Cranswick Regulatory News (CWK)

21 May 2007 07:03

Cranswick PLC21 May 2007 Embargoed 7am Monday May 21 2007 CRANSWICK plc: RECORD PROFITS Cranswick plc ("Cranswick" or "the Company"), the Yorkshire-based food producer,announces its audited results for the year ended March 31 2007. Highlights: • Sales increased by 19 per cent to £525m (2006: £441m) • Profit before tax & exceptional gains up 12 per cent at £32.4m (2006: £29.0m) • Earnings per share pre exceptional gains rose 5 per cent to 50.1p (2006: 47.8p) • Recommended 10 per cent increase in final dividend to 12.2p per ordinary share • Feed milling business sold • Encouraging start to current year Martin Davey, Cranswick Chairman, said: "Cranswick has continued its successfuldevelopment and is once again reporting record profits. Underlying sales growthwas particularly strong resulting in an increase in market share which wasfurther enhanced by the strategic acquisition of DeliCo on 1 November 2006. "The past year has seen sales rise by 19 per cent and we anticipate furtherincreases over the next year. "The Company today announces the sale of the feed milling business of CranswickMill, the group's original activity. The trading environment has beenparticularly challenging in recent years following the substantial reduction inthe UK pig herd. "The Board is confident that the maintenance of an unchanged strategy willcontinue the successful development of Cranswick. The current year hascommenced in an encouraging manner and the Board looks to the future withconfidence". -ends- For further information: Paul Quade 07947 186694CityRoad Communications 020 7248 8010 CHAIRMAN'S STATEMENT I am pleased to be able to report to Shareholders that Cranswick has continuedits successful development and is once again reporting record profits.Underlying sales growth was particularly strong resulting in an increase inmarket share which was further enhanced by the strategic acquisition of DeliCoon 1 November 2006. Results The Company achieved an increase in sales of 19 per cent to £525 million.Turnover in the food division was up by 21 per cent at £493 million and thisaccounted for 94 per cent of total Company sales. The increase in sales largelyreflected organic growth although the DeliCo acquisition during the year added£9 million. Strong sales increases were evident across most food categorieshighlighting the success of the Company's strategy in positioning itself in anumber of growing, premium areas of the market. The Company's other activitywhich is involved in the pet and aquatic sector saw a marginal reduction insales reflecting higher aquatic sales but a decline in bird food. Profit before tax and exceptional gains increased by 12 per cent from £29.0million to £32.4 million. Earnings per share on a similar basis rose to 50.1 p(2006 47.8p). The increase of 5 per cent in earnings per share reflects anormal tax charge this year compared to a lower charge previously following theacquisition of Perkins, as well as additional shares in issue. Exceptional gainsin both this year and last year relate to profits on disposal of surplusproperties. The results are considered in more detail in the review of activities section. Cash Flow Cash flow was again very strong with cash generated from operations of £41.8million, the same as the previous year. This allowed the Company to purchaseDeliCo without increasing year-end borrowings. The net cash cost of theacquisition was £13.4 million with a further £3.6 million satisfied by shares.Capital expenditure net of disposal proceeds was slightly ahead of last year at£10.8 million, resulting in borrowings of £75.9 million compared with £77.1million a year ago. Interest cover pre exceptional gains was 7.9 times comparedwith 6.7 times in 2006. Dividend The Board is proposing an increase in the final dividend of 10 per cent to 12.2pper ordinary share. Along with the interim dividend of 5.9p per ordinary sharepaid in January 2007 this makes a total dividend for the year of 18.1p perordinary share, an increase of 10 per cent on last year's 16.5p. The finaldividend, if approved by Shareholders, will be paid on 7 September 2007 toShareholders on the register at the close of business on 6 July 2007.Shareholders will have the option to receive the dividend by way of scrip issue. Strategic Development The Company was formed by farmers in the early 1970's to produce pig feed. In1998 the Board embarked on a strategy to broaden the base of the Company'sactivities and to seek opportunities to develop into related areas offeringgreater scope to add value to the Company's processes. Through a combination ofacquisitions and organic development the business has evolved into one focusedpredominantly on the supply of premium food products. As part of this strategy the Company today announces the sale of the feedmilling business of Cranswick Mill, the group's original activity. There will bea cash inflow resulting from the sale and the reduction in working capital ofapproximately £7 million. The trading environment for this business has beenparticularly challenging in recent years following the substantial reduction inthe UK pig herd. Despite some rationalisation of milling capacity in theindustry there continues to be oversupply. Efforts to mitigate the impact ofthis have included the further development of the starter feed business andtight cost control. Feed sales in the year totalled £25 million and a smallprofit was achieved. The opportunity to develop a solution to the challengesfacing the business was explored and successfully concluded with BOCM Pauls, aleading supplier of animal feed. BOCM have plans for investment in the site andfor the further development of the business. The sale of the feed millingbusiness follows the sale of the pig production business in the previousfinancial year. The pig marketing business of Cranswick Mill, the procurementarm of Cranswick Country Foods, is to continue as an integral part of the Group.We wish David Ball, managing director of Cranswick Mill, his colleagues and BOCMevery future success. The food division was expanded in November with the acquisition of DeliCo,producer of sliced cooked meats, a growing category in the food sector. Thebusiness has been successfully integrated by the management team in theCranswick Convenience Foods division. At the time of acquisition there wassubstantial unutilised capacity in the relatively new production facility. Ourplans for filling this capacity have been successful and the business is ontrack for a substantial increase in sales over the next year. Cranswick Gourmet Bacon, producer of traditional air-dried bacon, wasestablished by way of joint venture in 2004 with Cranswick holding 70 per centof the equity. This was increased to 85 per cent during the year and weanticipate that this will be increased to 100 per cent in the near future. Thequality of the premium bacon produced by this business is underlined by thenumerous awards it continues to pick up. The Company has recently received planning permission for the furtherdevelopment of the primary pork processing site in East Yorkshire which securesthe longer term plans of this important part of the Company's activities. Outlook Compound annual growth in sales over the past five years has been 18 per centper annum and is a combination of both organic and acquisitive development. Thepast year has seen sales rise by 19 per cent and we anticipate further salesincreases over the next year although, as reported previously, there are signsthat the Company is facing a more competitive trading environment. The Board isconfident that, with activities in a number of growing premium food categoriesand strong operational management teams, the maintenance of an unchangedstrategy will continue the successful development of Cranswick. The current yearhas commenced in an encouraging manner and the Board looks to the future withconfidence. Martin Davey Chairman 21 May 2007 Review of Activities Food - by the Chief Executive Bernard Hoggarth The strong sales growth continued, as in recent years, with sales up 21 per centat £493 million. Sales of food products rose by 20 per cent, with agriculturalproducts up 32 per cent. The food group's businesses have all shown strong growth in the premium sectors,with our sausage and bacon sales growth being exceptional. The focus andinvestment in developing our foodservice sales is now bearing fruit with salesin the year exceeding £20 million. The vast majority of this growth has comefrom specialist lines sold into the gastro-pub chains and supplying the highstreet dining outlets. All the Cranswick food producing sites have achieved the highest 'A' grade BRC(British Retail Consortium) standards. We are also proud to have the first foodfactory in the UK to score zero minor non-compliance at a recent audit. Newproduct development continues to be the life blood of the business across thefood operations. To put this into perspective fresh pork, sausage and baconcurrently have 25 products under development and launched 88 new products duringthe year. As part of this process, it is very pleasing to report the foodbusinesses collected 11 industry awards during the financial year. The fresh pork business has been successful in gaining planning permission for anew replacement processing facility at the Preston site in East Yorkshire. Thisshould be completed during the next two years. This development, coupled withinvestment we have made previously in the centrally packed meat plant adjoining,will consolidate its position as one of the most efficient primary facilities,and is currently the largest pig processing plant in the UK. This willfacilitate the continued development of our customer base and growth goingforward. Overall, fresh pork sales in the UK grew by 2 per cent in the year,whilst the Cranswick pork business achieved an impressive 23 per cent increase.Recent investment in new equipment is facilitating the processing ofby-product into organic matter which can be used as fertilizer. The tallowextracted in the process is utilised in the production of bio-fuel. We arecurrently exploring the possibility of using the recycled fuel to power thefactory boilers for hot water and steam production and to fuel part of our ownfleet of vehicles. In addition we have immediately reduced vehicle movements,due to the previous removal off site of all such by products via HGV's. The Lazenby's sausage factory is just 2 years old, but due to the phenomenalsuccess achieved in sales, and the development of new business, we areinstalling three new production lines to meet demand. This will require capitalexpenditure in excess of £2 million. The total sausage market showed nogrowth in the year, but premium categories grew by 19 per cent. The Cranswickbusiness however achieved growth of 28 per cent. Lazenby's was successful inbecoming the licensee for the 'Weight Watchers' brand of sausage which welaunched during the second half of the year. We also produce the "Black Farmer"brand, which was launched during the year, and Duchy Originals. The latter grewat almost 23 per cent, and reinforces again the continuing trend for consumersto 'trade up' in fresh prepared foods. Recently the Cranswick Gourmet Sausage Company launched the 'Simply Sausage'brand at The Ivy in London. This event was attended by buyers from the mainretailers and a myriad of journalist and food writers and was hosted bycelebrity chef James Martin. You can log onto the new website for informationon this exciting new range at: www.simplysausages.com. The cooked meat business, Cranswick Convenience Foods, has continued to grow itssales well above the market place. Pre-packed cooked meat sales nationally roseby almost 7 per cent whereas Cranswick grew by 16 per cent. Deli sales declinedslightly in line with the national fall of 3 per cent as consumers continue toswitch to more pre-packed convenient formats. The DeliCo acquisition has integrated into the group well and is performing inline with expectations. By the summer this facility will be operating at over 90per cent of capacity, again in line with our plans. There has been continuedcapital expenditure, in excess of £6.6 million across the cooked meat facilitiesduring the year. This enables us to continue to be at the forefront of thesector, by incorporating the most modern, efficient equipment into ourspecialist business units. This coupled with new product development andsignificant growth in our customer base, bodes well for the future. Bacon sales were up a very healthy 65 per cent with which we are delighted.With further growth anticipated we are planning for additional productioncapacity. We have acquired a new freehold site 'twixt Leeds and York of over8,000 square meters which will enable us to continue to grow this business. Weanticipate a weekly capacity from this new facility of in excess of 400 tonnesper week, this compares with a current peak of approximately 75 tonnes. Theexpected project cost will be approaching £9 million. This large investmentwill allow the continued focus on the development of the premium bacon category,in the same way that we have developed our sausage business over the lastdecade. Across the UK bacon market as a whole, we currently have less than a 2per cent market share. Taking the premium categories on the other hand,Cranswick Gourmet Bacon Company has a 22 per cent market share. Our baconbusiness received 2 Gold Medals and 2 Silver Medals in the BPEX Foodserviceawards and the Foodservice 'Pork Product of the Year' 2007. Continental Fine Foods, Cranswick's Manchester based charcuterie business had anexceptional year with sales up 21 per cent to almost £70 million. The businessinvested in a new high speed slicing line during the year at a cost of £1million which helped achieve average weekly volumes of over 700,000 packs,compared with 520,000 packs a year ago. Corned beef continues its revival withsales volumes up 22 per cent in the year. We are working with a small artisan producer of fresh filled pasta in Italy tobring all their facilities up to BRC standards, ready for serving the UK retailmarket. Following this accreditation we will launch this very special productwith a major retail customer later this year. This highlights perfectly one ofthe main routes to market for Continental Fine Foods, driven by our skilledbuyers, researchers and development teams. The Sandwich Factory (TSF) saw sales rise by 5 per cent in the year with salesof £36m. New business wins in the year include, Ryan Air, Flybe, BMI baby, FirstGreat Western Railways and the further development of exciting ranges with ourretail customers. TSF has been working with Duchy Originals on a new organic range of sandwiches.The first products should be launched during summer this year. These productswill target the premium category with research having shown that there is demandfor such premium products in the sector. Within the product portfolio are threenew categories. We now produce and supply "food to go" solutions, salads andpizzas. Total units produced were 40 million, with approximately 25 per centbeing alternatives to the standard skillet, or sliced sandwich. TSF has developed it's plan to use more recyclable packaging during the yearwith the introduction of cardboard skillets, biodegradable webs and 'returnable'plastic distribution trays. Further "green " initiatives include the developmentof an electrolyzed water supply to reduce the amount of chemicals used by thebusiness in the factory cleaning process by 40 per cent. In summary, we believe our food businesses now operate from some of the bestinvested and most modern production facilities in the UK. This, coupled with thestrong management teams we have in situ and the strength of our new productdevelopment teams, leads us to believe we are well placed to continue theprofitable growth and development of the food business. Pet - by the Chief Executive Derek Black Total sales were marginally down for the year at £31.5 million (2006 - £32.1million) with increased sales of aquatic products and a reduction in food. In Pet Products, predominantly bird and small animal food, sales were a littleunder £20.5 million down 8 per cent. This was due mainly to an extremely hotsummer, coupled with a mild autumn and winter. The public's perception is thatwild birds do not need feeding during a mild winter. Changing habitats and theneed to protect endangered native birds means it is imperative to feed birds notonly in winter but all year round and we, along with the RSPB, strive to getthis message over to the public. Our target markets remain unchanged and includehigh street retail chains, wholesale discount multiples, retail membershipgroups, grocery and mail order. Sales in the TMC aquatic business were ahead of last year at almost £11 million(2006 - £9.7 million) up 12 per cent. Sales of marine livestock increased by 20per cent. It is particularly pleasing to report the continued growth anddevelopment of the branch businesses. Manchester saw sales up 10 per cent andBristol an increase of 26 per cent. Sales of dry goods were adversely impactedfollowing a major fire in the warehouse in December at the Chorleywood site and,as a consequence, there was a more modest rise in sales of 6 per cent on lastyear in this category. The building is presently being reconstructed and will befully operational by July 2007. There will be no impact to profit, due to thecomprehensive levels of insurance cover in place. During the year TMC supplied a number of high profile projects including 7 largeocean exhibits to Sea Life centres around the UK, including the new aquarium inLoch Lomond, a large recirculation and water treatment system for a cod hatcheryin Scotland, and four large marine holding systems to a shellfish suppler. Newproduct launches has also been a key feature for the business with thedevelopment of the V2 ultra-violet skimmers, which was voted best Marine Productin 2006 by Practical Fishkeeping. CRANSWICK plc: AUDITED ----GROUP INCOME STATEMENT Year ended 31 March 2007 2007 2006 _________________________________________ _______________________________________ Before Exceptionals Total Before Exceptionals Total exceptionals exceptionals Notes £'000 £'000 £'000 £'000 £'000 £'000 Revenue 2 524,823 - 524,823 441,178 - 441,178 Cost of sales (438,508) - (438,508) (364,388) - (364,388)Gross profit 86,315 - 86,315 76,790 - 76,790 Operating expenses (49,239) - (49,239) (42,720) - (42,720) Operating profit 2 37,076 - 37,076 34,070 - 34,070 Profit on disposal of - 281 281 - 2,079 2,079property, plant andequipment Profit before finance and 37,076 281 37,357 34,070 2,079 36,149taxation Finance revenue 6 - 6 25 - 25Finance costs (4,707) - (4,707) (5,076) - (5,076) Profit before tax 32,375 281 32,656 29,019 2,079 31,098 Taxation (9,773) (229) (10,002) (7,716) (562) (8,278) Profit for the year 22,602 52 22,654 21,303 1,517 22,820 Profit for the yearattributable to:Equity holders of the 22,574 22,784parentMinority interest 80 36 22,654 22,820Earnings per share:(total and continuing)Basic 3 50.1p 0.1p 50.2p 47.8p 3.4p 51.2pDiluted 3 49.7p 0.1p 49.8p 47.4p 3.4p 50.8p CRANSWICK plc: AUDITED GROUP BALANCE SHEET 31 March 2007 2007 2006 Notes £'000 £'000Non-current assetsGoodwill 117,520 111,921Property, plant and equipment 80,277 67,725 197,797 179,646 Current assetsInventories 24,626 18,555Trade and other receivables 66,416 54,027Other financial assets 330 106Cash and cash equivalents 2,262 5,000Total current assets 93,634 77,688 Non-current assets classified as held for sale - 688 Total assets 291,431 258,022 Current liabilitiesTrade and other payables (65,073) (53,376)Other financial liabilities (16,933) (19,422)Income tax payable (3,834) (3,138)Provisions (289) (334)Total current liabilities (86,129) (76,270) Non-current liabilitiesOther payables (37) (76)Other financial liabilities (61,544) (62,720)Deferred tax liabilities (6,150) (4,657)Provisions (1,736) (1,877)Total non-current liabilities (69,467) (69,330) Total liabilities (155,596) (145,600) Net assets 135,835 112,422 EquityCalled-up share capital 6 4,595 4,467Share premium account 6 47,204 40,797Share-based payments 6 1,018 531Hedging and translation reserves 6 351 (13)Retained earnings 6 82,564 66,604Equity attributable to members of the parent company 135,732 112,386Minority interests 103 36Total equity 135,835 112,422 CRANSWICK plc: AUDITED GROUP CASH FLOW STATEMENT Year ended 31 March 2007 Notes 2007 2006 £'000 £'000Operating activitiesProfit before finance and taxation 37,357 36,149Adjustments to reconcile group operating profit to net cash inflows fromoperating activitiesDepreciation 9,252 8,087Share based payments 487 284Release of government grants (39) (36)Profit on sale of property, plant and equipment (250) (2,220)(Increase)/decrease in inventories and biological assets (5,329) 1,125Increase in trade and other receivables (9,141) (5,751)Increase in trade and other payables 9,493 4,200Cash generated from operations 41,830 41,838Tax paid (7,936) (6,954)Net cash from operating activities 33,894 34,884 Cash flows from investing activitiesInterest received 6 25Acquisition of subsidiaries (13,506) -Purchase of property, plant and equipment (11,979) (14,064)Proceeds from sale of equipment 1,147 3,929Net cash used in investing activities (24,332) (10,110) Cash flows from financing activitiesInterest paid (3,966) (5,119)Proceeds from issue of share capital 1,776 1,691Proceeds from borrowings 10,000 -Issue costs of long-term borrowings (40) -Repayment of borrowings (11,395) (18,753)Dividends paid (6,467) (5,847)Net cash used in financing activities (10,092) (28,028) Net decrease in cash and cash equivalents (530) (3,254)Cash and cash equivalents at beginning of period 46 3,291Effect of foreign exchange rates (10) 9Cash and cash equivalents at end of period 5 (494) 46 Notes to the preliminary announcement 1. Basis of preparation The income statements for the years ended 31 March 2007 and 2006 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 2006. 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 2007 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. The financial statements have been prepared under IFRS as adopted by theEuropean Union. The company's accounting policies can be found in the statutoryaccounts. 2. Segmental Analysis Turnover Operating profit 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Food 493,365 409,119 38,936 35,433Pet 31,458 32,059 566 796 524,823 441,178 39,502 36,229 Central costs - - (2,426) (2,159) 524,823 441,178 37,076 34,070 Exceptionals - - 281 2,079 Group total 524,823 441,178 37,357 36,149 Finance costs - - (4,701) (5,051) Profit before tax 524,823 441,178 32,656 31,098 3. Earnings per share Basic earnings per share are based on profit attributable to shareholders and onthe weighted average number of shares in issue during the year of 45.0 millionshares (2006: 44.5 million shares). The calculation of diluted earnings pershare is based on 45.3 million shares (2006: 44.8 million shares). 4. Dividends Subject to Shareholders' approval the final dividend will be paid on 7 September2007 to Shareholders on the register at the close of business on 6 July 2007. 5. Analysis of changes in net debt At Cash Other At 31 March flow non cash 31 March 2006 changes 2007 £'000 £'000 £'000 £'000 Cash and cash equivalents 5,000 (2,728) (10) 2,262Overdrafts (4,954) 2,198 - (2,756)Cash and cash equivalents 46 (530) (10) (494) Other financial assets - - 306 306Other financial liabilities (146) - 146 -Bank loans (75,970) 1,290 (114) (74,794)Loan notes (1,072) 145 - (927)Net debt (77,142) 905 328 (75,909) 6. Reconciliation of movements in equity Attributable to equity holders of the parent _____________________________________________________________________________ Minority Total Share Share Share Hedging Translation Retained Total Interest Equity capital premium based reserve reserve earnings payments £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 2006 4,467 40,797 531 (40) 27 66,604 112,386 36 112,422 Cash flow hedges - - - 369 - 369 - 369 Exchange - - - - (5) - (5) (5)differencesProfit for the - - - - - 22,574 22,574 80 22,654year Exercise of 65 1,711 - - - - 1,776 - 1,776optionsScrip dividends 15 1,144 - - - - 1,159 - 1,159 Share issues 48 3,552 - - - - 3,600 - 3,600 Share based - - 487 - - - 487 - 487paymentsDeferred tax - - - - - 300 300 - 300recogniseddirectly inequityCorporation tax - - - - - 712 712 - 712recogniseddirectly inequityPurchase of - - - - - - - (13) (13)MinorityInterestDividends - - - - - (7,626) (7,626) - (7,626) At 31 March 2007 4,595 47,204 1,018 329 22 82,564 135,732 103 135,835 7. The Company intends to post the Report and Accounts to shareholders on 6July 2007. Further copies will be available upon request from the CompanySecretary, Cranswick plc, 74 Helsinki Road, Sutton Fields, Hull, HU7 0YW. This information is provided by RNS The company news service from the London Stock Exchange