REG - Cranswick PLC - Interim Results Announcement <Origin Href="QuoteRef">CWK.L</Origin> - Part 1

CranswickAnnouncement

24/11/2014 07:10

RNS Number : 7428X
Cranswick PLC
24 November 2014
CRANSWICK plc: INTERIM RESULTS
Positive earnings momentum
Cranswick plc ("Cranswick" or "the Company" or "the Group"), a leading UK food producer, today announces its unaudited results for the six months ended 30 September 2014.
Financial Highlights:
 Revenues of 481.5 million (2013: 483.5 million)
 Adjusted Group operating margin1 of 5.4 per cent (2013: 4.9 per cent)
 Adjusted profit before tax1 up by 11.4 per cent to 25.8 million (2013: 23.2 million)
 Adjusted earnings per share1 7.3 per cent ahead at 41.1 pence (2013: 38.3 pence)
 Dividend per share 6.0 per cent higher at 10.6 pence (2013: 10.0 pence)
 Net debt reduced by 39.8 per cent to 22.4 million (2013: 37.2 million)
 Statutory profit before tax of 24.6 million (2013: 26.1 million)
 Statutory earnings per share of 39.2 pence (2013: 43.5 pence)
Operational Highlights:
 Extension of the Delico cooked meats facility in Milton Keynes completed on time and to budget
 Significant upgrade to the Norfolk fresh pork site, which is nearing completion
 Acquired Benson Park Limited, a leading producer of premium British cooked poultry, subsequent to the half year end
Martin Davey, Cranswick's Chairman commented: 
"It is pleasing to report to Shareholders that adjusted profit before tax for the six months increased 11.4 per cent to 25.8 million from 23.2 million in the corresponding period last year. Earnings per share on the same basis rose 7.3 per cent to 41.1 pence compared to 38.3 pence previously.
"Subsequent to the period end, the Company acquired Benson Park Limited, a Hull based, leading producer of premium British cooked poultry which serves the fast growing food to go sector. This is an important acquisition for Cranswick in meeting the Company's stated strategic aim of broadening both the protein range and the customer base of the business.
"The interim dividend is being increased by 6.0 per cent to 10.6 pence per share from 10.0 pence previously.
"With experienced management at all levels of the Group, a strong and continually evolving range of products along with a robust financial position the Board remains confident in the continued long term success and development of the business".
-ends-
1 adjusted group operating margin, adjusted profit before tax and adjusted earnings per share exclude net IAS 41 valuation movement on biological assets in both the current and prior financial years and the release of contingent consideration in the prior financial year. These are the measures used by the Board to assess the Group's underlying performance.
Enquiries:
Cranswick plc
Mark Bottomley, Finance Director 01482 372 000
Powerscourt 
Nick Dibden/Sophie Moate020 7250 1446
Note to Editors:
Cranswick was formed in the early 1970s by farmers in East Yorkshire to produce animal feed and has since evolved into a business focused on the supply of food products to the UK food retail and food service sectors. Well known for the production of gourmet sausages the Company is involved in the breeding and rearing of premium British pigs and also supplies fresh pork, cooked meats, premium cooked poultry, air-dried bacon, charcuterie, sandwiches and pastry products. Products are sold primarily under retailers own labels including Sainsbury's 'Taste The Difference' and Tesco's 'Finest' as well as under a number of brands such as 'Simply Sausages', 'The Black Farmer', 'Weightwatchers' and 'Red Lion Foods'. Sales in the year to March 2014 were 995 million and have grown more than 270 per cent over ten years.
Chairman's statement
The overall performance of the business during the first half of the year has been in line with the Board's expectations.
Sales of 481.5 million were comparable to that recorded in the same period a year ago. The underlying feature was of strong sales growth across most product categories coupled with a reduction in fresh pork sales. The latter was a result of business lost earlier in the year which is now being recovered. Details of trading in the period are covered more fully in the Operating review.
The versatility and value credentials of pig meat in its various forms continue to prove popular with the consumer. In addition, the consumer focus on British meat has seen a greater proportion of the Group's own pigs utilised internally thus delivering the benefits envisaged when the strategic decision was made to return to pig production with investment in the Company's own herds.
There have been well-publicised changes in consumers' food shopping habits, including smaller but more frequent shopping trips and reductions in food wastage. Along with increases in market share for the convenience sector and the growth of limited assortment discounters, this has impacted food sales at the major grocery retailers and added to the pressures in the competitive environment in which we operate.
Against this backdrop it is pleasing to report to Shareholders that adjusted profit before tax for the six months increased 11.4 per cent to 25.8 million from 23.2 million in the corresponding period last year. Earnings per share on the same basis rose 7.3 per cent to 41.1 pence compared to 38.3 pence previously, with the prior year benefitting from a lower effective tax rate.
Adjusted operating margin was similar to that achieved for the whole of the last financial year. The investments made in recent years to increase capacity and improve efficiencies have been important in offsetting commercial pressures. 
During the period, work to extend the Delico cooked meats facility in Milton Keynes was completed on time and to budget. This investment provides additional capacity and improved production yields. A major upgrade to the Norfolk fresh pork site, which is nearing completion, will deliver similar benefits. The ongoing development within pastry is delivering very encouraging sales levels though much still remains to be done operationally to deliver the targeted returns.
The strategy for the development of the business to date has been to complement organic growth with appropriate acquisitions. Subsequent to the period end, the Company acquired Benson Park Limited, a Hull based, leading producer of premium British cooked poultry which serves the fast growing food to go sector. This is an important acquisition for Cranswick in meeting the Company's stated strategic aim of broadening both the protein range and the customer base of the business. We welcome David Park, Managing Director, and his colleagues to Cranswick and look forward to working with them to further develop the business.
Operating cash inflow in the period reduced to 17.1 million from 23.8 million in the same period last year, reflecting higher working capital as the Group has grown its pig herd and prepares for a strong Christmas trading period. Interest was covered 66 times and at the end of the period net debt stood at 22.4 million. The Company is in a sound financial position and further details are provided in the Financial review.
The interim dividend is being increased by 6.0 per cent to 10.6 pence per share from 10.0 pence previously. The dividend will be paid on 23 January 2015 to Shareholders on the register at the close of business on 5 December 2014. Shareholders will again have the opportunity to receive the dividend by way of scrip issue.
The continued successful development of Cranswick would not be possible without truly committed individuals throughout the business. On behalf of the Board I express sincere thanks and appreciation to all of our colleagues for their unstinting efforts, enthusiasm and talents in driving the business forward.
The Company is totally focused on working closely with its customers to deliver quality food for the consumer from well invested production facilities of the highest standards. With experienced management at all levels of the Group, a strong and continually evolving range of products along with a robust financial position the Board remains confident in the continued long term success and development of the business.
Martin Davey
Chairman
24 November 2014
Operating review
Strong revenue growth in several of the Group's product categories offset lower fresh pork sales and a conscious decision to utilise more of Cranswick's own pigs internally. Retail market data for the 52 weeks to 12 October 2014 shows most product categories in which the Group participates continuing to grow, with the premium tier, where Cranswick's sales tend to be more concentrated, growing ahead of the overall category.
Adjusted Group operating profit increased by 11 per cent to 26.2 million in the first half of the financial year on revenues which were in line with last year at 481.5 million.
Adjusted group operating margin at 5.4 per cent of sales was in line with the last financial year as a whole. The improvement in Group operating margin compared to the first half last year reflected the ongoing focus on improving operational efficiencies across the Group and the benefit of a more stable pig price in the current financial year compared to the first half last year when prices were rising rapidly.
Cranswick's long term growth strategy is focussed on consolidating existing market positions, developing new products and channels in its core UK food market and growing its international operations and customer base, with growth being supported by organic initiatives and targeted acquisitions. It is pleasing to report that progress has been made in each of these areas during the period under review.
On 22 October 2014 Cranswick acquired Benson Park Limited, a leading producer of premium British cooked poultry. It supplies ingredients to customers which operate in the fast growing food to go sector of the retail multi-channel, convenience and foodservice markets. This strategic acquisition moves Cranswick into a new protein sector, broadening both the Group's product range and its customer base.
Following the substantial investment in the Group's pig breeding and rearing activities during the previous financial year, the focus has been on improving the quality of the herd and the performance of the breeding, rearing and finishing units. There is now capacity to service in excess of 20 per cent of the Group's overall British pig requirements and there will be ongoing investment to further improve productivity and efficiencies. The business is also exploring several options to enhance the competitiveness of the Group's pig operations, relative to the most efficient European producers.
Exports to Europe were lower than in the same period last year as more product was sold into the UK market where prices were more attractive, but exports to the rest of the world including Far Eastern markets were 24 per cent ahead of the same period last year, as the business continues to make positive progress in developing its export trade. The business is now exporting to a number of countries in the Far East and has recently sent shipments to West Africa and Australia. One third of the tonnage being processed through the Group's two primary processing facilities is being shipped overseas each week.
Fresh pork sales were 13 per cent lower than in the same period last year due to business lost at the start of the year which is now being recovered. The loss of this business was partly offset by additional barbecue business, particularly during the first quarter. Pig prices eased during the period and were well below the record highs recorded around the previous half year end. During the period, work on the new rapid chill system at the Norfolk abattoir was substantially completed. This investment, which is part of an ongoing upgrade to the East Anglian facility, will make the plant more energy efficient as well as improving yields and throughput speeds. 
Sausage sales were slightly ahead of the same period last year. Strong growth in premium sausage sales was countered by lower sales of frozen and mid-tier ranges. Sales of premium beef burgers were slightly lower year on year reflecting the shorter barbecue season in 2014 compared to the previous summer. According to the latest Kantar market research data, retail sales of super-premium sausages, which Cranswick predominantly produces, continue to grow ahead of the overall category both in volume and value terms. The price differential between the premium and standard tiers is relatively modest which makes trading up an attractive option for consumers.
Bacon sales were 3 per cent ahead as continued growth of the business' hand-cured, air-dried bacon was supported by a substantial uplift in sales of premium gammons. Shortly before the end of the period under review the business moved to sole supply status for premium bacon and gammons with one of the Group's lead retail customers. With further new product launches planned for both existing and new customers in the run up to the peak Christmas trading period, the business is well placed moving into the second half of the year.
Cooked meat sales grew by 8 per cent supported by new product launches and a strong promotional calendar as well as increased business with a key retail customer after securing a long term supply agreement in the previous financial year. During the period the project to extend the Delico facility in Milton Keynes was completed on time and to budget. This investment has substantially increased capacity at the site and will deliver further efficiency gains as well as improving product quality.
Pastry sales were significantly ahead of the prior year continuing the positive development since this category was introduced. Whilst top line performance has been very pleasing the rapid growth of the business is adding complexity cost and so further operational improvements are being targeted to deliver the forecast returns from the investment. During the period several new summer eating products were listed with the category's lead customer and several further products are being launched in autumn of 2014 and spring 2015. These will be complemented by a range of festive products in the lead up to Christmas. Good progress was made during the period in broadening the customer base for these products both through food service, forecourt and food to go channels including some customers already being serviced by the Group's sandwich business.
Sales of continental products increased by 9 per cent reflecting the UK consumer's growing taste for speciality continental products including charcuterie, cheeses, pasta and olives. Category growth was supported by new product launches and new retail contracts in the second half of the previous financial year together with a renewed focus on sourcing new artisan products across Europe. An important part of the continental range is corned beef which is sliced and packed at the Group's Manchester facility. This product performed extremely well during the period and made a positive contribution to the overall category performance. 
Sandwich sales grew by 12 per cent, driven partly by new contract wins at the start of the period and by additional sales to existing customers. The new contracts have brought additional complexity to the business through an increased product range which has impacted operational efficiencies, however a clear improvement was seen towards the end of the period which leaves the business well placed moving into the second half of the year. The new contract wins are more seasonally balanced than the historic mix of business in this category where sales and profitability have been skewed towards the summer months.
Cranswick has performed positively during a period in which the UK grocery market has remained competitive. The business continues to focus on delivering high quality premium products which offer real value to the UK consumer. This focus on quality and value is underpinned by a constant drive to innovate and bring new, tasty and exciting products to market. The ongoing growth and development of the Company is a testament to the continued efforts of the highly skilled and committed people across the business.
The Company remains highly cash generative allowing for attractive returns to Shareholders, continued investment in the Group's infrastructure and complementary acquisitions. Cranswick's facilities are amongst the very best in the industry and ongoing investment both in these assets and the teams which make them run so effectively will support the Group's future successful development.
Adam Couch
Chief Executive
24 November 2014
Financial review
The Group is presenting its interim financial information for the six months to 30 September 2014 with comparative information for the six months to 30 September 2013 and the year to 31 March 2014.
Revenue
Revenue decreased by 0.4 per cent from 483.5 million to 481.5 million, reflecting growth across most product categories offset by lower sales of fresh pork and, as planned, a greater proportion of the Group's own pigs being utilised internally. It is pleasing to note that the fresh pork business lost earlier in the year is now being recovered.
Adjusted Group operating profit
Adjusted Group operating profit increased by 10.8 per cent to 26.2 million (2013: 23.6 million). Adjusted Group operating margin at 5.4 per cent of sales was higher than the 4.9 per cent delivered in the same period last year and in line with that reported for the last financial year as a whole, reflecting the Group's continued focus on operating efficiencies, product quality and innovation. Pig prices eased during the second quarter of the financial year and are now below the record highs seen at this time last year.
Finance costs
Net financing costs at 0.4 million were 0.1 million lower than reported in the first half of the prior year, reflecting lower average bank borrowings and improved terms following the extension of the Group's banking facilities at the end of the previous financial year.
Adjusted profit before tax
Adjusted profit before tax was 11.4 per cent higher at 25.8 million (2013: 23.2 million).
Taxation
The tax charge as a percentage of profit before tax was 22.0 per cent (2013: 18.9 per cent). The standard rate of corporation tax was 21 per cent (2013: 23 per cent). The charge for the period was higher than the standard rate of corporation tax due to the impact of disallowable expenses. The charge for the prior period benefited from a 0.8 million deferred tax credit following a 3 per cent enacted reduction in the UK corporation tax rate. In addition the 1.1 million contingent consideration provision release was not chargeable to tax. Adjusting for these items the underlying effective rate for the prior period was 22.8 per cent.
Adjusted earnings per share
Adjusted earnings per share rose by 7.3 per cent to 41.1 pence (2013: 38.3 pence) in the six months to 30 September 2014. The average number of shares in issue was 49,023,000 (2013: 48,631,000).
Adjusted profit measures
Following the investment in pig breeding and rearing activities during the prior year, the Group now monitors performance principally through the adjusted profit measures which exclude certain non-cash items including the net IAS 41 valuation charge of 1.2 million on biological assets (2013: 1.8 million credit) and in the prior year, the release of the 1.1 million provision for contingent consideration payable to the previous owners of Kingston Foods. The statutory results, including these items, show a 5.4 per cent decrease in profit before tax to 24.6 million (2013: 26.1 million), a 5.7 per cent decrease in Group operating profit to 25.0 million (2013: 26.5 million) and a 9.9 per cent decrease in earnings per share to 39.2 pence (2013: 43.5 pence).
Cash flow and net debt
The net cash inflow from operating activities in the period was 17.1 million (2013: 23.8 million) reflecting an increase in working capital of 9.3 million (2013: 2.0 million) with the Group preparing for a strong Christmas trading period. Net debt increased in the six month period by 5.4 million to 22.4 million, but was 14.8 million lower than the previous half year end level. Net debt was just 7 per cent of shareholders' funds (2013: 13 per cent) as the Group's balance sheet continues to be conservatively managed. The Group's current bank facility of 120 million extends to July 2018 and provides the business with generous headroom to meet its objectives.
Pensions
The Group operates a defined contribution pension scheme whereby contributions are made to a scheme administered by a major insurance company. Contributions to this scheme are determined as a percentage of employees' earnings. The Group also operates a defined benefit pension scheme which has been closed to further benefit accrual since 2004. The deficit on this scheme at 30 September 2014 was 6.1 million which compared to 6.5 million at 31 March 2014. Cash contributions to the scheme during the period, as part of the programme to reduce the deficit, were 0.7 million. The present value of funded obligations was 27.0 million and the fair value of plan assets was 20.9 million.
The valuation of the defined benefit pension liability is dependent upon market conditions and actuarial methods and assumptions (including mortality assumptions). Such changes in actuarial assumptions and the performance of the funds may result in changes to amounts charged or released through the income statement and the Group may be required to pay increased pension contributions in the future. The Board will regularly review its pension strategy with reference to the value of assets and liabilities under the pension scheme as well as the potential impact of changes in actuarial assumptions.
Events after the balance sheet date
On 22 October 2014, the Group acquired 100 per cent of the issued share capital of Benson Park Limited, a leading producer of premium British cooked poultry, for an initial consideration of 17.7 million net of cash acquired of 2.3 million. A further 4.0 million of consideration may become payable contingent on the performance of the business during a two and a half year period from the date of acquisition. The acquisition moves the Group into a new protein sector and further broadens its product range and customer base. Further details of the acquisition are set out in note 11.
Principal risks and uncertainties
There are a number of risks and uncertainties facing the business in the second half of the financial year. The Board considers these risks and uncertainties to be the same as those described in the Report & Accounts for the year ended 31 March 2014, dated 19 May 2014, a copy of which is available on the Group's website at www.cranswick.plc.uk. The principal risks and uncertainties which are set out in detail on pages 12 to 14 of the Report & Accounts for the year ended 31 March 2014 are:
Strategic risks
 Consumer demand
 Competitor activity
Commercial risks
 Reliance on key customers
 Pricing and availability of raw materials
Financial risks
 Interest rate, currency, liquidity and credit risks
 Business acquisitions
Operational risks
 Food scares
 Business continuity
 Recruitment and retention of key staff
 Food safety and health and safety
 Pig herd infection and disease
Forward looking information
This interim report contains certain forward looking statements. These statements are made by the Directors in good faith based on the information available to them at the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking information.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the 'Operating review'. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described above. The Group has considerable financial resources together with strong trading relationships with its key customers and suppliers. As a consequence, the Directors believe that the Group is well placed to manage its business risk successfully.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.
Mark Bottomley
Finance Director
24 November 2014
Cranswick plc: Group income statement (unaudited)
for the six months ended 30 September 2014

 Half year
Year to

 2014

 2013
31 March 2014
Notes
'000

'000

'000













Revenue

481,540

483,521

994,905







Adjusted Group operating profit

26,192

23,640

53,255







Release of contingent consideration

-

1,086

1,086
Net IAS 41 valuation movement on biological assets

(1,182)

1,795

1,441







Group operating profit
4
25,010

26,521

55,782







Finance revenue

1

22

32
Finance costs

(378)

(492)

(1,057)







Profit before tax 

24,633

26,051

54,757







Taxation
5
(5,429)

(4,920)

(11,550)







Profit for the period

19,204

21,131

43,207







Earnings per share (pence)






On profit for the period:






Basic
6
39.2p

43.5p

88.7p
Diluted
6
39.0p

43.3p

88.3p














On adjusted profit for the period:






Basic
6
41.1p

38.3p

84.1p
Diluted
6
40.9p

38.1p

83.7p
Cranswick plc: Group statement of comprehensive income (unaudited)
for the six months ended 30 September 2014

 Half year
Year to 
31 March


2014
'000

2013
'000

2014
'000











Profit for the period
19,204

21,131

43,207






Other comprehensive income





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





Cash flow hedges






Losses arising in the period
(163)

(78)

(18)
Reclassification adjustments for losses included in the income statement

18

4

4
Income tax effect

29

15

3
Net other comprehensive income to be reclassified to profit or loss in subsequent periods

(116)

(59)

(11)







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






Actuarial losses on defined benefit pension scheme

(148)

(475)

(4,177)
Income tax effect

29

9

735
Net other comprehensive income not being reclassified to profit or loss in subsequent periods

(119)

(466)

(3,442)
Other comprehensive income, net of tax

(235)

(525)

(3,453)
Total comprehensive income, net of tax

18,969

20,606

39,754


Cranswick plc: Group balance sheet (unaudited)
at 30 September 2014


 Half year

As at
31 March


2014
'000

2013
'000

2014
'000







Non-current assets






Intangible assets

130,754

130,517

130,535
Property, plant and equipment

159,931

155,782

156,578
Biological assets

924

1,337

1,174
Financial assets

-

104

-
Total non-current assets

291,609

287,740

288,287







Current assets






Biological assets

15,300

12,416

13,543
Inventories

54,041

54,961

47,426
Trade and other receivables

95,474

92,249

97,775
Financial assets

-

696

-
Cash and short-term deposits

11,720

19,453

12,223
Total current assets

176,535

179,775

170,967







Total assets

468,144

467,515

459,254







Current liabilities






Trade and other payables

(104,238)

(107,126)

(108,806)
Financial liabilities

(207)

(380)

(327)
Income tax payable

(6,056)

(5,868)

(6,495)
Total current liabilities

(110,501)

(113,374)

(115,628)







Non-current liabilities






Other payables

(426)

(445)

(409)
Financial liabilities

(34,082)

(57,167)

(28,898)
Deferred tax liabilities

(3,892)

(5,798)

(4,737)
Provisions

(346)

(342)

(343)
Defined benefit pension scheme deficit

(6,078)

(3,334)

(6,528)
Total non-current liabilities

(44,824)

(67,086)

(40,915)







Total liabilities

(155,325)

(180,460)

(156,543)







Net assets

312,819

287,055

302,711







Equity






Called-up share capital

4,909

4,878

4,896
Share premium account

64,650

62,886

64,173
Share-based payments

8,939

7,853

7,779
Hedging reserve

(131)

(63)

(15)
Retained earnings

234,452

211,501

225,878
Equity attributable to owners of the parent

312,819

287,055

302,711


Cranswick plc: Group statement of cash flows (unaudited)
for the six months ended 30 September 2014


 
 Half year
 Year to 31 March


2014
'000
2013
'000
2014
'000










Operating activities




Profit for the period

19,204
21,131
43,207
Adjustments to reconcile Group profit for the period to net cash inflows from operating activities:




Income tax expense

5,429
4,920
11,550
Net finance costs

377
470
1,025
Gain on sale of property, plant and equipment

(49)
(51)
(100)
Depreciation of property, plant and equipment

8,753
8,485
17,831
Amortisation of intangibles

78
79
159
Share-based payments

1,160
1,088
1,014
Difference between pension contributions paid and amounts recognised in the income statement

(598)
(497)
(1,006)
Release of government grants

(18)
(49)
(85)
Release of contingent consideration

-
(1,086)
(1,086)
Net IAS 41 valuation movement on biological assets

1,182
(1,795)
(1,441)
Increase in biological assets

(2,689)
-
(176)
(Increase)/decrease in inventories

(6,615)
(6,068)
1,497
Decrease/ (increase) in trade and other receivables

2,485
2,341
(3,910)
(Decrease)/ increase in trade and other payables

(5,218)
1,718
4,702
Cash generated from operations

23,481
30,686
73,181
Tax paid

(6,374)
(6,880)
(13,050)
Net cash from operating activities

17,107
23,806
60,131





Cash flows from investing activities




Interest received

1
12
28
Principal amounts received in relation to loans advanced

-
598
1,002
Acquisition of subsidiary, net of cash acquired

-
(12,944)
(14,402)
Purchase of property, plant and equipment

(11,022)
(16,857)
(27,684)
Receipt of government grants

-
100
100
Proceeds from sale of property, plant and equipment

198
90
197
Net cash used in investing activities

(10,823)
(29,001)
(40,759)





Cash flows from financing activities




Interest paid

(369)
(431)
(1,094)
Proceeds from issue of share capital

60
27
410
Proceeds from borrowings

5,000
27,000
30,000
Issue costs of long term borrowings

(851)
-
-
Repayment of borrowings

-
-
(30,500)
Dividends paid

(10,362)
(8,744)
(12,700)
Repayment of capital element of finance leases

(265)
(288)
(349)
Net cash (used in)/ from financing activities

(6,787)
17,564
(14,233)





Net (decrease)/ increase in cash and cash equivalents

(503)
12,369
5,139
Cash and cash equivalents at beginning of period

12,223
7,084
7,084
Cash and cash equivalents at end of period

11,720
19,453
12,223
Cranswick plc: Group statement of changes in equity (unaudited)
for the six months ended 30 September 2014

Share
capital
'000
Share
premium
'000
Share-
based
payments
'000
Hedging
reserve
'000
Retained
earnings
'000
Total
equity
'000






At 1 April 2014
4,896
64,173
7,779
(15)
225,878
302,711








Profit for the period
-
-
-
-
19,204
19,204
Other comprehensive income
-
-
-
(116)
(119)
(235)
Total comprehensive income
-
-
-
(116)
19,085
18,969







Share-based payments
-
-
1,160
-
-
1,160
Scrip dividend
3
427
-
-
-
430
Share options exercised
10
50
-
-
-
60
Dividends
-
-
-
-
(10,792)
(10,792)
Deferred tax relating to changes in equity
-
-
-
-
113
113
Corporation tax relating to changes in equity
-
-
-
-
168
168
At 30 September 2014
4,909
64,650
8,939
(131)
234,452
312,819













At 1 April 2013
4,853
61,603
6,765
(4)
200,447
273,664







Profit for the period
-
-
-
-
21,131
21,131
Other comprehensive income
-
-
-
(59)
(466)
(525)
Total comprehensive income
-
-
-
(59)
20,665
20,606







Share-based payments
-
-
1,088
-
-
1,088
Scrip dividend
11
1,270
-
-
-
1,281
Share options exercised
14
13
-
-
-
27
Dividends
-
-
-
-
(10,025)
(10,025)
Deferred tax relating to changes in equity
-
-
-
-
212
212
Corporation tax relating to changes in equity
-
-
-
-
202
202
At 30 September 2013
4,878
62,886
7,853
(63)
211,501
287,055













At 1 April 2013
4,853
61,603
6,765
(4)
200,447
273,664







Profit for the year
-
-
-
-
43,207
43,207
Other comprehensive income
-
-
-
(11)
(3,442)
(3,453)
Total comprehensive income
-
-
-
(11)
39,765
39,754







Share-based payments
-
-
1,014
-
-
1,014
Scrip dividend
19
2,184
-
-
-
2,203
Share options exercised
24
386
-
-
-
410
Dividends
-
-
-
-
(14,903)
(14,903)
Deferred tax relating to changes in equity
-
-
-
-
246
246
Corporation tax relating to changes in equity
-
-
-
-
323
323
At 31 March 2014
4,896
64,173
7,779
(15)
225,878
302,711
Responsibility statement
The Directors confirm that to the best of their knowledge the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting and includes a fair review of the information required by DTR 4.2.7R (an indication of important events during the first six months and a description of the principle risks and uncertainties for the remaining six months of the year) and by DTR 4.2.8R (a disclosure of related party transactions and changes therein) of the Disclosure and Transparency Rules.
On behalf of the Board
Martin Davey  Mark Bottomley
ChairmanFinance Director
24 November 2014
Notes to the interim accounts
1. Basis of preparation
This interim report was approved by the Directors on 24 November 2014 and has been prepared in accordance with the Disclosure and Transparency Rules of the UK's Financial Conduct Authority and the requirements of IAS 34 Interim Financial Reporting as adopted by the European Union. The information does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 March 2014 prepared under IFRS as adopted by the European Union have been filed with the Registrar of Companies. The report of the auditors on the statutory accounts was not qualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006. The interim report has not been reviewed pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information' and does not include all of the information required for full annual financial statements.
2. Accounting policies
The accounting policies applied by the Group in this interim report are the same as those applied by the Group in the financial statements for the year ended 31 March 2014. 
Non-GAAP measures - Adjusted Group operating profit, adjusted profit before tax and adjusted earnings per share
Adjusted Group operating profit, adjusted profit before tax and adjusted earnings per share are defined before net IAS 41 valuation movement on biological assets, impairment charges and other significant non-trading items (being release of contingent consideration in the prior period). These additional non-GAAP measures of performance are included as the Directors believe that they provide a useful alternative measure for shareholders of the trading performance of the Group. The reconciliation between Group operating profit and adjusted Group operating profit is shown on the face of the Group income statement.
The following accounting standards and interpretations became effective, and were adopted by the Group, for the current reporting period:
International Accounting Standards (IAS / IFRSs)
Effective date
IAS 32 (revised)
Financial Instruments: Presentation on Offsetting Financial Assets and Financial Liabilities
1 January 2014
IFRS 10
Consolidated Financial Statements
1 January 2014
IFRS 11
Joint Arrangements
1 January 2014
IFRS 12
Disclosure of Interests in Other Entities
1 January 2014

The application of these standards has not had a material effect on the net assets, results and disclosures of the Group.
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
3. Segmental analysis
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 using adjusted profit before taxation measured on a basis consistent with the disclosure in the Group accounts.
The Group reported on just one reportable segment during the period and the preceding financial year. The revenues of the Group are not significantly impacted by seasonality.
Additions to property, plant and equipment during the period totalled 12.3 million (2013: 12.9 million). Future capital expenditure under contract at 30 September 2014 was 3.1 million (2013: 5.6 million).
4. Group operating profit
Group operating costs comprise:

 
 Half year
Year to 
31 March


2014
'000

2013
'000

2014
'000






Cost of sales excluding net IAS 41 valuation movement on biological assets
425,580

429,806

877,012
Net IAS 41 valuation movement on biological assets*
1,182

(1,795)

(1,441)
Cost of sales
426,762

428,011

875,571







Gross profit

54,778

55,510

119,334







Selling and distribution costs

18,035

18,184

35,995







Administrative expenses excluding release of contingent consideration
11,733

11,891

28,643
Release of contingent consideration

-

(1,086)

(1,086)
Administrative expenses

11,733

10,805

27,557







Total operating costs

456,530

457,000

939,123
* 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 5.4 million (2013: 4.9 million) and represents an effective rate of 22.0 per cent (2013: 18.9 per cent). The charge for the period was higher than the standard rate of corporation tax due to the impact of disallowable expenses. In the previous period, the tax charge benefited from a 0.8 million deferred tax credit reflecting the enacted reduction in the UK corporation tax rate to 20 per cent by 1 April 2015. In addition the 1.1 million contingent consideration provision release was not chargeable to tax. Adjusting for these items, the underlying rate for the prior period was 22.8 per cent.
6. Earnings per share
Basic earnings per share are based on profit for the period attributable to shareholders and on the weighted average number of shares in issue during the period of 49,022,524 (2013: 48,631,199). The calculation of diluted earnings per share is based on 49,223,926 shares (2013: 48,837,327).
Adjusted earnings per share
During the period, the Group has recognised a loss (2013: gain) on the IAS 41 valuation movement on biological assets. In addition, in the prior year, the Group released contingent consideration relating to the acquisition of Kingston Foods Limited. 
As the release of contingent consideration does not form part of the on-going business of the Group and due to the volatility of the valuation of biological assets the Directors consider it appropriate to present an adjusted measure of earnings per share on the face of the income statement which excludes the effects of these items to facilitate a more meaningful comparison with prior and future periods. Adjusted earnings per share are calculated using the weighted average number of shares for both basic and diluted amounts as detailed above.
Adjusted profit for the period is derived as follows:

 Half year
Year to 
31 March


2014
'000

2013
'000

2014
'000






Profit for the period
19,204

21,131

43,207
Release of contingent consideration
-

(1,086)

(1,086)
Net IAS 41 valuation movement on biological assets

1,182

(1,795)

(1,441)
Tax on net IAS 41 valuation movement on biological assets

(236)

359

288
Adjusted profit for the period

20,150

18,609

40,968
7. Dividends - half year ended 30 September

 Half year
Year to 
31 March


2014
'000

2013
'000

2014
'000






Interim dividend for year ended 31 March 2014 of 10.0p per share
-

-

4,878
Final dividend for year ended 31 March 2014 of 22.0p (2013: 20.6p)
per share
10,792
10,025

10,025


10,792

10,025

14,903
The interim dividend for the year ending 31 March 2015 of 10.6 pence per share was approved by the Board on 24 November 2014 for payment to shareholders on 23 January 2015 and therefore has not been included as a liability as at 30 September 2014.
8. Analysis of Group net debt

At
31 March 
2014

Cash 
flow

Non-cash
movements

At 
30 September
2014

'000

'000

'000

'000








Cash and short-term deposits
12,223

(503)

-

11,720
Overdrafts
-

-

-

-
Net cash and cash equivalents
12,223

(503)

-

11,720








Revolving credit
(28,898)

(5,000)

(184)

(34,082)
Finance leases
(309)

265

-

(44)
Net debt
(16,984)

(5,238)

(184)

(22,406)








Net debt is defined as cash and cash equivalents, loans receivable and interest rate swaps at fair value less interest bearing liabilities (net of unamortised issue costs).
9. 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.
10. 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 60 of the Report & Accounts for the year ended 31 March 2014.
Fair value of financial instruments
All derivative financial instruments are shown in the balance sheet at fair value as follows:

Half year

Year to

2014

2013

31 March 2014

Book
value
'000

Fair
value
'000

Book
value
'000

Fair
value
'000

Book
value
'000

Fair
value
'000












Forward currency contracts
(163)

(163)

(78)

(78)

(18)

(18)
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.
11. Events after the balance sheet date
On 22 October 2014, the Group acquired 100 per cent of the issued share capital of Benson Park Limited for a total consideration of 23.6 million. The principal activity of Benson Park Limited is the production of premium British cooked poultry. The acquisition moves the Group into a new protein sector and further broadens its product range and customer base.
Fair values of the net assets at the date of acquisition were as follows:




Provisional
fair value
'000
Net assets acquired:







Customer relationships





6,185

Property, plant and equipment





5,057

Inventories





2,190

Trade receivables





6,223

Bank and cash balances





2,304

Trade payables





(5,195)

Government grants





(465)

Corporation tax liability





(367)

Deferred tax liability





(102)

Finance lease obligations





(135)







15,695
Goodwill arising on acquisition





7,933
Total consideration





23,628








Satisfied by:







Cash





20,000

Contingent consideration





3,628






23,628







Net cash outflow arising on acquisition:







To be included within cash flows from investing activities





Cash consideration paid





20,000

Cash and cash equivalents acquired





(2,304)







17,696









To be included within net cash from operating activities





Transaction costs of the acquisition





203







17,899
The fair values on acquisition are provisional due to the timing of the transaction and will be finalised within twelve months of the acquisition date.
If Benson Park Limited had been acquired at the beginning of the period, the Group's profit after tax for the period would have been 20.5 million and revenues would have been 502.5 million.
Included in the 7.9 million of goodwill recognised 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 the assembled workforce.
Transaction costs of 0.2 million have been expensed in relation to the acquisition, and will be included in administrative expenses.
All of the trade receivables acquired were, or are expected to be, collected in full.
Contingent Consideration
The agreement includes contingent consideration payable in cash to the previous owners of Benson Park Limited based on the performance of the business over a 2.5 year period. The amount payable will be between nil and 4.0 million dependant on the average EBIT of the business during the 2.5 year period versus an agreed target level.
The fair value of the contingent consideration on acquisition was estimated at 3.8 million, discounted to 3.6 million in the table above.

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