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, pastry products and traditional
dry cured bacon.
FINANCIAL HIGHLIGHTS
£820.8m
£48.4m*
Turnover
2012
2011
2010
820.8m
758.4m
740.3m
Pr
2012
2011
2010
e Tax
48.4m*
47.1m
43.8m
78.6p*
Earnings Per Share
28.5p
Dividends Per Share
2012
2011
2010
78.6p*
74.5p
69.7p
2012
2011
2010
28.5p
27.5p
25.0p
•
•
•
•
Turnover up 8 per cent to £821m
Profit before tax up 3 per cent at £48.4m*
Increase of 6 per cent in earnings per share to 78.6p*
Dividend up 4 per cent to 28.5p per share
* after non-recurring gain of £2.6m (net)
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
02
06
10
18
19
20
24
30
36
41
42
44
45
45
46
47
48
49
50
51
52
90
91
92
94
SEASONAL CENTREPIECE
FOR A SPECIAL SHARING
OCCASION
Outdoor reared Hampshire
breed rib roast with diamond
scored crispy crackling, served
alongside barbecue pork
belly ribs, streaky bacon
wrapped chipolatas and
cider and apple sauce
CHAIRMAN’S STATEMENT
Martin Davey - Chairman
Against a background of strong raw material price increases early in the financial
year and a continued challenging environment for the consumer, the Company
recovered strongly during the second half and recorded its highest ever full year sales
and second best trading profit in its history. In fact, taking into account non-recurring
items, Cranswick achieved a record profit before taxation for the year.
The business worked closely with its customers to offer competitively priced food
to consumers so as to alleviate some of the economic pressures facing them.
Whilst this adversely impacted operating margins it contributed, along with the
increasing popularity of pork products, to an increase in sales volumes.
Non-recurring items comprised a gain on the sale of the shareholding in the
associated company, Farmers Boy (Deeside) Limited (“FBD”); Cranswick’s share
of trading losses at FBD and a non-cash charge for goodwill impairment at
The Sandwich Factory.
Results
Underlying sales rose 10 per cent in the year and reflected growth across most
product sectors. Especially strong growth was seen in sales of bacon, fresh pork
and sausages. Total revenue for the year was 8 per cent higher than previously at
£821 million. The decline in the operating margin referred to earlier was partially
offset by lower financing costs and along with net income from non-recurring items
of £2.6 million gave rise to a profit before taxation of £48.4 million. Earnings per
share were 6 per cent higher than last year at 78.6 pence. Excluding the overall
effect of goodwill impairment this year and FBD in both years, adjusted earnings per
share were 0.1 pence higher than the prior year at 72.9 pence.
Net finance costs of £1.0 million were covered 49 times by profit before net
finance costs and tax, compared to 30 times in the previous year. Cash flow in the
period was robust notwithstanding the investment in the Company’s asset base
of £20 million to expand production capacity, improve efficiency and broaden the
product range. Debt at the end of the year was further reduced by the proceeds
of the sale of the FBD shareholding and stood at £21.7 million, substantially lower
than £48.3 million a year earlier.
There is further information on trading and finance in the reviews by the
Chief Executive and Finance Director which follow.
FBD
Investment was made in FBD during 2010 when Cranswick’s site at Deeside was
put into a newly formed company, owned jointly with Wm Morrison Supermarkets
PLC, in exchange for a 49 per cent shareholding. It was felt by both parties that
it was now an appropriate time for the site to come under single ownership.
Cranswick’s shareholding was sold for cash at the end of March 2012 and we
wish the business every success.
Dividend
The Board is proposing to increase the final dividend by 4.3 per cent to 19.5 pence
per share from 18.7 pence per share previously. Together with the interim dividend,
which was raised 2.3 per cent to 9 pence per share and paid in January 2012, this
makes a total dividend for the year of 28.5 pence per share compared to 27.5
pence last year. The final dividend, if approved by Shareholders, will be paid on 7
September 2012 to Shareholders on the register at the close of business on 6 July
2012. Shares will go ex-dividend on 4 July 2012. Shareholders will again have the
option to receive the dividend by way of scrip issue.
2
Report & Accounts 2012
Cranswick plc
Cranswick plc
Report & Accounts 2012
3
SUCCULENT BRITISH
TERRINE TO START
Pork, pistachio and ham hock
terrine with a fresh leek base,
wrapped with delicate air
dried ham to encapsulate
the great British tastes
Board
The Board announces today that Bernard Hoggarth will be standing down from
his position as Chief Executive at the forthcoming Annual General Meeting, to be
held on 1 August 2012. After joining Cranswick in 1978 Bernard was appointed
CEO in 2004 as the Company continued its successful development. He reaches a
landmark birthday this summer and has planned for some time to reduce his input
to allow him the opportunity to focus on other interests. He will though continue
with Cranswick on a part-time basis in the role of Commercial Director. Adam Couch
will be appointed CEO when Bernard stands down. Adam has been with the
Company for over 20 years, since graduation, and was appointed to the Board in
2003 with specific responsibility for the fresh pork activities. Adam was appointed
COO a year ago as part of the Board’s strategy for succession planning.
On behalf of all at Cranswick I thank Bernard for his contribution as CEO, look
forward to his continued involvement in the business and wish Adam every success
as Cranswick continues its progress.
Staff
The year has not been without its challenges and for the business to have continued
its development in the manner outlined both above and in the reviews that follow is
a true reflection of the quality, determination, experience and expertise that prevails
throughout the Company. On behalf of the Board I express our sincere thanks and
appreciation to the management teams and their colleagues.
Compliance with the UK Corporate Governance Code
A statement relating to compliance with the Code is included in the Corporate
Governance Statement on page 24.
Outlook
The Company is well positioned. There is a strong and experienced management
team in place, a robust balance sheet, high quality assets and a range of products
that, by working closely with our customers, are proving popular with the consumer.
Continued focus on product development and operational efficiencies are key
to maintaining this popularity in the current economic environment. The Board
looks forward to the opportunities and challenges which lie ahead as it continues
Cranswick’s successful long-term development.
Martin Davey
Chairman
21 May 2012
Profit Before Tax
1990-2012
(£m)
Dividend Per Share
1990-2012
(pence)
4
Report & Accounts 2012
Cranswick plc
3.33.84.04.14.34.65.15.86.87.58.310.812.013.214.516.518.119.921.725.027.528.52.8‘90‘91‘92‘93‘94‘95‘96‘97‘98‘99‘00‘01‘02‘03‘04‘05‘06‘07‘08‘09‘10‘11‘121.41.72.22.33.03.14.05.07.19.311.717.519.821.221.631.132.733.034.7 43.80.9‘90‘91‘92‘93‘94‘95‘96‘97‘98‘99‘00‘01‘02‘03‘04‘05‘06‘07‘08‘09‘10‘11‘1247.148.4 Cranswick plc
Report & Accounts 2012
5
POSH PORK FOR THE
MAIN EVENT
Outdoor reared Hampshire
bone in pork chop with
butternut squash puree,
served with fresh leeks and
cranberries and finished with
a cranberry jus and crispy
crackling pork straw
REVIEW OF ACTIVITIES
Bernard Hoggarth - Chief Executive
The Group has not previously had to contend with such a diverse trading
environment in one financial year. During the first half of the year, the business
faced the challenge of passing on raw material inflation which was met with
unprecedented resistance by customers and proved more difficult than previously
to achieve. The second half of the year, on the other hand, saw a partial recovery
of certain raw material increases which was further aided by a steady decrease in
input costs, to help bridge the gap. These two factors, together with very pleasing
increases in sales in all categories, made for an excellent second half; something
which would have been very difficult to foresee only a few months earlier.
How pleasing it is therefore to report so many areas of the Group’s portfolio
delivering double digit growth and the business overall reporting revenue growth
of over 8 per cent, with underlying sales increasing in excess of 10 per cent.
Fresh Pork had an excellent year with sales ahead 15 per cent. The continuing
capital expenditure programme has seen the commissioning of the new breaded line
at the Norfolk plant with the capability to produce a range of escalope and schnitzel
products for the convenience sector. These new, whole muscle, reformed or stuffed
‘cordon bleu’ style products are proving extremely popular, thanks, in no small part,
to the very competitive price of pork compared to most other proteins. This price
advantage led to the Group’s most successful Christmas trading period for its fresh
pork, premium sausage and bacon products. Further investment in the Hull fresh
pork site is taking place, with the reorganisation of the butchery area, which will lead
to greater efficiencies and the installation of a rapid chill system for pig carcases,
which will deliver increased yields. Sales to Far Eastern markets have continued to
gain momentum. Exports both to Europe and further afield are becoming areas of
increased focus for the Group. In the UK, the Company has continued to increase
its customer base, both in standard pork and in niche areas such as the pedigree
Gloucester Old Spot fresh pork products, which are being produced specifically for
one of the Group’s large retail customers.
Sausage sales increased by a very healthy 12 per cent. This performance further
confirms Cranswick’s long term commitment to the quality sector of the market
place. The Group’s second sausage production facility in Norfolk is now complete
and performing well. A new range of products under the ‘Norfolk Sausage
Company’ banner was launched, focusing on a real value offering with larger
packs and an impactful promotional programme. At the Lazenby’s production
facility in Hull, focused and well researched new product development has led to
twelve new sausage lines being launched during the year including duck, honey
and apple, sun-dried tomato and mozzarella, pork and jalapeno chilli and West
Country cheddar with chives. A range of burgers was also launched including beef
and caramelised onion, pork and Bramley apple and beef with mature cheddar. A
new range of burgers and meat balls under the ‘Black Farmer’ brand was launched
recently in advance of the new barbeque season. Further business wins have been
achieved with the launch of new flavours and products across several of the
Group’s major grocery retail customers.
The bacon category performed particularly strongly with sales up 39 per cent.
The customer base has expanded throughout the course of the year, as has the
product range. New equipment has been installed and commissioned which
has significantly reduced the labour cost of producing diced bacon. Cranswick’s
air-dried, dry-cured bacon now features in the premium tier ranges of the seven
largest multiple retailers in the UK. As well as developing new air dried hams,
value wet cured or injected sliced products are being produced to service the
‘Butchers Choice’ tier.
Sandwich sales increased by 4 per cent. Traditionally Cranswick has been a
sandwich supplier to the ‘on-the-move’ foodservice sector, which has proved
increasingly challenging in recent years particularly in relation to rising input costs.
However, following a review of the cost base and investment in both equipment
and infrastructure at the Atherstone production facility, the business is now well
placed to take advantage of the changing dynamic of the sandwich market.
6
Report & Accounts 2012
Cranswick plc
Cranswick plc
Report & Accounts 2012
7
Pastry sales showed good growth from modest beginnings. Sales were strong over
the key Christmas trading period with party food high on the agenda. During the
year a range of products was developed for one of our key retail customers which
has been very well received by the consumer, with the result that the original product
range has now been doubled. A range of hot eating pies, together with flans and
quiches are planned subject to additional production capacity being developed.
Underlying cooked meat sales increased by 6 per cent. Recent developments in this
category include the launch of a range of air dried hams - a unique proposition,
as a British product, in the UK retail sector. Legs from the Hull fresh pork site are
dry-cured and air-dried at the gourmet bacon facility in Sherburn, before being
transported to the cooked meat plant in Barnsley to be cooked and retail packed.
This further demonstrates Cranswick’s successful track record of winning business
through collaboration and by producing a step change in product quality. Also,
due to volume pressure from increased sales at the Delico factory at Milton Keynes,
further investment has been made there in both the fabric of the building and
more efficient slicing lines.
Sales of continental products were broadly similar to the previous year.
This performance reflected one retail customer procuring and slicing more products
in-house, however, new business wins and growth from existing products and
customers helped mitigate this loss. A new Cranswick brand of olives under the
Bodega label has been launched successfully. These products are of the highest
quality with a real point of difference and have been brought to market at a time
when olives and antipasti products are really growing in popularity with the UK
consumer. Sales of Parma ham reached record levels, with charcuterie sales to one
specific discounter more than doubling which further demonstrates the consumer’s
growing interest in this style of product.
Foodservice business currently represents less than 6 per cent of Group revenues.
This figure includes sandwich sales, which historically have been made predominantly
to this sector. The internal appointment of a director to lead a new team with
specific foodservice expertise adds focus and provides increased resource to grow
sales across the Group’s full spectrum of products. The total foodservice industry in
the UK is worth approximately £48 billion. A market of this size provides tremendous
scope to introduce Cranswick’s brand of quality and innovation, using the model that
has been so successful with the Group’s retail customers.
Cranswick has well invested facilities which, across the sectors in which it operates,
are amongst the most efficient production sites in the UK. The quality of the
Group’s product range, together with class leading development chefs and a senior
marketing team which, working closely with its customers, continues to innovate
and search for new growth opportunities, provides for an extremely positive
outlook for the Group.
It has been my intention for some time to stand down as Chief Executive, and
this I intend to do at the Company’s Annual General Meeting on 1 August, after
34 years’ service with the Group. I am extremely proud of what Cranswick has
achieved over the last three decades. I have had the good fortune to work with a
great team of dedicated and innovative colleagues, whose commitment, vision and
teamwork have made the business what it is today. I hand over to Adam Couch,
a colleague of many years. I admire Adam’s energy and ambition for the business
and I am sure that Cranswick will continue to prosper under his stewardship.
Bernard Hoggarth
Chief Executive
21 May 2012
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Report & Accounts 2012
Cranswick plc
THE ULTIMATE ENGLISH
COOKED BREAKFAST
Freedom Foods ultimate pork
chipolatas with dry cured
and air dried British bacon
served with black pudding,
field mushrooms, vine
ripened tomatoes and a
free range poached egg
Cranswick plc
Report & Accounts 2012
9
GROUP OPERATING AND FINANCIAL REVIEW
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, but
increasing 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. More recently the Group has launched a range of artisan pastry products
to a number of its retail customers. The markets in which the food business
operates are competitive both in terms of pricing from fellow suppliers and the
retail environment in general. The UK food retail market is known to be amongst
the most competitive in the world. Despite this, Cranswick has a long record of
increasing sales and profits through a combination of investing in modern efficient
factories, developing a range of quality products and making sound acquisitions.
The business is 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 on pages 6 to 8.
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 its customers
• Maintaining the highest level of service to its 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,
continued capital investment and strong cash generation. Both profitability and
cash flow were augmented by the sale of the Group’s 49 per cent stake in Farmers
Boy (Deeside) Limited (“FBD”) on 30 March, which is discussed in more detail on
page 13. The trading environment in which the Group operates has remained
challenging. During the first half of the year, the business had to manage rapid
raw material price inflation, which it looked to recover through a combination of
selling price increases and operational efficiency improvements. 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 these pressures.
10
Report & Accounts 2012
Cranswick plc
GASTRO PORK AND BLACK
PUDDING PLATE
Freedom Foods slow roasted
Norfolk pork belly squares
and Bury black pudding
served with pea puree
and finished with
fresh pea shoots
Cranswick plc
Report & Accounts 2012
11
Revenue
Reported sales were 8 per cent ahead of last year reflecting
growth across most product sectors and the benefit of a 53
week year. The Deeside cooked meats business was transferred
into FBD on 9 July 2010 and from this date onwards sales from
FBD have been excluded from Group total sales. Adjusting
for the impact of FBD, underlying, like-for-like sales increased
by 10 per cent. Fresh pork sales increased by 15 per cent,
sausage sales by 12 per cent, bacon sales by 39 per cent and
sandwich sales by 4 per cent. Sales of charcuterie products
were 1 per cent lower as new products and customers
together with increased sales to existing customers helped
mitigate the decision of one retail customer to move to a direct
sourcing policy. Reported cooked meat sales were 1 per cent
lower, but after adjusting for sales transferred to FBD, like-for-
like sales were 6 per cent ahead.
Taxation
The tax charge as a percentage of profit before taxation was
22.5 per cent (2011: 25.0 per cent). The standard rate of UK
Corporation tax was 26 per cent for 2012 and 28 per cent for
2011. The lower than standard rate of tax in the current year
primarily relates to the gain on sale of the Group’s 49 per cent
stake in FBD which did not attract a charge to tax, together
with a deferred tax credit of £0.7 million following the
substantial enactment of the Finance Act 2012 which reduces
the Corporation tax rate from 26 per cent to 24 per cent in the
year to 31 March 2013. The lower than standard rate in the
previous year related to a deferred tax credit of £1.0 million on
the transfer of assets from the Deeside cooked meats business
to FBD and a further deferred tax credit of £0.7 million in
relation to the planned reduction in the Corporation tax rate
from 28 per cent to 26 per cent in the current year.
Operating Profit
Group operating profit of £41.8 million is stated after a
goodwill impairment charge of £4.9 million which followed
a reassessment of the carrying value of goodwill attributable
to the Sandwiches cash generating unit. Group operating
profit before impairment at £46.7 million fell by 5 per cent
and at 5.7 per cent of sales, operating margin on the same
basis was 0.8 per cent below the level achieved last year.
Notwithstanding the impairment charge, the reduction in
operating profit is entirely attributable to the input cost inflation
pressure experienced in the first half of the year. A combination
of sales growth, continued improvements in operational
efficiencies, strong export margins and more moderate raw
material prices allowed the Group to report a much stronger
second half performance.
Share of Results of Associate
The Group’s share of the post-tax result of its associate, FBD,
in the year to 31 March 2012 was a loss of £0.7 million (2011:
loss of £0.4 million). On 30 March 2012 the Group sold its 49
per cent holding in FBD to Wm Morrison Supermarkets PLC for
a cash consideration of £14.5 million. The transaction gave rise
to a profit on sale of £8.3 million.
Finance Costs
Net finance costs of £1.0 million (2011: £1.6 million) were
substantially lower than the previous year reflecting the strong
cash generation in the year and the improved terms negotiated
when the Group’s bank facilities were renewed in March 2011.
As a consequence, interest cover strengthened from 30.0
times to 49.2 times.
Profit Before Tax
Profit before tax at £48.4 million (2011: £47.1 million) was 3
per cent ahead. Adjusting for the effects of the associate in
both years and the goodwill impairment charge in the current
year referred to above, underlying profit before tax was £45.6
million (2011: £47.3 million).
Earnings Per Share
Basic earnings per share increased by 5.5 per cent to 78.6
pence, reflecting the profit on sale of the Group’s 49 per cent
stake in FBD, lower financing costs and the lower effective
corporation tax rate, partly offset by lower operating profits,
the goodwill impairment charge and an increase in the average
number of shares in issue during the year to 47,709,000 (2011:
47,408,000). Adjusted earnings per share, which exclude the
effect of the goodwill impairment charge this year and FBD
from both years, increased by 0.1 pence from 72.8 pence to
72.9 pence.
Cash Flow and Net Debt
The Group has continued to deliver strong operational cash
flows. Cash generated from operating activities was £45.5
million (2011: £51.6 million), with the reduction compared to
the previous year reflecting lower Group operating profits, a
modest increase in working capital and higher tax payments.
The net cash outflow from investing activities of £3.3 million
is accounted for by capital additions, net of fixed asset
sale proceeds and grants received, of £19.9 million, loan
repayments received of £1.9 million and the proceeds from the
sale of the Group’s 49 per cent stake in FBD of £14.5 million.
The previous year’s outflow was £36.3 million. The £20.8
million of net cash used in financing activities in 2012 is largely
due to interest paid of £1.3 million, dividends paid of £11.8
million, issue costs of long term borrowings of £1.0 million,
loan repayments of £7.0 million and proceeds from issue of
share capital, net of shares repurchased of £0.6 million.
The prior year cash outflow from financing was £21.9 million.
The overall result is a net increase in cash and cash equivalents
of £21.4 million (2011: decrease of £6.6 million). Net debt
reduced by £26.6 million to £21.7 million (2011: £48.3 million)
at the year end, and gearing fell from 22 per cent to 9 per cent.
Pensions
The Group operates a number of defined contribution
schemes, whereby 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 2012 was £5.3 million (2011: £2.9 million);
12
Report & Accounts 2012
Cranswick plc
with the increase mainly relating to lower discount rates on scheme
liabilities driven by lower bond yields. The present value of funded
obligations was £21.2 million (2011: £16.5 million) and the fair
value of plan assets was £15.8 million (2011: £13.6 million).
Investment in Associate
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 transaction gave
rise to a profit before tax in the period to 31 March 2011 of
£0.3 million, together with an associated deferred tax credit of
£1.0 million. On 30 March 2012 the Group sold its 49 per cent
stake to Wm Morrison Supermarkets PLC group. Further details
of the disposal are disclosed above and in note 14.
Capital Structure
The primary objective of the Group’s capital management is
to ensure that it maintains a strong credit rating and healthy
capital ratios in order to support its business and maximise
value for Shareholders and other stakeholders.
The Group regards its Shareholders’ equity and net debt as its
capital and manages its capital structure and makes adjustments
to it in light of changes in economic conditions. To maintain or
adjust the capital structure, the Group may adjust the dividend
payment to Shareholders, return capital to Shareholders or
issue new shares. No changes were made to the objectives,
policies or processes during the years ended 31 March 2012
and 31 March 2011.
The Groups capital structure is as follows:
Net Debt (note 25)
Cranswick plc
Shareholders’ equity
Capital Employed
2012
£m
21.7
245.9
267.6
2011
£m
48.3
220.9
269.2
Distributions, Capital Raising and Share Repurchases
The proposed final dividend for 2012 together with the interim
paid in January 2012 amount to 28.5 pence per share which is
4 per cent higher than the previous year. The increase in the
share capital of the Group comprises 205,884 of shares issued
relating to share options exercised during the year and 192,722
of shares issued in respect of scrip dividends. During the year
the Company repurchased 22,000 ordinary shares to satisfy
share option awards.
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
• Group operating margin – Group operating profit as a
percentage of sales revenue
• Free cash flow – cash generated from operations less tax
and net interest paid.
Performance Against KPI’s
Underlying sales growth
Gross margin
Group operating margin*
Free cash flow
2012
10.3%
12.4%
5.7%
£44.4m
2011
3.8%
13.4%
6.5%
£50.0m
* Before goodwill impairment charge of £4.9 million in the current year
The Group reported underlying sales growth of 10.3 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
12.4 per cent of sales compared to 13.4 per cent a year ago
reflecting the challenge of dealing with input cost inflation
during the first half of the year and operating margin before
goodwill impairment at 5.7 per cent was 0.8 per cent lower,
for the same reason. Principal cash flows are discussed on
page 12.
Future Development
The Group will continue to seek to increase sales through a
combination of product development with existing customers
and business gains with new ones. The standard of the Group’s
factories will be maintained at the highest level and further
suitable acquisition opportunities will be pursued.
Resources, risks and relationships
Resources
The Group aims to safeguard the assets that give it competitive
advantage, being its reputation for product innovation, 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 almost £120 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 2012
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 cause actual results to differ materially from
expected and historical results. During the year, the Group
established a Risk Committee with representatives from key
operations and functions across the business.
The Risk Committee aims to identify and assess the impact of
risks facing the business as well as understand the controls in
place to mitigate them. The principal risks and uncertainties facing
Cranswick and the actions taken to reduce their impact are set
out below:
Risk area
Nature of risk and potential impact
Risk mitigation
Industry risks
State of the economy
Competition, customer
retention and reliance on
key customers
A deterioration in the world and, in particular, UK
economies may adversely affect the activity levels of
consumers and the Group’s immediate customers,
leading to a fall in demand for the Group’s products
and ultimately lower profitability and cash flow.
Although Cranswick is unable to influence general
economic conditions, the business offers a range of
products across premium, standard and value tiers
which it is able to flex in response to consumer and
market trends.
The Group trades in highly competitive markets
which tend to operate without long term contracts.
Product innovation and changing consumer trends
provide a constant challenge to the future success
of the Group and its ability to compete effectively.
A significant proportion of the Group’s revenues are
generated from a small number of major grocery
retailer customers, loss of all or part of the Group’s
business with one or more of these customers would
adversely impact the Group’s results.
The Group manages the risk of operating in a
consolidated sector by maintaining strong customer
relationships. This process is supported by delivering
high levels of service and quality and by continued
focus on product development and technical
innovation. The commercial teams continually look
for opportunities to expand the customer base across
all product categories and work closely with key
customers to ensure service, quality and new product
development are of the highest standard.
Raw material price
fluctuations
The major exposure the Group has to raw material
price fluctuations is pig meat. An increase in raw
material input costs may impact Group profitability.
Purchasing of pigs and pig meat is coordinated
centrally and whilst the Group does not generally seek
to hedge against pig price movements because of
the downside risk, longer term 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. Environmental standards are being
tightened on a regular basis and require increasing
levels of investment. Compliance imposes costs and
prolonged failure to comply could materially affect
the Group’s ability to operate.
The Directors believe that good environmental
practices support the Board’s strategy by enhancing
the reputation of the Group, the efficiency of
production and the quality of products. Further
details of these initiatives are set out in the Group’s
Corporate Social Responsibility report and on the
Group’s website under the ‘Greenthinking’ banner.
Food scares and product
contamination
As a food producer, Cranswick is subject to industry
related risks of contamination of products and/or raw
materials and potential health related issues. Such an
incident may lead to product recall costs, reputational
damage and regulatory penalties
The risk of such events is mitigated by ensuring that
all raw materials are traceable to source and that the
manufacturing, storage and distribution systems of
both Group sites and those of suppliers are continually
audited and monitored by experienced and well
qualified site based and Group technical teams.
Supplier standards
Cranswick is reliant upon its suppliers meeting the
Group’s high quality and welfare standards. Failure
on their part could lead to customer complaints and
reputational damage.
The Group ensures all suppliers of key raw materials
have independent third party accreditations. Detailed
technical specifications are in place for all products,
and all sites have trained product inspection and
Quality Assurance teams.
14
Report & Accounts 2012
Cranswick plc
Risk area
Nature of risk and potential impact
Risk mitigation
Operational risks
Food safety
Business continuity
Legislation
A breach of food safety legislation or the introduction
of more stringent regulations may lead to reputational
damage and regulatory penalties including restrictions
on operations, damages or fines.
Cranswick conforms to all relevant food safety
regulations and adopts best practice across its
production facilities.
The Group faces the risk of incidents such as a major
fire, which may result in significant and prolonged
disruption to its operating facilities and ensuing loss
of sales and reduced profitability.
Business continuity plans are in place across the Group’s
manufacturing facilities and appropriate insurance cover
is in place to mitigate any financial loss.
Business continuity is enhanced by multi-site operations
across the majority of the Group’s product lines.
Legislation in all the markets the Group serves changes
on a regular basis, and interpretation of existing laws
can also change to create ever tightening standards,
often requiring additional human resources and the
provision of new assets and systems. Failure to comply
with existing or new legislation may adversely affect
the Group’s results.
Cranswick is committed to responding positively to
new regulation and ensuring that the Group’s views
are expressed during consultation exercises.
Overseas markets
Cranswick trades in a growing number of overseas
markets, and may not be familiar with local practices
and regulations. Failure to comply could lead to
prosecution and loss of raw material supply or customer.
Extensive research is carried out into new markets
ahead of commencement of trade.
The Group uses reputable local experts wherever
possible to ensure that local laws are complied with.
Technology
The Group is increasingly reliant on both IT and
operational technology and operations could be
significantly impacted if these systems are not well
maintained and updated on a regular basis.
The Group has well trained, operational engineers at
each site who carry out regular checks, calibration and
maintenance on all key machinery. It also has central
and site based IT teams to maintain computer systems.
Business integration
The Group has grown by acquisition as well as
organically, and faces the challenge of integrating new
businesses into the Cranswick group and achieving
operational targets.
The Group ensures suitable incentives are in place to
retain key management, who work closely with existing
group management to help smooth the transition.
There is also rigorous review of operations and results
by the Group board.
Human resource risks
Health & safety
A breach of health & safety regulations would leave
the Group exposed to reputational damage and
regulatory penalties.
Ethical management
Good employee working conditions are core to
Cranswick’s values however poor practice in this area
could lead to prosecution, industrial action and
adverse media attention.
A dedicated Group health & safety team, supported by
site based coordinators, 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.
The Group is a member of SEDEX and ALP, and has
agreed to comply with the ETI base code. Additionally,
all sites will undergo SMETA ethical audits at least
once every two years and carry out labour provider
audits each year. The Group also has an independent
whistleblowing hotline in place so that employees can
raise any concerns they might have.
Cranswick plc
Report & Accounts 2012
15
Risk area
Nature of risk and potential impact
Risk mitigation
The success of the Group is dependent on attracting
and retaining high quality senior management
and staff.
The Group mitigates the risk associated with loss of
key personnel through robust succession planning,
strong recruitment processes, effective incentives
and retention initiatives and on-going training and
development.
The Group experiences periods of heightened
demand across peak periods, and has the potential
to experience mass absence due to sickness. Without
flexibility in the workforce, customer orders may not
be fulfilled.
All Group sites have access to multiple approved
agencies for the supply of temporary, skilled and
unskilled labour. Strict hygiene rules and return to
work procedures are in operation at all sites.
Human resource risks
Staff recruitment and
retention
Access to workforce
Financial risks
Interest rates, currency,
liquidity and credit risk
The Group is exposed to interest rate risk on
borrowings and foreign currency risk on purchases,
particularly of charcuterie products. In addition the
Group needs access to funding for current business
and future growth.
Granting of credit and
recoverability of debt
The majority of sales are made to major UK retailers
and practically all sales, to these and other customers,
are made on credit terms. Granting of credit to
inappropriate parties or failure to collect debts on a
timely basis could leave the Group exposed to losses.
Interest rate and foreign currency risks are managed
using effective hedging policies, which are
coordinated and controlled by the Group’s treasury
function. Each operation has access to the 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
policies are discussed in more detail below.
Control procedures over acceptance of new customers
and review of the level of credit granted with reference
to external credit agencies take place at all sites. Debts
are recovered on a pro-active basis and management
teams aim to ensure customers trade within the agreed
terms. Credit risks are also discussed in more detail
on page 17.
Business acquisitions
Businesses may be acquired based on inaccurate
information, unachievable forecasts or without
appropriate consideration being given to the terms
of purchase.
Rigorous due diligence is carried out in advance of
any new business acquisition, using internal and
external specialists where required.
Treasury policies
Functional Currency
The functional currency of all Group undertakings is sterling.
Foreign Currency Risk
The foreign exchange risk facing the Group is in the purchasing
of charcuterie products. The 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
management meeting 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 2012 gearing had fallen to 9 per cent (2011: 22 per
cent). Given this conservative debt structure the Group has not
fixed the interest rate on any part of its current 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 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.
16
Report & Accounts 2012
Cranswick plc
Credit Risk
Practically all sales are made on credit terms, the majority of
which are to the major UK food retailers. Overdue accounts are
reviewed at monthly management meetings. 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 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 site is monitored on a daily basis and capital
expenditure is approved at local management meetings 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 part of the Group
has access to the Group’s overdraft facility and all term debt is
arranged centrally. The Group renewed its bank credit facilities in
March 2011. The 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 current
facility extends the maturity of the Group’s available financing to
more than three years, providing it with reduced liquidity risk and
long term funding to meet its objectives. Unutilised facilities at 31
March 2012 were £75.8 million (2011: £47.4 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.
Mark Bottomley
Finance Director
21 May 2012
Cranswick plc
Report & Accounts 2012
17
GROUP DIRECTORS AND BUSINESS LOCATIONS
Group Directors
Cooked Meats
Alan Chapman
Ian Fisher
Paul Gartside
Andy Jenkins
Clive Stephens
Nick Tranfield
Bacon and Sausage
Daniel Nolan
Linda Watkin
Drew Weir
Steve Westhead
Fresh Pork
Chris Aldersley
John Fletcher
Stuart Kelman
James Pontone
Neil Willis
Sandwiches
Nick Anderson
Tony Cleaver
Paul Nicholson
Simon Ravenscroft
Charcuterie
Rollo Thompson
Food Central
Andrew Caines
Marcus Hoggarth
Graeme Watson
Chris White
Malcolm Windeatt
18
Report & Accounts 2012
Cranswick plc
Sherburn
In-Elmet
Manchester
Denbigh
Hull
Barnsley
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 joined Cranswick and became Finance Director in 1985. He was
appointed Chief Executive in 1988 and became Chairman on
26 July 2004.
Bernard Hoggarth, Chief Executive
Bernard holds a National Diploma in Agriculture from the Norfolk
College of Agriculture. He joined Cranswick in 1978, focusing
on the agribusiness activity before becoming involved in the
development of the food manufacturing business during the 1990s.
He was appointed a Director in 1988 and Chief Executive in 2004.
It has been Bernard’s intention to stand down this year as Chief
Executive and he will do so on 1 August 2012. He will remain on
the board as Commercial Director.
Adam Couch, Chief Operating Officer
Adam joined the operational side of the fresh pork business of
Cranswick in 1991 after graduating from university in Hull with
a finance and accountancy degree. He was appointed a Director
in 2003 and Chief Operating Officer on 16 May 2011. He will
become Chief Executive on 1 August 2012. Adam is also a
committee member of the British Pig Executive, a position he has
held since 2005.
Mark Bottomley, Finance Director
Mark is a chartered accountant, qualifying with Binder Hamlyn.
He joined Cranswick as Group Financial Controller in January 2008
and was appointed Finance Director in June 2009. He has several
years’ experience in the food production sector where he has held
a variety of senior finance roles.
Jim Brisby, Sales and Marketing Director
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.
John is a chartered accountant with many years of experience in
the food industry. John is currently Group Finance Director of
Genus plc having previously worked for Uniq plc (formerly Unigate
PLC) from 1978 until 2002, in various roles including Group Finance
Director and Deputy Chairman. He was appointed a Non-Executive
Director of Cranswick plc on 1 August 2005 and is Senior
Independent Director and Chairman of the Audit Committee.
John is also a Non-Executive Director of Smiths News plc and is a
member of the Financial Reporting Review Panel.
Patrick Farnsworth +† *
Patrick has many years’ experience in the food industry, having
worked for William Jackson & Son Limited; a Hull based private
company, since 1965, where he was Joint Group Managing
Director from 1995 until his retirement in 2005. He was appointed
a Non-Executive Director of Cranswick plc on 1 August 2004 and
was the Senior Independent Director until 1 August 2005. He is
currently Chairman of the Nomination Committee.
Steven Esom +† *
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 Executive Director of Food at Marks &
Spencer plc which followed 12 years at Waitrose, the last 5 years
of which he was Managing Director. Until June 2009 he was a
Non–Executive Director of Carphone Warehouse plc. He is currently
an Operating Partner of Langholm Capital, Non-Executive Chairman
of Bart Spices and a Non-Executive Director of Tyrrells Investments
Limited and of the British Retail Consortium.
*
†
+
Member of Remuneration Committee
Member of Audit Committee
Member of Nomination Committee
Cranswick plc
Report & Accounts 2012
19
HEARTY PREMIUM
SAUSAGE AND BRITISH
VEGETABLE ROAST
Pork, pancetta and parmesan
sausages served on a bed of
British baby roasted beets,
red onion and fried potatoes
DIRECTORS’ REPORT
The Directors submit their report and the audited
accounts of the Group for the year ended 31 March 2012.
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 2 to 17.
Results and Dividends
The profit on ordinary activities before taxation was £48.4 million (2011: £47.1
million). After a taxation charge of £10.9 million (2011: £11.8 million), the profit
for the year is £37.5 million (2011: £35.3 million). An interim dividend of 9.0
pence per ordinary share was paid on 20 January 2012. The Directors recommend
the payment of a final dividend for the year, which is not reflected in these
accounts, of 19.5 pence per ordinary share which, together with the interim
dividend, represents 28.5 pence per ordinary share, totalling £13.7 million (2011:
27.5 pence per ordinary share, totalling £13.1 million). Subject to approval at the
Annual General Meeting, the final dividend will be paid in cash or scrip form on
7 September 2012 to members on the register at the close of business on 6 July
2012. The shares will go ex-dividend on 4 July 2012.
Events after the balance sheet date
Subsequent to the year end, on 5 April 2012, Cranswick plc sold its 5.5 per
cent investment in the Cranswick Pet Products business for a consideration of
£221,000. Further details are provided in note 29.
Financial Instruments
The Group’s risk management objectives and policy are discussed in the Treasury
Policies section of the Group Operating and Financial Review on pages 10 to 17.
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 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 Board is aware that the
Corporate Governance Code recommends the re-election of all Directors every year
and the Company will comply with this requirement so that now all Directors will
stand for re-election at the forthcoming Annual General Meeting.
Details of the Directors’ beneficial interests in the ordinary share capital of the
Company are included in the Directors’ Remuneration Report on pages 30 to 35.
Major Shareholders
The Company has been informed of the following significant holdings of voting
rights in the ordinary shares of the Company:
At 31 March 2012
At 8 May 2012
Number of Shares % of issued share capital Number of Shares % of issued share capital
Invesco Perpetual
Legal & General Investment Management
Jupiter Asset Management
Standard Life Investments
Aberforth Partners
Black Rock
14,133,933
2,486,754
2,434,231
1,994,393
2,043,983
1,535,756
29.42
5.18
5.07
4.15
4.26
3.20
14,116,357
2,423,690
2,420,878
2,123,309
2,043,983
1,579,145
29.38
5.04
5.04
4.42
4.25
3.29
20
Report & Accounts 2012
Cranswick plc
Cranswick plc
Report & Accounts 2012
21
Share Capital Structure
The Company has one class of shares, being ordinary shares of 10 pence
each. The allotted and fully paid up share capital is shown in note 22.
There are no special rights pertaining to any of the shares in issue.
The Directors of Cranswick plc have received limited authority to
disapply Shareholders’ pre-emption rights in certain circumstances,
to authorise the Company to buy back a proportion of the
Company’s share capital and to allow the Directors to allot shares.
Further resolutions will be placed before the Annual General
Meeting to be held on 1 August 2012 to renew these powers.
At the last Annual General Meeting the Directors received authority
from the Shareholders to:
Allot Shares – this gives Directors the authority to allot
authorised but unissued shares and maintains the flexibility in
respect of the Company’s financing arrangements. The nominal
value of ordinary shares which the Directors may allot in the
period up to the next Annual General Meeting, to be held on
1 August 2012, is limited to £1,587,896 which represented
approximately 33 per cent of the issued share capital (excluding
treasury shares) as at 31 May 2011. The Directors do not have
any present intention of exercising this authority other than in
connection with the issue of ordinary shares in respect of the
scrip dividend offer and the Company’s share option plans.
This authority will expire at the end of the Annual General
Meeting to be held on 1 August 2012.
Disapplication of rights of pre-emption – this disapplies rights
of pre-emption on the allotment of shares by the Company
and the sale by the Company of treasury shares. The authority
will allow the Directors to allot equity securities for cash
pursuant to the authority to allot shares mentioned above, and
to sell treasury shares for cash, on a pro rata basis to existing
Shareholders (but subject to any exclusion or arrangements
as the Directors consider necessary or expedient in relation
to fractional entitlements, any legal, regulatory or practical
problems or costs under the laws or regulations of any overseas
territory or the requirements of any regulatory body or stock
exchange) and otherwise on a pro rata basis up to an aggregate
nominal amount of £238,184, representing 5 per cent of the
Company’s issued share capital as 31 May 2011. This authority
will expire at the end of the Annual General Meeting to be held
on 1 August 2012.
Allot shares and disapply pre-emption rights in connection with
a rights issue – this authorises the Directors to allot relevant
securities and empowers the Directors to allot equity securities
and to sell treasury shares for cash in connection with a rights
issue. This is in addition to the authority to allot shares and the
disapplication of pre-emption rights contained in the authorities
mentioned above. The nominal value of ordinary shares which
the Directors may allot in the period up to the next Annual
General Meeting, to be held on 1 August 2012, is limited to
£1,587,896 which represented approximately 33 per cent of
the Company’s issued ordinary share capital (excluding treasury
shares) as at 31 May 2011. The Directors do not have any present
intention of exercising this authority and power. This authority will
expire at the end of the Annual General Meeting to be held on
1 August 2012.
22
Report & Accounts 2012
Cranswick plc
To buy own shares – this authority allows the Company to buy
its own shares in the market, as permitted under the Articles
of Association of the Company, up to a limit of 10 per cent of
the Company’s issued share capital. The price to be paid for any
share must not be less than 10p, being the nominal value of a
share, and must not exceed 105 per cent of the average middle
market quotations for the ordinary shares of the Company
as derived from the London Stock Exchange Daily Official List
for the 5 business days immediately preceding the day on
which the ordinary shares are purchased. The Directors have
no immediate plans to exercise the powers of the Company to
purchase its own shares and undertake that the authority would
only be exercised if the Directors were satisfied that a purchase
would result in an increase in expected earnings per share and
was in the best interests of the Company at the time. This
authority will expire at the end of the Annual General Meeting
to be held on 1 August 2012. The Directors would consider
holding any of its own shares that it purchases pursuant to this
authority as treasury shares.
During the year the Company repurchased 22,000 of its own shares at
a cost of £136,000. These shares were held as treasury shares and were
subsequently transferred to Directors and senior management of the
Group, at nil cost to the individual, to satisfy the exercise of LTIP share
options. At the year end the Group held no treasury shares.
The Company is not aware of any agreements between Shareholders
that may result in restrictions on the transfer of securities and for
voting rights.
There are no restrictions on the transfer of ordinary shares in the
Company other than where certain restrictions may apply from time to
time, on the Board of Directors and other senior executive staff, which
is imposed by laws and regulations relating to insider trading laws and
market requirements relating to close periods.
Employment Policies
The Group’s policy on employee involvement is to adopt an open
management style, thereby encouraging informal consultation at all
levels about aspects of the Group’s operations. Employees participate
directly in the success of the business by participation in the SAYE share
option schemes.
Employment policies are designed to provide equal opportunities
irrespective of colour, ethnic or natural origin, nationality, sex, religion,
marital or disabled status. Full consideration is given to applications
for employment by and the continuing employment, training and
career development of disabled people.
Payment Policy
The Group does not have a formal policy that they follow with regard
to payment to suppliers. Payment terms are agreed with each supplier
and every endeavour is made to adhere to the agreed terms. The
average credit terms for the Group, based on the year-end trade
creditors figure and a 365 day year, are 34 days. The average credit
taken by our customers on a similar basis is 28 days.
Essential Contracts
It is imperative that Cranswick is able to source its high quality raw
materials at the most competitive prices and to this end the Company
has numerous contracts in place for these supplies. While these
contracts are collectively essential to the business, no single contract or
supplier is critical to the Company’s business.
The Company also has strong relationships with certain major retailers
to supply them with product.
Charitable Donations
As part of the Group’s commitment to the communities in which it
operates, contributions totalling £30,000 were made during the year
to local charities and community projects.
Auditors
Ernst & Young LLP have expressed their willingness to continue
in office and a resolution proposing their re-appointment will be
submitted at the Annual General Meeting.
Directors’ statement as to disclosure of information to auditors
The Directors who were members of the Board at the time of
approving the Directors’ Report are listed on page 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
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 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 and Bernard Hoggarth.
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:
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 holders; or
2) at any time within six months following the Take-over Date,
in any other case.
In the event that the Court sanctions a scheme of arrangement under
Part 26 of the Companies Act 2006 in connection with a scheme
for the Company’s reconstruction or amalgamation with another
company, award holders under the LTIP may exercise their awards
during the six month period commencing on the date upon which
the scheme of arrangement is sanctioned by the Court. The LTIP also
contains provisions enabling award holders to exercise their awards
if a person becomes entitled to issue a compulsory acquisition notice
under the provisions relating to the compulsory acquisition of a
company set out in the Companies Act 2006. The period 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) have been satisfied.
Articles of Association
The Company’s Articles of Association may only be amended by a
special resolution at a general meeting of the Shareholders.
Annual General Meeting and Special Business to be
transacted at the Annual General Meeting.
The notice convening the Annual General Meeting can be found in the
separate Notice of Annual General Meeting accompanying this Report
and Accounts.
Details of the Special Business to be transacted at the Annual General
Meeting are contained in the separate letter from the Chairman which
also accompanies this Report and Accounts, 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
Malcolm Windeatt
Company Secretary
21 May 2012
Company number: 1074383
Cranswick plc
Report & Accounts 2012
23
CORPORATE GOVERNANCE STATEMENT
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 30 to
35, 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.
The Directors consider that the Company has, during the year ended 31 March
2012, complied with the requirements of the Code other than with Code provision
B.1.2 as the number of independent Non-Executive Directors was less than half the
Board, excluding the Chairman. It is the Board’s belief that the current composition
of the Board includes the appropriate skills balance, experience, independence and
knowledge of the business and that the appointment of a Non-Executive Director
should reflect a need to add complementary skills and experience to the Board and
not be driven by a requirement to match the number of Executive Directors.
The Board will continue to keep this under review, also with diversity in mind,
and assess the needs and requirements of the business as it develops.
The Board
During the year ended 31 March 2012, the Board consisted of an Executive
Chairman, a Chief Executive, three other Executive Directors and three
Non-Executive Directors. All the Non-Executive Directors are deemed to
be independent.
The Board met 10 times during the year to direct and control the overall strategy
and operating performance of the Group. To enable them to carry out these
responsibilities all Directors have full and timely access to all relevant information
and the Board has held meetings at various production facilities so that the
Directors can review the operations of those particular sites. All Directors have
allocated sufficient time to the Company to discharge their responsibilities
effectively.
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. The Chairman was responsible for
the leadership of the Board and ensuring its effectiveness, whereas the Group’s
day-to-day operations was 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.
On 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. During the year all Executive Directors received a
presentation on the contents of the Bribery Act. Procedures are in place for
Directors to seek both independent advice, at the expense of the Company, and
the advice and services of the Company Secretary in order to fulfil their duties.
During the year an Executive Committee was set up consisting of the Executive
Directors and senior executives of the business. The committee meets on a
monthly basis and reports back to the Board.
24
Report & Accounts 2012
Cranswick plc
SENSATIONAL BRITISH
SUMMER SALAD
Freedom Foods finely sliced
dry cured and air dried ham
with black pepper pastrami
and finely sliced butter basted
Devonshire Red chicken,
served with a rocket and
cucumber salad and red
onion marmalade
Cranswick plc
Report & Accounts 2012
25
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 has 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,
and is not 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.
The Board has completed its annual review of the register relating to
potential conflicts of interest with its Directors and confirm that no
such conflicts exist.
The Board, led by the Chairman, has carried out a formal evaluation
of its performance and that of its Committees under a system based
on a questionnaire circulated to all Directors which was used to
facilitate a Board discussion. Based on the evaluation exercise the
Board concluded that it, and its Committees, were working well and
a number of actions were agreed to make it more effective.
The Board is also aware that external facilitated evaluations are
required and these will be considered over the next twelve months.
The Chairman has evaluated the performance of individual Directors
through one-to-one meetings. In addition, the Non-Executive
Directors, led by the Senior Independent Director, meet, without the
Chairman present, in order to appraise his performance.
The Company’s Articles of Association provide that one third of the
Directors retire by rotation each year and with the proviso that each
Director shall seek re-election at the Annual General Meeting every
three years. All new Directors are subject to election by Shareholders
at the first opportunity following their appointment. The Board is
aware that the Code recommends the re-election of all directors
every year and the Company will now comply with this requirement.
Directors’ biographies and membership of the various Committees
are shown on page 19. The formal terms of reference for the Board
Committees together with the terms and conditions of appointment
of Non-Executive Directors are available for inspection at the
Company’s Registered Office and at the Annual General Meeting.
Number of meetings
Mark Bottomley
Jim Brisby
Adam Couch
Steven Esom
Martin Davey
Bernard Hoggarth
Patrick Farnsworth
John Worby
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
10
10
9
10
10
10
10
10
10
3
-
-
-
3
-
-
3
3
6
-
-
-
6
-
-
6
6
2
-
-
-
2
2
-
2
2
All the Directors attended the Annual General Meeting.
26
Report & Accounts 2012
Cranswick plc
Board Committees
Audit Committee
The Audit Committee is 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.
The Chairman, the Finance Director and the Group Financial
Controller, together with the external auditors and internal audit
attend the meetings as appropriate. The Company Secretary also
attends the meetings as secretary to the Committee. Both the
external auditors and internal audit have the opportunity to access
the Committee, without the Executive Directors being present, at
any time, and the Committee formally meets with both the external
auditors and internal audit independently at least once a year.
Audit Committee responsibilities
The Committee reviews:
•
•
•
the Group’s accounting policies;
internal audit reports on accounting and internal financial
control; and
reports from the external auditors.
The Audit Committee has overall responsibility for monitoring the
integrity of financial statements and related announcements and all
aspects of internal control. The Audit Committee meets at least three
times a year; two of these meetings involve a review of the Group’s
interim and full year financial statements.
There is also a whistle blowing policy in place, with an independent
help line, which includes arrangements by which staff can, in
confidence, raise concerns about possible improprieties in financial
reporting and other matters.
The Chairman of the Audit Committee will be available at the Annual
General Meeting to respond to any Shareholder questions that might
be raised on the Committee’s activities.
Risk Management and Internal Control
The Board of Directors has overall responsibility for the Group’s system
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 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 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 below and in the Group Operating and Financial
Review on pages 10 to 17);
• a strong control environment;
• an information and communication process; and
• a monitoring system and a regular Board review of effectiveness.
During the year a Risk Committee was set up to monitor the risk
areas within the Group and to report directly to the Audit Committee.
The Risk Committee is chaired by Mark Bottomley and includes Jim
Brisby and other senior executives representing the commercial,
operational, technical, information technology, engineering, health
and safety and financial functions. Internal audit and the Company
Secretary also attend these meetings. The team identified the key
business risks within their operations, considered the financial and
operational implications and assessed the effectiveness of the control
processes in place to mitigate these risks. The Audit Committee
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 Audit Committee to review
and report to the Board 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 Audit Committee reviewed the content of the Annual Report
and Accounts and considered them to be a fair reflection of the
Company’s performance in the period.
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 information is gathered and presented in a
consistent way which facilitates preparation of the consolidated
financial statements.
Internal Audit
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.
The Audit Committee reviews and approves the annual internal audit
plan and receives regular updates on progress in meeting the plan
objectives. The internal audit approach is risk based and takes into
account the overall Group risk framework, as well as risks specific
to individual operations. The plan set out at the beginning of the
current year was achieved. Internal audit findings together with
responses from management are considered by the Audit Committee
and where necessary challenged. The Audit Committee considers
annually the extent and effectiveness of the work of the internal
audit function.
Cranswick plc
Report & Accounts 2012
27
External Auditors
Ernst & Young LLP has been the Company’s auditors since 1972
following the take-over of a local Hull based practice. The Audit
Committee assesses annually the qualification, expertise, resources
and independence of the auditor and the effectiveness of the audit
process. The assessment as to the effectiveness is conducted through
an external audit questionnaire with senior finance management.
Remuneration Committee
The Remuneration Committee comprises the three independent
Non-Executive Directors chaired by Steven Esom. Martin Davey
attends meetings of the Remuneration Committee by invitation and
in an advisory capacity. No Director attends any part of a meeting
at which his own remuneration is discussed. The Executive Directors
determine the remuneration of the Non-Executive Directors.
The Audit Committee is also responsible for recommendations for
the appointment, reappointment or removal of the external auditors.
The Committee periodically reviews the tendering of the external
audit function, the last such review and tender being in 2008.
The Committee also approves the terms of engagement and
remuneration of the external auditors, and monitors their
independence. There is a policy in place in relation to the types
of non-audit services the external auditors should not carry out
so as not to compromise their independence and these would
include internal accounting or other financial services, internal
audit services, executive or management roles or functions, and
remuneration consultancy.
Following consideration of these matters at a meeting of the Audit
Committee in May 2012, a unanimous recommendation was made
to the Board for the reappointment of Ernst & Young LLP as the
Company’s external auditors to be proposed to Shareholders at the
2012 Annual General Meeting.
Auditor Independence
Ernst & Young LLP have confirmed that they have adequate policies
and safeguards in place to ensure that auditor objectivity and
independence is maintained. The Group meets its obligations for
maintaining an appropriate relationship with the external auditors
through the Audit Committee, whose terms of reference include an
obligation to consider and keep under review the degree of work
undertaken by the external auditor, other than the statutory audit,
to ensure such objectivity and independence is safeguarded.
There is also an established policy for the work the external auditors
can and cannot do so as not to compromise their independence and
in addition, the Chairman of the Audit Committee is consulted prior
to awarding to the external auditors any non-audit services in excess
of £20,000.
During the year, the auditors also provided tax advice and were
consulted on corporate transactions. Auditor objectivity and
independence was safeguarded through use of a separate tax partner
and separate corporate transactions partner.
During the year the Audit Committee considered the following
factors in assessing the objectivity and independence of Ernst &
Young LLP:
i) The auditors’ procedures for maintaining and monitoring
independence, including those to ensure that the partners
and staff have no personal or business relationships with the
Group, other than those in the normal course of business
permitted by UK ethical guidance.
ii) The auditors’ policies for the rotation of the lead partner and
key audit personnel. The current audit partner is due to be
replaced after this year’s audit having been in the position
since 2007. The senior manager changed in 2008.
iii) Adherence by management and the auditor to the Group’s
policy for the procurement of non-audit services.
28
Report & Accounts 2012
Cranswick plc
The Committee recommends to the Board the policy for executive
remuneration and determines, on behalf of the Board, the other
terms and conditions of service for each Executive Director.
It determines appropriate performance conditions for the annual
cash bonus and long term incentive schemes and approves awards
and the issue of options in accordance with the terms of those
schemes. The Remuneration Committee also, in consultation
with the Chairman, monitors the total individual remuneration
package of senior executives including bonuses, incentive payments
and share option and other share awards. The Remuneration
Committee has access to advice from the Company Secretary
and to detailed analysis of executive remuneration in comparable
companies. Details of the Committee’s current remuneration
policies are given in the Directors’ Remuneration Report on pages
30 and 32.
The Chairman of the Remuneration Committee will attend the
Annual General Meeting to respond to any Shareholder questions
that might be raised on the Committee’s activities.
Nomination Committee
The Nomination Committee is chaired by Patrick Farnsworth and
includes John Worby, Steven Esom and Martin Davey.
The Committee meets at least once a year and reviews the structure,
size and composition of the Board and is responsible for considering
and making recommendations to the Board on new appointments
of Executive and Non-Executive Directors. It also gives full
consideration to succession planning in the course of its work,
taking into account the challenges and opportunities facing the
Group and what skills and expertise are therefore needed on the
Board and from senior management in the future. The Committee,
after reviewing the requirements of the Company, recommended
the promotion of Adam Couch, having spent over a year as Chief
Operating Officer, to the position of Chief Executive Officer from 1
August 2012, following Bernard Hoggarth’s decision to stand down
from that role on that date. The Committee was also happy to
recommend that Bernard Hoggarth remains on the Board part time
as Commercial Director.
All Directors will seek re-election at the Annual General Meeting in
accordance with the Code. The Board has set out in the Notice of
Annual General Meeting its reasons for supporting the re-election
of the Directors at the forth coming Annual General Meeting.
Their biographical details on page 19 demonstrate the range of
experience and skills which each brings to the benefit of the
Company.
The Chairman of the Nomination Committee will attend the Annual
General Meeting to respond to any Shareholder questions that
might be raised on the Committee’s activities.
Shareholders
The Board attaches great importance to maintaining good
relationships with all Shareholders who are kept informed of
significant Company developments. Presentations are made to
analysts and institutional Shareholders on the half year and full
year results. Significant matters relating to the trading or
development of the business are disseminated to the market by
way of Stock Exchange announcements.
The views of Shareholders expressed during meetings with them
are communicated by the Chairman to the Board as a whole, and
through this 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 Chairs
of the Audit, Remuneration and Nominations Committees.
By order of the Board
Malcolm Windeatt
Company Secretary
21 May 2012
Cranswick plc
Report & Accounts 2012
29
DIRECTORS’ REMUNERATION REPORT
Information not subject to audit
Remuneration Committee
The Remuneration Committee comprises the three Non-Executive Directors chaired
by Steven Esom. The Executive Chairman attends the meetings in an advisory
capacity as requested. The Company Secretary attends the meetings as secretary
to the Committee. The Committee determines the remuneration of the Company’s
Executive Directors and puts forward its recommendations for approval by the
Board. It also monitors the remuneration of the Group’s senior executives.
The remuneration policy is reviewed and benchmarked by external consultants
every two to three years and last year AON Hewitt carried out such a review.
AON Hewitt were also retained by the Remuneration Committee to review the
existing management incentive scheme, their recommendations were discussed by
the Remuneration Committee and as a result the scheme was amended as set out
in this report. In addition PricewaterhouseCoopers continue to give advice to the
Remuneration Committee on share option awards and other benefit schemes.
The remuneration of the Non-Executive Directors is determined by the Executive
Directors and reflects the time, commitment and responsibility of their roles.
Remuneration policy
The Group’s policy is that the overall remuneration package offered should be
sufficiently competitive to attract, retain and motivate high quality Executives and
to align the rewards of the Executives with the progress of the Group whilst giving
consideration to salary levels in similar sized quoted companies in the sector and
in the region. The remuneration package is in two parts: a non-performance part
represented by basic salary (including benefits); and a significant performance
related element in the form of a profit related bonus and share-based awards.
The share-based awards are granted by the Remuneration Committee and only
vest on the achievement of demanding targets aligned to Shareholder returns and
earnings per share. The details of individual components of the remuneration
package and service contracts are set out below:
Basic Salary and Benefits
The non-performance related elements of remuneration which comprise basic salary,
car allowance and benefits are reviewed annually and are effective from 1 May.
Benefits principally comprise medical insurance and personal tax and pension advice.
Bonus scheme
The bonus scheme in operation is based on the achievement of Group profit
targets. The targets are set having regard to the Company’s budget, historical
performance and market outlook for the year. A small part of the bonus relates
to the achievement of a target performance for the first half of the year, where a
fixed sum is paid, with the remaining element based on a percentage of the results
in excess of an annual target. The performance is based solely on the Group’s
profit before tax, with a sliding scale of targets set around budget performance.
The total bonus is capped at 150 per cent of basic salary; however there is a
clawback arrangement 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.
GENEROUS HANDMADE
BEEF PIE FOR ONE
Handmade shortcrust beef
and black pepper pie served
with Yorkshire new potatoes
and fresh garden peas
30
Report & Accounts 2012
Cranswick plc
Cranswick plc
Report & Accounts 2012
31
Share options and Long Term Incentive Plan
The basic salary and the bonus scheme are intended as the most
significant part of Directors’ remuneration. In addition, executive share
options (though no options under this scheme have been issued
since 2005 and the scheme is unlikely to be used before 2015 when
it closes) and the Long Term Incentive Plan (LTIP) can be proposed
by the Remuneration Committee and are granted periodically to
promote the involvement of senior management in the longer term
success of the Group. Even though both option awards are seen as an
important part of rewarding employees the Remuneration Committee
is focusing on using the LTIP rather than the executive option scheme
for Executive Directors and senior executives.
pro rata. The TSR target allowed 30 per cent of the shares subject to the
target to be issued at nil cost at the 50th percentile and 100 per cent
at the 75th percentile with performance between the 50th and 75th
percentiles rewarded pro-rata. 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 Save As You Earn (SAYE) options on
the same terms as all other employees.
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 retail price index (‘RPI’) over a three
year period and half to a total shareholder return (‘TSR’) target
measured against a comparable group of food companies over a three
year period. The comparison companies used prior to 2011 are Carrs
Milling Industries plc, Dairy Crest Group plc, Devro plc, Glanbia plc,
Greencore plc, Northern Foods plc, Robert Wiseman Dairies plc, Premier
Foods plc and Uniq plc. For future awards the comparator group has
been expanded to 14 companies and in addition to Cranswick these
are Associated British Foods plc, A G Barr plc, Britvic plc, Carrs Milling
Industries plc, Dairy Crest Group plc, Devro plc, Greencore Group plc,
Hilton Food Group plc, Kerry Group plc, McBride plc, Premier Foods plc,
Robert Wiseman Dairies plc (no-longer quoted) and Tate and Lyle plc.
The EPS target allows 25 per cent of the shares subject to the target to
be issued at nil cost at an average annual outperformance of 3 per cent
and 100 per cent of the shares at an average annual outperformance
of 7 per cent with outperformance between 3 and 7 per cent rewarded
Pay and conditions across the Group
The following are the key aspects of how pay and employment
conditions across the Group are taken into account when setting the
remuneration of employees including the Executive Directors:
• 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.
• 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 SAYE share schemes which are open to
all eligible employees including Executive Directors.
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 eleven 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.
650
600
550
500
450
400
350
300
250
200
150
100
50
2001
32
Cranswick
FTSE 350 Food Producers
FTSE All Share
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: Investec
Report & Accounts 2012
Cranswick plc
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
policy is not to enter into employment contracts with any element of
notice period in excess of one year. Accordingly the other Executive
Directors have a one year rolling contract, Adam Couch commencing
1 May 2006, Mark Bottomley from 1 June 2009 and Jim Brisby from
26 July 2010. Appointment letters have been issued to Patrick Farnsworth,
for 19 months from 1 January 2012, to John Worby, for 31 months
from 1 January 2012 and Steven Esom, for 3 years from 12 November
2011. The contracts for Martin Davey and Bernard Hoggarth have
special provisions relating to liquidated damages requiring that the
notice period stipulated in the contract will be paid in full. For the
other contracts the Remuneration Committee will consider the
circumstances of an early termination and determine compensation
payments accordingly.
Pensions
Executive Directors are members of the Group ‘money-purchase’ pension
scheme. Employer contributions are determined by service contracts.
In some cases pension contributions are paid 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.
Information subject to audit
Directors’ remuneration
The remuneration of Directors for the year was as follows:
Salary and fees
Bonuses
Benefits
Payment in lieu of pension contribution
Pension contribution
Aggregate notional gains made
by Directors on exercise of options
2012
£’000
2,442
1,953
16
156
4,567
259
4,826
638
2011
£’000
2,122
390
16
-
2,528
386
2,914
544
Individual Directors’ remuneration, including pension contributions:
Salary and fees
Bonus
Benefits
Payments in
lieu of pension
Total
2012
Total
2011
Pension
2012
Pension
2011
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Non-Executive Directors:
Steven Esom
Patrick Farnsworth
John Worby
Executive Directors:
Mark Bottomley
Jim Brisby (2011 from appointment)
Adam Couch
Martin Davey
Bernard Hoggarth
40
40
45
365
314
422
684
532
-
-
-
342
300
405
453
453
-
-
-
3
1
3
5
4
-
-
-
-
-
28
76
52
40
40
45
710
615
858
1,218
1,041
37
39
44
354
176
506
757
615
-
-
-
67
42
50
50
50
-
-
-
65
24
75
125
97
Benefits principally comprise medical insurance and personal tax and pension advice.
Mark Bottomley, Jim Brisby and Adam Couch each sacrificed part of his cash bonus entitlement before its award. Pension contributions equal
to the amount sacrificed are made into pension plans for the benefit of their dependants. The amount shown in the bonus column reflects
the full bonus earned.
The number of Directors who were active members of the money purchase pension scheme during the year was 5 (2011: 5).
Cranswick plc
Report & Accounts 2012
33
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
award
At 1 April
2011
No.
Granted
in the year
No.
Exercised
in the year
No.
Lapsed
in the year
No.
At 31 March
2012
No.
Exercise
price
p
Market price
at grant
p
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
2009
2010
2011
2008
2009
2010
2011
2008
2009
2010
2011
2008
2009
2010
2011
2008
2009
2010
2011
13,200
25,000
-
-
-
43,600
5,000
6,600
13,200
-
-
-
-
37,200
25,000
32,500
36,000
-
-
-
-
50,500
25,000
32,500
36,000
-
-
-
-
56,800
25,000
32,500
36,000
-
-
-
-
56,800
-
-
-
(5,000)
-
-
-
(25,000)
-
-
-
(25,000)
-
-
-
(25,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,200
25,000
43,600
-
6,600
13,200
37,200
-
32,500
36,000
50,500
-
32,500
36,000
56,800
-
32,500
36,000
56,800
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
592
860
785
632
592
860
785
632
592
860
785
632
592
860
785
632
592
860
785
The performance periods commence on 1 April in each year and conclude on 31 March three years later and options are exercisable on the
attainment of certain performance criteria detailed on page 32. The range of exercise dates is 1 June 2012 to 1 June 2021.
The options granted in the year are exercisable between 1 June 2014 and 1 June 2021. The share price at the time of issue was 785p.
The following Directors exercised LTIP share options during the year:
Number
Date exercised
Exercise
Market
Notional
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
5,000
25,000
25,000
25,000
14 Jun 2011
2 Feb 2012
2 Feb 2012
2 Feb 2012
price
p
nil
nil
nil
nil
price
p
757
786
786
786
gain
£’000
38
196
196
196
34
Report & Accounts 2012
Cranswick plc
Savings related share option scheme
At 1 April
2011
No.
Granted
in the year
No.
Exercised
in the year
No.
Lapsed
in the year
No.
At 31 March
2012
No.
Weighted
average exercise
price
p
Range of
exercise dates
Mark Bottomley
2,200
2,590
Jim Brisby
3,533
-
Adam Couch
3,761
936
-
-
-
Martin Davey
2,025
1,554
(2,025)
Bernard Hoggarth
2,025
1,554
(2,025)
(2,200)
2,590
579
1 Mar 2017/
-
-
-
-
3,533
4,697
1,554
1,554
1 Sept 2017
474
1 Mar 2014/
1 Sept 2014
494
1 Mar 2013/
1 Sept 2019
579
1 Mar 2015/
1 Sept 2015
579
1 Mar 2015/
1 Sept 2015
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.
The following Executive Directors exercised savings related share options during the year:
Number
Date exercised
Exercise price
p
Market price
p
Notional Gain
£’000
Martin Davey
Bernard Hoggarth
2,025
2,025
27 Feb 2012
27 Feb 2012
474
474
782
782
6
6
Market price of shares
The market price of the Company’s shares at 31 March 2012 was 805 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
Director’s Beneficial Interests (Unaudited)
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Steven Esom
Patrick Farnsworth
Bernard Hoggarth
John Worby
Highest
(pence)
841.0
841.0
841.0
Lowest
(pence)
588.5
726.5
588.5
At 31 March 2012
Ordinary Shares
At 31 March 2011
Ordinary Shares
3,500
36,321
66,946
200,426
1,441
1,243
114,413
1,641
-
27,860
66,079
200,426
-
1,196
112,388
1,641
During the year the Remuneration Committee agreed that Executive Directors should build up a shareholding equivalent to one year’s net salary over
a 3 to 5 year period. The Non-Executive Directors also agreed to build up a holding on the same basis.
All the above interests are beneficial. There have been no further changes to the above interests in the period from 1 April 2012 to 8 May 2012.
On behalf of the Board
Steven Esom
Chairman of the Remuneration Committee
21 May 2012
Cranswick plc
Report & Accounts 2012
35
CORPORATE SOCIAL RESPONSIBILITY STATEMENT
Cranswick takes its ethical responsibilities to employees, customers, shareholders,
suppliers, producers and the environment extremely 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. Within the last year it has established a
working group to look at CSR across the business to facilitate the recognition
of best practice and shared learning leading to the development of a Group
Corporate Responsibility Policy which clearly defines its core values and aspirations.
People
Cranswick is committed to the highest standards of responsible behaviour, dignity
and integrity in its relationships with employees, customers, business partners and
authorities and in so doing endorses the principals of the Ethical Trading Initiative
(ETI). All sites within the Group are audited on a regular basis both by internal and
external parties to ensure that the spirit of the ETI is being followed at all times
as a minimum standard throughout the Group. Every site has demonstrated a
high level of compliance with the ETI base code. Where non-conformances have
been highlighted these issues have been addressed. A representative from the
Group also sits on the taskforce committee for the Equality and Human Rights
Commission, which was formed in order to improve working practices within the
meat and poultry industry.
The Company respects the rights and dignity of every employee and treats them
fairly and without discrimination regardless of their employment status and
in line with the Group’s Equal Opportunities policy. This confirms the Group’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. Cranswick ensures that all
of its employees are treated with respect and dignity, and that harassment, in any
form, will not be condoned. In order to ensure compliance with the policy, data
is collated on a monthly basis to monitor Equal Opportunities across the Group
and to implement a relative cultural split across the business with development
opportunities accessible at all levels and for every nationality. Similarly training data
is compiled to show the number of days training across the Group and therefore
identify any training requirements.
In April 2012 a Group Human Resources (HR) Manager was appointed to ensure
legal compliance across the Group and to standardise policies and procedures
in line with best working practice. Previously HR responsibilities were site based.
Work performed on behalf of the Company will now be formally based on a
recognised employment relationship established in accordance with national law
and recognised business practice.
The Company recognises that the people it employs either on a temporary or
permanent basis are its biggest asset. It will therefore strive to ensure that the
standards detailed above are implemented throughout the business and at all levels.
All labour supplying agencies are audited before use and re-audited on a scheduled
basis to assess on-going compliance with the Gangmasters (Licensing) Act 2004.
Details of the Company’s ethical standards are communicated to its stakeholders via
SEDEX, an ethical data exchange facility designed to link the full supply chain in an
open and transparent manner. The Company’s terms and conditions of employment
have been reviewed to ensure that they are fully compliant with the Agency Workers
Directive which came into force in October 2011.
36
Report & Accounts 2012
Cranswick plc
AMAZING ANTIPASTI
TASTING PLATE
A selection of finely sliced
charcuterie, including; Coppa
di Parma, Prosciutto di Spec,
Gigante Milano and Spanish
chorizo served with fresh
Cuquillo and Volos olives,
Honeydew melon and pear
Cranswick plc
Report & Accounts 2012
37
Cranswick recognises the benefits of collaborative working and the
sharing of knowledge throughout the organisation. Communication
is key to the development and progression of its business. In the
interests of developing employee relations and ensuring transparent
communication methods are in place, the Group has updated its
whistleblowing policy and procedure in 2012 which now enables
all workers to contact an independent third party to report any
issues of concern. In addition, the anti-bribery and corruption policy
has been updated following legislative changes in 2011, with
training given to all senior managers.
Total reportable accidents, at 1,894 per 100,000 employees
(a Health and Safety Executive standard measure) are above
the average for the Food Industry (1,433 in 2011) reflecting the
additional cut hazards inherent in butchery operation. The Group
continues to strive to reduce this figure.
Progress to accredit all operating sites to meet the British Standard
18001 (Occupational Health and Safety Management Systems)
continues, with six sites now in compliance and those remaining
scheduled to have their final audits during the current calendar year.
Each business within the Group has its own strategy for the
recruitment and training of staff, including the provision of
competitive terms and conditions, and a challenging and
stimulating working environment.
Cranswick is committed to high Health and Safety standards which
are endorsed by the Board of Directors. It is committed to yearly
improvements and works in partnership with staff and insurers
to improve safety standards through training and effective
management. Site level Health and Safety Co-ordinators monitor,
manage and improve Health and Safety performance and their
efforts are co-ordinated by the Group Health and Safety Manager,
with the assistance of two Group Co-ordinators.
Monthly accident statistics are reported and monitored using
Cranswick’s Insurer’s web based recording system which provides full
Health and Safety Management, including risk assessments, claims
management and audits. A tracker is utilised which prompts the
introduction of appropriate control measures to reduce the likelihood
of recurrence. The figures are compiled monthly and then reported
on for the calendar year for the purpose of this report and quarterly
reports are made to the Board.
Compared to the previous year*:
• The total number of recorded accidents in the group was
18 per cent lower.
• The Accident Incident Ratio (accident against number of
employees) reduced by 17 per cent.
• The total number of RIDDOR accidents was unchanged.
• The Accident Incident Ratio (RIDDOR’s against number of
employees) rose slightly by 1 per cent.
Accident levels have fallen across the Group reflecting the reduction
in incident levels attributable to improved working environments,
investment in training and effective site Health and Safety team
management. A Group Health and Safety DVD was produced during
the year and this is used at all sites for training purposes.
Cranswick plc Accident Statistics
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
2005
2006
2007
2008
2009
2010
2011
Total Recorded Accidents
RIDDOR Reportable Accidents
s
e
e
y
o
p
m
e
l
0
0
0
,
0
0
1
r
e
p
s
t
n
e
d
i
c
c
A
l
a
t
o
T
38
Report & Accounts 2012
Cranswick plc
l
s
e
e
y
o
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
R
i
Annual internal Health and Safety audits are carried out to measure
the standards at each site and produce an action plan for the
following 12 months. All sites have continued to improve their
audit percentage score in 2011 from the previous year.
The Group’s insurers carry out annual external Health and Safety
audits in which Cranswick has achieved results that are comparable
to the industry leaders.
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 is
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’s development has been focussed on the British pig
market and the Group has always been a staunch supporter of
British farming. With two operating abattoirs the Company holds
a strong position in the British pig market. Producer groups and
development initiatives with retailers, farmers and agricultural
colleges are all aimed at improving the business relationships
throughout the pig production chain to bolster the market against
increasing worldwide competition. The bulk of the Group’s
contracted pigs are sourced from within Yorkshire, Lincolnshire
& East Anglia which are recognised as being some of the best
pig breeding areas in the UK. Proximity to the two abattoirs is
important to good animal welfare and the reduction of food
miles – 39 per cent of the supplying farms lie within 25 miles of
Cranswick’s pork processing units in Hull and Norfolk, and 77 per
cent within 50 miles*.
High standards of animal welfare throughout the Group’s supply
chain is of the utmost importance to the business so Cranswick
endorses the five freedoms concept proposed by the Farm Animal
Welfare Council and the DEFRA Code of Practice for the Welfare
of Pigs. All husbandry methods avoid stress and discomfort by
ensuring freedom from fear, hunger, thirst, malnutrition and pain.
All farms and hauliers are, as a minimum, Red Tractor assured and
subject to independent welfare audit by nationally registered third
party certification bodies. The Group also invests heavily in other
higher welfare schemes such as the RSPCA Freedom Foods which
currently accounts for 45 per cent of the animals processed by the
Group’s abattoirs, all of which come from outdoor systems.
Suppliers and Producers
Cranswick believes that integrity and trust in its dealings with
its suppliers and producers are essential to building long term
supply relationships which will ultimately benefit its products.
The Group’s expectations and requirements are articulated to
its suppliers and producers prior to supply. The Company works
with its business partners to establish and maintain social and
environmental compliance standards throughout the supply chain.
The Group does not have a formal policy with regard to paying
suppliers, but it does agree individual payment terms appropriate
to their market sector and makes every endeavour to meet those
agreements. Sites are separately managed and encouraged to source
locally where such a policy serves the Company’s best interests.
Customers and Consumers
Cranswick is committed to working with its retail customers to ensure
clear informative labelling of product so that consumers can make
an informed purchase decision based on the origin, authenticity,
provenance and nutritional values of the foods it produces.
Food safety will always be of paramount importance and well
qualified and experienced site based technical teams, centrally
co-ordinated to share best practice and ensure that all products and
processes meet the increasing demands of the Group’s customers.
As a food company Cranswick recognises its responsibilities to
create and produce products which are safe, legal and wholesome.
The production sites are of modern design, well invested and
operate to a high standard of food safety, process control, hygiene
and housekeeping. All the sites are independently audited annually
against the BRC Global Standard for Food Safety and have recently
achieved the 60th consecutive Grade A compliance against this
exacting standard which is recognised as a technical and food
safety benchmark for the industry.
The customer base is centred on the major UK retailers, restaurant
groups and food service companies. In addition, some of Cranswick
products are supplied as raw materials to other food producers.
The sites’ food safety and quality management systems are
constantly assessed by customers for compliance with their own
specific policies and brand standards. The Group is also a member
of various food assurance schemes (Organic, BQAP, Red Tractor)
which require the sites to undergo scheme compliance and
traceability audits, some of which take place unannounced.
To ensure that the Company continues to operate in compliance
with the requirements of customer policy, brand standards, certified
food safety standards, schemes and food law it has a robust internal
audit system in place that is managed by the Group Technical
Compliance team. The outcome from such audits is used to self-
assess the level of compliance, to correct non-conformance where
highlighted, and as a means of shared learning across the Group.
Impact on the Environment
A review of the Group’s commitment to sustainability was conducted
at the end of Company’s first target period (2008 - 2010), during
which time the reduction in relative carbon footprint was 27 per
cent; exceeding the target of 20 per cent set three years earlier.
New targets were set over a longer term, to coincide with 2020
and to better align them with Cranswick’s stakeholder ambitions.
A further 30 per cent reduction in its relative carbon footprint was
agreed, together with commitments towards sustainable paper/
board sourcing. To further encourage the commitment at factory
level, the five remaining sites which do not already have ISO14001
accreditation are now going through this process.
The Group’s 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.
Annual review and realignment of the Company’s ambitions and
targets takes place to ensure they remain contemporary. To reflect
the change in the Group structure, with the acquisition of the Norfolk
Abattoir in 2009, and the sale of the Deeside cooked meat plant in
July 2010, the Group figures and the graphs below now record the
remaining businesses which comprise Cranswick plc from the 2010
report onwards.
The first year of the new target period saw a significant improvement
in performance, with a 10 per cent fall in the Group’s relative carbon
footprint to 282kg of carbon per tonne of production, but more
significantly a 6.6 per cent fall in its absolute carbon footprint,
amounting to reduction in carbon emissions of 5,844 metric tonnes
CO2 equivalent. (“CO2e”)
e
2
O
C
s
e
n
n
o
T
-
l
e
t
u
o
s
b
A
100,000
80,000
60,000
40,000
Cranswick Carbon Footprint
2008
2009
2010
2011
Absolute Carbon Footprint
Relative Carbon Footprint
0.400
0.350
0.300
0.250
0.200
n
o
i
t
c
u
d
o
r
p
f
o
e
n
n
o
t
/
e
2
O
C
s
e
n
n
o
T
-
e
v
i
t
a
l
e
R
Energy now contributes almost 65 per cent of the annual carbon
footprint, so efficiency and economy will be strong drivers in
improvements over the next few years. Relative energy consumed
per tonne of production was almost unchanged this year, due in
the main to the significant expansion of the Lazenby’s site, and
additional production space at the Sherburn gourmet bacon plant
being brought into use for Christmas 2010. The downward trend in
energy use per tonne is expected to resume as production volumes
through these additional areas increase. Reduction in Cranswick’s
energy footprint is a commercial and environmental necessity.
The small part of the Group which was ineligible for Climate
Change Agreements is captured under the Carbon Reduction
Commitment (CRC). But, with the anticipated revision of the
Climate Change Levy Scheme (CCL) in 2013, it is expected that
these will be brought under the CCL umbrella. The proposed
simplification of both schemes is eagerly awaited.
Cranswick Energy Use Per Tonne
n
o
i
t
c
u
d
o
r
p
f
o
e
n
n
o
t
r
e
p
h
W
k
800
600
400
200
0
2008
2009
2010
2011
* These figures have been subject to review by internal audit.
Cranswick plc
Report & Accounts 2012
39
Waste to landfill has reduced over the year, falling by 7 per cent
despite growth in production volumes, with increased waste to
energy and anaerobic digestion contributing. It is anticipated that,
as the waste disposal companies commission better sorting facilities,
further significant improvements in landfill reduction and recycling
levels will be made in the current year.
Cranswick Annual Landfill Volume
m
u
n
n
a
r
e
p
s
e
n
n
o
T
6,200
6,000
5,800
5,600
5,400
2008
2009
2010
2011
Water usage continues to be monitored and reported under the
FHC2020 agreement and is well on target to achieve the 20 per cent
reduction commitment by 2020. Along with energy use and carbon
footprint, this will become an operational KPI as the Group enters the
next phase of environmental commitment. The Group’s process water
usage per tonne of production rose slightly last year, attributed to
the various extensions around the Group which all require cleaning,
whether fully utilised or not.
Customer focus on the environment and sustainability has grown
and the Group’s environmental aspirations are being
realigned to meet the common shared goals.
The environmental section (‘Greenthinking’) of the
Group website: www.cranswick.co.uk will be
updated to reflect and report on these targets.
Cranswick continues to participate in the
Carbon Disclosure and the Forest
Footprint projects.
Community
Charitable activities continue at site level with both individual and
corporate sponsorship efforts. The Group’s charity golf day
contributed almost £26,000 to the KIDS charity, while the Company’s
promotion of Red Lion products helps that business contribute all
of its post-tax profits to forces charities. Other charitable donations
made by the business during the year totalled £30,000.
The environmental and community impact of any site redevelopment
is always important to the Company. Over 4,000 trees were planted
at the Preston site during the building of the new abattoir and
biodiversity is becoming an increasing factor in the Group’s planning.
With around 75 per cent of employees living within 10 miles of their
place of work, local involvement is an important interest for the Group.
Summary
Cranswick has again made good progress towards all targets during
the year. Various Group wide initiatives have helped in reducing
the usage of waste, water and energy, which will benefit the
environment and the local communities in which the Group operates.
The Company will continue to invest in its facilities to make sure they
operate to the highest standards and to focus on employee welfare
through training programmes and Health and Safety initiatives.
By order of the Board
Malcolm Windeatt
Company Secretary
21 May 2012
40
Report & Accounts 2012
Cranswick plc
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RELATION TO THE ANNUAL REPORT
AND FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the Group financial statements
in accordance with applicable United Kingdom law and regulations. Company law requires the
Directors to prepare Group financial statements for each financial year. Under that law, the Directors
are required to prepare Group financial statements under IFRSs as adopted by the European Union.
Under Company Law the Directors must not approve the Group financial statements unless
they are satisfied that they give a true and fair view of the state of affairs of the Group and of
the profit or loss of the Group for that period. In preparing the Group financial statements the
Directors are required to:
• present fairly the financial position, financial performance and cash flows of the Group;
•
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;
• make judgements that are reasonable;
• provide additional disclosures when compliance with the specific requirements in IFRSs
as adopted by the European Union 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; and
state whether the Group financial statements have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any material departures disclosed
and explained in the financial statements.
•
The Directors are responsible for keeping adequate accounting records that are sufficient to show
and explain the Group‘s transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that the Group financial statements
comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible
for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are also responsible for preparing the Directors’ Report, the Directors’ Remuneration
Report and the Corporate Governance Statement in accordance with the Companies Act 2006
and applicable regulations, including the requirements of the Listing Rules and the Disclosure
and Transparency Rules.
On behalf of the Board
Martin Davey
Chairman
Mark Bottomley
Finance Director
21 May 2012
Cranswick plc
Report & Accounts 2012
41
REPORT OF THE AUDITORS to the members of Cranswick plc
Independent auditor’s report to the members of Cranswick plc
We have audited the financial statements of Cranswick plc for the year ended 31
March 2012 which comprise the Group Income Statement, Group and Parent
Company Balance Sheets, the Group and Parent Company Statements of
Comprehensive Income, the Group and Parent Company Statements of Cash
Flow, the Group and Parent Company Statements of Changes in Equity and the
related notes 1 to 29. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union and, as regards the parent company
financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s members those matters we
are required to state to them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on
page 41, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate to
the Group’s and the parent company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant accounting
estimates made by the Directors; and the overall presentation of the financial
statements. In addition, we read all the financial and non-financial information
in the report and accounts to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion:
•
the financial statements give a true and fair view of the state of the group’s
and of the parent company’s affairs as at 31 March 2012 and of the group’s
profit for the year then ended;
the group financial statements have been properly prepared in accordance
•
with IFRSs as adopted by the European Union;
42
Report & Accounts 2012
Cranswick plc
•
the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance
•
with the requirements of the Companies Act 2006 and,
as regards the group financial statements, Article 4 of the
IAS Regulation.
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
• adequate accounting records have not been kept by the
•
parent company, or returns adequate for our audit have not
been received from branches 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 with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations we
require for our audit; or
• a Corporate Governance Statement has not been prepared
by the company.
Under the Listing Rules we are required to review:
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 24 to 29 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.
•
•
the Directors’ statement, set out on page 17, 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.
Matters on which we are required to report by exception
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 opinion:
Stuart Watson (Senior Statutory Auditor)
or and on behalf of Ernst & Young LLP,
Statutory Auditor
Hull
21 May 2012
Cranswick plc
Report & Accounts 2012
43
Group income statement
for the year ended 31 March 2012
Revenue
Cost of sales
Gross profit
Operating expenses excluding impairment
Notes
2012
£’000
2011
£’000
3
4
820,775
758,442
( )
718,605
( )
657,166
102,170
101,276
( )
55,434
( )
52,125
Group operating profit before impairment
46,736
49,151
Impairment of goodwill
Group operating profit
Share of results of associate
Profit on disposal of associate
Profit before net finance costs and tax
Finance revenue
Finance costs
Profit before tax
Taxation
Profit for the year
Earnings per share (pence)
On profit for the year:
Basic
Diluted
Adjusted (excluding effect of associate and goodwill impairment):
Basic
Diluted
4,11
( )
4,924
-
4
14
14
6
6
41,812
49,151
( )
712
8,254
( )
434
-
49,354
48,717
151
( )
1,154
106
( )
1,729
48,351
47,094
7
( )
10,871
( )
11,768
37,480
35,326
10
10
10
10
78.6p
78.4p
72.9p
72.7p
74.5p
74.3p
72.8p
72.5p
44
Report & Accounts 2012
Cranswick plc
Group statement of comprehensive income
for the year ended 31 March 2012
Notes
2012
£’000
2011
£’000
Profit for the year
37,480
35,326
Other comprehensive income
Movement on hedging items:
(Losses)/ gains arising in the year
Reclassification adjustment for (gains)/ losses included in
the income statement
Actuarial (losses)/ gains on defined benefit pension scheme
Deferred tax relating to components of other comprehensive income
Other comprehensive income for the year, net of tax
17
17
24
69
( )
146
( )
3,504
( )
892
2,827
( )
22
248
624
( )
234
660
Total comprehensive income for the year attributable to owners of the parent
34,653
35,986
Company statement of comprehensive income
for the year ended 31 March 2012
Notes
2012
£’000
2011
£’000
Profit for the year
24,837
15,924
Other comprehensive income
Movement on hedging items:
Losses arising in the year
Reclassification adjustment for losses included in
the income statement
Deferred tax relating to components of other comprehensive income
Other comprehensive income for the year, net of tax
17
17
-
-
-
-
( )
124
511
( )
108
279
Total comprehensive income for the year attributable to owners of the parent
24,837
16,203
Cranswick plc
Report & Accounts 2012
45
Group balance sheet
at 31 March 2012
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
Assets held for sale
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
Notes
11
12
14
17
15
16
17
25
29
18
19
20
18
19
7
20
24
22
2012
£’000
122,839
130,853
-
1,398
255,090
38,516
85,534
696
20,100
144,846
2011
£’000
127,763
123,262
5,791
4,722
261,538
35,694
78,665
496
1,302
116,157
221
-
400,157
377,695
91,078
( )
1,624
( )
5,936
( )
389
( )
84,941
( )
4,356
( )
5,954
( )
59
( )
99,027
( )
( )
95,310
462
( )
42,301
( )
7,093
( )
-
5,342
( )
55,198
( )
354
( )
49,286
( )
( )
8,490
409
( )
2,914
( )
61,453
( )
154,225
( )
156,763
( )
245,932
220,932
4,803
58,642
5,603
69
( )
176,953
245,932
4,764
56,609
4,102
146
155,311
220,932
Martin Davey
Chairman
21 May 2012
Mark Bottomley
Finance Director
46
Report & Accounts 2012
Cranswick plc
Company balance sheet
at 31 March 2012
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
Assets held for sale
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
Retained earnings
On behalf of the Board
Martin Davey
Chairman
21 May 2012
Notes
12
13
13
17
7
16
25
29
18
19
2012
£’000
598
158,338
-
-
390
159,326
8,834
18,137
26,971
221
2011
£’000
607
157,217
5,911
1,072
281
165,088
11,018
1
11,019
-
186,518
176,107
41,646
( )
-
1,116
( )
42,762
( )
36,947
( )
2,902
( )
844
( )
40,693
( )
19
42,246
( )
48,987
( )
22
85,008
( )
( )
89,680
101,510
86,427
4,803
58,642
4,000
1,806
5,603
26,656
101,510
4,764
56,609
4,000
1,806
4,102
15,146
86,427
Mark Bottomley
Finance Director
Cranswick plc
Report & Accounts 2012
47
Group statement of cash flows
for the year ended 31 March 2012
Operating activities
Profit for the year
Adjustments to reconcile Group profit for the year to net cash inflows
from operating activities:
Taxation
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 associate
Gain on sale of property, plant and equipment
Depreciation of property, plant and equipment
Impairment of goodwill
Share-based payments
Difference between pension contributions paid and amounts recognised
in the income statement
Release of government grants
(Increase)/ decrease in inventories
(Increase)/ decrease in trade and other receivables
Increase/ (decrease) in trade and other payables
Cash generated from operations
Tax paid
Net cash from operating activities
Cash flows from investing activities
Interest received
New loans advanced
Principal amounts received in relation to loans advanced
Purchase of property, plant and equipment
Receipt of government grants
Proceeds from sale of property, plant and equipment
Proceeds from sale of associate
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Proceeds from issue of share capital
Purchase of own shares
Proceeds from borrowings
Issue costs of long term borrowings
Repayment of borrowings
Dividends paid
Repayment of capital element of finance leases and hire purchase contracts
Net cash used in financing activities
Net increase/ (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
48
Report & Accounts 2012
Cranswick plc
Notes
2012
£’000
2011
£’000
37,480
35,326
7
14
14
14
12
11
14
25
25
10,871
1,003
-
( )
95
712
( )
8,254
( )
140
13,972
4,924
1,501
( )
1,076
( )
55
( )
2,822
( )
6,610
5,405
56,816
( )
11,283
45,533
173
-
1,906
( )
20,311
149
308
14,500
( )
3,275
( )
1,305
702
( )
136
-
( )
1,005
( )
7,000
( )
11,831
( )
272
( )
20,847
21,411
( )
2,623
18,788
11,768
1,623
( )
465
55
434
-
( )
96
12,440
-
1,013
( )
1,815
( )
12
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
Company statement of cash flows
for the year ended 31 March 2012
Operating activities
Profit for the year
Adjustments to reconcile Company profit for the year to net cash inflows
Notes
2012
£’000
2011
£’000
24,837
15,924
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
Gain on sale of associate
Depreciation of property, plant and equipment
Share-based payments
Decrease in trade and other receivables
Increase/ (decrease) in trade and other payables
Cash generated from operations
Tax paid
Net cash from operating activities
Cash flows from investing activities
Dividends received
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of associate
Net cash generated in investing activities
Cash flows from financing activities
Interest paid
Proceeds from issue of share capital
Purchase of own shares
Proceeds from borrowings
Issue costs of long term borrowings
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net increase/ (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
11,831
( )
2,435
2,905
-
95
( )
7,422
( )
74
380
2,443
5,468
19,194
2,262
( )
16,932
11,831
65
( )
-
14,500
26,266
3,050
( )
702
136
( )
-
1,005
( )
7,000
( )
11,831
( )
22,320
( )
20,878
2,741
( )
18,137
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
( )
14
12
14
25
25
Cranswick plc
Report & Accounts 2012
49
Group statement of changes in equity
for the year ended 31 March 2012
Share
capital
Share
premium
Share-
based
payments
Hedging
Treasury
Retained
reserve
shares
earnings
Total
equity
Note (a)
Note (b)
Note (e)
Note (f)
Note (g)
£’000
£’000
£’000
£’000
£’000
£’000
£’000
As at 1 April 2010
4,733
54,322
3,449
124
( )
-
131,205
193,585
-
-
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments
Scrip dividend
Share options exercised
Dividends
Transfer 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
Profit for the year
Other comprehensive income
Total comprehensive income
Own shares acquired
Share-based payments
Scrip dividend
Share options exercised (proceeds)
Share options exercised (transfer)
Dividends
Deferred tax related to changes in equity
Corporation tax related to changes in equity
-
-
-
-
-
19
20
-
-
-
-
-
-
-
-
-
1,351
682
-
-
-
-
-
-
-
-
1,501
-
-
-
-
-
-
-
215
( )
215
( )
-
-
-
-
-
-
-
-
At 31 March 2012
4,803
58,642
5,603
69
( )
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
37,480
2,612
( )
34,868
37,480
2,827
( )
34,653
-
-
-
-
-
-
-
-
-
-
-
-
-
136
( )
-
-
-
-
-
-
-
136
136
( )
136
( )
1,501
1,370
702
-
-
-
-
-
13,201
( )
13,201
( )
52
( )
163
52
( )
163
176,953
245,932
Notes:
a) Share capital
The balance classified as share capital represents the nominal value of ordinary 10p shares issued.
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.
50
Report & Accounts 2012
Cranswick plc
Company statement of changes in equity
for the year ended 31 March 2012
Share
Share
General
capital
premium
reserve
Merger
reserve
Share-
Hedging
Treasury
Retained
based
reserve
shares
earnings
Total
equity
payments
Note (a)
Note (b)
Note (c)
Note (d)
Note (e)
Note (f)
Note (g)
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
At 1 April 2010
4,733
54,322
4,000
1,806
3,449
387
( )
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
At 31 March 2011
-
-
-
-
20
11
-
-
-
-
-
-
1,699
588
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
653
-
-
-
-
4,764
56,609
4,000
1,806
4,102
Profit for the year, being total
comprehensive income
Own shares acquired
Share-based payments
Scrip dividend
Share options exercised (proceeds)
Share options exercised (transfer)
Dividends
Deferred tax related to
changes in equity
-
-
-
19
20
-
-
-
-
-
-
1,351
682
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,501
-
-
-
-
-
At 31 March 2012
4,803
58,642
4,000
1,806
5,603
-
387
387
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,564
79,487
15,924
15,924
108
( )
279
15,816
16,203
-
-
-
653
1,719
599
12,227
( )
12,227
( )
7
( )
7
( )
15,146
86,427
24,837
24,837
136
( )
-
-
-
-
-
-
-
136
136
( )
136
( )
1,501
1,370
702
-
-
-
-
13,201
( )
13,201
( )
10
10
26,656
101,510
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.
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 13).
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) Treasury shares
This reserve records the cost of the Group’s own shares acquired to satisfy employee share schemes.
Cranswick plc
Report & Accounts 2012
51
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 2012 were authorised for issue
by the Board of Directors on 21 May 2012 and the balance sheets were signed on the Board’s behalf by Martin Davey and Mark 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 23 – measurement of share-based payments
• Goodwill
• Provisions
• Pensions
• Acquisitions
• Put option
Note 11 – measurement of the recoverable amount of cash generating units containing goodwill
Note 20 – judgements in relation to amounts provided
Note 24 – Pension scheme actuarial assumptions
Note 14 – fair values on acquisition and investment in associates
Note 17 and note 21 – valuation of put option in relation to associate
• Trade receivable provisions
Note 16 – provision for impairment of trade receivables
New standards and interpretations applied
The following accounting standards and interpretations became effective for the current reporting period:
International Accounting Standards (IAS / IFRSs)
Effective date
IFRS 7
Financial Instruments: Disclosures (Amendment) - Transfer of Financial Assets
1 July 2011
IAS 24 (revised)
Related Party Disclosures
1 January 2011
52
Report & Accounts 2012
Cranswick plc
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 14
IFRIC 19
Prepayments of a Minimum Funding Requirement (Amendment)
Extinguishing Financial Liabilities with Equity Instruments
Effective date
1 January 2011
1 July 2011
The application of these 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:
International Accounting Standards (IAS / IFRSs)
IAS 32 (revised)
Financial Instruments: Presentation on Offsetting Financial Assets
and Financial Liabilities
Financial Instruments: Disclosures
Effective date*
1 January 2014
1 January 2013
IFRS 7
IFRS 7
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 1
IAS 12
Financial Instruments: Disclosures (Amendment) - Initial Application of IFRS 9
1 January 2015
Financial Instruments: Classification and Measurement
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Fair Value Measurement
Presentation of Items of Other Comprehensive Income (Amendment)
1 January 2015
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 July 2012
Income Taxes (Amendment) - Deferred Taxes: Recovery of underlying assets
1 January 2012
IAS 19 (revised)
Employee Benefits
IAS 27 (revised)
Separate Financial Statements
IAS 28 (revised)
Investments in Associates and Joint Ventures
1 January 2013
1 January 2013
1 January 2013
*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 interpretations 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.
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.
Operating profit
The Group’s investment in associate Farmers Boy (Deeside) Limited was made in July 2010 and was disposed of in March 2012 and therefore
does not form part of the on-going operations of the Group. Previously, the Group income statement included a subtotal of Operating profit
which included the share of results of the associate but in light of the disposal, the directors consider it appropriate to present instead new
subtotals of Group operating profit prior to the results of the associate, and Profit before net finance costs.
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.
Cranswick plc
Report & Accounts 2012
53
2. Accounting policies (continued)
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:
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 in other comprehensive income or directly in equity are also recognised in other comprehensive income or directly in equity and not
in the income statement. Otherwise income tax is recognised in the income statement.
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.
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.
Property, plant and equipment
Property, plant and equipment are included at cost less accumulated depreciation and any provision for impairment.
54
Report & Accounts 2012
Cranswick plc
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.
Investments
Investments in subsidiaries are shown at cost less any provision for impairment.
Interest in associates
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 an associate is carried in the 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, 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.
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 2012 and have been updated to 31 March 2012 with
reference to management accounts. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
Non-current assets held for sale
Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather
than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available
for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition
as a completed sale within one year from the date of classification.
In the consolidated income statement for the reporting period, and for the comparable period of the previous year, income and expenses from
discontinued operations are reported separately from continuing income and expenses down to the level of profit after taxes, even when the
Group retains a non-controlling interest in the subsidary after the sale. The resulting profit or loss (after taxes) is reported separately in the
income statement.
Property, plant and equipment once classified as held for sale are not depreciated.
Cranswick plc
Report & Accounts 2012
55
2. Accounting policies (continued)
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 of the asset and the term of the lease. The interest element of the rental
obligations is allocated to accounting periods during the lease term to reflect a constant rate of interest on the remainder of the capital
amount outstanding.
ii) Operating leases
Leases, which are not finance leases, are classified as operating leases. Lease payments are charged to the income statement on a straight
line basis over the term of the lease.
Government grants and contributions
UK Regional Development Grants and grants receivable from the European Union and DEFRA in respect of property, plant and equipment are
credited to deferred income and released to the income statement over the relevant depreciation period.
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.
56
Report & Accounts 2012
Cranswick plc
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.
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.
Treasury shares
Cranswick plc shares held by the Group are deducted from equity as “treasury shares” and are recognised at cost. Consideration received on
the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the original cost being taken to
retained earnings. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of equity shares.
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
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 (albeit currently not in use) 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.
Cranswick plc
Report & Accounts 2012
57
2. Accounting policies (continued)
ii) Equity settled share-based payments (continued)
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.
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.
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 Executive Directors on the Board, who are 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 reports on one reportable segment:
•
Food – Manufacture and supply of food products to UK grocery retailers, the food service sector and other food producers.
All Group revenues are received for the provision of goods; no revenues are received in relation to the provision of services.
Geographical segments
The following table sets out sales by destination, regardless of where the goods were produced:
UK
Continental Europe
Rest of World
The Group’s non-current assets were all located within the UK for both 2012 and 2011.
58
Report & Accounts 2012
Cranswick plc
2012
£’000
794,047
26,482
246
820,775
2011
£’000
737,717
19,459
1,266
758,442
Customer concentration
The Group has 2 customers which individually account for greater than 10 per cent of the Group’s total net revenue. These customers
account for 27 per cent and 25 per cent respectively. In the prior year these same two customers accounted for 27 per cent and 24 per cent
respectively.
4. Group operating profit
This is stated after charging/ (crediting):
Operating costs:
Selling and distribution
Administration excluding impairment
Impairment of goodwill
Total operating expenses
Depreciation of property, plant and equipment
Impairment of goodwill
Profit arising on transfer of business to associate
Release of government grants
Operating lease payments – minimum lease payments
Net foreign currency differences
Cost of inventories recognised as an expense
(Decrease)/ increase in provision for inventories
Auditors’ remuneration
Audit of these financial statements
Other fees:
- Local statutory audits of subsidiaries
- Tax services
- Other services
2012
£’000
32,358
23,076
55,434
4,924
60,358
13,972
4,924
-
55
( )
3,662
204
( )
559,967
423
( )
25
126
124
79
2011
£’000
31,293
20,832
52,125
-
52,125
12,440
-
297
( )
12
4,401
9
510,882
337
25
122
74
44
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. Tax services included tax
compliance work and a review of allowable expenses.
5. Employees
Group
Staff costs:
Wages and salaries
Social security costs
Other pension costs
2012
£’000
90,144
8,468
1,286
99,898
2011
£’000
84,277
7,943
1,435
93,655
Included within wages and salaries is a total expense for share-based payments of £1,501,000 (2011: £1,013,000) all of which arises from
transactions accounted for as equity-settled share-based payment transactions.
Cranswick plc
Report & Accounts 2012
59
5. Employees (continued)
The average monthly number of employees during the year was:
Group
Production
Selling and distribution
Administration
2012
Number
3,591
279
197
4,067
2011
Number
3,655
258
239
4,152
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 30 to 35. The employee costs shown above
include the following remuneration in respect of Directors of the Company:
Group and Company
Directors’ remuneration
Pension contribution
Aggregate gains made by Directors on exercise of share options
Number of Directors receiving pension contributions under money purchase schemes
6. Finance revenue and costs
Finance revenue
Finance revenue from loans receivable
Finance costs
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 24)
Finance charge payable under finance leases and hire purchase contracts
Movement in discount on provisions (note 20)
Total finance costs
2012
£’000
4,567
259
4,826
638
5
2012
£’000
151
1,080
1,080
53
17
4
1,154
2011
£’000
2,528
386
2,914
544
5
2011
£’000
106
1,681
1,681
9
26
13
1,729
The interest relates to financial assets and liabilities carried at amortised cost together with the impact of interest rate swaps.
60
Report & Accounts 2012
Cranswick plc
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
2012
£’000
11,998
569
( )
11,429
89
736
( )
89
558
( )
2011
£’000
13,436
275
( )
13,161
1,092
( )
668
( )
367
1,393
( )
Tax on profit on ordinary activities
10,871
11,768
Tax relating to items charged or credited to other comprehensive income or directly to equity:
Group
Recognised in Group statement of comprehensive income
Deferred tax on revaluation of cash flow hedges
Deferred tax on actuarial (loss)/ gain 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 (credit)/ charge on share-based payments
Total tax (credit)/ charge recognised directly in equity
2012
£’000
51
( )
841
( )
892
( )
52
163
( )
111
( )
1,003
( )
2012
£’000
-
10
( )
10
( )
2011
£’000
72
162
234
180
( )
77
( )
257
( )
23
( )
2011
£’000
108
7
115
Cranswick plc
Report & Accounts 2012
61
7. Taxation (continued)
b) Factors affecting tax charge for the period
The tax assessed for the year is lower than the standard rate of corporation tax in the UK.
The differences are explained below:
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by standard rate
of corporation tax in the UK of 26 per cent (2011: 28 per cent)
Effect of:
Disallowed expenses
Deferred tax rate change
Share-based payment deduction
Deferred tax on disposal of assets to associate
Non-taxable amount on disposal of associate
Impairment of goodwill
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
Rollover relief
Other temporary differences
Share-based payments
Deferred tax on defined benefit pension scheme
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
Other temporary differences
Share-based payments
Deferred tax asset
62
Report & Accounts 2012
Cranswick plc
2012
£’000
48,351
12,571
453
736
( )
199
( )
-
2,018
( )
1,280
480
( )
10,871
2012
£’000
9,128
78
27
858
( )
1,282
( )
7,093
2012
£’000
634
( )
42
( )
58
( )
140
( )
317
557
( )
2012
£’000
42
( )
123
( )
225
( )
390
( )
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
( )
9
( )
282
203
( )
579
1,393
( )
2011
£’000
23
139
( )
165
( )
281
( )
d) Temporary differences associated with Group investments
At 31 March 2012 a £nil tax liability has been recognised (2011: £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 would reduce from 28 per cent to 23 per cent over a period of four years from
2011, the March 2012 budget announced a further overall reduction to 22 per cent. The second reduction in the UK corporation tax rate from 26 per
cent to 24 per cent was substantively enacted on 21 March 2012 and will be effective from 1 April 2012. This will reduce the Company’s future current
tax charge accordingly. As a consequence, deferred tax has been provided at 24 per cent in the year to 31 March 2012.
The aggregate impact of the proposed reductions from 24 per cent to 22 per cent would reduce the deferred tax liability of the Group by approximately
£591,000 and reduce the deferred tax asset of the Company by £33,000.
8. Profit attributable to members
Of the profit attributable to members, the sum of £24,837,000 (2011: £15,924,000) has been dealt with in the accounts of Cranswick plc.
9. Equity dividends
Declared and paid during the year:
Final dividend for 2011 – 18.7p per share (2010: 17.0p)
Interim dividend for 2012 – 9.0p per share (2011: 8.8p)
Dividends paid
2012
£’000
8,910
4,291
13,201
2011
£’000
8,047
4,180
12,227
Proposed for approval of Shareholders at the Annual General Meeting on 1 August 2012:
Final dividend for 2012 – 19.5p (2011: 18.7p)
9,368
8,901
10. 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 £37,480,000
(2011: £35,326,000) 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
2012
Thousands
2011
Thousands
47,709
92
47,801
47,408
162
47,570
Basic weighted average number of shares for 2012 excludes a weighted average of 17,377 shares (2011: 69,431 shares) held during the year by the
Cranswick plc Employee Benefit Trust and a weighted average of 7,806 treasury shares (2011: nil treasury shares) held during the year by the Group.
At 31 March 2012 no shares were held by either the Trust or the Group (2011: 39,363 held by the Trust).
Cranswick plc
Report & Accounts 2012
63
10. Earnings per share (continued)
Adjusted earning per share
The Group acquired an interest in associate Farmers Boy (Deeside) Limited in the prior year, and disposed of the investment in the current year (note
14). In addition, the Group impaired the carrying value of goodwill in relation to its Sandwiches cash generating unit (note 11). As the investment in the
associate and the goodwill impairment do not form part of the on-going business of the Group the directors consider it appropriate to present an
adjusted EPS on the face of the income statement which excludes the effect of the associate from both years and the goodwill impairment from the
current year, thus facilitating better comparison with prior and future periods. Adjusted earnings per share are calculated using the weighted average
number of shares for both basic and diluted amounts as per the table above.
Net profits excluding the effect of the associate and goodwill impairment are derived as follows:
Profit for the year
Share of results of associate
Profit on disposal of associate
Fair value adjustment to put option in relation to associate
Gain arising on transfer of business to associate
Deferred tax credit on transfer of business to associate
Impairment of goodwill
Profit for the year excluding effect of associate and goodwill impairment
2012
£’000
37,480
712
( )
8,254
( )
95
-
-
4,924
34,767
11. Intangible fixed assets
Group
Cost
At 31 March 2010
On transfer of business to associate (note 14)
At 31 March 2011 and 31 March 2012
Impairments
As at 31 March 2010 and 2011
Impairment loss
As at 31 March 2012
Net book value
At 31 March 2010
At 31 March 2011
At 31 March 2012
2011
£’000
35,326
434
-
55
( )
297
( )
1,019
-
34,499
Goodwill
£’000
128,739
976
( )
127,763
-
4,924
4,924
128,739
127,763
122,839
During the prior year, 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 Farmers Boy (Deeside) Limited being received as consideration (note 14). 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.
64
Report & Accounts 2012
Cranswick plc
Impairment Testing
Goodwill is subject to annual impairment testing. Goodwill acquired through business combinations has been allocated for impairment testing purposes
to the following principal cash-generating units:
Cash generating unit
Fresh pork
Cooked meats
Sandwiches
Continental Fine Foods
Other
Assumptions used
2012
£’000
12,231
84,679
11,602
10,968
3,359
122,839
2011
£’000
12,231
84,679
16,526
10,968
3,359
127,763
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 Kantar Worldpanel data.
A pre-tax discount rate of 8.8 per cent has been used (2011: 8.8 per cent) being management’s estimate of the 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 weighted average cost of capital has been
used for each cash generating unit.
Sensitivity
Following the impairment of goodwill attributable to the Sandwiches cash generating unit, as described below, management believes that
currently there is no reasonably possible change to the assumptions that would reduce the value in use below the value of the carrying amount
for any of the Group’s other cash generating units. Assumptions and projections are updated on an annual basis.
Impairment of Sandwiches cash generating unit
The Group performed its annual impairment test as at 31 March 2012, in line with the process described above. The Sandwiches cash
generating unit has historically been the most sensitive to a reasonably possible change in assumptions. In the prior year, we noted that a 0.3
per cent reduction in the growth of operating cash flows to 2.7 per cent would reduce the value in use to a level equal to its carrying value.
Cranswick plc
Report & Accounts 2012
65
11. Intangible fixed assets (continued)
The projected cash flows for the current year were updated to reflect the latest Sandwiches budget for the year ending 31 March 2013,
expected future growth rate assumptions of 3 per cent (2011: 3 per cent) and post year end trading. Based on these calculations, which gave a
value in use below the value of the carrying amount, and on-going economic uncertainty, the Group has recognised an impairment loss within
administration expenses for goodwill allocated to the Sandwiches cash generating unit of £4,924,000 (2011: £nil).
Following the recognition of this impairment loss the carrying amount is the same as the recoverable amount, so any further adverse change
in key assumptions would lead to an additional impairment loss.
The Group has no other intangible assets.
12. Property, plant and equipment
Group
Cost
At 31 March 2010
Additions
Disposals
Disposal of assets to associate
Transfers between categories
At 31 March 2011
Additions
Disposals
Transfers between categories
At 31 March 2012
Depreciation
At 31 March 2010
Charge for the year
Relating to disposals
Relating to disposal of assets to associate
At 31 March 2011
Charge for the year
Relating to disposals
At 31 March 2012
Net book amounts
At 31 March 2010
At 31 March 2011
At 31 March 2012
Freehold
land and
buildings
£’000
41,960
11,515
15
( )
273
( )
6,038
59,225
1,442
100
( )
7,294
67,861
3,132
949
1
( )
-
4,080
1,261
13
( )
5,328
38,828
55,145
62,533
Leasehold
Plant,
Assets in the
Total
improvements
equipment
course of
and vehicles
construction
£’000
£’000
£’000
£’000
15,682
621
-
7,887
( )
-
8,416
596
-
-
112,263
14,900
3,160
( )
11,769
( )
7,256
119,490
19,694
631
( )
546
9,012
139,099
8,412
551
-
4,507
( )
4,456
459
-
4,915
7,270
3,960
4,097
64,499
10,940
2,755
( )
9,511
( )
63,173
12,252
549
( )
74,876
47,764
56,317
64,223
12,275
8,859
-
-
13,294
( )
7,840
-
-
7,840
( )
-
-
-
-
-
-
-
-
-
12,275
7,840
-
182,180
35,895
( )
3,175
( )
19,929
-
194,971
21,732
731
( )
-
215,972
76,043
12,440
2,756
( )
14,018
( )
71,709
13,972
562
( )
85,119
106,137
123,262
130,853
Included in freehold land and buildings is land with a cost of £5,263,000 (2011: £5,145,000) which is not depreciated relating to the Group
and £509,000 (2011: £509,000) relating to the Company. Cost includes £1,001,000 (2011: £1,001,000) in respect of capitalised interest.
66
Report & Accounts 2012
Cranswick plc
Company
Cost
At 31 March 2010
Additions
Transfers to other Group companies
At 31 March 2011
Additions
At 31 March 2012
Depreciation
At 31 March 2010
Charge for the year
Transfers to other Group companies
At 31 March 2011
Charge for the year
At 31 March 2012
Net book amounts
At 31 March 2010
At 31 March 2011
At 31 March 2012
13. Investments
Company
Shares at cost:
At 31 March 2010
Capital contribution relating to share options
Additions (note 14)
At 31 March 2011
Capital contribution relating to share options
Disposals
At 31 March 2012
Freehold
land and
buildings
£’000
1,956
-
1,447
( )
509
-
509
181
-
181
( )
-
-
-
1,775
509
509
Plant,
equipment
and vehicles
£’000
341
22
22
( )
341
65
406
163
88
8
( )
243
74
317
178
98
89
Total
£’000
2,297
22
1,469
( )
850
65
915
344
88
189
( )
243
74
317
1,953
607
598
Subsidiary
undertakings
Associates
£’000
£’000
156,790
427
-
157,217
1,121
-
158,338
-
-
5,911
5,911
-
5,911
( )
-
During the prior year, the Company acquired a 49 per cent shareholding in Farmer’s Boy (Deeside) Limited. The Company treated its shareholding
in Farmer’s Boy (Deeside) Limited, over which it had significant influence, as an associate, recognising the associate at its cost of £5,911,000.
On 30 March 2012, the Group sold its shareholding in the associate to the majority shareholder (note 14).
Cranswick plc
Report & Accounts 2012
67
13. Investments (continued)
The principal subsidiary undertakings during the year were:
Food
Cranswick Country Foods plc
Cranswick Country Foods (Norfolk) Limited (Held by Cranswick Country Foods plc)
Cranswick Convenience 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.
14. 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, with 49
per cent of the shares in Farmer’s Boy (Deeside) Limited being received as consideration. The Group treated its 49 per cent shareholding in Farmer’s Boy
(Deeside) Limited, over which it had significant influence, as an associate and 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 11). 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 initial transaction in the prior year was accounted for as follows:
Book value of assets disposed
Fair value of 49 per cent shareholding acquired
Difference between acquisition fair value and cost of associate
Disposal of goodwill on transfer of business to associate (note 11)
Recognition of put option at fair value
Non-cash total
Legal expenses
Total within profit before tax
Related deferred tax credit
Cash flow impact
On 30 March 2012 the Group sold its shareholding in Farmers Boy (Deeside) Limited to the majority shareholder.
Details of the assets disposed and the consideration received are as follows:
Book value of associate
Book value of put option in relation to associate
Total book value of assets disposed
Consideration received in cash
Profit on disposal of associate
68
Report & Accounts 2012
Cranswick plc
2011
£’000
5,911
( )
6,225
314
976
( )
1,127
465
168
( )
297
1,019
168
( )
2012
£’000
5,079
1,167
6,246
14,500
8,254
If the disposal had not occured, the put and call options would have been remeasured at their fair value at the reporting date based on a valuation
model, since the shares that were held in the associate were unquoted. However, in view of the disposal of the interest in the associate together with the
associated option arrangements, the directors do not consider it meaningful to distinguish the fair value movements of the options during the second
half of the financial year from the overall disposal gains.
The following table illustrates the summarised financial information of the Group’s investment in Farmers Boy (Deeside) Limited from the date of the
transaction in the prior year and to the date of disposal in the current year:
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
15. Inw
Group
Raw materials
Finished goods and goods for resale
16. Trade and other receivables
Financial assets:
Trade receivables
Amounts owed by Group undertakings
Other receivables
Non-financial assets:
Prepayments and accrued income
Financial assets are carried at amortised cost.
2012
£’000
-
-
-
-
-
2011
£’000
15,070
6,573
6,427
( )
9,425
( )
5,791
42,821
17,684
712
( )
434
( )
2012
£’000
26,847
11,669
38,516
Group
Company
2012
£’000
76,169
-
4,981
81,150
4,384
85,534
2011
£’000
69,398
-
5,119
74,517
4,148
78,665
2012
£’000
-
8,539
27
8,566
268
8,834
2011
£’000
29,929
5,765
35,694
2011
£’000
-
10,581
73
10,654
364
11,018
Cranswick plc
Report & Accounts 2012
69
16. Trade and other receivables (continued)
As at 31 March, the analysis of trade receivables that were past due but not impaired was as follows:
Group
Trade receivables
2012
2011
£’000
76,169
69,398
Of which:
Not due
£’000
64,593
60,771
Past due date in the following periods:
Less than
Between 30
30 days
and 60 days
£’000
9,796
5,937
£’000
1,084
1,411
More than
60 days
£’000
696
1,279
Trade receivables are non-interest bearing and are generally on 30-60 day terms and are shown net of any provision for impairment. As at 31
March 2012, trade receivables at nominal value of £1,162,000 (2011: £558,000) 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 2010
Provided in year
Written off
At 31 March 2011
Provided in year
Written off
At 31 March 2012
There are no bad debt provisions against other receivables.
17. Financial assets
Current
Forward currency contracts
Loans receivable
Movement on hedged items:
(Losses)/ gains arising in the year
Reclassification adjustment for (gains) /losses
included in the income statement
70
Report & Accounts 2012
Cranswick plc
£’000
639
47
128
( )
558
703
99
( )
1,162
2011
£’000
-
-
-
2011
£’000
124
( )
511
387
Group
Company
Group
2012
£’000
-
696
696
2012
£’000
69
( )
146
( )
215
( )
2011
£’000
146
350
496
2011
£’000
22
248
270
Company
2012
£’000
-
-
-
2012
£’000
-
-
-
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
Loans receivable
Put option in relation to associate
Financial assets relate to the following:
Group
Company
2012
£’000
1,398
-
1,398
2011
£’000
3,650
1,072
4,722
2012
£’000
-
-
-
2011
£’000
-
1,072
1,072
• 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 21.
• £nil (2011: £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. The loan, which was held at amortised cost, was repaid early, in
full, on 28 March 2012. Interest was receivable on the loan at Bank of England base rate plus 3 per cent.
• £2,094,000 (2011: £2,500,000) receivable from Thomas Dent Limited, a supplier to the Group. Repayment of the loan, which is held at amortised
cost, is receivable in 43 equal monthly instalments which commenced 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 14 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 original transaction. The exercise price of the option was
based on an agreed pricing structure. The option was exercised early at the agreement of both parties on 30 March 2012 as described in note 14.
18. Trade and other payables
Current
Trade payables
Amounts owed to Group undertakings
Other payables
Deferred income – Government grants
Non-current
Group
Company
2012
£’000
62,494
-
28,520
64
91,078
2011
£’000
57,497
-
27,366
78
84,941
2012
£’000
162
36,586
4,898
-
41,646
2011
£’000
80
33,340
3,527
-
36,947
Deferred income – Government grants
462
354
-
-
Cranswick plc
Report & Accounts 2012
71
19. Financial liabilities
Current
Bank overdrafts
Finance leases and hire purchase contracts
Interest rate swap
Forward currency contracts
Non-current
Amounts outstanding under revolving credit facility
Finance leases and hire purchase contracts
Group
Company
2012
£’000
1,312
243
-
69
1,624
42,246
55
42,301
2011
£’000
3,925
271
160
-
4,356
48,987
299
49,286
2012
£’000
-
-
-
-
-
42,246
-
42,246
2011
£’000
2,742
-
160
-
2,902
48,987
-
48,987
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 received LIBOR interest
and paid fixed interest of 2.04 per cent. The notional principal amount of the swap stood at £nil as at 31 March 2012 (2011: £19,750,000) and reduced
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 forward currency contracts and interest rate swaps which are carried at fair value. Interest rate
swaps were not hedge accounted in the period.
Bank facilities
The Group renegotiated its banking facilities during the prior year, on 24 March 2011, with arrangement fees of £1.0 million being paid in the current
year. The arrangement fees are being amortised over the period of the facilities.
A committed bank overdraft facility of £20 million (2011: £20 million) is in place until July 2015, of which £1,312,000 (2011: £3,925,000) was utilised
at 31 March 2012. 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 £43 million was utilised as at 31
March 2012 (2011: a revolving credit facility of £100 million of which £50 million was utilised). This facility expires in July 2015. Interest is payable on
the revolving credit facility at a margin over LIBOR.
The maturity profile of bank loans is as follows:
Group
Company
In one year or less
Between one year and two years
Between two years and five years
Unamortised issue costs
2012
£’000
-
-
43,000
43,000
754
( )
42,246
2011
£’000
-
-
50,000
50,000
1,013
( )
48,987
2012
£’000
-
-
43,000
43,000
754
( )
42,246
2011
£’000
-
-
50,000
50,000
1,013
( )
48,987
The bank facilities for both years are unsecured and subject to normal bank covenant arrangements.
72
Report & Accounts 2012
Cranswick plc
20. Provisions
Group
At 1 April 2011
Credited in the year
Unwinding of discount
At 31 March 2012
Analysed as:
Current liabilities
Non-current liabilities
Lease provisions
£’000
468
83
( )
4
389
2011
£’000
59
409
468
2012
£’000
389
-
389
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 year. There are no provisions held by the Company.
21. Financial instruments
An explanation of the Company and Group’s financial instruments risk management strategy is set out on pages 16 to 17 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 2012 and their
weighted average interest rates is set out below:
Group
As at 31 March 2012
Financial liabilities:
Bank overdrafts
Revolving credit facility
Finance leases and hire purchase contracts
Financial assets:
Cash at bank
Loans receivable
Weighted
average
effective
interest
rate
%
1.50%
1.70%
4.37%
Total
At
floating
interest
rates
1 year
or
less
Fixed interest
1-2 years
2-3 years
£’000
£’000
£’000
£’000
£’000
1,312
( )
1,312
( )
43,000
( )
43,000
( )
298
( )
-
44,610
( )
44,312
( )
-
-
243
( )
243
( )
-
-
-
-
55
( )
55
( )
-
-
-
-
-
-
-
-
-
0.00%
3.50%
20,100
2,094
20,100
2,094
22,416
( )
22,118
( )
243
( )
55
( )
Cranswick plc
Report & Accounts 2012
73
21. Financial instruments (continued)
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
( )
-
(including the effect of interest rate swaps)
Finance leases and hire purchase contracts
2.18%
4.37%
50,000
( )
30,250
( )
19,750
( )
570
( )
54,495
( )
-
-
34,175
( )
19,750
( )
271
( )
20,021
( )
19,750
-
-
244
( )
244
( )
-
-
-
55
( )
55
( )
-
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
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
( )
The maturity profile of bank loans is set out in note 19.
The interest rate profile of the interest earning financial assets and interest bearing liabilities of the Company as at 31 March 2012 and their
weighted average interest rates is set out below:
Company
Fixed interest
As at 31 March 2012
Weighted
Total
At
1 year
1-2 years
2-3 years
Financial liabilities:
Amounts owed to Group undertakings
Revolving credit facility
Financial assets:
Cash at bank
average
effective
interest
rate
%
1.50%
1.70%
floating
interest
rates
or
less
£’000
£’000
£’000
£’000
£’000
133,400
( )
133,400
( )
43,000
( )
43,000
( )
176,400
( )
176,400
( )
-
-
-
-
-
-
-
-
-
0.00%
18,137
18,137
-
-
-
158,263
( )
158,263
( )
-
-
-
74
Report & Accounts 2012
Cranswick plc
As at 31 March 2011
Weighted
Total
At
1 year
1-2 years
2-3 years
Fixed interest
average
effective
interest
rate
%
floating
interest
rates
or
less
£’000
£’000
£’000
£’000
£’000
Financial liabilities:
Bank overdrafts
Amounts owed to Group undertakings
Revolving credit facility
1.50%
1.50%
2,742
( )
2,742
( )
129,400
( )
129,400
( )
-
-
(including the effect of interest rate swaps)
2.18%
50,000
( )
30,250
( )
19,750
( )
182,142
( )
162,392
( )
19,750
( )
-
19,750
( )
19,750
182,142
( )
182,142
( )
-
-
-
-
-
-
-
-
-
-
-
-
-
0.00%
1
1
-
-
-
182,141
( )
182,141
( )
-
-
-
Less: effect of interest rate swaps
Total financial liabilities excluding
the effect of interest rate swaps
Financial assets:
Cash at bank
Currency profile
The Group’s financial assets at 31 March 2012 include sterling denominated cash balances of £18,834,000 (2011: £792,000), euro £1,265,000 (2011:
£506,000), US dollar £nil (2011: £4,000) and Danish Krona £1,000 (2011: £nil), all of which are held in the UK. The Group’s financial liabilities include
sterling denominated overdraft balances of £1,312,000 (2011: £3,718,000) and euro £nil (2011: £207,000), 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. Debts with other customers, which represent a smaller proportion of the Group’s trade receivables are considered
to provide greater risk, particularly in the current economic climate. These debts are reviewed on a regular basis by credit controllers and senior
management and prudent provision is made when there is objective evidence that the Group will not be able to recover balances in full.
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.
Cranswick plc
Report & Accounts 2012
75
21. Financial instruments (continued)
The Group’s 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 14) was measured using level 3 of the fair value
hierarchy. The fair value of the option was based on discounted cash flows derived from the associate’s budgets and business plan. The option was
exercised and the Group’s investment in the associate sold to the majority shareholder on 30 March 2012 (note 14).
The Group’s 5.5 per cent retained shareholding in the Aquatics business of Pet and Aquatics Properties Limited 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.
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
2012
2011
Financial assets
Cash
Loans receivable
Put option in relation to associate
Forward currency contracts
Book
value
£’000
20,100
2,094
-
-
Fair
value
£’000
20,100
2,094
-
-
22,194
22,194
Financial liabilities
Bank overdraft
1,312
( )
Amounts outstanding under revolving credit facility
43,000
( )
Finance leases and hire purchase contracts
Interest rate swap – (note 19)
Forward currency contracts
298
( )
-
69
( )
1,312
( )
43,000
( )
298
( )
-
69
( )
Book
value
£’000
1,302
4,000
1,072
146
6,520
3,925
( )
50,000
( )
570
( )
160
( )
-
Fair
value
£’000
1,302
4,000
1,072
146
6,520
3,925
( )
50,000
( )
570
( )
160
( )
-
At 31 March
22,485
( )
22,485
( )
48,135
( )
48,135
( )
44,679
( )
44,679
( )
54,655
( )
54,655
( )
76
Report & Accounts 2012
Cranswick plc
Company
2012
2011
Financial assets
Cash
Put option in relation to associate
Financial liabilities
Bank overdraft
Book
value
£’000
18,137
-
18,137
-
Amounts outstanding under revolving credit facility
43,000
( )
Interest rate swap – (note 19)
-
43,000
( )
Fair
value
£’000
18,137
-
18,137
-
43,000
( )
-
43,000
( )
Book
value
£’000
1
1,072
1,073
( )
2,742
( )
50,000
( )
160
( )
52,902
Fair
value
£’000
1
1,072
1,073
( )
2,742
( )
50,000
( )
160
( )
52,902
At 31 March
24,863
( )
24,863
( )
( )
51,829
( )
51,829
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 17 and 19.
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
7,500,000
Maturities
Exchange rates
2 April 2012 to 16 July 2012
1.17 – 1.20 euros
Fair value
£’000
( )
69
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
Until December 2011, the Group hedged 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 received LIBOR interest
and paid fixed interest of 2.04 per cent. The notional principal amount of the swap stood at £nil as at 31 March 2012 (2011: £19,750,000)
and reduced 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 had ceased.
Therefore movements in fair value have been posted directly to the income statement.
Cranswick plc
Report & Accounts 2012
77
21. Financial instruments (continued)
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.
2012
sterling
2011
sterling
Liquidity risk
Increase/
decrease in
basis points
+100
-100
+100
-100
Effect on
profit before
tax
£’000
( )
467
467
( )
293
293
The tables below summarise the maturity profile of the Group’s financial liabilities at 31 March 2012 and 2011 based on contractual
undiscounted payments:
Group
Year ended 31 March 2012
Less than 1 year
1 to 2 years
2 to 5 years
£’000
£’000
£’000
Bank overdraft
Revolving credit facility
Finance leases and hire purchase contracts
Trade and other payables
1,312
729
251
91,014
93,306
-
729
56
-
785
-
43,974
-
-
43,974
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
Total
£’000
1,312
45,432
307
91,014
138,065
Total
£’000
3,925
53,514
186
594
84,863
143,082
78
Report & Accounts 2012
Cranswick plc
Company
Year ended 31 March 2012
Less than 1 year
1 to 2 years
2 to 5 years
Revolving credit facility
Trade and other payables
Cross guarantees (note 26)
£’000
£’000
£’000
729
41,646
1,312
43,687
729
-
-
729
43,974
-
-
43,974
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 (note 26)
2,742
821
186
36,947
1,183
41,879
-
810
-
-
-
810
-
51,883
-
-
-
51,883
The interest rate swaps disclosed in the above tables are the net undiscounted cash flows as these amounts are settled net.
The impact of liquidity risk on the Group is discussed in detail in the Group Operating and Financial Review on page 17.
22. Called-up share capital
Group and Company
Allotted, called-up and fully paid
Ordinary shares of 10p each
2012
Number
2011
Number
At 1 April
On exercise of share options
Scrip dividends
At 31 March
47,636,135
47,330,067
205,884
192,772
105,514
200,554
48,034,791
47,636,135
2012
£’000
4,764
20
19
4,803
Total
£’000
45,432
41,646
1,312
88,390
Total
£’000
2,742
53,514
186
36,947
1,183
94,572
2011
£’000
4,733
11
20
4,764
On 2 September 2011, 54,802 ordinary shares were issued at 728.1 pence as a result of Shareholders exercising the scrip dividend option in
lieu of the cash payment for the 2011 final dividend.
On 20 January 2012, 137,970 ordinary shares were issued at 704.0 pence as a result of Shareholders exercising the scrip dividend option in lieu
of the cash payment for the 2012 interim dividend.
During the course of the year, 205,884 ordinary shares were issued to employees exercising SAYE, Executive and LTIP options at prices between
nil and 679 pence.
During the year the Company repurchased 22,000 of its own shares at a cost of £136,000. These shares were held as treasury shares and were
subsequently transferred to directors and senior management of the Group, at nil cost to the individual, to satisfy the exercise of LTIP share
options. At the year end the Group held no treasury shares.
Cranswick plc
Report & Accounts 2012
79
22. Called-up share capital (continued)
Ordinary share capital of £30,900 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
Savings related
LTIP
Number
Exercise price
4,766
7,374
12,904
10,576
57,676
109,452
56,618
201,632
786,900
375p
471p
679p
665p
474p
594p
692p
579p
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
March 2015 to October 2019
June 2012 to June 2021
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 prior year, 105,514 ordinary shares were issued to employees exercising SAYE and Executive options at prices between 255.0
pence and 679.0 pence.
23. 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 £1,501,000 (2011: £1,013,000).
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.
80
Report & Accounts 2012
Cranswick plc
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
2012
Number
4,991
4,991
( )
-
-
2012
Number
-
-
-
-
2012
WAEP
£
6.01
6.01
-
-
2012
WAEP
£
-
-
-
-
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
-
-
i) The weighted average share price at the date of exercise for the options exercised was £7.92 (2011: £8.01).
ii) There were no share options outstanding as at 31 March 2012, the weighted average remaining contractual life of the options
outstanding at the end of the prior year was 4.25 years.
There were no options granted during the year.
Long Term Incentive Plan (LTIP)
During the course of the year 374,900 options at nil cost were granted to Directors and senior executives, the share price at that time was
785 pence. Details of the performance criteria relating to the LTIP scheme can be found in the Directors’ Remuneration report on page 32.
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
2012
Number
534,500
374,900
-
( )
122,500
786,900
-
2012
WAEP
£
-
-
-
-
-
-
2011
Number
460,043
229,300
( )
17,625
( )
137,218
534,500
-
2011
WAEP
£
-
-
-
-
-
-
Cranswick plc
Report & Accounts 2012
81
23. Share-based payments (continued)
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
2012
Number
350,800
254,900
-
( )
80,000
525,700
-
2012
WAEP
£
-
-
-
-
-
-
2011
Number
309,643
153,500
( )
11,250
( )
101,093
350,800
-
2011
WAEP
£
-
-
-
-
-
-
i) The weighted average fair value of options granted during the year was £6.86 (2011: £7.71). The share options granted during the year
were at £nil. The share price at the date of grant was £7.85. (2011: £8.60).
ii) The weighted average share price at the date of exercise for the options exercised was £7.83 (2011: £8.60).
iii) For the share options outstanding as at 31 March 2012, the weighted average remaining contractual life is 8.48 years. (2011: 8.50 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
Company
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
2012
Number
479,562
202,377
( )
81,185
( )
139,756
460,998
14,127
2012
Number
18,894
14,971
( )
8,008
( )
7,290
18,567
-
2012
WAEP
£
5.62
5.79
6.20
4.81
5.84
4.97
2012
WAEP
£
5.88
5.79
6.92
4.74
5.90
-
2011
Number
493,950
91,284
45,167
( )
60,505
( )
479,562
923
2011
Number
10,139
9,620
-
865
( )
18,894
-
2011
WAEP
£
5.35
6.92
5.55
5.42
5.62
6.65
2011
WAEP
£
5.14
6.92
-
6.65
5.88
-
82
Report & Accounts 2012
Cranswick plc
i) The share options granted during the year were at £5.79 (2011: £6.92), representing a 20 per cent discount on the price at the relevant date.
The share price at the date of grant was £7.42 (2011: £8.60).
ii) The weighted average share price at the date of exercise for the options exercised was £7.89 (2011: £8.49).
iii) For the share options outstanding as at 31 March 2012, the weighted average remaining contractual life is 3.16 years. (2011: 2.94 years).
The weighted average fair value of options granted during the year was £1.69 (2011: £2.21). The range of exercise prices for options
outstanding at the end of the year was £3.75 - £6.92 (2011: £3.75 - £6.92).
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 2012 and 31 March 2011:
Group and Company
Dividend yield
Expected share price volatility
Risk free interest rate
Expected life of option
Exercise prices
2012
LTIP
4.47%
31.0%
1.30%
3 years
£nil
2012
SAYE
4.73%
31.0%
0.49% - 1.50%
3,5,7 years
£5.79
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
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.
24. Pension schemes
Defined benefit pension scheme
The Group acquired a defined benefit final salary pension scheme during 2009, 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.
Cranswick plc
Report & Accounts 2012
83
24. Pension schemes (continued)
a) Change in benefit obligation
Benefit obligation at the beginning of the year
Interest cost
Actuarial losses/ (gains)
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
Expected return on plan assets
Actuarial gain/ (loss) 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 losses/ (gains) immediately recognised
Cumulative amount of actuarial losses/ (gains) 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 at the end of the year
Expected long term rate of return on plan assets during the year
Rate of compensation increase
84
Report & Accounts 2012
Cranswick plc
2012
£’000
16,501
906
4,097
343
( )
21,161
2012
£’000
13,587
853
593
1,129
343
( )
15,819
2012
£’000
21,161
( )
15,819
5,342
( )
2012
£’000
906
853
( )
53
2012
£’000
1,446
3,504
2,967
2012
4.60%
2.90%
5.45%
6.10%
2.90%
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%
7.55%
3.20%
Future expected lifetime of pensioner at age 65:
Current pensioners
Male
Female
Future pensioners
Male
Female
2012
23.0
25.6
25.0
27.6
2011
24.0
26.4
26.0
28.3
The mortality rates used have been taken from Base tables S1PA (2011: PA00).
A 0.1 per cent decrease in the discount rate would give rise to a £45,000 decrease in the amounts charged to the income statement during
the year, and a £520,000 increase in the deficit at 31 March 2012.
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
2012
2012
2011
Expected long-term
Fair value
Expected long-term
2011
Fair value
rate of return
of plan assets
rate of return
of plan assets
Asset category
Equity securities
Bonds
Cash
Diversified growth fund
Total
-
3.85%
3.70%
6.70%
£’000
-
6,705
103
9,011
15,819
7.10%
4.60%
4.10%
-
£’000
8,139
5,407
41
-
13,587
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 for the prior year was 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
2012
£’000
15,819
21,161
( )
5,342
( )
-
593
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 2013 in respect of regular contributions.
Cranswick plc
Report & Accounts 2012
85
24. Pension schemes (continued)
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 £91,000 (2011: £140,000). Contributions during the year totalled £1,286,000
(2011: £1,435,000).
25. Additional cash flow information
Analysis of Group net debt
Cash and cash equivalents
Overdrafts
Other financial assets
Other financial liabilities
Revolving credit
Finance leases and hire purchase contracts
Net debt
At
31 March
2011
£’000
1,302
3,925
( )
2,623
( )
4,000
1,377
160
( )
48,987
( )
570
( )
48,340
( )
Cash
flow
£’000
18,798
2,613
21,411
1,906
( )
19,505
-
7,000
272
26,777
Other
non cash
changes
£’000
-
-
-
-
-
160
259
( )
-
99
( )
At
31 March
2012
£’000
20,100
( )
1,312
18,788
2,094
20,882
-
( )
42,246
( )
298
( )
21,662
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).
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
( )
Cash and cash equivalents
Overdrafts
Other financial assets
Other financial liabilities
Revolving credit
Bank loans
Finance leases and hire purchase contracts
Net debt
86
Report & Accounts 2012
Cranswick plc
Analysis of Company net debt
Cash and cash equivalents
Overdrafts
Other financial liabilities
Revolving credit
Net debt
Cash and cash equivalents
Overdrafts
Other financial liabilities
Revolving credit
Bank loans
Net debt
26. Contingent liabilities
At
31 March
2011
£’000
1
( )
2,742
( )
2,741
( )
160
( )
48,987
( )
51,888
At
31 March
2010
£’000
4,004
-
4,004
( )
387
-
( )
59,530
( )
55,913
Cash
flow
£’000
18,136
2,742
20,878
-
7,000
27,878
Cash
flow
£’000
( )
4,003
( )
2,742
( )
6,745
-
( )
50,000
60,000
3,255
Other
non cash
changes
£’000
-
-
-
160
( )
259
( )
99
Other
non cash
changes
£’000
-
-
-
227
1,013
( )
470
770
At
31 March
2012
£’000
18,137
-
18,137
-
( )
42,246
( )
24,109
At
31 March
2011
£’000
1
( )
2,742
( )
2,741
( )
160
( )
48,987
-
( )
51,888
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 £44,312,000 as at 31 March 2012
(2011: £53,925,000).
For the Company, the amounts drawn down by other Group companies which were guaranteed by the Company at the year end totalled
£1,312,000 (2011: £1,183,000).
Cranswick plc
Report & Accounts 2012
87
27. Commitments
(a) The Directors have contracted for future capital expenditure for property, plant and equipment totalling £4,836,000
(2011: £584,000).
(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.
28. Related party transactions
2012
£’000
2,903
5,777
3,721
12,401
2011
£’000
2,718
6,666
2,670
12,054
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
Sales to related party
Service rendered to related party
Amounts owed by related party
Associate – Farmers Boy (Deeside) Limited
2012
2011
£’000
12,422
13,521
£’000
259
289
£’000
-
1,583
Farmers Boy (Deeside) Limited ceased to be a related party upon sale of the Group’s 49 per cent shareholding on 30 March 2012.
Company
Related party
Subsidiaries
2012
2011
Services rendered to related party
Interest paid to related party Dividends received from related party
£’000
18,165
14,830
£’000
1,890
2,565
£’000
11,831
10,508
Amounts owed by or to subsidiary undertakings are disclosed in notes 16 and 18. Any such amounts are unsecured and repayable on demand.
Remuneration of key management personnel
Short-term employee benefits
Post-employment benefits
Share-based payment
88
Report & Accounts 2012
Cranswick plc
2012
£’000
4,990
259
812
6,061
2011
£’000
2,921
386
515
3,822
29. Events after the balance sheet date
Following an internal reorganisation within the Cranswick Pet and Aquatics group, Cranswick plc sold its 5.5 per cent investment in the
Cranswick Pet Products business on 5 April 2012 for a consideration of £221,000. At 31 March, as a result of the sale, the investment was
transferred to assets held for sale.
The transaction resulted in the Group retaining its 5.5 per cent interest in the Aquatics business through a 5.5 per cent shareholding in Pet and
Aquatics Properties Limited. The investment, being an unquoted entity, the value of which cannot be reliably measured, is held at a carrying
value of £nil.
Cranswick plc
Report & Accounts 2012
89
ShareholDer InForMatIon
Five year statement
2012
£’m
2011
£’m
2010
£’m
2009
£’m
2008
£’m
Turnover
820.8
758.4
740.3
606.8
559.2
Profit before tax
Earnings per share
*
48.4
*
78.6p
47.1
43.8
34.7
33.0
74.5p
69.7p
40.5p
51.9p
Dividend per share
28.5p
27.5p
25.0p
21.7p
19.9p
Capital expenditure
21.7
35.9
20.5
21.2
25.8
Net debt
Net assets
(21.7)
(48.3)
(54.7)
(66.6)
(78.4)
245.9
220.9
193.6
166.5
155.3
* Includes gain on sale of associate and goodwill impairment charge.
Dividends per share relate to dividends declared in respect of that year.
Net debt is defined as per note 25 to the accounts.
May
June
August
September
November
January
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
90
Report & Accounts 2012
Cranswick plc
ShareholDer analySIS
Shareholder analysis
at 8 May 2012
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 2011
Share price at 31 March 2012
High in the year
Low in the year
Number of
shares
5,317,532
42,724,554
48,042,086
394,576
1,293,908
862,341
3,618,827
2,343,372
39,529,062
48,042,086
Number of
holdings
1,201
723
1,924
969
581
120
154
33
67
1,924
830p
805p
841p
589p
Share price movement
Cranswick’s share price movement over the eleven year period to May 2012 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”), all rebased to 100 at May 2001, is shown below:
)
e
c
n
e
p
(
e
c
i
r
p
e
r
a
h
S
550
500
450
400
350
300
250
200
150
100
50
0
2001
Source: Investec
Cranswick
FTSE 350 Food Producers
FTSE All Share
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Cranswick plc
Report & Accounts 2012
91
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
2012
Gold
Meat & Poultry Stuffed Category
Tesco Finest Extra Matured Norfolk Pork Crown
Joint (also collecting the Chairman’s Award)
Silver
Chilled Bacon Category
M&S Juniper Smoked Dry Cure Bacon
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 successful at the British Sausage Week Awards
2011 bringing home the Multiple Retailer Bronze Award for
Legendary British Bangers for their Sainsbury’s Taste the Difference
Outdoor Bred Cumberland Pork Sausages.
The award, presented by Noddy Holder to Nicola Whitehead,
Sainsbury’s National Account Controller was part of the 14th
Annual British Sausage week, which celebrates the Great British
Banger and promotes the wide range of exciting sausages currently
available in Britain.
92
Report & Accounts 2012
Cranswick plc
BPEX Foodservice Pork Product of the Year Competiton
Pizza and Pasta Awards
2011
Bronze
Best Pork & Poultry Product
Original Pork Simply Seasoned Sausage Roll
2011 Winner
Asda American Sizzler serve over pizza
2008
Gold
Best Cured Product
Jack Scaife Hand Cured, Air Dried Gammon Steak
Sainsbury’s Supplier Oscar - 2012
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
2012 Winner
Making big things bigger through innovation
Taste the Difference Air Dried Hams project
British Turkey Awards
2010 Winner
Best Ready to Eat Product
Tesco Finest Hand Carved Butter Basted Turkey
BPEX Bacon Connoisseurs’ Week
2012 Winner
2010 Winner
Supermarket Traditional Wet Cure Category
Sainsbury’s Taste the Difference Wiltshire Cured
Unsmoked Back Bacon
Overall Winner & Best Retailer ‘Smoked’ Category
M&S Outdoor Bred British Smoked Dry Cured
Streaky Bacon
Meat and Poultry News Awards
2011 Winner
2009 Winner
Corrina Firth
Young Processor of the Year Award
Producer of the Year Award
Cranswick plc supplier - Thomas Dent
of Penrith in Cumbria
Winner
Best New Flavour Category
M&S Outdoor Bred British Demerara
Sweet Cure Bacon
Super Meat Awards
Great Taste Awards
2012 Winner
Fresh Pasta
Asda Extra Special Linguine (2 star)
Winner
Winner
Winner
Fresh Filled Pasta
Asda Extra Special Spinach & Ricotta Pasta (2 star)
Plain Olives
Asda Extra Special Nocellara Olives (2 star)
Continental Style Sausages
Asda Spanish Cooking Chorizo (1 star)
Q Awards
2011 Winner
Delicatessen
Asda Extra Special Spicy Sausage Handmade Pasta
2010 Winner
Best Sausage Category
The Co-operative Truly Irresistible Gluten Free
Pork Sausage
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 2012
93
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 LLP – 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
94
Report & Accounts 2012
Cranswick plc
ProDUCtIon FaCIlItIeS
Fresh pork
Sausages
Bacon
Cooked meats
Cranswick plc
Report & Accounts 2012
95
NOTES
96
Report & Accounts 2012
Cranswick plc