REG - Cranswick PLC - Interim Results
22/11/2022 07:00
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RNS Number : 1240H Cranswick PLC 22 November 2022
CRANSWICK plc: INTERIM RESULTS
A resilient performance in a challenging environment
22 November 2022
Cranswick plc ("Cranswick" or "the Company" or "the Group"), a leading UK food
producer, today announces its unaudited results for the 26 weeks ended 24
September 2022.
Commercial and strategic progress:
· Strong revenue growth reflecting inflation recovery with
like-for-like volumes in line with the prior period
· Broad-based inflationary pressure across the Group's cost base
continues to be well controlled
· Total capital expenditure of £38.1m across the Group's asset
base to add capacity, capability and drive efficiency
· New £32m Hull Breaded Poultry facility successfully
commissioned at the start of the period with retail and food service customers
now on board
· Installation of third contact cooking line at the Hull Cooked
Bacon facility to add capacity and capability
· Further investment in the Group's pig farming operations with
self-sufficiency now more than 40%
Sustainability highlights:
· Six major solar panel installations at manufacturing sites
approved, increasing green energy generation
· Progress made on transitioning the fleet to clean energy through
investment in electric vehicles, Bio LPG and renewable diesel
· Leading Food Partner status achieved with FareShare for commitment
to reducing food waste and providing meals for people in need
Financial highlights*:
H1 22 H1 21 Change Change
(Reported) (Like-for-like†)
Revenue £1,116.3m £993.1m +12.4% +10.7%
Adjusted Group operating profit £68.4m £69.6m -1.7%
Adjusted Group operating margin 6.1% 7.0% -88bps
Adjusted profit before tax £66.0m £68.3m -3.4%
Adjusted earnings per share 98.6p 103.5p -4.7%
· Statutory profit before tax 2.7% lower at £61.5m (2021:
£63.2m)
· Statutory earnings per share down 3.9% to 92.0p (2021: 95.7p)
· Interim dividend increased by 3.0% to 20.6p (2021: 20.0p)
· Return on capital employed(‡) at 15.9% (2021: 17.8%)
· Net debt (excluding IFRS 16 lease liabilities) of £61.1m (2021:
£18.6m and March 2022: £36.2m)
· Robust balance sheet and significant headroom
Adam Couch, Cranswick's Chief Executive Officer commented:
"We have made further commercial and strategic progress in what continues to
be a relentlessly challenging operating environment.
"Our unwavering focus on quality, value, innovation and our people, along with
our commitment to delivering great tasting food, created with passion for our
customers and the UK consumer, continue to drive our competitive advantage.
We continue to invest to meet the needs of our customers, building our
capacity and capability whilst driving efficiency across new and existing
facilities.
"I want to thank our colleagues and all our stakeholders for their continued
support and commitment and we look forward to working together to drive our
shared agenda.
"Our outlook for the current financial year is unchanged. Notwithstanding
the many challenges that we, our industry and the wider economy face, 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."
* Adjusted and like-for-like 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 14.
† For comparative purposes, like-for-like revenues exclude the current year
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.
(±) Cranswick has committed to switching to a full mass balance soya purchasing
system. This covers 50% of the soya used by the business. The remaining
50% of the soya is purchased from deforestation-free sources in North America.
Presentation
A conference call for analysts and institutional investors will take place at
9.30 am today. Slides to accompany the call will be sent to registered
participants ahead of the call. Slides will also be 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
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 13,700 people and
operates from 20 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. Results for the 52 weeks to 26 March 2022 showed revenue of
£2,008.5m and profit before tax of £129.9m. For more information go to:
www.cranswick.plc.uk (http://www.cranswick.plc.uk)
Cranswick is committed to ensuring that its business activities are
sustainable from farm-to-fork. Its ambitious sustainability strategy Second
Nature has been developed to deliver the Group's vision to become the world's
most sustainable meat business. Cranswick has committed to be a Net Zero
business across its operations by 2040. Notable achievements to date
include:
a. 15 manufacturing sites certified carbon neutral
b. Meeting the Champions 12.3 target to halve edible food loss and
waste 10 years ahead of the 2030 deadline
c. Removing over 2,100 tonnes of plastic from the business, including
the removal of black plastic and PVC, and increasing the recycled content of
plastic packaging to up to 80%
d. Committing to purchase 100% certified deforestation-free soya(±)
e. All production facilities are now powered by renewable grid
supplied electricity
f. Donating over 700,000 meals to local communities
g. Over 1,500 colleagues volunteering as Second Nature 'Changemakers'
to help meet the Group's sustainability goals
h. Sustainability Award Winner in 2022: Food Manufacture Excellence
Awards
i. Achieved Leading Food Partner status with FareShare for reducing
food waste and providing meals for people in need
Find out more at: www.thisissecondnature.co.uk
(http://www.thisissecondnature.co.uk)
Summary
The first half financial performance was in line with our expectations. We
have delivered strong revenue growth, primarily reflecting good control of
widespread cost inflation, with like-for-like volumes maintained and new
products launched, including those from the newly commissioned Hull Breaded
Poultry facility for both retail and food service customers.
We have invested a further £38.1m across our asset base to add capacity,
capability and drive efficiency. The new Hull Breaded Poultry facility was
commissioned at the start of the period with retail and food service customers
now on board. We have also made further investment in our pig farming
operations both during the period and subsequently, with self-sufficiency in
this area now more than 40%.
We also continue to invest at pace to drive forward our 'Second Nature'
sustainability programme. Six new solar panel installations were approved
during the period alongside upgrading refrigeration systems across our estate
to reduce CO(2) emissions further. We have made progress on transitioning
our fleet to clean energy through investment in electric vehicles, Bio LPG and
renewable diesel. We are proud to have achieved Leading Food Partner status
with FareShare for our commitment to reducing food waste and providing meals
for people in need.
Results
Total revenue in the 26 weeks to 24 September 2022 was £1,116.3m, 12.4%
higher than the £993.1m reported in the corresponding period last year.
Adjusting for the contribution from acquisitions made in the previous year,
revenue increased by 10.7% on a like-for-like basis.
Adjusted profit before tax for the period at £66.0m was 3.4% lower than the
£68.3m reported in the corresponding period last year. Adjusted earnings
per share on the same basis was down 4.7% at 98.6p compared to 103.5p in the
equivalent period last year.
Cash flow and financial position
Net debt, excluding IFRS 16 lease liabilities, at the end of the period stood
at £61.1m (2021: £18.6m). The increase since September 2021 reflects the
investment in Cranswick Pet Products (formerly known as Grove Pet Foods) in
January 2022 and the investment in, and inflationary impact on, both working
capital and biological assets. The Group has access to an unsecured,
sustainability linked £250m facility which was renewed in November 2021 and
extended post period end through to November 2026.
Dividend
The interim dividend is being increased by 3.0% to 20.6p per share from 20.0p
per share previously. The interim dividend will be paid on 27 January 2023
to Shareholders on the register at the close of business on 16 December 2022.
Shareholders will again have the option to receive the dividend by way of a
scrip issue.
Colleagues
The Board recognises that the Company's success would not be possible without
talented and motivated management teams, supported by skilled and enthusiastic
colleagues at each site. We thank all our colleagues for their commitment
and contribution during this very challenging period.
Avian Influenza
The UK poultry industry is experiencing the most virulent Avian Influenza
season with record numbers of protection and captive bird monitoring zones in
place. From 7 November 2022, a nationwide bird housing order was introduced.
We continue to monitor events closely with the strictest bio-security
protocols enforced across all Cranswick farms.
Outlook
Our outlook for the current financial year is unchanged. Notwithstanding the
many challenges that we, our industry and the wider economy face, 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.
Operating review
Revenue and adjusted operating profit
H1 22 H1 21 Change Change
(Reported) (Like-for-like)*
Revenue £1,116.3m £993.1m +12.4% +10.7%
Adjusted Group operating profit* £68.4m £69.6m -1.7%
Adjusted Group operating margin* 6.1% 7.0% -88bps
Group operating profit £63.9m £64.5m -0.9%
* See Note 14
Revenue
Reported revenue increased by 12.4% to £1,116.3m. Like-for-like revenue,
which excluded the contribution from prior year acquisitions during the
period, increased by 10.7%, with corresponding volumes in line. Revenue
growth primarily reflects recovery of significant and widespread cost
inflation, with all four categories well ahead of the same period last year.
Gourmet Products revenue grew strongly reflecting successful onboarding of
new customers and the rollout of products from the new Hull Cooked Bacon
facility. Growth in Poultry revenue reflected the launch of a new range of
breaded and coated products from the new Hull Breaded Poultry facility, partly
offset by lower sales of Cooked Poultry products. Fresh Pork revenue was
also ahead with stronger pricing reflecting the successful pass through of
higher pig prices more than compensating for modestly lower volumes. Export
revenue also returned to growth in the second quarter reflecting improved
volumes and stronger pricing.
Adjusted Group operating profit
Adjusted Group operating profit was 1.7% lower at £68.4m with adjusted Group
operating margin down 88bps to 6.1%. Adjusted Group operating profit
included a net charge of £3.1m in relation to costs associated with the
product recall at the Hull Cooked Poultry facility at the start of the period.
The lower Group operating margin reflected the short-term lag, as
anticipated, in recovering inflationary pressure across several cost
categories. Good progress continues to be made in managing and recovering
these incremental costs.
Category review
FOOD SEGMENT
Fresh Pork
Fresh Pork includes the Group's three primary processing facilities and
associated farming operations and represented 25% of Group revenue. Fresh
Pork revenue was 5.9% above the prior period, primarily reflecting inflation
recovery driving revenue growth with volume falling only marginally from peak
pandemic levels. Labour constraints seen in the prior year have eased with
ongoing investment in our skilled labour pool. Our successful campaign to
recruit skilled butchers from the Philippines has helped to alleviate the
pressure in this area and we now have approaching 300 colleagues from the
Philippines employed across the Group. We continue to invest in all three
Fresh Pork facilities to drive further efficiencies and to enhance capability.
This investment programme includes the first stage of the redevelopment of
the Hull site where investment in the latest technology will automate
previously manual processes driving both quality and efficiency benefits.
Further investment is also being made to expand retail packing, to increase
the range of Fresh Pork products supplied.
Fresh Pork export revenue was below the same period last year, however second
quarter revenue was well ahead reflecting a modest uplift in volume and a
marked improvement in pricing compared to Q1.
The UK standard pig price increased from 147p/kg at the start of year to
200p/kg by the end of September, reflecting the sharp rise in feed prices with
wheat and soya prices reaching all-time highs in Q1. Prices have since
stabilised at this level through the early part of H2. With the continued
support of our customers, we have reflected these higher input costs in the
price that we pay both our own farming business and third-party producers.
We continue to invest in our farming infrastructure with the purchase of an
additional pig herd completed during the period lifting our self-sufficiency
to more than 40%. As well as enhancing security of supply this increases our
ability to drive our agricultural sustainability strategy. We have a herd of
c45,000 sows producing c24,000 pigs per week.
Convenience
Convenience, which comprises Cooked Meats and Continental Products,
represented 39% of Group revenue. Revenue was 13.1% ahead of the same period
last year.
Cooked Meats revenue growth reflected proactive inflation recovery and strong
performance from 'slow cook' and 'sous vide' ranges as these products continue
to meet the changing needs of consumers who are increasingly demanding more
convenient high-quality meals in the home. A £7.8m project is underway at
our Hull Cooked Meats facility to double capacity in this area supporting
underlying category growth, new product development and business wins. These
include a new range of slow cooked turkey products launched with a major
premium retailer. A similar size project has also commenced at the Milton
Keynes site to add cooked meat production capacity.
Continental Products revenue grew strongly supported by robust underlying
volume growth as the category continues to build on the popularity of olives,
antipasti and charcuterie products as a centre of plate eating occasion.
This growth has been delivered through category leadership, a strong supply
chain model, and is supported by the manufacturing facility in Bury where
£7.5m is being spent to create additional production space and introduce
state-of-the-art robotics to increase quality and efficiency of production.
Innovation plans and our sector expertise will drive further expansion in
this category.
Revenue from Katsouris Brothers and Ramona's Kitchen, acquired in August 2021,
was strongly ahead of the same period last year. Ramona's Kitchen offers a
range of plant-based Mediterranean foods to several retailers under the
Ramona's Kitchen brand and, during the period, launched the 'Heavenly Houmous'
range with new listings secured with several leading retailers.
Gourmet Products
Gourmet Products, which comprise Sausage, Bacon, and Pastry, represented 16%
of Group revenue. Revenue was 19.5% ahead of the same period last year.
Category revenue increased strongly in the period supported by a step change
in volumes of cooked bacon and sausage from the new Gourmet Kitchen facility
in Hull.
Sausage revenue growth reflected a resurgent performance in the food service
sector partly offset by lower retailer promotional activity. An £8.2m site
investment programme at the Hull facility to add new alginate casing
capability and deliver process improvements is nearing completion. The
business won the prestigious 'Britain's best sausage' award for 2022,
recognising our ongoing innovation in this category.
Cooked Bacon revenue was strongly ahead. Delivery to date, following
commissioning of the new Gourmet Kitchen facility in April 2021, has been in
line with expectations with £4.5m of additional investment in a third contact
cooking line increasing capacity and capability completed during the period.
The facility supplies cooked bacon and sausage to both retail and food
service customers, including a leading Quick Service Restaurant chain.
Bacon revenue was ahead, with inflation recovery offsetting lower volumes
which reflects reduced promotional activity in this category during the first
half of the financial year.
Pastry revenue improved year-on-year with the recovery of the food service
business complementing premium retail demand. Sales to the national coffee
shop chains and other 'food-to-go' customers continue to recover to
pre-pandemic levels.
Poultry
Poultry, which includes Fresh, Cooked and Breaded Poultry, represented 19% of
Group revenue. Poultry revenue increased by 7.6% during the period driven by
the successful launch of products from the new Hull Breaded Poultry facility,
partly offset by lower Cooked Poultry sales.
Fresh Poultry continued to perform well with the number of birds processed per
week during the period in excess of 1.3m birds. Revenue growth reflected a
modest volume uplift and stronger pricing. Further investment to add
additional automated portioning and thigh deboning capability will increase
efficiency and further maximise value from birds processed at the site.
Cooked Poultry revenues were lower as a result of the product recall in Q1
where the factory was closed briefly whilst testing and remedial work was
carried out. Volumes continued to recover throughout the period.
The new £32m Hull Breaded Poultry facility was successfully commissioned at
the beginning of the period. The state-of-the-art facility is capable of
servicing retail, food service and 'food-to-go' customers. Initial retail
volumes have been complemented by the addition of a strategic Quick Service
Restaurant customer shortly after the period end.
OTHER SEGMENT
Pet Food
Cranswick Pet Products, formally known as Grove Pet Foods, was acquired on 28
January 2022. Revenue from Pet Products represented 1% of Group revenue
during the period.
Focus during the period has been on reshaping the business for the future to
create a more efficient manufacturing operation with a strong complementary
customer base. Progress has included strengthening the management team,
gaining British Retail Consortium approval for the site and the approval of a
capital investment programme to lower the cost of manufacturing. Good
progress is also being made in securing a significant new customer. During
the period a legacy private label customer decided to exit the business
resulting in the impairment of £3.0m of customer relationship intangible
assets.
Work will begin shortly on an £8.6m investment programme at the business's
manufacturing facility in Lincolnshire. The project, which will take
approximately two years to complete, will expand capacity through dual line
capability and upgrade the facility to support the strategic growth plans of
the business.
Sustainability
We have made further meaningful progress during the period in delivering our
'Second Nature' sustainability strategy, working towards achieving carbon
neutral manufacturing by investing in how we power our sites, focusing on
reducing our waste, conserving our water, and sourcing our feed.
During the period we have continued to decarbonise our fleet by taking
delivery of our first batch of electric trailers. We have accelerated our
investment in solar energy with six projects at a cost of £3.7m being
approved during the period and nine additional production facilities have been
approved to the ISO50001 standard.
Finance review
Revenue
Reported revenue increased by 12.4% to £1,116.3m (2021: £993.1m).
Like-for-like revenue, excluding the contribution from acquisitions made in
the previous financial year, increased by 10.7%.
Adjusted Group operating profit
Adjusted Group operating profit reduced by 1.7% to £68.4m (2021: £69.6m).
Adjusted Group operating margin at 6.1% of sales was 88bps lower than the
prior period.
Finance costs and funding
Net financing costs at £2.4m (2021: £1.3m) included the amortisation of
arrangement fees following the refinance in the prior year, and additional
bank interest reflecting higher average borrowings compared to the same period
last year and increases in the base rate throughout the period.
On 22 November 2021, the Group successfully refinanced its banking facility.
The sustainability linked agreement is unsecured and with an initial period
agreed to November 2025. The facility was successfully extended, shortly
after the period end, for a further year, through to November 2026. The
facility comprises a revolving credit facility of £250m, including a
committed overdraft of £20m. It also includes the option to access a
further £50m on the same terms at any point during the term of the agreement.
The facility provides the business with generous headroom for the future.
Adjusted profit before tax
Adjusted profit before tax was 3.4% lower at £66.0m (2021: £68.3m).
Taxation
The tax charge of £12.4m (2021: £12.6m) was 20.2% of profit before tax
(2021: 19.9%). The UK statutory rate of corporation tax was 19.0% (2021:
19.0%). The effective rate was higher than the standard rate due to
non-qualifying depreciation, disallowable expenses and the deferred tax charge
resulting from the future, enacted increase in the UK corporation tax rate to
25.0%, partly offset by the super-deduction on eligible capital investment.
Adjusted earnings per share
Adjusted earnings per share for the 26 weeks to 24 September 2022 fell by 4.7%
to 98.6p compared to the 103.5p reported in the corresponding period in the
prior year. The average number of shares in issue was 53,348,000 (2021:
52,796,000).
Statutory profit measures
Statutory profit before tax decreased by 2.7% to £61.5m (2021: £63.2m),
statutory Group operating profit was 0.9% lower at £63.9m (2021: £64.5m) and
statutory earnings per share were 3.9% lower at 92.0p (2021: 95.7p). Full
reconciliations of these results to the adjusted measures can be found in Note
14.
Cash flow and net debt
Cash generated from operations in the period was £59.3m (2021: £83.4m),
reflecting a working capital outflow in the period of £45.1m (2021: £18.3m)
of which £15.9m (2021: £7.6m) was the movement in biological assets. Net
debt, including the impact of IFRS 16 lease liabilities, increased by £30.5m
in the period to £136.5m from £106.0m at 26 March 2022 reflecting the growth
in working capital in the business. Capital expenditure was £38.1m in the
period.
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. The surplus on this scheme at 24
September 2022 was £4.3m compared to £8.3m at 26 March 2022. Cash
contributions to the scheme during the period were £0.9m. The present value
of funded obligations was £21.0m, and the fair value of plan assets was
£25.3m. The decrease in the surplus during the period reflects the update
to actuarial assumptions in relation to inflation and the liability discount
rate.
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 regularly reviews 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.
Principal risks and uncertainties
The Board continues to assess the principal risks and uncertainties of the
Group on a frequent basis. The principal risks and uncertainties faced by
the business at 26 March 2022 are set out on pages 75 to 79 of the Report
& Accounts for the 52 weeks ended 26 March 2022, dated 24 May 2022, a copy
of which is available on the Group's website. An update to these principal
risks and uncertainties at 24 September 2022 is set out in Note 15.
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.
Group income statement (unaudited)
for the 26 weeks ended 24 September 2022
Half year 52 weeks ended
26 March
2022
(Audited)
£'m
Notes 2022 2021
£'m
£'m
Revenue 1,116.3 993.1 2,008.5
Adjusted Group operating profit 68.4 69.6 140.6
Net IAS 41 valuation movement on biological assets 1.2 (3.2) (2.8)
Amortisation of acquired intangible assets (2.7) (1.9) (4.2)
Impairment of intangible assets 9 (3.0) - -
Group operating profit 5 63.9 64.5 133.6
Finance costs (2.4) (1.3) (3.7)
Profit before tax 61.5 63.2 129.9
Taxation 6 (12.4) (12.6) (26.4)
Profit for the period 49.1 50.6 103.5
Earnings per share (pence)
On profit for the period:
Basic 7 92.0 95.7 195.7
Diluted 7 91.8 95.2 194.8
Group statement of comprehensive income (unaudited)
for the 26 weeks ended 24 September 2022
52 weeks ended
26 March 2022
Half year
2022 2021 (Audited)
£'m £'m £'m
Profit for the period 49.1 50.6 103.5
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in
subsequent periods:
Cash flow hedges
Gains/(losses) arising in the period 0.5 0.2 (0.3)
Reclassification adjustments for gains included in the
income statement
0.5 - -
Income tax effect (0.2) - 0.1
Net other comprehensive income to be reclassified to profit (0.2)
or loss in subsequent periods
0.8 0.2
Items not to be reclassified to profit or loss in subsequent periods:
Actuarial (losses)/gains on defined benefit pension scheme (5.0) 1.7 0.7
Income tax effect 1.0 (0.8) (0.5)
Net other comprehensive income not being reclassified to profit or loss in 0.2
subsequent periods
(4.0) 0.9
(3.2) -
Other comprehensive income, net of tax
1.1
45.9 103.5
Total comprehensive income, net of tax
51.7
Group balance sheet (unaudited)
at 24 September 2022 As at
26 March 2022
Half year
Notes 2022 2021 (Audited)
£'m £'m £'m
Non-current assets
Intangible assets 225.8 210.4 231.3
Defined benefit pension scheme surplus 4.3 8.4 8.3
Property, plant and equipment 444.0 395.2 434.8
Right-of-use assets 71.9 65.4 65.5
Biological assets 2.6 1.2 2.7
Total non-current assets 748.6 680.6 742.6
Current assets
Biological assets 67.9 46.7 50.7
Inventories 131.1 89.9 105.2
Trade and other receivables 277.8 236.4 244.4
Income tax receivable 0.9 - -
Financial assets 1.2 0.2 -
Cash and short-term deposits 11 11.5 6.4 0.2
Total current assets 490.4 379.6 400.5
Total assets 1,239.0 1,060.2 1,143.1
Current liabilities
Trade and other payables (267.4) (228.6) (238.7)
Lease liabilities (13.8) (12.8) (13.8)
Financial liabilities (0.6) (3.0) (3.1)
Provisions (2.7) (1.3) (1.8)
Income tax payable - (0.6) (2.4)
Total current liabilities (284.5) (246.3) (259.8)
Non-current liabilities
Other payables (0.5) (0.9) (0.6)
Lease liabilities (61.6) (55.8) (56.0)
Financial liabilities (75.3) (25.0) (36.4)
Deferred tax liabilities (23.1) (13.4) (19.7)
Provisions (1.5) (1.2) (1.7)
Total non-current liabilities (162.0) (96.3) (114.4)
Total liabilities (446.5) (342.6) (374.2)
Net assets 792.5 717.6 768.9
Equity
Called-up share capital 5.3 5.3 5.3
Share premium account 119.3 109.5 115.9
Share-based payments 48.0 40.8 44.3
Hedging reserve 0.5 0.1 (0.3)
Retained earnings 619.4 561.9 603.7
Equity attributable to owners of the parent 792.5 717.6 768.9
Group statement of cash flows (unaudited)
for the 26 weeks ended 24 September 2022
52 weeks ended 26 March 2022
Half year
Notes 2022 2021 (Audited)
£'m £'m £'m
Operating activities
Profit for the period 49.1 50.6 103.5
Adjustments to reconcile Group profit for the period to net cash inflows from
operating activities:
Income tax expense 12.4 12.6 26.4
Net finance costs 2.4 1.3 3.7
Gain on sale of property, plant and equipment (0.5) (0.1) (0.1)
Depreciation of property, plant and equipment 26.9 23.2 47.9
Depreciation of right-of-use assets 6.9 6.5 13.2
Amortisation of acquired intangibles 2.7 1.9 4.2
Impairment of intangibles 3.0 - -
Share-based payments 3.7 3.4 6.9
Difference between pension contributions paid and amounts recognised in the (1.9)
income statement
(0.9) (0.8)
Release of government grants (0.1) (0.1) (0.2)
Net IAS 41 valuation movement on biological assets (1.2) 3.2 2.8
Increase in biological assets (15.9) (7.6) (12.7)
Increase in inventories (25.9) (7.9) (21.3)
Increase in trade and other receivables (33.4) (13.5) (20.1)
Increase in trade and other payables 30.1 10.7 17.5
Cash generated from operations 59.3 83.4 169.8
Tax paid (11.0) (4.0) (9.8)
Net cash from operating activities 48.3 79.4 160.0
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired 9 - (5.6) (38.5)
Purchase of property, plant and equipment (38.1) (40.5) (93.7)
Proceeds from sale of property, plant and equipment 0.6 0.7 1.3
Net cash used in investing activities (37.5) (45.4) (130.9)
Cash flows from financing activities
Interest paid (1.4) (0.3) (1.6)
Proceeds from issue of share capital 1.3 1.0 4.6
Issue costs of long-term borrowings - - (1.8)
Proceeds from borrowings 11 36.0 - -
Repayment of borrowings - (35.0) (22.0)
Dividends paid (27.6) (25.0) (32.8)
Payment of lease capital (6.7) (6.2) (12.1)
Payment of lease interest (1.1) (1.1) (2.2)
Net cash from/(used in) financing activities 0.5 (66.6) (67.9)
Net increase/(decrease) in cash and cash equivalents 11 11.3 (32.6) (38.8)
Cash and cash equivalents at beginning of period 11 0.2 39.0 39.0
Cash and cash equivalents at end of period 11 11.5 6.4 0.2
Group statement of changes in equity (unaudited)
for the 26 weeks ended 24 September 2022
Share Share Share- Hedging Retained Total
capital premium based reserve earnings equity
payments
£'m £'m £'m £'m £'m £'m
At 26 March 2022 5.3 115.9 44.3 (0.3) 603.7 768.9
Profit for the period - - - - 49.1 49.1
Other comprehensive income - - - 0.8 (4.0) (3.2)
Total comprehensive income - - - 0.8 45.1 45.9
Share-based payments - - 3.7 - - 3.7
Scrip dividend - 2.1 - - - 2.1
Share options exercised - 1.3 - - - 1.3
Dividends - - - - (29.7) (29.7)
Deferred tax relating to changes in equity - - - - (0.5) (0.5)
Corporation tax relating to changes in equity - - - - 0.8 0.8
At 24 September 2022 5.3 119.3 48.0 0.5 619.4 792.5
At 27 March 2021 5.3 106.4 37.4 (0.1) 537.1 686.1
Profit for the period - - - - 50.6 50.6
Other comprehensive income - - - 0.2 0.9 1.1
Total comprehensive income - - - 0.2 51.5 51.7
Share-based payments - - 3.4 - - 3.4
Scrip dividend - 2.1 - - - 2.1
Share options exercised - 1.0 - - - 1.0
Dividends - - - - (27.1) (27.1)
Deferred tax relating to changes in equity - - - - (0.1) (0.1)
Corporation tax relating to changes in equity - - - - 0.5 0.5
At 25 September 2021 5.3 109.5 40.8 0.1 561.9 717.6
(Audited)
At 27 March 2021 5.3 106.4 37.4 (0.1) 537.1 686.1
Profit for the year - - - - 103.5 103.5
Other comprehensive income - - - (0.2) 0.2 -
Total comprehensive income - - - (0.2) 103.7 103.5
Share-based payments - - 6.9 - - 6.9
Scrip dividend - 4.9 - - - 4.9
Share options exercised - 4.6 - - - 4.6
Dividends - - - - (37.7) (37.7)
Deferred tax relating to changes in equity - - - - (0.1) (0.1)
Corporation tax relating to changes in equity - - - - 0.7 0.7
At 26 March 2022 5.3 115.9 44.3 (0.3) 603.7 768.9
Responsibility statement
The Directors confirm that these condensed interim financial statements have
been prepared in accordance with UK-adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and that
the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the first
26 weeks of the year and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining 26 weeks of the financial year; and
· material related-party transactions in the first 26 weeks of the year
and any material changes in the related-party transactions described in the
last annual report.
On behalf of the Board
Tim Smith
Mark Bottomley
Chairman
Chief Financial Officer
22 November 2022
Notes to the interim accounts
1. Basis of preparation
Cranswick plc is incorporated in the UK. The Group is presenting its
condensed consolidated interim financial statements for the 26 weeks to 24
September 2022 with comparative information for the 26 weeks to 25 September
2021 and the 52 weeks to 26 March 2022. This interim report was approved by
the Directors on 22 November 2022.
The interim report has been prepared in accordance with the UK-adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
The annual financial statements will be prepared under prepared in accordance
with UK-adopted International Accounting Standards and the requirements of the
Companies Act 2006.
The information does not constitute statutory accounts within the meaning of
Section 435 of the Companies Act 2006. The statutory accounts for the 52
weeks ended 26 March 2022 were prepared in accordance with UK-Adopted
International Accounting Standards ('UK-Adopted IAS') and with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards, and 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 is unaudited but has been subject to an independent
review by PricewaterhouseCoopers LLP pursuant to the Auditing Practices Board
guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity".
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 in the Finance review. 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 risks
successfully.
The Board's going concern assessment has utilised the Group's latest forecasts
and has taken into account the Group's current position, future prospects and
the potential impact of the principal risks of the Group. Forecasts have
been sensitised to reflect severe yet plausible downside scenarios which
consider the principal risks faced by the Group, as well as the Group's
considerable financial resources and strong trading relationships with its key
customers and suppliers. Specifically, modelled risks included, but were not
limited to, the impact of Avian Influenza and an outbreak of African Swine
Fever in the UK. Sensitivity analysis was carried out on the Group's
forecasts to quantify the financial impact of these risks on the strategic
plan and on the Group's viability against specific measures including
liquidity and bank covenants.
Given the strong liquidity of the Group, the £250m committed banking
facilities in place beyond the going concern period, and the diversity of
operations, the results of the sensitivity analysis highlighted that the Group
would be able to withstand the impact of the most severe, but plausible,
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.
After reviewing the available information, including forecasts, business plans
and downside scenario modelling and after making enquiries, the Directors have
a reasonable expectation that the Group has adequate resources to continue to
meet its financial obligations as they fall due and continue in operational
existence for a period of at least twelve months from the date of signing the
interim financial statements. For this reason, the condensed set of
consolidated interim financial statements are prepared on a going concern
basis.
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 52
weeks ended 26 March 2022.
There were no accounting standards or interpretations that have become
effective in the current reporting period which had an impact on disclosures,
financial position or performance.
Taxation
Taxes for the interim periods are accrued using the tax rate that is expected
to be applicable to total earnings for the full year based on enacted tax
rates at the interim date.
3. Significant estimates and judgements
In preparing these condensed interim financial statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied
to the consolidated financial statements for the 52 weeks ended 26 March
2022. This includes assumptions made around goodwill impairment testing.
There was an impairment trigger for two of the Group's CGUs due to the lower
headroom on the Livestock CGU and the loss of a customer at Cranswick Pet
Products (formerly known as Grove Pet Foods), see Note 9 for further
information. An assessment was carried out to review the carrying value of
goodwill which has not identified any impairment. No reasonable change in
assumptions would result in an impairment.
4. Segmental analysis
The Group has two reporting segments - Food and Other.
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 below. These 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.
Following the acquisition of Cranswick Pet Products (formerly known as Grove
Pet Foods Limited), the Group has a new operating segment resulting in the
need for a new reporting segment 'Other' as the aggregation criteria for the
'Food' reporting segment is not met for the new operating segment.
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.
Half year 52 weeks ended
26 March 2022
2022 2022 2022 2021 2021 2021
£'m £'m £'m £'m £'m £'m £'m £'m £'m
Food Other Total Food Other Total Food Other Total
Revenue 1,102.6 13.7 1,116.3 993.1 - 993.1 2,004.6 3.9 2,008.5
Adjusted operating profit 67.6 0.8 68.4 69.6 - 69.6 140.7 (0.1) 140.6
Finance costs (2.4) - (2.4) (1.3) - (1.3) (3.7) - (3.7)
Adjusted profit before tax 65.2 0.8 66.0 68.3 - 68.3 137.0 (0.1) 136.9
Geographical segments
The following table sets out revenues by destination, regardless of where the
goods were produced:
52 weeks ended
26 March
Half year
2022 2021 2022
£'m £'m £'m
UK 1,075.8 945.1 1,924.9
Continental Europe 20.3 21.4 31.9
Rest of world 20.2 26.6 51.7
1,116.3 993.1 2,008.5
In addition to the non-UK sales disclosed above the Group also made sales to
export markets through UK-based meat trading agents totalling £38.9m (2021:
£34.4m). Including these sales, total sales to export markets were £79.4m
for the period (2021: £82.4m).
Customer concentration
The Group has three customers (2021: three) which individually account for
more than 10% of the Group's total revenue. These customers account for 21%,
15% and 11% respectively. In the prior year these same three customers
accounted for 22%, 16% and 12% respectively.
5. Group operating profit
Group operating costs, net, comprise: 52 weeks ended 26 March
Half year
2022 2021 2022
£'m £'m £'m
Cost of sales excluding net IAS 41 valuation movement on biological assets 970.5 1,727.5
856.0
Net IAS 41 valuation movement on biological assets* (1.2) 3.2 2.8
Cost of sales 969.3 859.2 1,730.3
Gross profit 147.0 133.9 278.2
Selling and distribution costs 46.5 38.5 80.3
Administrative expenses excluding impairment and amortisation of intangible 35.2 60.1
assets
29.0
Impairment of intangible asset (Note 9) 3.0 - -
Amortisation of intangible assets 2.7 1.9 4.2
Administrative expenses 40.9 30.9 64.3
Other operating income (4.3) - -
Total operating costs, net 1,052.4 928.6 1,874.9
* 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.
Included within other operating income is a credit of £4.3m for an insurance
claim received in the period.
6. Taxation
The tax charge of £12.4m (2021: £12.6m) gives an effective tax rate of 20.2%
(2021: 19.9%). The effective tax rate is higher than the UK statutory rate
of corporation tax of 19.0% (2021: 19.0%) mainly due to the impact of the
increase in the UK corporation tax rate to 25%, effective from 1 April 2023,
since the calculation of deferred tax should be based on the rate at which the
asset or liability is expected to unwind. The effective tax rate is also
increased by depreciation on assets not qualifying for tax relief and
disallowable expenses. These increases are partly offset by the 130% "super
deduction" for investment in qualifying plant and machinery from 1 April 2021
to 31 March 2023. The additional 30% super deduction reduces the effective
rate of tax but does not outweigh the impacts of the rate change and
non-qualifying depreciation.
7. 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 53,348,000 (26 March 2022: 52,923,000, 25 September 2021:
52,796,000). The calculation of diluted earnings per share is based on
53,451,000 shares (26 March 2022: 53,169,000, 25 September 2021: 53,093,000).
8. Dividends
52 weeks ended
26 March
Half year
2022 2021 2022
£'m £'m £'m
Interim dividend for year ended 26 March 2022 of 20.0p per share - - 10.6
Final dividend for year ended 26 March 2022 of 55.6p (2021: 51.3p) 27.1
per share 29.7 27.1
29.7 27.1 37.7
The interim dividend for the year ending 25 March 2023 of 20.6p per share was
approved by the Board on 22 November 2022 for payment to Shareholders on 27
January 2023 and therefore has not been included as a liability at 24
September 2022.
9. Acquisitions
On 28 January 2022, the Group acquired 100% of the share capital of a holding
entity Holdco Alpha Limited and its subsidiary Grove Pet Foods Limited
("Grove"), a producer of dried pet foods for several leading brands under
private label relationships alongside its own brands, together with associated
freehold land and buildings, for an initial net cash consideration of £32.9m.
The following table sets out the final fair values of the identifiable assets
and liabilities acquired by the Group in relation to Grove:
Fair value
£'m
Net assets acquired:
Customer relationships 6.2
Trademark 2.2
Property, plant and equipment 10.1
Inventories 2.0
Trade and other receivables 2.5
Right-of-use assets 0.3
Bank and cash balances (0.5)
Trade and other payables (3.0)
Hire purchase leases (0.3)
Lease liabilities (0.3)
Income tax liability (0.7)
Deferred tax liability (1.8)
16.7
Goodwill arising on acquisition 15.1
Total consideration 31.8
Satisfied by:
Initial cash consideration 32.4
Completion accounts adjustment (0.6)
31.8
Net cash outflow arising on acquisition:
Cash consideration paid 32.4
Cash and cash equivalents acquired 0.5
32.9
Included in the £15.1m of goodwill recognised above are certain intangible
assets that cannot be individually separated from the acquirees and reliably
measured due to their nature. These items include the expected value of
synergies and an assembled workforce.
A review of the completion accounts has been undertaken in line with the Sale
and Purchase Agreement. This has resulted in an adjustment of £0.6m
receivable from the seller, referred to as the 'completion accounts
adjustment' above.
In May 2022, one of Grove's customers informed the Group of their intention to
terminate the trading relationship and therefore the newly recognised
intangible asset is now expected to generate lower future cashflows. A
review of the recoverable amount has identified an updated customer
relationships value of £3.2m, resulting in an impairment loss of £3.0m.
Despite the loss of the customer, a review of the carrying value of goodwill
has not identified any goodwill impairment. The goodwill assessment has been
performed on the same basis as at year end, but with an update to the discount
rate and the future operating cash flows of the business. The discount rate
has been updated to the latest position at the period end and the operating
profits were based on the latest Board approved cash flows which were revised
to exclude the loss of the customer.
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 126
of the Report & Accounts for the 52 weeks ended 26 March 2022.
Fair value of financial instruments
All financial instruments are shown in the balance sheet at fair value as
follows:
Half year 52 weeks ended
2022 2021 26 March 2022
Book Fair Book Fair Book Fair
value value value value value value
£'m £'m £'m £'m £'m £'m
Forward currency contracts (0.6) (0.6) (0.1) (0.1) 0.3 0.3
Deferred consideration 2.7 2.7 2.9 2.9 2.7 2.7
The book value of trade and other receivables, trade and other payables, cash
balances, overdrafts and amounts outstanding under the revolving credit
facility equates to fair value to the Group.
Reconciliation of deferred consideration:
£'m
At 26 March 2022 2.7
Accrued in the period -
At 24 September 2022 2.7
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 valuation models and are based on mid-market levels as at
close of business on the Group's reporting date.
Contingent consideration is measured using Level 3 of the fair value hierarchy
and relates to future amounts payable on acquisitions. Amounts payable are
based on agreements within purchase contracts, management's expectations of
the future profitability of the acquired entity and the timings of payments.
11. Analysis of Group net debt
At Cash Non-cash At
26 March flow movements 24 September
2022 2022
£'m £'m £'m £'m
Cash and cash equivalents 0.2 11.3 - 11.5
Revolving credit (36.4) (36.0) (0.2) (72.6)
Net debt excluding IFRS 16 leases liability (36.2) (24.7) (0.2) (61.1)
Lease liabilities (69.8) 7.8 (13.4) (75.4)
Total net debt (106.0) (16.9) (13.6) (136.5)
Net debt is defined as cash and cash equivalents and loans receivable less
interest-bearing liabilities (including IFRS 16 lease liabilities) net of
unamortised issue costs.
12. 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.
13. Property, plant and equipment
Additions to owned property, plant and equipment during the period totalled
£40.1m (2021: £42.0m). Future capital expenditure under contract at 24
September 2022 was £16.1m (2021: £27.8m).
Additions to right-of-use assets in the period totalled £14.0m (2021:
£3.2m). At 24 September 2022, the Group had no signed leases for
right-of-use assets which commence after the balance sheet date (2021: £nil).
14. 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 and amortisation of acquired intangible assets and, where
relevant, profit on sale of a business and impairment charges. Free cash
flow is defined as net cash from operating activities less net interest paid
and like-for-like revenue excludes the current year contribution from prior
year acquisitions prior to the anniversary of their acquisition.
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 goodwill and other intangible assets) and non-cash
(amortisation of acquired 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.
A reconciliation to relevant GAAP measures is given below:
Free cash flow
52 weeks ended
26 March
Half year
2022 2021 2022
£'m £'m £'m
Net cash from operating activities 48.3 79.4 160.0
Net interest paid (1.4) (0.3) (1.6)
Free cash flow 46.9 79.1 158.4
Like-for-like revenue 52 weeks ended
26 March
Half year
2022 2021 2022
£'m £'m £'m
Revenue 1,116.3 993.1 2,008.5
Prior year acquisitions (16.9) - -
Like-for-like revenue 1,099.4 993.1 2,008.5
Adjusted gross profit 52 weeks ended
26 March
Half year
2022 2021 2022
£'m £'m £'m
Gross profit 147.0 133.9 278.2
Net IAS 41 valuation movement on biological assets (1.2) 3.2 2.8
Adjusted gross profit 145.8 137.1 281.0
Adjusted Group operating profit and adjusted EBITDA 52 weeks ended
26 March
Half year
2022 2021 2022
£'m £'m £'m
Group operating profit 63.9 64.5 133.6
Net IAS 41 valuation movement on biological assets (1.2) 3.2 2.8
Amortisation of acquired intangible assets 2.7 1.9 4.2
Impairment of acquired intangible assets 3.0 - -
Adjusted Group operating profit 68.4 69.6 140.6
Depreciation of plant, property, and equipment 26.9 23.2 47.9
Depreciation of right-of-use assets 6.9 6.5 13.2
Adjusted EBITDA 102.2 99.3 201.7
Adjusted profit before tax 52 weeks ended
26 March
Half year
2022 2021 2022
£'m £'m £'m
Profit before tax 61.5 63.2 129.9
Net IAS 41 valuation movement on biological assets (1.2) 3.2 2.8
Amortisation of acquired intangible assets 2.7 1.9 4.2
Impairment of acquired intangible assets 3.0 - -
Adjusted profit before tax 66.0 68.3 136.9
Adjusted earnings per share
On adjusted profit for the period: Half year 52 weeks ended
26 March
2022 2022 2021 2021 2022 2022
Basic pence Diluted pence Basic pence Diluted pence Basic pence Diluted pence
On profit for the period 92.0 91.8 95.7 95.2 195.7 194.8
Net IAS 41 valuation movement on biological assets (2.3) (2.3) 6.0 6.0 5.2 5.2
Tax on net IAS 41 valuation movement on biological assets 0.6 0.6 (1.1) (1.1) (2.4) (2.4)
Amortisation of acquired intangible assets 5.1 5.1 3.6 3.6 7.9 7.9
Tax on amortisation of acquired intangible assets (1.0) (1.0) (0.7) (0.7) (1.0) (1.0)
Impairment of acquired intangible assets 5.6 5.6 - - - -
Tax on impairment of acquired intangible assets (1.4) (1.4) - - - -
On adjusted profit for the period 98.6 98.4 103.5 103.0 205.4 204.5
15. Principal risks and uncertainties
The Group continues to enhance its risk management framework which facilitates
the identification, evaluation and mitigation of key risks facing the
business. Over the course of recent months, the Group has started to
integrate technology into its risk management framework by embedding a new
risk management IT system that provides a number of benefits which include:
encouraging risk owners to have more in-depth and thought-provoking risk
conversations; direct access to risk data which streamlines the process of
compiling risk reports, and the efficient real-time reporting and management
of risks across the Group. The principal risks and uncertainties facing the
Group are set out in detail on pages 75 to 79 of the Report & Accounts for
the 52 weeks ended 26 March 2022, dated 24 May 2022, a copy of which is
available on the Group's website.
These risks include:
- Reliance on key customers & exports - Labour availability & cost
- Disease & infection within livestock - COVID-19
- Consumer demand - Brexit disruption
- Recruitment & retention of senior management - Competitor activity
- Climate change - Health & Safety
- Food scares & product contamination - Interest rate, currency, liquidity & credit risk
- Disruption to Group operations - IT systems & cyber security
- Adverse media attention - Pig meat availability & price
- Growth & change
The Board considers the principal risks and uncertainties at 24 September 2022
to be the same as those described in the Report & Accounts for the 52
weeks ended 26 March 2022. However, over recent months the Group has seen
volatility within existing risks caused by external issues including the
ongoing war in Ukraine, the cost of living crisis, the high rate of UK
inflation and uncertainties within specific supply chains such as the
availability and price of CO(2).
Disease in livestock continues to present a significant risk to the Group with
the UK poultry industry experiencing the most virulent Avian Influenza season
with record numbers of protection and captive bird monitoring zones in place.
From 7 November 2022 a nationwide bird housing order was introduced. We
continue to monitor events closely with the strictest bio-security protocols
enforced across all Cranswick farms. African Swine Fever (ASF) continues to
impact China and, to a lesser extent Eastern Europe, with cases detected in
Romania, Poland, and Germany. While the spread of the virus in Europe
appears to be well controlled, we remain acutely aware of the impact an
outbreak of ASF would have on the UK pig industry and its ability to continue
exporting. The UK industry remains on high alert with intensive bio-security
protocols in place.
In addition, the Group continues to monitor the COVID-19 risk particularly as
we head towards the winter months.
Independent review report to Cranswick plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Cranswick plc's condensed consolidated interim financial
statements (the "interim financial statements") in the interim results of
Cranswick plc for the 26 week period ended 24 September 2022 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Group balance sheet as at 24 September 2022;
· the Group income statement and Group statement of comprehensive
income for the period then ended;
· the Group statement of cash flows for the period then ended;
· the Group statement of changes in equity for the period then ended;
and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results of Cranswick
plc have been prepared in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council 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, 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.
We have read the other information contained in the interim results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with this ISRE. However, future events or
conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the interim results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the interim results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Leeds
22 November 2022
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