REG - Cranswick PLC - Half Yearly Report <Origin Href="QuoteRef">CWK.L</Origin> - Part 2
30/11/2015 07:10
- Part 2: For the preceding part double click ID:nRSd2764Ha
503,319 456,530 949,599
* 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 of adjusted operating profit.
5. Taxation
The tax charge for the period was £5.8 million (2014: £5.4 million) and
represents an effective rate of 22.5 per cent (2014: 22.0 per cent). The
charge for the period was higher than the standard rate of corporation tax due
to the impact of disallowable expenses including impairment of goodwill in the
current period.
Reductions to the standard rate of corporation tax were proposed in the July
2015 Budget statement to reduce the rate from 20 per cent to 19 per cent by 1
April 2017 and to 18 per cent by 1 April 2020. These changes had not been
substantively enacted at the balance sheet date and, therefore, are not
included in this interim consolidated financial information.
6. Earnings per share
Basic earnings per share are based on profit for the period attributable to
Shareholders and on the weighted average number of shares in issue during the
period of 49,464,032 (2014: 49,022,524). The calculation of diluted earnings
per share is based on 49,666,112 shares (2014: 49,223,926).
Adjusted earnings per share
The Directors consider it appropriate to present an adjusted measure of
earnings per share on the face of the income statement which excludes certain
non-cash items to provide a more meaningful measure of the underlying
performance of the business. These items include impairment of goodwill, the
amortisation of customer relationship intangible assets, which became
significant for the first time during the year ended 31 March 2015 following
the acquisition of Benson Park Limited, and gains and losses from the IAS 41
valuation movement on biological assets due to the volatility of pig prices.
Adjusted earnings per share are calculated using the weighted average number
of shares for both basic and diluted amounts as detailed above.
Adjusted profit for the period is derived as follows:
Half year Year to 31 March
2015£'000 2014£'000 2015£'000
Profit for the period 19,776 19,204 41,252
Net IAS 41 valuation movement on biological assets 637 1,182 4,245
Tax on net IAS 41 valuation movement on biological assets (127) (236) (849)
Amortisation of customer relationship intangible assets 698 - 671
Tax on amortisation of customer relationship intangible assets (140) - (134)
Impairment of goodwill 4,635 - -
Adjusted profit for the period 25,479 20,150 45,185
7. Dividends - half year ended 30 September
Half year Year to 31 March
2015£'000 2014£'000 2015£'000
Interim dividend for year ended 31 March 2015 of 10.6p per share - - 5,203
Final dividend for year ended 31 March 2015 of 23.4p (2014: 22.0p)per share 11,604 10,792 10,792
11,604 10,792 15,995
The interim dividend for the year ending 31 March 2016 of 11.6 pence per share
was approved by the Board on 30 November 2015 for payment to Shareholders on
29 January 2016 and therefore has not been included as a liability as at 30
September 2015.
8. Intangible fixed assets
Customer
Goodwill relationships Total
£'000 £'000 £'000
Cost
At 30 September 2014 135,239 795 136,034
On acquisition 9,359 6,185 15,544
At 31 March 2015 and at 30 September 2015 144,598 6,980 151,578
Amortisation and impairmentAt 30 September 2014 4,924 356 5,280
Amortisation - 593 593
At 31 March 2015 4,924 949 5,873
Amortisation - 698 698
Impairment 4,635 - 4,635
At 30 September 2015 9,559 1,647 11,206
Net book value
At 30 September 2014 130,315 439 130,754
At 31 March 2015 139,674 6,031 145,705
At 30 September 2015 135,039 5,333 140,372
Impairment testing
Goodwill is subject to annual impairment testing. Goodwill acquired through
business combinations has been allocated for impairment testing purposes to
the following principal cash generating units:
Cash generating unit Half year Year to 31 March
2015 2014 2015
£'000 £'000 £'000
Fresh pork 12,231 12,231 12,231
Livestock 1,691 1,691 1,691
Cooked meats 90,167 90,167 90,167
Sandwiches 6,967 11,602 11,602
Continental Fine Foods 10,968 10,968 10,968
Premium cooked poultry 9,259 - 9,259
Other 3,756 3,656 3,756
135,039 130,315 139,674
Following a change in the customer base of the Sandwiches category, an
impairment review was performed on the Sandwiches cash generating unit as at
30 September 2015. This cash generating unit has historically been the most
sensitive to a reasonably possible change in assumptions.
The recoverable amount for the Sandwiches cash generating unit has been
determined based on value in use calculations. The projected cash flows were
updated to reflect the latest Sandwiches forecasts for the years ending 31
March 2016 and 31 March 2017 and cash flow projections for the next three
years. Forecast replacement capital expenditure is included from forecasts and
thereafter capital spend is assumed to represent 100 per cent of
depreciation.
Subsequent cash flows are forecast to grow in line with an assumed long-term
industry growth rate of 3 per cent derived from third party market
information, including Kantar Worldpanel data. A pre-tax discount rate of 7.7
per cent has been used (31 March 2015: 6.5 per cent) being management's
estimate of the weighted average cost of capital.
The calculation is most sensitive to the following assumptions:
Sales volumes
Sales volumes are influenced by the growth of the underlying food segment, the
market shares of our customers, selling prices, and the quality of our
products and service. Historical volumes are used as the base and adjusted
over the projection period in line with current growth rates.
Gross margin
Gross margin depends upon average selling prices, the cost of raw materials
and changes in the cost of production overheads. Historical margins are used
as the base, adjusted for management's expectations derived from experience
and with reference to forecasts.
Discount rates
All calculations of this nature are sensitive to the discount rate used.
Management's estimate of the weighted average cost of capital has been used.
Based on these calculations, which gave a value in use below the value of the
carrying amount, the Group has recognised an impairment charge within
administrative expenses for goodwill allocated to the Sandwiches cash
generating unit of £4,635,000 (2014: £nil).
Following the recognition of this impairment the carrying amount of the
Sandwiches cash generating unit is the same as the recoverable amount of £8.9
million, so any further adverse change in key assumptions would lead to an
additional impairment charge.
9. Financial instruments
The Group's activities expose it to a number of financial risks which include
foreign currency risk, interest rate risk, credit risk and liquidity risk.
The Board considers the Group's financial instruments risk management strategy
to be the same as described within the Directors' Report on page 70 of the
Report & Accounts for the year ended 31 March 2015.
Fair value of financial instruments
All derivative financial instruments are shown in the balance sheet at fair
value as follows:
Half year Year to
2015 2014 31 March 2015
Bookvalue£'000 Fairvalue£'000 Bookvalue£'000 Fairvalue£'000 Bookvalue£'000 Fairvalue£'000
Forward currency contracts (169) (169) (163) (163) (210) (210)
The book value of trade and other receivables, trade and other payables, cash
balances, overdrafts, amounts outstanding under revolving credit facilities
and finance leases and hire purchase contracts equates to fair value for the
Group.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities.
Level 2: other techniques for which all inputs which have a significant effect
on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the
recorded fair value that are not based on observable market data.
Transfers between levels of the fair value hierarchy are deemed to have
occurred at the end of the reporting period. There were no such transfers in
the period.
The Group's forward currency contracts are measured using Level 2 of the fair
value hierarchy. The valuations are provided by the Group's bankers from
their proprietary valuations models and are based on mid-market levels as at
close of business on the Group's reporting date.
The Group's 3.3 per cent retained shareholding in the aquatics business
Tropical Marine Centre (2012) Limited would have been classified as Level 3;
however as the investment is an unquoted entity and cannot be reliably
measured the Directors consider that its value is immaterial and no fair value
has been applied.
10. Analysis of Group net debt
At31 March 2015 Cash flow Non-cashmovements At 30 September2015
£'000 £'000 £'000 £'000
Cash and cash equivalents 3,941 10,682 - 14,623
Revolving credit (21,265) 2,000 (184) (19,449)
Net debt (17,324) 12,682 (184) (4,826)
Net debt is defined as cash and cash equivalents and loans receivable less
interest bearing liabilities (net of unamortised issue costs).
11. Related party transactions
During the period the Group entered into transactions, in the ordinary course
of business, with its subsidiaries which are related parties. Balances and
transactions with subsidiaries are eliminated on consolidation.
INDEPENDENT REVIEW REPORT TO CRANSWICK PLC
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2015 which comprises the Group income statement, Group statement of
comprehensive income, Group balance sheet, Group statement of cash flows and
related notes 1 to 11. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed set of financial statements.
This report is made solely to the Company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK and
Ireland) "Review of Interim Financial Information Performed by the Independent
Auditor of the Entity" issued by the Auditing Practices Board. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company, for our work, for this report, or for the conclusions
we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2015 is not prepared,
in all material respects, in accordance with International Accounting Standard
34 as adopted by the European Union and the Disclosure and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Hull
30 November 2015
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