Report & Accounts
Year Ended 31 March 2013
Financial Highlights
Revenue
£875.2m
2013
2012
2011
875.2m
820.8m
758.4m
2013
2012
2011
Adjusted Profit Before Tax*
£49.3m
Adjusted Earnings Per Share*
Dividends Per Share
78.9p
2013
2012
2011
78.9p
72.9p
72.8p
30.0p
2013
2012
2011
49.3m
45.6m
47.3m
30.0p
28.5p
27.5p
2013
2012
Movement
£875.2m
£820.8m
£864.6m
£820.8m
£50.0m
£49.3m
78.9p
30.0p
£46.7m
£45.6m
72.9p
28.5p
+7%
+5%
+7%
+8%
+8%
+5%
Reported revenue
Underlying revenue †
Operating profit before impairment
Adjusted profit before tax *
Adjusted earnings per share *
Dividends per share
Notes:
Comparative figures are for the 53 weeks to 31 March 2012
* excluding impairment charges and the effects of associate
† excluding contribution from Kingston Foods acquired on 29 June 2012
Company Profile
Cranswick was formed by farmers in the early 1970’s to produce
pig feed. In 1988 the Board embarked on a strategy to broaden
the base of the Company’s activities and to seek opportunities to
develop into related areas offering greater scope to add value to the
Company’s processes. Activities have since been extended from this
agricultural base into the food sector.
This development has been achieved through a combination of
acquisitions and subsequent organic growth, with Cranswick now
supplying a range of fresh pork, gourmet sausages, premium
cooked meats, traditional air-dried bacon, charcuterie, pastry
products and sandwiches to its customers from a number of
production facilities in the UK.
The business is focused predominantly on the supply of fresh and
processed food to the UK food retail, food manufacturing and food
service categories.
The high quality of food supplied by the company is borne out
by the awards which continue to be received across all product
categories.
Operational Highlights
•
•
•
•
•
•
•
•
New £12m gourmet pastry facility
£4m extension to Hull cooked meats operation
£5m investment in additional fresh pork retail packing capacity
Launch of new products including gourmet burgers, premium air-dried
cooked meats and breaded pork ranges
£31m of capital expenditure across the Group, with £125m invested in total
over last 5 years
Chinese export accreditation awarded to Hull and Norfolk fresh pork
facilities
Export sales volumes up 9%
Acquisition of Kingston Foods and East Anglian Pigs
Contents
Business Review
Chairman’s Statement
Review of Activities
Awards 6
Group Operating & Financial Review
Business Locations & Group Directors
2
4
8
18
Corporate Responsibility
Corporate Social Responsibility
20
Governance
Corporate
Responsibility Highlights
Directors
Directors’ Report
Corporate Governance Statement
Audit Committee Report
Remuneration Committee Report
Statement of Directors’ Responsibilities
24
25
28
32
36
46
•
•
•
•
Total reportable accidents down by 6%
Reportable accident incident ratio improved by 15%
Tonnage of waste to landfill reduced by 47%, over 2,500 tonnes
Awarded 69th consecutive Grade A rating for British Retail Consortium
Global Standard for Food Safety
Financial Statements
47
Report of the Auditors
48
Group Income Statement
Group Statement of Comprehensive Income
49
Company Statement of Comprehensive Income 49
Group Balance Sheet
50
Company Balance Sheet
51
Group Statement of Cash Flows
52
Company Statement of Cash Flows
53
Group Statement of Changes in Equity
54
Company Statement of Changes in Equity
55
56
Notes to the Accounts
Shareholder Information
Shareholder Information
Shareholder Analysis
Advisers
95
96
97
Visit us online
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www.cranswick.plc.uk
Cranswick plc Report & Accounts 2013 | 1
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Chairman’s Statement
Martin Davey - Chairman
This has been a positive year for Cranswick. Further progress was achieved in trading and investment was
made for this progress to continue over the longer term. Pig meat consumption in the UK continues to
grow. There was a 2 per cent increase in UK per capita consumption during 2012 compared to a fractional
increase in poultry and reductions in beef/veal and lamb/mutton (source: BPEX). In food service pig meat
performed well and accounted for 28 per cent of all protein servings, making it the most popular protein out
of the home (source: BPEX).
The business is totally focused on working closely with both its customer base and supply chain to ensure
that the consumer has competitively priced food that is nutritious, tasty and a wholesome constituent of a
balanced diet.
Results
The performance in the year was
particularly pleasing considering the
previous year was a 53 week period
compared to the usual 52 week period this
past year.
Underlying sales, which exclude the
contribution from Kingston Foods, rose
5 per cent during the year and reflected
growth across most product sectors.
Particularly strong growth was seen in sales
of bacon and sausage. Underlying sales
were 7 per cent higher on an equivalent 52
week basis. Total revenue for the year was
7 per cent higher at £875 million and 9 per
cent higher than previously after adjusting
for the extra week.
With an unchanged operating margin before
impairment, and after net finance costs of
£0.8 million, adjusted profit before tax was
£49.3 million compared to £45.6 million last
year which included the benefit of the extra
week, an increase of 8 per cent. Earnings
per share on the same basis were 8 per
cent higher at 78.9 pence. Reported profit
before tax was £47.4 million and earnings
per share were 75.1 pence compared to
£48.4 million and 78.6 pence respectively a
year ago.
Net finance costs were covered 63 times
by profit before net finance costs and tax,
compared to 49 times in the previous year.
Operating cash flow in the year was strong
and after significant investment in the
asset base and the acquisition of cooked
meats supplier Kingston Foods, year end
net debt stood at £20.1 million compared
to £21.7 million a year earlier. This amount
is comfortably within the Company’s
borrowing facility and with a very small
pension scheme exposure puts the balance
sheet in good shape.
There are full reviews of trading and
finances in the reviews by the Chief
Executive and Finance Director which follow.
Investments
During the year Kingston Foods was
2 | Cranswick plc Report & Accounts 2013
acquired and integrated into the Company’s
cooked meats business. Kingston, which
has broadened the Group’s customer base,
has performed well since acquisition and I
welcome Tony Turner, managing director,
and his colleagues to Cranswick.
Subsequent to the year end the Company
acquired East Anglian Pigs. This is a
successful business involved in the
breeding, rearing and finishing of British
pigs and a key supplier to the Group’s
Norfolk activities. It operates in the British
premium outdoor pig-rearing sector and
has accreditation under the RSPCA Freedom
Foods and the Red Tractor schemes. This
strategic acquisition enhances Cranswick’s
commitment to, and greater control over, a
robust and integrated supply chain with a
clear focus on premium British ingredients.
I welcome Adrian Dowling, managing
director, and his colleagues to Cranswick.
Significant organic developments included
the purchase of and investment in the
Riverside fresh pork facility in Hull and the
construction of the pastry plant in Malton,
North Yorkshire. These two sites, which
have only recently been commissioned, will
contribute to the long term growth of the
Company.
Investment elsewhere in the business
contributed additional capacity and
operating efficiencies which in turn have
enabled the Company to absorb some
of the inflationary pressures within the
supply chain. This, along with substantial
new business from customers later in the
year, were significant features of the year’s
trading.
Resources were committed to secure
approval for fresh pork exports to China
and authorisation has also been obtained to
supply the Australian market. Along with the
approval obtained previously for supplies
to the USA this increases the potential
international opportunities for the business.
Dividend
The Board is proposing to increase the
final dividend to 20.6 pence per share,
At a glance
Revenue
£875.2m
7%
2012: £820.8m
Operating Margin
Before Impairment
5.7%
2012: 5.7%
Adjusted Profit Before Tax
£49.3m
8%
2012: £45.6m
Adjusted Earnings Per Share
78.9p
8%
2012: 72.9p
Dividends Per Share
30.0p
5%
2012: 28.5p
Net Cash From
Operating Activities
£49.8m
9%
2012: £45.5m
an increase of 5.6 per cent on last year.
Together with the interim dividend, which
was raised 4.4 per cent to 9.4 pence per
share and paid in January 2013, this makes
a total dividend for the year of 30.0 pence
per share. This represents an increase of 5.3
per cent on the 28.5 pence per share paid
last year. The final dividend, if approved by
Shareholders, will be paid on 6 September
2013 to Shareholders on the register at the
close of business on 5 July 2013. Shares will
go ex-dividend on 3 July 2013. Shareholders
will again have the option to receive the
dividend by way of scrip issue.
Board
Adam Couch was appointed Chief Executive
in August 2012 in line with the prior
notification to Shareholders. This followed
the appointment of Jim Brisby as Sales and
Marketing Director and Mark Bottomley as
Finance Director within the previous three
years as part of the Board’s succession
planning. Each of these were internal
appointments and made after giving due
consideration to potential candidates
from outside the Company. It illustrates
to our colleagues the opportunity for
career development with Cranswick and
maintains the culture, ethos and values of
the business. With the executive team now
well established I will be moving to a part
time role as Chairman with effect from 1
September 2013.
Patrick Farnsworth will be standing down
from the Board at the forthcoming Annual
General Meeting. Patrick has served as
a Non-Executive Director since 2004 and
this year will have completed a term of
nine years at which time, under corporate
governance guidelines, he will no longer
be deemed independent. I would like to
thank Patrick for his contribution to the
development of the business and wish him
well for the years ahead.
Kate Allum, CEO of First Milk Limited and
former head of European supply chain for
McDonald’s, joins the Board as a Non-
Executive Director in July 2013. Kate brings
operational experience of international food
markets and broadens the expertise and
experience within the Board.
Hector Fraser
Hector, one of the 23 local farmers who
founded Cranswick in the early 1970’s
and who served as a director until his
retirement in 1989, sadly passed away last
month. Hector contributed enormously to
the early development of the business and
the Directors join with all at Cranswick in
offering condolences to Hector’s wife Judy
and all his family.
Corporate Governance
The Board is mindful of the requirements
of the UK Corporate Governance Code
and embraces this as part of its culture.
A statement relating to compliance with
the Code is included within the Corporate
Governance Statement on page 28.
Developments since last year include the
arrangements that have been put in place
for external evaluation of the Board and its
procedures as well as the improved gender
diversity within the Board as referred to
above.
Staff
The achievements of the year would not
have been possible without the expertise,
determination and commitment of the
management teams and their colleagues
within the business. Once again they have
proved themselves to be amongst the best
in the sector and on behalf of the Board I
express sincere thanks and appreciation.
Outlook
Cranswick is very much focused on working
closely with its customers in providing
a range of products that continues
to prove popular with the consumer.
Encouragement is taken from the increase
in pork consumption within the UK and this,
coupled with new product development,
positions the business favourably.
Recent issues in the integrity of the
supply chain for meat products and the
introduction in 2013 of higher welfare
standards for pig production in the EU
enhance the competitive position of UK
based pork processors. The Company’s
well invested asset base, providing efficient
means of production and headroom for
future growth, along with an experienced
management team and a robust balance
sheet should enable it to capitalise on
opportunities that arise.
The Board looks forward to the task that
lies ahead as it pursues the continuation
of Cranswick’s successful long term
development.
Martin Davey
Chairman
20 May 2013
Profit Before Tax*
1990-2013
(£m)
Revenue
*
excluding impairment
charges and the effects of
asscociate
11.7
£157m
7.1 9.3
£116m
£64m
2.2 2.3
3.0
3.1
1.4 1.7
0.9
5.0
4.0
£607m
34.7
32.7 33.0
31.1
21.6
21.2
19.8
£313m
17.5
£875m
49.3
47.3
45.6
43.8
Dividend Per Share
1990-2013
(pence)
30.0
28.5
27.5
25.0
21.7
19.9
18.1
16.5
14.5
13.2
12.0
10.8
8.3
7.5
6.8
5.8
5.1
4.6
4.0 4.1
4.3
3.8
3.3
2.8
‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13
‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13
Cranswick plc Report & Accounts 2013 | 3
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Review of Activities
Adam Couch - Chief Executive
In my first annual report as Chief Executive it is pleasing to report significant growth across the business,
driven by Cranswick’s continued focus on premium quality food products, supplied from efficient, modern,
well invested facilities. Reported sales increased by 7 per cent with sales, excluding the contribution from
Kingston Foods, increasing by 5 per cent. This was particularly pleasing given the previous year benefited
from the inclusion of an extra week.
The business has faced a number of challenges over the last twelve months, and none more so than the
continuing inflationary pressures on pig producers driven by high feed prices. These pressures led to
record pig prices, with the price peaking in December 2012 at 161 pence per kilogramme. These record
input costs were met with positive action by the Group, its producers and retail customers. This action
should lead to longer term, more strategic pricing arrangements which will allow the industry to better
manage volatile cereal and soya costs, the major constituents of animal feed, that have been experienced in
the last two years.
The business has managed the upward
pressure on pig prices, partly through the
support of the Group’s customers, but also
through the operational efficiencies which
have developed following the significant
investment in the business’ infrastructure
over the past 5 years. This expenditure,
totalling £125 million, has been made on
improving and expanding the primary
processing, sausage, cooked meats and
bacon facilities and most recently in
developing a new pastry production unit on
a green field site at Malton, North Yorkshire,
which was commissioned in May this
year. This investment has delivered first
class operations with sufficient headroom
to meet the demands of the Group’s
customers at peak times whilst improving
operating efficiencies and maintaining
the quality standards expected by the
Company’s stakeholders. The issues faced
by the wider meat industry, which broke in
January 2013, are a timely reminder of how
fragile the supply chain in the food sector
can become. Cranswick is immensely
proud of the work done in conjunction
with its suppliers and customers in this
area which place the business in a strong
position to further develop supplier and
customer relationships. Integrated, tighter
and more transparent supply chains are
expected to be a feature going forward and
Cranswick has taken positive action in this
area through the acquisition of East Anglian
Pigs Limited (EAP).
Fresh pork had a strong year with sales
growing by 5 per cent. This growth was
particularly marked in the last quarter
Revenue growth by category
of the financial year, with new business
from two of the Group’s key retail
customers added, which could only be
accommodated by the addition of a new
retail packing facility. An existing food grade
facility, situated in Hull, East Yorkshire, in
proximity to the Group’s largest fresh pork
processing plant, was acquired in January
and commissioned only one month later.
The Hull fresh pork site now has capacity
to process 30,000 pigs each week and
this facility is supported by the Group’s
second fresh pork site in Norfolk which
is capable of processing 18,000 pigs each
week. Both are of significant importance
to the local farming communities in each
region as the majority of pigs processed
are sourced from within a 50 mile radius of
the respective sites. The Hull and Norfolk
operations have both benefited from
gaining direct export approval to China
and more recently to Australia. Export
sales, which have increased by 9 per cent in
volume terms over the last twelve months,
now account for 5 per cent of the Group’s
revenues. Sixteen 25 tonne containers
are shipped to the Far East each week and
shipment of premium cuts to Australia is
imminent.
Sausage sales increased by 10 per cent.
This was a pleasing performance given the
inclement summer weather experienced
in 2012. Further investment in the
Group’s gourmet sausage facility in Hull
ensured that excellent service levels were
achieved in the peak production periods,
particularly in the lead up to Christmas,
which is Cranswick’s busiest trading
Fresh pork
Sausage
Bacon
5%
10%
13%
Cooked meats
Continental products
Sandwiches
11%
7%
7%
period. Logistically this can be extremely
challenging, but the Company continues
to successfully meet its customers’
demanding expectations. The Hull facility,
which now has weekly capacity in excess
of 700 tonnes and is capable of producing
11 million sausages each week, still very
much embodies the Group’s premium
ethos. Producing high quality products
to such a scale is achieved through an
unstinting focus on quality and continual
reference back to the artisan origins of
these premium product ranges. This
methodology, so successful in growing the
premium gourmet sausage business, has
been used to great effect in developing
a range of premium beef burgers. These
products incorporate whole cuts of prime
traceable British beef with a homemade
appearance and texture using only the
finest ingredients. Sales of beef burgers
grew strongly in the year and contributed
to the increase in overall sales in this
category.
Sales of premium hand-cured, air-dried
bacon were ahead by 13 per cent. The
unique nature of this process has gained
wide acclaim and features in all but one of
the major retailers top tier offerings. New
products have also been developed in the
gammon category which offers consumers
further premium cuts which were
previously unavailable. The bacon facility,
at Sherburn-in-Elmet, near Leeds, has seen
further investment this year through the
latest laser slicing technology to further
improve efficiencies, increase throughput
speeds and provide additional capacity to
accommodate peak production periods.
Cooked meat sales continue to perform
strongly with sales ahead of the previous
year by 11 per cent. Growth was supported
by significant business wins during the final
quarter. This additional business will have
greater impact in the forthcoming year.
The hand-cured, air-dried premium ham
range, developed last year for one of the
Group’s key retail customers, in conjunction
with the Hull fresh pork and Sherburn
sites, has continued to gain market share.
This range sets a new standard in terms
4 | Cranswick plc Report & Accounts 2013
and this is a common theme throughout
all the Group’s operations. I would like to
express my thanks for their dedication, help
and support in the last twelve months.
Pork’s value proposition remains strong,
particularly compared to both beef
and lamb. This together with its health
attributes and versatility allied to the
Group’s knowledge and understanding of
both its customers and the UK consumer,
leave Cranswick well positioned to continue
its growth strategy.
Adam Couch
Chief Executive
20 May 2013
of visual appearance and taste utilising
premium RSPCA Freedom Foods accredited
material. There was further investment
in production capacity during the year,
with the addition of a 2,000 square metre
extension to the Sutton Fields facility in
Hull, which increased capacity by 50 per
cent and was commissioned in advance of
the peak Christmas trading period. Growth
was further supported by the acquisition
of Kingston Foods earlier in the financial
year. Adjusting for the contribution to sales
from Kingston Foods in the period since
acquisition, underlying sales increased by 6
per cent.
Sales of continental products, which were 7
per cent lower than the previous year, held
up extremely well considering the loss of
business with a major retail customer over
the last two years. New products have been
introduced including a range of olives under
the ‘Bodega’ brand and new listings of filled
fresh pasta with one of the Group’s major
retail customers. New customers have also
been added with sales to one of the retail
discounters growing particularly strongly.
Alongside these developments, sales of
core products, including corned beef, have
remained extremely resilient.
Sandwich sales increased by 7 per cent
against the backdrop of a competitive
market. New sandwich platter business
secured with one of the major multiples
will drive top line growth in the coming
year and this follows a move into the
convenience retail sector during the last 12
months. Sales were also boosted during
the year by supplying meal solutions to key
sporting events over the summer period,
including the Olympic opening and closing
ceremonies. In addition, a number of
operational changes have been made which
will further improve the site performance
by driving efficiencies through cost
reduction and range simplification.
The gourmet pastry facility was completed
in May this year and will offer an extended
range of premium pastry products to
complement the all butter pastry sausage
roll and the Yorkish Pasty ranges which
established Cranswick in this market. The
new state of the art facility extends to 5,000
square metres and employs technology
unrivalled in the sector. New products
will include quiches and hot pies, with
one of the Group’s major high street retail
customers as the anchor customer. Pastry
sales grew strongly during the year. With
the new Malton facility now commissioned
and new customers and products being
added, the business is well positioned to
continue its positive development.
Cranswick’s growth has been driven
through a pursuit of excellence in quality
food products allied to an unstinting
focus on driving operational efficiencies
throughout the Group’s operations.
Aligned to this, a more vertically integrated
approach is now being developed, given the
UK consumer’s concern with food safety,
provenance and traceability. This approach
was evidenced by the Company’s recently
announced acquisition of EAP.
The successful development of the business
has only been possible through the skill and
determination of Cranswick’s colleagues
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Cranswick plc Report & Accounts 2013 | 5
Awards
Grocer Own Label Excellence Awards
Grocer Food and Drink Awards
2013
Gold
Meat & Poultry Stuffed
Tesco Finest Extra Matured Norfolk Pork Guard
of Honour Joint with Pork, Apricot & Brandy
Stuffing
Silver
Chilled Mediterranean
Tesco Finest Spinach & Ricotta Pasta
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
Silver
2009 Winner
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
Chilled Savoury Category
Sainsbury’s Taste the Difference British Pork
Cocktail Sausages Wrapped in a Butter Puff
Pastry
Delicatessen Meat Category
Sainsbury’s Taste the Difference Traditional
Spiced Ham
2011
Silver
Chilled Savoury Category
Jamie Oliver - My Delicious British Pancetta
Quality Food Awards
2012 Winner
Value Fresh Category
Sainsbury’s Basic Value Pork Shoulder Joint
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
BPEX Foodservice Pork Product of the Year
Competition
2011
Bronze
Best Pork & Poultry Product
Original Pork Simply Seasoned Sausage Roll
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
Winner
Best New Flavour Category
M&S Outdoor Bred British Demerara
Sweet Cure Bacon
Winner
Bacon & Sausage Category
Morrisons’ The Best Lightly Oak Smoked
Sweetcure Rindless Back Bacon
Q Awards
2011 Winner
Meat Management Awards
Delicatessen
Asda Extra Special Spicy Sausage Handmade
Pasta
2010 Winner
Best Pork Product and Best Red Meat Product
Richard Woodall Dry Cured Bacon
2009 Winner
Manufacturer of the Year
Cranswick win overall supermarket award at
Bacon Connoisseurs’ Week 2013
We are delighted to have won the Bacon revolution awards
overall supermarket award at Bacon Connoisseurs’ Week 2013 for
Morrisons M Signature Old Fashioned cure back bacon. The award
was presented to Cranswick by author and English actress Faye
Ripley in London on Monday 18 March 2013.
The Bacon which contains juniper, cloves, black pepper and
muscovado sugar, is produced using traditional methods, including
hand-curing, air-drying and quality ingredients which set it apart
from our competitors.
6 | Cranswick plc Report & Accounts 2013
Guild of Fine Foods
Retailers ‘Great Taste Awards’
2013 Winner
Cooked Meats
Sainsbury’s Taste the Difference Oak Smoked Air
Dried Yorke Ham (1 Star)
Sainsbury’s Taste the Difference Bacon & Stuffing
Topped Ham (1 Star)
Winner
Winner
Fresh Pasta
Asda Extra Special Linguine (2 star)
Plain Olives
Mild Bodega Olives (2 Stars)
2012 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)
Pizza and Pasta Awards
2011 Winner
Asda American Sizzler serve over pizza
Sainsbury’s Supplier Oscar - 2012
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
Meat and Poultry News Awards
2011 Winner
Corrina Firth
Young Processor of the Year Award
2009 Winner
Producer of the Year Award
Cranswick plc supplier - Thomas Dent
of Penrith in Cumbria
Super Meat Awards
2010 Winner
Best Sausage Category
The Co-operative Truly Irresistible Gluten Free
Pork Sausage
World Cheese Awards 2012
2012 Winner
Gold
Aldi Mozzarella
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Cranswick plc Report & Accounts 2013 | 7
Group Operating & 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 4 and 5.
Business Objectives
It is the Board’s view that meeting the following business objectives is fundamental to achieving the financial and non-financial measures
that increase value to Shareholders and other stakeholders:
Business Objective
Progress against objectives in 2012-13
Delivering innovative, quality products to its customers
Maintaining the highest level of service to its customers
Improving operational efficiency
•
•
•
•
•
Launch of premium burger range
New breaded pork range
Hand cured, air dried ham products launched
Expansion of range of new pastry products
On-going new product development and re-development of
existing ranges
Further information on the Group’s progress in meeting this
objective is set out in the Review of Activities on pages 4 and 5.
•
•
Industry leading service levels were maintained throughout
the year
Further investment in capacity ensured that peak demand
periods could be accommodated. Projects included:
•
•
•
Cooked meats (Hull) - Sutton Fields extension
Fresh pork (Hull) - butchery reorganisation
Fresh pork (Hull) - new retail packing facility
Further information on the Group’s progress in meeting this
objective is set out in the Review of Activities on pages 4 and 5.
•
Substantial capital investment was made across the business
to drive operational efficiency improvements. Key projects
delivered the following:
•
•
•
Fresh pork (Hull) – increased throughput speeds and
yield improvements
Bacon (Sherburn) - increased throughput speeds and
yield improvements
Cooked meats (Hull) – increased throughput speeds and
yield improvements
Further information on the Group’s progress in meeting this
objective is set out in the Review of Activities on pages 4 and 5.
8 | Cranswick plc Report & Accounts 2013
Business Objective
Progress against objectives in 2012-13
Securing employee health and safety
•
•
The total number of RIDDOR accidents (reportable accidents
to the HSE) fell by 6 per cent
The RIDDOR Accident Incident Ratio fell by 15 per cent
Further information on the Group’s progress in meeting this
objective is set out in the Corporate Social Responsibility
statement on pages 20 to 23.
Maximising returns on investment
•
Investment has been made across the business to deliver
efficiency improvements and to provide additional capacity
for future growth. All projects are measured against strict
investment criteria using the Group’s weighted average cost
of capital as a hurdle rate. However, in certain circumstances,
either due to legislative or customer requirements, other
criteria may be applied.
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 is to oversee and support initiatives
aimed at achieving Group objectives,
including appraisal of capital projects and
identification and approval of acquisitions
that will: take the Group into new and
growing areas of the market; open up new
customer relationships to the Group; or
consolidate existing market positions.
Current and future
development and
performance
Business development and
performance
The key features of the year have been
the record sales and underlying operating
profit for the Group, continued capital
investment and strong cash generation.
The Group delivered record production
and sales volumes across the Christmas
trading period. The trading environment
in which the Group operates has remained
challenging. During the third quarter of the
year, the business faced rapid raw material
price inflation, which it managed through
the support of the Group’s customers
and also through 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.
Revenue
Reported sales were 7 per cent ahead of last
year reflecting growth across most product
sectors. After adjusting for the revenue
contributed by Kingston Foods, which was
acquired on 29 June 2012, sales were 5
per cent higher than the prior year which
included the benefit of a 53rd week. Sales of
fresh pork, cooked meats, bacon, sausages
and sandwiches all grew strongly. Sales of
continental products were lower following
the decision of one retail customer to move
to a direct sourcing policy, although new
products and new customers together
with increased sales to existing customers
helped, to some extent, to mitigate this.
Pastry sales grew particularly strongly,
albeit from a modest base, and there was a
growing contribution to revenues from the
Group’s export markets.
Operating profit
Group operating profit of £48.2 million is
stated after a property impairment charge
of £1.8 million. This was a non-cash item
which followed a reassessment of the
carrying value of a mothballed production
facility in East Lancashire. Group operating
profit before impairment at £50.0 million
increased by 7 per cent and at 5.7 per cent
of sales, operating margin was in line with
the level achieved last year.
Share of results of associate
The Group’s share of the post-tax result
of its associate, Farmers Boy (Deeside)
Limited (FBD), in the prior year was a loss
of £0.7 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 in
the year to 31 March 2012 of £8.3 million.
Further details of the disposal are disclosed
in note 15.
Finance costs
Net finance costs of £0.8 million (2012: £1.0
million) were lower than the previous year
reflecting the strong cash generation in
the year which resulted in lower average
borrowings. Interest cover strengthened
from 49.2 times to 62.9 times.
Profit before tax
Profit before tax at £47.4 million (2012:
£48.4 million) was 2 per cent lower, but after
adjusting for the effects of the associate
and goodwill impairment in the prior year
and the property impairment charge in the
current year referred to above, adjusted
profit before tax was 8 per cent higher at
£49.3 million (2012: £45.6 million). This was
notwithstanding the fact that the prior year
benefited from the inclusion of a 53rd week.
Taxation
The tax charge as a percentage of profit
before taxation was 23.6 per cent (2012:
22.5 per cent). The standard rate of UK
Corporation Tax was 24 per cent for 2013
and 26 per cent for 2012. The lower than
standard rate of tax in the current year
relates to a deferred tax credit of £0.3
million following the substantial enactment
of the Finance Act 2013 which reduces the
corporation tax rate from 24 per cent to 23
per cent in the year to 31 March 2014. The
lower than standard rate in the previous
year related to the gain on sale of the
Group’s 49 per cent stake in FBD which did
not attract a tax charge, together with a
further credit of £0.7 million in relation to
the planned reduction in the Corporation
tax rate from 26 per cent to 24 per cent in
the current year.
Earnings per share
Adjusted earnings per share, which exclude
the effect of the property impairment
charge this year and the effects of FBD and
goodwill impairment from the prior year,
increased by 6.0 pence from 72.9 pence to
78.9 pence. Basic earnings per share fell
by 4.5 per cent to 75.1 pence, reflecting a
strong increase in underlying profitability in
the current year, offset by the impairment
charge and, in the prior year, the profit on
sale of the Group’s 49 per cent stake in FBD.
The weighted average number of shares
in issue during the year was 48,257,000
(2012: 47,709,000). Again, the prior year
earnings per share figure benefited from the
inclusion of a 53rd week.
Cash flow and net debt
The Group continues to deliver strong
operational cash flows. Cash generated
from operating activities was £49.8 million
(2012: £45.5 million), with the increase
compared to the previous year reflecting
increased Group operating profits partly
offset by an increase in working capital
reflecting growth of the business overall.
The net cash outflow from investing
activities of £35.5 million is principally
accounted for by capital additions, net of
Cranswick plc Report & Accounts 2013 | 9
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fixed asset sale proceeds, of £30.5 million
and the cash spent of the acquisition of
Kingston Foods of £6.0 million, less loan
repayments received of £0.7 million. The
previous year’s outflow was £3.3 million.
The £26.0 million of net cash used in
financing activities in 2013 is largely due
to interest paid of £0.9 million, dividends
paid of £11.4 million and loan repayments
of £14.0 million net of proceeds from issue
of share capital of £0.5 million. The prior
year cash outflow from financing was £20.8
million. The overall result is a net decrease
in cash and cash equivalents of £11.7 million
(2012: increase of £21.4 million). Net debt
reduced by £1.6 million to £20.1 million
(2012: £21.7 million) at the year end, and
gearing fell from 9 per cent to 7 per cent.
Capital structure
Pensions
(2012: £15.8 million).
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. Cranswick Country Foods plc
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
2013 was £3.4 million (2012: £5.3 million).
The present value of funded obligations was
£21.5 million (2012: £21.2 million) and the
fair value of plan assets was £18.2 million
Post balance sheet events
On 29 April 2013, the Group acquired the
whole of the issued share capital of East
Anglian Pigs Limited, a company involved in
the breeding, rearing and finishing of British
pigs, for a net cash consideration of £10.7
million.
Further details of the acquisition are
set out in the Chairman’s Statement
on page 2 and in note 30.
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 2013 and 31 March 2012.
The Group’s capital structure is as follows:
Net Debt (note 26)
Cranswick plc Shareholders’ equity
Capital Employed
2013
£m
20.1
273.7
293.8
2012
£m
21.7
245.9
267.6
Distributions, capital raising and share repurchases
The proposed final dividend for 2013 together with the interim paid in January 2013 amount to 30.0 pence per share which is 5 per cent
higher than the previous year. Share capital increased by 492,741 shares. The increase comprised 182,958 of shares issued relating to share
options exercised during the year and 309,783 of shares issued in respect of scrip dividends.
Business KPIs
The Board has assessed that the following KPIs are the most effective measures of progress towards achieving the Group’s objectives:
Financial
•
•
•
•
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
Non-financial
•
•
RIDDOR accidents – total number of accidents reportable to the Health & Safety Executive (HSE) per 1,000 employees
RIDDOR accident ratio – ratio of RIDDOR accidents to total accidents
Performance against KPIs
Financial
Underlying sales growth*
Gross Margin
Group operating margin**
Free cash flow
Non Financial
Total RIDDOR accidents per 1,000 employees
RIDDOR accident ratio
2012 was a 53 week year
* Excludes the revenue contribution from business acquired during the year
** Before a property impairment charge of £1.8 million in the current year and a goodwill impairment charge of £4.9 million in the prior year
10 | Cranswick plc Report & Accounts 2013
2013
2012
5.3%
12.2%
5.7%
10.3%
12.4%
5.7%
£49.0m
£44.4m
16.1
12.3%
18.9
15.4%
The Group reported underlying sales
growth, which excluded the impact of
acquisitions, of 5.3 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. After adjusting
for the benefit of the 53rd week in the
previous year, underlying, like-for-like sales
were 7.3 per cent higher. Gross margin
was 12.2 per cent of sales compared to 12.4
per cent a year ago reflecting the on-going
challenge of dealing with input cost inflation.
Operating margin before impairment at 5.7
per cent of sales was in line with the prior
year as improved operating efficiencies
offset gross margin pressure.
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.
Principal cash flows are discussed
on pages 9 and 10.
Reputation
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
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 £125 million over the past five
years, and it intends to continue investing
to ensure that it maintains its competitive
edge and has sufficient capacity to meet its
growth aspirations.
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 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.
Principle 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.
Effective risk management underpins the delivery of the Group’s strategy and objectives. The Board is ultimately responsible for
Cranswick’s system of risk management and internal control and sets the Group’s overall appetite for risk. This overarching risk appetite is
cascaded down through the business to operational management. Risk management processes are embedded throughout the Group at all
levels.
Roles and responsibilities
Board
Audit Committee
Risk Committee
Site management
Responsible for the Group’s system of risk management and internal control and for
setting the Group’s overall appetite for risk.
Review the systems of internal control which are in place and provide assurance to the
Board that the process of risk management and internal control is operating effectively.
Provide oversight and advice to the Board and Audit Committee in relation to current and
future risk exposures and future risk strategy including advice on determination of risk
appetite and tolerance.
Operate the risk management process within the approved risk management framework
and ensure that it is implemented effectively and efficiently.
Identify and assess all key risks, properly allocate management responsibility and ensure
that risks remain adequately identified, analysed and controlled.
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Cranswick plc Report & Accounts 2013 | 11
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
Change in 2012/13
No change
Competition,
customer retention
and reliance on key
customers
Change in 2012/13
No change
Raw material price
fluctuations
Change in 2012/13
Increased volatility in
animal feed prices and
impact of new 2013 EU
welfare regulations
Environmental
matters
Change in 2012/13
No change
Food scares
and product
contamination
Change in 2012/13
Recent meat industry
food scares
Supplier standards
Change in 2012/13
Recent meat industry
food scares
Operational Risks
Food safety
Change in 2012/13
No change
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. Pork remains an extremely
competitively priced protein.
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
retail 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 major exposure the Group has to raw material
price fluctuations is pig meat. An increase in raw
material input costs may impact Group profitability.
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. Significant
supply side consolidation seen in recent years further
mitigates this risk.
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.
The Group further mitigates the risk of raw material
price inflation through on-going pricing discussions
with its customers and continued focus on improving
operating efficiencies across all its production facilities.
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 statement and on the Group’s
website under the ‘Greenthinking’ banner.
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.
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.
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. All of its production sites are
subject to audits to ensure Group standards are
maintained.
12 | Cranswick plc Report & Accounts 2013
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Cranswick plc Report & Accounts 2013 | 13
Risk area
Nature of risk and potential impact
Risk mitigation
Operational Risks (continued)
Business continuity
Change in 2012/13
No change
Legislation
Change in 2012/13
No change
Overseas markets
Change in 2012/13
Recent meat industry
food scares
Technology
Change in 2012/13
No change
Business integration
Change in 2012/13
No change
Human Resource Risks
Health & Safety
Change in 2012/13
No change
Ethical management
Change in 2012/13
No change
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.
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 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.
Business continuity plans are in place across the
Group’s manufacturing facilities and appropriate
insurance cover is in place to mitigate any financial
loss. Potential business disruption is limited due
to multi-site operations across the majority of the
Group’s product lines.
Cranswick is committed to responding positively to
new regulation and ensuring that the Group’s views
are expressed during consultation exercises.
Extensive research is carried out into new markets
ahead of commencement of trade.
The Group uses reputable local contacts to ensure that
local laws are complied with.
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.
Robust back-up procedures are in place, as are
disaster recovery plans, both of which are tested
regularly.
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.
A breach of Health & Safety regulations would leave
the Group exposed to reputational damage and
regulatory penalties.
A rigorous due diligence approach is adopted for all
potential acquisitions which encompasses all legal,
commercial, financial, technical and environmental
matters.
A dedicated Group Health & Safety team,
supported by site based coordinators, proactively
monitors, manages and improves 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.
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.
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 (anonymously if they so
choose).
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.
Staff recruitment and
retention
The success of the Group is dependent on
attracting and retaining high quality senior
management and staff.
Change in 2012/13
No change
14 | Cranswick plc Report & Accounts 2013
Risk area
Nature of risk and potential impact
Risk mitigation
Human Resource Risks (continued)
Access to workforce
Change in 2012/13
No change
Financial Risks
Interest rates,
currency, liquidity and
credit risk
Change in 2012/13
No change
Granting of credit and
recoverability of debt
Change in 2012/13
No change
Business acquisitions
Change in 2012/13
No change
The Group experiences periods of heightened
demand, 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.
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
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.
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.
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 below.
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 risk management 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. The Group
Finance Director is consulted about the key
decisions on currency cover.
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 2013 gearing
had fallen to 7 per cent (2012: 9 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.
Interest rate risk
Credit 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
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 and/
or commercial awareness. Every attempt
is made to resist advance payments to
suppliers for goods and services; where
this proves commercially unworkable,
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 two years,
providing it with reduced liquidity risk and
Cranswick plc Report & Accounts 2013 | 15
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medium term funding to meet its objectives.
Unutilised facilities at 31 March 2013 were
£78.1 million (2012: £75.8 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
20 May 2013
16 | Cranswick plc Report & Accounts 2013
Mouth-watering Outdoor
Reared British dry-cured
back bacon on a thick cut
white farmhouse loaf.
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Cranswick plc Report & Accounts 2013 | 17
Business Locations & Group Directors
Group Directors
Sandwiches
Nick Anderson
Paul Nicholson
Simon Ravenscroft
Charcuterie & Pastry
Rollo Thompson
Pig Rearing
Ian Barnes
Charles Bowes
Food Central
Andrew Caines
Marcus Hoggarth
Graeme Watson
Chris White
Malcolm Windeatt
Cooked Meats
Alan Chapman
Ian Fisher
Paul Gartside
Andy Jenkins
Clive Stephens
Nick Tranfield
Tony Turner
Paul Williams
Bacon & Sausage
Daniel Nolan
Linda Watkin
Drew Weir
Steve Westhead
Fresh Pork
Chris Aldersley
John Fletcher
Stuart Kelman
James Pontone
Neil Willis
Manchester
Denbigh
Sherburn-in-Elmet
Malton
Hull
Preston, Hull
Barnsley
Little Melton
Atherstone
Milton Keynes
Watton
18 | Cranswick plc Report & Accounts 2013
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Cranswick plc Report & Accounts 2013 | 19
Corporate Social Responsibility
Cranswick takes its ethical responsibilities to employees, customers, shareholders, suppliers, producers
and the environment very seriously. The Company recognises that a balanced and committed approach to
all aspects of Corporate Social Responsibility (CSR) will bring benefits to each of the Company stakeholders
and will strengthen its business position and credentials to facilitate future sustainable growth and
development.
The Company continues 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
recording of data and training needs.
development needs.
Cranswick is committed to introducing,
developing and maintaining the key
systems and processes required to
underpin the effective delivery of
its employment strategy across the
business.
The Company seeks to integrate the
benefits of people management into its
culture and the Group Human Resources
(HR) Manager ensures that these are
consistently applied across all the sites.
Through representation on the Equality
and Human Rights Commission taskforce,
Cranswick takes the lead in ensuring ethical
business practices are developed at the
highest level. All of the Company’s ethical
processes are regularly audited internally
and externally by third parties. Cranswick
has been at the forefront of best practice
in conducting annual ethical audits both
at its own sites and those of its labour
providers. Performance is judged against
the Gangmasters (Licensing) Act 2004,
the Ethical Trading Initiative and retailer
expectations.
Encouraging the principles of equality and
diversity are key to the successful and
inclusive culture that lies at the heart of
Cranswick. Regular training is provided for
all employees, reiterating the importance
of equal opportunities and best practice
behaviours. This year, the site HR managers
have been trained in Equality and Diversity
principles to roll these out to all middle and
senior management teams.
All employment decisions, including
recruitment and internal promotions,
are based on merit, qualification and
abilities and will not be influenced or
affected by an employee’s race, colour,
nationality, religion, sex, marital status,
family status, sexual orientation,
disability or age.
The business uses one employment law
provider which provides the opportunity for
HR teams and managers to refer to a single
point of contact without any concerns
relating to cost or legitimacy of information
provided. This ensures consistent advice
is given across the Group and centralises
20 | Cranswick plc Report & Accounts 2013
A succession programme is in place to
identify and nurture talent throughout the
Group. Nominated employees undergo a
development plan to enhance their current
competencies and develop new skills to
assist in continuing Cranswick’s success.
A graduate recruitment programme is
structured such that candidates are taken
through a rigorous assessment and site
visit to ensure they have the right qualities
before being recruited. The programme
involves graduates spending a year within
the production environment to develop a
comprehensive knowledge of the Group’s
operations before joining their targeted
function within the business.
Advancing and nurturing Cranswick’s
cultural values are key commitments
the Group has made to its employees.
The Company aims to provide a working
environment that is consistent and fair,
which aids the development and skills of its
staff. This enhances their job satisfaction
and ensures they have the skills to carry
out their role safely and efficiently. A Group
Handbook has been introduced which
delivers the same policies and procedures
to all employees across the business
regardless of geographical location,
employment status or ethnicity.
Cranswick understands the value in
training and educating its employees in
order to support employee engagement
and retention. A structured training
programme is being undertaken to ensure
that all new recruits within the business
undergo an informative, comprehensive
and developmental induction programme
when first joining Cranswick. This will aid
their knowledge of business practices and
integrate them into the Group’s friendly
and innovative cultural environment. A
staff survey has also been rolled out across
the sites to help identify key strengths and
Staff Numbers
(Average Full Time
Equivalents)
Employees
Agency Workers
Total
Gender and
Employee
Information
Males
Females
4000
3500
3000
2500
2000
1500
1000
500
0
Total
Number
Male
Female
Number
%
Number
%
4,402
2,839
7,241
2,931
1,926
4,857
66.6%
67.8%
67.1%
1,471
913
33.4%
32.2%
2,384
32.9%
67%
68%
33%
Employees
32%
Agency Workers
Health & Safety
Cranswick’s commitment to achieving
high standards of Health & Safety
continues with the commitment of the
Board through the efforts of a dedicated
and coordinated team.
The site commitment to Health & Safety
has been further enhanced this year by
a director from each site achieving the
“Safety for Senior Executives” qualification
from the Institute of Occupational Safety
& Health. Performance is reported monthly
and discussed quarterly at Board level.
The factory based Health & Safety Co-
ordinators all hold the appropriate National
Examination Board in Occupational Safety
and Health (NEBOSH) qualification to help
deliver the appropriate standards at site
level. Consistency across the Group is
centrally directed and coordinated. With
the increasing complexity of equipment
and the legislation surrounding its design
and use, the team has been strengthened
by the addition of a Group Machinery
Safety Coordinator. As well as assessing the
safety compliance of all new and current
machinery within the business the role
involves delivering the appropriate training
to the site based engineering staff.
Any new machinery introduced to
the business will not be used unless
compliance with the latest Certificate of
Conformity (CEE) regulations has been
checked.
Responsible procurement
The Group operates from some of the best
invested food production sites in the UK
including the most modern pig abattoir
in the country. These undergo exacting
external and internal audits carried out by
independent auditing bodies, customers,
government authorities, and by the Group’s
technical compliance team. In the current
year the business has hosted 225 separate
external compliance audits, many of which
are unannounced.
Cranswick also recently celebrated its
69th consecutive Grade A rating against
the British Retail Consortium (BRC)
Global Standard for Food Safety, a track
record that is believed to be industry
leading within the sector, resulting in the
Company being a nominated finalist for
Food Company of the Year at the 2012
Society of Food Hygiene & Technology
Awards.
In addition to BRC compliance of sites
and systems of manufacture, many of
the Company’s pork products are in full
compliance with the Red Tractor Assurance
Scheme (Red Tractor), and the British Meat
Processors Association (BMPA) pork and
pork product standards. This provides the
consumer with confidence that these are
produced within an assured supply chain, to
specified standards, that is traceable all the
way back to the farm, the integrity of which
is challenged by third party announced and
unannounced audits. Cranswick also produces
organic products that are subject to a mass
balance exercise carried out by independent
auditors working for The Soil Association.
Cranswick plc accident statistics
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5.0%
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RIDDOR Reportable
Accidents
Recorded Accidents
2008
2009
2010
2011
2012
All sites within the Group have achieved
British Standard 18001, the Occupational
Health & Safety Management Systems.
Systems at new sites acquired during
the year are being aligned with Group
standards and will follow the same path.
Monthly accident statistics are monitored,
using an industry leading web based
accident recording system, which allows
management to analyse each accident,
establish root cause, and introduce control
measures, where required, to prevent
re-occurrence.
Six of the sites had inspection visits
from a Health and Safety Executive
(HSE) Inspector following the HSE’s
introduction of Fee for Intervention
Scheme without incurring any charges
for failings of material breach of the law.
The Company is committed to excellent
Health & Safety training of both its own
employees and agency workers. All receive
a full Health & Safety induction course
including fire safety, manual handling, task
and machinery training in their working
environment in order to operate in a safe
manner.
Compared to the prior year:
•
•
The total number of RIDDOR (reportable accidents to the HSE) reduced by 6 per cent
The RIDDOR Accident Incident Ratio reduced by 15 per cent
The engine room which drives technical
compliance across the Group is the exacting
internal technical audit programme which
saw over 600 separate audits carried out in
the last 12 months. The programme is not
there just to identify non-compliance but is
also a means for highlighting best practice
and shared learning across the Group.
Cranswick is committed to ensuring
the integrity and traceability of the raw
materials (meat, ingredients and packaging)
used in its products. The approval of raw
material suppliers and their products and
raw material specifications are controlled
centrally by the Group Technical Service
Team which collectively has responsibility
for 576 active suppliers and over 1600 raw
materials. Suppliers are approved by either
independent third party audit, such as the
BRC Global Standard for Food Safety, or
by Cranswick’s approval audit carried out
by the Group’s technical team. Cranswick’s
expectations of its suppliers are clearly laid
out within Technical Conditions of Supply.
Cranswick has a team of talented and
industry proven technical personnel who
are responsible for this long standing track
record of compliance. However to more
effectively manage the increasing number of
manufacturing sites, customers and audits
taking place within the Group the technical
structure has been changed during the year
by establishing a higher tier of Divisional
Technical Controllers, who collectively report
into the Group Technical Director, this
has resulted in clearer areas of technical
responsibility as well as creating a structure
for long term succession planning.
In recent months meat related food scares
have undermined consumer confidence
in the meat industry. Like many other
food companies, Cranswick has revisited
its supplier approval and traceability
monitoring systems and modified them
where appropriate. The Group is also
looking at the wider challenges associated
with preventing DNA cross contamination
during the manufacture of single species
products in multi-species factories and has
been proactive in supporting the BMPA and
the Food Standards Agency (FSA) in their
work with industry stakeholders.
It is pleasing to be able to report that
Cranswick has screened for the presence
of horse meat DNA in 85 finished
product/raw material samples and all
reported negative.
Whilst none of the Group’s raw material
or finished products have been found to
contain horsemeat, Cranswick remains
vigilant and in the year under review it spent
£1.4 million on laboratory screening of
products and raw materials for compliance
to specification.
At a time when the food industry is
frequently held to account by the media
this level of audit, commitment to resource,
clear informative labelling, and the resulting
high level of compliance should be a re-
assurance to customers, investors and
consumers that the Group is equipped to
deal with these and future challenges.
Cranswick plc Report & Accounts 2013 | 21
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Suppliers & Producers
Pork meat is the single most important
raw material supplied to the Group.
The Cranswick sites at Preston, near Hull,
and Norfolk collectively process in excess of
37,000 pigs per week and are a key supplier
to the Group’s further processing sites
and others outside the Group. Both sites
are strategically well placed within two of
the largest pig breeding and rearing areas
within the country. This close proximity
with the supply chain ensures that travel
times from farm to abattoir are minimised
with resulting animal welfare and food mile
benefits – the map opposite provides a
summary of distances from the processing
site.
Many of the pigs supplied to Cranswick
are reared to higher welfare standards
associated with Outdoor Bred or Outdoor
Reared standards. Approximately 50 per
cent of those processed by Preston, and 70
per cent by Norfolk being to the exacting
requirements of the RSPCA Freedom
Foods welfare standard, the balance of
those processed are reared indoors in full
compliance with the Red Tractor/British
Quality Assured Pork (BQAP) welfare
standards.
New European Union (EU) Welfare
regulations came into force on the 1
January 2013 which significantly limit the
use of stalls for sows and gilts during
gestation in Europe. The UK has been
Distance of pigs from processing sites
Preston, Near Hull
40% within 25 miles
60% within 40 miles
75% within 50 miles
80% within 60 miles
Norfolk
50% within 25 miles
80% within 40 miles
90% within 50 miles
95% within 60 miles
operating to these standards since 2003
but elsewhere within the EU the picture
is less clear. Cranswick’s EU suppliers are
required to provide written declarations
that pork meat supplied to the Group is
sourced from pigs reared on compliant
farms and the business is currently carrying
out compliance audits in France, Germany
and other parts of Europe. The Group also
monitors compliance within its supply chain
by a programme of traceability audits back
to the farm.
Cranswick is also working with several
retailer specific pig producer groups
and is an active member of the
working group which is looking into the
development of free farrowing systems
and the development of sustainable
farming initiatives.
In the year under review Red Tractor
has reviewed and developed its welfare
standard so that this is now more focused
on outcome measures which put pig
welfare at the centre of the audit process.
Cranswick participated in this working
group and fully supports the changes.
Customers and consumers
Cranswick’s commitment to the
production of safe, legal, wholesome
foods that are in full compliance with the
specification agreed with its customers
are at the heart of everything it does.
Cranswick supplies finished products to the
major UK retailers, restaurant groups, and
food service customers as well as supplying
raw material to other manufacturers.
Many of the Group’s customers consider
Cranswick to be their key supplier or
category champion and a preferred partner
on key technical initiative projects.
Cranswick is committed to working with its
retail customers to ensure clear informative
labelling of the products it manufactures
so that consumers can make an informed
purchase choice based on clearly stated
origin, authenticity, provenance, nutrition
and allergen declarations.
The Group is well placed to meet the
requirements of the Food Information
Regulations by the December 2014
deadline which will see the most
significant change to food labelling in the
last 10 years.
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.
Sustainability
Progress against Cranswick’s 2020 targets
to reduce its carbon footprint remain on
track.
Carbon footprint
The Group’s absolute carbon footprint
fell by a further 1.5 per cent despite a 4
per cent rise in production volume with a
corresponding fall in the carbon emissions
per tonne of production of 5.5 per cent.
The Group continues to participate in
the Carbon Disclosure Project which
now encompasses the Forest Footprint
Disclosure to make this data more freely
available to interested parties.
22 | Cranswick plc Report & Accounts 2013
Absolute and Relative Carbon Footprint
100,000
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90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2008
2009
2010
2011
2012
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0.400
0.350
0.300
0.250
0.200
0.150
0.100
0.050
0.000
Relative Carbon
Footprint (tonnes of
CO2e by tonne of
product)
Absolute Carbon
Footprint (tonnes of
CO2e)
Waste To Landfill
s
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n
n
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T
7000
6000
5000
4000
3000
2000
1000
0
2008
2009
2010
2011
2012
Waste disposal
Better segregation and classification of
the waste streams at site level coupled
with enhanced separation capabilities at
the recycling centres have reduced the
tonnage of waste to landfill by 47 per cent,
over 2,500 tonnes. The Group’s approach
to waste disposal underwent significant
change in 2012, resulting in a renegotiated
Group contract to realise the benefits from
the more progressive approach to waste
management. Roll out across all sites will be
completed in the calendar year 2013, and
the changes to existing disposal routes only
affected the latter part of the calendar year.
Much of the diverted waste goes to waste
to energy, in part due to the contamination
from meat which limits recycling options.
Food waste going to anaerobic digestion
has increased by 20 per cent, and cardboard
and plastic recycling by 6.5 per cent. The
Group is targeting zero waste to landfill
within the next two years.
Opportunities to generate revenue from
the conversion of waste fats to biodiesel
or use within the Group’s own fleet are
being investigated.
Water
Water use per tonne of product
Water usage around the Group has
gone up significantly this year, in
part due to changing practices in the
washing of livestock vehicles on site and
additional export hygiene requirements.
Coupled with the increasing concern
over water availability, this has led to
closer investigation of options to reduce
consumption or reuse water where
conditions and technologies allow. By their
nature, these tend to be significant projects
which take both time and capital to deliver
the longer term benefits. Nevertheless,
the Group is still tracking well on its
commitment to a 20 per cent reduction in
process water usage by 2020 under the
Federation House Commitment.
Cranswick’s commitment to have all
its existing sites accredited to the
Environmental Management Standard
ISO14001 has been achieved, and the
newly acquired sites will follow as part of
their integration into the Group.
Energy
Energy usage per tonne of production has
increased slightly, influenced by product
mix, up 2 per cent year on year. The rising
cost of energy (around 10 per cent in cost
per tonne of production) will influence
decisions on investment in energy efficient
equipment and buildings. Solar panels,
induction lighting and heat recovery are all
being employed on site extensions and new
builds.
Climate Change Agreements are now being
established for the two existing sites in
the Group which missed out on the first
scheme, together with the two new sites
acquired during the year. As a consequence,
the Group’s involvement with the Carbon
Reduction Commitment (CRC) will be phased
out in the next CRC reporting year.
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2.50
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1.50
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2008
2009
2010
2011
2012
Community
Supporting local communities is
important to the Group
Over 80 per cent of Cranswick’s work force
lives within 10 miles of their place of work.
The Group recognises its responsibilities, as
a member of the communities in which it
operates and encourages the businesses to
engage with their local communities.
Charitable Giving
•
•
•
- involvement with
- charitable fund raising
At site level
activities continue, including an annual
golf day which raised over £30,000 for
the KIDS Charity.
At a Group level
Help for Heroes through the Red Lion
Brand helps that business contribute
all of its post-tax profits to Forces
charities.
Other charitable donations
the business during the year totalled
£40,000.
made by
The environmental and community impact
of any site development or redevelopment
is always important to the Company and
over the years many initiatives have been
progressed including the planting of over
4,000 trees at the Preston site.
Summary
Cranswick will continue to review and
monitor the performance of its target
areas set out in this report and through
this process the Group’s stakeholders will
have a clearer picture of what corporate
responsibility means to the Company and
that it is an integral part of its development.
By order of the Board
Malcolm Windeatt
Company Secretary
20 May 2013
Cranswick plc Report & Accounts 2013 | 23
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Directors
Executive Directors
Martin Davey,
Chairman +
Martin has been with Cranswick for the
past 28 years, joining the Company and
appointed Finance Director in 1985. He led
Cranswick’s entry onto the Stock Exchange
in 1985 and was appointed Chief Executive
in 1988. He became Chairman in 2004 and
will continue in this role on a part-time basis
from 1 September 2013. He is a chartered
accountant and for a period of time was a
non-executive director of Thorntons plc.
Adam Couch,
Chief Executive
Adam has over 20 years’ experience in the
food industry joining the operational side
of the fresh pork business of Cranswick
in 1991. He was appointed to the Board
as managing director of the fresh pork
business in 2003 and then became Chief
Operating Officer in 2011. He was appointed
to the role of Chief Executive in August 2012.
Adam was also a committee member of
the British Pig Executive between 2005 and
2013.
Non-Executive Directors
Mark Bottomley,
Finance Director
Bernard Hoggarth,
Commercial Director
Bernard 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
was Chief Executive between 2004 and
2012. With effect from August 2012 Bernard
remained on the Board as Commercial
Director, though on a part time basis.
Mark joined Cranswick as Group Financial
Controller in 2008 and was appointed
Finance Director in 2009. He is a chartered
accountant and 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 some 17 years ago as
a sales and marketing executive. 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 in 2010.
John Worby +† *
Patrick Farnsworth +† *
Steven Esom +† *
John joined Cranswick as a Non-Executive
Director in 2005 and is Senior Independent
Director and Chairman of the Audit
Committee. He is a chartered accountant
with many years’ experience in the food
industry. John recently retired as 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 is also a
Non-Executive Director of Smiths News plc
and is a member of the Financial Reporting
Review Panel.
Patrick was appointed a Non-Executive
Director of Cranswick in 2004. He is
currently Chairman of the Nomination
Committee. He has many years’ experience
in the food industry, having worked for
William Jackson & Son Limited, a Hull based
food company, since 1965, where he was
Joint Group Managing Director from 1995
until his retirement in 2005. This year
Patrick will have completed 9 years as an
independent Non-Executive Director and
therefore will stand down after the Annual
General Meeting.
Steven joined Cranswick as a Non-Executive
Director in 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. For the
last 4 years he has been an Operating
Partner of Langholm Capital. He is currently
the Non-Executive Chairman for the
British Retail Consortium (trading), the Ice
Organisation and a Non-Executive Director
of Tyrrells Investments Limited.
*
†
+
Member of Remuneration Committee
Member of Audit Committee
Member of Nomination Committee
24 | Cranswick plc Report & Accounts 2013
Directors’ Report
The Directors submit their report and the audited accounts of the Group for the year ended
31 March 2013.
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 16.
Results and dividends
Profit before tax
Taxation
Profit for the year
Interim dividend per share paid on 25 January 2013
Final dividend per share proposed
2013
£’000
47,439
(11,198)
36,241
9.4p
20.6p
2012
£’000
48,351
(10,871)
37,480
9.0p
19.5p
Total dividend
£14.5m
£13.7m
Subject to approval at the Annual General Meeting, the final dividend will be paid in cash or scrip form on 6 September 2013 to members on
the register at the close of business on 5 July 2013. The shares will go ex-dividend on 3 July 2013.
Events after the balance sheet
date
On 29 April 2013, the Group acquired 100
per cent of the issued share capital of East
Anglian Pigs Limited (now renamed Wayland
Farms Limited) for a net cash consideration
of £10.7 million. The principal activities of
East Anglian Pigs Limited are pig breeding,
rearing and finishing. The acquisition gives
the Group greater control over its supply
chain. Further details are provided in note
30.
Major Shareholders
Financial instruments
Directors and their interests
The Group’s risk management objectives
and policy are discussed in the Group
Operating and Financial Review on pages 8
to 16.
Details of the Directors’ beneficial interests
in the ordinary shares of the Company and
in share options over the ordinary share
capital of the Company are included in the
Remuneration Committee Report on pages
42 and 43.
In accordance with the recommendations
of the UK Corporate Governance Code, all
Directors, apart from Patrick Farnsworth,
will stand for re-election at the forthcoming
Annual General Meeting.
The Company has been informed of the following significant holdings of voting rights in the ordinary shares of the Company:
Invesco Perpetual
Legal & General Investment Management
Aberforth Partners
Jupiter Asset Management
Ruffer
At 31 March 2013
Number of shares
% of issued share
capital
14,172,969
2,388,220
2,079,164
1,794,035
1,752,272
29.21
4.92
4.28
3.70
3.61
There have been no notifications of any significant changes to these shareholdings as at 20 May 2013.
Cranswick plc Report & Accounts 2013 | 25
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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 23. 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 29
July 2013 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
29 July 2013, is limited to £1,601,457 which
represented approximately 33 per cent of
the issued share capital (excluding treasury
shares) as at 31 May 2012. 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 29 July 2013.
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 £240,219, representing 5 per cent of the
Company’s issued share capital as 31 May
2012. This authority will expire at the end of
the Annual General Meeting to be held on
29 July 2013.
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
26 | Cranswick plc Report & Accounts 2013
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 29 July 2013, is
limited to £1,601,457 which represented
approximately 33 per cent of the Company’s
issued ordinary share capital (excluding
treasury shares) as at 31 May 2012. 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 29 July 2013.
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 10 pence, 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 29 July 2013.
The Directors would consider holding any of
its own shares that it purchases pursuant to
this authority as treasury shares.
The Company did not repurchase any
shares during the year and 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 it follows with regard to payments 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 39 days. The average credit
taken by our customers on a similar basis is
29 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 various products.
Charitable Donations
As part of the Group’s commitment to
the communities in which it operates,
contributions totalling £40,000 were made
during the year to local charities and
community projects.
Auditors
A resolution to reappoint Ernst & Young LLP
as independent external auditors will be
proposed 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 24. 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
Remuneration Committee 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 proportion of the awards
which are capable of exercise depends
on the extent 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.
Directors’ Responsibility
Statement
Each of the Directors listed on page 24
confirms that to the best of their knowledge:
•
•
the Financial Statements, prepared in
accordance with IFRS as adopted by the
European Union, give a true and fair
review of the assets, liabilities, financial
position and results of Cranswick
and its subsidiaries included in the
consolidation taken as a whole; and
the Directors’ Report and the Business
Review include a fair review of the
development and performance of
the business and the position of
Cranswick and its subsidiaries included
in the consolidation taken as a whole,
together with a description of the
principal risks and uncertainties that
they face.
By order of the Board
Malcolm Windeatt
Company Secretary
20 May 2013
Company number: 1074383
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Cranswick plc Report & Accounts 2013 | 27
Corporate Governance Statement
The Board is committed to high standards of Corporate Governance and takes its role very seriously in
adopting and maintaining good governance.
Principles of good governance
The adoption and maintenance of good
governance is the responsibility of the
Board as a whole. This report, together with
the Audit Committee Report, on pages 32
to 34 and the Remuneration Committee
Report, on pages 36 to 34, describes how
the Board applies the principles of good
governance and best practice as set out in
the 2010 UK Corporate Governance Code
(the ‘Code’) which can be found on the
Financial Reporting Council’s website www.
frc.org.uk.
Statement of Compliance
The Directors consider that the Company
has, during the year ended 31 March 2013,
complied with the requirements of the Code
other than with Code provisions:
•
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.
•
B.6 requires the Company to undertake
a rigorous annual evaluation of its
Board, committees and individual
directors. In the current year The Board
decided that an external evaluation
should be undertaken. Whilst this
process was commenced prior to the
year end, the actual results will not be
known until around July 2013 and will
be reported on in the Company’s 2014
Annual Report.
The Board
During the year ended 31 March 2013, the
Board consisted of an Executive Chairman,
a Chief Executive, two other full time
Executive Directors, one part time Executive
Director and three Non-Executive Directors.
All the Non-Executive Directors are deemed
to be independent.
The Board during the year met 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 operating sites 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.
The Board covers key decision areas of the Group’s affairs including:
•
•
•
•
•
•
•
acquisition and divestment policy;
strategy;
internal control and risk management policies;
approval of budgets;
major capital expenditure projects;
monitoring of the Group’s profit and cash flow performance; and
general treasury policy.
The UK Corporate Governance Code stipulates there should be a clear division of responsibility at the head of the company
between the running of the Board and the executive responsible for running the company business.
The Chairman was responsible for:
•
•
•
•
•
the leadership of the Board and ensuring its effectiveness on all aspects of its’ role;
ensuring all directors were able to maximise their contributions to the Board;
providing strategic insight from his long business experience in the industry and with the Company;
providing a sounding board for the Chief Executive on key business decisions and challenging proposals where appropriate; and
meeting with major shareholders on governance matters and being an alternate point of contact for shareholders on other matters.
The Chief Executive was responsible for:
•
•
•
•
leading the business and the rest of the management team, on a day to day basis, in accordance with the strategy agreed by the Board;
leading the development of the Group’s strategy with input from the rest of the Board;
leading the management team in the implementation of the Group’s strategy including new build decisions; and
bringing matters of particular significance or risk to the Chairman for discussion and consideration by the Board if appropriate.
28 | Cranswick plc Report & Accounts 2013
Upon appointment, all Directors undertake
a formal introduction to all the Group’s
activities and are also provided with the
opportunity for on-going training to ensure
that they are kept up-to-date on changes
in relevant legislation and the general
business environment, including the
review of relevant literature and attending
external courses. Procedures are in place
for Directors to seek both independent
advice, at the expense of the Company, and
the advice and services of the Company
Secretary in order to fulfil their duties.
the business, continues to operate meeting
around six times a year to discuss issues
affecting the trading side of the business
including the development of various
projects and approving non-strategic capital
expenditure. The Executive Committee
reports back to the Board.
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.
An Executive Committee, consisting of the
Executive Directors and senior executives of
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.
Non-Executive Directors
The Non-Executive Directors bring
experience and complementary skills to
the Board, aid constructive debate and
challenge during Board discussions and
help develop strategy with an independent
outlook.
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, or as a member of the Company’s pension scheme;
has no close family ties with any of the Company’s advisors or senior employees;
holds no cross-directorships or has no significant links with other directors through involvement in other companies or bodies;
does not represent a significant shareholder; and
has not served on the board for more than nine years from the date of their first election.
The UK Governance Code requires listed companies to undertake a rigorous annual evaluation of the performance of their Board,
committees and of individual directors.
The Code implies that an evaluation of the Board should be externally facilitated at least every three years and therefore after carrying out a
review of external advisors the Board has appointed EquityCommunication Limited, an independent business that has no other relationship
with the Company, to perform an external evaluation of the Cranswick Board and its committees. This process has commenced prior to
the year end, and the results are expected to be finalised around July 2013. The findings of the review will be reported in the 2014 Annual
Report.
The Chairman has evaluated the performance of individual Directors. In addition, the Non-Executive Directors, led by the Senior
Independent Director, meet, without the Chairman present, in order to appraise his performance.
Directors’ biographies and membership of the various Committees are shown on page 24. 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 Board Meetings
Martin Davey - Chairman
Adam Couch - Chief Executive
Mark Bottomley - Finance Director
Jim Brisby - Sales and Marketing Director
Bernard Hoggarth - Commercial Director
John Worby - Senior Independent Director &
Chairman Of the Remuneration Committee
Steven Esom - Independent Director and
Chairman of the Remuneration Committee
Patrick Farnsworth - Independent Director
and Chairman of the Nomination Committee
All Directors attended the Annual General Meeting
Board
10
10
10
10
10
10
10
10
10
Directors’ biographies and
membership of the various
Committees are shown on page 24
Cranswick plc Report & Accounts 2013 | 29
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Board Committees
Audit Committee
The Audit Committee comprises 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 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.
Total Number of
Meetings
John Worby
Steven Esom
Patrick Farnsworth
Audit
Committee
3
3
3
3
The work, responsibilities and governance
of the Audit Committee are set out on
pages 32 to 34.
The Chairman of the Audit Committee will
be available at the Annual General Meeting
to respond to any Shareholder questions
that might be raised on the Committee’s
activities.
Remuneration Committee
The Remuneration Committee 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 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 from external advisors who provide
detailed analysis of executive remuneration
in comparable companies.
30 | Cranswick plc Report & Accounts 2013
Remuneration
Committee
apart from Patrick Farnsworth who will
have completed 9 years on 1 August
2013 as an independent Non-Executive
Director.
Total Number of
Meetings
Steven Esom
John Worby
Patrick Farnsworth
4
4
4
4
Details of the Committee’s current
remuneration policies are given in the
Remuneration Committee Report on pages
36 to 44.
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.
Nomination
Committee
The Board has set out in the Notice of
Annual General Meeting their reasons for
supporting the re-election of the Directors
at the forthcoming Annual General Meeting.
Their biographical details on page 24
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.
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 in order to
plan, execute, monitor and control the
Group’s objectives effectively and to ensure
that internal control becomes embedded in
the operations.
Total Number of
Meetings
Patrick Farnsworth
John Worby
Steven Esom
Martin Davey
3
3
3
3
3
As noted in the Audit Committee Report on
pages 32 to 34, the Audit Committee has
reviewed the effectiveness of the internal
control and risk management systems and
reported to the Board that it was not aware
of any significant deficiency, or material
weakness, in the system of internal control
and that the business maintains a sound
risk management control system.
All appointments are made on individual
merit regardless of gender, ethnicity or
religious beliefs; the principle concern of
the Group is to ensure all candidates are of
appropriate experience, ability and fit for
the role.
Appointment to the Board
During the year the Committee
acknowledged that Patrick Farnsworth
will complete 9 years as an Independent
Non-Executive Director on 1 August 2013
and therefore arranged for an independent
advisor, Norman Broadbent, to short list a
number of candidates for interview. After
carrying out the exercise the Board has
selected Kate Allum as an Independent Non-
Executive Director for Cranswick plc and she
is expected to join the Board on 1 July 2013.
Re-election
All directors will be standing for re-
election at the Annual General Meeting
The Board confirms that the key on-going
processes and features of the Group’s
internal risk based control system have
been fully operative throughout the year
and up to the date of the Annual Report
being approved.
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 the preparation of the
consolidated financial statements.
Shareholders
The Board attaches great importance
to maintaining good relationships with
all Shareholders who are kept informed
of significant Company developments.
Presentations are made by the Chief
Executive, the Finance Director and the Sales
and Marketing Director, to analysts and
institutional Shareholders on the half year
and full year results and to discuss Company
direction. A similar presentation is made to
shareholders attending the Annual General
Meeting. 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 or the Chief Executive, as
appropriate, 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, Chief Executive or the Finance
Director discusses governance and strategy
with major Shareholders from time to time.
Other Directors are available to meet the
Company’s major Shareholders if requested.
The Senior Independent Director is available
to listen to the views of Shareholders,
particularly if they have concerns which
contact with the Chairman has failed
to resolve, or for which such contact is
inappropriate. Principles of corporate
governance and voting guidelines issued by
the Company’s institutional Shareholders
and their representative bodies are
circulated to and considered by the Board.
The Board also welcomes the attendance
and questions from Shareholders at the
Annual General Meeting which is also
attended by the Chairmen of the Audit,
Remuneration and Nomination Committees.
By order of the Board
Malcolm Windeatt
Company Secretary
20 May 2013
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Cranswick plc Report & Accounts 2013 | 31
Audit Committee Report
John Worby - Chairman of the Audit Committee
The Audit Committee has overall responsibility for monitoring the integrity of the financial statements, and
related announcements, the effectiveness of the risk control procedures and internal control systems which
are important to both management and to the shareholders.
The Audit Committee
Members of the Audit Committee consist of the three independent Non-Executive Directors, John Worby, Steven Esom and Patrick
Farnsworth. The Committee is chaired by John Worby, who has considerable recent relevant financial experience.
The Audit Committee is required to meet at least three times a year and has an agenda linked to the Group financial calendar.
The Audit Committee invites the Chairman, the Group Finance Director and the Group Financial Controller, together with the external
auditors and internal audit to attend its meetings. 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.
Summary of the Audit Committee’s principal responsibilities:
•
•
•
•
•
•
•
•
•
Reviewing and monitoring the integrity of the Group’s interim and full year financial statements.
Reviewing the Group’s accounting policies.
Keeping under review the effectiveness of the Group’s internal controls and risk management systems.
Monitoring and reviewing the effectiveness of the internal audit function.
Reviewing the internal audit plan and internal audit reports on accounting, internal financial and other control matters.
Overseeing the relationship with the external auditors including the effectiveness, scope, cost and objectivity of the external audit.
Recommending the appointment, reappointment or removal of the external auditors.
Reviewing the independence of the external auditors, including considering the level of non-audit work carried out by them.
Reviewing and monitoring the Company’s procedures in relation to the Company’s Whistle Blowing and Anti-Bribery policies.
The Committee annually reviews its terms of reference and makes recommendations to the Board for any appropriate changes. The current
Terms of Reference include all the relevant aspects set out in the UK Corporate Governance Code and will be available for inspection at the
Company’s Registered Office and at the Annual General Meeting.
The work of the Committee in the last year and up to the date of this report is set out below and elsewhere in this report.
Risk Management and Internal Control
The Audit Committee is responsible for keeping under review the effectiveness of the Company’s internal control and risk management
systems. The Chairman of the Audit Committee reports to the Board, following each Audit Committee meeting, on issues relating to internal
controls and risk management.
The Group has a whistle blowing policy in place, including 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 policy, and any whistle blowing
incidents, are reviewed regularly by the Audit Committee.
Key on-going processes include:
•
•
•
•
•
a system to identify, evaluate and manage business risk (as detailed below and in the Group Operating and Financial Review on page 11;
maintaining a strong control environment;
formulating and reviewing policies and procedures in relation to whistle blowing and compliance with the Bribery Act
an information and communication process; and
a monitoring system and a regular review of effectiveness by the Audit Committee.
A Group Risk Committee monitors the risk areas within the Group and reports directly to the Audit Committee. The Risk Committee is
chaired by the Group Finance Director and includes other senior executives covering the commercial, operational, technical, information
technology, engineering, health and safety and financial functions of the business. Internal audit and the Company Secretary also attend
these meetings. The team identified the key business risks within their functions, considered the financial and operational implications and
assessed the effectiveness of the control processes in place to mitigate these risks. A summary of the findings has been reported to and
reviewed by the Audit Committee and the Board and this, along with the Board’s 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.
32 | Cranswick plc Report & Accounts 2013
Following its review the Audit Committee reported to the Board that it was not aware of any significant deficiency, or material
weakness, in the system of internal control and that the business maintains a sound risk management control system.
Financial Reporting
The Audit Committee is responsible for reviewing and monitoring the integrity of the Company’s financial statements. During the year the
Audit Committee reviewed reports from the Group Finance Director and the external auditors on matters of significance in relation to the
financial statements, including key estimates and judgements made in preparing the statements. They also reviewed the content of the 2013
Report and Accounts, and the 2012 Interim Report, to ensure that shareholders are provided with the necessary information needed to
assess the Company’s performance, business model and strategy.
Significant issues considered during the year included:
•
•
•
•
•
•
the fair value of acquisitions during the year, particularly in relation to the Kingston Foods acquisition;
the carrying value of goodwill and whether there has been any impairment. This included reviewing the position in relation to the Group’s
sandwich business following the impairment of goodwill made last year;
assessing whether there was sufficient banking head room to support a going concern concept;
the valuation of the closed defined benefit pension scheme;
the impairment of the value of any assets held; and
the review of accruals and provisions in respect of liabilities not settled at the year end date.
The Audit Committee, after discussions with the external auditors, accepted that these issues had been correctly treated in the financial
statements which taken as a whole are fair, balanced and understandable and provide the information for shareholders to assess the
Company’s performance, business model and strategy.
Internal Audit
External auditors
The Audit Committee is responsible
for monitoring the performance and
effectiveness of the Company’s internal
audit activities. The Group’s internal audit
function includes Company employees
supported by Grant Thornton, which
provides specialist advice and resource
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 reviewed and
approved the annual internal audit
plan and received regular updates on
progress in meeting the plan objectives
at each of its meetings during the year.
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 were
considered by the Audit Committee and
where necessary challenged. The Audit
Committee also reviewed progress by
management in addressing the issues
identified on a timely basis. The Audit
Committee undertook its annual review of
the extent and effectiveness of the work of
the internal audit function.
Ernst & Young LLP has been the Company’s
auditor 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 was
conducted during the year through an
external audit questionnaire with senior
finance management, the results of which
were reviewed and discussed by the Audit
Committee.
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 tender being in
2008. The Committee also approves the
terms of engagement and remuneration of
the external auditors, and monitors their
independence.
Auditor independence
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 an established policy
in place concerning the types of non-audit
services the external auditors should not
carry out to avoid compromising their
independence and these include internal
accounting or other financial services,
executive or management roles or functions,
and remuneration consultancy. 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.
Ernst & Young LLP have confirmed that they
have adequate policies and safeguards in
place to ensure that auditor objectivity and
independence is maintained.
During the year the Audit Committee
reviewed and 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.
iii. The auditors’ policies for the rotation
of the lead partner and key audit
personnel. A new Senior Statutory
Audit Partner was selected by Ernst
& Young in 2012 due to the previous
senior audit partner having held office
for 5 years. The current senior manager
has been in place since 2009.
iii. The nature of non-audit work
undertaken during the year and its
approval in accordance with the Audit
Committee’s guidelines for ensuring
independence.
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Cranswick plc Report & Accounts 2013 | 33
Details of the non-audit work and fees paid
during the year are set out in note 4 to the
financial statements. The work undertaken
during the year and the safeguards
considered by the Committee to ensure
independence included the following:
i.
Ernst & Young LLP provide tax
advice. Their audit objectivity and
independence was safeguarded
through the use of a separate tax
partner.
ii. Ernst & Young LLP were engaged to
advise the Company on a number of
corporate transactions. Following a
tender, for this type of work, carried
out in the previous year, and given
the nature of the work required
in 2012/13 it was, after careful
consideration, assessed that Ernst &
Young LLP were best placed to carry
out this work. Their audit objectivity
and independence was safeguarded
through the use of a separate
corporate transactions partner and
prior approval by the Chairman of the
Audit Committee on a case by case
basis.
Following consideration of the above
matters relating to the performance and
independence of the external auditors at
a meeting of the Audit Committee in May
2013, 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 2013 Annual General
Meeting.
The Audit Committee acknowledges the
“Guidance on Audit Committees” issued
by the FRC in September 2012 and, in
particular, the requirement to put the audit
services contract out to tender at least
once every ten years. This guidance is
effective for accounting periods beginning
on or after 1 October 2012. As noted
above, the last audit tender was 5 years
ago in 2008. The Audit Committee is also
aware of, and sensitive to, Investor body
guidelines on non-audit fees and intends to
further review, in the year ahead, its policy
of awarding non-audit services to ensure
that the correct balance is maintained
between ensuring that the Group benefits
cost-effectively from the accumulated
knowledge and experience of Ernst & Young
whilst also making sure that their audit
independence and objectivity is maintained.
This report was approved by the Audit
Committee and signed on its behalf by:
John Worby
Chairman of the Audit Committee
20 May 2013
34 | Cranswick plc Report & Accounts 2013
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“Good Wholesome
Yorkshire Cooking,
Baked to Perfection!”
Gill Ridgard,
The Yorkshire Baker
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Remuneration Committee Report
Steven Esom - Chairman of the Remuneration Committee
Letter from the Chairman of the Remuneration Committee
Dear Shareholder,
Introduction
I am pleased to present the Remuneration Committee’s annual report on Directors’ remuneration. The report sets out the Group’s
remuneration policy and gives details of the remuneration paid to Executive and Non-Executive Directors for their services to the Company
during the year.
The UK Government has proposed new legislation to reform the way in which directors’ remuneration is reported and voted upon. The new
legislative requirements will not come into effect until October 2013 and so, whilst not being mandatory for this report, the Remuneration
Committee has incorporated a number of the proposed changes in this report to give greater clarity and transparency.
The report is split into two sections. Firstly, a policy report which:
•
•
•
sets out the different elements which make up the Executive Directors’ remuneration;
explains how each component operates; and
details the performance metrics which underpin each element of remuneration.
The second section contains an implementation report which discloses how the policy for Executive remuneration has been applied
during the year.
Overview of the last financial year
As highlighted in the Chairman’s Statement on pages 2 and 3, Cranswick performed strongly, with adjusted operating profit and earnings
per share substantially ahead of last year. The targets set by the Remuneration Committee, which had been based on the Group Budget
for the year, anticipated the challenging trading environment with strong inflationary pressures within the supply chain and a highly
competitive retail environment. It was necessary for the management to step change performance in order to meet these targets with
emphasis on growing sales through innovation, high operational efficiency, growing volumes in the critical Christmas period and mitigate
the rapid increase in raw material price inflation. The performance was well above the targets set. Accordingly bonus payments were made
at 150 per cent of salary which is the maximum payable under the scheme.
Also, Adam Couch was appointed as Chief Executive on 1 August 2012 and his salary reflects a first step increase from that date, owing to
the additional responsibilities following his promotion from Chief Operating Officer. A second and final step increase was made on 1 May
2013 to align with market rates. Further details of Adam’s salary review are set out on page 41.
Highlights for the current financial year
No changes are being proposed to the Group’s current policy on Executive remuneration. In accordance with current policy, the Executive
Directors, other than the Chief Executive for the reasons set out above and on page 41, were awarded an increase of 3.3 per cent in line
with the annualised increase in the Retail Prices Index (RPI) for the twelve months ending 31 March 2013. This award is consistent with
the benchmark for the review of other senior executives. The level of pay award across the Group takes into account local practices and
regional variations in pay and conditions.
Summary
Executive remuneration policy will continue to be monitored to ensure it is correctly aligned with the Group’s business strategy. The
Remuneration Committee considers the policy, set out in this report, to be an appropriate one which aims to properly reward performance
in line with the Company’s business objectives and growth and delivery of shareholder value.
Steven Esom
Chairman of the Remuneration Committee
20 May 2013
36 | Cranswick plc Report & Accounts 2013
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Cranswick plc Report & Accounts 2013 | 37
Information not subject to audit
The Remuneration Committee
Advisers to the Committee
Remuneration policy
The Remuneration Committee is responsible
to the Board and comprises the three
Non-Executive Directors chaired by Steven
Esom. The Executive Chairman attends
the meetings in an advisory capacity as
and when requested and the Company
Secretary attends the meetings as secretary
to the Committee. No individual is
involved in decisions relating to their own
remuneration.
Role of the Committee
The role of the Committee is to:
•
•
•
•
•
review the on-going relevance
and effectiveness of the Group
remuneration policy;
determine the remuneration of the
Company’s Executive Directors;
monitor the remuneration of the
Group’s senior executives;
approve the design of the Executive
Directors’ and the Group’s senior
executives’ annual bonus arrangement;
and
approve the level and appropriateness
of the long term incentive plan (LTIP)
for the Executive Directors and senior
executives.
The Committee keeps itself fully informed
on the developments within the industry
and in the field of remuneration and
seeks advice from external advisors where
appropriate. The Committee reviews and
benchmarks its remuneration policy through
external consultants every two to three
years; the last such review being carried
out by AON Hewitt in 2011. AON Hewitt
has been retained by the Remuneration
Committee for advice throughout the year.
AON Hewitt provides no other services to
the Company though it is now part of the
AON Corporation group of companies which
also provide insurance broking services to
the Group. The Committee is satisfied that
the provision of such services does not
create any conflicts of interest. In addition
PricewaterhouseCoopers continue to give
advice to the Remuneration Committee
on share option awards and other benefit
schemes. PricewaterhouseCoopers has
provided no other services to the Group
during the year. The Committee believes the
advice given during the year from both AON
Hewitt and PricewaterhouseCoopers has
been independent, relevant and objective.
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 pension and
benefits); and
a significant performance related
element in the form of a profit related
bonus and share-based awards.
The details of individual components of the
remuneration package and service contracts
are set out below:
Element
of Pay
Purpose and link to
strategy
Operation
Performance Metrics
Changes To Policy
Base
salary
To provide a market
competitive base
salary to attract and
retain executives
Set competitively to reflect the
individual’s skills, experience and
responsibilities
Periodic reviews of market rates
Any increase is based on
individual performance,
change in role and the
Company pay award
There are no planned
changes to the current
approach in 2013
Base salaries are reviewed annually
and take into account inflation
and performance and any changes
take effect from 1 May. Every three
years a review is carried out, with
external advisors, to benchmark the
salaries and to ensure they remain
competitive
Pension
To provide a
framework to save
for retirement
Executive Directors are entitled to
non-contributory membership of
the Group’s defined contribution
pension scheme with the employer’s
contribution set at 20 per cent of
each Executive Director’s base salary
N/A
There are no planned
changes to the current
approach in 2013
Alternatively, at their option,
Executive Directors may have
contributions of the same amount
paid to them in cash, in lieu of
pension, subject to the normal
statutory deductions
In some cases there are payments
of pension contributions in lieu of
salary
38 | Cranswick plc Report & Accounts 2013
Element
of Pay
Purpose and link to
strategy
Operation
Performance Metrics
Changes To Policy
Annual
Bonus
To incentivise
executive directors
and senior
executives linked to
the performance of
the business, on an
annual basis, based
on key financial
metrics
Benefits
To provide market
competitive
benefits as part of
the remuneration
package.
Share
based
awards
A Save As You Earn
(SAYE) share scheme
is available to all
eligible employees
Long term incentive
(LTIP) awards are
available to ensure
that executives and
senior management
are involved in the
longer term success
of the Group
The bonus scheme in operation is
based on the achievement of Group
profit targets which 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 profit
performance for the first half of the
year, where a fixed sum is paid, with
the remaining element based on an
annual profits target
The bonus targets are reviewed
every year and changes take effect
from 1 April
The total bonus is capped at 150
per cent of basic salary and is non-
pensionable
There is a claw back arrangement
in place should the need arise, for
example, if the profit on which any
bonus is paid is subsequently found
to be overstated
Market competitive benefits include
private medical insurance, life
assurance, personal tax advice, and
pension advice
Benefits are not pensionable
SAYE options are made available
to eligible staff, including Executive
Directors, with the full 20 per cent
discount being given to the relevant
share price at the time. Employees
can save up to £250 per month in
this scheme
The LTIP awards are granted by
the Remuneration Committee and
only vest after three years on the
achievement of demanding targets
aligned to Total Shareholder Return
(TSR) and earnings per share (EPS)
The performance is based
solely on the Group’s profit
before tax, with a sliding
scale of targets set around
budget performance
There are no planned
changes to the current
approach in 2013
There are no planned
changes to the current
approach in 2013
There are no planned
changes to the current
approach in 2013
There are no planned
changes to the current
approach in 2013
N/A
N/A
The LTIP maturing in 2013
will not have achieved the
EPS target but has achieved
86 per cent of the TSR
measure giving a share
award of 43 per cent which
will be available to vest in
June
Long Term Incentive Plan
•
The Remuneration Committee awards
options under the LTIP scheme in order
to ensure that Executives and senior
management are involved in the longer
term success of the Group. Options can only
be exercised if certain performance criteria
are achieved by the Group.
•
50 per cent of the options 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.
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 above RPI of 3 per
cent and 100 per cent of the shares at
an average annual outperformance of 7
per cent with outperformance between
3 and 7 per cent rewarded pro rata.
50 per cent are aligned to a total
shareholder return (TSR) target
measured against a comparable group
of food companies over a three year
period. 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.
The comparison companies used besides
Cranswick 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 (to the 2011 offer as
no-longer quoted) and Tate and Lyle plc.
Cranswick plc Report & Accounts 2013 | 39
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Service contracts
Non-Executive Directors
Each Non-Executive Director has an
appointment letter - Patrick Farnsworth for
19 months from 1 January 2012, John Worby
for 31 months from 1 January 2012 and
Steven Esom for 3 years from 12 November
2011. The continuing appointments
are subject to annual re-election at the
Company’s Annual General Meeting.
The remuneration of the Non-Executive
Directors is determined by the Executive
Directors and reflects:
•
•
•
the time, commitment and
responsibility of their roles;
that their fees are reviewed annually
with consideration being given to
market rates and the need to attract
and retain individuals with the
necessary skills and experience; and
that they do not participate in the
Group’s incentive bonus arrangement,
pension scheme, or share based
awards.
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 following Executive Directors have a
one year rolling contract: Adam Couch
commencing 1 May 2006 (revised 1 August
2012), Mark Bottomley from 1 June 2009
and Jim Brisby from 26 July 2010. For early
termination the Remuneration Committee
will consider the circumstances including
any duty to mitigate loss, and determine
compensation payments accordingly.
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 takeover.
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 contracts also have special provisions
relating to liquidated damages requiring
that the notice period stipulated in the
contract will be paid in full. Whilst these
contractual terms differ from the current
policy, the Remuneration Committee has
concluded that it would not be appropriate,
in the circumstances, to seek to further
amend the contractual terms agreed with
these individuals in 2006.
There are no termination or exit payments
in any of the service contracts. Any sums
payable up to the point of leaving will be
considered by the Remuneration Committee
and will take into account earnings, any
bonus earned, any share awards due and
any pay in lieu of notice.
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 to
individual businesses.
The Group offers employment
conditions that are commensurate
with a medium sized quoted company,
including high standards of health and
safety and equal opportunities.
The Group operates Save As You Earn
share schemes which are open to all
eligible employees including Executive
Directors. It is worth noting that
around 20 per cent of the work force
holds shares in the Company.
Performance graph – Total Shareholder Return
The graph below shows the percentage change (from a base of 100 in May 2003) in the total shareholder return (with dividends
reinvested) for each of the last ten years on a holding of the Company’s shares against the corresponding change in a hypothetical
holding in the shares of the FTSE 350 Food Producers and Processors Price Index (“FTSE FPP”) and the FTSE All Share Index (“FTSE All
Share”). The FTSE FPP and the FTSE All Share were chosen as representative benchmarks of the sector and the market as a whole for
the business.
300
275
250
225
200
175
150
125
100
75
50
25
0
2003
Cranswick
FTSE 350 Food Producers
FTSE All Share
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
c
e
t
s
e
v
n
I
:
e
c
r
u
o
S
40 | Cranswick plc Report & Accounts 2013
Information subject to audit
Directors’ remuneration
The remuneration of Directors for the year was as detailed below. The sub-totals shown for 2013 and 2012 represent the requirements of
current legislation. The totals for both years reflect the ‘single figure’ basis proposed by new BIS requirements.
2013
Salary
and fees
Benefits
Payments in
lieu of pension
Bonus Sub Total
Pension
LTIP
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
47
45
49
382
345
478
712
394
-
-
-
3
1
3
4
4
2,452
15
-
-
-
22
13
41
150
74
300
-
-
-
536
481
681
1,031
554
3,283
47
45
49
943
840
1,203
1,897
1,026
6,050
-
-
-
50
50
50
-
-
150
-
-
-
106
56
153
153
153
621
47
45
49
1,099
946
1,406
2,050
1,179
6,821
Salary
and fees
Benefits
Payments in
lieu of pension
Bonus Sub Total
Pension
LTIP
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Non-Executive Directors
Steven Esom
Patrick Farnsworth
John Worby
Executive Directors
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
Total emoluments
2012
Non-Executive Directors
Steven Esom
Patrick Farnsworth
John Worby
Executive Directors
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
Total emoluments
40
40
45
365
314
422
684
532
-
-
-
3
1
3
5
4
-
-
-
-
-
28
76
52
-
-
-
342
300
405
453
453
2,442
16
156
1,953
Adam Couch’s salary had a first step
increase in August 2012 following his
promotion from Chief Operating Officer
to Chief Executive. A second and final step
increase was awarded on 1 May 2013
and his salary is now considered by the
Remuneration Committee to be in line with
market rates.
Bernard Hoggarth stood down as Chief
Executive in August 2012 but remains on the
Board on a part-time basis as Commercial
Director. His salary has therefore been
adjusted accordingly.
Benefits principally comprise medical
insurance, personal tax, and pension advice.
The value of the LTIP for the year to 31
March 2013 relates to awards, made in
2010, with a performance criteria based
on the three years ending 31 March 2013
that will vest in June 2013, calculated at the
closing share price at 31 March 2013 which
is deemed to be the best indicator of the
vesting value. The value of the prior year
LTIP awards have been shown based on the
closing share price as at 31 March 2012.
40
40
45
710
615
858
1,218
1,041
4,567
-
-
-
67
42
50
50
50
259
-
-
-
99
49
243
243
243
877
40
40
45
876
706
1,151
1,511
1,334
5,703
The number of Directors who were active
members of the money purchase pension
scheme during the year was 5 (2012: 5).
Cranswick plc Report & Accounts 2013 | 41
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Total pay of the Chief Executive compared to total shareholder return
The graph below presents a comparison of the total pay of the Chief Executive over the last five years against the total shareholder
return of the Company:
250
200
150
100
50
0
8
0
0
2
l
i
r
p
A
1
n
o
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d
a
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0
1
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f
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V
-
R
S
T
2000
1500
1000
500
0
’
)
0
0
0
£
(
y
a
p
l
a
t
o
t
e
v
i
t
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c
e
x
E
f
e
i
h
C
2009
2010
2011
2012
2013
Base salary
Pension and pay in lieu of pension and benefits
Bonus
LTIP
Total shareholder return
Share options
The interests of the Executive Directors in the LTIP and SAYE schemes were as follows:
Long term incentive plan
Year of
award
At 1 April
2012
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
2009
2010
2011
2012
2009
2010
2011
2012
2009
2010
2011
2012
2009
2010
2011
2012
2009
2010
2011
2012
Granted
in the
year
No.
-
-
-
No.
13,200
25,000
43,600
-
44,600
6,600
13,200
37,200
-
-
-
-
40,100
32,500
36,000
50,500
-
-
-
-
59,100
32,500
36,000
56,800
-
-
-
-
59,100
32,500
36,000
56,800
-
-
-
-
51,600
Exercised in
the year
Lapsed in
the year
At 31 March
2013
Exercise
Price
Market
price at
grant
No.
-
-
-
-
-
-
-
-
-
-
-
-
No.
924
-
-
-
462
-
-
-
2,275
-
-
-
(30,225)
2,275
-
-
-
-
-
-
(30,225)
2,275
-
-
-
-
-
-
No.
12,276
25,000
43,600
44,600
6,138
13,200
37,200
40,100
30,225
36,000
50,500
59,100
-
36,000
56,800
59,100
-
36,000
56,800
51,600
p
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
p
592
860
785
801
592
860
785
801
592
860
785
801
592
860
785
801
592
860
785
801
The performance periods run for 3 years from 1 April in each year and conclude on 31 March three years later and are exercisable on the
attainment of certain performance criteria detailed on page 39. The range of exercise dates are 1 June 2012 to 1 June 2022.
The LTIP, issued in 2010, that vests in June 2013, will not achieve the EPS target but will achieve 86 per cent of the TSR measure giving a
share award of 43 per cent. Of the original award, as shown above, 57 per cent will therefore lapse. This is reflected in the remuneration
table on page 41.
The options granted in the year are exercisable between 1 June 2015 and 1 June 2022. The share price at the time of issue was 801p.
42 | Cranswick plc Report & Accounts 2013
The following Directors exercised LTIP share options during the year:
Number
Date exercised
Martin Davey
Bernard Hoggarth
30,225
30,225
20 June 2012
3 August 2012
Exercise
price
Market
Price
Notional
gain
p
nil
nil
p
796
846
£’000
241
256
Savings related share option scheme
At 1 April
2012
Granted
in the year
Exercised
in the year
Lapsed
in the
year
At 31 March
2013
Range of
exercise dates
Weighted
average
exercise
price
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
No.
2,590
3,533
4,697
1,554
1,554
No.
No.
No.
-
-
-
-
-
-
-
(1,277)
-
-
-
-
-
-
No.
2,590
3,533
3,420
1,554
1,554
p
579
474
502
579
579
1 Mar 2017/
1 Sept 2017
1 Mar 2014/
1 Sept 2014
1 Mar 2016/
1 Sept 2019
1 Mar 2015/
1 Sept 2015
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:
Adam Couch
1,277
1 March 2013
Number
Date exercised
Exercise
price
Market
Price
Notional
gain
p
471
p
£’000
1,000
7
Market price of shares
The market price of the Company’s shares at 31 March 2013 was 986 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)
1,023.0
1,023.0
1,023.0
Lowest
(pence)
732.5
849.0
732.5
At 31 March 2013
Ordinary Shares
3,625
37,280
72,371
200,426
1,441
1,287
114,413
1,641
Cranswick plc Report & Accounts 2013 | 43
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The Remuneration Committee has agreed
that Executive Directors should build up a
shareholding equivalent to one year’s net
salary over a 3 to 5 year period, following
the adoption of this policy in 2012. 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
2013 to 20 May 2013.
On Behalf of the board
Steven Esom
Chairman of the Remuneration
Committee
20 May 2013
44 | Cranswick plc Report & Accounts 2013
T A S T E O U R T R A V E L S
Lively Cuquillo and Volos
olives shaken up with garlic
and a sprinkle of paprika
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Cranswick plc Report & Accounts 2013 | 45
Statement of Directors’ Responsibilities
in relation to the annual report and
financial statements
On behalf of the board
Martin Davey
Chairman
Mark Bottomley
Finance Director
20 May 2013
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 Remuneration
Committee 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.
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 2013 which comprise the Group
Income Statement, the Group and Company
Statements of Comprehensive Income,
Group and Company Balance Sheets, the
Group and Company Statements of Cash
Flow, the Group and Company Statements
of Changes in Equity and the related notes
1 to 30. 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
46, 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 2013 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; and
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
Companies Act 2006; and
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 28 to 31 with respect to internal
control and risk management systems
in relation to financial reporting
processes and about share capital
structures is consistent with the
financial statements.
Matters on which we are
required to report by exception
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:
•
•
•
•
•
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:
•
•
•
the Directors’ statement, set out on
page 16, in relation to going concern;
the part of the Corporate Governance
Statement relating to the company’s
compliance with the nine provisions
of the UK Corporate Governance Code
specified for our review; and
certain elements of the report to
shareholders by the Board on directors’
remuneration.
Alistair Denton
Senior Statutory Auditor
For on behalf or Ernst & Young LLP
Statutory Auditor
Hull
20 May 2013
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Cranswick plc Report & Accounts 2013 | 47
Notes
2013
£’000
2012
£’000
3
4
11
12
4
15
15
6
6
7
10
10
10
10
875,171
820,775
(768,633)
(718,605)
106,538
102,170
(56,497)
(55,434)
50,041
46,736
-
(1,836)
(4,924)
-
48,205
41,812
-
-
(712)
8,254
48,205
49,354
62
(828)
151
(1,154)
47,439
48,351
(11,198)
(10,871)
36,241
37,480
75.1p
74.9p
78.9p
78.7p
78.6p
78.4p
72.9p
72.7p
Group Income Statement
for the year ended 31 March 2013
Revenue
Cost of sales
Gross profit
Operating expenses excluding impairment
Group operating profit before impairment
Impairment of goodwill
Impairment of property, plant and equipment
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 earnings per share (excluding effect of associate and impairment):
Basic
Diluted
48 | Cranswick plc Report & Accounts 2013
Group Statement of Comprehensive Income
for the year ended 31 March 2013
Notes
2013
£’000
2012
£’000
Profit for the year
36,241
37,480
Other comprehensive income
Movement on hedging items:
Losses arising in the year
Reclassification adjustment for losses/ (gains) included in the income statement
Actuarial gains/ (losses) on defined benefit pension scheme
Deferred tax relating to components of other comprehensive income
20
20
25
(4)
69
942
(275)
(69)
(146)
(3,504)
892
Other comprehensive income for the year, net of tax
732
(2,827)
Total comprehensive income for the year attributable to owners of the parent
36,973
34,653
Company Statement of Comprehensive Income
for the year ended 31 March 2013
Company profit for the year in both years of £16,826,000 (2012: £24,837,000) was equal to total comprehensive income for the year
attributable to owners of the parent.
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found on pages 56-94
Cranswick plc Report & Accounts 2013 | 49
Group Balance Sheet
at 31 March 2013
Non-current assets
Intangible assets
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 reserve
Retained earnings
Equity attributable to owners of the parent
On behalf of the board
Martin Davey
Chairman
20 May 2013
Mark Bottomley
Finance Director
50 | Cranswick plc Report & Accounts 2013
Notes
2013
£’000
2012
£’000
11
12
13
18
16
17
18
26
13
19
20
21
19
20
7
21
25
23
129,003
147,386
-
702
122,839
130,853
-
1,398
277,091
255,090
48,463
93,097
696
7,633
38,516
85,534
696
20,100
149,889
144,846
-
221
426,980
400,157
(106,109)
(91,078)
(608)
(7,123)
-
(1,624)
(5,936)
(389)
(113,840)
(99,027)
(410)
(462)
(29,572)
(42,301)
(5,947)
(190)
(3,357)
(7,093)
-
(5,342)
(39,476)
(55,198)
(153,316)
(154,225)
273,664
245,932
4,853
61,603
6,765
4,803
58,642
5,603
(4)
(69)
200,447
273,664
176,953
245,932
Company Balance Sheet
at 31 March 2013
Non-current assets
Property, plant and equipment
Investments in subsidiary undertakings
Investment in associate
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
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
20 May 2013
Mark Bottomley
Finance Director
Notes
2013
£’000
2012
£’000
12
13
13
7
17
26
13
575
598
159,212
158,338
-
565
-
390
160,352
159,326
15,369
5,169
20,538
8,834
18,137
26,971
-
221
180,890
186,518
19
(42,446)
(41,646)
(1,270)
(1,116)
(43,716)
(42,762)
20
(28,498)
(42,246)
23
(72,214)
(85,008)
108,676
101,510
4,853
61,603
4,000
1,806
6,765
4,803
58,642
4,000
1,806
5,603
29,649
26,656
108,676
101,510
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Notes to the accounts can be
found on pages 56-94
Cranswick plc Report & Accounts 2013 | 51
Group Statement of Cash Flows
for the year ended 31 March 2013
Operating activities
Profit for the year
Notes
2013
£’000
2012
£’000
36,241
37,480
Adjustments to reconcile Group profit for the year to net cash inflows from operating activities:
Taxation
Net finance costs
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 property, plant and equipment
Impairment of goodwill
Amortisation of intangible assets
Share-based payments
Difference between pension contributions paid and amounts recognised in the
income statement
Release of government grants
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Tax paid
Net cash from operating activities
Cash flows from investing activities
Interest received
Principal amounts received in relation to loans advanced
Acquisition of subsidiaries, net of cash acquired
Purchase of property, plant and equipment
Receipt of government grants
Proceeds from sale of property, plant and equipment
Proceeds from sale of associate
Proceeds from sale of investment classified as held for sale
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Proceeds from issue of share capital
Purchase of own shares
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 (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
52 | Cranswick plc Report & Accounts 2013
7
15
15
12
12
11
11
14
15
26
26
26
11,198
766
-
-
-
(237)
15,486
1,786
-
119
1,162
(1,043)
(61)
(9,514)
(5,568)
10,696
61,031
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
(11,219)
(11,283)
49,812
45,533
62
696
(5,986)
173
1,906
-
(30,809)
(20,311)
-
318
-
221
149
308
14,500
-
(35,498)
(3,275)
(862)
491
-
-
(14,000)
(11,404)
(243)
(1,305)
702
(136)
(1,005)
(7,000)
(11,831)
(272)
(26,018)
(20,847)
(11,704)
18,788
7,084
21,411
(2,623)
18,788
Company Statement of Cash Flows
for the year ended 31 March 2013
Notes
2013
£’000
2012
£’000
Operating activities
Profit for the year
Adjustments to reconcile Company profit for the year to net cash inflows from operating activities:
Dividends received
Taxation
Net finance cost
Fair value adjustment to put option in relation to associate
Gain on sale of associate
Depreciation of property, plant and equipment
12
Share-based payments
(Increase)/ decrease in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Tax paid
Net cash from operating activities
Cash flows from investing activities
Dividends received
Purchase of property, plant and equipment
Proceeds from sale of associate
Proceeds from sale of investment classified as held for sale
Net cash from investing activities
Cash flows from financing activities
Interest paid
Proceeds from issue of share capital
Purchase of own shares
Issue costs of long term borrowings
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
15
26
26
26
16,826
24,837
(11,404)
(11,831)
2,687
2,868
-
-
44
288
(6,283)
810
5,836
(2,617)
3,219
2,435
2,905
(95)
(7,422)
74
380
2,443
5,468
19,194
(2,262)
16,932
11,404
11,831
(22)
-
221
(65)
14,500
-
11,603
26,266
(2,877)
(3,050)
491
-
-
(14,000)
(11,404)
(27,790)
(12,968)
18,137
5,169
702
(136)
(1,005)
(7,000)
(11,831)
(22,320)
20,878
(2,741)
18,137
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Notes to the accounts can be
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Cranswick plc Report & Accounts 2013 | 53
Group Statement of Changes in Equity
for the year ended 31 March 2013
Share
capital
Share
premium
Note (a)
£’000
Note (b)
£’000
Share-
based
payments
Note (e)
£’000
Hedging
reserve
Treasury
shares
Retained
earnings
Total
equity
Note (f)
£’000
Note (g)
£’000
£’000
£’000
As 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)
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments
Scrip dividend
Share options exercised (proceeds)
Dividends
Deferred tax related to changes in
equity
Corporation tax related to changes in
equity
-
-
-
-
31
19
-
-
-
-
-
-
-
2,489
472
-
-
-
-
-
-
1,162
-
-
-
-
-
-
65
65
-
-
-
-
-
-
At 31 March 2013
4,853
61,603
6,765
(4)
-
-
-
-
(136)
-
-
-
155,311
220,932
37,480
(2,612)
34,868
-
-
-
-
37,480
(2,827)
34,653
(136)
1,501
1,370
702
-
136
(136)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(13,201)
(13,201)
(52)
(52)
163
163
176,953
245,932
36,241
667
36,908
-
-
-
36,241
732
36,973
1,162
2,520
491
(13,924)
(13,924)
370
140
370
140
200,447
273,664
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.
54 | Cranswick plc Report & Accounts 2013
Company Statement of Changes in Equity
for the year ended 31 March 2013
Share
Share
capital premium
General
reserve
Note (a) Note (b)
£’000
£’000
Note (c) Note (d)
£’000
£’000
Merger
reserve
Share-
based
payments
Note (e)
£’000
Treasury Retained
earnings
shares
Total
equity
Note (g)
£’000
£’000
£’000
At 31 March 2011
4,764
56,609
4,000
1,806
4,102
-
15,146
86,427
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
At 31 March 2012
Profit for the year, being total
comprehensive income
Share-based payments
Scrip dividend
Share options exercised (proceeds)
Dividends
Deferred tax related to changes in
equity
At 31 March 2013
-
-
-
19
20
-
-
-
-
-
-
1,351
682
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,501
-
-
-
-
-
4,803
58,642
4,000
1,806
5,603
-
-
31
19
-
-
-
-
2,489
472
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,162
-
-
-
-
4,853
61,603
4,000
1,806
6,765
-
24,837
24,837
(136)
-
-
-
-
-
-
-
136
(136)
(136)
1,501
1,370
702
-
-
-
-
-
-
-
-
-
-
-
(13,201)
(13,201)
10
10
26,656
101,510
16,826
16,826
-
-
-
1,162
2,520
491
(13,924)
(13,924)
91
91
29,649
108,676
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.
Notes to the accounts can be
found on pages 56-94
Cranswick plc Report & Accounts 2013 | 55
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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 2013 were authorised for issue
by the Board of Directors on 20 May 2013 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 24 – measurement of share-based payments
• Goodwill
• Provisions
• Pensions
• Acquisitions
Note 11 – measurement of the recoverable amount of cash generating units containing goodwill
Note 21 – judgements in relation to amounts provided
Note 25 – pension scheme actuarial assumptions
Note 14 and note 30 – fair values on acquisition
•
Trade receivable provisions
Note 17 – 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)
IAS 12 Income Taxes (Amendment) – Deferred Taxes: Recovery of underlying assets
Effective date
1 January 2012
The application of this standard has not had a material effect on the net assets, results and disclosures of the Group.
56 | Cranswick plc Report & Accounts 2013
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
IFRS 7
IFRS 7
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 1
Financial Instruments: Disclosures
Financial Instruments: Disclosures (Amendment) – Initial Application of IFRS 9
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)
IAS 19 (revised)
Employee Benefits
IAS 27 (revised)
Separate Financial Statements
IAS 28 (revised)
Investments in Associates and Joint Ventures
IFRS
May 2012 Annual Improvements
Effective date*
1 January 2014
1 January 2013
1 January 2015
1 January 2015
1 January 2014
1 January 2014
1 January 2014
1 January 2013
1 July 2012
1 January 2013
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 interpretation but the need for endorsement restricts the Group’s
discretion to early adopt standards. The Group has not early adopted any of the above standards.
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 separately by virtue of their size or incidence if the financial
statements are to give a true and fair view.
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.
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2. Accounting policies (continued)
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.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the
consideration transferred, measured at acquisition date fair value. Acquisition costs incurred are expensed and included in administrative
expenses.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with IAS 39
either in profit or loss or as a change to other comprehensive income.
Intangible assets
Goodwill is the excess of the fair value of the consideration paid for a business over the fair value of the identifiable assets, liabilities and
contingent liabilities acquired. Goodwill is capitalised and subject to an impairment review, both annually and when there are indications
that the carrying value may not be recoverable.
Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the
recoverable amount is less than the carrying amount, an impairment loss is recognised. When an entity is disposed of, any goodwill
associated with it is included in the carrying amount of the operation when determining the gain or loss on disposal except that goodwill
arising on acquisitions prior to 31 March 2004 which was previously deducted from equity is not recycled through the income statement.
Intangible assets acquired as part of an acquisition of a business are capitalised at fair value separately from goodwill only if the fair value
can be measured reliably on initial recognition and the future economic benefits are expected to flow to the Group. Customer relationships
are amortised evenly over their expected useful lives of 5 years, with amortisation charged through administration expenses in the income
statement.
Property, plant and equipment
Property, plant and equipment are included at cost less accumulated depreciation and any provision for impairment.
Freehold land is not depreciated. Depreciation is charged on property, plant and equipment on the depreciable amount, being cost less the
estimated residual value (based on prices prevailing at the balance sheet date) on a straight line basis over their estimated useful economic
lives, or the estimated useful economic lives of their individual parts.
58 | Cranswick plc Report & Accounts 2013
Useful economic lives are principally as follows:
Freehold buildings
50 years
Short leasehold improvements
Residue of lease
Plant and equipment
Motor vehicles
5 - 11 years
4 years
The carrying value of property, plant and equipment is reviewed for impairment individually or at the cash generating unit level when events
or changes in circumstances indicate that the carrying value may not be recoverable.
Capitalised borrowing costs
Borrowing costs incurred in financing the construction of qualifying assets such as property, plant and equipment are capitalised up to
the date at which the relevant asset is substantially complete. 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 was accounted for using the equity method, initially recognised at fair value. An associate is an entity
in which the Group has significant influence. Under the equity method, the investment in the associate was carried in the Group balance
sheet at deemed cost (being its fair value on initial recognition) plus post-acquisition changes in the Group’s share of net assets of the
associate, 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.
For the prior year, the financial statements of the associate were prepared for the period to 30 January 2012 and were updated to 31 March
2012 with reference to management accounts. Where necessary, adjustments were 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 subsidiary after the sale. The resulting profit or loss (after taxes) is reported
separately in the income statement.
Property, plant and equipment once classified as held for sale are not depreciated.
Accounting for leases
Finance leases
i)
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.
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2. Accounting policies (continued)
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.
Biological assets
Biological assets are measured on initial recognition and at the end of each reporting period at fair value less cost to sell. Changes in the
measurement of fair value less cost to sell are included in profit or loss for the period in which they arise. All costs incurred in maintaining
the assets are included in profit or loss for the period in which they arise. Fair values of livestock held for breeding are determined with
reference to market prices of livestock of similar age, breed and genetic material.
Cash and cash equivalents
Cash equivalents are defined as cash at bank and in hand including short term deposits with original maturity within 3 months. For the
purposes of the Group cash flow statement, cash and cash equivalents consist of cash and cash equivalents net of outstanding bank
overdrafts.
Financial instruments
i) Debt instruments, including bank borrowings
Debt instruments are initially recognised at the fair value of net proceeds received after the deduction of issue costs. Subsequently debt
instruments are recognised at amortised cost using the effective interest method. Issue costs are charged to the income statement over
the term of the debt at a constant rate on the balance sheet carrying amount under the effective interest method.
ii) Derivative financial instruments
The Group uses derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge its cash flow risks
associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are stated at fair value.
The fair value of forward contracts is calculated by reference to current forward exchange rates for contracts with a similar maturity
profile. The fair value of interest rate swaps is determined by reference to market values for similar instruments.
Where derivatives meet the hedging criteria under IAS 39 for cash flow hedges the portion of the gain or loss on the hedging instrument
that is determined to be an effective hedge is recognised directly in other comprehensive income and the ineffective portion is
recognised in the income statement. Gains or losses recognised in comprehensive income are transferred to the income statement in
the same period in which the hedged item affects the net profit or loss. If a forecast transaction is no longer expected to occur, amounts
previously recognised in other comprehensive income are transferred to the income statement.
For derivatives that do not qualify for hedge accounting under IAS 39, any gains or losses arising from changes in fair value are taken
directly to net profit or loss for the period.
Financial assets – Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, do
not qualify as trading assets and have not been designated as either fair value through profit and loss or available-for-sale. Such assets are
carried at amortised cost using the effective interest method if the time value of money is significant. Gains and losses are recognised in the
income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
60 | Cranswick plc Report & Accounts 2013
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.
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.
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2. Accounting policies (continued)
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 revenues by destination, regardless of where the goods were produced:
UK
Continental Europe
Rest of World
2013
£’000
849,836
20,222
5,113
875,171
2012
£’000
794,047
26,482
246
820,775
In addition to the non-UK sales disclosed above the Group also made sales to export markets through UK based meat trading agents
totalling £20,122,000 (2012: £19,232,000). Including these sales, total sales to export markets were £45,457,000 for the year (2012:
£45,960,000).
Customer concentration
The Group has 3 customers which individually account for more than 10 per cent of the Group’s total net revenue. These customers account
for 28 per cent, 23 per cent and 10 per cent respectively. In the prior year these same three customers accounted for 27 per cent, 25 per
cent and 8 per cent respectively.
The Group’s non-current assets were all located within the UK for both 2013 and 2012.
62 | Cranswick plc Report & Accounts 2013
4. Group operating profit
This is stated after charging/ (crediting):
Operating expenses:
Selling and distribution
Administration excluding impairment
Impairment of goodwill
Impairment of property, plant and equipment
Total operating expenses
Depreciation of property, plant and equipment
Impairment of goodwill
Impairment of property, plant and equipment
Release of government grants
Operating lease payments – minimum lease payments
Net foreign currency differences
Cost of inventories recognised as an expense
Increase/ (decrease) in provision for inventories
Auditors’ remuneration
Fees payable to the Company’s auditor in respect of the audit
Audit of these financial statements
Local statutory audits of subsidiaries
Total audit remuneration
Fees payable to the Company’s auditor in respect of non-audit related services
Tax compliance services
Tax advisory services
Other services
Total non-audit related remuneration
2013
£’000
2012
£’000
34,627
21,870
56,497
-
1,836
58,333
15,486
-
1,836
(61)
4,155
(42)
559,190
321
25
136
161
57
57
148
262
32,358
23,076
55,434
4,924
-
60,358
13,972
4,924
-
(55)
3,662
(204)
559,967
(423)
25
126
151
87
37
79
203
Of the ‘Other’ non-audit related services £131,000 (2012: £75,000) was in respect of corporate finance services in relation to acquisitions.
Fees paid to Ernst & Young LLP for non-audit services by the Company itself are not disclosed in the individual accounts of Cranswick plc
because Group financial statements are prepared which are required to disclose such fees on a consolidated basis.
5. Employees
Group
Staff costs:
Wages and salaries
Social security costs
Other pension costs
2013
£’000
2012
£’000
98,284
90,144
8,790
1,137
8,468
1,286
108,211
99,898
Included within wages and salaries is a total expense for share-based payments of £1,162,000 (2012: £1,501,000) all of which arises from
transactions accounted for as equity-settled share-based payment transactions.
Cranswick plc Report & Accounts 2013 | 63
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5. Employees (continued)
The average monthly number of employees during the year was:
Group
Production
Selling and distribution
Administration
2013
2012
Number
Number
3,933
249
220
4,402
3,591
279
197
4,067
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 36 to 44. The employee costs shown on the
previous page include the following remuneration in respect of Directors of the Company:
Group and Company
Directors’ remuneration
Pension contribution
2013
£’000
6,050
150
6,200
2012
£’000
4,567
259
4,826
Aggregate gains made by Directors on exercise of share options
504
638
Number of Directors receiving pension contributions under money purchase schemes
5
5
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 25)
Finance charge payable under finance leases and hire purchase contracts
Movement in discount on provisions and financial liabilities
Total finance costs
The interest relates to financial assets and liabilities carried at amortised cost.
2013
£’000
2012
£’000
62
151
714
714
85
8
21
828
1,080
1,080
53
17
4
1,154
64 | Cranswick plc Report & Accounts 2013
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
Tax on profit on ordinary activities
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 gain/ (loss) on defined benefit pension scheme
Recognised in Group statement of changes in equity
Deferred tax on share-based payments
Corporation tax credit on share options exercised
2013
£’000
2012
£’000
12,245
11,998
204
(569)
12,449
11,429
(801)
(327)
(123)
(1,251)
89
(736)
89
(558)
11,198
10,871
2013
£’000
2012
£’000
15
260
275
(370)
(140)
(510)
(51)
(841)
(892)
52
(163)
(111)
Total tax credit recognised directly in equity
(235)
(1,003)
Company
Recognised in Company statement of changes in equity
Deferred tax credit on share-based payments
Total tax credit recognised directly in equity
(91)
(91)
(10)
(10)
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7. Taxation (continued)
b) Factors affecting tax charge for the year
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences are explained below:
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by standard rate
2013
£’000
2012
£’000
47,439
48,351
of corporation tax in the UK of 24 per cent (2012: 26 per cent)
11,385
12,571
Effect of:
Disallowed expenses
Deferred tax rate change
Share-based payment deduction
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
66 | Cranswick plc Report & Accounts 2013
191
(327)
(132)
-
-
81
453
(736)
(199)
(2,018)
1,280
(480)
11,198
10,871
2013
£’000
2012
£’000
8,179
9,128
78
44
(1,582)
(772)
5,947
(1,011)
-
(136)
(354)
250
(1,251)
2013
£’000
(23)
(118)
(424)
(565)
78
27
(858)
(1,282)
7,093
(634)
(42)
(58)
(140)
317
(557)
2012
£’000
(42)
(123)
(225)
(390)
d) Temporary differences associated with Group investments
At 31 March 2013 a £nil tax liability has been recognised (2012: £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 main rate of corporation tax in the UK reduced from 26 per cent to 24 per cent from 1 April 2012. A further reduction in the corporation
tax rate to 23 per cent was enacted before the balance sheet date. Deferred tax is therefore provided at 23 per cent.
Further reductions in the corporation tax rate have been announced but not yet enacted. It is anticipated that by 1 April 2015, the main rate
of corporation tax in the UK will be reduced to 20 per cent. The aggregate impact of the proposed reductions from 23 per cent to 20 per
cent would reduce the deferred tax liability of the Group by approximately £776,000 and reduce the deferred tax asset of the Company by
£74,000.
8. Profit attributable to members
Of the profit attributable to members, the sum of £16,826,000 (2012: £24,837,000) has been dealt with in the accounts of Cranswick plc.
9. Equity dividends
Declared and paid during the year:
Final dividend for 2012 – 19.5p per share (2011: 18.7p)
Interim dividend for 2013 – 9.4p per share (2012: 9.0p)
Dividends paid
2013
£’000
2012
£’000
9,381
4,543
8,910
4,291
13,924
13,201
Proposed for approval of Shareholders at the Annual General Meeting on 29 July 2013:
Final dividend for 2013 – 20.6p (2012: 19.5p)
9,997
9,368
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Cranswick plc Report & Accounts 2013 | 67
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
£36,241,000 (2012: £37,480,000) 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
2013
2012
Thousands
Thousands
48,257
47,709
137
92
48,394
47,801
Basic weighted average number of shares for 2013 excludes a weighted average of nil shares (2012: 17,377 shares) held during the year by
the Cranswick plc Employee Benefit Trust and a weighted average of nil treasury shares (2012: 7,806 treasury shares) held during the year by
the Group . At 31 March 2013 no shares were held by either the Trust or the Group (2012: nil).
Adjusted earnings per share
In the current year the Group impaired freehold property, plant and equipment to their fair value at its mothballed production facility in
East Lancashire (note 12). In the prior year, the Group impaired the carrying value of goodwill in relation to its Sandwiches cash generating
unit (note 11) and disposed of its investment in associate Farmers Boy (Deeside) Limited which was acquired in July 2010 (note 15). As
the impairment of both goodwill and property, plant and equipment and the investment in the associate 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 impairments and the associate, 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.
Adjusted net profits excluding the effect of the associate and the impairment of property, plant and equipment and goodwill are derived as
follows:
Profit for the year
Impairment of property, plant and equipment
Share of results of associate
Profit on disposal of associate
Fair value adjustment to put option in relation to associate
Impairment of goodwill
2013
£’000
36,241
1,836
-
-
-
-
Adjusted profit for the year excluding effect of associate and impairment
38,077
2012
£’000
37,480
-
712
(8,254)
(95)
4,924
34,767
68 | Cranswick plc Report & Accounts 2013
11. Intangible assets
Group
Cost
At 31 March 2011 and 31 March 2012
On acquisition of subsidiary (note 14)
At 31 March 2013
Amortisation and impairment
At 31 March 2011
Impairment loss
At 31 March 2012
Amortisation
At 31 March 2013
Net book value
At 31 March 2011
At 31 March 2012
At 31 March 2013
Impairment testing
Customer
Goodwill
relationships
£’000
£’000
127,763
5,488
133,251
-
4,924
4,924
-
4,924
127,763
122,839
-
795
795
-
-
-
119
119
-
-
Total
£’000
127,763
6,283
134,046
-
4,924
4,924
119
5,043
127,763
122,839
128,327
676
129,003
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
2013
£’000
12,231
90,167
11,602
10,968
3,359
2012
£’000
12,231
84,679
11,602
10,968
3,359
128,327
122,839
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 8.3 per cent has been used (2012: 8.8 per cent) being management’s estimate of the weighted average cost of
capital.
Cranswick plc Report & Accounts 2013 | 69
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11. Intangible assets (continued)
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 in the prior year, 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 cash generating units. Assumptions and projections are updated on an annual basis.
Impairment of Sandwiches cash generating unit
In the prior year, the Group performed its annual impairment test as at 31 March 2012, in line with the process described above. The
Sandwiches cash generating unit had historically been the most sensitive to a reasonably possible change in assumptions. The projected
cash flows for the year ended 31 March 2012 were updated to reflect the Sandwiches budget for the year ending 31 March 2013, expected
future growth rate assumptions of 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 recognised an impairment loss within administration expenses
for goodwill allocated to the Sandwiches cash generating unit of £4,924,000.
70 | Cranswick plc Report & Accounts 2013
12. Property, plant and equipment
Group
Cost
At 31 March 2011
Additions
Transfers between categories
Disposals
At 31 March 2012
Additions
On acquisition
Transfers between categories
Disposals
At 31 March 2013
Depreciation
At 31 March 2011
Charge for the year
Relating to disposals
At 31 March 2012
Charge for the year
Transfers between categories
Impairment loss
Relating to disposals
At 31 March 2013
Net book amounts
At 31 March 2011
At 31 March 2012
At 31 March 2013
Freehold
land and
buildings
Leasehold
improvements
£’000
£’000
Plant,
equipment
and
vehicles
£’000
Assets
in the
course of
construction
£’000
59,225
1,442
7,294
(100)
67,861
4,658
-
7,536
(19)
80,036
4,080
1,261
(13)
5,328
1,597
3,428
1,548
-
8,416
596
-
-
9,012
77
91
(6,070)
-
3,110
4,456
459
-
4,915
223
(3,428)
-
-
119,490
19,694
546
(631)
139,099
22,512
591
(1,466)
(570)
7,840
-
(7,840)
-
-
5,957
-
-
-
63,173
12,252
(549)
74,876
13,666
-
238
(508)
-
-
-
-
-
-
-
-
-
11,901
1,710
88,272
55,145
62,533
68,135
3,960
4,097
1,400
56,317
64,223
71,894
7,840
-
5,957
Total
£’000
194,971
21,732
-
(731)
215,972
33,204
682
-
(589)
71,709
13,972
(562)
85,119
15,486
-
1,786
(508)
101,883
123,262
130,853
147,386
160,166
5,957
249,269
Included in freehold land and buildings is land with a cost of £6,640,000 (2012: £5,263,000) which is not depreciated relating to the Group
and £509,000 (2012: £509,000) relating to the Company.
Cost includes £1,026,000 (2012: £1,001,000) in respect of capitalised interest. £25,000 of interest, which was the whole amount eligible, was
capitalised during the year (2012: £nil). The rate used to determine the amount of borrowing costs eligible for capitalisation was 1.53 per
cent which is the effective rate of the borrowing used to finance the construction.
The directors believe that the fair value of the property, plant and equipment is not materially different to the net book amounts presented
above.
Impairment
During the current year the Board took the decision to demolish its mothballed production facility in East Lancashire following considerable
investment in increased capacity at other Group locations in preference to utilising these premises as previously planned. The book value
of the property, plant and equipment was £1,836,000. The fair value, which relates solely to the land, was determined by an independent
valuer as £50,000 giving rise to an impairment loss of £1,786,000. A further £50,000 has been accrued for demolition of the property giving
a total income statement impairment charge of £1,836,000.
Cranswick plc Report & Accounts 2013 | 71
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12. Property, plant and equipment (continued)
Company
Cost
At 31 March 2011
Additions
At 31 March 2012
Additions
At 31 March 2013
Depreciation
At 31 March 2011
Charge for the year
At 31 March 2012
Charge for the year
At 31 March 2013
Net book amounts
At 31 March 2011
At 31 March 2012
At 31 March 2013
13. Investments
Company
Shares at cost:
At 31 March 2011
Capital contribution relating to share options
Disposals
At 31 March 2012
Capital contribution relating to share options
At 31 March 2013
Freehold
land and
buildings
£’000
Plant,
equipment
and vehicles
£’000
509
-
509
-
509
-
-
-
-
-
509
509
509
341
65
406
21
427
243
74
317
44
361
98
89
66
Total
£’000
850
65
915
21
936
243
74
317
44
361
607
598
575
Subsidiary
undertakings
Associates
£’000
£’000
157,217
1,121
-
158,338
874
159,212
5,911
-
(5,911)
-
-
-
In the prior year, on 30 March 2012, the Company sold its shareholding in associate Farmer’s Boy (Deeside) Limited to the majority
shareholder (note 15).
The principal subsidiary undertakings during the year were:
• Cranswick Country Foods plc • The Sandwich Factory Group Limited (registered in Scotland)
• Cranswick Convenience Foods Limited • Kingston Foods Limited (100 per cent owned by Cranswick Convenience Foods Limited)
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.
In April 2009 the Group disposed of its Pet and Aquatics segment retaining a 5.5 per cent share of both businesses. Following a subsequent
reorganisation of the Pet and Aquatics businesses, Cranswick plc sold its 5.5 per cent investment in the Pet Products business on 5 April
2012 for a consideration of £221,000. At 31 March 2012, as a result of the sale, the investment was transferred to assets held for sale. The
consideration for the sale was received in cash in the current year. The transaction resulted in the Group retaining its 5.5 per cent interest
in the Aquatics business, this interest has since reduced to a 3.3 per cent holding of TMC 2012 Limited following a further reorganisation
and change in major shareholders. The investment, being an unquoted entity, the value of which cannot be reliably measured, is held at a
carrying value of £nil.
72 | Cranswick plc Report & Accounts 2013
14. Acquisition
On 29 June 2012, the Group acquired 100 per cent of the issued share capital of Kingston Foods Limited for a total consideration of £8.9
million. The principal activity of Kingston Foods Limited is the manufacture and distribution of cooked meat and poultry products and the
acquisition is expected to enlarge the customer base of the Group.
Fair values of the net assets at the date of acquisition were as follows:
Net assets acquired:
Customer relationships
Property, plant and equipment
Inventories
Trade receivables
Bank and cash balances
Trade payables
Provisions
Corporation tax liability
Deferred tax liability
Goodwill arising on acquisition
Total consideration
Satisfied by:
Cash
Contingent consideration
Analysis of cash flows on acquisition:
Included within cash flows from investing activities
Cash consideration paid
Cash and cash equivalents acquired
Included within net cash from operating activities
Transaction costs of the acquisition
Net cash outflow arising on acquisition
Fair value
£’000
795
682
433
1,743
1,857
(1,615)
(187)
(97)
(200)
3,411
5,488
8,899
7,843
1,056
8,899
7,843
(1,857)
5,986
145
6,131
From the date of acquisition, the acquired business has contributed £11.6 million of revenue and a net profit after tax of £0.7 million to the
Group. If the combination had taken place at the beginning of the period, the Group’s profit after tax for the year would have been £36.6
million and revenues would have been £879.2 million.
Included in the £5,488,000 of goodwill recognised above, are certain intangible assets that cannot be individually separated from the
acquiree and reliably measured due to their nature. These items include the expected value of synergies and an assembled workforce.
Transaction costs of £145,000 have been expensed and are included in administration expenses.
Contingent Consideration
The agreement includes contingent consideration payable in cash to the previous owners of Kingston Foods Limited based on the
performance of the business over a 3 year period from acquisition. The amount payable will be between £nil and £2.5 million dependent on
the average EBITDA of the business during the 3 year period versus an agreed target level.
The fair value of the contingent consideration at 31 March 2013 was estimated at £1,121,000, discounted in the table above.
Cranswick plc Report & Accounts 2013 | 73
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15. Investment in associate
Group
The Group treated its 49 per cent shareholding in Farmers 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. 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
2012
£’000
5,079
1,167
6,246
14,500
8,254
The following table illustrates the summarised financial information of the Group’s investment in Farmers Boy (Deeside) Limited to the date
of disposal in the prior year:
2012
£’000
42,821
(712)
2012
£’000
26,847
11,669
38,516
2013
£’000
34,688
13,775
48,463
Share of the associate’s results:
Revenue
Loss for the period
16. Inventories
Group
Raw materials
Finished goods and goods for resale
74 | Cranswick plc Report & Accounts 2013
17. Trade and other receivables
Financial assets:
Trade receivables
Amounts owed by Group undertakings
Other receivables
Non-financial assets:
Prepayments and accrued income
Group
Company
2013
£’000
2012
£’000
2013
£’000
82,556
76,169
-
-
4,814
87,370
5,727
93,097
-
14,870
4,981
81,150
4,384
85,534
236
15,106
263
15,369
2012
£’000
-
8,539
27
8,566
268
8,834
Financial assets are carried at amortised cost. As at 31 March, the analysis of trade receivables that were past due but not impaired was as
follows:
2013
2012
Trade receivables
Of which:
Not due
Past due date in the following periods:
Less than 30
days
£’000
£’000
Between 30
and 60 days
£’000
More than
60 days
£’000
72,738
64,593
7,830
9,796
960
1,084
1,028
696
£’000
82,556
76,169
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 2013, trade receivables at nominal value of £631,000 (2012: £1,162,000) 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:
Group
Bad debt provision
At 31 March 2011
Provided in year
Written off
At 31 March 2012
Provided in year
Written off
At 31 March 2013
There are no bad debt provisions against other receivables.
£’000
558
703
(99)
1,162
199
(730)
631
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Cranswick plc Report & Accounts 2013 | 75
18. Financial assets
Current
Loans receivable
Non-current
Loans receivable
Group
2013
£’000
2012
£’000
696
696
702
1,398
Loans of £1,398,000 (2012: £2,094,000) are 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 Company had no financial assets at the end of either year.
19. Trade and other payables
Current
Trade payables
Amounts owed to Group undertakings
Other payables
Deferred income – Government grants
Non-current
Group
Company
2013
£’000
2012
£’000
2013
£’000
2012
£’000
71,340
62,494
-
-
34,714
28,520
55
64
149
36,118
6,179
-
162
36,586
4,898
-
106,109
91,078
42,446
41,646
Deferred income – Government grants
410
462
-
-
20. Financial liabilities
Group
Company
2013
£’000
2012
£’000
2013
£’000
2012
£’000
549
55
4
608
28,498
1,074
-
1,312
243
69
1,624
-
-
-
-
-
-
-
-
42,246
28,498
42,246
-
55
-
-
-
-
29,572
42,301
28,498
42,246
Current
Bank overdrafts
Finance leases and hire purchase contracts
Forward currency contracts
Non-current
Amounts outstanding under revolving credit facility
Contingent consideration
Finance leases and hire purchase contracts
76 | Cranswick plc Report & Accounts 2013
Movement on hedged items:
Losses arising in the year
Reclassification adjustment for losses/ (gains) included in the income statement
Group
2013
£’000
2012
£’000
(4)
69
65
(69)
(146)
(215)
All financial liabilities are amortised at cost, except for forward currency contracts which are carried at fair value.
Movements on hedged foreign currency contracts are reclassified through cost of sales.
Forward currency contracts are 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 22.
Bank facilities
The Group renegotiated its banking facilities during March 2011. The arrangement fees of £1.0 million are being amortised over the period
of the facilities.
A committed bank overdraft facility of £20 million (2012: £20 million) is in place until July 2015, of which £549,000 (2012: £1,312,000) was
utilised at 31 March 2013. 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 £29 million was utilised as
at 31 March 2013 (2012: a revolving credit facility of £100 million of which £43 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
2013
£’000
-
-
29,000
29,000
2012
£’000
-
-
43,000
43,000
2013
£’000
-
-
29,000
29,000
Unamortised issue costs
(502)
(754)
(502)
2012
£’000
-
-
43,000
43,000
(754)
The bank facilities for both years are unsecured and subject to normal bank covenant arrangements.
28,498
42,246
28,498
42,246
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Cranswick plc Report & Accounts 2013 | 77
21. Provisions
Group
At 31 March 2012
Credited in the year
Amounts paid
Arising on acquisition
Movement on discount
At 31 March 2013
Analysed as:
Current liabilities
Non-current liabilities
Lease provisions
£’000
389
(236)
(153)
187
3
190
2012
£’000
389
-
389
2013
£’000
-
190
190
Lease provisions are held against dilapidation obligations on leased properties. These provisions are expected to be utilised over the next 3
years. There are no provisions held by the Company.
78 | Cranswick plc Report & Accounts 2013
22. Financial instruments
An explanation of the Company and Group’s financial instruments risk management strategy is set out on pages 15 and 16 in the Group
Operating and Financial Review.
Interest rate risk profile of financial assets and liabilities
The interest rate profile of the interest earning financial assets and interest bearing liabilities of the Group as at 31 March 2013 and their
weighted average interest rates is set out below:
Group
As at 31 March 2013
Financial liabilities:
Bank overdrafts
Revolving credit facility
Finance leases and hire purchase contracts
Weighted
average
effective
interest
rate
%
2.00%
1.50%
6.32%
Financial assets:
Cash at bank
Loans receivable
As at 31 March 2012
Total
At
floating
interest
rates
1 year
or
less
Fixed interest
1-2 years
2-3 years
£’000
£’000
£’000
£’000
£’000
(549)
(549)
(29,000)
(29,000)
(55)
-
(29,604)
(29,549)
-
-
(55)
(55)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.00%
3.50%
7,633
1,398
7,633
1,398
(20,573)
(20,518)
(55)
Weighted
average
effective
interest
rate
%
Total
At
floating
interest
rates
1 year
or
less
Fixed interest
1-2 years
2-3 years
£’000
£’000
£’000
£’000
£’000
Financial liabilities:
Bank overdrafts
Revolving credit facility
Finance leases and hire purchase contracts
Financial assets:
Cash at bank
Loans receivable
1.50%
1.70%
4.37%
(1,312)
(1,312)
(43,000)
(43,000)
(298)
-
(44,610)
(44,312)
0.00%
3.50%
20,100
2,094
20,100
2,094
-
-
(243)
(243)
-
-
-
-
(55)
(55)
-
-
(22,416)
(22,118)
(243)
(55)
-
-
-
-
-
-
-
The maturity profile of bank loans is set out in note 20.
Cranswick plc Report & Accounts 2013 | 79
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22. Financial instruments (continued)
The interest rate profile of the interest earning financial assets and interest bearing liabilities of the Company as at 31 March 2013 and their
weighted average interest rates is set out below:
Company
As at 31 March 2013
Financial liabilities:
Amounts owed to Group undertakings
Revolving credit facility
Financial assets:
Cash at bank
As at 31 March 2012
Financial liabilities:
Amounts owed to Group undertakings
Revolving credit facility
Financial assets:
Cash at bank
Currency profile
Weighted
average
effective
interest
rate
%
Total
At
floating
interest
rates
1 year
or
less
Fixed interest
1-2 years
2-3 years
£’000
£’000
£’000
£’000
£’000
2.00%
1.50%
(139,400)
(139,400)
(29,000)
(29,000)
(168,400)
(168,400)
0.00%
5,169
5,169
(163,231)
(163,231)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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%
1.70%
(133,400)
(133,400)
(43,000)
(43,000)
(176,400)
(176,400)
0.00%
18,137
18,137
(158,263)
(158,263)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Group’s financial assets at 31 March 2013 include sterling denominated cash balances of £7,320,000 (2012: £18,834,000), euro £119,000
(2012: £1,265,000), US dollar £186,000 (2012: £nil) and Danish Krona £nil (2012: £1,000), all of which are held in the UK. The Group’s financial
liabilities include sterling denominated overdraft balances of £66,000 (2012: £1,312,000) and euro £483,000 (2012: £nil), 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.
80 | Cranswick plc Report & Accounts 2013
All cash financial assets are held by UK financial institutions. The maximum credit exposure relating to financial assets is represented by
their carrying values as at the balance sheet date.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or
indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
The Group’s forward currency contracts are measured using Level 2 of the fair value hierarchy.
The Group’s 3.3 per cent (2012: 5.5 per cent) retained shareholding in the Aquatics business TMC 2012 Limited would have been classified as
level 3, however as the investment is an unquoted entity and cannot be reliably measured the Directors consider that its value is immaterial
and no fair value has been applied.
Fair value of financial instruments
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties on an arm’s
length basis. The fair value of floating rate assets and liabilities is estimated to be equivalent to book value. All derivative financial
instruments are shown in the balance sheet at fair value.
Group
2013
2012
Financial assets
Cash
Loans receivable
Financial liabilities
Bank overdraft
Book
value
£’000
7,633
1,398
9,031
Fair
value
£’000
7,633
1,398
9,031
Book
value
£’000
20,100
2,094
22,194
Fair
value
£’000
20,100
2,094
22,194
(549)
(549)
(1,312)
(1,312)
Amounts outstanding under revolving credit facility
(29,000)
(29,000)
(43,000)
(43,000)
Finance leases and hire purchase contracts
Forward currency contracts
At 31 March
Company
Financial asset
Cash
Financial liabilities
(55)
(4)
(55)
(4)
(298)
(69)
(298)
(69)
(29,608)
(29,608)
(44,679)
(44,679)
(20,577)
(20,577)
(22,485)
(22,485)
2013
2012
Book
value
£’000
Fair
value
£’000
Book
value
£’000
Fair
value
£’000
5,169
5,169
18,137
18,137
Amounts outstanding under revolving credit facility
(29,000)
(29,000)
(43,000)
(43,000)
At 31 March
(23,831)
(23,831)
(24,863)
(24,863)
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.
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Cranswick plc Report & Accounts 2013 | 81
22. Financial instruments (continued)
Hedges
Financial instruments designated as cash flow hedges are held at fair value in the balance sheet. The Group hedges the following 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
euro
Amount
6,250,000
Maturities
Exchange rates
2 April 2013 - 1 August 2013
€1.17 - €1.20
Fair value
£’000
(4)
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.
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.
2013
sterling
2012
sterling
Increase/
Effect on
decrease in profit before
basis points
+100
-100
+100
-100
tax
£’000
(413)
413
(467)
467
82 | Cranswick plc Report & Accounts 2013
Liquidity risk
The tables below summarise the maturity profile of the Group’s financial liabilities at 31 March 2013 and 2012 based on contractual
undiscounted payments:
Group
At 31 March 2013
Bank overdraft
Revolving credit facility
Finance leases and hire purchase contracts
Trade and other payables
At 31 March 2012
Bank overdraft
Revolving credit facility
Finance leases and hire purchase contracts
Trade and other payables
Company
At 31 March 2013
Revolving credit facility
Trade and other payables
Cross guarantees (note 27)
At 31 March 2012
Revolving credit facility
Trade and other payables
Cross guarantees (note 27)
Less than
1 year
£’000
549
434
56
106,054
107,093
Less than
1 year
£’000
1,312
729
251
91,014
93,306
Less than
1 year
£’000
434
42,446
549
43,429
Less than
1 year
£’000
729
41,646
1,312
43,687
434
29,145
1 to 2
years
£’000
-
434
-
-
1 to 2
years
£’000
-
729
56
-
785
2 to 5
years
£’000
-
Total
£’000
549
29,145
30,013
-
-
2 to 5
years
£’000
-
43,974
-
-
56
106,054
136,672
Total
£’000
1,312
45,432
307
91,014
43,974
138,065
1 to 2
years
£’000
2 to 5
years
£’000
434
29,145
-
-
-
-
Total
£’000
30,013
42,446
549
434
29,145
73,008
1 to 2
years
£’000
2 to 5
years
£’000
729
43,974
-
-
-
-
729
43,974
Total
£’000
45,432
41,646
1,312
88,390
The impact of liquidity risk on the Group is discussed in detail in the Group Operating and Financial review on pages 15 and 16.
Cranswick plc Report & Accounts 2013 | 83
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23. Called-up share capital
Group and Company
Allotted, called-up and fully paid
Ordinary shares of 10p each
At 1 April
On exercise of share options
Scrip dividends
At 31 March
2013
Number
2012
Number
48,034,791
47,636,135
182,958
309,783
205,884
192,772
2013
£’000
4,803
19
31
2012
£’000
4,764
20
19
48,527,532
48,034,791
4,853
4,803
On 7 September 2012, 187,694 ordinary shares were issued at 827.5 pence as a result of Shareholders exercising the scrip dividend option
in lieu of the cash payment for the 2012 final dividend.
On 25 January 2013, 122,089 ordinary shares were issued at 791.9 pence as a result of Shareholders exercising the scrip dividend option in
lieu of the cash payment for the 2013 interim dividend.
During the course of the year, 182,958 ordinary shares were issued to employees exercising SAYE and LTIP options at prices between nil and
679.0 pence.
Ordinary share capital of £12,685 is reserved for allotment under the Savings Related Share Options 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
LTIP
Number
Exercise price
Exercise period
8,570
4,921
49,738
39,164
52,490
186,721
126,682
1,071,891
679p
665p
474p
594p
692p
579p
629p
Nil
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
March 2016 to October 2020
June 2013 to June 2022
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 prior year, 205,884 ordinary shares were issued to employees exercising SAYE, Executive and LTIP options at prices
between nil and 679.0 pence.
During the prior 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 (2012: nil shares).
84 | Cranswick plc Report & Accounts 2013
24. 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 £1,162,000 (2012: £1,501,000).
Executive Share Option Scheme
Share options are granted periodically to promote the involvement of senior management in the longer term success of the Group. Options
can only be exercised if certain performance conditions are met by the Group. These conditions are based on Total Shareholder Return over
the performance period and require the Group to be in the top half of a basket of food companies quoted on the London Stock Exchange
selected by the remuneration Committee. Options have a contractual life of ten years, being the maximum term.
Directors may also apply for SAYE options on the same terms as apply to all other employees.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, Executive share options
during the year:
Group
Outstanding as at 1 April
Exercised during the year (i)
Outstanding as at 31 March (ii)
Exercisable at 31 March
2013
Number
2013
WAEP
£
-
-
-
-
-
-
-
-
2012
Number
4,991
(4,991)
-
-
2012
WAEP
£
6.01
6.01
-
-
i) The weighted average share price at the date of exercise for the options exercised in the prior year was £7.92.
ii) There were no share options outstanding as at the end of either year.
There were no options granted during the year.
Long Term Incentive Plan (LTIP)
During the course of the year 394,500 options at nil cost were granted to Directors and senior executives, the share price at that time was
801 pence. Details of the performance criteria relating to the LTIP scheme can be found in the Directors’ Remuneration report on page 39.
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
2013
Number
786,900
394,500
(12,789)
(96,720)
1,071,891
73,191
2013
WAEP
£
-
-
-
-
-
-
2012
Number
534,500
374,900
-
(122,500)
786,900
-
2012
WAEP
£
-
-
-
-
-
-
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Cranswick plc Report & Accounts 2013 | 85
24. 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
2013
Number
525,700
264,500
(8,211)
(60,450)
721,539
48,639
2013
WAEP
£
-
-
-
-
-
-
2012
Number
350,800
254,900
-
(80,000)
525,700
-
2012
WAEP
£
-
-
-
-
-
-
i) The weighted average fair value of options granted during the year was £7.03 (2012: £6.86). The share options granted
during the year were at £nil per share. The share price at the date of grant was £8.01 (2012: £7.85).
ii) The weighted average share price at the date of exercise for the options exercised was £8.20 (2012: £7.83).
iii) For the share options outstanding as at 31 March 2013, the weighted average remaining contractual life is 8.21 years. (2012: 8.48 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 (i)
Lapsed during the year
Exercised during the year (ii)
Outstanding as at 31 March (iii)
2013
Number
460,998
129,084
(35,558)
(86,238)
468,286
2013
WAEP
£
5.84
6.29
6.01
5.69
5.98
2012
Number
479,562
202,377
(81,185)
(139,756)
460,998
2012
WAEP
£
5.62
5.79
6.20
4.81
5.84
Exercisable at 31 March
4,091
6.12
14,127
4.97
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)
2013
Number
18,567
3,232
(825)
(1,374)
19,600
2013
WAEP
£
5.90
6.29
6.56
5.94
5.94
2012
Number
18,894
14,971
(8,008)
(7,290)
18,567
2012
WAEP
£
5.88
5.79
6.92
4.74
5.90
Exercisable at 31 March
305
5.94
-
-
86 | Cranswick plc Report & Accounts 2013
i) The share options granted during the year were at £6.29 (2012: £5.79), representing a 20 per cent discount on the price at the relevant
date. The share price at the date of grant was £8.49 (2012: £7.42).
ii) The weighted average share price at the date of exercise for the options exercised was £9.71 (2012: £7.89).
iii) For the share options outstanding as at 31 March 2013, the weighted average remaining contractual life is 2.99 years (2012: 3.16 years).
The weighted average fair value of options granted during the year was £2.19 (2012: £1.69). The range of exercise prices for options
outstanding at the end of the year was £4.74 - £6.92 (2012: £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 2013 and 31 March 2012:
Group and Company
Dividend yield
Expected share price volatility
Risk free interest rate
Expected life of option
Exercise prices
2013
LTIP
4.35%
31.0%
2013
SAYE
4.11%
31.0%
2012
LTIP
4.47%
31.0%
2012
SAYE
4.73%
31.0%
0.40%
0.37% - 1.21%
1.30%
0.49% - 1.50%
3 years
3,5,7 years
3 years
3,5,7 years
£nil
£6.29
£nil
£5.79
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.
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Cranswick plc Report & Accounts 2013 | 87
25. 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.
a) Change in benefit obligation
Benefit obligation at the beginning of the year
Interest cost
Actuarial losses
Benefits paid from plan
Benefit obligation at the end of the year
b) Change in plan assets
2013
£’000
2012
£’000
21,161
16,501
948
519
(1,093)
21,535
2013
£’000
906
4,097
(343)
21,161
2012
£’000
Fair value of plan assets at the beginning of the year
15,819
13,587
Expected return on plan assets
Actuarial gain on plan assets
Employer contributions
Benefits paid from plan
Fair value of plan assets at the end of the year
c) Amounts recognised in the balance sheet
Present value of funded obligations
Fair value of plan assets
Net liability recorded in the balance sheet
d) Components of pension cost
Amounts recognised in the income statement
Interest cost
Expected return on plan assets
Total pension cost recognised in the income statement
Actual return on assets
Actual return on plan assets
Amounts recognised in the Group statement of comprehensive income
Actuarial gains/ (losses) immediately recognised
Cumulative amount of actuarial losses recognised
88 | Cranswick plc Report & Accounts 2013
863
1,461
1,128
(1,093)
18,178
2013
£’000
853
593
1,129
(343)
15,819
2012
£’000
(21,535)
(21,161)
18,178
(3,357)
15,819
(5,342)
2013
£’000
2012
£’000
948
(863)
85
906
(853)
53
2,324
1,446
942
(3,504)
(2,025)
(2,967)
e) Principal actuarial assumptions
2013
2012
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
Future expected lifetime of pensioner at age 65:
Current pensioners
Male
Female
Future pensioners
Male
Female
4.40%
3.25%
4.95%
5.45%
3.25%
23.1
25.7
25.1
27.6
4.60%
2.90%
5.45%
6.10%
2.90%
23.0
25.6
25.0
27.6
The mortality rates used have been taken from Base tables S1PA (2012: S1PA).
A 0.1 per cent decrease in the discount rate would give rise to a £6,000 increase in the amounts charged to the income statement during the
year, and a £530,000 increase in the deficit at 31 March 2013.
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
Asset category
Equity securities
Bonds
Cash
Diversified growth fund
Property
Total
2013
2013
Expected Fair value of
plan assets
long-term
£’000
rate of return
2012
Expected
long-term
rate of return
2012
Fair value of
plan assets
£’000
6.30%
3.50%
3.30%
-
6.30%
8,592
8,507
104
-
975
18,178
-
3.85%
3.70%
6.70%
-
-
6,705
103
9,011
-
15,819
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 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.
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Cranswick plc Report & Accounts 2013 | 89
25. Pension schemes (continued)
g) History of experience gains and losses
2013
£’000
2012
£’000
2011
£’000
2010
£’000
Fair value of scheme assets
18,178
15,819
13,587
11,788
Present value of defined benefit obligation
(21,535)
(21,161)
(16,501)
(17,141)
Deficit in the scheme
(3,357)
(5,342)
(2,914)
(5,353)
Experience adjustments on plan liabilities
-
-
-
-
Experience adjustments on plan assets
1,461
593
(70)
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 2014 in respect of regular
contributions.
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 £134,000 (2012: £91,000). Contributions
during the year totalled £1,137,000 (2012: £1,286,000).
90 | Cranswick plc Report & Accounts 2013
26. Additional cash flow information
Analysis of Group net debt
Cash and cash equivalents
Overdrafts
Other financial assets
At
31 March
2012
£’000
20,100
(1,312)
18,788
2,094
20,882
Cash
flow
£’000
(12,467)
763
(11,704)
(696)
(12,400)
Other
non cash
changes
£’000
At
31 March
2013
£’000
-
-
-
-
-
7,633
(549)
7,084
1,398
8,482
Revolving credit
Finance leases and hire purchase contracts
Net debt
(42,246)
14,000
(252)
(28,498)
(298)
(21,662)
243
1,843
-
(55)
(252)
(20,071)
Net debt is defined as cash and cash equivalents and loans receivable less interest bearing liabilities (net of unamortised issue costs).
Cash and cash equivalents
Overdrafts
Other financial assets
Other financial liabilities
Revolving credit
Finance leases and hire purchase contracts
Net debt
Analysis of Company net debt
Cash and cash equivalents
Revolving credit
Net debt
Cash and cash equivalents
Overdrafts
Other financial liabilities
Revolving credit
Net debt
At
31 March
2011
£’000
1,302
(3,925)
(2,623)
4,000
1,377
(160)
(48,987)
(570)
Cash
flow
£’000
18,798
2,613
21,411
(1,906)
19,505
-
7,000
272
(48,340)
26,777
At
31 March
2012
£’000
Cash
flow
£’000
18,137
(12,968)
(42,246)
(24,109)
At
31 March
2011
£’000
1
(2,742)
(2,741)
(160)
(48,987)
(51,888)
14,000
1,032
Cash
flow
£’000
18,136
2,742
20,878
-
7,000
27,878
Other
non cash
changes
£’000
At
31 March
2012
£’000
-
-
-
-
-
160
(259)
-
(99)
20,100
(1,312)
18,788
2,094
20,882
-
(42,246)
(298)
(21,662)
Other
non cash
changes
£’000
At
31 March
2013
£’000
-
(252)
(252)
5,169
(28,498)
(23,329)
Other
non cash
changes
£’000
-
-
-
At
31 March
2012
£’000
18,137
-
18,137
160
(259)
(99)
-
(42,246)
(24,109)
Cranswick plc Report & Accounts 2013 | 91
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27. Contingent liabilities
The Company, together with its subsidiary undertakings, has entered into a cross guarantee with Lloyds TSB Bank plc, The Royal Bank of
Scotland plc, 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 £29,549,000 as at 31 March 2013 (2012:
£44,312,000).
For the Company, the amounts drawn down by other Group companies which were guaranteed by the Company at the year-end totalled
£549,000 (2012: £1,312,000).
28. Commitments
(a) The Directors have contracted for future capital expenditure for property, plant and equipment totalling £5,206,000 (2012:
£4,836,000).
(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.
2013
£’000
3,620
7,892
3,282
2012
£’000
2,903
5,777
3,721
14,794
12,401
92 | Cranswick plc Report & Accounts 2013
29. Related party transactions
During the year the Group and Company entered into transactions, in the ordinary course of business, with related parties, including
transactions between the Company and its subsidiary undertakings. In the Group accounts transactions between the Company and its
subsidiaries are eliminated on consolidation but these transactions are reported for the Company below:
Group
Related party
Associate – Farmers Boy (Deeside) Limited
2013
2012
Sales to
related party
£’000
Service rendered
to related party
£’000
Amounts owed
by related party
£’000
-
12,422
-
259
-
-
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
2013
2012
Services rendered
to related party
£’000
Interest paid
to related party
£’000
Dividends received
from related party
£’000
19,000
18,165
2,066
1,890
11,404
11,831
Amounts owed by or to subsidiary undertakings are disclosed in notes 17 and 19. Any such amounts are unsecured and repayable on
demand.
Remuneration of key management personnel
Short-term employee benefits
Post-employment benefits
Share-based payment
2013
£’000
6,698
150
621
7,469
2012
£’000
4,990
259
812
6,061
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Cranswick plc Report & Accounts 2013 | 93
30. Events after the balance sheet date
On 29 April 2013, the Group acquired 100 per cent of the issued share capital of East Anglian Pigs Limited for a total consideration of £13.5
million. The principal activities of East Anglian Pigs Limited are pig breeding, rearing and finishing. The acquisition gives the Group greater
control over its supply chain.
Fair values of the net assets at the date of acquisition were as follows:
Net assets acquired:
Property, plant and equipment
Biological assets
Inventories
Trade receivables
Bank and cash balances
Trade payables
Provisions
Financial liabilities
Corporation tax liability
Deferred tax liability
Finance lease obligations
Goodwill arising on acquisition
Total consideration
Satisfied by:
Cash
Net cash outflow arising on acquisition:
Cash consideration paid
Cash and cash equivalents acquired
Provisional
fair value
£’000
3,828
10,148
743
1,642
2,753
(3,391)
(150)
(1,500)
(290)
(93)
(603)
13,087
378
13,465
13,465
13,465
(2,753)
10,712
The fair values on acquisition are provisional due to the timing of the transaction and will be finalised within twelve months of the
acquisition date.
Included in the £378,000 of goodwill recognised above, are certain intangible assets that cannot be individually separated from the acquiree
and reliably measured due to their nature. These items include the expected value of the assembled workforce and the strategic benefits of
vertical integration including security of supply.
94 | Cranswick plc Report & Accounts 2013
Shareholder Information
Five year statement
Turnover
Profit before tax
Adjusted profit before tax*
2013
£’m
875.2
47.4
49.3
2012
£’m
820.8
48.4
45.6
2011
£’m
758.4
47.1
47.3
2010
£’m
740.3
43.8
43.8
Earnings per share
75.1p
78.6p
74.5p
69.7p
Adjusted earnings per share*
78.9p
72.9p
72.8p
69.7p
Dividends per share
30.0p
28.5p
27.5p
25.0p
Capital expenditure
33.2
21.7
35.9
20.5
2009
£’m
606.8
34.7
34.7
40.5p
40.5p
21.7p
21.2
Net debt
Net assets
(20.1)
(21.7)
(48.3)
(54.7)
(66.6)
273.7
245.9
220.9
193.6
166.5
*Adjusted profit before tax and earnings per share exclude impairment charges and the effects of associate to better reflect the underlying
performance of the Group.
Dividends per share relate to dividends declared in respect of that year.
Net debt is defined as per note 26 to the accounts.
Financial calendar
Preliminary announcement of full year results
Publication of Annual Report
Annual General Meeting
Payment of final dividend
Announcement of interim results
Payment of interim dividend
May
June
July
September
November
January
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Cranswick plc Report & Accounts 2013 | 95
Shareholder Analysis
at 9 May 2013
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 2012
Share price at 31 March 2013
High in the year
Low in the year
Share price movement
Number of
Number of
Holdings
Shares
1,143
5,185,876
678
43,343,826
1,821
48,529,702
931
529
120
136
36
69
375,369
1,200,472
867,073
3,243,833
2,561,053
40,281,902
1,821
48,529,702
805p
986p
1,023p
733p
Cranswick’s share price movement over the ten year period to May 2013 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 2003, is
shown below:
300
275
250
225
200
175
150
125
100
75
50
25
)
0
0
1
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0
2003
Cranswick
FTSE 350 Food Producers
FTSE All Share
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
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Advisers
Secretary
Company Number
Registered Office
Stockbrokers
Registrars
Auditors
Solicitors
Bankers
Malcolm Windeatt FCA
1074383
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.capitaregistars.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
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Cranswick plc Report & Accounts 2013 | 97
Notes
98 | Cranswick plc Report & Accounts 2013
Reg istered Office
Helsinki Road, Sutton Fields, Hull HU7 0YW
Telephone: 01482 372000
www.cranswick.co.uk