REG - Cranswick PLC - Interim Results Announcement <Origin Href="QuoteRef">CWK.L</Origin> - Part 2
24/11/2014 07:10
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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
At31 March 2014 Cash flow Non-cashmovements At 30 September2014
£'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
Bookvalue£'000 Fairvalue£'000 Bookvalue£'000 Fairvalue£'000 Bookvalue£'000 Fairvalue£'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:
Provisionalfair 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.
This information is provided by RNS
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