24th May 2005 07:01
Cranswick PLC24 May 2005 Embargoed until 07.00 Tuesday May 24 2005 CRANSWICK plc: RECORD RESULTS Cranswick plc, the Yorkshire-based food producer, announces its audited resultsfor the year ended March 31 2005. Highlights: • Turnover increased by 18 per cent to £318.5 million (2004: £270.1m) • Profit before tax up 12 per cent to £23.6 million (2004: £21.1m)* • Earnings per share rise by 15 per cent to 41.1p (2004: 35.8p)* • Proposed final dividend of 9.8p - up 11 per cent • Perkins acquisition integrating well * Prior to goodwill amortisation and exceptionals Chairman Martin Davey said: "It gives me immense pride to be reporting furtherincreases in turnover, profit and earnings per share, each to new highs, andwith confidence in Cranswick's future prospects the Board is proposing anincrease of 11 per cent in the final dividend." "The Company is well positioned to continue its successful development. It hasproducts in growing sectors of the market. Significant investment has been madein operational facilities to ensure that it continues to produce at the highestlevel of quality and on the most efficient basis." "Operational teams with successful track records continue to drive theirbusinesses forward supported by the resources and expertise within the Group.Initiatives to broaden the customer base and the product range are meeting withsuccess." -ends- For further information: Martin Davey, Chairman 07775 576426 Bernard Hoggarth, Chief Executive 07836 703434 John Lindop, Finance Director 07768 362592 CityRoad Communications 020 7248 8010 Paul Quade 07947 186694 STATEMENT TO SHAREHOLDERS It is a tremendous compliment to the management team and staff that, in what wasan eventful year for the Company, Cranswick continued its record of growth.There were a number of challenges in the period including a serious fire at theCottingham site. The year also saw the rationalisation of feed milling capacity,completion of a major capital investment programme, the setting up of a jointventure to produce traditional dry cured bacon and the acquisition of PerkinsChilled Foods along with an associated fund raising exercise. The Company has made significant progress during the year. It gives me immensepride to be reporting further increases in turnover, profit and earnings pershare, each to new highs, and with confidence in Cranswick's future prospectsthe Board is proposing an increase of 11 per cent in the final dividend. Results Turnover in the year increased by 18 per cent to £318.5 million. Sales in thefood operations, including agribusiness, increased significantly rising 19 percent from £240.0 million to £286.6 million this year. The latter includes salesof £26.7 million made by Perkins Chilled Foods since acquisition in January2005. Sales in the pet business rose 6 per cent to £31.9 million. Profit before taxation, prior to goodwill amortisation and exceptionals, was upby 12 per cent to £23.6 million. Earnings per share on the same basis, allowingfor the additional shares in issue and a lower tax charge, were up 15 per centto 41.1p. Profit for the financial year attributable to members was £12.8m, up2%. Exceptional costs totalling £1.9 million (net) are attributable to thereorganisation of production facilities following the capital investmentprogramme and insurance in connection with the fire at the Cottingham site. Theexceptional items gave rise to a net cash inflow of £1.0 million and weanticipate further cash receipts in the medium term from the sale of threefreehold sites which are surplus to requirements following the reorganisation. The results are considered in more detail in the review of activities by thechief executives of the food and pet businesses. Cash Flow The underlying cashflow of the business continued to be very strong with the netcash inflow from operating activities generating £25.6 million compared with£21.3 million the previous year. The cash outflow on capital expenditure was£18.7 million compared with a depreciation charge of £5.8 million, the mainitems being the new facilities for sausage, charcuterie and pet food. The costof the Perkins acquisition was £83.3 million which was funded out of newborrowing facilities totalling £120 million (which also replaced existing debt)and a small share placing of £9.1 million. Interest cover for the year was 13times and remains at a comfortable level with the acquisition and funding costsincluded on a full year basis based on historic performance. We ended the yearwith net debt of £92.4 million, 107 per cent of shareholders funds. Dividend The Board is proposing an increase in the final dividend of 11 per cent to 9.8pper ordinary share. Along with the interim dividend of 4.7p per ordinary sharepaid in January 2005 this makes a total dividend for the year of 14.5p perordinary share, an increase of 10 per cent on last year's 13.2p. The finaldividend, if approved by shareholders, will be paid on 9 September 2005 toshareholders on the register at the close of business on 29 July 2005.Shareholders will again have the option to receive the dividend by way of scripissue. Strategic Development Cranswick was formed by farmers in the early 1970's to produce pig feed. In 1988the Board embarked on a strategy to broaden the base of the Company's activitiesand to seek opportunities to develop into related areas offering greater scopeto add value to the Company's processes. Activities have since been extendedfrom this agricultural base into the food and pet sectors. The development of the pet activities commenced with the acquisition of a birdseed business local to the feed mill and was an extension of the Company'sexpertise in raw materials and milling. Subsequent acquisitions have extendedthe activities into the production of small animal food and the supply of fishand aquatic products. The food division incorporates the original agribusiness activities andaccounted for 90 per cent. of overall sales in the year. It has evolved into abusiness focused predominantly on the supply of fresh and processed food to theUK food retail, food manufacturing and food service sectors. This developmenthas been achieved through a combination of acquisitions and subsequent organicgrowth, with Cranswick now supplying a range of fresh pork, gourmet sausages,premium cooked meats, traditional dry cured bacon, charcuterie and sandwiches toits customers from a number of production facilities in the UK. The acquisition of Perkins Chilled Foods, one of the UK's leading providers ofcooked meats and poultry to the UK food retail and food service sectors, inJanuary 2005 was an important step in Cranswick's strategic development. Itprovides the Company with increased critical mass in the growing UK cooked meatsmarket, including the premium pre-sliced and pre-packed segment, an area whichwe had been targeting for future growth; greater market share in relation to thesupply of cooked meats to the major UK food retailers, continuing the trend ofconsolidation within the UK pig meats sector; and a broader range of products,enabling us to offer our customers a more comprehensive service across the UKcooked meats category. I would like to welcome Nick Tranfield, managing director of Perkins ChilledFoods, his fellow directors and staff to Cranswick and look forward to theircontribution towards the Company's continuing development. As anticipated thebusiness has made a positive contribution towards the results of the Company,has been successfully merged with our pre-existing cooked meats business and isintegrating well into the Group. Board Structure There have been a number of changes to the Board during the year. Jim Bloom, whowas one of the founders of the Company, retired at the 2004 AGM. Jim'sinvolvement was greatly valued by all and on behalf of everyone at Cranswick Iwould like to thank him for the enormous contribution he made to the successfuldevelopment of the business from its origins as a local feed mill to where it istoday. On Jim's retirement I was appointed executive chairman, Bernard Hoggarthappointed chief executive of the food activities and Derek Black appointed chiefexecutive of the pet business. Bernard and Derek were previously managingdirectors of their respective areas. The non-executive presence on the Board hasbeen increased with two new appointments. Patrick Farnsworth joined the Board inAugust 2004 and the appointment of John Worby, with effect from August 1st 2005,has been announced today. They have a number of years experience in the foodsector and we welcome them to the Company. Employees Cranswick has a devolved operational culture which seeks to harness the benefitsof autonomous business units whilst utilising the expertise within the Companyto coordinate strategies in a number of key areas such as sales and marketing,buying and technical. Whilst there is considerable expertise within the management teams at theindividual units there can be no underestimating the importance of all thepeople at Cranswick in achieving the growth to date and in the continuation ofthe Company's successful track record. One way in which employees participate inthe success of the Company is through the SAYE share scheme and it was good tosee a large number benefiting this year. I mentioned earlier that the year had not been without its challenges. To havecontinued the growth record of the Company was especially encouraging. On behalfof the Board I thank all our people at Cranswick. Outlook The Company is well positioned to continue its successful development. It hasproducts in growing sectors of the market. Significant investment has been madein operational facilities to ensure that it continues to produce at the highestlevel of quality and on the most efficient basis. Operational teams withsuccessful track records continue to drive their businesses forward supported bythe resources and expertise within the Group. Initiatives to broaden thecustomer base and the product range are meeting with success. The Board looks forward to the opportunities and challenges that will arise aswe continue the Company's progress. Martin DaveyChairman 24 May 2005 Review of Activities food By the chief executive Bernard Hoggarth The continued sales growth is most encouraging. Sales of £287 million were 20per cent up on last year and included £27 million from Perkins Chilled Foodswhich was acquired in January 2005 and is integrating well. The main focus of the food business is still the premium end of the retailsector. Strong growth has been achieved and we believe can continue throughinnovation, convenience and by offering consistent quality at affordable prices.We firmly believe that 'Quality does not go out of fashion'. To support thisgrowth, significant investment has been made in production facilities to providecapacity and to improve efficiencies. In addition to the growth at the retaillevel we are also experiencing good sales growth and see continuing marketingopportunities in the food service sector where our presence has been boosted bycombining the Cranswick and Perkins teams. The production of pig feed, our original activity, was consolidated onto theCranswick Mill site during the year reflecting the overcapacity nationally infeed milling. The Wellingore site was closed and sold. This improved efficiencyand along with a return of raw material prices to more normal levels restoredmargins. Exports of specialist piglet feed have developed well in recent years.Pig marketing and the production of 'Tendalean' pigs are key sources of supplyfor the Company's fresh pork business. The fresh pork market in the UK has grown by almost 4 per cent in the last yearwhich is encouraging considering that the market has been relatively flatpreviously. Against this we achieved growth in sales of fresh pork of 30 percent to record levels with volumes in the new retail pack facility and in BBQproducts rising significantly. Sales of 'Tendalean' pork, developed through theuse of specific breeds of pigs and maturation techniques, also rose during theyear. The 'Tendalean' pork rib roast was successful in the 2004 SuperMeat Awardswinning the 'Best Pork Product' category and being named 'Overall Winner'against other categories covering beef, lamb, seafood and ready meals. The joint venture for the production of traditional dry cured bacon, CranswickGourmet Bacon, has absorbed first year start up costs and been successful ingaining business such that following a nationwide launch during May weanticipate that we will be heading towards 50 per cent capacity utilisation. Thebacon is produced as smoked and un-smoked and is available under private label,Lazenby's and Jack Scaife brands. This 'Super Premium' tier of bacon is quitenew to the major grocery retailers and gives us the entry opportunities weexperienced ten years ago with the launch of the Cranswick Gourmet Sausagebusiness, which effectively created a new tier in the sausage category. Sales in the sausage business were adversely impacted following the fire at theCottingham site in June 2004 although the profit impact of this in the year wasnot material because of the level of insurance cover in place. Whilst the damagewas restricted to one part of the factory this was not rebuilt becauseconstruction had already commenced on a new facility nearby. Following thecommissioning in January 2005 of the new £6 million sausage production facilityat Sutton Fields in Hull the previously separate businesses of Lazenby's andCranswick Gourmet Sausage were relocated and consolidated. The factory wasofficially opened by the Chief Executive of Sainsbury's, Justin King. Thisinvestment provides us with a very efficient unit that has the capacity tosupport significant growth in our sausage sales and the sales and marketing teamare very much focused on this. Growth in the market for the 'Super Premium' sausage tier exceeds 9 per centyear on year and that for the 'Premium' tier overall is almost 6 per cent. Thisis particularly encouraging as these are our main target categories. Cranswick'ssausages are available under private label, including Sainsbury's 'Taste theDifference', Duchy Originals and Lazenby's. Product development is an integralpart of growing the business and the range includes low fat, low salt and glutenfree sausages to meet consumer requirements. Development work also extends tothe use of innovative equipment such as that which enables the spraying of avegetarian based sausage casing. An additional facility was opened during the year to handle the growingcharcuterie sales at Continental Fine Foods. The investment in these newpremises and in additional product slicing equipment was almost £4 million. Thishas eliminated impending capacity constraints and improved efficiencies whichwere factors in enabling Continental to gain the Italian charcuterie businesswith one of the leading grocery retailers. Following a successful launch sales,under the 'Simply Italian' and 'Negroni' brands, are growing strongly and weanticipate this to continue. Specialist areas such as pasta, stuffed olives and feta, pre-pack pates and bulkpates for the delicatessen counters continue to be a feature of our charcuteriebusiness which has seen growth in sales of almost 90 per cent since acquisitionfour years ago reflecting a broadening of the customer base and growth in themarket. We now have four sites, three in Yorkshire and one in Deeside, producing cookedmeats following the acquisition of Perkins compared to one previously. Thecombined business has been renamed Cranswick Convenience Foods and operatesunder a single management team. The integration process, which is ongoing, hasled to some reorganisation so as to facilitate the most cost efficientproduction of specific lines, to optimise the use of sales and marketingresources and to enhance efficiencies in buying. A broader range of products isnow available including high quality poultry, beef, lamb and pork products ahigh proportion of which are in consumer pre-packs. In addition cooked meats aresupplied in bulk format for slicing at delicatessen counters and cooked poultryis supplied for in-store rotisseries. Development initiatives in both productsand packaging formats are a key part of the enlarged business. Sales of cookedmeats, for which the market continues to grow, were substantially higher thisyear following the acquisition and the customer base now includes most of thegrocery retailers. Sales of sandwiches, a market which is still growing, were considerably ahead oflast year and look set to increase further this year. Business lost in theprevious year was regained and two substantial trading agreements extended.Production at the Denbigh site ceased and was transferred to The SandwichFactory ('TSF') base in Warwickshire. TSF, which is focused predominantly on thefood service and convenience store sectors, was successful at the 2004 BritishSandwich Association Awards winning four of the categories including 'En-RouteRetailer of the Year' and 'British Sandwich Designer of the Year'. The Denbighactivities are now concentrated on the distribution of sandwiches and sandwichfillings under 'North Wales Foods'. Review of Activities pet By the chief executive Derek Black Turnover continued to increase with sales up 6 per cent to £32 million. The year has been one of major change in the food business with the opening ofthe new 'state of the art' fully automated production facility at Driffield.This plant is regarded as the largest of its type in Europe and has theproduction capacity to double our output of bird and small animal foods.Activities previously undertaken at the Beverley and Carlisle sites, oldpremises operating at full capacity, have been relocated, consolidated andrenamed Cranswick Pet Products. Food sales in the year were 4 per cent ahead at almost £22 million. Whilst therewas some reduction in sales of pigeon feed and cage and aviary bird food thiswas offset by the continued development of our garden bird food and accessoryproducts under the brand 'Natures Feast'. The increased interest in garden birdproducts reflects changing lifestyles and the positive approach to wild birdconservation. Sales in the aquatic business at Tropical Marine Centre increased 10 per cent tomore than £10 million. Although last year's poor summer impacted on the sales ofgarden pond products increases elsewhere more than offset this. Sales of marinelivestock, including those from our own hatchery, were up as were dry goodswhich incorporate the supply of commercial livestock filtration systems andconsumables. The Manchester site, opened three years ago, continued to develop sales and theBristol site, opened a year ago, achieved the targets set. The development ofthese two sites has freed up capacity to allow the original Hertfordshire siteto focus on niche European sales expansion. Exports account for 20 per cent ofsales and during the year the business was involved in a number of high profileprojects including the supply of marine livestock and related consumables to twolarge aquarium displays in prestigious retail malls in Berlin and Prague. In theUK similar products were supplied to the new exhibit extension at The Deep inHull. CRANSWICK plc: AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT year ended 31 March 2005 2005 2004 Before exceptionals Exceptionals Total £'000 £'000 £'000 £'000 Turnover - continuing operations- Ongoing 291,827 - 291,827 270,116- Acquisition 26,711 - 26,711 - 318,538 - 318,538 270,116 Cost of sales (259,293) (2,642) (261,935) (219,162)Gross profit 59,245 (2,642) 56,603 50,954 Operating expenses before goodwillamortisation (33,633) - (33,633) (29,112)Operating profit before goodwill amortisation 25,612 (2,642) 22,970 21,842 Goodwill amortisation (3,235) - (3,235) (2,240) Operating profit - continuing operations-Ongoing 20,593 (2,642) 17,951 19,602-Acquisition 1,784 - 1,784 - 22,377 (2,642) 19,735 19,602 Profit on disposal of tangible fixed assets - 707 707 -Net interest payable and similar charges (1,972) - (1,972) (683) Profit on ordinary activities before taxation 20,405 (1,935) 18,470 18,919Profit on ordinary activities before 23,640 (1,935) 21,705 21,159 taxation and goodwill amortisation Tax on profit on ordinary activities (6,341) 657 (5,684) (6,356) Profit for the financial year attributable to 14,064 (1,278) 12,786 12,563members of the parent company Equity dividends (6,268) (5,462) Retained profit for the year 6,518 7,101 Earnings per share:Basic 30.4p 30.4pDiluted 30.2p 30.2pAdjusted for goodwill amortisation 41.1p 35.8p Dividends 14.5p 13.2p CRANSWICK plc: AUDITED CONSOLIDATED BALANCE SHEET 31 March 2005 2005 2004 £'000 £'000 Fixed assetsIntangible assets 106,884 41,451Tangible assets 63,156 38,047 170,040 79,498 Current assetsStocks 19,635 11,884Assets held for sale 891 -Debtors 48,127 33,212Cash at bank and in hand 5,025 2,801 73,678 47,897 Creditors - amounts falling due within one year 68,450 56,099 Net current assets / (liabilities) 5,228 (8,202) Total assets less current liabilities 175,268 71,296 Creditors - amounts falling due after more than one year 83,974 148 Provision for liabilities and charges 5,297 2,302 85,997 68,846 Capital and reservesCalled-up share capital 4,405 4,157Share premium account 38,250 27,886Profit and loss account 43,342 36,803 Equity shareholders' funds 85,997 68,846 CRANSWICK plc: AUDITED CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 March 2005 2005 2004 £'000 £'000Operating activitiesNet cash inflow from operating activities 25,565 21,308 Returns on investment and servicing of financeHire purchase interest - (1)Net bank interest (1,734) (618)Issue costs on new bank loans (540) -Loan note interest (59) (139) (2,333) (758) Taxation paid (6,864) (5,842) Capital expenditure and financial investmentPurchase of tangible fixed assets (18,682) (9,565)Proceeds of sale of tangible fixed assets 1,806 180 (16,876) (9,385) Acquisitions and disposalsPurchase of subsidiary undertakings (83,321) (15,122)Net overdraft acquired with subsidiary undertaking - (493) (83,321) (15,615) Equity dividends paid (4,815) (4,608) Cash outflow before financing (88,644) (14,900) FinancingIssue of ordinary share capital 9,834 -Bank loans 95,000 -Loan note repayments (808) (3,643)Capital element of hire purchase payments (49) (100)Net cash inflow/(outflow) from financing 103,977 (3,743) Increase / (decrease) in cash in the year 15,333 (18,643) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 2005 2004 £'000 £'000 Operating profit 22,377 19,602Goodwill amortisation 3,235 2,240Depreciation, net of government grants 5,822 4,611Release of government grants (36) (36)Cash cost of exceptional items (915) -(Profit)/loss on sale of tangible fixed assets (221) 12Increase in stocks (492) (2,429)Increase in debtors (3,141) (3,944)(Decrease)/increase in creditors (1,064) 1,252Net cash inflow from operating activities 25,565 21,308 ANALYSIS OF NET DEBT At Issue Cash Other At 31 March of loan flow non cash 31 March 2004 notes changes 2005 £'000 £'000 £'000 £'000 £'000 Cash at bank and in hand 2,801 2,224 5,025Overdrafts (14,843) 13,109 (1,734) (12,042) 15,333 - 3,291Bank loans - (94,460) (27) (94,487)Loan notes (1,173) (835) 808 - (1,200)Hire purchase (49) 49 - - (13,264) (835) (78,270) (27) (92,396) Notes 1. The profit and loss accounts for the years ended 31 March 2005 and 2004 are not statutory accounts within the meaning of Section 240 (5) of the Companies Act 1985. The auditors of Cranswick, Ernst & Young LLP, have made a report under Section 235 of the Act on the statutory accounts of Cranswick for the financial year ended 31 March 2004. Such report was unqualified and did not contain a statement under Section 237(2), (3) or (4) of the Act and such accounts have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 March 2005 incorporate an unqualified audit report (which does not contain a statement under Section 237 (2), (3) or (4) of the Act) and will be delivered to the Registrar of Companies following the Annual General Meeting of Cranswick. 2. Basic earnings per share are based on profit attributable to shareholders and on the weighted average number of shares in issue during the year of 42,072,481 (2004 - 41,318,512 ). Adjusted earnings per share are based on profit attributable to shareholders adjusted for goodwill amortisation and exceptional items. 3. Subject to shareholders' approval the final dividend will be paid on 9 September 2005 to shareholders on the register on 29 July 2005. 4. The Company intends to post the Report and Accounts to shareholders on 1 July 2005. Further copies will be available upon request from the Company Secretary, Cranswick plc, Cranswick, Driffield, East Yorkshire, YO25 9PF This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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