report & accounts
Year ended 31 March 2008
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Registered office: Helsinki Road, Sutton Fields, Hull HU7 0YW Tel. 01482 372000
www.cranswick.co.uk
Production facilities
“ ...well invested quality assets ”
Fresh pork
Sausages
Bacon
Cooked meats
Cranswick was formed in the 1970s by farmers in East Yorkshire to produce animal feed.
The Company went on to the Stock Market in 1985 and since that time has evolved into a
business that is highly focused on the food sector. Activities include the supply of fresh pork,
gourmet sausages, charcuterie, cooked meats, sandwiches and traditional dry cured bacon. This
represents over 90 per cent of sales.
Sales are also made into the pet and aquatic sector through the supply of bird and small animal
food, marine fish and aquatic products.
Share price 1985-2008 (pence)
1200
1000
800
600
400
200
0
‘86
‘87
‘88
‘89
‘90
‘91
‘92
‘93
‘94
‘95
‘96
‘97
‘98
‘99
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
Start date is entry on to Stock Market, 4 December 1985 – Source: Investec
Financial highlights
Turnover
(£m)
Profit before tax*
(£m)
Earnings per share*
(pence)
Dividends per share
(pence)
599
33.7
32.4
51.9
50.1
47.8
510
29.0
19.9
18.1
16.5
433
2006 2007 2008
2006 2007 2008
2006 2007 2008
2006 2007 2008
• Turnover up 17 per cent to £599m
• Profit before tax up 4 per cent at £33.7m*
• Increase of 4 per cent in earnings per share to 51.9p*
• Dividend up 10 per cent to 19.9p per share
* Pre-exceptional gain
1
Cranswick plc - Report & Accounts 2008
2
Contents
Chairman’s statement
Review of activities
Group operating and financial review
Group Directors and business locations
Directors
Report of the Directors
Cranswick and the environment
Group income statement
Group statement of recognised income and expense
Company statement of recognised income and expense
Group balance sheet
Company balance sheet
Group cash flow statement
Company cash flow statement
Notes to the accounts
Corporate governance statement
Statement of Directors’ responsibilities in relation to the financial statements
Directors’ remuneration report
Report of the auditors to the members of Cranswick plc
Advisers
Shareholder information
Some of the awards in recent years to Cranswick businesses
Production facilities - see inside back cover
4
9
15
22
23
25
29
30
31
31
32
33
34
35
36
68
72
73
78
80
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83
3
Cranswick plc - Report & Accounts 2008
Chairman’s statement
Continued growth delivers record profits.
The past year has seen continued growth for Cranswick.
Turnover, which has been restated in accordance with IAS 18, rose 17 per cent to £598.9 million and profit before tax rose
8 per cent to £35.3 million. Earnings per share rose 11 per cent to 55.9 pence.
The results for both this year and last year include the benefit of exceptional gains. This year the amount is £1.6 million and
is principally attributable to the sale of the feed milling business, reported to Shareholders previously. The balance relates
to other asset disposals as does the exceptional gain of £0.3 million in the previous year.
Prior to these exceptional gains, profit before tax increased by 4 per cent to £33.7 million and earnings per share were up
by 4 per cent to 51.9 pence per share.
There were strong increases in sales in both the food and pet businesses and this is considered in more detail in the review
of activities.
Turnover in the food activities was 17 per cent higher than the previous year which was particularly pleasing. As indicated
to Shareholders earlier in the year the Company came under margin pressure as a result of sales price deflation, rising raw
material prices in the second half of the year and the devaluation of Sterling against the Euro, the latter, in particular,
impacting the charcuterie business. As is usual, there is a time lag before increased costs suffered by manufacturers can be
reflected in selling prices. I am pleased to report that following increased selling prices in the primary processing activities
towards the end of the year we are now also starting to see selling price increases in our further processing activities.
Major projects encompassing the integration of DeliCo, acquired in November 2006, and the commissioning of the new
‘air-dried bacon’ factory were completed during the year and the benefits that they bring are important elements of
our strategic growth plans. During the year the minority shareholding in the bacon business was acquired. All Cranswick
businesses are now wholly owned.
The pet business, which accounts for 7 per cent of overall Company sales, had a good year and saw turnover rise by 29 per
cent. The aquatics activity had to cope with the disruption of a fire at the Chorleywood site in December 2006 but still went
on to deliver record results. The premises damaged by the fire were replaced and the site was fully operational a year later.
The pet products business was impacted by soaring raw material costs early in the year but recovered strongly during the
second half as these were incorporated into increased selling prices.
Cash generation a key feature
The cash generated from operations was strong at £40.2 million, notwithstanding an increase in working capital of £8.6
million. Tax, interest and dividend payments amounted to £22.1 million and the cash spent on the purchase of fixed assets,
as part of the strategy for continued growth, was more than double the previous year at £25.3 million. This produced a
cash outflow of £1.8 million, leaving year-end net borrowings at £78.4 million, 50 per cent of shareholders' funds. The total
borrowing facility available to the Group at the year-end was substantially ahead of that figure. Interest cover improved
from 7.9 to 8.3 times.
Dividend increase of 10 per cent
The Board is proposing an increase in the final dividend of 10 per cent to 13.4p per ordinary share. Along with the interim
dividend of 6.5p per share paid in January 2008 this makes a total for the year of 19.9p per ordinary share, an increase
of 10 per cent on last year’s 18.1p. The final dividend, if approved by Shareholders, will be paid on 5 September 2008 to
Shareholders on the register at the close of business on 4 July 2008. Shares will go ex-dividend on 2 July 2008. Shareholders
will again have the option to receive the dividend by way of scrip issue.
4
5
Cranswick plc - Report & Accounts 2008
6
The past year has seen
continued growth for
Cranswick.
35.3
32.7
31.1
21.6
21.2
19.8
17.5
11.7
9.3
7.1
Profit before tax
1990 - 2008 (£m)
5.0
4.0
3.0
3.1
2.2
2.3
1.7
1.4
0.9
'90
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
Board confident in its strategy for Cranswick
The Board’s strategy in developing the business has been to establish a presence in a number of related and growing
areas of the food sector emanating from its origins in pig feed and pig production. This has seen the Company establish a
significant presence within fresh pork, cooked meats, bacon, sausage, charcuterie and sandwiches. Within this sphere of
activities the Company has focused on premium categories which have been the stronger growing areas of the market.
The activities in the pet sector evolved from the original agribusiness activity and once again the Company has a presence
in growth categories.
This strategy, which has been coordinated through acquisitive and organic developments, has delivered strong growth
for Shareholders. Over the past 10 years, compound annual rates of growth in turnover, profit before tax, earnings per
share and dividends per share have all been well into double digits. The Board is confident that Cranswick with its modern,
efficient facilities producing a range of quality products which appeal to the tastes of today’s consumer can continue to
generate strong growth in its business over the next 10 years.
Board change
Following a period of illness Noel Taylor resigned from the Board in March 2008. Noel joined the Board in 1992 as
Managing Director of the cooked meat operation and has been a non-executive director since 1999. On behalf of everyone
at Cranswick, I would like to thank Noel for the contribution he has made to the business and wish him well in his
recovery.
The key asset of the business is the staff
The results for the past year have been delivered by operational management teams at each of our business units who
possess great expertise and who have been supported by an enthusiastic and talented team of employees. To all of these,
many of whom have an interest in the share capital of the Company through share ownership and employee share option
schemes, I extend the thanks and appreciation of the Board.
We look ahead with confidence
The Company has had to absorb increases in its cost base during the second half of the year and further increases are
anticipated. Cost increases to date are being incorporated into selling prices on a phased basis, as anticipated, during the
first quarter of the new financial year. With this positive development and with the underlying growth in the categories
in which we operate set to continue, we look forward to Cranswick’s further successful development.
Martin Davey
Chairman, 19 May 2008
7
Cranswick plc - Report & Accounts 2008
8
Review of activities - Food
by the Chief Executive Bernard Hoggarth
Year of continued growth.
It is very pleasing to be able to report continued growth in food group sales over the past year. Sales grew by 17 per cent
in the year to £559 million. Almost 80 per cent of these sales (£440 million) were to our multiple retail customers. Food
service growth continued to be strong too, with sales in excess of £38 million. The food group’s focus continues to be in
the premium sector.
During the second half of the year raw material inflation was experienced across most categories which impacted margins.
The process of passing on this inflation to our customers and ultimately to the consumer is challenging, due to the
competitive nature of the retail sector. Our teams have worked tirelessly on these ‘inflation’ projects and I am pleased
to report that there was some success in quarter four, and this has gained momentum into quarter one of the new
financial year.
The fresh pork business based in East Yorkshire has now commenced work on a new primary processing facility. Construction
work will be ring fenced and, I am pleased to say, will not interfere with the smooth running of the business. The project
should be completed during 2009 and will make the site the most technically advanced pork processing plant in the UK.
It also ensures the local pig farming community has a modern, efficient, well invested facility situated in the centre of the
largest pig producing area in the country. Pork sales grew by 15 per cent in the year, with retail-packed volumes for the
major multiples and our premium range of fresh pork particularly strong. Extra matured pork in this premium range is
produced from an outdoor-based system with farmers using a specialist breed of pig and sire line. The food group will be
supplying its summer eating range of pork products for the barbecue season to its major retail customers.
Gourmet sausage sales were buoyant during the year with sales increasing by 19 per cent. We successfully launched our
new brand ‘Simply Sausages’ into the retail sector and further listings are expected during the year. We also produce,
under licence, the ‘Weight Watchers’ sausage range. New production capacity was tested to the limit at Christmas and it
proved to be the most successful period ever in the factory with 100 per cent customer service levels, and volume peaking
the week prior to Christmas at almost 500 tonnes of sausages. New business wins have helped bolster sales and offer
further opportunities for growth going forward.
I am pleased to report that the new Cranswick Gourmet Bacon Company facility, one of the largest projects undertaken in
the business, was completed on time. With the new site operational, it enabled us to achieve 100 per cent service levels
during the hectic Christmas build up. This was even more satisfying considering the level of labour intensive products
manufactured at this time of year. Sales grew by a very pleasing 44 per cent year on year. In a relatively new and developing
area for the group, we are delighted with this growth. We successfully launched gammon joints, applewood smoked
back bacon, organic variations and we also commenced the slicing and packing of product under the ‘Weight Watchers’
brand. We were delighted that the ‘Taste the Difference’ applewood smoked back bacon received The Grocer’s own label
excellence award recently. The final phase of the site development was the recent installation of a ‘Wiltshire curing’
facility. The Wiltshire curing process is one of the oldest, traditional methods of curing bacon. In our true gourmet style,
we will additionally air dry the product to further enhance the flavour and eating experience. The sales shift into the
premium sector seems finally to have arrived in the bacon category. With our new facility we are well placed to capitalise
on this trend.
Cranswick Convenience Foods, the cooked meat business, had a very busy year with the integration of the DeliCo facility
and the introduction of additional business wins into that site. This, along with organic growth, increased sales by 32 per
cent. Operating from five sites and producing deli products as well as pre-packed sliced meats, the business cooks beef
and poultry as well as pork based products. The cooked meat business experienced significant raw material inflation
during the final quarter, which in the case of beef and turkey was exceptional and of such magnitude that the absorption
of these increased costs proved difficult. Extra volume and revenue growth helped the business dilute some of this cost
9
Cranswick plc - Report & Accounts 2008
and supported margins until price increases were achieved. The UK pre-packed cooked meat market grew by almost 4
per cent in the past year, but the deli market contracted by just over 1 per cent. These trends are a major focus for the
cooked meat business and together with customers’ changing shopping habits and their desire for new and inspirational
products is the reason we have a large new product development team of seventeen chefs and technicians spread around
the Convenience Foods production facilities.
Continental Fine Foods (CFF) sales increased by 20 per cent as the consumer trend to try new continental products continues.
New products in the Italian range were launched, from which we anticipate strong growth. Hand-made ‘artisan’ fresh
Italian pasta has recently been launched. This project so typifies the role of CFF today. The procurement team received
their brief and after much searching, a family firm who produced hand-made pasta products near Modena, in Italy, was
identified. We believed the provenance and quality of the ‘home-made’ pasta and fillings were exceptional. We helped
the Italian producer achieve its factory accreditation, assisted in the development of ranges for the UK market and
arranged visits to Italy by our customer’s technical and development teams. The range was launched, with CFF arranging
importation and distribution. We are soon to launch a range of speciality pâtés by the celebrated chef Albert Roux and
again this underlines the quality focus of our food business. In addition to raw material inflation, the CFF business had to
cope with the devaluation of Sterling against the Euro in the second half of the year although the impact on the business
was mitigated to some extent by the use of forward exchange contracts.
The Sandwich Factory sales rise of 7 per cent was pleasing and ahead of market rates. The development of the customer
base whilst causing some initial impact on margins, looks set to put the business in a stronger position going forward.
The business suffered cost inflation in bread and dairy products, but enters the new financial year with more volume and
margin recovery underway.
It is a credit to our technical teams across the group that all ten food production sites operate from BRC (global standard)
‘A’ grade facilities. As a business we believe that as well as being innovative and efficient food producers we must also be
very aware of the ‘impact on the environment’ from our operations. As such, we work with the Carbon Trust and we are
the first meat sector company to sign up to FHC2000, with a target of reducing our processed water usage by 20 per cent
over the next twelve years. We have set up, through ENVIROWISE, inspections of all sites to establish the carbon footprint
for the individual business units and also to establish current usage for water, energy, waste, packaging and emissions
expressed per tonne of finished product produced. By using environmental KPI’s our site directors are responsible for
reporting progress to the Board going forward, and reducing the environmental impact in subsequent years.
Substantial investment over recent years has given Cranswick some of the most modern and efficient facilities in the
industry. Our excellent, experienced management teams, with their focus on quality, product development and innovation
set us apart from many of our competitors. We are also well placed to continue benefiting from the premiumisation of
many of the categories in which we operate. I feel confident that going forward the business is well placed to continue its
record of growth.
10
11
Cranswick plc - Report & Accounts 2008
Review of activities - Pet
by the Chief Executive Derek Black
Strong growth with sales up 29 per cent at £39.7 million (2007 – £30.6 million)
with increased sales in both pet and aquatics.
Pet Products delivered a strong performance in both bird and small animal food with sales up substantially, reflecting
excellent growth in both convenience and bulk pack. During the first half of the year the business suffered from spiralling
global raw material prices, which impacted margins. This issue was subsequently rectified by way of increased selling
prices.
New product launches continue to be at the heart of business expansion with 30 new products being brought to market
during the year. It is pleasing to note that sales of wild bird accessories have benefited from this investment with year on
year growth of some 80 per cent, with a further 25 new products on stream for this season. The Nature’s Feast brand is now
recognised as one of the category leaders and represents innovation, quality, functionality and excellent value for money.
Our development strategy remains unchanged. The focus has been on high street budget retail, national grocery
and pet retail chains, wholesale discount multiples, retail membership groups and mail order and we have enjoyed
continued growth.
During the year we obtained the Investors in People (IIP) award. This will be the platform for other accreditations in our
structured development. The environment is at the forefront of our decision-making and in excess of 85 per cent of waste
produced at the Driffield site is recycled. As an example, hessian sacks from supplies of raw materials are being processed
into hanging basket liners.
We have streamlined operations, centralised our raw material holding facilities and leased a 50,000 sq ft warehousing
facility situated close to the Pet Products site at Driffield.
Tropical Marine Centre (TMC) delivered increased sales, despite the disruption caused by a major fire at the Chorleywood
facility in December 2006 which has been previously reported. I am pleased to confirm that the re-build and fit out was
completed on time and the business has relocated from temporary accommodation in Watford. Sales of marine livestock
were boosted by exclusive access to new fisheries at the Great Barrier Reef in Australia, which became available for the
first time. Dry goods sales benefited from a strong year for new product introductions in TMC`s highly popular and award
winning V2 range. This included products like the V2Skim which is specially designed to fit in the growing range of smaller
reef tanks. The V2 range has greatly widened the appeal and affordability of the marine hobby, helping to sustain strong
growth in the sector. Other new products included a greatly enlarged and rebranded range of Gamma frozen foods. We
have also developed a range of eco–friendly, low carbon footprint LED lighting systems under the Aquaray brand. The
“Aquabeam 500” is the first product to be launched under this range and is the first affordable solid state lighting system
of its kind, affording substantial energy savings on conventional lighting systems. We believe this product will suit many
other business applications and is just the start of many future opportunities.
The two satellite sites at Manchester and Bristol continue to perform above expectation and this has provided us with the
confidence to expand operations into mainland Europe. We have secured a site under a leasehold arrangement in Lisbon,
Portugal and this will be fully operational in early autumn, servicing customers in major towns and cities throughout
Portugal and Spain.
We have the most advanced pet food manufacturing and aquatic facilities in Europe which, along with dedicated staff and
strong management teams, will drive our expansion plans over the years ahead.
12
13
Cranswick plc - Report & Accounts 2008
14
Group operating and financial review
Nature, objectives and strategies
The Group’s businesses
The Group’s operations are organised into two business divisions, food and pet. The performance of these two divisions
in the year is discussed in the review of activities within the Statement to Shareholders on pages 9 to 12. Both businesses
operate entirely in the UK although a proportion of sales are export. The food business manufactures a range of high
quality, predominantly fresh products including fresh pork, sausages, bacon and cooked meats for sale to the high street
food retailers. It also supplies a range of pre-sliced, pre-packaged charcuterie products for sale into these same customers.
The markets in which the food business operates are competitive both in terms of pricing from fellow suppliers and the
retail environment in general. The UK food retail market is known to be amongst the most competitive in the world.
Despite this, Cranswick has a long record of increasing sales and profits through a combination of investing in modern
efficient factories, developing a range of quality products and making sound acquisitions. The businesses are under the
control of stable, experienced and talented operational management teams supported by a skilled workforce. The pet
business produces a range of bird and small animal food for sale into specialist pet and more general retail outlets, as
well as selling tropical marine fish and aquatic products largely into specialist retailers both in the UK and abroad.
Environmental matters
The Board believes that good environmental practices support the Board’s strategy by enhancing the reputation of
the Company, the efficiency of production and the quality of products. The industry is subject to a range of UK and EU
legislation. Environmental standards are being tightened on a regular basis and require increasing levels of investment.
Compliance imposes costs and prolonged failure to comply could materially affect the Group’s ability to operate.
Further information on the Group’s policies on minimising its environmental impact is given in our Environmental Report
on page 29.
Business objectives
It is the Board’s view that meeting the following business objectives is key to achieving the financial and non-financial
measures that increase shareholder value:
• Delivering innovative, quality products to our customers
• Maintaining the highest level of service to our customers
•
Improving operational efficiency
• Securing employee health and safety
• Maximising returns on investment
Business strategies
The Group’s market strategy is to focus on the growing quality end of the markets in which we operate, to establish
meaningful and long-lasting relationships with our major customers by a combination of product development and high
service levels and to invest in quality facilities and the latest equipment to enable us to operate as efficiently as possible.
Each operating unit within the Group is given the responsibility for developing its own plans to deliver the objectives
of the Group with particular emphasis on growing sales through product innovation and high service levels, improving
operational efficiency and securing employee health and safety. The role of the Board in achieving Group objectives is to
support operational management and to identify suitable acquisitions that will take the Group into new and growing
areas of the market, will open up new customer relationships to the Group or will consolidate existing market positions.
15
Cranswick plc - Report & Accounts 2008
Business KPIs
The Board has assessed that the following KPIs are the most effective measures of progress towards achieving the Group’s
objectives. A report on performance against these KPIs is given below.
Organic sales growth – year on year increase in sales revenue excluding the impact of acquisitions and disposals.
Gross return on sales – gross profit as a percentage of sales revenue.
Net return on sales – operating profit as a percentage of sales revenue.
Free cash flow – cash generated from operations less tax and interest paid.
Current and future development and performance
Business development and performance
The key features of the year have been the record profit before tax for the Group and the strong operating cash generation
from operating activities, which enabled us to fund a record level of capital expenditure, with only a small increase in
borrowings. The record of unbroken growth in profits now goes back 20 years. The trading environment in which we
operate has remained challenging; in particular there have been delays in passing on increases in raw material costs
and the impact of Sterling’s devaluation against the Euro, particularly in our Charcuterie business. We have experienced
continuing competitor pressure although the efficiencies that we are achieving as we put extra volumes through our
factories have mitigated to some extent against those pressures. In addition we are making good progress in recovering
cost price increases.
Group revenue
Group revenue from continuing activities
2008
£598.9m
2007
(Restated)
£510.5m
The Group’s revenue from continuing activities has increased by 17 per cent, but sales were 21 per cent ahead on a like-for-
like basis after accounting for the sale of the animal feed business in May and the acquisition of DeliCo in November 2006.
Food sales increased by 20 per cent on a like-for-like basis, with fresh pork growing at 15 per cent, sausage at 19 per cent,
bacon at 44 per cent, cooked meats at 27 per cent, charcuterie at 20 per cent and sandwiches at 7 per cent. Sales in the pet
activities increased by 29 per cent, with bird food growing at 42 per cent and aquatic products at 6 per cent.
Profit before tax
Group operating profit before exceptional items
Net finance costs
Pre-tax profit before exceptional items
Exceptional items
Profit before tax
£m
38.4
(4.7)
33.7
1.6
35.3
2008
£m
37.1
(4.7)
32.4
0.3
32.7
The increase in group operating profit before exceptional items is largely attributable to the growth in profits in the
pet activities.
Performance against KPIs
Organic sales growth
Gross return on sales
Net return on sales
Free cashflow
2008
21.0%
14.2%
6.4%
£25.9m
2007
(Restated)
16.0%
16.7%
7.3%
£29.9m
The Company has seen substantial growth in organic sales over the past year driven by its expertise in product development,
service levels, quality and value and further sales growth is anticipated in the next twelve months. During the year the
Company came under margin pressure as a result of sales price deflation, rising raw material prices and devaluation of
Sterling against the Euro and this is reflected in the gross and net returns on sales. Principal cash flows are discussed on
page 18.
16
Future development
The Group will continue to seek to increase sales through a combination of product development with existing customers
and business gains with new ones. The standard of our factories will be maintained at the highest level and suitable
acquisition opportunities will be pursued.
Resources, risks and relationships
Resources
The Group aims to safeguard the assets that give it competitive advantage, being its reputation for product innovation,
product quality, food safety and service levels; its modern well-equipped factories; its operational management and its
skilled workforce.
Reputation
It is the responsibility of local operational management assisted by their own product development team, Group Technical
and Group Health & Safety to maintain and where possible enhance the Group’s reputation for product innovation, product
quality, food safety and service levels.
Factories
The Group has some of the best-invested, modern facilities in the industry, having invested £81 million over the past five
years, and it intends to continue investing to ensure that it maintains its competitive edge.
Employees
The Group aims to recruit, train and retain employees who are valued for their contribution and able to fulfil their potential
in meeting the business objectives of their operating unit. The Group companies each have their strategies for retaining
staff, including the provision of competitive terms and conditions and share options. The Group has had a Savings-related
Share Option Scheme in place for over 10 years, which is open to all employees with 2 years service and has proved very
successful with many staff now also shareholders.
Principal risks and uncertainties
The Group annually carries out a formal exercise to identify and assess the impact of risks on their businesses and the
exercise has recently been reviewed. The more significant risks and uncertainties faced by the Group, in line with the rest
of the food manufacturing sector, were identified as customer retention, food scares, raw material prices, margins and
profitability, and competition. The corporate governance report on pages 68 to 71 describes more about the Group’s risk
management processes.
Relationships
The Board encourages businesses to support local community organisations and charities in the locations in which they
operate.
Financial position and performance
Exceptional items
The exceptional item in 2008 relates to the profit on sale of the feed milling business of Cranswick Mill of £1.1 million,
profit on disposal of stock and fixed assets at Tropical Marine of £0.8 million following settlement of the material damage
insurance claim relating to the fire at the Chorleywood premises in December 2006, less £0.3 million provided against
future rental and restatement costs for an unoccupied leasehold property in Thornaby, North Yorkshire, all stated before a
tax credit of £0.2 million. The exceptional item in 2007 relates to the profit on sale of the former pet products facility at
Beverley, East Yorkshire. Deferred tax of £229,000, of which £150,000 relates to the prior year, was provided on the rolled-
over gain.
Finance costs
Finance costs of £4.7 million were in line with the previous year, with increased net debt resulting from the substantial
capital investment programme in the year, partially offset by lower UK interest rates.
Taxation
An analysis of the tax charge is set out in note 8 to the financial statements. The total tax charge as a percentage of profit
before taxation was 27.4 per cent in the current year and 30.6 per cent in 2007, the current year rate benefiting from the
net tax credit on the exceptional items referred to above and a lower deferred tax charge which reflects the reduction in
the Corporation Tax rate from 30% to 28% from 1 April 2008. The standard rate of UK Corporation Tax was 30% in both
years. In addition the Group benefits from tax amounts taken directly to equity and included in the Group Statement of
Recognised Income and Expense.
17
Cranswick plc - Report & Accounts 2008
Earnings per share
Basic earnings per share before exceptionals increased by 4 per cent to 51.9 pence. Due to the large exceptional gain in the
year, earnings per share after exceptionals increased by 11 per cent to 55.9 pence. The average number of shares in issue,
which is the basis of both calculations, was 45,832,000 (2007 - 44,967,000).
Cash flow
Cash generated from operating activities was slightly down on the previous year at £40.2 million (2007 - £41.8 million) of
cash and cash equivalents. The net cash outflow from investing activities of £20.6 million reflects capital additions of £25.3
million less sales proceeds of £4.7 million. The previous year’s outflow was £24.3 million and comprised the cash component
of the Delico acquisition of £13.5 million plus capital additions of £12.0 million less sales proceeds of £1.2 million. The £17.8
million of net cash used in financing activities in 2008 is largely due to interest paid of £5.3 million, dividends paid of £7.7
million and repayment of borrowings of £5.4 million. The prior year cash outflow from financing of £10.1 million was
largely due to interest paid of £4.0 million and dividends paid of £6.5 million. The additional borrowings of £10.0 million
to fund the DeliCo acquisition and £1.8m proceeds from the issue of share capital were almost offset by the repayment of
borrowings of £11.4 million. The overall result is a net decrease in cash and cash equivalents of £7.7 million (2007 - £0.5
million).
Capital structure
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy
capital ratios in order to support its business and maximise shareholder value.
The Group regards its Shareholders’ equity as its capital and manages its capital structure and makes adjustments to it, in
light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives,
policies or processes during the years end 31 March 2008 and 31 March 2007.
The Group’s capital structure is as follows:
Net debt (note 25)
Cranswick plc shareholders’ equity
Capital employed
2008
£m
78.4
155.3
233.7
2007
£m
75.9
135.7
211.6
More details about the Group’s capital structure are set out in Note 21 Financial Instruments.
Distributions, capital raising and share repurchases
Under IFRS, dividends paid and proposed during the year are no longer shown on the profit and loss account but are
charged against reserves when they are paid. Details of dividends paid and proposed during the year are given in the
Directors’ Report on page 25. The proposed final dividend for 2008 together with the interim paid in January 2008 amount
to 19.9 pence per share which is 10 per cent higher than the previous year. The increase in share capital of the Group
comprises 167,554 of share options exercised during the year and 103,611 in respect of scrip dividends. There were no share
repurchases during the year.
Treasury policies
Functional currency
The functional currency of the Group is Sterling.
Foreign currency risk
The major foreign exchange risk facing the Group is in the purchasing of product in the charcuterie and pet food operations.
The major currencies involved are the Euro and the US dollar. The policy of the Group is to seek to mitigate the impact of
this risk by taking out forward contracts with UK banks for up to 12 months ahead and for amounts that commence at
approximately 25% of the requirement and move progressively towards full cover. At least 2 members of the main board
attend the monthly meetings of the subsidiary boards at which the key decisions on currency cover are taken.
18
19
Cranswick plc - Report & Accounts 2008
20
Interest rate risk
The main board set the policy on interest rate risk at the time of the Perkins acquisition on 6 January 2005, when borrowings
increased significantly. The Group’s policy is to manage its cost of borrowing using a mix of fixed and variable rate debt.
Whilst fixed rate interest bearing debt is not exposed to cash flow interest rate risk, there is no opportunity for the Group
to enjoy a reduction in borrowing costs in markets where rates are falling. In addition, the fair value risk inherent in fixed
rate borrowing means that the Group is exposed to unplanned costs should debt be restructured or repaid early as part of
the liquidity management process. In contrast, whilst floating rate borrowings are not exposed to changes in fair value, the
Group is exposed to cash flow risk as costs increase if market rates rise. Cover was implemented by taking out an interest
rate swap agreement with a UK bank on the amortising portion (£45 million) of the medium term loan drawn down to
finance the acquisition. This is being repaid at the rate of £5.625 million every 6 months from March 2006 to September
2009. The policy is reviewed from time to time as circumstances change. The monitoring of interest rate risk is handled
entirely at head office based on the monthly consolidation of cash flow projections and the daily borrowings position.
Credit risk
Practically all sales are made on credit terms, the majority of which are to the major UK food retailers. Overdue accounts
are reviewed at the monthly board meetings of the operations. The incidence of bad debts is very low. Every attempt is
made to resist advance payments for goods and services; where this proves impossible, arrangements are put in place,
where practical, to guarantee the repayment of the monies in the event of default. For all major customers, credit terms
are agreed by negotiation and for all other customers, credit terms are set by reference to external credit agencies.
Liquidity risk
The Group has historically been very cash generative. The bank position for each operation is monitored on a daily basis
and capital expenditure is approved at the monthly board meeting of each operation at which at least two members of the
main board are present and reported at the subsequent monthly main board meeting. Major projects are approved by the
main board. Each operation has access to the Group’s overdraft facility and all term debt is arranged centrally. The current
bank facilities available to the Group are a term loan of £45.0 million repayable in January 2010, an amortising loan facility
of £16.875 million repayable at the rate of £11.25 million per annum, a revolving credit facility of £10.0 million and an
overdraft facility of £20.0 million. Unutilised facilities at 31 March 2008 were £14.3 million (2007 - £25.2 million) following
repayment of borrowings of £11.25 million during the year.
Price risk
The major exposure the Group has to raw material price fluctuations is pig meat, part of which is as a result of currency
movements. The Group does not seek to hedge against pig price movements because of the downside risk.
Further details of the Group’s financial instruments are disclosed in Note 21 to the accounts.
Going concern
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in
preparing the financial statements.
On behalf of the Board
John Lindop
Finance Director, 19 May 2008
21
Cranswick plc - Report & Accounts 2008
22
Directors
Executive directors
✤
Martin Davey, Chairman
Martin qualified as a chartered accountant with Pannell Kerr Forster. He joined Cranswick and became Finance
Director in 1985. He was appointed Chief Executive in 1988 and became Executive Chairman on 26 July 2004.
Since 5 April 2004 Martin has been a non-executive director of Thorntons plc, on which he spends one day per
month. All fees receivable are paid to the Company.
John Lindop, Finance
John qualified as a chartered accountant with Robson Rhodes’ London office. He spent ten years with Northern
Foods plc where he was latterly Group Financial Controller and Company Secretary. In 1992 he joined Cranswick
as Company Secretary and was appointed to the Board as Finance Director in 1993. Since 23 March 2007 John has
been a non-executive director of Black Sheep Brewery plc, on which he spends one day per month. All fees
receivable are paid to the Company.
Bernard Hoggarth, Chief Executive Food
Bernard holds a National Diploma in Agriculture from the Norfolk College of Agriculture. He joined Cranswick
in 1978, focusing on the agribusiness activity before becoming involved in the development of the food
manufacturing business during the 1990s. He was appointed a director in 1988 and Chief Executive of Food
in 2004.
Derek Black, Chief Executive Pet
Derek gained experience in the agricultural industry before joining Cranswick in 1980. He was responsible for the
development of the grain trading business until its sale in 1996. He became involved in the formation of the pet
business in 1993 and has focused exclusively on its activities since 1996. He was appointed a director in 1988 and
Chief Executive of Pet in 2004.
Adam Couch, Food
Adam joined Cranswick in 1991 as a graduate trainee from Hull University, where he graduated in accountancy.
Adam was appointed a director in 2003 and is Managing Director of the fresh pork operations.
Non-executive directors
✤✦ ✲
John Worby
John is a chartered accountant with many years experience in the food industry, having worked for Uniq plc
(previously Unigate PLC) from 1978 until 2002, in various roles including group finance director and deputy
chairman. He was appointed a non-executive director of Cranswick plc on 1 August 2005 and is Senior Independent
Director and Chairman of the Audit Committee. John has a number of non-executive directorships including
Genus plc and Smiths News plc. He is also a trustee of Uniq Pension Trustees Limited.
✤✦ ✲
Patrick Farnsworth
Patrick has many years experience in the food industry, having worked for William Jackson & Son Limited, a Hull-
based private company, since 1965, where he was Joint Group Managing Director from 1995 until his retirement
in 2005. He was appointed a non-executive director of Cranswick plc on 1 August 2004 and was the senior
independent director until 1 August 2005.
✲ Member of Remuneration Committee
✦
✤
Member of Audit Committee
Member of Nomination Committee
23
Cranswick plc - Report & Accounts 2008
24
Report of the Directors
The Directors submit their report and the audited accounts of the
Company for the year ended 31 March 2008.
Principal activities, business review and future developments
The Company’s activities are focused in the food and pet sectors. A review of the business and future development of
the Group and a discussion of the principal risks and uncertainties faced by the Group is presented in the Statement to
Shareholders on pages 4 to 12 and in the Group Operating and Financial Review on pages 15 to 21.
Results and dividends
The profit on ordinary activities before taxation was £35.3 million (2007 - £32.7 million). After a taxation charge of £9.7
million (2007 - £10.0 million), the profit for the year is £25.7 million (2007 - £22.7 million). An interim dividend of 6.5p per
ordinary share was paid on 25 January 2008. The Directors recommend the payment of a final dividend for the year, which
is not reflected in these accounts, of 13.4p per ordinary share which, together with the interim dividend, represents 19.9p
per ordinary share, totaling £9.2 million (2007 – 18.1p per ordinary share, totaling £8.3 million). Subject to approval at
the Annual General Meeting, the final dividend will be paid in cash or scrip form on 5 September 2008 to members on the
register at the close of business on 4 July 2008. The shares will go ex-dividend on 2 July 2008.
Financial instruments
The Group’s risk management objectives and policy are discussed in the Treasury Policies section of the Group Operating
and Financial Review on pages 18 to 21.
Directors and their interests
The appointment and removal of a director is governed by the Articles of Association and within the Terms of the
Nomination Committee. The Directors of the Company currently in office are as stated on page 23. Noel Taylor, following
a period of ill health, resigned as a director on 14 March 2008. Each of the other Directors served for the whole of the year
under review. Derek Black and Patrick Farnsworth retire in accordance with the Articles of Association and, being eligible,
each offers himself for re-election.
Details of the Directors’ beneficial interests in the ordinary share capital of the Company are included in the Directors’
Remuneration Report on pages 73 to 77.
Major shareholders
The Company has been informed of the following interests at 9 May 2008 in the 46,231,031 ordinary shares of the
Company:
Number of Shares
% of issued share capital
AMVESCAP PLC
Legal & General Investment Management
Jupiter Asset Management
AXA Framlington Investment Managers
Aberforth Partners
Insight Investment
13,393,294
3,013,030
2,209,299
1,684,490
1,653,300
1,627,784
28.97
6.52
4.78
3.64
3.58
3.52
Share capital structure
The company has one class of shares, being ordinary shares of 10p each. The authorised, allotted and fully paid up share
capital is shown in note 22. There are no special rights pertaining to any of the shares in issue.
The Directors of Cranswick plc have received limited authority to disapply shareholders pre-emption rights in certain
circumstances, to authorise the Company to buy back a proportion of the Company’s share capital and to allow the Directors
to allot shares. Further resolutions will be placed before the Annual General Meeting to renew these powers.
Employment policies
The Company’s policy on employee involvement is to adopt an open management style, thereby encouraging informal
consultation at all levels about aspects of the Company’s operations. Employees participate directly in the success of the
business by participation in the SAYE share option schemes.
Employment policies are designed to provide equal opportunities irrespective of colour, ethnic or natural origin, nationality,
sex, religion, marital or disabled status. Full consideration is given to applications for employment by and the continuing
employment, training and career development of disabled people.
25
Cranswick plc - Report & Accounts 2008
Payment policy
The Group does not have a formal policy that it follows with regard to payment to suppliers. Payment terms are agreed
with each supplier and every endeavour is made to adhere to the agreed terms. The average credit terms for the Group
as a whole, based on the year-end trade creditors figure and a 365 day year, are 41 days. The average credit taken by our
customers on a similar basis is 35 days.
Auditors
Ernst & Young LLP have expressed their willingness to continue in office and a resolution proposing their re-appointment
will be submitted at the Annual General Meeting.
Directors’ statement as to disclosure of information to auditors
The Directors who were members of the Board at the time of approving the Directors’ report are listed on page 23. Having
made enquiries of fellow Directors and of the Company’s auditors, each of these Directors confirm that:
•
•
to the best of each Director’s knowledge and belief, there is no information relevant to the preparation of their
report of which the Company’s auditors are unaware; and
each Director has taken all the steps a director might reasonably be expected to have taken to be aware of relevant
audit information and to establish that the Company’s auditors are aware of that information.
Significant agreements
There are no agreements that the Company considers significant and to which the Company is party to that would take
effect, alter or terminate upon change of control of the Company following a takeover bid.
Long term incentive plan
In the event of a general offer being made to acquire part or all of the issued share capital of the Company as a result of
which the offeror may acquire control of the Company, award holders under the Cranswick plc Long Term Incentive Plan
(“LTIP”) will have an opportunity to exercise their awards either:
(a)
immediately before the time at which the change of control of the Company occurs or any condition subject
to which the offer is made has been satisfied (“Take-over Date”) but conditional on the Take-over Date occurring, if
the Remuneration Committee issues a written notice in advance of the Take-over Date to award holders; or
(b) at any time within 6 months following the Take-over Date, in any other case.
In the event that the Court sanctions a scheme of arrangement under section 425 Companies Act 1985 (or its replacement
provisions under Companies Act 2006) in connection with a scheme for the Company’s reconstruction or amalgamation
with another company, award holders under the LTIP may exercise their awards during the six month period commencing
on the date upon which the scheme of arrangement is sanctioned by the Court. The LTIP also contains provisions enabling
award holders to exercise their awards if a person becomes entitled to issue a compulsory acquisition notice under the
provisions relating to the compulsory acquisition of a company set out in the Companies Act 1985 (or its replacement
provision under the Companies Act 2006). The period allowed for exercise in these circumstances is any time up to the
seventh day before the final day upon which that person remains entitled to serve such a notice.
In each case, the extent to which awards are capable of exercise depends on the extent to which the performance targets
(as adjusted or amended) have been satisfied.
Articles of association
There are no special rules relating to the alteration of the Articles of Association, any amendments are approved by the
Shareholders. Revised Articles of Association to comply with the Companies Act 2006 are to be included in the Notice of
the Annual General Meeting accompanying this Report and Accounts.
Annual General Meeting and special business to be transacted at the Annual General Meeting
The Notice convening the Annual General Meeting can be found in the separate Notice of Annual General Meeting
accompanying this Report and Accounts.
Details of the Special Business to be transacted at the Annual General Meeting are contained in the separate letter from
the Chairman which also accompanies this Report and Accounts.
By order of the Board
Malcolm Windeatt
Company Secretary, 19 May 2008
26
27
Cranswick plc - Report & Accounts 2008
28
Cranswick and the environment
Managing and where possible reducing the impact that the business has on the environment continues to be an important
measure of the Company’s performance. Retail customers, financial investors and consumers all have a growing interest in
the preservation of the environment, and seek assurances that the business operates with the utmost care.
In 2007 Cranswick recognised that in order to continue to make meaningful reductions in the environmental impact of the
business, there was a need to review and co-ordinate the Group's approach to environmental management.
In order to progress this further, an Environmental Project Management Team was established and tasked with assessing
the Group’s current performance, identifying and sharing best practice and formulating performance benchmarks that
could be used to measure the environmental performance in subsequent years.
To meet this commitment the Company would pursue the following environmental objectives:
•
•
•
•
•
•
•
•
•
•
To continually assess and improve the environmental performance and to raise levels of environmental awareness throughout the business.
To ensure compliance with all applicable environmental legislation, regulations and associated codes of practice.
To reduce emissions and prevent pollution.
To improve waste management practices.
To reduce consumption of natural resources.
To minimise noise and nuisance.
To assist in the management of the ecology.
To assist in the investigation of environmental incidents in which the Company may be involved.
To encourage customers and suppliers to use sustainable resources wherever this is possible.
To make the environmental information available to interested parties.
Cranswick has always recognised the importance of preserving the environment hence two of the largest manufacturing
sites, Preston (near Hull) and Valley Park (near Barnsley) have held certification against ISO 14001, the international
standard for environmental management, for 3 and 5 years respectively, and during 2008 it is anticipated that DeliCo (near
Milton Keynes) will be added to the list of certified sites.
In addition, Preston continues to utilise the Waste to Energy solution by processing waste from the site’s abattoir and meat
cutting operations, and where feasible, from sister sites, to generate tallow which can then be converted into bio fuel and
solids which can be converted into biomass.
The key achievements of the project to date are:
• A new Group Environmental Policy which through more efficient energy management commits the business to target a 20% reduction
of the comparative Group carbon footprint i.e. tonnes of CO2 per tonne of product produced, by the end of the 2010/11 financial year.
•
In partnership with suppliers the Company launched a new Packaging Strategy Policy which commits the business to a target of reducing
packaging weight per unit of measure of product produced by 25% by the end of 2010/11 financial year. For the year 2007 the estimate of
the savings of virgin raw material was 860 tonnes.
•
Trials are currently taking place to reduce and then remove PVC in Thermoformed production across the Group throughout 2008.
• A formal Carbon Action Plan has been agreed with the Carbon Trust which gives the Company access to environmental expertise and funding
support for the next 3 years.
• Using GHG protocol we have calculated the carbon footprint per tonne of CO2 produced per tonne of finished product dispatched for each
manufacturing site so as to establish 2007 as the bench mark year against which subsequent carbon footprint performance can be measured.
For the year 2007 the measurement for the group was 28% of CO2 tonnes per tonne of product.
•
•
Cranswick has become the first meat sector company to sign up to the FHC 2020 agreement with Envirowise and the Food Federation which
commits the Group to reducing the use of process water by 20% by 2020.
Each of the manufacturing sites has an energy and waste reduction action plan prepared by industry specialists commissioned on the Group’s
behalf by the Carbon Trust and Envirowise.
• WRAP survey has been carried out to help identify opportunities to reduce/eliminate PVC (substitution and down grading), move to RPET
(recycled content), move into recyclable substrates (Mono RPET) and work towards compostability.
Environmental progress is reported at board level against performance benchmarks established from the operation of the
business during 2007.
The necessary personnel and financial resources will be allocated to assist the Company in meeting its environmental
objectives and business plans, and in ensuring that these remain current and effective.
On behalf of the Board
Bernard Hoggarth
Chief Executive Food, 19 May 2008
29
Cranswick plc - Report & Accounts 2008
Group income statement
for the year ended 31 March 2008
2008
2007 (Restated)
Before Exceptionals
Total
Before Exceptionals
Total
Notes exceptionals
exceptionals
£’000
£’000
£’000
£’000
£’000
£’000
Revenue
3
598,893
-
598,893
510,483
Cost of sales
Gross profit
(513,701)
85,192
-
-
(513,701)
(425,383)
85,192
85,100
Operating expenses
(46,824)
-
(46,824)
(48,024)
38,368
-
38,368
37,076
-
-
-
-
-
510,483
(425,383)
85,100
(48,024)
37,076
Operating profit
Profit on disposal of property,
plant and equipment
Profit before finance
and taxation
Finance revenue
Finance costs
4
5
3
7
7
-
1,622
1,622
-
281
281
38,368
1,622
39,990
37,076
281
37,357
4
-
4
6
(4,650)
-
(4,650)
(4,707)
-
-
6
(4,707)
Profit before tax
33,722
1,622
35,344
32,375
281
32,656
Taxation
Profit for the year
Profit for the year
attributable to:
Equity holders of the parent
Minority interest
Earnings per share:
(total and continuing)
Basic
Diluted
8
24
11
11
(9,874)
187
(9,687)
(9,773)
(229)
(10,002)
23,848
1,809
25,657
22,602
52
22,654
23,796
52
23,848
25,605
22,522
52
25,657
80
22,602
22,574
80
22,654
51.9p
4.0p
55.9p
50.1p
0.1p
50.2p
51.6p
3.9p
55.5p
49.7p
0.1p
49.8p
30
Group statement of recognised income and expense
for the year ended 31 March 2008
Income and expense recognised directly in equity
Movement on hedging items:
Amount recognised in equity during the period
Amount removed from equity and included in the income statement
Exchange differences on retranslation of foreign operations
Deferred tax recognised directly in equity
Corporation tax recognised directly in equity
Net income recognised directly in equity
Profit for the year
Total recognised income and expense for the year
Attributable to:
Equity holders of the parent
Minority interest
2008
£’000
504
196
(17)
(725)
88
46
25,657
25,703
25,651
52
25,703
Company statement of recognised income
and expense
for the year ended 31 March 2008
Income and expense recognised directly in equity
Movement on hedging items:
Amount recognised in equity during the period
Amount removed from equity and included in the income statement
Deferred tax recognised directly in equity
Corporation tax recognised directly in equity
Net (expense)/income recognised directly in equity
Profit for the year
Total recognised income and expense for the year
2008
£’000
(432)
196
20
(216)
11,011
10,795
-
2007
£’000
271
98
(5)
300
712
1,376
22,654
24,030
23,950
80
24,030
2007
£’000
354
98
(118)
712
1,046
6,665
7,711
31
Cranswick plc - Report & Accounts 2008
Group balance sheet
31 March 2008
Non-current assets
Goodwill
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Other financial assets
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Other financial liabilities
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Other payables
Other financial liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Called-up share capital
Share premium account
Share-based payments
Hedging and translation reserves
Retained earnings
Equity attributable to members of the parent company
Minority interest
Total equity
M Davey
Chairman
19 May 2008
32
J Lindop
Finance Director
Notes
12
13
15
16
17
25
18
19
20
18
19
8
20
22
24
24
24
24
2008
£’000
117,756
92,721
210,477
30,638
77,348
1,029
3,770
112,785
2007
£’000
117,520
80,277
197,797
24,626
66,416
330
2,262
93,634
323,262
291,431
(73,025)
(31,811)
(3,798)
(153)
(108,787)
(8)
(50,414)
(7,463)
(1,336)
(59,221)
(65,073)
(16,933)
(3,834)
(289)
(86,129)
(37)
(61,544)
(6,150)
(1,736)
(69,467)
(168,008)
(155,596)
155,254
135,835
4,623
48,693
1,939
1,034
98,965
155,254
155,254
-
4,595
47,204
1,018
351
82,564
135,732
103
135,835
Company balance sheet
31 March 2008
Non-current assets
Property, plant and equipment
Investments in subsidiary undertakings
Current assets
Trade and other receivables
Other financial assets
Income tax receivable
Total current assets
Total assets
Current liabilities
Trade and other payables
Other financial liabilities
Income tax payable
Total current liabilities
Non-current liabilities
Other financial liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Called-up share capital
Share premium account
General reserve
Merger reserve
Share-based payments
Hedging reserve
Retained earnings
Equity attributable to members of the parent company
M Davey
Chairman
19 May 2008
J Lindop
Finance Director
Notes
13
14
16
17
18
19
19
8
22
24
24
24
24
24
24
2008
£’000
2,348
155,426
157,774
44,239
70
-
2007
£’000
2,339
155,430
157,769
25,660
306
1
44,309
25,967
202,083
183,736
(54,994)
(28,518)
(90)
(83,602)
(50,414)
(359)
(50,773)
(41,654)
(16,279)
-
(57,933)
(61,544)
(403)
(61,947)
(134,375)
(119,880)
67,708
63,856
4,623
48,693
4,000
1,806
317
70
8,199
67,708
4,595
47,204
4,000
1,806
210
306
5,735
63,856
33
Cranswick plc - Report & Accounts 2008
Group cash flow statement
for the year ended 31 March 2008
Operating activities
Profit before finance and taxation
Adjustments to reconcile group operating profit to net cash inflows from operating
activities:
Depreciation
Share based payments
Release of government grants
Profit on sale of property, plant and equipment
Increase in inventories and biological assets
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Tax paid
Net cash from operating activities
Cash flows from investing activities
Interest received
Acquisition of subsidiaries
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of subsidiary
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Proceeds from issue of share capital
Proceeds from borrowings
Issue costs of long-term borrowings
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of foreign exchange rates
Cash and cash equivalents at end of period
34
Notes
2008
£’000
2007
£’000
39,990
37,357
10,090
921
(29)
(2,170)
(6,077)
(10,209)
7,732
40,248
(9,046)
31,202
4
(54)
(25,295)
4,228
500
9,252
487
(39)
(250)
(5,329)
(9,141)
9,493
41,830
(7,936)
33,894
6
(13,506)
(11,979)
1,147
-
(20,617)
(24,332)
-
-
(5,332)
683
(5,420)
(7,734)
(17,803)
(7,218)
(494)
14
(7,698)
25
25
(3,966)
1,776
10,000
(40)
(11,395)
(6,467)
(10,092)
(530)
46
(10)
(494)
Company cash flow statement
for the year ended 31 March 2008
Operating activities
Profit before finance and taxation
Adjustments to reconcile operating profit to net cash inflows from operating activities:
Notes
2008
£’000
2007
£’000
11,284
9,089
Depreciation
Share based payments
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operations
Tax (paid)/received
Net cash from operating activities
Cash flows from investing activities
Dividends received
Purchase of property, plant and equipment
Payments to acquire investments in subsidiaries
Proceeds from sale of investments in subsidiaries
Net cash generated/(used) in investing activities
Cash flows from financing activities
Interest paid
Dividends paid to equity shareholders
Proceeds from issue of share capital
Proceeds from borrowings
Issue costs of long-term borrowings
Repayment of borrowings
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
33
107
25,597
(29,950)
7,071
(151)
6,920
9,772
(42)
(16)
500
10,214
(11,073)
(7,734)
683
(5,420)
(23,544)
(6,410)
(2,102)
(8,512)
-
-
25
25
35
68
5,135
10,838
25,165
744
25,909
6,466
(6)
(14,599)
-
(8,139)
(9,266)
(6,467)
1,776
10,000
(40)
(11,395)
(15,392)
2,378
(4,480)
(2,102)
35
Cranswick plc - Report & Accounts 2008
Notes to the accounts
1. Authorisation of financial statements and statement of compliance with IFRS
The Group and Company financial statements of Cranswick plc (the “Company”) for the year ended 31 March 2008 were
authorised for issue by the Board of Directors on 19 May 2008 and the balance sheets were signed on the Board’s behalf
by M Davey and J Lindop. Cranswick plc is a public limited company incorporated and domiciled in England and Wales. The
Company’s ordinary shares are traded on the London Stock Exchange.
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union. The Company’s financial statements have been prepared in accordance with IFRS as
adopted by the European Union and as applied in accordance with the provisions of the Companies Act 1985. The principal
accounting policies adopted by the Group and by the Company are set out in note 2.
The Company has taken advantage of the exemption provided under section 230 of the Companies Act 1985 not to publish
its individual income statement and related notes.
2. Accounting policies
Basis of preparation
The financial statements of Cranswick plc, both consolidated and company, have been prepared under IFRS as adopted by
the European Union. A summary of the principal accounting policies, which have been consistently applied throughout the
year and the preceding year, is as follows:
Basis of consolidation
The Group financial statements consolidate the financial statements of Cranswick plc and its subsidiaries. The results of
undertakings acquired or sold are consolidated for the periods from the date of acquisition or up to the date of disposal.
Acquisitions are accounted for under the purchase method of accounting.
Judgements and key sources of estimation uncertainty
The preparation of financial statements requires management to make judgements, estimates and assumptions that
affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues
and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those
estimates.
In the process of applying the Group’s accounting policies, management has made the following judgements, apart
from those involving estimations, which have the most significant effect on the amounts recognised in the financial
statements:
Share based payments
Note 23 – measurement of share based payments
Goodwill
Provisions
Foreign currencies
Note 12 – measurement of the recoverable amount of cash generating units
containing goodwill
Note 20 – provisions
In the accounts of the Group’s companies, individual transactions denominated in foreign currencies are translated into
functional currency at the actual exchange rates ruling at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies are translated into functional currency at the rates ruling at the balance sheet date.
Profits and losses on both individual foreign currency transactions during the year and monetary assets and liabilities are
dealt with in the income statement.
36
On consolidation, the income statements of the overseas subsidiaries are translated at the average exchange rates for the
year and the balance sheets at the exchange rates at the balance sheet date. The exchange differences arising as a result
of translating income statements at weighted average rates and restating opening net assets at closing rates are taken
to the translation reserve and the gain or loss on disposal of an overseas subsidiary is calculated after taking into account
cumulative exchange gains or losses in respect of that subsidiary. Cumulative exchange differences at the date of transition
to IFRS were deemed to be nil.
Revenue
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Group and the revenue, and
any associated costs can be measured reliably. Revenue on the sale of goods is recognised when the significant risks and
rewards of ownership of the goods have passed to the buyer on dispatch and represents the value of sales to customers net
of discounts, similar allowances and estimates of returns and excludes value added tax.
Restatement
The directors have reclassified £14.3 million in 2007 from cost of sales and operating costs to revenue in respect of discounts
and similar allowances, a presentation which more appropriately reflects the nature of these amounts. There is no impact
on net profit or earnings per share.
Intangible assets
Goodwill is the excess of the fair value of the consideration paid for a business over the fair value of the identifiable assets,
liabilities and contingent liabilities acquired. Goodwill is capitalised and subject to an impairment review, both annually
and when there are indications that the carrying value may not be recoverable.
Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates.
Where the recoverable amount is less than the carrying amount, an impairment loss is recognised. When an entity is
disposed of, any goodwill associated with it is included in the carrying amount of the operation when determining the
gain or loss on disposal except that goodwill arising on acquisitions prior to 31 March 2004 which was previously deducted
from equity is not recycled through the income statement.
Intangible assets acquired as part of an acquisition of a business are capitalised at fair value separately from goodwill only
if the fair value can be measured reliably on initial recognition and the future economic benefits are expected to flow to
the Group.
Taxation
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date. Deferred
tax is provided on temporary differences at the balance sheet date between the tax base of assets and liabilities and their
carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
i) except where the deferred income tax liability arises from the initial recognition of goodwill or the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither accounting profit nor taxable profit or loss; and
ii) in respect of taxable temporary differences associated with investments in subsidiaries, except where the timing of
the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that the temporary differences will reverse in the foreseeable future and
37
Cranswick plc - Report & Accounts 2008
taxable profits will be available against which the temporary differences can be utilised:
i) except where the deferred income tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or a liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; and
ii) in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are
only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that apply to the period when the asset is realised
or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance
sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.
Otherwise income tax is recognised in the income statement.
Property, plant and equipment
Property, plant and equipment are included at cost less accumulated depreciation and any provision for impairment.
Freehold land is not depreciated. Depreciation is charged on property, plant and equipment on the depreciable amount,
being cost less the estimated residual value (based on prices prevailing at the balance sheet date) on a straight line basis
over their estimated useful economic lives, or the estimated useful economic lives of their individual parts.
Useful economic lives are principally as follows:
Freehold buildings
50 years
Short leasehold improvements
Residue of lease
Plant and equipment
Motor vehicles
5 - 11 years
4 years
The carrying value of property, plant and equipment is reviewed for impairment individually or at the cash generating unit
level when events or changes in circumstances indicate that the carrying value may not be recoverable.
Capitalised borrowing costs
Borrowing costs incurred in financing the construction of qualifying assets such as property, plant and equipment are
capitalised up to the date at which the relevant asset is substantially complete. Borrowings costs are calculated using the
Group’s weighted average cost of borrowing during the period of capitalisation. All other borrowing costs are expensed
as incurred.
Accounting for leases
(i) Finance leases
Assets which are financed by leasing agreements that transfer substantially all the risks and rewards of ownership to
the lessee (finance leases) are capitalised at the inception of the lease at fair value or, if lower, the present value
of the minimum lease payments, in property, plant and equipment and the corresponding capital cost is shown
as an obligation to the lessor in borrowings. Depreciation is charged to the income statement over the shorter of the
estimated useful life and the term of the lease. The interest element of the rental obligations is allocated to
accounting periods during the lease term to reflect a constant rate of interest on the remainder of the capital
amount outstanding.
(ii) Operating leases
Leases, which are not finance leases, are classified as operating leases. Lease payments are charged to the income
statement on a straight line basis over the term of the lease.
Government grants and contributions
UK Regional Development Grants and grants receivable from the European Union and DEFRA in respect of property, plant
and equipment are credited to deferred income and released to the income statement over the relevant depreciation
period.
38
Inventories
Inventories, with the exception of biological assets (tropical marine fish), are stated at the lower of cost, on a first in, first
out basis, and net realisable value after making allowance for any obsolete or slow-moving items. In the case of finished
goods, cost comprises direct materials, direct labour and an appropriate proportion of manufacturing fixed and variable
overheads based on a normal level of activity.
Biological assets
Biological assets are included in the balance sheet at fair value less estimated point of sale costs. Gains and losses are
charged to the income statement in the period in which they arise.
Cash and cash equivalents
Cash equivalents are defined as cash at bank and in hand including short term deposits with original maturity within 3
months. For the purposes of the group cashflow statement, cash and cash equivalents consist of cash and cash equivalents
net of outstanding bank overdrafts.
Financial instruments
i) Debt instruments, including bank borrowings
Debt instruments are initially recognised at the fair value of net proceeds received after the deduction of issue costs.
Subsequently debt instruments are recognised at amortised cost using the effective interest method. Issue costs are
charged to the income statement over the term of the debt at a constant rate on the balance sheet carrying amount
under the effective interest method.
ii) Derivative financial instruments
The Group uses derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge
its cash flow risks associated with interest rate and foreign currency fluctuations. Such derivative financial instruments
are stated at fair value.
The fair value of forward contracts is calculated by reference to current forward exchange rates for contracts with
a similar maturity profile. The fair value of interest rate swaps is determined by reference to market values for similar
instruments.
Where derivatives meet the hedging criteria under IFRS 7 for cash flow hedges the portion of the gain or loss on the
hedging instrument that is determined to be an effective hedge is recognised directly in equity and the ineffective
portion is recognised in net profit or loss. Gains or losses recognised in equity are transferred to the income statement
in the same period in which the hedged item affects the net profit and loss.
For derivatives that do not qualify for hedge accounting under IFRS 7, any gains or losses arising from changes in fair
value are taken directly to net profit or loss for the period.
Employee benefits
i) Pensions
The Group operates a number of defined contribution schemes for employees under which contributions are paid into
schemes managed by major insurance companies. Contributions are calculated as a percentage of employees’ earnings
and obligations for contributions to the schemes are recognised as cost of sales or operating expenses in the income
statement in the period in which they arise.
ii) Equity settled share based payments
The Company operates a savings related share option scheme under which options have been granted to Group
employees (SAYE scheme). The company reflects in the income statement the cost of share based payments granted
to its own employees. The fair value of options granted after 7 November 2002 which have not vested prior to
1 January 2005 is calculated using the Black-Scholes model and the resulting cost is charged to the income statement over
the vesting period.
In addition, the company operates an executive share option scheme for senior executives. Share options issued are
exercisable subject to the attainment of certain market-based performance criteria. The fair value of options granted
after 7 November 2002 which have not vested prior to 1 January 2005, is calculated using mathematical models,
including the Black-Scholes model, modified for the impact of market-based performance criteria and the resulting cost
is charged to the income statement over the vesting period.
The Company and Group re-assesses its estimate of the number of options that are expected to become exercisable
at each balance sheet date as a result of changes in the expectation of achievement of non-market based performance
conditions. Any adjustments to the original estimates are recognised in the income statement.
39
Cranswick plc - Report & Accounts 2008
Non-current assets held for sale
On classification as held for sale, non-current assets are recognised at the lower of carrying amount and fair value less costs
to sell and no further depreciation is charged. Impairment losses on initial classification as held for sale are included in
profit or loss, as are any gains and losses on subsequent re-measurement.
Exceptional items
Exceptional items are material items which derive from events or transactions that fall within the ordinary activities of the
reporting entity and which individually or, if of a similar type, in aggregate need to be disclosed by virtue of their size or
incidence if the financial statements are to give a true and fair view.
Dividends
Dividends receivable by the Company are recognised in the income statement if they are declared, appropriately authorised
and no longer at the discretion of the entity paying the dividend, prior to the balance sheet date. Dividends payable by
the Company are recognised when declared and therefore final dividends proposed after the balance sheet date are not
recognised as a liability at the balance sheet date. Dividends paid to shareholders are shown as a movement in equity
rather than on the face of the income statement.
Investments
Investments in subsidiaries are shown at cost less any provision for impairment.
New standards and interpretations applied
The Group has adopted the following new and amended IFRS and IFRIC interpretations during the year. Adoption of these
revised standards and interpretations did not have any effect on the financial performance or position of the Group. They
did however give rise to additional disclosures.
International Accounting Standards (IAS/IFRS)
IFRS 7
Financial Instruments: Disclosures
IAS 1
Amendment – Presentation of Financial Statements: Capital Disclosures
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 8
IFRIC 9
Scope of IFRS 2
Reassessment of Embedded Derivatives
IFRIC 10
Interim Financial Reporting and Impairment
IFRIC 11
Group Cash-Settled Share Based Payment Transactions
New standards and interpretations not applied
The IASB and IFRIC have issued a number of new standards and interpretations with an effective date after the date
of these financial statements. The Directors do not consider that the adoption of these standards and interpretations
will have a material impact on the Group’s and Company’s financial statements in the period of initial application. The
standards not applied are as follows:
International Accounting Standards (IAS/IFRS)
IFRS 2
Share-based Payment – Vesting Conditions and Cancellations
IFRS 8
IAS 1
IAS 1
IAS 32
Operating Segments
Revised Presentation of Financial Statements
Puttable Financial Instruments
Puttable Financial Instruments
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 12
IFRIC 13
IFRIC 14
Service Concession Arrangements
Customer Loyalty Programmes
Effective date
1 January 2009
1 January 2009
1 January 2009
1 January 2009
1 January 2009
1 January 2008
1 January 2008
The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
1 July 2008
Upon adoption of IFRS 8, the Group will have to disclose additional information about its operating segments, although it
is anticipated there will be no effect on reported income or net assets.
40
3. Revenue and segmental analysis
The Group’s primary segments are Food and Pet business segments as the Group’s management and reporting structure
is set out along these lines and the two segments exhibit different risks and rates of return. The results are discussed in
the review of activities. Secondary segment information is presented geographically. There are no significant transactions
between the primary segments.
Business segments
2008
Pet
£’000
Food
£’000
2007
(Restated)
Total
£’000
Food
£’000
Pet
£’000
Total
£’000
Revenue
559,228
39,665
598,893
479,839
30,644
510,483
Result before exceptionals
Exceptionals
Results
Central costs
Profit before finance and taxation
Net finance costs
Profit before taxation
Income taxes
Profit for the year
39,275
830
40,105
1,885
792
2,677
41,160
1,622
42,782
(2,792)
39,990
(4,646)
35,344
(9,687)
25,657
38,936
-
38,936
566
281
847
39,502
281
39,783
(2,426)
37,357
(4,701)
32,656
(10,002)
22,654
All revenue derives from sales of goods from continuing operations.
Assets and liabilities
Assets (excluding goodwill)
177,855
22,790
200,645
Goodwill
117,756
-
117,756
152,516
117,520
18,745
171,261
-
117,520
Assets (including goodwill)
295,611
22,790
318,401
270,036
18,745
288,781
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
67,912
4,184
4,861
323,262
72,096
95,912
168,008
57,012
2,985
2,650
291,431
59,997
95,599
155,596
Unallocated assets and liabilities comprise certain items of property, plant and equipment, loan notes, net debt and
taxation balances.
Other segment information
Capital expenditure:
Property, plant and equipment
Depreciation
24,420
9,545
1,330
545
25,750
10,090
11,383
8,697
424
555
11,807
9,252
In addition, £10,206,000 of property plant and equipment was acquired as part of the DeliCo acquisition in November 2006
which relates to the Food and UK segments.
Geographical segments
The following table sets out sales by destination,
regardless of where the goods were produced:
Sales revenue by geographical market
UK
Continental Europe
Rest of World
2008
2007
(Restated)
£’000
£’000
588,492
499,398
9,915
486
10,599
486
598,893
510,483
41
Cranswick plc - Report & Accounts 2008
The following table sets out the geographical location of the Group’s assets and of additions to property, plant and equip-
ment and intangible assets:
UK
Continental Europe
Unallocated assets
4. Group operating profit
This is stated after charging/(crediting):
Operating costs:
Selling and distribution
Administration
Depreciation of property, plant and equipment
Release of government grants
Operating lease payments – minimum lease payments
Net foreign currency differences
Cost of inventories recognised as an expense
Increase/(decrease) in provision for inventories
Audit of the financial statements*
Carrying amount of
segment assets,
including goodwill
Additions to property,
plant and equipment
and tangible assets
2008
£’000
2007
£’000
2008
£’000
2007
£’000
318,401
288,529
25,750
11,803
-
4,861
252
2,650
-
-
4
-
323,262
291,431
25,750
11,807
2008
2007
(Restated)
£’000
£’000
22,983
23,841
46,824
10,090
(29)
5,015
(41)
20,828
27,196
48,024
9,252
(39)
3,744
(303)
438,759
358,706
129
165
(81)
149
* £28,000 relates to the Company (2007 - £26,000) and £137,000 (2007 - £123,000) relates to the subsidiaries.
In addition, payments to Ernst & Young LLP for non audit services amounted to £117,000 (2007 - £156,000) of which £4,000
related to an audit related service (2007 – £5,000), £44,000 (2007 - £73,000) related to due diligence services and £69,000
(2007 - £78,000) to taxation.
Fees paid to Ernst & Young LLP for non-audit services to the Company itself are not disclosed in the individual accounts of Cranswick
plc because group financial statements are prepared which are required to disclose such fees on a consolidated basis.
5. Exceptional items
Non-recurring income during the year was as follows:
Recognised below operating profit
Profit on disposal of property, plant and equipment
2008
£’000
2007
£’000
1,622
281
The corporation tax credit associated with these exceptional items amounted to £90,000 (2007 - £nil). Deferred tax of
£97,000 was released (2007 – £229,000 provided on the rolled over gain).
The cash flow impact of exceptional items is £3,826,000 (2007 - £770,000) received in relation to asset disposals after
associated costs.
42
6. Employees
Group
Staff costs:
Wages and salaries
Social security costs
Other pension costs
2008
£’000
72,827
6,103
1,378
80,308
2007
£’000
59,130
5,293
921
65,344
Included within wages and salaries is a total expense for share based payments of £921,000 (2007 - £487,000) all of which
arises from transactions accounted for as equity-settled share based payment transactions.
Company
Staff costs:
Wages and salaries
Social security costs
Other pension costs
2008
£’000
1,376
163
534
2,073
2007
£’000
1,610
188
219
2,017
Included within wages and salaries is a total expense for share based payments of £107,000 (2007 - £68,000) all of which
arises from transactions accounted for as equity-settled share based payment transactions.
The average monthly number of employees during the year was:
Group
Production
Selling and distribution
Administration
2008
No
2,933
235
260
3,428
2007
No
2,567
204
253
3,024
The Group and Company consider the Directors to be the Key Management Personnel. Details of each Director’s
remuneration, pension contributions and share options are detailed in the Report on Directors’ Remuneration on pages 73
to 77. The employee costs shown above include the following emoluments in respect of Directors of the Company:
Group and Company
2008
£’000
2007
£’000
Directors’ remuneration (excluding IFRS 2 share option charge)
3,458
3,724
Aggregate gains made by directors on exercise of share options
9
487
43
Cranswick plc - Report & Accounts 2008
7. Finance revenue and costs
Finance revenue
Bank interest received
Finance costs
Loan note interest paid
Bank interest paid and similar charges
Total interest expense for financial liabilities not at fair value through profit and loss
Movement in discount on provisions
Total finance costs
2008
£’000
2007
£’000
(4)
(6)
54
4,553
4,607
43
4,650
45
4,610
4,655
52
4,707
The interest relates to financial assets and liabilities carried at amortised cost together with the impact of interest rate swaps.
8. Taxation
a) Analysis of tax charge in the year
UK corporation tax:
UK corporation tax on profits of the year
Adjustments in respect of previous years
Overseas taxation:
Overseas taxation on profits of the year
Adjustments in respect of previous years
Total current tax
UK deferred tax:
Originating and reversal of temporary differences
Adjustments in respect of previous years
Total deferred tax
Tax on profit on ordinary activities
Tax relating to items charged or credited directly to equity:
Group
Share based payments
Net gain on revaluation of cash flow hedges
Corporation tax credit on share options exercised
Tax charge/(credit) in the statement of recognised income and expense
Company
Net (loss)/gain on revaluation of cash flow hedges
Corporation tax credit on share options exercised
Deferred tax charge/(credit) on share options exercised
Tax credit in the statement of recognised income and expense
44
2008
£’000
9,038
6
9,044
54
9,098
599
(10)
589
9,687
2008
£’000
535
190
(88)
637
2008
£’000
(72)
52
(20)
-
-
2007
£’000
9,323
(6)
9,317
25
-
9,342
430
230
660
10,002
2007
£’000
(411)
111
(712)
(1,012)
2007
£’000
135
(712)
(17)
(594)
b) Factors affecting tax charge for the period
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences are explained below:
Group
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by standard rate
of corporation tax in the UK of 30% (2007 - 30%)
Effect of:
Disallowed expenses
Rollover and indexation
Deferred tax rate difference
Other
Adjustments in respect of prior years
Total tax charge for the year
c) Deferred tax
Group
The deferred tax included in the balance sheet is as follows:
Deferred tax liability
Accelerated capital allowances
Rollover and holdover relief
Other temporary differences
Share based payments
Deferred tax liability
2008
£’000
2007
£’000
35,344
32,656
10,603
9,797
69
(741)
(535)
241
50
44
(40)
-
(23)
224
9,687
10,002
2008
£’000
5,814
933
974
(258)
7,463
2007
£’000
5,424
938
592
(804)
6,150
The Group will benefit from the reduction in the main rate of corporation tax to 28% from 1 April 2008. Deferred tax is
required to be measured at the tax rates expected to apply in the periods in which the temporary differences are expected
to reverse, hence deferred tax has been provided at 28%.
Deferred tax in the income statement
Accelerated capital allowances
Share based payments
Rollover relief
Other temporary differences
Deferred income tax expense
Company
Deferred tax liability in the balance sheet
Accelerated capital allowances
Rollover relief
Other temporary differences
Share based payments
Deferred tax liability
2008
£’000
390
10
(5)
194
589
2008
£’000
165
39
208
(53)
359
2007
£’000
918
(80)
66
(244)
660
2007
£’000
153
41
294
(85)
403
d) Temporary differences associated with group investments
At 31 March 2008 no deferred tax liability has been recognised (2007: £nil) in respect of any taxes that would be payable on
the unremitted earnings of certain of the Group’s subsidiaries as the Group can control the timing of any such payments.
There are no income tax consequences to the Group in relation to dividends paid to shareholders.
45
Cranswick plc - Report & Accounts 2008
9. Profit attributable to members
Of the profit attributable to members, the sum of £11,011,000 (2007 - £6,665,000) has been dealt with in the accounts of
Cranswick plc.
10. Equity dividends
Declared and paid during the year:
Final dividend for 2007 – 12.2p per share (2006 – 11.1p)
Interim dividend for 2008 – 6.5p per share (2007 – 5.9p)
Dividends paid
Proposed for approval of shareholders at the Annual General Meeting on 28 July 2008:
Final dividend for 2008 - 13.4p (2007 - 12.2p)
11. Earnings per share
2008
£’000
5,587
2,980
8,567
2007
£’000
4,959
2,667
7,626
6,195
5,607
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to members of the parent
company of £25,605,000 (2007 - £22,574,000) by the weighted average number of shares outstanding during the year.
In calculating diluted earnings per share amounts, the weighted average number of shares is adjusted for the weighted
average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares into
ordinary shares.
The Group discloses in its consolidated income statement as exceptional items those material items which individually or, if
of a similar type, in aggregate need to be disclosed by virtue of their size or incidence if the financial statements are to give
a true and fair view. Accordingly, basic and diluted earnings per share are also presented on this basis using the weighted
average number of ordinary shares for both basic and diluted amounts as per the table below.
Basic weighted average number of shares
Dilutive potential ordinary shares – share options
2008
2007
Thousands
Thousands
45,832
286
46,118
44,967
366
45,333
Basic weighted average number of shares for 2008 excludes 195,000 shares (2007 – 195,000 shares) held during the year
by the Cranswick plc Employee Benefit Trust.
12. Intangible fixed assets
Group
Cost
At 31 March 2006
Acquisition of subsidiary undertakings
At 31 March 2007
Acquisition of subsidiary undertakings
At 31 March 2008
Impairments as at 31 March 2006, 2007 and 2008
Net book amounts at 31 March 2007
Net book amounts at 31 March 2008
46
Goodwill
£’000
111,921
5,599
117,520
236
117,756
-
117,520
117,756
In August 2008, the Group increased its investment in Cranswick Gourmet Bacon Company Ltd from 85% to 100% for a
cash consideration of £38,000 and loan notes of £336,000. Goodwill arising from this amounted to £219,000.
Goodwill of £5,539,000 arising on the acquisition of Delico Limited in November 2006 is detailed further in Note 14.
The Company has no other intangible assets.
As from 1 April 2004, the date of transition to IFRS, goodwill is no longer amortised but is instead subject to annual
impairment testing.
Goodwill acquired through business combinations has been allocated for impairment testing purposes to the following
principal cash-generating units:
Cash generating unit
Cooked meats
Sandwiches
Continental Fine Foods
Other
2008
£’000
86,903
16,526
10,968
3,359
2007
£’000
86,903
16,526
10,968
3,123
117,756
117,520
Assumptions used
The recoverable amount for each cash generating unit has been determined based on value in use calculations using
annual budgets for each business for the following year, approved by the Board of Directors, and cash flow projections for
the next four years. Forecast replacement capital expenditure is included from budgets and thereafter capital is assumed
to represent 100% of depreciation.
Subsequent cash flows are forecast to grow in line with the assumed long-term trend in UK GDP of circa 2.5 per cent
derived from third party market information.
A discount rate of 9.1 per cent has been used (2007 - 9.8 per cent) being management’s estimate of the Group’s weighted
average cost of capital.
The calculation is most sensitive to the following assumptions:
• Sales volumes
• Gross margin
• Discount rate
Sales volumes are influenced by the growth of the underlying food segment, the market shares of our customers, selling
prices, and the quality of our products and service. Historical volumes are used as the base and adjusted over the projection
period in line with current growth rates. These sectors have historically demonstrated growth rates higher than GDP but
for these purposes a reversion to long-term GDP growth is assumed beyond the five year period of cash flow projections.
Gross margin depends upon average selling prices, the cost of raw materials and changes in the cost of production
overheads. Historical margins are used as the base, adjusted for management’s expectations derived from experience.
All calculations of this nature are sensitive to the discount rate used. Management’s estimate of the Group’s weighted
average cost of capital has been used for each cash generating unit.
Management believes that currently the assumptions used are unlikely to change to an extent which reduces value in use
below that of recoverable amount. Assumptions and projections are updated on an annual basis.
47
Cranswick plc - Report & Accounts 2008
13. Property, plant and equipment
Group
Cost
At 31 March 2006
On acquisition of subsidiary undertaking
Additions
Transfers from/(to) assets held for resale
Disposals
At 31 March 2007
Additions
Disposals
At 31 March 2008
Depreciation
At 31 March 2006
On acquisition of subsidiary undertaking
Charge for the year
Transfers from/(to) assets held for resale
Relating to disposals
At 31 March 2007
Charge for the year
Relating to disposals
At 31 March 2008
Net book amounts
At 31 March 2006
At 31 March 2007
At 31 March 2008
16,860
102,402
155,425
Freehold
land and
buildings
Leasehold
improvements
Plant,
equipment
and vehicles
£’000
£’000
£’000
27,580
16,487
Total
£’000
112,622
16,363
11,807
170
(2,191)
138,771
25,750
(9,096)
68,555
16,363
11,357
(61)
(2,051)
94,163
15,779
(7,540)
36,770
6,157
7,867
(39)
(1,707)
49,048
8,712
(5,226)
52,534
31,785
45,115
49,868
44,897
6,157
9,252
(29)
(1,783)
58,494
10,090
(5,880)
62,704
67,725
80,277
92,721
-
132
231
(140)
27,803
9,916
(1,556)
36,163
2,148
-
466
10
(76)
2,548
467
(654)
2,361
-
318
-
-
16,805
55
-
5,979
-
919
-
-
6,898
911
-
7,809
25,432
25,255
33,802
10,508
9,907
9,051
Included in freehold land and buildings is land with a cost of £3,853,000 (2007 - £2,952,000) which is not depreciated
relating to the Group and £1,210,000 (2007 - £1,210,000) relating to the Company. The cost of freehold land and buildings
includes £935,000 (2007 - £538,000) in respect of capitalised interest. £397,000 of interest, which was the whole amount
eligible, was capitalised during the year (2007 - £nil).
48
Freehold land
and buildings
Plant,
equipment
and vehicles
£’000
£’000
2,431
-
-
2,431
-
-
2,431
110
-
21
131
21
-
152
2,321
2,300
2,279
51
18
3
72
43
(5)
110
4
15
14
33
12
(4)
41
47
39
69
Company
Cost
At 31 March 2006
Transfers from other group companies
Additions
At 31 March 2007
Additions
Disposals
At 31 March 2008
Depreciation
At 31 March 2006
Transfer from other group companies
Charge for the year
At 31 March 2007
Charge for the year
Relating to disposals
At 31 March 2008
Net book amounts
At 31 March 2006
At 31 March 2007
At 31 March 2008
14. Investment in subsidiary undertakings
Company
Shares at cost:
At 31 March 2006
Additions in year
At 31 March 2007
Disposals in year
At 31 March 2008
Total
£’000
2,482
18
3
2,503
43
(5)
2,541
114
15
35
164
33
(4)
193
2,368
2,339
2,348
£’000
137,231
18,199
155,430
(4)
155,426
49
Cranswick plc - Report & Accounts 2008
During the year the Group disposed of its investment in Cranswick GmbH for a cash consideration of £500,000 as part of
the disposal of the feed milling business. The profit on disposal is included as part of the exceptional item.
Delico Limited was acquired on 1 November 2006 and has been accounted for as an acquisition from that date. The fair
values of the assets acquired are the same as the book values and are detailed below:
Property, plant and equipment
Inventories
Cash and short term deposits
Trade and other receivables
Trade and other payables
Deferred taxation
Net assets
Goodwill arising on acquisition
Cost of acquisition
Discharged by:
Cash consideration
Issue of new shares (478,766 shares at £7.52)
Acquisition costs
Fair value
£’000
10,206
742
1,168
3,248
(1,570)
(1,134)
12,660
5,539
18,199
14,272
3,600
327
18,199
Included in the £5,539,000 of goodwill recognised above are certain intangible assets that cannot be individually separated
and reliably measured from the acquiree due to their nature. These items include capacity and an assembled workforce.
The principal subsidiary undertakings are:
Food
Cranswick Country Foods plc
Studleigh-Royd Limited
Brookfield Foods Limited
The Sandwich Factory Group Limited (registered in Scotland)
Cranswick Gourmet Bacon Company Limited (holding via Cranswick Country Foods plc)
Cranswick Mill Limited
Cranswick ApS (registered in Denmark)
Delico Limited
Pet
Cranswick Pet & Aquatics plc
Except where otherwise stated, each of the companies is registered in England and Wales and Cranswick plc holds directly
100 per cent of the shares and voting rights of each subsidiary undertaking.
15. Inventories
Group
Raw materials
Finished goods and goods for resale
Biological assets (see below)
2008
£’000
24,218
6,278
142
30,638
2007
£’000
20,334
4,155
137
24,626
The Group breeds and imports tropical marine fish and other invertebrates for supply to specialist aquatic retailers. At 31 March
2008 marine stock represented approximately 44,000 fish (2007 - approximately 47,000 fish). The fair value of tropical marine
fish is determined from retail selling price less a margin and increased by £6,000 (2007 – reduced by £4,000) in the year.
50
16. Trade and other receivables
Financial Assets:
Trade receivables
Amounts owed by group undertakings
-
Other receivables
Non-financial assets:
Prepayments and accrued income
Group
Company
2008
£’000
2007
£’000
2008
£’000
68,504
58,585
-
3,474
71,978
5,370
77,348
-
3,457
62,042
4,374
66,416
44,177
20
44,197
42
44,239
2007
£’000
-
25,602
58
25,660
-
25,660
Financial assets are carried at amortised cost
As at 31 March, the analysis of trade receivables that were past due but not impaired is as follows:
Group
Trade receivables
Of which:
Not due
Past due date in the following periods:
Less than
30 days
Between 30
and 60 days
More than
60 days
£’000
£’000
£’000
£’000
£’000
2008
2007
68,504
57,683
7,718
2,061
1,042
58,585
52,912
4,488
714
471
Trade receivables are non-interest bearing and are generally on 30-60 days’ terms and are shown net of a provision for
impairment. As at 31 March 2008, trade receivables at nominal value of £634,000 (2007 - £591,000) were impaired and fully
provided for. Provision is made when there is objective evidence that the Group will not be able to recover balances in
full. Balances are written off when the probability of recovery is assessed as being remote. Movements in the provision for
impairment of receivables were as follows:
Bad debt provision
At 31 March 2006
Provided in year
Written off
At 31 March 2007
Provided in year
Written off
At 31 March 2008
There are no bad debt provisions against other receivables.
17. Other financial assets - current
Forward currency contracts
Interest rate swaps
Group
Company
2008
£’000
959
70
1,029
2007
£’000
24
306
330
2008
£’000
70
70
-
£’000
536
61
(6)
591
167
(124)
634
2007
£’000
-
306
306
51
Cranswick plc - Report & Accounts 2008
Movement on hedged items:
Amounts recognised in equity
Amounts removed from equity and included in
the income statement
Group
Company
2008
£’000
504
196
700
2007
£’000
271
98
369
2008
£’000
(432)
196
(236)
2007
£’000
354
98
452
Movements on hedged foreign currency contracts are recycled through cost of sales. Interest rate movements on hedged
bank borrowings are re-cycled through finance costs.
All financial assets are used for hedging. Forward currency contracts are used to hedge a proportion of anticipated purchases
denominated in foreign currencies and are held at fair value in the balance sheet. To the extent that these forward contracts
represent effective hedges, movements in fair value are taken directly to equity and are then recycled through the income
statement in the period during which the hedged item impacts the income statement. A description of amounts and maturities
is contained in note 21.
Under the terms of the interest rate swap the Group receives LIBOR interest and pays fixed interest of 4.98%. The notional principal
amount stands at £18,000,000 as at 31 March 2008 and reduces in equal semi-annual amounts to £nil by January 2010.
18. Trade and other payables
Current
Trade payables
Amounts owed to group undertakings
Other payables
Non-current
Deferred income
19. Other financial liabilities
Current
Bank overdrafts
Amounts outstanding under revolving credit facility
Current instalments due on bank loan
Loan notes
Non-current
Group
Company
2008
£’000
2007
£’000
52,763
43,882
-
20,262
73,025
-
21,191
65,073
2008
£’000
154
54,057
783
54,994
8
37
-
Group
Company
2008
£’000
11,468
8,000
11,250
1,093
31,811
2007
£’000
2,756
2,000
11,250
927
16,933
2008
£’000
8,512
8,000
11,250
756
28,518
2007
£’000
-
36,541
5,113
41,654
-
2007
£’000
2,102
2,000
11,250
927
16,279
Non-current instalments due on bank loan
50,414
61,544
50,414
61,544
All financial liabilities are amortised at cost.
A bank overdraft facility of £20 million (2007 - £10 million) is in place until December 2009, of which £11,468,000 (2007 -
£2,756,000) was utilised at 31 March 2008. Interest is payable at a margin over base rate.
A revolving credit facility of £10 million is in place of which £8 million was utilised as at 31 March 2008 (2007 - facility of
£20 million of which £2 million was utilised). This facility expires in December 2009. Interest is payable on the loan at a
margin of 0.6% above LIBOR.
52
The maturity profile of bank loans is as follows:
In one year or less
Between one year and two years
Between two and five years
Unamortised issue costs
Group
Company
2008
£’000
11,250
50,625
61,875
(211)
61,664
-
2007
£’000
11,250
11,250
50,625
73,125
(331)
72,794
2008
£’000
11,250
50,625
61,875
(211)
61,664
-
2007
£’000
11,250
11,250
50,625
73,125
(331)
72,794
The balance outstanding on the bank loan is repayable in 3 semi-annual instalments of £5,625,000 from September 2008,
followed by a single payment of £45,000,000 in December 2009. Interest is payable on the loan at a margin of 0.6% above
LIBOR. The loan is unsecured. The loan is subject to normal bank covenant arrangements. Under the terms of the interest
rate swap the Group receives LIBOR interest and pays fixed interest of 4.98%.
Loan notes bear interest based on base rate and are repayable on demand at six-monthly intervals.
20. Provisions
Group
At 1 April 2007
Utilisation in the year
Unwinding of discount
At 31 March 2008
Analysed as:
Current liabilities
Non-current liabilities
Lease
provisions
£’000
2,025
(579)
43
1,489
2007
£’000
289
1,736
2,025
Group
2008
£’000
153
1,336
1,489
Lease provisions are held against dilapidations obligations on leased properties and for the costs of onerous leases for
property, plant and machinery. These provisions are expected to be utilised over the next six years. There are no provisions
held by the Company.
53
Cranswick plc - Report & Accounts 2008
21. Financial instruments
An explanation of the Company and Group’s financial instruments risk management strategy is set out on pages 18 to 21
in the Group Operating and Financial Review.
Interest rate risk profile of financial assets and liabilities
The interest rate profile of the interest earning financial assets and interest bearing liabilities of the Group as at 31 March
2008 and their weighted average interest rates is set out below:
Group
As at 31 March 2008
Financial liabilities:
Bank overdrafts
Revolving credit facility
Bank loan (including the effect
of interest rate swaps)
Loan notes
Less: effect of interest rate swaps
Total financial liabilities excluding
the effect of interest rate swaps
Weighted
average
effective
interest
rate
%
6.54%
6.22%
6.05%
5.24%
Fixed interest
1-2 years
2-3 years
Total
At
floating
interest
rates
1 year
or
less
£’000
£’000
£’000
£’000
£’000
(11,468)
(11,468)
(8,000)
(8,000)
-
-
(61,875)
(43,875)
(9,000)
(1,093)
(1,093)
-
(82,436)
(64,436)
-
(18,000)
(9,000)
9,000
(9,000)
(9,000)
9,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Financial assets: Cash at bank
4.54%
3,770
3,770
(78,666)
(78,666)
(82,436)
(82,436)
-
-
-
Weighted
average
effective
interest
rate
%
6.25%
6.05%
5.50%
5.25%
Fixed interest
1-2 years
2-3 years
Total
At
floating
interest
rates
1 year
or
less
£’000
£’000
£’000
£’000
£’000
(2,756)
(2,000)
(2,756)
(2,000)
-
-
-
-
-
-
(73,125)
(46,125)
(9,000)
(9,000)
(9,000)
(927)
(927)
(78,808)
(51,808)
-
(27,000)
-
(9,000)
9,000
-
(9,000)
9,000
-
(9,000)
9,000
As at 31 March 2007
Financial liabilities:
Bank overdrafts
Revolving credit facility
Bank loan (including the effect
of interest rate swaps)
Loan notes
Less: effect of interest rate swaps
Total financial liabilities excluding
the effect of interest rate swaps
(78,808)
(78,808)
Financial assets: Cash at bank
4.25%
2,262
2,262
(76,546)
(76,546)
The maturity profile of bank loans is set out in note 19.
-
-
-
-
-
-
-
-
-
The interest rate profile of the interest earning financial assets and interest bearing liabilities of the Company as at 31
March 2008 and their weighted average interest rates is set out on following page:
54
Company
As at 31 March 2008
Financial liabilities:
Bank overdrafts
Revolving credit facility
Bank loan (including the effect
of interest rate swaps)
Loan notes
Less: effect of interest rate swaps
Total financial liabilities excluding
the effect of interest rate swaps
Financial assets: Cash at bank
As at 31 March 2007
Financial liabilities:
Bank overdrafts
Revolving credit facility
Bank loan (including the effect
of interest rate swaps)
Loan notes
Less: effect of interest rate swaps
Total financial liabilities excluding
the effect of interest rate swaps
Financial assets: Cash at bank
Currency profile
Weighted
average
effective
interest
rate
%
6.54%
6.22%
6.05%
5.24%
Fixed interest
1-2 years
2-3 years
Total
At
floating
interest
rates
1 year
or
less
£’000
£’000
£’000
£’000
£’000
(8,512)
(8,000)
(8,512)
(8,000)
-
-
(61,875)
(43,875)
(9,000)
(756)
(79,143)
-
(756)
-
(61,143)
(18,000)
(9,000)
9,000
(79,143)
(79,143)
-
-
(79,143)
(79,143)
-
-
-
(9,000)
(9,000)
9,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Weighted
average
effective
interest
rate
Total
At
floating
interest
rates
1 year
or
less
Fixed interest
1-2 years
2-3 years
%
£’000
£’000
£’000
£’000
£’000
6.25%
6.05%
5.50%
5.25%
(2,102)
(2,000)
(2,102)
(2,000)
-
-
-
-
-
-
(73,125)
(46,125)
(9,000)
(9,000)
(9,000)
(927)
(78,154)
-
(927)
(51,154)
(27,000)
-
(9,000)
9,000
-
(9,000)
9,000
-
(9,000)
9,000
(78,154)
(78,154)
-
-
(78,154)
(78,154)
-
-
-
-
-
-
-
-
-
The Group’s financial assets at 31 March 2008 include Sterling denominated cash balances of £1,648,000 (2007 - £894,000),
Danish Krona £99,000 (2007 - £195,000), Euro £611,000 (2007 - £902,000) and US dollar £1,412,000 (2007 - £271,000), all of
which are held in the UK with the exception of Danish Krona £98,000 (2007 - £83,000) and Euro £nil (2007 - £218,000). The
Group’s financial liabilities are denominated in Sterling.
The proportion of the Group’s net assets denominated in foreign currencies is immaterial.
The Company’s financial assets and liabilities are denominated in Sterling.
55
Cranswick plc - Report & Accounts 2008
Credit risk
The Group makes a significant proportion of its sales to the major UK supermarket groups, which correspondingly
represent a significant proportion of the Group’s trade receivables at any one time. Based on the financial strength of
these customers, the Directors do not consider that the Group faces a significant credit risk in this regard.
All cash financial assets are held by UK financial institutions. The maximum credit exposure relating to financial assets is
represented by their carrying values as at the balance sheet date.
Fair value of financial instruments
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing
parties on an arm’s length basis. Fair value is determined by reference to market prices where an active market exists or
from discounting future cash flows based on market yield curves. All derivative financial instruments are shown on the
balance sheet at fair value.
The fair value of floating rate assets and liabilities is estimated to be equivalent to book value.
Group
2008
2007
Financial assets
Cash
Forward currency contracts
Interest rate swap
Financial liabilities
Bank overdraft
Amounts outstanding under revolving credit facility
Bank loan, gross of issue costs
Loan notes
At 31 March
Company
Financial asset
Interest rate swap
Financial liabilities
Bank overdraft
Amounts outstanding under revolving credit facility
Bank loan, gross of issue costs
Loan notes
Book
value
£’000
3,770
959
70
4,799
(11,468)
(8,000)
(61,875)
(1,093)
(82,436)
Fair
value
£’000
3,770
959
70
4,799
(11,468)
(8,000)
(61,875)
(1,093)
(82,436)
Book
value
£’000
2,262
24
306
2,592
Fair
value
£’000
2,262
24
306
2,592
(2,756)
(2,000)
(2,756)
(2,000)
(73,125)
(73,125)
(927)
(927)
(78,808)
(78,808)
(77,637)
(77,637)
(76,216)
(76,216)
2008
2007
Book
value
£’000
Fair
value
£’000
Book
value
£’000
Fair
value
£’000
70
70
306
306
(8,512)
(8,000)
(61,875)
(756)
(79,143)
(8,512)
(8,000)
(61,875)
(756)
(2,102)
(2,000)
(2,102)
(2,000)
(73,125)
(73,125)
(927)
(927)
(79,143)
(78,154)
(78,154)
At 31 March
(79,073)
(79,073)
(77,848)
(77,848)
The book value of trade and other receivables and trade and other payables equates to fair value for the Group and
Company. Details of these financial assets and liabilities are included in notes 16 and 18.
56
Hedges
Financial instruments designated as cash flow hedges are held at fair value in the balance sheet. The Group hedges two
types of cash flows:
Forward contracts to hedge expected future purchases
The Group hedges a proportion of its near-term expected purchases denominated in overseas currencies. Where these
hedges meet the hedge criteria of IFRS 7 changes in fair value are posted directly to equity and subsequently recycled
through the income statement at the time that the hedged item affects profit and loss.
Group
Dollars
Euros
Amount
Maturities
Exchange rates
Fair value
$13,450,000
€14,000,000
1 April 2008 to 10
October 2008
1 April 2008 to 15
September 2008
$1.98 - $2.00
€1.3050 – €1.4710
£’000
107
852
These contracts were effective cash flow hedges under the criteria set out in IFRS 7 and therefore these fair value gains
were recognised directly in equity.
The Company does not hold any forward contracts.
Interest rate swap
The Group hedges a proportion of the interest cash flows payable in respect of bank loans. Under the terms of the interest
rate swap the Group receives LIBOR interest and pays fixed interest of 4.98 per cent. The notional principal amount of the
swap stands at £18,000,000 as at 31 March 2008 and reduces in equal semi-annual amounts to £nil by January 2010.
The swap was an effective cash flow hedge under the criteria set out in IFRS 7 and therefore movements in fair value have
been posted directly to equity and recycled through the income statement at the time the hedged item affects the profit
and loss account.
Interest rate risk
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables
held constant, of the Group’s profit before tax (through the impact on floating rate borrowings). There is no impact on
the Group’s equity. The sensitivity analysis excludes all non-derivative fixed rate financial instruments carried at amortised
cost but includes those recognised at fair value as well as all non-derivative floating rate financial instruments. Fair value
interest rate hedges, that are part of a hedging relationship, have been excluded from the analysis, as gains and losses
from fair valuing both the hedging item and hedging instrument almost cancel one another out completely in the income
statement.
However, for the purpose of the sensitivity analysis hedged loans are treated as floating rate borrowings as a result of the
swap relationship, which exposes them to a variable interest expense in the income statement.
Currency derivatives have not been included in the sensitivity analysis below as they are not considered to be exposed to
interest rate risk.
2008
Sterling
2007
Sterling
Increase/
decrease in
basis points
Effect on
profit before
tax
+25
-25
+25
-25
£000
(201)
201
(202)
202
57
Cranswick plc - Report & Accounts 2008
Liquidity risk
The tables below summarise the maturity profile of the Group’s financial liabilities at 31 March 2008 and 2007 based on
contractual undiscounted payments.
Year ended 31 March 2008
Bank overdraft
Revolving credit facility
Bank loan
Loan notes
Trade and other payables
Year ended 31 March 2007
Bank overdraft
Revolving credit facility
Bank Loan
Loan notes
Trade and other payables
Less than
1 year
£’000
11,468
8,000
11,715
1,093
73,025
1 to 2
years
£’000
-
-
-
54,591
8
Total
£’000
11,468
8,000
66,306
1,093
73,033
105,301
54,599
159,900
Less than
1 year
£’000
2,756
2,000
11,715
927
65,073
82,471
1 to 3
years
£’000
-
-
70,345
-
37
Total
£’000
2,756
2,000
82,060
927
65,110
70,382
152,853
22. Called-up share capital
Group and Company
Authorised:
2008
2007
Number
Number
Ordinary shares of 10p each
63,600,000
63,600,000
2008
£’000
6,360
2008
£’000
4,595
17
11
2007
£’000
6,360
2007
£’000
4,467
65
15
48
2008
2007
Number
Number
45,954,326
44,669,630
167,554
103,611
-
653,694
152,236
478,766
-
46,225,491
45,954,326
4,623
4,595
Allotted, called-up and fully paid
Ordinary shares of 10p each:
At 1 April
On exercise of share options
Scrip dividends
Issues on acquisition of subsidiary
At 31 March
58
On 7 September 2007, 27,239 ordinary shares were issued at 844.1p as a result of shareholders exercising the scrip dividend
option in lieu of the cash payment for the 2007 final dividend.
On 25 January 2008, 76,372 ordinary shares were issued at 790.0p as a result of shareholders exercising the scrip dividend
option in lieu of the cash payment for the 2008 interim dividend.
During the course of the year, 137,554 ordinary shares were issued to employees exercising SAYE options at prices between
255.0p and 679.0p and 30,000 ordinary shares were issued to directors and employees exercising executive share options
at a price of 601.0p per ordinary share.
Of the unissued ordinary share capital £99,467 is reserved for allotment under the Savings Related and Executive Share
Option Schemes. The options are exercisable as follows:
Savings related
Savings related
Savings related
Savings related
Savings related
Savings related
Savings related
Executive
Number
18,756
11,038
49,887
71,887
130,505
122,126
100,473
490,000
Exercise price
Exercise period
264p
415p
255p
375p
471p
679p
665p
601p
March 2005 to October 2009
March 2007 to October 2010
March 2008 to October 2011
March 2008 to October 2012
March 2009 to October 2013
March 2010 to October 2014
March 2011 to October 2015
July 2008 to July 2015
On 6 September 2006, 61,081 ordinary shares were issued at 714.8p as a result of shareholders exercising the scrip dividend
option in lieu of the cash payment for the 2006 final dividend.
On 26 January 2007, 91,155 ordinary shares were issued at 792.9p as a result of shareholders exercising the scrip dividend
option in lieu of the cash payment for the 2007 interim dividend.
During the course of the prior year, 243,694 ordinary shares were issued to employees exercising SAYE options at prices be-
tween 255p and 415p, and 215,000 ordinary shares were issued to directors and employees exercising executive share options
at a price of 518.5p per ordinary share and 195,000 ordinary shares were allotted at par to Cranswick Trustees Limited in
respect of the Cranswick plc Long Term Incentive Plan.
23. Share based payments
Executive Share Options
The Company operates three executive share option schemes, a Revenue approved scheme, an unapproved scheme and
a long term incentive plan, all of which are equity settled.
Share options are granted periodically to promote the involvement of senior management in the longer term success of
the company. Options can only be exercised if certain performance conditions are met by the Company. These conditions
are based on total shareholder return over the performance period and require the Company to be in the top half of
a basket of food companies quoted on the London Stock Exchange selected by the remuneration Committee. Options have
a contractual life of ten years.
Directors may also apply for SAYE options on the same terms as apply to all other employees.
59
Cranswick plc - Report & Accounts 2008
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share
options during the year.
Group
2008
2008
2007
Number
WAEP
Number
Outstanding as at 1 April
Forfeited during the year
Exercised during the year (note i)
Outstanding as at 31 March
Exercisable at 31 March
-
535,000
(15,000)
(30,000)
490,000
£
6.01
6.01
6.01
6.01
-
795,000
(45,000)
(215,000)
535,000
-
Company
2008
2008
2007
Outstanding as at 1 April
Exercised during the year (note i)
Outstanding as at 31 March
Exercisable at 31 March
Number
WAEP
Number
265,000
265,000
-
-
£
6.01
-
6.01
400,000
(135,000)
265,000
-
-
2007
WAEP
£
5.79
6.01
5.19
6.01
-
2007
WAEP
£
5.79
5.19
6.01
-
i) The weighted average share price at the date of the exercise for the options exercised is £8.71 (2007 – £9.50).
For the share options outstanding as at 31 March 2008, the weighted average remaining contractual life is 0.6 years. (2007
– 1.6 years).
There were no options granted during the year.
The weighted average fair value of options granted during the previous year was £6.01. The range of exercise prices for
options outstanding at the end of the year was £6.01.
Long Term Incentive Plan
During the course of the year 190,000 options at nil cost were granted to directors and senior executives, the share price at
that time was 854p. There is a three year performance period at the end of which half the options will be measured against
earnings per share targets and the other half measured against total shareholder return targets. The EPS target allows 25
per cent of the shares subject to the target to be issued at nil cost at an outperformance of 3 per cent and 100 per cent of
the shares at an outperformance of 7 per cent with outperformance between 3 and 7 per cent rewarded pro-rata. The TSR
target allows 50 per cent of the shares subject to the target to be issued at nil cost at the 50th percentile and 100% at the
75th percentile with performance between the 50th and 75th percentile rewarded pro-rata. The comparison companies
are Carrs Milling Industries plc, Dairy Crest Group plc, Devro plc, Glanbia plc, Greencore Group plc, Northern Foods plc,
Robert Wiseman Dairies plc, Premier Foods plc, RHM plc, and Uniq plc. The options have a contractual life of ten years. No
options were forfeited during the year leaving 380,000 outstanding.
60
Group
2008
2008
2007
2007
Outstanding as at 1 April
Granted during the year
Forfeited during the year
Outstanding as at 31 March
Exercisable at 31 March
Number
WAEP
Number
WAEP
190,000
190,000
380,000
-
-
£
-
-
-
-
-
-
195,000
(5,000)
190,000
-
£
-
-
-
-
-
Company
2008
2008
2007
2007
Number
WAEP
Number
WAEP
Outstanding as at 1 April
Granted during the year
Outstanding as at 31 March
Exercisable at 31 March
-
125,000
125,000
250,000
£
-
-
-
-
-
125,000
125,000
-
£
-
-
-
-
61
Cranswick plc - Report & Accounts 2008
All Employee Share Options (SAYE scheme)
All employees are entitled to a grant of options once they have been in service for two years or more. The exercise price
is equal to the market price of the shares less 20 per cent on the date of the grant. The contractual life of the options is 3,
5 or 7 years.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share
options during the year:
Group
2008
2008
2007
Number
WAEP
Number
Outstanding as at 1 April
Granted during the year (note i)
Forfeited during the year
Exercised during the year (note ii)
Outstanding as at 31 March (note iii)
Exercisable at 31 March
Company
Outstanding as at 1 April
Granted during the year (note i)
Exercised during the year (note ii)
Outstanding as at 31 March
605,870
102,204
(66,208)
(137,194)
504,672
11,978
2008
£
4.42
6.65
5.14
3.66
5.16
3.91
2008
739,063
153,033
(42,532)
(243,694)
605,870
1,736
2007
Number
WAEP
Number
16,387
3,793
(9,581)
10,599
£
4.20
6.65
3.98
5.28
-
24,542
1,069
(9,224)
16,387
-
2007
WAEP
£
4.15
6.79
3.71
2.75
4.42
2.55
2007
WAEP
£
3.50
6.79
2.64
4.20
-
Exercisable at 31 March
-
i) The share options granted during the year were at 665p, representing a 20 per cent discount on the price at the
relevant date.
ii) The weighted average share price at the date of the exercise for the options exercised is £6.58 (2007 - £9.68).
iii) Included within this balance are options over 18,756 shares (2007 - 26,444 shares) that have not been recognised in
accordance with IFRS 2 as options were granted on or before 7 November 2002. These options have not been
subsequently modified and therefore do not need to be accounted for in accordance with IFRS 2.
For the share options outstanding as at 31 March 2008 the weighted average remaining contractual life is 2.56 years. (2007
- 2.70 years).
The weighted average fair value of options granted during the year was £8.48 (2007 - £8.77). The range of exercise prices
for options outstanding at the end of the year was £2.55 - £6.79 (2007 - £2.55 - £6.79).
The fair value of both Executive and All Employee equity settled options granted is estimated as at the date of grant
using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were
granted. The following table lists the inputs to the model used for the years ended 31 March 2008 and 31 March 2007:
Group and Company
Dividend yield
Expected share price volatility
Risk free interest rate
Expected life of option (years)
Exercise prices
2008
1.90%-4.10%
24.5%-31.0%
4.29%-5.80%
3,5,7 years
£nil - £6.79
2007
1.90%-4.10%
24.5%-31.0%
4.29%-5.00%
3,5,7 years
£nil - £6.79
62
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may
occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may
not necessarily be the actual outcome.
The initial fair value of executive options is adjusted to take into account the market-based performance condition.
24. Reconciliation of movements in equity
Group
Attributable to equity holders of the parent
Minority
Total
Share Share
capital premium
Share Hedging Translation Retained
based
payments
reserve earnings
reserve
Total interest
equity
(Note 1)
(Note 2)
(Note 3)
(Note 4)
(Note 5)
£’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
Exchange differences
Profit for the year
Exercise of options
Scrip dividends
Share issues
Share based payments
Deferred tax recognised
directly in equity
Corporation tax
recognised directly in equity
Purchase of Minority Interest
Dividends
-
-
-
65
15
48
-
-
-
-
-
-
-
-
1,711
1,144
3,552
-
-
-
-
-
-
-
-
-
-
-
487
-
-
-
-
369
-
-
-
-
-
-
-
-
-
-
-
(5)
-
-
369
-
(5)
369
(5)
22,574
22,574
80
22,654
-
-
-
-
1,776
1,159
3,600
487
300
300
-
-
-
-
-
-
1,776
1,159
3,600
487
300
712
(13)
712
-
712
-
(13)
(7,626)
(7,626)
-
(7,626)
At 1 April 2007
4,595
47,204
1,018
329
22
82,564
135,732
103
135,835
Cash flow hedges
Exchange differences
Profit for the year
Exercise of options
Scrip dividends
Share based payments
Deferred tax recognised
directly in equity
Corporation tax
recognised directly in equity
Purchase of Minority Interest
Dividends
-
-
-
17
11
-
-
-
-
-
-
-
-
666
823
-
-
-
-
-
-
-
-
-
-
921
-
-
-
-
700
-
-
-
-
-
-
-
-
-
-
(17)
-
-
700
(17)
-
-
700
(17)
25,605
25,605
52
25,657
-
-
-
683
834
921
(725)
(725)
-
-
-
-
-
683
834
921
(725)
88
88
88
-
-
(155)
(155)
(8,567)
(8,567)
-
(8,567)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 31 March 2008
4,623
48,693
1,939
1,029
5
98,965
155,254 -
155,254
63
Cranswick plc - Report & Accounts 2008
Company
At 1 April 2006
Cash flow hedges
Profit for the year
Exercise of options
Scrip dividends
Share issues
Share based payments
Deferred tax recognised
directly in equity
Corporation tax
recognised directly in equity
Dividends
At 1 April 2007
Cash flow hedges
Profit for the year
Exercise of options
Scrip dividends
Share based payments
Deferred tax recognised
directly in equity
Dividends
At 31 March 2008
Notes:
1. Share capital
Share
capital
Share
premium
Share
based
payments
Hedging
reserve
Merger
reserve
General
Retained
reserve earnings
Total
(Note 1)
(Note 2)
(Note 3)
(Note 4)
(Note 6)
(Note 7)
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
4,467
40,797
142
(146)
1,806
4,000
6,102
57,168
-
-
65
15
48
-
-
-
-
-
-
1,711
1,144
3,552
-
-
-
-
-
-
-
-
-
68
-
-
-
452
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,665
-
-
-
-
452
6,665
1,776
1,159
3,600
68
-
(118)
(118)
-
-
712
712
(7,626)
(7,626)
4,595
47,204
210
306
1,806
4,000
5,735
63,856
-
-
17
11
-
-
-
-
-
666
823
-
-
-
-
-
-
-
107
-
-
(236)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(236)
11,011
11,011
-
-
-
683
834
107
20
20
(8,567)
(8,567)
4,623
48,693
317
70
1,806
4,000
8,199
67,708
The balance classified as share capital represents the nominal value of ordinary 10p shares issued.
2. Share premium
The balance classified as share premium includes the net proceeds in excess of nominal value on issue of the company’s
equity share capital, comprising 10p ordinary shares.
3. Share based payments reserve
This reserves records the fair value of share based payments expensed in the income statement.
4. Hedging reserve
This reserve records exchange differences arising from the translation of the financial statements of foreign subsidiaries.
In addition it includes the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined
to be an effective hedge.
5. Translation reserve
This reserve records exchange differences arising from the translation of the financial statements of foreign subsidiaries.
6. Merger reserve
Where shares have been issued as consideration for acquisitions, the value of shares issued in excess of nominal value
has been credited to the merger reserve rather than to the share premium account.
7. General reserve
This reserve arose in 1993 when the High Court of Justice granted permission to reduce the Company’s share premium
account by £4,000,000 which was credited to a separate reserve named the general reserve.
64
25. Additional cash flow information
Analysis of Group net debt
At
31 March
2007
Cash
flow
Other
non cash
changes
At
31 March
2008
£’000
£’000
£’000
Cash and cash equivalents
Overdrafts
Other financial assets
Revolving credit
Bank loans
Loan notes
Net debt
Cash and cash equivalents
Overdrafts
Other financial liabilities
Revolving credit
Bank loans
Loan notes
Net debt
£’000
3,770
(11,468)
(7,698)
70
(7,628)
(8,000)
(61,664)
(1,093)
(78,385)
14
-
14
(236)
(222)
-
(120)
(336)
(678)
2,262
(2,756)
(494)
306
(188)
(2,000)
(72,794)
(927)
(75,909)
At
31 March
2006
1,494
(8,712)
(7,218)
-
(7,218)
(6,000)
11,250
170
(1,798)
Cash
flow
Other
non cash
changes
At
31 March
2007
£’000
£’000
£’000
£’000
5,000
(4,954)
46
-
46
(146)
(2,000)
(73,970)
(1,072)
(77,142)
(2,728)
2,198
(530)
-
(530)
-
-
1,290
145
905
(10)
-
(10)
306
296
146
-
(114)
-
328
2,262
(2,756)
(494)
306
(188)
-
(2,000)
(72,794)
(927)
(75,909)
Net debt is defined as cash and cash equivalents and derivatives at fair value less interest bearing liabilities (net of
unamortised issue costs).
65
Cranswick plc - Report & Accounts 2008
Analysis of Company net debt
Overdrafts
Other financial assets
Revolving credit
Bank loans
Loan notes
Net debt
Overdrafts
Other financial assets
Other financial liabilities
Revolving credit
Bank loans
Loan notes
Net debt
26. Contingent liabilities
At
31 March
2007
Cash
flow
Other
non cash
changes
At
31 March
2008
£’000
£’000
£’000
£’000
(2,102)
306
(1,796)
(2,000)
(72,794)
(927)
(77,517)
(6,410)
-
(6,410)
(6,000)
11,250
171
(989)
-
(236)
(236)
-
(120)
-
(356)
(8,512)
70
(8,442)
(8,000)
(61,664)
(756)
(78,862)
At
31 March
2006
Cash
flow
Other
non cash
changes
At
31 March
2007
£’000
£’000
£’000
£’000
(4,480)
-
(4,480)
(146)
(2,000)
(73,970)
(1,072)
(81,668)
2,378
-
2,378
-
-
1,290
145
3,813
-
306
306
146
-
(114)
-
338
(2,102)
306
(1,796)
-
(2000)
(72,794)
(927)
(77,517)
The Company, together with its subsidiary undertakings, has entered into a cross guarantee with Lloyds TSB Bank plc
and The Royal Bank of Scotland plc in respect of the Group’s facilities with those banks. Drawn down amounts totalled
£81,343,000 as at 31 March 2008 (2007 - £77,881,000).
27. Commitments
(a) The Directors have contracted for future capital expenditure for property, plant and equipment totalling
£7,347,000 (2007 - £475,000).
(b)
The Group’s future minimum rentals payable under non-cancellable operating leases are as follows:
Group
Company
2008
£’000
3,737
9,890
24,067
37,694
2007
£’000
1,831
8,124
30,905
40,860
-
-
-
-
2008
£’000
2007
£’000
-
-
-
-
Not later than one year
After one year but not more than five years
After five years
66
28. Pension commitments
The Group operates a number of defined contribution pension schemes whereby contributions are made to schemes
operated by major insurance companies. Contributions to these schemes are determined as a percentage of employees’
earnings and the amount charged to the profit and loss account is disclosed in note 6. Contributions owing to the
insurance companies at the year-end, included in trade and other payables, amounted to £nil (2007 - £218,000).
29. Related party transactions
During the year the Group and Company entered into transactions, in the ordinary course of business, with related parties,
including transactions between the company and its subsidiary undertakings. In the Group accounts transactions between
the Company and its subsidiaries are eliminated on consolidation but these transactions are reported for the Company
below:
Company only
Related party
Subsidiaries
2008
2007
Services rendered to
the related party
Dividends received
from related party
£’000
15,015
13,640
£’000
9,772
6,466
Amounts owed by or to subsidiary undertakings are disclosed in the Company balance sheet on page 33. Any such amounts
are unsecured and repayable on demand.
Remuneration of key management personnel
Short-term employee benefits
Post-employment benefits
Share-based payment
2008
£’000
3,010
448
451
3,909
2007
£’000
3,330
394
170
3,894
67
Cranswick plc - Report & Accounts 2008
Corporate governance statement
Statement by the Directors on compliance with the provisions of the Combined Code.
Principles of good governance
The Board is committed to high standards of corporate governance. The adoption and maintenance of good governance
is the responsibility of the Board as a whole. This report, together with the Directors’ Remuneration Report on pages 73 to
77, describes how the Board applies the principles of good governance and best practice as set out in the Combined Code
on Corporate Governance (the “Combined Code”) which came into effect for reporting years commencing after November
2006 and therefore applies to the full year under review. A statement of compliance with the Combined Code can be found
at the end of this report.
The Board
Until 14th March 2008 the Board consisted of an Executive Chairman, two Chief Executives, two other executive directors
and three non-executives, two of whom were deemed to be independent. Thereafter the number of non-executives reduced
to two with the resignation of Noel Taylor. The remaining two non-executive directors are deemed to be independent.
Mr Taylor was not formally deemed to be independent due to his long association with the Company although the Board
regarded his background and contribution as highly valuable. The Combined Code recommends that for a company the
size of Cranswick it should have at least two independent non-executive directors and therefore the Board is confident that
it meets the requirements of the Combined Code in full.
The Board meets each month throughout the year to direct and control the overall strategy and operating performance
of the Group. To enable them to carry out these responsibilities all Directors have full and timely access to all relevant
information. A formal schedule of matters reserved for decision by the Board covers key areas of the Group’s affairs
including acquisition and divestment policy, approval of budgets, major capital expenditure projects, profit and cash flow
performance and general treasury and risk management policies. Responsibility for the Group’s day-to-day operations is
delegated to the Chief Executives of the two divisions who, supported by the executive directors and executive management,
implement the Board’s strategy and manage the Group’s business. Upon appointment, all directors undertake a formal
introduction to all the Group’s activities and are also provided with the opportunity for on-going training to ensure that
they are kept up-to-date on changes in relevant legislation and the general business environment, including the review of
relevant literature and attending external courses on subjects they wish to improve on. Procedures are in place for directors
to seek both independent advice, at the expense of the Company, and the advice and services of the Company Secretary
in order to fulfil their duties. The Company Secretary is responsible to the Board for ensuring that Board procedures
are complied with and for advising the Board, through the Chairman, on all governance matters. The appointment and
removal of the Company Secretary is determined by the Board as a whole.
The Board, led by the Chairman, has carried out a formal evaluation of its performance and that of its committees under a
system based on a questionnaire circulated to all directors which were used to facilitate a board discussion. The evaluation
exercise showed that the Board and its committees were working well but as expected a number of actions were agreed
to improve effectiveness. The Chairman has carried out an evaluation of the performance of individual directors by
individual discussions with the Board members. He meets with the non-executive directors at least once a year to consider
his conclusions. In addition, the non-executive directors meet, without the Chairman present, in order to appraise his
performance.
The Company’s Articles of Association provide that one third (but not more than one third) of the Directors retire by
rotation each year and with the proviso that each Director shall seek re-election at the Annual General Meeting every three
years. All new directors are subject to election by shareholders at the first opportunity following their appointment.
Directors’ biographies and membership of the various committees are shown on page 23. The formal terms of reference
for the main Board Committees together with the terms and conditions of appointment of non-executive directors are
available for inspection at the Company’s Registered Office and at the Annual General Meeting.
68
Board Committees
Audit Committee
The Audit Committee throughout the year comprised of two independent non-executives, John Worby and Patrick
Farnsworth and until his resignation on 14th March 2008 Noel Taylor. The Committee is chaired by John Worby, the
Company’s Senior Independent Director, who is a Chartered Accountant and has considerable recent relevant financial
experience. It is a requirement of the Combined Code that the Audit Committee should comprise all independent non-
executive directors. The Board is confident that the Company complies with this requirement with the exception of Noel
Taylor as outlined on page 71.
The Chairman, the Finance Director and the Group Financial Controller, who is responsible for assessing the Group’s internal
financial controls, together with the external auditors attend the meetings as appropriate. The external auditors have the
opportunity for direct access to the Committee without the Executive Directors being present and the Committee formally
meets with the external auditors at least once a year without the Executive Directors being present.
The Committee reviews the Group’s accounting policies and internal reports on accounting and internal financial control
matters together with reports from the external auditors. The Audit Committee has overall responsibility for monitoring the
integrity of financial statements and related announcements and for all aspects of internal control and meets at least three
times a year, two of which involve a review of the Group’s interim and full year statements. The Audit Committee considers
annually the extent and effectiveness of the work of the internal audit function. The Audit Committee is also responsible
for recommendations for the appointment, reappointment or removal of the external auditors and for reviewing their
effectiveness. It also approves the terms of engagement and remuneration of the external auditors, and monitors their
independence. There is a policy in place in relation to the types of non-audit services the external auditors cannot do so
as not to compromise their independence and these would include internal accounting or other financial services, internal
audit services or their outsourcing, executive or management roles or functions, and remuneration consultancy. There is
also a whistle blowing policy in place which includes arrangement by which staff can, in confidence, raise concerns about
possible improprieties in matters of financial reporting and other matters.
The terms of reference for the Audit Committee are available from the Company Secretary.
The Chairman of the Audit Committee will be available at the Annual General Meeting to respond to any shareholder
questions that might be raised on the Committee’s activities.
Remuneration Committee
The Remuneration Committee comprised of Patrick Farnsworth (Chairman), John Worby and Noel Taylor until his resignation
on 14th March 2008. It is a requirement of the Combined Code that the Remuneration Committee should, in the case of
smaller companies, consist of at least two members who are considered by the Combined Code to be independent. It is
a requirement of the Combined Code that the Remuneration Committee should comprise all independent non-executive
directors. The Board is confident that the Company complies with this requirement following the resignation of Noel Taylor.
Martin Davey, Executive Chairman, attends meetings of the Remuneration Committee by invitation and in an advisory
capacity. No Director attends any part of a meeting at which his own remuneration is discussed. The Executive Directors
determine the remuneration of the non-executive directors.
The Committee recommends to the Board the policy for executive remuneration and determines, on behalf of the Board,
the other terms and conditions of service for each Executive Director. It determines appropriate performance conditions
for the annual cash bonus and long term incentive schemes and approves awards and the issue of options in accordance
with the terms of those schemes. The Remuneration Committee also recommends and monitors the level and structure
of remuneration of senior management below that of Main Board Director. The Remuneration Committee has access to
advice from the Company Secretary and to detailed analysis of executive remuneration in comparable companies. During
the year the Committee also received remuneration advice from Deloitte & Touche. Details of the Committee’s current
remuneration policies are given in the Directors’ Remuneration Report on pages 73 to 77.
The terms of reference for the Remuneration Committee are available from the Company Secretary.
The Chairman of the Remuneration Committee attends the Annual General Meeting to respond to any Shareholder
questions that might be raised on the Committee’s activities.
69
Cranswick plc - Report & Accounts 2008
Nomination Committee
The Nomination Committee comprises Martin Davey, Executive Chairman, who also acts as the Committee’s Chairman,
Patrick Farnsworth, independent non-executive, and John Worby, independent non-executive. It is a requirement of the
Combined Code that a majority of the members of the Nomination Committee should be non-executive directors, and
the Chairman should be either the chairman of the board or a non-executive director. The Board is confident that it fully
complies with these requirements of the Combined Code. Due to the size of the Company and the stability of the Board
the Chairman’s time commitment to the Committee is not anticipated to be heavy.
The Committee meets at least once a year and reviews the structure, size and composition of the Board and is responsible
for considering and making recommendations to the Board on new appointments of executive and non-executive directors.
It also gives full consideration to succession planning in the course of its work taking into account the challenges and
opportunities facing the Company and what skills and expertise are therefore needed on the Board and from senior
management in the future. No new Board appointments were considered necessary during the year.
The terms of reference for the Nomination Committee are available from the Company Secretary.
The Chairman of the Nomination Committee will attend the Annual General meeting to respond to any Shareholder
questions that might be raised on the Committee’s activities.
Meetings attendance
Details of the number of meetings of, and members’ attendance at, the Board, Audit, Remuneration and Nomination
Committees during the year are set out in the table below.
No. of meetings
D.Black
A.Couch
M.Davey
B.Hoggarth
J.Lindop
N.Taylor
P.Farnsworth
J.Worby
Shareholders
Board
Audit
Remuneration
Nomination
Committee
Committee
Committee
12
11
12
12
12
12
5
11
12
3
-
-
-
-
-
1
3
3
3
-
-
-
-
-
1
3
3
1
-
-
1
-
-
-
1
1
The views of Shareholders expressed during meetings with them are communicated by the Chairman to the Board as a
whole, and through this process of communication the Board’s executive and non-executive directors are able to gain a
sound understanding of the views and concerns of the major Shareholders. The Chairman discusses governance and strategy
with major Shareholders. Other Directors are available to meet the Company’s major Shareholders if requested. The Senior
Independent Director is available to listen to the views of Shareholders, particularly if they have concerns which contact
with the Chairman has failed to resolve or for which such contact is inappropriate. Principles of corporate governance and
voting guidelines issued by the Company’s institutional Shareholders and their representative bodies are circulated to and
considered by the Board. The Board also welcomes the attendance and questions of Shareholders at the Annual General
Meeting which is also attended by the Chairmen of the Audit, Remuneration and Nominations Committees.
Going Concern
The Directors have prepared the accounts on a going concern basis, having satisfied themselves from a review of internal
budgets and forecasts and current bank facilities that the Group has adequate resources to continue in operational
existence for the foreseeable future.
70
Internal Control
The Board of Directors has overall responsibility for the Group’s systems of internal control, which safeguards the
shareholders’ investment and the Group’s assets, and for reviewing its effectiveness. Such a system can only provide
reasonable and not absolute assurance against material misstatement or loss, as it is designed to manage rather than
eliminate the risk of failure to achieve business objectives.
The Group operates within a clearly defined organisational structure with established responsibilities, authorities and
reporting lines to the Board. The organisational structure has been designed in order to plan, execute, monitor and control
the Group’s objectives effectively and to ensure that internal control becomes embedded in the operations.
The Chairman of the Audit Committee reports to the Board on issues relating to internal controls and risk management
issues following each Audit Committee meeting. The Board confirms that the key on-going processes and features of the
Group’s internal risk based control system, which accord with the Turnbull guidance, have been fully operative throughout
the year and up to the date of the Annual Report being approved. These include; a process to identify and evaluate
business risk; a strong control environment; an information and communication process; a monitoring system and a regular
Board review for effectiveness. The Group Financial Controller is responsible for overseeing the Group’s internal controls.
During the year the management of the Food and Pet businesses identified the key business risks within their operations,
considered the financial implications and assessed the effectiveness of the control processes in place to mitigate these
risks. The Board reviewed a summary of the findings and this, along with direct involvement in the strategies of the
businesses, investment appraisal and budgeting process, enabled the Board to report on the effectiveness of internal
control. Following its review the Board determined that it was not aware of any significant deficiency or material weakness
in the system of internal control.
Auditor Independence
The Board is satisfied that Ernst & Young LLP has adequate policies and safeguards in place to ensure that auditor objectivity
and independence is maintained. The Company meets its obligations for maintaining the appropriate relationship with the
external auditors through the Audit Committee whose terms of reference include an obligation to consider and keep under
review the degree of work undertaken by the external auditor, other than the statutory audit, to ensure such objectivity
and independence is safeguarded. In addition, the Chairman of the Audit Committee is consulted prior to awarding to the
external auditors any non audit services in excess of £20,000.
During the year the Audit Committee considered the following factors in assessing the objectivity and independence of
Ernst & Young LLP:
i)
The auditors’ procedures for maintaining and monitoring independence, including those to ensure that the
partners and staff have no personal or business relationships with the Company, other than those in the normal
course of business permitted by UK ethical guidance.
The auditors’ policies for the rotation of the lead partner and key audit personnel.
ii)
iii) Adherence by management and the auditor to the Group’s policy for the procurement of non-audit services.
Compliance with the Revised Combined Code
The Directors consider that the Company has, during the year ended 31 March 2008, complied with the requirements of
the revised Combined Code other than as set out below:
i)
ii)
The Company did not comply with Combined Code provision A.7.2 for nine months of the year in that Noel Taylor,
non-executive director, did not have a fixed term contract, but was employed subject to a notice period of 6
months. On the 1st January 2008 he was given a two year letter of appointment as with the other non-executive
directors.
The Company did not comply throughout the year with Combined Code provisions B2.1 and C3.1 regarding the
composition of the Audit and Remuneration Committees as Noel Taylor is not deemed an independent non-
executive director. Following his resignation on 14th March 2008 the Company believes it now complies.
By order of the Board
Malcolm Windeatt
Company Secretary,
19 May 2008
71
Cranswick plc - Report & Accounts 2008
Statement of Directors’ responsibilities in relation
to the financial statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable
United Kingdom law and those International Financial Reporting Standards as adopted by the European Union.
The Directors confirm to the best of their knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit of Cranswick plc and the undertakings included in
the consolidation taken as a whole; and
• the management report includes a fair review of the development and performance of the business and the
position of Cranswick plc and the undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
The Directors are required to prepare financial statements for each financial year which present fairly the financial position
of the cash flows of the Company and of the Group and the financial performance of the Group for that period. In
preparing those financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information; and
• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable
users to understand the impact of particular transactions, other events and conditions on the entity’s financial
position and financial performance; and
• state that the Company and the Group have complied with IFRSs, subject to any material departures disclosed and
explained in the financial statements.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time
the financial position of the Company and of the Group and enable them to ensure that the financial statements comply
with the Companies Act 1985 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
By order of the Board
M Davey
Chairman
J Lindop
Finance Director
19 May 2008
72
Directors’ remuneration report
Information not subject to audit
Remuneration committee
The Remuneration Committee comprises the non-executive directors Patrick Farnsworth (Chairman of the Committee)
John Worby and, until his resignation, Noel Taylor. The Executive Chairman attends the meetings in an advisory capacity
as requested. The Committee determines the remuneration of the Company’s executive directors and puts forward its
recommendations for approval by the Board. The Committee has used the firm of Deloitte & Touche (who provided no
other services during the year) as remuneration consultants in the year and has also undertaken a review of remuneration
levels at quoted companies of comparable size. The remuneration of the non-executives is determined by the executive
directors and reflects the time, commitment and responsibility of their roles.
Remuneration policy
The Company’s policy is that the overall remuneration package offered by the Company should be sufficiently competitive
to attract, retain and motivate high quality executives and to align the rewards of the executives with the progress of the
Company whilst giving consideration to salary levels in similar sized quoted companies in the sector and in the region. The
remuneration package includes a significant performance related element in the form of a profit related bonus and share
based awards. The share based awards are granted by the Remuneration Committee and only vest on the achievement of
demanding targets aligned to shareholder returns. The details of individual components of the remuneration package and
service contracts are set out below:-
Basic salary and benefits
Basic salary, car allowance and benefits are reviewed annually. Benefits principally comprise medical insurance.
Bonus scheme
The bonus scheme in operation is based on the achievement of group profit targets. A fixed sum is payable when the target
is achieved with a percentage being payable for results in excess of the target. The total bonus is capped at 150% of basic
salary. Non-executive directors do not participate in the Company’s bonus scheme. Incentive payments and benefits are
not pensionable.
Share options
The basic salary and the bonus scheme are intended as the most significant part of directors’ remuneration; in addition,
executive share options can be proposed by the Remuneration Committee and are granted periodically to promote the
involvement of senior management in the longer term success of the Company. Options can only be exercised if certain
performance criteria are achieved by the Company. For executive options these criteria are based on total shareholder
return over the 3 year performance period and require the Company to be in the top half against a basket of food
companies quoted on the London Stock Exchange. The comparison companies are ABF plc, Carrs Milling Industries plc,
Dairy Crest Group plc, Devro plc, Glanbia plc, Greencore plc, Northern Foods plc, Robert Wiseman Dairies plc, and Uniq
plc. For the Long Term Incentive Plan (“LTIP”) approved at the 2006 Annual General Meeting half the shares granted
under the LTIP are subject to an earnings per share (”EPS”) target measured against average annual increases in the retail
price index (“RPI”) over a three year period and the other half to a total shareholder return (“TSR”) target measured
against a comparable group of food companies over a three year period. The comparison companies are Carrs Milling
Industries plc, Dairy Crest Group plc, Devro plc, Glanbia plc, Greencore plc, Northern Foods plc, Robert Wiseman Dairies
plc, Premier Foods plc, RHM plc and Uniq plc. The EPS target allows 25 per cent of the shares subject to the target to be
issued at nil cost at an average annual outperformance of 3 per cent and 100 per cent of the shares at an average annual
outperformance of 7 per cent with outperformance between 3 and 7 per cent rewarded pro rata. The TSR target allows
50 per cent of the shares subject to the target to be issued at nil cost at the 50th percentile and 100 per cent at the 75th
percentile with performance between the 50th and 75th percentiles rewarded pro-rata. The Remuneration Committee,
who decides whether performance conditions have been met, considers these to be the most appropriate measures of the
long term performance of the Company. Directors may also apply for SAYE options on the same terms as apply to all other
employees.
Pensions
Executive Directors are members of the Company “money-purchase” pension scheme. Employer contributions are
determined by the service contracts. In some cases there are payments in lieu of pension contributions at the option of the
individual.
73
Cranswick plc - Report & Accounts 2008
Service contracts
The service contracts for M. Davey, D. Black and B. Hoggarth include one year notice periods from 1 May 2006 except in
the case of a takeover of the Company when the notice period is 2 years for the first six months following the take-over.
J. Lindop and A. Couch have one year rolling contracts which commenced on 30 June 2004 and 1 May 2006 respectively. P.
Farnsworth and J. Worby have two year appointment letters from 1 January 2008. The contracts for M. Davey, D. Black, B.
Hoggarth and J. Lindop have special provisions relating to liquidated damages requiring that the notice period stipulated
in the contract will be paid in full. For the other contracts the Remuneration Committee will consider the circumstances of
an early termination and determine compensation payments accordingly.
Performance graph
The graph below shows the percentage change (from a base of 100 in May 2003) in the total shareholder return (with
dividends reinvested) for each of the last five years on a holding of the Company’s shares against the corresponding change
in a hypothetical holding in the shares in the FTSE 350 Food Producers and Processors Price Index (“FTSE FPP”) and the FTSE
All Share Index (“FTSE All Share”). The FTSE FPP and the FTSE All Share were chosen as representative benchmarks for the
business of the sector and the market as a whole for the business.
Source: Investec
Information subject to audit
Directors’ remuneration
The remuneration of directors for the year was as follows:
Salary and fees
Bonuses
Benefits
Payment in lieu of pension contribution
Pension contribution
Aggregate notional gains made by directors on exercise of options
74
2008
£’000
1,967
788
6
249
3,010
448
3,458
9
2007
£’000
1,801
1,275
5
249
3,330
394
3,724
487
Individual directors, including pension contributions:
Non-executive directors:
PW Farnsworth
RN Taylor
(to date of resignation)
JG Worby
Executive directors:
DJ Black
MTP Davey
B Hoggarth
JD Lindop
AH Couch
Salary
and fees
Bonus
Other
Benefits
Total
2008
Total
2007
Pension
2008
Pension
2007
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
35
52
38
312
542
421
233
334
-
-
-
170
170
170
108
170
-
-
-
81
76
92
-
-
-
1
-
1
1
1
1
1
35
53
38
564
789
684
342
505
-
32
55
11
32
-
631
817
725
488
550
59
105
81
129
63
-
11
-
55
94
71
108
55
“Other” comprises payments in lieu of pension contribution.
The number of directors who were active members of the money purchase pension scheme during the year was 6 (2007 - 6).
Benefits principally comprise medical insurance.
M Davey is a non-executive director of Thorntons plc. His fees in this capacity are paid to the Company; amounts receivable
for the year ended 31 March 2008 were £41,675 (2007 - £34,458). J Lindop is a non-executive director of Black Sheep
Brewery plc. His fees in this capacity are paid to the Company; amounts receivable for the year ended 31 March 2008 were
£10,980 (2007 - £10,275).
Share Options
The Company operates an executive share option scheme and a long term incentive plan for senior executives, including
directors, and a savings related share option scheme which is available to all employees. The interests of the directors in
these schemes were as follows:
Executive share option scheme
At
1 April
2007
No
50,000
50,000
50,000
50,000
50,000
Granted
in the year
Exercised
in the year
No
No
Lapsed
At
31 March
2008
No
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
50,000
50,000
50,000
50,000
Exercise
price
Range of
exercise dates
p
601.0
601.0
601.0
601.0
601.0
4 July 2008/3 July 2015
4 July 2008/3 July 2015
4 July 2008/3 July 2015
4 July 2008/3 July 2015
4 July 2008/3 July 2015
MTP Davey
DJ Black
AH Couch
B Hoggarth
JD Lindop
No share options were exercised in the year apart from the SAYE Scheme shown below
The executive share options of each director are exercisable subject to the attainment of performance criteria based on the
total return to shareholders during the 3 year performance period being in the top half against a basket of food companies
quoted on the London Stock Exchange.
75
Cranswick plc - Report & Accounts 2008
Long term incentive plan
At
1 April 2007
Granted
in the year
Exercised
in the year
Lapsed
MTP Davey
DJ Black
AH Couch
B Hoggarth
JD Lindop
No
No
No
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
-
-
-
-
-
-
-
-
-
-
At
31 March
2008
No
50,000
50,000
50,000
50,000
50,000
Range of
exercise dates
Weighted
average
exercise
price
p
Nil
Nil
Nil
Nil
Nil
1 Sept 2009/1 Sept 2017
1 Sept 2009/1 Sept 2017
1 Sept 2009/1 Sept 2017
1 Sept 2009/1 Sept 2017
1 Sept 2009/1 Sept 2017
The options of each Director under the long term incentive plan are exercisable after 3 years on the attainment of
certain performance criteria detailed on page 60.
The options granted in the year are exercisable between 1 September 2010 and 1 September 2017.
Savings related share option scheme
At
1 April 2007
Granted
in the year
Exercised
in the year
Lapsed
MTP Davey
DJ Black
AH Couch
B Hoggarth
JD Lindop
No
No
No
2,526
3,158
5,689
2,310
3,158
1,443
(2,526)
288
1,785
866
-
(791)
-
(1,516)
(791)
-
-
-
-
-
At
31 March
2008
No
1,443
2,655
7,474
1,660
2,367
Range of
exercise dates
Weighted
average
exercise
price
p
665
468
395
572
444
1 Mar 2011/1 Sept 2011
1 Mar 2010/1 Sept 2011
1 Mar 2009/1 Sept 2015
1 Mar 2009/1 Sept 2011
1 Mar 2010/1 Sept 2010
The Directors are eligible, as are other employees of the Group, to participate in the SAYE scheme, which by its nature
does not have performance conditions.
The following Directors exercised savings related share options during the year:
D J Black
J D Lindop
MTP Davey
B Hoggarth
Number
Date exercised
791
1 March 2008
791
1 March 2008
2,526
1 March 2008
1,516
1 March 2008
Exercise
Price
p
415.0
415.0
375.0
375.0
Market
Price
p
540.0
540.0
540.0
540.0
Notional
Gain
£’000s
1
1
4
3
The market price of the company’s shares at 31 March 2008 was 515.0p per share. The highest and lowest market prices
during the year for each share option that is unexpired at the end of the year are as follows:
Options in issue throughout the year
Options issued during the year: SAYE
Executive
Highest
945.5p
847.5p
900.0p
Lowest
495.0p
495.0p
495.0p
76
Directors' beneficial interests (unaudited)
M T P Davey
D J Black
A Couch
B Hoggarth
J D Lindop
P Farnsworth
J Worby
At 31 March 2008
At 31 March 2007
Ordinary Shares
Ordinary Shares
200,426
88,758
55,644
107,594
106,513
1,082
1,641
182,900
82,883
44,627
101,642
101,778
1,058
1,641
All the above interests are beneficial.
There have been no other changes to the above interests in the period from 1 April 2008 to 9 May 2008
On behalf of the Board
Patrick Farnsworth
Chairman of the Remuneration Committee
19 May 2008
77
Cranswick plc - Report & Accounts 2008
Report of the auditors
to the members of Cranswick plc
Independent auditor’s report to the members of Cranswick plc
We have audited the group and parent company financial statements (the “financial statements”) of Cranswick plc for the
year ended 31 March 2008 which comprise the Group Income Statement, the Group and Parent Company Balance Sheets,
the Group and Parent Company Cash Flow Statements, the Group and Parent Company Statements of Recognised Income
and Expense and the related notes 1 to 29. These financial statements have been prepared under the accounting policies
set out therein. We have also audited the information in the Directors’ Remuneration Report that is described as having
been audited.
This report is made solely to the company’s members, as a body, in accordance with Section 235 of the Companies Act 1985.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for
this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report, the Directors’ Remuneration Report and the financial
statements in accordance with applicable United Kingdom law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the financial statements and the part of the Directors’ Remuneration Report to be audited in
accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial
statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance
with the Companies Act 1985 and, as regards the group financial information, Article 4 of the IAS Regulation. We also report
to you whether in our opinion the information given in the directors’ report is consistent with the financial statements.
The information given in the directors’ report includes that specific information presented in the Operating and Financial
Review that is cross referred from the Business Review section of the directors’ report.
In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not
received all the information and explanations we require for our audit, or if information specified by law regarding
directors’ remuneration and other transactions are not disclosed.
We review whether the Corporate Governance Statement reflects the company’s compliance with the nine provisions of
the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report
if it does not. We are not required to consider whether the board’s statements on internal control cover all risks and
controls, or form an opinion on the effectiveness of the group’s corporate governance procedures or its risk and control
procedures.
We read other information contained in the Annual Report and consider whether it is consistent with the audited financial
statements. The other information comprises only the directors’ report, the unaudited part of the Directors’ Remuneration
Report, the Chairman’s Statement, the Group Operating and Financial Review, the Corporate Governance Statement, and
the five year statement and shareholder information. We consider the implications for our report if we become aware of
any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend
to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in
the financial statements and the part of the Directors’ Remuneration Report to be audited. It also includes an assessment
of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the group’s and company’s circumstances, consistently applied and
adequately disclosed.
78
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary
in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of
the Directors’ Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in
the financial statements and the part of the Directors’ Remuneration Report to be audited.
Opinion
In our opinion:
•
the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union,
of the state of the group’s affairs as at 31 March 2008 and of its profit for the year then ended;
•
the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the
European Union as applied in accordance with the provisions of the Companies Act 1985, of the state of the parent
•
company’s affairs as at 31 March 2008;
the financial statements and the part of the Directors’ Remuneration Report to be audited have been properly
prepared in accordance with the Companies Act 1985 and, as regards the group financial statements, Article 4 of the
IAS Regulation; and
•
the information given in the directors’ report is consistent with the financial statements.
Ernst & Young LLP
Registered auditor
Hull, 19 May 2008
79
Cranswick plc - Report & Accounts 2008
Advisers
Secretary
Malcolm Windeatt FCA
Company Number
1074383
Registered Office
74 Helsinki Road
Sutton Fields
Hull HU7 0YW
Stockbrokers
Investec Investment Banking - London
Brewin Dolphin Securities - Newcastle
Registrars
Capita IRG plc
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Auditors
Ernst & Young LLP - Hull
Solicitors
Rollits - Hull
Bankers
Lloyds TSB Bank plc
The Royal Bank of Scotland plc
Merchant Bankers
N M Rothschild & Sons - Leeds
80
Shareholder information
Five Year Statement
IFRS
2008
£’m
2007
£’m
2006
£’m
2005
£’m
UK GAAP
2004
£’m
Turnover *
598.9
510.5
432.9
313.9
268.0
Profit before tax **
35.3
32.7
31.1
21.6
21.2
Earnings per share **
55.9p
50.2p
51.2p
38.6p
35.8p
Dividends per share
19.9p
18.1p
16.5p
14.5p
13.2p
Capital expenditure
25.8
11.8
14.3
19.1
10.0
Net debt
Net assets
(78.4)
(75.9)
(77.1)
(92.4)
(13.3)
155.3
135.8
112.4
92.8
68.8
* The directors have reclassified discounts and similar allowances from cost of sales and operating costs to revenue, a
presentation which more appropriately reflects the nature of these amounts.
** Prior to goodwill amortisation under UK GAAP; this is the principal difference between UK GAAP and IFRS.
Dividends per share relate to dividends declared in respect of that year.
Net debt is defined as per note 25 to the accounts.
Financial calendar
Preliminary announcement of full year results
Publication of Annual Report
Annual General Meeting
May
July
July
Payment of final dividend
September
Announcement of interim results
November
Payment of interim dividend
January
81
Cranswick plc - Report & Accounts 2008
Shareholder analysis
at 9 May 2008
Classification
Private shareholders
Corporate bodies and nominees
Size of holding (shares)
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 50,000
50,001 – 100,000
Above 100,000
Share price
Share price at 31 March 2007
Share price at 31 March 2008
High in the year
Low in the year
Share price movement
Number of
holdings
Number of
shares
1,142
547
1,689
6,256,748
39,974,283
46,231,031
777
549
119
126
54
64
317,323
1,232,195
852,760
2,858,961
3,856,337
37,113,455
1,689
46,231,031
940p
515p
945p
495p
Cranswick’s share price movement over the five year period to May 2008 and comparison against the FTSE 350 Food
Producers and Processors Price Index (“FTSE FPP”) and against the FTSE All Share Price Index (“FTSE All Share”), both
rebased at May 2003, is shown below:
Source: Investec
82
Some of the awards in recent years
to Cranswick businesses
Grocer Own Label Excellence Award
2008 Winner Meat & Poultry Grocer Own Label Awards – Applewood Smoked Bacon
BPEX Foodservice Pork Product of the Year Competition
2008 Gold
Best Cured Product – Jack Scaife Hand Cured, Air Dried Gammon Steak
Gold
Gold
Best Fresh Pork Cut – Outdoor Reared Hampshire Breed Thick Cut Pork Chops
Best Pork Ready Meal – Ham Shanks in Dijonnaise Sauce
Silver
Best Innovative Pork Product – Smokey Flavour Maple BBQ Ribs
2007
Gold
Gold
Silver
Silver
Best Innovative Pork Product – Pork Shanks
Best Cured Product – Muscavado Sweetcure Streaky Bacon
Best Cured Product – Muscavado Sweetcure Back Bacon
Best Fresh Pork Cut – Hampshire Outdoor Reared Rib Roast
Yorkshire Company of the Year 2007
2007 Winner Yorkshire Business Enterprise Award
Super Meat Awards
2007 Winner Best Pork or Bacon Product – Truly Irresistible Oak Smoked Dry Cured Back Bacon
Finalist Best Pork or Bacon Product – Sainsburys Taste the Difference Slow Cook Outdoor Reared
British Pork Belly
Finalist Best Sausage Product – Sainsburys Taste the Difference British Pork and Caramelised Red
Onion Sausages
Finalist Best Organic Product – Sainsburys So Organic Dry Cured British Bacon
2005
Finalist Best Sausage Product – Aberdeen Angus Beef Sausage
2004 Winner Best Pork & Bacon Product
Winner Best Product Overall – Both with Pork Rib Roast
2003
Finalist Best Beef Product – Monterey Jack Cheeseburger
Meat Industry Award
2006 Winner Sausage of the Year – Sainsburys ‘Pancetta & Parmesan’ sausage
Food Awards 2006
2006 Winner Best Packaging for a Product – Sainsburys Taste The Difference Dry Cured Sweet Cure Back Bacon
British Turkey Awards
2006 Winner Best Ready to Eat Product award – Sainsburys Taste the Difference Free Range Turkey Breast
2003
Finalist Best Catering Product – Turkey & Pepper Kebabs
Meat and Poultry News Awards
2005 Winner Manufacturer of the Year
2004 Winner Organic Meat Product of the Year – Duchy Organic Honey & Rosemary Chipolatas
2002 Winner Manufacturer of the Year
Winner Organic Meat Product of the Year – Organic Pork Joint with Sage & Apple Stuffing
Guild of Fine Food Retailers ‘Great Taste’ Awards
2005 Gold
Smoked Streaky Bacon
Silver
Silver
Unsmoked Streaky Bacon
Chilli and Coriander Sausage
Bronze
Pork Sausage
2002 Gold
Arista Pork Loin
Gold
Silver
Chorizo
Bavarian Ham
Bronze Green Greek Olives
83
Cranswick plc - Report & Accounts 2008
British Sandwich Association Awards
2005 Winner En-Route Retailer of the Year category
Finalist British Sandwich Designer of the Year
2004 Winner En-Route Retailer of the Year category
Winner Tuna Sandwich Designer of the Year
Winner Hot & Spicy Sandwich Designer of the Year
Winner British Sandwich Designer of the Year
2002 Winner En-Route Retailer of the Year category
Food Development Agency Awards
2004 Winner Best Retail Product – Pork Range
Yorkshire Annual Report Awards
2004 Winner Shareholder Value category
2003 Winner Shareholder Value category
2002 Winner Medium Quoted Company category
Winner Shareholder Value category
PFK Aquatic Awards
2004 Winner Best Test Kit – Salifert ph Profi
2001 Winner Best Fish Food Product – Gamma
Winner Best Test Kit – Salifert
Winner Best Pond Clarifier – Pond Clear UV
Winner Best Pump – Rio Aqua Pump
Meat and Livestock Commission Awards
2003
Best Catering Sausage – Smithfield Sausage
Silver
Pizza, Pasta and Italian Food Association Awards
2003 Winner Manufactured Pasta Product of the Year – Garlic Mushroom filled Pasta
2002
Finalist Pasta Retailer of the Year category
Meat and Livestock Commission Awards
2002 Winner Retail Category – Ready to Eat/Heat to Eat – Smokey Joe Pork Wrap & Trinidad Pork Tortilla
2001 Winner Retail Category – Ready to Eat/Heat to Eat – Cajun Beef Ciabatta
British Meat Awards
2002 Winner Food Service Lamb Product – Aloo Saag Lamb Chapatti
Winner Retail Pork Product – Creole Pork Enchilada Wrap
The London Stock Exchange PLC Awards
2002
Finalist Company of the Year
2001
Finalist Company of the Year
84
85
Production facilities
“ ...well invested quality assets ”
Fresh pork
Sausages
Bacon
Cooked meats
Cranswick was formed in the 1970s by farmers in East Yorkshire to produce animal feed.
The Company went on to the Stock Market in 1985 and since that time has evolved into a
business that is highly focused on the food sector. Activities include the supply of fresh pork,
gourmet sausages, charcuterie, cooked meats, sandwiches and traditional dry cured bacon. This
represents over 90 per cent of sales.
Sales are also made into the pet and aquatic sector through the supply of bird and small animal
food, marine fish and aquatic products.
Share price 1985-2008 (pence)
1200
1000
800
600
400
200
0
‘86
‘87
‘88
‘89
‘90
‘91
‘92
‘93
‘94
‘95
‘96
‘97
‘98
‘99
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
Start date is entry on to Stock Market, 4 December 1985 – Source: Investec
report & accounts
Year ended 31 March 2008
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Registered office: Helsinki Road, Sutton Fields, Hull HU7 0YW Tel. 01482 372000
www.cranswick.co.uk