REG - Cranswick PLC - Preliminary Results
21/05/2024 07:00
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RNS Number : 1767P Cranswick PLC 21 May 2024
CRANSWICK plc: PRELIMINARY RESULTS
A year of strong financial and strategic progress
21 May 2024
Cranswick plc ("Cranswick" or "the Company" or "the Group"), a leading UK food
producer, today announces its audited preliminary results for the 53 weeks
ended 30 March 2024.
Commercial and strategic progress*:
· Strong reported revenue growth of 11.9%, with like-for-like(†)
revenue growth of 11.6%
· On a comparable 52-week basis, revenue up 9.8% reflecting effective
inflation recovery and underpinned by 4.5% volume growth in UK food with
growth accelerating through the second half of the year
· Excellent customer service levels delivered throughout the year;
98% fulfilment across extensive product portfolio
· Adjusted operating margin increased from 6.3% to 7.1%, reflecting a
strong contribution from expanded pig farming operations, tight cost control
and robust returns from the effective deployment of capital
· Free cash conversion of 142.3%, with ROCE(‡) up 264bps to 18.5%
and leverage reduced to 0.4x (including IFRS 16 lease liabilities)
· Substantial ongoing investment in feed milling and pig farming
operations to ensure security of supply and drive enhanced returns
· £46.1m(¥) invested in two strategic acquisitions:
o £32.8m acquisition of Elsham Linc indoor pig farming business furthers
diversifies the Group's pig farming operations and adds additional feed
milling capability, with self-sufficiency in UK pigs now over 50%
o £13.3m acquisition of Froch Foods adding further cooked meat and bacon
processing capacity
· Total capital expenditure of £91.4m to add capacity, capability
and drive operating efficiencies
· Three earnings enhancing capital projects totalling £112m in
progress, with £17.1m spent in year:
o £62m multi-phased expansion project ongoing at the Hull pork primary
processing site
o £23m fit out of new houmous facility at Worsley, Manchester progressing
to plan
o £27m expansion of value-added poultry across both Hull sites now
underway
· £10m investment in Lincoln pet food site nearing completion, with
new national retail customer on board
Financial highlights*:
2024 2023 Change Change
(Reported) (Like-for-
like†)
Revenue £2,599.3m £2,323.0m +11.9% +11.6%
Adjusted Group operating profit £185.1m £146.5m +26.3%
Adjusted Group operating margin 7.1% 6.3% +81bps
Adjusted profit before tax £176.6m £140.1m +26.1%
Adjusted earnings per share 242.8p 210.0p +15.6%
· Statutory profit before tax 13.5% higher at £158.4m (2023:
£139.5m), net of £15.4m non-cash Pet intangible assets impairment
· Statutory earnings per share up 1.0% to 210.4p (2023: 208.3p)
· Full year dividend increased by 13.4% to 90.0p (2023: 79.4p); 34
years of unbroken dividend growth
· Return on capital employed(‡) up 264bps to 18.5% (2023: 15.8%)
· Strong free cash flow of £223.4m, with free cash conversion of
142.3%
· Net debt (excluding IFRS 16 lease liabilities) lower at £0.1m
(2023: £20.2m)
· Robust balance sheet with £250m bank facility providing
significant headroom
Adam Couch, Cranswick's Chief Executive Officer, commented:
"Our ongoing successful performance is down to the unwavering passion,
commitment, and professionalism of our teams across the business. I would
like to extend my gratitude to all of our colleagues at Cranswick for their
continued dedication and support which has enabled us to deliver a strong set
of results and make progress towards our strategic objectives.
"Alongside our colleagues, I would also like to thank our suppliers and
customers, with whom we continue to work in close partnership.
"Our successful performance owes a great deal to the substantial investment we
have put into enhancing our farming infrastructure and expanding our vertical
integration. We have increased the size, scale and quality of our pig herds
through ongoing organic growth and the acquisitions of new indoor and premium
outdoor pigs.
"Over the last 12 months we have strengthened our asset base, substantially
expanded our farming operations, enhanced market positions and developed new
customer relationships. We continue to make good progress against each of
our strategic objectives and we are well placed to continue our successful
development in the current financial year and over the longer term."
* Adjusted, like-for-like and free cash references throughout this statement
refer to non-IFRS measures or Alternative Performance Measures ('APMs').
Definitions and reconciliations of the APMs to IFRS measures are provided in
Note 11.
¥ Refer to Note 10 for breakdown of cash outflow on acquisition.
† For comparative purposes, like-for-like revenues exclude the impact of current
year acquisitions and the contribution from prior year acquisitions prior to
the anniversary of their purchase.
‡ Return on capital employed is defined as adjusted operating profit divided by
the sum of average opening and closing net assets, net debt/(funds), pension
(surplus)/deficit and deferred tax.
Presentation
A presentation of the results will be made to analysts and institutional
investors today at 10.30am at The Worshipful Company of Butchers, 87
Bartholomew Close, London, EC1A 7BN. Analysts and institutional investors
will also be able to join the presentation via a conference call facility.
The slides will be made available on the Company website. For the dial-in
details please contact Powerscourt on the details below.
Enquiries:
Cranswick plc
Mark Bottomley, Chief Financial Officer
01482 275 000
Powerscourt
Nick Dibden / Elizabeth Kittle / Louisa Henry
020 7250 1446
cranswick@powerscourt-group.com
Note to Editors:
Cranswick is a leading and innovative supplier of premium, fresh and
added-value food products. The business employs over 14,500 people and
operates from 23 well-invested, highly efficient facilities in the UK.
Cranswick was formed in the early 1970s by farmers in East Yorkshire to
produce animal feed and has since evolved into a business which produces a
range of high quality, predominantly fresh food, including fresh pork,
poultry, convenience, gourmet products and pet food. The business develops
innovative, great tasting food products to the highest standards of food
safety and traceability. The Group supplies the major grocery multiples as
well as the growing premium and discounter retail channels. Cranswick also
has a strong presence in the 'food-to-go' sector and a substantial export
business. For more information go to: www.cranswick.plc.uk
(http://www.cranswick.plc.uk)
At Cranswick, it is second nature for us to protect and nurture our
environment while supporting people and communities to thrive. Guided by our
sustainability strategy, Second Nature, we have seamlessly integrated our
sustainability commitments into the core of our business model, which in turn
shapes our decision-making, culture, and actions. Notable achievements to
date include:
a) Approved Science Based Targets (SBTi) emission reduction
plans in place for scope 1, 2 and 3
b) All major production facilities are powered by renewable grid
supplied electricity
c) 30% of manufacturing sites use on-site solar generation
d) Northern HGV fleet run on renewable diesel (HVO), reducing
emissions by 95%
e) Committing to purchase 100% certified deforestation-free soya
f) Reducing the use of unnecessary plastic across our
operations by 19.8 per cent
g) Building strong relationships with national food
redistribution organisations FareShare and Company Shop
h) Ranked No.1 in the 2023 Better Food Index, which ranks 30 of
the largest food and drink companies in the UK on their actions and
commitments towards a fair and sustainable food system
Find out more information on our sustainability journey at www.cranswick.co.uk
(http://www.cranswick.co.uk)
Chairman's Statement
I am pleased to report on the encouraging strategic progress achieved this
year. Continued growth and success have been achieved through exceptional
customer service and the highest product quality, complemented by the value
and versatility of our product categories.
Our management team's expertise and experience has skilfully transformed
industry challenges into valuable opportunities. On behalf of the Board, I
would like to express our gratitude to all Cranswick colleagues for their
exceptional resourcefulness, innovative ideas and steadfast commitment which
resulted in the record performance for the business.
I am very pleased with the progress we have made towards our strategic
priorities this year, supported by significant investments in targeted capital
expenditure and carefully chosen acquisitions. Our investment programme has
continued at pace with a relentless focus on automation, adding scale and
delivering further quality, capacity and efficiency improvements.
The persistent effects arising from broad-based cost inflation have been
proactively addressed through effective and timely cost management and
recovery measures throughout the period. By sustaining our partnerships with
customers, we provided cost-effective solutions across our product ranges,
concurrently enhancing operational efficiencies and driving automation
projects.
This year's success has also been achieved in the face of considerable
ongoing challenges in the UK food and farming industry, with
labour shortages, financial pressures and political uncertainty all proving
to be major concerns for many independent producers. It is now
more crucial than ever for the UK to have a thriving and resilient food and
farming sector, especially given the challenges our food system is currently
facing. The Government has identified that our national security depends
on addressing a small number of critical risks which include food security.
It seems imperative to me that the Government should better concentrate
its resources on improving our resilience to those risks.
We have further developed and grown our farming and milling operations which
has strengthened our vertical integration and enhanced our business
resilience. The expansion of our farming capability helps us to ensure full
farm-to-fork traceability as the acquisition of Elsham Linc indoor pig
farming business significantly increases the size of our Red Tractor-assured
indoor pig herd and adds additional feed milling capability, increasing
our self-sufficiency in UK pigs to over 50 per cent. Looking forward, we
anticipate further sector consolidation, and Cranswick is committed
to expanding its farming capability to ensure the continuity of supply,
sustainability leadership, and the highest animal welfare standards.
Results
Total revenue for the 53 weeks to 30 March 2024 was £2,599.3 million, showing
an increase of 11.9 per cent from the previous year's reported figure of
£2,323.0 million. Adjusting for contributions of the acquisitions made in
the previous and current financial years, revenue grew by 11.6 per cent on
a like-for-like basis.
Adjusted profit before tax for the period at £176.6 million was 26.1 per
cent higher than the £140.1 million reported last year. Adjusted earnings
per share on the same basis was up 15.6 per cent at 242.8 pence
from 210.0 pence last year.
Cash flow and financial position
At the end of the year, net debt was £99.4 million, down from £101.4 million
in the previous year. Net debt excluding IFRS 16 lease liabilities was
also reduced to just £0.1 million compared to £20.2 million previously.
The Group has access to an unsecured, sustainability linked £250 million
facility which runs through to November 2026.
Dividend
The Board is proposing a final dividend of 67.3 pence per share, 14.5 per cent
higher than the 58.8 pence paid last year. Together with the interim
dividend of 22.7 pence per share, this equates to a total dividend for the
year of 90.0 pence per share, an increase of 13.4 per cent on last year,
extending the period of consecutive years of dividend growth to 34 years.
The final dividend, if approved by Shareholders, will be paid on 30 August
2024 to Shareholders on the register at the close of business on 19 July
2024. Shares will go ex-dividend on 18 July 2024.
Board changes
During the year, we have continued to evolve the Board to ensure it provides
the appropriate skills and experience to support and challenge Cranswick's
executive team.
With effect from 23 May 2023, Yetunde Hofmann was appointed as the Company's
designated Non-Executive Director for engagement with the workforce. This
is an important position that I had the honour of undertaking before
my appointment as Chairman. It was a pleasure to welcome Yetunde to the
role, and her extensive experience brings a valuable perspective to our team.
Liz Barber succeeded Mark Reckitt as the Company's Senior Independent Director
following his retirement as a Non-Executive Director of the Company on 24 July
2023. As of this date, the Board appointed Alan Williams to take on Liz's
previous role as Chair of the Audit Committee.
Pam Powell retired as an Independent Non-Executive Director with effect from 1
September 2023 and her position as Chair of the Remuneration Committee is
succeeded on an interim basis by Liz Barber.
On 21 March 2024 we announced the appointment of Rachel Howarth as
a Non-Executive Director with effect from 30 April 2024. Rachel is the
Group People Officer at Whitbread plc. Rachel was previously the Group HR
Director with SSP Group PLC, before which she spent sixteen years with
Tesco Plc. On appointment, Rachel became a member of the Remuneration,
Nomination and ESG committees. It is intended that Rachel will succeed Liz
Barber as Chair of the Remuneration Committee in August, following conclusion
of the scheduled review of the Company's Directors' Remuneration Policy.
On behalf of the Board, I welcome Rachel and thank Mark and Pam for their
positive contribution to Cranswick's successful development over their
respective tenures.
Outlook
We have made strong strategic and commercial progress in the past year which
has strengthened the base from which to deliver the ongoing plans of the
Group. The start to the current year has been in line with the Board's
expectations and the outlook for the current financial year is unchanged.
The strengths of our business, which include our diverse and long-standing
customer base, breadth and quality of products and channels, robust financial
position and industry-leading infrastructure will support the further
development of Cranswick over the longer-term.
Tim J Smith CBE
Chairman
21 May 2024
Chief Executive's Review
We have delivered a strong financial performance in the year and made further
progress in delivering our strategy. We grew revenue by 11.9 per cent and
increased adjusted profit before tax by 26.1 per cent.
Our ongoing successful performance is down to the unwavering passion,
commitment, and professionalism of our teams across the business. I have
said many times that our people are our greatest asset and I would like to
extend my gratitude to all of our colleagues at Cranswick for their continued
dedication and support which has enabled us to deliver a strong set of results
and make progress towards our strategic objectives.
Alongside our colleagues, I would also like to thank our suppliers and
customers, with whom we continue to work in close partnership. In last
year's report, I highlighted numerous challenges impacting the UK farming
sector and broader food supply chains stemming from the Ukraine war and
widespread cost inflation. This year, we experienced a more stable
environment for farmers, leading to the recovery of pig prices, contributing
to the achievement of our robust results. We have increased our
self-sufficiency enabling us to maintain our pig volumes against a
double-digit percentage reduction in the national herd.
Our successful performance owes a great deal to the substantial investment we
have put into enhancing our farming infrastructure and expanding our vertical
integration. We have increased the size, scale and quality of our pig herds
through ongoing organic growth and the acquisitions of new indoor and premium
outdoor pigs. Notably, our acquisition of Elsham Linc has substantially
bolstered our Red Tractor assured indoor pig herd. This business comprises
18 sites in North Lincolnshire, including a feed mill, and has 8,000 sows
producing in excess of 3,200 finished pigs per week. We also acquired a
second pig herd during 2023 as part of a wider agreement to lease and operate,
on a long-term basis, a fully integrated pig and arable farming enterprise in
North Yorkshire. Thanks to these investments, our self-sufficiency in UK
pigs is now over 50 per cent.
Access to labour remains one of our most important challenges. To address
this, we expanded our recruitment programme and now have more than 650
colleagues from the Philippines in the business who form a key part of our
workforce. We continue to put forward the case for the farming and food
producer sector to the UK government and through various industry bodies.
One of the measures introduced in Spring 2024 was an increase in the salary
threshold to £38,700, for those arriving in the UK on Skilled Worker visas.
This figure marks a significant rise from the previous level of £26,200; a
shift that is poised to considerably limit labour accessibility for our Group
in the foreseeable future. The scarcity of labour resources presents a
critical challenge, threatening our ability to consistently deliver the
exceptional service levels our customers have come to rely on. We continue
to press government for a greater understanding of this issue and appreciation
of the importance of food security.
Strong performance
We have again delivered record results with reported revenue growing by 11.9
per cent to £2,599.3 million and adjusted operating profit increasing 26.3
per cent to £185.1 million. We have reduced net debt on a pre IFRS 16 basis
from £20.2 million in March 2023 to just £0.1 million, whilst also investing
£91.4 million across our asset base.
We saw operating margin strengthen during the year, driven by proactive
management and mitigation of cost inflation, as well as benefits arising from
capital expenditure and efficiencies achieved in our operations. In
addition, our return on capital employed has improved by 2.6 per cent to 18.5
per cent, reflecting our ability to deploy capital at pace to drive strong
returns. We are proposing to increase our full year dividend by a further
13.4 per cent this year, marking our 34(th) year of consecutive dividend
growth.
This strong performance was driven in part by the value offered by pork and
poultry which provide customers and UK consumers with affordable proteins,
value for money and versatility. Following the initial inflation shock last
year, we are seeing the recovery in demand, reflected in a substantial growth
in premium products and across all four core UK food categories. Our
commitment to delivering exceptional service to our customers is reflected in
our record-breaking Christmas trading results, continuing the momentum into
the last quarter of the year, with an impressive 98 per cent accomplishment of
customer service levels.
Year-on-year, there was a significant decrease in total export sales. Far
East exports were driving this momentum, with lower prices and lower demand
resulting from the slowdown in China's food and agricultural sector. Our
Norfolk primary processing facility continues to operate without an export
license. It has been nearly four years since we voluntarily suspended this
license, and we remain fully committed to resolving this issue. We will
continue to raise the matter with DEFRA and other relevant government
departments at every opportunity until the matter is successfully resolved.
Progress on our strategy
We are putting our strategy into action across our three strategic pillars -
Consolidate, Expand and Diversify - to deliver growth across all areas of our
business.
We continue to invest to further strengthen our vertical integration. I have
already mentioned the acquisition of Elsham Linc, which further diversifies
the Group's pig farming operations and adds additional feed milling
capability. Our acquisition of Froch Foods complements our existing bacon
and cooked meats production capability and demonstrates our commitment to
consolidating our presence in these categories, whilst adding capacity and
driving efficiencies.
We are also investing at pace across our three fresh pork primary processing
operations to increase capacity and drive further operational efficiencies in
our rapidly growing value-added pork business. This investment programme
includes a £62 million multi-phased redevelopment of the Hull primary
processing site, which will add substantial capacity, drive further
efficiencies and add onsite cold storage capability.
We are increasing our presence in growth markets such as poultry and
Mediterranean foods by investing in new and existing sites. We are
redeveloping our site at Worsley, near Manchester, which was acquired at the
end of the last financial year. The £23 million fit out occupies half of
the site's 50,000 square foot footprint providing substantial additional
houmous manufacturing capacity.
In our cooked and prepared poultry category we are making a £27 million
capital investment to increase our cooking and roasting capacity and enhance
our ability to deliver value-add products. Our ambition to expand our
business in East Anglia by increasing our fresh poultry operations remains,
but we continue to encounter obstacles primarily arising from the complexities
involved in navigating through the lengthy and overly complex planning
application process.
The present year marks a transformative period for Cranswick Pet Products,
albeit the progress has not been as quick as we initially envisaged.
Nonetheless, our ongoing investments into the business coupled with the
strategic long-term supply agreement with Pets at Home and marketing efforts
position us well for sustained growth and success in the foreseeable future.
The outlook remains optimistic, both for our business and the broader market
landscape.
Second Nature
Besides our financial performance, we are also dedicated to fulfilling our
sustainability objectives and generating long-term value for all our
stakeholders. This year, we have accomplished several milestones in our
journey to become a more responsible and resilient business. We recently
refreshed our hugely impactful Second Nature sustainability strategy, making
it more accessible, relevant and relatable for all our stakeholders. We are
proud of these achievements, but we acknowledge that there is still more to
do. We will persist in working with our customers, suppliers, farmers and
other partners to drive positive change.
A people business
Cranswick is very much a people business, and I believe strongly that our
colleagues are our greatest and most valuable asset. We know that being an
employer of choice in a highly competitive labour market is crucial for
attracting and retaining the best people which is why we have worked hard to
establish ourselves as a sector leader in pay, working conditions, health and
safety, inclusivity and employee wellbeing.
This year alone, I was pleased to see that we have welcomed several more
graduates into our program, taking the total to 97 since 2013, with 30 of
these individuals now promoted into senior full-time roles. We also have
around 150 apprentices across the Group, who are undertaking a range of
apprenticeship qualifications.
As an organisation, we actively promote and support diversity and inclusion,
and our Diversity, Equality and Inclusion (DEI) programme is driven by a
dedicated steering group who are responsible for taking our DEI goals and
aspirations forward. By nurturing and developing talent through effective
succession planning, we have also been able to maintain a deep and continually
replenished pool of great people, who have been vital to achieving the success
we have today.
Adam Couch
Chief Executive Officer
21 May 2024
Operating and Financial Review
Operating review
Revenue and adjusted Group operating profit
2024 2023 Change Change
(Reported) (Like-for-like*)
Revenue £2,599.3m £2,323.0m +11.9% +11.6%
Adjusted Group Operating Profit* £185.1m £146.5m +26.3%
Adjusted Group Operating Margin* 7.1% 6.3% +81bps
*See Note 11
Revenue
Reported revenue increased by 11.9 per cent to £2,599.3 million.
Like-for-like revenue which excludes the contributions from acquisitions prior
to the anniversary of their acquisition date increased by 11.6 per cent with
corresponding volumes 1.5 per cent higher. On a 52-week basis, reported
revenue increased by 9.8 per cent, underpinned by core UK food volume growth
of 4.5 per cent with all four categories delivering positive volume
momentum. Growth accelerated through the second half of the year to 6.6 per
cent, from 2.6 per cent in the first half.
Fresh Pork revenue growth reflected the pass through of higher pig prices,
with volume growth delivered in both retail and wholesale channels. Poultry
volumes were positive with strong growth in Prepared Poultry as the business
continues to mature following its initial start-up phase. Convenience
revenue was also ahead reflecting further inflation recovery and onboarding of
new customers. Growth in Gourmet Products continued with new product
launches driving strong volume growth at the Hull Cooked Sausage and Bacon
facility.
Customer service levels remained consistently high throughout the year, with
over 98 per cent fulfilment, including during the record Christmas trading
period.
Adjusted Group operating profit
Adjusted Group operating profit increased by 26.3 per cent to £185.1 million
with adjusted Group operating margin at 7.1 per cent. Excluding the final
insurance receipts in respect of the May 2022 product recall claim and the
contribution from the 53(rd) week, adjusted operating profit was 20.7 per cent
higher than the prior year. This improvement reflected the strong returns we
are now generating from ongoing investment in our farming and milling
operations together with inflation recovery in the first half of the year,
easing input prices, operational efficiency improvements and tight cost
control. The positive recovery was partly offset by the losses incurred in
our Pet Food business which is still partway through a major transformation
process.
Category review
Fresh Pork
Fresh Pork revenue, which represented 25 per cent of Group revenue, increased
by 7.7 per cent, with like-for-like revenue excluding the impact of
acquisitions up 6.9 per cent reflecting the further recovery of high UK pig
prices which peaked at 225.65p/kg in August. UK Fresh Pork volumes were
strongly ahead of the prior year, offset by lower Far East export volumes.
Retail performance was strong with volumes up 4.5 per cent driven by an uplift
in retailer promotional plans throughout the year with special buys and
premium tier promotions contributing strongly. UK wholesale revenue also
benefitted from increased pricing and more volume directed into the UK trade
as export demand slowed.
Far East export revenue was 31.1 per cent behind the prior year as both
pricing and demand from the key Chinese market remained subdued.
During the year we invested £31 million across the three primary processing
facilities and our farming infrastructure. £7.6 million related to the £62
million ongoing multi-phased redevelopment of the Hull primary processing site
which will add substantial capacity and drive further efficiency improvements
along with the added benefit of onsite cold storage capability. This ongoing
investment in our primary processing asset base provides the platform to not
only grow our fresh pork business but also to feed into our rapidly growing
wider value-added pork businesses.
The acquisition of Elsham Linc, a large-scale indoor farming business with 18
sites in North Lincolnshire, including a feed mill, and the purchase of an
additional pig herd during the year substantially increased the scale of our
farming operations at a time when the overall size of the UK pig herd has
fallen by 15 per cent. The continued investment in, and expansion of, our
higher welfare and Red Tractor assured pig herds has lifted our
self-sufficiency in UK pigs to over 50 per cent. Moving forward we will
continue to invest at pace in our pig farming operations and consider further
acquisitions to ensure we have the right quantity and mix of pigs to service
our customers' requirements.
Convenience
Convenience revenue increased 13.3 per cent and represented 39 per cent of
Group revenue. Revenue growth reflected both ongoing inflation recovery and
stronger volumes driven by a strong performance in Katsouris Brothers through
business wins and category growth.
Cooked Meats revenue growth reflected ongoing inflation recovery and
underlying volume growth in our 'slow cook' and 'sous vide' product ranges.
Towards the end of the financial year, across the wider cooked meats category,
we signed a new long-term supply agreement with one of our strategic retail
customers.
The expansion of our Hull Cooked Meats facility enabled the successful launch
of our 'slow cook range' with two new major retail customers. Leading
Christmas products have become 'hero lines' with new, modern flavours and
formats added to the range. The award-winning 'Turkey with all the
trimmings' product was the first to market full meal solution.
At the Milton Keynes facility the extension works are now complete with the
additional capacity enabling new business to be brought on board.
Shortly after the year end the Valley Park site in South Yorkshire
relinquished some lower margin business. New retail business has however
since been secured and an ongoing cost-out plan at the site leaves the
business better able to serve its anchor strategic customer and search for new
accretive business opportunities going forward.
Continental Products revenue increased with inflation recovery offsetting
modestly lower volumes. We achieved a great result with our Christmas range
which included 1.9 million platters that are becoming a popular choice for
modern Christmas celebrations. The creative 'Charcuter-tree' was an integral
part of one of our customer's Christmas marketing campaign. Our premium
grazing platters are ideally suited to party and sharing occasions, combining
charcuterie, olives, antipasti and crackers. We have invested heavily in
automation and complex assembly equipment at our Bury facility to facilitate
growth in this attractive market segment.
Katsouris Brothers revenue increased reflecting both inflation recovery and
strong volume growth. Our halloumi products have performed particularly well
with business wins in retail and food service. Strong sales of ambient
products under the Cypressa brand also drove positive year-on-year growth with
the range's success recognised with the Grocer Gold for the Cypressa Halkidiki
Olives double stuffed with Garlic and Red Pepper and Cypressa Greek Extra
Virgin Olive Oil.
The Ramona's business continued to perform well and is now the number one
houmous brand by volume in the UK. The Watford facility is now running at
maximum capacity with some volume needing to be outsourced in the short-term
ahead of the planned move to the new Worsley facility later in the year.
Redevelopment of the Worsley facility, which was acquired at the end of the
last financial year, is ongoing. The £23 million fit-out, which will be
complete in the second half of 2024, will deliver a best-in-class houmous and
dips production facility enabling a significant increase in capacity using new
and innovative production processes.
Gourmet Products
Gourmet Products revenue increased 20.8 per cent year-on-year and represented
18 per cent of Group revenue, with all businesses contributing positively to
the strong revenue momentum.
The acquisition of Froch Foods Holdings Limited ('Froch Foods') completed
during the year adds capacity to our added-value processing of predominantly
pork and poultry related products. Froch Foods supplies one of our large
retail customers in this category and the acquisition aligns with our
commitment to invest in, and add capacity to, our core categories to drive
further growth.
Revenue from the Cooked Bacon and Sausage facility was significantly ahead,
underpinned by double-digit percentage volume growth. Successfully
onboarding a second depot for a quick service restaurant customer and the
addition of new retail customers for our premium cooked sausage range both
contributed to the strong performance.
Sausage and bacon sales increased strongly with both retail and food service
segments delivering good volume performance during the year. Volume growth
was boosted by more retail promotions involving multi-buy deals, with premium
products performing especially well. Food service volumes were robust as
eating breakfast outside the home continues to gain in popularity. Our
Christmas output of pigs in blankets increased by 25 per cent with over 75
million single units delivered to our customers across the festive period.
Pastry revenue improved year-on-year with promotional mechanics and an
innovative product range boosting demand. New premium tier products were
launched during the year with underlying strong performance in the core
product range.
Poultry
Poultry revenue increased by 7.6 per cent and represented 17 per cent of Group
revenue. Volumes increased year-on-year with strong growth from Prepared
Poultry.
Fresh Poultry continued to perform well with an average 1.4 million birds
processed each week. Volume growth in the year was driven through stronger
retail sales performance with the site's anchor customer, in part facilitated
by investment in additional automated portioning and thigh deboning in the
prior year.
Cooked Poultry revenue was modestly ahead of the previous year, with the site
successfully launching new products into a premium retail category. A
substantial £17 million capital investment programme, which will increase
cooking and cooling capacity, along with additional roasting capability for
portions and bone-in products, is progressing well with completion targeted
before the end of the current financial year. During the year, the May 2022
product recall claim was successfully concluded with final insurance receipts
of £4.7 million received and recognised in other operating income.
The Prepared Poultry facility, in its second year of operation, delivered
strong volume growth albeit the site continued to operate well below optimum
capacity. With the site carrying a high fixed overhead base, additional
volume is needed to meet margin expectations. The recent onboarding of a new
retail customer will go some way to addressing this issue. The outlook for
the business remains positive with a further £10 million expansion project
now underway to support the category growth pipeline.
Following on from the highly virulent Avian Influenza ('AI') season in the
previous financial year, it is pleasing to report that the disease has been
far more benign in the current financial year with Cranswick farms
unaffected. Indeed, the UK has self-declared zonal freedom from AI with
effect from 29 March 2024. The UK does not currently have outbreaks
occurring in poultry or other captive birds and the level of risk is low with
no disease control zones in place in England. This said, strict bio-security
protocols remain in place at the Suffolk plant and across all our farms in the
southeast of England.
Pet Products
Cranswick Pet Products represented 1 per cent of Group revenue, with revenue
down 4.7 per cent primarily due to the timing of onboarding the new Pets at
Home (PaH) contract. During the first half of the year the focus was on
building stock ahead of deliveries into PaH depots which started in the second
half of the year.
We have reduced complexity in the factory, consolidated the customer base and
invested for future growth, alongside investing heavily in our Alpha and
Vitalin brands. We have taken positive steps to upgrade the facility, with a
multi-year £10 million investment programme at the Lincoln site to increase
capacity and add capability nearing completion.
The financial performance of the pet food business, whilst disappointing,
reflected the profound changes taking place in the business, with a strategic
review of the customer base, brand investment, stock build ahead of the PaH
launch and disruption resulting from the major investment programme all
contributing. Following a review of the carrying value of goodwill and other
intangibles at the year end, we made a non-cash impairment charge of £15.4
million against these assets. The business is now on a stronger footing,
well placed to grow rapidly and ultimately deliver a level of return in line
with the wider Group. We will continue to reshape the customer base of the
business and our appetite to invest in the long-term production capability of
the site is undiminished.
Finance review
Revenue
Reported revenue increased by 11.9 per cent to £2,599.3 million (2023:
£2,323.0 million). Like-for-like revenue, excluding the impact from
acquisitions, increased by 11.6 per cent.
Adjusted gross profit and adjusted EBITDA
Adjusted gross profit increased by 24.5 per cent to £374.7 million (2023:
£300.9 million) with adjusted gross profit margin at 14.4 per cent (2023:
13.0 per cent). Adjusted EBITDA increased by 23.9 per cent to £266.8
million (2023: £215.3 million) and adjusted EBITDA margin increased by 100
basis points to 10.3 per cent (2023: 9.3 per cent).
Adjusted Group operating profit
Adjusted Group operating profit increased by 26.3 per cent to £185.1 million
(2023: £146.5 million) and adjusted Group operating margin improved by 81
basis points to 7.1 per cent (2023: 6.3 per cent).
Full reconciliations of adjusted measures to statutory results can be found in
Note 11. The net IAS 41 movement on biological assets results in a £2.2
million credit (2023: £7.6 million credit) on a statutory basis primarily
reflecting the movement in the UK pig price during the year.
Finance costs and funding
Net financing costs of £8.9 million (2023: £6.4 million) included £3.6
million (2023: £2.5 million) of IFRS 16 lease interest. Bank finance costs
were £1.3 million higher than the prior year at £5.3 million (2023: £4.0
million) primarily reflecting the increase in the bank base rate during the
year.
The Group has access to a £250 million revolving credit facility, including a
committed overdraft of £20 million running until November 2026. It also
includes the option to access a further £50 million on the same terms at any
point during the term of the agreement. The facility provides the business
with almost £250 million of headroom at 30 March 2024. The adequacy of this
facility has been confirmed as part of robust scenario testing performed over
the three-year viability period for the Group.
Adjusted profit before tax
Adjusted profit before tax was 26.1 per cent higher at £176.6 million (2023:
£140.1 million).
Taxation
The tax charge of £45.3 million (2023: £28.1 million) was 28.6 per cent of
profit before tax (2023: 20.1 per cent). The standard rate of UK corporation
tax was 25.0 per cent (2023: 19.0 per cent). The effective rate was higher
than the standard rate due to the impairment of goodwill and other expenses
which are not deductible for tax purposes. The effective tax rate on
adjusted profit before tax was 26.1 per cent (2023: 19.8 per cent).
Adjusted earnings per share
Adjusted earnings per share increased by 15.6 per cent to 242.8 pence (2023:
210.0 pence). The average number of shares in issue was 53,776,235 (2023:
53,461,000).
Statutory profit measures
Statutory profit before tax was £158.4 million (2023: £139.5 million), with
statutory Group operating profit at £166.9 million (2023: £145.9 million)
and statutory earnings per share of 210.4 pence (2023: 208.3 pence).
Statutory gross profit was £376.9 million (2023: £308.5 million).
Cash flow and net debt
The net cash inflow from operating activities in the year was £228.4 million
(2023: £153.0 million). The increase of £75.4 million was primarily due to
an increase EBITDA of £46.5 million. Net debt, including the impact of IFRS
16 lease liabilities, fell to £99.4 million (2023: £101.4 million) with the
inflow from operating activities offset by £90.6 million, net of disposal
proceeds, invested in the Group's asset base, £43.9 million of dividends paid
to the Group's Shareholders, £15.6 million of own shares purchased and placed
into the Cranswick Employee Benefit Trust, £17.8 million of IFRS 16 lease
charges and £41.4 million of tax paid.
Pensions
The Group operates defined contribution pension schemes whereby contributions
are made to schemes administered 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. On 2 December 2022, the Trustees of
the defined benefit pension scheme purchased a buy-in insurance policy to
secure the majority of the benefits provided by the scheme. The surplus on
this scheme at 30 March 2024 was £0.2 million (2023: £0.2 million). The
present value of funded obligations was £20.8 million, and the fair value of
plan assets was £21.0 million. The Group did not make any contributions in
the year and does not expect to make any further contributions to the scheme
during the year ending March 2025.
Group income statement
For the 53 weeks ended 30 March 2024
2024 2023
Notes £'m £'m
Revenue 2,599.3 2,323.0
Adjusted Group operating profit 185.1 146.5
Net IAS 41 valuation movement on biological assets 2.2 7.6
Amortisation of intangible assets (5.0) (5.2)
Impairment of intangible (15.4) (3.0)
assets
Group operating profit 4 166.9 145.9
Finance costs (8.9) (6.4)
Share of net profit of joint venture 0.4 -
Profit before tax 158.4 139.5
Taxation (45.3) (28.1)
Profit for the year 113.1 111.4
Earnings per share (pence)
On profit for the year:
Basic 5 210.4p 208.3p
Diluted 5 209.7p 207.8p
Group statement of comprehensive income
For the 53 weeks ended 30 March 2024
2024 2023
£'m £'m
Profit for the year 113.1 111.4
Other comprehensive (expense)/income
Other comprehensive (expense)/income to be reclassified to profit or loss in
subsequent periods:
Cash flow hedges
(Losses)/gains arising in the year (0.1) 0.1
Reclassification adjustments for (losses)/gains included in the income (0.1) 0.3
statement
Income tax effect 0.1 (0.1)
Net other comprehensive (expense)/income to be reclassified to profit or loss (0.1) 0.3
in subsequent periods
Items not to be reclassified to profit or loss in subsequent periods:
Actuarial losses on defined benefit pension scheme - (12.5)
Income tax effect - 2.8
Net other comprehensive expense not to be reclassified to profit or loss in
subsequent periods
- (9.7)
Other comprehensive expense
(0.1) (9.4)
Total comprehensive income 113.0 102.0
Group balance sheet
At 30 March 2024
2024 2023 27 March 2022
Notes £'m Restated* Restated*
£'m £'m
Non-current assets
Financial asset investment 0.1 - -
Investment in joint venture 0.8 - -
Intangible assets 213.5 223.2 231.3
Defined benefit pension scheme surplus 0.2 0.2 8.3
Property, plant and equipment 518.9 464.1 434.8
Right-of-use assets 92.4 76.3 65.5
Biological assets 6.4 6.3 2.7
Total non-current assets 832.3 770.1 742.6
Current assets
Biological assets 83.7 72.8 50.7
Inventories 113.7 113.0 105.2
Trade and other receivables 325.3 288.5 244.4
Financial assets - 0.1 -
Income tax receivable 2.0 - -
Cash and short-term deposits 7 27.0 20.3 0.2
Total current assets 551.7 494.7 400.5
Total assets 1,384.0 1,264.8 1,143.1
Current liabilities
Trade and other payables (310.0) (268.5) (238.7)
Financial liabilities (2.3) (0.1) (3.1)
Lease liabilities (17.3) (14.4) (13.8)
Provisions (1.8) (0.8) (1.8)
Income tax payable - (4.3) (2.4)
Total current liabilities (331.4) (288.1) (259.8)
Non-current liabilities
Other payables (0.9) (0.4) (0.6)
Financial liabilities (27.1) (43.2) (36.4)
Lease liabilities (82.1) (66.8) (56.0)
Deferred tax liabilities (28.4) (20.7) (19.7)
Provisions (2.6) (2.7) (1.7)
Total non-current liabilities (141.1) (133.8) (114.4)
Total liabilities (472.5) (421.9) (374.2)
Net assets 911.5 842.9 768.9
Equity
Called-up share capital 5.4 5.4 5.3
Share premium account 128.3 123.9 115.9
Share-based payments 11.8 9.5 10.9
Shares held in trust (15.6) - -
Hedging reserve (0.1) - (0.3)
Retained earnings 781.7 704.1 637.1
Total equity attributable to owners of the parent 911.5 842.9 768.9
* See note 2 for details regarding the restatement as a result of a change in
accounting policy.
Group statement of cash flows
For the 53 weeks ended 30 March 2024
2024 2023
Notes £'m £'m
Operating activities
Profit for the year 113.1 111.4
Adjustments to reconcile Group profit for the year to net cash inflows from
operating activities:
Income tax expense 45.3 28.1
Net finance costs 8.9 6.4
Loss/(gain) on sale of property, plant and equipment 1.0 (0.5)
Loss on disposal of right-of-use asset 0.2 -
Depreciation of property, plant and equipment 65.5 54.1
Depreciation of right-of-use assets 16.2 14.7
Amortisation of intangible assets 5.0 5.2
Impairment of intangible assets 15.4 3.0
Share-based payments 8.8 4.7
Difference between pension contributions paid and amounts recognised in the
income statement
- (4.4)
Share of joint venture (0.4) -
Release of Government grants (0.4) (0.2)
Net IAS 41 valuation movement on biological assets (2.2) (7.6)
Increase in biological assets (1.3) (18.1)
Decrease/(increase) in inventories 0.3 (7.7)
Increase in trade and other receivables (33.8) (44.8)
Increase in trade and other payables 28.2 29.1
Cash generated from operations 269.8 173.4
Tax paid (41.4) (20.4)
Net cash from operating activities 228.4 153.0
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 10 (23.5) 0.1
Payment of property, plant and equipment acquired on acquisition (9.1) -
Purchase of financial asset investment (0.1) -
Purchase of property, plant and equipment (91.4) (85.1)
Proceeds from sale of property, plant and equipment 0.8 1.2
Net cash used in investing activities (123.3) (83.8)
Cash flows from financing activities
Interest paid (5.0) (3.8)
Proceeds from issue of share capital 4.4 3.7
Own shares purchased (15.6) -
Issue costs of long-term borrowings - (0.4)
(Repayment of)/proceeds from borrowings (14.0) 4.0
Repayment of borrowings acquired (6.5) -
Dividends paid (43.9) (36.3)
Payment of lease capital (14.2) (13.8)
Payment of lease interest (3.6) (2.5)
Net cash used in financing activities (98.4) (49.1)
Net increase in cash and cash equivalents 7 6.7 20.1
Cash and cash equivalents at beginning of year 7 20.3 0.2
Cash and cash equivalents at end of year 7 27.0 20.3
Group statement of changes in equity
For the 53 weeks ended 30 March 2024
Share Share Share-based Shares held in trust Hedging Retained Total
capital premium payments £'m reserve earnings equity
£'m £'m £'m £'m £'m £'m
At 26 March 2022 as originally presented 5.3 115.9 44.3 - (0.3) 603.7 768.9
Change in accounting policy - - (33.4) - - 33.4 -
Total equity at the beginning of the financial year (restated*) 5.3 115.9 10.9 - (0.3) 637.1 768.9
Profit for the year - - - - - 111.4 111.4
Other comprehensive income - - - - 0.3 (9.7) (9.4)
Total comprehensive income - - - 0.3 101.7 102.0
Share-based payments - - 4.7 - - - 4.7
Exercise, lapse or forfeit of share-based payments (restated*)
- - (6.1) - - 6.1 -
Scrip dividend - 4.4 - - - - 4.4
Share options exercised 0.1 3.6 - - - - 3.7
Dividends - - - - - (40.7) (40.7)
Deferred tax related to changes in equity
- - - - - (0.9) (0.9)
Current tax related to changes in equity - - - - - 0.8 0.8
At 25 March 2023 (restated*) 5.4 123.9 9.5 - - 704.1 842.9
At 25 March 2023 as originally presented 5.4 123.9 49.0 - - 664.6 842.9
Change in accounting policy - - (39.5) - - 39.5 -
Total equity at the beginning of the financial year (restated*) 5.4 123.9 9.5 - - 704.1 842.9
Profit for the year - - - - - 113.1 113.1
Other comprehensive income - - - - (0.1) - (0.1)
Total comprehensive income - - - - (0.1) 113.1 113.0
Share-based payments - - 8.8 - - - 8.8
Shares acquired by Employee Benefit Trust
- - - (15.6) - - (15.6)
Exercise, lapse or forfeit of share-based payments
- - (6.5) - - 6.5 -
Share options exercised - 4.4 - - - - 4.4
Dividends - - - - - (43.9) (43.9)
Deferred tax related to changes in equity
- - - - - 1.4 1.4
Current tax related to changes in equity - - - - - 0.5 0.5
At 30 March 2024 5.4 128.3 11.8 (15.6) (0.1) 781.7 911.5
* See note 2 for details regarding the restatement as a result of a change in
accounting
policy.
Notes to the accounts
1. Basis of preparation
The results comprise those of Cranswick plc and its subsidiaries for the 53
weeks ended 30 March 2024. This preliminary announcement has been prepared on
the basis of accounting policies as set out in the statutory accounts for the
53 weeks ended 30 March 2024, except for the change in accounting policy
detail below. This announcement does not constitute the Company's statutory
accounts within the meaning of Section 435 of the Companies Act 2006.
The consolidated financial statements of Cranswick plc have been prepared
under the historical cost convention except where measurement of balances at
fair value is required as explained in the accounting policies below. The
Group's financial statements have been prepared in accordance with UK-Adopted
International Accounting Standards ('UK-Adopted IAS'). The Group's financial
statements have been prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006.
The Financial Statements of the Group are prepared to the last Saturday in
March. Accordingly, these Financial Statements are prepared for the 53 week
period ended 30 March 2024. Comparatives are for the 52 week period ended 25
March 2023. The Balance Sheets for 2024, 2023 and 2022 have been prepared as
at 30 March 2024, 25 March 2023 and 27 March 2022 respectively. The 2023 and
2022 Balance Sheets have been restated following a change in accounting
policy. For more details, please see below.
Statutory accounts for the 53 weeks ended 30 March 2024, 52 weeks ended 25
March 2023 and 26 March 2022 have been reported on by the auditors who issued
an unqualified opinion in respect of all years and the auditors' reports for
2024, 2023 and 2022 did not contain statements under 498(2) or 498(3) of the
Companies Act 2006. Statutory accounts for the 52 weeks ended 25 March 2023
and 26 March 2022 have been filed with the Registrar of Companies. The
statutory accounts for the 53 weeks ended 30 March 2024, which were approved
by the Board on 21 May 2024, will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
Viability and Going Concern
In accordance with the provisions of the UK Corporate Governance Code, the
Board has assessed the going concern and viability of the Group over an
appropriate time period, taking into account the current position, future
prospects and the potential impact of the principal risks to the Group's
business model and ability to deliver its strategy.
The Board has reviewed management's forecasts that have been sensitised to
reflect severe yet plausible downside scenarios which consider the principal
risks faced by the Group, including but not limited to a loss of consumer
demand, an outbreak of Avian Influenza impacting our chicken flock and
a widespread outbreak of African Swine Fever in the UK and Europe, as well as
the Group's considerable financial resources and strong trading relationships
with its key customers and suppliers. These forecasts, which have been
reviewed by the Board, lead the Board to believe that the Group is well
placed to manage its business risk successfully.
After reviewing the available information, including business plans and
downside scenario modelling and making enquiries, the Board has reasonable
expectation that the Group has adequate resources to continue in operational
existence for at least twelve months from the date of signing Group financial
statements. For this reason, they continue to adopt the going concern basis
for preparing these financial statements.
The Board has determined that a three-year period to March 2027 is an
appropriate period over which to provide its Viability Statement. This
timeframe has been specifically chosen due to the fast-moving nature of the
food industry and the current financial and operational forecasting cycles of
the Group.
The sensitivity analysis utilised the Group's robust three-year budget and
forecasting process to quantify the financial impact on the strategic plan and
on the Group's viability against specific measures including liquidity, credit
rating and bank covenants.
Given the strong liquidity of the Group; the committed banking facilities and
the diversity of operations, the results of the sensitivity analysis
highlighted that the Group, would, over the three-year period, be able to
withstand the impact of the most severe combination of the risks modelled by
making adjustments to its strategic plan and discretionary expenditure, with
strong headroom against current available facilities and full covenant
compliance in all modelled scenarios.
Based on the results of this analysis, the Board has a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities
as they fall due over the period to 27 March 2027.
2. Accounting policies
The accounting policies applied by the Group in this preliminary announcement
are the same as those applied by the Group in the financial statements for the
52 weeks ended 25 March 2023, except for the new standards, interpretations
and change in accounting policy explained below.
Accounting standards or interpretations which have been adopted in the year
From 26 March 2023, the following standards and amendments are effective in
the Group's consolidated Financial Statements:
· IFRS 17 'Insurance Contracts';
· Amendments to IAS 8 'Accounting policies, Changes in Accounting
Estimates and Errors', distinguishing changes in accounting estimates from
changes in accounting policies;
· Amendments to IAS 1 'Presentation of Financial Statements', disclosure
of accounting policies and materiality judgements;
There has been no material impact on the consolidated Financial Statements
from any amendments effective during the year.
Amendments to IAS 12 'Income Taxes': on 7 May 2021, the IASB issued amendments
to IAS 12 'Income Taxes' relating to deferred tax on assets and liabilities
arising from a single transaction. The amendments require companies to
recognise deferred tax on transactions that on initial recognition give rise
to equal amounts of taxable and deductible temporary differences. This
amendment has been adopted by the Group from 26 March 2023 and has resulted in
an increase in the deferred tax asset and liability by the same amount. The
prior year comparative figures have been amended in line with IAS 12 'Income
Taxes'.
Accounting standards or interpretations issued but not yet effective
Apart from IFRS 18 'Presentation and Disclosure in Financial Statements',
there were no accounting standards or interpretations issued which have an
effective date after the date of these consolidated financial statements that
the Group reasonably expects to have an impact on disclosures, financial
position or performance.
Change in accounting policy
The Group changed its accounting policy for share-based payments such that the
value of shares that have exercised, lapsed or forfeit is now credited to
Retained earnings as opposed to remaining within the Share-based payment
reserve.
The change in accounting policy had no impact upon the Group Income Statement,
Group Statement of Comprehensive Income, Group Statement of Cash Flows, net
assets of the Group, or the Group distributable reserves. The change in
accounting policy enables the readers of the financial statements to identify
the cumulative value of share-based payments that are still to be exercised,
lapse or forfeit.
The impact of the change in accounting policy is detailed in the Group
Statement of Changes in Equity.
There is no change to basic and diluted earnings per share arising from the
change in accounting policy.
3. Business and geographical segments
IFRS 8 requires operating segments to be identified on the basis of the
internal financial information reported to the Chief Operating Decision Maker
(CODM). The Group's CODM is deemed to be the Executive Directors on the
Board, who are primarily responsible for the allocation of resources to
segments and the assessment of performance of the
segments.
The CODM assesses profit performance principally through adjusted profit
measures consistent with those disclosed in the Annual Report and Accounts.
The reporting segments are organised based on the nature of the end markets
served. The 'Food' segment entails manufacture and supply of food products
to UK grocery retailers, the food service sector and other UK and global food
producers. The 'Other' segment represents all other activities which do not
meet the above criteria, principally Cranswick Pet
Products.
The reportable segment 'Food' represents the aggregation of four operating
segments which are aligned to the product categories of the Group; Fresh Pork,
Convenience, Gourmet Products and Poultry, all of which manufacture and supply
food products through the channels described above. The acquisition of
Elsham Linc Limited is included within the Fresh Pork product category, and
the acquisition of Froch Foods Holdings Limited is included within the Gourmet
Product category. The operating segments have been aggregated into one
reportable segment as they share similar economic characteristics. The
economic indicators, which have been assessed in concluding that these
operating segments should be aggregated, include the similarity of long-term
average margins; expected future financial performance; and operating and
competitive risks. In addition, the operating segments are similar with
regard to the nature of the products and production process, the type and
class of customer, the method of distribution and the regulatory environment.
2024 £'m 2024 £'m 2024 £'m 2023 £'m 2023 £'m 2023 £'m
Food Other Total Food Other Total
Revenue 2,573.9 25.4 2,599.3 2,296.4 26.6 2,323.0
Adjusted operating/(loss) profit 192.5 (7.4) 185.1 146.3 0.2 146.5
Finance costs (8.9) - (8.9) (6.3) (0.1) (6.4)
Share of net profit of joint venture 0.4 - 0.4 - - -
Adjusted profit/(loss) before tax 184.0 (7.4) 176.6 140.0 0.1 140.1
Assets 1,355.0 29.0 1,384.0 1,248.4 16.4 1,264.8
Liabilities (446.2) (26.3) (472.5) (410.6) (11.3) (421.9)
Net assets 908.8 2.7 911.5 837.8 5.1 842.9
Depreciation 79.0 2.7 81.7 67.5 1.3 68.8
Property, plant and equipment and right-of-use asset additions
120.0 6.0 126.0 105.4 3.5 108.9
4. Group operating
profit
Group operating costs comprise:
2024 2023
£'m £'m
Cost of sales excluding net IAS 41 valuation movement on biological assets 2,224.6 2,022.1
Net IAS 41 valuation movement on biological assets* (2.2) (7.6)
Cost of sales 2,222.4 2,014.5
Gross profit 376.9 308.5
Selling and distribution costs 100.0 94.8
Administrative expenses excluding amortisation and impairment of intangible
assets
95.3 69.5
Impairment of acquired intangible assets 15.4 3.0
Amortisation of intangible assets 5.0 5.2
Administrative expenses 115.7 77.7
Other operating income (5.7) (9.9)
Total operating costs 2,432.4 2,177.1
*This represents the difference between operating profit prepared under IAS 41
and operating profit prepared under historical cost accounting, which forms
part of the reconciliation to adjusted operating profit.
Included within other operating income are credits of £5.7 million for
insurance claims received in the period (2023: £9.9 million). The net impact
of these claims is not material.
5. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to members of the parent company of £113.1 million (2023:
£111.4 million) by the weighted average number of shares outstanding during
the year. In calculating diluted earnings per share amounts, the weighted
average number of shares is adjusted for the weighted average number of
ordinary shares that would be issued on the conversion of all dilutive
potential ordinary shares into ordinary shares.
The weighted average number of ordinary shares for both basic and diluted
amounts was as per the table below:
2024 2023
Thousands Thousands
Basic weighted average number of shares 53,776 53,461
Dilutive potential ordinary shares - share options 187 129
53,963 53,590
Adjusted earnings per share are calculated using the weighted average number
of shares for both basic and diluted amounts as detailed above (see Note 11).
6. Dividends
Subject to Shareholders' approval the final dividend will be paid on 30 August
2024 to Shareholders on the register at the close of business on 19 July 2024.
7. Analysis of changes in net debt
At 26 March 2023 Acquired on acquisition Cash flow Other non-cash changes At 30 March 2024
£'m £'m £'m £'m £'m
Cash and cash equivalents 20.3 (1.5) 8.2 - 27.0
Bank loans - (6.5) 6.5 - -
Revolving credit facility (40.5) - 14.0 (0.6) (27.1)
Lease liabilities (81.2) - 17.8 (35.9) (99.3)
Net debt (101.4) (8.0) 46.5 (36.5) (99.4)
Net (debt)/funds are defined as cash and cash equivalents less
interest-bearing liabilities net of unamortised issue costs.
8. Related party transactions
During the year the Group and Company entered into transactions, in the
ordinary course of business, with related parties, including transactions
between the Company and its subsidiary undertakings. In the Group accounts
transactions between the Company and its subsidiaries are eliminated on
consolidation.
9. Intangible assets
The losses incurred by Cranswick Pet Products in the year suggested a
potential goodwill and intangible asset impairment. Impairment modelling
indicated that the discounted present value of future pre-tax cash flows
attributable to Cranswick Pet Products did not support the carrying value of
the goodwill asset, resulting in a full £15.1 million impairment charge.
Management concluded that the fair value less cost of disposal was not
materially different to the value-in-use model. Therefore, considering all
relevant factors, a value in use model has been used to assess the impairment
of goodwill. The value in use model considers the specific operational and
strategic factors affecting the business, without the need to rely on
uncertain market conditions.
Two additional intangible assets were recognised on acquisition, customer
relationships and trade names. Both assets were separately tested for
impairment given the change in business model and a greater focus on new
customer relationships. The recalculated customer relationships value of
£3.0 million, indicates that £0.3 million of impairment is required to the
fair value of £3.3 million.
10. Acquisitions
i) Froch Foods Limited
On 19 January 2024, the Group acquired 100 per cent of the share capital of a
holding entity Froch Foods Holding Limited and its subsidiary Froch Foods
Limited, an added-value processor of predominantly pork and poultry related
products, together with associated leasehold buildings, for a total cash
consideration of £9.8 million.
The following table sets out the fair values of the identifiable assets and
liabilities acquired by the Group:
Provisional fair value
£'m
Net assets acquired:
Property, plant and equipment 8.0
Right-of-use assets 1.4
Customer relationships 5.0
Trade and other receivables 0.7
Bank and cash balances 1.6
Bank loans (1.7)
Trade and other payables (4.1)
Lease liabilities (1.4)
Provisions (0.6)
Deferred tax liability (1.7)
7.2
Goodwill arising on acquisition 2.6
Total consideration 9.8
Satisfied by:
Initial cash consideration 9.4
Deferred consideration 0.4
9.8
Net cash outflow arising on acquisition:
Cash consideration paid 9.4
Cash and cash equivalents acquired (1.6)
7.8
The fair values on acquisition are provisional and will be concluded within
twelve months of the acquisition date.
Following management's assessment, the Group recognised a customer
relationship intangible asset of £5.0 million. No further intangible assets
were identified. Included in the £2.6 million of goodwill recognised above
are certain intangible assets that cannot be individually separated from the
acquiree and reliably measured due to their nature. These items include the
expected value of synergies and an assembled workforce.
The fair value of trade and other receivables acquired is the same as the
gross contractual amounts. All of the trade and other receivables acquired
are expected to be collected in full.
Transaction costs in relation to the acquisition of £0.3 million have been
expensed within administrative expenses.
From the date of acquisition to 30 March 2024, the external revenue of Froch
Foods Limited was £1.3 million and the business contributed net profit after
tax of £0.1 million to the Group. Had the acquisition taken place at the
beginning of the financial year, Group revenue would have been £2,604.9
million, and Group profit after tax would have been £114.6 million.
In addition to the net cash outflow on acquisition of £7.8 million, the Group
immediately paid a further £5.5 million consisting of a £1.7 million bank
loan and £3.8 million other payables settled on acquisition.
ii) Elsham Linc Limited
On 4 August 2023, the Group acquired 100 per cent of the issued share capital
of Elsham Linc Limited, a commercial pig farming enterprise operating from
numerous sites predominately across North Lincolnshire and the Humber, for a
net cash consideration of £14.7 million.
Included within the assets acquired is Elsham Linc Limited's 50 per cent share
of the Mere Pigs joint venture, a commercial pig farming business.
Beechgrove Farms Limited, the other party to the joint venture, holds the
remaining 50 per cent interest in Mere Pigs.
The following table sets out the provisional fair values of the identifiable
assets and liabilities acquired by the Group in relation to Elsham Linc
Limited:
Fair value
£'m
Net assets acquired:
Property, plant and equipment 22.7
Investment in joint venture 0.4
Biological assets 7.5
Inventories 1.0
Trade and other receivables 2.3
Bank and cash balances (3.1)
Bank loans (4.8)
Trade and other payables (16.9)
Deferred tax liability (0.6)
8.5
Goodwill arising on acquisition 3.1
Total consideration 11.6
Satisfied by:
Initial cash consideration 10.5
Deferred consideration 1.1
11.6
Net cash outflow arising on acquisition:
Cash consideration paid 11.6
Cash and cash equivalents acquired 3.1
14.7
The deferred consideration of £1.1 million was settled within the year. No
further amounts payable are recognised at the year end.
Included in the £3.1 million of goodwill recognised above are certain
intangible assets that cannot be individually separated from the acquiree and
reliably measured due to their nature. These items include the expected
value of synergies and an assembled workforce.
The fair value of trade and other receivables acquired is the same as the
gross contractual amounts. All of the trade and other receivables acquired
are expected to be collected in full.
Following management's assessment, no customer relationship intangibles have
been recognised and there are no trademarks linked to Elsham Linc Limited.
Transaction costs in relation to the acquisition of £0.3 million have been
expensed within administrative expenses.
From the date of acquisition to 30 March 2024, the external revenue of Elsham
Linc Limited was £4.7 million and the business contributed net profit after
tax of £1.5 million to the Group. The share of profit in the joint venture
from the date of acquisition was £0.4 million. Had the acquisition taken
place at the beginning of the financial year, Group revenue would have been
£2,611.5 million, and Group profit after tax would have been £113.7 million.
In addition to the cash consideration paid of £11.6 million, the Group
immediately paid a further £21.2 million consisting of a £3.1 million bank
overdraft, £4.8 million bank loan, £9.1 million for property, plant and
equipment acquired and £4.2 million other payables settled on acquisition.
iii) Financial asset investment - BIA Analytical Ltd
On 22 September 2023, the Group acquired 2.77 per cent of the ordinary share
capital of BIA Analytical Ltd, a lab-based authenticity testing business, for
£0.1 million. BIA Analytical is registered in Northern Ireland, company
number NI657772.
iv) Deferred and Contingent Consideration
The Sale and Purchase agreements for Atlantica UK Limited and Ramona's Kitchen
Limited included contingent consideration payable in cash to the previous
owners based on the performance of the businesses in the period to 30 June
2024.
The fair value of the contingent consideration on acquisition was estimated at
£2.7 million and was estimated calculating the present value of the future
expected cash flows. During the year, deferred contingent consideration of
£1.0 million was paid. The remaining value has been reassessed at the end
of the reporting period based on latest Board approved cash flows, resulting
in £1.7 million recognised as at the year end.
The Sale and Purchase agreement for Froch Foods Holdings Limited included
deferred consideration payable in cash to the previous owners based on the
finalisation of completion accounts. The amount payable is estimated at
£0.4 million, and will be paid within the year.
v) Pig herd acquisition
In the year the Group purchased a pig herd, along with some plant and
machinery for £3.1 million, as part of a wider agreement to lease and
operate, on a long-term basis, a fully integrated pig and arable farming
enterprise in North Yorkshire. In accordance with IFRS 3 Business
Combinations, this has been accounted for as an asset acquisition.
11. Alternative performance measures
The Board monitors performance principally through adjusted and like-for-like
performance measures. Adjusted profit and earnings per share measures
exclude certain non-cash items including the net IAS 41 valuation movement on
biological assets, amortisation and impairment of acquired intangible assets,
and profit on sale of a business. Free cash flow is defined as net cash from
operating activities less net interest paid and free cash conversion measures
the conversion of adjusted profit for the year into cash. Like-for-like
revenue excludes the impact of current year acquisitions and the contribution
from prior year acquisitions prior to the anniversary of their purchase.
The Board believes that such alternative measures are useful as they exclude
volatile (net IAS 41 valuation movement on biological assets), one-off
(impairment of intangible assets and profit on sale of a business) and
non-cash (amortisation of intangible assets) items which are normally
disregarded by investors, analysts and brokers in gaining a clearer
understanding of the underlying performance of the Group when making
investment and other decisions. Equally, like-for-like revenue provides
these same stakeholders with a clearer understanding of the organic sales
growth of the business.
Like-for-like revenue
2024 2023 Change
£'m £'m
Revenue 2,599.3 2,323.0 +11.9%
Cranswick Mediterranean Foods Limited (1.6) -
Elsham Linc Limited (4.7) -
Froch Foods Limited (1.3) -
Like-for-like revenue 2,591.7 2,323.0 +11.6%
Adjusted gross profit
2024 2023 Change
£'m £'m
Gross profit 376.9 308.5 +22.2%
Net IAS 41 valuation movement (2.2) (7.6)
Adjusted gross profit 374.7 300.9 +24.5%
Adjusted Group operating profit and adjusted EBITDA
2024 2023 Change
£'m £'m
Group operating profit 166.9 145.9 +14.4%
Net IAS 41 valuation movement (2.2) (7.6)
Impairment of intangible assets 15.4 3.0
Amortisation of intangible assets 5.0 5.2
Adjusted Group operating profit 185.1 146.5 +26.3%
Depreciation of property, plant and equipment 65.5 54.1
Depreciation of right-of-use assets 16.2 14.7
Adjusted EBITDA 266.8 215.3 +23.9%
11. Alternative performance measures (continued)
Adjusted profit before tax
2024 2023 Change
£'m £'m
Profit before tax 158.4 139.5 +13.5%
Net IAS 41 valuation movement (2.2) (7.6)
Amortisation of intangible assets 5.0 5.2
Impairment of intangible assets 15.4 3.0
Adjusted profit before tax 176.6 140.1 +26.1%
Adjusted earnings per share
2024 2024 2024 2023 2023 2023
Basic Diluted Basic Diluted
£'m pence pence £'m pence pence
On profit for the year 113.1 210.4 209.7 111.4 208.3 207.8
Amortisation of intangible assets 5.0 9.4 9.3 5.2 9.6 9.6
Tax on amortisation of intangible assets (1.3) (2.3) (2.3) (1.0) (1.8) (1.8)
Net IAS 41 valuation movement (2.2) (4.2) (4.1) (7.6) (14.2) (14.2)
Tax on net IAS 41 valuation movement 0.6 1.0 1.0 1.9 3.6 3.6
Impairment of goodwill 15.1 28.0 27.9 - - -
Impairment of intangible assets 0.3 0.6 0.6 3.0 5.6 5.6
Tax on impairment of intangible assets (0.1) (0.1) (0.1) (0.6) (1.1) (1.1)
On adjusted profit for the year 130.5 242.8 242.0 112.3 210.0 209.5
Free cash flow
2024 2023 Change
£'m £'m
Net cash from operating activities 228.4 153.0 49.3%
Net interest paid (5.0) (3.8)
Free cash flow 223.4 149.2 49.7%
Free cash conversion
2024 2023 Change
£'m £'m
Free cash flow 223.4 149.2 +49.7%
Non-growth capital expenditure (22.1) (36.4)
Net IAS 41 valuation movement 2.2 7.6
Lease capital paid (14.2) (13.8)
Lease interest paid (3.6) (2.5)
185.7 104.1
Adjusted profit for the year 130.5 112.3
Free cash conversion 142.3% 92.7% +4,960bps
11. Alternative performance measures (continued)
Return on capital employed
2024 2023 Change
£'m £'m
Average opening and closing net assets 877.2 805.6
Average opening and closing net debt 100.4 103.7
Average opening and closing pension surplus (0.2) (4.2)
Average opening and closing deferred tax 24.6 20.1
1,002.0 925.2
Adjusted Group operating profit 185.1 146.5
Return on capital employed 18.5% 15.8% +264bps
12. Principal risks and uncertainties
The Group has an established risk management framework which identifies,
assesses, and mitigates key risks facing the business. The principal risks and
uncertainties facing the Group are set out in detail on pages 71 to 76 of the
Report and Accounts for the 52 weeks ended 25 March 2023, dated 23 May 2023, a
copy of which is available on the Group's website.
These risks include: competitor activity, climate change, growth and change,
reliance on key customers and exports, consumer demand, pig meat availability
and price, adverse media attention, health and safety, food scares and product
contamination, disruption to Group operations, IT systems and cyber security,
labour availability and cost, disease and infection within livestock,
recruitment and retention of key personnel, and interest rate, currency,
liquidity and credit risk.
With the exception of COVID-19 and Brexit Disruption principal risks, which
have been removed, as management of these risks is now embedded within our
day-to-day operations, the Board considers the principal risks and
uncertainties as at 30 March 2024 to be the same as those described in the
Report and Accounts for the 52 weeks ended 25 March 2023.
Major events over recent times, such as the ongoing war between Russia and
Ukraine, the conflict in Gaza and shipping disruption in the Red Sea, have
presented challenges and uncertainties to the Group, specifically across our
supply chain and operations. In addition, the Group is also aware that
Government policies may change following the forthcoming UK General Election.
Going forward, ongoing economic uncertainty, inflation, and interest rates
continue to put pressure on household budgets and despite indications that
inflation continues to fall, the timeline of the current cost of living crisis
remains uncertain. The Group continues to closely monitor these situations
to ensure our operational resilience remains strong and has robust measures in
place to identify and manage potentially disruptive events should they arise.
13. Report and accounts
The Report and Accounts will be available on the Company's website at
www.cranswick.plc.uk (http://www.cranswick.plc.uk) on 28 June 2024. Further
copies will be available upon request from the Company Secretary, Cranswick
plc, Crane Court, Hesslewood Country Office Park, Ferriby Road, Hessle, HU13
0PA.
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