R E P O R T & A C C O U N T S
YEAR ENDED 31 MARCH 2010
quality products, outstanding performance
Cranswick was formed in the 1970’s 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.
F I N A N C I A l H I g H l I g H T S
Turnover
(£m)
Profit before tax*
(£m)
Earnings per share*
(pence)
Dividends per share
(pence)
740.3
43.8
69.7
25.0
606.8
559.2
34.7
32.2
53.7
49.1
21.7
19.9
2008
2009
2010
2008
2009
2010
2008
2009
2010
2008
2009
2010
• Turnover from continuing operations up 22 per cent to £740m
• Profit before tax from continuing operations up 26 per cent at £43.8m
• Increase of 30 per cent in earnings per share from continuing operations to 69.7p*
• Dividend up 15 per cent to 25.0p per share
*Before exceptional items.
C o n t e n t s
Chairman’s statement
Review of activities
Professional awards
Group operating and financial review
Business locations
Group directors
Directors
Directors’ report
Corporate governance statement
Directors’ remuneration report
Corporate social responsibility statement
statement of directors’ responsibilities
Report of the auditors
Group income statement
Group statement of comprehensive income
Company statement of comprehensive income
Group balance sheet
Company balance sheet
Group statement of cash flows
Company statement of cash flows
Group statement of changes in equity
Company statement of changes in equity
notes to the accounts
Advisers
shareholder information
shareholder analysis
Production facilities
3
7
10
13
20
20
21
23
29
35
41
45
46
48
49
49
50
51
52
53
54
55
56
97
98
99
100
C h A i R mA n ’ s s t A t e m e n t
i am pleased to report to shareholders that during the past year the Company has continued to
progress and has further established its presence in the UK food sector. there was a very strong
increase in turnover and the Company’s strategy to focus on food production was evidenced by the
sale of the pet business and the acquisition of the pork processing activities of Bowes of norfolk
(‘CCF norfolk’). shareholders were notified of these transactions previously. in addition there has
again been significant investment in the Group’s asset base to enable the organic growth of the
business to be maintained.
Results
sales for the year increased to £740 million, a rise of
operating margin along with lower financing costs, resulting
22 per cent compared to the previous year. organic growth
from the strong cash flow of the business and lower interest
represented 11 per cent of the increase and CCF norfolk
contributed 11 per cent. there were very strong increases
in certain product categories. sales of cooked meats rose by
13 per cent, sausages by 23 per cent and bacon by 61 per
cent which substantiates the decision to invest significantly
in these categories in recent years. there are plans for
investment in certain areas and, in addition, the coming year
will see completion of the investment project at the fresh
rates, contributed to an increase in profit before taxation
of 26 per cent to £43.8 million. earnings per share rose
30 per cent to 69.7p per share from 53.7p previously. the
strong cash flow resulted in a reduction in net debt from
£66.6 million a year ago to £54.7 million at the end of
march. the borrowings of the business are conservatively
structured and interest was covered 21 times compared to
10 times a year ago. there is further information on trading
and finance in the Reviews by the Chief executive and Finance
pork facility in hull. the provision of a high quality fixed
asset base to meet the organic growth aspirations of the
business in the most efficient way possible is a key strategic
Director which follow.
Dividend
priority for the Board.
the operating margin in the underlying business was
comparable to that achieved in the previous year which is
pleasing given the continued raw material cost inflation during
the first six months. significant inflation was experienced
the Board is proposing an increase in the final dividend of
15.6 per cent to 17.0p per ordinary share. Along with the
interim dividend of 8.0p per ordinary share paid in January
2010 this makes a total for the year of 25.0p per ordinary
share an increase of 15.2 per cent on last year’s 21.7p. the
final dividend, if approved by shareholders, will be paid on
in the prior year, continued into this year and peaked in the
3 september 2010 to shareholders on the register at the
summer. Prices then came back and more recently there
close of business on 2 July 2010. shares will go ex-dividend
have been modest increases leaving prices slightly below the
on 30 June 2010. shareholders will again have the option
peak of last summer. strong growth in sales and maintained
to receive the dividend by way of scrip issue.
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Richard Marginson
Outlook
it is with sadness that i report to shareholders the death
the Company is well positioned to meet the increasing
during the year of Richard marginson. Richard was one
demand for UK pork products. the business has developed
of the original 23 shareholders, a founder Director of the
significant expertise in the supply chain, building on its origins
Company and the first Chairman. he made an enormous
in pig feed production and the rearing of pigs, and through
contribution to the development of the business in those
acquisitions, joint ventures and organic initiatives it now has
early days and served as Chairman until retiring from the
market leading positions in a number of categories. the
Board in 1991. on behalf of all at Cranswick we extend our
past year has seen increased expenditure by the consumer
sympathy to Richard’s wife Gladys and family.
on products such as air-dried bacon, premium sausages,
Board
steven esom was appointed as a non executive Director
during the second half of the year. steven has a wealth of
experience within the food sector including twelve years at
Waitrose where he was managing Director and at marks &
spencer where he was executive Director of Food.
Staff
Cranswick is operated on a decentralised basis with a number
of product categories each with its own management team.
the continued successful growth of the Company is a
reflection of their expertise and commitment and on behalf
of the Board i would like to thank them and their colleagues
for their contribution in driving the business forward.
Profit before tax
1990-2010
(£m)
fresh pork and ham and this looks set to continue as the
value and versatility of pork, the ‘alternative white meat’,
are increasingly appreciated. With experienced management
throughout the Group and a well invested asset base the
Board is confident in the successful long term development
of the business and is encouraged by the positive start made
in the current financial year.
Martin Davey
Chairman
24 may 2010
43.8
34.7
32.7 33.0
31.1
21.2 21.6
19.8
17.5
11.7
9.3
7.1
1.4
1.7
0.9
2.2
2.3
3.0
3.1
5.0
4.0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
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R e v i e W o F A C t i v i t i e s
BY the C hieF e XeCUtive, BeRnARD ho GGARth
it is very satisfying to report continued growth in sales. total external sales increased by 22 per cent to
£740 million. Underlying sales grew by 11 per cent after stripping out the contribution from the CCF
norfolk fresh pork business which was acquired during the year. internal sales within the Group also
grew strongly to £123 million. internal sales are generated by the supply to the further processing
sites of primal fresh pork for conversion into sausages and air-dried bacon, and fresh pork legs to be
cured, cooked and processed into ham products.
During the second half of the year the pig price and the
Air-dried bacon has created a new premium category in the
price of most other proteins eased from the highs seen
market. this is still a developing and immature category and
earlier in the year. however, prices are now firming again
new business wins coupled with growth of existing accounts,
and with demand from the major UK grocery retailers for
saw sales increase by 61 per cent in the year.
British pork products increasing, the requirement for British
pig meat is expected to remain strong. the continued price
competitiveness of pork against the other major proteins
including beef and lamb should also ensure that demand for
pork remains strong and that prices remain relatively firm.
the continuing volatility of sterling against the euro will be
one of the major factors in the competitiveness of imported
pig meat going forward.
the extension of the Lazenby’s sausage factory in hull on land
purchased adjacent to the existing site is nearing completion.
sales have grown strongly over the five years since the new
factory was completed, and during the year grew by a further
23 per cent. the extension which includes new despatch
facilities is essential to meet peak volume requirements during
the barbecue season and at Christmas. the new extended
facility will provide a maximum weekly capacity of 700 tonnes,
During the year the Board has approved several large capital
an increase of 50 per cent. Licensed brands including ‘the
projects to ensure that the Group continues to have sufficient
Black Farmer’ and ‘Weight Watchers’ have continued to grow
headroom in production capacity to facilitate future growth.
strongly, helped by increased listings. it is pleasing to see
it is vital that the Company remains at the forefront of the
that even in the current economic climate many consumers
sector with some of the best invested and efficient plants in
are continuing to trade up in the sausage category, looking
the UK pork industry, so maintaining the Group’s competitive
for high meat content products with good flavour profiles
edge going forward.
and provenance. these are products which are trusted to
one such project is the planned investment to expand the
air-dried bacon facility at sherburn. the factory, which was
commissioned just over two years ago, is already hitting
capacity during peaks in seasonal demand. investment in
the latest generation of high speed slicers, together with
doubling of throughput by the commissioning of the second
adjacent unit, will ensure the business is well placed to meet
growing demand.
provide a quality, simple, home meal solution, either for a
family meal, or a special dining-in occasion. trading up and
buying the best products for home consumption still appears
to be a consideration for many families as they cut back on
expenditure and dining out occasions become less frequent.
this is not to say that ‘red label’ shoppers are any less active;
they are still price focused and are quite prepared to switch
between retailers to find the best value deals.
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the largest project the Group has undertaken to date is
capacity increased by 50 per cent. specialist boning lines
the redevelopment of the primary pork processing facility
have been added to simplify the butchery process and
at the Preston site near hull. When completed later this
increase efficiency and productivity. management has been
year, it will lift production capacity at the site by 50 per
strengthened and it is pleasing to report the good progress
cent. this is an essential development for several reasons.
being made in integrating the norfolk site with the Group’s
the plant is situated in the middle of the largest pig rearing
existing fresh pork operations.
area in the UK and with other factories in the region now
processing fewer animals than previously, the Preston site
will be providing a first class local service to the area’s pig
farming community. this also helps to reduce ‘food miles’
which is a high priority for the industry. this, together with
the growing requirement for British pork, as mentioned
earlier, meant it was imperative that the business was able
to satisfy the increasing demand from retail customers and
also ensure the shortest journeys for contracted livestock. the
continued development of specialist pig breeds for premium
lines has helped the business become the lead supplier of
fresh pork to the Group’s largest customer. in tandem with
Cooked meat sales were strong with growth of 13 per cent.
With sales to most of the multiple retailers it is vital that
new product development, which is essential in building
new accounts, is of the highest standard. this programme
includes the development of an integrated supply chain by
entering into longer term supply agreements with certain
key pig producers which gives them security to develop with
Cranswick. the supply of specific standards of British pork
legs including ‘Freedom Foods’ and ‘outdoor Reared’ is of
increasing importance to the Group’s customers. this, coupled
with work on the incorporation of certain rare breeds into
breeding programmes, forms part of the ongoing research
the investment at Preston the norfolk facility is also being
upgraded. investment to date has again seen production
into eating quality.
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The sandwich category had a successful year and whilst
A new and exciting project is the planned launch of a range
sales were down 1 per cent for the year as a whole, they
of charcuterie products under the ‘Jamie Oliver’ brand in the
recovered strongly and were ahead of the prior year for the
autumn. The range will also include fresh pasta, sausage,
second half, with profitability also much improved. Sales to
fresh pork and bacon products. Jamie is well respected by
airline operators continued to grow, benefitting from some
the public for his simple approach to food and cooking
global agreements and contracts. Frozen solutions for retail
and the success of his television series and book sales bear
and foodservice customers now account for more than 5
testament to this. This new range has fantastic potential
per cent of sales with a range of frozen sandwich platters
to drive sales across all categories with many of the major
launched with a retail customer at Christmas. Licensee
grocery retailers.
agreements with the ‘Chicago Town Pizza’ and ‘Reggae,
Reggae’ brands will help drive sales going forward. The
sandwich filling category is very much a focus too and recently
there have been business wins in the convenience sector
with the new fillings range. The trading environment now
looks much healthier, with longer term contracts secured
and new accounts growing strongly.
Continental products performed well during the year with sales
up 8 per cent. ‘Round pound’ deals with retailer customers
using the ‘Premier Deli’ brand drove sales exceptionally well
throughout the year. There have been other notable successes
during the year too, including sales of fresh olives and antipasti.
Following investment in a new production area and specialist
equipment at the Guinness Circle site in Manchester, olive
sales grew by over 50 per cent. The business is now able to
produce mixed packs and marinated products. The choice
and availability of Mediterranean products is exceptional at
a time when the consumer’s interest in this style of food is
so high. New retail customers have been brought on board
and business with existing customers has been increased
These are exciting times for the Company. The business
through the addition of olives and Italian cheeses to the
continues to grow and there are still many opportunities to
category. The Company was also first to market with a
be developed. Cranswick is one of the best invested meat
premium offering of ‘soft slice’ charcuterie products. This
based food producers in the UK and this, coupled with the
range is produced without the need to deep chill prior to
ongoing work on innovation, efficiency, service levels and,
slicing and the impact of this process on eating quality and
most importantly, with the quality of the people in the
flavour has been exceptional.
businesses, should keep Cranswick as the supplier of choice
for its customers.
Bernard Hoggarth
Chief Executive
24 May 2010
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A W A R D s A n D R e C o G n i t i o n
2010
Best Pork Product
Best Red Meat Product
Richard Woodall Dry Cured Bacon
Meat Management Awards
2010 Winner
2009 Winner
Best Pork Product and Best Red Meat Product
Richard Woodall Dry Cured Bacon
Manufacturer of the Year
Grocer Own Label Excellence Award
2010
Gold
Silver
2009 Winner
Winner
Winner
Meat Joints Category
sainsbury’s taste the Difference British Ultimate outdoor Reared
Dry Cured Unsmoked Gammon Joint
Chilled Savoury Category
sainsbury’s taste the Difference British Pork Cocktail sausages
Wrapped in a Butter Puff Pastry
Delicatessen Meat Category
sainsbury’s taste the Difference traditional spiced ham
Bacon & Sausage Category
morrison’s the Best Lightly oak smoked sweetcure Rindless Back
Bacon
Meat & Poultry Grocer Own Label Category
Applewood smoked Bacon
Quality Food Awards
2009 Winner
Fresh Meat Game and Poultry Award
sainsbury’s taste the Difference 12 British Ultimate Chipolatas
BPEX - Bacon Connoisseur’s Week
2010
2010 Winner
2010 Winner
Overall Winner
m&s outdoor Bred British smoked Dry Cured streaky Bacon
Best retailer ‘Smoked’ category
m&s outdoor Bred British smoked Dry Cured streaky Bacon
Best new flavour Category
m&s outdoor Bred British Demerara sweet Cure Back Bacon
BPEX Foodservice Pork Product of the Year Competiton
2008
Gold
Gold
Gold
Best Cured Product
Jack scaife hand Cured, Air Dried Gammon steak
Best Fresh Pork Cut
outdoor Reared hampshire Breed thick Cut Pork Chops
Best Pork Ready Meal
ham shanks in Dijonnaise sauce
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Silver
2007
Gold
Gold
Silver
Silver
Best Innovative Pork Product
smokey Flavour maple BBQ Ribs
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
AWA RDS
YORKSHIRE POST
2007 Winner
Yorkshire Business Enterprise Award
Food Awards 2006
2006 Winner
Best Packaging for a Product
sainsbury’s taste the Difference Dry Cured sweet Cure Back Bacon
British Turkey Awards
2006 Winner
Best Ready to Eat Product Award
sainsbury’s taste the Difference Free Range turkey Breast
Meat and Poultry News Awards
2009 Winner
2005 Winner
Producer of the Year Award
Cranswick plc supplier - thomas Dent of Penrith in Cumbria
Manufacturer of the Year
Super Meat Awards
2007 Winner
Finalist
Finalist
Finalist
2005
Finalist
Best Pork or Bacon Product
truly irresistible oak smoked Dry Cured Bacon
Best Pork or Bacon Product
sainsbury’s taste the Difference slow Cooked outdoor Reared
British Pork Belly
Best Sausage Product
sainsbury’s taste the Difference British Pork and Caramalised Red
onion sausages
Best Organic Product
sainsbury’s so organic Dry Cured British Bacon
Best Sausage Product
Aberdeen Angus Beef sausage
Meat Industry Awards
2006 Winner
Sausage of the Year
sainsbury‘s ‘Pancetta & Parmesan’ sausage
Guild of Fine Food Retailers ‘Great Taste’ Awards
2008
2005
Gold
Gold
Silver
Silver
Bronze
Taste the Difference Ultimate Oak Smoked Bacon
Smoked Streaky Bacon
Unsmoked Streaky Bacon
Chilli and Coriander Sausage
Pork Sausage
British Sandwich Association Awards
2005 Winner
Finalist
En-Route Retailer of the Year Category
British Sandwich Designer of the Year
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G R o U P o P e R A t i n G A n D
F i n A n C iA L R e v i e W
nAtURe, oBJeCtives AnD st RAteGies
Business objectives
The Group’s business
Following the sale of the pet activities on 24 April 2009, the
Group’s operations are focused entirely on the production
it is the Board’s view that meeting the following business
objectives is key to achieving the financial and non-financial
measures that increase value to shareholders and other
and supply of food products. the Company’s strategy to
stakeholders:
focus on food production was further evidenced by the
•
Delivering innovative, quality products to our customers
acquisition of the pork processing activities of Bowes of
•
maintaining the highest level of service to our customers
norfolk Limited, now renamed ‘CCF norfolk’, on 24 June
2009. Both transactions are referred to in more detail below.
the performance of the business in the year is discussed in
the Review of Activities. the business operates entirely in
•
improving operational efficiency
•
securing employee health and safety
•
maximising returns on investment
the UK, although a small proportion of sales are exported.
Business strategies
it produces 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, together with a range of
pre-packed sandwiches predominantly for sale into food service
the Group’s market strategy is to focus primarily on the
growing quality end of the markets in which it operates, to
establish meaningful and long-lasting relationships with its
major customers by a combination of product development
and high service levels and to invest in quality facilities and
the latest equipment to enable it to operate as efficiently
outlets. the markets in which the food business operates are
as possible. operational management is given responsibility
competitive both in terms of pricing from fellow suppliers and
for developing plans to deliver the objectives of the Group
the retail environment in general. the UK food retail market
with particular emphasis on growing sales through product
is known to be amongst the most competitive in the world.
innovation and high service levels, improving operational
Despite this, Cranswick has a long record of increasing sales
efficiency and securing employee health and safety. the
and profits through a combination of investing in modern
role of the Board in achieving Group objectives is to support
efficient factories, developing a range of quality products
operational management and to identify suitable acquisitions
and making sound acquisitions. the businesses are under
that will take the Group into new and growing areas of the
the control of stable, experienced and talented operational
market, will open up new customer relationships to the Group
management teams supported by a skilled workforce.
or will consolidate existing market positions.
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CURRent AnD FUtURe DeveLoPment
AnD P eRFoRmAnCe
Profit before tax
Business development and
performance
operating profit from
continuing operations
net finance costs
the key features of the year have been the record profit
Profit from continuing
2010
£m
45.9
(2.1)
2009
£m
38.4
(3.7)
before tax for the Group and the continuing strong cash
generation from operating activities. the record of unbroken
growth in profits now goes back more than 20 years. the
trading environment in which we operate has remained
challenging; in particular we experienced delays in passing
on increases in raw material costs through the first half of
the year as the input cost inflation experienced in the prior
year continued with prices peaking in the summer. Prices
subsequently eased slightly but more recently have moved
operations before tax
43.8
34.7
the increase in operating profit from continuing operations
is attributable to a combination of strong sales growth and
improved operational efficiency. the reduction in net finance
costs was as a result of the strong cash flow and the full
year benefit of the reduction in UK interest rates seen in the
latter part of the previous financial year.
Discontinued operations
moderately higher. the Group has experienced continuing
on 24 April 2009 the Board announced that the pet division
competitor pressure although the efficiencies achieved as
activities had been sold, following a competitive process, to
extra volumes are put through our factories have mitigated
a management buyout team. Accordingly the results of the
to some extent against those pressures.
pet division have been reported as discontinued at 31 march
Revenue
Revenue from continuing
2010
£m
2009
£m
2010 and 31 march 2009. the pet business produced a range
of bird and small animal food for sale into specialist pet and
more general retail outlets, as well as selling tropical marine
operations
740.3
606.8
fish and aquatic products largely into specialist retailers both
in the UK and abroad. the sale proceeds of £18.4 million
the Group’s revenue from continuing operations has
were received in cash.
increased by 22 per cent, of which 11 per cent was organic,
in the four week period prior to its sale, the pet division
with the balance from CCF norfolk. sales of fresh pork
generated a profit before tax of £30,000 (year ended 31
have grown by 48 per cent, reflecting the contribution of
march 2009 - £2,038,000 before an impairment charge of
CCF norfolk, sausages by 23 per cent, bacon by 61 per
£2,544,000). turnover for the same period was £3.6 million
cent, cooked meats by 13 per cent and charcuterie by 8 per
(year ended 31 march 2009 - £46.5 million).
cent whilst sandwich sales which, as anticipated, recovered
strongly in the second half of the year, were 1 per cent lower.
Revenue in the income statement excludes the activities of
the pet business, since under iFRs the results of discontinued
operations are disclosed as a single line item at the foot of
the income statement.
Acquisition of Bowes of
Norfolk Limited
on 24 June 2009, after receiving clearance from the UK
Competition Authorities, the Company acquired the whole
of the issued share capital of Bowes of norfolk Limited
(CCF norfolk) for a net cash consideration, before costs, of
£10.5 million. CCF norfolk is a significant operator in the pork
processing sector and the acquisition reinforces Cranswick’s
position in that industry.
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Business KPIs
Future development
the Board has assessed that the following KPis are the
the Group will continue to seek to increase sales through a
most effective measures of progress towards achieving the
combination of product development with existing customers
Group’s objectives:
•
organic sales growth – year on year increase in
sales revenue excluding the impact of acquisitions
and disposals
•
Gross margin – gross profit as a percentage of
sales revenue
•
operating margin – operating profit as a percentage
of sales revenue
and business gains with new ones. the standard of the Group’s
factories will be maintained at the highest level and further
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,
•
Free cash flow – cash generated from operations
product quality, food safety and service levels; its modern
less tax and interest paid
well-equipped factories; its operational management and
Performance against KPIs
2010
2009
its skilled workforce.
Reputation
organic sales growth
(continuing)
11.2%
9.2%
it is the responsibility of local operational management assisted
Gross margin (continuing)
13.1%
14.1%
by their own product development team, Group technical
operating margin
(continuing)
Free cash flow
6.2%
6.3%
£29.6m
£41.2m
and Group health & safety to maintain and where possible
enhance the Group’s reputation for product innovation,
product quality, food safety and service levels.
the Company has seen substantial organic sales growth in
Factories
the underlying business of 11.2 per cent over the past year
the Group has some of the best-invested, modern facilities
driven by its expertise in product development, service levels,
in the industry, having invested £94 million over the past
quality and value with further sales growth anticipated in
five years, and it intends to continue investing to ensure that
the next twelve months. CCF norfolk contributed a further
it maintains its competitive edge.
10.8 per cent of sales growth in the period following its
acquisition on 24 June 2009. Gross margin including the
Employees
contribution from CCF norfolk was 13.1 per cent of sales
compared to 14.1 per cent a year ago. excluding CCF norfolk,
gross margin at 13.9 per cent was only slightly below the prior
year level, despite the continued raw material cost inflation
experienced during the first half of the year as the business
achieved improved operating efficiencies. operating margin
on the same basis at 6.7 per cent was 0.4 per cent higher.
margins were lower in the newly acquired CCF norfolk
business, but this is being addressed through a combination of
capital investment and operational efficiency improvements.
Principal cash flows are discussed under financial position
and performance, below.
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, share options and a stimulating and challenging
working environment. 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.
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Principal risks and uncertainties
Raw material prices – the major exposure the Group
the Group annually carries out a formal exercise to identify
and assess the impact of risks on its 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 production sector,
has to raw material price fluctuations is pig meat, part of
which is as a result of currency movements. Purchasing of
pigs and pig meat is co-ordinated centrally and whilst the
Company does not generally seek to hedge against pig
price movements because of the downside risk, longer
term contracts have been negotiated in certain instances
are identified as competition and customer retention, food
with key pig suppliers.
safety, business continuity, environmental matters, raw
material prices and legislation. these are discussed in more
detail below.
Competition and customer retention – the Company
manages the risk of operating in a consolidated sector by
maintaining strong customer relationships. this process is
Legislation - Legislation in all the markets we serve changes
on a regular basis, and interpretation of existing laws can also
change to create ever tightening standards, often requiring
additional human resources and the provision of new assets
and systems. We are committed to respond positively to new
regulation and ensure that our views are expressed during
supported by delivering high levels of service and quality
consultation exercises.
and by continued focus on product development and
technical innovation.
Food safety – the risk of food scares is mitigated by
FinAnCiAL P osition A nD
PeRFoR mAnCe
ensuring that all raw materials are traceable to source and
Exceptional items
that manufacturing, storage and distribution systems are
continually monitored by experienced and well qualified
site based and Group technical teams.
the exceptional charge of £6.1 million in 2009 related to a
one-off, non-cash, exceptional deferred tax charge arising
from a change in UK corporation tax legislation in the Finance
Business continuity – the Group faces the risk of incidents
Act 2008 to phase out industrial Buildings Allowances and
such as a major fire, which may result in significant and
is referred to in more detail below.
prolonged disruption to its operating facilities. Business
Finance costs
continuity plans are in place across the Group’s manufacturing
Finance costs of £2.1 million (2009 - £3.7 million) were lower
than the previous year reflecting the strong cash generation in
the year and the full year benefit of the reduction in UK interest
rates seen in the second half of the last financial year.
facilities and appropriate insurance cover is in place to mitigate
any financial loss. Business continuity has been further
enhanced by the acquisition of a second pork processing
site in norfolk during the year.
Environmental matters – the Directors believe that good
environmental practices support the Board’s strategy by
enhancing the reputation of the Group, 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 details of these initiatives are set out in the
Group’s Corporate social Responsibility report and on the
Group’s website under the ‘Greenthinking’ banner.
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Taxation
Cash flow
the tax charge as a percentage of profit from continuing
the Group has continued to generate strong operational
operations before taxation was 25.8 per cent in the current year
cash flows. Cash generated from operating activities was
and 28.7 per cent in 2009 excluding the one-off exceptional
£32.2 million (2009 - £44.8 million) with higher Group profit
deferred tax charge of £6.1 million. this exceptional charge
offset by higher tax payments and an increase in working
had no impact on the cash flow of the business during the
capital; a significant part of which was attributable to the
prior year and represented the additional tax payable over
newly acquired CCF norfolk. the net cash outflow from
the twenty five year period the allowances would have been
investing activities of £11.8 million reflects capital additions,
available to the Group. the standard rate of UK Corporation
net of fixed asset sale proceeds, of £19.9 million, and the
tax was 28 per cent for both 2010 and 2009. the lower than
net inflow from acquisitions and disposals of £8.1m. the
standard rate of tax in the current year primarily relates to
previous year’s outflow was £20.7 million and comprised
prior year deferred tax adjustments and should not therefore
entirely of capital additions, net of fixed asset sale proceeds,
be interpreted as an ongoing feature. in addition the Group
of £20.7m. the £8.4 million of net cash used in financing
benefits from tax amounts taken directly to equity and
activities in 2010 is largely due to interest paid of £2.7 million,
included in the Group statement of Comprehensive income
dividends paid of £8.8 million and proceeds from issue of
and Group statement of Changes in equity.
share capital of £2.9 million. the prior year cash outflow
Earnings per share
Basic earnings per share from continuing operations, and
before the exceptional deferred tax charge in the prior year,
increased by 30 per cent to 69.7 pence. the average number
of shares in issue was 46,534,000 (2009 – 46,099,000).
from financing of £24.4 million was largely due to interest
paid of £3.6 million, dividends paid of £8.8 million, issue
costs of long term borrowings of £1.3 million and net
repayment of borrowings of £11.2 million. the overall result
is a net increase in cash and cash equivalents of £12.0 million
(2009 – decrease of £0.3 million).
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Net debt
net debt reduced by £11.9 million to £54.7 million (2009 - £66.6
Distributions, capital raising
and share repurchases
million) at the year end, resulting from strong operating cash flows
the proposed final dividend for 2010 together with the
and the net cash inflow from acquisitions and disposals.
interim paid in January 2010 amount to 25.0 pence per
Pensions
share which is 15 per cent higher than the previous year.
the increase in the share capital of the Group comprises
the Company operates a number of defined contribution
504,196 of share options exercised during the year, 265,913
schemes, whereby contributions are made to schemes
in respect of scrip dividends and 100,000 shares allotted to
operated by major insurance companies. Contributions to
the Cranswick plc employee Benefit trust. there were no
these schemes are determined as a percentage of employees’
share repurchases during the year.
basic salary. CCF norfolk operates a defined benefit scheme
which has been closed to further accrual since 2004. Under
international Accounting standard (iAs) 19, the deficit at the
date of acquisition was £5.8 million and this had reduced to
tReAsURY PoLiC ies
Functional currency
£5.4 million at 31 march 2010. the present value of funded
the functional currency of all Group undertakings is sterling.
obligations was £17.1 million and the fair value of plan assets
Foreign currency risk
was £11.8 million.
Capital structure
the major foreign exchange risk facing the Group is in the
purchasing of charcuterie products. the major currency
the primary objective of the Group’s capital management is
involved is the euro. the policy of the Group is to seek
to ensure that it maintains a strong credit rating and healthy
to mitigate the impact of this risk by taking out forward
capital ratios in order to support its business and maximise
contracts with UK banks for up to 12 months ahead and for
value for shareholders and other stakeholders.
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
amounts that commence at approximately 25 per cent of
the requirement and move progressively towards full cover.
At least 2 members of the main Board attend the monthly
meetings of the subsidiary Board at which the key decisions
on currency cover are taken.
Interest rate risk
issue new shares. no changes were made in the objectives,
the Group’s policy is to manage its cost of borrowing using
policies or processes during the years ended 31 march 2010
a mix of fixed and variable rate debt. Whilst fixed rate
and 31 march 2009.
the Group’s capital structure is as follows:
net debt
Cranswick plc shareholders’
equity
Capital employed
2010
£m
54.7
193.6
248.3
2009
£m
66.6
166.5
233.1
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 three UK banks on the amortising
portion (£35 million) of the medium term loan drawn down
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GoinG C onCeRn
when the Group renewed its credit facilities in December
the Group’s business activities, together with the factors
2008. this is being repaid at the rate of £2.5 million every
likely to affect its future development, performance and
3 months from march 2009 to september 2011, with the
position are set out in the Review of Activities. the financial
balance of £7.5 million repayable in December 2011. the
position of the Group, its cash flows, liquidity position and
hedging policy is reviewed from time to time as circumstances
borrowing facilities are described above, as are the Group’s
change. the monitoring of interest rate risk is handled entirely
objectives, policies and processes for managing its capital; its
at head office, based on the monthly consolidation of cash
financial risk management objectives; details of its financial
flow projections and the daily borrowings position.
instruments and hedging activities; and its exposure to credit
Credit risk
risk and liquidity risk.
Practically all sales are made on credit terms, the majority of
the Group has considerable financial resources together
which are to the major UK food retailers. overdue accounts
with strong trading relationships with its key customers
are reviewed at the monthly Board meetings of the operations.
and suppliers. As a consequence, the Directors believe
the incidence of bad debts is low. For all major customers,
that the Group is well placed to manage its business
credit terms are agreed by negotiation and for all other
risk successfully.
customers, credit terms are set by reference to external
credit agencies. every attempt is made to resist advance
payments to suppliers 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.
Liquidity risk
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
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
Mark Bottomley
Finance Director
members of the main Board are present and reported at the
24 may 2010
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 facilities currently available to the Group are
a term loan of £35.0 million (£20.0 million of which was
drawn down during the year) repayable in December 2011,
an amortising loan facility of £25.0 million repayable in seven
quarterly instalments of £2.5 million, with a final repayment
of £7.5 million in December 2011, a revolving credit facility
of £30.0 million and an overdraft facility of £20.0 million.
Unutilised facilities at 31 march 2010 were £54.0 million
(2009 - £53.0 million).
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B U s i n e s s L o C A t i o n s
SHERBURN
IN ELMET
MANCHESTER
KINGSTON-
UPON-HULL
BARNSLEY
DEESIDE
DENBIGH
ATHERSTONE
NORFOLK
MILTON KEYNES
G R o U P Di R e C t oR s
Fresh Pork
Neil Willis
James Pontone
Stuart Kelman
Chris Aldersley
Sandwiches
Tony Cleaver
Paul Nicholson
Food Central
Jim Brisby
Malcolm Windeatt
Simon Ravenscroft
Andrew Caines
Nick Anderson
Charcuterie
Rollo Thompson
Cooked Meats
Nick Tranfield
Paul Gartside
Andy Jenkins
Clive Stephens
Bacon & Sausage
Linda Watkin
Bill Crossland
Daniel Nolan
D i R e C t oR s
Executive Directors
Non-Executive Directors
+ Martin Davey, Chairman
+†* John Worby
martin qualified as a chartered accountant with Pannell Kerr
John is a chartered accountant with many years experience
Forster. he joined Cranswick and became Finance Director
in the food industry. John is currently Group Finance Director
in 1985. he was appointed Chief executive in 1988 and
of Genus plc having previously worked for Uniq plc (formerly
became Chairman on 26 July 2004.
Unigate PLC) from 1978 until 2002, in various roles including
Bernard Hoggarth, Chief Executive
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
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 is also a non-
executive Director of smiths news plc.
during the 1990s. he was appointed a Director in 1988 and
+†* Patrick Farnsworth
Chief executive in 2004.
Patrick has many years experience in the food industry, having
Adam Couch
Adam joined the operational side of the fresh pork business
of Cranswick in 1991 after graduating with a finance and
accountancy degree from the University in hull. he was
appointed a Director in 2003 and is currently managing
Director of the Fresh Pork operations. Adam is also a committee
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 the British Pig executive a position he has held
+†* Steven Esom
since 2005.
steven joined Cranswick as a non-executive Director
Mark Bottomley, Finance Director
mark is a chartered accountant, qualifying with Binder hamlyn.
he joined Cranswick as Group Financial Controller in January
2008 and was appointed Finance Director in June 2009. he
has several years experience in the food production sector
where he has held a variety of senior finance roles.
on 12 november 2009. he has held a number of senior
positions within the food sector including executive Director
of Food at marks & spencer plc which followed 12 years
at Waitrose, the last 5 years of which he was managing
Director. Until June 2009 he was a non-executive Director
of Carphone Warehouse plc. he is currently an operating
Partner of Langholm Capital, non-executive Chairman
of Barts spices and a non-executive Director of tyrells
investments Limited.
* member of Remuneration Committee
† member of Audit Committee
+ member of nomination Committee
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D i R e C t oR s ’ R e P oR t
the Directors submit their report and the audited accounts of the Group for the year ended 31 march 2010.
Principal activities, business review
and future developments
Directors and their interests
the appointment and removal of a Director is governed by the
the Group’s activities during the year were focused on the food
Articles of Association and within the terms of the nomination
sector. A review of the business and future development of the
Committee. the Company’s Articles of Association provide
Group and a discussion of the principal risks and uncertainties
that one third of the Directors retire by rotation each year
faced by the Group is presented in the Chairman’s statement
and with the proviso that each Director shall seek re-election
and Review of Activities on pages 3 to 9 and in the Group
at the Annual General meeting every three years. All new
operating and Financial Review on pages 13 to 19.
Results and dividends
the profit on ordinary activities before taxation from continuing
operations was £43.8 million (2009 - £34.7 million). After a
taxation charge of £11.3 million (2009 - £16.0 million), the
profit for the year is £32.6 million (2009 - £19.0 million). An
interim dividend of 8.0 pence per ordinary share was paid on
22 January 2010. the Directors recommend the payment of
a final dividend for the year, which is not reflected in these
accounts, of 17.0 pence per ordinary share which, together
with the interim dividend, represents 25.0 pence per ordinary
share, totalling £11.7 million (2009 – 21.7 pence per ordinary
share, totalling £10.0 million). subject to approval at the
Annual General meeting, the final dividend will be paid in
Directors are subject to election by shareholders at the first
opportunity following their appointment. the Directors of the
Company currently in office are as stated on page 21. martin
Davey, Bernard hoggarth, Adam Couch, John Worby and
Patrick Farnsworth served for the whole of the year under
review. Derek Black resigned as a director on 24 April 2009
following the disposal of the Pet Division and John Lindop
retired as a director on 31 may 2009. mark Bottomley was
appointed Finance Director on 1 June 2009 and steven esom
as a non-executive Director on 12 november 2009. martin
Davey and Bernard hoggarth retire in accordance with the
Articles of Association and, being eligible, each offers himself
for re-election. steven esom who was appointed since the
last Annual General meeting will stand for election.
cash or scrip form on 3 september 2010 to members on the
Details of the Directors’ beneficial interests in the ordinary
register at the close of business on 2 July 2010. the shares
share capital of the Company are included in the Directors’
will go ex-dividend on 30 June 2010.
Remuneration Report on page 40.
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 19.
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Major Shareholders
Disapplication of rights of pre-emption – this disapplies
the Company has been informed of the following significant
holdings of voting rights at 1 may 2010 in the 47,336,523
ordinary shares of the Company:
number of
shares
% of
issued
share
capital
13,949,221
29.47
AmvesCAP PLC
Legal & General
investment management
2,928,195
Jupiter Asset management
2,437,114
Artemis investment
management
1,706,924
standard Life investments
1,672,169
6.19
5.15
3.61
3.53
Share capital structure
rights of pre-emption on the allotment of shares by
the Company and the sale by the Company of treasury
shares. the authority will allow the Directors to allot
equity securities for cash pursuant to the authority to
allot shares mentioned above, and to sell treasury shares
for cash, on a pro rata basis to existing shareholders (but
subject to any exclusion or arrangements as the Directors
consider necessary or expedient in relation to fractional
entitlements, any legal, regulatory or practical problems
or costs under the laws or regulations of any overseas
territory or the requirements of any regulatory body or
stock exchange) and otherwise on a pro rata basis up to
an aggregate nominal amount of £232,347, representing
5 per cent of the Company’s issued share capital as at
29 may 2009. this authority will expire at the end of the
Annual General meeting to be held on 26 July 2010.
the Company has one class of shares, being ordinary shares
Allot shares and disapply pre-emption rights in
of 10p each. the authorised, allotted and fully paid up share
connection with a rights issue – this authorises the
capital is shown in note 24. there are no special rights
Directors to allot relevant securities and empowers the
pertaining to any of the shares in issue.
Directors to allot equity securities and to sell treasury shares
for cash in connection with a rights issue. this is in addition
to the authority to allot shares and the disapplication of
pre-emption rights contained in the authorities mentioned
above. the nominal value of ordinary shares which the
Directors may allot in the period up to the next Annual
General meeting, to be held on 26 July 2010, is limited to
£1,548,826 which represents approximately 33 per cent
of the Company’s issued ordinary share capital (excluding
treasury shares) as at 29 may 2009. the Directors do not
have any present intention of exercising this authority and
power. this authority will expire at the end of the Annual
General meeting to be held on 26 July 2010.
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 be held on 26 July
2010 to renew these powers.
At the last Annual General meeting the Directors received
authority from the shareholders to:
Allot Shares – this gives Directors the authority to allot
authorised but unissued shares and maintains the flexibility
in respect of the Company’s financing arrangements. the
nominal value of ordinary shares which the Directors may
allot in the period up to the next Annual General meeting,
to be held on 26 July 2010, is limited to £1,548,826 which
represents approximately 33 per cent of the issued share
capital (excluding treasury shares) as at 29 may 2009.
the Directors do not have any present intention of exercising
this authority other than in connection with the issue of
ordinary shares in respect of the scrip dividend offer and
the Company’s share option plans. this authority will
expire at the end of the Annual General meeting to be
held on 26 July 2010.
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To buy own shares – this authority allows the Company
Payment policy
to buy its own shares in the market, as permitted under
the Articles of Association of the Company, up to a limit
of 10 per cent of the Company’s issued share capital. the
the Group and the Company do not have a formal policy that
they follow with regard to payment to suppliers. Payment
price to be paid for any share must not be less than 10p,
terms are agreed with each supplier and every endeavour
being the nominal value of a share, and must not exceed
is made to adhere to the agreed terms. the average credit
105 per cent of the average middle market quotations
for the ordinary shares of the Company as derived from
the London stock exchange Daily official List for the 5
business days immediately preceding the day on which
terms for the continuing Group, based on the year-end trade
creditors figure and a 365 day year, are 35 days. the average
credit taken by our customers on a similar basis is 32 days.
the ordinary shares are purchased. the Directors have no
Essential Contracts
immediate plans to exercise the powers of the Company to
purchase its own shares and undertake that the authority
would only be exercised if the Directors were satisfied
that a purchase would result in an increase in expected
it is imperative that Cranswick is able to source its high
quality raw materials at the most competitive prices and
to this end the Company has numerous supply contracts
earnings per share and was in the best interests of the
in place. While these contracts are collectively essential to
Company at the time. this authority will expire at the end
the business, no single contract or supplier is critical to the
of the Annual General meeting to be held on 26 July 2010.
Company’s business.
the Directors would consider holding any of its own
shares that it purchases pursuant to this authority as
treasury shares.
the Company also has strong relationships with certain
major retailers to supply them with product.
the Company is not aware of any agreements between
Auditors
shareholders that may result in restrictions on the transfer
ernst & Young LLP have expressed their willingness to continue
of securities and for voting rights.
in office and a resolution proposing their re-appointment
there are no restrictions on the transfer of ordinary shares in
will be submitted at the Annual General meeting.
the Company other than where certain restrictions may apply
from time to time, on the Board of Directors and other senior
Directors’ statement as to disclosure
of information to auditors
executive staff, which is imposed by laws and regulations
the Directors who were members of the Board at the time of
relating to insider trading laws and market requirements
approving the Directors’ Report are listed on page 21. having
relating to close periods.
Employment policies
the Group’s policy on employee involvement is to adopt
an open management style, thereby encouraging informal
consultation at all levels about aspects of the Group’s operations.
employees participate directly in the success of the business
by participation in the sAYe share option schemes.
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
employment policies are designed to provide equal opportunities
relevant audit information and to establish that the
irrespective of colour, ethnic or natural origin, nationality, sex,
Company’s auditors are aware of that information.
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.
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Change of control
there are no agreements that the Company considers significant
and to which the Company is party that would take effect,
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.
alter or terminate upon change of control of the Company
in each case, the extent to which awards are capable of
following a takeover bid other than the following:
exercise depends on the scope to which the performance
•
the Company is party to a number of banking
agreements which upon a change of control of
the Company are terminable by the bank upon the
provision of 10 working days notice, and
•
there are no agreements between the Company and
its directors or employees providing for compensation
targets (as adjusted or amended) have been satisfied.
Articles of Association
the Company’s Articles of Association may only be
amended by a special resolution at a general meeting of
the shareholders.
for loss of office or employment (whether through
resignation, purported redundancy or otherwise) that
occurs because of a takeover bid other than as stated
Annual General Meeting and Special
Business to be transacted at the
Annual General Meeting
in the Directors Remuneration Report relating to martin
Davey and Bernard hoggarth.
Long Term Incentive Plan
the notice convening the Annual General meeting can be
found in the separate notice of Annual General meeting
accompanying this Report and Accounts.
in the event of a general offer being made to acquire
Details of the special Business to be transacted at the Annual
part or all of the issued share capital of the Company as
General meeting are contained in the separate letter from the
a result of which the offeror may acquire control of the
Chairman which also accompanies this Report and Accounts,
Company, award holders under the Cranswick plc Long term
and covers the Directors’ authority to allot shares, the partial
incentive Plan (‘LtiP’) will have an opportunity to exercise
disapplication of pre-emption rights and the authority for
the Company to buy its own shares.
By order of the Board
Malcolm Windeatt
Company Secretary
24 may 2010
Company number: 1074383
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 Part 26 of the 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 2006. the period
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C o R P o R A t e G o v e R n A n C e
s tAt e m e n t
stAtement BY the DiReCtoRs on
ComPLiAnCe With the PRovisions
oF the Com BineD Co De
year responsibility for the Group’s day-to-day operations
was delegated to the Chief executive who, supported by the
executive Directors and executive management, implements
Principles of good governance
the Board’s strategy and manages the Group’s business. Upon
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.
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
this report, together with the Directors’ Remuneration
kept up-to-date on changes in relevant legislation and the
Report on pages 35 to 40, describes how the Board applies
general business environment, including the review of relevant
the principles of good governance and best practice as set
literature and attending external courses. Procedures are
out in the Combined Code on Corporate Governance (the
in place for Directors to seek both independent advice, at
‘Combined Code’) which can be found on the Financial
the expense of the Company, and the advice and services
Reporting Council’s website (www.frc.org.uk). A statement
of the Company secretary in order to fulfil their duties. the
of compliance with the Combined Code can be found at
Company secretary is responsible to the Board for ensuring
the end of this report.
The Board
During the year ended 31 march 2010, the Board consisted
of an executive Chairman, a Chief executive (and up to
24 April 2009 a Chief executive of the pet division), two
other executive Directors and two non-executive Directors
until 12 november 2009 after which there were three. All the
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 has completed a register relating to potential
conflicts of interest with its Directors and confirms that no
such conflicts exist. this register will be reviewed annually
non-executive Directors are deemed to be independent. the
or at such other time as is deemed necessary.
Combined Code states that at least half the board, excluding
the Board, led by the Chairman, has carried out a formal
the chairman, should comprise non-executive Directors
evaluation of its performance and that of its Committees
determined by the Board to be independent. the Board is
under a system based on a questionnaire circulated to all
confident that since 12 november 2009 it has complied with
Directors which was used to facilitate a Board discussion. the
this requirement of the Combined Code.
evaluation exercise showed that the Board and its Committees
the Board meets each month to direct and control the overall
were working well but, as expected, a number of actions
strategy and operating performance of the Group. to enable
were agreed to improve effectiveness. the Chairman has
them to carry out these responsibilities all Directors have
evaluated the performance of individual Directors through
full and timely access to all relevant information. A formal
one-to-one meetings. the Chairman meets with the non-
schedule of matters reserved for decision by the Board
executive Directors at least once a year to share his assessment
covers key areas of the Group’s affairs including acquisition
of executive Board member performance. in addition, the
and divestment policy, approval of budgets, major capital
non-executive Directors, led by the senior independent
expenditure projects, profit and cash flow performance and
Director, meet, without the Chairman present, in order to
general treasury and risk management policies. During the
appraise his performance.
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the Company’s Articles of Association provide that one third
the Committee reviews the Group’s accounting policies
of the Directors retire by rotation each year and with the
and internal reports on accounting and internal financial
proviso that each Director shall seek re-election at the Annual
control matters together with reports from the external
General meeting every three years. All new Directors are
auditors. the Audit Committee has overall responsibility for
subject to election by shareholders at the first opportunity
monitoring the integrity of financial statements and related
following their appointment.
announcements and for all aspects of internal control and
Directors’ biographies and membership of the various
Committees are shown on page 21. the formal terms of
reference for the Board Committees together with the terms
and conditions of appointment of non-executive Directors
meets at least three times a year, two of which involve a
review of the Group’s interim and full year financial statements.
the Audit Committee considers annually the extent and
effectiveness of the work of the internal audit function. the
are available for inspection at the Company’s Registered
Audit Committee is also responsible for recommendations for
office and at the Annual General meeting.
the appointment, reappointment or removal of the external
auditors and for reviewing their effectiveness. the Committee
BoARD Commit tees
puts the external audit function out to tender every four to
Audit Committee
the Audit Committee comprised of two independent non-
executive Directors, John Worby and Patrick Farnsworth until
12 november 2009 when steven esom joined the Board,
increasing the number to three. the Committee is chaired by
John Worby, the Group’s senior independent Director, who
is a chartered accountant, has considerable recent relevant
financial experience and has spent many years in the food
industry. Patrick Farnsworth has many years experience in
the food sector where he was Joint managing Director of
William Jackson & son Limited until his retirement in 2005.
steven esom has held a number of senior positions within
five years, the last such tender being in 2008. the external
auditor’s performance is assessed each year. the Committee
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 should not carry out 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 arrangements
by which staff can, in confidence, raise concerns about
possible improprieties in matters of financial reporting and
the food industry including managing Director at Waitrose
and executive Director of Food at marks & spencer. it is a
other matters.
requirement of the Combined Code that the Audit Committee
the terms of reference for the Audit Committee are available
should comprise of at least three independent non-executive
from the Company secretary.
Directors. the Board is confident that the Group, since
the Chairman of the Audit Committee will be available at the
12 november 2009, complies with this requirement.
Annual General meeting to respond to any shareholder questions
the Chairman, the Finance Director, who is ultimately
that might be raised on the Committee’s activities.
responsible for assessing the Group’s internal financial
Internal Control
controls, and the Group Financial Controller, together with
the Board of Directors has overall responsibility for the Group’s
the external auditors and, when requested, internal audit
system of internal control, which safeguards the shareholders’
attend the meetings as appropriate. the external auditors
investment and the Group’s assets, and for reviewing its
have the opportunity to access the Committee, without
effectiveness. such a system can only provide reasonable
the executive Directors being present, at any time, and the
and not absolute assurance against material misstatement
Committee formally meets with the external auditors at least
or loss, as it is designed to manage rather than eliminate the
once a year on this basis.
risk of failure to achieve business objectives.
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the Group operates within a clearly defined organisational
Internal Audit
structure with established responsibilities, authorities and
the Group’s internal audit function comprises of company
reporting lines to the Board. the organisational structure has
employees supported by Grant thornton, which provides
been designed in order to plan, execute, monitor and control
specialist advice and resources where necessary. internal
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
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, evaluate and manage
business risk (as detailed in the Group operating and Financial
audit is required to report to the Audit Committee on the
extent to which systems of internal control are effective and
to provide independent and objective assurance that the
processes by which significant risks are identified, assessed
and managed are appropriate and effectively applied.
the Audit Committee reviews and approves the annual audit
plan and receives regular updates on progress in meeting
the plan objectives. the internal audit approach is risk based
and takes into account the overall Group risk framework, as
well as risks specific to individual operations. the plan set out
at the beginning of the current year was achieved. internal
audit findings together with responses from management
Review); a strong control environment; an information and
have been considered and where necessary challenged.
communication process; a monitoring system; and a regular
Board review of effectiveness. the Group Finance Director
is ultimately responsible for overseeing the Group’s internal
controls.
During the year the management team identified the
key business risks within their operations, considered the
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 Group meets its obligations
for maintaining an appropriate relationship with the external
auditors through the Audit Committee, whose terms of
financial implications and assessed the effectiveness of
reference include an obligation to consider and keep under
the control processes in place to mitigate these risks. the
review the degree of work undertaken by the external auditor,
Board reviewed a summary of the findings and this, along
other than the statutory audit, to ensure such objectivity and
with direct involvement in the strategies of the businesses,
independence is safeguarded. there is also an established
investment appraisal and the budgeting process, enabled
policy for the work the external auditors can and cannot do
the Board to report on the effectiveness of internal control.
so as not to compromise their independence and in addition,
Following its review the Board determined that it was not
the Chairman of the Audit Committee is consulted prior to
aware of any significant deficiency or material weakness in
awarding to the external auditors any non-audit services in
the system of internal control.
Financial Reporting
the Group prepares annual budgets that are agreed by the
Board. operational management are required to report to the
excess of £20,000.
During the year the Audit Committee considered the following
factors in assessing the objectivity and independence of ernst
& Young LLP:
Board on a monthly basis on financial performance including
i) the auditors’ procedures for maintaining and monitoring
trading results, balance sheet, cash flows and related key
independence, including those to ensure that the partners
performance indicators. Updated forecasts are prepared half
yearly together with information on key risk areas. the use of
a standard reporting pack by all Group entities ensures that
and staff have no personal or business relationships with the
Group, other than those in the normal course of business
permitted by UK ethical guidance.
the information is gathered and presented in a consistent
ii) the auditors’ policies for the rotation of the lead partner
way that facilitates the preparation of the consolidated
and key audit personnel.
financial statements.
iii) Adherence by management and the auditor to the Group’s
policy for the procurement of non-audit services.
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Remuneration Committee
Nomination Committee
the Remuneration Committee comprises of Patrick Farnsworth
the nomination Committee comprises martin Davey, the
(Chairman), John Worby and from 12 november 2009
Committee’s Chairman, Patrick Farnsworth, John Worby, and
steven esom. it is a requirement of the Combined Code that
from 12 november 2009 steven esom. it is a requirement
the Remuneration Committee should consist of at least three
of the Combined Code that a majority of the members
independent non-executive Directors. the Board is confident
of the nomination Committee should be independent
that since 12 november 2009 the Group complies with this
non-executive Directors, and the Chairman should be either
requirement. martin Davey attends meetings of the Remuneration
the Chairman of the Board or a non-executive Director.
Committee by invitation and in an advisory capacity. no
the Board is confident that it fully complies with these
Director attends any part of a meeting at which his own
requirements of the Combined Code. Due to the integration
remuneration is discussed. the executive Directors determine
of the Group and the stability of the Board the Chairman’s
the remuneration of the non-executive Directors.
time commitment to the Committee is not anticipated to
the Committee recommends to the Board the policy for
be onerous.
executive remuneration and determines, on behalf of the
the Committee meets at least once a year and reviews the
Board, the other terms and conditions of service for each
structure, size and composition of the Board and is responsible
executive Director. it determines appropriate performance
for considering and making recommendations to the Board
conditions for the annual cash bonus and long term incentive
on new appointments of executive and non-executive
schemes and approves awards and the issue of options in
Directors. it also gives full consideration to succession
accordance with the terms of those schemes. the Remuneration
planning in the course of its work taking into account the
Committee also, in consultation with the Chairman, determine
challenges and opportunities facing the Group and what
the total individual remuneration package of senior executives
skills and expertise are therefore needed on the Board and
including bonuses, incentive payments and share option
from senior management in the future. the Committee,
and other share awards. the Remuneration Committee has
after carrying out an external search process involving an
access to advice from the Company secretary and to detailed
outside agency and interviewing a number of candidates,
analysis of executive remuneration in comparable companies.
recommended the appointment of steven esom as an
in addition, from time to time the Committee undertakes
additional independent non-executive Director. the current
a more detailed review using external consultants. the last
Directors seeking re-election at the Annual General meeting
such review was undertaken by Deloitte in 2008 and it is the
will be martin Davey and Bernard hoggarth. steven esom
Committee’s intention to conduct a review during the next
who was appointed since the last Annual General meeting
financial year. Details of the Committee’s current remuneration
will stand for election. their biographical details on page 21
policies are given in the Directors’ Remuneration Report on
demonstrate the range of experience and skills which each
pages 35 and 40.
brings to the benefit of the Company.
the terms of reference for the Remuneration Committee
the terms of reference for the nomination Committee are
are available from the Company secretary.
available from the Company secretary.
the Chairman of the Remuneration Committee will attend the
the Chairman of the nomination Committee will attend the
Annual General meeting to respond to any shareholder questions
Annual General meeting to respond to any shareholder questions
that might be raised on the Committee’s activities.
that might be raised on the Committee’s activities.
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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
m. Bottomley (from appointment – max 10)
D. Black (to resignation – nil)
A. Couch
s. esom (from appointment – max 5/1/4/1)
m. Davey
B. hoggarth
J. Lindop (to retirement – max 2)
P. Farnsworth
J. Worby
Board
Audit
Remuneration
Nomination
Committee
Committee
Committee
12
10
-
12
5
12
12
2
12
11
3
-
-
-
1
-
-
-
3
3
9
-
-
-
4
-
-
-
9
9
3
-
-
-
1
3
-
-
3
3
All who were Directors at the time attended the Annual General meeting.
Shareholders
Compliance with the Combined Code
the views of shareholders expressed during meetings with
the Directors consider that the Group has, during the year
them are communicated by the Chairman to the Board as
ended 31 march 2010, complied with the requirements of
a whole, and through this process the Board’s executive
the Combined Code other than as set out below:
and non-executive Directors are able to gain a sound
i) the company did not comply with Combined Code provision
understanding of the views and concerns of the major
A.3.2 for eight months of the year as the number of
shareholders. the Chairman discusses governance and strategy
independent non-executive Directors was less than half
with major shareholders from time to time. other Directors
the Board. since 12 november 2009 the Company believes
are available to meet the Company’s major shareholders if
it now complies.
requested. the senior independent Director is available to
ii) the Company did not comply, for eight months of the
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 from shareholders at the Annual General
meeting which is also attended by the Chairmen of the Audit,
Remuneration and nominations Committees.
Information pursuant to the
Takeovers Directive
the Company has provided the information required under
DtR 7.2.6 within the section headed “change of control” in
the Director’s report on page 27.
year, with Combined Code provisions B.2.1 and C.3.1
regarding the composition of the Audit and Remuneration
Committees as there were less than three independent
non-executive Directors. since 12 november 2009 the
Company believes it now complies.
By order of the Board
Malcolm Windeatt
Company Secretary
24 may 2010
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D i R e C t o R s ’ R e m U n e R A t i o n
R e P o R t
inFoRmAtion not sUBJeCt to AUD it
Bonus scheme
Remuneration Committee
the bonus scheme in operation is based on the achievement
of Group profit targets. the targets are set having regard to
the Remuneration Committee comprises the non-executive
the Company’s budget, historical performance and market
Directors Patrick Farnsworth (Chairman of the Committee),
outlook for the year. A small part of the bonus relates to
John Worby and steven esom from 12 november 2009. the
the achievement of a target performance for the first half
executive Chairman attends the meetings in an advisory
of the year where a fixed sum is paid with the remaining
capacity as requested. the Committee determines the
element based on a percentage of the results in excess of
remuneration of the Company’s executive Directors and puts
an annual target. the total bonus is capped at 150 per cent
forward its recommendations for approval by the Board.
of basic salary. non-executive Directors do not participate in
the remuneration policy is reviewed and benchmarked
the Group’s bonus scheme. incentive payments and benefits
by external consultants every two to three years; it is the
are not pensionable.
Committee’s intention to conduct a review during the next
financial year. PricewaterhouseCoopers were appointed by
the Remuneration Committee and have given advice during
the year on share option awards. the remuneration of the
non-executive Directors is determined by the executive
Directors and reflects the time, commitment and responsibility
of their roles.
Remuneration policy
the Group’s policy is that the overall remuneration package
offered should be sufficiently competitive to attract, retain
Share options and Long Term Incentive Plan
the basic salary and the bonus scheme are intended as the
most significant part of Directors’ remuneration; in addition,
executive share options and the Long term incentive Plan
(‘LtiP’) 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
Group. even though both option awards are seen as an
important part of rewarding the employee the Remuneration
Committee is focusing on using the LtiP rather than the
and motivate high quality executives and to align the rewards
executive option scheme.
of the executives with the progress of the Group whilst giving
options can only be exercised if certain performance criteria
consideration to salary levels in similar sized quoted companies
are achieved by the Group. Under the LtiP half the shares
in the sector and in the region. the remuneration package is
granted are subject to an earnings per share (‘ePs’) target
in two parts; a non performance part represented by basic
measured against average annual increases in the retail price
salary (including benefits) and, a significant performance
index (‘RPi’) over a three year period and the other half to
related element in the form of a profit related bonus and
a total shareholder return (‘tsR’) target measured against
share-based awards. the share-based awards are granted
a comparable group of food companies over a three year
by the Remuneration Committee and only vest on the
period. the comparison companies are Carrs milling industries
achievement of demanding targets aligned to shareholder
plc, Dairy Crest Group plc, Devro plc, Glanbia plc, Greencore
returns and earnings per share. the details of individual
plc, northern Foods plc, Robert Wiseman Dairies plc, Premier
components of the remuneration package and service
Foods plc and Uniq plc. the ePs target allows 25 per cent of
contracts are set out below:
the shares subject to the target to be issued at nil cost at an
Basic salary and benefits
the non performance related elements of remuneration
which comprise basic salary, car allowance and benefits
are reviewed annually and are effective from the 1 may.
Benefits principally comprise medical insurance, personal
tax advice and car benefit.
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. With the first three share awards, made
in previous years, the tsR target allowed 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
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performance between the 50th and 75th percentiles rewarded
Service contracts
pro-rata. For the LtiP issued in the year the tsR target was
the service contracts for martin Davey, Bernard hoggarth and
amended so that only 30% per cent of the shares subject to
Derek Black (up to his resignation) include one year notice
the target are to be issued at nil cost at the 50th percentile
periods from 1 may 2006 except in the case of a takeover of
and 100 per cent at the 75th percentile with performance
the Company when the notice period is 2 years for the first
between the 50th and 75th percentiles rewarded pro-rata.
six months following the take-over. these conditions were
Under the terms of the scheme an award to an individual
incorporated into new contracts several years ago, when the
cannot exceed 100% of that individual’s annual salary except
directors changed from contracts which had notice periods
in exceptional circumstances when up to 200% of the annual
of up to three years. the Remuneration Committee’s current
salary is permitted. the Remuneration Committee, which
policy is not to enter into employment contracts with any
decides whether performance conditions have been met,
element of notice period in excess of one year. Accordingly,
considers these to be the most appropriate measures of the
Adam Couch and John Lindop (up to his retirement) have
long term performance of the Group.
the criteria for executive options is based on total shareholder
return over a 3 year performance period and requires the Group
to be in the top half of 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
one year rolling contracts commencing 1 may 2006. mark
Bottomley has a 1 year rolling contract which commenced on
1 June 2009. two year appointment letters have been issued
to Patrick Farnsworth and John Worby from 1 January 2010
and steven esom from 12 november 2009. the contracts
for martin Davey, Bernard hoggarth, Derek Black (up to his
resignation) and John Lindop (up to his retirement) have
special provisions relating to liquidated damages requiring
that the notice period stipulated in the contract will be paid
Directors may also apply for sAYe options on the same terms
in full. For the other contracts the Remuneration Committee
as all other employees.
Pensions
executive Directors are members of the Group ‘money-
purchase’ pension scheme. employer contributions are
determined by service contracts. in some cases there are
payments of pension contributions in lieu of salary and in
other cases there are payments of salary in lieu of pension
contributions, both at the option of the individual.
Source: Investec
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 2000) in the total shareholder return (with
dividends reinvested) for each of the last ten 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 of
the sector and the market as a whole for the business.
R
S
T
8000
7000
6000
5000
4000
3000
2000
1000
0
M ay 00
Cranswick
FTSE 350 Food Producers
FTSE All Share
M ay 01
M ay 02
M ay 03
M ay 04
M ay 05
M ay 06
M ay 07
M ay 08
M ay 09
M ay 10
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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
2010
£’000
1,817
2,258
20
77
4,172
345
4,517
562
2009
£’000
2,044
1,794
9
77
3,924
509
4,433
18
Individual Directors’ remuneration, including pension contributions:
salary
Bonus
other
Benefits
and fees
£’000
£’000
£’000
£’000
Total
2010
£’000
total
2009
£’000
Pension
Pension
2010
£’000
2009
£’000
Non-Executive
Directors:
s esom
(from appointment)
PW Farnsworth
JG Worby
Executive
Directors:
DJ Black
(to resignation)
Jm Bottomley
(from appointment)
Ah Couch
mtP Davey
B hoggarth
JD Lindop
(to retirement)
12
37
42
28
156
380
623
484
55
-
-
-
-
175
549
826
705
3
-
-
-
-
-
-
77
-
-
-
-
-
-
12
37
42
-
36
41
28
407
10
341
-
3
3
4
-
932
1,529
1,193
58
849
1,152
946
493
-
-
-
5
40
72
120
93
15
-
-
-
62
-
68
114
95
170
“other” comprises payments in lieu of pension contribution – now ceased. Benefits principally comprise medical insurance,
personal tax advice and car benefit.
the number of Directors who were active members of the money purchase pension scheme during the year was 6 (2009 - 5).
martin Davey was a non-executive Director of thornton’s plc until his resignation on 5 December 2008. his fees in this capacity
were paid to the Company; amounts receivable for the year ended 31 march 2010 were £nil (2009 - £32,250). John Lindop
is a non-executive Director of Black sheep Brewery plc. his fees in this capacity were paid to the Company up to the date of
his retirement; amounts receivable for the year ended 31 march 2010 were £2,856 (2009 - £11,383).
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Share options
the Group 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
Granted
exercised
2010 or
exercise
Range of
2009
in the year
in the year
Lapsed
resignation
price
exercise dates
(number)
(number)
(number)
(number)
(number)
(pence)
At 31 March
DJ Black
50,000
Ah Couch
50,000
mtP Davey
50,000
B hoggarth
50,000
JD Lindop
50,000
-
-
-
-
-
-
-
50,000
50,000
50,000
-
-
-
-
-
-
-
-
50,000
601.0
4 July 2008/
3 July 2015
601.0
4 July 2008/
3 July 2015
601.0
4 July 2008/
3 July 2015
601.0
4 July 2008/
3 July 2015
50,000
601.0
4 July 2008/
3 July 2015
the executive share options of each Director were 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 of a basket of food companies
quoted on the London stock exchange. the performance criteria relating to these options have been achieved and the options
have been exercised.
the following directors exercised executive share options during the year:
number
Date exercised
exercise Price
Price
notional Gain
(pence)
(pence)
£’000
market
Ah Couch
mtP Davey
B hoggarth
50,000
50,000
50,000
25 march 2010
19 February 2010
16 December 2009
601.0
601.0
601.0
794.7
766.1
746.6
97
83
73
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Long term incentive plan
Granted
exercised
At 31 March
Year of
At 1 April
award
2009
in the
year
in the
year
2010 or
exercise
Lapsed
resignation
price
market
price at
grant
(number)
(number)
(number)
(number)
(number)
(pence)
(pence)
Jm Bottomley
2009 -
13,200
DJ Black
Ah Couch
mtP Davey
B hoggarth
JD Lindop
2006
2007
2008
2006
2007
2008
2009 -
2006
2007
2008
2009 -
2006
2007
2008
2009 -
2006
2007
2008
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32,500
32,500
32,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,039
13,992
16,125
14,961
10,039
-
14,961
14,961
-
-
-
-
-
-
-
-
-
10,039
-
10,039
-
10,039
13,018
14,600
13,200
14,961
11,008
8,875
25,000
25,000
32,500
25,000
25,000
32,500
25,000
25,000
32,500
14,961
11,982
10,400
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
592.5
755.5
847.5
632.0
755.5
847.5
632.0
592.5
755.5
847.5
632.0
592.5
755.5
847.5
632.0
592.5
755.5
847.5
632.0
Derek Black resigned on 24 April 2009 and John Lindop retired on 31 may 2009 and their holdings above are shown as at
their leaving date.
the performance periods commence on 1 April in each year and conclude on 31 march three years later and are exercisable
on the attainment of certain performance criteria detailed on pages 35 and 36. the range of exercise dates are 1 June 2010
to 19 August 2020.
A proportion of the options granted under the LtiP in 2007 were converted to restrictive share awards during the year.
the awards remain subject to the same performance criteria and vesting conditions. the above holdings include Directors
interests in restricted shares held under the LtiP.
the options granted in the year are exercisable between 1 June 2012 and 19 August 2020. the share price at the time of
issue was 592.5p.
the following directors exercised LtiP share options during the year:
number
Date exercised
exercise Price
Price
notional Gain
(pence)
(pence)
£’000s
market
Ah Couch
mtP Davey
B hoggarth
14,961
14,961
14,961
18 september 2009
19 February 2010
18 september 2009
nil
nil
nil
650.4
766.1
650.4
97
115
97
P A Ge 3 9 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
Savings related share option scheme
At 1 April
Granted
exercised
At 31 March
2010 or
Weighted
average
excerise
Range of
2009
in the year
in the year
Lapsed
resignation
price
exercise dates
(number)
(number)
(number)
(number)
(number)
(pence)
DJ Black
4,900
Ah Couch
3,761
mtP Davey
2,025
B hoggarth
2,025
JD Lindop
2,367
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,900
436
1 mar 2010/
1 sept 2016
3,761
472
1 mar 2013/
1 sept 2016
2,025
474
1 mar 2012/
1 sept 2012
2,025
474
1 mar 2012/
1 sept 2012
2,367
442
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
Director’s Beneficial Interests
(Unaudited)
does not have performance conditions.
no savings related share options were exercised by executive
Directors during the year.
Market price of shares
the market price of the Company’s shares at 31 march
2010 was 808.5 pence per share. the highest and lowest
market prices during the year for each share option that was
unexpired at the end of the year are as follows:
highest
Lowest
(pence)
(pence)
Ah Couch
mtP Davey
P Farnsworth
B hoggarth
J Worby
At
At
31 March
31 march
2010
2009
Ordinary
ordinary
Shares
shares
64,136
61,921
200,426
200,426
1,161
1,121
112,388
108,388
1,641
1,641
options in issue
throughout the year
options issued during
the year:
All the above interests are beneficial.
820
569
there have been no further changes to the above interests
- sAYe
- LtiP
820
820
726
589
On behalf of the Board
in the period from 1 April 2010 to 7 may 2010.
Patrick Farnsworth
Chairman of the
Remuneration Committee
24 may 2010
P A Ge 4 0 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
C o R P o R A t e s o C i A L
R e s P o n s i B i L i t Y s t A t e m e n t
Cranswick take its responsibilities to employees, customers, shareholders and the environment very
seriously. the Company increasingly recognises that a balanced and committed approach to all aspects
of Corporate social Responsibility will bring benefits to each of the Company’s stakeholders and will
strengthen its business position and credentials to facilitate future sustainable growth and development.
Workplace
the Group aims to recruit, train and retain employees who are
the business takes the health and safety of its employees
valued for their contribution and able to fulfil their potential in
very seriously and is committed to high levels of training
meeting the business objectives of the Company. the Group
to ensure that all factories and processes remain safe and
companies each have their own strategies for retaining staff,
fulfilling places in which to work. overall accident rates have
including the provision of competitive terms and conditions,
shown a decrease over the past five years. An industry leading
share options and a challenging and stimulating working
web based accident recording system allows the Company
environment.
to be reactive to all incidents, monitoring and implementing
the Company employs 4,138 permanent members of staff
actions to prevent recurrence.
compared with 3,349 the previous year (excluding the
Total Accidents per 100,000 employees
discontinued pet division); the increase reflecting the acquisition
of CCF norfolk, in addition to the natural growth of the
other sites as production levels increase. Agency personnel
are used to supplement these levels at an average of around
40 per cent of permanent manning levels. Careful auditing
of the supplying agencies is carried out to ensure adherence
to best practice and to see that they are registered under
20,000
18,000
16,000
14,000
12,000
10,000
8,000
the Gangmasters (Licensing) Act 2004.
2005
2006
2007
2008
2009
P A Ge 4 1
| C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
training is provided both to all full time employees and any
Environment
temporary or agency workers. All undertake a full health and
safety induction course, together with training in manual
handling, Fire, and First Aid regulations. the Company
provides in-house courses including Accident investigation,
Risk Assessment, and manual handling and source other
training requirements externally. in 2010/11, the Company
will focus on Behavioural safety management training for
supervisors and managers.
health and safety is reviewed regularly at Board level, with
the Group health & safety manager attending quarterly
Board meetings to present his report to Directors. this report
includes accident statistics, and pro-active and re-active
ongoing projects to further enhance the standards of health
and safety in the business.
each site has a dedicated full time health & safety Co-ordinator,
who is trained to neBoshh standards with staff appropriate
to the size of the site. they take local responsibility for health
& safety, carrying out such tasks as accident investigation, risk
assessments, training, and safety tours under the guidance
of two Group health & safety Co-ordinators who report to
the Group health and safety manager.
sites are internally audited to ensure that standards are
maintained and improved and the Group’s insurers carry out
their own external health and safety audits across all sites
and confirm that there are excellent standards of health &
safety in the Group.
the Group has committed to accredit all operating sites
to meet the British standard 18001 (occupational health
and safety management systems) and the Company is one
year into this three year project, and on course to complete
in 2011.
the Company is currently co-ordinating the business’ approach
to socially Responsible trading in order to provide a forum
to share ethical knowledge and learning across the Group.
All manufacturing sites are registered on the seDeX scheme
database to enable customers and suppliers to view the
ethical standards and two of Cranswick’s largest sites are
already subject to independent ethical audit. it is the aim to
extend this initiative to all sites.
environmental progress at site and Group level is measured
and reported to the Board against performance benchmarks
for energy efficiency, water usage, and landfill, relative to
production tonnage.
nine of the sites are covered by Climate Change Agreements,
and they have consistently achieved the target reductions
in carbon emissions per tonne of product since the scheme
was introduced in 2001. the impending Carbon Reduction
Commitment may have a small impact on the parts of the
Group not caught by the existing Climate Change Levy.
Progress in reducing the carbon footprint has continued since
the initial benchmarking in 2007. the overall reduction in
the Group’s defined footprint remains at 11 per cent over
two years against a three year target of 15 per cent, falling
from just over 0.36 tonnes of carbon per tonne of product
to below 0.33 tonnes.
Further reductions in the Company’s carbon footprint are
anticipated through the replacement of older refrigeration
systems, with more environmentally friendly systems, to
increase efficiencies and reduce the potential for leakage.
the Group is fully compliant with legislative constraints of
the f-Gas Regulations and the phase out of older hCFC
gases such as R22.
Landfill waste reduction has continued, and is down over
20 per cent since 2007 with recycling and the increased
availability of waste to energy outlets. one site now has
local access to an anaerobic digestion plant which will
potentially reduce its landfill by between 70 and 80 per
cent in the coming year.
the Group’s process water usage continues to be reported
under the FhC2020 agreement, with individual site initiatives
to reduce usage. A reverse osmosis unit installed at the
milton Keynes site has reduced boiler water usage by 6 per
cent with the further benefit of reducing corrosion in the
cooker installation. Work to improve effluent quality through
microbiological pre-treatment is ongoing at several sites to
ensure that consent limits are met and to reduce treatment
costs from water companies.
P A Ge 4 2 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
Four of the ten operating sites are now of sufficient size to
Company’s satisfaction. the approval of raw material suppliers
require permits under the integrated Pollution and Prevention
is centrally controlled and involves independent third party
Control regulation. two of these sites are also fully certified
audit or approval by the Group technical services team.
under the international standard for environmental management,
Cranswick is committed to clear informative labelling which
iso14001. the Group’s participation in the Carbon Disclosure
allows consumers to make informed purchasing decisions.
Project (www.cdproject.net) and the Forest Footprint Disclosure
Project continues.
Cranswick’s development has been focussed on the British
pig market and the Group has always been a staunch
the Cranswick plc website (www.cranswick.co.uk) has been
supporter of British farming. the acquisition of CCF norfolk
expanded to cover the environmental initiatives that have
has strengthened the Company’s position in the British pig
been introduced under the ‘Greenthinking’ banner. the
market. Producer groups and development initiatives with
Company encourages an open approach to these issues,
retailers, farmers and agricultural colleges are all aimed
and a question and answer element and contact facilities
at improving business relationships throughout the pig
are provided to help interested parties find the appropriate
production chain to bolster the market against increasing
detail at the desired level.
worldwide competition. some 70 per cent of contracted
Market place
As a food company Cranswick recognises its responsibilities
to create and produce products which are safe, legal and
wholesome. the food production sites are of modern design
and well invested and operate to a high standard of food
safety, process control, hygiene and housekeeping. All the sites
are independently audited against the BRC Global standard
for Food safety and have a consistent record of achieving
Grade A compliance against this exacting standard which
is recognised as a performance benchmark for the industry.
the customer base is heavily focused on the major UK Grocery
Retailers, Restaurant Groups and Food service Companies.
in addition products for further processing are supplied to
other food producers. the sites and their food safety and
quality management systems are constantly assessed by
customers for compliance with their own specific policies.
the Company also has in place a robust system of internal
audits to ensure that sites continue to operate in compliance
with the standards expected by customers, third party auditing
bodies and enforcement authorities, and this system is a key
driver in maintaining the excellent record of compliance.
Key to all food claims is ensuring that the raw materials used
(meat, ingredients and packaging) are traceable to source
and where raw materials are identity preserved, the supplier
will be challenged to prove their traceability systems to the
pigs are sourced from within Yorkshire, Lincolnshire &
norfolk which are recognised as being some of the best pig
breeding areas in the UK. of these, approximately 40 per
cent will be sourced from within 25 miles, 60 per cent within
40 miles, and 70 per cent within 50 miles of Cranswick’s
pork processing units in hull and norfolk. As a result of
the acquisition of CCF norfolk food miles are significantly
reduced. Pigs which are transported from further afield are
done so using transporters equipped with drinkers and air
ventilators. All hauliers are members of independently audited
and certified welfare assurance schemes.
the Group does not have a formal policy with regard to
payment of suppliers, but it does agree individual payment
terms appropriate to the supplier market sector and makes
every endeavour to meet those agreements. sites are separately
managed and encouraged to source locally where it serves
the Company’s best interests.
Business continuity depends on the effective management
of crisis situations. each of the sites has a crisis management
team in place which is centrally coordinated and guided by
the Group’s crisis management procedures. to ensure that
these procedures remain robust, a simulated crisis event is
staged annually utilising the expertise of a specialist crisis
management company, with all outcomes and learning
shared across the Group.
P A Ge 4 3 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
Food safety will always be of paramount importance, and
Summary
well qualified and experienced technical teams are in place at
site level which are centrally co-ordinated across the Group to
share best practice and ensure that all products and processes
meet the increasing demands of customers.
Community
the Group has made real progress towards all targets during
the year. the ‘Greenthinking’ programme and other Group
wide initiatives are delivering tangible reductions in energy,
water and waste usage which will benefit the environment
and the local communities in which the Group operates.
All sites are encouraged to participate in charitable activities
the Company will continue to focus on employee welfare
including sponsored marathons, cycle rides and other fund
through training programmes, health and safety initiatives
raising activities. overall, some 75 per cent of employees live
and by ensuring that the facilities in which they operate are
within 10 miles of their place of work, so local involvement,
maintained to the highest standards.
particularly in rural locations, can be very beneficial.
By order of the Board
When sites undergo development and expansion there is
always a consideration of environmental and community
impact. the redevelopment of the hull pork processing
facility has been designed to reduce odour and noise, and
incorporates systems for additional heat recovery and reduced
water usage. new roads have been put in to relieve traffic
flow into the outskirts of the village and acres of trees
have been planted to reduce the visual impact of the site.
improvements to the drainage systems at the norfolk site
have been made to reduce the danger of contamination to
local water courses.
Malcolm Windeatt
Company Secretary
24 may 2010
P A Ge 4 4 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
s t A t e m e n t o F D i R e C t o R s ’
R e s P o n s i B i L i t i e s
in R eL Ation to the F inAnCiAL 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
•
state that the Company and the Group has complied
with iFRss, subject to any material departures disclosed
and explained in the financial statements; and
and fair view of the assets, liabilities, financial position
•
make judgements and estimates that are reasonable
and profit of Cranswick plc and the undertakings
and prudent.
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.
Under Company Law the directors must not approve the
financial statements unless they are satisfied that they
present fairly the financial position and the cash flows of the
Company and of the Group and the financial performance
the directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company
and the Group’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and the Group and enable them to ensure that the financial
statements comply with the Companies Act 2006 and
Article 4 of the iAs Regulation. they are also responsible for
safeguarding the assets of the Company and of the Group
and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
of the Group for that period. in preparing these financial
On behalf of the Board
statements the directors are required to:
•
select suitable accounting policies in accordance with
iAs 8: Accounting Policies, Changes in Accounting
estimates and errors and then apply them consistently;
Martin Davey
Chairman
Mark Bottomley
Finance Director
•
present information, including accounting policies, in a
24 may 2010
manner that provides relevant, reliable, comparable and
understandable information;
•
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
Group’s financial position and financial performance;
P A Ge 4 5 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
R e P o R t o F t h e A U D i t o R s
to the memBeRs oF CRAnsWiCK plc
Independent auditor’s report to the
members of Cranswick plc
Scope of the audit of the financial
statements
We have audited the financial statements of Cranswick
An audit involves obtaining evidence about the amounts
plc for the year ended 31 march 2010 which comprise the
and disclosures in the financial statements sufficient to
Group income statement, the Group and Parent Company
give reasonable assurance that the financial statements
Balance sheets, the Group and Parent Company statements
are free from material misstatement, whether caused by
of Comprehensive income, the Group and Parent Company
fraud or error. this includes an assessment of: whether the
statements of Cash Flows, the Group and Parent Company
accounting policies are appropriate to the Group’s and the
statements of Changes in equity and the related notes
parent Company’s circumstances and have been consistently
1 to 30. the financial reporting framework that has been
applied and adequately disclosed; the reasonableness of
applied in their preparation is applicable law and international
significant accounting estimates made by the directors; and
Financial Reporting standards (iFRss) as adopted by the
the overall presentation of the financial statements.
european Union and, as regards the parent Company financial
statements, as applied in accordance with the provisions of
the Companies Act 2006.
this report is made solely to the Company’s members, as
a body, in accordance with Chapter 3 of Part 16 of the
Opinion on financial statements
in our opinion:
•
the financial statements give a true and fair view of
the state of the Group’s and of the parent Company’s
affairs as at 31 march 2010 and of the Group’s profit
Companies Act 2006. our audit work has been undertaken
for the year then ended;
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report
•
the Group financial statements have been properly
prepared in accordance with iFRss as adopted by the
and for no other purpose. to the fullest extent permitted by
european Union;
law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a
•
the parent Company financial statements have been
properly prepared in accordance with iFRss as adopted
body, for our audit work, for this report, or for the opinions
by the european Union and as applied in accordance
we have formed.
with the provisions of the Companies Act 2006; and
Respective responsibilities of directors
and auditors
•
the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006 and, as regards the group financial
statements, Article 4 of the iAs Regulation.
As explained more fully in the Directors’ Responsibilities
statement set out on page 45, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. our responsibility
is to audit the financial statements in accordance with
applicable law and international standards on Auditing (UK
and ireland). those standards require us to comply with
the Auditing Practices Board’s (APB’s) ethical standards
for Auditors.
P A Ge 4 6 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
Opinion on other matters prescribed
by the Companies Act 2006
in our opinion:
•
the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with
the Companies Act 2006;
•
the information given in the Directors’ Report for the
financial year for which the financial statements are
th• e parent Company financial statements and the part
of the Directors’ Remuneration Report to be audited
are not in agreement with the accounting records and
returns; or
•
certain disclosures of Directors’ remuneration specified
by law are not made; or
•
we have not received all the information and
explanations we require for our audit; or
prepared is consistent with the financial statements;
•
a Corporate Governance statement has not been
and
prepared by the Company.
•
the information given in the Corporate Governance
statement set out on pages 29 to 34 with respect
to internal control and risk management systems in
relation to financial reporting processes and about
share capital structures is consistent with the financial
statements.
Matters on which we are required to
report by exception
Under the Listing Rules we are required to review:
t• he directors’ statement, set out on page 19, in relation
to going concern; and
•
the part of the Corporate Governance statement on
pages 29 to 34 relating to the company’s compliance
with the nine provisions of the June 2008 Combined
Code specified for our review.
We have nothing to report in respect of the following:
On behalf of Ernst & Young LLP, Statutory Auditor
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
•
adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have
Stuart Watson
Senior Statutory Auditor
not been received from branches not visited by us; or
hull, 24 may 2010
P A Ge 4 7
| C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
Group income statement
for the year ended 31 march 2010
Revenue
Cost of sales
Gross profit
operating expenses
2010
Total
Before
exceptionals
2009
exceptionals
total
£’000
740,338
£’000
£’000
£’000
606,774 -
606,774
N
o
t
e
s
3
(643,535)
(521,402) -
96,803
85,372 -
(50,895)
(46,984) -
(521,402)
85,372
(46,984)
38,388
3
(3,703)
34,688
Operating profit from continuing operations
3,4
45,908
38,388 -
Finance revenue
Finance costs
7
7
48
(2,204)
3 -
(3,703) -
Profit from continuing operations before tax
43,752
34,688 -
taxation
8,5
(11,295)
(9,951)
(6,063)
(16,014)
Profit for the year from continuing operations
32,457
24,737
(6,063)
18,674
Discontinued operations:
Profit for the year from discontinued operations
9
125
Profit for the year attributable to owners of the parent
32,582
Earnings per share (pence)
From continuing operations:
Basic
Diluted
On profit for the year:
Basic
Diluted
12
12
12
12
69.7p
69.6p
70.0p
69.8p
53.7p
53.5p
55.5p
55.4p
314
18,988
40.5p
40.4p
41.2p
41.1p
P A Ge 4 8 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
Group statement of comprehensive income
for the year ended 31 march 2010
Profit for the year
32,582
18,988
N
o
t
e
s
2010
£’000
2009
£’000
Other comprehensive income
movement on hedging items:
Gains arising in the year
Reclassification adjustment for gains included in the income statement
exchange differences on retranslation of foreign operations
Actuarial losses on defined benefit pension scheme
Deferred tax relating to components of other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to
owners of the parent
Company statement of comprehensive income
for the year ended 31 March 2010
19
19
26
186
(573)
24
(87)
-
132
(318)
263
(1,029)
(29)
213
(582)
32,264
18,406
N
o
t
e
s
2010
£’000
2009
£’000
Profit for the year
13,705
9,385
Other comprehensive income
movement on hedging items:
(Losses)/gains arising in the year
Reclassification adjustment for gains included in the income statement
Deferred tax relating to components of other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to owners of the
parent
19
19
(77)
(434)
143
(368)
124
(70)
(15)
39
13,337
9,424
P A Ge 4 9 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
Group balance sheet
at 31 march 2010
Non-current assets
Goodwill
Property, plant and equipment
Financial assets
Total non-current assets
Current assets
inventories
trade and other receivables
other financial assets
Cash and cash equivalents
Total current assets
Assets held for sale
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
Defined benefit pension scheme deficit
Total non-current liabilities
Liabilities held for sale
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
N
o
t
e
s
13
14
19
17
18
19
27
2010
£’000
128,739
106,137
2009
£’000
117,756
91,688
1,500
-
236,376
209,444
35,960
84,066
263
5,922
28,464
73,655
263
4,399
126,211
106,781
9 -
20,387
362,587
336,612
20
21
22
20
21
8
22
26
9 -
24
(86,745)
(12,487)
(3,509)
(149)
(75,273)
(34,872)
(5,955)
(334)
(102,890)
(116,434)
(82)
-
(49,866)
(9,829)
(982)
(36,382)
(11,557)
(1,166)
(5,353)
-
(66,112)
(49,105)
(169,002)
193,585
4,733
54,322
3,449
(124)
131,205
193,585
(4,591)
(170,130)
166,482
4,646
49,760
2,939
239
108,898
166,482
Martin Davey
Chairman
24 may 2010
Mark Bottomley
Finance Director
P A Ge 5 0 | C R A N S W I C K p l c RePoR
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Company balance sheet
at 31 march 2010
Non-current assets
Property, plant and equipment
investments in subsidiary undertakings
Deferred tax assets
Total non-current assets
Current assets
trade and other receivables
other financial assets
Cash and cash equivalents
Total current assets
N
o
t
e
s
14
15
8
2010
£’000
2009
£’000
1,953
153,979
220
1,959
155,426
23
156,152
157,408
15,423
18
19 -
22,167
124
4,004
-
19,427
22,291
non-current assets held for sale
9 -
343
Total assets
Current liabilities
trade and other payables
other financial liabilities
income tax payable
Total current liabilities
Non-current liabilities
other financial 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
175,579
180,042
20
21
(38,084)
(10,387)
(902)
(49,373)
(46,048)
(28,290)
(216)
(74,554)
21
(49,530)
(36,382)
(98,903)
(110,936)
76,676
69,106
24
4,733
54,322
4,000
1,806
638
(387)
11,564
76,676
4,646
49,760
4,000
1,806
568
124
8,202
69,106
Martin Davey
Chairman
24 may 2010
Mark Bottomley
Finance Director
P A Ge 5 1
| C R A N S W I C K p l c RePoR
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Group statement of cash flows
for the year ended 31 march 2010
Operating activities
Profit for the year
Adjustments to reconcile Group profit for the year
to net cash inflows from operating activities
tax on discontinued operations
tax on continuing operations
net finance costs
Depreciation and impairment of property, plant and equipment
share based payments
Difference between pension contributions paid and amounts
recognised in the income statement
Release of government grants
Profit on sale of property, plant and equipment
increase in inventories
increase in trade and other receivables
increase in assets held for sale
(Decrease)/increase in trade and other payables
Cash generated from operations
tax paid
Net cash from operating activities
Cash flows from investing activities
interest received
Reimbursement of consideration paid in prior years
Acquisition of subsidiaries
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
2010
£’000
2009
£’000
N
o
t
e
s
32,582
18,988
(95)
11,295
2,166
11,852
510
(512)
-
(6)
(189)
(5,817)
(1,954)
(2,589)
-
(1,356)
45,887
(13,683)
32,204
48
1,248
16
(11,233)
-
-
(820)
16,014
3,971
13,859
1,000
(7)
(87)
(3,966)
(1,971)
6,381
53,362
(8,602)
44,760
3
(20,294)
376
(20,948)
258
Proceeds from sale of discontinued operations
9
18,067
-
Net cash used in investing activities
(11,788)
(20,687)
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
(2,670)
2,924
20,000
(19,762)
(8,808)
-
(3,591)
462
59,000
(1,280)
(70,206)
(8,769)
Repayment of capital element of finance leases and hire purchase contracts
(120)
-
Net cash used in financing activities
(8,436)
(24,384)
net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
effect of foreign exchange rates
Cash and cash equivalents at end of year
11,980
(8,038)
24
3,966
27
27
(311)
(7,698)
(29)
(8,038)
P A Ge 5 2 | C R A N S W I C K p l c RePoR
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Company statement of cash flows
for the year ended 31 march 2010
Operating activities
Profit for the year
Adjustments to reconcile Company profit for the year
to net cash inflows from operating activities
Dividends received
taxation
net finance costs
Depreciation and impairment of property, plant and equipment
share based payments
Loss on disposal of investments
Decrease in trade and other receivables
Decrease in trade and other payables
Cash generated from operations
tax paid
Net cash from operating activities
Cash flows from investing activities
Reimbursement of consideration paid in prior years
Dividends received
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
N
o
t
e
s
2010
£’000
2009
£’000
13,705
9,385
(8,808)
1,791
4,338
105
70
199
-
7,392
(7,676)
11,116
(1,112)
10,004
1,248
-
8,808
(97)
343
-
(8,769)
108
8,064
171
251
22,445
(9,245)
22,410
(349)
22,061
8,769
(125)
Net cash generated in investing activities
10,302
8,644
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 increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(4,801)
2,924
20,000
(19,460)
(8,808)
(10,145)
10,161
(6,157)
4,004
-
27
27
(7,592)
462
59,000
(1,280)
(70,171)
(8,769)
(28,350)
2,355
(8,512)
(6,157)
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Group statement of changes in equity
for the year ended 31 march 2010
Share
capital
Share
premium
(Note 1)
£’000
(Note 2)
£’000
Share-
based
payments
(Note 5)
£’000
Hedging
reserve
Translation
reserve
Retained
earnings
Total
equity
(Note 6)
£’000
(Note 7)
£’000
£’000
£’000
4,623
48,693
1,939
1,029
5
98,965
155,254
-
-
-
-
11
12
-
-
-
-
-
-
-
617
450
-
-
-
- -
-
-
1,000 -
(766)
(766)
- -
- -
- -
- -
- -
4,646
49,760
2,939
263
(387)
(387)
-
-
-
-
27
60
-
-
-
-
-
-
-
1,698
2,864
-
-
-
- -
-
-
510 -
- -
- -
- -
- -
- -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,988
18,988
(29)
(29)
213
(582)
19,201
18,406
-
-
-
1,000
628
462
(9,397)
(9,397)
90
39
90
39
(24)
108,898
166,482
32,582
32,582
24
24
45
(318)
32,627
32,264
-
-
-
510
1,725
2,924
(10,533)
(10,533)
78
78
135
135
As at 1 April 2008
Profit for the year
other comprehensive income
total comprehensive income
share-based payments
scrip dividend
share options exercised
Dividends
Deferred tax relating to changes in equity
Corporation tax relating to changes
in equity
At 31 march 2009
Profit for the year
other comprehensive income
total comprehensive income
share-based payments
scrip dividend
share options exercised
Dividends
Deferred tax relating to changes in equity
Corporation tax relating to changes
in equity
At 31 March 2010
4,733
54,322
3,449
(124) -
131,205
193,585
Notes:
1. Share capital
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. 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.
4. 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.
P A Ge 5 4 | C R A N S W I C K p l c RePoR
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Company statement of changes in equity
for the year ended 31 march 2010
Share
capital
Share
premium
General
reserve
Merger
reserve
(Note 1)
£’000
(Note 2)
£’000
(Note 3)
£’000
(Note 4)
£’000
Share-
based
payments
(Note 5)
£’000
As at 1 April 2008
4,623
48,693
4,000
1,806
317
70
Profit for the year
-
other
comprehensive
income
total comprehensive
income
share-based
payments
scrip dividend
share options
exercised
Dividends
Deferred tax relating
to changes in equity
-
-
-
-
-
11
12
At 31 march 2009
4,646
Profit for the year
-
other
comprehensive
income
total comprehensive
income
share-based
payments
scrip dividend
share options
exercised
Dividends
Deferred tax relating
to changes in equity
-
-
-
-
-
27
60
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
617 -
450
-
49,760
-
-
-
-
-
-
1,698 -
2,864
-
-
-
4,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,806
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
251 -
-
-
-
-
-
568
70 -
-
-
-
-
Hedging
reserve
Retained
earnings
Total
equity
(Note 6)
£’000
£’000
£’000
8,199
9,385
67,708
9,385
54
54
(15)
39
9,370
9,424
-
-
-
251
628
462
(9,397)
(9,397)
30
30
124
8,202
69,106
13,705
13,705
(511)
143
(368)
(511)
13,848
13,337
-
-
-
70
1,725
2,924
(10,533)
(10,533)
47
47
At 31 March 2010
4,733
54,322
4,000
1,806
638
(387)
11,564
76,676
5. Share-based payments reserve
this reserve records the fair value of share-based payments expensed in the income statement.
6. Hedging reserve
this reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an
effective hedge.
7. Translation reserve
this reserve records exchange differences arising from the translation of the financial statements of foreign subsidiaries.
P A Ge 5 5 | C R A N S W I C K p l c RePoR
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n o t e s t o t h e A C C o U n t s
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 2010 were
authorised for issue by the Board of Directors on 24 may 2010 and the balance sheets were signed on the Board’s behalf by
m Davey and Jm Bottomley. 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 2006. 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 408 of the Companies Act 2006 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 25 – measurement of share-based payments
Goodwill
Provisions
Pensions
note 13 – measurement of the recoverable amount of cash generating units containing goodwill
note 22 – judgements in relation to amounts provided
note 26 – Pension scheme actuarial assumptions
Acquisitions
note 16 – acquisition fair values
P A Ge 5 6 | C R A N S W I C K p l c RePoR
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Foreign currencies
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.
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 despatch and represents the value of sales to customers net
of discounts, similar allowances and estimates of returns and excludes value added tax.
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.
P A Ge 5 7 | C R A N S W I C K p l c RePoR
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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
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
short leasehold improvements
Plant and equipment
motor vehicles
50 years
Residue of lease
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. Borrowing 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.
P A Ge 5 8 | C R A N S W I C K p l c RePoR
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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.
Inventories
inventories 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.
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 cash flow 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 iAs 39 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 the income statement. 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 or loss.
For derivatives that do not qualify for hedge accounting under iAs 39, any gains or losses arising from changes in fair value
are taken directly to net profit or loss for the period.
Financial assets – Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market, do not qualify as trading assets and have not been designated as either fair value through profit and loss or
available-for-sale. such assets are carried at amortised cost using the effective interest method if the time value of money
is significant. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or
impaired, as well as through the amortisation process.
P A Ge 5 9 | C R A N S W I C K p l c RePoR
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Employee benefits
i) Pensions
the group operates a defined benefit pension scheme for certain employees which requires contributions to be made to
a separate trustee administered fund. the scheme was closed to new members on 30 June 2004.
the liability recognised in the balance sheet in respect of the defined benefit pension scheme is the present value of
the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for
unrecognised past-service costs. the defined benefit obligation is calculated annually by independent actuaries using the
projected unit method. the present value of the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high quality corporate bonds that are denominated in sterling, and that have
terms to maturity approximating to the terms of the related pension liability.
the amounts charged to operating profit are any gains and losses on settlements and curtailments, and these are included
as part of staff costs.
Past-service costs are recognised immediately in income, unless the changes to the pension scheme are conditional on the
employees remaining in service for a specified period of time (the vesting period). in this case, the past-service costs are
amortised on a straight-line basis over the vesting period.
the difference between the interest cost on plan liabilities and the expected return on plan assets is recognised in the
income statement as other finance revenue or costs.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited
to equity in the statement of comprehensive income in the period in which they arise.
the Group also 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 Group operates a savings related share option scheme under which options have been granted to Group employees
(‘sAYe scheme’). in addition, the Group operates an executive share option scheme and a Long term incentive Plan (‘LtiP’)
for senior executives. share options issued are exercisable subject to the attainment of certain market based and non-market
based performance criteria.
the cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which
they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant
employees become fully entitled to the award. Fair value is determined using the Black-scholes option pricing model. in
valuing equity-settled transactions, no account is taken of any service and performance (vesting conditions), other than
performance conditions linked to the price of the shares of the Company (market conditions). Any other conditions which
are required to be met in order for an employee to become fully entitled to an award are considered to be non-vesting
conditions. Like market performance conditions, non-vesting conditions are taken into account in determining the grant
date fair value.
no expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a
market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting
condition is satisfied, provided that all other performance or service conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated; representing the extent to which the
vesting period has expired and management’s best estimate of the number of equity instruments that will ultimately vest.
the movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a
corresponding entry in equity.
P A Ge 6 0 | C R A N S W I C K p l c RePoR
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Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled
award, the cost based on the original award terms continues to be recognised over the original vesting period. in addition,
an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification,
based on the difference between the fair value of the original award and the fair value of the modified award, both as
measured on the date of the modification. no reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled (including when a non-vesting condition within the control of the entity or
employee is not met), it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the
income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the
cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the
income statement.
on transition to iFRs, the Group did not apply the measurement rules of iFRs 2 to equity settled awards granted before 7
november 2002 or granted after that date and vested before 1 January 2005. however later modifications of such equity
instruments are measured under iFRs 2.
Non-current assets held for sale
non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair
value less costs to sell. non-current assets and disposal groups are classified as held for sale if their carrying amounts will be
recovered through a sale transaction rather than through continuing use. this condition is regarded as met only when the
sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. management
must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year
from the date of classification.
in the consolidated income statement for the reporting period, and for the comparable period of the previous year, income
and expenses from discontinued operations are reported separately from continuing income and expenses down to the level
of profit after taxes, even when the Group retains a non-controlling interest in the subsidiary after the sale. the resulting
profit or loss (after taxes) is reported separately in the income statement.
Property, plant and equipment once classified as held for sale are not depreciated.
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.
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New standards and interpretations applied
the following accounting standards and interpretations became effective for the current reporting period:
International Accounting Standards (IAS/IFRS)
iFRs 2
iFRs 7
iFRs 8
iAs 1
iAs 23
isA 27
iAs 32
share-based Payments: vesting Conditions and Cancellations (Amendments)
Financial instruments: Disclosures (Amendments)
operating segments
Presentation of Financial statements (Revised)
Borrowing Costs (Revised)
Consolidated and separate Financial statements (Amendments)
Financial instruments: Presentation and iAs 1 Puttable Financial instruments and obligations arising on
Liquidation (Amendment)
improvements to iFRss (may 2008)
International Financial Reporting Interpretations Committee (IFRIC)
iFRiC 9
iFRiC 13
iFRiC 15
iFRiC 16
iFRiC 18
Remeasurement of embedded Derivatives and iAs 39 Financial instruments: Recognition and measurement
Customer Loyalty Programmes
Agreements for the Construction of Real estate
hedges of a net investment in a Foreign operation
transfer of Assets from Customers
the application of iAs 1 (Revised) ‘Presentation of Financial statements’ has resulted in the Group presenting both a Group
statement of comprehensive income (which replaces the Group statement of recognised income and expense) and a Group
statement of changes in equity (which replaces the Group reconciliation of movements in equity) as primary statements. the
Group statement of changes in equity presents all changes in equity, and the Group statement of comprehensive income
presents all changes in financial position other than through transactions with owners. this presentation has been applied in
these financial statements for the year ended 31 march 2010. Comparative information has also been presented so that it is
also in conformity with the revised standard.
iFRs 8 ‘operating segments’ replaces iAs 14, ‘segment Reporting’ and requires the disclosure of segment information on the
same basis as the management information provided to the chief operating decision maker. the adoption of this standard
has not resulted in a change in the Group’s reportable segments.
the application of the remaining standards and interpretations has not had a material effect on the net assets, results and
disclosures of the Group.
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:
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International Accounting Standards (IAS/IFRS)
First time Adoption of international Reporting standards
Amendments to iFRs 1 – Additional exemptions for First-time Adopters
Amendments to iFRs 1 – Limited exemption from Comparative iFRs 7 disclosures
1 July 2010
Amendments to iFRs 2 – Group Cash-settled share-based Payment transactions
1 January 2010
iFRs 1
iFRs 1
iFRs 1
iFRs 2
iFRs 3
iFRs 9
iAs 24
iAs 27
iAs 32
iAs 39
Business Combinations (Revised January 2008)
Financial instruments: Classification & measurement
Related Party Disclosures (Revised)
Consolidated and separate Financial statements (Revised January 2008)
Amendment to iAs 32: Classification of Rights issues
eligible hedged items
improvements to iFRs (issued April 2009)
International Financial Reporting Interpretations Committee (IFRIC)
iFRiC 14
iFRiC 17
iFRiC 19
Amendment: Prepayments of a minimum Funding Requirement
Distributions of non-Cash Assets to owners
extinguishing Financial Liabilities with equity instruments
Effective date*
1 July 2009
1 January 2010
1 July 2009
1 January 2013
1 January 2011
1 July 2009
1 February 2010
1 July 2009
various dates
Effective date
1 January 2011
1 July 2009
1 July 2010
*the effective dates stated above are those given in the original iAsB/iFRiC standards and interpretations. As the Group
prepares its financial statements in accordance with iFRs as adopted by the european Union, the application of new standards
and interpretations will be subject to their having been endorsed for use in the eU via the eU endorsement mechanism. in
the majority of cases this will result in an effective date consistent with that given in the original standard or interpretation
but the need for endorsement restricts the Group’s discretion to early adopt standards.
the Group has not early adopted the revised iFRs 3 and so will apply it prospectively to all business combinations on or after
1 April 2010. Whilst it is not possible to estimate the outcome of adoption, the key features of the revised iFRs 3 include a
requirement for acquisition-related costs to be expensed and not included in the purchase price; and for contingent consideration
to be recognised at fair value on the acquisition date (with subsequent changes recognised in the income statement and not
as a change to goodwill). the standard also changes the treatment of minority interests with an option to recognise these
at full fair value as at the acquisition date and a requirement for previously held minority interests to be fair valued as at the
date control is obtained, with gains and losses recognised in the income statement.
iAs 27 revised is effective for annual periods beginning on or after 1 July 2009, in line with the revised iFRs 3. the revised
standard no longer restricts the allocation to minority interest of losses incurred by a subsidiary to the amount of the minority
equity investment in the subsidiary.
Any future partial disposal of equity interest in a subsidiary that does not result in a loss of control will be accounted for as an
equity transaction and will have no impact on goodwill, nor will it give rise to any gain or loss. Where there is loss of control
of a subsidiary, any retained interest will have to be remeasured to fair value, which will impact the gain or loss recognised
on disposal.
the Directors do not anticipate that the adoption of the remaining standards and interpretations will have a material impact
on the Group’s financial statements in the period of initial application.
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3. Business and geographical segments
the Group has adopted iFRs 8 ‘operating segments’ with effect from 1 April 2009. iFRs 8 requires operating segments to
be identified on the basis of the internal financial information reported to the Chief operating Decision maker (‘CoDm’). the
Group’s CoDm is deemed to be the Board, which is primarily responsible for the allocation of resources to segments and the
assessment of performance of the segments.
the CoDm assesses profit performance using profit before taxation measured on a basis consistent with the disclosure in
the Group accounts.
the Group continues to report on two reportable segments:
•
Food – manufacture and supply of food products to UK grocery retailers, the food service sector
and other food producers
•
Pet – sales into the pet and aquatic sector through the supply of bird and small animal food, marine fish
and aquatic products. this segment was discontinued during the year ended 31 march 2009
All Group revenues are received for the provision of goods; no revenues are received in relation to the provision of services.
Previously, segments were determined and presented in accordance with iAs 14, ‘segment Reporting’. the adoption of iFRs
8 has not resulted in a change in the Group’s reportable segments.
Segment revenues and results
Food
2010
Pet
Total
Food
2009
Pet
total
Continuing Discontinued
Continuing Discontinued
£’000
£’000
£’000
£’000
£’000
£’000
Revenue
740,338
3,620
743,958
606,774
46,491
653,265
Operating profit before
central costs
Central costs
Operating profit
net finance costs
50,882
(4,974) -
45,908
(2,156)
Fair value remeasurement loss
-
-
Profit before tax (Segment results)
43,752
income taxes
Profit for the year
(11,295)
32,457
there was no inter-segment turnover in either period.
40
50,922
43,481
2,309
45,790
(4,974)
45,948
(2,166)
43,782
(11,200)
40
(10)
-
30
95
125
32,582
-
(5,093) -
38,388
(3,700)
34,688
(16,014)
18,674
(5,093)
2,309
40,697
(271)
(2,544)
(3,971)
(2,544)
(506)
34,182
820
314
(15,194)
18,988
Assets and liabilities
non-current assets
Current assets
other - Goodwill
total segment assets
Unallocated assets
Consolidated total assets
non-current liabilities
Current liabilities
total segment liabilities
Unallocated liabilities
Consolidated total liabilities
107,637 -
126,211 -
128,739 -
362,587 -
66,112 -
102,890 -
169,002 -
-
-
107,637
126,211
128,739
362,587
362,587
91,688 -
91,688
101,804
20,387
122,191
117,756 -
117,756
311,248
20,387
331,635
66,112
-
-
-
70,970
70,970
4,591
4,591
102,890
169,002
169,002
4,977
336,612
75,561
75,561
94,569
170,130
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Unallocated assets and liabilities in the prior year comprised certain items of property, plant and equipment, loan notes, net
debt and taxation balances which were managed on a Group basis. subsequent to the sale of the Pet business all assets and
liabilities have been allocated to the Food segment.
on 24 April 2009 the assets and liabilities of the Pet segment were disposed of as described in note 9. At 31 march
2009 the assets and liabilities of the Pet segment had been designated as held for sale and its operations treated as
discontinued. the turnover and operating profit of the Pet segment for 2010 reflects its trading for the period prior to sale.
Other segment information
Food
2010
Pet
Total
Food
2009
Pet
total
Continuing Discontinued
Continuing Discontinued
£’000
£’000
£’000
£’000
£’000
£’000
Capital expenditure:
Property, plant and
equipment
Depreciation
20,457 -
11,852 -
20,457
11,852
20,136
1,069
21,205
10,930
718
11,648
in addition to the depreciation reported above, impairment losses of £nil (2009 - £2,211,000) were recognised on property
plant and equipment in the Pet segment during the prior year on recognition as held for sale.
Geographical segments
the following table sets out sales by destination, regardless of where the goods were produced:
Sales revenue by geographical market
Food
Continuing
£’000
2010
Pet
Discontinued
£’000
UK
Continental europe
Rest of World
723,901
15,804
633
3,620
-
-
Total
£’000
727,521
15,804
633
Food
Continuing
£’000
2009
Pet
Discontinued
£’000
total
£’000
599,639
43,640
643,279
7,135
-
2,443
408
9,578
408
740,338
3,620
743,958
606,774
46,491
653,265
the following table sets out the geographical location of the Group’s non-current assets:
Carrying amount of segment non-current assets
Food
Continuing
£’000
236,376
2010
Pet
Discontinued
£’000
Total
£’000
Food
Continuing
£’000
2009
Pet
Discontinued
£’000
total
£’000
-
236,376
209,444
-
209,444
UK
Customer concentration
the Group has three customers within the continuing Food segment which individually account for greater than 10 per cent
of the Group’s total net revenue. these customers account for 31 per cent, 20 per cent and 11 per cent respectively. in the
prior year, these same three customers accounted for 32 per cent, 16 per cent and 12 per cent.
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4. Group operating profit
this is stated after charging/(crediting):
operating costs:
selling and distribution
Administration
2010
Continuing Discontinued
£’000
£’000
Total
£’000
Continuing
£’000
2009
Discontinued
£’000
29,000
21,895
50,895
162
452
614
29,162
22,347
51,509
25,979
21,005
46,984
2,700
5,981
8,681
total
£’000
28,679
26,986
55,665
Depreciation of property, plant
and equipment
impairment of property plant and
equipment
-
Release of government grants
operating lease payments –
minimum lease payments
11,852
-
11,852
10,930
718
11,648
-
-
(6)
-
119
2,092
(6)
(7)
-
2,211
(7)
4,907
923
net foreign currency differences
(203)
-
(203)
4,876
16
4,892
4,717
521
190
402
Cost of inventories recognised as
an expense
increase in provision for
inventories
Audit of these financial
statements*
494,507
2,752
497,259
475,070
31,391
506,461
384
-
152
-
384
152
177
128
62
17
239
145
* £25,000 relates to the Company and consolidation (2009 - £25,000) and £127,000 (2009 - £120,000) relates to audit of
the financial statements of subsidiaries.
in addition, payments to ernst & Young LLP for non audit services amounted to £450,000 (2009 - £85,000) of which £2,000
related to an audit related service (2009 – £4,000), £374,000 (2009 - £15,000) related to due diligence services and £74,000
(2009 - £66,000) to taxation.
Fees paid to ernst & Young LLP for non-audit services by 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 expense during the year was as follows:
Continuing
£’000
2010
Discontinued
£’000
Total
£’000
Continuing
£’000
2009
Discontinued
£’000
total
£’000
Recognised below operating
profit
Deferred tax on abolition of
industrial Buildings Allowances
Cash flow impact of exceptionals
-
-
-
-
-
-
(6,063)
(541)
(6,604)
-
-
-
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6. Employees
Group
staff costs:
Wages and salaries
social security costs
other pension costs
2010
Continuing Discontinued
£’000
£’000
Total
£’000
2009
Continuing Discontinued
£’000
£’000
89,899
8,272
1,427
99,598
446
45
10
501
90,345
8,317
1,437
100,099
69,199
6,370
1,364
76,933
4,769
447
70
5,286
total
£’000
73,968
6,817
1,434
82,219
included within wages and salaries is a total expense for share-based payments of £510,000, of which a credit of £13,000
related to discontinued operations (2009 - £1,000,000, of which a charge of £143,000 related to discontinued operations)
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
2010
Continuing Discontinued
Number
Number
Total
Number
2009
Continuing Discontinued
number
number
Production
selling and distribution
Administration
3,787
179
172
4,138
10
4
3
17
3,797
183
175
4,155
2,988
193
168
3,349
114
43
35
192
total
number
3,102
236
203
3,541
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 Directors’ Remuneration Report on pages 35 to 40. the employee
costs shown above include the following remuneration in respect of Directors of the Company:
Group and Company
2010
Continuing Discontinued
£’000
£’000
Total
£’000
4,172
345
4,517
2009
Continuing Discontinued
£’000
£’000
3,517
447
3,964
407
62
469
4,144
340
4,484
28
5
33
total
£’000
3,924
509
4,433
18
Directors’ remuneration
Pension contribution
Aggregate gains made by
Directors on exercise of
share options
no. of directors receiving
pension contributions under
money purchase schemes
562
-
562
18
-
5
1
6
4
1
5
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7. Finance revenue and costs
2010
2009
Continuing Discontinued
£’000
£’000
Total
£’000
Continuing Discontinued
£’000
£’000
Finance revenue
Bank interest received
Finance revenue from
non-current financial assets
3 -
45 -
48 -
Finance costs
Loan note interest paid
1 -
Bank interest paid and similar
charges
total interest expense for
financial liabilities not at fair
value through profit or loss
net finance cost on defined
benefit pension deficit
Finance charge payable
under finance leases and hire
purchase contracts
movement in discount on
provisions
1,933
1,934
218 -
28 -
24 -
total
£’000
3
-
3 -
-
3 -
-
3
3
45
48
1
27
-
27
10
10
1,943
3,642
271
3,913
1,944
3,669
271
3,940
-
-
218
28
24
-
-
-
-
34
3,703
-
271
34
3,974
Total finance costs
2,204
10
2,214
the interest relates to financial assets and liabilities carried at amortised cost together with the impact of interest rate swaps.
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8. Taxation
a) Analysis of tax charge in the year
tax charge based on the profit for the year:
UK corporation tax:
UK corporation tax on profits of the year
Adjustments in respect of previous years
total current tax
UK deferred tax:
origination and reversal of temporary differences
Adjustments in respect of previous years
total deferred tax
2010
£’000
11,391
(19)
11,372
739
(911)
(172)
2009
£’000
11,112
(314)
10,798
3,956
440
4,396
Tax on profit on ordinary activities
11,200
15,194
the tax charge in the income statement is disclosed as follows:
income tax expense on continuing operations
income tax credit on discontinued operations
tax relating to items charged or credited directly to equity:
Group
Recognised in Group statement of comprehensive income
Deferred tax on revaluation of cash flow hedges
Deferred tax on actuarial losses on defined benefit pension scheme
Recognised in Group statement of changes in equity
Deferred tax on share-based payments
Corporation tax credit on share options exercised
2010
£’000
11,295
(95)
11,200
2010
£’000
(108)
(24)
-
(132)
(78)
(135)
(213)
2009
£’000
16,014
(820)
15,194
2009
£’000
(213)
(213)
(90)
(39)
(129)
Total tax credit recognised directly in equity
(345)
(342)
Company
Recognised in Company statement of comprehensive income
Deferred tax on revaluation of cash flow hedges
Recognised in Company statement of changes in equity
Deferred tax on share-based payments
Total tax credit recognised directly in equity
2010
£’000
(143)
(47)
(190)
2009
£’000
15
(30)
(15)
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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:
2010
£’000
43,782
12,259
550
(679)
(930)
11,200
-
-
-
-
-
2009
£’000
34,182
9,571
145
619
(872)
(456)
6,004
(94)
151
126
15,194
2010
£’000
2009
£’000
11,804
10,883
129
(219)
(386)
811
326
(463)
(1,499)
-
9,829
11,557
2010
£’000
284
155
(682)
143
-
(72)
(172)
2009
£’000
(935)
(114)
(122)
6,004
(437)
4,396
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by standard rate of corporation tax
in the UK of 28 per cent (2009 - 28 per cent)
effect of:
Disallowed expenses
impairment of assets held for resale
Release of deferred tax on discontinued operations
Release of deferred tax on change of tax base
industrial buildings allowances
share-based payment deduction
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 in the balance sheet
Accelerated capital allowances
Rollover and holdover relief
other temporary differences
share-based payments
Deferred tax on defined benefit pension scheme
Deferred tax liability
the deferred tax included in the income statement is as follows:
Deferred tax in the income statement
Accelerated capital allowances
share-based payments
Rollover relief
industrial buildings allowances
-
Deferred tax on defined benefit pension scheme
other temporary differences
Deferred tax (credit)/expense
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Company
the deferred tax included in the balance sheet is as follows:
Deferred tax asset in the balance sheet
Accelerated capital allowances
Rollover relief
other temporary differences
share-based payments
Deferred tax asset
2010
£’000
182
56
(281)
(177)
(220)
2009
£’000
32
56
36
(147)
(23)
d) Temporary differences associated with Group investments
At 31 march 2010 no deferred tax liability has been recognised (2009 - £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.
9. Sale of a business (discontinued operations)
on 24 April 2009, the Group sold the trade and certain assets and liabilities of the Group’s pet division to a management
buyout team. Cranswick plc has retained a 5.5 per cent share in the business. the Pet Division manufactured and sold bird
food and also imported and sold tropical marine fish and related products. the initial proceeds of the disposal of £17.0 million,
plus a subsequent working capital adjustment of £1.4 million, were received in cash. As at 31 march 2009 the assets and
liabilities of the pet division, which were later disposed, were classified as held for sale and carried at their fair value; with
the loss on reclassification to held for sale being recognised in the income statement in that period. in accordance with iFRs
5 the results of the pet division to the date of sale have been treated as discontinued and shown as a single line item at the
foot of the income statement and the prior year comparatives have been similarly disclosed.
the results of the pet division are presented below:
Revenue
expenses
Operating profit
Finance cost
Loss recognised on remeasurement to fair value
Profit/(loss) before tax from discontinued operations
tax credit
Profit for the year from discontinued operations
the tax credit is analysed as follows:
on profit on ordinary activities for the period
exceptional charge on abolition of iBAs
on reclassification to assets held for resale
2010
£’000
3,620
(3,580)
40
(10)
30
95
125
95
95
-
-
-
2009
£’000
46,491
(44,182)
2,309
(271)
(2, 544)
(506)
820
314
(607)
(541)
1,968
820
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the net assets of the Pet Division which were disposed were as follows:
net assets disposed of:
Property, plant and equipment
inventories
trade and other receivables
trade and other payables
total consideration satisfied by cash
Costs associated with disposal, settled in cash
net cash inflow arising on disposal
£’000
8,210
6,447
6,524
(2,796)
18,385
18,385
(318)
18,067
the cash flow impact of the exceptional charge on abolition of industrial Building Allowances in the year ended 31 march
2009 was £nil.
For the year ended 31 march 2009, on recognition of the Pet Division as discontinued, £20,387,000 of assets (£343,000 of
which were included in the balance sheet of the Company) and £4,591,000 of liabilities were classified as held for resale.
the net cash flows attributable to the discontinued Pet Division, excluding disposal cash flows were as follows:
operating cash flows
investing cash flows
Financing cash flows
Net (outflow)/inflow
Profit per share from discontinued operations was as follows:
Basic
Diluted
10. Profit attributable to members
2010
£’000
(448)
-
(10)
(458)
0.3p
0.2p
2009
£’000
2,576
(1,068)
(562)
946
0.7p
0.7p
of the profit attributable to members, the sum of £13,705,000 (2009 - £9,385,000) has been dealt with in the accounts of
Cranswick plc.
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11. Equity dividends
Declared and paid during the year:
Final dividend for 2009 – 14.7p per share (2008 – 13.4p)
interim dividend for 2010 – 8.0p per share (2009 – 7.0p)
Dividends paid
2010
£’000
6,802
3,731
10,533
2009
£’000
6,169
3,228
9,397
Proposed for approval of Shareholders at the Annual General Meeting on 26 July 2010:
Final dividend for 2010 – 17.0p (2009 – 14.7p)
8,016
6,801
12. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to members of the parent company
of £32,582,000 (2009 - £18,988,000) 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
2010
2009
Thousands
thousands
46,534
112
46,646
46,099
127
46,226
Basic weighted average number of shares for 2010 excludes 176,581 shares (2009 – 195,000 shares) held during the year by
the Cranswick plc employee Benefit trust.
13. Intangible fixed assets
Group
Cost
At 31 march 2008 and 31 march 2009
Acquisition of subsidiary undertakings
Reimbursement of consideration paid in prior years
At 31 March 2010
Impairments as at 31 March 2008, 2009 and 2010
Net book value
net book amount at 31 march 2009
Net book amount at 31 March 2010
Goodwill
£’000
117,756
12,231
(1,248)
128,739
-
117,756
128,739
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on 24 June 2009, the Group acquired 100% of the issued share capital of Bowes of norfolk Limited. Goodwill on acquisition
amounted to £12,231,000. Further details of the acquisition are disclosed in note 16.
During the year, the Company received a reimbursement of consideration of £1,248,000 from the vendor in relation to an
acquisition in a prior year. the reimbursement was an agreed adjustment in respect of the total amount payable.
the Group has no other intangible assets.
Goodwill is 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
Fresh Pork
Cooked meats
sandwiches
Continental Fine Foods
other
Assumptions used
2010
£’000
12,231
85,655
16,526
10,968
3,359
128,739
2009
£’000
-
86,903
16,526
10,968
3,359
117,756
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 per cent of depreciation.
subsequent cash flows are forecast to grow in line with an assumed long-term industry growth rate of between 3 and 5 per
cent derived from third party market information, including K World Panel data.
A discount rate of 9.9 per cent has been used (2009 - 9.3 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.
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 and with reference
to budget forecasts.
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 would reduce value in
use below the value of the recoverable amount. Assumptions and projections are updated on an annual basis.
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14. Property, plant and equipment
Group
Cost
At 31 march 2008
Additions
transfers between categories
transfers to assets held for resale
Disposals
At 31 march 2009
Additions
on acquisition
Disposals
At 31 March 2010
Depreciation
At 31 march 2008
Charge for the year
transfers to assets held for resale
impairment loss
Relating to disposals
At 31 march 2009
Charge for the year
Relating to disposals
At 31 March 2010
Net book amounts
At 31 march 2008
At 31 march 2009
At 31 March 2010
-
-
-
-
Freehold
land and
buildings
£’000
34,465
8,347
(5,632)
37,180
697
4,120
-
(37)
41,960
-
2,361
472
(2,047)
1,567
2,353
779
3,132
32,104
34,827
38,828
Leasehold
improvements
Plant,
equipment
and vehicles
Assets in the
course of
construction
total
£’000
£’000
£’000
£’000
16,860
102,402
95
(535)
-
-
7,491
1,698
(8,108)
(1,103)
16,420
102,380
335
(1,073)
15,682
12,422
1,911
(4,450)
112,263
7,809
864
(535)
477
8,615
870
(1,073)
8,412
9,051
7,805
7,270
52,534
10,312
(3,483)
167
(934)
58,596
10,203
(4,300)
64,499
49,868
43,784
47,764
-
-
-
-
-
-
-
-
-
-
-
-
-
1,698
5,272
155,425
21,205
(1,698)
-
5,272
7,003
(14,275)
(1,103)
161,252
20,457
6,031
(5,560)
12,275
182,180
62,704
11,648
(6,065)
2,211
(934)
69,564
11,852
(5,373)
76,043
1,698
5,272
92,721
91,688
12,275
106,137
included in freehold land and buildings is land with a cost of £5,418,000 (2009 - £3,198,000) which is not depreciated relating
to the Group and £795,000 (2009 - £795,000) relating to the Company. the cost of freehold land and buildings includes
£935,000 (2009 - £935,000) in respect of capitalised interest. the depreciation charge for the year for plant, equipment and
vehicles includes £154,000 (2009: £nil) in respect of assets held under finance leases and hire purchase contracts.
the impairment loss in the prior year relates to the write down of the fixed assets of the pet division to their fair value on
recognition as held for sale.
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Company
Cost
At 31 march 2008
Additions
transfers to assets held for resale
At 31 march 2009
Additions
transfers from other Group companies
At 31 March 2010
Depreciation
At 31 march 2008
Charge for the year
transfers to assets held for resale
impairment loss
At 31 march 2009
Charge for the year
transfers from other Group companies
At 31 March 2010
Net book amounts
At 31 march 2008
At 31 march 2009
At 31 March 2010
15. Investment in subsidiary undertakings
Company
shares at cost:
At 31 march 2008 and 31 march 2009
Reimbursement of consideration paid in prior years
Disposals
At 31 March 2010
Freehold
land and
buildings
£’000
Plant,
equipment and
vehicles
£’000
-
-
-
-
2,431
(475)
-
1,956
-
-
1,956
152
21
(132)
119
160
21
181
2,279
1,796
1,775
110
125
235
64
42
341
41
31
72
84
7
163
69
163
178
total
£’000
2,541
125
(475)
2,191
64
42
2,297
193
52
(132)
119
232
105
7
344
2,348
1,959
1,953
£’000
155,426
(1,248)
(199)
153,979
During the year, the Company received a reimbursement of consideration of £1,248,000 from the vendor in relation to an
acquisition in a prior year. the reimbursement was an agreed adjustment in respect of the total amount payable.
During the year the Company liquidated its 100% owned dormant subsidiary Cranswick Aps. the loss on disposal recognised
in the income statement of the Company was £199,000. there was no overall loss to the Group.
the principal subsidiary undertakings during the year were:
Food
Cranswick Country Foods plc
studleigh-Royd Limited
Brookfield Foods Limited
the sandwich Factory Group Limited (registered in scotland)
Delico Limited
Cranswick Country Foods (norfolk) Limited (Acquired 24 June 2009) (held by Cranswick Country Foods plc)
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Pet
Cranswick Pet & Aquatics plc (trade and assets disposed 24 April 2009)
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. on 24 April 2009, the trade and certain assets
and liabilities of Cranswick Pet & Aquatics plc were disposed of by the Group (note 9).
16. Acquisition
on 24 June 2009, the Group acquired 100 per cent of the issued share capital of Bowes of norfolk Limited for a cash
consideration of £17.2 million. the principal activity of Bowes of norfolk Limited is that of pork processing.
Book and fair values of the net assets at the date of acquisition were as follows:
net assets acquired:
Property, plant and equipment
Financial assets
Deferred tax asset
inventories
trade receivables
Bank and cash balances
Retirement benefit obligations
trade payables
Government grants
Finance lease obligations
Goodwill arising on acquisition
total consideration
satisfied by:
Cash
Costs associated with acquisition, settled in cash
net cash outflow arising on acquisition:
Cash consideration paid
Costs associated with acquisition, settled in cash
Cash and cash equivalents acquired
Fair value
Acquiree’s
book value
before
combination
£’000
£’000
8,489
1,500
656
1,679
7,809
6,658
(5,778)
(12,883)
(100)
(600)
7,430
6,031
1,500
1,344
1,679
7,809
6,658
(5,778)
(12,883)
(100)
(600)
5,660
12,231
17,891
17,157
734
17,891
17,157
734
(6,658)
11,233
From the date of acquisition, the acquired business has contributed a net profit after tax of £0.5 million to the Group. if the
combination had taken place at the beginning of the year, the Group’s profit after tax from continuing operations for the year
would have been £32.6 million and revenue from continuing operations would have been £762.2 million.
included in the £12,231,000 of goodwill recognised above, are certain intangible assets that cannot be individually separated
from the acquiree and reliably measured due to their nature. these items include the expected value of synergies, business
continuity planning through access to a further pork processing facility and an assembled workforce.
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17. Inventories
Group
Raw materials
Finished goods and goods for resale
18. Trade and other receivables
Financial Assets:
trade receivables
Amounts owed by Group undertakings
other receivables
non-financial assets:
Prepayments and accrued income
trade receivables continuing operations
trade receivables held for resale
2010
£’000
30,017
5,943
35,960
Group
Company
2010
£’000
2009
£’000
75,466
64,438
-
3,918
79,384
4,682
84,066
75,466
-
75,466
-
2,810
67,248
6,407
73,655
64,438
5,614
70,052
2010
£’000
-
15,118
62
15,180
243
15,423
-
-
-
2009
£’000
24,944
3,520
28,464
2009
£’000
-
21,852
253
22,105
62
22,167
-
-
-
Financial assets are carried at amortised cost. As at 31 march, the analysis of trade receivables that were past due but not
impaired was 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
75,466
64,438
£’000
63,989
56,425
£’000
8,334
6,572
£’000
2,072
1,006
£’000
1,071
435
2010
2009
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 2010, trade receivables at nominal value of £639,000 (2009 - £352,000) 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.
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movements in the provision for impairment of receivables were as follows:
Bad debt provision
At 31 march 2008
transferred to assets held for resale
Provided in year
Written off
At 31 march 2009
Provided in year
Written off
At 31 March 2010
there are no bad debt provisions against other receivables.
19. Other financial assets
Current
Group
Company
Forward currency contracts
interest rate swap (2)
movement on hedged items:
Gains/(losses) arising in the year
Reclassification adjustment for gains included in the
income statement
-
2010
£’000
263
263
2010
£’000
Group
2009
£’000
139
124
263
2009
£’000
186
263
(573)
(387)
(1,029)
(766)
2010
£’000
-
-
-
Company
2010
£’000
(77)
(434)
(511)
Non-current
Group
Company
Financial assets
2010
£’000
2009
£’000
1,500
-
2010
£’000
-
£’000
634
(782)
998
(498)
352
372
(85)
639
2009
£’000
-
124
124
2009
£’000
124
(70)
54
2009
£’000
-
non-current financial assets relate to consideration receivable from east Anglian Pigs Limited, the management buyout team
which acquired the pig rearing division of Bowes of norfolk Limited concurrently with Cranswick plc’s acquisition of the
company. Repayment of the loan is receivable in a single instalment of £500,000 on 23 June 2012 with the balance due in
24 equal monthly instalments with the final payment on 23 June 2014. interest is receivable on the loan at Bank of england
base rate plus 3 per cent.
movements on hedged foreign currency contracts are reclassified through cost of sales. interest rate movements on hedged
bank borrowings are reclassified through finance costs. All ‘other’ current financial assets are used for hedging.
Forward currency contracts
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 23.
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Interest rate swap (1)
Under the terms of this interest rate swap (relating to the Group’s previous bank facilities, which have now been repaid) the
Group receives LiBoR interest and pays fixed interest of 4.98 per cent. the notional principal amount of the swap stood at
£9,000,000 as at 31 march 2009 and reduced in equal semi-annual instalments of £4,500,000 to £nil by January 2010.
Interest rate swap (2)
Under the terms of this interest rate swap (relating to the Group’s current bank facilities) the Group receives LiBoR interest
and pays fixed interest of 2.04 per cent. the notional principal amount of the swap stands at £26,750,000 as at 31 march
2010 and reduces in equal quarterly instalments of £1,750,000 with a final notional payment of principal of £16,250,000 in
December 2011.
20. Trade and other payables
Current
trade payables
Group
Company
2010
£’000
2009
£’000
2010
£’000
55,269
50,236
448
Amounts owed to Group undertakings
-
-
32,482
other payables
Deferred income
Non-current
Deferred income
21. Other financial liabilities
Current
Bank overdrafts
Amounts outstanding under revolving credit facility
Current instalments due on bank loan
Loan notes
Finance leases and hire purchase contracts
interest rate swap (1) – (note 19)
interest rate swap (2) – (note 19)
Non-current
non-current instalments due on bank loan
Finance leases and hire purchase contracts
2009
£’000
201
41,745
4,102
-
31,464
25,036
5,154
12
1
-
86,745
75,273
38,084
46,048
82
-
-
-
Group
Company
2010
£’000
1,956
-
10,000
-
144
-
387
2009
£’000
12,437
9,000
12,500
762
-
173
-
12,487
34,872
2010
£’000
-
-
10,000
-
-
-
387
10,387
2009
£’000
6,157
9,000
12,500
460
-
173
-
28,290
49,530
336
49,866
36,382
49,530
36,382
-
-
-
36,382
49,530
36,382
none of the finance leases and hire purchase contracts has amounts due after greater than 5 years.
All financial liabilities are amortised at cost, except for interest rate swaps.
A bank overdraft facility of £20 million (2009 - £20 million) is in place until December 2011, of which £1,956,000 (2009 -
P A Ge 8 0 | C R A N S W I C K p l c RePoR
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£12,437,000) was utilised at 31 march 2010. interest is payable at a margin over base rate.
A revolving credit facility of £30 million is in place of which £nil was utilised as at 31 march 2010 (2009 - facility of £30 million
of which £9 million was utilised). this facility expires in December 2011. interest is payable on the loan at a margin of 1.75
per cent above LiBoR.
the maturity profile of bank loans is as follows:
Group
Company
in one year or less
Between one year and two years
Between two and five years
Unamortised issue costs
2010
£’000
10,000
50,000
2009
£’000
12,500
10,000
-
27,500
-
60,000
(470)
59,530
50,000
(1,118)
48,882
2010
£’000
10,000
50,000
60,000
(470)
59,530
2009
£’000
12,500
10,000
27,500
50,000
(1,118)
48,882
the balance outstanding on the term loan of £60.0 million is repayable in 7 quarterly instalments of £2.5 million from April
2010, followed by a single payment of £42.5 million in December 2011. A further £20 million was drawndown under the
facility during the year. interest is payable on the loan at a margin of 1.75 per cent 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 2.04 per cent.
interest on the loan notes was based on base rate and was repayable on demand at six-monthly intervals. the loan notes
were repayable on demand and were repaid in full during the year.
22. Provisions
Group
At 1 April 2009
Credited in the year
Utilisation in the year
Unwinding of discount
At 31 March 2010
Analysed as:
Current liabilities
non-current liabilities
Lease
provisions
£’000
1,500
(59)
(334)
24
1,131
2009
£’000
334
1,166
1,500
Group
2010
£’000
149
982
1,131
Lease provisions are held against dilapidation 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 four years. there are no provisions held by
the Company.
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23. Financial instruments
An explanation of the Company and Group’s financial instruments risk management strategy is set out on pages 13 to 19 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
2010 and their weighted average interest rates is set out below:
Group
As at 31 March 2010
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
Financial liabilities:
Bank overdrafts
Bank loan (including the effect
of interest rate swaps)
2.25%
(1,956)
(1,956) -
-
-
3.09% (60,000)
(33,250)
(7,000)
(19,750) -
Finance leases and hire purchase contracts
5.75%
(480)
-
(144)
(154)
(62,436)
(35,206)
(7,144)
(19,904)
(182)
(182)
Less: effect of interest rate swaps
-
(26,750)
7,000
19,750 -
total financial liabilities excluding the effect
of interest rate swaps
(62,436)
(61,956)
(144)
(154)
(182)
Financial assets: Cash at bank
non-current financial assets
0.00%
3.50%
5,922
1,500
5,922 -
1,500 -
-
-
-
-
(55,014)
(54,534)
(144)
(154)
(182)
As at 31 march 2009
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
Financial liabilities:
Bank overdrafts
Revolving credit facility
Bank loan (including the effect
of interest rate swaps)
5.11%
(12,437)
(12,437)
3.48%
(9,000)
(9,000)
-
-
-
-
-
-
3.67% (50,000)
(7,250)
(16,000)
(7,000)
(19,750)
Loan notes
2.40%
(762)
(762)
-
-
-
(72,199)
(29,449)
(16,000)
(7,000)
(19,750)
Less: effect of interest rate swaps
-
(42,750)
16,000
7,000
19,750
total financial liabilities excluding the effect
of interest rate swaps
(72,199)
(72,199)
Financial assets: Cash at bank
2.86%
4,399
4,399
(67,800)
(67,800)
-
-
-
-
-
-
-
-
-
the maturity profile of bank loans is set out in note 21.
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the interest rate profile of the interest earning financial assets and interest bearing liabilities of the Company as at 31 march
2010 and their weighted average interest rates is set out below:
Company
As at 31 March 2010
Financial liabilities:
Bank loan (including the effect
of interest rate swaps)
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
3.09%
(60,000)
(33,250)
(7,000)
(19,750) -
Less: effect of interest rate swaps
-
(26,750)
7,000
19,750 -
total financial liabilities excluding the effect
of interest rate swaps
(60,000)
(60,000) -
Financial assets: Cash at bank
0.00%
4,004
4,004 -
(55,996)
(55,996) -
-
-
-
-
-
-
As at 31 march 2009
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
Financial liabilities:
Bank overdrafts
Revolving credit facility
Bank loan (including the effect
of interest rate swaps)
5.11%
3.48%
(6,157)
(9,000)
(6,157) -
(9,000) -
3.67%
(50,000)
(7,250)
(16,000)
Loan notes
2.40%
(460)
(460) -
-
-
-
-
-
-
(7,000)
(19,750)
(65,617)
(22,867)
(16,000)
(7,000)
(19,750)
Less: effect of interest rate swaps
-
(42,750)
16,000
7,000
19,750
total financial liabilities excluding the effect
of interest rate swaps
(65,617)
(65,617) -
Financial assets: Cash at bank
2.86% -
-
-
(65,617)
(65,617) -
-
-
-
-
-
-
Currency profile
the Group’s financial assets at 31 march 2010 include sterling denominated cash balances of £4,349,000 (2009 - £2,853,000),
Danish krona £nil (2009 - £8,000), euro £1,573,000 (2009 - £1,378,000) and Us dollar £nil (2009 - £160,000), all of which
are held in the UK (2009 – euro £297,000 held with banks outside the UK). the Group’s financial liabilities are denominated
in sterling.
the proportion of the Group’s net assets denominated in foreign currencies is immaterial.
the Group’s other financial assets and liabilities are denominated in sterling.
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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 hierarchy
the Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either
directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable
market data.
the Group’s assets and liabilities measured at fair value, comprising the interest rate swap and forward currency contracts, are
all measured using Level 2 of the fair value hierarchy. the Group’s 5.5% retained shareholding in Cranswick Pet & Aquatics
Limited (described in note 9) would have been classified as level 3, however as the investment is an unquoted entity and
cannot be reliably measured the Directors consider that its value is immaterial and no fair value has been applied.
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. the fair value of floating rate assets and liabilities is estimated to be equivalent to book value. All
derivative financial instruments are shown on the balance sheet at fair value.
Group
2010
2009
Financial assets
Cash
non-current financial assets
Forward currency contracts
interest rate swap (2) – (note 19)
Financial liabilities
Bank overdraft
Amounts outstanding under revolving credit facility
Bank loan
Loan notes
Finance leases and hire purchase contracts
interest rate swap (1) – (note 19)
interest rate swap (2) – (note 19)
At 31 March
Book value
£’000
Fair value
£’000
Book value
£’000
Fair value
£’000
-
-
-
-
5,922
1,500
263
7,685
(1,956)
(60,000)
(480)
(387)
(62,823)
(55,138)
5,922
4,399
4,399
1,500
-
-
-
-
-
-
263
7,685
(1,956)
(60,000)
(480)
(387)
(62,823)
(55,138)
139
124
4,662
(12,437)
(9,000)
(50,000)
(762)
(173)
(72,372)
(67,710)
-
-
139
124
4,662
(12,437)
(9,000)
(50,000)
(762)
(173)
(72,372)
(67,710)
-
-
P A Ge 8 4 | C R A N S W I C K p l c RePoR
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Company
2010
2009
Book value
£’000
Fair value
£’000
Book value
£’000
Fair value
£’000
Financial asset
Cash
interest rate swap (2) – (note 19)
Financial liabilities
Bank overdraft
Amounts outstanding under revolving credit facility
Bank loan
Loan notes
interest rate swap (1) – (note 19)
interest rate swap (2) – (note 19)
4,004
4,004
-
4,004
124
124
-
124
124
4,004
(60,000)
-
-
-
-
-
-
-
-
-
-
(6,157)
(9,000)
(6,157)
(9,000)
(60,000)
(50,000)
(50,000)
(460)
(173)
(460)
(173)
(387)
(387)
-
-
(60,387)
(60,387)
(65,790)
(65,790)
At 31 March
(56,383)
(56,383)
(65,666)
(65,666)
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 18 and 20.
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:
i) 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 iAs 39 changes in fair value are posted directly to equity and subsequently reclassified
through the income statement at the time that the hedged item affects profit or loss.
Group
Currency
Amount
Maturities
Exchange rates
euros
euros 14,750,000
12 April 2010 to
22 september 2010
€1.09 – €1.15
Fair value
£’000
263
these contracts were effective cash flow hedges under the criteria set out in iAs 39 and therefore these fair value gains
were recognised directly in equity.
the Company does not hold any forward contracts.
ii) Interest rate swaps
the Group hedges a proportion of the interest cash flows payable in respect of bank loans.
• Interest rate swap (1) – (note 19)
Under the terms of this interest rate swap (relating to the Group’s previous bank facilities, which have now been repaid)
the Group received LiBoR interest and paid fixed interest of 4.98 per cent. the notional principal amount of the swap
stood at £9,000,000 as at 31 march 2009 and reduced in equal semi-annual instalments of £4,500,000 to £nil by January
2010.
the swap was an ineffective cash flow hedge under the criteria set out in iAs 39 and therefore movements in fair value
have been posted to the income statement.
P A Ge 8 5 | C R A N S W I C K p l c RePoR
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•
Interest rate swap (2) – (note 19)
Under the terms of this interest rate swap (relating to the Group’s current bank facilities) the Group receives LiBoR
interest and pays fixed interest of 2.04 per cent. the notional principal amount of the swap stands at £26,750,000 as
at 31 march 2010 and reduces in equal quarterly instalments of £1,750,000 with a final notional payment of principal
of £16,250,000 in December 2011.
the swap was an effective cash flow hedge under the criteria set out in iAs 39 and therefore movements in fair value
have been posted directly to equity and reclassified through the income statement, in finance costs, at the time the
hedged item affects the income statement.
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 material impact on
the Group’s equity.
Currency derivatives have not been included in the sensitivity analysis below as they are not considered to be exposed to
interest rate risk.
2010
sterling
2009
sterling
Liquidity risk
Increase / decrease
in basis points
Effect on profit before tax
£000
+100
-100
+100
-100
(271)
271
(565)
565
the tables below summarise the maturity profile of the Group’s financial liabilities at 31 march 2010 and 2009 based on
contractual undiscounted payments:
Group
Year ended 31 March 2010
Bank overdraft
Bank loan
interest rate swap
Finance leases and hire purchase contracts
trade and other payables
Year ended 31 march 2009
Bank overdraft
Revolving credit facility
Bank loan
interest rate swap
Loan notes
trade and other payables
Less than
1 year
£’000
1,956
11,225
357
170
86,733
100,441
Less than
1 year
£’000
12,437
9,000
11,231
304
762
75,273
109,007
1 to 2
years
£’000
-
50,757
197
171
-
51,125
1 to 2
years
£’000
-
-
10,943
234
-
-
2 to 5
years
£’000
-
-
-
191
-
191
2 to 5
years
£’000
-
-
30,515
129
-
-
11,177
30,644
Total
£’000
1,956
61,982
554
532
86,733
151,757
total
£’000
12,437
9,000
52,689
667
762
75,273
150,828
P A Ge 8 6 | C R A N S W I C K p l c RePoR
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Company
Year ended 31 March 2010
Bank loan
interest rate swap
trade and other payables
Cross guarantees
Year ended 31 march 2009
Bank overdraft
Revolving credit facility
Bank loan
interest rate swap
Loan notes
trade and other payables
Cross guarantees
Less than
1 year
£’000
11,225
357
38,084
1,956
51,622
Less than
1 year
£’000
6,157
9,000
11,231
304
460
46,048
6,280
79,480
1 to 2
years
£’000
50,757
197
-
-
50,954
1 to 2
years
£’000
-
-
10,943
234
-
-
-
2 to 5
years
£’000
-
-
-
-
-
2 to 5
years
£’000
-
-
30,515
129
-
-
-
11,177
30,644
Total
£’000
61,982
554
38,084
1,956
102,576
total
£’000
6,157
9,000
52,689
667
460
46,048
6,280
121,301
the interest rate swaps disclosed in the above tables are the net undiscounted cash flows as these amounts are settled net.
24. Called-up share capital
Group and Company
Authorised
2010
Number
2009
number
2010
£’000
2009
£’000
ordinary shares of 10p each
100,000,000
63,600,000
10,000
6,360
Allotted, called-up and fully paid
ordinary shares of 10p each
2010
2009
Number
number
2010
£’000
2009
£’000
At 1 April
on exercise of share options
scrip dividends
Allotted to Cranswick plc employee Benefit trust
46,459,958
46,225,491
4,646
4,623
504,196
265,913
100,000
125,168
109,299
-
50
27
10
12
11
-
At 31 March
47,330,067
46,459,958
4,733
4,646
on 4 september 2009, 168,701 ordinary shares were issued at 594.0 pence as a result of shareholders exercising the scrip
dividend option in lieu of the cash payment for the 2009 final dividend.
on 22 January 2010, 97,212 ordinary shares were issued at 744.6 pence as a result of shareholders exercising the scrip dividend
option in lieu of the cash payment for the 2010 interim dividend.
During the course of the year, 504,196 ordinary shares were issued to employees exercising sAYe and executive options at
prices between 255.0 pence and 679.0 pence.
P A Ge 8 7 | C R A N S W I C K p l c RePoR
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of the unissued ordinary share capital £54,395 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
savings related
executive
number
4,277
421
20,285
38,010
37,435
33,904
204,953
154,665
50,000
exercise price
exercise period
415p
255p
375p
471p
679p
665p
474p
594p
march 2006 to october 2010
march 2007 to october 2011
march 2008 to october 2012
march 2009 to october 2013
march 2010 to october 2014
march 2011 to october 2015
march 2012 to october 2016
march 2013 to october 2017
601p
July 2008 to July 2015
on 5 september 2008, 77,905 ordinary shares were issued at 567.7 pence as a result of shareholders exercising the scrip
dividend option in lieu of the cash payment for the 2008 final dividend.
on 23 January 2009, 31,394 ordinary shares were issued at 593.1 pence as a result of shareholders exercising the scrip
dividend option in lieu of the cash payment for the 2009 interim dividend.
During the course of the prior year, 125,168 ordinary shares were issued to employees exercising sAYe options at prices
between 255.0 pence and 471.0 pence.
25. Share-based payments
the Group operates three share option schemes, a Revenue approved scheme (sAYe), an unapproved scheme (executive
share option) and a Long term incentive Plan (LtiP), all of which are equity settled. the total expense charged to the income
statement during the year in relation to share-based payments was £510,000 (2009: £1,000,000).
Executive Share Option Scheme
share options are granted periodically to promote the involvement of senior management in the longer term success of the
Group. options can only be exercised if certain performance conditions are met by the Group. these conditions are based
on total shareholder return over the performance period and require the Group 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.
the following table illustrates the number and weighted average exercise prices (WAeP) of, and movements in, executive
share options during the year:
Group
outstanding as at 1 April
Lapsed during the year
exercised during the year (i)
outstanding as at 31 march (ii)
exercisable at 31 march
2010
Number
475,000
-
(425,000)
50,000
50,000
2010
WAEP
£
6.01
-
6.01
6.01
6.01
2009
number
490,000
(15,000)
475,000
475,000
-
2009
WAeP
£
6.01
6.01
-
6.01
6.01
P A Ge 8 8 | C R A N S W I C K p l c RePoR
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Company
outstanding as at 1 April
exercised during the year (i)
outstanding as at 31 march (ii)
exercisable at 31 march
2010
Number
265,000
219,991
45,009
45,009
2010
WAEP
£
6.01
6.01
6.01
6.01
2009
number
265,000
-
265,000
265,000
2009
WAeP
£
6.01
-
6.01
6.01
i) the weighted average share price at the date of the exercise for the options exercised was £7.67.
ii) For the share options outstanding as at 31 march 2010, the weighted average remaining contractual life is 4.25 years.
(2009 – 5.25 years). the exercise price for all options outstanding at the end of the year was £6.01.
there were no options granted during the year.
Long Term Incentive Plan (LTIP)
During the course of the year 182,700 options at nil cost were granted to Directors and senior executives, the share price
at that time was 592.5 pence. Details of the performance criteria relating to the LtiP scheme can be found in the Directors’
Remuneration report on pages 35 and 36.
Group
outstanding as at 1 April
Granted during the year (i)
Lapsed during the year
exercised during the year (ii)
outstanding as at 31 march (iii)
exercisable at 31 march
Company
outstanding as at 1 April
Granted during the year (i)
Lapsed during the year
exercised during the year (ii)
outstanding as at 31 march (iii)
exercisable at 31 march
2010
Number
532,500
182,700
(136,738)
(118,419)
460,043
37,343
2009
number
365,000
177,500
(10,000)
532,500
2010
WAEP
£
-
-
-
-
-
-
-
-
2009
Number
2009
WAEP
2008
number
£
-
-
-
-
-
-
375,000
110,700
(107,930)
(79,727)
298,043
37,343
250,000
125,000
-
-
375,000
-
2009
WAeP
£
-
-
-
-
-
-
2008
WAeP
£
-
-
-
-
-
-
i) the weighted average fair value of options granted during the year was £3.89 (2009 - £4.22). the share options granted
during the year were at £nil. the share price at the date of grant was £5.92.
ii) the weighted average share price at the date of the exercise for the options exercised was £6.62.
iii) For the share options outstanding as at 31 march 2010, the weighted average remaining contractual life is 8.37 years.
(2009 – 8.32 years). the exercise price for all options outstanding at the end of the year was £nil.
P A Ge 8 9 | C R A N S W I C K p l c RePoR
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All Employee Share Option Scheme (SAYE)
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, sAYe share
options during the year.
Group
outstanding as at 1 April
Granted during the year (i)
Lapsed during the year
exercised during the year (ii)
outstanding as at 31 march (iii)
exercisable at 31 march
Company
outstanding as at 1 April
Granted during the year (i)
Lapsed during the year
exercised during the year (ii)
outstanding as at 31 march (iii)
exercisable at 31 march
2010
Number
529,244
156,161
(112,259)
(79,196)
493,950
14,723
2010
WAEP
£
5.00
5.94
5.14
4.55
5.35
5.70
2009
number
504,672
284,808
(135,068)
(125,168)
529,244
17,461
2010
Number
2010
WAEP
2009
number
£
12,051
1,984
(3,896)
10,139
-
-
10,599
9,371
(5,339)
(2,580)
12,051
5.08
5.94
-
5.36
5.14
-
-
2009
WAeP
£
5.16
4.74
6.28
3.69
5.00
3.20
2009
WAeP
£
5.28
4.74
6.71
4.71
5.08
-
i) the share options granted during the year were at £5.94, representing a 20 per cent discount on the price at the relevant
date. the share price at the date of grant was £7.85.
ii) the weighted average share price at the date of the exercise for the options exercised was £7.45 (2009 - £6.37).
iii) included within this balance are options over nil shares (2009 – 6,396 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 2010 the weighted average remaining contractual life is 3.39 years (2009
– 3.58 years).
the weighted average fair value of options granted during the year was £1.87 (2009 - £1.23). the range of exercise prices
for options outstanding at the end of the year was £2.55 - £6.79 (2009 - £2.55 - £6.79).
P A Ge 9 0 | C R A N S W I C K p l c RePoR
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the fair value of the sAYe and LtiP 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 2010 and 31 march 2009.
Group and Company
Dividend yield
expected share price volatility
Risk free interest rate
2010
LTIP
4.48%
31.0%
2010
SAYE
3.39%
31.0%
2.74%
2.09% - 3.33%
expected life of option (years)
3 years
3,5,7 years
exercise prices
£nil
£5.94
2009
LtiP
3.87%
31.0%
5.27%
3 years
£nil
2009
sAYe
4.27%
31.0%
2.75% - 3.25%
3,5,7 years
£4.74
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 LtiP options is adjusted to take into account the market-based performance condition.
26. Pensions schemes
Defined benefit pension scheme
the Group acquired a defined benefit final salary pension scheme during the year, which is funded by the payment of contributions
to separately administered trust funds. the scheme was closed to new members and future accrual on 30 June 2004.
Pension costs are determined with the advice of an independent qualified actuary on the basis of a triennial valuation using
the projected unit credit method. the latest available formal actuarial valuations of the schemes were carried out as at 1
January 2007, with the 1 January 2010 valuation currently in progress. these valuations were updated to the year end. Plan
assets are stated at fair value at the respective balance sheet dates and overall expected rates of return are established by
applying published brokers’ forecasts to each category of scheme assets.
a) Change in benefit obligation
Benefit obligation acquired
interest cost
Actuarial losses
Benefits paid from plan
Benefit obligation at end of year
b) Change in plan assets
Fair value of plan assets acquired
expected return on plan assets
Actuarial gain on plan assets
employer contributions
Benefits paid from plan
Fair value of plan assets at end of year
P A Ge 9 1 | C R A N S W I C K p l c RePoR
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2010
£’000
14,869
692
2,042
(462)
17,141
2010
£’000
9,091
474
1,955
730
(462)
11,788
c) Amounts recognised in the balance sheet
Present value of funded obligations
Fair value of plan assets
net liability recorded in the balance sheet
d) Components of pension cost
Amounts recognised in the income statement
interest cost
expected return on plan assets
total pension cost recognised in the income statement
Actual return on assets
Actual return on plan assets
Amounts recognised in the Group statement of comprehensive income
Actuarial losses immediately recognised
Cumulative amount of actuarial losses recognised
e) Principal actuarial assumptions
the weighted average actuarial assumptions used in the valuation of the scheme were as follows:
Discount rate
Rate of price inflation
expected long term rate of return on plan assets during financial year
Rate of compensation increase
Future expected lifetime of pensioner at age 65:
Current pensioners
male
Female
Future pensioners
male
Female
2010
£’000
(17,141)
11,788
(5,353)
2010
£’000
692
(474)
218
2,429
87
87
2010
5.60%
3.45%
7.55%
3.45%
23.8
26.3
25.9
28.2
the mortality rates used have been taken from Base tables PCmA00 and PCFA00.
A 0.1% increase in the discount rate would give rise to a £6,000 decrease in the amounts charged to the income statement
during the year, and a £360,000 decrease in the deficit at 31 march 2010
P A Ge 9 2 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
f) Plan Assets
Asset Category
equity securities
Bonds
Cash
total
2010
Percentage
of Plan
Assets
Fair value
of Plan
Assets
8.50%
5.60%
4.50%
£’000
8,540
1,750
1,498
11,788
the expected rates of return on cash and bonds are determined by reference to relevant gilt yield and corporate bond indices
respectively. the long term rate of return on equities is calculated at a premium of 4 per cent above gilt yields.
the overall expected rate of return is calculated by weighting the individual rates in accordance with the anticipated balance
in the plan’s investment portfolio.
the plans have not invested in any of the Group’s own financial instruments nor in any properties or other assets used by
the Group.
g) History of experience gains and losses
experience adjustments on plan liabilities
experience adjustments on plan assets
net actuarial loss for the year
Cumulative actuarial loss
2010
£’000
(2,042)
1,955
(87)
(87)
the Group expects to contribute approximately £800,000 to the scheme during the year to 31 march 2011 in respect of
regular contributions. in addition the Company will pay a one off special contribution of £870,000.
Defined contribution pension schemes
the Group also 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. Contributions owing to the insurance companies at the year-end, included in trade and
other payables, amounted to £104,000 (2009 - £55,000). Contributions during the year totalled £1,314,000
(2009 - £1,364,000).
P A Ge 9 3 | C R A N S W I C K p l c RePoR
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27. Additional cash flow information
Analysis of Group net debt
Cash and cash equivalents
overdrafts
other financial assets
At
31 march
2009
Cash
flow
£’000
£’000
other
non cash
changes
£’000
At
31 March
2010
£’000
4,399
(12,437)
(8,038)
1,499
10,481
-
11,980
263
-
(7,775)
11,980
24
24
1,500
1,524
5,922
(1,956)
3,966
1,763
5,729
other financial liabilities
(173)
-
(214)
(387)
Revolving credit
Bank loans
Loan notes
Finance leases and hire purchase contracts
-
(9,000)
(48,882)
(762)
-
-
9,000
(10,000)
762
120
net debt
(66,592)
11,862
-
-
(59,530)
(480)
(54,668)
(648)
(600)
62
net debt is defined as cash and cash equivalents, loans receivable and derivatives at fair value less interest bearing liabilities
(net of unamortised issue costs). Cash and cash equivalents all relate to continuing operations.
non-cash movements include £1,500,000 of loans receivable (see non-current financial assets – note 19) and £600,000 of
finance lease obligations which were acquired as part of the acquisition described in note 16.
Cash and cash equivalents
overdrafts
other financial assets
other financial liabilities
Revolving credit
Bank loans
Loan notes
net debt
At
31 march
2008
Cash
flow
£’000
£’000
other
non cash
changes
£’000
At
31 march
2009
£’000
3,770
(11,468)
(7,698)
658
(969)
-
(311)
70
-
(7,628)
(311)
-
-
(8,000)
(61,664)
(1,093)
(78,385)
-
-
(1,000)
13,155
331
12,175
(29)
(29)
193
164
(173)
4,399
(12,437)
(8,038)
263
(7,775)
(173)
(9,000)
(373)
(48,882)
(762)
(382)
(66,592)
P A Ge 9 4 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
Analysis of Company net debt
Cash and cash equivalents
overdrafts
other financial assets
other financial liabilities
Revolving credit
Bank loans
Loan notes
net debt
overdrafts
other financial assets
other financial liabilities
Revolving credit
Bank loans
Loan notes
net debt
At
31 march
2009
Cash
flow
£’000
£’000
other
non cash
changes
£’000
At
31 March
2010
£’000
-
-
-
-
-
-
(6,157)
(6,157)
124
-
4,004
6,157
10,161
(6,033)
10,161
(173)
-
(9,000)
(48,882)
(460)
(64,548)
At
31 march
2008
9,000
(10,000)
460
9,621
Cash
flow
£’000
£’000
(8,512)
2,355
-
70
-
(8,442)
2,355
-
-
(8,000)
(61,664)
(756)
(78,862)
-
-
(1,000)
13,155
296
14,806
4,004
4,004
4,004
(387)
(59,530)
-
-
-
-
(124)
(124)
(214)
(648)
(986)
(55,913)
other
non cash
changes
£’000
At
31 march
2009
£’000
54
54
(173)
(6,157)
124
(6,033)
(173)
(9,000)
(373)
(48,882)
(460)
(492)
(64,548)
28. Contingent liabilities
the Company, together with its subsidiary undertakings, has entered into a cross guarantee with Lloyds tsB Bank plc, the
Royal Bank of scotland plc and Clydesdale Bank plc in respect of the Group’s facilities with those banks. Drawn down amounts
totalled £61,956,000 as at 31 march 2010 (2009 - £71,437,000).
For the Company, the amounts drawn down by other group companies which were guaranteed by the Company at the year
end totalled £1,956,000 (2009 - £6,280,000).
P A Ge 9 5 | C R A N S W I C K p l c RePoR
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29. Commitments
a) the Directors have contracted for future capital expenditure for property, plant and equipment totalling £14,917,000
(2009 - £3,083,000).
b) the Group’s future minimum rentals payable under non-cancellable operating leases are as follows:
Group
not later than one year
After one year but not more than five years
After five years
the Company has no non-cancellable operating leases.
30. Related party transactions
2010
£’000
3,348
8,032
12,207
23,587
2009
£’000
2,718
7,481
14,007
24,206
on 24 April 2009 the Pet Division was sold to the management team, headed up by Derek Black, previously a main Board
director responsible for the Pet Division, for an initial consideration of £17.0 million, plus a subsequent working capital
adjustment of £1.4 million. Derek Black resigned as a main board director of Cranswick plc on that day and is a shareholder
and director of the new company. Cranswick plc has retained a 5.5 per cent share in the business.
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
2010
2009
services rendered to the
related party
£’000
interest paid to
related party
£’000
Dividends received from
related party
£’000
18,200
15,660
2,415
4,267
8,808
8,769
Amounts owed by or to subsidiary undertakings are disclosed in notes 18 and 20. Any such amounts are unsecured and
repayable on demand.
Remuneration of key management personnel
short-term employee benefits
Post-employment benefits
share-based payment
2010
£’000
4,172
345
139
2009
£’000
3,924
509
579
4,656
5,012
P A Ge 9 6 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0
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
northern house
Woodsome Park
Fenay Bridge
huddersfield
hD8 0GA
Auditors
ernst & Young LLP – hull
Solicitors
Rollits – hull
Bankers
Lloyds tsB Bank plc
the Royal Bank of scotland plc
Clydesdale Bank plc
Merchant Bankers
n m Rothschild & sons – Leeds
P A Ge 9 7 | C R A N S W I C K p l c RePoR
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Shareholder information
Five year statement
2010
£’m
2009
£’m
2008
£’m
2007
£’m
2006
£’m
turnover *
740.3
606.8
559.2
479.8
401.6
Profit before tax *
43.8
34.7
33.0
32.1
30.6
earnings per share *
69.7p
40.5p
51.9p
49.3p
50.3p
Dividends per share
25.0p
21.7p
19.9p
18.1p
16.5p
Capital expenditure
20.5
21.2
25.8
11.8
14.3
net debt
net assets
(54.7)
(66.6)
(78.4)
(75.9)
(77.1)
193.6
166.5
155.3
135.8
112.4
*: Excludes discontinued Pet Division operations for all years presented.
Dividends per share relate to dividends declared in respect of that year.
Net debt is defined as per note 27 to the accounts.
Financial calendar
Preliminary announcement of full year results
Publication of Annual Report
Annual General meeting
Payment of final dividend
Announcement of interim results
Payment of interim dividend
may
July
July
september
november
January
P A Ge 9 8 | C R A N S W I C K p l c RePoR
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Shareholder analysis
at 12 may 2010
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 2009
share price at 31 march 2010
high in the year
Low in the year
Share price movement
number of
holdings
number of
shares
5,888,003
41,450,356
47,338,359
400,007
1,289,231
830,079
3,091,002
3,510,155
38,217,885
47,338,359
1,161
732
1,893
939
583
115
137
48
71
1,893
544p
808p
820p
569p
Cranswick’s share price movement over the ten year period to may 2010 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
2000, is shown below:
)
p
(
e
c
i
r
p
e
r
a
h
s
d
e
s
a
b
e
R
1200
1100
1000
900
800
700
600
500
400
300
200
100
0
M ay 00
Cranswick
FTSE 350 Food Producers
FTSE All Share
source: investec
M ay 01
M ay 02
M ay 03
M ay 04
M ay 05
M ay 06
M ay 07
M ay 08
M ay 09
M ay 10
P A Ge 9 9 | C R A N S W I C K p l c RePoR
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P R o D U C t i o n F A C i Li t i e s
Fresh pork
Sausages
Bacon
Cooked meats
P A Ge 1 0 0 | C R A N S W I C K p l c RePoR
t & A C CoUn t s 2 0 1 0