in recent years, with sales up 21 per cent
at £493 million. Sales of food products rose by 20 per cent, with agricultural
products up 32 per cent.
The food group's businesses have all shown strong growth in the premium sectors,
with our sausage and bacon sales growth being exceptional. The focus and
investment in developing our foodservice sales is now bearing fruit with sales
in the year exceeding £20 million. The vast majority of this growth has come
from specialist lines sold into the gastro-pub chains and supplying the high
street dining outlets.
All the Cranswick food producing sites have achieved the highest 'A' grade BRC
(British Retail Consortium) standards. We are also proud to have the first food
factory in the UK to score zero minor non-compliance at a recent audit. New
product development continues to be the life blood of the business across the
food operations. To put this into perspective fresh pork, sausage and bacon
currently have 25 products under development and launched 88 new products during
the year. As part of this process, it is very pleasing to report the food
businesses collected 11 industry awards during the financial year.
The fresh pork business has been successful in gaining planning permission for a
new replacement processing facility at the Preston site in East Yorkshire. This
should be completed during the next two years. This development, coupled with
investment we have made previously in the centrally packed meat plant adjoining,
will consolidate its position as one of the most efficient primary facilities,
and is currently the largest pig processing plant in the UK. This will
facilitate the continued development of our customer base and growth going
forward. Overall, fresh pork sales in the UK grew by 2 per cent in the year,
whilst the Cranswick pork business achieved an impressive 23 per cent increase.
Recent investment in new equipment is facilitating the processing of
by-product into organic matter which can be used as fertilizer. The tallow
extracted in the process is utilised in the production of bio-fuel. We are
currently exploring the possibility of using the recycled fuel to power the
factory boilers for hot water and steam production and to fuel part of our own
fleet of vehicles. In addition we have immediately reduced vehicle movements,
due to the previous removal off site of all such by products via HGV's.
The Lazenby's sausage factory is just 2 years old, but due to the phenomenal
success achieved in sales, and the development of new business, we are
installing three new production lines to meet demand. This will require capital
expenditure in excess of £2 million. The total sausage market showed no
growth in the year, but premium categories grew by 19 per cent. The Cranswick
business however achieved growth of 28 per cent. Lazenby's was successful in
becoming the licensee for the 'Weight Watchers' brand of sausage which we
launched during the second half of the year. We also produce the 'Black Farmer'
brand, which was launched during the year, and Duchy Originals. The latter grew
at almost 23 per cent, and reinforces again the continuing trend for consumers
to 'trade up' in fresh prepared foods.
Recently the Cranswick Gourmet Sausage Company launched the 'Simply Sausage'
brand at The Ivy in London. This event was attended by buyers from the main
retailers and a myriad of journalist and food writers and was hosted by
celebrity chef James Martin. You can log onto the new website for information
on this exciting new range at: www.simplysausages.com.
The cooked meat business, Cranswick Convenience Foods, has continued to grow its
sales well above the market place. Pre-packed cooked meat sales nationally rose
by almost 7 per cent whereas Cranswick grew by 16 per cent. Deli sales declined
slightly in line with the national fall of 3 per cent as consumers continue to
switch to more pre-packed convenient formats.
The DeliCo acquisition has integrated into the group well and is performing in
line with expectations. By the summer this facility will be operating at over 90
per cent of capacity, again in line with our plans. There has been continued
capital expenditure, in excess of £6.6 million across the cooked meat facilities
during the year. This enables us to continue to be at the forefront of the
sector, by incorporating the most modern, efficient equipment into our
specialist business units. This coupled with new product development and
significant growth in our customer base, bodes well for the future.
Bacon sales were up a very healthy 65 per cent with which we are delighted.
With further growth anticipated we are planning for additional production
capacity. We have acquired a new freehold site 'twixt Leeds and York of over
8,000 square meters which will enable us to continue to grow this business. We
anticipate a weekly capacity from this new facility of in excess of 400 tonnes
per week, this compares with a current peak of approximately 75 tonnes. The
expected project cost will be approaching £9 million. This large investment
will allow the continued focus on the development of the premium bacon category,
in the same way that we have developed our sausage business over the last
decade. Across the UK bacon market as a whole, we currently have less than a 2
per cent market share. Taking the premium categories on the other hand,
Cranswick Gourmet Bacon Company has a 22 per cent market share. Our bacon
business received 2 Gold Medals and 2 Silver Medals in the BPEX Foodservice
awards and the Foodservice 'Pork Product of the Year' 2007.
Continental Fine Foods, Cranswick's Manchester based charcuterie business had an
exceptional year with sales up 21 per cent to almost £70 million. The business
invested in a new high speed slicing line during the year at a cost of £1
million which helped achieve average weekly volumes of over 700,000 packs,
compared with 520,000 packs a year ago. Corned beef continues its revival with
sales volumes up 22 per cent in the year.
We are working with a small artisan producer of fresh filled pasta in Italy to
bring all their facilities up to BRC standards, ready for serving the UK retail
market. Following this accreditation we will launch this very special product
with a major retail customer later this year. This highlights perfectly one of
the main routes to market for Continental Fine Foods, driven by our skilled
buyers, researchers and development teams.
The Sandwich Factory (TSF) saw sales rise by 5 per cent in the year with sales
of £36m. New business wins in the year include, Ryan Air, Flybe, BMI baby, First
Great Western Railways and the further development of exciting ranges with our
retail customers.
TSF has been working with Duchy Originals on a new organic range of sandwiches.
The first products should be launched during summer this year. These products
will target the premium category with research having shown that there is demand
for such premium products in the sector. Within the product portfolio are three
new categories. We now produce and supply 'food to go' solutions, salads and
pizzas. Total units produced were 40 million, with approximately 25 per cent
being alternatives to the standard skillet, or sliced sandwich.
TSF has developed it's plan to use more recyclable packaging during the year
with the introduction of cardboard skillets, biodegradable webs and 'returnable'
plastic distribution trays. Further 'green ' initiatives include the development
of an electrolyzed water supply to reduce the amount of chemicals used by the
business in the factory cleaning process by 40 per cent.
In summary, we believe our food businesses now operate from some of the best
invested and most modern production facilities in the UK. This, coupled with the
strong management teams we have in situ and the strength of our new product
development teams, leads us to believe we are well placed to continue the
profitable growth and development of the food business.
Pet - by the Chief Executive Derek Black
Total sales were marginally down for the year at £31.5 million (2006 - £32.1
million) with increased sales of aquatic products and a reduction in food.
In Pet Products, predominantly bird and small animal food, sales were a little
under £20.5 million down 8 per cent. This was due mainly to an extremely hot
summer, coupled with a mild autumn and winter. The public's perception is that
wild birds do not need feeding during a mild winter. Changing habitats and the
need to protect endangered native birds means it is imperative to feed birds not
only in winter but all year round and we, along with the RSPB, strive to get
this message over to the public. Our target markets remain unchanged and include
high street retail chains, wholesale discount multiples, retail membership
groups, grocery and mail order.
Sales in the TMC aquatic business were ahead of last year at almost £11 million
(2006 - £9.7 million) up 12 per cent. Sales of marine livestock increased by 20
per cent. It is particularly pleasing to report the continued growth and
development of the branch businesses. Manchester saw sales up 10 per cent and
Bristol an increase of 26 per cent. Sales of dry goods were adversely impacted
following a major fire in the warehouse in December at the Chorleywood site and,
as a consequence, there was a more modest rise in sales of 6 per cent on last
year in this category. The building is presently being reconstructed and will be
fully operational by July 2007. There will be no impact to profit, due to the
comprehensive levels of insurance cover in place.
During the year TMC supplied a number of high profile projects including 7 large
ocean exhibits to Sea Life centres around the UK, including the new aquarium in
Loch Lomond, a large recirculation and water treatment system for a cod hatchery
in Scotland, and four large marine holding systems to a shellfish suppler. New
product launches has also been a key feature for the business with the
development of the V2 ultra-violet skimmers, which was voted best Marine Product
in 2006 by Practical Fishkeeping.
CRANSWICK plc: AUDITED ----GROUP INCOME STATEMENT
Year ended 31 March 2007
2007 2006
_________________________________________ _______________________________________
Before Exceptionals Total Before Exceptionals Total
exceptionals exceptionals
Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 524,823 - 524,823 441,178 - 441,178
Cost of sales (438,508) - (438,508) (364,388) - (364,388)
Gross profit 86,315 - 86,315 76,790 - 76,790
Operating expenses (49,239) - (49,239) (42,720) - (42,720)
Operating profit 2 37,076 - 37,076 34,070 - 34,070
Profit on disposal of - 281 281 - 2,079 2,079
property, plant and
equipment
Profit before finance and 37,076 281 37,357 34,070 2,079 36,149
taxation
Finance revenue 6 - 6 25 - 25
Finance costs (4,707) - (4,707) (5,076) - (5,076)
Profit before tax 32,375 281 32,656 29,019 2,079 31,098
Taxation (9,773) (229) (10,002) (7,716) (562) (8,278)
Profit for the year 22,602 52 22,654 21,303 1,517 22,820
Profit for the year
attributable to:
Equity holders of the 22,574 22,784
parent
Minority interest 80 36
22,654 22,820
Earnings per share:
(total and continuing)
Basic 3 50.1p 0.1p 50.2p 47.8p 3.4p 51.2p
Diluted 3 49.7p 0.1p 49.8p 47.4p 3.4p 50.8p
CRANSWICK plc: AUDITED GROUP BALANCE SHEET
31 March 2007
2007 2006
Notes £'000 £'000
Non-current assets
Goodwill 117,520 111,921
Property, plant and equipment 80,277 67,725
197,797 179,646
Current assets
Inventories 24,626 18,555
Trade and other receivables 66,416 54,027
Other financial assets 330 106
Cash and cash equivalents 2,262 5,000
Total current assets 93,634 77,688
Non-current assets classified as held for sale - 688
Total assets 291,431 258,022
Current liabilities
Trade and other payables (65,073) (53,376)
Other financial liabilities (16,933) (19,422)
Income tax payable (3,834) (3,138)
Provisions (289) (334)
Total current liabilities (86,129) (76,270)
Non-current liabilities
Other payables (37) (76)
Other financial liabilities (61,544) (62,720)
Deferred tax liabilities (6,150) (4,657)
Provisions (1,736) (1,877)
Total non-current liabilities (69,467) (69,330)
Total liabilities (155,596) (145,600)
Net assets 135,835 112,422
Equity
Called-up share capital 6 4,595 4,467
Share premium account 6 47,204 40,797
Share-based payments 6 1,018 531
Hedging and translation reserves 6 351 (13)
Retained earnings 6 82,564 66,604
Equity attributable to members of the parent company 135,732 112,386
Minority interests 103 36
Total equity 135,835 112,422
CRANSWICK plc: AUDITED GROUP CASH FLOW STATEMENT
Year ended 31 March 2007
Notes 2007 2006
£'000 £'000
Operating activities
Profit before finance and taxation 37,357 36,149
Adjustments to reconcile group operating profit to net cash inflows from
operating activities
Depreciation 9,252 8,087
Share based payments 487 284
Release of government grants (39) (36)
Profit on sale of property, plant and equipment (250) (2,220)
(Increase)/decrease in inventories and biological assets (5,329) 1,125
Increase in trade and other receivables (9,141) (5,751)
Increase in trade and other payables 9,493 4,200
Cash generated from operations 41,830 41,838
Tax paid (7,936) (6,954)
Net cash from operating activities 33,894 34,884
Cash flows from investing activities
Interest received 6 25
Acquisition of subsidiaries (13,506) -
Purchase of property, plant and equipment (11,979) (14,064)
Proceeds from sale of equipment 1,147 3,929
Net cash used in investing activities (24,332) (10,110)
Cash flows from financing activities
Interest paid (3,966) (5,119)
Proceeds from issue of share capital 1,776 1,691
Proceeds from borrowings 10,000 -
Issue costs of long-term borrowings (40) -
Repayment of borrowings (11,395) (18,753)
Dividends paid (6,467) (5,847)
Net cash used in financing activities (10,092) (28,028)
Net decrease in cash and cash equivalents (530) (3,254)
Cash and cash equivalents at beginning of period 46 3,291
Effect of foreign exchange rates (10) 9
Cash and cash equivalents at end of period 5 (494) 46
Notes to the preliminary announcement
1. Basis of preparation
The income statements for the years ended 31 March 2007 and 2006 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 2006. 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 2007 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.
The financial statements have been prepared under IFRS as adopted by the
European Union. The company's accounting policies can be found in the statutory
accounts.
2. Segmental Analysis
Turnover Operating profit
2007 2006 2007 2006
£'000 £'000 £'000 £'000
Food 493,365 409,119 38,936 35,433
Pet 31,458 32,059 566 796
524,823 441,178 39,502 36,229
Central costs - - (2,426) (2,159)
524,823 441,178 37,076 34,070
Exceptionals - - 281 2,079
Group total 524,823 441,178 37,357 36,149
Finance costs - - (4,701) (5,051)
Profit before tax 524,823 441,178 32,656 31,098
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 45.0 million
shares (2006: 44.5 million shares). The calculation of diluted earnings per
share is based on 45.3 million shares (2006: 44.8 million shares).
4. Dividends
Subject to Shareholders' approval the final dividend will be paid on 7 September
2007 to Shareholders on the register at the close of business on 6 July 2007.
5. Analysis of changes in net debt
At Cash Other At
31 March flow non cash 31 March
2006 changes 2007
£'000 £'000 £'000 £'000
Cash and cash equivalents 5,000 (2,728) (10) 2,262
Overdrafts (4,954) 2,198 - (2,756)
Cash and cash equivalents 46 (530) (10) (494)
Other financial assets - - 306 306
Other financial liabilities (146) - 146 -
Bank loans (75,970) 1,290 (114) (74,794)
Loan notes (1,072) 145 - (927)
Net debt (77,142) 905 328 (75,909)
6. Reconciliation of movements in equity
Attributable to equity holders of the parent
_____________________________________________________________________________ Minority Total
Share Share Share Hedging Translation Retained Total Interest Equity
capital premium based reserve reserve earnings
payments
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2006 4,467 40,797 531 (40) 27 66,604 112,386 36 112,422
Cash flow hedges - - - 369 - 369 - 369
Exchange - - - - (5) - (5) (5)
differences
Profit for the - - - - - 22,574 22,574 80 22,654
year
Exercise of 65 1,711 - - - - 1,776 - 1,776
options
Scrip dividends 15 1,144 - - - - 1,159 - 1,159
Share issues 48 3,552 - - - - 3,600 - 3,600
Share based - - 487 - - - 487 - 487
payments
Deferred tax - - - - - 300 300 - 300
recognised
directly in
equity
Corporation tax - - - - - 712 712 - 712
recognised
directly in
equity
Purchase of - - - - - - - (13) (13)
Minority
Interest
Dividends - - - - - (7,626) (7,626) - (7,626)
At 31 March 2007 4,595 47,204 1,018 329 22 82,564 135,732 103 135,835
7. The Company intends to post the Report and Accounts to shareholders on 6
July 2007. 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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