Interim Results
Cranswick PLC
22 November 2005
Embargoed 7am Tuesday November 22 2005
CRANSWICK plc: RECORD INTERIM RESULTS
Six months ended 30 September 2005
Cranswick plc, the food manufacturing business, announces record interim
results.
Highlights:
• Turnover up 51 per cent at £217.4m (2004: £144.3m)
• Pre-tax profit increased by 30 per cent to £13.6m (2004: £10.5m)
• Earnings per share 19 per cent higher at 21.6p (2004: 18.2p)
• Interim dividend up 15 per cent at 5.4p per share (2004: 4.7p)
• Perkins Chilled Foods successfully integrated
• Growth continues
Chairman Martin Davey said: 'The successful integration of Perkins, our largest
acquisition to date, was a key feature of the period. The business delivered an
excellent result leading to the enlarged cooked meats activity turning in a very
positive performance.'
'The development of traditional dry cured bacon has now evolved from start-up
phase through to volume output. The cost of developing the business has been
absorbed, positive results are now coming through, and we believe there is
potential for significant growth in this business.'
'Agribusiness has seen a favourable change in fortunes from a year ago. An
increase in sales of specialist piglet feeds and enhanced operating efficiencies
following a rationalisation of sites were contributory factors to this
improvement.'
'The Company operates in a competitive environment but continues to seek
opportunities to minimise the impact of this through improvements in operating
efficiencies. The Company has positions in markets which continue to grow and
available capacity in a number of areas to enable it to meet future volume
increases.'
'The Board continues to be confident in the prospects for Cranswick and the
maintenance of its record of sustained growth.'
-ends-
For further information:
Martin Davey, Chairman 07775 576426
John Lindop, Finance Director 07768 362592
Bernard Hoggarth, Chief Executive, Food 07836 703434
Cranswick plc
Paul Quade 020 7248 8010
CityRoad Communications 07947 186694
STATEMENT TO SHAREHOLDERS
Results and review of activities
It is pleasing to report record interim results achieved in a market place that
is challenging. By comparison to the same period last year turnover is up by 51
per cent to £217.4m and operating profit is 49 per cent higher at £16.3m. Profit
before tax is ahead by 30 per cent to £13.6m and earnings per share 19 per cent
higher at 21.6p. The latter figures reflect the additional finance cost and the
increase in the number of shares in issue following the acquisition of Perkins
Chilled Foods in January 2005.
The food division, which includes agribusiness, accounted for 93 per cent of
turnover in the period and had an encouraging first half. Sales rose by 57 per
cent to £202.1m and operating profit by 56 per cent to £16.8m. Our products are
positioned in a number of growth sectors of the market which is contributing to
an increase in underlying sales.
The successful integration of Perkins, our largest acquisition to date, was a
key feature of the period. Synergy benefits were achieved as anticipated. The
business delivered an excellent set of results contributing sales of £63.9m
which led to the enlarged cooked meats activity turning in a very positive
performance.
Agribusiness has seen a favourable change in fortunes from a year ago. An
increase in sales of specialist piglet feeds and enhanced operating efficiencies
following a rationalisation of sites were contributory factors to this
improvement. The rationalisation gave rise, as planned, to a reduction in sales
of 12 per cent to £15.2m.
There was further growth in sales of fresh pork, charcuterie and sandwiches
although sales of sausages were 11 per cent down on a year ago as anticipated
following the impact of the factory fire in 2004. Fresh pork was 11 per cent
ahead, charcuterie 17 per cent and sandwiches 38 per cent. These gains were
achieved by a combination of winning new business and growth with existing
customers augmented by branding initiatives.
The development of traditional dry cured bacon which commenced in 2004 has now
evolved from start-up phase through to volume output and it has established a
reputation with the grocery retailers as a premium product gaining a gold medal
at the Guild of Fine Food Retailers 'Great Taste Awards'. The cost of developing
the business has been absorbed, positive results are now coming through and we
believe there is potential for significant growth in this business.
Sales in the pet division were comparable to the same period last year at £15.3m
although operating profits were £0.5m lower at £0.3m. The pet food business
experienced production issues in the new facility which have now been overcome
but this impacted on operating costs and sales, which were marginally down on a
year ago. The business is now aggressively pursuing new sales opportunities to
enable it to return to its growth track. The performance in the aquatics
activity was similar to a year ago.
Cash flow and borrowings
Interest cover in the period was a comfortable 6.2 times. The cash flow of the
business has remained strong with net borrowings reducing over the six month
period by £5.3m to £87.1m. Operating profit before depreciation generated £20.2m
compared to £13.5m in the same period last year, whilst capital expenditure
amounted to £7.8m. The strategic disposal of the pig herd and the sale of one of
the surplus sites in the period brought in additional funds.
Dividend
The interim dividend is being increased by 15 per cent to 5.4p per share (2004 -
4.7p). The dividend will be paid on 27 January 2006 to shareholders on the
register at the close of business on 2 December 2005. Shareholders will again
have the option to receive the dividend by way of scrip issue.
Board
Bernard Bell will retire from the Board in December on reaching the age of 60
years. Bernard has been with the Company for over 20 years and been a valued
member of the management team that has developed the business from its
beginnings as a manufacturer of animal feed. The Board extends its thanks to
Bernard for his input over that period.
Outlook
This period has been one of further growth for Cranswick as it continues its
development in the food sector. A major acquisition has been successfully
integrated, a new business 'start-up' is evolving very encouragingly and
businesses which experienced challenges in the last couple of years have
performed well.
There is a strong, experienced management team in place and a well invested
asset base. The Company has positions in markets which continue to grow and
available capacity in a number of areas to enable it to meet future volume
increases.
Notwithstanding this, the business operates in a competitive environment but
continues to seek opportunities to minimise the impact of this through
improvements in operating efficiencies wherever possible.
Giving due consideration to all the above factors the Board continues to be
confident in the prospects for Cranswick and the maintenance of its record of
sustained growth
Martin Davey
Chairman
22 November 2005
CRANSWICK plc: GROUP INCOME STATEMENT
UNAUDITED
Six months ended 30 September 2005
Notes Half year Year to 31
-------- --------- March
----------
2005 2004 2005
Restated* Restated*
£'000 £'000 £'000
Turnover 2 217,438 144,314 318,538
Cost of sales (179,955) (118,279) (261,917)
-------- --------- ----------
Gross profit 37,483 26,035 56,621
Operating expenses (21,210) (15,097) (33,766)
-------- --------- ----------
Operating profit 2 16,273 10,938 22,855
Profit on disposal of property,
plant and equipment - - 707
Finance costs (2,628) (441) (1,972)
-------- --------- ----------
Profit before tax 13,645 10,497 21,590
Taxation 4 (4,058) (2,966) (5,360)
-------- --------- ----------
Profit for the period attributable
to members of the parent company 9,587 7,531 16,230
-------- --------- ----------
Earnings per share:
Basic 3 21.6p 18.2p 38.6p
Diluted 3 21.5p 18.1p 38.3p
Operating profit for the year ended 31 March 2005 is stated after charging
exceptional cost of sales of £2,642,000.
* As restated for the adoption of International Financial Reporting Standards
accounting policies as outlined in Note 1.
CRANSWICK plc: CONSOLIDATED BALANCE SHEET
UNAUDITED
30 September 2005
-------- -------
Half year Year to
31 March
-------- -------
2005 2004 2005
£'000 Restated* Restated*
£'000 £'000
Assets
Goodwill 111,857 41,451 110,413
Property, plant and equipment 65,152 47,988 63,156
-------- ------- --------
177,009 89,439 173,569
-------- ------- --------
Current assets
Biological assets 118 1,559 2,238
Inventories 18,955 10,984 17,442
Trade and other receivables 53,166 36,951 48,127
Other financial assets - - 45
Cash at bank and in hand 2,087 2,231 5,025
-------- ------- --------
74,326 51,725 72,877
Non-current assets classified as held
for sale 1,584 - 891
Total assets 252,919 141,164 247,337
Current liabilities
Trade and other payables (53,184) (34,023) (47,940)
Other financial liabilities (421) - -
Tax liabilities (3,311) (3,194) (2,634)
Interest bearing liabilities (15,446) (24,914) (13,559)
-------- ------- --------
Total current liabilities (72,362) (62,131) (64,133)
-------- ------- --------
Non-current liabilities
Interest bearing liabilities (73,291) - (83,862)
Deferred tax liabilities (4,686) (3,247) (4,489)
Deferred income (94) (131) (112)
Provisions (2,474) - (1,865)
-------- ------- --------
Total non-current liabilities (80,545) (3,378) (90,328)
-------- ------- --------
Total liabilities (152,907) (65,509) (154,461)
-------- ------- --------
Net assets 100,012 75,655 92,876
-------- ------- --------
Equity
Called-up share capital 6 4,456 4,165 4,405
Share premium account 6 40,220 28,185 38,250
Share based payments 6 373 173 247
Hedging and translation reserve 6 (386) 27 66
Profit and loss account 6 55,349 43,105 49,908
-------- ------- --------
Equity attributable to members of the 100,012 75,655 92,876
parent company
-------- ------- --------
CRANSWICK plc: CONSOLIDATED CASH FLOW STATEMENT
UNAUDITED
for the six months ended 30 September 2005
Half year Year to
31 March
2005 2004 2005
Restated* Restated*
£'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations 21,042 10,903 25,565
Interest paid (2,642) (413) (1,793)
Tax paid (3,340) (3,270) (6,864)
-------- -------- --------
Net cash from operating activities 15,060 7,220 16,908
-------- -------- --------
Cash flows from investing activities
Acquisition of subsidiaries, net of cash
acquired - - (83,321)
Purchase of property, plant and equipment (7,791) (12,729) (18,682)
Proceeds from sale of equipment 871 240 1,806
-------- -------- --------
Net cash used in investing activities (6,920) (12,489) (100,197)
-------- -------- --------
Cash flows from financing activities
Proceeds from issue of share capital 1,580 - 9,834
Proceeds from borrowings - - 95,000
Issue costs of long-term borrowings - - (540)
Repayment of borrowings (10,059) (800) (808)
Payment of finance lease liabilities - (49) (49)
Dividends paid (3,918) (3,336) (4,815)
-------- -------- --------
Net cash used in financing activities (12,397) (4,185) 98,622
-------- -------- --------
Net (decrease)/increase in cash and cash
equivalents (4,257) (9,454) 15,333
Cash and cash equivalents at beginning of
period 3,291 (12,042) (12,042)
Effect of foreign exchange rates (2) 21 -
-------- -------- --------
Cash and cash equivalents at end of period (968) (21,475) 3,291
-------- -------- --------
Reconciliation of operating profit to cash
generated from operations
Operating profit before exceptionals 16,273 10,938 25,497
Depreciation 3,934 2,533 5,786
Release of government grants (18) (18) (36)
(Profit)/loss on sale of property, plant and
equipment (124) 2 (221)
Share based payments 126 59 133
Decrease/(increase) in inventories 606 (632) (510)
Decrease in trade and other receivables (5,040) (3,731) (3,141)
Increase/(decrease) in trade and other
payables 5,285 1,752 (1,028)
Cash cost of exceptionals - - (915)
-------- -------- --------
Cash generated from operations 21,042 10,903 25,565
-------- -------- --------
Notes to the interim accounts
1. Accounting policies
Cranswick plc ('the Group') has previously prepared its financial statements
under UK Generally Accepted Accounting Principles ('UK GAAP'). Following a
directive issued by the EC in July 2002, the Group is required to prepare its
2005/6 consolidated financial statements in accordance with International
Financial Reporting Standards ('IFRS').
This interim report has been prepared using accounting policies consistent with
those which management expects to apply in the Group's first IFRS Annual Report
and Accounts for the year ending 31 March 2006. These policies are the same as
those published by the Group on 17 November 2005 within the 2004/05 IFRS
restatement, which is available on the Group's website at www.cranswick.co.uk.
As noted within the IFRS restatement the Group has taken the exemption within
IFRS 1 'First Time Adoption of IFRS' to apply IAS 32 'Financial Instruments:
Presentation and Disclosure', and IAS 39 'Financial Instruments: Recognition and
Measurement' prospectively and not to retrospectively restate prior period
comparatives upon adoption. Accordingly IAS 32 and IAS 39 are applied from 1
April 2005 and the accounting policy for financial derivatives for the year
ended 31 March 2005 is as set out in the Annual Report and Accounts for that
year which was published in May 2005. An explanation of the impact of the
adoption of IAS 32 and IAS 39 is included in note 6 below.
The main impacts of IFRS on previously reported numbers for 2004/05 are
summarised as follows:
Half year Year
----------- ------
ended ended
------- -------
30 September 31 March
-------------- ----------
2004 2005
------ ------
£'000 £'000
------- -------
Profit before tax reported under UK GAAP 9,359 18,470
Cessation of goodwill amortisation 1,188 3,235
Charge for share based payments (59) (133)
Biological assets 9 18
----------- ---------
Profit before tax restated under IFRS 10,497 21,590
----------- ---------
In addition, under IFRS there was a reduction in the taxation charge of £197,000
for the half year ended 30 September 2005 and £324,000 for the year ended 31
March 2005.
Financial information has been prepared on the basis of IFRS expected to be in
effect for the year ending 31 March 2006. The IFRS in effect at that date may
differ owing to decisions taken by the EC on endorsement, interpretative
guidance issued by the International Accounting Standards Board ('IASB') or the
International Financial Reporting Interpretations Committee ('IFRIC') and the
requirements of company legislation.
The interim report was approved by the Directors on 22 November 2005 and is
unaudited. The information does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. The statutory accounts for the
year ended 31 March 2005 prepared under UK GAAP received an unqualified audit
report and have been filed with the Registrar of Companies.
2. Segmental analysis - half year ended 30 September
Turnover Operating profit
-------- -------- ------------- --------
2005 2004 2005 2004
£'000 £'000 £'000 £'000
Food 202,108 128,975 16,790 10,750
Pet 15,330 15,339 286 802
-------- -------- -------- --------
217,438 144,314 17,076 11,552
Central costs - - (803) (614)
-------- -------- -------- --------
Group total 217,438 144,314 16,273 10,938
-------- -------- -------- --------
3. Earnings per share: 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 44,353,777 (2004: 41,458,375). The calculation of diluted earnings per
share is based on 44,682,131 shares (2004: 41,655,816).
4. Taxation: the tax charge for the six months ended 30 September 2005 reflects
the estimated effective rate for the full year.
5. Analysis of changes in net debt
At Opening Cash Other At
31 March adjustment for flow non cash 30 September
2005 IAS 32 and 39 changes 2005
£'000 £'000 £'000 £'000 £'000
Cash at bank
and in hand 5,025 - (2,936) (2) 2,087
Bank overdrafts (1,734) - (1,321) - (3,055)
-------- --------- ------- -------- --------
Cash and cash
equivalents 3,291 - (4,257) (2) (968)
-------- --------- ------- -------- --------
Other financial
assets - 45 - (45) -
Other financial
liabilities - - - (421) (421)
Bank loans (94,487) - 10,000 (54) (84,541)
Loan notes (1,200) - 59 - (1,141)
-------- --------- ------- -------- --------
Net debt (92,396) 45 5,802 (522) (87,071)
-------- --------- ------- -------- --------
6. Reconciliation of movements in equity
Share Share Share Hedging Profit and loss Total
capital premium based and translation Account £'000
£'000 £'000 payments reserve £'000
£'000 £'000
As at 1
April 4,405 38,250 247 21 49,922 92,845
2005
Impact of
adoption of
IAS 32 and
IAS 39 - - - 45 (14) 31
------ ------- -------- -------- -------- --------
Restated
for
adoption of
IAS 32 and
IAS 39 4,405 38,250 247 66 49,908 92,876
Profit for
the period - - - - 9,587 9,587
Share based
payments - - 126 - 54 180
Cash flow
hedges - - - (451) 135 (316)
Scrip 7 434 - - - 441
dividend
Share options
exercised 44 1,536 - - - 1,580
Dividends - - - - (4,335) (4,335)
Exchange
differences - - - (1) - (1)
------ ------- -------- -------- -------- --------
At 30
September
2005 4,456 40,220 373 (386) 55,349 100,012
------ ------- -------- -------- -------- --------
On adoption of IAS 32 and IAS 39 at 1 April 2005 as described in Note 1,
interest rate swaps held by the Group have been recognised as a financial asset
at their fair value of £45,000 with a corresponding deferred tax provision of
£14,000 and the opening balance sheet has been restated accordingly. These swaps
meet the special cash flow hedge criteria of IAS 39 and accordingly gains and
losses have been recognised directly in equity. There is no impact on reported
profit in prior periods.
7. The Company intends to post the Interim Report to shareholders on 24 November
2005. Further copies will be available upon request from the Company Secretary,
Cranswick plc, Cranswick, Driffield, East Yorkshire, YO25 9PF.
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