CRANSWICK plc: PRELIMINARY RESULTS
A year of strong financial and strategic progress
21 May 2024
Cranswick plc (“Cranswick” or “the Company” or “the Group”), a leading UK food producer, today announces its audited preliminary results for the 53 weeks ended 30 March 2024.
Commercial and strategic progress*:
· Strong reported revenue growth of 11.9%, with like-for-like† revenue growth of 11.6%
· On a comparable 52-week basis, revenue up 9.8% reflecting effective inflation recovery and underpinned by 4.5% volume growth in UK food with growth accelerating through the second half of the year
· Excellent customer service levels delivered throughout the year; 98% fulfilment across extensive product portfolio
· Adjusted operating margin increased from 6.3% to 7.1%, reflecting a strong contribution from expanded pig farming operations, tight cost control and robust returns from the effective deployment of capital
· Free cash conversion of 142.3%, with ROCE‡ up 264bps to 18.5% and leverage reduced to 0.4x (including IFRS 16 lease liabilities)
· Substantial ongoing investment in feed milling and pig farming operations to ensure security of supply and drive enhanced returns
· £46.1m¥ invested in two strategic acquisitions:
o £32.8m acquisition of Elsham Linc indoor pig farming business furthers diversifies the Group’s pig farming operations and adds additional feed milling capability, with self-sufficiency in UK pigs now over 50%
o £13.3m acquisition of Froch Foods adding further cooked meat and bacon processing capacity
· Total capital expenditure of £91.4m to add capacity, capability and drive operating efficiencies
· Three earnings enhancing capital projects totalling £112m in progress, with £17.1m spent in year:
o £62m multi-phased expansion project ongoing at the Hull pork primary processing site
o £23m fit out of new houmous facility at Worsley, Manchester progressing to plan
o £27m expansion of value-added poultry across both Hull sites now underway
· £10m investment in Lincoln pet food site nearing completion, with new national retail customer on board
Financial highlights*:
| 2024 | 2023 | Change (Reported) | Change (Like-for- like†) | |
| Revenue | £2,599.3m | £2,323.0m | +11.9% | +11.6% |
| Adjusted Group operating profit | £185.1m | £146.5m | +26.3% | |
| Adjusted Group operating margin | 7.1% | 6.3% | +81bps | |
| Adjusted profit before tax | £176.6m | £140.1m | +26.1% | |
| Adjusted earnings per share | 242.8p | 210.0p | +15.6% | |
· Statutory profit before tax 13.5% higher at £158.4m (2023: £139.5m), net of £15.4m non-cash Pet intangible assets impairment
· Statutory earnings per share up 1.0% to 210.4p (2023: 208.3p)
· Full year dividend increased by 13.4% to 90.0p (2023: 79.4p); 34 years of unbroken dividend growth
· Return on capital employed‡ up 264bps to 18.5% (2023: 15.8%)
· Strong free cash flow of £223.4m, with free cash conversion of 142.3%
· Net debt (excluding IFRS 16 lease liabilities) lower at £0.1m (2023: £20.2m)
· Robust balance sheet with £250m bank facility providing significant headroom
Adam Couch, Cranswick’s Chief Executive Officer, commented:
“Our ongoing successful performance is down to the unwavering passion, commitment, and professionalism of our teams across the business. I would like to extend my gratitude to all of our colleagues at Cranswick for their continued dedication and support which has enabled us to deliver a strong set of results and make progress towards our strategic objectives.
“Alongside our colleagues, I would also like to thank our suppliers and customers, with whom we continue to work in close partnership.
“Our successful performance owes a great deal to the substantial investment we have put into enhancing our farming infrastructure and expanding our vertical integration. We have increased the size, scale and quality of our pig herds through ongoing organic growth and the acquisitions of new indoor and premium outdoor pigs.
“Over the last 12 months we have strengthened our asset base, substantially expanded our farming operations, enhanced market positions and developed new customer relationships. We continue to make good progress against each of our strategic objectives and we are well placed to continue our successful development in the current financial year and over the longer term.”
| * | Adjusted, like-for-like and free cash references throughout this statement refer to non-IFRS measures or Alternative Performance Measures (‘APMs’). Definitions and reconciliations of the APMs to IFRS measures are provided in Note 11. |
| ¥ | Refer to Note 10 for breakdown of cash outflow on acquisition. |
| † | For comparative purposes, like-for-like revenues exclude the impact of current year acquisitions and the contribution from prior year acquisitions prior to the anniversary of their purchase. |
| ‡ | Return on capital employed is defined as adjusted operating profit divided by the sum of average opening and closing net assets, net debt/(funds), pension (surplus)/deficit and deferred tax. |
Presentation
A presentation of the results will be made to analysts and institutional investors today at 10.30am at The Worshipful Company of Butchers, 87 Bartholomew Close, London, EC1A 7BN. Analysts and institutional investors will also be able to join the presentation via a conference call facility. The slides will be made available on the Company website. For the dial-in details please contact Powerscourt on the details below.
Enquiries:
Cranswick plc
Mark Bottomley, Chief Financial Officer 01482 275 000
Powerscourt
Nick Dibden / Elizabeth Kittle / Louisa Henry 020 7250 1446
cranswick@powerscourt-group.com
Note to Editors:
Cranswick is a leading and innovative supplier of premium, fresh and added-value food products. The business employs over 14,500 people and operates from 23 well-invested, highly efficient facilities in the UK.
Cranswick was formed in the early 1970s by farmers in East Yorkshire to produce animal feed and has since evolved into a business which produces a range of high quality, predominantly fresh food, including fresh pork, poultry, convenience, gourmet products and pet food. The business develops innovative, great tasting food products to the highest standards of food safety and traceability. The Group supplies the major grocery multiples as well as the growing premium and discounter retail channels. Cranswick also has a strong presence in the ‘food-to-go’ sector and a substantial export business. For more information go to: www.cranswick.plc.uk
At Cranswick, it is second nature for us to protect and nurture our environment while supporting people and communities to thrive. Guided by our sustainability strategy, Second Nature, we have seamlessly integrated our sustainability commitments into the core of our business model, which in turn shapes our decision-making, culture, and actions. Notable achievements to date include:
a) Approved Science Based Targets (SBTi) emission reduction plans in place for scope 1, 2 and 3
b) All major production facilities are powered by renewable grid supplied electricity
c) 30% of manufacturing sites use on-site solar generation
d) Northern HGV fleet run on renewable diesel (HVO), reducing emissions by 95%
e) Committing to purchase 100% certified deforestation-free soya
f) Reducing the use of unnecessary plastic across our operations by 19.8 per cent
g) Building strong relationships with national food redistribution organisations FareShare and Company Shop
h) Ranked No.1 in the 2023 Better Food Index, which ranks 30 of the largest food and drink companies in the UK on their actions and commitments towards a fair and sustainable food system
Find out more information on our sustainability journey at www.cranswick.co.uk
Chairman’s Statement
I am pleased to report on the encouraging strategic progress achieved this year. Continued growth and success have been achieved through exceptional customer service and the highest product quality, complemented by the value and versatility of our product categories.
Our management team’s expertise and experience has skilfully transformed industry challenges into valuable opportunities. On behalf of the Board, I would like to express our gratitude to all Cranswick colleagues for their exceptional resourcefulness, innovative ideas and steadfast commitment which resulted in the record performance for the business.
I am very pleased with the progress we have made towards our strategic priorities this year, supported by significant investments in targeted capital expenditure and carefully chosen acquisitions. Our investment programme has continued at pace with a relentless focus on automation, adding scale and delivering further quality, capacity and efficiency improvements.
The persistent effects arising from broad-based cost inflation have been proactively addressed through effective and timely cost management and recovery measures throughout the period. By sustaining our partnerships with customers, we provided cost-effective solutions across our product ranges, concurrently enhancing operational efficiencies and driving automation projects.
This year’s success has also been achieved in the face of considerable ongoing challenges in the UK food and farming industry, with labour shortages, financial pressures and political uncertainty all proving to be major concerns for many independent producers. It is now more crucial than ever for the UK to have a thriving and resilient food and farming sector, especially given the challenges our food system is currently facing. The Government has identified that our national security depends on addressing a small number of critical risks which include food security. It seems imperative to me that the Government should better concentrate its resources on improving our resilience to those risks.
We have further developed and grown our farming and milling operations which has strengthened our vertical integration and enhanced our business resilience. The expansion of our farming capability helps us to ensure full farm-to-fork traceability as the acquisition of Elsham Linc indoor pig farming business significantly increases the size of our Red Tractor-assured indoor pig herd and adds additional feed milling capability, increasing our self-sufficiency in UK pigs to over 50 per cent. Looking forward, we anticipate further sector consolidation, and Cranswick is committed to expanding its farming capability to ensure the continuity of supply, sustainability leadership, and the highest animal welfare standards.
Results
Total revenue for the 53 weeks to 30 March 2024 was £2,599.3 million, showing an increase of 11.9 per cent from the previous year’s reported figure of £2,323.0 million. Adjusting for contributions of the acquisitions made in the previous and current financial years, revenue grew by 11.6 per cent on a like-for-like basis.
Adjusted profit before tax for the period at £176.6 million was 26.1 per cent higher than the £140.1 million reported last year. Adjusted earnings per share on the same basis was up 15.6 per cent at 242.8 pence from 210.0 pence last year.
Cash flow and financial position
At the end of the year, net debt was £99.4 million, down from £101.4 million in the previous year. Net debt excluding IFRS 16 lease liabilities was also reduced to just £0.1 million compared to £20.2 million previously. The Group has access to an unsecured, sustainability linked £250 million facility which runs through to November 2026.
Dividend
The Board is proposing a final dividend of 67.3 pence per share, 14.5 per cent higher than the 58.8 pence paid last year. Together with the interim dividend of 22.7 pence per share, this equates to a total dividend for the year of 90.0 pence per share, an increase of 13.4 per cent on last year, extending the period of consecutive years of dividend growth to 34 years.
The final dividend, if approved by Shareholders, will be paid on 30 August 2024 to Shareholders on the register at the close of business on 19 July 2024. Shares will go ex-dividend on 18 July 2024.
Board changes
During the year, we have continued to evolve the Board to ensure it provides the appropriate skills and experience to support and challenge Cranswick’s executive team.
With effect from 23 May 2023, Yetunde Hofmann was appointed as the Company’s designated Non-Executive Director for engagement with the workforce. This is an important position that I had the honour of undertaking before my appointment as Chairman. It was a pleasure to welcome Yetunde to the role, and her extensive experience brings a valuable perspective to our team.
Liz Barber succeeded Mark Reckitt as the Company’s Senior Independent Director following his retirement as a Non-Executive Director of the Company on 24 July 2023. As of this date, the Board appointed Alan Williams to take on Liz’s previous role as Chair of the Audit Committee.
Pam Powell retired as an Independent Non-Executive Director with effect from 1 September 2023 and her position as Chair of the Remuneration Committee is succeeded on an interim basis by Liz Barber.
On 21 March 2024 we announced the appointment of Rachel Howarth as a Non-Executive Director with effect from 30 April 2024. Rachel is the Group People Officer at Whitbread plc. Rachel was previously the Group HR Director with SSP Group PLC, before which she spent sixteen years with Tesco Plc. On appointment, Rachel became a member of the Remuneration, Nomination and ESG committees. It is intended that Rachel will succeed Liz Barber as Chair of the Remuneration Committee in August, following conclusion of the scheduled review of the Company’s Directors’ Remuneration Policy.
On behalf of the Board, I welcome Rachel and thank Mark and Pam for their positive contribution to Cranswick’s successful development over their respective tenures.
Outlook
We have made strong strategic and commercial progress in the past year which has strengthened the base from which to deliver the ongoing plans of the Group. The start to the current year has been in line with the Board’s expectations and the outlook for the current financial year is unchanged. The strengths of our business, which include our diverse and long-standing customer base, breadth and quality of products and channels, robust financial position and industry-leading infrastructure will support the further development of Cranswick over the longer-term.
Tim J Smith CBE
Chairman
21 May 2024