Report & Accounts
Year Ended 31 March 2011
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.
financial highlights
£758.4m
Turnover
£47.1m
Profit Before Tax
2011
2010
2009
758.4m
740.3m
606.8m
2011
2010
2009
2009
47.1m
43.8m
34.7m
34.7m
74.5p
27.5p
Earnings Per Share
Dividends Per Share
2011
2010
2009
* Before exceptional tax charge
74.5p
69.7p
53.7p*
2011
2010
2009
27.5p
25.0p
21.7p
•
•
•
Turnover up 2 per cent to £758m
Profit before tax up 8 per cent at £47.1m
Increase of 7 per cent in earnings per share to 74.5p
• Dividend up 10 per cent to 27.5p per share
contents
Chairman’s statement
Review of activities
Group operating and financial review
Group directors and business locations
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
Shareholder information
Shareholder analysis
Awards
Advisers
03
07
11
18
19
21
27
35
43
49
50
52
53
53
54
55
56
57
58
59
60
100
101
102
104
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Report & Accounts 2011
Cranswick plc
chairman’s
Martin Davey - Chairman
Cranswick’s performance in the past year was particularly pleasing and continued the Company’s record of unbroken growth
with increases in both sales and profitability. This generated the funds for further investment in the Company’s asset base to
improve efficiency and to provide the production capacity required to maintain growth in the years ahead.
Results
Dividend
Underlying sales rose 4 per cent in the year on volumes that were 6 per cent
The Board is proposing an increase in the final dividend of 10 per cent
higher although sales in the final quarter of the year were flat reflecting the
to 18.7 pence per ordinary share. Along with the interim dividend of 8.8
difficulties facing UK consumers. The Deeside cooked meat business was
pence per ordinary share paid in January 2011 this makes a total for the
transferred into the Farmers Boy (Deeside) associate “FBD” in July 2010 and
year of 27.5 pence per ordinary share, an increase of 10 per cent on last
from this date onwards sales are excluded from Group total sales which for
year’s 25 pence. The final dividend, if approved by Shareholders, will be
the full year were 2 per cent higher than last year at £758 million.
paid on 2 September 2011 to Shareholders on the register at the close
The operating margin was slightly ahead of last year and after a financing
Shareholders will again have the option to receive the dividend by way of
of business on 1 July 2011. Shares will go ex-dividend on 29 June 2011.
cost of £1.6 million and the Company’s share of the FBD result, profit
scrip issue.
before taxation was 8 per cent higher than last year at £47.1 million. The
financing cost was lower than a year ago which was attributable to the
Board
strong cash flow of the business notwithstanding the investment made in
the asset base. Earnings per share at 74.5 pence were 7 per cent higher
A number of executive appointments have been made in recognition of the
than the 69.7 pence per share achieved last year.
important roles played in developing the business to where it is today and
in acknowledging the roles to be played in continuing to drive the business
The outcome at FBD was after absorbing costs associated with the set-up,
forward over the years ahead.
reorganisation and factory extension. Other capital projects undertaken in
the Group over the past year include the abattoir development in fresh pork,
Today it is being announced that Adam Couch has been appointed Chief
the expansion of the air-dried bacon facility at Sherburn and investment in
Operating Officer. Adam joined the operational side of the fresh pork
sausage production in Norfolk.
business in 1991 after leaving university in Hull. He was appointed to
the Board in 2003 and is currently managing director of the fresh pork
The borrowings of the business are conservatively structured and the
activity.
Company has recently put in place a new four year bank facility which
provides appropriate headroom going forward. Interest costs were covered
Jim Brisby was appointed to the Board as Sales and Marketing Director
30 times compared to 21 times a year ago and at the year-end net debt
during the year. Jim joined Cranswick 16 years ago after graduating and
was lower at £48.3 million.
was subsequently appointed sales and marketing director of Cranswick
Country Foods in 2004 and has been an integral part of the team that has
There is further information on trading and finance in the reviews by the
grown the business over the years.
Chief Executive and Finance Director which follow.
In addition a number of internal appointments have been made to the
boards of the product focused teams throughout the business.
Cranswick plc
Report & Accounts 2011
3
statement
Staff
Outlook
The successful development of the business over the years would not have
This has been a very positive year for Cranswick. Record levels of sales
been possible without the expertise and commitment of the management
and profitability have been achieved and substantial investment has been
teams and their colleagues throughout the business and on behalf of the
made in the asset base to improve efficiency and to provide the capacity
Board I express our sincere thanks and appreciation for their contribution.
for continued growth. That said, the difficulties facing the UK consumer,
Compliance with the UK Corporate Governance Code
along with rising raw material prices and the dynamics of the competitive
market in which the Company operates suggests that the year to 31
March 2012 may be more demanding than usual. However, the Board
A statement relating to compliance with the Code is included in the
anticipates that with the Company’s well invested asset base, strong range
Corporate Governance Statement on page 32.
of products, experienced management team and robust financial position
it is well positioned to continue the successful long-term development of
the Company.
Martin Davey
Chairman
16 May 2011
Dividend Per Share
1990-2011
(pence)
47.1
43.8
8.3
7.5
6.8
5.8
5.1
4.6
4.0
4.1
4.3
3.8
3.3
2.8
27.5
25.0
21.7
19.9
18.1
16.5
14.5
13.2
12.0
10.8
Profit Before Tax
1990-2011
(£m)
34.7
32.7 33.0
31.1
21.2 21.6
19.8
17.5
11.7
9.3
7.1
2.2
2.3
3.0
3.1
1.4
1.7
0.9
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 ‘11
‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11
4
Report & Accounts 2011
Cranswick plc
Cranswick plc
Report & Accounts 2011
5
6
Report & Accounts 2011
Cranswick plc
review of
Bernard Hoggarth - Chief Executive
It is pleasing to report underlying sales growth of 4 per cent, given the slowdown in consumer food expenditure experienced by
the majority of our multiple retailer customers, particularly in the post-Christmas trading period. Total external sales which
were ahead 2 per cent at £758 million reflected the transfer of the Deeside cooked meats business to Farmers Boy (Deeside)
Limited in July 2010. Internal sales, which include the supply of fresh pork to the further processing sites, for production of
bacon, ham and sausages, increased strongly by 10 per cent.
There have been several major developments during the year. One of the
the business to take advantage of substantial price differentials compared
most interesting is the Group’s move into pastry and in particular sausage
to those available in Europe.
rolls. These gourmet style, hand crafted sausage rolls will be marketed as
both private label products and under the ‘Yorkshire Baker’ brand. With
It is pleasing to report that a growing proportion of our livestock producers
the product already launched with one customer and a listing agreed with
are now supplying Cranswick under the terms of ‘Freedom Food Farm
a second, Cranswick has again raised the bar in a new category into which
Accreditation’. This premier welfare standard which is operated and
it has entered. This initiative will inevitably lead to the development of a
managed by the RSPCA is increasingly recognised by the consumer and
range of pastry based products.
now accounts for approximately 40 per cent of the Group’s livestock
purchases. An ever increasing volume of British pork produced to this
Cranswick is well known as a major private label supplier to the multiple
standard is required by the UK food retailers to satisfy growing consumer
food retailers but during the year a brand marketing manager was appointed
demand. There has been financial pressure on the British pig farming
to drive the sales of branded products. This new role embraces all brands,
sector, following a significant and sustained rise in the price of feed on the
whether produced under license, or Cranswick’s own. The impact of taking
back of higher ingredient prices. Pig prices are currently rising and further
‘Jamie Oliver’ products to market, alongside those of ‘Weight Watchers’,
increases cannot be ruled out. That said, pork still remains extremely price
‘Black Farmer’, ‘Red Lion’ and now ‘Yorkshire Baker’ gives a real focus to
competitive and much more versatile when compared to other major
this development. The ‘Red Lion’ brand, launched in October, generated
proteins including beef and lamb.
sales of almost £12 million during the year. These sales generated a
significant contribution to Red Lion Foods which donates 100 per cent of
Bacon sales grew by 17 per cent, maintaining the impressive growth record
its post-tax profits to Forces charities and causes. Consumer interest in the
seen in recent years. The gourmet bacon facility near Leeds completed
‘Red Lion’ brand, coupled with the high level of media attention, should
phase two of its development during the last quarter of the financial year.
drive continued sales growth.
The site now boasts a totally unique factory for the production of dry-cured,
air-dried bacon. The freehold facility now extends to almost 10,000 square
Fresh pork sales from the Group’s two primary processing facilities based
metres. Even though the extension and development work continued over
in East Yorkshire and Norfolk grew strongly with the combined revenues
the peak Christmas trading period 99 per cent service levels were achieved.
rising by 17 per cent. The major capital project at the Preston site near
Further expenditure is planned in the coming financial year, including
Hull was completed during the year and capacity has been increased by
investment in additional packing equipment and a new fully automated
over 50 per cent. In addition, the introduction of robotics, technology
lardon line. A new retail customer will be added to utilise some of the
used for the first time in a UK fresh pork facility, has delivered significant
additional capacity and there are also real opportunities to develop existing
efficiency benefits. As part of the plant’s on-going development United
customer ranges even further over the coming year.
States Department of Agriculture (USDA) accreditation has been achieved
and will allow the export of specific product groups to the USA and enable
Sausage sales increased by 7 per cent. The extension to the Lazenby’s
Cranswick plc
Report & Accounts 2011
7
activities production facility was completed in the autumn increasing capacity by 50
The airline business continued to grow with both sandwiches and snack
per cent and enabling the business to better manage the peak Christmas
foods performing strongly and there was also further growth in the
trading period. Weekly production during the barbecue season and at
consolidation and picking of products for several airlines, not only for
Christmas can now approach 700 tonnes. During the year investment of
European destinations, but long haul to South America too. Supply to
£2 million was made in a second sausage production facility at the Group’s
the convenience sector grew as did sandwich supply to the majority of
pork plant in Norfolk providing additional weekly capacity of 200 tonnes.
train operators, with the emphasis being on the first class offering. Lower
This second facility allows the business to offer a wider range of premium
margin business, where price increases could not be achieved, has been
products, target new customers and at the same time be extremely
exited and at the same time longer term supply agreements have been
competitive, offering excellent value to the price conscious consumer.
secured with key customers. The new product development teams are
working hard creating specific products for the launch of a new range
There were several developments in the cooked meat business during the
of ‘Red Lion’ sandwiches in the summer. The sandwich sector is a very
year, not least the transfer of assets of the Deeside facility in North Wales
competitive one, but the sandwich business’ focus on food service will be
to Farmers Boy (Deeside) Limited, part of the manufacturing division of
the platform for the launch of several new products from other parts of the
Wm Morrison Supermarkets PLC. Allowing for this, underlying sales of
Group and is an ideal route to market.
cooked meats increased by 8 per cent. The business recently entered into a
licensing agreement with ‘Weight Watchers’ to produce cooked meats and
In summary, the Group has had several issues to manage during the year;
other products and has already achieved four separate retail listings in what
some specific to individual business units, and some of a more general
is an important growth category. There have also been other major business
nature. There is no sign that, in the short term, the general economic
wins across the Group’s product categories during the second half of the
climate will change for the better, so the business remains focused on
year, leading to some exceptional growth in the ‘Standard Plus’ category.
meeting the consumer’s needs with best value offerings. Whether it is
premium quality for dining at home, value meal solutions, or even ham for
Sales of Continental products were 14 per cent lower following one
the sandwich box, Cranswick must remain competitive. There is no doubt
customer’s move to a direct sourcing policy. That said, the customer base
that in the categories in which the business operates, it has industry leading
for core continental products has been significantly widened during the
facilities following a £100 million capital investment programme over the
year and it looks like the record of underlying organic growth is back on
past 5 years. The Group’s product development teams are ‘best in class’ as
track with new customers for cooking ingredients and snacking foods
the Group’s product portfolio clearly demonstrates. With the track record
and several new listings with the UK’s largest retailer. The majority of the
of its teams, the on-going development of and entry into new categories
categories under the continental umbrella are in significant growth giving
and continued organic growth, Cranswick is in a strong position to meet
rise to some exciting opportunities as the business moves into the new
the challenges which lie ahead.
Bernard Hoggarth
Chief Executive
16 May 2011
financial year. A less glamorous, but still important, part of the continental
portfolio is corned beef which is sliced and packed at Continental Fine Foods
in Manchester. This category has performed extremely well despite being
faced with severe raw material shortages during the year. These shortages
led to substantial input cost inflation for this product which Cranswick
successfully passed on in full to its retail customers. Following investment
in olive packing equipment and the on-going development of this category,
olive sales increased by a very healthy 28 per cent. Moving forward, the
olive category continues to be an area of focus for the business, both into
the retail and food service sectors.
Sandwich sales increased by 13 per cent in a competitive sector, where
certain manufacturers were not chasing recovery of raw material price
inflation. The sandwich business was also more affected by the fuel price
increase during the year than other parts of the Group being focused on
the food service sector, with direct daily deliveries to many customers.
8
Report & Accounts 2011
Cranswick plc
bacon
as it used to taste
Chris Battle’s passion for
traditional bacon being
produced to his authentic
recipe is as strong today
as it was when his family
introduced the original hand
cured, air-dried method over
100 years ago for a mild taste.
Cranswick plc
Report & Accounts 2011
9
10
Report & Accounts 2011
Cranswick plc
group operating and
Mark Bottomley
Finance Director
Nature, objectives and strategies
The Group’s business
The Group’s operations are focused on the production and supply of
food products. The business operates entirely in the UK, although a small
proportion of sales are exported. 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 outlets. The markets in which the food business
operates are competitive both in terms of pricing from fellow suppliers and
the retail environment in general. The UK food retail market is known to
be amongst the most competitive in the world. Despite this, Cranswick
has a long record of increasing sales and profits through a combination
of investing in modern efficient factories, developing a range of quality
products and making sound acquisitions. The businesses are under the
control of stable, experienced and talented operational management teams
supported by a skilled workforce. The performance of the business in the
year is discussed in the Review of Activities.
Business objectives
It is the Board’s view that meeting the following business objectives is key
to achieving the financial and non-financial measures that increase value to
Shareholders and other stakeholders:
•
•
•
•
•
Delivering innovative, quality products to our customers
Maintaining the highest level of service to our customers
Improving operational efficiency
Securing employee health and safety
Maximising returns on investment
Business strategies
The Group’s market strategy is to focus 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 as possible.
Operational management is given responsibility for developing plans to
deliver the objectives of the Group with particular emphasis on growing sales
through product innovation and high service levels, improving operational
efficiency and securing employee health and safety. The role of the Board in
achieving Group objectives is to support operational management and to
identify suitable acquisitions that will take the Group into new and growing
areas of the market, will open up new customer relationships to the Group
or will consolidate existing market positions.
Current and future development
and performance
Business development and performance
The key features of the year have been the record profit before tax for the
Group, record levels of capital investment and the continuing strong cash
generation from operating activities. The trading environment in which
the Group operates has remained challenging. The Group has experienced
continuing competitor pressure although the efficiencies achieved through
on-going capital investment and as extra volumes are put through its
factories have mitigated to some extent against those pressures.
Revenue
Reported sales were 2 per cent ahead of last year. The Deeside cooked
meats business was transferred into Farmers Boy (Deeside) Limited (FBD) on
9 July 2010 and from this date onwards sales from FBD have been excluded
from Group total sales. Adjusting for this and the benefit of a full year
contribution from CCF Norfolk compared to nine months in the previous
year, underlying like-for-like sales increased by 4 per cent. Sales of fresh
pork, which benefited from the additional contribution from CCF Norfolk,
increased by 17 per cent. Sausage sales grew by 7 per cent, bacon by 17
per cent and sandwiches by 13 per cent. Sales of charcuterie products
Cranswick plc
Report & Accounts 2011
11
financial review
were 14 per cent lower, following the decision by one retail customer to
of £8.1 million. The £21.9 million of net cash used in financing activities
move to a direct sourcing policy. Reported cooked meat sales were 8 per
in 2011 is largely due to interest paid of £1.7 million, dividends paid of
cent lower reflecting the transfer of the Deeside cooked meats business
£10.5 million, loan repayments of £10.0 million and proceeds from issue of
into FBD. Adjusting for this, cooked meats sales were 8 per cent ahead on
share capital of £0.6 million. The prior year cash outflow from financing of
a comparable basis.
Operating profit
£8.4 million was largely due to interest paid of £2.7 million, dividends paid
of £8.8 million and proceeds from issue of share capital of £2.9 million.
The overall result is a net decrease in cash and cash equivalents of £6.6
million (2010: increase of £12.0 million). Net debt reduced by £6.4 million
Operating profit at £48.7 million increased by 6 per cent and at 6.4 per
to £48.3 million (2010: £54.7 million) at the year end, and gearing reduced
cent of sales was 0.2 per cent ahead of the level achieved last year. The
from 28 per cent to 22 per cent. The Company replaced its existing bank
increase in operating profit is attributable to a combination of sales growth
facilities during the year. The new facility runs to July 2015 and comprises
and improved operational efficiency, particularly at CCF Norfolk where
a revolving credit facility of £100 million including a committed overdraft
significant improvements have been made in the period since acquisition.
facility of £20 million. This unsecured facility provides the business with
Finance costs
appropriate headroom going forward.
Pensions
Finance costs of £1.6 million (2010: £2.1 million) were lower than the
previous year reflecting the strong cash generation in the year. Interest
The Group operates a number of defined contribution schemes, whereby
cover improved from 21.3 times to 30.0 times.
Taxation
The tax charge as a percentage of profit from continuing operations before
taxation was 25.0 per cent in the current year and 25.8 per cent in 2010.
The standard rate of UK Corporation Tax was 28 per cent for 2011 and
2010. The lower than standard rate of tax in the current year primarily
relates to a deferred tax credit of £1.0 million on the transfer of assets
contributions are made to schemes operated by major insurance companies.
Contributions to these schemes are determined as a percentage of
employees’ 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 31 March 2011 was £2.9
million (2010: £5.3 million). The present value of funded obligations was
£16.5 million (2010: £17.1 million) and the fair value of plan assets was
£13.6 million (2010: £11.8 million).
from the Deeside cooked meats business to FBD and a further deferred tax
credit of £0.7 million following the substantial enactment of the Finance
Investment in associate
Act 2011 which reduces the Corporation tax rate from 28 per cent to 26
per cent in the year to 31 March 2012.
Earnings per share
On 9 July 2010, the principal assets and trade of the Deeside cooked meats
facility were transferred to Farmers Boy (Deeside) Limited, a company
within the Wm Morrison Supermarkets PLC group, to provide them with
a dedicated facility in return for a 49 per cent stake in that company. The
Basic earnings per share increased by 7 per cent to 74.5 pence, reflecting
transaction gave rise to a profit before tax in the period of £0.3 million,
the increase in profit before tax and slightly lower effective tax rate, offset
together with an associated deferred tax credit of £1.0 million. The Group’s
by an increase in the average number of shares in issue during the year to
share of the post-tax results of the business in the period to 31 March 2011
47,408,000 (2010: 46,534,000).
Cash flow and net debt
was a loss of £0.4 million. Further details are set out in note 15.
Capital structure
The Group has continued to generate strong operational cash flows. Cash
The primary objective of the Group’s capital management is to ensure
generated from operating activities was £51.6 million (2010: £32.2 million)
that it maintains a strong credit rating and healthy capital ratios in order
reflecting higher Group profit, a reduction in working capital and lower
to support its business and maximise value for Shareholders and other
tax payments. The net cash outflow from investing activities of £36.3
stakeholders.
million reflects capital additions, net of fixed asset sale proceeds and grants
received, of £33.9 million. The previous year’s outflow was £11.8 million
The Group regards its Shareholders’ equity and net debt as its capital and
and comprised of capital additions, net of fixed asset sale proceeds, of
manages its capital structure and makes adjustments to it in light of changes
£19.9 million together with the net inflow from acquisitions and disposals
in economic conditions. To maintain or adjust the capital structure, the
12
Report & Accounts 2011
Cranswick plc
Group may adjust the dividend payment to Shareholders, return capital to
business and in particular at CCF Norfolk. Operating margin at 6.4 per cent
Shareholders or issue new shares. No changes were made in the objectives,
was 0.2 per cent higher as a result of the revenue growth and efficiency
policies or processes during the years ended 31 March 2011 and 31 March
improvements. Principal cash flows are discussed on page 12.
2010.
The Groups capital structure is as follows:
Net Debt (note 27)
Cranswick plc Shareholders’ equity
Capital Employed
Future development
2011
£m
48.3
220.9
269.2
2010
£m
54.7
193.6
248.3
The Group will continue to seek to increase sales through a combination of
product development with existing customers and business gains with new
ones. The standard of the Group’s factories will be maintained at the highest
level and further suitable acquisition opportunities will be pursued.
Resources, risks and relationships
Distributions, capital raising and share repurchases
Resources
The proposed final dividend for 2011 together with the interim paid in
January 2011 amount to 27.5 pence per share which is 10 per cent higher
than the previous year. The increase in the share capital of the Group
comprises 105,514 of shares issued relating to share options exercised
during the year and 200,554 of shares issued in respect of scrip dividends.
There were no share repurchases during the year.
Business KPIs
The Board has assessed that the following KPIs are the most effective
measures of progress towards achieving the Group’s objectives:
•
•
•
•
Underlying 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
Free cash flow – cash generated from operations less tax and
interest paid
Performance against KPI’s
Underlying sales growth
Gross margin
Operating margin
Free cash flow
2011
3.8%
13.4%
6.4%
£50.0m
2010
11.2%
13.1%
6.2%
£29.6m
The Group has seen sales growth in the underlying business of 3.8 per cent
over the past year driven by its expertise in product development, service
levels, quality and value with further sales growth anticipated in the next
twelve months. Gross margin was 13.4 per cent of sales compared to 13.1
per cent a year ago reflecting improved operational efficiency across the
The Group aims to safeguard the assets that give it competitive advantage,
being its reputation for product innovation, product quality, food safety
and service levels; its modern well-equipped factories; its operational
management and its skilled workforce.
Reputation
It is the responsibility of local operational management assisted by their
own product development team, Group Technical and Group Health &
Safety to maintain and where possible enhance the Group’s reputation for
product innovation, product quality, food safety and service levels.
Factories
The Group has some of the best-invested, modern facilities in the industry,
having invested over £100 million over the past five years, and it intends to
continue investing to ensure that it maintains its competitive edge.
Employees
The Group aims to recruit, train and retain employees who are valued for
their contribution and able to fulfil their potential in meeting the business
objectives of their operating unit. The Group companies each have their
strategies for retaining staff, including the provision of competitive terms
and conditions, 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.
Cranswick plc
Report & Accounts 2011
13
Principal risks and uncertainties
There are a number of potential risks and uncertainties, which could have a material impact on the Group’s long-term performance and could cause actual
results to differ materially from expected and historical results. The Group annually carries out a formal exercise to identify and assess the impact of risks
on its businesses. The principal risks and uncertainties facing Cranswick and the actions taken to mitigate their impact are set out below:
Risk area
Industry risks
Nature of risk and potential impact
Risk mitigation
State of economy
A deterioration in the world and, in particular, UK economies
Although Cranswick is unable to influence general economic
may adversely affect the activity levels of consumers and the
conditions, the business offers a range of products across
Group’s immediate customers, leading to a fall in demand for
premium, standard and value tiers which it is able to flex in
the Group’s products and ultimately lower profitability and cash
response to consumer and market trends.
flow.
Competition and customer
The Group trades in highly competitive markets which tend
The Group manages the risk of operating in a consolidated
retention
to operate without long term contracts. Product innovation
sector by maintaining strong customer relationships. This
and changing consumer trends provide a constant challenge
process is supported by delivering high levels of service and
to the future success of the Group and its ability to compete
quality and by continued focus on product development and
effectively.
technical innovation.
Raw material price
The major exposure the Group has to raw material price
Purchasing of pigs and pig meat is co-ordinated centrally and
fluctations
fluctuations is pig meat, part of which is as a result of currency
whilst the Group does not generally seek to hedge against pig
movements. An increase in raw material input costs may impact
price movements because of the downside risk, longer term
Group profitability.
contracts have been negotiated in certain instances with key
pig suppliers.
Environmental matters
The industry is subject to a range of UK and EU legislation.
The Directors believe that good environmental practices support
Environmental standards are being tightened on a regular basis
the Board’s strategy by enhancing the reputation of the Group,
and require increasing levels of investment. Compliance imposes
the efficiency of production and the quality of products. Further
costs and prolonged failure to comply could materially affect the
details of these initiatives are set out in the Group’s Corporate
Group’s ability to operate.
Social Responsibility report and on the Group’s website under
the ‘Greenthinking’ banner.
Food scares and product
As a food producer, Cranswick is subject to industry related risks
The risk of such events is mitigated by ensuring that all raw
contamination
of contamination of products and/or raw materials. Such an
materials are traceable to source and that the manufacturing,
incident may lead to product recall costs, reputational damage
storage and distribution systems of both Group sites and those of
and regulatory penalties.
suppliers are continually audited and monitored by experienced
and well qualified site based and Group technical teams.
14
Report & Accounts 2011
Cranswick plc
Risk area
Nature of risk and potential impact
Risk mitigation
Operational risks
Food safety
A breach of food safety legislation or the introduction of
Cranswick conforms to all relevant food safety regulations and
more stringent regulations may lead to reputational damage
adopts best practice across its production facilities.
and regulatory penalties including restrictions on operations,
damages or fines.
Business continuity
The Group faces the risk of incidents such as a major fire,
Business continuity plans are in place across the Group’s manu-
which may result in significant and prolonged disruption to
facturing facilities and appropriate insurance cover is in place to
its operating facilities and ensuing loss of sales and reduced
mitigate any financial loss. Business continuity has been further
profitability.
enhanced by the acquisition of a second pork processing site in
Norfolk.
Legislation
Legislation in all the markets the Group serves changes on
Cranswick is committed to responding positively to new
a regular basis, and interpretation of existing laws can also
regulation and ensuring that the Group’s views are expressed
change to create ever tightening standards, often requiring
during consultation exercises.
additional human resources and the provision of new assets
and systems. Failure to comply with existing or new legislation
may adversely affect the Group’s results.
Human resource risks
Health & Safety
A breach of health & safety regulations would leave the Group
A dedicated Group health & safety team supported by site
exposed to reputational damage and regulatory penalties.
based co-ordinators proactively monitor, manage and improve
performance. All team members receive continual training to
industry approved standards. Quarterly reports on performance
against KPIs are issued to site management and the Group
Board.
Staff recruitment and
The success of the Group is dependent on attracting and
The Group mitigates the risk associated with loss of key personnel
retention
retaining high quality senior management and staff.
through
robust succession planning, strong
recruitment
processes, effective incentives and retention initiatives and on-
going training and development.
Financial risks
Interest rates, currency,
The Group is exposed to interest rate risk on borrowings and
Interest rate and foreign currency risks are managed using
liquidity and credit
foreign currency risk on purchases, particularly of charcuterie
effective hedging policies, which are coordinated and controlled
products. In addition the Group needs access to funding for
by the Group’s treasury function. Each business has access to the
current business and future growth.
Group’s overdraft facility and bank positions are monitored on a
daily basis. All term debt is arranged centrally and appropriate
headroom is maintained. Treasury polices are discussed in more
detail on page 16.
Cranswick plc
Report & Accounts 2011
15
Treasury policies
Functional currency
The functional currency of all Group undertakings is sterling.
Foreign currency risk
The major foreign exchange risk facing the Group is in the purchasing
of charcuterie products. The major currency involved is the euro. The
policy of the Group is to seek to mitigate the impact of this risk by taking
out forward contracts for up to 12 months ahead and for 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
The Group’s current policy is to manage its cost of borrowing using a mix
of fixed and variable rate debt. Whilst fixed rate interest bearing debt is
not exposed to cash flow interest rate risk, there is no opportunity for the
Group to enjoy a reduction in borrowing costs in markets where rates
are falling. In addition, the fair value risk inherent in fixed rate borrowing
means that the Group is exposed to unplanned costs should debt be
restructured or repaid early as part of the liquidity management process.
In contrast, whilst floating rate borrowings are not exposed to changes in
fair value, the Group is exposed to cash flow risk as costs increase if market
rates rise. The Group has reduced its borrowings significantly in recent
years and at 31 March 2011 gearing had fallen to 22 per cent (2010: 28
per cent). Given this conservative debt structure the Group has not fixed
the interest rate on its new facility. The Board will keep this situation
under constant review and will fix the interest rate on a proportion of the
Group’s borrowing at such time as it becomes appropriate to do so. The
Group has an existing interest rate swap with three UK banks relating to
its previous facilities until December 2011. Whilst this swap is deemed
to be an ineffective hedge, it still provides fixed interest cover against a
proportion of the Group’s current debt. The monitoring of interest rate
risk is handled entirely at head office, based on the monthly consolidation
of cash flow projections and the daily borrowings position.
Credit risk
proves impossible, arrangements are put in place, where practical,
to guarantee the repayment of the monies in the event of default.
Liquidity risk
The Group has historically been very cash generative. The bank position
for each operation is monitored on a daily basis and capital expenditure
is approved at the monthly Board meeting of each operation at which at
least two members of the main Board are present and reported at the
subsequent monthly main Board meeting. Major projects are approved
by the main Board. Each operation has access to the Group’s overdraft
facility and all term debt is arranged centrally. The Group replaced its
existing bank credit facilities during the year. The new facility is made
up of a revolving credit facility of £100.0 million including a committed
overdraft facility of £20.0 million. The Group manages the utilisation of the
revolving credit facility through the monitoring of monthly consolidated
cash flow projections and the daily borrowings position. The new facility
extends the maturity of the Group’s available financing to more than four
years providing it with reduced liquidity risk and long term funding to
meet its objectives. Unutilised facilities at 31 March 2011 were £47.4
million (2010: £54.0 million).
Going concern
The Group’s business activities, together with the factors likely to affect its
future development, performance and position are set out in the Review
of Activities. The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described above, as are the Group’s
objectives, policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and hedging
activities; and its exposure to credit risk and liquidity risk.
The Group has considerable financial resources together with strong
trading relationships with its key customers and suppliers. As a
consequence, the Directors believe that the Group is well placed to
manage its business risk successfully.
After reviewing the available information, including business plans and
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.
Practically all sales are made on credit terms, the majority of which
are to the major UK food retailers. Overdue accounts are reviewed
at the monthly Board meetings of the operations. The incidence of
bad debts is low. For all major customers, credit terms are agreed
by negotiation and for all other customers, credit terms are set by
reference to external credit agencies. Every attempt is made to resist
advance payments to suppliers for goods and services; where this
Mark Bottomley
Finance Director
16 May 2011
16
Report & Accounts 2011
Cranswick plc
sausages
with bite
Over the years Martin Heap
has strived to create the perfect
sausage recipe by combining
fresh ingredients with choice
cuts of fresh pork.
With a desire to offer sausages
without compromise the result
is quite simply the best sausages
you are likely to taste!
Cranswick plc
Report & Accounts 2011
17
group directors and business locations
Group Directors
Cooked Meats
Alan Chapman
Paul Gartside
Andy Jenkins
Clive Stephens
Nick Tranfield
Bacon and Sausage
Daniel Nolan
Linda Watkin
Drew Weir
Steve Westhead
Fresh Pork
Chris Aldersley
Stuart Kelman
James Pontone
Neil Willis
Sandwiches
Nick Anderson
Tony Cleaver
Paul Nicholson
Simon Ravenscroft
Charcuterie
Rollo Thompson
Food Central
Andrew Caines
Marcus Hoggarth
Chris White
Malcolm Windeatt
18
Report & Accounts 2011
Cranswick plc
Sherburn
In-Elmet
Manchester
Hull
Barnsley
Denbigh
Deeside
Atherstone
Norfolk
Milton Keynes
directors
Executive Directors
Non-Executive Directors
Martin Davey, Chairman +
John Worby +† *
Martin qualified as a chartered accountant with Pannell Kerr Forster. He
John is a chartered accountant with many years experience in the food
joined Cranswick and became Finance Director in 1985. He was appointed
industry. John is currently Group Finance Director of Genus plc having
Chief Executive in 1988 and became Chairman on 26 July 2004.
previously worked for Uniq plc (formerly Unigate PLC) from 1978 until
Bernard Hoggarth, Chief Executive
2002, in various roles including Group Finance Director and Deputy
Chairman. He was appointed a Non-Executive Director of Cranswick plc
on 1 August 2005 and is Senior Independent Director and Chairman of the
Bernard holds a National Diploma in Agriculture from the Norfolk College
Audit Committee. John is also a Non-Executive Director of Smiths News
of Agriculture. He joined Cranswick in 1978, focusing on the agribusiness
plc.
activity before becoming involved in the development of the food
manufacturing business during the 1990s. He was appointed a Director in
Patrick Farnsworth +† *
1988 and Chief Executive in 2004.
Adam Couch, Chief Operating Officer
Patrick has many years experience in the food industry, having worked for
William Jackson & Son Limited, a Hull based private company, since 1965,
where he was Joint Group Managing Director from 1995 until his retirement
Adam joined the operational side of the fresh pork business of Cranswick
in 2005. He was appointed a Non-Executive Director of Cranswick plc on
in 1991 after graduating from university in Hull with a finance and
1 August 2004 and was the Senior Independent Director until 1 August
accountancy degree. He was appointed a Director in 2003 and Chief
2005. He is currently Chairman of the Nomination Committee.
Operating Officer on 16 May 2011. He remains Managing Director of the
Fresh Pork operations. Adam is also a committee member of the British Pig
Steven Esom +† *
Executive, a position he has held since 2005.
Mark Bottomley, Finance Director
Steven joined Cranswick as a Non-Executive Director on 12 November
2009 and is currently Chairman of the Remuneration Committee. He
has held a number of senior positions within the food sector including
Mark is a chartered accountant, qualifying with Binder Hamlyn. He joined
Executive Director of Food at Marks & Spencer plc which followed 12 years
Cranswick as Group Financial Controller in January 2008 and was appointed
at Waitrose, the last 5 years of which he was Managing Director. Until
Finance Director in June 2009. He has several years’ experience in the food
June 2009 he was a Non–Executive Director of Carphone Warehouse plc.
production sector where he has held a variety of senior finance roles.
He is currently an Operating Partner of Langholm Capital, Non-Executive
Chairman of Bart Spices and a Non-Executive Director of Tyrrells Investments
Jim Brisby, Sales and Marketing Director
Limited and of the British Retail Consortium.
Jim joined Cranswick 15 years ago from UMIST in Manchester, where
he graduated with a degree in business management. In 2004 he was
appointed Sales and Marketing Director of Cranswick Country Foods plc, a
major subsidiary of Cranswick, and he has been an integral member of the
team that has grown the business over the years. He was appointed Sales
and Marketing Director on 26 July 2010.
*
†
+
Member of Remuneration Committee
Member of Audit Committee
Member of Nomination Committee
Cranswick plc
Report & Accounts 2011
19
20
Report & Accounts 2011
Cranswick plc
directors’
The Directors submit their report and the audited accounts of the Group for the year ended 31 March 2011.
Principal activities, business review and future
developments
The Group’s activities during the year were focused on the food sector.
A review of the business and future development of the Group and a
discussion of the principal risks and uncertainties faced by the Group is
presented in the Chairman’s Statement, Review of Activities and the Group
Operating and Financial Review on pages 3 to 16.
Results and dividends
retire by rotation each year and with the proviso that each Director shall
seek re-election at the Annual General Meeting every three years. All new
Directors are subject to election by Shareholders at the first opportunity
following their appointment. The Directors of the Company currently in
office are as stated on page 19. Martin Davey, Bernard Hoggarth, Adam
Couch, Mark Bottomley, John Worby, Patrick Farnsworth and Steven Esom
served for the whole of the year under review. Jim Brisby was appointed
Sales and Marketing Director on 26 July 2010. Patrick Farnsworth and
Adam Couch retire in accordance with the Articles of Association and,
being eligible, each offers himself for re-election. Jim Brisby, who was
appointed since the last Annual General Meeting, will stand for election.
The profit on ordinary activities before taxation was £47.1 million (2010:
£43.8 million). After a taxation charge of £11.8 million (2010: £11.3
million), the profit for the year is £35.3 million (2010: £32.6 million). An
Details of the Directors’ beneficial interests in the ordinary share capital of the
Company are included in the Directors’ Remuneration Report on page 40.
interim dividend of 8.8 pence per ordinary share was paid on 21 January
2011. The Directors recommend the payment of a final dividend for the
Major Shareholders
year, which is not reflected in these accounts, of 18.7 pence per ordinary
share which, together with the interim dividend, represents 27.5 pence per
ordinary share, totalling £13.1 million (2010: 25.0 pence per ordinary share,
The Company has been informed of the following significant holdings of
voting rights in the 47,636,891 ordinary shares of the Company at 4 May
totalling £11.8 million). Subject to approval at the Annual General Meeting,
2011:
the final dividend will be paid in cash or scrip form on 2 September 2011 to
members on the register at the close of business on 1 July 2011. The shares
will go ex-dividend on 29 June 2011.
Financial instruments
The Group’s risk management objectives and policy are discussed in the
Standard Life Investments
Treasury Policies section of the Group Operating and Financial Review on
Jupiter Asset Management
page 16.
Directors and their interests
The appointment and removal of a Director is governed by the Articles
of Association and within the Terms of the Nomination Committee. The
Company’s Articles of Association provide that one third of the Directors
Legal & General Investment
Management
JPMorgan Asset Management
Aviva Investors
Share capital structure
AMVESCAP PLC
14,209,192
29.83
Number of
% of issued
Shares
share capital
2,611,443
2,535,512
2,351,309
1,937,148
1,476,271
5.48
5.32
4.94
4.07
3.10
The Company has one class of shares, being ordinary shares of 10 pence
each. The authorised, allotted and fully paid up share capital is shown in
Cranswick plc
Report & Accounts 2011
21
report
note 24. There are no special rights pertaining to any of the shares in
treasury shares for cash in connection with a rights issue. This is in
issue.
addition to the authority to allot shares and the disapplication of
pre-emption rights contained in the authorities mentioned above.
The Directors of Cranswick plc have received limited authority to disapply
The nominal value of ordinary shares which the Directors may allot
Shareholders’ pre-emption rights in certain circumstances, to authorise the
in the period up to the next Annual General Meeting, to be held
Company to buy back a proportion of the Company’s share capital and to
on 1 August 2011, is limited to £1,579,457 which represented
allow the Directors to allot shares. Further resolutions will be placed before
approximately 33 per cent of the Company’s issued ordinary share
the Annual General Meeting to be held on 1 August 2011 to renew these
capital (excluding treasury shares) as at 28 May 2010. The Directors
powers.
do not have any present intention of exercising this authority and
power. This authority will expire at the end of the Annual General
At the last Annual General Meeting the Directors received authority from
Meeting to be held on 1 August 2011.
the Shareholders to:
To buy own shares – this authority allows the Company to buy its own
Allot Shares – this gives Directors the authority to allot authorised
shares in the market, as permitted under the Articles of Association
but unissued shares and maintains the flexibility in respect of the
of the Company, up to a limit of 10 per cent of the Company’s issued
Company’s financing arrangements. The nominal value of ordinary
share capital. The price to be paid for any share must not be less than
shares which the Directors may allot in the period up to the next
10p, being the nominal value of a share, and must not exceed 105
Annual General Meeting, to be held on 1 August 2011, is limited
per cent of the average middle market quotations for the ordinary
to £1,579,457 which represented approximately 33 per cent of the
shares of the Company as derived from the London Stock Exchange
issued share capital (excluding treasury shares) as at 28 May 2010.
Daily Official List for the 5 business days immediately preceding
The Directors do not have any present intention of exercising this
the day on which the ordinary shares are purchased. The Directors
authority other than in connection with the issue of ordinary shares
have no immediate plans to exercise the powers of the Company to
in respect of the scrip dividend offer and the Company’s share option
purchase its own shares and undertake that the authority would only
plans. This authority will expire at the end of the Annual General
be exercised if the Directors were satisfied that a purchase would
Meeting to be held on 1 August 2011.
result in an increase in expected earnings per share and was in the
best interests of the Company at the time. This authority will expire
Disapplication of rights of pre-emption – this disapplies rights of
at the end of the Annual General Meeting to be held on 1 August
pre-emption on the allotment of shares by the Company and the
2011. The Directors would consider holding any of its own shares
sale by the Company of treasury shares. The authority will allow the
that it purchases pursuant to this authority as treasury shares.
Directors to allot equity securities for cash pursuant to the authority
to allot shares mentioned above, and to sell treasury shares for
The Company is not aware of any agreements between Shareholders that
cash, on a pro rata basis to existing Shareholders (but subject to any
may result in restrictions on the transfer of securities and for voting rights.
exclusion or arrangements as the Directors consider necessary or
expedient in relation to fractional entitlements, any legal, regulatory
There are no restrictions on the transfer of ordinary shares in the Company
or practical problems or costs under the laws or regulations of any
other than where certain restrictions may apply from time to time, on the
overseas territory or the requirements of any regulatory body or stock
Board of Directors and other senior executive staff, which is imposed by laws
exchange) and otherwise on a pro rata basis up to an aggregate
and regulations relating to insider trading laws and market requirements
nominal amount of £236,918, representing 5 per cent of the
relating to close periods.
Company’s issued share capital as at 28 May 2010. This authority
will expire at the end of the Annual General Meeting to be held on
Employment policies
1 August 2011.
Allot shares and disapply pre-emption rights in connection with a
management style, thereby encouraging informal consultation at all levels
rights issue – this authorises the Directors to allot relevant securities
about aspects of the Group’s operations. Employees participate directly in the
and empowers the Directors to allot equity securities and to sell
success of the business by participation in the SAYE share option schemes.
The Group’s policy on employee involvement is to adopt an open
22
Report & Accounts 2011
Cranswick plc
Employment policies are designed to provide equal opportunities irrespective
contracts in place for these supplies. While these contracts are collectively
of colour, ethnic or natural origin, nationality, sex, religion, marital or
essential to the business, no single contract or supplier is critical to the
disabled status. Full consideration is given to applications for employment
Company’s business.
by and the continuing employment, training and career development of
disabled people.
Payment policy
The Company also has strong relationships with certain major retailers to
supply them with product.
Charitable Donations
The Group and the Company do not have a formal policy that they
follow with regard to payment to suppliers. Payment terms are agreed
As part of the Group’s commitment to the communities in which it
with each supplier and every endeavour is made to adhere to the
operates, contributions totalling £37,000 were made during the year to
agreed terms. The average credit terms for the Group, based on the
local charities and community projects.
year-end trade creditors figure and a 365 day year, are 41 days. The
average credit taken by our customers on a similar basis is 28 days.
Auditors
Essential Contracts
Ernst & Young LLP have expressed their willingness to continue in office
and a resolution proposing their re-appointment will be submitted at the
It is imperative that Cranswick is able to source its high quality raw materials
Annual General Meeting.
at the most competitive prices and to this end the Company has numerous
Cranswick plc
Report & Accounts 2011
23
Directors’ statement as to disclosure of information to
auditors
2)
at any time within six months following the Take-over Date, in
any other case.
The Directors who were members of the Board at the time of approving the
Directors’ Report are listed on page 19. Having made enquiries of fellow
Directors and of the Company’s auditors, each of these Directors confirm
that:
•
•
to the best of each Director’s knowledge and belief, there is no
information relevant to the preparation of their report of which
the Company’s auditors are unaware; and
each Director has taken all the steps a Director might reasonably be
expected to have taken to be aware of relevant audit information
and to establish that the Company’s auditors are aware of that
information.
Change of control
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 allowed for exercise in these circumstances is any time up to the
seventh day before the final day upon which that person remains entitled
to serve such a notice.
In each case, the extent to which awards are capable of exercise depends
on the scope to which the performance targets (as adjusted or amended)
There are no agreements that the Company considers significant and to
which the Company is party that would take effect, alter or terminate upon
change of control of the Company following a takeover bid other than the
have been satisfied.
Articles of Association
following:
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
for loss of office or employment (whether through resignation, purported
redundancy or otherwise) that occurs because of a takeover bid other than
as stated in the Directors Remuneration Report relating to Martin Davey
The Company’s Articles of Association may only be amended by a special
resolution at a general meeting of the Shareholders.
Annual General Meeting and Special Business to be
transacted at the Annual General Meeting
The notice convening the Annual General Meeting can be found in the
separate Notice of Annual General Meeting accompanying this Report and
and Bernard Hoggarth.
Accounts.
Long Term Incentive Plan
In the event of a general offer being made to acquire part or all of the
issued share capital of the Company as a result of which the offeror may
acquire control of the Company, award holders under the Cranswick plc
Long Term Incentive Plan (‘LTIP’) will have an opportunity to exercise their
awards either:
Details of the Special Business to be transacted at the Annual General
Meeting are contained in the separate letter from the Chairman which also
accompanies this Report and Accounts, and covers the Directors’ authority
to allot shares, the partial disapplication of pre-emption rights and the
authority for the Company to buy its own shares.
By order of the Board
1)
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
Malcolm Windeatt
Company Secretary
16 May 2011
Company number: 1074383
holders; or
24
Report & Accounts 2011
Cranswick plc
time honoured
traditions
Richard Woodall’s pork, bacon
and sausages are produced to time
honoured recipes dating back to 1828.
Colin Woodall, the 8th generation of
the Woodall family, still has appetite
for his top quality air dried hams,
bacon and sausages.
Cranswick plc
Report & Accounts 2011
25
26
Report & Accounts 2011
Cranswick plc
corporate governance
Statement by the Directors on compliance with the provisions of the UK Corporate Governance Code.
Principles of good governance
The Board is committed to high standards of corporate governance. The
adoption and maintenance of good governance is the responsibility of the
Board as a whole. This report, together with the Directors’ Remuneration
Report on pages 35 to 40, describes how the Board applies the principles
of good governance and best practice as set out in the UK Corporate
Governance Code (the ‘Code’) which can be found on the Financial
Reporting Council’s website www.frc.org.uk. A statement of compliance
delegated to the Chief Executive who, supported by the Executive Directors
and Executive management, implements the Board’s strategy and manages
the Group’s business. Upon appointment, all Directors undertake a formal
introduction to all the Group’s activities and are also provided with the
opportunity for on-going training to ensure that they are kept up-to-date
on changes in relevant legislation and the general business environment,
including the review of relevant literature and attending external courses.
Procedures are in place for Directors to seek both independent advice, at
the expense of the Company, and the advice and services of the Company
with the Code can be found at the end of this report.
Secretary in order to fulfil their duties.
The Board
During the year ended 31 March 2011, the Board consisted of an Executive
Chairman, a Chief Executive, two other Executive Directors (until 26 July
2010 after which there were three) and three Non-Executive Directors. All
the Non-Executive Directors are deemed to be independent. The Code
states that at least half the board, excluding the chairman, should comprise
Non-Executive Directors determined by the Board to be independent.
The Board is confident that up to 26 July 2010 it had complied with
the Code; however, since that date compliance with the Code would
require the appointment of a further Non-Executive Director. After careful
consideration, the Board has concluded it would be more beneficial at the
present time to maintain a relatively small board rather than increase the
number of directors. The Board will keep this under review in particular as
to the needs and requirements of the business and with diversity in mind.
The Board meets each month to direct and control the overall strategy
and operating performance of the Group. To enable them to carry out
these responsibilities all Directors have full and timely access to all relevant
information. A formal schedule of matters reserved for decision by the Board
covers key areas of the Group’s affairs including acquisition and divestment
policy, approval of budgets, major capital expenditure projects, profit and
cash flow performance and general treasury and risk management policies.
During the year responsibility for the Group’s day-to-day operations was
The Company Secretary is responsible to the Board for ensuring that Board
procedures are complied with and for advising the Board, through the
Chairman, on all governance matters. The appointment and removal of
the Company Secretary is determined by the Board as a whole.
The Board considers the Non-Executive Directors to be independent and
have accepted the following definition of an independent director:
•
•
•
•
•
•
•
Has not been an employee of the Company or Group within the
last five years;
Within the last three years has not had a material business
relationship with the Company either directly, or as a partner,
shareholder, director or senior employee of a body that has such a
relationship with the Company;
Has not received additional remuneration from the Company apart
from a director’s fee, and does not participate in the Company’s
share option or performance-related pay scheme, or as a member
of the Company’s pension scheme;
Has no close family ties with any of the Company’s advisors or
senior employees;
Holds no cross-directorships or has no significant links with other
directors through involvement in other companies or bodies;
Does not represent a significant shareholder; and
Has not served on the board for more than nine years from the date
of their first election.
Cranswick plc
Report & Accounts 2011
27
statement The Board has completed a register relating to potential conflicts of interest
Controller, together with the external auditors and, when requested,
with its Directors and confirm that no such conflicts exist. This register will
internal audit attend the meetings as appropriate. The Company Secretary
be reviewed annually or at such other time as is deemed necessary.
also attends the meetings as secretary to the Committee. Both the external
auditors and internal audit have the opportunity to access the Committee,
The Board, led by the Chairman, has carried out a formal evaluation of
without the Executive Directors being present, at any time, and the
its performance and that of its Committees under a system based on a
Committee formally meets with both the external auditors and internal
questionnaire circulated to all Directors which was used to facilitate a
audit independently at least once a year on this basis.
Board discussion. The evaluation exercise showed that the Board and its
Committees were working well but, as expected, a number of actions
The Committee reviews the Group’s accounting policies and internal
were agreed to improve effectiveness. The Chairman has evaluated the
reports on accounting and internal financial control matters together
performance of individual Directors through one-to-one meetings. The
with reports from the external auditors. The Audit Committee has overall
Chairman meets with the Non-Executive Directors at least once a year to
responsibility for monitoring the integrity of financial statements and related
share his assessment of Executive Board member performance. In addition,
announcements and for all aspects of internal control and meets at least
the Non-Executive Directors, led by the Senior Independent Director, meet,
three times a year, two of which involve a review of the Group’s interim
without the Chairman present, in order to appraise his performance.
and full year financial statements. There is also a whistle blowing policy in
The Company’s Articles of Association provide that one third of the Directors
concerns about possible improprieties in matters of financial reporting and
place which includes arrangements by which staff can, in confidence, raise
retire by rotation each year and with the proviso that each Director shall
other matters.
seek re-election at the Annual General Meeting every three years. All new
Directors are subject to election by Shareholders at the first opportunity
The terms of reference for the Audit Committee are available from the
following their appointment. The Board is aware that the Code recommends
Company Secretary.
the re-election of all directors every year which for the Company would be
applicable in 2012. The Directors have decided this year to continue with
The Chairman of the Audit Committee will be available at the Annual
the requirements as stated in the Articles of Association.
General Meeting to respond to any Shareholder questions that might be
Directors’ biographies and membership of the various Committees are
shown on page 19. The formal terms of reference for the Board Committees
Internal Control
together with the terms and conditions of appointment of Non-Executive
raised on the Committee’s activities.
Directors are available for inspection at the Company’s Registered Office
The Board of Directors has overall responsibility for the Group’s system
and at the Annual General Meeting.
Board Committees
Audit Committee
The Audit Committee comprised of the three independent Non-Executive
Directors 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. It is a requirement
of the Code that the Audit Committee should comprise of at least three
independent Non-Executive Directors. The Company therefore complies
with this requirement.
The Chairman, the Finance Director, who is ultimately responsible for
assessing the Group’s internal financial controls, and the Group Financial
of internal control, which safeguards the Shareholders’ investment and
the Group’s assets, and for reviewing its effectiveness. Such a system
can only provide reasonable and not absolute assurance against material
misstatement or loss, as it is designed to manage rather than eliminate the
risk of failure to achieve business objectives.
The Group operates within a clearly defined organisational structure with
established responsibilities, authorities and reporting lines to the Board.
The organisational structure has been designed in order to plan, execute,
monitor and control the Group’s objectives effectively and to ensure that
internal control becomes embedded in the operations.
The Chairman of the Audit Committee reports to the Board on issues
relating to internal controls and risk management 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
28
Report & Accounts 2011
Cranswick plc
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 Review on pages 11 to 16); a strong control
environment; an information and 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 financial implications and assessed
the effectiveness of the control processes in place to mitigate these risks.
The Board reviewed a summary of the findings and this, along with direct
involvement in the strategies of the businesses, investment appraisal and
the budgeting process, enabled the Board to report on the effectiveness of
internal control. Following its review the Board determined that it was not
aware of any significant deficiency or material weakness in the system of
internal control.
The Group’s interest in its associate is not included in the internal control
procedures disclosed above.
Financial Reporting
The Group prepares annual budgets that are agreed by the Board.
Operational management are required to report to the Board on a monthly
basis on financial performance including trading results, balance sheet,
cash flows and related key performance indicators. Forecasts are updated
on a half yearly basis together with information on key risk areas. The
use of a standard reporting pack by all Group entities ensures that the
information is gathered and presented in a consistent way that facilitates
the preparation of the consolidated financial statements.
Internal Audit
The Audit Committee considers annually the extent and effectiveness of
the work of the internal audit function. The Group’s internal audit function
comprises of Company employees supported by Grant Thornton, which
provides specialist advice and resources where necessary. The role of internal
audit is to advise management and 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.
Cranswick plc
Report & Accounts 2011
29
The Audit Committee reviews and approves the annual internal audit plan
than the statutory audit, to ensure such objectivity and independence is
and receives regular updates on progress in meeting the plan objectives.
safeguarded. There is also an established policy for the work the external
The internal audit approach is risk based and takes into account the overall
auditors can and cannot do so as not to compromise their independence
Group risk framework, as well as risks specific to individual operations. The
and in addition, the Chairman of the Audit Committee is consulted prior
plan set out at the beginning of the current year was achieved. Internal
to awarding to the external auditors any non-audit services in excess of
audit findings together with responses from management are considered
£20,000.
by the Audit Committee and where necessary challenged. Internal audit
has direct access to the Chair of the Audit Committee and meets with him
During the year, the auditors also provided tax advice and were consulted
and other members of the Audit Committee without Company Executives
on corporate transactions. Their auditor objectivity and independence was
being present at least once a year.
safeguarded through use of a separate tax partner and separate corporate
transactions partner.
External auditors
During the year the Audit Committee considered the following factors in
Ernst & Young LLP has been the Company’s auditors since 1972 following
assessing the objectivity and independence of Ernst & Young LLP:
the take-over of a local Hull based practice. The Audit Committee assesses
annually the qualification, expertise, resources and independence of the
i)
The auditors’ procedures
for maintaining and monitoring
auditor and the effectiveness of the audit process. The assessment as to the
independence, including those to ensure that the partners and staff
effectiveness is conducted through an external audit questionnaire with
have no personal or business relationships with the Group, other
senior finance management.
than those in the normal course of business permitted by UK ethical
guidance.
The Audit Committee is also responsible for recommendations for the
ii)
The auditors’ policies for the rotation of the lead partner and key
appointment, reappointment or removal of the external auditors. The
audit personnel. The Audit partner changed in 2007 and the senior
Committee reviews the external audit function every four to five years, the
manager in 2008.
last such review being in 2008. The Committee also approves the terms of
iii)
Adherence by management and the auditor to the Group’s policy
engagement and remuneration of the external auditors, and monitors their
for the procurement of non-audit services.
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
Remuneration Committee
their independence and these would include internal accounting or other
financial services, internal audit services, executive or management roles or
The Remuneration Committee comprises the three independent Non-
functions, and remuneration consultancy.
Executive Directors chaired by Steven Esom. It is a requirement of the
Code that the Remuneration Committee should consist of at least three
Following consideration of these matters at a meeting of the Audit
independent Non-Executive Directors. The Company therefore complies
Committee in May 2011, a unanimous recommendation was made to
with this requirement. Martin Davey attends meetings of the Remuneration
the Board for the reappointment of Ernst & Young LLP as the Company’s
Committee by invitation and in an advisory capacity. No Director attends
external auditors to be proposed to Shareholders at the 2011 Annual
any part of a meeting at which his own remuneration is discussed. The
General Meeting.
Auditor independence
Executive Directors determine the remuneration of the Non-Executive
Directors.
The Committee recommends to the Board the policy for executive
The Board is satisfied that Ernst & Young LLP has adequate policies and
remuneration and determines, on behalf of the Board, the other terms and
safeguards in place to ensure that auditor objectivity and independence is
conditions of service for each Executive Director. It determines appropriate
maintained. The Group meets its obligations for maintaining an appropriate
performance conditions for the annual cash bonus and long term incentive
relationship with the external auditors through the Audit Committee,
schemes and approves awards and the issue of options in accordance
whose terms of reference include an obligation to consider and keep
with the terms of those schemes. The Remuneration Committee also, in
under review the degree of work undertaken by the external auditor, other
consultation with the Chairman, monitors the total individual remuneration
30
Report & Accounts 2011
Cranswick plc
package of senior executives including bonuses, incentive payments and
recommendations to the Board on new appointments of Executive and Non-
share option and other share awards. The Remuneration Committee has
Executive Directors. It also gives full consideration to succession planning in
access to advice from the Company Secretary and to detailed analysis of
the course of its work, taking into account the challenges and opportunities
executive remuneration in comparable companies. In addition, from time
facing the Group and what skills and expertise are therefore needed on
to time the Committee undertakes a more detailed review using external
the Board and from senior management in the future. The Committee,
consultants. This year the review was carried out by AON Hewitt. Details
after reviewing the requirements of the Company, recommended the
of the Committee’s current remuneration policies are given in the Directors’
appointment of Jim Brisby as Sales and Marketing Director, as he has been
Remuneration Report on pages 35 and 40.
an integral member of the sales team that has grown the business over the
last 15 years, and the promotion of Adam Couch to Chief Operating Officer
The terms of reference for the Remuneration Committee are available from
following eight years as an Executive Director and Managing Director of the
the Company Secretary.
Fresh Pork operations.
The Chairman of the Remuneration Committee will attend the Annual
The current Directors seeking re-election at the Annual General Meeting
General Meeting to respond to any Shareholder questions that might be
will be Patrick Farnsworth and Adam Couch. Jim Brisby who was appointed
raised on the Committee’s activities.
Nomination Committee
since the last Annual General Meeting will stand for election. The Board has
set out in the Notice of Annual General Meeting their reasons for supporting
the election and re-election of these Directors at the forth coming Annual
General Meeting. Their biographical details on page 19 demonstrate the
The Nomination Committee comprises of Patrick Farnsworth, the Committee’s
range of experience and skills which each brings to the benefit of the
Chairman since 26 July 2010, Martin Davey, Chairman of the Committee
Company.
until 26 July 2010, John Worby and Steven Esom. It is a requirement of the
Code that a majority of the members of the Nomination Committee should
The terms of reference for the Nomination Committee are available from
be independent Non-Executive Directors, and the Chairman should be
the Company Secretary.
either the Chairman of the Board or a Non-Executive Director. The Company
complies with these requirements of the Code.
The Chairman of the Nomination Committee will attend the Annual
General Meeting to respond to any Shareholder questions that might be
The Committee meets at least once a year and reviews the structure, size
raised on the Committee’s activities.
and composition of the Board and is responsible for considering and making
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:
Number of meetings
Mark Bottomley
Jim Brisby (maximum 8)
Adam Couch
Steven Esom
Martin Davey
Bernard Hoggarth
Patrick Farnsworth
John Worby
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
12
12
8
12
12
12
12
12
12
4
-
-
-
4
-
-
3
4
6
-
-
-
6
-
-
6
6
2
-
-
-
2
2
-
2
2
All who were Directors at the time attended the Annual General Meeting.
Cranswick plc
Report & Accounts 2011
31
Shareholders
Compliance with the UK Corporate Governance Code
The Board attaches great importance to maintaining good relationships
The Directors consider that the Company has, during the year ended 31
with all Shareholders who are kept informed of significant Company
March 2011, complied with the requirements of the Code other than as
developments. Presentations are made to analysts and institutional
set out below:
Shareholders on the half year and full year results and to discuss Company
direction. Significant matters relating to the trading or development of
•
The Company did not comply with Code provision B.1.2 since 26
the business are disseminated to the market by way of Stock Exchange
July 2010 as the number of independent Non-Executive Directors
announcements.
was less than half the Board. This situation is still under review by
The views of Shareholders expressed during meetings with them are
communicated by the Chairman to the Board as a whole, and through this
By order of the Board
the Board as stated above.
Malcolm Windeatt
Company Secretary
16 May 2011
process the Board’s Executive and Non-Executive Directors are able to gain a
sound understanding of the views and concerns of the major Shareholders.
The Chairman discusses governance and strategy with major Shareholders
from time to time. Other Directors are available to meet the Company’s
major Shareholders if requested. The Senior Independent Director is
available to listen to the views of Shareholders, particularly if they have
concerns which contact with the Chairman has failed to resolve, or for
which such contact is inappropriate. Principles of corporate governance and
voting guidelines issued by the Company’s institutional Shareholders and
their representative bodies are circulated to and considered by the Board.
The Board also welcomes the attendance and questions 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 24.
32
Report & Accounts 2011
Cranswick plc
tastes of the
continent
Leonardo and Giuseppe’s
handmade authentic Italian
recipes have been passed
down from generation
to generation producing
new exciting flavour
combinations in a time
honoured tradition.
Cranswick plc
Report & Accounts 2011
33
34
Report & Accounts 2011
Cranswick plc
directors’ remuneration
Information not subject to audit
Remuneration Committee
Basic salary and benefits
The Remuneration Committee comprises the three Non-Executive Directors
The non-performance related elements of remuneration which comprise
chaired by Steven Esom, from 26 July 2010, and prior to that by Patrick
basic salary, car allowance and benefits are reviewed annually and are
Farnsworth. The Executive Chairman attends the meetings in an advisory
effective from 1 May. Benefits principally comprise medical insurance and
capacity as requested. The Company Secretary attends the meetings as
personal tax and pension advice.
secretary to the Committee. The Committee determines the remuneration
of the Company’s Executive Directors and puts forward its recommendations
Bonus scheme
for approval by the Board. It also monitors the remuneration of the Group’s
senior executives. The remuneration policy is reviewed and benchmarked
The bonus scheme in operation is based on the achievement of Group
by external consultants every two to three years and this year AON Hewitt
profit targets. The targets are set having regard to the Company’s budget,
were appointed by the Committee to carry out such a review. AON Hewitt
historical performance and market outlook for the year. A small part of
were also retained to review the existing management incentive scheme,
the bonus relates to the achievement of a target performance for the first
their recommendations were discussed by the Remuneration Committee
half of the year where a fixed sum is paid with the remaining element
and as a result the scheme was amended as set out in this report. In addition
based on a percentage of the results in excess of an annual target. The
PricewaterhouseCoopers continue to give advice on share option awards.
performance is based solely on the Group’s profit before tax, with a sliding
The remuneration of the Non-Executive Directors is determined by the
scale of targets set around budget performance. The total bonus is capped
Executive Directors and reflects the time, commitment and responsibility
at 150 per cent of basic salary, however there is a clawback arrangement
of their roles.
Remuneration policy
in place if the need arises. Non-Executive Directors do not participate in the
Group’s bonus scheme. Incentive payments, car allowance and benefits are
not pensionable.
The Group’s policy is that the overall remuneration package offered should
Share options and Long Term Incentive Plan
be sufficiently competitive to attract, retain and motivate high quality
executives and to align the rewards of the Executives with the progress of
The basic salary and the bonus scheme are intended as the most significant
the Group whilst giving consideration to salary levels in similar sized quoted
part of Directors’ remuneration; in addition, executive share options
companies in the sector and in the region. The remuneration package is in
(though no options under this scheme have been issued since 2005) and
two parts; a non-performance part represented by basic salary (including
the Long Term Incentive Plan (LTIP) can be proposed by the Remuneration
benefits) and, a significant performance related element in the form of a
Committee and are granted periodically to promote the involvement of
profit related bonus and share-based awards. The share-based awards are
senior management in the longer term success of the Group. Even though
granted by the Remuneration Committee and only vest on the achievement
both option awards are seen as an important part of rewarding employees
of demanding targets aligned to Shareholder returns and earnings per
the Remuneration Committee is focusing on using the LTIP rather than the
share. The details of individual components of the remuneration package
executive option scheme for Executive Directors and senior executives.
and service contracts are set out below:
Options can only be exercised if certain performance criteria are achieved by
the Group. Under the LTIP half the shares granted are subject to an earnings
per share (‘EPS’) target measured against average annual increases in the
Cranswick plc
Report & Accounts 2011
35
report retail price index (‘RPI’) over a three year period and the other half to a total
policy is not to enter into employment contracts with any element of notice
shareholder return (‘TSR’) target measured against a comparable group of
period in excess of one year. Accordingly the other Executive Directors have
food companies over a three year period. The comparison companies used
a one year rolling contract, Adam Couch commencing 1 May 2006, Mark
prior to 2011 are Carrs Milling Industries plc, Dairy Crest Group plc, Devro
Bottomley from 1 June 2009 and Jim Brisby from 26 July 2010. Two year
plc, Glanbia plc, Greencore plc, Northern Foods plc, Robert Wiseman Dairies
appointment letters have been issued to Patrick Farnsworth and John
plc, Premier Foods plc and Uniq plc. For future awards the comparator
Worby from 1 January 2010 and Steven Esom from 12 November 2009. The
group will be expanded to 14 companies. The EPS target allows 25 per
contracts for Martin Davey and Bernard Hoggarth have special provisions
cent of the shares subject to the target to be issued at nil cost at an average
relating to liquidated damages requiring that the notice period stipulated in
annual outperformance of 3 per cent and 100 per cent of the shares at
the contract will be paid in full. For the other contracts the Remuneration
an average annual outperformance of 7 per cent with outperformance
Committee will consider the circumstances of an early termination and
between 3 and 7 per cent rewarded pro rata. For the share awards issued
determine compensation payments accordingly.
prior to 2009, 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
Pay and conditions across the Group
cent at the 75th percentile with performance between the 50th and 75th
percentiles rewarded pro-rata. For the LTIP share awards issued from 2009
The following are the key aspects of how pay and employment conditions
onwards the TSR target was amended so that only 30 per cent of the shares
across the Group are taken into account when setting the remuneration of
subject to the target are to be issued at nil cost at the 50th percentile and
employees including the Executive Directors:
100 per cent at the 75th percentile with performance between the 50th
and 75th percentiles rewarded pro-rata. Under the terms of the scheme
an award to an individual cannot exceed 100 per cent of that individual’s
annual salary except in exceptional circumstances when up to 200 per cent
of the annual salary is permitted. The Remuneration Committee, which
decides whether performance conditions have been met, considers EPS and
TSR to be the most appropriate measures of the long term performance of
the Group.
Directors may also apply for SAYE options on the same terms as all other
employees.
Pensions
•
•
•
•
•
•
The Group operates within the UK food sector and has many
employees who carry out demanding tasks within the business.
All employees, including Directors, are paid by reference to the
market rate.
Performance is measured and rewarded through a number of
performance related bonus schemes across the Group including
LTIP share options for Executive Directors and senior executives.
Performance measures are cascaded down
through
the
organisation to the business units.
The Group offers employment conditions that are commensurate
with a medium sized quoted company, including high standards
of health and safety and equal opportunities.
The Group operates Save As You Earn share schemes which are
Executive Directors are members of the Group ‘money-purchase’ pension
open to all eligible employees including Executive Directors.
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.
Service contracts
The service contracts for Martin Davey and Bernard Hoggarth include one
year notice periods from 1 May 2006 except in the case of a takeover of the
Company when the notice period is 2 years for the first six months following
the take-over. These conditions were incorporated into new contracts
several years ago, when the Directors changed from contracts which had
notice periods of up to three years. The Remuneration Committee’s current
36
Report & Accounts 2011
Cranswick plc
Performance graph - Total shareholder return
The graph below shows the percentage change (from a base of 100 in May 2001) 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 of 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.
Cranswick
FTSE All Share
FTSE All Share Food Producers
700
600
500
400
300
200
100
0
May 2001
May 2003
May 2005
May 2007
May 2009
May 2011
Source: Investec
Information subject to audit
Directors’ remuneration
The remuneration of Directors for the year, which includes recent Board appointments, was as follows:
Salary and fees
Bonuses
Benefits
Payment in lieu of pension contribution
Pension contribution
2011
£’000
2,122
390
16
-
2,528
386
2,914
2010
£’000
1,817
2,258
20
77
4,172
345
4,517
Aggregate notional gains made by Directors on exercise of options
544
562
Cranswick plc
Report & Accounts 2011
37
Individual Directors’ remuneration, including pension contributions:
Non-Executive Directors:
Steven Esom (2010 from appointment)
Patrick Farnsworth
John Worby
Executive Directors:
Derek Black (2010 to resignation)
Mark Bottomley (2010 from appointment)
Jim Brisby (from appointment)
Adam Couch
Martin Davey
Bernard Hoggarth
John Lindop (2010 to resignation)
Salary
and fees
Bonus
Benefits
£’000
£’000
£’000
Total
2011
£’000
Total
2010
£’000
Pension
2011
£’000
Pension
2010
£’000
37
39
44
-
278
175
396
646
504
-
-
-
-
-
72
-
107
107
107
-
-
-
-
-
4
1
3
4
4
-
37
39
44
-
354
176
506
757
615
-
12
37
42
28
341
-
932
1,529
1,193
58
-
-
-
-
65
24
75
125
97
-
-
-
-
5
40
-
72
120
93
15
Benefits principally comprise medical insurance and personal tax and pension advice.
The number of Directors who were active members of the money purchase pension scheme during the year was 5 (2010: 6).
38
Report & Accounts 2011
Cranswick plc
Share options
The Group operates an executive share option scheme (no options currently in issue) and a long term incentive plan for senior executives, including
Executive Directors, and a savings related share option scheme which is available to all employees with at least 2 years service. The interests of the Executive
Directors in these schemes were as follows:
Long term incentive plan
Year of
At 1 April
Granted in
Exercised in
Lapsed in the
award
2010 or on
the year
the year
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
appointment
No.
13,200
No.
-
-
25,000
5,000
6,600
-
-
-
13,200
25,000
25,000
32,500
-
-
-
-
36,000
25,000
25,000
32,500
-
-
-
-
36,000
25,000
25,000
32,500
-
-
-
-
36,000
2009
2010
2008
2009
2010
2007
2008
2009
2010
2007
2008
2009
2010
2007
2008
2009
2010
No.
-
-
-
-
-
year
No.
-
-
-
-
-
21,250
3,750
-
-
-
-
-
-
21,250
3,750
-
-
-
-
-
-
21,250
3,750
-
-
-
-
-
-
At 31 March
2011
No.
Exercise
price
p
Market
price at
grant
13,200
25,000
5,000
6,600
13,200
-
25,000
32,500
36,000
-
25,000
32,500
36,000
-
25,000
32,500
36,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
p
592
860
632
592
860
847
632
592
860
847
632
592
860
847
632
592
860
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 2011 to 23 June 2020.
The options granted in the year are exercisable between 1 June 2013 and 23 June 2020. The share price at the time of issue was 860p.
The following Directors exercised LTIP share options during the year:
Adam Couch
Martin Davey
Bernard Hoggarth
Number
Date
exercised
21,250
21,250
21,250
28 June 2010
28 June 2010
28 June 2010
Exercise
price
p
Nil
Nil
Nil
Market
price
p
854
854
854
Notional
gain
£’000
181
181
181
Cranswick plc
Report & Accounts 2011
39
Savings related share option scheme
At 1 April
Granted in the
Exercised in the
2010 or on
appointment
No.
-
3,533
3,761
2,025
2,025
year
No.
2,200
-
-
-
-
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
year
No.
-
-
-
-
-
Lapsed in
the year
No.
At
31 March
2011
No.
-
-
-
-
-
2,200
3,533
3,761
2,025
2,025
Weighted
Range of
average exercise
exercise dates
price
p
692
1 Mar 2016 /
1 Sept 2016
474
1 Mar 2014 /
1 Sept 2014
473
1 Mar 2013 /
1 Sept 2016
474
1 Mar 2012 /
1 Sept 2012
474
1 Mar 2012 /
1 Sept 2012
The Executive Directors are eligible, as are other employees of the Group, to participate in the SAYE scheme, which by its nature does not have performance
conditions. No savings related share options were exercised by Executive Directors during the year.
Market price of shares
Director’s Beneficial Interests (unaudited)
The market price of the Company’s shares at 31 March 2011 was 830
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:
Options in issue throughout the year
Options issued during the year
- SAYE
- LTIP
Highest
(pence)
907
882
907
Lowest
(pence)
784
792
784
At 31 March 2011
At 31 March 2010
(or on appointment)
Ordinary Shares
Ordinary Shares
27,860
66,079
200,426
1,196
112,388
1,641
27,169
64,136
200,426
1,161
112,388
1,641
Jim Brisby
Adam Couch
Martin Davey
Patrick Farnsworth
Bernard Hoggarth
John Worby
All the above interests are beneficial.
There have been no further changes to the above interests in the period
from 1 April 2011 to 6 May 2011.
On behalf of the Board
Steven Esom
Chairman of the Remuneration Committee
16 May 2011
40
Report & Accounts 2011
Cranswick plc
a real taste of
Yorkshire
Great food, handmade
in Yorkshire to produce
mouthwatering sausage rolls
and pastries, handcrafted by
Gill Ridgard, the Yorkshire
Baker.
Utilising all butter puff pastry
filled with prime cuts of
fresh meat, fresh herbs and
vegetables.
Good wholesome Yorkshire
cooking, baked to perfection.
Cranswick plc
Report & Accounts 2011
41
42
Report & Accounts 2011
Cranswick plc
corporate social
Cranswick takes its ethical responsibilities to employees, customers, shareholders, suppliers, producers and the environment very
seriously. The Company recognises that a balanced and committed approach to all aspects of Corporate Social Responsibility
(‘CSR’) will bring benefits to each of the Company stakeholders and will strengthen its business position and credentials to
facilitate future sustainable growth and development.
People
The Company is committed to the highest standards of responsible
behaviour, dignity and integrity in its relationships with fellow employees,
customers, business partners and authorities and in so doing endorse the
principals of the Ethical Trading Initiative (‘ETI’).
The Company will respect the rights and dignity of every employee and
treat them fairly and without discrimination regardless of their employment
status and in line with the Group’s Equal Opportunities policies.
The Company recognises that the people that are employed either on a
temporary or permanent basis are the biggest asset to the Group. The
Company will therefore strive to ensure that the standards detailed above
are implemented throughout the business and at all levels.
The Company believes in team working and the sharing of knowledge
throughout the organisation, communication is key to the development
and progression of the business.
To every extent possible work performed on behalf of the Company shall be
based on a recognised employment relationship established in accordance
with national law and recognised business practice.
Cranswick is committed to high Health & Safety standards which are
endorsed by the Board of Directors. It is committed to yearly improvements
and to work in partnership with staff and insurers to improve safety
standards through training and effective management.
of two Group Co-ordinators. These are supported at every site by a
dedicated Site Co-ordinator, to monitor, manage and improve Health &
Safety performance in a pro-active fashion. All these individuals are trained
to ‘NEBOSHH’ (National Examination Board in Occupational Safety and
Health) standards.
Monthly accident statistics are reported and monitored using the Company’s
insurer’s web based recording system which has been expanded this year
to provide full Health & Safety management, including risk assessments,
claims management and audits. A tracker is included which prompts the
introduction of appropriate control measures to reduce the likelihood of
recurrence. Quarterly reports are made to the Board detailing accident and
claims statistics and trends. The figures are compiled monthly and reported
on for the 2010 calendar year for the purpose of this report.
All sites carry out accident investigations using the web based system
allowing easy visibility and monitoring. Compared to the previous year:
•
•
•
•
The total number of recorded accidents in the Group was 14 per
cent* lower.
The Accident Incident Ratio (accident against number of employees)
reduced by 19 per cent*.
The total number of ‘RIDDOR’ (Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations) accidents was 23 per cent*
lower.
The Accident Incident Ratio (RIDDOR’s against number of employees)
was 27 per cent* lower.
These reductions can be attributed to improved working environments,
investment
in training and effective site Health & Safety team
The team is led by the Group Health & Safety Manager, with the assistance
management.
Cranswick plc
Report & Accounts 2011
43
responsibility statement Cranswick plc Accident Statistics
increasing high standards of Safety.
throughout the Group and demonstrate the Directors’ commitment to
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
s
e
e
y
o
l
p
m
e
0
0
0
,
0
0
1
r
e
p
s
t
n
e
d
i
c
c
a
R
O
D
D
I
R
2005
2006
2007
2008
2009
2010
Reported statistics this year include the Norfolk site for the first time.
This was acquired in 2009, and the peak in the figures above reflects the
additional accident numbers attributed to this large site. The subsequent
reduction shown in the 2010 figures reflects the benefit of the Cranswick
standards introduced to the site and levels are falling to those reported
for the Group before the acquisition. Accident levels have fallen across
the Group reflecting the reduction in incident levels, particularly those of
reportable accidents under RIDDOR.
Total reportable accidents, at 1,645 per 100,000 employees (a Health &
Safety Executive standard measure) are above the average for the Food
and Drinks Industry (1,404 in 2010) reflecting the additional cut hazards
inherent in butchery operations.
The Company is committed to accredit all operating sites to meet the British
Standard 18001 (Occupational Health & Safety Management Systems) and
in year two of the three year project, this is progressing to plan, with five of
the nine sites accredited to date. Yearly internal Health & Safety audits are
carried out to measure the standards at each site and to produce an action
plan for the following 12 months. All sites have continued to improve their
The Group companies each have their own strategies for the recruitment and
training of staff, including the provision of competitive terms and conditions
within a challenging and stimulating working environment. Over the last
year a working forum has been established to look at CSR across the Group
to facilitate the recognition of best practice and shared learning leading to
the development of a Group Corporate Responsibility Policy which clearly
defines Cranswick’s core values and aspirations. A Group Policy on Equal
Opportunities confirms the Company’s commitment to being an employer
that will take all reasonable steps to employ, train and promote employees
on the basis of their experience, abilities and qualifications without regard
to race, colour, ethnic origin, nationality, religion, sex, sexual orientation,
marital status, age or disability. The Company will ensure that all of its
employees are treated with respect and dignity, and that harassment, in
any form, will not be condoned.
By the end of 2011 all Group companies will have undertaken an ethical
audit carried out by an independent third party service provider. Those sites
which have already gone through this process have demonstrated a high
level of compliance with the ETI base code, where non-conformance has
been highlighted these issues have been addressed. The Company has also
implemented its own programme of internal ethical audits so that it can
proactively deal with any non-conformance that may arise.
All labour supplying agencies are audited before use and re-audited on
a scheduled basis to assess ongoing compliance with the Gangmasters
(Licensing) Act 2004, and details of the Companies ethical standards
are communicated to its stakeholders via ‘SEDEX’ (Supplier Ethical Data
Exchange), a facility designed to link the full supply chain in an open and
transparent manner. The Company is actively reviewing Group companies’
terms and conditions of employment to ensure that they are fully compliant
with the Agency Workers Directive which comes onto the statute book in
audit percentage score in 2010 from the previous year. The Group’s insurers
carry out annual external Health & Safety audits in which Cranswick has
October 2011.
achieved results comparable to the industry leaders.
Impact on the Environment
Training is provided to all full time employees and any temporary or agency
workers. All undertake a full Health & 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. Staff training has been enhanced by the commissioning and
production of a Cranswick Health & Safety DVD. This has been a major
project, but it will benefit the pro-active approach to Health & Safety
In 2008 the Group committed to a programme of steps to reduce its
relative carbon footprint by 20 per cent by the end of the 2011 financial
year. The Group Carbon footprint envelope includes all factory activities
(energy, f-gas, travel and waste) and all Group owned transport activities.
Statistics are collated monthly and the footprint calculated using Carbon
Trust software, reported at the half and full calendar year to the Board.
44
Report & Accounts 2011
Cranswick plc
Improved production efficiencies, better plant utilisation and energy
Waste to landfill has also started to reduce over the period. The ratio of
management have all contributed to meeting this target – the reduction
landfill tonnage compared to production volume has fallen by 37 per cent
from 0.4 tonnes CO2e per tonne of production in 2008 to 0.32 last year is
despite production volumes increasing by over 40 per cent*. Increased
a 20 per cent* reduction.
Cranswick Carbon Footprint
0.450
0.400
0.350
0.300
0.250
0.200
d
e
c
u
d
o
r
p
e
n
n
o
t
r
e
p
e
2
O
C
s
e
n
n
o
T
2008
2009
2010
recycling, waste to energy and anaerobic digestion have all contributed
to this with cardboard recycling up by 85 per cent over the three years to
1,520 tonnes, and plastic recycling from virtually nil in 2008 to 150 tonnes
this year. Contamination with meat waste is a barrier to increasing these
figures, but alternatives are being sought.
Cranswick Annual Landfill Volume
r
a
e
y
r
e
p
s
e
n
n
o
T
6,800
6,700
6,600
6,500
6,400
6,300
6,200
6,100
6,000
Energy contributes significantly to the overall carbon footprint, and whilst
2008
2009
2010
overall usage has increased with the size of the business, the energy used
per tonne of production has fallen by 19 per cent* on the 2008 base year.
Water usage continues to be monitored and reported under the FHC2020
Options to improve this performance are being actively investigated, with
agreement. Along with energy use and carbon footprint, this will become
potential for the use of Combined Heat and Power (‘CHP’) on several of the
an operational KPI as the Group enters the next phase of its environmental
larger sites. The Group is registered for the Carbon Reduction Commitment
commitment. Process water usage per tonne of production has fallen by
(‘CRC’), but since all the bigger sites operate under Climate Control
around 10 per cent over the last three years.
Agreements, the impact of the CRC will be confined to an additional
bureaucratic burden. Reduction in the Group’s energy footprint is a
Customer focus on the environment and sustainability has grown and
commercial necessity as well as an environmental one.
the Group’s environmental aspirations are being realigned to meet the
Cranswick Energy Use Per Tonne
650
600
550
500
450
400
350
300
e
n
n
o
t
r
e
p
h
W
k
2008
2009
2010
common goals which it shares with them. The environmental section
‘Greenthinking’ of the Group website www.cranswick.co.uk, will be
updated to reflect these targets and report on them.
The Group continues to participate in the Carbon Disclosure Project and
the Forest Footprint Project.
Products and Raw Materials
Cranswick is committed to 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 Company’s satisfaction. The approval of
raw material suppliers is centrally controlled and involves independent third
party audit or approval by the Group Technical Services team.
Cranswick plc
Report & Accounts 2011
45
Cranswick’s development has been focussed on the British pig market
suppliers, but it does agree individual payment terms appropriate to their
and the Group has always been a staunch supporter of British farming.
market sector and makes every endeavour to meet those agreements. Sites
The acquisition of CCF Norfolk strengthened the Company’s position in
are separately managed and encouraged to source locally where it serves
the British pig market. Producer groups and development initiatives with
the Company’s best interests.
retailers, farmers and agricultural colleges are all aimed at improving the
business relationships throughout the pig production chain to bolster the
Customers and Consumers
market against increasing worldwide competition. The bulk of the Group’s
contracted pigs are sourced from within Yorkshire, Lincolnshire and East
Cranswick is committed to a policy of working with its retail customers
Anglia which are recognised as being some of the best pig breeding areas in
to ensure clear informative labelling of product so that consumers can
the UK. Proximity to the Group’s two abattoirs is important in good animal
make an informed purchase decision based on the origin, authenticity,
welfare and the reduction of food miles – 39 per cent* of the supplying
provenance and nutritional values of the foods the Group produces.
farms lie within 25 miles of Cranswick’s pork processing units in Hull and
Norfolk, and 77 per cent* within 50 miles. All hauliers are members of
Food safety will always be of paramount importance and well qualified and
independently audited and certified welfare assurance schemes.
experienced technical teams are in place at site level which are centrally
Suppliers and Producers
co-ordinated across the Group to share best practice and ensure that all
products and processes meet the increasing demands of customers.
The Company believes that integrity and trust in its dealings with suppliers
As a food company Cranswick recognises its responsibilities to create
and producers is essential in building long term supply relationships which
and produce products which are safe, legal and wholesome. The food
will ultimately benefit its products, and will always articulate expectations
production sites are of modern design and well invested and operate to a
and requirements prior to supply.
high standard of food safety, process control, hygiene and housekeeping.
Cranswick will work with its business partners to establish and maintain
Consortium (‘BRC’) Global Standard for Food Safety and have just achieved
social and environmental compliance standards throughout the supply chain.
the 50th consecutive Grade A compliance against this exacting standard
The Group does not have a formal policy with regard to payment of
which is recognised as a performance benchmark for the industry. The
All the sites are independently audited annually against the British Retail
46
Report & Accounts 2011
Cranswick plc
customer base is heavily focused on the major UK Retailers, Restaurant
benefit the environment and the local communities in which the Group
Groups and Food Service Companies. In addition raw materials are supplied
operates. The Company will continue to focus on employee welfare through
to other food producers. The sites and their food safety and quality
training programmes, Health and Safety initiatives and by ensuring that the
management systems are constantly assessed by customers for compliance
facilities in which they operate are maintained to the highest standards.
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. This
system is a key driver in maintaining the excellent record of compliance.
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.
Community
All sites are encouraged to participate in charitable activities including
sponsored marathons, cycle rides and other fund raising activities. Overall,
some 74 per cent* of employees live within 10 miles of their place of work,
so local involvement particularly in rural locations can be very beneficial.
As part of the Group’s commitment to the communities in which it operates,
contributions totalling £37,000 were made during the year to local charities
and community projects.
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.
Summary
The Group continued to make 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
By order of the Board
Malcolm Windeatt
Company Secretary
16 May 2011
*These figures have been subject to review by internal audit.
Cranswick plc
Report & Accounts 2011
47
in relation
48
Report & Accounts 2011
Cranswick plc
statement of directors’
in relation
to the
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:
•
make judgements and estimates that are reasonable and
•
•
the financial statements, prepared in accordance with the
prudent.
applicable set of accounting standards, give a true and fair view
The Directors are responsible for keeping adequate accounting records
of the assets, liabilities, financial position and profit of Cranswick
that are sufficient to show and explain the Company and the Group’s
plc and the undertakings included in the consolidation taken as
transactions and disclose with reasonable accuracy at any time the financial
a whole; and
position of the Company and the Group and enable them to ensure that
the management report includes a fair review of the development
the financial statements comply with the Companies Act 2006 and Article
and performance of the business and the position of Cranswick
4 of the IAS Regulation. They are also responsible for safeguarding the
plc and the undertakings included in the consolidation taken as
assets of the Company and of the Group and hence for taking reasonable
a whole, together with a description of the principal risks and
steps for the prevention and detection of fraud and other irregularities.
uncertainties that they face.
On behalf of the Board
Martin Davey
Chairman
Mark Bottomley
Finance Director
16 May 2011
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 of the Group for that period. In preparing these
financial 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;
present information, including accounting policies, in a 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;
state that the Company and the Group has complied with IFRSs,
subject to any material departures disclosed and explained in the
financial statements; and
Cranswick plc
Report & Accounts 2011
49
responsibilitiesfinancial statements
report
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 plc for the year
An audit involves obtaining evidence about the amounts and disclosures
ended 31 March 2011 which comprise the Group Income Statement, the
in the financial statements sufficient to give reasonable assurance that the
Group and Company Statements of Comprehensive Income, the Group and
financial statements are free from material misstatement, whether caused
Company Balance Sheets, the Group and Company Statements of Cash
by fraud or error. This includes an assessment of: whether the accounting
Flows, the Group and Company Statements of Changes in Equity and the
policies are appropriate to the Group’s and the Parent Company’s
related notes 1 to 30. The financial reporting framework that has been
circumstances and have been consistently applied and adequately
applied in their preparation is applicable law and International Financial
disclosed; the reasonableness of significant accounting estimates made
Reporting Standards (IFRSs) as adopted by the European Union and,
by the Directors; and the overall presentation of the financial statements.
as regards the parent company financial statements, as applied in
In addition, we read all the financial and non-financial information in the
accordance with the provisions of the Companies Act 2006.
annual report to identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material misstatements or
This report is made solely to the Company’s members, as a body,
inconsistencies we consider the implications for our report.
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Opinion on financial statements
Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted
In our opinion:
by law, we do not accept or assume responsibility to anyone other than
• the financial statements give a true and fair view of the state of the
the Company and the Company’s members as a body, for our audit work,
Group’s and of the Parent Company’s affairs as at 31 March 2011
for this report, or for the opinions we have formed.
and of the Group’s profit for the year then ended;
Respective responsibilities of directors and auditor
• the Group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;
• the Parent Company financial statements have been properly prepared
As explained more fully in the Directors’ Responsibilities Statement set out
in accordance with IFRSs as adopted by the European Union
on page 49, the Directors are responsible for the preparation of the financial
and as applied in accordance with the provisions of the
statements and for being satisfied that they give a true and fair view.
Companies Act 2006; and
Our responsibility is to audit and express an opinion on the financial
• the financial statements have been prepared in accordance with the
statements in accordance with applicable law and International Standards
requirements of the Companies Act 2006 and, as regards the Group
on Auditing (UK and Ireland). Those standards require us to comply with the
financial statements, Article 4 of the IAS Regulation.
Auditing Practices Board’s Ethical Standards for Auditors.
50
Report & Accounts 2011
Cranswick plc
of the auditors
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 prepared is consistent with the
financial statements; and
•
the information given in the Corporate Governance Statement set out
on pages 27 to 32 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
• 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
• a Corporate Governance Statement has not been prepared by the
Company.
Under the Listing Rules we are required to review:
•
•
the Directors’ statement, set out on page 16, in relation to going concern;
the part of the Corporate Governance Statement relating to the Company’s
compliance with the nine provisions of the June 2008 Combined Code
specified for our review; and
• certain elements of the report to Shareholders by the Board on
Directors’ remuneration.
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our
Stuart Watson
Senior Statutory Auditor
opinion:
• adequate accounting records have not been kept by the Company,
or returns adequate for our audit have not been received from branches
for and on behalf of Ernst & Young LLP, Statutory
Auditor
not visited by us; or
•
the Parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
Hull, 16 May 2011
with the accounting records and returns; or
Cranswick plc
Report & Accounts 2011
51
Group income statement
for the year ended 31 March 2011
Revenue
Cost of sales
Gross profit
Operating expenses
Share of results of associate
Operating profit from continuing operations
Finance revenue
Finance costs
Notes
2011
£’000
2010
£’000
3
758,442
740,338
( )
657,166
101,276
( )
52,125
( )
434 -
( )
643,535
96,803
( )
50,895
48,717
45,908
106
( )
1,729
48
( )
2,204
4
15
3, 4
6
6
Profit from continuing operations before tax
47,094
43,752
Taxation
Profit for the year from continuing operations
Discontinued operations:
Profit for the year from discontinued operations
Profit for the year attributable to owners of the parent
Earnings per share (pence)
From continuing operations:
Basic
Diluted
On profit for the year:
Basic
Diluted
7
8
11
11
11
11
11,768
( )
( )
11,295
35,326
32,457
-
125
35,326
32,582
74.5p
74.3p
74.5p
74.3p
69.7p
69.6p
70.0p
69.8p
52
Report & Accounts 2011
Cranswick plc
Group statement of comprehensive income
for the year ended 31 March 2011
Notes
2011
£’000
2010
£’000
Profit for the year
35,326
32,582
Other comprehensive income
Movement on hedging items:
Gains arising in the year
Reclassification adjustment for losses/ (gains) included in
the income statement
Exchange differences on retranslation of foreign operations
Actuarial gains/ (losses) on defined benefit pension scheme
Deferred tax relating to components of other comprehensive income
Other comprehensive income for the year, net of tax
19
19
26
22
248
-
624
234
( )
660
186
( )
573
24
( )
87
132
( )
318
Total comprehensive income for the year attributable to owners of the parent
35,986
32,264
Company statement of comprehensive income
for the year ended 31 March 2011
Notes
2011
£’000
2010
£’000
Profit for the year
15,924
13,705
Other comprehensive income
Movement on hedging items:
Losses arising in the year
Reclassification adjustment for losses/ (gains) included in
the income statement
Deferred tax relating to components of other comprehensive income
Other comprehensive income for the year, net of tax
19
19
124
( )
511
108
( )
279
( )
77
( )
434
143
( )
368
Total comprehensive income for the year attributable to owners of the parent
16,203
13,337
Cranswick plc
Report & Accounts 2011
53
Notes
12
13
15
19
17
18
19
27
20
21
22
20
21
7
22
26
24
2011
£’000
127,763
123,262
5,791 -
4,722
261,538
35,694
78,665
496
1,302
116,157
2010
£’000
128,739
106,137
1,500
236,376
35,960
84,066
263
5,922
126,211
377,695
362,587
84,941
( )
4,356
( )
5,954
( )
59
( )
86,745
( )
12,487
( )
3,509
( )
149
( )
95,310
( )
( )
102,890
354
( )
49,286
( )
8,490
( )
409
( )
2,914
( )
61,453
( )
82
( )
49,866
( )
( )
9,829
982
( )
5,353
( )
66,112
( )
156,763
( )
169,002
( )
220,932
193,585
4,764
56,609
4,102
146
155,311
220,932
4,733
54,322
3,449
124
( )
131,205
193,585
Group balance sheet
at 31 March 2011
Non-current assets
Goodwill
Property, plant and equipment
Investment in associate
Financial assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Financial assets
Cash and short-term deposits
Total current assets
Total assets
Current liabilities
Trade and other payables
Financial liabilities
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Other payables
Financial liabilities
Deferred tax liabilities
Provisions
Defined benefit pension scheme deficit
Total non-current liabilities
Total liabilities
Net assets
Equity
Called-up share capital
Share premium account
Share-based payments
Hedging and translation reserves
Retained earnings
Equity attributable to owners of the parent
On behalf of the Board
Martin Davey
Chairman
16 May 2011
Mark Bottomley
Finance Director
54
Report & Accounts 2011
Cranswick plc
Company balance sheet
at 31 March 2011
Non-current assets
Property, plant and equipment
Investments in subsidiary undertakings
Investment in associate
Financial assets
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Cash and short-term deposits
Total current assets
Total assets
Current liabilities
Trade and other payables
Financial liabilities
Income tax payable
Total current liabilities
Non-current liabilities
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
Notes
13
14
14
19
7
18
27
20
21
2011
£’000
607
157,217
5,911 -
1,072 -
281
165,088
11,018
1
11,019
2010
(Restated)
£’000
1,953
156,790
220
158,963
15,423
4,004
19,427
176,107
178,390
36,947
( )
2,902
( )
844
( )
40,693
( )
38,084
( )
10,387
( )
902
( )
49,373
( )
21
48,987
( )
49,530
( )
24
89,680
( )
( )
98,903
86,427
79,487
4,764
56,609
4,000
1,806
4,102
-
15,146
86,427
4,733
54,322
4,000
1,806
3,449
387
( )
11,564
79,487
On behalf of the Board
Martin Davey
Chairman
16 May 2011
Mark Bottomley
Finance Director
Cranswick plc
Report & Accounts 2011
55
Group statement of cash flows
for the year ended 31 March 2011
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
Non-cash items on transfer of business to associate
Fair value adjustment to put option in relation to associate
Share of result of associate
Gain on sale of property, plant and equipment
Depreciation of property, plant and equipment
Share-based payments
Difference between pension contributions paid and amounts recognised
in the income statement
Release of government grants
Decrease/ (increase) in inventories
Decrease/ (increase) in trade and other receivables
Increase in assets held for sale
Decrease 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
New loans advanced
Purchase of property, plant and equipment
Receipt of government grants
Proceeds from sale of property, plant and equipment
Proceeds from sale of discontinued operations
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Proceeds from issue of share capital
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Repayment of capital element of finance leases and hire purchase contracts
Net cash used in financing activities
Net (decrease)/ increase 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
56
Report & Accounts 2011
Cranswick plc
Notes
2011
£’000
2010
£’000
35,326
32,582
7
7
15
15
13
12
16
8
27
27
-
11,768
1,623
( )
465 -
55 -
434 -
( )
96
12,440
1,013
( )
1,815
( )
12 6
266
4,858
-
( )
3,172
62,223
( )
10,639
51,584
90
-
-
( )
2,500 -
( )
34,759
350 -
498
-
( )
36,321
( )
1,683
599
50,000
( )
60,000
( )
10,508
( )
260
( )
21,852
( )
6,589
3,966
-
( )
2,623
( )
95
11,295
2,166
( )
189
11,852
510
( )
512
( )
( )
5,817
( )
1,954
( )
2,589
( )
1,356
45,887
( )
13,683
32,204
48
1,248
( )
11,233
( )
20,294
376
18,067
( )
11,788
( )
2,670
2,924
20,000
( )
19,762
( )
8,808
( )
120
( )
8,436
11,980
( )
8,038
24
3,966
Company statement of cash flows
for the year ended 31 March 2011
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 cost
Non-cash items on transfer of business to associate
Fair value adjustment to put option in relation to associate
Depreciation of property, plant and equipment
15
13
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
12
Dividends received
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash from investing activities
Cash flows from financing activities
Interest paid
Proceeds from issue of share capital
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
27
27
Notes
2011
£’000
2010
£’000
15,924
13,705
10,508
( )
1,596
4,303
1,127 -
( )
55 -
88
226
-
3,862
6,780
( )
7,639
2,068
( )
5,571
-
10,508
23
( )
1,280
11,765
4,172
( )
599
50,000
60,000
( )
10,508
( )
24,081
( )
6,745
( )
4,004
2,741
( )
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
10,302
4,801
( )
2,924
20,000
19,460
( )
8,808
( )
10,145
( )
10,161
6,157
( )
4,004
Cranswick plc
Report & Accounts 2011
57
Group statement of changes in equity
for the year ended 31 March 2011
Share
capital
Share
premium
Share-
based
payments
Hedging
Translation
Retained
reserve
reserve
earnings
Total
equity
Note (a)
Note (b)
Note (e)
Note (f)
Note (g)
£’000
£’000
£’000
£’000
£’000
£’000
£’000
At 1 April 2009
4,646
49,760
2,939
263
24
( )
108,898
166,482
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments
Scrip dividend
Share options exercised
Dividends
Deferred tax related to changes in equity
Corporation tax related to changes in equity
-
-
-
-
27
60
-
-
-
-
-
-
-
1,698
2,864
-
-
-
-
-
-
510
-
-
-
-
-
-
-
-
-
-
-
At 31 March 2010
4,733
54,322
3,449
124
( )
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments
Scrip dividend
Share options exercised
Dividends
Transfers between categories
Deferred tax related to changes in equity
Corporation tax related to changes in equity
-
-
-
-
20
11
-
-
-
-
-
-
-
-
1,699
588
-
-
-
-
-
-
-
1,013
-
-
-
360
( )
-
-
-
270
270
-
-
-
-
-
-
-
At 31 March 2011
4,764
56,609
4,102
146
Notes:
a) Share capital
The balance classified as share capital represents the nominal value of ordinary 10p shares issued.
-
-
32,582
387
( )
387
( )
24
24
45
32,627
32,582
318
( )
32,264
510
1,725
2,924
-
-
-
10,533
( )
10,533
( )
78
135
78
135
131,205
193,585
35,326
390
35,716
-
-
-
35,326
660
35,986
1,013
1,719
599
12,227
( )
12,227
( )
360
180
77
-
180
77
155,311
220,932
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
b) 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.
c) 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.
d) 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.
58
Report & Accounts 2011
Cranswick plc
Company statement of changes in equity
for the year ended 31 March 2011
Share
Share
General
Merger
Share-
Hedging
Retained
capital
premium
reserve
reserve
based
reserve
earnings
Total
equity
payments
(restated)
Note (a)
Note (b)
Note (c)
Note (d)
Note (e)
Note (f)
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
At 1 April 2009
4,646
49,760
4,000
1,806
Prior year adjustment (Note 2)
-
-
-
-
At 1 April 2009 (as restated)
4,646
49,760
4,000
1,806
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments
Scrip dividend
Share options exercised
Dividends
Deferred tax related to changes in equity
-
-
-
-
27
60
-
-
-
-
-
-
1,698
2,864
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
568
2,371
2,939
-
-
-
510
-
-
-
-
124
-
124
8,202
-
8,202
69,106
2,371
71,477
-
13,705
13,705
511
( )
511
( )
143
368
( )
13,848
13,337
-
-
-
-
-
-
-
-
510
1,725
2,924
10,533
( )
10,533
( )
47
47
At 31 March 2010
4,733
54,322
4,000
1,806
3,449
387
( )
11,564
79,487
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments
Scrip dividend
Share options exercised
Dividends
Deferred tax related to changes in equity
-
-
-
-
20
11
-
-
-
-
-
-
1,699
588
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
653
-
-
-
-
At 31 March 2011
4,764
56,609
4,000
1,806
4,102
-
387
387
15,924
15,924
108
( )
279
15,816
16,203
-
-
-
-
-
-
-
-
-
653
1,719
599
12,227
( )
12,227
( )
7
( )
7
( )
15,146
86,427
e) Share-based payments reserve
This reserve records the fair value of share-based payments expensed in the income statement, and in the case of the Company in relation to
share-based payments to employees of subsidiary companies, capital contributions to cost of Investments (note 14).
f) 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.
g) Translation reserve
This reserve records exchange differences arising from the translation of the financial statements of foreign subsidiaries.
Following the liquidation of Cranswick ApS (note 14), the Group no-longer has any foreign subsidiaries.
Cranswick plc
Report & Accounts 2011
59
Notes to the accounts
1. Authorisation of financial statements and statement of compliance with IFRSs
The Group and Company financial statements of Cranswick plc (the “Company”) for the year ended 31 March 2011 were authorised for issue
by the Board of Directors on 16 May 2011 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
and in accordance with the Companies Act 2006. 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
• Acquisitions
• Put option
Interest in associate
Note 12 – 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
Note 15 and 16 – fair values on acquisition and investment in associates
Note 19 and 23 – valuation of put option in relation to associate
The Group’s investment in its associate is accounted for using the equity method, initially recognised at fair value. An associate is an entity in
which the Group has significant influence. Under the equity method, the investment in the associate is carried in the Group balance sheet at
deemed cost (being its fair value on initial recognition) plus post-acquisition changes in the Group’s share of net assets of the associate. Under
the equity method, the investment in an associate is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of
net assets of the associate, less distributions received and less any impairment in value of individual investments. Any goodwill arising on the
acquisition of an associate is included within the carrying amount of the associate and is neither amortised nor tested for impairment.
60
Report & Accounts 2011
Cranswick plc
The share of profit or loss of the associate is shown on the face of the income statement. This is the profit attributable to equity holders of the
associate and therefore is profit after tax. Where there has been a change recognised directly in the equity of the associate, the Group recognises its
share of any changes and discloses this, when applicable, in the Group Statement of Changes in Equity. Unrealised gains and losses resulting
from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.
The financial statements of the associate were prepared for the period to 30 January 2011 and have been updated to 31 March 2011 with
reference to management accounts. Where necessary, adjustments are made to bring the accounting policies in line with those of the
Group.
Foreign currencies
In the accounts of each entity in the Group, 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 settlement of individual foreign currency
transactions and movements on monetary assets and liabilities are dealt with in the income statement.
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.
There have been no business combinations giving rise to goodwill or other intangible assets subsequent to 1 April 2010.
Intangible assets acquired as part of an acquisition of a business are capitalised at fair value separately from goodwill only if the fair value can
be measured reliably on initial recognition and the future economic benefits are expected to flow to the Group.
Taxation
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax
rates and laws that are enacted or substantively enacted by the balance sheet date. Deferred tax is provided on temporary differences at the
balance sheet date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
i) except where the deferred income tax liability arises from the initial recognition of goodwill or the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and
ii)
in respect of taxable temporary differences associated with investments in subsidiaries, except where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses,
to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profits will be available against
which the temporary differences can be utilised:
Cranswick plc
Report & Accounts 2011
61
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.
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.
62
Report & Accounts 2011
Cranswick plc
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 other comprehensive income and the ineffective portion is recognised in the
income statement. Gains or losses recognised in comprehensive income are transferred to the income statement in the same period in which
the hedged item affects the net profit or loss. If a forecast transaction is no longer expected to occur, amounts previously recognised in other
comprehensive income are transferred to the income statement.
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.
Employee benefits
i) Pensions
A subsidiary of 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
Cranswick plc
Report & Accounts 2011
63
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 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 awarded 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.
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.
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Report & Accounts 2011
Cranswick plc
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.
Exceptional items
Exceptional items are material items which derive from events or transactions that fall within the ordinary activities of the reporting entity and
which individually or, if of a similar type, in aggregate need to be disclosed by virtue of their size or incidence if the financial statements are to
give a true and fair view.
Dividends
Dividends receivable by the Company are recognised in the income statement if they are declared, appropriately authorised and no longer at the
discretion of the entity paying the dividend, prior to the balance sheet date. Dividends payable by the Company are recognised when declared
and therefore final dividends proposed after the balance sheet date are not recognised as a liability at the balance sheet date. Dividends paid
to Shareholders are shown as a movement in equity rather than on the face of the income statement.
Investments
Investments in subsidiaries are shown at cost less any provision for impairment.
New standards and interpretations applied
The following accounting standards and interpretations became effective for the current reporting period:
International Accounting Standards (IAS / IFRSs)
IFRS 2
IFRS 3
IAS 27
IAS 32
IAS 39
Group Cash-settled Share-based Payment Transactions (Amendment)
Business Combinations (Revised January 2008)
Consolidated and Separate Financial Statements (Revised January 2008)
Classification of Rights Issues (Amendment)
Eligible Hedged Items
Effective date
1 January 2010
1 July 2009
1 July 2009
1 February 2010
1 July 2009
Improvements to International Financial Reporting Standards (April 2009)
Various
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 17
Distributions of Non-Cash Assets to Owners
1 July 2009
The application of IFRS 2 ‘Group Cash-settled Share-based Payment Transactions (Amendment)’ has resulted in the Company recognising in its
own balance sheet, share based payments awarded to employees of subsidiaries that are settled in the Company’s own shares. The financial effect
of awards by the Company of options over its equity shares to employees of subsidiary undertakings is recognised by the Company in its own
financial statements as an increase in its investment in subsidiaries with a credit to equity equivalent to the IFRS 2 charge recognised by subsidiary
undertakings. This treatment has been applied for the first time in these financial statements for the year ended 31 March 2011. Comparative
information has been restated so that it is also in conformity with the revised standard. This has resulted in the net assets of the Company for the
year ended 31 March 2010 being restated from £76,676,000 to £79,487,000. There was no impact on the Group balance sheet.
The application of the other 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 anticipate 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:
Cranswick plc
Report & Accounts 2011
65
International Accounting Standards (IAS / IFRSs)
Financial Instruments: Disclosures (Amendment)
Financial Instruments: Classification and Measurement
IFRS 7
IFRS 9
IAS 12
Effective date*
1 July 2011
1 January 2013
Income Taxes (Amendment) – Deferred Taxes: Recovery of underlying assets
1 January 2012
IAS 24 (revised)
Related Party Disclosures
Improvements to IFRS (issued May 2010)
1 January 2011
Various dates
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 14
IFRIC 19
Prepayments of a Minimum Funding Requirement (Amendment)
Extinguishing Financial Liabilities with Equity Instruments
1 January 2011
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 any of the above standards.
3. Business and geographical segments
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.
Segment revenues and results
Revenue
Operating profit
Net finance costs
Profit before tax (Segment results)
Income taxes
Profit for the year
2011
Food
Total
£’000
Food
2010
Pet
Continuing
Discontinued
£’000
£’000
Total
£’000
758,442
740,338
3,620
743,958
48,717
1,623
( )
47,094
45,908
2,156
( )
43,752
11,768
( )
11,295
( )
35,326
32,457
40
10
( )
30
95
125
45,948
2,166
( )
43,782
11,200
( )
32,582
All revenue and profit for 2011 was derived from the Food segment. The Food segment includes the operating profits of the Group’s associate.
The revenue and profit of the Pet segment for 2010 reflected its trading for the period prior to sale.
There was no inter-segment turnover in either year.
Subsequent to the sale of the Pet business all assets and liabilities of the Group were allocated to the Food segment.
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Cranswick plc
Geographical segments
The following table sets out sales by destination, regardless of where the goods were produced:
Sales revenue by geographical market
UK
Continental Europe
Rest of World
2011
Food
Total
£’000
Food
2010
Pet
Continuing
Discontinued
£’000
£’000
737,717
19,459
1,266
723,901
15,804
633
3,620
-
-
Total
£’000
727,521
15,804
633
758,442
740,338
3,620
743,958
The Group’s non-current assets were all located within the UK for both 2011 and 2010.
Customer concentration
The Group has 2 customers which individually account for more than 10 per cent of the Group’s total net revenue. These customers
account for 27 per cent and 24 per cent respectively. In the prior year these same two customers, plus one other customer, accounted for 31
per cent, 20 per cent and 11 per cent respectively.
4. Group operating profit
This is stated after charging/(crediting):
Operating costs:
Selling and distribution
Administration
2011
Total
£’000
31,293
20,832
52,125
2010
Continuing
Discontinued
£’000
£’000
29,000
21,895
50,895
Total
£’000
29,162
22,347
51,509
11,852
( )
6
4,892
( )
203
162
452
614
-
-
-
16
-
Depreciation of property, plant and equipment
Profit arising on transfer of business to associate
Release of government grants
Operating lease payments – minimum lease payments
Net foreign currency differences
12,440
11,852
297 -
12
( )
4,401
9
-
( )
6
4,876
( )
203
Cost of inventories recognised as an expense
510,882
494,507
2,752
497,259
Increase in provision for inventories
Auditors’ remuneration
Audit of these financial statements
Other fees:
- Local statutory audits of subsidiaries
- Tax services
- Other services
337
25
122
74
44
384
25
127
74
376
-
-
-
-
-
384
25
127
74
376
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.
Cranswick plc
Report & Accounts 2011
67
5. Employees
Group
Staff costs:
Wages and salaries
Social security costs
Other pension costs
2011
Total
£’000
84,277
7,943
1,435
93,655
2010
Continuing
Discontinued
£’000
£’000
89,899
8,272
1,427
99,598
446
45
10
501
Total
£’000
90,345
8,317
1,437
100,099
Included within wages and salaries is a total expense for share-based payments of £1,013,000 (2010: £510,000, of which a charge of
£13,000 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
Production
Selling and distribution
Administration
2011
Total
No.
3,655
258
239
4,152
2010
Continuing
Discontinued
No.
No.
3,787
179
172
4,138
10
4
3
17
Total
No.
3,797
183
175
4,155
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
Directors’ remuneration
Pension contribution
2011
Total
£’000
2,528
386
2,914
2010
Continuing
Discontinued
£’000
£’000
4,144
340
4,484
28
5
33
-
Total
£’000
4,172
345
4,517
562
Aggregate gains made by Directors on exercise of share options
544
562
Numbers of Directors receiving pension contributions
under money purchase schemes
5 5
1
6
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Report & Accounts 2011
Cranswick plc
6. Finance revenue and costs
Group
Finance revenue
Bank interest receivable
Finance revenue from loans receivable
Total finance revenue
Finance costs
Loan note interest paid
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 (note 26)
Finance charge payable under finance leases and hire purchase contracts
Movement in discount on provisions (note 22)
Total finance costs
2010
Continuing
Discontinued
£’000
£’000
2011
Total
£’000
-
106
106
-
1,681
1,681
9
26
13
3
45
48
1
1,933
1,934
218
28
24
1,729
2,204
Total
£’000
3
45
48
1
1,943
1,944
218
28
24
2,214
-
-
-
-
10
10
-
-
-
10
The interest relates to financial assets and liabilities carried at amortised cost together with the impact of interest rate swaps.
Cranswick plc
Report & Accounts 2011
69
7. Taxation
a) Analysis of tax charge in the year
Tax charge based on the profit for the year:
Current income tax:
UK corporation tax on profits for the year
Adjustments in respect of prior years
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Deferred tax rate change
Adjustments in respect of prior years
Total deferred tax
2011
£’000
13,436
275
( )
13,161
1,092
( )
668 -
( )
367
1,393
( )
2010
£’000
11,391
19
( )
11,372
739
911
( )
172
( )
Tax on profit on ordinary activities
11,768
11,200
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 gain/ (loss) 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
Total tax credit recognised directly in equity
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 charge/ (credit) on share-based payments
Total tax charge/ (credit) recognised directly in equity
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Report & Accounts 2011
Cranswick plc
2011
£’000
11,768
-
11,768
2011
£’000
72
162
234
180
( )
77
( )
257
( )
23
( )
2011
£’000
108
7
115
2010
£’000
11,295
95
( )
11,200
2010
£’000
108
( )
24
( )
132
( )
78
( )
135
( )
213
( )
345
( )
2010
£’000
143
( )
47
( )
190
( )
b) Factors affecting tax charge for the year
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences are explained below:
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by standard rate
of corporation tax in the UK of 28 per cent (2010: 28 per cent)
Effect of:
Disallowed expenses
Deferred tax rate change
Share-based payment deduction
Deferred tax on disposal of assets to associate
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
Deferred tax on defined benefit pension scheme
Other temporary differences
Deferred tax credit
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
2011
£’000
47,094
13,186
244
668 -
( )
67
( )
1,019 -
( )
92
11,768
2011
£’000
9,762
120
135
769
( )
758
( )
8,490
2011
£’000
2,042
( )
203
( )
9
( )
579
282
1,393
( )
2011
£’000
23
-
139
( )
165
( )
281
( )
2010
£’000
43,782
12,259
550
679
( )
930
( )
11,200
2010
£’000
11,804
129
219
( )
386
( )
1,499
( )
9,829
2010
£’000
284
155
682
( )
143
72
( )
172
( )
2010
£’000
182
56
281
( )
177
( )
220
( )
Cranswick plc
Report & Accounts 2011
71
7. Taxation (continued)
d) Temporary differences associated with Group investments
At 31 March 2011 a £nil tax liability has been recognised (2010: £nil) in respect of any taxes that would be payable on the unremitted earnings of certain
subsidiaries, as receipt by the Group of any dividends would be exempt from UK corporation tax. There are no income tax consequences to the Group
in relation to dividends paid to Shareholders.
e) Change in Corporation Tax rate
The March 2011 Budget announced that the UK Corporation tax rate will reduce from 28 per cent to 23 per cent over a period of four years from 2011.
The first reduction in the UK corporation tax rate from 28 per cent to 26 per cent was substantively enacted on 29 March 2011 and will be effective
from 1 April 2011. This will reduce the Company’s future current tax charge accordingly. As a consequence, deferred tax has been provided at 26 per
cent in the year to 31 March 2011.
The aggregate impact of the proposed reductions from 26 per cent to 23 per cent would reduce the deferred tax liability of the Group by approximately
£980,000 and reduce the deferred tax asset of the Company by £32,000.
8. Sale of a business (discontinued operations)
In the prior year, 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 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. In accordance with IFRS 5 the results of the Pet Division to the date of sale were treated as discontinued and shown as a single
line item at the foot of the income statement.
The results of the pet division for the prior year are presented below:
Revenue
Expenses
Operating profit
Finance costs
Profit before tax from discontinued operations
Tax credit
Profit for the period from discontinued operations
The tax credit is analysed as follows:
On profit on ordinary activities for the period
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
72
Report & Accounts 2011
Cranswick plc
2011
£’000
-
-
-
-
-
-
-
-
2010
£’000
3,620
3,580
( )
40
10
( )
30
95
125
95
£’000
8,210
6,447
6,524
2,796
( )
18,385
18,385
318
( )
18,067
The net cash flows attributable to the discontinued Pet Division, excluding disposal cash flows were as follows:
Operating cash flows
Financing cash flows
Net outflow
Profit per share from discontinued operations was as follows:
Basic
Diluted
9. Profit attributable to members
2011
£’000
-
-
-
-
-
Of the profit attributable to members, the sum of £15,924,000 (2010: £13,705,000) has been dealt with in the accounts of Cranswick plc.
10. Equity dividends
Declared and paid during the year:
Final dividend for 2010 – 17.0p per share (2009: 14.7p)
Interim dividend for 2011 – 8.8p per share (2010: 8.0p)
Dividends paid
2011
£’000
8,047
4,180
12,227
2010
£’000
448
( )
10
( )
458
( )
0.3p
0.2p
2010
£’000
6,802
3,731
10,533
Proposed for approval of Shareholders at the Annual General Meeting on 1 August 2011:
Final dividend for 2011 – 18.7p (2010: 17.0p)
8,901
8,016
11. 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 £35,326,000
(2010: £32,582,000) 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 weighted average number of ordinary shares for both basic and diluted amounts was as per the table below:
Basic weighted average number of shares
Dilutive potential ordinary shares – share options
2011
Thousands
2010
Thousands
47,408
162
47,570
46,534
112
46,646
Basic weighted average number of shares for 2011 excludes a weighted average of 69,431 shares (2010: 140,515 shares) held during the year by the
Cranswick plc Employee Benefit Trust. At 31 March 2011 39,363 shares were held by the Cranswick plc Employee Benefit Trust, the original cost of
these shares was £4,000, and the market value of the shares at the year end was £327,000.
Cranswick plc
Report & Accounts 2011
73
12. Intangible fixed assets
Group
Cost
At 31 March 2009
Acquisition of subsidiary undertakings
Reimbursement of consideration paid in prior years
At 31 March 2010
On transfer of business to associate (note 15)
At 31 March 2011
Impairments
At 31 March 2009, 2010 and 2011
Net book value
At 31 March 2009
At 31 March 2010
At 31 March 2011
Goodwill
£’000
117,756
12,231
1,248
( )
128,739
976
( )
127,763
-
117,756
128,739
127,763
On 9 July 2010, the principal assets and trade of the Group’s Deeside cooked meats facility were transferred to Farmers Boy (Deeside) Limited,
with 49 per cent of the shares in Farmer’s Boy (Deeside) Limited being received as consideration (note 15). As a result of the Deeside cooked
meats facility leaving the Group goodwill relating to the cooked meats cash generating unit was reduced proportionately, based on assessment
of the relative value of the portion of the cash generating unit disposed of compared to the relative value of the portion of the cash generating
unit retained.
During the prior year, the Group acquired 100 per cent of the issued share capital of Bowes of Norfolk Limited (now renamed Cranswick
Country Foods (Norfolk) Limited). Goodwill on acquisition amounted to £12,231,000. Further details of the acquisition are disclosed in note
16.
Also during the prior 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
2011
£’000
12,231
84,679
16,526
10,968
3,359
127,763
2010
£’000
12,231
85,655
16,526
10,968
3,359
128,739
74
Report & Accounts 2011
Cranswick plc
Assumptions used
The recoverable amount for each cash generating unit has been determined based on value in use calculations using annual budgets for each
business for the following year, approved by the Board of Directors, and cash flow projections for the next four years. Forecast replacement
capital expenditure is included from budgets and thereafter capital is assumed to represent 100 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 8.8 per cent has been used (2010: 9.9 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
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
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.
Discount rates
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.
With the exception of the growth rates applied to the Sandwiches cash generating unit, as detailed below, 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.
Sensitivity
The Sandwiches cash generating unit is the most sensitive to a change in the growth of operating cash flows. The growth rate applied to
Sandwiches is 3 per cent. A 0.3 per cent reduction in this growth rate to 2.7 per cent would reduce the recoverable amount to a level equal
to its carrying value.
Cranswick plc
Report & Accounts 2011
75
13. Property, plant and equipment
Group
Cost
At 31 March 2009
Additions
On acquisition
Disposals
At 31 March 2010
Additions
Disposals
Disposal of assets to associate
Transfers between categories
At 31 March 2011
Depreciation
At 31 March 2009
Charge for the year
Relating to disposals
At 31 March 2010
Charge for the year
Relating to disposals
Relating to disposal of assets to associate
At 31 March 2011
Net book amounts
At 31 March 2009
At 31 March 2010
At 31 March 2011
Freehold
land and
buildings
£’000
37,180
697
4,120
37
( )
41,960
11,515
15
( )
273
( )
6,038
59,225
2,353
779
-
3,132
949
1
( )
-
4,080
34,827
38,828
55,145
Leasehold
Plant,
Assets in the
Total
improvements
equipment
course of
and vehicles
construction
£’000
£’000
£’000
£’000
16,420
335
-
1,073
( )
15,682
621
-
7,887
( )
-
8,416
8,615
870
1,073
( )
8,412
551
-
4,507
( )
4,456
7,805
7,270
3,960
102,380
12,422
1,911
4,450
( )
112,263
14,900
3,160
( )
11,769
( )
7,256
119,490
58,596
10,203
4,300
( )
64,499
10,940
2,755
( )
9,511
( )
63,173
43,784
47,764
56,317
5,272
7,003
-
-
12,275
8,859
-
-
13,294
( )
7,840
-
-
-
-
-
-
-
-
5,272
12,275
7,840
161,252
20,457
6,031
5,560
( )
182,180
35,895
3,175
( )
19,929
( )
-
194,971
69,564
11,852
5,373
( )
76,043
12,440
2,756
( )
14,018
( )
71,709
91,688
106,137
123,262
Included in freehold land and buildings is land with a cost of £5,145,000 (2010: £5,418,000) which is not depreciated relating to the Group
and £509,000 (2010: £795,000) relating to the Company. Cost includes £1,001,000 (2010: £935,000) in respect of capitalised interest.
The depreciation charge for the year for plant, equipment and vehicles includes £42,000 (2010: £154,000) in respect of assets held under
finance leases and hire purchase contracts.
76
Report & Accounts 2011
Cranswick plc
Company
Cost
At 31 March 2009
Additions
Transfers from other Group companies
At 31 March 2010
Additions
Transfers to other Group companies
At 31 March 2011
Depreciation
At 31 March 2009
Charge for the year
Transfers from other Group companies
At 31 March 2010
Charge for the year
Transfers to other Group companies
At 31 March 2011
Net book amounts
At 31 March 2009
At 31 March 2010
At 31 March 2011
Freehold
land and
buildings
£’000
1,956
-
-
1,956
-
1,447
( )
509
160
21
-
181
-
181
( )
-
1,796
1,775
509
Plant,
equipment
and vehicles
£’000
235
64
42
341
22
22
( )
341
72
84
7
163
88
8
( )
243
163
178
98
Total
£’000
2,191
64
42
2,297
22
1,469
( )
850
232
105
7
344
88
189
( )
243
1,959
1,953
607
Cranswick plc
Report & Accounts 2011
77
14. Investments
Company
Shares at cost:
At 31 March 2009
Prior year adjustment – Capital contribution relating to share options (Note 2)
At 31 March 2009 – As restated
Reimbursement of consideration paid in prior years
Disposals
Capital contribution relating to share options
At 31 March 2010
Capital contribution relating to share options
Additions (note 15)
At 31 March 2011
Subsidiary
undertakings
(Restated)
£’000
155,426
2,371
157,797
1,248
( )
199
( )
440
156,790
427
-
157,217
Associates
£’000
-
-
-
-
-
-
-
-
5,911
5,911
On 9 July 2010 the Company acquired a 49 per cent shareholding in Farmer’s Boy (Deeside) Limited (note 15). The Company has treated its
shareholding in Farmer’s Boy (Deeside) Limited, over which it has significant influence, as an associate, recognising the associate at its cost of
£5,911,000.
During the prior 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.
Also during the prior year the Company liquidated its 100 per cent 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:
Cranswick Country Foods plc
Cranswick Country Foods (Norfolk) Limited (Held by Cranswick Country Foods plc)
Cranswick Convenience Foods Limited (formerly Studleigh-Royd Limited)
Brookfield Foods Limited
The Sandwich Factory Group Limited (registered in Scotland)
Except where otherwise stated, each of the companies is registered in England and Wales and Cranswick plc holds directly 100 per cent of the
shares and voting rights of each subsidiary undertaking.
15. Investment in associate
Group
On 9 July 2010, the principal assets and trade of the Group’s Deeside cooked meats facility were transferred to Farmers Boy (Deeside) Limited, a company
within the Wm Morrison Supermarkets PLC group, with 49 per cent of the shares in Farmer’s Boy (Deeside) Limited being received as consideration.
The Group has treated its 49 per cent shareholding in Farmer’s Boy (Deeside) Limited, over which it has significant influence, as an associate and has
accounted for it using the equity method, initially recognising the associate at its fair value. As a result of the Deeside cooked meats facility leaving the
Group a proportionate amount of goodwill relating to the cooked meats cash generating unit was disposed of (note 12). The transaction also included
a put and call option over the Group’s 49 per cent shareholding exercisable during a six month period commencing three years from the date of the
transaction. The Group’s put option has been recognised at its fair value at the balance sheet date (note 19).
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Report & Accounts 2011
Cranswick plc
The transaction gave rise to the following (expenses)/ income during the year:
Book value of assets disposed
Fair value of 49 per cent shareholding acquired
Difference between acquisition fair value and cost of associate
Goodwill impairment loss (note 12)
Recognition of put option at fair value
Non-cash total
Legal expenses
Total within profit before tax
Related deferred tax credit
Cash flow impact
The results of the Deeside cooked meats facility for the period prior to the transfer are presented below:
Revenue
Expenses
Operating profit
Finance revenue
Profit before tax
Taxation
Profit for the period
The following table illustrates the summarised financial information of the Group’s investment in Farmer’s Boy (Deeside) Limited:
Share of the associate’s balance sheet:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Share of net assets
Share of the associate’s results:
Revenue
Loss for the year
2011
£’000
( )
5,911
6,225
314
( )
976
1,127
465
( )
168
297
1,019
( )
168
2011
£’000
16,466
( )
15,952
514
41
555
( )
155
400
2011
£’000
15,070
6,573
6,427
( )
9,425
( )
5,791
17,684
434
( )
Cranswick plc
Report & Accounts 2011
79
16. Acquisition
During the prior year, on 24 June 2009, the Group acquired 100 per cent of the issued share capital of Cranswick Country Foods (Norfolk)
Limited (formerly Bowes of Norfolk Limited) for a cash consideration of £17.2 million.
The principal activity of Cranswick Country Foods 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
Acquiree’s
book value
before
combination
£’000
8,489
1,500
656
1,679
7,809
6,658
5,778
( )
12,883
( )
100
( )
600
( )
7,430
Fair value
£’000
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 to 31 March 2010, the acquired business contributed a net profit after tax of £0.5 million to the Group.
If the combination had taken place at the beginning of the financial year ended 31 March 2010, the Group’s profit after tax from continuing
operations for that 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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Report & Accounts 2011
Cranswick plc
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
2011
£’000
29,929
5,765
35,694
Group
Company
2011
£’000
69,398
-
5,119
74,517
4,148
78,665
2010
£’000
75,466
-
3,918
79,384
4,682
84,066
2011
£’000
-
10,581
73
10,654
364
11,018
2010
£’000
30,017
5,943
35,960
2010
£’000
-
15,118
62
15,180
243
15,423
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
2011
2010
£’000
69,398
75,466
Of which:
Not due
£’000
60,771
63,989
Past due date in the following periods:
Less than
30 days
£’000
5,937
8,334
Between 30
and 60 days
£’000
1,411
2,072
More than
60 days
£’000
1,279
1,071
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 2011, trade receivables at nominal value of £558,000 (2010: £639,000) were impaired and fully provided for. Provision is made when
there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery
is assessed as being remote.
Movements in the provision for impairment of receivables were as follows:
Bad debt provision
At 31 March 2009
Provided in year
Written off
At 31 March 2010
Provided in year
Written off
At 31 March 2011
There are no bad debt provisions against other receivables.
£’000
352
372
85
( )
639
47
128
( )
558
Cranswick plc
Report & Accounts 2011
81
19. Financial assets
Current
Forward currency contracts
Loans receivable
Movement on hedged items:
Gains/ (losses) arising in the year
Reclassification adjustment for losses/ (gains)
included in the income statement
Group
Company
2010
£’000
263
-
263
2011
£’000
-
-
-
Group
Company
2010
£’000
2011
£’000
2010
£’000
-
-
2010
£’000
186
124
( )
77
( )
573
( )
387
( )
511
387
434
( )
511
( )
2011
£’000
146
350 -
496
2011
£’000
22
248
270
Movements on hedged foreign currency contracts are reclassified through cost of sales. Interest rate movements on hedged bank borrowings
are reclassified through finance costs.
Non-current
Group
Company
Loans receivable
Put option in relation to associate
Financial assets relate to the following:
2011
£’000
3,650
1,072
4,722
2010
£’000
1,500
-
1,500
2011
£’000
-
1,072 -
1,072 -
2010
£’000
-
• Forward currency contracts used to hedge a proportion of anticipated purchases denominated in foreign currencies and 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 other
comprehensive income and are then reclassified 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.
• £1,500,000 (2010: £1,500,000) 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.
• £2,500,000 (2010: £nil) receivable from Thomas Dent Limited, a supplier to the Group. Repayment of the loan is receivable in 43 equal monthly
instalments commencing on 30 September 2011. Interest is receivable on the loan at bank of England base rate plus 3 per cent.
• The transaction described in note 15 included a put and call option over the Group’s 49 per cent shareholding in Farmers Boy (Deeside) Limited
exercisable during a six month period commencing three years from the date of the transaction. The exercise price of the option is based on
an agreed pricing structure. The fair value of the option on initial recognition was £1,127,000. The option was revalued at the year end when
its fair value had reduced to £1,072,000 (note 23).
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Report & Accounts 2011
Cranswick plc
20. Trade and other payables
Current
Trade payables
Amounts owed to Group undertakings
Other payables
Deferred income – Government grants
Non-current
Group
Company
2011
£’000
57,497
-
27,366
78
84,941
2010
£’000
55,269
-
31,464
12
86,745
2011
£’000
80
33,340
3,527
-
36,947
2010
£’000
448
32,482
5,154
-
38,084
Deferred income – Government grants
354
82
-
-
21. Financial liabilities
Current
Group
Company
Bank overdrafts
Current instalments due on bank loan
Finance leases and hire purchase contracts
Interest rate swap
Non-current
Non-current instalments due on bank loan
Amounts outstanding under revolving credit facility
Finance leases and hire purchase contracts
2011
£’000
3,925
-
271
160
4,356
-
48,987
299
49,286
2010
£’000
1,956
10,000
144
387
12,487
49,530
-
336
49,866
2011
£’000
2,742 -
-
-
160
2,902
-
48,987 -
-
48,987
2010
£’000
10,000
-
387
10,387
49,530
-
49,530
None of the finance leases and hire purchase contracts has amounts due after greater than 5 years.
Interest rate swap
Under the terms of the 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 2.04 per cent. The notional principal amount of the swap stands at £19,750,000 as at
31 March 2011 (2010: £26,750,000) and reduces in equal quarterly instalments of £1,750,000 with a final notional payment of principal
of £16,250,000 in December 2011.
All financial liabilities are amortised at cost, except for interest rate swaps.
Bank facilities
The Group renegotiated its banking facilities during the year, as the previous agreement was due to expire in December 2011. The new
facilities were agreed on 24 March 2011 with arrangement fees of £1.0 million being paid subsequent to the year end. The arrangement fees will be
amortised over the period of the facilities.
A committed bank overdraft facility of £20 million (2010: £20 million) is in place until July 2015, of which £3,925,000 (2010: £1,956,000) was utilised
at 31 March 2011. Interest is payable at a margin over base rate.
A revolving credit facility of £100 million (including the £20 million committed overdraft facility) is in place of which £50 million was utilised as at 31
March 2011 (2010: term loans of £60 million and a revolving credit facility of £30 million of which £nil was utilised). This facility expires in July 2015.
Interest is payable on the revolving credit facility at a margin over LIBOR.
Cranswick plc
Report & Accounts 2011
83
21. Financial liabilities (continued)
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
2011
£’000
-
-
50,000
50,000
1,013
( )
48,987
2010
£’000
10,000
50,000
-
60,000
470
( )
59,530
2011
£’000
-
-
50,000 -
50,000
1,013
( )
48,987
2010
£’000
10,000
50,000
60,000
470
( )
59,530
The bank facilities for both years are unsecured and subject to normal bank covenant arrangements.
22. Provisions
Group
At 1 April 2010
Credited in the year
Utilisation in the year
Unwinding of discount
At 31 March 2011
Analysed as:
Current liabilities
Non-current liabilities
Lease provisions
£’000
1,131
172
( )
504
( )
13
468
2010
£’000
149
982
1,131
Group
2011
£’000
59
409
468
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 three years. There are no provisions held by the Company.
84
Report & Accounts 2011
Cranswick plc
23. Financial instruments
An explanation of the Company and Group’s financial instruments risk management strategy is set out on page 16 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 2011 and their
weighted average interest rates is set out below:
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
1.50%
3,925
( )
3,925 -
( )
-
50,000
( )
30,250
( )
19,750 -
( )
570
( )
54,495
( )
-
-
34,175
( )
19,750
( )
271
( )
20,021
( )
19,750 -
-
-
244
( )
244
( )
-
55
( )
55
( )
54,495
( )
53,925
( )
271
( )
244
( )
55
( )
0.00%
3.50%
1,302
4,000
1,302 -
4,000 -
-
-
-
-
49,193
( )
48,623
( )
271
( )
244
( )
55
( )
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
2.25%
1,956
( )
1,956
( )
-
-
(including the effect of interest rate swaps)
Finance leases and hire purchase contracts
2.18%
4.37%
Group
As at 31 March 2011
Financial liabilities:
Bank overdrafts
Revolving credit facility
Less: effect of interest rate swaps
Total financial liabilities excluding
the effect of interest rate swaps
Financial assets:
Cash at bank
Loans receivable
As at 31 March 2010
Financial liabilities:
Bank overdrafts
Bank loan
Less: effect of interest rate swaps
Total financial liabilities excluding
the effect of interest rate swaps
Financial assets:
Cash at bank
Loans receivable
(including the effect of interest rate swaps)
Finance leases and hire purchase contracts
3.09%
5.75%
60,000
( )
33,250
( )
7,000
( )
19,750
( )
480
( )
62,436
( )
-
-
144
( )
154
( )
35,206
( )
26,750
( )
7,144
( )
19,904
( )
7,000
19,750
-
-
182
( )
182
( )
-
62,436
( )
61,956
( )
144
( )
154
( )
182
( )
0.00%
3.50%
5,922
1,500
5,922
1,500
-
-
-
-
-
-
55,014
( )
54,534
( )
144
( )
154
( )
182
( )
The maturity profile of bank loans is set out in note 21.
Cranswick plc
Report & Accounts 2011
85
23. Financial instruments (continued)
The interest rate profile of the interest earning financial assets and interest bearing liabilities of the Company as at 31 March 2011 and their
weighted average interest rates is set out below:
Company
Fixed interest
As at 31 March 2011
Weighted
Total
At
1 year
1-2 years
2-3 years
average
effective
interest
rate
%
floating
interest
rates
or
less
£’000
£’000
£’000
£’000
£’000
Financial liabilities:
Bank overdrafts
Bank loan (including the effect
1.50%
2,742
( )
2,742 -
( )
-
of interest rate swaps)
2.18%
50,000
( )
30,250
( )
19,750 -
( )
Less: effect of interest rate swaps
Total financial liabilities excluding
the effect of interest rate swaps
52,742
( )
32,992
( )
19,750 -
( )
-
19,750
( )
19,750 -
52,742
( )
52,742
( )
-
Financial assets: Cash at bank
0.00%
1
1
-
52,741
( )
52,741
( )
-
-
-
-
-
-
-
-
Fixed interest
-
-
-
As at 31 March 2010
Weighted
Total
At
1 year
1-2 years
2-3 years
average
effective
interest
rate
%
floating
interest
rates
or
less
£’000
£’000
£’000
£’000
£’000
Financial liabilities:
Bank loan (including the effect
of interest rate swaps)
3.09%
60,000
( )
33,250
( )
7,000
( )
Less: effect of interest rate swaps
Total financial liabilities excluding
the effect of interest rate swaps
-
26,750
( )
7,000
60,000
( )
60,000
( )
19,750
( )
19,750
-
-
-
-
-
-
-
-
-
-
-
Financial assets: Cash at bank
0.0%
4,004
4,004
55,996
( )
55,996
( )
86
Report & Accounts 2011
Cranswick plc
Currency profile
The Group’s financial assets at 31 March 2011 include sterling denominated cash balances of £792,000 (2010: £4,349,000), euro £506,000 (2010:
£1,573,000) and US dollar £4,000 (2010: £nil), all of which are held in the UK. The Group’s financial liabilities include sterling denominated overdraft
balances of £3,718,000 (2010: £1,429,000) and euro £207,000 (2010: £527,000), all of which are held in the UK.
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.
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 interest rate swap and forward currency contracts, are measured using Level 2 of the fair value hierarchy.
The Group’s put option in relation to its 49 per cent shareholding in Farmers Boy (Deeside) Limited (note 19) is measured using level 3 of the fair value
hierarchy. The fair value of the option is based on discounted cash flows derived from the associate’s budgets and business plan. The Directors believe
that the most sensitive assumption used within the calculation of the option fair value is the discount rate. A one per cent movement in the discount
rate would give rise to a £0.4 million adjustment in the value of the option if all other assumptions remained unchanged.
The Group’s 5.5 per cent retained shareholding in Cranswick Pet & Aquatics Limited (described in note 8) would also 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.
Cranswick plc
Report & Accounts 2011
87
23. Financial instruments (continued)
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 in the balance sheet at fair value.
Group
2011
2010
Financial assets
Cash
Loans receivable
Put option in relation to associate
Forward currency contracts
Financial liabilities
Bank overdraft
Book
value
£’000
1,302
4,000
1,072
146
6,520
3,925
( )
Amounts outstanding under revolving credit facility
50,000
( )
Bank loan
Finance leases and hire purchase contracts
Interest rate swap – (note 21)
-
570
( )
160
( )
Fair
value
£’000
1,302
4,000
1,072 -
146
6,520
3,925
( )
50,000 -
( )
-
570
( )
160
( )
Book
value
£’000
5,922
1,500
-
263
7,685
1,956
( )
-
60,000
( )
480
( )
387
( )
54,655
( )
54,655
( )
62,823
( )
Fair
value
£’000
5,922
1,500
263
7,685
1,956
( )
60,000
( )
480
( )
387
( )
62,823
( )
At 31 March
48,135
( )
48,135
( )
55,138
( )
55,138
( )
Company
2011
2010
Financial asset
Cash
Put option in relation to associate
Financial liabilities
Bank overdraft
Book
value
£’000
1
1,072
1,073
2,742
( )
Amounts outstanding under revolving credit facility
50,000
( )
Bank loan
Interest rate swap – (note 21)
-
160
( )
52,902
( )
Fair
value
£’000
1
1,072 -
1,073
2,742 -
( )
50,000 -
( )
-
160
( )
52,902
( )
Book
value
£’000
4,004
-
4,004
-
-
60,000
( )
387
( )
60,387
( )
Fair
value
£’000
4,004
4,004
60,000
( )
387
( )
60,387
( )
At 31 March
51,829
( )
51,829
( )
56,383
( )
56,383
( )
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.
88
Report & Accounts 2011
Cranswick plc
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 other comprehensive income and subsequently reclassified through the
income statement at the time that the hedged item affects profit or loss.
Group
Currency
euros
Amount
Maturities
4,500,000
15 April 2011 to 29 June 2011
Exchange rates
1.16 – 1.19 euros
Fair value
£’000
146
These contracts were effective cash flow hedges under the criteria set out in IAS 39 and therefore fair value gains and losses related to the
contracts were recognised directly in other comprehensive income.
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. Under the terms of the 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
2.04 per cent. The notional principal amount of the swap stands at £19,750,000 as at 31 March 2011 (2010: £26,750,000) 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 ineffective cash flow hedge under the criteria set out in IAS 39 and accordingly hedge accounting has ceased. Therefore
movements in fair value have been posted directly to the income statement, and amounts previously taken to other comprehensive income
have been reclassified to 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.
2011
sterling
2010
sterling
Increase/
Effect on
decrease in
profit before
basis points
+100
-100
+100
-100
tax
£’000
( )
293
293
( )
271
271
Cranswick plc
Report & Accounts 2011
89
23. Financial instruments (continued)
Liquidity risk
The tables below summarise the maturity profile of the Group’s financial liabilities at 31 March 2011 and 2010 based on contractual
undiscounted payments:
Group
Year ended 31 March 2011
Less than 1 year
1 to 2 years
2 to 5 years
£’000
£’000
£’000
Bank overdraft
Revolving credit facility
Interest rate swap
Finance leases and hire purchase contracts
Trade and other payables
3,925
821
186
287
84,863
90,082
-
810
-
251
-
-
51,883
-
56
-
1,061
51,939
Year ended 31 March 2010
Less than 1 year
1 to 2 years
2 to 5 years
£’000
£’000
£’000
Bank overdraft
Bank loan
Interest rate swap
Finance leases and hire purchase contracts
Trade and other payables
1,956
11,225
357
170
86,733
100,441
-
50,757
197
171
-
51,125
-
-
-
191
-
191
Company
Year ended 31 March 2011
Less than 1 year
1 to 2 years
2 to 5 years
£’000
£’000
£’000
Bank overdraft
Revolving credit facility
Interest rate swap
Trade and other payables
Cross guarantees
2,742
821
186
36,947
1,183
41,879
-
810
-
-
-
810
-
51,883
-
-
-
51,883
Year ended 31 March 2010
Less than 1 year
1 to 2 years
2 to 5 years
£’000
£’000
£’000
Bank loan
Interest rate swap
Trade and other payables
Cross guarantees
11,225
357
38,084
1,956
51,622
50,757
197
-
-
50,954
-
-
-
-
-
Total
£’000
3,925
53,514
186
594
84,863
143,082
Total
£’000
1,956
61,982
554
532
86,733
151,757
Total
£’000
2,742
53,514
186
36,947
1,183
94,572
Total
£’000
61,982
554
38,084
1,956
102,576
The interest rate swaps disclosed in the above tables are the net undiscounted cash flows as these amounts are settled net.
The renegotiation of the Group’s banking facilities during the year has extended the maturity of a significant proportion of the Group’s debt. The
impact of liquidity risk on the Group is discussed in detail in the Group Operating and Financial Review on page 16.
90
Report & Accounts 2011
Cranswick plc
24. Called-up share capital
Group and Company
Authorised
2011
Number
2010
Number
2011
£’000
2010
£’000
Ordinary shares of 10p each
100,000,000
100,000,000
10,000
10,000
Allotted, called-up and fully paid
Ordinary shares of 10p each
2011
Number
2010
Number
At 1 April
On exercise of share options
Scrip dividends
Allotted to Cranswick plc Employee Benefit Trust
47,330,067
46,459,958
105,514
200,554
-
504,196
265,913
100,000
At 31 March
47,636,135
47,330,067
2011
£’000
4,733
11
20
-
4,764
2010
£’000
4,646
50
27
10
4,733
On 3 September 2010, 150,976 ordinary shares were issued at 856.5 pence as a result of Shareholders exercising the scrip dividend option in
lieu of the cash payment for the 2010 final dividend.
On 21 January 2011, 49,578 ordinary shares were issued at 858.9 pence as a result of Shareholders exercising the scrip dividend option in lieu
of the cash payment for the 2011 interim dividend.
During the course of the year, 105,514 ordinary shares were issued to employees exercising SAYE and Executive options at prices between
255.0 pence and 679.0 pence.
Of the unissued ordinary share capital £97,969 is reserved for allotment under the Savings Related Share Option Schemes, Executive Share
Option Schemes and Long Term Incentive Plans (LTIP). The options are exercisable as follows:
Savings related
Savings related
Savings related
Savings related
Savings related
Savings related
Savings related
Executive
LTIP
Number
Exercise price
18,700
8,057
26,936
13,691
185,900
134,994
91,284
4,991
534,500
375p
471p
679p
665p
474p
594p
692p
601p
Nil
Exercise period
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
March 2014 to October 2018
July 2008 to July 2015
June 2011 to June 2020
Of the LTIP options, 39,363 of the shares required were held by the Cranswick plc Employee Benefit Trust at the year end.
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 prior year, 504,196 ordinary shares were issued to employees exercising SAYE and Executive options at prices between 255.0
pence and 679.0 pence.
Cranswick plc
Report & Accounts 2011
91
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 £1,013,000 (2010: £510,000).
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, being the maximum term.
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
Exercised during the year (i)
Outstanding as at 31 March (ii)
Exercisable at 31 March
Company
Outstanding as at 1 April
Exercised during the year (i)
Outstanding as at 31 March (ii)
Exercisable at 31 March
2011
Number
50,000
45,009
( )
4,991
4,991
2011
Number
45,009
45,009
( )
-
-
2011
WAEP
£
6.01
6.01
6.01
6.01
2011
WAEP
£
6.01
6.01
-
-
2010
Number
£
475,000
425,000
( )
50,000
50,000
2010
Number
265,000
219,991
( )
45,009
2010
WAEP
6.01
6.01
6.01
6.01
2010
WAEP
£
6.01
6.01
6.01
45,009
6.01
i) The weighted average share price at the date of exercise for the options exercised was £8.01 (2010: £7.67).
ii) For the share options outstanding as at 31 March 2011, the weighted average remaining contractual life is 4.25 years.
(2010: 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.
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Cranswick plc
Long Term Incentive Plan (LTIP)
During the course of the year 229,300 options at nil cost were granted to Directors and senior executives, the share price at that time was
860.0 pence. Details of the performance criteria relating to the LTIP scheme can be found in the Directors’ Remuneration report on pages 35
and 36. The maximum term of LTIP options is 10 years.
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
2011
Number
460,043
229,300
( )
17,625
( )
137,218
534,500
-
2011
Number
309,643
153,500
11,250
( )
101,093
( )
350,800
-
2011
WAEP
£
-
-
-
-
-
-
2011
WAEP
£
-
-
-
-
-
-
2010
Number
532,500
182,700
136,738
( )
118,419
( )
460,043
37,343
2010
Number
385,000
117,300
109,938
( )
82,719
( )
309,643
37,343
2010
WAEP
£
-
-
-
-
-
-
2010
WAEP
£
-
-
-
-
-
-
i) The weighted average fair value of options granted during the year was £5.78 (2010: £3.89). The share options granted during the year
were at £nil. The share price at the date of grant was £8.60. (2010: £5.92).
ii) The weighted average share price at the date of exercise for the options exercised was £8.60 (2010: £6.62).
iii) For the share options outstanding as at 31 March 2011, the weighted average remaining contractual life is 8.50 years. (2010: 8.37 years).
The exercise price for all options outstanding at the end of the year was £nil.
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 maximum term of SAYE
options is 3.5, 5.5 or 7.5 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 (note i)
Lapsed during the year
Exercised during the year (note ii)
Outstanding as at 31 March (note iii)
Exercisable at 31 March
2011
Number
493,950
91,284
( )
45,167
( )
60,505
479,562
923
2011
WAEP
£
5.35
6.92
5.55
5.42
5.62
6.65
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
Cranswick plc
Report & Accounts 2011
93
25. Share-based payments (continued)
Company
Outstanding as at 1 April
Granted during the year (note i)
Exercised during the year (note ii)
Outstanding as at 31 March (note iii)
Exercisable at 31 March
2011
Number
10,139
9,620
865
( )
18,894
-
2011
WAEP
£
5.14
6.92
6.65
5.88
-
2010
Number
£
12,051
1,984
3,896
( )
10,139
-
2010
WAEP
5.08
5.94
5.36
5.14
-
i) The share options granted during the year were at £6.92, representing a 20 per cent discount on the price at the relevant date.
The share price at the date of grant was £8.60 (2010: £7.85).
ii) The weighted average share price at the date of exercise for the options exercised was £8.49 (2010: £7.45).
iii) For the share options outstanding as at 31 March 2011 the weighted average remaining contractual life is 2.94 years (2010: 3.39 years).
The weighted average fair value of options granted during the year was £1.77 (2010: £1.87). The range of exercise prices for options
outstanding at the end of the year was £3.75 - £6.92 (2010: £2.55 - £6.79).
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 2011 and 31 March 2010:
Group and Company
Dividend yield
Expected share price volatility
Risk free interest rate
Expected life of option
Exercise prices
2011
LTIP
3.63%
31.0%
1.25%
3 years
£nil
2011
SAYE
3.71%
31.0%
1.58% - 2.88%
3,5,7 years
£6.92
2010
LTIP
4.48%
31.0%
2.74%
3 years
£nil
2010
SAYE
3.39%
31.0%
2.09% - 3.33%
3,5,7 years
£5.94
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 market-based performance conditions.
26. Pension schemes
Defined benefit pension scheme
The Group acquired a defined benefit final salary pension scheme during the prior 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 valuation of the scheme was carried out as at 1 January 2010. This valuation was 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.
94
Report & Accounts 2011
Cranswick plc
a) Change in benefit obligation
Benefit obligation at the beginning of the year
Benefit obligation acquired
Interest cost
Actuarial (gains)/ losses
Benefits paid from plan
Benefit obligation at the end of the year
b) Change in plan assets
Fair value of plan assets at the beginning of the year
Fair value of plan assets acquired
Expected return on plan assets
Actuarial (loss)/ gain on plan assets
Employer contributions
Benefits paid from plan
Fair value of plan assets at the end of the year
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 (gains)/ losses immediately recognised
Cumulative amount of actuarial (gains)/ 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
2011
£’000
17,141
-
935
694
( )
881
( )
16,501
2011
£’000
11,788
-
926
70
( )
1,824
881
( )
13,587
2011
£’000
16,501
( )
13,587
2,914
( )
2011
£’000
935
926
( )
9
2011
£’000
856
624
( )
537
( )
2011
5.55%
3.20%
6.10%
3.20%
2010
£’000
-
14,869
692
2,042
462
( )
17,141
2010
£’000
-
9,091
474
1,955
730
462
( )
11,788
2010
£’000
17,141
( )
11,788
5,353
( )
2010
£’000
692
474
( )
218
2010
£’000
2,429
87
87
2010
5.60%
3.45%
7.55%
3.45%
Cranswick plc
Report & Accounts 2011
95
26. Pension schemes (continued)
Future expected lifetime of pensioner at age 65:
Current pensioners
Male
Female
Future pensioners
Male
Female
2011
24.0
26.4
26.0
28.3
2010
23.8
26.3
25.9
28.2
The mortality rates used have been taken from Base tables PCMA00 and PCFA00.
A 0.1 per cent decrease in the discount rate would give rise to a £16,000 decrease in the amounts charged to the income statement during
the year, and a £271,000 increase in the deficit at 31 March 2011.
The scheme rules require the pension benefits to be uplifted by Retail Price Index (RPI), so there was no financial effect from the statutory
requirement to uplift pension benefits by Consumer Price index (CPI) rather than RPI.
f) Plan assets
2011
2011
2010
Asset category
Expected long-term
Fair value
Expected long-term
2010
Fair value
rate of return
of plan assets
rate of return
of plan assets
Equity securities
Bonds
Cash
Total
7.10%
4.60%
4.10%
£’000
8,139
5,407
41
13,587
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 plan has 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
Fair value of scheme assets
Present value of defined benefit obligation
Deficit in the scheme
Experience adjustments on plan liabilities
Experience adjustments on plan assets
2011
£’000
13,587
16,501
( )
2,914
( )
-
70
( )
2010
£’000
11,788
( )
17,141
( )
5,353
-
1,955
Experience gains and losses are presented from 24 June 2009 when the scheme was acquired by the Group.
The Group expects to contribute approximately £1,128,000 to the scheme during the year to 31 March 2012 in respect of regular contributions.
96
Report & Accounts 2011
Cranswick plc
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 £140,000 (2010: £104,000). Contributions during the year totalled £1,435,000
(2010: £1,427,000).
27. Additional cash flow information
Analysis of Group net debt
Cash and cash equivalents
Overdrafts
Other financial assets
Other financial liabilities
Revolving credit
Bank loans
Finance leases and hire purchase contracts
Net debt
At
31 March
2010
£’000
5,922
1,956
( )
3,966
1,763
5,729
387
( )
-
59,530
( )
480
( )
54,668
( )
Cash
flow
£’000
4,620
( )
1,969
( )
6,589
( )
2,500
4,089
( )
-
50,000
( )
60,000
260
6,171
Other
non cash
changes
£’000
-
-
-
263
( )
263
( )
227
1,013
470
( )
350
( )
157
At
31 March
2011
£’000
1,302
( )
3,925
( )
2,623
4,000
1,377
( )
160
( )
48,987
-
( )
570
( )
48,340
Net debt is defined as cash and cash equivalents, loans receivable and interest rate swaps at fair value less interest bearing liabilities (net of
unamortised issue costs). Cash and cash equivalents all relate to continuing operations.
At
31 March
2009
£’000
4,399
12,437
( )
8,038
( )
263
7,775
( )
173
( )
9,000
( )
48,882
( )
762
( )
-
66,592
( )
Cash
flow
£’000
1,499
10,481
11,980
-
11,980
-
9,000
10,000
( )
762
120
11,862
Other
non cash
changes
£’000
24
-
24
1,500
1,524
214
( )
-
648
( )
-
600
( )
62
At
31 March
2010
£’000
5,922
( )
1,956
3,966
1,763
5,729
387
( )
-
59,530
( )
-
480
( )
54,668
( )
Cash and cash equivalents
Overdrafts
Other financial assets
Other financial liabilities
Revolving credit
Bank loans
Loan notes
Finance leases and hire purchase contracts
Net debt
Cranswick plc
Report & Accounts 2011
97
27. Additional cash flow information (continued)
Analysis of Company net debt
Cash and cash equivalents
Overdrafts
Other financial liabilities
Revolving credit
Bank loans
Net debt
Cash and cash equivalents
Overdrafts
Other financial assets
Other financial liabilities
Revolving credit
Bank loans
Loan notes
Net debt
28. Contingent liabilities
At
31 March
2010
£’000
4,004
-
4,004
387
( )
-
59,530
( )
55,913
( )
At
31 March
2009
£’000
-
6,157
( )
6,157
( )
124
6,033
( )
173
( )
9,000
( )
48,882
( )
460
( )
64,548
( )
Cash
flow
£’000
4,003
( )
2,742
( )
6,745
( )
-
50,000
( )
60,000
3,255
Cash
flow
£’000
4,004
6,157
10,161
-
10,161
-
9,000
10,000
( )
460
9,621
Other
non cash
changes
£’000
-
-
-
227
1,013
470
( )
770
Other
non cash
changes
£’000
-
-
-
124
( )
124
( )
214
( )
-
648
( )
-
986
( )
At
31 March
2011
£’000
1
2,742
( )
2,741
( )
160
( )
48,987
( )
-
51,888
( )
At
31 March
2010
£’000
4,004
-
4,004
-
4,004
387
( )
-
59,530
( )
-
55,913
( )
The Company, together with its subsidiary undertakings, has entered into a cross guarantee with Lloyds TSB Bank plc, The Royal Bank
of Scotland plc, Clydesdale Bank PLC (trading as Yorkshire Bank) and Coöperatieve Centrale Raiffeisen-Boerleenbank B.A. (trading as
Rabobank International) in respect of the Group’s facilities with those banks. Drawn down amounts totalled £53,925,000 as at 31 March 2011
(2010: £61,956,000).
For the Company, the amounts drawn down by other Group companies which were guaranteed by the Company at the year end totalled
£1,183,000 (2010: £1,956,000).
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Report & Accounts 2011
Cranswick plc
29. Commitments
(a) The Directors have contracted for future capital expenditure for property, plant and equipment totalling £584,000 (2010:
£14,917,000).
(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
2011
£’000
2,718
6,666
2,670
12,054
2010
£’000
3,348
8,032
12,207
23,587
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:
Group
Related party
Associate – Farmers Boy (Deeside) Limited
Sales to related party
Service rendered to related party
Amounts owed by related party
£’000
13,521
-
£’000
289
-
£’000
1,583
-
Services rendered to related party
Interest paid to related party Dividends received from related party
£’000
14,830
18,200
£’000
2,565
2,415
£’000
10,508
8,808
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
2011
£’000
2,921
386
515
3,822
2010
£’000
4,775
345
139
5,259
Cranswick plc
Report & Accounts 2011
99
2011
2010
Company
Related party
Subsidiaries
2011
2010
shareholder
Five year statement
2011
£’m
2010
£’m
2009
£’m
2008
£’m
2007
£’m
Turnover *
758.4
740.3
606.8
559.2
479.8
Profit before tax *
47.1
43.8
34.7
Earnings per share *
74.5p
69.7p
40.5p
Dividends per share
27.5p
25.0p
21.7p
Capital expenditure
35.9
20.5
21.2
33.0
51.9p
19.9p
25.8
32.1
49.3p
18.1p
11.8
Net debt
Net assets
( )
48.3
( )
54.7
( )
66.6
( )
78.4
( )
75.9
220.9
193.6
166.5
155.3
135.8
*: 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
August
September
November
January
100 Report & Accounts 2011
Cranswick plc
information
Shareholder analysis
at 4 May 2011
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 2010
Share price at 31 March 2011
High in the year
Low in the year
Number of holdings
Number of shares
5,774,964
41,861,927
47,636,891
385,915
1,225,937
771,501
3,413,715
2,906,445
38,933,378
47,636,891
1,175
678
1,853
940
540
109
155
38
71
1,853
808p
830p
907p
784p
Share price movement
Cranswick’s share price movement over the ten year period to May 2011 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 2001, is shown below:
Cranswick
FTSE All Share
FTSE All Share Food Producers
1200
1000
800
600
400
200
0
May 2001
May 2003
May 2005
May 2007
May 2009
May 2011
Source: Investec
Cranswick plc
Report & Accounts 2011
101
awards
Meat Management Awards
2010 Winner
Best Pork Product and Best Red Meat Product
Richard Woodall Dry Cured Bacon
2009 Winner
Manufacturer of the Year
Grocer Own Label Excellence Awards
2011
Gold
Gold
Silver
Silver
2010
Gold
Best Sausage or Bacon Category
Sainsbury’s Taste The Difference 6 Outdoor Bred
Cumberland Pork Sausages
Best Deli Meat Category
Sainsbury’s Delicatessen Hand Carved Roast Ham
Best Beef, Lamb & Pork product
Tesco Finest Extra Matured Norfolk Outdoor
Reared Pork Shoulder Joint with Pork
& Apricot Stuffing
Best Deli Meat
Tesco Finest British Outdoor Reared Yorkshire
Crumbed Ham
Meat Joints Category
Sainsbury’s Taste the Difference British
Ultimate Outdoor Reared Dry Cured
Unsmoked Gammon Joint
Silver
Chilled Savoury Category
Sainsbury’s Taste the Difference British Pork
Cocktail Sausages Wrapped in a Butter Puff Pastry
2009 Winner
Winner
Delicatessen Meat Category
Sainsbury’s Taste the Difference Traditional
Spiced Ham
Bacon & Sausage Category
Morrisons’ The Best Lightly Oak Smoked
Sweetcure Rindless Back Bacon
2008 Winner
Meat & Poultry Category
Applewood Smoked Bacon
Grocer Food and Drink Awards
2011
Silver
Chilled Savoury Category
Jamie Oliver - My Delicious British Pancetta
Quality Food Awards
2010 Winner
2009 Winner
Best ‘Free From’ Category
Co-operative Truly Irresistible Gluten Free
Pork Sausage
Fresh Meat Game and Poultry Award
Sainsbury’s Taste the Difference 12 British
Ultimate Chipolatas
Award Highlights
Cranswick were pleased to collect an award at the British Turkey
Awards 2010, held at London’s Claridge’s on 23rd September.
Tesco Finest Hand Carved Butter Basted Turkey won the Best
Ready To Eat Category.
Pictured L-R opposite is Matthew Pullen (Chairman of the British
Turkey Publicity and Marketing Committee), Richard Ellett
(Cranswick’s Tesco National Account Manager), Lisa Bean (from
event sponsor Sierra Space Heating) and Sir Geoff Hurst MBE.
102 Report & Accounts 2011
Cranswick plc
BPEX Foodservice Pork Product of the Year Competiton
Meat and Poultry News Awards
2008
Gold
Best Cured Product
Jack Scaife Hand Cured, Air Dried Gammon Steak
2009 Winner
Producer of the Year Award
Cranswick plc supplier - Thomas Dent
of Penrith in Cumbria
Gold
Gold
Silver
Best Fresh Pork Cut Outdoor Reared
Hampshire Breed Thick Cut Pork Chops
Best Pork Ready Meal
Ham Shanks in Dijonnaise Sauce
Best Innovative Pork Product
Smokey Flavour Maple BBQ Ribs
2007
Gold
Best Innovative Pork Product
Pork Shanks
Gold
Silver
Best Cured Product
Muscavado Sweetcure Streaky Bacon
Best Cured Product
Muscavado Sweetcure Back Bacon
2007
Silver
Best Fresh Pork Cut
Hampshire Outdoor Reared Rib Roast
BPEX Bacon Connoisseurs Week
2010 Winner
Overall Winner & Best Retailer ‘Smoked’ Category
M&S Outdoor Bred British Smoked Dry Cured
Streaky Bacon
2010 Winner
Best New Flavour Category
M&S Outdoor Bred British Demerara
Sweet Cure Bacon
Yorkshire Company of the Year 2007
2007 Winner
Yorkshire Business Enterprise Award
Food Awards 2007
2007 Winner
Best Packaging for a Product
Sainsbury’s Taste the Difference Dry
Cured Sweet Cure Back Bacon
British Turkey Awards
2010 Winner
Best Ready to Eat Product
Tesco Finest Hand Carved Butter Basted Turkey
Super Meat Awards
2010 Winner
Best Sausage Category
The Co-operative Truly Irresistible Gluten Free
Pork Sausage
2007 Winner
Best Pork or Bacon Product
Truly Irresistible Oak Smoked Dry Cured Bacon
Guild of Fine Foods Retailers ‘Great Taste Awards’
2008
Gold
Sainsbury’s Taste the Difference
Ultimate Oak Smoked Bacon
Gold
Smoked Streaky Bacon
Cranswick plc
Report & Accounts 2011
103
advisers
Secretary
Malcolm Windeatt FCA
Company Number
1074383
Registered Office
Stockbrokers
Registrars
Auditors
Solicitors
Bankers
74 Helsinki Road
Sutton Fields
Hull
HU7 0YW
Investec Investment Banking - London
Shore Capital Stockbrokers - Liverpool
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0871 664 0300 (Calls cost 10p per minute plus network extras; lines are open 8.30am to 5.30pm,
Monday - Friday). If calling from overseas please call +44 208 639 3399
email: shareholder.services@capitaregistrars.com
www.capitaregistrars.com
Ernst & Young LLP – Hull
Rollits – Hull
Lloyds TSB Bank plc
The Royal Bank of Scotland plc
Clydesdale Bank PLC (trading as Yorkshire Bank)
Coöperatieve Centrale Raiffeisen-Boerleenbank B.A. (trading as Rabobank International)
Merchant Bankers
N M Rothschild & Sons – Leeds
104 Report & Accounts 2011
Cranswick plc
R e g i s t e r e d O f f i c e
Helsinki Road, Sutton Fields, Hull HU7 0YW
Telephone: 01482 372000
www.cranswick.co.uk