23rd May 2006 07:01
Cranswick PLC23 May 2006 Embargoed 7am Tuesday May 23 2006 CRANSWICK plc: RECORD BREAKING YEAR Cranswick plc, the Yorkshire-based food producer, announces its preliminaryaudited results for the year ended March 31 2006. Highlights: • Turnover rose 38 per cent to £441m (2005: £319m) • Pre-tax profit up 44 per cent at £31.1m (2005: £21.6m) after exceptional gain • Underlying pre-tax profit up 23 per cent at 29.0m (2005: £23.5m) • Underlying earnings per share 15 per cent higher at 47.8p (2005: 41.6p) • Proposed final dividend of 11.1p per share - 13 per cent increase • Cottingham site sold • Perkins acquisition fully integrated and performing well Cranswick Chairman, Martin Davey, said: "Cranswick has once again raised profitsto record levels. This is a tremendous compliment to the operational teams andtheir staff. "The Company has continued to progress despite the challenges posed by increasedcosts and the general trading environment. Whilst these challenges continue intothe current year, trading in the opening weeks is in line with management'sexpectations and we look forward with cautious optimism. "The business has evolved by way of acquisitions and subsequent organic growth.We will continue to seek opportunities to maintain this pattern of growth" -ends- For further information: Martin Davey, Chairman 07775 576426John Lindop, Finance Director 07768 362592Bernard Hoggarth, Chief Executive, Food 07836 703434Cranswick plc Paul Quade 020 7248 8010CityRoad Communications 07947 186694 CHAIRMAN'S STATEMENT It is with great pride that I am able to report to Shareholders that Cranswickhas once again raised profits to record levels. In the year to March 2006 profitbefore tax, benefiting from the gain on the disposal of the surplus Cottinghamsite, was up 44 per cent on last year at £31.1 million. Coupled with asubstantial increase in sales, strong cash generation and a good underlyingperformance this gives the Board the confidence to propose an increase in thefinal dividend of 13 per cent. Results As outlined above the Company performed particularly well during the year andthis is a tremendous compliment to the operational teams and their staffoperating in a tough trading environment. Turnover in the year rose 38 per centto £441 million, partially due to the inclusion for a full year of PerkinsChilled Foods, acquired in January 2005, compared to three months in theprevious period. Perkins had a successful year and has been fully integratedinto the Company. Strong organic growth was achieved elsewhere in the businessin particular in sales of fresh pork, charcuterie and sandwiches. Profit before tax and exceptionals (principally the Cottingham gain on disposal)increased by 23 per cent from £23.5 million to £29.0 million. Earnings per shareon a similar basis, after taking into account additional shares in issue, rose15 per cent to 47.8p (2005 41.6p). The results are considered in more detail in the review of activities. Cash Flow The cash flow was very strong in the year with cash generated from operations of£41.8 million compared with £25.6 million the previous year. The cash outflow oncapital expenditure was £14.1 million but this was offset by disposal proceedsof £3.9 million and proceeds arising on the sale of the pig production businessof £3.1 million. Borrowings reduced by £15.4 million to £77.0 million over thecourse of the year, representing 68 per cent of total equity. Interest cover forthe year was 6.7 times underlying profits. Dividend The Board is proposing an increase in the final dividend of 13 per cent to 11.1pper ordinary share. Along with the interim dividend of 5.4p per ordinary sharepaid in January 2006 this makes a total dividend for the year of 16.5p perordinary share, an increase of 14 per cent on last year's 14.5p. The finaldividend, if approved by Shareholders, will be paid on 9 September 2006 toShareholders on the register at the close of business on 29 July 2006.Shareholders will again have the option to receive the dividend by way of scripissue. Employees One of the key features of the business is the alignment of a devolvedoperational culture with the benefits of strategic coordination in certain keyareas such as sales and marketing, buying and technical. For this culture tolead to the continued successful growth of the business, in a sector that is notwithout its challenges, it is reliant on the expertise of management at each ofthe business units and for them to have the commitment of all staff workingalongside them. On behalf of the Board I would like to say thank you to them for theirunstinting efforts in driving the business forward. Outlook In the year to March the performance of the business continued to benefit fromthe underlying strength of the management teams at the Company's operationalactivities. This attribute has enabled the Company to continue its progressdespite the challenges posed by increased costs and the general tradingenvironment. Whilst these challenges continue into the current year, trading inthe opening weeks is in line with management's expectations and we look forwardwith cautious optimism. Looking further ahead the strategy for the continued growth of the Companyremains unchanged. The business has evolved by way of acquisitions and subsequent organic growthinto one focussed predominantly on the supply of a range of complementary freshand processed food products to the UK food retail, food manufacturing andfoodservice sectors. We will continue to seek opportunities to maintain thispattern of growth. Martin DaveyChairman 23 May 2006 Review of Activities Food - by the Chief Executive Bernard Hoggarth The food activities turned in a robust performance with the strong sales growthseen in recent years being maintained this year. Turnover rose from £286.6million to £409.1 million, representing almost 93 per cent of total Companysales and reflects both acquisitive and organic growth. Further opportunitiesfor sales growth are being pursued in most of the categories in which weoperate. The focus for sales is the premium categories with the vast majority ofour products going to the retail sector, although foodservice is of growingimportance. The substantial investment over the last two years is paying dividends.Customers recognise the advantages derived from having some of the most modernand well invested facilities in the food industry and I am pleased to say that 8production sites have recently achieved BRC (British Retail Consortium) Grade'A' technical status which we understand to be a unique achievement in oursector. With over 275 technical compliances to be passed to achieve this ratingin such complex food production businesses we feel this is a great achievementand that the technical teams deserve well earned congratulations. This, coupledwith our excellent quality focused people in NPD (new product development) givesour customers the confidence that Cranswick will be at the forefront ofdevelopment and innovation, food safety and cost efficient production. Beingnamed UK Meat Manufacturer of the Year in December gave further recognition tothese quality attributes. During the year we sold the pig breeding and rearing herds. Contracts were putin place for the continued supply of both the pigs to Cranswick Country Foodsand the feed by Cranswick Mill which enables ongoing control over this supply ofraw material for use in our specialist pork products. The disposal freed upworking capital and management time and allowed the production system to bemanaged by a specialist producer whose core competency is pig breeding andproduction. At Cranswick Mill, our agribusiness activity, profitability was restoredalthough feed volumes were 9 per cent lower, as anticipated, following the siterationalisation undertaken during the previous year. Export sales of specialistpiglet starter feeds were up substantially with new business wins in EasternEurope including Slovakia, Czech Republic, Latvia and Lithuania. Complementingthe turnround in the feed milling business the livestock marketing activity alsoperformed well. Sales in the agri business totalled £32 million. The UK fresh pork market experienced modest annual growth of almost 2 per centthough external sales in our own fresh pork business, including the summereating and barbecue products, were up a healthy 13 per cent to £97 million.Including internal sales, to the sausage and cooked meat activities, sales were19 per cent ahead. It was a strong year for 'retail packed' pork. We producedalmost 14 million packs, a rise of 20 per cent over the previous year.Investment in recent years enabled these additional volumes to be achievedwhich, along with enhanced efficiencies, partially offset the impact of acompetitive trading environment. Annual growth in sales of sausages in the premium categories in the UK was over14 per cent. However, our own sales were down 4 per cent to £32 million as aresult of not fully recovering the business lost during the previous yearfollowing the fire at the Cottingham site. Despite this, the business benefitedfrom the relocation from two separate production plants to a more modern andefficient single site to turn in a performance ahead of last year. As thelicensee for Duchy Originals sausages it was most encouraging to see year onyear sales growth of over 42 per cent across this product range. Sales to ourlargest sausage customer, Sainbury's, for own label premium sausage grew by 38per cent. This gives them a significant share of the premium category. Anaccolade to the quality, consistency and value of the product. Towards the endof the year we commenced production on behalf of the 'Black Farmer'. We believethis original and innovative brand to have an extremely promising future with aunique story creating strong brand loyalty. The continued development of our 'Jack Scaife' traditional dry cured baconbusiness has been excellent. Turnover in this its second year of operationreached £8 million, compared to over £1 million previously, driven by newlistings and new customers. We expect the growth to continue. The quality ofthis superb range of bacon products was recognised in the year in the winning offour awards including two from The Guild of Fine Food Retailers. Cranswick Convenience Foods, our cooked meats business, saw sales increase from£57 million last year to £150 million reflecting the inclusion of PerkinsChilled Foods for a full year compared to three months previously. Consideringthe UK delicatessen market is showing signs of decline with annual sales downjust over 1 per cent compared to sales of pre-pack cooked meats growing atalmost 7 per cent the decision to move into slicing and consumer packs with thePerkins acquisition makes sound commercial sense. Continued investment in stateof the art technology and excellent premises has enabled us to achieveadditional quality business during the course of the year. We now supply most ofthe high street multiples and are in discussion with several leading retailersfor an increased allocation of their cooked meat business. This, coupled withthe continued expansion in the premium tiers, gives us reason to believe we arewell positioned for further growth. The sandwich business saw a 19 per cent increase in sales to £34 million. Salesby The Sandwich Factory under the Brian Turner and Antony Worrall Thompsoncelebrity chef labels have developed well with a presence amongst airline, railand roadside operators. A range of 'healthy eating options' has been developedto meet consumer trends and at the retail end our own 'Deliciously' brand hasgained a listing. During the year we produced approximately 40 millionsandwiches! The new sandwich fillings business has got off to a good start withfirst year sales of £2 million being achieved. In addition the company istrialling the production of bulk pre-packaged salads. The Sandwich Factory won aprestigious accolade at the British Sandwich Awards being named, in conjunctionwith BP, as 'En-route Retailer of the Year' for a range of sandwiches and hoteat products. The company has now won the award in two of the past three years.With the continued growth and development of the business we plan to acquireadditional premises and are in discussions to acquire the lease on an adjacentproperty. The North Wales Foods division successfully completed its move into anew chilled warehouse and distribution centre during the year. Continental Fine Foods, based at Trafford Park in Manchester, saw an 8 per centincrease in sales to £56 million. This was made possible after acquiringadditional premises during 2004. Major growth has been achieved with the 'SimplyItalian' range which was taken on during the previous year. Sales of theseproducts rose by over 40 per cent to £11 million. With the increase in cookeryprogrammes on television, people dining out more and the rise in exotic holidayswe see no end to the consumers desire for new flavours and food experiences.Through our team at Continental we are able to procure new and exciting productsfrom around Europe and will endeavour to be 'first to market' for our customers. The trend towards more meals being eaten away from the home (53 per cent ofadults in Britain eat out more than once a week) is reason for foodservice beinga focused area of future growth for the business. Sausage sales into this sectorare increasing and we won the BPEX Award for 'Foodservice Sausage of the Year'.The Foodservice division, a sales and marketing function for all of the foodactivities, has been strengthened by the recent addition of specialist accountmanagement. Pet - by the Chief Executive Derek Black Total sales were marginally ahead of last year at £32.1 million (2005 £31.9million) with sales of food slightly up and aquatics showing a small reduction. In Pet Products, mainly bird and small animal food, turnover at over £22 millionwas up by 3 per cent which was pleasing after experiencing some technical issueswith the commissioning of the new production facility which adversely impactedthe business. These problems have now been resolved. We are confident that weare now in a position to drive sales forward supported by substantial capacityavailability in contrast to the two old sites from which we previously operatedthat were being run at full capacity. The newly centralised facility will enableus to expand sales into our targeted markets which are predominantly high streetretail chains, wholesale and retail membership groups, mail order and discountmultiples. The smaller of the two surplus sites has since been sold leaving justthe East Yorkshire site to be disposed of. There is strong growth in garden bird food and accessories which now representsabout half our turnover in the Pet Products division. We have developed inexcess of 50 new products under our 'Nature's Feast' brand including a range ofpremium 'high energy' foods and innovative bird feeders. This reflectscontinuing public awareness of the native wild bird population along withchanging lifestyle trends where the garden is now classed as an 'outdoor room'and leisure area. This compensates for the trend away from sales of pigeon andindoor bird food. Sales in the aquatic business at Tropical Marine Centre were slightly downcompared to last year at almost £10 million, despite higher sales at thebranches in Manchester and Bristol, primarily due to a poor pond season in thehome market. We developed and launched a number of new products ranging from'true to life' synthetic marine corals and replica rock plus a range of watersterilisers and protein skimmers for the indoor marine enthusiast. During the year TMC supplied a number of high profile projects including marinelivestock to a public aquarium in Alicante, a central feature display in a largeshopping mall in Lithuania, a range of water purification systems touniversities in Zurich and Cork and to an aquaculture project in southern Spain.Export sales increased by 20 per cent, representing almost a quarter of TMC'ssales, and will continue to be a focus of our future expansion plans. CRANSWICK plc: AUDITED GROUP INCOME STATEMENT Year ended 31 March 2006 2006 2005 --------- --------- -------- -------- -------- -------- Before Exceptionals Total Before Exceptionals Total exceptionals exceptionals Notes £'000 £'000 £'000 £'000 £'000 £'000 Revenue 2 441,178 - 441,178 318,538 - 318,538 Cost of (364,388) - (364,388) (259,275) (2,642) (261,917)sales --------- --------- -------- -------- -------- --------Gross profit 76,790 76,790 59,263 (2,642) 56,621 Operatingexpenses (42,720) - (42,720) (33,766) - (33,766) --------- --------- -------- -------- -------- --------Operatingprofit 2 34,070 - 34,070 25,497 (2,642) 22,855 Profit ondisposal ofproperty, plant andequipment - 2,079 2,079 - 707 707 --------- --------- -------- -------- -------- --------Profitbeforefinance and taxation 34,070 2,079 36,149 25,497 (1,935) 23,562 Finance 25 - 25 14 - 14incomeFinance (5,076) - (5,076) (1,986) - (1,986)costs --------- --------- -------- -------- -------- -------- Profitbefore tax 29,019 2,079 31,098 23,525 (1,935) 21,590 Taxation (7,716) (562) (8,278) (6,017) 657 (5,360) --------- --------- -------- -------- -------- -------- Profit forthe 21,303 1,517 22,820 17,508 (1,278) 16,230year --------- --------- -------- -------- -------- -------- Profit forthe yearattributableto:Equityholders 22,784 16,230of theparentMinorityinterest 36 - -------- -------- 22,820 16,230 -------- --------Earnings pershare:Basic 3 47.8p 3.4p 51.2p 41.6p (3.0p) 38.6pDiluted 3 47.4p 3.4p 50.8p 41.4p (3.1p) 38.3p CRANSWICK plc: AUDITED CONSOLIDATED BALANCE SHEET 31 March 2006 Notes 2006 2005 £'000 £'000AssetsGoodwill 111,921 111,921Property, plant and equipment 67,725 63,156 -------- -------- 179,646 175,077 -------- -------- Current assetsBiological assets 157 2,238Inventories 18,398 17,442Trade and other receivables 54,027 48,127Other financial assets 106 -Cash at bank and in hand 5,000 5,025 -------- --------Total current assets 77,688 72,832 -------- -------- Non-current assets classified as held for sale 688 891 Total assets 258,022 248,800 Current liabilitiesTrade and other payables (53,376) (47,940)Other financial liabilities (19,422) (13,559)Income tax payable (3,138) (2,634)Provisions (334) (907) -------- --------Total current liabilities (76,270) (65,040) -------- -------- Non-current liabilitiesOther financial liabilities (62,720) (83,862)Deferred tax liabilities (4,657) (4,790)Deferred income (76) (112)Provisions (1,877) (2,151) -------- --------Total non-current liabilities (69,330) (90,915) -------- -------- Total liabilities (145,600) (155,955) -------- --------Net assets 112,422 92,845 -------- -------- EquityCalled-up share capital 6 4,467 4,405Share premium account 6 40,797 38,250Share based payments 6 531 247Hedging and translation reserves 6 (13) 21Profit and loss account 6 66,604 49,922 -------- --------Equity attributable to members of the 112,386 92,845parent companyMinority interest 36 - -------- --------Total equity 112,422 92,845 -------- -------- CRANSWICK plc: AUDITED CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 March 2006 Notes 2006 2005 £'000 £'000Operating activitiesProfit before finance and taxation 36,149 23,562Adjustments to reconcile group operating profit tonet cash inflows from operating activitiesDepreciation 8,087 5,786Impairments - 1,619Share based payments 284 133Release of government grants (36) (36)Profit on sale of property, plant and equipment (2,220) (928)Decrease/(increase) in inventories 1,125 (510)Increase in trade and other receivables (5,751) (3,141)Increase/(decrease) in trade and other payables 4,200 (920) ------- --------Cash generated from operations 41,838 25,565 Tax paid (6,954) (6,864) ------- --------Net cash from operating activities 34,884 18,701 ------- -------- Cash flows from investing activitiesAcquisition of subsidiaries - (83,321)Purchase of property, plant and equipment (14,064) (18,682)Proceeds from sale of equipment 3,929 1,806 ------- --------Net cash used in investing activities (10,135) (100,197) ------- -------- Cash flows from financing activitiesNet interest paid (5,094) (1,793)Proceeds from issue of share capital 1,691 9,834Proceeds from borrowings - 95,000Issue costs of long-term borrowings - (540)Repayment of borrowings (18,753) (808)Payment of finance lease liabilities - (49)Dividends paid (5,847) (4,815) ------- --------Net cash used in financing activities (28,003) 96,829 ------- -------- Net (decrease)/increase in cash and cash (3,254) 15,333equivalentsCash and cash equivalents at beginning of period 3,291 (12,042)Effect of foreign exchange rates 9 - ------- --------Cash and cash equivalents at end of period 5 46 3,291 ------- -------- Notes to the preliminary announcement 1. Basis of preparation The group's income statements for the years ended 31 March 2006 and 2005 are notstatutory accounts within the meaning of Section 240 (5) of the Companies Act1985. The auditors of Cranswick, Ernst & Young LLP, have made a report underSection 235 of the Act on the statutory accounts of Cranswick for the financialyear ended 31 March 2005. Such report was unqualified and did not contain astatement under 237(2), (3) or (4) of the Act and such accounts have beendelivered to the Registrar of Companies. The statutory accounts for the yearended 31 March 2006 incorporate an unqualified audit report (which does notcontain a statement under Section 237 (2), (3) or (4) of the Act) and which willbe delivered to the Registrar of Companies following the Annual General Meetingof Cranswick. This is the first year in which Cranswick has prepared financial statementsunder International Financial Reporting Standards ("IFRS"), and the comparativeshave been restated from UK Generally Accepted Accounting Principles ("UK GAAP")to comply with IFRS. The company's accounting policies can be found in thestatutory accounts. 2. Segmental analysis Turnover Operating profit -------- -------- -------- -------- 2006 2005 2006 2005 £'000 £'000 £'000 £'000 Food 409,119 286,634 35,433 26,020Pet 32,059 31,904 796 1,188 -------- -------- -------- -------- 441,178 318,538 36,229 27,208 Exceptionals - - 2,079 (1,935)Central costs - - (2,159) (1,711) -------- -------- -------- --------Group total 441,178 318,538 36,149 23,562 Finance costs - - (5,051) (1,972) -------- -------- -------- --------Profit before tax 441,178 318,538 31,098 21,590 -------- -------- -------- -------- 3. Earnings per share: Basic earnings per share are based on profit attributableto shareholders and on the weighted average number of shares in issue during theyear of 44.5 million shares (2005: 42.1 million shares). The calculation ofdiluted earnings per share is based on 44.8 million shares (2005: 42.3 millionshares). 4. Dividends: subject to shareholders' approval the final dividend will be paidon 9 September 2006 to shareholders on the register on 29 July 2006. 5. Analysis of changes in net debt At Adoption of IAS Cash Other At 31 March 32 and flow non cash 31 March 2005 39 changes 2006 £'000 £'000 £'000 £'000 £'000Cash at bank and in hand 5,025 - (34) 9 5,000Bank overdrafts (1,734) - (3,220) - (4,954) -------- --------- ------- -------- --------Cash and cash 3,291 - (3,254) 9 46equivalents Other financial assets - 45 - 61 106Other financialliabilities - - - (146) (146)Loan notes (1,200) - 128 - (1,072)Bank loans (94,487) - 18,625 (108) (75,970) -------- --------- ------- -------- --------Net debt (92,396) 45 15,499 (184) (77,036) -------- --------- ------- -------- -------- 6. Reconciliation of movements in equity Attributable to equity holders of the parent Minority Total company interest --------------------------------------------------------------------------- Share Share Share Hedging Profit and loss Total £'000 £'000 capital premium based and translation Account £'000 £'000 £'000 payments reserves £'000 £'000 £'000 As at 1April 4,405 38,250 247 21 49,922 92,845 - 92,8452005Impact ofadoption ofIAS 32 andIAS - - - 45 (14) 31 - 3139Profit forthe - - - - 22,784 22,784 36 22,820periodCorporationtaxcrediteddirectly to - - - - 529 529 - 529equityShare basedpayments - - 284 - 98 382 - 382Cash flowhedges - - - (85) 26 (59) - (59)Scrip 15 903 - - - 918 - 918dividendShareoptions 47 1,644 - - - 1,691 - 1,691exercisedDividends - - - - (6,741) (6,741) - (6,741)Exchangedifferences - - - 6 - 6 - 6 ------- ------- ------- -------- ------- ------ ------- -------At 31 March2006 4,467 40,797 531 (13) 66,604 112,386 36 112,422 ------- ------- ------- -------- ------- ------ ------- ------- The Group has taken the exemption provided under IFRS 1: First-time adoption ofInternational Financial Reporting Standards not to restate comparatives inrespect of IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39Financial Instruments: Recognition and Measurement and accordingly thesestandards have been adopted from 1 April 2005. On adoption of IAS 32 and IAS 39at 1 April 2005, interest rate swaps held by the Group have been recognised as afinancial asset at their fair value of £45,000 with a corresponding deferred taxprovision of £14,000. These swaps meet the special cash flow hedge criteria ofIAS 39 and accordingly gains and losses have been recognised directly in equity. 7. The Company intends to post the Report and Accounts to shareholders on 7 July2006. Further copies will be available upon request from the Company Secretary,Cranswick plc, 74 Helsinki Road, Sutton Fields, Hull, HU7 0YW. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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