Interim Results

RNS Number : 2404I
Cranswick PLC
17 November 2008
 









Embargoed 7am November 17 2008

 

CRANSWICK plc: INTERIM RESULTS

CONTINUED RECORD OF GROWTH


Cranswick plc, the food producer, announces its unaudited results for the six months ended 30 September 2008.


Highlights:


  • Sales up 9 per cent at £321.2m (2007: £294.3m)

  • Profit before tax rose 5 per cent to £18.5m (2007: £17.6m)*

  • Earnings per share up 8 per cent at 28.9p (2007: 26.8p)*

  • Dividend increased by 8 per cent to 7.0p per share (2007: 6.5p)

  • Strong cash generation


before exceptional items


Cranswick Chairman Martin Davey said:  'It is pleasing to be able to report once more that Cranswick has continued its record of growth. This is especially encouraging given the challenges of raw material inflation, significant currency fluctuations and weakening economic activity. 


'In the food business there was success in growing the range of products supplied into our customer base across the categories of premium, standard plus, standard and 'value'.


'It was good to see growth in sales of 'air-dried' bacon from the new bacon factory following substantial recent investment.  Further growth in the customer base for this premium bacon is anticipated during the second half of the year.


'Investment continues to be made in new product development to bring fresh ideas to the consumer.


'Whilst enormous cost pressures have been experienced, and dealt with, over the past year the signs are that this inflationary element has peaked. The Company is strongly cash generative and has proven management teams across the Group in which the Board has full confidence to continue Cranswick's successful development.'


-ends-

For further information:


Paul Quade                                                                                          07947 186694

CityRoad Communications                                                                   020 7248 8010

 

CHAIRMAN'S STATEMENT 


Results and review of activities

It is pleasing to be able to report once more to Shareholders that Cranswick has continued its record of growth. This is especially encouraging given the challenges of raw material inflation, significant currency fluctuations and weakening economic activity.


Turnover in the period was £321.2 million, an increase of 9 per cent on that achieved in the same period last year. On a like-for-like basis the increase was 10 per cent, the difference being turnover attributable to the animal feed business which was sold in May 2007. Profit before tax at £18.5 million is up 5 per cent on a year ago, prior to the exceptional gain which arose on the sale of the feed business. Earnings per share on the same basis, prior to the deferred tax charge referred to below, rose 8 per cent to 28.9 pence per share. Earnings per share post the exceptional deferred tax charge was 14.0 pence.


Sales in the food business increased by 9 per cent on a like-for-like basis to £298.7 millionwhich included the impact of inflation, as the Company sought to pass on higher raw material costs. There were notable increases in a number of sales categories. Pork sales were 10 per cent higher; sales of cooked meats and sausages each increased by 8 per cent; sales of continental products were up by 7 per cent and bacon and sandwich sales both rose by 24 per cent. The time lag that typically occurs before rising raw material prices can be incorporated into selling prices meant that it was necessary for some of those higher costs to be absorbed by the business.


There was success in growing the range of products supplied into our customer base across the categories of premium, standard plus, standard and 'value'. It was good to see growth in sales of 'air-dried' bacon from the new bacon factory following substantial recent investment. Further growth in the customer base for this premium bacon is anticipated during the second half of the year. The first phase of the development at the pork processing site is nearing completion and a site has been acquired adjacent to the sausage production facility which is being earmarked for the medium term expansion of this aspect of the business.


Investment continues to be made in new product development ('npd') to bring fresh ideas to the consumer. This embraces a significant number of products and processes including 'Freedom Foods' accredited fresh pork, Wiltshire and other specialist cure bacon and gammons, the ongoing roll-out of the 'Simply Sausages' brand and numerous developments within cooked meats. The broadening of the product range is not limited to 'npd' and meat products. For the first time the Company has introduced a range of continental cheese to the customer base and within sandwiches the popular combinations are supported by regular introduction of new lines.


Sales in the pet business were 26 per cent ahead of last year at £22.5 million. Inflation was confined primarily to the bird food activity whereas there was a relatively stable environment in aquatics. Sales in the pet products business rose by 34 per cent and it was good to see convenience sized packs of both own brand and private label products in a wide range of retail outlets. The Nature's Feast brand is now recognised as one of the category leaders and represents innovation, quality and excellent value. Aquatic sales were 10 per cent higher reflecting continued strong growth in marine livestock. During the period the 'Aquaray' aquarium lighting range was launched and initial reaction has been extremely positive. This provides the marine hobbyist with a number of benefits including substantial energy savings compared to other products. The new Lisbon branch opened on schedule during October and provides the opportunity to increase sales in both Spain and Portugal.



Cash flow and borrowings

The cash flow of the business has remained strong with net cash from operating activities of £17.6 million and with net borrowings reducing over the six month period by £3.6 million to £74.7 million notwithstanding a working capital increase of £5.4 million which arose mainly as a result of a policy to increase stock holdings of raw materials in a period of rising prices. The stocks are being progressively reduced in the third quarter. Capital expenditure was much lower than the same period last year at £6.2 million, only slightly higher than the depreciation charge. The net interest charge was similar to the previous first half at £2.2 million but interest cover improved from 9.0 times to 9.3 times, a very comfortable level.


Taxation

The tax charge for the period includes a one-off exceptional deferred tax charge of £6.9 million arising from a change in UK corporate tax legislation in the Finance Act 2008 to phase out industrial buildings allowances. This charge had no impact on the cash flow of the business during the period and represents the additional tax payable over the twenty-five year period the allowances would have been available to the Company. These increased payments are offset by the reduction in the headline rate of corporation tax from 30 per cent to 28 per cent effective in the current year.  


Dividend

The interim dividend is being increased by 8 per cent to 7.0 pence per share. The dividend will be paid on 23 January 2009 to Shareholders on the register at the close of business on 28 November 2008. Shareholders will again have the option to receive the dividend by way of scrip issue.


Employees

It is a tremendous reflection on the expertise and commitment of all at Cranswick that the Company has continued to progress in what has been a challenging trading environment. On behalf of the Board I would like to express our thanks and appreciation to all employees for their contribution.


Outlook

Whilst enormous cost pressures have been experienced, and dealt with, over the past year the signs are that this inflationary element has peaked. The Company is strongly cash generative and has proven management teams across the Group in which the Board has full confidence to continue Cranswick's development.





Martin Davey


Chairman


17 November 2008 




CRANSWICK plc: GROUP INCOME STATEMENT (UNAUDITED)

 for the six months ended 30 September 2008



Notes

Half Year

2008


2007 (Restated)



Before

exceptionals

£'000

Exceptionals


£'000

Total


£'000


Before

exceptionals

£'000

Exceptionals


£'000

Total


£'000

Revenue

3

321,159

-

321,159


294,292

-

294,292

Cost of sales


(274,690)

-

(274,690)


(250,751)

-

(250,751)

Gross profit


46,469

-

46,469


43,541

-

43,541

Operating expenses


(25,710)

-

(25,710)


(23,780)

-

(23,780)

Operating profit

3

20,759

-

20,759


19,761

-

19,761

Profit on disposal of property, 

plant and equipment

-

-

-


-

401

401

Profit before finance and taxation


20,759

-

20,759


19,761

401

20,162

Finance revenue


2

-

2


91

-

91

Finance costs


(2,246)

-

(2,246)


(2,297)

-

(2,297)

Profit before tax 


18,515

-

18,515


17,555

401

17,956

Taxation

4

(5,221)

(6,867)

(12,088)


(5,231)

24

(5,207)

Profit for the period 


13,294

(6,867)

6,427


12,324

425

12,749










Attributable to:









Equity holders of the parent


13,294


6,427


12,272


12,697

Minority interest


-


-


52


52



13,294


6,427


12,324


12,749

Earnings per share: 









Basic

5

28.9p

(14.9)p

14.0p


26.8p

0.9p

27.7p

Diluted

5

28.8p

(14.9)p

13.9p


26.6p

0.9p

27.5p




Notes

Year to 31 March 2008




Before

exceptionals

£'000

Exceptionals


£'000

Total


£'000

Revenue

3

598,893

-

598,893

Cost of sales


(513,701)

-

(513,701)

Gross profit


85,192

-

85,192

Operating expenses


(46,824)

-

(46,824)

Operating profit

3

38,368

-

38,368

Profit on disposal of property, 

plant and equipment

-

1,622

1,622

Profit before finance and taxation


38,368

1,622

39,990

Finance revenue


4

-

4

Finance costs


(4,650)

-

(4,650)

Profit before tax 


33,722

1,622

35,344

Taxation

4

(9,874)

187

(9,687)

Profit for the period 


23,848

1,809

25,657






Attributable to:





Equity holders of the parent


23,796


25,605

Minority interest


52


52



23,848


25,657

Earnings per share: 





Basic

5

51.9p

4.0p

55.9p

Diluted

5

51.6p

3.9p

55.5p









CRANSWICK plc: GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED)

for the six months ended 30 September 2008




Half Year


Year to 

31 March



2008

£'000


2007

£'000


2008

£'000

Income and expense recognised directly in equity






Movement on hedging items:







Amount recognised in equity during the period


(721)



339



504

Amount removed from equity and included in the income statement



(98)



(95)



196

Exchange differences on retranslation of foreign operations



-



(2)



(17)

Deferred tax recognised directly in equity


312


(411)


(725)

Corporation tax recognised directly in equity


7


38


88

Net income recognised directly in equity


(500)


(131)


46

Profit for the year


6,427


12,749


25,657

Total recognised income and expense for the period



5,927



12,618



25,703

Attributable to:







Equity holders of the parent


5,927


12,566


25,651

Minority interest


-


52


52



5,927


12,618


25,703

  CRANSWICK plc: GROUP BALANCE SHEET

(UNAUDITED)

30 September 2008

  

 
Notes
Half year
 
As at
31 March
 
 
2008
£’000
 
2007
£’000
 
2008
£’000
Non–current assets
 
 
 
 
 
 
Goodwill
 
117,756
 
117,756
 
117,756
Property, plant and equipment
 
92,564
 
85,707
 
92,721
 
 
210,320
 
203,463
 
210,477
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
Inventories
 
39,431
 
26,963
 
30,638
Trade and other receivables
 
74,925
 
73,267
 
77,348
Other financial assets
 
210
 
574
 
1,029
Cash and cash equivalents
 
3,800
 
6,869
 
3,770
Total current assets
 
118,366
 
107,673
 
112,785
 
 
 
 
 
 
 
Non-current assets classified as held for sale
 
-
 
280
 
-
 
 
 
 
 
 
 
Total assets
3
328,686
 
311,416
 
323,262
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
Trade and other payables
 
(73,348)
 
(74,718)
 
(73,025)
Other financial liabilities
 
(33,784)
 
(23,742)
 
(31,811)
Income tax payable
 
(5,587)
 
(5,775)
 
(3,798)
Provisions
 
(153)
 
(294)
 
(153)
Total current liabilities
 
(112,872)
 
(104,529)
 
(108,787)
 
 
 
 
 
 
 
Non-current liabilities
 
 
 
 
 
 
Other payables
 
(5)
 
(19)
 
(8)
Other financial liabilities
 
(44,850)
 
(55,979)
 
(50,414)
Deferred tax liabilities
 
(13,647)
 
(5,677)
 
(7,463)
Provisions
 
(1,275)
 
(1,588)
 
(1,336)
Total non-current liabilities
 
(59,777)
 
(63,263)
 
(59,221)
 
 
 
 
 
 
 
Total liabilities
3
(172,649)
 
(167,792)
 
(168,008)
 
 
 
 
 
 
 
Net assets
 
156,037
 
143,624
 
155,254
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
Called-up share capital
8
4,631
 
4,602
 
4,623
Share premium account
8
49,165
 
47,640
 
48,693
Share based payments reserve
8
2,484
 
1,488
 
1,939
Hedging and translation reserves
8
215
 
593
 
1,034
Retained earnings
8
99,542
 
89,301
 
98,965
Total equity
 
156,037
 
143,624
 
155,254



CRANSWICK plc: GROUP CASHFLOW STATEMENT

(UNAUDITED)

for the six months ended 30 September 2008



 
 
Half year
Year to
31 March
 
 
2008
£’000
2007
£’000
2008
£’000
Operating activities
 
 
 
 
Profit before finance and taxation
 
20,759
20,162
39,990
Adjustments to reconcile group profit before finance and taxation to net cash inflows from operating activities:
 
 
 
 
Depreciation
 
5,543
4,982
10,090
Share based payments
 
545
470
921
Release of government grants
 
(3)
(18)
(29)
Profit on sale of property, plant and equipment
 
(77)
(438)
(2,170)
Increase in inventories and biological assets
 
(8,793)
(2,401)
(6,077)
Decrease/(increase) in trade and other receivables
 
2,423
(6,886)
(10,209)
Increase in trade and other payables
 
1,007
9,685
7,732
Cash generated from operations
 
21,404
25,556
40,248
Tax paid
 
(3,796)
(4,150)
(9,046)
Net cash from operating activities
 
17,608
21,406
31,202
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
Interest received
 
2
91
4
Acquisition of subsidiaries
 
-
(55)
(54)
Purchase of property, plant and equipment
 
(6,172)
(12,697)
(25,295)
Proceeds from sale of property, plant and equipment
 
163
2,693
4,228
Proceeds from sale of subsidiary
 
-
500
500
Net cash used in investing activities
 
(6,007)
(9,468)
(20,617)
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
Interest paid
 
(2,230)
(3,038)
(5,332)
Proceeds from issue of share capital
 
38
213
683
Repayment of borrowings
 
(5,922)
(7,775)
(5,420)
Dividends paid
 
(5,727)
(5,357)
(7,734)
Net cash used in financing activities
 
(13,841)
(15,957)
(17,803)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(2,240)
(4,019)
(7,218)
Cash and cash equivalents at beginning of period
 
(7,698)
(494)
(494)
Effect of foreign exchange rates
 
-
3
14
Net cash and cash equivalents
 
(9,938)
(4,510)
(7,698)
 
 
 
 
 



 





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 charges therein) of the Disclosure and Transparency Rules.


On behalf of the Board




M Davey    J Lindop

Chairman    Finance Director

17 November 2008


Notes to the interim accounts

 

 
1.     Basis of preparation

 

This interim report was approved by the Directors on 17 November 2008 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 240 of the Companies Act 1985. The statutory accounts for the year ended 31 March 2008 prepared under IFRS have been filed with the Registrar of Companies. The report of the auditors was not qualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The interim report has not been audited 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 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 2008.


In accordance with IAS18, the directors have reclassified £8.9 million in the six months to 30 September 2007 from cost of sales and operating costs to revenue in respect of discounts and similar allowances, a presentation which more appropriately reflects the nature of these amounts. This restatement has no impact on net profit or earnings per share.


3. Segmental analysis - half year ended 30 September




Turnover


Operating profit



2008

2007


2008

2007



£'000

£'000


£'000

£'000




(Restated)




Food


298,679

276,511


21,110

20,504

Pet


22,480

17,781


1,151

517



321,159

294,292


22,261

21,021

Central costs


-

-


(1,502)

(1,260)

Group total


321,159

294,292


20,759

19,761




Assets


Liabilities



2008

2007


2008

2007



£'000

£'000


£'000

£'000








Food


301,628

283,010


67,493

67,197

Pet


22,939

20,510


3,708

3,810



324,567

303,520


71,201

71,007

Unallocated


4,119

7,896


101,448

96,785

Group total


328,686

311,416


172,649

167,792


Unallocated assets and liabilities comprise certain items of property, plant and equipment, non-current assets classified as held for sale, loan notes, net debt and taxation balances.

Since 30 September 2007, the construction of the new Gourmet Bacon Factory has increased assets within the Food segment. Future capital expenditure under contract at 30 September 2008 was £2.6 million (2007: £4.7million).




4. Taxation

The recurring tax charge for the six months ended 30 September 2008 reflects the estimated effective rate for the full year of 28.2%.


The exceptional charge of £6.9 million relates to the increase in the deferred tax provision arising from the abolition of Industrial Buildings Allowances.



5. 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 period of 46,047,348 (200745,785,554) excluding shares held by Cranswick Trustees Limited on behalf of the Cranswick plc Employee Benefit Trust. The calculation of diluted earnings per share is based on 46,169,483 shares (200746,190,021).



6. Dividends - half year ended 30 September

 
 
Half year
Year to
31 March
 
 
2008
£’000
2007
£’000
2008
£’000
 
 
 
 
 
Interim for year ended 31 March 2008 of 6.5p per share
 
-
-
2,980
Final for year ended 31 March 2008 of 13.4p (2007: 12.2p) per share
 
6,169
5,587
5,587
 
 
6,169
5,587
8,567


The interim dividend for the year ended 31 March 2009 of 7.0p per share was approved by the Board on 17 November 2008 for payment to shareholders on 23 January 2009 and therefore has not been included as a liability as at 30 September 2008.



7. Analysis of Group net debt

    



 
At
31 March
2008
 
Cash
flow
 
Other
non cash
changes
 
At
30 September
2008
 
£'000
 
£'000
 
£'000
 
£'000
 
 
 
 
 
 
 
 
Cash and cash equivalents
3,770
 
30
 
-
 
3,800
Overdrafts
(11,468)
 
(2,270)
 
-
 
(13,738)
Net cash and cash equivalents
(7,698)
 
(2,240)
 
-
 
(9,938)
Other financial assets
70
 
-
 
17
 
87
 
(7,628)
 
(2,240)
 
17
 
(9,851)
Revolving credit
(8,000)
 
-
 
-
 
(8,000)
Bank loans
(61,664)
 
5,625
 
(61)
 
(56,100)
Loan notes
(1,093)
 
297
 
-
 
(796)
Net debt
(78,385)
 
3,682
 
(44)
 
(74,747)
 
 
 
 
 
 
 
 



 



8. Reconciliation of movements in equity 


 

Share

capital



 

£'000

Share

premium




£'000

Share

based

payments



£'000

Hedging

and translation



£'000

Retained

earnings




£'000


Minority

interest 




£'000

Total

equity




£'000

As at 1 April 2008

4,623

48,693

1,939

1,034

98,965

-

155,254

Profit for the period

-

-

-

-

6,427

-

6,427

Share based payments

-

-

545

-

-

-

545

Cash flow hedges

-

-

-

(819)

-

-

(819)

Scrip dividend

7

435

-

-

-

-

442

Share options exercised

1

37

-

-

-

-

38

Dividends

-

-

-

-

(6,169)

-

(6,169)

Deferred tax recognised directly in reserves


-


-


-


-


312


-


312

Corporation tax recognised directly in reserves


-


-


-


-


7


-


7

At 30 September 2008

4,631

49,165

2,484

215

99,542

-

156,037









As at 1 April 2007

4,595

47,204

1,018

351

82,564

103

135,835

Profit for the period

-

-

-

-

12,697

52

12,749

Share based payments

-

-

470

-

-

-

470

Cash flow hedges

-

-

-

244

-

-

244

Scrip dividend

3

227

-

-

-

-

230

Share options exercised

4

209

-

-

-

-

213

Dividends

-

-

-

-

(5,587)

-

(5,587)

Exchange differences

-

-

-

(2)

-

-

(2)

Deferred tax recognised directly in reserves


-


-


-


-


(411)


-


(411)

Corporation tax recognised directly in reserves


-


-


-


-


38


-


38

Purchase of minority interest


-


-


-


-


-


(155)


(155)

At 30 September 2007

4,602

47,640

1,488

593

89,301

-

143,624









As at 1 April 2007

4,595

47,204

1,018

351

82,564

103

135,835

Profit for the period

-

-

-

-

25,605

52

25,657

Share based payments

-

-

921

-

-

-

921

Cash flow hedges

-

-

-

700

-

-

700

Scrip dividend

11

823

-

-

-

-

834

Share options exercised

17

666

-

-

-

-

683

Dividends

-

-

-

-

(8,567)

-

(8,567)

Exchange differences

-

-

-

(17)

-

-

(17)

Deferred tax recognised directly in reserves


-


-


-


-


(725)


-


(725)

Corporation tax recognised directly in reserves


-


-


-


-


88


-


88

Purchase of minority interest


-


-


-


-


-


(155)


(155)

At 31 March 2008

4,623

48,693

1,939

1,034

98,965

-

155,254






 





9. There are a number of risks and uncertainties facing the business in the second half of the financial year. The Board considers these to be the same as described in the Report & Accounts for the year ended 31 March 2008 dated 19 May 2008, a copy of which is available on the Company's website at www.cranswick.co.uk. The principal risks and uncertainties which are set out in detail on pages 17 to 21 of the Report & Accounts for the year ended 31 March 2008 are customer retention, food scares, raw material prices, margin and profitability, and competition.


10In the ordinary course of business, transactions between the parent company and subsidiary undertakings occurred during the period. These are eliminated on consolidation. 


11. The Company intends to post the Interim Report to shareholders on 19 November 2008. Further copies will be available upon request from the Company Secretary, Cranswick plc, 74 Helsinki Road, Sutton Fields, HullHU7 0YW.



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