REG - Cranswick PLC - PRELIMINARY RESULTS
23/05/2023 07:00
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RNS Number : 2521A Cranswick PLC 23 May 2023
CRANSWICK plc: PRELIMINARY RESULTS
Strong commercial growth and continued strategic progress
23 May 2023
Cranswick plc ("Cranswick" or "the Company" or "the Group"), a leading UK food
producer, today announces its audited preliminary results for the 52 weeks
ended 25 March 2023.
Commercial and strategic progress:
· Strong revenue growth reflecting inflation recovery with operating
margin improving from 6.1% to 6.5% in the second half of the year
· Broad-based inflationary pressure across the Group's cost base
continues to be well controlled
· Total capital expenditure of £85.1m across the Group's asset
base to add capacity, capability and drive efficiency
· New £32m Hull Prepared Poultry facility successfully commissioned
at the start of the year with retail and food service customers now on board
· Installation of third contact cooking line at Hull Cooked Bacon
facility to add capacity and capability
· £9m investment in Lincoln Pet Products site underway with
significant new customer secured
· Further investment in the Group's pig farming operations;
self-sufficiency in British pigs now approaching 50%
Sustainability highlights:
· 7.2% reduction in Scope 1 & 2 location based carbon emissions
across both manufacturing and agricultural operations
· Six further major solar panel installations at manufacturing sites
underway, increasing green energy generation
· Progress on transitioning 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*:
2023 2022 Change Change
(Reported) (Like-for-like†)
Revenue £2,323.0m £2,008.5m +15.7% +14.4%
Adjusted Group operating profit £146.5m £140.6m +4.2%
Adjusted Group operating margin 6.3% 7.0% -69bps
Adjusted profit before tax £140.1m £136.9m +2.3%
Adjusted earnings per share 210.0p 205.4p +2.2%
· Statutory profit before tax 7.4% higher at £139.5m (2022:
£129.9m)
· Statutory earnings per share up 6.4% to 208.3p (2022: 195.7p)
· Full year dividend increased by 5.0% to 79.4p (2022: 75.6p); 33
years of unbroken dividend growth
· Return on capital employed(‡) of 15.8% (2022: 16.9%)
· Net debt (excluding IFRS 16 lease liabilities) lower at £20.2m
(2022: £36.2m)
· Robust balance sheet with £250m bank facility providing
significant headroom
Adam Couch, Cranswick's Chief Executive Officer, commented:
"Over the last twelve months all at Cranswick have demonstrated resilience and
determination in abundance, enabling us to deliver a strong set of results and
make further meaningful progress in delivering our strategic objectives.
"I would like to thank our colleagues for their continued enthusiasm and
commitment. I would also like to thank our suppliers and customers, with
whom we continue to work in close partnership, for their support and
understanding.
"We have successfully navigated three years of unprecedented disruption and
uncertainty and we now have a much larger, more diverse, and better equipped
business, which is primed to deliver the next phase of growth.
"We invested £85.1 million across our asset base during the year. Our total
investment in the last three years exceeds £250 million. Investment during
the year has been broad-based as we look to expand capacity and enhance the
capability of existing facilities.
"We are proposing to lift our full year dividend by a further five per cent
this year. This will be our 33(rd) year of consecutive dividend growth.
"We have made a positive start to the new financial year. 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 10.
† For comparative purposes, like-for-like revenues exclude the impact of current
year acquisitions and the contribution from prior year acquisitions prior to
the anniversary of their purchase.
‡ Return on capital employed is defined as adjusted operating profit divided by
the sum of average opening and closing net assets, net debt/(funds), pension
(surplus)/deficit and deferred tax.
Presentation
A presentation of the results will be made to analysts and institutional
investors today at 9.30am at The Worshipful Company of Butchers, 87
Bartholomew Close, London, EC1A 7BN. Analysts and institutional investors
will also be able to join the presentation via a conference call facility.
The slides will be made available on the Company website. For the dial-in
details please contact Powerscourt on the details below.
Enquiries:
Cranswick plc
Mark Bottomley, Chief Financial Officer 01482 275 000
Powerscourt
Elizabeth Kittle / Louisa Henry / Maxim Hibbs 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 22 well-invested, highly efficient facilities in the UK.
Cranswick was formed in the early 1970s by farmers in East Yorkshire to
produce animal feed and has since evolved into a business which produces a
range of high quality, predominantly fresh food, including fresh pork,
poultry, convenience, gourmet products and pet food. The business develops
innovative, great tasting food products to the highest standards of food
safety and traceability. The Group supplies the major grocery multiples as
well as the growing premium and discounter retail channels. Cranswick also
has a strong presence in the 'food-to-go' sector and a substantial export
business. For more information go to: www.cranswick.plc.uk
(http://www.cranswick.plc.uk)
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 2,200 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 major production facilities are now powered by renewable grid supplied
electricity
f. Donating over 1,000,000 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)
Chairman's Statement
Since last year, we have successfully recovered from the COVID-19 pandemic and
the impact on our business. The escalation of war in Ukraine and the
resulting inflation and cost-of-living crisis in the UK created significant
new challenges for the Group. Our skilled and experienced management team
has risen to the challenge and delivered an excellent set of results. On
behalf of the Board, I would like to thank our talented executives and all our
Cranswick colleagues for their dedication and commitment.
We made further positive progress in pursuing our strategic priorities. We
continue to gain market share in our core pork business through our relentless
focus on improving quality, driving innovation and delivering exceptional
value. Our poultry business, a key pillar of our medium-term growth
strategy, is now a material contributor to Group performance. We continue to
invest in, and expand, our attractive, fast-growing Continental Products
range. We made excellent progress in reshaping our rapidly developing pet
food business, where we strengthened and refocused the management team and
committed to the first phase of a substantial capital investment programme.
We also secured a major new long-term contract with a national pet food
retailer.
We delivered strong revenue growth, primarily reflecting good control of
widespread cost inflation, with a strong pipeline of new products launched,
nimbly responding to changes in market led demand. Our customers and
consumers continue to recognise and appreciate the quality, value and
versatility of our product range.
Our broad-based investment plans remain firmly on track with several
substantial projects in progress which will enhance the capability of, and add
capacity to, several of our flagship production facilities. The new Hull
Prepared Poultry facility was commissioned at the start of the year with two
major retail and food service customers now secured. We also made further
investment in our pig farming operations during the year and we continue to
invest at pace to push on with our 'Second Nature' sustainability programme.
In recent years, we have substantially expanded our farming infrastructure.
Our self-sufficiency in British pigs is now approaching 50 per cent. Our
poultry farming business, including milling, breeding and growing operations
is industry leading. The UK farming industry has faced a host of challenges
over the last three years. Labour shortages, financial pressures and
political uncertainty have led many independent producers to question their
long-term commitment to the sector. More than ever the UK needs a vibrant
farming sector at a time when the resilience of our food system has, again,
come under close scrutiny. We expect further sector consolidation and
Cranswick will continue to expand its farming capability to ensure continuity
of supply, full farm-to-fork traceability, leadership in response to the
challenges of sustainability and the highest animal welfare standards.
Results
Total revenue in the 52 weeks to 25 March 2023 was £2,323.0 million, 15.7 per
cent higher than the £2,008.5 million reported last year. Adjusting for the
impact of acquisitions made in the previous and current financial years,
revenue increased by 14.4 per cent on a like-for-like basis.
Adjusted profit before tax for the period at £140.1 million was 2.3 per cent
higher than the £136.9 million reported last year. Adjusted earnings per
share on the same basis was up 2.2 per cent at 210.0 pence compared to 205.4
pence last year.
Cash flow and financial position
Net debt at the end of the year stood at £101.4 million (2022: £106.0
million). Net debt excluding IFRS 16 lease liabilities was £20.2 million
compared to £36.2 million previously. The Group has access to an unsecured,
sustainability linked £250 million facility which runs through to November
2026.
Dividend
The Board is proposing a final dividend of 58.8 pence per share, an increase
of 5.8 per cent on the 55.6 pence paid last year. Together with the interim
dividend of 20.6 pence per share, this equates to a total dividend for the
year of 79.4 pence per share, an increase of 5.0 per cent on last year and
extends the consecutive years of dividend growth to 33.
The final dividend, if approved by Shareholders, will be paid on 1 September
2023 to Shareholders on the register at the close of business on 21 July
2023. Shares will go ex-dividend on 20 July 2023.
Board
The Board continues to evolve to ensure it provides the appropriate skills and
experience to support and challenge the executive team.
Kate Allum stepped down as a Non-Executive Director and Chair of the
Remuneration Committee at the conclusion of the last AGM on 1 August 2022 at
the end of her final three year term. Pam Powell succeeded Kate as
Remuneration Committee Chair.
This year we announced the appointment of Yetunde Hofmann as a Non-Executive
Director with effect from 1 August 2022. Yetunde has food industry
experience having previously worked for Northern Foods plc and having also
recently been a non-executive director of Treatt plc.
We appointed Chris Aldersley to the Board with effect from 1 August 2022.
Chris joined Cranswick in 1998 and since then has undertaken a variety of
senior management roles, becoming the Group's Chief Operating Officer in 2015.
Chris has responsibility for managing the operations at the Group's four
primary processing, eighteen added value facilities and its agricultural
operations, which support the Group's vertically integrated supply chain
strategy. The appointment of Chris to the Board recognises his contribution
to the Group and the central importance of his role going forward in
delivering the Group's long-term strategy.
Mark Reckitt will step down as a Non-Executive Director and Senior Independent
Director at the Company's forthcoming AGM in July 2023. On behalf of the
Board, I thank Mark for his positive contribution to Cranswick's successful
development over the last nine years.
Mark will be succeeded as Senior Independent Director by Liz Barber. Upon
doing so, at the forthcoming AGM, Liz will relinquish her role as Audit
Committee Chair.
As announced separately today, we will be appointing Alan Williams as a
Non-Executive Director with effect from the Company's AGM on 24 July 2023.
Alan is currently the Chief Financial Officer of Travis Perkins plc and was
previously Chief Financial Officer of Greencore Group plc. Alan will take on
the role of Audit Committee Chair from the date of his appointment.
Outlook
We have made a positive start to the current year. We have a strong balance
sheet and comfortable financial headroom to support our ongoing capital
investment programme which underpins our ambitious growth plans. The
strengths of our business, which include our diverse and long-standing
customer base, breadth and quality of products and channels, robust financial
position and industry leading infrastructure will support the further
development of Cranswick over the longer term.
Tim J Smith CBE
Chairman
23 May 2023
Chief Executive's Review
I am incredibly proud of how the entire Cranswick team has responded to the
many challenges we faced this year. Over the last twelve months all at
Cranswick have demonstrated resilience and determination in abundance,
enabling us to deliver a strong set of results and make further meaningful
progress in delivering our strategic objectives. I would like to thank our
colleagues for their continued enthusiasm and commitment. I would also like
to thank our suppliers and customers, with whom we continue to work in close
partnership, for their support and understanding. We have successfully
navigated three years of unprecedented disruption and uncertainty and we now
have a much larger, more diverse, and better equipped business, which is
primed to deliver the next phase of growth.
The UK farming sector and wider food supply chains have faced enormous
challenges, primarily resulting from the outbreak and escalation of the war in
Ukraine. In my review last year, I highlighted the support, in partnership
with our customers, we had provided to our own farming operations and to our
third-party pig producers, in response to the rapid escalation in cereal and
soya prices and ensuing widespread input cost inflation. Despite this
support, and the UK pig price reaching an all time high in recent months, the
UK pig herd has contracted, with many independent producers choosing to cut
back or cease production entirely. We have seen this same trend across
Europe. The UK has experienced significant shortages of staple goods
throughout the year. We recognise that food security is of paramount
importance and in response to this elevated risk we have increased our
internal supply of pigs with self-sufficiency now approaching 50 per cent.
We will continue to expand our own herd to ensure we have the right quantity
and mix of indoor and premium outdoor pigs to satisfy our customers'
requirements.
We continue to press the case for the UK farming and food producer sector with
government and our industry bodies. We have also taken proactive action to
address some of the many challenges we and the wider industry face. In
response to the challenge of recruiting high quality skilled butchers, we have
cast our net further afield and now have 400 skilled butchers recruited from
the Philippines. This successful recruitment programme has enabled us to
continue to deliver excellent service levels to our customers throughout the
year, despite the significant cost to the business, when some in the sector
have had to cut back production due to ongoing labour shortages.
Strong performance
We have delivered record results with reported revenue growing by 15.7 per
cent to £2,323.0 million and adjusted operating profit increasing 4.2 per
cent to £146.5 million. The broad-based inflationary pressure we are
experiencing across our cost base continues to be well controlled and
mitigated. Our relentless focus on cash enabled us to reduce net debt on a
pre IFRS 16 basis from £36.2 million in March 2022 to £20.2 million, after
investing £85.1 million across our asset base and again increasing the
dividend. We continue to deliver attractive returns on the capital we
deploy. We have built four new facilities over the last five years with a
combined investment of over £190 million, whilst our return on capital
employed has stayed above 15 per cent. We are proposing to lift our full year
dividend by a further five per cent this year. This will be our 33(rd) year
of consecutive dividend growth, a feat that all at Cranswick are immensely
proud of.
Revenue grew strongly reflecting the successful recovery of widespread cost
inflation with all categories growing strongly. Revenue growth accelerated
in the second half of the year, building on the momentum generated in the
first half and helped by a record December trading period for the Group.
Whilst total volume growth in the year was only modest, prior year
comparatives reflected pandemic related elevated in-home consumption.
Like-for-like volumes remain well ahead of pre-pandemic levels. Adjusted
operating margin improved in the second half of the year, reflecting ongoing
inflation recovery, but was still below the level delivered in FY22.
Inflation recovery is still work in progress and will remain a feature through
FY24.
Total export sales increased year-on-year with stronger pricing offsetting
lower volumes. Far East exports were modestly lower than the prior year with
higher prices, to a large extent, offset by lower demand, as China remained in
strict lockdown for much of the year. We still operate without an export
licence for our Norfolk primary processing facility. It is now almost three
years since we self-suspended this licence and despite continued lobbying, we
have no visibility on when it is likely to be reinstated. We will redouble
our efforts to resolve this issue in the coming year.
Significant strategic progress
We have made further progress in strengthening our three strategic pillars:
Consolidate; Expand; and Diversify, and by doing so delivering our long term,
sustainable growth strategy. We continue to drive further consolidation as
we gain market share in our core primary pork and value-added, convenience
categories. Ongoing capital investment and expansion of our pig herd
underpin this momentum.
Through a combination of new, greenfield, site development and targeted
complementary bolt on acquisitions we have expanded our presence in our
fast-growing poultry and Mediterranean foods categories. Alongside our core
pork business, we see poultry as the engine room of our growth plans over the
next decade.
Diversification includes both moving into new markets, as we have done so
successfully in China, and developing new product categories closer to home.
Our new pet food business is a great example of this approach. Since
acquiring the Grove pet food business in January 2022, we have subsequently
renamed it Cranswick Pet Products. More importantly we have strengthened the
management team, embarked on a £9 million capital investment programme and
gained British Retail Consortium 'A' grade status at the Lincoln facility.
We are also focused on realigning the customer base and, in this context, I am
delighted that we recently agreed a long-term supply agreement with Pets at
Home. Although our pet food business currently makes a very modest
contribution to Group revenue and earnings, we are very excited about the
opportunity to grow our presence in this attractive, large and fast-growing
market.
Investing at pace
We invested £85.1 million across our asset base during the year. Our total
investment in the last three years alone exceeds £250 million. We
successfully commissioned our new £32 million Hull Prepared Poultry facility
at the start of the year, with retail and food service customers onboarded and
volumes ahead of the original business plan. Investment during the year has
been broad-based as we look to expand capacity and enhance the capability of
existing facilities. We now operate from 22 well invested and highly
efficient production facilities in the UK and we will continue to invest at
pace to ensure we serve our customers from the best quality asset base the UK
industry can offer in terms of food safety, technical compliance, and
colleague well-being. Looking ahead we expect to invest at these elevated
levels over the next three years, with spend particularly focused on our pork
primary processing operations to add substantial capacity and drive further
efficiencies as we look to service our rapidly growing value-added pork
business. Whilst modest in the overall context of our capital investment
programme, we are now automating the production of pigs in blankets. We now
produce approximately 60 million pigs in blankets, primarily for Christmas
trade, and the search for an automated solution has been a long and
frustrating one. We are excited about the opportunity this creates, and it
is just one example of our unstinting focus on, and relentless search for,
efficiency improvements in our business.
Shortly before year-end we purchased a pre-existing production facility in
Worsley, near Manchester. This facility will be redeveloped to provide
additional manufacturing capacity for our fast-growing Mediterranean foods
business. We also acquired the trade and assets of Mediterranean Foods
(London) Ltd in February 2023. Mediterranean Foods supplies houmous and
other Mediterranean snacks and the business complements our growing portfolio
of Continental Products businesses.
A sustainable business model
We have again invested at pace to drive forward our 'Second Nature'
sustainability programme. Six new major solar panel installations have now
been approved and we are upgrading refrigeration systems across our estate to
further reduce CO(2) emissions. We have made progress in transitioning our
fleet to clean energy through investment in electric vehicles, Bio LPG and
renewable diesel. Our focus on regenerative farming is building resilience
into our farming operations and agricultural supply chains as we move towards
our target of gaining carbon neutral status for all Cranswick farms by 2030.
This year we again improved our Carbon Disclosure Project scores: grade A-
for Climate and grade B- for Soya within Forests were both a grade improvement
on the previous year and reflect our continued focus on, and commitment to,
delivering our industry leading sustainability strategy.
A people business
I continually say that we are a people business, and that our colleagues are
our biggest and most valuable asset. We understand that being an employer of
choice in a tight labour market enables us to compete and win by attracting
and retaining the best talent. We are sector leading in terms of pay,
working conditions, health and safety, inclusivity and wellbeing for all Group
colleagues. We recruited 12 more graduates this year, bringing the total
enrolled onto the programme since 2013 to 85, with 25 now occupying management
roles. We also have a vibrant apprenticeship programme with over 141
apprentices spread across the business. We actively support and encourage
diversity and our Diversity, Equality and Inclusion programme is now firmly
embedded and recognised in all functions. Succession planning through
developing and retaining talent has been the cornerstone of our success over
many years and we would not be the business we are today without a deep and
continually replenished talent pool.
Adam Couch
Chief Executive Officer
23 May 2023
Operating and Financial Review
Operating review
Revenue and adjusted operating profit
2023 2022 Change Change
(Reported) (Like-for-like*)
Revenue £2,323.0m £2,008.5m +15.7% +14.4%
Adjusted Group Operating Profit* £146.5m £140.6m +4.2%
Adjusted Group Operating Margin* 6.3% 7.0% -69bps
*See Note 10
Revenue
Reported revenue increased by 15.7 per cent to £2,323.0 million reflecting
inflation recovery. Like-for-like revenue increased by 14.4 per cent with
corresponding volumes down 1.4 per cent, primarily reflecting lower export
volumes. Volumes in our core UK Pork, Convenience and Poultry businesses
remained resilient.
Gourmet Products revenue was particularly strong with volumes from the Hull
Cooked Sausage and Bacon facility accelerating strongly in its second year of
operation. Convenience revenue was also strongly ahead reflecting continued
expansion of the Continental Products businesses as we broaden our range in
adjacent categories.
The new £32 million Prepared Poultry facility in Hull was successfully
commissioned at the beginning of the year and has delivered first year revenue
ahead of initial expectations. This additional revenue offset lower sales
from our Hull Cooked Poultry business resulting from the impact of the product
recall at the beginning of the year.
Customer services levels remained consistently high including during a record
Christmas trading period.
Adjusted Group operating profit
Adjusted Group operating profit increased by 4.2 per cent to £146.5 million.
Adjusted Group operating margin was 69 bps lower at 6.3 per cent. Adjusted
Group operating margin improved to 6.5 per cent in the second half of the year
compared to the 6.1 per cent reported in the first half of the year with
margin accelerating through the second half of the year reflecting ongoing
recovery of significant, broad-based cost inflation.
Category review
FOOD SEGMENT
Fresh Pork
Fresh Pork revenue was 15.6 per cent above the prior year and represented 26
per cent of Group revenue. Revenue increased as a result of higher average
UK pig prices. UK Fresh Pork volumes were modestly ahead of the prior year.
The average UK standard pig price ("SPP") closed the year at a record high of
214p/kg, 45.6 per cent higher than the opening price of 147p/kg. The average
price for the year was 30.2 per cent higher than the prior year. This
significant movement in the pig price reflected a sharp increase in the cost
of feed following the outbreak of war in Ukraine with wheat and soya prices
reaching all-time highs. These higher input costs alongside more widespread
inflationary cost pressure pushed the pig price rapidly up to 200p/kg by the
end of the first half. The pig price remained at this level throughout the
third quarter before increasing further in the fourth quarter.
Security of supply is of paramount importance in ensuring we are able to meet
the needs of our customers and so we continued to invest in increasing our
self-sufficiency. During the year we increased the herd both in terms of
premium outdoor and indoor pigs. We now have a herd of c62,000 sows
producing c29,000 pigs per week resulting in self-sufficiency in UK pigs of
approaching 50 per cent. Direct ownership gives us greater control over our
vertical supply chain and facilitates implementation of sustainability
initiatives and targets.
Weekly average pig numbers remained strong with a record peak in November when
we processed over 67,700 pigs per week to meet Christmas demand. The average
for the year was 61,600, 2.7 per cent ahead of pre pandemic levels.
Far East export revenue was 2.7 per cent behind the prior year as demand from
China remained subdued as the country slowly emerged from its strict pandemic
enforced lockdown. Exports to other markets grew strongly, partly
compensating for the lower Far East revenue.
Our successful campaign to recruit skilled butchers from the Philippines into
our primary processing facilities helped to alleviate the well-publicised
labour shortage in our sector, although there was a significant cost to the
business from doing this. During the year we invested £20 million across
the three primary processing facilities and our farming infrastructure. £10
million of this investment related to the first stage of the redevelopment of
our largest primary processing facility in Hull. Alongside the existing
semi-automated shoulder deboning line, we have more recently added a similar
leg deboning line and now an automated cutting line. The Hull facility
incorporates some of the most technologically advanced butchery equipment the
industry has to offer.
African Swine Fever ("ASF") continues to affect large parts of China and, to a
lesser extent, parts of Europe. In Europe, most ASF cases continue to be
detected in Romania and Poland however recent cases have been found in eastern
Germany, Italy and Greece. In the UK, we remain acutely aware of the impact
an outbreak of ASF would have on the UK pig industry. New legislation was
introduced in November banning the import of non-commercial pork. These
measures will further enhance the intensive bio-security protocols which are
in place across the industry.
Convenience
Convenience revenue was 15.5 per cent ahead on a reported basis and
represented 38 per cent of Group revenue. Revenue growth reflected ongoing
inflation recovery and continued progress in expanding the range offered by
the Continental Products portfolio of businesses, with volumes ahead of the
prior year.
Cooked Meats revenue growth reflected proactive inflation recovery and a
strong performance from the '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 at home. This year, range
expansion included centre-of plate 'slow cook' Christmas products including
Turkey Crown, Three Bird Roast, Beef Rump and Slow Cook Gammon, with over
400,000 units supplied over the Christmas period. The ongoing £8 million
investment at the Hull Cooked Meats facility will double 'slow cook' capacity,
enabling us to drive further growth in this attractive, fast growing
category. At the Milton Keynes facility a £10 million extension is nearing
completion. This will provide opportunities for further expansion with added
production capacity and additional packing capability enabling the site to
increase food service and wholesale volumes. Investment at the Valley Park
facility is driving process efficiency through a programme of upgrades
utilising the most efficient slicing technology.
Continental Products revenue grew strongly underpinned by robust underlying
volume growth as the category continued to build on the popularity of olives,
antipasti and charcuterie products as a centre of plate eating occasion.
Growth continues to be delivered through category leadership and a strong
supply chain model. Investment in the Bury site has continued at pace with
£3 million spent on increasing olive, antipasti and charcuterie production
capacity. A further £3 million was deployed on new manufacturing capability
including state-of-the-art robotics to increase quality and efficiency of
production. Innovation and sector expertise will continue to drive growth in
this category.
Katsouris Brothers revenue was strongly ahead driven by double-digit volume
growth. Ramona's performed particularly well with a number of new retail
listings. Ramona's is the only houmous brand to be listed in three major
retailers. Category expansion has continued throughout the year with
Katsouris winning three Great Taste awards for its branded Cypressa Virgin
Olive Oil, Tahini and Authentic Cyprus Halloumi.
Product development at Continental, Katsouris and Ramona's drove success over
the Christmas period. Collectively 48 festive lines were launched with 2.3
million units sold. Sharing platters were particularly successful with over
1.5 million units sold.
Expansion of the portfolio of Continental businesses remains a priority for
the Group. Following the acquisition of Atlantica UK and Ramona's Kitchen in
2022, two further manufacturing facilities were acquired in 2023 to
significantly increase production capacity and add cooking capability and
flexibility.
In February 2023 the Group acquired the trade and assets of Mediterranean
Foods (London) Ltd, now renamed Cranswick Mediterranean Foods, a supplier of
houmous and fried Mediterranean snacks. This acquisition adds additional
capacity in houmous and new falafel frying capability.
In March 2023 the Group purchased a food-grade manufacturing facility in
Worsley, Manchester. This 50,000 square foot facility will allow future
expansion across our fast-growing Continental Foods business.
Gourmet Products
Gourmet Products revenue increased 20.2 per cent year-on-year, and represented
17 per cent of Group revenue, underpinned by strong volume growth.
Sausage revenue grew strongly with robust retail volumes driven by tier
expansion and product innovation with both premium and discount retailers.
The continued recovery of food service volumes also contributed to revenue
growth with more breakfasts being consumed out of the home. An £8 million
investment programme at the Hull facility to add new alginate casing
capability and deliver process improvements is largely complete.
Bacon revenue was ahead, with higher prices offsetting lower volumes resulting
from reduced retailer promotional activity in the category, particularly
during the first half of the year. New premium bacon business was secured,
complementing the established supply of fresh pork and sausage into the same
customer.
Pastry revenue improved year-on-year. Food service sales recovered to
pre-pandemic levels offsetting a modest softening in retail demand for premium
pastry products. Innovative product development resulted in a strong
Christmas trading period. New festive launches included two vegetarian pies
which received a trio of BBC Good Food and Good Housekeeping awards.
Revenue from the Cooked Bacon and Sausage facility was substantially ahead.
Robust Quick Service Restaurant volumes and premium retail sales, which were
ahead of expectations, were complemented by a new food service customer.
Investment in the site to increase capacity has continued with £5 million
spent on a third contact cooking line.
Poultry
Poultry revenue increased by 6.7 per cent and represented 18 per cent of Group
revenue. Volumes were modestly down year-on-year.
Fresh Poultry performed well with an average 1.3 million birds processed per
week. Supply to a popular casual dining chain started during the year,
adding to the site's growing customer base and mitigating a modest decline in
demand from the site's anchor customer. Investment into a 5(th) portioning
line has progressed during the year. This investment will add additional
automated portioning and thigh deboning capability, with the additional
capacity added to meet retail demand.
Avian Influenza ("AI") continues to represent a heightened risk to the Fresh
Poultry business. Although the business impact has been limited and the
overall risk to production is still low, controlling the spread of AI remains
a priority. Heightened bio-security protocols remain in place at the site
and on all farms.
Cooked Poultry revenue was well below the prior year following the product
recall in May 2022. Volumes continue to recover, albeit they are still below
those prior to the product recall. Net of mitigation the product recall did
not have a material impact on the Group's results.
The new £32 million Prepared Poultry facility in Hull was successfully
commissioned at the beginning of the year. The state-of-the-art facility
produces a range of premium prepared poultry products for an anchor retail
customer and a strategic Quick Service Restaurant customer. First year
volumes were ahead of initial expectations.
OTHER SEGMENT
Pet Products
Cranswick Pet Products (formally known as Grove Pet Foods) represented 1 per
cent of Group revenue. Revenue growth in Pet Products reflected the first
full year of ownership compared to two months in the prior year.
Significant progress has been made on reshaping the business for the future.
Following a strengthening of the management team, the principal
manufacturing site in Lincolnshire has gained British Retail Consortium
approval and a multi-year capital investment programme has commenced. The
first phase of this investment costing £9 million is underway and will
provide increased capacity for dry dog food and increase the site's automated
packing capability.
The business recently agreed terms to manufacture a range of established
private label products for Pets at Home. Pets at Home is the largest
specialist pet retailer in the UK with over 450 stores. This partnership,
alongside reinvigorating the business's existing Vitalin and Alpha dog food
brands, will support the ongoing strategic development of the business and
accelerate our ambition to develop Pet Products into a leading British pet
food manufacturer complemented by our farm-to-fork strategy in poultry and
pigs. During the first half of the year, a legacy private label contract was
terminated. This resulted in a £3.0 million impairment of the acquired
customer relationship intangible asset.
Finance review
Revenue
Reported revenue increased by 15.7 per cent to £2,323.0 million (2022:
£2,008.5 million). Like-for-like revenue, excluding the impact from
acquisitions, increased by 14.4 per cent.
Adjusted gross profit and adjusted EBITDA
Adjusted gross profit increased by 7.1 per cent to £300.9 million (2022:
£281.0 million) with adjusted gross profit margin at 13.0 per cent (2022:
14.0 per cent). Adjusted EBITDA increased by 6.7 per cent to £215.3 million
(2022: £201.7 million) and adjusted EBITDA margin was 9.3 per cent (2022:
10.0 per cent).
Adjusted Group operating profit
Adjusted Group operating profit increased by 4.2 per cent to £146.5 million
(2022: £140.6 million) and adjusted Group operating margin stood at 6.3 per
cent (2022: 7.0 per cent).
Full reconciliations of adjusted measures to statutory results can be found in
Note 10. The net IAS 41 movement on biological assets results in a £7.6
million credit (2022: £2.8 million charge) on a statutory basis primarily
reflecting the substantial increase in the UK pig price during the year.
Finance costs and funding
Net financing costs of £6.4 million (2022: £3.7 million) included £2.5
million (2022: £2.2 million) of IFRS 16 lease interest. Bank finance costs
were £2.4 million higher than the prior year at £4.0 million (2022: £1.6
million) due to the increase in the bank base rate during the year.
During the year the Group successfully extended the term of it's banking
facility for a further year with the facility now running to November 2026.
This provides the Group with access to a £250 million revolving credit
facility, including a committed overdraft of £20 million. It also includes
the option to access a further £50 million on the same terms at any point
during the term of the agreement. The facility provides the business with
over £200 million of headroom at 25 March 2023. The adequacy of this
facility has been confirmed as part of robust scenario testing performed over
the three-year viability period for the Group.
Adjusted profit before tax
Adjusted profit before tax was 2.3 per cent higher at £140.1 million (2022:
£136.9 million).
Taxation
The tax charge of £28.1 million (2022: £26.4 million) was 20.1 per cent of
profit before tax (2022: 20.3 per cent). The standard rate of UK corporation
tax was 19.0 per cent (2022: 19.0 per cent). The effective rate was higher
than the standard rate due to disallowable expenses and the deferred tax
charge resulting from the future enacted increase in the UK corporation tax
rate to 25.0 per cent, partly offset by the super-deduction on eligible
capital investment.
Adjusted earnings per share
Adjusted earnings per share increased by 2.2 per cent to 210.0 pence (2022:
205.4 pence). The average number of shares in issue was 53,461,000 (2022:
52,923,000).
Statutory profit measures
Statutory profit before tax was £139.5 million (2022: £129.9 million), with
statutory Group operating profit at £145.9 million (2022: £133.6 million)
and statutory earnings per share of 208.3 pence (2022: 195.7 pence).
Statutory gross profit was £308.5 million (2022: £278.2 million).
Cash flow and net debt
The net cash inflow from operating activities in the year was £153.0 million
(2022: £160.0 million). This reduction was primarily due to an increase in
tax payments resulting from unwinding of the super deduction claimed in the
prior year and a one-off contribution of £3.7 million into the Group's
defined benefit pension scheme. Net debt, including the impact of IFRS 16
lease liabilities, fell to £101.4 million (2022: £106.0 million) with the
inflow from operating activities offset by £83.9 million invested in the
Group's asset base, net of disposal proceeds, £36.3 million of dividends paid
to the Group's Shareholders and £16.3 million of IFRS 16 lease charges.
Pensions
The Group operates defined contribution pension schemes whereby contributions
are made to schemes administered by major insurance companies. Contributions
to these schemes are determined as a percentage of employees' earnings.
The Group also operates a defined benefit pension scheme which has been closed
to further benefit accrual since 2004. On 2 December 2022, the Trustees of
the defined benefit pension scheme purchased a buy-in insurance policy to
secure the majority of the benefits provided by the scheme. The surplus on
this scheme at 25 March 2023 was £0.2 million, compared to £8.3 million at
26 March 2022. Cash contributions to the scheme during the year, and
additional contributions to support the purchase of the buy-in insurance
policy, were £4.3 million. The present value of funded obligations was
£22.1 million, and the fair value of plan assets was £22.3 million. The
Group does not expect to make any further contributions to the scheme during
the year ending March 2024.
Group income statement
For the 52 weeks ended 25 March 2023
2023 2022
Notes £'m £'m
Revenue 2,323.0 2,008.5
Adjusted Group operating profit 146.5 140.6
Net IAS 41 valuation movement on biological assets 7.6 (2.8)
Amortisation of intangible assets (5.2) (4.2)
Impairment of intangible assets (3.0) -
Group operating profit 4 145.9 133.6
Finance costs (6.4) (3.7)
Profit before tax 139.5 129.9
Taxation (28.1) (26.4)
Profit for the year 111.4 103.5
Earnings per share (pence)
On profit for the year:
Basic 5 208.3p 195.7p
Diluted 5 207.8p 194.8p
Group statement of comprehensive income
For the 52 weeks ended 25 March 2023
2023 2022
£'m £'m
Profit for the year 111.4 103.5
Other comprehensive income/(expense)
Other comprehensive income/(expense) to be reclassified to profit or loss in
subsequent periods:
Cash flow hedges
Gains/(losses) arising in the year 0.1 (0.3)
Reclassification adjustments for gains included in the income statement 0.3 -
Income tax effect (0.1) 0.1
Net other comprehensive income/(expense) to be reclassified to profit or loss
in subsequent periods
0.3 (0.2)
Items not to be reclassified to profit or loss in subsequent periods:
Actuarial (losses)/gains on defined benefit pension scheme (12.5) 0.7
Income tax effect 2.8 (0.5)
Net other comprehensive (expense)/income not to be reclassified to profit or
loss in subsequent periods
(9.7) 0.2
Other comprehensive expense
(9.4) -
Total comprehensive income 102.0 103.5
Group balance sheet
At 25 March 2023
2023 2022
Notes £'m £'m
Non-current assets
Intangible assets 223.2 231.3
Defined benefit pension scheme surplus 0.2 8.3
Property, plant and equipment 464.1 434.8
Right-of-use assets 76.3 65.5
Biological assets 6.3 2.7
Total non-current assets 770.1 742.6
Current assets
Biological assets 72.8 50.7
Inventories 113.0 105.2
Trade and other receivables 288.5 244.4
Financial assets 0.1 -
Cash and short-term deposits 7 20.3 0.2
Total current assets 494.7 400.5
Total assets 1,264.8 1,143.1
Current liabilities
Trade and other payables (268.5) (238.7)
Financial liabilities (0.1) (3.1)
Lease liabilities (14.4) (13.8)
Provisions (0.8) (1.8)
Income tax payable (4.3) (2.4)
Total current liabilities (288.1) (259.8)
Non-current liabilities
Other payables (0.4) (0.6)
Financial liabilities (43.2) (36.4)
Lease liabilities (66.8) (56.0)
Deferred tax liabilities (20.7) (19.7)
Provisions (2.7) (1.7)
Total non-current liabilities (133.8) (114.4)
Total liabilities (421.9) (374.2)
Net assets 842.9 768.9
Equity
Called-up share capital 5.4 5.3
Share premium account 123.9 115.9
Share-based payments 49.0 44.3
Hedging reserve - (0.3)
Retained earnings 664.6 603.7
Total equity attributable to owners of the parent 842.9 768.9
Group statement of cash flows
For the 52 weeks ended 25 March 2023
Notes 2023 2022
£'m £'m
Operating activities
Profit for the year 111.4 103.5
Adjustments to reconcile Group profit for the year to net cash inflows from
operating activities:
Income tax expense 28.1 26.4
Net finance costs 6.4 3.7
Gain on sale of property, plant and equipment (0.5) (0.1)
Depreciation of property, plant and equipment 54.1 47.9
Depreciation of right-of-use assets 14.7 13.2
Amortisation of intangible assets 5.2 4.2
Impairment of acquired intangible assets 3.0 -
Share-based payments 4.7 6.9
Difference between pension contributions paid and amounts recognised in the
income statement
(4.4) (1.9)
Release of government grants (0.2) (0.2)
Net IAS 41 valuation movement on biological assets (7.6) 2.8
Increase in biological assets (18.1) (12.7)
Increase in inventories (7.7) (21.3)
Increase in trade and other receivables (44.8) (20.1)
Increase in trade and other payables 29.1 17.5
Cash generated from operations 173.4 169.8
Tax paid (20.4) (9.8)
Net cash from operating activities 153.0 160.0
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 9 0.1 (38.5)
Purchase of property, plant and equipment (85.1) (93.7)
Proceeds from sale of property, plant and equipment 1.2 1.3
Net cash used in investing activities (83.8) (130.9)
Cash flows from financing activities
Interest paid (3.8) (1.6)
Proceeds from issue of share capital 3.7 4.6
Issue costs of long-term borrowings (0.4) (1.8)
Proceeds from/(repayment of) borrowings 4.0 (22.0)
Dividends paid (36.3) (32.8)
Payment of lease capital (13.8) (12.1)
Payment of lease interest (2.5) (2.2)
Net cash used in financing activities (49.1) (67.9)
Net increase/(decrease) in cash and cash equivalents 7 20.1 (38.8)
Cash and cash equivalents at beginning of year 7 0.2 39.0
Cash and cash equivalents at end of year 7 20.3 0.2
Group statement of changes in equity
For the 52 weeks ended 25 March 2023
Share-
Share Share based Hedging Retained Total
capital premium payments reserve earnings equity
£'m £'m £'m £'m £'m £'m
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 related to changes in equity - - - - (0.1) (0.1)
Current tax related to changes in equity - - - - 0.7 0.7
At 26 March 2022 5.3 115.9 44.3 (0.3) 603.7 768.9
Profit for the year - - - - 111.4 111.4
Other comprehensive income - - - 0.3 (9.7) (9.4)
Total comprehensive income - - - 0.3 101.7 102.0
Share-based payments - - 4.7 - - 4.7
Scrip dividend - 4.4 - - - 4.4
Share options exercised 0.1 3.6 - - - 3.7
Dividends - - - - (40.7) (40.7)
Deferred tax related to changes in equity - - - - (0.9) (0.9)
Current tax related to changes in equity - - - - 0.8 0.8
At 25 March 2023 5.4 123.9 49.0 - 664.6 842.9
Notes to the accounts
1. Basis of preparation
The results comprise those of Cranswick plc and its subsidiaries for the 52
weeks ended 25 March 2023. This preliminary announcement has been prepared on
the basis of accounting policies as set out in the statutory accounts for the
52 weeks ended 26 March 2022 (except as detailed below and in note 2). This
announcement does not constitute the Company's statutory accounts within the
meaning of Section 435 of the Companies Act 2006.
The consolidated financial statements of Cranswick plc have been prepared
under the historical cost convention except where measurement of balances at
fair value is required as explained in the accounting policies below. The
Group's financial statements have been prepared in accordance with UK-Adopted
International Accounting Standards ('UK-Adopted IAS'). The Group's financial
statements have been prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006.
The Financial Statements of the Group are prepared to the last Saturday in
March. Accordingly, these Financial Statements are prepared for the 52 week
period ended 25 March 2023. Comparatives are for the 52 week period ended 26
March 2022. The Balance Sheet for 2023 and 2022 have been prepared as at 25
March 2023 and 26 March 2022 respectively.
Statutory accounts for the 52 weeks ended 25 March 2023 and 26 March 2022 have
been reported on by the auditors who issued an unqualified opinion in respect
of both years and the auditors' reports for 2023 and 2022 did not contain
statements under 498(2) or 498(3) of the Companies Act 2006. Statutory
accounts for the 52 weeks ended 26 March 2022 have been filed with the
Registrar of Companies. The statutory accounts for the 52 weeks ended 25
March 2023, which were approved by the Board on 23 May 2023, will be delivered
to the Registrar of Companies following the Company's Annual General Meeting.
Viability and Going Concern
In accordance with the provisions of the UK Corporate Governance Code, the
Board has assessed the viability of the Group over an appropriate time period,
taking into account the current position, future prospects and the potential
impact of the principal risks to the Group's business model and ability to
deliver its strategy.
The Board has determined that a three-year period to March 2026 is an
appropriate period over which to provide its Viability Statement. This
timeframe has been specifically chosen due to the fast-moving nature of the
food industry and the current financial and operational forecasting cycles of
the Group.
In making this assessment of viability, the Board carried out a robust
assessment of the principal risks and uncertainties facing the Group as well
as considering material macroeconomic conditions and geopolitical challenges
including the loss of consumer demand, especially during the cost-of-living
crisis, and the impact of disease and infection in livestock, in particular
focusing on the risk of both an outbreak of Avian Influenza impacting our
chicken flock and a widespread outbreak of African Swine Fever in the UK and
Europe.
The sensitivity analysis utilised the Group's robust three-year budget and
forecasting process to quantify the financial impact on the strategic plan and
on the Group's viability against specific measures including liquidity, credit
rating and bank covenants.
Given the strong liquidity of the Group; the committed banking facilities
which are in place beyond the viability period; and the diversity of
operations, the results of the sensitivity analysis highlighted that the Group
would, over the three-year period, be able to withstand the impact of the most
severe combination of the risks modelled by making adjustments to its
strategic plan and discretionary expenditure, with strong headroom against
current available facilities and full covenant compliance in all modelled
scenarios.
Based on the results of this analysis, the Board has a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities
as they fall due over the period to 28 March 2026.
2. Accounting policies
The accounting policies applied by the Group in this preliminary announcement
are the same as those applied by the Group in the financial statements for the
52 weeks ended 26 March 2022, except for the new standards and interpretations
explained below.
New and revised standards and interpretations not applied
In the Financial Statements, the Group has not applied the following new and
revised IFRSs that have been issued but are not yet effective:
International Accounting Standards (IAS/IFRSs) Effective date
Narrow scope amendments to IAS 1 and IAS 8 1 January 2023
IFRS 17 Insurance contracts 1 January 2023
IAS 12 Deferred tax (amendment) 1 January 2023
IAS 1 Presentation of Financial Statements (amendment) 1 January 2024
IFRS 16 Leases (amendment) 1 January 2024
None of these are expected to have a significant effect on the Financial
Statements of the Group.
3. Business and geographical segments
IFRS 8 requires operating segments to be identified on the basis of the
internal financial information reported to the Chief Operating Decision Maker
(CODM). The Group's CODM is deemed to be the Executive Directors on the Board,
who are primarily responsible for the allocation of resources to segments and
the assessment of performance of the
segments.
The CODM assesses profit performance principally through adjusted profit
measures consistent with those disclosed in the Annual Report and
Accounts.
The 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 the products and production
process, the type and class of customer, the method of distribution and the
regulatory environment.
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 Limited.
2023 £'m 2023 £'m 2023 £'m 2022 £'m 2022 £'m 2022 £'m
Food Other Total Food Other Total
Revenue 2,296.4 26.6 2,323.0 2,004.6 3.9 2,008.5
Adjusted operating profit 146.3 0.2 146.5 140.7 (0.1) 140.6
Finance costs (6.3) (0.1) (6.4) (3.7) - (3.7)
Adjusted profit before tax 140.0 0.1 140.1 137.0 (0.1) 136.9
Assets 1,248.4 16.4 1,264.8 1,132.2 10.9 1,143.1
Liabilities (410.6) (11.3) (421.9) (368.3) (5.9) (374.2)
Net assets 837.8 5.1 842.9 763.9 5.0 768.9
Depreciation 67.5 1.3 68.8 60.9 0.2 61.1
Non-current asset additions 105.4 3.5 108.9 139.5 0.2 139.7
4. Group operating
profit
Group operating costs comprise:
2023 2022
£'m £'m
Cost of sales excluding net IAS 41 valuation movement on biological assets 2,022.1 1,727.5
Net IAS 41 valuation movement on biological assets* (7.6) 2.8
Cost of sales 2,014.5 1,730.3
Gross profit 308.5 278.2
Selling and distribution costs 94.8 80.3
Administrative expenses excluding amortisation and impairment of intangible
assets
69.5 60.1
Impairment of acquired intangible assets 3.0 -
Amortisation of intangible assets 5.2 4.2
Administrative expenses 77.7 64.3
Other operating income (9.9) -
Total operating costs 2,177.1 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 to adjusted operating profit.
Included within other operating income is a credit of £9.9 million for an
insurance claim received in the period (2022: £nil). The net impact of the
claim is not material.
5. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to members of the parent company of £111.4 million (2022:
£103.5 million) by the weighted average number of shares outstanding during
the year. In calculating diluted earnings per share amounts, the weighted
average number of shares is adjusted for the weighted average number of
ordinary shares that would be issued on the conversion of all dilutive
potential ordinary shares into ordinary shares.
The weighted average number of ordinary shares for both basic and diluted
amounts was as per the table below:
2023 2022
Thousands Thousands
Basic weighted average number of shares 53,461 52,923
Dilutive potential ordinary shares - share options 129 246
53,590 53,169
Adjusted earnings per share are calculated using the weighted average number
of shares for both basic and diluted amounts as detailed above (see Note 10).
6. Dividends
Subject to Shareholders' approval the final dividend will be paid on 1
September 2023 to Shareholders on the register at the close of business on 21
July 2023.
7. Analysis of changes in net debt
At Other At
26 March Cash non-cash 25 March
2022 flow changes 2023
Group £'m £'m £'m £'m
Cash and cash equivalents 0.2 20.1 - 20.3
Revolving credit (36.4) (3.6) (0.5) (40.5)
Lease liabilities (69.8) 16.3 (27.7) (81.2)
Net debt (106.0) 32.8 (28.2) (101.4)
Net (debt)/funds are defined as cash and cash equivalents less
interest-bearing liabilities net of unamortised issue costs.
8. Related party transactions
During the year the Group and Company entered into transactions, in the
ordinary course of business, with related parties, including transactions
between the Company and its subsidiary undertakings. In the Group accounts
transactions between the Company and its subsidiaries are eliminated on
consolidation.
9. Acquisitions
i) Cranswick Mediterranean Foods Limited
On 13 February 2023, the Group acquired the trade and assets of Mediterranean
Foods (London) Ltd. The business, now named Cranswick Mediterranean Foods
Limited, produces Mediterranean snacking foods and was acquired for a cash
consideration of £0.5 million.
The following table sets out the final fair values of the identifiable assets
and liabilities acquired by the Group from Mediterranean Foods (London) Ltd:
Fair value
£'m
Net assets acquired:
Property, plant and equipment 0.6
Inventories 0.1
Trade and other payables (0.1)
Provisions (0.1)
0.5
Goodwill arising on acquisition -
Total consideration 0.5
Satisfied by:
Initial cash consideration 0.5
Deferred contingent consideration -
0.5
Net cash outflow arising on acquisition:
Cash consideration paid 0.5
Cash and cash equivalents acquired -
0.5
Transaction costs in relation to the acquisition of £0.1 million have been
expensed within administrative expenses.
Post-acquisition Cranswick Mediterranean Foods Limited has contributed £0.1
million revenue and £nil operating result which is included in the Group
income statement. Had the acquisiton taken place at the beginning of the year,
the revenue in the year would have been £2.2 million higher and profit in the
year would have been the same.
ii) Holdco Alpha Ltd (Grove Pet Foods)
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 (later
renamed to 'Cranswick Pet Products'), 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 £32.9 million.
The following table sets out the 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)
Corporation 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 (included in cash flows from investing activities) 32.4
Cash and cash equivalents acquired 0.5
32.9
Included in the £15.1 million 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 was undertaken during the year in line
with the Sale and Purchase Agreement. This has resulted in an adjustment of
£0.6 million received 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 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
£3.2 million, resulting in an impairment loss of £3.0 million.
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 the prior 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 year 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. Alternative performance measures
The Board monitors performance principally through adjusted and like-for-like
performance measures. Adjusted profit and earnings per share measures
exclude certain non-cash items including the net IAS 41 valuation movement on
biological assets, amortisation of acquired intangible assets, profit on sale
of a business and goodwill impairment charges. Free cash flow is defined as
net cash from operating activities less net interest paid and like-for-like
revenue excludes the impact of current year acquisitions and the contribution
from prior year acquisitions prior to the anniversary of their purchase.
The Board believes that such alternative measures are useful as they exclude
volatile (net IAS 41 valuation movement on biological assets), one-off
(impairment of goodwill and profit on sale of a business) and non-cash
(amortisation of intangible assets) items which are normally disregarded by
investors, analysts and brokers in gaining a clearer understanding of the
underlying performance of the Group when making investment and other
decisions. Equally, like-for-like revenue provides these same stakeholders
with a clearer understanding of the organic sales growth of the business.
Like-for-like revenue
2023 2022 Change
£'m £'m
Revenue 2,323.0 2,008.5 +15.7%
Ramona's Kitchen, Atlantica UK Limited and Mediterranean Foods (2.8) -
Cranswick Pet Products (22.3) -
Like-for-like revenue 2,297.9 2,008.5 +14.4%
Adjusted gross profit
2023 2022 Change
£'m £'m
Gross profit 308.5 278.2 +10.9%
Net IAS 41 valuation movement (7.6) 2.8
Adjusted gross profit 300.9 281.0 +7.1%
Adjusted Group operating profit and adjusted EBITDA
2023 2022 Change
£'m £'m
Group operating profit 145.9 133.6 +9.2%
Net IAS 41 valuation movement (7.6) 2.8
Impairment of acquired intangible assets 3.0 -
Amortisation of intangible assets 5.2 4.2
Adjusted Group operating profit 146.5 140.6 +4.2%
Depreciation of property, plant and equipment 54.1 47.9
Depreciation of right-of-use assets 14.7 13.2
Adjusted EBITDA 215.3 201.7 +6.7%
Adjusted profit before tax
2023 2022 Change
£'m £'m
Profit before tax 139.5 129.9 +7.4%
Net IAS 41 valuation movement (7.6) 2.8
Amortisation of intangible assets 5.2 4.2
Impairment of acquired intangible assets 3.0 -
Adjusted profit before tax 140.1 136.9 +2.3%
Adjusted earnings per share
2023 2023 2023 2022 2022 2022
Basic Diluted Basic Diluted
£'m pence pence £'m pence pence
On profit for the year 111.4 208.3 207.8 103.5 195.7 194.8
Amortisation of intangible assets 5.2 9.6 9.6 4.2 7.9 7.9
Tax on amortisation of intangible assets (1.0) (1.8) (1.8) (0.5) (1.0) (1.0)
Net IAS 41 valuation movement (7.6) (14.2) (14.2) 2.8 5.2 5.2
Tax on net IAS 41 valuation movement 1.9 3.6 3.6 (1.3) (2.4) (2.4)
Impairment of acquired intangible assets 3.0 5.6 5.6 - - -
Tax on impairment of acquired intangible assets (0.6) (1.1) (1.1) - - -
On adjusted profit for the year 112.3 210.0 209.5 108.7 205.4 204.5
Free cash flow
2023 2022 Change
£'m £'m
Net cash from operating activities 153.0 160.0 -4.4%
Net interest paid (3.8) (1.6)
Free cash flow 149.2 158.4 -5.8%
Return on capital employed
2023 2022 Change
£'m £'m
Average opening and closing net assets 805.6 727.5
Average opening and closing net debt 103.7 99.5
Average opening and closing pension surplus (4.2) (7.0)
Average opening and closing deferred tax 20.1 11.2
925.2 830.9
Adjusted Group operating profit 146.5 140.6
Return on capital employed 15.8% 16.9% -109bps
11. Principal risks and uncertainties
The Group has an established risk management framework which identifies,
assesses, and mitigates key risks facing the business. The principal risks and
uncertainties facing the Group are set out in detail on pages 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: competitor activity, climate change, growth & change,
consumer demand, reliance on key customers & exports, pig meat
availability & price, health & safety, Brexit disruption, IT systems
& cyber security, food scares & product contamination, adverse media
attention, disease & infection within livestock, disruption to Group
operations, recruitment & retention of key personnel, labour availability
& cost, COVID-19 pandemic and interest rate, currency, liquidity &
credit risk.
Whilst the Board considers the principal risks and uncertainties as at 25
March 2023 to be the same as those described in the Report & Accounts for
the 52 weeks ended 26 March 2022, the war in Ukraine continues to create
economic uncertainty across markets in which the Group operates, impacting, in
particular, the cost and availability of materials in the Group's supply
chain. To manage these uncertainties, the Group identified potential future
scenarios which allowed timely and appropriate mitigating actions to be put in
place.
The cost of living crisis, driven predominately by rising energy prices,
increasing interest rates and high inflation, has put significant pressure on
household budgets. Consequently the Group has started to see changes in
consumer spending habits. Retail data, in the categories in which the Group
operates, is being proactively monitored to ensure that appropriate strategies
are developed to minimise the impact of any potential economic downturn.
12. Report and accounts
The Report and Accounts will be available on the Company's website at
www.cranswick.plc.uk (http://www.cranswick.plc.uk) on 30 June 2023. Further
copies will be available upon request from the Company Secretary, Cranswick
plc, Crane Court, Hesslewood Country Office Park, Ferriby Road, Hessle, HU13
0PA.
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