TIDMCWK
RNS Number : 0419U
Cranswick PLC
21 November 2023
CRANSWICK plc: INTERIM RESULTS
Strong revenue growth and positive earnings momentum
21 November 2023
Cranswick plc ("Cranswick" or "the Company" or "the Group"), a
leading UK food producer, today announces its unaudited results for
the 26 weeks ended 23 September 2023.
Commercial and strategic highlights:
-- Strong revenue growth of 12.3% reflecting effective inflation
recovery and resilient volume growth across all four core UK food
categories
-- A positive contribution from rapidly expanding pig farming
operations, robust returns from effective deployment of capital and
tight cost control lifted adjusted operating margin from 6.1% to
6.8%
-- Capital investment programme continues at pace with
relentless focus on automation, adding scale and delivering further
quality, technical and safety improvements
o Total capital expenditure of GBP39.4m across the Group's asset
base to add capacity, capability and drive operating efficiencies
with over GBP600m now deployed across the Group's asset base since
FY16
o GBP62m multi-phased expansion project underway at the Hull
pork primary processing site
o GBP23m fit out of new houmous facility at Worsley, Manchester
now underway
-- GBP31.7m (1) acquisition of Elsham Linc indoor pig farming
business further diversifies the Group's pig farming operations and
adds additional feed milling capability, with self-sufficiency in
UK pigs now over 50%
Sustainability highlights:
-- Ranked first in second edition of 'The Better Food Index'(2)
, which ranks the 30 largest food and drinks companies in the UK on
their actions and commitments towards a fair and sustainable food
system
-- Upgraded to 'low risk' in the 'Coller FAIRR Protein Producer
Index'(3) 2023/24 and ranked fifth overall
-- We continue to work towards our ambition of zero edible food
waste by 2030, and as part of this journey we have now
redistributed the equivalent of 1.2m meals to vulnerable people
through our partnership with FareShare
Financial highlights (4) :
Change Change
(Reported) (Like-for-like(5)
H1 2023 H1 2022 )
-------------------------- ------------ ------------ ------------ -------------------
Revenue GBP1,253.7m GBP1,116.3m +12.3% +12.0%
Adjusted Group operating
profit GBP85.5m GBP68.4m +25.0%
Adjusted Group operating
margin 6.8% 6.1% +69bps
Adjusted profit before
tax GBP81.6m GBP66.0m +23.6%
Adjusted earnings per
share 112.2p 98.6p +13.8%
-- Statutory profit before tax 41.3% higher at GBP86.9m (2022: GBP61.5m)
-- Statutory earnings per share up 29.9% to 119.5p (2022: 92.0p)
-- Interim dividend increased by 10.2% to 22.7p (2023: 20.6p)
-- Return on capital employed(6) up 54bps to 16.4% (2023:15.9%)
-- Net debt (excluding IFRS 16) GBP10.1m lower at GBP51.0m
(September 2022: GBP61.1m and March 2023: GBP20.2m)
-- Robust balance sheet and low leverage with GBP250m bank
facility providing significant headroom
Outlook:
Whilst we remain cautious about current market and wider
economic and geopolitical conditions, the outlook for the current
financial year ending 30 March 2024 is now expected to be at the
upper end of current market consensus (7) .
Adam Couch, Cranswick's Chief Executive Officer commented:
"Our strong start to the year continued through the second
quarter. Our relentless focus on quality, service, innovation, and
managing our cost base through this extremely challenging
inflationary cycle, allied to delivering exceptional customer
service, has underpinned these results.
"Momentum has continued through the start of the third quarter
as our customers and the UK consumer continue to appreciate the
affordability, value for money and versatility of our core pork and
poultry categories.
"Our continued positive progress is made possible by the
substantial ongoing investment in our asset base, expansion of our
pig farming operations and the quality and capability of our
colleagues across the business.
"We have an excellent track record of deploying capital having
invested GBP600m since FY16 in new facilities, capacity expansion
and automation projects underpinned by an unrelenting focus on
delivering efficiency improvements.
"I want to thank, once again, our colleagues and all our
stakeholders for their continued support and commitment as we build
towards what promises to be another extremely busy festive
period.
"Notwithstanding the many challenges that we, our industry and
the wider economy continue to experience, I am confident that the
strengths of our business, which include its 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
in the current financial year and over the longer term."
1 Refer to Note 9 for breakdown of cash outflow on acquisition.
2 Tortoise Media's 'The Better Food Index' is a ranking of the 30
largest food and drinks companies in the UK on their actions and
commitments towards a fair and sustainable food system.
3 The 'Coller FAIRR Protein Producer Index' assesses 60 of the largest
listed global meat, dairy and aquaculture companies on ten ESG factors:
greenhouse gas emissions, deforestation and biodiversity, water
use and scarcity, waste and pollution, antibiotics, working conditions,
animal welfare, food safety, governance and alternative proteins.
4 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 16.
5 For comparative purposes, like-for-like revenue excludes the current
year contribution from current and prior year acquisitions prior
to the anniversary of their purchase.
6 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.
Market consensus for adjusted profit before tax as at 20 November
2023 ranged between GBP153.2m and GBP160.8m.
7
Presentation
A conference call for analysts and institutional investors will
take place at 9.30am 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:
1. Cranswick is a leading and innovative supplier of premium,
fresh and added-value food products. The business employs over
14,200 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
2. 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. 18 manufacturing sites certified carbon neutral
b. 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%
c. Committing to purchase 100% certified deforestation-free soya
d. All major production facilities are now powered by renewable grid supplied electricity
e. Donating 1,200,000 meals to local communities
f. Over 1,500 colleagues volunteering as Second Nature
'Changemakers' to help meet the Group's sustainability goals
g. 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
Summary
We have made a strong start to the year with demand remaining
resilient in our core UK food business. Revenue was well ahead in
each of our four UK food categories reflecting further inflation
recovery and positive volume momentum as our customers and the UK
consumer continue to appreciate the affordability, value and
versatility of our core pork and poultry products.
Broad-based cost inflation, which has now slowed, was
proactively managed and mitigated during the period through tight
cost control and recovery. Rapid investment in automation projects
and a relentless drive to improve operating efficiencies further
supported margin recovery, building on the momentum generated in
the second half of the last financial year.
We continue to invest at pace in our pig farming operations,
with self-sufficiency in UK pigs increasing to over 50% during the
period. Through the acquisition of the Elsham Linc indoor pig
farming business, a further pig herd in North Yorkshire, and the
ongoing expansion of our existing pig herds, we have further
strengthened our presence in the UK pig farming sector as an
efficient, large-scale producer, ensuring that we have the required
quality, quantity and mix of indoor and premium outdoor pigs to
service our customers' requirements.
We invested a further GBP39.4m across our asset base during the
period to support future growth and drive further operating
efficiencies. We have committed to a GBP62m multi-phased investment
programme at our Hull pork primary processing facility and we have
started a GBP23m fit out of the new Worsley facility, acquired at
the end of the last financial year, to significantly expand houmous
production capacity.
Results
Total revenue in the 26 weeks to 23 September 2023 was
GBP1,253.7m, 12.3% higher than the GBP1,116.3m reported in the
corresponding period last year. Adjusting for the contribution from
acquisitions made in the current and previous period, revenue
increased by 12.0% on a like-for-like basis.
Adjusted profit before tax for the period at GBP81.6m was 23.6%
higher than the GBP66.0m reported in the corresponding period last
year. Adjusted earnings per share on the same basis was up 13.8% at
112.2p compared to 98.6p in the equivalent period last year,
reflecting the growth in adjusted profit before tax, partially
offset by the impact of the 6% increase in the headline rate of
corporation tax effective from the start of the current financial
year.
Cash flow and financial position
Net debt, excluding IFRS 16 lease liabilities, at the end of the
period stood at GBP51.0m (September 2022: GBP61.1m and March 2023:
GBP20.2m). The increase since March 2023 reflects the GBP31.7m
acquisition of Elsham Linc in August 2023(1) . The Group remains in
a robust financial position and has access to a GBP250m unsecured,
sustainability linked facility providing generous headroom which
runs through to November 2026.
Dividend
The interim dividend is being increased by 10.2% to 22.7p per
share from 20.6p per share previously. The interim dividend will be
paid on 26 January 2024 to Shareholders on the register at the
close of business on 15 December 2023.
Outlook
We have made a strong start to the year with positive trading
momentum continuing into the third quarter. Demand for our core UK
pork and poultry categories remains resilient as the UK consumer
continues to recognise the quality, value and versatility of our
product range and we build towards what promises to be another
extremely busy Christmas trading period. Whilst we remain cautious
about current market and wider economic and geopolitical
conditions, the outlook for the current financial year ending 30
March 2024 is now expected to be at the upper end of current market
consensus(7) .
The Board is encouraged by the continued strategic progress of
the business and confident that focus on the strengths of the
Company, which include its long-standing customer relationships,
breadth and quality of our products and industry leading asset
infrastructure, provides a solid platform for successful long-term
growth.
(1) Refer to Note 9 for breakdown of cash outflow on
acquisition.
(7) Market consensus for adjusted profit before tax as at 20
November 2023 ranged between GBP153.2m and GBP160.8m.
Operating review
Revenue and adjusted operating profit
H1 2023 H1 2022 Change Change
(Reported) (Like-for-like)*
---------------------------------- ------------- ------------- ------------ ------------------
Revenue GBP1,253.7m GBP1,116.3m +12.3% +12.0%
Adjusted Group operating profit* GBP85.5m GBP68.4m +25.0%
Adjusted Group operating margin* 6.8% 6.1% +69bps
Group operating profit GBP90.8m GBP63.9m +42.1%
---------------------------------- ------------- ------------- ------------ ------------------
(*) See Note 16
Revenue
Reported revenue increased by 12.3% to GBP1,253.7m reflecting
continued inflation recovery. Like-for-like revenue increased by
12.0%, with corresponding volumes down 2.7% primarily reflecting
lower export shipments. Pet food volumes were also lower as the
business focused on building stock for the new Pets at Home
contract launch. Revenue from our core UK food business was ahead
by 16.1% underpinned by volume growth of 2.7% with all four UK food
categories making a positive contribution. Fresh Pork revenue grew
strongly reflecting the successful pass through of higher pig
prices and volume growth in UK retail and wholesale channels.
Convenience revenue was well ahead reflecting further inflation
recovery and a solid volume uplift. Robust growth in Gourmet
Products revenue reflected a positive performance across all
product subcategories, bolstered by onboarding of new customers and
the launch of new products by the Hull Cooked Bacon facility.
Poultry revenue increased with positive volume contributions from
both the fresh and cooked businesses. Prepared Poultry revenue was
strongly ahead as the business continues to ramp up albeit the site
still has substantial capacity headroom. Shopper confidence is now
at its highest level since late 2021 and we are starting to see a
change in consumer behaviour as shoppers begin to trade up again
driven, in part, by compelling promotional offers.
Adjusted Group operating profit
Adjusted Group operating profit was 25.0% higher at GBP85.5m
with adjusted Group operating margin up 69bps to 6.8%. Higher Group
operating margin reflected robust returns from effective deployment
of capital, tight cost control and a positive contribution from the
Group's expanded farming operations.
Category review
FOOD SEGMENT
Fresh Pork
Fresh Pork revenue was 12.2% above the prior period and
represented 25.3% of Group revenue. Revenue growth reflected the
pass through of higher pig prices and strong volume growth in UK
food, offset by lower export revenue with both pricing and demand
from China remaining subdued.
Despite feed prices falling back from the peaks experienced
following the outbreak of war in Ukraine in 2022, the UK standard
pig price increased from 214p/kg at the start of the year to a high
of 226p/kg before easing back slightly to 223p/kg by the end of
September. This upward pressure on prices reflected the ongoing
contraction of the UK pig herd and resulting tightening of supply
as many independent producers have either cut back or ceased
production entirely in response to the unprecedented inflationary
pressures experienced over the last eighteen months.
We continue to invest in our farming infrastructure. We
increased the size, scale and quality of our pig herd during the
period through ongoing organic growth and investment together with
the acquisition of new indoor and premium outdoor capacity. The
acquisition of Elsham Linc, a large-scale indoor farming business
with 18 sites in North Lincolnshire, including a feed mill, and
comprising 8,000 sows producing 3,200 finished pigs each week,
significantly increases the size of our Red Tractor assured indoor
pig herd. We also acquired a second pig herd during the period as
part of a wider agreement to lease and operate, on a long-term
basis, a fully integrated pig and arable farming enterprise in
North Yorkshire. With the addition of these two new herds our
self-sufficiency in UK pigs is now over 50%. We will continue to
invest in and, as necessary, expand our pig herd to ensure supply
of the appropriate quantity and quality of pigs to meet our
customers' needs. We will continue to invest in our sustainable pig
farming operations to guarantee supply, support full farm-to-fork
traceability and maintain the highest animal welfare standards.
We are investing at pace across our three fresh pork primary
processing operations with significant committed investment to
increase capacity and drive further operational efficiencies as we
look to service our rapidly growing value-added pork business. This
investment programme includes a GBP62m multi-phased redevelopment
of the Hull primary processing site, which will add substantial
capacity, drive further efficiency improvements and add onsite cold
storage capability.
African Swine Fever ("ASF") has now been reported in five
different world regions affecting 52 countries. Since January 2021,
10 countries have reported ASF as a first occurrence in the
country, while 12 countries reported it spreading to new zones. In
September 2023 ASF was reported for the first time in Sweden. It is
not yet known how the virus was introduced given the large
geographic jump. In the UK we remain acutely aware of the impact an
outbreak of ASF would have on the UK pig industry and so intensive
bio-security protocols remain in place across the country.
Convenience
Convenience revenue was 13.9% ahead on a reported basis and
represented 39.5% of Group revenue. Revenue growth was driven by
continuing inflation recovery and solid Cooked Meats volume
growth.
Cooked Meats revenue growth reflected ongoing inflation recovery
and volume growth underpinned by promotional activity. We expanded
our range of 'slow cook' and 'sous vide' products in response to
increasing demand for convenient high-quality meals at home. A
GBP9m expansion project, which is well underway at our Hull
facility, will double our 'slow cook' capacity as we look to build
on the success of our centre-of-plate Christmas range of products.
An GBP11m extension of our Milton Keynes facility is progressing to
plan. When complete, the extension will add production capacity and
packing capability.
Continental Products revenue growth was supported by further
inflation recovery, with volumes modestly lower compared to the
prior period, albeit the good September weather ensured a strong
end to the half-year. The ongoing popularity of charcuterie, olives
and antipasti products either sold individually or as mixed platter
packs continue to drive category growth.
Katsouris revenue grew through inflation recovery with volumes
modestly ahead. The good September weather again ensured a positive
end to the period with olives, antipasti and halloumi products all
selling well. A new halloumi contract has been secured, which will
come on stream in the second half of the year. Ramona's continues
to expand rapidly and is now the number one houmous brand by volume
in the UK.
Work has commenced on redeveloping the site at Worsley, near
Manchester, which was acquired at the end of the last financial
year. The GBP23m fit out will occupy 50% of the 50,000 square foot
footprint providing substantial additional houmous manufacturing
capacity utilising both continuous and batch cooking systems.
Gourmet Products
Gourmet Products revenue increased by 18.0% underpinned by
strong volume growth and represented 16.7% of Group revenue.
Sausage and Bacon revenues were both ahead, with retail volumes
strengthening as promotional activity returned during the first
half of the financial year and with a resurgent demand for premium
products driven by deep-cut promotions and multi-buy offers. Food
Service volumes were also ahead in sausage and bacon with demand
for bacon from the out-of-home breakfast market particularly
high.
Pastry revenue improved year-on-year with volume growth the main
driver. Innovation was a key contributor with dual deposited
sausage rolls, a market first, performing well. Several new premium
meal solutions were also launched, complemented by a robust
performance from the 'Gastro' range for the site's anchor retail
customer.
Revenue from the Cooked Bacon and Sausage facility grew
strongly. Growth reflected promotional activity, new business wins
and new product launches into both retail and food service
customers and was facilitated by the new contact cooking line.
Poultry
Poultry revenue increased by 6.9% during the period and
represented 17.7% of Group revenue.
Fresh Poultry continued to perform well with the number of birds
processed per week during the period averaging 1.4m. Revenue growth
reflected higher pricing and volume growth, with new restaurant
outlets for portioned product onboarded during the period.
Following the extremely virulent Avian Influenza ("AI") season
experienced by the UK in 2022, the level of infections has been
significantly lower so far this year with no Cranswick farms
affected. We continue to monitor events closely with the strictest
bio-security protocols enforced across all Cranswick farms.
Cooked Poultry revenue was modestly higher as revenue continues
to recover following the product recall in Q1 of the previous
financial year. A new product format was launched in the period
with hot-deli pulled chicken supplied into a premium retail
customer. Ongoing investment in the Hull facility will increase
cooking and roasting capacity and enhance our ability to deliver
value-add products.
Prepared Poultry revenue grew strongly as the business continues
to develop following commissioning of the Hull facility in April
2022. In September the business won the award of Best Poultry
Product at the Meat Management Awards recognising the quality of
coated chicken products produced at the site. Whilst volumes have
grown appreciably, the site is still operating well below capacity
and needs additional volume to achieve an acceptable level of
return. Robust commercial plans are in place to address this .
OTHER SEGMENT
Pet Food
Cranswick Pet Products revenue was 0.8% of Group revenue.
Revenue fell by 28.2% compared to the same period last year, as
expected, reflecting the transition from its legacy customer
base.
The GBP10m investment programme at the Lincoln manufacturing
facility is progressing to plan. This project expands capacity
through dual line capability and upgrades the facility to support
the strategic growth plans of the business.
During the period the site started supplying Pets at Home, with
volumes expected to ramp up in the second half of the year. The
refreshed Vitalin and Alpha dog food brands have been relaunched
with listings secured in Pets at Home and through online retail
channels with supply commencing shortly after the period end.
Finance review
Revenue
Reported revenue increased by 12.3% to GBP1,253.7m (2022:
GBP1,116.3m). Like-for-like revenue, excluding the contribution
from acquisitions made in the current and previous financial
period, increased by 12.0%.
Adjusted Group operating profit
Adjusted Group operating profit increased by 25.0% to GBP85.5m
(2022: GBP68.4m). Adjusted Group operating margin at 6.8% of sales
was 69bps higher than the prior period.
Finance costs and funding
Net finance costs were GBP3.9m (2022: GBP2.4m) following the
increases in the base rate throughout the period.
Adjusted profit before tax
Adjusted profit before tax was 23.6% higher at GBP81.6m (2022:
GBP66.0m).
Taxation
The tax charge of GBP22.7m (2022: GBP12.4m) was 26.1% of profit
before tax (2022: 20.2%). The UK statutory rate of corporation tax
was 25.0% (2022: 19.0%). The effective rate was higher than the
standard rate mainly due to increased depreciation on assets not
qualifying for tax relief and the tax adjustments required on
share-based payments.
Adjusted earnings per share
Adjusted earnings per share for the 26 weeks to 23 September
2023 increased by 13.8% to 112.2p compared to the 98.6p reported in
the corresponding period in the prior year, reflecting the growth
in adjusted profit before tax, partially offset by the impact of
the 6% increase in the headline rate of corporation tax effective
from the start of the current financial year . The average number
of shares in issue was 53,712,000 (2022: 53,348,000).
Statutory profit measures
Statutory profit before tax increased by 41.3% to GBP86.9m
(2022: GBP61.5m), statutory Group operating profit was 42.1% higher
at GBP90.8m (2022: GBP63.9m) and statutory earnings per share were
29.9% higher at 119.5p (2022: 92.0p). Full reconciliations of these
results to the adjusted measures can be found in Note 16.
Cash flow and net debt
Cash generated from operations in the period was GBP103.2m
(2022: GBP59.3m), including a working capital outflow in the period
of GBP24.9m (2022: GBP45.1m) of which GBP2.8m (2022: GBP15.9m) was
the movement in biological assets. Net debt, including the impact
of IFRS 16 lease liabilities, increased by GBP40.5m in the period
to GBP141.9m from GBP101.4m at 25 March 2023 reflecting the
acquisition of Elsham Linc and the growth in working capital in the
business. Capital expenditure was GBP39.4m 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. 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 23
September 2023 was GBP0.1m compared to GBP0.2m at 25 March 2023.
Cash contributions to the scheme during the period were GBPnil. The
Group does not expect to make any contributions to the scheme
during the year ending March 2024. The present value of funded
obligations was GBP20.0m, and the fair value of plan assets was
GBP20.1m.
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 25 March 2023 are set
out on pages 72 to 76 of the Annual Report and Accounts for the 52
weeks ended 25 March 2023, dated 23 May 2023, a copy of which is
available on the Group's website. An update to these principal
risks and uncertainties at 23 September 2023 is set out in Note
17.
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 23 September 2023
Half year
---------------- ----------
Notes 52 weeks
ended
25 March
2023
2023 2022 (Audited)
GBP'm GBP'm GBP'm
-------------------------------------------- -------- ------- ------- ----------
Revenue 1,253.7 1,116.3 2,323.0
====================================================== ======= ======= ==========
Adjusted Group operating profit 85.5 68.4 146.5
Net IAS 41 valuation movement on biological
assets 7.7 1.2 7.6
Amortisation of acquired intangible
assets (2.4) (2.7) (5.2)
Impairment of intangible assets - (3.0) (3.0)
Group operating profit 5 90.8 63.9 145.9
Finance costs (3.9) (2.4) (6.4)
====================================================== ======= ======= ==========
Profit before tax 86.9 61.5 139.5
Taxation 6 (22.7) (12.4) (28.1)
============================================ ======== ======= ======= ==========
Profit for the period 64.2 49.1 111.4
====================================================== ======= ======= ==========
Earnings per share (pence)
On profit for the period:
Basic 7 119.5 92.0 208.3
Diluted 7 119.1 91.8 207.8
========================== ===== ==== =====
Group statement of comprehensive income (unaudited)
for the 26 weeks ended 23 September 2023
52 weeks
ended
25 March
Half year 2023
------------------
2023 2022 (Audited)
GBP'm GBP'm GBP'm
--------------------------------------------------- ---------------- -------- -------- ------------
Profit for the period 64.2 49.1 111.4
===================================================================== ======== ======== ============
Other comprehensive income/(expense)
Other comprehensive income to be reclassified
to profit or loss in subsequent periods:
Cash flow hedges
Gains arising in the period - 0.5 0.1
Reclassification adjustments for gains
included in the income statement - 0.5 0.3
Income tax effect - (0.2) (0.1)
===================================================== ============== ======== ======== ============
Net other comprehensive income to be reclassified
to profit or loss in subsequent periods - 0.8 0.3
===================================================== ============== ======== ======== ============
Items not to be reclassified to profit
or loss in subsequent periods:
Actuarial losses on defined benefit pension
scheme (0.1) (5.0) (12.5)
Income tax effect - 1.0 2.8
===================================================== ============== ======== ======== ============
Net other comprehensive expense not being
reclassified to profit or loss in subsequent
periods (0.1) (4.0) (9.7)
===================================================== ============== ======== ======== ============
Other comprehensive expense (0.1) (3.2) (9.4)
===================================================== ============== ======== ======== ============
Total comprehensive income 64.1 45.9 102.0
===================================================== ============== ======== ======== ============
Group balance sheet (unaudited)
at 23 September 2023 As at
25 March
Half year 2023
------------------
Notes 2023 2022 (Audited)
GBP'm GBP'm GBP'm
-------------------------------------- ------ -------- -------- ----------
Non-current assets
Property, plant and equipment 496.7 444.0 464.1
Right-of-use assets 85.0 71.9 76.3
Intangible assets 224.1 225.8 223.2
Investment in joint venture 9 0.4 - -
Financial asset investment 9 0.1 - -
Defined benefit pension scheme
surplus 0.1 4.3 0.2
Biological assets 6.3 2.6 6.3
====================================== ====== ======== ======== ==========
Total non-current assets 812.7 748.6 770.1
====================================== ====== ======== ======== ==========
Current assets
Biological assets 90.8 67.9 72.8
Inventories 128.7 131.1 113.0
Trade and other receivables 310.2 277.8 288.5
Income tax receivable 3.6 0.9 -
Financial assets 0.1 1.2 0.1
Cash and short-term deposits 11 27.8 11.5 20.3
====================================== ====== ======== ======== ==========
Total current assets 561.2 490.4 494.7
====================================== ====== ======== ======== ==========
Total assets 1,373.9 1,239.0 1,264.8
====================================== ====== ======== ======== ==========
Current liabilities
Trade and other payables (292.0) (267.4) (268.5)
Lease liabilities (14.4) (13.8) (14.4)
Financial liabilities (2.8) (0.6) (0.1)
Provisions (0.8) (2.7) (0.8)
Income tax payable - - (4.3)
====================================== ====== ======== ======== ==========
Total current liabilities (310.0) (284.5) (288.1)
====================================== ====== ======== ======== ==========
Non-current liabilities
Other payables (0.3) (0.5) (0.4)
Lease liabilities (76.5) (61.6) (66.8)
Financial liabilities (78.8) (75.3) (43.2)
Deferred tax liabilities (27.1) (23.1) (20.7)
Provisions (2.8) (1.5) (2.7)
Total non-current liabilities (185.5) (162.0) (133.8)
====================================== ====== ======== ======== ==========
Total liabilities (495.5) (446.5) (421.9)
Net assets 878.4 792.5 842.9
====================================== ====== ======== ======== ==========
Equity
Called-up share capital 5.4 5.3 5.4
Share premium account 125.4 119.3 123.9
Share-based payments 53.3 48.0 49.0
Shares held in trust 15 (3.3) - -
Hedging reserve - 0.5 -
Retained earnings 697.6 619.4 664.6
Total equity attributable to owners
of the parent 878.4 792.5 842.9
====================================== ====== ======== ======== ==========
Group statement of cash flows (unaudited)
for the 26 weeks ended 23 September 2023
52 weeks
ended 25
Half year March 2023
----------------
Notes 2023 2022 (Audited)
GBP'm GBP'm GBP'm
Operating activities
Profit for the period 64.2 49.1 111.4
Adjustments to reconcile Group profit
for the period to net cash inflows from
operating activities:
Income tax expense 22.7 12.4 28.1
Net finance costs 3.9 2.4 6.4
Loss/(gain) on sale of property, plant
and equipment 0.2 (0.5) (0.5)
Loss on right-of-use assets 0.4 - -
Depreciation of property, plant and equipment 30.1 26.9 54.1
Depreciation of right-of-use assets 7.7 6.9 14.7
Amortisation of acquired intangibles 2.4 2.7 5.2
Impairment of intangible assets - 3.0 3.0
Share-based payments 4.3 3.7 4.7
Difference between pension contributions
paid and amounts recognised in the income
statement - (0.9) (4.4)
Release of government grants (0.1) (0.1) (0.2)
Net IAS 41 valuation movement on biological
assets (7.7) (1.2) (7.6)
Increase in biological assets (2.8) (15.9) (18.1)
Increase in inventories (14.7) (25.9) (7.7)
Increase in trade and other receivables (19.4) (33.4) (44.8)
Increase in trade and other payables 12.0 30.1 29.1
================================================= ====== ======= ======= ==============
Cash generated from operations 103.2 59.3 173.4
Tax paid (22.9) (11.0) (20.4)
================================================= ====== ======= ======= ==============
Net cash from operating activities 80.3 48.3 153.0
================================================= ====== ======= ======= ==============
Cash flows from investing activities
Acquisition of subsidiary, net of cash
acquired 9 (13.6) - 0.1
Payment of property, plant and equipment
acquired on acquisition 9 (9.1) - -
Purchase of financial asset investment 9 (0.1) - -
Purchase of property, plant and equipment (39.4) (38.1) (85.1)
Proceeds from sale of property, plant
and equipment 0.3 0.6 1.2
Net cash used in investing activities (61.9) (37.5) (83.8)
================================================= ====== ======= ======= ==============
Cash flows from financing activities
Interest paid (2.0) (1.4) (3.8)
Proceeds from issue of share capital 1.5 1.3 3.7
Shares held in trust purchased (3.3) - -
Issue costs of long-term borrowings - - (0.4)
Proceeds from borrowings 11 38.0 36.0 4.0
Repayment of borrowings acquired on acquisition 11 (4.8) - -
Dividends paid (31.7) (27.6) (36.3)
Payment of lease capital (7.1) (6.7) (13.8)
Payment of lease interest (1.5) (1.1) (2.5)
================================================= ====== ======= ======= ==============
Net cash (used in)/from financing activities (10.9) 0.5 (49.1)
================================================= ====== ======= ======= ==============
Net increase in cash and cash equivalents 11 7.5 11.3 20.1
Cash and cash equivalents at beginning
of period 11 20.3 0.2 0.2
================================================= ====== ======= ======= ==============
Cash and cash equivalents at end of period 11 27.8 11.5 20.3
================================================= ====== ======= ======= ==============
Group statement of changes in equity (unaudited)
for the 26 weeks ended 23 September 2023
Share Share Share- Shares Hedging Retained Total
capital premium based held reserve earnings equity
payments in trust
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
----------------------------------- --------- --------- ---------- ---------- --------- ------------ --------
At 25 March 2023 5.4 123.9 49.0 - - 664.6 842.9
=================================== ========= ========= ========== ========== ========= ============ ========
Profit for the period - - - - - 64.2 64.2
Other comprehensive expense - - - - - (0.1) (0.1)
=================================== ========= ========= ========== ========== ========= ============ ========
Total comprehensive income - - - - - 64.1 64.1
Share-based payments expense - - 4.3 - - - 4.3
Shares acquired by Employee
Benefit Trust - - - (3.3) - - (3.3)
Share options exercised - 1.5 - - - - 1.5
Dividends - - - - - (31.7) (31.7)
Deferred tax relating to
changes in equity - - - - - 0.2 0.2
Corporation tax relating
to changes in equity - - - - - 0.4 0.4
=================================== ========= ========= ========== ========== ========= ============ ========
At 23 September 2023 5.4 125.4 53.3 (3.3) - 697.6 878.4
=================================== ========= ========= ========== ========== ========= ============ ========
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/(expense) - - - - 0.8 (4.0) (3.2)
=================================== ========= ========= ========== ========== ========= ============ ========
Total comprehensive income - - - - 0.8 45.1 45.9
Share-based payments expense - - 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
=================================== ========= ========= ========== ========== ========= ============ ========
(Audited)
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/(expense) - - - - 0.3 (9.7) (9.4)
=================================== ========= ========= ========== ========== ========= ============ ========
Total comprehensive income - - - - 0.3 101.7 102.0
Share-based payments expense - - 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 relating to
changes in equity - - - - - (0.9) (0.9)
Corporation tax relating
to changes in equity - - - - - 0.8 0.8
=================================== ========= ========= ========== ========== ========= ============ ========
At 25 March 2023 5.4 123.9 49.0 - - 664.6 842.9
=================================== ========= ========= ========== ========== ========= ============ ========
Responsibility statement
The Directors confirm that these condensed set of consolidated
interim financial statements have been prepared in accordance with
UK-adopted International Accounting Standard (IAS) 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 consolidated 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.
The Board of Directors that served during the 26 weeks ended 23
September 2023, and their respective responsibilities, can be found
on pages 82 to 83 and 95 of the Annual Report and Accounts for the
52 weeks ended 25 March 2023, dated 23 May 2023. A list of current
Directors is maintained on the Cranswick plc website:
www.cranswick.plc.uk
On behalf of the Board
Tim Smith Mark Bottomley
Chairman Chief Financial Officer
21 November 2023
Notes to the interim accounts
1. Basis of preparation
Cranswick plc is a public limited company incorporated and
domiciled in England, United Kingdom. The condensed set of
consolidated interim financial statements have been prepared in
accordance with the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority and UK-adopted IAS 34, 'Interim
Financial Reporting'. The Group is presenting its condensed
consolidated interim financial statements for the 26 weeks to 23
September 2023 with comparative information for the 26 weeks to 24
September 2022 and the 52 weeks to 25 March 2023. This interim
report was approved by the Directors on 21 November 2023.
The annual financial statements will be prepared in accordance
with UK-adopted International Accounting Standards (IAS) and the
requirements of the Companies Act 2006.
As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, the condensed set of consolidated
financial statements have been prepared applying the accounting
policies and presentation that were applied in the preparation of
the Group's published consolidated financial statements for the 52
weeks ended 25 March 2023. These statements do not include all the
information required for full annual consolidated financial
statements and should be read in conjunction with the full Annual
Report and Accounts for the 52 weeks ended 25 March 2023.
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 25 March 2023 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. Management has produced forecasts to
reflect severe yet plausible downside scenarios which consider the
principal risks faced by the Group, including, but not limited to,
a loss of consumer demand, an outbreak of Avian Influenza and a
widespread outbreak of African Swine Fever in the UK and Europe, as
well the Group's considerable financial resources and strong
trading relationships with its key customers and suppliers.
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 GBP250m 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 business
plans and downside scenario modelling and making enquiries, the
Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the twelve
months from the date of signing the condensed consolidated interim
financial statements. For this reason, the Directors continue to
adopt the going concern basis for preparing these consolidated
interim financial statements.
2. Accounting policies
The accounting policies applied by the Group in this interim
report are the same as those applied by the Group in the financial
statements for the 52 weeks ended 25 March 2023, except as
described below:
Purchase of shares held in trust
The Shares held in trust reserve relates to ordinary shares in
Cranswick plc which are held in an Employee Benefit Trust set up in
May 2020. The shares held in trust are intended to be granted to
the beneficiaries of the Group's Long Term Incentive Plan (LTIP)
when the relevant conditions of the LTIP are satisfied, with a
transfer between the Shares held in trust reserve and Retained
earnings.
Joint Ventures
The Group's interest in joint ventures is accounted for using
the equity method. Under this method the Group's share of the
profit or loss of joint ventures is included in the Group income
statement and the Group share of joint ventures net assets is
included in the Group balance sheet, less dividends received.
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.
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.
3. Significant estimates and judgements
The significant estimates and judgements are unchanged from
those disclosed in the consolidated year end financial statements
with the exception of IAS 41 biological assets where there has been
a change in available external data from AHDB in respect of suckler
and weaner pig prices. As a result, management have used historic
data and applied a correlation with the current UK standard pig
price. There is no change in underlying methodology applied,
however as these suckler and weaner prices are no longer observable
in the market, management considers that this causes the valuation
to move into Level 3 of the fair value hierarchy. Having considered
the sensitivities in key inputs to suckler and weaner valuations,
management considers that reasonable sensitivities would not result
in a material impact on the fair value.
4. Segmental analysis
IFRS 8 requires operating segments to be identified on the basis
of the internal financial information reported to the Chief
Operating Decision Maker (CODM). The Group's CODM is deemed to be
the Executive Directors on the Board, who are primarily responsible
for the allocation of resources to segments and the assessment of
performance of the segments.
The CODM assesses profit performance principally through
adjusted profit measures consistent with those disclosed in the
Annual Report and Accounts.
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.
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 above. The acquisition of Elsham Linc is
included within the Fresh Pork product category. The 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.
52 weeks ended
Half year 25 March 2023
--------------------------------------------------------
2023 2023 2023 2022 2022 2022
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Food Other Total Food Other Total Food Other Total
-------------------- -------- ------- -------- -------- ------- -------- -------- -------- --------
Revenue 1,243.8 9.9 1,253.7 1,102.6 13.7 1,116.3 2,296.4 26.6 2,323.0
==================== ======== ======= ======== ======== ======= ======== ======== ======== ========
Adjusted operating
profit 87.2 (1.7) 85.5 67.6 0.8 68.4 146.3 0.2 146.5
Finance costs (3.9) - (3.9) (2.4) - (2.4) (6.3) (0.1) (6.4)
==================== ======== ======= ======== ======== ======= ======== ======== ======== ========
Adjusted profit
before tax 83.3 (1.7) 81.6 65.2 0.8 66.0 140.0 0.1 140.1
==================== ======== ======= ======== ======== ======= ======== ======== ======== ========
Geographical segments
The following table sets out revenues by destination, regardless
of where the goods were produced:
52 weeks
ended
Half year 25 March
------------------------
2023 2022 2023
GBP'm GBP'm GBP'm
-------------------- -------------- -------- ----------
UK 1,224.7 1,075.8 2,236.2
Continental Europe 15.8 20.3 36.7
Rest of world 13.2 20.2 50.1
=====================
1,253.7 1,116.3 2,323.0
===================== ============== ======== ==========
In addition to the non-UK sales disclosed above the Group also
made sales to export markets through UK-based meat trading agents
totalling GBP28.9m (2022: GBP38.9m). Including these sales, total
sales to export markets were GBP57.9m for the period (2022:
GBP79.4m).
Customer concentration
The Group has three customers (2022: three) which individually
account for more than 10% of the Group's total revenue. These
customers account for 22%, 16% and 10% respectively. In the prior
year, these same three customers accounted for 21%, 15% and 11%
respectively.
5. Group operating profit
Group operating costs comprise:
52 weeks
Half year ended 25
March
-------------------
2023 2022 2023
GBP'm GBP'm GBP'm
---------------------------------------------- ----- -------- -------- ---------------
Cost of sales excluding net IAS 41 valuation
movement on biological assets 1,077.1 970.5 2,022.1
Net IAS 41 valuation movement on biological
assets(*) (7.7) (1.2) (7.6)
===================================================== ======== ======== ===========
Cost of sales 1,069.4 969.3 2,014.5
===================================================== ======== ======== ===========
Gross profit 184.3 147.0 308.5
=============================================== ==== ======== ======== ===========
Selling and distribution costs 48.1 46.5 94.8
=============================================== ==== ======== ======== ===========
Administrative expenses excluding impairment
and amortisation of intangible assets 43.0 35.2 69.5
Impairment of intangible assets (Note
14) - 3.0 3.0
Amortisation of acquired intangible
assets 2.4 2.7 5.2
=============================================== ==== ======== ======== ===========
Administrative expenses 45.4 40.9 77.7
=============================================== ==== ======== ======== ===========
Other operating income - (4.3) (9.9)
=============================================== ==== ======== ======== ===========
Total operating costs 1,162.9 1,052.4 2,177.1
=============================================== ==== ======== ======== ===========
(*) 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 at 24 September 2022 is a
credit of GBP4.3m and at 25 March 2023 is a credit of GBP9.9m for
an insurance claim received in the period.
6. Taxation
The tax charge of GBP22.7m (2022: GBP12.4m) gives an effective
tax rate of 26.1% (2022: 20.2%). The effective tax rate is higher
than the UK statutory rate of corporation tax of 25.0% (2022:
19.0%) due to increased depreciation on assets not qualifying for
tax relief and tax adjustments required on share-based
payments.
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 (excluding the 93,692 ordinary
shares held by the Employee Benefit Trust) of 53,712,000 (25 March
2023: 53,461,000, 24 September 2022: 53,348,000). The calculation
of diluted earnings per share is based on 53,903,000 shares (25
March 2023: 53,590,000, 24 September 2022: 53,451,000).
8. Dividends
52 weeks
ended
Half year 25 March
----------------
2023 2022 2023
GBP'm GBP'm GBP'm
------------------------------------------ ------- ------- ----------
Interim dividend for year ended 25 March
2023 of 20.6p per share - - 11.0
Final dividend for year ended 25 March
2023 of 58.8p (2022: 55.6p)
per share 31.7 29.7 29.7
=========================================== ======= ======= ==========
31.7 29.7 40.7
=========================================== ======= ======= ==========
The interim dividend for the year ending 30 March 2024 of 22.7p
per share was approved by the Board on 21 November 2023 for payment
to Shareholders on 26 January 2024 and therefore has not been
included as a liability at 23 September 2023.
9. Acquisitions
(i) Elsham Linc Limited
On 4 August 2023, the Group acquired 100% of the issued share
capital of Elsham Linc Limited, a commercial pig farming enterprise
operating from numerous sites across North Lincolnshire and the
Humber, for an initial net cash consideration of GBP13.6m.
Included within the assets acquired is Elsham Linc Limited's 50%
share of the Mere Pigs joint venture, a commercial pig farming
business. Beechgrove Farms Limited, the other party to the joint
venture, holds the remaining 50% interest in Mere Pigs.
The acquisition is in line with the Group's focus on increasing
self-sufficiency in British pigs.
The acquisition has been accounted for as a business combination
using the acquisition method of accounting in accordance with IFRS
3 Business Combinations and consequently the assets acquired, and
liabilities assumed, have been recorded by the Group at fair value,
with an excess purchase price over the fair value of the
identifiable asset and liabilities being recognised as
goodwill.
The following table sets out the provisional fair values of the
identifiable assets and liabilities acquired by the Group in
relation to Elsham Linc Limited:
Provisional
fair value
GBP'm
Net assets acquired:
Property, plant and equipment 22.7
Investment in joint venture 0.4
Biological assets 7.5
Inventories 1.0
Trade and other receivables 2.3
Bank and cash balances (3.1)
Bank loans (4.8)
Trade and other payables (17.5)
Deferred tax liability (0.2)
================================== ============
8.3
Goodwill arising on acquisition 3.3
================================== ============
Total consideration 11.6
================================== ============
Satisfied by:
Initial cash consideration 10.5
Deferred consideration 1.1
============================ =====
11.6
============================ =====
Net cash outflow arising on acquisition:
Cash consideration paid 10.5
Cash and cash equivalents acquired 3.1
========================================== =====
13.6
========================================== =====
The fair values on acquisition are provisional pending
finalisation of the completion accounts and will be concluded
within twelve months of the acquisition date at which the deferred
consideration will be paid.
The fair value of trade and other receivables acquired is the
same as the gross contractual amounts. All of the trade and other
receivables acquired are expected to be collected in full.
Following management's assessment, no customer relationship
intangibles have been recognised and there are no trademarks linked
to Elsham Linc Limited.
Included in the GBP3.3m of goodwill recognised above are certain
intangible assets that cannot be individually separated from the
acquiree and reliably measured due to their nature. These items
include the expected value of synergies and an assembled
workforce.
Transaction costs in relation to the acquisition of GBP0.3m have
been expensed within administrative expenses.
From the date of acquisition to 23 September 2023, the external
revenue of Elsham Linc Limited was GBP3.0m and the business
contributed net profit after tax of GBP0.3m to the Group. The share
of profit in the joint venture from the date of acquisition was
less than GBP0.1m. Had the acquisition taken place at the beginning
of the financial year, Group revenue would have been GBP1,268.6m,
and Group profit after tax would have been GBP64.8m.
In addition to the initial cash consideration paid of GBP10.5m,
the Group immediately paid a further GBP21.2m consisting of a
GBP3.1m bank overdraft, GBP4.8m bank loan, GBP9.1m for property,
plant and equipment acquired and GBP4.2m other payables settled on
acquisition.
(ii) Financial asset investment - BIA Analytical Ltd
On 22 September 2023, the Group acquired 2.77% of the ordinary
share capital of BIA Analytical Ltd, a lab-based authenticity
testing business, for GBP0.1m. BIA Analytical is registered in
Northern Ireland, company number NI657772.
(iii) Contingent consideration
The Sale and Purchase agreements for Atlantica UK Limited and
Ramona's Kitchen Limited included contingent consideration payable
in cash to the previous owners based on the performance of the
businesses in the period to 30 June 2024. The amount payable will
be between GBPnil and GBP2.8m.
The fair value of the contingent consideration on acquisition
was estimated at GBP2.7m and was estimated calculating the present
value of the future expected cashflows. The value has been
reassessed at the end of the reporting period based on latest Board
approved cash flows with no change required.
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 129 of the Annual Report and
Accounts for the 52 weeks ended 25 March 2023.
Fair value of financial instruments
All financial instruments are shown in the balance sheet at fair
value as follows:
Half year 52 weeks ended
-----------------------------------------------------------
2023 2022 25 March 2023
Book Fair Book Fair Book Fair
value value value value value value
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
---- ------------------------------------- ------- ------- ------- --------------- -------
Forward currency
contracts - - (0.6) (0.6) - -
===================================== ==== ======= ======= ======= =============== =======
Contingent consideration 2.7 2.7 2.7 2.7 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 contingent consideration:
GBP'm
----------------------- ------
At 25 March 2023 2.7
Accrued in the period -
At 23 September 2023 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 of financial instruments 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 At
25 March Acquired Cash Non-cash 23 September
2023 on acquisition flow movements 2023
GBP'm GBP'm GBP'm GBP'm GBP'm
--------------------------- ---------- ---------------- ------- ----------- --------------
Cash and cash equivalents 20.3 (3.1) 10.6 - 27.8
Bank loan - (4.8) 4.8 - -
Revolving credit facility (40.5) - (38.0) (0.3) (78.8)
=========================== ========== ================ ======= =========== ==============
Net debt excluding IFRS
16 leases liability (20.2) (7.9) (22.6) (0.3) (51.0)
Lease liabilities (81.2) - 8.6 (18.3) (90.9)
=========================== ========== ================ ======= =========== ==============
Total net debt (101.4) (7.9) (14.0) (18.6) (141.9)
=========================== ========== ================ ======= =========== ==============
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 of GBP1.2m.
The Group acquired a GBP3.1m overdraft and GBP4.8m bank loan as
part of the Elsham Linc Limited acquisition, these were repaid
immediately upon acquisition.
12. Related party transactions
During the period the Group entered into transactions, in the
ordinary course of business, with its subsidiaries and joint
venture which are related parties. Balances and transactions with
subsidiaries are eliminated on consolidation.
13. Property, plant and equipment, right-of-use assets and capital expenditure commitments
Additions to owned property, plant and equipment during the
period totalled GBP40.5m (2022: GBP40.1m). Future capital
expenditure under contract at 23 September 2023 was GBP18.5m (2022:
GBP16.1m).
Additions to right-of-use assets in the period totalled GBP13.8m
(2022: GBP14.0m). At 23 September 2023, the Group had no signed
leases for right-of-use assets which commence after the balance
sheet date (2022: GBPnil).
14. Impairment of non-current assets
No impairment of goodwill was recognised in the 26 weeks ended
23 September 2023 (2022: GBPnil). The Group reviewed both internal
and external sources of information and concluded that there are no
indicators of impairment during the 26 weeks to 23 September 2023,
hence no impairment loss was recognised in the period.
During the year, a review of existing cash-generating units
(CGUs) was conducted to assess whether the previously identified
CGUs accurately represent the way Cranswick collects data and
reviews it for management reporting and strategic planning
purposes.
Following a review of IAS 36 'Impairment of Assets', it was
deemed appropriate for the goodwill assessment to combine the Fresh
Pork and Livestock CGUs on a collective basis as this is how the
Cranswick management team monitors the strategy, assesses the
performance of the business and monitors goodwill. Consequently,
goodwill associated with the Livestock CGU was combined with the
Fresh Pork CGU. The resulting change does not impact the assessment
of goodwill impairment considerations in the current period or
prior years.
No impairment of other intangible assets was recognised in the
26 weeks ended 23 September 2023 (2022: GBP3.0m).
There were no impairment losses in the period (2022: GBPnil)
with respect to investments in joint ventures.
15. Shares held in trust
During the 26 weeks ended 23 September 2023, the Cranswick
Employee Benefit Trust (the "Trust"), which was set up in May 2020,
began purchasing Cranswick plc shares. Shares held in trust are
recorded at cost and deducted from equity.
The Shares held in trust reserve represents the cost of shares
in Cranswick plc purchased in the market and held by the Trust to
satisfy share awards under the Group's Long Term Incentive Plan.
The number of ordinary shares held by the Trust at 23 September
2023 was 93,692 which represents 0.17% of total called-up share
capital. No shares held in trust in Cranswick plc were cancelled
during the periods presented.
16. 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
current and 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 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.
Like-for-like revenue 52 weeks
ended
Half year 25 March
------------------
2023 2022 2023
GBP'm GBP'm GBP'm
--------------------------------------- -------- -------- ----------
Revenue 1,253.7 1,116.3 2,323.0
Cranswick Mediterranean Foods Limited (0.9) - -
Elsham Linc Limited (3.0) - -
======================================== ======== ======== ==========
Like-for-like revenue 1,249.8 1,116.3 2,323.0
======================================== ======== ======== ==========
Adjusted gross profit 52 weeks
ended
Half year 25 March
------------------
2023 2022 2023
GBP'm GBP'm GBP'm
--------------------------------------------- -------- -------- ----------
Gross profit 184.3 147.0 308.5
Net IAS 41 valuation movement on biological
assets (7.7) (1.2) (7.6)
============================================== ======== ======== ==========
Adjusted gross profit 176.6 145.8 300.9
============================================== ======== ======== ==========
Adjusted Group operating profit 52 weeks
and adjusted EBITDA ended
Half year 25 March
------------------
2023 2022 2023
GBP'm GBP'm GBP'm
------------------------------------------------ -------- -------- ----------
Group operating profit 90.8 63.9 145.9
Net IAS 41 valuation movement on biological
assets (7.7) (1.2) (7.6)
Amortisation of acquired intangible assets 2.4 2.7 5.2
Impairment of intangible assets - 3.0 3.0
================================================= ======== ======== ==========
Adjusted Group operating profit 85.5 68.4 146.5
Depreciation of plant, property and equipment 30.1 26.9 54.1
Depreciation of right-of-use assets 7.7 6.9 14.7
================================================= ======== ======== ==========
Adjusted EBITDA 123.3 102.2 215.3
================================================= ======== ======== ==========
Adjusted profit before tax 52 weeks
ended
Half year 25 March
------------------
2023 2022 2023
GBP'm GBP'm GBP'm
--------------------------------------------- -------- -------- ----------
Profit before tax 86.9 61.5 139.5
Net IAS 41 valuation movement on biological
assets (7.7) (1.2) (7.6)
Amortisation of acquired intangible assets 2.4 2.7 5.2
Impairment of acquired intangible assets - 3.0 3.0
============================================== ======== ======== ==========
Adjusted profit before tax 81.6 66.0 140.1
============================================== ======== ======== ==========
Adjusted earnings per share
On adjusted profit for the period: 52 weeks
ended
Half year 25 March
--------------------------------------
2023 2023 2022 2022 2023 2023
Basic Diluted Basic Diluted Basic Diluted
pence pence pence pence pence pence
-------------------------------------- ------- --------- ------- --------- ------- ---------
On profit for the period 119.5 119.1 92.0 91.8 208.3 207.8
Net IAS 41 valuation movement on
biological assets (14.3) (14.2) (2.3) (2.3) (14.2) (14.2)
Tax on net IAS 41 valuation movement
on biological assets 3.6 3.6 0.6 0.6 3.6 3.6
Amortisation of acquired intangible
assets 4.5 4.5 5.1 5.1 9.6 9.6
Tax on amortisation of acquired
intangible assets (1.1) (1.1) (1.0) (1.0) (1.8) (1.8)
Impairment of intangible assets - - 5.6 5.6 5.6 5.6
Tax on impairment of intangible
assets - - (1.4) (1.4) (1.1) (1.1)
On adjusted profit for the period 112.2 111.9 98.6 98.4 210.0 209.5
====================================== ======= ========= ======= ========= ======= =========
Free cash flow
52 weeks
ended
Half year 25 March
------------------
2023 2022 2023
GBP'm GBP'm GBP'm
------------------------------------ -------- -------- ----------
Net cash from operating activities 80.3 48.3 153.0
Net interest paid (2.0) (1.4) (3.8)
===================================== ======== ======== ==========
Free cash flow 78.3 46.9 149.2
===================================== ======== ======== ==========
17. Principal risks and uncertainties
The Group continues to have a structured and mature approach to
risk management that ensures a systematic and planned method to the
identification, evaluation and mitigation of key risks facing the
business. The successful implementation, over prior months, of a
new risk management IT system across the Group, has led to
improvements in the quality and integrity of reported risk
information and importantly the ability to respond promptly to
existing and emerging risks. Going forward, the Group will focus on
using analysis functionality within the new risk management IT
system to further enhance our risk assessment processes.
The principal risks and uncertainties facing the Group are set
out in detail on pages 72 to 76 of the Annual Report and Accounts
for the 52 weeks ended 25 March 2023, dated 23 May 2023, a copy of
which is available on the Group's website.
As previously reported within the Annual Report and Accounts for
the 52 weeks ended 25 March 2023, COVID-19 and Brexit Disruption
principal risks have been removed at 23 September 2023 as they no
longer pose a material risk to the Group. Management of these two
risks will be dealt with as part of our day-to-day operations.
The Board therefore considers the principal risks and
uncertainties at 23 September 2023 to be as follows:
* Labour availability and cost
* Reliance on key customers and exports
* Growth and change
* Disease and infection within livestock
* Pig meat availability and price
* Consumer demand
* Competitor activity
* Recruitment and retention of key personnel
* Health and Safety
* Climate change
* Food scares and product contamination * Interest rate, currency, liquidity and credit risk
* Disruption to Group operations * IT systems and cyber security
* Adverse media attention
Over recent months the Group has continued to see 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 broader economic and supply chain
uncertainties.
Disease in livestock continues to present a significant risk to
the Group with the unseasonal high number of Avian Influenza (AI)
cases in the Northeast of Scotland being closely watched together
with the strictest bio-security protocols across all Cranswick
farms being enforced.
In addition, African Swine Fever (ASF) continues to impact China
and, to a lesser extent Eastern Europe, with cases detected in
Italy, 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.
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 23
September 2023 (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 23 September 2023;
-- 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 ("ISRE (UK) 2410"). 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 ISRE (UK) 2410.
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
21 November 2023
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