Final Results
Cranswick PLC
20 May 2003
CRANSWICK plc: CONTINUED GROWTH
£15m ACQUISITION OF THE SANDWICH FACTORY
Cranswick plc, the Yorkshire-based food producer, announces its audited annual
results for the 12 months ended March 31 2003.
Highlights:
- Profit before tax up 27 per cent at £22.2m (2002: £17.5m)*
- Earnings per share rise by 22 per cent to 38.5p (2002: 31.5p)*
- Turnover increases by 5 per cent to £237.7m (2002: £225.6m)
- Acquisition of The Sandwich Factory for £15m cash
- Proposed final dividend of 8p per share, total for the year 12p (2002: 10.75p)
*Prior to goodwill amortisation and this year's exceptional items
Chairman, Jim Bloom, said: 'It is pleasing to report on a successful year that
has seen Cranswick's unbroken growth record continued and the Company broaden
the base of its activities with the development into the supply of sandwiches
and sandwich fillings.
'The Board announces the acquisition of The Sandwich Factory ('TSF') for a
consideration of £15m payable in cash. TSF is involved in the supply of
sandwiches, primarily in the food service sector, and complements North Wales
Food, acquired in October 2002. This acquisition further develops Cranswick's
presence in the growing sandwich market. The business is being purchased free of
debt. In the year to 31 March 2003 TSF made £2.5m of attributable profit on
sales of £26.7m.
'TSF has a strong management team that has driven the growth of the business.
The team will be remaining with the company as we work together to continue its
growth'.
Mr Bloom added: 'It is disappointing to report that it recently came to the
Board's attention that underpayments had been made over a number of years to pig
producers for pigs sold to the pig marketing business. Provision has been made
to correct this. Changes have been made to the management of this activity and
the Company, which has its origins in pig farming, apologises sincerely to its
suppliers.
'Sales in the food activity, which accounts for over two-thirds of the Company's
turnover, increased by 11 per cent to £165.4m with particularly strong growth in
sales of gourmet sausages and continental food products.
'The Company is operating in a challenging trading environment. Investment
continues to be made to enable ongoing improvement in operating efficiencies so
as to minimise the impact of this. Despite the current trading environment the
Board remains confident in its strategy for the long term development of
Cranswick and in the ability of the management team to continue the Company's
growth.
'The recent development into the sandwich sector is exciting, establishing a
presence in another growing market and is an integral part of the Board's
strategy for the on-going development of the Company'.
For further information:
Martin Davey, Chief Executive 07775 576426
John Lindop, Finance Director 07768 362592
Cranswick plc
Paul Quade 020 7334 0243
CityRoad Communications 07947 186694
STATEMENT TO SHAREHOLDERS
Results
It is pleasing to report on a successful year that has seen Cranswick's unbroken
growth record continued and the Company broaden the base of its activities with
the development into the supply of sandwiches and sandwich fillings.
Turnover in the year increased by 5 per cent to £237.7 million and is considered
in more detail in the review of activities. Prior to goodwill amortisation and
exceptional items referred to below profit before taxation was up by 27 per cent
to £22.2 million. Adjusted earnings per share on the same basis rose by 22 per
cent to 38.5p from 31.5p previously, as adjusted for the July 2002 1 for 1 share
bonus issue. Profit on ordinary activities before taxation increased by 13 per
cent to £18.3 million. Cash generation in the year was strong and the Company
finished the year with net surplus funds of £1.6m.
In the year in which the Company made such robust progress it is disappointing
to report that it recently came to the Board's attention that underpayments had
been made over a number of years to pig producers for pigs sold to the pig
marketing business. Based on a thorough review, which is nearing completion,
provision has been made to correct the underpayments. The amount relating to
prior years including interest has been treated as an exceptional item. Changes
have been made to the management of this activity and the Company, which has its
origins in pig farming, apologises sincerely to its suppliers. The exceptional
charge in the profit and loss account of £2.5m is net of a credit of £0.7m
consequent upon the strategic reduction in raw material trading in the pet food
business.
Acquisition
The Board today announces the acquisition of The Sandwich Factory Group Limited
('TSF') for a consideration of £15.0m payable in cash sourced from a combination
of surplus funds and bank facilities. The vendors are 3i plc and management. TSF
is involved in the supply of sandwiches to customers primarily in the food
service sector from its base in Atherstone, Warwickshire. This acquisition
further develops Cranswick's presence in the growing sandwich market and
complements the business of North Wales Foods, which was acquired in October
2002. The business is being purchased free of debt. At 31 March 2003 TSF had net
assets of £1.0m and achieved attributable profit of £2.5m on sales of £26.7m.
The acquisition will be immediately earnings enhancing.
TSF has a strong management team that has driven the growth of the business. The
team will be remaining with the company as we work together to continue its
growth. We welcome Tony Pritchard and Tony Cleaver, founders of TSF, and their
colleagues to Cranswick.
Dividend
The Board is proposing a final dividend of 8.0p per ordinary share. Having paid
an interim dividend of 4.0p in January 2003 this makes a total dividend for the
year of 12.0p per ordinary share, an increase of 12 per cent on last year's
10.75p. The final dividend, if approved by shareholders, will be paid on 12
September 2003 to shareholders on the register at the close of business on 1
August 2003. Shareholders will again have the option to receive the dividend by
way of scrip issue.
Cash flow
Cash generation remained very strong with cash inflow from operating activities
increasing to £25.6m from £22.3m the previous year. Taxation payments of £6.6m,
dividend payments of £4.0m, capital expenditure of £7.1m and the net outflow of
£2.5m on the acquisition of North Wales Foods left a cash inflow of £5.7m. This
cash inflow together with the cash balances at the start of the year was
utilised to repay £12.0m of loan notes leaving net surplus funds of £1.6m at the
year-end.
Consistent growth
The strong track record of the Company is evidenced by the compound rates of
growth over both the past five and ten years. Profit before tax and goodwill
amortisation has risen to record levels annually. Over five years profit has
risen from £7.1m for the year ended March 1999 to £22.2m this year (prior to the
exceptional items), a compound rate of increase of 33 per cent per annum;
earnings per share have risen from 17.1p to 38.5p and dividends per share from
6.75p to 12.0p, compound rates of increase of 22 per cent and 15 per cent per
annum respectively. Over ten years the compound rates of increase are 28 per
cent per annum in profits, 23 per cent per annum in earnings per share and 13
per cent per annum in dividends per share. This excellent track record
underlines the management strategy for the development of Cranswick.
Review of activities - food
Sales in the food activity, which accounts for over two thirds of the Company's
turnover, increased by 11 per cent to £165.4m with particularly strong growth in
sales of gourmet sausages and continental food products.
In fresh pork, sales of retail packed 'Ready to Roast' joints increased as did
sales of barbecue and marinaded products. Further progress is anticipated this
year with the barbecue range which includes garlic and herb shoulder steaks and
kebabs comprising pork or turkey garnished with red and green peppers. The
construction of the new retail packing plant in Hull, on schedule for
commissioning during the summer, will improve production efficiencies and
significantly reduce product handling and transport between sites.
Investment has also been made in the cooked meats plant at Sutton Fields giving
additional capacity and providing the opportunity for efficiencies to be
achieved with the ongoing integration of the two cooked meat sites. Product
development is an integral feature of the food activities and in cooked meats
the recent launch of a sliced premium ham has been well received.
Sales of premium sausages and continental food products continue to grow with
new products introduced, the relaunch of existing products and the expansion
occurring within the market. Investment has been made in a new integrated
warehouse management system in the continental foods activity to ensure the
highest levels of customer service are maintained as turnover rises. Investment
at the sausage sites has included the purchase of automatic packing equipment to
improve production efficiencies still further.
During the year the Cranswick Foodservice division was established to provide a
dedicated resource to coordinate the sales and marketing of our products to this
sector. Products being supplied include pork steaks, cooked marinaded ribs,
sausages and fine charcuterie.
The development into the supply of sandwiches and sandwich fillings in the year
with the acquisition of North Wales Foods in October 2002 has been very
encouraging. Founders of the business, Nigel Jones and Simon Ravencroft will
continue to manage its ongoing development within Cranswick and we welcome them
and their staff to the Company.
This has been a successful year for the food activities and culminated in
Cranswick Country Foods being named as 'Manufacturer of the Year' at the Meat
and Poultry Awards. Congratulations are due to all involved in this part of our
business.
Review of activities - agribusiness
The agribusiness activity, which operates under the Cranswick Mill name, is the
original activity of the Company and is involved in the sale of pig and poultry
feed and the marketing of pigs. Turnover in the year was £51.0m, a reduction of
10 per cent compared to last year.
The further reduction in the size of the UK pig herd made for a difficult
trading environment for the feed business although this was countered by an
increase in sales of poultry feed and by the growth in exports. The export
activity, focused primarily on sales of piglet diets into mainland Europe,
increased turnover by over 50 per cent and this contributed towards an excellent
performance.
The pig marketing division increased the number of pigs traded by 6 per cent, a
good performance given the reduction in the UK herd. Emphasis was placed on
increased presence in the 'store' pig market where weaner pigs are purchased
from pig breeders for sale to specialist pig finishers and this contributed to
the increased volumes.
The number of pigs processed in the UK has fallen from 15.9m in 1999 to 10.2m in
2002 and a further reduction is forecast for 2003. This has given rise to a
tough trading environment for feed manufacturers. A major increase in pig
numbers is not expected in the medium term and this would suggest that capacity
rationalisation and consolidation amongst feed manufacturers is a possibility
during this period.
Review of activities - pet
Sales from this activity, which comprises the food business of Buckton's and the
Tropical Marine aquatics business, rose by 5 per cent to £21.3m.
A solid performance from the pet food activities gave rise to a 4 per cent
increase in turnover to £12.9 m. During the summer a new range of convenience
pack size wild bird food and garden feeders was launched under the 'Nature's
Feast' brand for the expanding garden centre and DIY outlets and contributed to
the growth in sales in this category. Increases were also recorded in other bird
food products. These increases in turnover were partially offset by the planned
reduction in sales of lower margin raw materials to other manufacturers. The pet
food product range has been developed to include dry dog and cat food for supply
to our existing customer base.
A site has recently been acquired in East Yorkshire on which to build a new
fully automated bird food and small animal food production facility. The new
factory should be commissioned and production transferred to it during the
second half of 2004 bringing production efficiencies.
Turnover in the aquatics business was up 6 per cent to £8.4 m. The marine
livestock and aquatic products facility in Manchester continues to perform ahead
of expectations and this has given the confidence to consider a third key
geographical location within the UK for future expansion.
Sales of marine livestock to customers such as specialist aquatic retail outlets
and public aquaria, including the highly successful attraction 'The Deep' in
Hull and 'The Sea Life Centre' in Paris, increased by 16 per cent. The marine
fish breeding facility has also achieved record sales during the year, supplying
wholesale customers in Europe and the USA.
Sales of pond products were impacted by poor weather conditions during late
spring and summer, whilst sales of systems to support fish displays in aquatic
retail outlets along with products for the aquarium hobbyist saw strong demand.
Outlook
The Company is operating in a challenging trading environment. Margins in the
food business during the final quarter were impacted by rising raw material
costs and pressure on selling prices. In addition the further decline of the UK
pig herd continues to exert pressure on the agribusiness activity. Investment
continues to be made to enable ongoing improvement in operating efficiencies so
as to minimise the impact of this.
Despite the current trading environment the Board remains confident in its
strategy for the long term development of Cranswick and in the ability of the
management team to continue the Company's growth. The team is experienced and
has an excellent track record. The recent development into the sandwich sector
is exciting, establishes a presence in another growing market and is an integral
part of the Board's strategy for the on-going development of the Company.
Jim Bloom Martin Davey
Chairman Chief Executive
20 May 2003
AUDITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 March 2003
2003 2003 2003 2002
£'000 £'000 £'000 £'000
Underlying Exceptional
business items
Turnover 237,686 - 237,686 225,551
Operating profit before goodwill 22,415 (1,590) 20,825 17,979
amortisation
Interest charge (172) (900) (1,072) (515)
Profit on ordinary activities before
taxation and goodwill amortisation 22,243 (2,490) 19,753 17,464
Goodwill amortisation (1,442) - (1,442) (1,201)
Profit on ordinary activities before 20,801 (2,490) 18,311 16,263
taxation
Taxation (6,575) 747 (5,828) (4,993)
Profit on ordinary activities after taxation
attributable to shareholders 14,226 (1,743) 12,483 11,270
Equity dividends 4,930 4,371
Retained profit for the year 7,553 6,899
Earnings per share (pence)
Basic 34.9p (4.3p) 30.6p 28.5p
Diluted 34.6p (4.2p) 30.4p 28.1p
Adjusted for goodwill amortisation 38.5p (4.3p) 34.2p 31.5p
Dividends per share (pence) - - 12.0p 10.75p
Notes
1. The profit and loss accounts for the years ended 31 March 2003 and 2002 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 2002. Such report was unqualified and
did not contain a statement under Section 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 2003 incorporate an
unqualified audit report (which does not contain a statement under Section
237(2), (3) or (4) of the Act) and will be delivered to the Registrar of
Companies following the Annual General Meeting of Cranswick.
2. 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
40,725,986 (2002 - 39,559,770). Adjusted earnings per share are based on
profit attributable to shareholders adjusted for goodwill amortisation and
exceptional items.
3. Subject to shareholders' approval the final dividend will be paid on 12
September 2003 to shareholders on the register on 1 August 2003.
4. The Company intends to post the Report and Accounts to shareholders on 27
June 2003. Further copies will be available upon request from the Company
Secretary, Cranswick plc, Cranswick, Driffield, East Yorkshire, YO25 9PF.
AUDITED
CONSOLIDATED BALANCE SHEET
31 March 2003
2003 2002
£'000 £'000
Fixed Assets
Intangible assets 28,807 27,898
Tangible assets 30,491 27,907
59,298 55,805
Current assets
Stocks 8,863 7,653
Debtors 27,045 27,129
Cash at bank and in hand 8,083 13,811
43,991 48,593
Creditors - amounts falling due within one year
Loan notes payable 4,816 13,203
Bank overdraft 1,482 1,559
Hire purchase 100 107
Trade and other creditors 27,466 28,823
Corporation tax 2,702 3,240
Proposed equity dividend 3,325 3,265
39,891 50,197
Net current assets/(liabilities) 4,100 (1,604)
Total assets less current liabilities 63,398 54,201
Creditors - amounts falling due after more than one year
Hire purchase 49 149
Provision for liabilities and charges
Deferred taxation 1,926 1,846
Accruals and deferred income
Government grants 184 184
61,239 52,022
Capital and reserves
Called-up share capital 4,143 2,037
Share premium account 27,388 27,345
Profit and loss account 29,708 22,640
Equity shareholders' funds 61,239 52,022
AUDITED
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2003
2003 2002
£'000 £'000
Operating activities
Net cash inflow from operating activities 25,564 22,290
Returns on investment and servicing of finance
Hire purchase interest (1) (7)
Net bank interest 205 (213)
Loan note interest (214) (435)
(10) (655)
Taxation paid (6,608) (4,629)
Capital expenditure and financial investment
Purchase of tangible fixed assets (7,086) (4,456)
Proceeds of sale of tangible fixed assets 385 221
(6,701) (4,235)
Acquisition and disposals
Purchase of subsidiary undertaking (3,272) (170)
Net cash acquired with subsidiary undertaking 740 1,931
Part purchase of minority interest - (142)
(2,532) 1,619
Equity dividends paid (4,004) (2,500)
Cash inflow before financing 5,709 11,890
Financing
Issue of ordinary share capital 765 4,703
Medium term loan repayments - (5,312)
Loan note repayments (12,029) (112)
Capital element of hire purchase payments (107) (1,145)
Net cash outflow from financing (11,371) (1,866)
(Decrease)/increase in cash in the year (5,662) 10,024
RECONCILIATION OF OPERATING PROFIT TO NET
CASH INFLOW FROM OPERATING ACTIVITIES
Group
2003 2002
£'000 £'000
Operating profit 19,383 16,778
Goodwill amortisation 1,442 1,201
Depreciation, net of government grants 3,959 3,752
Loss on sale of tangible fixed assets 18 192
(Increase)/Decrease in stocks (1,130) 441
Decrease/(increase) in debtors 346 (2,046)
Increase in creditors 1,546 1,972
Net cash inflow from operating activities 25,564 22,290
This information is provided by RNS
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