Half Yearly Report

RNS Number : 7926T
Cranswick PLC
25 November 2013
 

 

 

 

 

 

 

CRANSWICK plc: INTERIM RESULTS

A robust performance

 

Cranswick plc ("Cranswick" or "the Company" or "the Group"), a leading UK supplier of pork products, announces its unaudited results for the six months ended 30 September 2013.

 

Financial highlights:

 

Statutory results

2013

2012

Movement





Reported revenue

£483.5m

£418.6m

+15%

Underlying revenue 1

£474.9m

£418.6m

+13%

Profit before tax

£26.1m

£22.4m

+16%

Earnings per share

43.5p

35.7p

+22%

Dividend per share

10.0p

9.4p

+6%

Net debt

£37.2m

£32.2m

+15%





 

 

Adjusted results

2013

2012

Movement





Reported revenue

£483.5m

£418.6m

+15%

Underlying revenue 1

£474.9m

£418.6m

+13%

Adjusted profit before tax 2

£23.2m

£22.4m

+4%

Adjusted earnings per share 2

38.3p

35.7p

+7%

Dividend per share

10.0p

9.4p

+6%

Net debt

£37.2m

£32.2m

+15%





 

1 excluding contribution from acquisitions

2 adjusted profit before tax and adjusted earnings per share exclude release of contingent consideration and net IAS 41 valuation movement on biological assets.  These are the measures used by the Board to assess the Group's underlying performance.

 

Cranswick's Chairman, Martin Davey, said:  "The first half of the year has overall been quite a positive period for the Company.

 

"Continued growth in sales, significant investment in the asset base, most notably the commissioning of the new pastry facility, along with the strategic development of the Company's pig breeding and rearing activities were all positive features of the six months trading.  The increase in sales is especially encouraging.

 

"The pastry business is making progress and the impact of higher pig prices has been partially mitigated by on-going efficiency improvements, sales volume growth, acquisitions and through constructive discussions with customers.

 

"The Board anticipates that the full year performance will be in line with its expectations.

 

"With experienced management at all levels of the Group, a strong range of products, a well invested asset base and a robust financial position, the Board remains confident in the continued long term success and development of the business."

 

-ends-

 

Enquiries:

 

Paul Quade                                                                                                        07947 186 694

CityRoad Communications                                                                                  0207 248 8010

 

 

 

 

Note to Editors:

 

Cranswick was formed in the early 1970s by farmers in East Yorkshire to produce animal feed and has since evolved into a business focused on the supply of food products to the UK food retail and food service sectors. Well known for the production of gourmet sausages the Company is involved in the breeding and rearing of premium British pigs and also supplies fresh pork, cooked meats, air-dried bacon, charcuterie, sandwiches and pastry products.  Products are sold primarily under retailers own labels including Sainsbury's 'Taste The Difference' and Tesco's 'Finest' as well as under a number of brands such as 'Simply Sausages', 'The Black Farmer', 'Weightwatchers' and 'Red Lion Foods'.  Sales in the year to March 2013 were £875 million and have grown more than 370 per cent over ten years.

 

 

Chairman's statement

 

The first half of the year has overall been quite a positive period for the Company.

 

Continued growth in sales, significant investment in the asset base, most notably the commissioning of the new pastry facility, along with the strategic development of the Company's pig breeding and rearing activities were all positive features of the six months trading.  As previously reported the business had to contend with the challenge of rising input costs as pig prices reached record highs.

 

Both total and underlying sales for the period were significantly ahead of the comparable period a year ago.  Total sales at £484 million were 15 per cent higher whilst underlying sales were 13 per cent ahead.

 

The increase in sales is especially encouraging.  It further develops the sales growth achieved in recent years, evidences the success of the investment in new product development and underlines pork's health attributes, versatility and pricing credentials compared to other proteins.  There was particularly strong growth in sales of fresh pork and bacon and this along with other trading highlights is covered in the Chief Executive's Review of activities.

 

Statutory profit before taxation increased 16 per cent to £26.1 million from £22.4 million and associated basic earnings per share rose 22 per cent to 43.5 pence compared to 35.7 pence in the same period last year.

 

Adjusting the current period figures for the impact of contingent consideration and IAS 41 credits, profit before taxation was 4% higher than a year ago at £23.2 million and earnings per share 7 per cent higher at 38.3 pence.

 

Adjusted operating margin was lower than that achieved a year ago due to the impact of the rise in pig prices to historical highs and the absorption of start-up costs at the new pastry facility.

 

The impact of higher pig prices has been partially mitigated by on-going efficiency improvements, sales volume growth, acquisitions and through constructive discussions with customers.  Prices have continued at historical highs and, as previously reported, are expected to remain so through to the end of the calendar year at least.

 

A key factor in driving the pig price higher has been the increased focus on British meat from customers during the year.  To satisfy this demand and to secure the supply of product going forward the Company has made a strategic investment in its pig breeding and rearing activities.  The total number of pigs produced internally is now 15 to 20 per cent of weekly requirements and in addition this will offset some of the impact of higher input costs.

 

The pastry business is making progress and, working closely with its customer base, has recently seen a number of successful new product launches supported by a high profile promotional campaign.  Consumer response to these products has been very favourable.  The factory has substantial capacity to meet management's future sales aspirations and expectations are for this category to develop in a similar way to other comparable areas of the Group.

 

Operating cash inflow in the period improved to £23.8 million from £18.1 million in the same period previously. Interest was covered 56 times and at the end of the period net debt stood at £37.2 million.  The pension deficit continues at a low level amounting to £3.3 million at 30 September.  The Company is in a very sound financial position and further details are provided in the Financial Review.

 

The interim dividend is being increased to 10.0 pence per share from 9.4 pence previously and will be paid on 24 January 2014 to Shareholders on the register at the close of business on 6 December 2013.  Shareholders will again have the option to receive the dividend by way of scrip issue.

 

The Board anticipates that the full year performance will be in line with its expectations.

The continued successful performance of Cranswick would not be possible without truly committed individuals throughout the business.  On behalf of the Board I express sincere thanks and appreciation to all of our colleagues for their unstinting efforts, enthusiasm and talents in driving the business forward.

 

The Company is totally focused on working closely with its customers to deliver quality food for the consumer from a supply base that has production facilities of the highest standard and relationships with suppliers that have integrity at their core.  With experienced management at all levels of the Group, a strong range of products, a well invested asset base and a robust financial position, the Board remains confident in the continued long term success and development of the business.

 

 

 

 

Martin Davey

Chairman

 

25 November 2013

 

 

Review of activities

 

The business delivered a robust performance during the first half of the current financial year, with total revenues ahead by 15 per cent.  Underlying sales increased by 13 per cent driven by a combination of new products and new customers, underpinned by market growth in the Group's core categories as the UK consumer continues to appreciate the attractiveness, versatility and low relative pricing of pork compared to other proteins, particularly beef and lamb.

 

As expected, pig prices increased during the first quarter of the financial year.  Prices increased further during July to a new record high and remained at this level throughout the second quarter.  UK pig prices are likely to remain at historical highs at least through to the end of the calendar year.    On-going efficiency improvements and the strong volumes being processed through the Group's facilities provided some mitigation, but the extent of and time lag in recovering these higher input costs, together with the pastry start-up costs meant that adjusted operating margins were lower than those reported in the same period last year and below those of the last financial year as a whole.

 

As reported on 20 May 2013, the Group acquired East Anglian Pigs Limited (now renamed Wayland Farms Limited) on 29 April 2013.  This was followed by the acquisition of two additional breeding units from Dent Limited on 13 September 2013, which are now operating under the Wold Farms banner.  Cranswick now has a herd of 15,000 breeding sows, capable of producing 7,000 outdoor-reared pigs each week for use in Cranswick's premium range products and gives Cranswick greater control over a robust and integrated supply chain, with a clear focus on premium British ingredients.  This focus has been central to supporting the move to an all British fresh pork offering by one of the Group's largest retail customers.

 

Fresh pork sales grew strongly by 26 per cent compared to the same period last year.  The recent development of the new Riverside retail packing facility in Hull, which is dedicated to one of the Group's retail customers, has supported this growth and enabled more efficient utilisation of the retail packing operations at the Hull and Norfolk primary processing facilities.  Further investment into both the Hull and Norfolk facilities is continuing as new chilling technology is introduced to improve carcass quality.  The Group's three fresh pork facilities are amongst the most advanced processing operations in Europe and leave Cranswick well positioned to continue its expansion in both the UK and overseas markets.  Export sales grew by 30 per cent in the period and the business will continue to develop further its presence in Far Eastern markets as evidenced by supply commencing recently to Thailand and Vietnam. 

 

Sausage sales increased by 4 per cent, helped by the improved summer weather in 2013 which generated more barbecue opportunities. July saw a record sales week for the Lazenby's facility for a non-Christmas period.  The premium sausage category continues its impressive resilience of recent years as consumers recognise the quality proposition that high end products offer. The artisan nature of Cranswick's products and the skills employed, have been transferred to a range of premium beef burgers and growth in these products has been particularly impressive with sales improving by 34 per cent. The increased raw material cost has had a particular impact on the sausage category; however this has been partially mitigated by a continued focus on new product development with redevelopment of existing ranges and the introduction of new ones.   New listings in this category have been agreed with one of the Group's existing premium retail customers for the key Christmas trading period.   With traceability high on the customer and consumer agenda, the Group's integrated supply and sourcing policy offers the UK consumer further assurance as to the provenance and quality of Cranswick's products and provides the Company's customers with a real point of difference.

 

Bacon sales improved by 18 per cent in the period.  This growth underlines the trend of trading up to the premium bacon category, as the quality of Cranswick's hand cured, air dried products continues to be appreciated.  Sales growth was also supported by the introduction of new speciality cures and smoked products and by the continued development of ready to cook ranges which are now being produced across the fresh pork, bacon and sausage categories.  The Christmas period is particularly important for this category and so it is pleasing to be able to report that a number of significant contracts for both gammon steaks and joints have been secured for the festive season.

 

Cooked meats sales increased by 13 per cent compared with the corresponding period last year.  This was against a backdrop of increasing raw material prices and discussions are on-going with customers to mitigate this impact. Further new product development in premium ham products is helping to drive sales and the close collaboration with other sites in the group, offers the customer an integrated approach in this area. To support further growth and development of the cooked meats category investment is taking place at the Milton Keynes facility to substantially increase capacity and introduce advanced cooking and slicing technology to deliver significant efficiency gains. Total capital expenditure across the Group's four cooked meat facilities is expected to be £11 million in the current financial year reflecting the Company's growth aspirations in this category.

 

Pastry sales grew strongly following the move into the Group's new gourmet pastry facility in Malton, North Yorkshire which was commissioned during the period and officially opened on 8 November.  Start-up costs were higher than had been anticipated as the business focused on the successful launch of several new product ranges for the Group's key retail customer in this category. It is pleasing to be able to report that costs are now running at anticipated levels and the focus is on achieving the forecast returns from the investment.  The period under review has been particularly busy, with the launch of a new range of premium hand lined quiches for the summer season, followed by a premium savoury pie range which was launched in early October with sales outstripping already strong forecasts.  A strong relationship has been developed with the lead retail customer in this category and an exciting Christmas range has been developed in anticipation of the 2013 festive season.

 

Sales of continental products were 3 per cent lower than in the same period last year.  This is a pleasing achievement given the loss of business with one of the Group's retail customers during the first quarter, as this customer continued its strategy of moving to an in-house sourcing strategy.  Sales recovered strongly in the second quarter and were in fact 15 per cent above the equivalent period last year.  The expectation is that this positive trend should continue through the second half of the year, following the launch of more than 45 new products in the period, with significant growth in olives and antipasti and the addition of new retail contracts.  With on-going development of the Group's customer profile, there is continued optimism for the further successful growth of this category.

 

Sandwiches sales were 5 per cent lower following a conscious decision to rationalise the core product range and develop a more focused customer strategy.  These initiatives, driven by a new management team, together with a renewed focus on operational efficiencies have seen the business perform strongly during the first half of the year.  The introduction of new product lines including the "&Made" brand has had a significant beneficial impact.  There is a real opportunity to give food service customers a wider product offering utilising selected products from the Group's broad category base and in particular the new pastry ranges.  With 25 per cent of all breakfast menu offerings including bacon, the business is ideally placed to satisfy a number of food service customer requirements in this area.  Also, given the consolidation that has taken place in the UK sandwich category in the last two years, the business is confident that there will be opportunities to develop a stronger presence in the retail sector, with discussions currently on-going on several fronts.

 

The continued successful development of Cranswick is testament to quality and unstinting dedication of the teams across each of the Group's businesses.  The Company remains highly cash generative enabling both attractive returns to shareholders and continued investment in the Group's infrastructure.  As a result, Cranswick's facilities are amongst the very best in the industry and the resolve to invest further both in existing and new facilities and the most talented people demonstrates the Group's optimism and drive for further growth.

 

 

 

 

Adam Couch

Chief Executive

 

25 November 2013

 

 

Financial review

 

The Group is presenting its interim financial information for the six months to 30 September 2013 with comparative information for the six months to 30 September 2012 and the year to 31 March 2013, restated for the impact of IAS 19 (Revised).

 

Reported results

Following the investment in pig breeding and rearing activities during the period as referred to in more detail below, the Group now monitors performance principally through the adjusted profit measures which exclude certain non-cash items including the net IAS 41 valuation credit of £1.8 million on biological assets and the release of the £1.1 million provision for contingent consideration payable to the previous owners of Kingston Foods which reflects the Directors' current expectations of the anticipated performance of the business over the three year period from acquisition.  The statutory results, including these items, show a 16 per cent increase in profit before tax to £26.1 million (2012: £22.4 million) and a 22 per cent increase in earnings per share to 43.5 pence (2012: 35.7 pence).

 

Revenue

Revenue increased by 15 per cent from £418.6 million to £483.5 million.  Adjusting for the contributions from Kingston Foods Limited which was acquired on 29 June 2012 and Wayland Farms which was acquired on 29 April 2013, underlying sales increased by 13 per cent.

 

Adjusted Group operating profit

Adjusted Group Operating profit increased by 4 per cent to £23.6 million (2012: £22.8 million). Adjusted Group operating margin at 4.9 per cent of sales was lower than the 5.5 per cent delivered in the same period last year and the 5.7 per cent reported for the last financial year as a whole.  The lower operating margin in the period reflected substantially higher input costs compared to those of the same period last year and start-up costs at the new gourmet pastry facility at Malton, North Yorkshire, which was commissioned during the period, partly offset by strong sales volume growth, operational efficiencies and the positive contribution from Wayland Farms in the period following acquisition.

 

Finance costs

Net financing costs at £0.5 million were similar to those reported in the first half of the prior year.

 

Adjusted profit before tax

Adjusted profit before tax was 4 per cent higher at £23.2 million (2012: £22.4 million).

 

Taxation

The tax charge as a percentage of profit before tax was 18.9 per cent (2012: 23.3 per cent).  The standard rate of corporation tax was 23 per cent (2012: 24 per cent).  The charge for the current period benefited from a £0.8 million (2012: £0.3 million) deferred tax credit following a 2 per cent enacted reduction in the UK corporation tax rate from April 2014 and a further 1 per cent reduction from April 2015 (2012: 1 per cent reduction from April 2013).  In addition the £1.1 million contingent consideration provision release was not chargeable to tax.  Adjusting for these items the underlying effective rate was 22.8 per cent (2012: 24.6 per cent).

 

Earnings per share

Adjusted earnings per share rose by 7 per cent to 38.3 pence (2012: 35.7 pence) in the six months to 30 September 2013 due in part to the lower tax charge (note 5).  The average number of shares in issue was 48,631,000 (2012: 48,115,000).

 

Acquisitions

On 29 April 2013 the Group acquired 100 per cent of the issued share capital of East Anglian Pigs Limited (now renamed Wayland Farms Limited) for a net cash consideration of £10.9 million.    Wayland Farms made a positive contribution to Cranswick's activities during the period.  On 13 September 2013 the Group made further investment in its pig rearing and breeding activities by acquiring certain assets and livestock from Dent Limited for £2.0 million.  Further detail on both transactions is set out in note 8.

 

The pig herd was valued on initial recognition at £12.0 million and at 30 September 2013 at £13.8 million in accordance with the provisions of IAS 41 Biological assets.  The valuation gain between initial recognition and the period end of £1.8 million has been disclosed separately on the face of the income statement.

 

Cash flow and net debt

The net cash inflow from operating activities in the period increased to £23.8 million (2012: £18.1 million) reflecting a modest £2.0 million working capital increase (2012: £6.9 million increase).  Net debt increased in the six month period by £17.1 million to £37.2 million, but was only £5.0 million above the previous half year end level, notwithstanding the £12.9 million outflow on acquisitions and £16.9 million of capital expenditure.  Net debt was just 13 per cent of shareholders' funds (2012: 13 per cent) as the Group's balance sheet continues to be conservatively managed.  The Group's current bank facility of £100 million extends to July 2015 and provides the business with generous headroom and medium term funding to meet its objectives.

 

Pensions

The Group operates a number of defined contribution pension schemes whereby contributions are made to schemes operated by major insurance companies.  Contributions to these schemes are determined as a percentage of employees' earnings.  The Group also operates a defined benefit pension scheme which has been closed to further benefit accrual since 2004.  The deficit on this scheme at 30 September 2013 was £3.3 million which compared to £3.4 million at 31 March 2013.  Cash contributions to the scheme during the period, as part of the programme to reduce the deficit, were £0.6 million.  The present value of funded obligations was £21.1 million and the fair value of plan assets was £17.8 million.

 

The valuation of the defined benefit pension liability is dependent upon market conditions and actuarial methods and assumptions (including mortality assumptions).   Such changes in actuarial assumptions and the performance of the funds may result in changes to amounts charged or released through the income statement and the Group may be required to pay increased pension contributions in the future.  The Board will regularly review its pension strategy with reference to the value of assets and liabilities under the pension scheme as well as the potential impact of changes in actuarial assumptions.

 

Restatement

Following the amendment to IAS 19, which came into effect for the Group from 1 April 2013, interest on pension scheme assets is now calculated by reference to the liability discount rate rather than the expected long-term yield on the assets, as was the case previously.  Comparative information has been restated accordingly and further details, including the impact on the Group's profit before tax, are set out in note 2.

 

Principal risks and uncertainties

There are a number of risks and uncertainties facing the business in the second half of the financial year.  The Board considers, with the exception of the risks associated with the acquisition of pig rearing and breeding operations as detailed below, these risks and uncertainties to be the same as those described in the Report & Accounts for the year ended 31 March 2013, dated 20 May 2013, a copy of which is available on the Group's website at www.cranswick.co.uk.  The principal risks and uncertainties which are set out in detail on pages 11 to 16 of the Report & Accounts for the year ended 31 March 2013 are:

 

Industry risks

·      State of the economy

·      Competition, customer retention and reliance on key customers

·      Raw material price fluctuations

·      Environmental matters

·      Food scares and product contamination

·     Supplier standards

Operational risks

·      Food safety

·      Business continuity

·      Legislation

·      Overseas markets

·      Technology

·     Business integration

Human resource risks

·      Health & Safety

·      Ethical management

·      Staff recruitment and retention

·     Access to workforce

Financial risks

·      Interest rate, currency, liquidity and credit risk

·      Granting of credit and recoverability of debt

·     Business acquisitions

 

 

Additional risks

As a result of the acquisition of pig rearing and breeding operations, as detailed in note 8, the Board considers that the Group now faces the following additional principal risks and uncertainties:

 

Risk area

Nature of risk and potential impact

Risk mitigation






Pig herd infection and disease


Infection or disease outbreak results in the loss of livestock, or the inability to move animals freely, impacting on the supply of raw materials to the Group's abattoirs and secondary processors as well as Group profitability


The Group's farming facilities have a broad geographical spread to avoid over reliance on a single production area

The Group vaccinates its pig herds against common porcine diseases

The Group's farms employ formal bio-security standards featuring movement controls and veterinary inspections






Purchasing of pig feed


The volatility of commodity pricing on pig feed impacts on the operating costs of the Group's livestock business


The Group protects against its exposure to pig feed price fluctuations through the use of forward pricing agreements to fix future input prices, where appropriate

 

 

Forward looking information

This interim report contains certain forward looking statements.  These statements are made by the Directors in good faith based on the information available to them at the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking information.

 

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the 'Review of activities'.  The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described above.  The Group has considerable financial resources together with strong trading relationships with its key customers and suppliers.  As a consequence, the Directors believe that the Group is well placed to manage its business risk successfully, despite the current uncertain economic outlook.

 

After 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 condensed consolidated interim financial statements.

 

 

 

 

Mark Bottomley

Finance Director

 

25 November 2013

 

 

Cranswick plc: Group income statement (unaudited)

for the six months ended 30 September 2013

 

 

            Half year

Year to


   2013


   2012

31 March 2013

Notes

£'000


£'000


£'000




(Restated)


(Restated)








Revenue


483,521


418,645


875,171








Adjusted Group operating profit


23,640


22,834


50,041








Impairment of property, plant and equipment


-


-


(1,836)

Release of contingent consideration


1,086


-


-

Net IAS 41 valuation movement on biological assets


1,795


-


-








Group operating profit

4

26,521


22,834


48,205








Finance revenue


22


39


62

Finance costs


(492)


(488)


(963)








Profit before tax


26,051


22,385


47,304








Taxation

5

(4,920)


(5,222)


(11,165)








Profit for the period


21,131


17,163


36,139








 

Earnings per share (pence)







On profit for the period:







Basic

6

43.5p


35.7p


74.9p

Diluted

6

43.3p


35.6p


74.7p















On adjusted profit for the period:







Basic

6

38.3p


35.7p


78.7p

Diluted

6

38.1p


35.6p


78.5p

 

 

Cranswick plc: Group statement of comprehensive income (unaudited)

for the six months ended 30 September 2013

 

 

 

 

 

      Half year

Year to

31 March



2013

£'000


2012

£'000


2013

£'000




(Restated)

(Restated)







Profit for the period

21,131


17,163


36,139







Other comprehensive income






Other comprehensive income to be reclassified to profit or loss in subsequent periods:






Cash flow hedges







Losses arising in the period

(78)


(15)


(4)

Reclassification adjustments for losses included in the income statement


 

4


 

69


 

69

Income tax effect


15


(12)


(15)

Net other comprehensive income to be reclassified to profit or loss in subsequent periods


 

(59)


 

42


 

50








Items not to be reclassified to profit or loss in subsequent periods:







Actuarial (losses)/ gains on defined benefit pension scheme


(475)


(831)


1,077

Income tax effect


9


191


(293)

Net other comprehensive income not being reclassified to profit or loss in subsequent periods


 

(466)


 

(640)


 

784
 
Other comprehensive income, net of tax


 

(525)


 

(598)


 

834
 
Total comprehensive income, net of tax


 

20,606


 

 16,565


 

36,973


Cranswick plc:  Group balance sheet (unaudited)

at 30 September 2013

 


 

            Half year


As at

31 March



2013

£'000


2012

£'000


2013

£'000








Non-current assets







Intangible assets


130,517


130,382


129,003

Property, plant and equipment


155,782


138,003


147,386

Biological assets


1,337


-


-

Financial assets


104


1,050


702

Total non-current assets


287,740


269,435


277,091








Current assets







Biological assets


12,416


-


-

Inventories


54,961


44,311


48,463

Trade and other receivables


92,249


91,161


93,097

Financial assets


696


696


696

Cash and short-term deposits


19,453


10,705


7,633

Total current assets


179,775


146,873


149,889








Total assets


467,515


416,308


426,980








Current liabilities







Financial liabilities


(380)


(326)


(608)

Income tax payable


(5,868)


(6,015)


(7,123)

Provisions


-


(189)


-

Total current liabilities


(113,374)


(101,102)


(113,840)








Non-current liabilities







Other payables


(445)


(434)


(410)

Financial liabilities


(57,167)


(46,741)


(29,572)

Deferred tax liabilities


(5,798)


(6,446)


(5,947)

Provisions


(342)


(188)


(190)

Defined benefit pension scheme deficit


(3,334)


(5,725)


(3,357)

Total non-current liabilities


(67,086)


(59,534)


(39,476)








Total liabilities


(180,460)


(160,636)


(153,316)








Net assets


287,055


255,672


273,664








Equity







Called-up share capital


4,878


4,833


4,853

Share premium account


62,886


60,221


61,603

Share-based payments


7,853


6,579


6,765

Hedging reserve


(63)


(15)


(4)

Retained earnings


211,501


184,054


200,447

Equity attributable to owners of the parent


287,055


255,672


273,664


Cranswick plc: Group statement of cash flows (unaudited)

for the six months ended 30 September 2013

 


   

         Half year

   Year to 31 March



2013

£'000

2012

£'000

2013

£'000


Note


(Restated)

(Restated)






Operating activities





Profit for the period


21,131

17,163

36,139

Adjustments to reconcile Group profit for the period to net cash inflows from operating activities:





Income tax expense


4,920

5,222

11,165

Net finance costs


470

449

901

Gain on sale of property, plant and equipment


(51)

(32)

(237)

Depreciation of property, plant and equipment


8,485

7,579

15,486

Impairment of property, plant and equipment


-

-

1,786

Amortisation of intangibles


79

40

119

Share-based payments


1,088

976

1,162

Difference between pension contributions paid and amounts recognised in the income statement


 

(497)

 

(448)

 

(908)

Release of government grants


(49)

(32)

(61)

Release of contingent consideration


(1,086)

-

-

Net IAS 41 valuation movement on biological assets


(1,795)

-

-

Increase in inventories


(6,068)

(5,362)

(9,514)

Decrease/ (increase) in trade and other receivables


2,341

(3,758)

(5,568)

Increase in trade and other payables


1,718

2,193

10,561

Cash generated from operations


30,686

23,990

61,031

Tax paid


(6,880)

(5,937)

(11,219)

Net cash from operating activities


23,806

18,053

49,812






Cash flows from investing activities





Interest received


12

39

62

Principal amounts received in relation to loans advanced


598

348

696

Acquisition of subsidiary, net of cash acquired

8

(12,944)

(5,986)

(5,986)

Purchase of property, plant and equipment


(16,857)

(14,596)

(30,809)

Receipt of government grants


100

4

-

Proceeds from sale of property, plant and equipment


90

48

318

Proceeds from sale of investment classified as held for sale


-

221

221

Net cash used in investing activities


(29,001)

(19,922)

(35,498)






Cash flows from financing activities





Interest paid


(431)

(455)

(862)

Proceeds from issue of share capital


27

56

491

Proceeds from borrowings


27,000

2,000

-

Repayment of borrowings


-

-

(14,000)

Dividends paid


(8,744)

(7,828)

(11,404)

Repayment of capital element of finance leases


(288)

(183)

(243)

Net cash from/ (used in) financing activities


17,564

(6,410)

(26,018)






Net increase/ (decrease) in cash and cash equivalents


12,369

(8,279)

(11,704)

Cash and cash equivalents at beginning of period


7,084

18,788

18,788

Cash and cash equivalents at end of period


19,453

10,509

7,084

 

 

Cranswick plc: Group statement of changes in equity (unaudited)

for the six months ended 30 September 2013

 

Share

capital

 

£'000

Share

premium

 

£'000

Share-

based

payments

£'000

Hedging

reserve

 

£'000

Retained

earnings

 

£'000

Total

equity

 

£'000

 








 

At 1 April 2013

4,853

61,603

6,765

(4)

200,447

273,664









 

Profit for the period

-

-

-

-

21,131

21,131

 

Other comprehensive income

-

-

-

(59)

(466)

(525)

 

Total comprehensive income

-

-

-

(59)

20,665

20,606

 








 

Share-based payments

-

-

1,088

-

-

1,088

 

Scrip dividend

11

1,270

-

-

-

1,281

 

Share options exercised

14

13

-

-

-

27

 

Dividends

-

-

-

-

(10,025)

(10,025)

 

Deferred tax relating to changes in equity

-

-

-

-

212

212

 

Corporation tax relating to changes in equity

 

-

 

-

 

-

 

-

 

202

 

202

 

At 30 September 2013

4,878

62,886

7,853

(63)

211,501

287,055

 








 

(Restated)







 

At 1 April 2012

4,803

58,642

5,603

(69)

176,953

245,932

 








 

Profit for the period

-

-

-

-

17,163

17,163

 

Other comprehensive income

-

-

-

54

(652)

(598)

 

Total comprehensive income

-

-

-

54

16,511

16,565

 








 

Share-based payments

-

-

976

-

-

976

 

Scrip dividend

19

1,534

-

-

-

1,553

 

Share options exercised

11

45

-

-

-

56

 

Dividends

-

-

-

-

(9,381)

(9,381)

 

Deferred tax relating to changes in equity

-

-

-

-

(68)

(68)

 

Corporation tax relating to changes in equity

 

-

 

-

 

-

 

-

 

39

 

39

 

At 30 September 2012

4,833

60,221

6,579

(15)

184,054

255,672

 








 

(Restated)







 

At 1 April 2012

4,803

58,642

5,603

(69)

176,953

245,932

 








 

Profit for the year

-

-

-

-

36,139

36,139

 

Other comprehensive income

-

-

-

65

769

834

 

Total comprehensive income

-

-

-

65

36,908

36,973

 








 

Share-based payments

-

-

1,162

-

-

1,162

 

Scrip dividend

31

2,489

-

-

-

2,520

 

Share options exercised

19

472

-

-

-

491

 

Dividends

-

-

-

-

(13,924)

(13,924)

 

Deferred tax relating to changes in equity

-

-

-

-

370

370

 

Corporation tax relating to changes in equity

 

-

 

-

 

-

 

-

 

140

 

140

 

At 31 March 2013

4,853

61,603

6,765

(4)

200,447

273,664

 

 

 

Responsibility statement

The Directors confirm that to the best of their knowledge the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting and includes a fair review of the information required by DTR 4.2.7R (an indication of important events during the first six months and a description of the principle risks and uncertainties for the remaining six months of the year) and by DTR 4.2.8R (a disclosure of related party transactions and changes therein) of the Disclosure and Transparency Rules.

 

On behalf of the Board

 

 

 

 

Martin Davey               Mark Bottomley

Chairman                      Finance Director

 

25 November 2013

 

 

Notes to the interim accounts

 

1.   Basis of preparation

 

This interim report was approved by the Directors on 25 November 2013 and has been prepared in accordance with the Disclosure and Transparency Rules of the UK's Financial Services Authority and the requirements of IAS 34 Interim Financial Reporting as adopted by the European Union. The information does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 March 2013 prepared under IFRS as adopted by the European Union have been filed with the Registrar of Companies. The report of the auditors on the statutory accounts was not qualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006. The interim report has not been reviewed pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information' and does not include all of the information required for full annual financial statements.

 

 

2.   Accounting policies

 

The accounting policies applied by the Group in this interim report are the same as those applied by the Group in the financial statements for the year ended 31 March 2013.  Except as follows:

 

During the period the Group acquired East Anglian Pigs Limited (renamed Wayland Farms Limited) the principal activities of which are pig breeding, rearing and finishing.  Subsequently, the Group also acquired certain trade and assets of another business with similar activities.  Both transactions included the acquisition of biological assets in the form of breeding sows (classified as non-current assets) and their progeny for processing within the Group and externally (classified as current assets).  On initial recognition and at the balance sheet date biological assets have been measured at their fair value less costs to sell, in line with IAS 41.  Gains and losses in relation to the fair value of biological assets are recognised in the income statement, within 'cost of sales', in the period in which they arise.

 

In addition, during the period, the Group has amended its income statement presentation to present cost of sales, selling and distribution costs, administrative expenses and gross profit within the notes to the financial statements rather than on the face of the income statement as was the case previously.  The Directors consider it appropriate to amend the income statement presentation in this way to facilitate a more meaningful comparison with prior and future periods following the acquisitions in the current period which introduce valuation movements on biological assets into the income statement.

 

Non-GAAP measures - Adjusted Group operating profit, adjusted profit before tax and adjusted earnings per share

 

International Accounting Standards (IAS / IFRSs)

Effective date




IFRS 7

Financial Instruments: Disclosures

1 January 2013

IFRS 13

Fair Value Measurement

1 January 2013

IAS 1

Presentation of Items of Other Comprehensive Income (Amendment)

1 July 2012

IAS 19 (revised)

Employee Benefits

1 January 2013

IFRS

May 2012 Annual Improvements

1 January 2013




IAS 1 Presentation of Items of Other Comprehensive Income (Amendment)

 

IAS 19 (revised) Employee Benefits

 

3.    Segmental analysis

 

Additions to property, plant and equipment during the period totalled £12.9 million (2012: £14.1 million).  Future capital expenditure under contract at 30 September 2013 was £5.6 million (2012: £5.0 million).

 

 

4.    Group operating profit

 

Group operating costs comprise:

 

 

     

      Half year

Year to

31 March



2013

£'000


2012

£'000


2013

£'000







Cost of sales excluding net IAS 41 valuation movement on biological assets

 

429,806


 

367,649


 

768,633

Net IAS 41 valuation movement on biological assets

(1,795)


-


-

Cost of sales

428,011


367,649


768,633








Gross profit


55,510


50,996


106,538








Selling and distribution costs


18,184


16,699


34,627








Administrative expenses excluding impairment and release of contingent consideration


 

11,891


 

11,463


 

21,870

Impairment of property, plant and equipment


-


-


1,836

Release of contingent consideration


(1,086)


-


-

Administrative expenses


10,805


11,463


23,706








Total operating costs


457,000


395,811


826,966

 

 

5.    Taxation

 

The tax charge for the period was £4.9 million (2012: £5.2 million) and represents a rate of 18.9 per cent (2012: 23.3 per cent).  The tax charge for the period benefited from a £0.8 million deferred tax credit reflecting the enacted reduction in the UK corporation tax rate to 20 per cent by 1 April 2015.  In addition the £1.1 million contingent consideration provision release was not chargeable to tax.  Adjusting for these items, the overall effective rate was 22.8 per cent.

 

 

6.    Earnings per share

 

Basic earnings per share are based on profit for the period attributable to shareholders and on the weighted average number of shares in issue during the period of 48,631,199 (2012: 48,115,168).  The calculation of diluted earnings per share is based on 48,837,327 shares (2012: 48,236,454).

 

Adjusted earnings per share

During the period the Group released contingent consideration in relation to the acquisition of Kingston Foods Limited.  In addition, the Group acquired Wayland Farms Limited (note 8), and subsequently recognised a profit on the IAS 41 valuation movement on biological assets acquired.  In the prior year the Group impaired freehold property, plant and equipment to their fair value at its mothballed production facility in East Lancashire.

 

As the release of contingent consideration and the impairment of property, plant and equipment do not form part of the on-going business of the Group and due to the volatility of the valuation of biological assets the Directors consider it appropriate to present an adjusted measure of earnings per share on the face of the income statement which excludes the effects of these items to facilitate a more meaningful comparison with prior and future periods.  Adjusted earnings per share are calculated using the weighted average number of shares for both basic and diluted amounts as detailed above.

 

Adjusted profit for the period is derived as follows:

 

 

 

      Half year

Year to

31 March



2013

£'000


2012

£'000


2013

£'000





(Restated)

(Restated)







Profit for the period

21,131


17,163


36,139

Impairment of property, plant and equipment

-


-


1,836

Release of contingent consideration

(1,086)


-


-

Net IAS 41 valuation movement on biological assets


(1,795)


-


-

Tax on net IAS 41 valuation movement on biological assets


359


-


-

Adjusted profit for the period


18,609


17,163


37,975

 

 

7.    Dividends - half year ended 30 September

 

 

 

 

      Half year

Year to

31 March



2013

£'000


2012

£'000


2013

£'000







Interim dividend for year ended 31 March 2013 of 9.4p per share

-


-


4,543

Final dividend for year ended 31 March 2013 of 20.6p (2012: 19.5p)

per share

 

10,025

 

 

 

9,381


 

9,381



10,025


9,381


13,924

 

The interim dividend for the year ending 31 March 2014 of 10.0p per share was approved by the Board on 25 November 2013 for payment to shareholders on 24 January 2014 and therefore has not been included as a liability as at 30 September 2013.

 

 

8.   Acquisitions

 

On 29 April 2013, the Group acquired 100 per cent of the issued share capital of East Anglian Pigs Limited (renamed Wayland Farms Limited) for a total consideration of £13.5 million.  On 20 August 2013, the Group incorporated a new company; Wold Farms Limited and subsequently, on 13 September 2013, Wold Farms Limited acquired certain trade and assets of Dent Limited for a total consideration of £2.0 million.  The principal activities of both Wayland Farms Limited and Wold Farms Limited are pig breeding, rearing and finishing.  The acquisitions give the Group greater control over its supply chain.

 

Fair values of the net assets at the date of acquisition were as follows:

 



Provisional fair values




Wayland Farms

Limited


Wold   Farms Limited


 

Total




£'000


£'000


£'000









Net assets acquired:








Property, plant and equipment


3,828


272


4,100


Biological assets


10,550


1,425


11,975


Inventories


398


15


413


Trade receivables


1,368


-


1,368


Bank and cash balances


2,540


-


2,540


Trade payables


(3,258)


-


(3,258)


Provisions


(150)


-


(150)


Financial liabilities


(1,500)


-


(1,500)


Finance lease obligations


(603)


-


(603)


Corporation tax liability


(148)


-


(148)


Deferred tax liability


(905)


59


(846)




12,120


1,771


13,891









Goodwill arising on acquisition


1,355


238


1,593

Total consideration


13,475


2,009


15,484









Satisfied by:








Cash


13,475


2,009


15,484









Net cash outflow arising on acquisition:








Cash consideration paid


13,475


2,009


15,484


Cash and cash equivalents acquired


(2,540)


-


(2,540)




10,935


2,009


12,944

 

The fair values on acquisition are provisional due to the timing of the transactions and will be finalised within twelve months of the respective acquisition dates.

 

 

 

8.   Acquisitions (continued)

 

In the period since acquisition, the external revenues of Wold Farms Limited were £nil and the company contributed a net profit after tax of £nil to the Group.  Due to the nature of the transaction, with only a proportion of the trade and assets of Dent Limited being acquired, the Directors consider it impracticable to assess the impact of Wold Farms Limited on the revenues and profit after tax of the Group had the combination taken place at the beginning of the period.

 

Included in the £1,593,000 of goodwill recognised, are certain intangible assets that cannot be individually separated from the acquirees and reliably measured due to their nature.  These items include the expected value of synergies, the assembled workforces and the strategic benefits of vertical integration including security of supply.

 

Transaction costs of £145,000 and £60,000 have been expensed in relation to Wayland Farms Limited and Wold Farms Limited respectively, and are included in administrative expenses.

 

 

9.   Analysis of Group net debt

 

At

31 March

2013


Cash

flow


Non-cash

movements


At

30 September

2013


£'000


£'000


£'000


£'000









Cash and short-term deposits

7,633


11,820


-


19,453

Overdrafts

(549)


549


-


-

Net cash and cash equivalents

7,084


12,369


-


19,453

Other financial assets

1,398


(598)


-


800


8,482


11,771


-


20,253









Revolving credit

(28,498)


(27,000)


(1,625)


(57,123)

Finance leases

(55)


313


(603)


(345)

Net debt

(20,071)


(14,916)


(2,228)


(37,215)









Net debt is defined as cash and cash equivalents, loans receivable and interest rate swaps at fair value less interest bearing liabilities (net of unamortised issue costs).

 

 

10.  Related party transactions

 

During the period the Group entered into transactions, in the ordinary course of business, with its subsidiaries which are related parties.  Balances and transactions with subsidiaries are eliminated on consolidation.


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