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REPORT & ACCOUNTS
Year Ended 31 March 2014
HIGHLIGHTS
Revenue £m
+13.7%
Adjusted profit before tax *† £m
+6.3%
TRADING HIGHLIGHTS
994.9
820.8
875.2
49.1
52.2
45.6
•
Strong revenue growth
2012
2013
2014
2012
2013
2014
Adjusted earnings per share *†
+6.9%
p
Dividend per share p
+6.7%
78.7
84.1
72.9
28.5
30.0
32.0
2012
2013
2014
2012
2013
2014
Free cash flow £m
+20.5%
Net debt £m
-15.4%
49.0
43.4
59.1
21.7
20.1
17.0
•
•
Record adjusted profit
before tax
Full year dividend increased
by 6.7 per cent
•
Record free cash flow
•
•
•
•
£14 million investment in
pig breeding and rearing
activities
£28 million investment in
asset base
Reportable accident incident
ratio down 47 per cent
Like-for-like relative carbon
footprint down 7 per cent
2012
2013
2014
2012
2013
2014
*: 2014 – Excluding release of contingent consideration and net IAS 41 valuation movement on biological assets
2013 – Excluding impairment of property, plant and equipment
2012 – Excluding impairment of goodwill and effects of associate
†: Restated to reflect amendment to IAS 19 Employee Benefits
STRATEGIC
REPORT
Highlights
About Us
At a Glance
Chairman’s Statement
Our Track Record
Awards
Our Strategy and Business Model
Our Key Performance Indicators
Risk Management and Principal Risks
Operational Review
Financial Review
Group Directors and Categories
Corporate Social Responsibility
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
IFC
Governance Introduction from
Statement of Directors’ Responsibilities 62
Shareholder Information
the Chairman
Board of Directors
Corporate Governance Statement
Audit Committee Report
Nomination Committee Report
Remuneration Committee Report
Directors’ Report
32
33
34
38
44
46
58
Report of the Auditors
Group Income Statement
Statements of Comprehensive Income
Balance Sheets
Statements of Cash Flows
Statements of Changes in Equity
Notes to the Accounts
64
66
67
68
70
72
74
Shareholder Analysis
Advisers
1
2
4
6
7
8
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12
16
20
23
24
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115
116
Cranswick plc Report & Accounts 2014
ABOUT US
“Cranswick plc is a leading and innovative British supplier of premium, fresh and
added-value food products with annual revenues of approximately £1.0 billion.
Our core market is the United Kingdom where we provide a range of fresh pork,
gourmet sausages, premium cooked meats, charcuterie, traditional hand-cured,
air-dried bacon, gourmet pastry products and sandwiches through retail, food
service and manufacturing channels.
With a clear focus on premium ranges, we deliver exceptional food through a
dedicated focus on innovation, quality and service.
We have a rapidly developing export business serving the European,
US and South East Asian markets.
We operate from twelve well invested, highly efficient production facilities in
the UK employing almost 8,000 people.
Our vertically integrated business model now enables us to source almost 20 per
cent of the Group’s British pig requirement from our
own farms.”
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For further information
please visit our website
www.cranswick.co.uk
Report & Accounts 2014 Cranswick plc
1
AT A GLANCE
CRANSWICK’S
DEVELOPMENT
1995
GOURMET SAUSAGE
INNOVATION
2001
CONTINENTAL
PRODUCTS
2003
SANDWICH
PRODUCTS
2004
AIR-DRIED BACON
AND GAMMON
2008
ARTISAN HAMS
BACON AND
CHARCUTERIE
2011
HANDMADE
PASTRY
1970s
ESTABLISH
AGRI-FOOD
BUISINESS
1988
PROGRESS TO FOOD
MANUFACTURING
EARLY 1990s
THROUGH THE
VALUE CHAIN
(animal feed)
(fresh pork)
(deli meats)
2005
UTILISING THE PIG
(sliced
cooked
meats)
2009
CREATING
HEADROOM FOR
GROWTH
(capacity)
2013
BACKWARD
INTEGRATION
(pig
rearing)
Cranswick was formed by farmers in the early 1970s to produce pig feed. In 1988 the Board embarked on a strategy to broaden the base of the
Group’s activities. Opportunities were sought to develop into related areas that added value to the Group’s processes. Activities have since been
extended from this agricultural base into the food sector. See our strategy for future growth on page 8.
OUR PRODUCT CATEGORIES
Today, the business is focused
predominantly on the supply of fresh
and processed food to the UK food
retail, food manufacturing and food
service categories.
Fresh and
Added Value
Pork
Sausages
and Burgers
Traditional
Air-Dried Bacon
and Gammon
Cooked Meats
and Charcuterie
Premium
Sandwiches
Handmade
Pastry
Read more about category
performance on pages 16 and 17
OUR LOCATIONS
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Cranswick plc Report & Accounts 2014
This development has been achieved
through a combination of acquisitions
and subsequent organic growth, with
Cranswick now serving its customers
from twelve production facilities across
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PIG PRODUCTION
HEARTLAND
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GOURMET PASTRY Malton
TRADITIONAL BACON Sherburn
FRESH PORK Hull
Cooked meats Hull
GOURMET SAUSAGE Hull
COOKED MEATS Barnsley
CONTINENTALS Manchester
FOODSERVICE Denbigh
SANDWICHES Atherstone
FRESH PORK & SAUSAGES Norfolk
COOKED MEATS Milton Keynes
COOKED MEATS Milton Keynes
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the UK.
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For more information on our
business model see page 9
OUR SUPPLY CHAIN MODEL
Cranswick British
Owned Farms
Cranswick Primary
Processing Pork
SAUSAGE
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Contracts
European
Meat Imports
OUR BRANDS
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BACON
COOKED
MEATS
CUSTOMER
Other
Manufacturers
& Export
Consolidation or
direct delivery to
customer
CUSTOMER
Retail
Foodservice
Export
Premium British
sausages developed
from the original
recipes from Martin
Heap.
A flavour explosion
with a belief that
great taste
comes from
passion and
imagination.
A selection of artisan
British charcuterie
hams, sausages
& traditional
cured bacon
developed
by the eighth
generation of
the Woodall
family.
Luxury handmade
pastry made with
premium British
ingredients and all
butter puff pastry.
All recipes and
processes
are based on
local baking
hero,
Gill
Ridgard.
Authentic Mediterranean
flavours on the go
delivered through a
selection of premium
continental antipasti
and charcuterie
sourced by our
Italian
connoisseur
Vaz Frigerio.
FOOD SAFETY AND SUSTAINABILITY
83 the number of Consecutive Grade As issued to
Cranswick by the British Retail Consortium
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Our primary processing sites are located
in the two key eastern pig production
hubs. This results in reduced pig and
inter-site transport times. The recent
acquisition of the pig production
businesses has delivered further supply
chain security and transparency.
We process up to 40,000 British pigs
each week and 45 per cent of these are
higher welfare.
40,000
pigs processed/week
45%
of which are outdoor reared &
freedom foods accredited
Cranswick has a portfolio of
aspirational super premium food
brands. These are differentiated
through product story, format, British
& Mediterranean heritage and product
quality. All our brands aim to capture
the imagination of premium shoppers
looking for new food experiences and
exceptional taste.
All twelve UK sites are BRC Grade A
approved and certain sites are
Freedom Foods approved to comply
with higher welfare standards. All
primary and added value meat
processing sites have Soil Association
approval. All meat manufacturing
sites are covered by the Red Tractor
scheme. The Hull fresh pork operation
is USDA approved and both primary
processing facilities are Chinese export
approved. All sites are also regularly
audited by our retail customers.
Report & Accounts 2014 Cranswick plc
3
CHAIRMAN’s STATEMENT
Martin Davey - Chairman
This has been a positive, albeit challenging, year for Cranswick. The business has had
to contend with record input prices, the impact on its customer base of the changing
dynamics of UK food retailing and an environment where the consumer has been
subject to ongoing financial constraints.
For the business to have continued to maintain its progress against this backdrop is
no mean achievement. Strong growth in both total and underlying sales was recorded
and this reflected market share gains along with further growth in those categories in
which the Group is positioned in the UK market. Market growth was particularly strong
in the “super premium” categories as seen with both sausage and bacon. Export sales
continued to grow and this achievement was recently recognised by the industry with
Cranswick being named “Exporter of the Year”.
Results
Total sales, which include a small amount of third party sales from the
pig breeding and rearing activities acquired in the year, of £995 million
were 14 per cent ahead of the previous year and included particularly
significant increases in fresh pork, bacon and cooked meats.
Underlying sales increased by 12 per cent. Adjusted operating profit
rose to £53.3 million although operating margins were slightly below
those of the previous year on account of the increase in input prices.
Reported profit before taxation was £54.8 million and earnings per
share were 88.7 pence. Excluding the net IAS 41 valuation movement
on the pig herd in the current financial year and non-recurring items
in both the current and prior financial years, adjusted profit before
taxation was £52.2 million, an increase of 6.3 per cent on that achieved
previously. Earnings per share on the same basis (after tax) rose
6.9 per cent to 84.1 pence.
The borrowings of the business are conservatively structured and
the Company has recently extended its banking facility through to
July 2018. This £120 million unsecured facility provides generous
headroom going forward. Net finance costs were covered 54 times by
Group operating profit, in line with the previous year. Operating cash
flow in the period was particularly strong, notwithstanding the
£27.7 million investment in the Group’s asset base and £14.4 million
spent on acquisitions. Net debt at the end of the year stood at £17.0
million compared to £20.1 million a year earlier.
Strategic investments
During the year the Company invested in pig breeding and pig rearing
activities. These operate under Wayland Farms and Wold Farms and
together supply 15 to 20 per cent of the Company’s weekly British
pig requirements. This strategic development enhances Cranswick’s
commitment to, and gives greater control over, a robust and integrated
supply chain with a clear focus on premium British ingredients. In
addition, it has helped offset some of the impact of the rise in
input prices.
Further investment in new product categories came with the
commissioning of the Yorkshire Baker pastry facility in Malton, North
Yorkshire. The site produces a range of premium pastry products
including pies, sausage rolls and quiches and was operational from
summer last year. Commissioning costs and the challenges of a
start-up have been absorbed whilst growing the sales and developing
the range in partnership with the customer base.
Other investments in the year added capacity and improved operating
efficiencies enabling the Company to absorb some of the supply
chain inflation.
Dividend
The Board is proposing to increase the final dividend to 22 pence
per share, an increase of 6.8 per cent from last year. Together with
the interim dividend, which was raised 6.4 per cent to 10 pence per
share; this makes a total dividend for the year of 32 pence per share.
This is an increase of 6.7 per cent on the 30 pence per share paid
last year. The final dividend, if approved by Shareholders, will be paid
on 5 September 2014 to Shareholders on the register at the close
of business on 4 July 2014. Shares will go ex-dividend on 2 July 2014.
Shareholders will again have the option to receive the dividend by way
of scrip issue.
Board
Bernard Hoggarth, who stood down from the position of Chief
Executive in 2012 and has continued as a Director since then on a
part-time basis, intends to retire from the Board at the forthcoming
Annual General Meeting. Bernard has been with Cranswick for 36
years and has made an enormous contribution to the development
of the Company. Over this period the business has evolved from an
East Yorkshire supplier of animal feed into one of the UK’s leading food
producers. His involvement over the years has embraced at different
times animal feed sales, pig rearing and marketing along with the
development into food production. This period has seen Cranswick
progress from being a farmer-owned regional business into a listing
on the London Stock Exchange and a member of the FTSE250. I
have worked with Bernard for almost 30 of those years and express
the appreciation of the Board and my own personal thanks for his
immense contribution and for being a great colleague throughout
that time.
John Worby will also be standing down from the Board at the
forthcoming Annual General Meeting. John has served as a
Non-Executive Director and Chairman of the Audit Committee since
2005 and this year will have completed nine years as a Director, at
which time, under corporate governance guidelines, he will no longer
be deemed independent. John’s experience and contribution to
discussions have been of enormous value in the development of the
business and, on behalf of the Board, I extend our sincere thanks and
wish him well for the future.
4
Cranswick plc Report & Accounts 2014
Mark Reckitt joined the Board as a Non-Executive Director in
May 2014 and will take over as Chairman of the Audit Committee at
the conclusion of the forthcoming Annual General Meeting. He retired
from his position as Group Strategy Director at Smiths Group plc in
April 2014. Prior to joining Smiths Group in 2011 Mark had 20 years
with Cadbury plc in roles embracing finance and strategy. He is also a
Non-Executive Director and Chairman of the Audit Committee
at JD Wetherspoon plc.
In addition to the Board changes outlined above Kate Allum joined
the Company as a Non-Executive Director in July 2013, as previously
reported to Shareholders. Kate’s experience of international food
markets has broadened the expertise and experience within the Board.
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 34. Recent developments have
included the external evaluation of the Board and its procedures,
undertaken in 2013, which reported positively and the improved
gender diversity within the Board.
been the focus of attention for some years under a dedicated project
team. Significant progress has been made in a number of areas
including waste, water, energy, packaging and carbon footprint and
this was highlighted recently with the Group winning the industry’s
“Environmental Initiative of the Year” award for 2014. Further details
are included within the Corporate Social Responsibility section on
pages 24 to 31 and the Awards section on page 7.
Staff
The continued successful development of the business over the
past year would not have been achieved without the hard work,
determination and expertise of all staff at the Company and on
behalf of the Board I extend sincere appreciation and thanks for their
contribution.
Outlook
The past year has seen another positive performance from the
Company. The Board looks forward to the challenges and opportunities
that lie ahead as it pursues Cranswick’s continued successful long-term
development.
Environmental initiatives
Managing and reducing the impact that the business has on the
environment is an integral part of the Company’s activities and has
Martin Davey
Chairman
19 May 2014
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Report & Accounts 2014 Cranswick plc
5
OUR TRACK RECORD
Adjusted profit before tax and revenue £m
T
B
P
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A
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Adjusted PBT
Revenue
1,200.0
52.2
49.1
1,000.0
47.3
45.6
43.8
34.7
32.7 33.0
31.1
21.2 21.6
19.8
17.5
11.7
9.3
7.1
1.4
1.7
0.9
2.2
2.3
3.0
3.1
5.0
4.0
‘90
‘91
‘92
‘93
‘94
‘95
‘96
‘97
‘98
‘99
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘11
‘12
‘13
‘14
800.0
600.0
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400.0
200.0
0.0
Dividend per share p
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
8.3
7.5
6.8
5.8
5.1
3.8
4.0
4.1
4.3
4.6
3.3
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32.0
30.0
28.5
27.5
25.0
21.7
19.9
18.1
16.5
14.5
13.2
12.0
10.8
‘90
‘91
‘92
‘93
‘94
‘95
‘96
‘97
‘98
‘99
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘11
‘12
‘13
‘14
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Cranswick plc Report & Accounts 2014
AWARDS
Working closely with its customers, the Group has maintained focus on service, quality and innovation throughout the year and
continues to deliver exciting, competitively priced products for the UK consumer. This work, along with the Group’s strong export
growth and focus on a number of successful environmental initiatives, has received industry recognition through the following
recent awards:
Cranswick wins
"Manufacturer of
the Year" award at
the Meat Management
Industry Awards 2013
Cranswick wins “Export
Initiative of the Year” and
“Environmental Initiative
of the Year” awards at the
Meat & Poultry Processing
Awards 2014
Chris Aldersley receiving the "Export
Mark Goddard receiving the
Initiative of the Year" award.
"Environmental Initiative of the
For a full list of our awards, please see our
website at www.cranswick.co.uk
Year" award.
Report & Accounts 2014 Cranswick plc
7
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OUR STRATEGY AND BUSINESS MODEL
Our strategy
Our overall strategic aim is to create long-term value for our Shareholders, customers and other stakeholders. We will do this by focusing primarily
on the growing quality end of the markets in which we operate and by establishing meaningful and long-lasting relationships with our major
customers. This will be achieved through a combination of product development and high service levels. We will continue to invest in quality
facilities and the latest equipment so that we operate as efficiently as possible and to provide a safe and secure working environment for our
employees.
Our long-term growth strategy is focused on consolidating existing market positions, developing new products channels in our core UK food
market and growing our international operations and customer base. Growth will continue to be driven by organic initiatives and targeted
acquisitions.
Our objective
To be a leading supplier of premium, fresh and added-value food products with a focus on operational effi ciency
and delivering innovative quality products to our customers
Our growth strategy
Our growth strategy is underpinned by six coordinated, creative and sustainable strategic priorities:
ORGANIC INITIATIVES
AND TARGETED
ACQUISITIONS
UK CONSOLIDATION
Penetrating more customers
and more categories
UK DIVERSIFICATION
Developing new products
INTERNATIONAL
Growing our international
operations and customer base
1
2
3
4
5
6
MARKET PENETRATION Gain market share in existing categories/tiers;
move into adjacent tiers; add new customers; develop adjacent categories
INNOVATION Develop new and innovative products that give our
customers a real point of diff erence
CHANNEL DEVELOPMENT Sell products through multiple channels: retail,
food-service, manufacturing, wholesale, convenience, food on the move and online
SUPPLY CHAIN Ensure a robust supply chain with focus on security, integrity,
integration, diff erentiation, alignment and low cost sourcing
BRANDS Develop new and existing brands to further diff erentiate
our premium tier products
INTERNATIONAL Grow European and worldwide markets for traded,
primary, added-value and branded products
The markets in which we operate 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 value-added acquisitions.
Implementing Cranswick’s strategy is assessed through a number of financial and non-financial KPIs summarised on pages 10 and 11.
Performance in the year under review and objectives for 2014 –15 are discussed in more detail on pages 16 to 18. The principal risks and
uncertainties, which might impact achievement of the Group’s strategic objectives and mitigating actions, are set out on pages 12 to 14.
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Cranswick plc Report & Accounts 2014
Our business model
Our business model is centred on our four key values: Quality, Value, Innovation and People. These values are supported by a robust operational
framework, as shown below:
Our four key values
1 QUALITY
Continued focus on taste, heritage
and authenticity, whilst maintaining
the highest level of customer service
2 VALUE
Improving operational effi ciency and
maximising returns on investment
3 INNOVATION
Delivering innovative quality products
to our customers
4 PEOPLE
Empowered, dedicated and enthusiastic
people with a shared vision operating
in a safe and secure workplace
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HIGH WEL F A R E
STANDA R D S
ENVIRONMENTAL I N I T I A T I V E
S
Cranswick’s operations are focused on the production and supply of food products. We operate entirely in the UK, although a small but increasing
proportion of sales are exported. We produce a range of high quality, predominantly fresh products including fresh pork, sausages, bacon and
cooked meats for sale to the high street food retailers. We also supply a range of pre-sliced, pre-packaged charcuterie products for sale to these
same customers, together with a range of pre-packed sandwiches predominantly for food service outlets. More recently the Group has launched
a range of artisan pastry products to a number of its retail customers from its new, purpose-built facility in Malton, North Yorkshire.
The Group operates from twelve highly efficient well invested food production facilities across the UK. Continued investment ensures that these
facilities have sufficient capacity headroom to meet Cranswick’s growth aspirations, that they operate as efficiently as possible and that they
provide a safe and secure working environment for the Group’s workforce.
Supply chain security and integrity is a crucial component of our business model. Robust technical and traceability systems ensure that our
products are responsibly and sustainably sourced from suppliers whose values are aligned to our own.
We also own our own pig breeding and rearing operations which are capable of supplying 15 to 20 per cent of our British pig requirements.
This gives us even greater supply chain transparency, security and efficiency. For further information on our supply chain model, see page 3.
The business is under the control of stable, experienced and talented operational management teams supported by a skilled workforce. We offer
training and specialist support where needed to ensure that our people feel empowered, dedicated and enthusiastic with a shared vision for the
long-term success and development of our business.
Report & Accounts 2014 Cranswick plc
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OUR KEY PERFORMANCE INDICATORS
The Board has assessed that the following financial KPIs are the most effective measure of progress towards the
Group’s strategic objectives:
Key Performance Indicator
Definition
Comments
Underlying revenue growth %
12.0%
10.3
12.0
Underlying sales growth is defined as the
Total accident ratio per 1,000 employees
9.8 per 1,000
12.5
12.3
excluding the impact of acquisitions
year on year increase in sales revenue
Underlying revenue grew by 12.0 per cent in
the year following new business wins in fresh
pork, strong growth in the bacon and cooked
9.8
meats categories and continued development
5.3
of the premium pastry category.
2012
2013
2014
2012
2013
2014
Adjusted gross margin %
12.0%
12.4
12.2
12.0
Gross margin is defined as adjusted gross
The 0.2 per cent year on year decline in gross
profit as a percentage of sales revenue
margin reflects the time lag in recovering
RIDDOR accident ratio per 1,000 employees
0.9 per 1,000
1.9
1.6
higher input costs in the first half of the year,
2012
2013
2014
2012
2013
2014
partly offset by ongoing improvements in
operating efficiencies.
0.9
Adjusted group operating margin %
5.4%
5.7
5.7
5.4
2012
2013
2014
Group operating margin is defined as
Group operating margin declined by
adjusted Group operating profit as a
0.3 per cent reflecting the time lag in
percentage of sales revenue
recovering higher input costs in the first
half of the year and start-up costs at the
new pastry facility, partly offset by ongoing
improvements in operating efficiencies and
the positive contribution from acquisitions.
Free cash flow £m
£59.1m
43.4
Free cash flow is defined as the level of cash
Free cash flow increased by £10.1 million
generated from operations less tax and net
compared to the prior year driven by a
59.1
49.0
interest payable
6 per cent increase in Group operating profit
and a £2 million reduction in net working
capital compared to a £5 million outflow in
2013.
2012
2013
2014
Return on capital employed %
16.8%
16.7
17.2
Return on capital employed is defined as
Return on capital employed fell slightly as the
16.8
adjusted operating profit divided by the
Group continues to invest in its asset base
sum of the average of opening and closing
to provide additional capacity to drive future
net assets, net debt, pension liabilities and
long-term growth.
deferred tax
2012
2013
2014
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Cranswick plc Report & Accounts 2014
The Board has assessed that the following non-financial KPIs are the most effective measure of progress towards
the Group’s strategic objectives:
Key Performance Indicator
Definition
Comments
Underlying revenue growth %
12.0%
10.3
12.0
5.3
Adjusted gross margin %
12.0%
12.4
12.2
12.0
Adjusted group operating margin %
5.4%
5.7
5.7
5.4
2012
2013
2014
Free cash flow £m
£59.1m
59.1
43.4
49.0
2012
2013
2014
Return on capital employed %
16.8%
16.7
17.2
16.8
2012
2013
2014
Total accident ratio per 1,000 employees
9.8 per 1,000
12.3
12.5
9.8
2012
2013
2014
2012
2013
2014
RIDDOR accident ratio per 1,000 employees
0.9 per 1,000
1.9
1.6
Total accident ratio is the total number of
Total accidents per 1,000 employees fell by
recorded accidents per 1,000 employees
22 per cent year on year. The reduction is
attributable to an ongoing focus on improving
working environments and health and safety
management across the Group.
The RIDDOR accident ratio is the number of
RIDDOR accidents per 1,000 employees fell
accidents reportable to the Health and Safety
by 47 per cent year on year. The reduction is
Executive per 1,000 employees
attributable to an ongoing focus on improving
0.9
working environments and health and safety
management across the Group.
2012
2013
2014
2012
2013
2014
Report & Accounts 2014 Cranswick plc
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RISK MANAGEMENT AND PRINCIPAL RISKS
As a leading UK food producer, the Group faces a variety of risks and uncertainties. Operating in a highly competitive industry, it is
critical that the Group identifies, assesses and prioritises its risks. This, along with the development of appropriate mitigating actions,
enables the Group to achieve its strategic objectives and protect its reputation.
The Group has a formal risk management process in place, which is embedded within the business to support the identification and effective
management of risks across the Group. It is regularly reviewed and updated for changes within the Group, industry and wider economy.
Risk management model
O R I N G
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GROUP RISK
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OPERATIONAL MANAGEMENT
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BOARD ”Responsible for the Group’s system of risk
management and internal control and for setting the Group’s
overall risk appetite“
AUDIT COMMITTEE “Reviews the systems of internal control
that are in place and provides assurance to the Board that
the processes of risk management and internal control are
operating eff ectively“
GROUP RISK COMMITTEE “Provides oversight and advice to
the Audit Committee and Board in relation to current and future
risk exposures and future risk strategies“
OPERATIONAL MANAGEMENT “Operate site level risk
management processes to ensure that risks remain adequately
identifi ed, analysed and controlled“
Risk management framework
The Board is responsible for the identification and effective
Risk monitoring process
The Board formally reviews the Group risk register on an annual
management of risks across the Group and relies on the Group Risk
basis. The Group Risk Committee is responsible for highlighting to the
Committee to oversee the Group’s risk management processes.
Board and to the Audit Committee any key changes to the Group’s
The Internal Audit function provides independent assurance to
risk register during the intervening periods. For 2013–14 the risks
management and the Audit Committee keeps under review the
facing the Group are broadly consistent with the previous year, with
effectiveness of mechanisms put in place to mitigate risks. This process
no significant changes in risk profiles. However, as reported at the half
specifically recognises the close relationship between Internal Audit
year, following the investment in pig breeding and rearing activities the
and risk management. The Audit Committee obtains assurance that
Group now faces risks associated with this activity.
the processes of risk management and internal control are adequate.
Further details are set out in the Corporate Governance Report on
page 37.
Group risk register
A Group risk register is in place which is generated from site risk
Internal audit plan
The internal audit plan is principally driven by the Group’s risk
management framework. During the year Internal Audit reviews
the auditable elements of these risks and informs operational
management and the Audit Committee of any required
registers owned by operational management who individually set
corrective actions.
out the risks, likelihood of occurrence, consequences of impact and
mitigating actions for their respective area of responsibility. Identified
The principal risks and uncertainties facing the Group are summarised
risks which have a significant impact on the Group as a whole are
on the following pages. However, this is not intended to be an
escalated to the Group risk register and are captured according to
standard internal classifications (strategic, commercial, financial and
operational risks).
exhaustive analysis of all risks currently facing the Group.
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Cranswick plc Report & Accounts 2014
Risk area
Description of risk
How we manage it
Strategic risks
Consumer demand
Deterioration in the economy may adversely affect the
The business offers a range of products across
activity levels of consumers and the Group’s immediate
premium, standard and value tiers which it is able to
customers, leading to a fall in demand for the Group’s
flex in response to customer and market demands. Pork
products and ultimately lower profitability and cash flow.
remains an extremely competitively priced and
sought-after product.
Competitor activity
The Group trades in highly competitive markets which
The Group manages the risk of operating in a
tend to operate without long-term contracts. Product
competitive sector by developing and maintaining strong
innovation and changing consumer trends provide a
customer relationships. This process is supported by
constant challenge to the future success of the Group
delivering high levels of service and quality, and by the
and its ability to compete effectively.
continued focus on product development and technical
innovation.
Commercial risks
Reliance on key
A significant proportion of the Group’s revenues are
The Group’s commercial teams continually look for
customers
generated from a small number of major grocery retail
opportunities to expand the customer base across
customers. Loss of all or part of the Group’s business
all product categories and work closely with key
with one or more of these customers would adversely
customers to ensure service, quality and new product
impact on the Group’s financial performance.
developments are of the highest standard.
Pricing and availability
The major exposure the Group has to pricing and
The Group has a trusted, long-standing farming supply
of raw materials
availability of raw materials is in relation to pig meat. An
base, and the acquisition of Wayland Farms and the
increase in raw material input costs, pig feed prices or a
recent formation of Wold Farms have also helped to
lack of availability of pig meat would adversely impact on
mitigate the risks associated with pig price fluctuations
the Group’s profitability.
and raw material supply. In addition the Group mitigates
the risk of raw material price inflation through ongoing
pricing discussions with its customers and suppliers.
Financial risks
Interest rate, currency,
The Group is exposed to interest rate risk on borrowings
Interest rate and foreign currency risks are managed
liquidity and credit risks
and foreign currency risk on purchases particularly
using effective hedging policies, which are managed
of charcuterie products from the European Union. In
by the Group’s Treasury function. Each site has access
addition the Group needs access to funding for current
to the Group’s overdraft facility and bank balances are
business and future growth.
monitored on a daily basis by Group Finance. All term
debt is arranged centrally and appropriate headroom
is maintained. Bank facilities were renewed prior to the
year end through to July 2018.
Business acquisitions
Businesses may be acquired based on inaccurate
Rigorous due diligence reviews are carried out in
information, unachievable forecasts or without
advance of any new business acquisition, using internal
appropriate consideration being given to the terms
and specialised external resource where required.
of the purchase.
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Report & Accounts 2014 Cranswick plc
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RISK MANAGEMENT AND PRINCIPAL RISKS (CONTINUED)
Risk area
Description of risk
How we manage it
Operational risks
Food scares
As a food producer, the Group is subject to the risks of
The risk of such events is mitigated by ensuring that all
product and/or raw material contamination and potential
raw materials are traceable to original source and that
health related industry wide food scares and issues. Such
the manufacturing, storage and distribution systems of
incidents may lead to product recall costs, reputational
both Group sites and suppliers are continually monitored
damage and regulatory penalties.
by experienced and well trained site based and Group
technical teams.
Business continuity
The Group faces the risk of incidents such as major fire,
Detailed business continuity plans are in place across the
flood or loss of key utilities, which may result in significant
Group’s manufacturing sites and appropriate insurance
and prolonged disruption to its operating facilities
arrangements are deployed to mitigate any financial loss.
resulting in loss of sales and reduced profitability.
Potential business disruption is minimised through
multi-site operations across the Group’s key product lines.
Recruitment and
The success of the Group is dependent on attracting and
The Group mitigates the risk associated with the loss
retention of key staff
retaining high quality senior management and staff.
of key staff through robust succession planning, strong
recruitment processes, competitive remuneration
packages and ongoing training and development plans.
Food safety and health
A breach of food safety or health and safety standards,
The Group conforms to all relevant food safety and
and safety
legislation or ethical standards may lead to reputational
health and safety regulations and adopts industry best
damage and regulatory penalties including restrictions on
practice across its production sites and within its supply
operations, damages or fines.
chain. All sites are subject to frequent audits by internal
teams, customers and regulatory authorities to ensure
standards are being adhered to.
Pig herd infection and
An infection or disease outbreak may result in the loss of
The Group mitigates against this risk with farming
disease
livestock, or the inability to move animals freely, impacting
facilities which have a broad geographical spread to avoid
on the supply of raw materials into the Group’s abattoirs.
reliance on a single production area. In addition, robust
vaccination and herd operating procedures mitigate the
risk of common diseases and infections.
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Report & Accounts 2014 Cranswick plc
15
OPERATIONAL REVIEW
Adam Couch - Chief Executive
I am pleased to report that the business delivered a robust trading performance during
the financial year with total revenues ahead by 14 per cent. Underlying revenues,
which exclude the contribution from acquisitions, increased by 12 per cent, reflecting
strong growth across most of the Group’s categories, driven by new product launches
and a broadening customer base. This performance was underpinned by market
growth in the Group’s core categories and by strong export volumes. Adjusted Group
operating profit increased by 6 per cent, reflecting strong revenue growth which was
partly offset by the impact of higher input costs, particularly in the first half of the year.
The pig rearing and breeding operations, which were acquired during the year, also
made a positive contribution to the Group’s performance.
Rising input costs
Pig prices increased during the first half of the financial year to reach
Infrastructure investment
The Group invested £28 million in its infrastructure during the year,
a new record high in July 2013 and remained at this level through to
bringing total capital expenditure to more than £130 million over
the end of the third quarter. This was caused by high feed prices and
the last five years. This investment is reflected in the quality of the
demand for high quality British pork. Cranswick managed this input
Group’s production facilities which are some of the most efficient and
cost inflation through constructive discussion with its customers,
well invested in the sectors in which Cranswick operates. Significant
by delivering ongoing operating efficiency improvements and by
completed and ongoing projects are highlighted in the individual
producing pigs internally. Pig prices eased in the fourth quarter of the
category sections below.
year; however the extent of and time lag in recovering these higher
input costs, together with higher than anticipated start-up costs at the
Group’s new gourmet pastry facility in Malton, North Yorkshire, meant
that adjusted operating margin at 5.4 per cent was slightly lower than
Category review
the 5.7 per cent reported last year.
Fresh pork (15 per cent)
Despite these price increases the UK consumer continues to
Fresh pork sales grew by 15 per cent compared to
appreciate the attractiveness, versatility and low relative pricing of pork
the same period last year as the Group saw the full
compared to other meat proteins, particularly beef and lamb. Demand
year benefit of contract wins in the fourth quarter
for premium products continued unabated, with premium sausage and
of the last financial year. Sales were also boosted by
bacon sales growing well ahead of their overall respective categories.
strong export volumes which increased by 10 per cent compared to
Acquisition of pig herd
During the year the Group invested heavily in its pig breeding and
the previous year. In the lead up to Christmas 1,000 tonnes of product
were being shipped to the Far East each week. The Group is making
a substantial investment in the Norfolk facility to upgrade the abattoir
and introduce a new rapid chiller which will increase capacity and
rearing activities, acquiring East Anglian Pigs (now renamed Wayland
improve yields in this area of the plant.
Farms) on 29 April 2013 and then further breeding units in September
and December 2013 which operate under the Wold Farms banner.
During the year Cranswick withdrew its support from the price
Cranswick now has a herd of premium outdoor pigs for use in its
reporting mechanism that calculates the Deadweight Average Pig Price
premium range products which can satisfy 15 to 20 per cent of the
(DAPP). This was based on historic discussions with the British Pig
Group’s overall British pig requirements. This move supported the
Executive (BPEX) about the clarity and transparency of the calculation.
decision by one of the Group’s key retail customers, in August 2013,
Cranswick will continue to work with BPEX to examine alternative ways
to move to an all British fresh pork offering. A combination of falling
in which pricing of pigs may be reported.
feed prices and strong demand for higher welfare British pork helped
enable Wayland Farms to make a positive contribution to the Group
In January, the Russian authorities banned the import of European
post-acquisition. The Group will continue to invest in its pig operations
pig meat in response to the outbreak of African swine fever in Eastern
to further improve productivity and efficiencies. The UK market is
currently only 50 per cent self-sufficient in pig meat, but ongoing
Poland and Lithuania. Although the UK does not export to Russia, the
decision has had an impact on both volumes and prices for the UK’s
investment in the sector should help to make inroads into this shortfall
trading partners within the eurozone.
in the medium term.
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Cranswick plc Report & Accounts 2014
Earlier in the year Porcine Endemic Diarrhoea virus (PEDv) was
Pastry (138 per cent)
discovered in the US herd. This disease has a significant impact on
Pastry sales grew strongly, albeit from a low base, to
mortality of the young pig population. The UK herd has not been
more than double those of the previous year following
affected to date but the industry remains vigilant and biosecurity
the move into the new Malton facility. Start-up costs
continues to be of paramount importance.
were higher than anticipated as the business focused
Sausage (2 per cent)
on the successful launch of several new product ranges for the Group’s
lead retail customer in this category. With costs now running at
Sausage sales increased by 2 per cent reflecting
anticipated levels, the focus is now firmly on delivering the anticipated
continued demand for the Group’s premium sausage
returns from the £12 million investment. The new product pipeline saw
ranges. July saw a record sales week for the Lazenby’s
the launch of a range of hand lined quiches for the summer season
facility for a non-Christmas period. The premium
followed by a premium savoury pie range in the autumn. A further 19
sausage category continues its impressive resilience of recent years as
new products will be launched in the current financial year, with new
consumers recognise the quality proposition that high end products
customers, both retail and food-service, being targeted.
offer. However, sausage sales to the lead customer at the Norfolk
site were lower year on year and as a result the decision was taken
Continental (3 per cent)
to consolidate sausage production at the Group’s principal sausage
Sales of Continental products were up 3 per cent on
facility in Hull. With much of the equipment also transferred, the costs
the previous year. This performance was particularly
associated with this reorganisation were kept to a minimum. Sales of
pleasing given that sales were 16 per cent lower in the
premium beef burgers, which are produced using the same artisan
skills developed for Cranswick’s gourmet sausages, also performed
first quarter following the loss of business with one of
the Group’s retail customers which continued its strategy of moving to
well during the strong summer barbecue season, with sales ahead
in-house sourcing. Several new product launches and the addition of
by 24 per cent compared to the prior year. A third burger production
new retail contracts helped this category return to growth. A renewed
line has now been commissioned to meet increased demand in the
focus on sourcing new artisan products from Continental Europe and
forthcoming summer season.
further development of the customer profile will drive ongoing growth
Bacon (14 per cent)
in this category.
Bacon sales were 14 per cent higher than the previous
Sandwiches (5 per cent)
period. Sales of premium bacon continue to grow
Sandwich sales were 5 per cent lower following a
strongly as the UK consumer trades up from the
decision to rationalise the core product range and
standard tier category. The introduction of speciality
develop a more focused customer strategy. These
cures and smoked products supported this growth along with ongoing
initiatives have been driven by a new management
development of ready to cook ranges which are now also being
team which has brought a new focus to improving operating
produced across the fresh pork and sausage categories. Seasonal
efficiencies and raw material sourcing. This has seen the business
gammon steaks and joints also performed extremely well over the
perform strongly during the year. The new management team has
key Christmas trading period. The unique artisan production methods
targeted margin enhancing sustainable contracts. It is pleasing to
developed at the Sherburn site continue to support the wider Group
report that despite losing one large contract during the year and a
in offering unrivalled product quality. This is demonstrated through
second effective from the end of quarter one of the new financial year,
collaboration with the Barnsley cooked meats facility in producing
profitable long-term new contract wins will fully mitigate these losses.
premium air-dried cooked meat products and through the use of air
The introduction of new product lines including the “&Made” brand
dried streaky bacon in Christmas sausage products.
has had a significant beneficial impact. There is a real opportunity to
Cooked meats (16 per cent)
give food-service customers a wider offering using selected products
from the Group’s broad category base and in particular the new
Cooked meats sales increased 16 per cent year on
pastry ranges. 25 per cent of all breakfast menus include bacon. The
year. Demand for premium air-dried hams helped
business is therefore ideally placed to satisfy food-service customer
drive this growth along with strong promotional
requirements in this area. Also, given the consolidation that has taken
activity, particularly in the fourth quarter of the
place in the UK sandwich category in the last two years, the business
financial year. Investment to extend the Milton Keynes facility is
is confident that there will be opportunities to develop a stronger
progressing to plan and budget. This project which is due to be
presence in the retail sector.
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completed in the second quarter of the new financial year will
substantially increase capacity, deliver significant efficiency gains and
further improvements in product quality through the use of advanced
cooking and slicing technology.
Report & Accounts 2014 Cranswick plc
17
OPERATIONAL REVIEW (CONTINUED)
Summary and outlook
Cranswick’s growth continues to be underpinned by the quality of
its products which deliver real value to, and great food experiences
for, the UK consumer. The business operates from highly efficient
and well invested facilities with empowered management teams
working collaboratively and sustainably with the Group’s customers
and suppliers. The Group’s future growth strategy will focus on
consolidating its position in UK markets, developing new channels
both in pork and other proteins and continuing to grow its
international presence.
The Group remains highly cash generative. This allows it to make
attractive returns to Shareholders, to continue to invest in its
infrastructure to build capacity, drive further operational efficiencies
and to pursue earnings-enhancing strategic acquisitions.
The successful development of Cranswick is testament to the skill,
quality and determination of the teams across each of the Group’s
businesses and I would like to express my thanks for their dedication
and support over the last twelve months.
With experienced management at all levels, a strong range of products,
a well invested asset base and a robust financial position, the Group is
well placed to continue its long-term growth strategy.
Adam Couch
Chief Executive
19 May 2014
18
Cranswick plc Report & Accounts 2014
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Report & Accounts 2014 Cranswick plc
19
FINANCIAL REVIEW
Mark Bottomley - Finance Director
The Group is presenting its financial information for the year ended 31 March 2014
with comparative information for the year ended 31 March 2013, restated for the
impact of IAS 19 (Revised).
Revenue
Revenue increased by 13.7 per cent from £875.2 million to
Adjusted profit before tax (i)
Adjusted profit before tax was 6.3 per cent higher at £52.2 million
£994.9 million. Adjusting for the contributions from Kingston Foods
(2013: £49.1 million).
Limited which was acquired on 29 June 2012 and Wayland Farms which
was acquired on 29 April 2013, underlying sales increased by 12.0 per
cent. Sales increased across all product categories with the exception
Taxation
The tax charge as a percentage of profit before taxation was
of Sandwiches, where the customer base and product range have
21.1 per cent (2013: 23.6 per cent). The standard rate of UK
been rationalised. This has helped to drive a significantly improved
corporation tax was 23 per cent for 2014 and 24 per cent for 2013. The
trading result within this category. Fresh Pork, Cooked Meats, Bacon
charge for the current year benefited from a £1.0 million (2013: £0.3
and Pastry grew very strongly as a result of increased market share and
million) deferred tax credit following a 2 per cent enacted reduction in
new product development. Again, there was a growing contribution to
revenues from the Group’s export business.
the UK corporation tax rate from April 2014 and a further 1 per cent
reduction from April 2015 (2013: 1 per cent reduction from April 2013).
Adjusted Group operating profit (i)
Adjusted Group operating profit increased by 6.4 per cent to
In addition the £1.1 million contingent consideration provision release
was not chargeable to tax.
£53.3 million (2013: £50.0 million). Adjusted Group operating margin
at 5.4 per cent of sales was lower than the 5.7 per cent reported for
Adjusted earnings per share (i)
Adjusted earnings per share increased by 6.9 per cent from
the last financial year. The lower operating margin in the year reflected
78.7 pence to 84.1 pence, reflecting an increase in underlying
substantially higher input costs compared to those of the prior year
profitability. The weighted average number of shares in issue during
and start-up costs at the new gourmet pastry facility at Malton, North
the year was 48,734,000 (2013: 48,257,000).
Yorkshire, which was commissioned during the year. It was partly offset
by strong revenue growth, operational efficiencies and the positive
contribution from Wayland Farms in the eleven months following
Acquisitions
On 29 April 2013 the Group acquired 100 per cent of the issued share
acquisition. Raw material price inflation mainly impacted the first half
capital of East Anglian Pigs Limited (now renamed Wayland Farms
of the year, with operating margin falling to 4.9 per cent. In the second
Limited) for a net cash consideration of £10.9 million. Wayland Farms
half the margin recovered strongly to 5.8 per cent as raw material
made a positive contribution to Cranswick’s activities during the period.
prices dropped back.
On 13 September 2013 and 19 December 2013 the Group made
further investment in its pig rearing and breeding activities by acquiring
Finance costs
Net finance costs of £1.0 million (2013: £0.9 million) were marginally
certain trade, assets and livestock from Dent Limited for
£2.0 million, and from the administrators of Dent Limited for £1.5
higher than the previous year. This reflects slightly higher average
million, respectively. Further details of these transactions are set out in
borrowings during the year as a result of acquisitions and continued
note 14.
capital investment largely offset by strong cash generation. Interest
cover strengthened from 53.5 times to 54.4 times.
The pig herd was valued on initial recognition at £13.1 million and at
31 March 2014 at £14.7 million in accordance with the provisions of
On 27 March 2014, the Group successfully extended its banking
IAS 41 Biological Assets which requires livestock to be valued at fair
facilities. The new facility, which is on improved terms, runs to
value rather than historic cost. The valuation gain between initial
July 2018 and comprises a revolving credit facility of £120 million,
recognition and the year end of £1.4 million has been disclosed
including a committed overdraft of £20 million. In addition, it includes
separately on the face of the income statement.
an accordion feature which allows the Group to drawdown a further
£30 million on the same terms at any point during the life of the facility.
This unsecured facility provides generous headroom going forward.
Note (i) Adjusted profit measures
Following the investment in pig breeding and rearing activities during the period as referred to in more detail above, the Group now monitors
performance principally through the adjusted profit measures which exclude certain non-cash items including the net IAS 41 valuation credit
of £1.4 million on biological assets and the release of the £1.1 million provision for contingent consideration payable to the previous owners of
Kingston Foods which reflects the Directors’ current expectations of the anticipated performance of the business over the three year period from
acquisition. The statutory results, including these items, show a 15.8 per cent increase in profit before tax to £54.8 million (2013: £47.3 million), a
15.7 per cent increase in Group operating profit to £55.8 million (2013: £48.2 million) and an 18.4 per cent increase in earnings per share to 88.7
pence (2013: 74.9 pence).
20
Cranswick plc Report & Accounts 2014
Cash flow and net debt
The Group continues to deliver strong operational cash flows. Cash
generated from operating activities was £60.1 million
During the year the triennial valuation of the scheme was completed.
Following a review of the valuation the Group’s Directors agreed a
(2013: £49.8 million). The increase compared to the previous year
new contribution schedule with the Trustees of the scheme to further
reflects increased Group operating profits and a reduction in working
reduce the deficit. Over the period from April 2014 to November 2019,
capital of £2.1 million, compared to an increase of £4.5 million in the
cash contributions will be increased to £1.3 million per annum.
prior year. The net cash outflow from investing activities of
£40.8 million is accounted for by capital additions, net of fixed asset
sale proceeds, of £27.4 million and the cash spent on the acquisition
Restatement
Following the amendment to IAS 19, which came into effect for the
of Wayland and Wold Farms of £14.4 million, less loan repayments
Group from 1 April 2013, interest on pension scheme assets is now
received of £1.0 million. The previous year’s outflow was £35.5 million.
calculated by reference to the liability discount rate rather than the
The £14.2 million of net cash used in financing activities in 2014 is
largely due to interest paid of £1.1 million, dividends paid of
expected long-term yield on the assets, as was the case previously.
Comparative information has been restated accordingly and further
£12.7 million and net loan repayments of £0.5 million. The prior year
details, including a modest reduction in the Group’s profit before tax
cash outflow from financing was £26.0 million. The overall result is a
and earnings per share, are set out in note 2.
net increase in cash and cash equivalents of £5.1 million
(2013: decrease of £11.7 million). Net debt reduced by £3.1 million to
£17.0 million (2013: £20.1 million) at the year end, and gearing fell from
7.3 per cent to 5.6 per cent.
Pensions
The Group operates a number of defined contribution pension
Mark Bottomley
Finance Director
schemes whereby contributions are made to schemes operated by
major insurance companies. Contributions to these schemes are
19 May 2014
determined as a percentage of employees’ earnings. The Group also
operates a defined benefit pension scheme which has been closed to
further benefit accrual since 2004. The deficit on this scheme at
31 March 2014 was £6.5 million (2013: £3.4 million). Cash contributions
to the scheme during the year, as part of the programme to reduce the
deficit, were £1.1 million. The present value of funded obligations was
£25.2 million and the fair value of plan assets was £18.7 million.
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Report & Accounts 2014 Cranswick plc
21
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Cranswick plc Report & Accounts 2014
GROUP DIRECTORS AND CATEGORIES
Pig Rearing
Charles Bowes
Glenn Dams
Fresh Pork
Chris Aldersley
John Fletcher
Stuart Kelman
Barry Lock
Nick Mitchell
James Pontone
Neil Willis
Cooked Meats
Ian Fisher
Paul Gartside
Andy Jenkins
Kate Maxwell
Clive Stephens
Nick Tranfield
Paul Williams
Sausages, Bacon and PastRy
Darren Andrew
Daniel Nolan
Gill Ridgard
Drew Weir
Steve Westhead
CHARCUTERIE
Rollo Thompson
Sandwiches AND Ingredients
Nick Anderson
Gary Landsborough
Simon Ravenscroft
Food Central
Andrew Caines
Marcus Hoggarth
Graeme Watson
Malcolm Windeatt
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Report & Accounts 2014 Cranswick plc
23
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. To further progress this process a
Group CSR committee was set up during the year chaired by the Finance Director and consisting of key people across the functions of HR, Health
and Safety, Environment and Technical.
People
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
Cranswick is consistently developing its succession planning through
into its culture and the Group Human Resources (HR) Manager ensures
talent management programmes in conjunction with first line
that these are consistently applied across all the sites.
manager and senior line manager training, to prepare its teams for the
challenges of the future and create sustainable business value.
Cranswick has undertaken to further develop its HR strategy this year
and the people plan has been incorporated in to the CSR and business
The business continues to be committed to engaging with the local
strategy to underpin the vision and purpose of the company going
community via youth employment initiatives including sponsoring
forward. Cranswick aims for its people to be the best in the industry
awards for apprenticeships and has been unique in setting up and
and in order to achieve this it is committed to developing a
delivering a butchery apprenticeship scheme at its site in Preston,
multi-skilled, inspired, empowered and motivated workforce.
near Hull. The training scheme now has 17 young people working at
The HR strategy includes CSR as part of its vision and values, and will
training. In addition to this a number of sites also have engineering
the site with a view to becoming skilled butchers at the end of their
implement a pattern of planned activities to ensure the attraction and
apprenticeships in place.
retention of talented individuals who have key core skills that will aid
the achievement of the long-term business goals and objectives. This
Health and wellbeing are key to creating a happy and engaging working
in turn will enable improved performance across the Group.
environment and Cranswick has run a variety of initiatives including
The business has chosen to give its employees a meaningful voice,
demonstrations, charitable bike rides and offering free fruit
drop-in clinics with health professionals, healthy eating cookery
which means that they have the channels through which to put
to employees.
forward their views via Works Councils or union membership, and that
they will be communicated with effectively or have role models with
Ethical standards are high within the Company and we employ the
whom they can identify. All areas now have a forum in place where
only International Register of Certified Auditors (IRCA) registered
employees have a worker representative who sits on a committee on
Internal Social Systems Auditor in the UK using systems that have been
a regular basis, and who is able to air the views of their colleagues. On
developed by the business. Audits are carried out annually of all sites
some sites this may also be a union representative. Employees are
and Cranswick is a member of Supplier Ethical Data Exchange (SEDEX).
given the opportunity to feel a greater sense of purpose and are seen
Cranswick has been at the forefront of best practice in conducting
as productive and valuable stakeholders in the business. A staff survey
annual ethical audits both at its own sites and those of its labour
has delivered positive actions from the Group and a variety of initiatives
providers. Performance is judged against the Gangmasters (Licensing)
have been implemented which have aided the trust and engagement
Act 2004, the Ethical Trading Initiative and retailer expectations.
of employees with the business.
The focus moving forward will be targeted at ensuring that ethical
standards are being maintained within our supply chain and we are
The Group is committed to implementing a training and development
optimistic that, given our past history for efficiency in this area, this will
strategy that articulates the workforce capabilities, skills or
be a successful initiative.
competencies and that ensures a sustainable, successful business.
Young people continue to join the business on the graduate
programme and a number of placement students have also been
Encouraging the principles of equality and diversity are key to the
successful and inclusive culture that lies at the heart of Cranswick.
sponsored through their final year at university with the promise of
Regular training is provided for all employees, reiterating the
a role with the company when they have completed their education.
importance of equal opportunities and best practice behaviours. This
The graduate programme ensures lines of continued innovation,
year, the site HR managers have been trained in equality and diversity
methodologies, and generational differences are developed
principles to roll these out to all middle and senior management teams.
throughout the business, to maintain its competitive edge. Graduates
also introduce new ideas and enthusiasm into the company.
24
Cranswick plc Report & Accounts 2014
TOTAL EMPLOYEES
TOTAL EMPLOYEES
34%
34%
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.
66%
66%
The business employs 4,627 people, up from the previous year of 4,402, and in addition a further 3,211 agency workers are also involved.
Male
Male
Gender and employee information
Female
Female
3,054
3,054
1,573
1,573
TOTAL EMPLOYEES
Main board
Main board
Senior managers & executives
Senior managers & executives
34%
66%
12%
12%
88%
88%
29%
29%
71%
71%
Male
Female
3,054
1,573
Male
Male
Female
Female
7
7
1
1
Male
Male
Female
Female
195
195
80
80
Main board
Health and safety
Senior managers & executives
Cranswick’s commitment to achieving high standards of health and safety continues with the commitment of the Board through the efforts of
a dedicated and coordinated team.
12%
29%
Cranswick is committed to high standards of health and safety, which
accident individually, and to monitor control measures that have been
is an integral part of its business. There is an ongoing programme
of yearly improvements, fully endorsed by the Board, working in
88%
71%
introduced, to prevent recurrence. The system includes an action
tracker, to guarantee closure of required actions in the required
partnership with its insurers to achieve and improve these standards
time period.
for its workforce. These standards of health and safety training are
applied equally to temporary agency workers as well as permanent
The factory based Health and Safety Coordinators all hold the
Male
employees.
Female
7
1
Male
Female
195
80
appropriate National Examination Board in Occupational Safety
and Health (NEBOSH) qualification to help deliver the appropriate
The Board take a keen interest in the group performance with the
standards at site level. Consistency across the Group is centrally
accident and claims statistics reviewed and discussed at quarterly
directed and coordinated. With the increasing complexity of equipment
Board meetings. The Group Health and Safety team implement and
and the legislation surrounding its design and use, the team has a
monitor new initiatives across the sites required to fulfil the excellent
Group Machinery Safety Coordinator. As well as assessing the safety
standards of health and safety within the business. Monthly accident
compliance of all new and current machinery within the business the
statistics are monitored, using an industry leading web based accident
role also involves delivering the appropriate training to the site based
recording system. This system allows the Group to analyse each
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.
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.
The new sites in 2013 (the pork processing site at Riverside in Hull; the pastry business at Malton; the Wayland pig production units in Norfolk and
the Wold units in Yorkshire) have been intergrated into the Group health and safety management programme.
Report & Accounts 2014 Cranswick plc
25
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CORPORATE SOCIAL RESPONSIBILITY (CONTINUED)
Health and safety (continued)
Compared to the prior year
•
•
The total number of RIDDOR (reportable accidents to the HSE) reduced by 36 per cent
The RIDDOR Accident Incident Ratio reduced by 47 per cent
The total number of recorded accidents for the extended Group in
This also reflects in the RIDDOR Accident Incident Ratio in 2013, which
2013 was 5 per cent lower than the prior year. On a like-for-like basis
was 47 per cent lower than the prior year.
this decrease is 15 per cent, reflecting the continued reducing trend.
The Accident Incident Ratio (against number of employees) for 2013
and good health and safety team management at the sites. This year
was 22 per cent lower than the prior year.
Cranswick is introducing a web-based risk assessment system, to cover
These reductions can be attributed to improved working environments
all workplace task and activities and the Control of Substances Harmful
RIDDOR reportable accidents in 2013 for the extended Group declined
to Health (COSHH).
by 36 per cent, a significant reduction, reflecting the increasing
commitment from management and employees alike in driving
The Company is committed to excellent health and safety training of
Cranswick’s continuing success.
both its own employees and agency workers. All receive a full health
and safety induction course including fire safety, manual handling,
The Group like-for-like figures show an even more impressive 43 per
task and machinery training in their working environment in order to
cent decline in total RIDDOR’s recorded in 2013. This is Cranswick’s
operate in a safe manner.
biggest ever reduction year on year, of which we are proud. Key
focuses for the future are safeguarding our workforce and continuing
this reduction.
Accidents per 1,000 employees
19.0
2.5
15.4
Total
RIDDOR
1.9
12.3
1.9
12.5
1.6
9.8
0.9
20.0
15.0
10.0
5.0
0.0
2009
2010
2011
2012
2013
Calendar year to 31 December
3.0
2.5
2.0
1.5
1.0
0.5
0.0
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Cranswick plc Report & Accounts 2014
Responsible procurement
The Group continues to operate from some of the best invested food
This is an increase of 85 audits year on year and reflects increased
production sites in the UK including the most modern and efficient
supply chain surveillance by retailers and other customers. It is
pig abattoir in the country. These undergo exacting external and
pleasing to be able to report that the vast majority of these audits
internal audits carried out by independent auditing bodies, customers,
were completed to the full satisfaction of our customers and scheme
government authorities, and by the Group’s own technical compliance
compliance.
team. In the current year the business has hosted 310 separate
external compliance audits, many of which were unannounced.
Cranswick has recently celebrated its 83rd consecutive Grade A rating against the British Retail Consortium (BRC) Global Standard for Food
Safety. A record of compliance that stretches back to 2005. 4 of the sites also achieved an A* rating during 2013–14. This is the highest award
given by the BRC and is reserved for those sites that achieve Grade A compliance by unannounced audit – an achievement that Cranswick is
very proud of. Cranswick believes this long-standing track record of compliance to be sector leading.
In addition to BRC compliance of sites and systems of manufacture,
Cranswick has a team of talented and industry proven technical
many of the Company’s pork products are in full compliance with the
personnel who are responsible for this long standing track record
Red Tractor Assurance Scheme (Red Tractor), and the British Meat
of compliance.
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
Cranswick is committed to ensuring the integrity and traceability
of the raw materials (meat, ingredients and packaging) used in its
the way back to farm, the integrity of which is challenged by third party
products. The approval of raw material suppliers and their products
announced and unannounced audits. Cranswick also produces organic
and raw material specifications are controlled centrally by the Group
products that are subject to a mass balance exercise carried out by
Technical Service Team which collectively has responsibility for 558
independent auditors working for The Soil Association.
active suppliers and over 1545 raw materials. Suppliers are approved
by either independent third party audit, such as the BRC Global
The engine room that drives technical compliance across the Group is
Standard for Food Safety, or by Cranswick’s approval audit carried out
the exacting internal technical audit programme which saw over 794
by the Group’s Technical Service team. Cranswick’s expectations of its
separate audits carried out in the last twelve months. The programme
suppliers are clearly laid out within its Technical Conditions of Supply.
is not only there just to identify non-compliance but is also a means for
highlighting best practice and shared learning across the Group.
In the last twelve months the Cranswick Group Technical service team has carried out 161 separate supply chain audits to ensure the safety,
traceability and quality of the raw materials used.
During 2013 meat related food fraud has undermined consumer
during the manufacture of single species products in multi-species
confidence in the food industry. The Elliot Report highlighted the
factories and has been proactive in supporting the BMPA and the
need for more effective management and policing of supply chains. In
Food Standards Agency (FSA) in their work with industry stakeholders.
response Cranswick has increased the resource available to maintain
Cranswick has also put in place an extensive DNA screening schedule
its supplier approval and traceability monitoring systems and modified
for raw materials supplied to its businesses.
them to meet these challenges. The Group is also looking at the wider
challenges associated with preventing DNA cross contamination
It is pleasing to be able to report that Cranswick has carried out DNA speciation testing on 665 finished product/raw material samples and all
have proved to be compliant.
Cranswick remains vigilant and in the year under review it spent
At a time when the food industry is frequently held to account by the
£1.65 million on laboratory screening of products and raw materials for
media this level of audit, commitment to resource, traceability, and
compliance to specification.
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.
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Report & Accounts 2014 Cranswick plc
27
CORPORATE SOCIAL RESPONSIBILITY (CONTINUED)
Suppliers and producers
Pork meat is the single most important raw material supplied to the Group.
The Cranswick sites at Preston, near Hull, and Norfolk collectively
supply chain ensures that travel times from farm to abattoir are
process in excess of 37,000 pigs per week and are a key supplier to the
minimised with resulting animal welfare and food mile benefits – the
Group’s further processing sites and others outside the Group. Both
map below provides a summary of distances from the processing sites.
sites are strategically well placed within two of the largest pig breeding
and rearing areas within the country. This close proximity with the
PRESTON
NEAR HULL
UNITED
KINGDOM
NORFOLK
PRESTON, NEAR HULL
40 per cent within 25 miles
60 per cent within 40 miles
75 per cent within 50 miles
80 per cent within 60 miles
NORFOLK
50 per cent within 25 miles
80 per cent within 40 miles
90 per cent within 50 miles
95 per cent within 60 miles
Many of the pigs supplied to Cranswick are reared to higher welfare
to visual inspection and palpation. We fully support this move and are
standards associated with Outdoor Bred or Outdoor Reared standards.
actively working with BPEX and the Food Standards Agency (FSA) ahead
Approximately 50 per cent of those processed by Preston, and 70 per
of the expected launch date of June 2014.
cent by Norfolk are reared to the exacting requirements of the RSPCA
Freedom Foods welfare standard; the balance of those processed are
Similarly Cranswick is working with the British Pig Executive (BPEX) on
reared indoors in full compliance with the Red Tractor/British Quality
the implementation of the Welfare of Animals at the Time of Killing
Assured Pork (BQAP) welfare standards.
(WATOK) legislation which will require us to have standard operating
procedures for operations that have a bearing on the welfare of the
Changes to meat inspection are set to challenge the industry in the
animal from time of unloading to bleeding. Any operative carrying out
coming months with a move away from invasive meat inspection, and
these procedures must have a certificate of competence to do so.
the possibility that this can spread contamination within the abattoir,
The Cranswick agricultural team is also working with several retailer specific pig producer groups on rearing systems, breed development,
welfare, sustainability, environment and ethical standards.
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 is central to the way it operates its business.
Cranswick supplies finished products to the major UK retailers,
Cranswick is committed to working with its retail customers to
restaurant groups, and food service customers and also supplies
ensure clear informative labelling of the products it manufactures so
raw material to other manufacturers. Many of the Group’s customers
consider Cranswick to be their key supplier or category champion and
that consumers can make an informed purchase choice based on
clearly stated origin, authenticity, provenance, nutrition and allergen
a preferred partner on key technical initiative projects.
declarations.
Senior members of the Cranswick technical team are active within the
wider industry and participate in technical committees at the BMPA,
BPEX and the Provisions Trade Federation (PTF).
28
Cranswick plc Report & Accounts 2014
The Group is well placed to meet the requirements of the Food Information Regulations by the December 2014 deadline with over
40 per cent of labels already compliant.
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 remains on track.
Cranswick has now appointed a new Group Environment Manager,
The additional three sites incorporated in the figures increase the
who reports into the Executive and CSR Committees, and who is
overall total by 4.7 per cent to 78,500 tonnes.
responsible for a coordinated response to the many opportunities and
challenges in this area. As well as driving environmental initiatives at
The relative carbon footprint, a measure of the carbon emitted per
site level, there is an increasing external interface with stakeholders
tonne of production, continues its downward trend, 6.9 per cent down
including the Environment Agency and other legislative bodies,
like-for-like and 3.5 per cent down for the extended Group. Against
neighbours, customers, suppliers and investors.
the Group’s 2020 target of a 30 per cent decrease against the 2010
Carbon footprint
The carbon footprint, expressed as a tonne of carbon dioxide
equivalent (CO2e), has been calculated every year since 2008 and is an
aggregated total of the individual site figures. It includes all site energy,
baseline it has already achieved a 26 per cent reduction. These targets
will be reviewed and refined in the light of the performance to date.
This reflects increasing efforts at site level to improve energy
efficiencies and control f-gas losses through investment in new systems
f-gas usage and waste. It is calculated using DEFRA’s guidelines and
and improved maintenance.
standard set of conversion factors for Company reporting. Following
this year’s revision in the factor for electricity conversion, the Group
The Company accepts that there is a requirement to disclose the
figures back to 2010 (the baseline for our environmental targets in the
carbon footprint separately in the following categories:
Environmental Policy) have been recalculated to ensure comparability
of annual progress.
Emissions in tonnes of carbon dioxide from:
i)
combustion of fuel and operation of facilities; and
Kingston Foods, Riverside and “Yorkshire Baker” figures have been
ii) purchase of electricity, heat, steam and cooling.
included in the Group data for 2013 for the first time and are reported
alongside like-for-like figures.
The way the business is set up makes it impracticable to distinguish
between the two categories; however the bulk of the emissions would
Despite an increase in production of 7 per cent, the Group’s absolute
be from electricity and gas, which are monitored.
carbon footprint on a like-for-like basis has fallen slightly, by
0.4 per cent to 75,000 tonnes of carbon dioxide equivalent (CO2e).
Carbon footprint like for like
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
80,589
0.314
74,161
0.282
75,160
75,059
Absolute – tonnes CO2e
Relative – tonnes CO2e/tonne product
0.248
0.231
2010
2011
2012
2013
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
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Report & Accounts 2014 Cranswick plc
29
Calendar year to 31 December
Waste to landfill tonnes
-52.0%
6,040
5,879
6,040
5,613
Water use cubic metres per tonne of product
-2.5%
3.17
12.5%
30.4%
57.1%
3,103
1,490
2008
2009
2010
2011
2012
2013
Landfi ll
Recycling
Refuse derived fuel 6,830
1,490
3,627
2.32
2.43
2.60
2.78
2.71
2008
2009
2010
2011
2012
2013
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
Carbon footprint like for like
80,589
0.314
90,000
80,000
70,000
60,000
50,000
40,000
30,000
Absolute – tonnes CO2e
Relative – tonnes CO2e/tonne product
74,161
0.282
75,160
75,059
0.248
0.231
20,000
10,000
80,000
90,000
80,589
CORPORATE SOCIAL RESPONSIBILITY (CONTINUED)
Carbon footprint like for like
Carbon footprint like for like
Energy
90,000
Energy use and cost continue to increase. The Group used 9 per cent
more energy like-for-like and 15 per cent for the extended Group.
Increased production accounted for much of this. Continuing the trend
0.282
of recent years, energy costs rose into double figures, giving added
impetus to a programme of site specific energy reviews which has
0.282
included installation of Automatic Monitoring and Targeting (AM&T)
software systems. This has culminated in one site being used as a
test bed for a programme of upgrades to equipment, monitoring and
control systems with the potential to reduce energy usage by around
30 per cent. Subject to performance review this technology can be
rolled out across the Group.
80,589
74,161
74,161
0.314
0.314
40,000
80,000
60,000
60,000
50,000
50,000
70,000
70,000
0
40,000
30,000
investigated.
75,160
75,160
Waste to landfill tonnes
-52.0%
0.248
0.248
75,059
75,059
6,040
5,879
6,040
5,613
Absolute – tonnes CO2e
0.35
Opportunities to generate revenue from the conversion of waste
Relative – tonnes CO2e/tonne product
2010
2011
Absolute – tonnes CO2e
Relative – tonnes CO2e/tonne product
fats to biodiesel or use within the Group’s own fleet are being
0.35
20,000
30,000
As previously reported, Climate Change Agreements are in place for all
sites in the Group under the second phase of this scheme. As a result,
the year ended 31 March 2014 will be the final year of Cranswick’s
participation in the Carbon Reduction Commitment.
10,000
20,000
10,000
0
0
2011
2011
2010
2010
Waste disposal
During 2013 and in partnership with Biffa/IRM, Cranswick’s preferred
waste management contractor, the Group has made a step change
in its landfill reduction target by diverting 87.5 per cent of its waste
Waste to landfill tonnes
streams to either refuse derived fuel (RDF), anaerobic digestion (AD)
or recycling.
Waste to landfill tonnes
-52.0%
-52.0%
Despite difficult market conditions within the waste industry the Group
has continued to challenge its waste management contractor to
establish improved disposal routes and increase rebates for recyclates.
6,040
Dedicated contract managers working “line side” assist factory
management to separate and divert waste streams away from general
waste resulting in a significant reduction in disposal cost per tonne.
6,040
6,040
6,040
5,879
5,879
5,613
5,613
2012
2013
2008
2012
2009
2010
2011
2013
2012
Calendar year to 31 December
Waste Disposal breakdown tonnes
Waste Disposal breakdown tonnes
Water use cubic metres per tonne of product
-2.5%
12.5%
30.4%
12.5%
30.4%
3.17
0.231
0.231
3,103
0.30
0.30
0.25
0.25
0.20
0.20
0.15
0.15
0.10
0.10
0.05
0.05
1,490
0.00
0.00
2013
2012
2013
Waste Disposal breakdown tonnes
12.5%
30.4%
57.1%
Landfi ll
Recycling
Refuse derived fuel 6,830
1,490
3,627
Cranswick is now investigating the potential to collect and convert
parts of its food waste into a high grade biofuel, capable of running its
vehicle fleet whilst at the same time reducing the carbon footprint of
1,490
each vehicle by circa 80 per cent. Early indications for this project are
3,103
3,103
57.1%
57.1%
encouraging.
2008
2009
2010
2011
2012
1,490
2013
2008
2009
2010
2011
2012
2013
Calendar year to 31 December
2.60
2.78
2.71
2.32
2.43
Landfi ll
1,490
Refuse derived fuel 6,830
Landfi ll
1,490
Recycling
3,627
Refuse derived fuel 6,830
Recycling
3,627
Water
Water use continues to increase across the Group in absolute terms. However, the water use per tonne of production has fallen and the Group
Water use cubic metres per tonne of product
remains on course to meet its FHC2020 commitment of a 20 per cent fall in this measure by 2020.
Water use cubic metres per tonne of product
-2.5%
-2.5%
2008
2009
2010
2011
2012
2013
3.17
3.17
2.32
2.32
2.43
2.43
2.60
2.60
2.78
2.78
2.71
2.71
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
2013
2013
Calendar year to 31 December
30
Cranswick plc Report & Accounts 2014
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.
Community
Supporting local communities is important to the Group.
Nearly 80 per cent of the workforce live within ten miles of their place of work so the Company remains centred on encouraging and supporting
employees to be active in their communities through volunteer working or fundraising. The Group understands the need to work with local
communities and to be a responsible neighbour.
Throughout the year a number of employees have been engaged in physical challenges, raising money for their local and national charities.
In addition charitable donations made by the Company at the various sites have totalled in excess of £16,000 in the year.
The Group continues to be involved with the Red Lion Brand, a business which donates all of its post-tax profits to forces charities.
Cranswick does not make any political donations.
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.
On behalf of the Board
Mark Bottomley
Finance Director
19 May 2014
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Report & Accounts 2014 Cranswick plc
31
GOVERNANCE INTRODUCTION
FROM THE CHAIRMAN
Chairman’s overview
The Board is responsible for the stewardship of the business and is committed to maintaining high standards of corporate governance across the
Group. It believes good governance enhances business performance as well as reputation within its marketplace and across relationships with its
stakeholders.
Cranswick’s approach to governance is outlined in the following report, which describes how it integrates into the business the main principles
of the five sections of the 2012 UK Corporate Governance Code (the “Code”), namely leadership, effectiveness, accountability, remuneration and
relations with shareholders. However the Company, for this year, has not complied with code B.1.2 with the number of independent directors
being less than the number of executive directors; the full explanation is highlighted in the report though going forward the situation will be
addressed.
In line with the development of the business, the governance framework is kept under close review in order to ensure that shareholders’ interests
are safeguarded and to sustain the success of the Company over the longer term.
The role of the Board
The Board’s main role is to work with the Executive team, providing support and advice to complement and enhance the work undertaken.
The Board consistently challenges processes, plans and actions and exercises a degree of rigorous enquiry and intellectual debate. This serves to
promote continual and sustained improvement across the business.
The performance evaluation review undertaken during the year highlighted the positive and open culture of the Board.
The Board composition and appointments are set out in the Governance Report.
The Board Committees
The Board Committees have also continued to perform effectively during the year. The focus of the Nomination Committee included the
leadership needs and succession planning at both Board and senior executive level, including the recruitment of Mark Reckitt. The Remuneration
Committee reviewed the policy for Executive Director remuneration and worked to ensure that remuneration arrangements continue to support
the Company’s strategy. The Audit Committee continues to monitor the financial challenges the Group faces in a highly competitive industry and
the risk management processes it develops to enable the Group to achieve its strategic objectives and to protect its reputation.
Finally
Cranswick remains committed to sharing its business vision with its Shareholders by maintaining regular open dialogue and effective
communication. It believes that continued engagement with its Shareholders is highly beneficial to all parties as it helps to build greater
understanding of its investors’ views, opinions and concerns.
Martin Davey
Chairman
19 May 2014
32
Cranswick plc Report & Accounts 2014
BOARD OF DIRECTORS
Executive Directors
+
Martin Davey, Chairman
Martin, who is a chartered accountant, has been with Cranswick for the past 29 years, joining the Company as 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 has continued in this role on a part-time basis from 1 September 2013. He is also Chair of the Nominations Committee.
Adam Couch, Chief Executive
Adam has over 23 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.
Mark Bottomley, Finance Director
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 18 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.
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.
Subsequently Bernard remained on the Board as Commercial Director, on a part-time basis; however he will now retire after the Annual
General Meeting following a 36 year association with the Company. He will, however be available to the business, if required, for any ad
hoc projects that may arise.
Non-Executive Directors
John Worby
+† *
John joined Cranswick as a Non-Executive Director in 2005 and is Senior Independent Non-Executive Director and Chair of the Audit
Committee. He is a chartered accountant with many years’ experience in the food industry. John retired as Group Finance Director
of Genus plc in 2013 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 Connect Group plc and Fidessa Group plc and
is a member of the Financial Reporting Review Panel. This year John will have completed nine years as an Independent Non-Executive
Director and therefore will stand down after the Annual General Meeting.
+† *
Steven Esom
Steven joined Cranswick as a Non-Executive Director in 2009 and is currently Chair 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
twelve years at Waitrose, the last five years of which he was Managing Director. For the last four years he was an Operating Partner
of Langholm Capital. He is currently the Non-Executive Chairman for the British Retail Consortium (trading), the Ice Organisation and
Advantage Travel Centres. He was until 2013 a Non-Executive Director of Tyrrells Investments Limited.
+† *
Kate Allum
Kate joined Cranswick as a Non-Executive Director in July 2013. She is currently Chief Executive of First Milk Limited and a former head
of the European supply chain for McDonalds.
+† *
Mark Reckitt
Mark joined Cranswick as a Non-Executive Director on 1 May 2014. Mark was Group Strategy Director of Smiths Group plc from
February 2011 to April 2014 and was additionally Divisional President, Smiths Interconnect from October 2012 to April 2014. Prior to
joining Smiths, Mark was interim Managing Director of Green & Black’s Chocolate and before that was Chief Strategy Officer at Cadbury
plc between 2004 and 2010. Mark held a range of Strategy and Finance roles at Cadbury since joining in 1989, including Finance
Director of Cadbury UK. Prior to joining Cadbury, Mark spent six years in Investment Banking and Retailing, following his qualification as
a chartered accountant in 1983. Mark is also a Non-Executive Director of JD Wetherspoon plc, where he is Chair of the Audit Committee
and member of the Remuneration and Nomination Committees.
* Member of Remuneration Committee
† Member of Audit Committee
+ Member of Nomination Committee
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Report & Accounts 2014 Cranswick plc
33
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
The Board
During the year ended 31 March 2014, the Board consisted of an
responsibility of the Board as a whole. This report, together with
Executive Chairman, a Chief Executive, two other full time Executive
the Audit Committee Report, on pages 38 to 42, the Nomination
Directors, one part time Executive Director and three (four in July 2013)
Committee Report, on pages 44 to 45 and the Remuneration
Non-Executive Directors. All the Non-Executive Directors are deemed
Committee Report, on pages 46 to 57, describes how the Board applies
to be independent.
the principles of good governance and best practice as set out in the
Code which can be found on the Financial Reporting Council’s website
www.frc.org.uk.
The Board provides leadership of the Company and Group and
during the year met to direct and control the overall strategy and
operating performance of the Group. It is collectively responsible
Statement of Compliance
The Directors consider that the Company has, during the year ended
and accountable to shareholders for the long-term success of the
Company. To enable them to carry out these responsibilities all
31 March 2014, complied with the requirements of the Code other
Directors have full and timely access to all relevant information and
than with Code provision:
the Board has held meetings at various operating sites so that the
Directors can review the operations of those particular sites. All
•
B.1.2, apart from the month of July 2013, when Kate Allum joined
Directors have allocated sufficient time to the Company to discharge
at the beginning of the month and prior to Patrick Farnsworth
their responsibilities effectively.
retiring at the end of the month, as the number of Independent
Non-Executive Directors was less than half the Board, excluding
Board agendas are set by the Chairman in consultation with the Chief
the Chairman. The Board had been aware that Bernard Hoggarth
Executive and with the assistance from the Company Secretary. The
intended to retire soon after standing down as Chief Executive.
Company Secretary maintains a twelve month rolling programme of
Bernard retires from the Board in July 2014 after which the
agenda items to ensure that all matters reserved for the Board and
balance of the Board will be equal numbers of Independent
other key issues are considered at the appropriate time.
Non-Executive Directors and Executives Directors, excluding
the Chairman. It is the Board’s belief that the composition of
the Board includes the appropriate skills balance, experience,
independence and knowledge that the business requires. The
Board will continue to keep this under review, also with diversity in
mind, and assess the needs and requirements of the business as
it develops.
The Directors have also reviewed the financial statements and taken
as a whole consider them to be fair, balanced and understandable
and provide the information for shareholders to assess the Company’s
performance, business model and strategy. The Audit Committee
provide guidance to the Board to assist it in reaching this conclusion.
Standing agenda items included:
•
•
•
•
•
•
•
•
reports from the Chief Executive, Finance Director and the Sales and Marketing Director;
annual strategy review;
reports from the Chairs of the Audit, Remuneration and Nomination Committees;
risk and risk management;
health and safety reports;
approval of the quarterly trading updates, half year and year end reports;
approval of major capital expenditure proposals; and
review of the Group’s finance requirements.
34
Cranswick plc Report & Accounts 2014
Key agenda items this year included:
•
•
•
•
•
•
•
•
•
acquisition of Wayland Farms Limited;
acquisition of pig rearing units for Wold Farms Limited;
review of other prospective business proposals;
approval of the Group budget;
review of the Group’s refinancing proposal;
approval of the interim dividend;
appointments of Kate Allum and Mark Reckitt as Independent Non-Executive Directors;
consideration of the Board performance evaluation; and
review of the directors’ conflict of interest register.
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:
•
•
•
•
•
•
setting the Board agenda;
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:
•
•
•
•
•
the day-to-day management of the Group’s business;
leading the business and the rest of the management team 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.
Upon appointment, all Directors undertake a formal introduction to all
the Group’s activities and are also provided with the opportunity for
Non-Executive Directors
The Non-Executive Directors bring experience and complementary
ongoing training. This ensures that they are kept up to date on changes
skills to the Board, aid constructive debate and challenge during Board
in relevant legislation and the general business environment, including
discussions and help develop strategy with an independent outlook.
the review of relevant literature and attending external courses.
The Board considers the Non-Executive Directors to be independent in
Procedures are in place for Directors to seek both independent advice,
accordance with the definition highlighted in the Code.
at the expense of the Company, and the advice and services of the
Company Secretary in order to fulfil their duties.
The UK Governance Code requires listed companies to undertake
a rigorous annual evaluation of the performance of their Board,
An Executive Committee, consisting of the Executive Directors and
committees and of individual directors.
senior executives of the business, meets 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.
Board performance evaluation
David Mensley of EquityCommunications Limited, an independent
business that has no other relationship with the Company, carried
The Board has completed its annual review of the register relating to
out an external evaluation of the Board and its Committees, which
potential conflicts of interest with its Directors and confirms that no
was completed in July 2013, through means of a questionnaire and
such conflicts exist.
discussion where necessary. The resulting report was circulated to
all directors and was then discussed by the Board. Based on the
The Company Secretary is responsible to the Board for ensuring that
evaluation exercise the Board concluded that it, and its Committees,
Board procedures are complied with and for advising the Board,
were working well and a number of actions were agreed to make them
through the Chairman, on all governance matters. The appointment
more effective.
and removal of the Company Secretary is determined by the Board as
a whole.
Report & Accounts 2014 Cranswick plc
35
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
The Chairman has evaluated the performance of individual Directors.
Directors’ biographies and membership of the various Committees
In addition, the Non-Executive Directors, led by the Senior Independent
are shown on page 33. The formal terms of reference for the Board
Non-Executive Director, meet, without the Chairman present, in order
Committees together with the terms and conditions of appointment of
to appraise his performance.
Non-Executive Directors are available for inspection at the Company’s
Registered Office and at the Annual General Meeting.
Total number of Board meetings
Attendance
Martin Davey – Chairman and Chair of the Nomination Committee
Adam Couch – Chief Executive
Mark Bottomley – Finance Director
Jim Brisby – Sales and Marketing Director
Bernard Hoggarth – Commercial Director
John Worby – Senior Independent Non-Executive Director and Chair of the Audit Committee
Steven Esom – Independent Non-Executive Director and Chair of the Remuneration Committee
Patrick Farnsworth – Independent Non–Executive Director and Chair of the Nomination Committee until retirement
(3 maximum)
Kate Allum – Independent Non-Executive Director (9 maximum)
All the Directors attended the Annual General Meeting.
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Board Committees
Audit Committee
The Audit Committee comprises the independent Non-Executive
Directors and is chaired by John Worby, the Group’s Senior
Independent Director. He is a chartered accountant who has
the issue of options in accordance with the terms of those schemes.
The Remuneration Committee also, in consultation with the Chief
Executive, 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
considerable recent relevant financial experience and has spent many
advice from the Company Secretary and from external advisers who
years in the food industry.
The Audit Committee has overall responsibility for monitoring the
integrity of financial statements and related announcements and all
provide detailed analysis of executive remuneration in comparable
companies. Details of the Committee’s current remuneration policies
are given in the Remuneration Committee Report on pages 46 to 57.
aspects of internal control. The Audit Committee meets at least three
The Chair of the Remuneration Committee will attend the Annual
times a year; two of these meetings involve a review of the Group’s
General Meeting to respond to any Shareholder questions that might
interim and full year financial statements.
be raised on the Committee’s activities.
The work, responsibilities and governance of the Audit Committee are
set out on pages 38 to 42.
Nomination Committee
The Nomination Committee is now chaired by Martin Davey and
includes John Worby, Steven Esom, Kate Allum and from 1 May 2014
The Chair of the Audit Committee will be available at the Annual
Mark Reckitt.
General Meeting to respond to any Shareholder questions that might
be raised on the Committee’s activities.
Remuneration Committee
The Remuneration Committee comprises the independent
Non-Executive Directors and is chaired by Steven Esom.
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
Martin Davey, Adam Couch and Mark Bottomley attend the meetings
the challenges and opportunities facing the Group relating to skills and
of the Remuneration Committee by invitation and in an advisory
expertise needed on the Board and from senior management in
capacity. No Director attends any part of a meeting at which his own
the future.
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
Details of the Committee’s activities are given in the Nomination
Committee Report on pages 44 and 45.
The Chair of the Nomination Committee will attend the Annual General
Meeting to respond to any Shareholder questions that might be raised
determines appropriate performance conditions for the annual cash
on the Committee’s activities.
bonus and long-term incentive schemes and approves awards and
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Cranswick plc Report & Accounts 2014
Risk management and internal control
The Board of Directors has overall responsibility for the Group’s system
The views of Shareholders expressed during meetings are
communicated by the Chairman or the Chief Executive, as appropriate,
of internal control, which safeguards the Shareholders’ investment and
to the Board as a whole. Through this process the Board’s Executive
the Group’s assets, and for reviewing its effectiveness. Such a system
and Non-Executive Directors are able to gain a sound understanding
can only provide reasonable and not absolute assurance against
of the views and concerns of the major Shareholders. The Chairman,
material misstatement or loss, as it is designed to manage rather than
Chief Executive or the Finance Director discusses governance and
eliminate the risk of failure to achieve business objectives.
strategy with major Shareholders from time to time. Other Directors
are available to meet the Company’s major Shareholders if requested.
The Group operates within a clearly defined organisational structure
The Senior Independent Non-Executive Director is available to listen
with established responsibilities, authorities and reporting lines to the
to the views of Shareholders, particularly if they have concerns which
Board. The organisational structure has been designed in order to
contact with the Chairman has failed to resolve, or for which such
plan, execute, monitor and control the Group’s objectives effectively
contact is inappropriate. Principles of corporate governance and voting
and to ensure that internal control becomes embedded in the
operations.
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
As noted in the Audit Committee Report on pages 38 to 42, the Audit
Shareholders at the Annual General Meeting which is also attended by
Committee has reviewed the effectiveness of the internal control
the Chairs of the Audit, Remuneration and Nomination Committees.
and risk management systems and reported to the Board that it was
not aware of any significant deficiency, or material weakness, in the
By order of the Board
system of internal control and that the business maintains a sound risk
management control system.
Malcolm Windeatt
Company Secretary
19 May 2014
The Board confirms that the key ongoing 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 is 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.
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Report & Accounts 2014 Cranswick plc
37
AUDIT COMMITTEE REPORT
Letter from the Chair of the Audit Committee
Dear Shareholder,
Introduction
On behalf of the Board I am pleased to present the Audit Committee’s annual report for the year ended 31 March 2014. The purpose of the
report is to highlight areas that the Committee has reviewed during the year including areas of financial reporting issues, the risk management of
the Group, internal controls and the role of the auditors.
Role of the Committee
The Committee’s primary role is to assist the Board in the provision of effective governance over the appropriateness of the Group’s financial
reporting, risk management and internal control. It is responsible for monitoring the integrity of the financial statements and considering whether
accounting policies adopted are appropriate. It also reviews the Company’s internal controls and risk management systems and considers
the activities, plans and effectiveness of both the Group’s internal audit function and its external auditor. A summary of the Audit Committee’s
principal responsibilities is set out in the Audit Committee report on the following pages.
Activities of the Committee
The Audit Committee met three times during the year to consider issues relating to:
•
•
•
•
•
financial reporting;
risk management and internal control;
internal audit;
external audit effectiveness; and
auditor independence.
The work of the Committee in each of these areas is explained in detail in the Audit Committee report on the following pages. Given the changes
in reporting requirements arising from the UK Corporate Governance Code, which apply to these financial statements, the Committee focused
on financial reporting during the year. In particular, the Audit Committee report has been enhanced to cover key issues and judgements and how
they were dealt with by the Committee and to cover the work done on the effectiveness of the external audit.
In addition, at the request of the Board, the Audit Committee has reviewed and reported to the Board that it is satisfied that the financial
statements 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.
In order to give this report the Audit Committee carried out a number of additional procedures including:
•
•
•
•
reviewing and giving feedback on an early draft of the Annual Report at a special additional Audit Committee meeting;
obtaining confirmation from the relevant preparers of the various parts of the Annual Report that they had reviewed the fairness and
completeness of their sections;
ensuring a thorough verification process had been completed; and
reviewing and discussing a paper from the Finance Director outlining issues to consider and why he believed the Annual Report was fair
balanced and understandable.
The Board and the Committee understand that “fair” should mean reasonable and impartial, “balanced” should mean even-handed in terms of
being positive and negative and “understandable” should mean simple, clear and free from jargon or unnecessary clutter.
On behalf of the Board
John Worby
Chair of the Audit Committee
19 May 2014
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Cranswick plc Report & Accounts 2014
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 independent Non-Executive Directors: John Worby, Steven Esom, Kate Allum and, until
31 July 2013, Patrick Farnsworth. Mark Reckitt joined the Committee on 1 May 2014. The Committee is chaired by John Worby, a qualified
chartered accountant, and who has considerable recent relevant financial experience.
Total number of Committee meetings
Attendance
John Worby – Chair
Kate Allum (2 maximum)
Steven Esom
Patrick Farnsworth (1 maximum)
3
3
2
3
1
Activities of the Committee
The Committee is required to meet at least three times a year and has an agenda linked to the Group financial calendar. It invites the Company
Chairman, the Chief Executive, the Finance Director and the external auditors to attend its meetings together with the Group Financial Controller
and Internal Audit. 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, quarterly trading statements, half yearly and full year financial statements;
reviewing the Group’s accounting policies;
keeping under review the effectiveness of the Group’s financial reporting, internal controls and risk management systems;
monitoring and reviewing the effectiveness of the Internal Audit function in the context of the Company’s overall risk management system;
reviewing the annual 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; and
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.
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Report & Accounts 2014 Cranswick plc
39
AUDIT COMMITTEE REPORT (CONTINUED)
Financial reporting
During the year the Audit Committee reviewed reports from the 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. An additional meeting of the Audit
Committee was set up to discuss an early draft of the content of the 2014 Report & Accounts covering areas of significance in each of the reports
in light of the new reporting regulations. They also reviewed the final content of the 2014 Report & Accounts and the 2013 Interim Report, and
as noted in the covering letter to this report to Shareholders, they also undertook enhanced procedures in relation to whether the financial
statements 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.
Significant issues considered during the year included:
•
•
fair values on the acquisition during the year of Wayland Farms and the Wold Farm transaction – valuations were compiled based on reports
by external advisers and consultants. The Audit Committee was satisfied that the valuations adopted were reasonable;
a review of the contingent consideration on the Kingston Foods acquisition in the prior year – contingent targets were highly unlikely to be
met and, in agreement with the previous vendors of the business who waived their rights to any further consideration, the Audit Committee
was satisfied that it was appropriate that the balance of the consideration was released and that it be treated as an exceptional item;
•
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 in 2012 – following a review of forecast earnings and cash flow projections
the Committee was satisfied that no further impairment had occurred;
•
assessing whether there was sufficient banking headroom to support a going concern concept – an amendment and extension of banking
facilities was completed before the year end, increasing the facilities. Based on forecast earnings and cash flow projections the Committee
was satisfied that the going concern concept can be supported;
•
the review of accruals and provisions, including customer overriders, in respect of liabilities not settled at the year end date – these were
discussed with the various management teams. The Audit Committee was satisfied that any provisions not required were released and that
the accrual for liabilities not provided appeared to have been reasonably calculated;
•
the valuation of the closed defined benefit pension scheme – a triennial valuation was carried out by external advisers and the outcome was
reflected in the financial statements. The Audit Committee reviewed the reasonableness of the key assumptions, including obtaining input
from the external auditors; and
•
the valuation process of biological assets following the acquisition of pig herds during the year – biological assets were valued in line with
the requirements of IAS 41 using adjusted market data inputs. The net IAS 41 valuation movement on the biological assets was highlighted
separately on the face of the income statement. The Audit Committee reviewed a paper from the Finance Director on the basis of
calculation and was satisfied that the standard had been fairly applied and the required disclosures made in the financial statements.
The Audit Committee, after discussions with the external auditors, accepted that these issues noted above had been fairly treated in the financial
statements. The Committee also reported to the Board that it was satisfied that the financial statements 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.
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 Chair 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, together with any whistle blowing
incidents, is reviewed regularly by the Audit Committee.
Key ongoing processes include:
•
•
•
•
•
a system to identify, evaluate and manage business risk;
maintaining a strong control environment;
formulating, 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.
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Cranswick plc Report & Accounts 2014
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 Finance Director and includes other senior executives covering
the commercial, operational, technical, information technology,
engineering, health and safety, environmental and financial functions
of the business. Internal audit and the Company Secretary also attend
these meetings. The team identifies the key business risks within their
functions, considers the financial and operational implications and
assesses the effectiveness of the control processes in place to mitigate
these risks. Internal Audit completes a rolling program of reviews of site
risk registers, to challenge completeness and accuracy, and highlights
any key issues back to the Group Risk Committee.
A summary of the findings was 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.
end of the current statutory audit partner’s five year term as lead
audit partner.
The Audit Committee also approves the terms of engagement
and remuneration of the external auditors and monitors their
independence.
Effectiveness of the external audit process
During the year, the Committee undertook a review of Ernst & Young’s
performance and the effectiveness of the external audit process. The
assessment as to the effectiveness was conducted through an external
audit questionnaire with the Audit Committee members and the
Group’s senior finance management team, the results of which were
reviewed and discussed by the Audit Committee and with the auditors.
The Committee also gave consideration to Ernst & Young’s experience
and expertise, the extent to which the audit plan had been met, its
robustness and perceptiveness with regard to key accounting and
audit judgements, and the content of its audit reports.
Following its review the Audit Committee reported to the Board
that it was not aware of any significant deficiencies, or material
weaknesses, in the system of internal control and that the business
The Committee remains satisfied with Ernst & Young’s performance
and is of the view that there is nothing of concern that would impact
the effectiveness of the external audit process.
maintains a sound risk management control system.
Internal Audit
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 a third party provider, currently 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.
External auditors
Ernst & Young LLP has been the Group’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 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. Subject to ongoing
satisfactory performance of the external auditors, the Committee
expects to carry out another tendering exercise in 2017 following the
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 Chair of the Audit Committee is consulted prior to
awarding to the external auditors any non-audit services in excess of
£20,000.
During the year the Audit Committee reviewed and considered the
following factors in assessing the objectivity and independence of Ernst
& Young LLP:
i)
ii)
iii)
iv)
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;
the auditors’ policies for the rotation of the lead partner,
every five years, and key audit personnel. The current Senior
Statutory Audit Partner was selected by Ernst & Young in 2012
and the current senior manager has been in place since 2008;
the nature of non-audit work undertaken during the year
and its approval in accordance with the Audit Committee’s
guidelines for ensuring independence; and
a report from Ernst & Young LLP confirming that they have
adequate policies and safeguards in place to ensure that
auditor objectivity and independence is maintained.
Report & Accounts 2014 Cranswick plc
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AUDIT COMMITTEE REPORT (CONTINUED)
Details of the non-audit work and fees paid during the year are set out below:
Non-audit fees
Tax compliance services
Tax advisory services
Other services
Total non-audit fees
Total audit fees
Ratio of non-audit fees to audit fees
£’000
75
46
158
279
175
1.6 : 1
The work undertaken by the external auditors during the year
Following consideration of the above matters relating to the
and the safeguards considered by the Audit Committee to ensure
performance and independence of the external auditors at a meeting
independence included the following:
of the Audit Committee in May 2014, a recommendation was made
to the Board for the reappointment of Ernst & Young LLP as the
i)
The auditors provide tax advice. Their audit objectivity and
independence was safeguarded through the use of a separate
Company’s external auditors to be proposed to Shareholders at the
2014 Annual General Meeting.
tax partner.
ii)
Ernst & Young were engaged to advise the Company on a
behalf by:
This report was approved by the Audit Committee and signed on its
number of corporate transactions. Following a tender, for this
type of work, carried out in 2011/12, and given the nature of
the work during the following years it was concluded, after
careful consideration and following reports and discussions
with the Finance Director and the senior management team,
that Ernst & Young 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 Chair of the Audit Committee on a
John Worby
Chair of the Audit Committee
case by case basis.
19 May 2014
The Audit Committee is aware of, and sensitive to, investor body
guidelines on non-audit fees and the policy of awarding non-audit
services is kept under review to ensure that the correct balance is
maintained between ensuring that the Group realises cost-effective
benefits from accumulated knowledge, and experience of,
Ernst & Young whilst also making sure that their audit independence
and objectivity is maintained.
During this last year the Audit Committee was concerned that the
level of non-audit fees earned by Ernst & Young was increasing due
to the continuing corporate activity being undertaken by the Group
and that, as a result, unless some action was taken, the ratio of non-
audit to audit fees paid to Ernst & Young would consistently be above
one to one. It therefore took the decision to carry out a tendering
exercise for the Group’s tax compliance services. This process involved
PricewaterhouseCoopers, KPMG, Grant Thornton, BDO and Baker
Tilly. On 31 January 2014 PricewaterhouseCoopers was appointed to
provide tax compliance services to the Group. As a result the
non-audit fees earned by Ernst & Young should reduce accordingly.
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NOMINATION COMMITTEE REPORT
The Nomination Committee reviews the structure, size and composition of the Board and is responsible for considering the skills, knowledge,
experience and gender for the Board to operate effectively and to give consideration to succession planning.
The Nomination Committee since the retirement of Patrick Farnsworth on 31 July 2013 is chaired by Martin Davey and includes the Non-Executive
Directors John Worby, Steven Esom, Kate Allum, and from 1 May 2014 Mark Reckitt.
Total number of Committee meetings
Attendance
Martin Davey – Chair
Kate Allum
Steven Esom
John Worby
Role of the Committee
The Committee meets at least once a year, it reviews the structure,
size and composition of the Board and considers the optimal level
of independence and diversity of skills, knowledge, experience and
gender required for the Board to operate effectively. It is responsible
for considering and making recommendations to the Board on new
appointments of Executive and Non-Executive Directors. It also gives
due consideration to succession planning in the course of its work,
taking into account the challenges and opportunities facing the Group
and the skills and expertise needed within the Board and senior
management in the future.
Activities of the Committee
The Committee met on three occasions in the year ended
31 March 2014 to consider the following matters:
•
•
•
the structure, size, composition and diversity of both the Board
and its Committees;
succession planning for the Group and senior executives;
the diversity policy for the Group;
3
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3
•
•
recommendations to the Board on the appointment of a
Non-Executive Director; and
the Committee’s Terms of Reference to ensure they reflect the
Committee’s remit.
The Committee has reviewed the diversity policy which provides for
equality and fairness, recognising and respecting individual strengths
and differences. The policy enables all employees and prospective
employees to be treated in the same way. Whilst the Board and
Nomination Committee respects the benefits of diversity and supports
it in its approach to external recruitment and internal appointments,
it is not considered appropriate or necessary to set any specific or
measurable targets. All appointments are made on individual merit
regardless of gender, ethnicity or religious beliefs. The Group’s
principal concern is to ensure that all candidates have the appropriate
skills, knowledge and experience to fulfil the role.
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Cranswick plc Report & Accounts 2014
Appointment to the Board
During the year the Committee acknowledged that John Worby will
complete nine years as an Independent Non-Executive Director on
1 August 2014. As he will no longer be considered independent after
this point under Corporate Governance rules and best practice, the
Company will be required to have another Independent
Non-Executive Director. The Board carried out a formal, rigorous
and transparent process by arranging for an independent adviser,
Norman Broadbent Executive Search Limited, to short list a number
of candidates for interview. No open advertising was carried out; the
Committee preferred to use the services of an independent adviser.
After carrying out the exercise and the preferred candidate meeting
with the Committee and a number of Executive Directors, the Board
appointed Mark Reckitt as an Independent Non-Executive Director. He
is a chartered accountant, has considerable recent relevant financial
experience and is well placed to succeed John Worby as Chair of
the Audit Committee. He joined the Board on 1 May 2014. Norman
Broadbent Executive Search Limited does not have any connections
with the Company or Group.
Retirement from the Board
Bernard Hoggarth has announced his intentions to retire from the
Board after the Annual General Meeting following an association of
36 years with the Company. There are no plans to replace him on the
Board as Jim Brisby’s appointment as Sales and Marketing Director in
2010 and Adam Couch’s promotion to Chief Executive in 2012 were
considered by the Board as part of the succession
planning needed for when Bernard retired.
Re-election
All Directors who served throughout the year will be standing for
re-election at the Annual General Meeting apart from John Worby,
who will have completed nine years as an Independent Non-
Executive Director on 1 August 2014, and Bernard Hoggarth who
has announced his retirement from the Board after the Annual
General Meeting. Mark Reckitt, who joined since the last Annual
General Meeting. will be standing for election.
The Board has set out in the Notice of Annual General Meeting
its reasons for supporting the re-election of the Directors at the
forthcoming Annual General Meeting. Their biographical details on
page 33 demonstrate the range of experience and skills which each
brings to the benefit of the Company.
The Chair 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.
On behalf of the Board
Martin Davey
Chair of the Nomination Committee
19 May 2014
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45
REMUNERATION COMMITTEE REPORT
Letter from the Chair of the Remuneration Committee
Dear Shareholder,
Introduction
On behalf of the Board I am pleased to present the Remuneration Committee’s annual report on Directors’ remuneration for the year ended
31 March 2014. 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.
Role of the Remuneration Committee and principles of remuneration policy
The principal role of the Remuneration Committee is to determine and agree with the Board the policy for the remuneration of the Executive
Directors. Within the framework of the agreed policy the Committee is responsible for all aspects of the Executive Directors’ remuneration and
those senior executives earning in excess of £150,000 per annum, for monitoring the remuneration of other senior executives and administering
the long-term incentive arrangements. It undertakes a regular review of the incentive plans to ensure that they remain appropriate to the
Company’s current circumstances, prospects and strategic priorities and that, in particular, the remuneration policy adopted is aligned with and
based on the creation of value for shareholders and provides appropriate incentives for management to achieve this objective without taking
inappropriate business risks. The Committee also reviews and notes annually the remuneration trends across the Group and any major changes
in employee benefit structures.
Activities of the Committee
The Committee met on six occasions in the year ended 31 March 2014 to consider the following matters:
•
•
•
•
•
•
•
review the Executives Directors’ and other senior executives base salaries;
set corporate and personal objectives for the 2013/14 annual bonus arrangements for Executive Directors and senior executives;
assess the performance against the targets set for the Executive Directors’ bonus arrangements for 2012/13;
approve the outturn of the performance criteria for the Long Term Incentive awards which were granted in 2010;
approve the Long Term Incentive awards granted in 2013;
recommend to the Board for approval the issue of the Company’s Save As You Earn (SAYE) share scheme for 2013 which is available to all
eligible employees; and
consider the revised remuneration reporting regulations and prepare this report on Directors’ remuneration.
Remuneration disclosure
This report complies with the requirements of the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008 as
amended in 2013 (the “Regulations”), the principles of the 2012 UK Corporate Governance Code and the Listing Rules of the Financial Conduct
Authority. It is split into two distinct sections:
First, a policy report which is subject to Shareholders approval:
•
•
•
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.
Second, it contains an Annual Report on Remuneration, 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 4 and 5, Cranswick made positive progress, with adjusted operating profit and earnings per
share 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 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 above the targets set. Accordingly bonus payments were made at around 47 per cent of salary, just lower than a third of the
maximum available of 150 per cent.
As reported last year the pay award to the Executive Directors base salaries, on 1 May 2013, was 3.3 per cent which is reflected in the table
on page 53 other than for Adam Couch who received a second and final step increase on 1 May 2013 to align with market rates following his
appointment as Chief Executive on 1 August 2012. Further details of Adam’s salary review are set out on page 53.
46
Cranswick plc Report & Accounts 2014
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, were awarded an increase of 2.7 per cent in line with the annualised increase in the Retail Prices Index (RPI) as at 28 February 2014, to
be effective from 1 May 2014. This award is consistent with the benchmark for the review of other senior executives and the level of pay award
across the Group which also 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.
On behalf of the Board
Steven Esom
Chair of the Remuneration Committee
19 May 2014
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Report & Accounts 2014 Cranswick plc
47
REMUNERATION COMMITTEE REPORT (CONTINUED)
Remuneration policy report
The remuneration policy that is intended to apply, subject to Shareholders’ approval, from 1 May 2015 is detailed below. Current remuneration
arrangements will be in line with this policy.
Link between policy, strategy and structure
Cranswick’s remuneration policy is principally designed to attract, motivate and retain Executive Directors and senior executives to execute
effectively its corporate and business strategy in order to deliver annual operating plans and sustainable year on year profit growth, as well as
to generate and preserve value to its Shareholders over the longer term without encouraging excessive levels of risk taking. The principles and
values that underpin the remuneration strategy are applied on a consistent basis for all Group employees. It is the Group’s policy to reward
all employees fairly, responsibly and by reference to local market practices, by providing an appropriate balance between fixed and variable
remuneration.
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 (to which there are no planned changes to the current
approach in 2014–15) are set out below:
Element
of pay
Purpose and
link to strategy
Operation
Performance
metrics
Maximum
entitlement
Base salary
To provide a market
Set competitively to reflect the
Any increase is
Base salaries will
competitive base salary
individual’s skills, experience and
based on individual
move in line with the
to attract and retain
responsibilities
performance, change
RPI and consideration
executives
in role and the
of the level of pay
Periodic reviews of market rates
Company pay award
awards for other
employees. Every
three years the base
salary will be bench
marked against
market rates
Pension entitlement
is limited to 20 per
cent of base salary
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
advisers, to benchmark the salaries and
to ensure they remain competitive
Pension
To provide a framework to
Executive Directors are entitled to
N/A
save for retirement
non-contributory membership of
the Group’s defined contribution
pension scheme with the employer’s
contribution set at up to 20 per cent of
each Executive Director’s base salary
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
Benefits
To provide market
Market competitive benefits principally
N/A
competitive benefits as
comprise health insurances, personal
part of the remuneration
tax, pensions advice and company car
package
allowance
Benefits are not pensionable
Benefits will move in
line with market rates
48
Cranswick plc Report & Accounts 2014
Element
of pay
Annual bonus
Purpose and
link to strategy
To incentivise Executive
Directors and senior
executives linked to
the performance of the
business, on an annual
basis, based on key
financial metrics
Operation
Performance
metrics
Maximum
entitlement
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, the full details are
given below
The performance
is based solely on
the Group’s profit
before tax, with a
sliding scale of targets
set around budget
performance
The maximum
payable is 150 per
cent of base salary
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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 with interim payments being
made in November and June the
following year, provided targets are
achieved
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
Subject to approval by the Board of
awards to be made 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. For 2014 the
savings limit has been increased to
£500 per month
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 full details of which
are reported on page 50
N/A
Fees are reviewed periodically and take
into account market rates. Additional
payments may be paid to the Senior
Independent Non-Executive Director
and to Chairs’ of Board Committees to
reflect the additional responsibilities
attached to these positions
Non-Executive Directors do not
participate in the Group’s incentive
bonus arrangement, pension scheme,
or share-based awards
N/A
Going forward the
maximum that can
be saved is limited to
£500 per month
The LTIP award
during the year will
have a three year
performance period
commencing on
1 April of that year
and ending three
years later on
31 March
For Executive
Directors the value
of the entitlement
per annum is
equivalent to 100
per cent of salary
and in exceptional
circumstances this
can be increased to
200 per cent
The maximum
available moves in
line with market rates
Report & Accounts 2014 Cranswick plc
49
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
Fees payable to Non-
Executive Directors
To pay fees in line with
those paid by other
UK listed companies of
comparable size
REMUNERATION COMMITTEE REPORT (CONTINUED)
Long term incentive plan (LTIP)
The Remuneration Committee awards options under the LTIP scheme
in order to ensure that Executive Directors and senior management
Recruitment policy
The recruitment policy is that new Directors will be entitled to
are involved in the longer-term success of the Group. Options can only
participate in the short-term and long-term incentive plans on the
be exercised if certain performance criteria are achieved by the Group.
same basis as existing Directors and their level of pay may be based on
their increasing role and responsibilities and in line with market rates.
•
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
Overall policy
The Group’s policy is that the overall remuneration package offered
target allows 25 per cent of the shares subject to the target to be
should be sufficiently competitive to attract, retain and motivate high
issued at nil cost at an average annual outperformance above RPI
quality executives whilst giving consideration to salary levels in similar
of 3 per cent and 100 per cent of the shares at an average annual
sized quoted companies in the sector and in the region. Their
outperformance of 7 per cent with outperformance between
share-based awards (LTIP) are aligned with the long-term progress
3 and 7 per cent rewarded pro rata.
of the Group and in line with the Shareholders’ interests. The bonus
award is linked to the performance of the business based on key
•
50 per cent are aligned to a total shareholder return (TSR) target
financial metrics.
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.
The comparison companies used by Cranswick are:
Associated British Foods plc, A G Barr plc, Britvic plc, Carrs Milling
Industries plc, Dairy Crest Group plc, Devro plc, Greencore Group
Service contracts
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.
plc, Hilton Food Group plc, Kerry Group plc, McBride plc, Premier
The service contract for Martin Davey includes a one year notice period
Foods plc, Robert Wiseman Dairies plc (to the 2011 offer as no-
from 1 May 2006 except in the case of a takeover of the Company
longer quoted) and Tate and Lyle plc.
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
when the notice period is two years for the first six months following
the takeover. The contract also has special provisions relating to
liquidated damages requiring that the notice period stipulated in the
contract will be paid in full. These conditions were incorporated into
new contracts several years ago when the Directors changed from
contracts that had notice periods of up to three years. 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
performance of the Group.
with this individual in 2006.
Annual bonus arrangement
The bonus scheme in operation is based on the achievement of Group
profit targets which are set having regard to the Company’s budget,
Bernard Hoggarth has a similar contract though he has given notice
that he will retire at the 2014 Annual General Meeting.
historical performance and market outlook for the year. The actual
There are no termination or exit payments in any of the service
target is not disclosed as it is considered to be sensitive information.
contracts. Any sums payable up to the point of leaving will be
There are four bonus profit targets triggering 20 per cent, 40 per cent,
considered by the Remuneration Committee and will take into account
80 per cent and 150 per cent of base salaries with a pro-rata basis for
earnings, any bonus earned, any share awards due and any pay in
profits falling between those targets. There is a fixed sum paid out at
lieu of notice. Similarly it is not the intention of the Remuneration
the half year stage based on the achievement of the half year target.
Committee to commit the Company to pay signing on payments for
any new directors, though it reserves the right to review this position in
Discretion
The Committee retains discretion to make any payments,
certain situations.
notwithstanding that they are not in line with the policy set out above,
where the terms of the payment were agreed i) before the policy
Non-Executive Directors
Each Non-Executive Director has an appointment letter – John Worby
came into effect, or ii) at a time when the relevant individual was not
for 31 months from 1 January 2012, Steven Esom for three years from
a director of the Company and, in the opinion of the Committee, the
12 November 2011, Kate Allum for three years from
payment was not in consideration of the individual becoming a Director
1 July 2013 and Mark Reckitt three years from 1 May 2014. The
of the Company.
continuing appointments are subject to annual re-election at the
Company’s Annual General Meeting.
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Cranswick plc Report & Accounts 2014
The remuneration of the Non-Executive Directors is determined by the
The following are the key aspects of how pay and employment
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.
Copies of the service contracts and letters of appointment are held at
the Company’s Registered Office and will be available for inspection at
the Annual General Meeting.
Pay and conditions across the Group
The Committee does not directly consult with employees regarding the
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; and
remuneration of the Executive Directors. However, when considering
•
the Group operates a Save As You Earn share schemes which is
remuneration levels to apply, the Committee will take into account
open to all eligible employees including Executive Directors. (It
base pay increases, bonus payments and share awards made to the
is worth noting that around 20 per cent of the workforce holds
Company’s employees generally.
shares in the Company).
Potential remuneration of Executive Directors
The tables below illustrate the potential pay opportunities for the Executive Directors under three different scenarios for 2014/15.
Chairman £’000
Chief Executive £’000
2,000
1,500
1,000
500
0
38%
37%
25%
31%
30%
39%
100%
LTIP
Bonus
Basic
3,000
2,500
2,000
1,500
1,000
500
0
23%
33%
44%
100%
29%
43%
28%
Fixed
On target
Maximum
Fixed
On target
Maximum
Finance director £’000
Sales director £’000
2,000
1,500
1,000
500
0
•
•
•
31%
41%
28%
24%
33%
43%
100%
2,000
1,500
1,000
500
0
24%
33%
43%
100%
31%
41%
28%
LTIP
Bonus
Basic
Fixed
On target
Maximum
Fixed
On target
Maximum
Fixed – comprises fixed pay being base salary, benefits and pension
On target – assumes performance achieves 50 per cent of the bonus and 50 per cent of the LTIP award
Maximum – the maximum amount receivable for the bonus and LTIP award
The LTIP value has been calculated using the closing price as at 31 March 2014.
LTIP
Bonus
Basic
LTIP
Bonus
Basic
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REMUNERATION COMMITTEE REPORT (CONTINUED)
Annual Report on Remuneration for the year ended 31 March 2014
The Remuneration Committee recommends to the Board the policy for the Executive Directors’ remuneration including terms and conditions
of service, the performance conditions for the annual cash bonus and long-term incentive schemes, and the total remuneration packages for
senior executives.
The Remuneration Committee
The Remuneration Committee is responsible to the Board and comprises the Non-Executive Directors chaired by Steven Esom. The Chairman
attends the meetings, along with the Chief Executive and the Finance Director, 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.
Total number of Committee meetings
Attendance
Steven Esom – Chair
Kate Allum (2 maximum)
Patrick Farnsworth (4 maximum)
John Worby
6
6
2
4
6
Role of the Committee
The role of the Committee is to:
Advisers to the Committee
The Committee keeps itself fully informed on the developments within
the industry and in the field of remuneration and seeks advice from
•
•
•
•
•
•
review the ongoing relevance and effectiveness of the Group
external advisers where appropriate. The Committee reviews and
remuneration policy;
benchmarks its remuneration policy through external consultants
determine the remuneration of the Company’s Executive Directors
typically every two to three years; the last such review was carried out
and other senior executives earning in excess of £150,000
by AON Hewitt in 2011, effective for 2012, and the intention is for a
per annum;
further review to be undertaken in 2014 for implementation in 2015.
monitor the remuneration of the Group’s other senior executives;
approve the design of the Executive Directors’ and the Group’s
AON Hewitt, which is independent and has no connection to
senior executives’ annual bonus arrangement;
Cranswick, has been retained by the Remuneration Committee for
approve the level and appropriateness of the long-term incentive
advice throughout the year. AON Hewitt provides no other services to
plan (LTIP) for the Executive Directors and senior executives; and
the Company though it is now part of the AON Corporation group of
listen to and consider any Shareholders views relating to Directors
companies which also provide insurance broking services to the Group.
remuneration as expressed at the AGM.
No payment was made to AON Hewitt in the year. The Committee
is satisfied that the provision of such services does not create any
Activities of the Committee
The Remuneration Committee met on six occasions during the year
conflicts of interest.
to discuss in the main the Executive Directors and senior executives
In addition PricewaterhouseCoopers continues to give advice to the
base salaries, the bonus arrangements for the current and previous
Remuneration Committee on share option awards and other benefit
year and their share based incentive awards. Also discussed was
schemes. PricewaterhouseCoopers has given Auto Enrolment pension
the issue to all eligible employees share options in accordance with
advice to the Group during the year and has recently been appointed
the Company’s SAYE scheme. Consideration was also given to the
as tax advisers to the Group. The Committee is of the opinion that such
requirements of the new reporting regulations.
services do not create a conflict of interest.
The Committee believes the advice given during the year from both
AON Hewitt and PricewaterhouseCoopers has been independent,
relevant and objective.
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Cranswick plc Report & Accounts 2014
Directors’ remuneration
The remuneration of Directors for the year was as detailed below:
2014
Non-Executive Directors
Kate Allum (from appointment)
Steven Esom
Patrick Farnsworth (until retirement)
John Worby
Executive Directors
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
Total emoluments
2013
Non-Executive Directors
Steven Esom
Patrick Farnsworth
John Worby
Executive Directors
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
Total emoluments
Salary
and fees
£’000
Benefits
Pension
Bonus
£’000
£’000
£’000
34
50
16
51
369
331
542
586
300
-
-
-
-
29
28
31
31
28
2,279
147
-
-
-
-
74
66
108
135
60
443
-
-
-
-
172
154
252
272
139
989
Salary
and fees
£’000
Benefits
Pension
Bonus
£’000
£’000
£’000
47
45
49
357
320
453
687
369
-
-
-
28
26
28
29
29
2,327
140
-
-
-
72
63
91
150
74
450
-
-
-
536
481
681
1,031
554
3,283
LTIP
£’000
-
-
-
-
133
114
154
174
174
749
LTIP
£’000
-
-
-
122
65
171
171
171
700
Total
£’000
34
50
16
51
777
693
1,087
1,198
701
4,607
Total
£’000
47
45
49
1,115
955
1,424
2,068
1,197
6,900
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.
Martin Davey has reduced his working hours as Chairman and his
salary has therefore been adjusted accordingly. His pension payment
includes £18,000, previously deducted from pension contributions for
life assurance not now required by the Life Company and subsequently
repaid to Martin in lieu of pension.
Benefits principally comprise health insurances, personal tax, pensions
advice and company car allowance.
Pension consists of contributions of up to 20 per cent of base salary
which is paid either into a defined contribution pension scheme or is
received as a cash allowance in lieu of the pension contribution, or, as
a combination of both.
The value of the LTIP for the year ended 31 March 2014 relates to
awards made in 2011 with a performance criteria based on the three
years ended 31 March 2014 that will vest in June 2014, calculated at
the closing price on 31 March 2014 of 1,233 pence. It is estimated
that the EPS element of the award will not achieve its performance
target and only 49.6 per cent of the TSR element of the award will be
achieved. Overall only about 24.8 per cent of the grant will be awarded
and this is reflected in the above 2014 table.
The value of the LTIP for the year ended 31 March 2013 relates to
awards, made in 2010, with a performance criteria based on the three
years ended 31 March 2013 that vested in June 2013, calculated at an
exercise price of 1,103.21 pence for Adam Couch, Martin Davey and
Bernard Hoggarth and 1,137.27 pence for Mark Bottomley and Jim
Brisby. The EPS element of the award did not achieve its performance
target but 86 per cent was achieved of the TSR measure giving an
overall award of 43 per cent and this is reflected in the 2013 table above.
The bonus 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.
The minimum performance was above the targets set and therefore
bonus payments were made at around 47 per cent of salary and this is
reflected in the table above.
The number of Directors who were active members of the money
purchase pension scheme in the year was five (2013: five).
Report & Accounts 2014 Cranswick plc
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REMUNERATION COMMITTEE REPORT (CONTINUED)
Performance graph – total shareholder return
The graph below shows the percentage change (from a base of 100 in May 2004) 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.
Total shareholder return
Cranswick
FTSE All Share
FTSE 350 Food Producers
600
500
400
300
200
100
0
2004
Source: Investec
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
The table below illustrates the change in the total CEO remuneration over a period of five years, with the bonus awards in those years and the
LTIP vesting awards set against a percentage of the maximum available.
£'000
Base salary
Benefits
Pension
Bonus
LTIP
CEO total remuneration
Bonus award against
maximum opportunity
LTIP vesting against
maximum opportunity
2010
2011
2012
2013*
2014
464
24
93
705
172
1,458
97%
85%
483
25
97
107
207
919
14%
100%
508
28
102
453
243
1,334
56%
93%
505
28
86
639
171
1,429
80%
43%
542
31
108
252
154
1,087
31%
25%
*Bernard Hoggarth was the Chief Executive in 2010, 2011, 2012 and up to four months into 2013; thereafter Adam Couch has been in the role.
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Cranswick plc Report & Accounts 2014
Change in total remuneration of the Chief Executive compared to employees
The table below shows the percentage change from 2013 to 2014 in the Chief Executive’s salary compared to the change for all permanent
employees of the business (excluding the Chief Executive).
Chief Executive
All other employees – total pay
Total pay
(24%)
3%
Salary
7%
-
Benefits
10%
-
Bonus
(61%)
-
As reported on page 53 Adam Couch’s base salary had a second and final step change during the year following his appointment to the role of
Chief Executive in August 2012, to bring him in line with market rates.
For all other employees it is impractical to split their pay across salary, benefits and bonus as there are differing practices and regional variations
in pay and conditions across the Group.
Relative importance of the spend on pay
The table below shows the total remuneration paid across the Group together with the total dividend paid in respect of 2014 and the preceding
financial year.
Pay against distributions
Remuneration paid to all employees*
Total dividends paid in the year
*: Includes the impact of pay awards and growth in employee numbers.
Share options
The interests of the Executive Directors in the LTIP and SAYE schemes were as follows:
Long term incentive plan
2014
£’000
107,090
14,903
2013
£’000
98,284
13,924
Change
%
9%
7%
Year of
award
At 1 April
2013
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
2010
2011
2012
2013
2010
2011
2012
2013
Granted
in the
year
No.
-
-
-
-
No.
12,276
25,000
43,600
44,600
-
33,500
6,138
13,200
37,200
40,100
-
-
-
-
-
30,100
30,225
36,000
50,500
59,100
-
-
-
-
-
49,200
36,000
56,800
59,100
-
-
-
-
53,100
36,000
56,800
51,600
-
-
-
-
27,200
Exercised in
the year
No.
(12,276)
Lapsed
in the
year
No.
-
(10,750)
(14,250)
-
-
-
(6,138)
(5,676)
-
-
-
(30,225)
(32,787)
-
-
-
(7,524)
(27,974)
-
-
-
(15,480)
(20,520)
-
-
-
(37,976)
-
-
(15,480)
(20,520)
-
-
-
(42,714)
-
-
(15,480)
(20,520)
-
-
-
(42,714)
-
-
At 31 March
2014
Exercise
price
No.
-
-
10,813
44,600
33,500
-
-
9,226
40,100
30,100
-
-
12,524
59,100
49,200
-
14,086
59,100
53,100
-
14,086
51,600
27,200
p
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
Market
price at
grant
p
592
860
785
801
1,127
592
860
785
801
1,127
592
860
785
801
1,127
860
785
801
1,127
860
785
801
1,127
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REMUNERATION COMMITTEE REPORT (CONTINUED)
The performance periods run for three 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 50. The range of exercise dates are 1 June 2014 to 1 June 2023.
The LTIP, issued in 2011, which vests in June 2014, will not achieve the EPS target but will achieve 49.6 per cent of the TSR measure giving a share
award of 24.8 per cent. Of the original award, as shown above, 75.2 per cent will therefore lapse.
The options granted in the year are exercisable between 1 June 2016 and 1 June 2023 and are equivalent to 100 per cent of each Executive
Director’s base salary. The share price at the time of issue was 1,127p.
If the minimum performance was achieved the EPS element would give 25 per cent and the TSR element would give 30 per cent; overall
27.5 per cent of the grant would be awarded. If this was the case Mark Bottomley would receive 9,212 shares, Jim Brisby 8,277, Adam Couch
13,530, Martin Davey 14,602 and Bernard Hoggarth 7,480.
The following Directors exercised LTIP share options during the year:
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
Saving related share option scheme
Number
Date exercised
Exercise
price
Market
price
Notional
gain
23,026
6 December 2013
11,814
6 December 2013
45,705
15,480
15,480
7 June 2013
7 June 2013
7 June 2013
p
nil
nil
nil
nil
nil
p
£’000
1,137.28
1,137.28
1,103.21
1,103.21
1,103.21
262
134
504
171
171
Year of
award
At 1
April
2013
No.
Granted
in the
year
No.
Exercised
in the
year
No.
Lapsed
in the
year
No.
At 31
March
2014
No.
Exercise
price
p
Range of
exercise dates
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Bernard Hoggarth
2011
2009
2013
2009
2011
2011
2011
2,590
3,533
-
2,484
936
1,554
1,554
-
-
982
-
-
-
-
-
(3,533)
-
-
-
-
-
-
-
-
-
-
-
-
2,590
-
982
2,484
936
1,554
1,554
1 Mar 2017 – 1 Sept 2017
579
-
-
1 Mar 2017 – 1 Sept 2017
916
474
1 Mar 2016 – 1 Sept 2016
579 1 May 2019 – 1 Sept 2019
1 Mar 2015 – 1 Sept 2015
579
1 Mar 2015 – 1 Sept 2015
579
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 Director exercised savings-related share options during the year:
Jim Brisby
3,533
3 March 2014
474
1,262
p
p
£’000
28
Number
Date
exercised
Exercise
price
Market
price
Notional
gain
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Cranswick plc Report & Accounts 2014
Market price of shares
The market price of the Company’s shares at 31 March 2014 was 1,233 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
Directors’ Interests (Unaudited)
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Steven Esom
Bernard Hoggarth
John Worby
LTIP
(Performance related)
SAYE
(Non-performance
related)
Beneficial
interest
88,913
79,426
120,824
126,286
-
92,886
-
2,590
982
3,420
1,554
-
1,554
-
20,977
48,626
74,305
200,426
1,441
105,413
1,641
Highest
p
1,321
Lowest
p
986
1,321
1,321
1,186
1,055
Total
112,480
129,034
198,549
328,266
1,441
199,853
1,641
Kate Allum has no interests in the Company at the present time.
The Remuneration Committee has agreed that Executive Directors should build up a shareholding equivalent to one year’s net salary over a three
to five 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.
There have been no further changes to the above interests in the period from 1 April 2014 to 19 May 2014.
Statement of Shareholders' Voting
The resolution to approve the 2013 Directors’ Remuneration Report was passed on a show of hands at the Company’s last AGM held on
29 July 2013.
The votes cast by proxy in respect of that resolution were:
For
Against
Withheld
On behalf of the Board
Steven Esom
Chair of the Remuneration Committee
19 May 2014
Number
30,768,668
3,553,368
138,826
%
89.3%
10.3%
0.4%
Report & Accounts 2014 Cranswick plc
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DIRECTORS’ REPORT
The Directors submit their report and the audited accounts of the Group for the year ended 31 March 2014.
Dividends
Interim dividend per share paid on 24 January 2014
Final dividend per share proposed
Total dividend
2014
10.0p
22.0p
2013
9.4p
20.6p
£15.7m
£14.5m
Subject to approval at the Annual General Meeting, the final dividend will be paid in cash or scrip form on 5 September 2014 to members on the
register at the close of business on 4 July 2014. The shares will go ex-dividend on 2 July 2014.
Distributions, capital raising and share repurchases
The proposed final dividend for 2014 together with the interim paid in January 2014 amount to 32.0 pence per share which is 6.7 per cent higher
than the previous year. Share capital increased by 434,357 shares. The increase comprised 243,021 of shares issued relating to share options
exercised during the year and 191,336 of shares issued in respect of scrip dividends.
Directors and their interests
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 46 to 57.
In accordance with the recommendations of the UK Corporate Governance Code, all Directors, apart from John Worby and Bernard Hoggarth, will
stand for re-election at the forthcoming Annual General Meeting.
Major Shareholders
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
Wellington Management
Schroder Investment Management
Jupiter Asset Management
NBIM
Fidelity Management & Research
At 31 March 2014
Number of shares
% of issued share capital
12,735,640
2,330,789
2,006,353
1,753,837
1,708,127
1,672,229
1,603,277
26.01
4.76
4.10
3.58
3.49
3.42
3.27
Subsequent to the year end the Group was notified that as at
The Directors of Cranswick plc have received limited authority to
7 May 2014 Invesco Perpetual had reduced its shareholding to
disapply Shareholders’ pre-emption rights in certain circumstances,
22.35 per cent and that Woodford Investment Management had
to authorise the Company to buy back a proportion of the Company’s
acquired a 3.65 per cent shareholding. There have been no other
share capital and to allow the Directors to allot shares. Further
notifications of any significant changes to these shareholdings as at
resolutions will be placed before the Annual General Meeting to be
19 May 2014.
held on 28 July 2014 to renew these powers.
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.
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
58
Cranswick plc Report & Accounts 2014
the Directors may allot in the period up to the next Annual General
shares) as at 3 June 2013. The Directors do not have any present
Meeting, to be held on 28 July 2014, is limited to £1,622,222 which
intention of exercising this authority and power. This authority will
represented approximately 33 per cent of the issued share capital
expire at the end of the Annual General Meeting to be held on 28
(excluding treasury shares) as at 3 June 2013. The Directors do not
July 2014.
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
To buy own shares
This authority allows the Company to buy its own shares in the
will expire at the end of the Annual General Meeting to be held on
market, as permitted under the Articles of Association of the
28 July 2014.
Disapplication of rights of pre-emption
This disapplies rights of pre-emption on the allotment of shares
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
by the Company and the sale by the Company of treasury shares.
ordinary shares of the Company as derived from the London Stock
The authority will allow the Directors to allot equity securities for
Exchange Daily Official List for the five business days immediately
cash pursuant to the authority to allot shares mentioned above,
preceding the day on which the ordinary shares are purchased.
and to sell treasury shares for cash, on a pro-rata basis to existing
The Directors have no immediate plans to exercise the powers of
Shareholders (but subject to any exclusion or arrangements
the Company to purchase its own shares and undertake that the
as the Directors consider necessary or expedient in relation to
authority would only be exercised if the Directors were satisfied that
fractional entitlements, any legal, regulatory or practical problems
a purchase would result in an increase in expected earnings per
or costs under the laws or regulations of any overseas territory or
share and was in the best interests of the Company at the time. This
the requirements of any regulatory body or stock exchange) and
authority will expire at the end of the Annual General Meeting to be
otherwise on a pro rata basis up to an aggregate nominal amount
held on 28 July 2014. The Directors would consider holding any of its
of £243,333, representing 5 per cent of the Company’s issued share
own shares that it purchases pursuant to this authority as treasury
capital as 3 June 2013. This authority will expire at the end of the
shares.
Annual General Meeting to be held on 28 July 2014.
Allot shares and disapply pre-emption
the year end the Group held no treasury shares.
rights in connection with a rights issue
This authorises the Directors to allot relevant securities and
The Company is not aware of any agreements between Shareholders
empowers the Directors to allot equity securities and to sell treasury
that may result in restrictions on the transfer of securities and for
The Company did not repurchase any shares during the year and at
shares for cash in connection with a rights issue. This is in addition
voting rights.
to the authority to allot shares and the disapplication of pre-emption
rights contained in the authorities mentioned above. The nominal
There are no restrictions on the transfer of ordinary shares in the
value of ordinary shares which the Directors may allot in the period
Company other than where certain restrictions may apply from time to
up to the next Annual General Meeting, to be held on 28 July 2014, is
time, on the Board of Directors and other senior executive staff, which
limited to £1,622,222 which represented approximately 33 per cent
is imposed by laws and regulations relating to insider trading laws and
of the Company’s issued ordinary share capital (excluding treasury
market requirements relating to close periods.
Capital structure
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to
support its business and maximise value for Shareholders and other stakeholders.
The Group regards its Shareholders’ equity and net debt as its capital and manages its capital structure and makes adjustments to it in light of
changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to Shareholders, return
capital to Shareholders or issue new shares. No changes were made to the objectives, policies or processes during the years ended 31 March
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2014 and 31 March 2013.
The Group’s capital structure is as follows:
Net debt (note 26)
Cranswick plc Shareholders’ equity
Capital employed
2014
£’m
17.0
302.7
319.7
2013
£’m
20.1
273.7
293.8
Report & Accounts 2014 Cranswick plc
59
DIRECTORS’ REPORT (CONTINUED)
Change of control
There are no agreements that the Company considers significant and
Interest rate risk
The Group’s current policy is to manage its cost of borrowing using
to which the Company is party that would take effect, alter or terminate
a mix of fixed and variable rate debt. Whilst fixed rate interest
upon change of control of the Company following a takeover bid other
bearing debt is not exposed to cash flow interest rate risk, there
than the following:
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
The Company is party to a number of banking agreements which upon
inherent in fixed rate borrowing means that the Group is exposed to
a change of control of the Company are terminable by the bank upon
unplanned costs should debt be restructured or repaid early as part
the provision of ten working days’ notice, and there are no agreements
of the liquidity management process. In contrast, whilst floating rate
between the Company and its Directors or employees providing for
borrowings are not exposed to changes in fair value, the Group is
compensation for loss of office or employment (whether through
exposed to cash flow risk as costs increase if market rates rise. The
resignation, purported redundancy or otherwise) that occurs because
Group has reduced its borrowings significantly in recent years and
of a takeover bid other than as stated in the Remuneration Committee
at 31 March 2014 gearing had fallen to 6 per cent (2013: 7 per cent).
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
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
offeror may acquire control of the Company, award holders under the
entirely at head office, based on the monthly consolidation of cash flow
Cranswick plc Long Term Incentive Plan (LTIP) will have an opportunity
projections and the daily borrowings position.
to exercise their awards either:
Credit risk
1.
immediately before the time at which the change of control of the
Practically all sales are made on credit terms, the majority of which
Company occurs or any condition subject to which the offer is
are to the major UK food retailers. Overdue accounts are reviewed at
made has been satisfied (“Take-over Date”) but conditional on the
monthly management meetings. The incidence of bad debts is low.
Take-over Date occurring, if the Remuneration Committee issues a
For all major customers, credit terms are agreed by negotiation and
written notice in advance of the Take-over Date to award
holders; or
for all other customers, credit terms are set by reference to external
credit agencies and/or commercial awareness. Every attempt is made
2.
at any time within six months following the Take-over Date, in any
to resist advance payments to suppliers for goods and services; where
other case.
this proves commercially unworkable, arrangements are put in place,
where practical, to guarantee the repayment of the monies in the event
In the event that the Court sanctions a scheme of arrangement under
of default.
Part 26 of the Companies Act 2006 in connection with a scheme for
the Company’s reconstruction or amalgamation with another company,
Liquidity risk
award holders under the LTIP may exercise their awards during the
The Group has historically been very cash generative. The bank
six month period commencing on the date upon which the scheme
position for each site is monitored on a daily basis and capital
of arrangement is sanctioned by the Court. The LTIP also contains
expenditure is approved at local management meetings at which at
provisions enabling award holders to exercise their awards if a person
least two members of the main Board are present and reported at the
becomes entitled to issue a compulsory acquisition notice under the
subsequent monthly main Board meeting. Major projects are approved
provisions relating to the compulsory acquisition of a company set out
by the main Board. Each part of the Group has access to the Group’s
in the Companies Act 2006. The period allowed for exercise in these
overdraft facility and all term debt is arranged centrally. The Group
circumstances is any time up to the seventh day before the final day
renewed its bank credit facilities in March 2014. The facility is made
upon which that person remains entitled to serve such a notice.
up of a revolving credit facility of £120.0 million including a committed
overdraft facility of £20.0 million. The Group manages the utilisation
In each case, the proportion of the awards that are capable of exercise
of the revolving credit facility through the monitoring of monthly
depends on the extent to which the performance targets (as adjusted
consolidated cash flow projections and the daily borrowings position.
The current facility extends the maturity of the Group’s available
financing to more than four years, providing it with reduced liquidity
risk and medium-term funding to meet its objectives. Unutilised
facilities at 31 March 2014 were £102.2 million (2013: £78.1 million).
Articles of Association
The Company’s Articles of Association may only be amended by a
special resolution at a general meeting of the Shareholders.
or amended) have been satisfied.
Financial instruments
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 twelve months ahead and for amounts that
commence at approximately 25 per cent of the requirement and move
progressively towards full cover. The Finance Director is consulted
about the key decisions on currency cover.
60
Cranswick plc Report & Accounts 2014
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
Directors’ statement as to disclosure of
information to auditors
The Directors who were members of the Board at the time of
separate Notice of Annual General Meeting accompanying this Report
approving the Directors’ Report are listed on page 33. Having made
and Accounts.
enquiries of fellow Directors and of the Company’s auditors, each of
these Directors confirm that:
Details of the Special Business to be transacted at the Annual General
Meeting are contained in the separate letter from the Chairman which
•
to the best of each Director’s knowledge and belief, there is no
also accompanies this Report and Accounts and covers the Directors’
information relevant to the preparation of their report of which
authority to allot shares, the partial disapplication of pre-emption rights
the Company’s auditors are unaware; and
and the authority for the Company to buy its own shares.
•
each Director has taken all the steps a Director might reasonably
Greenhouse gas emissions
Details of the Group’s geenhouse gas emissions are included within the
Corporate Social Responsibility section on pages 29 and 30.
Employment policies
The Group’s policy on employee involvement is to adopt an open
management style, thereby encouraging informal consultation at all
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.
Directors’ responsibility statement
Each of the Directors listed on page 33 confirms that to the best of
their knowledge:
levels about aspects of the Group’s operations. Employees participate
•
the financial statements, prepared in accordance with IFRS as
directly in the success of the business by participation in the SAYE
adopted by the European Union, give a true and fair review of the
share option schemes.
assets, liabilities, financial position and results of Cranswick and its
subsidiaries included in the consolidation taken as a whole; and
Employment policies are designed to provide equal opportunities
•
the Directors’ Report and the Strategic Report include a fair
irrespective of colour, ethnic or natural origin, nationality, sex, religion,
review of the development and performance of the business
marital or disabled status. Full consideration is given to applications for
and the position of Cranswick and its subsidiaries included in the
employment by and the continuing employment, training and career
consolidation taken as a whole, together with a description of the
development of disabled people.
principal risks and uncertainties that they face.
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.
By order of the Board
Malcolm Windeatt
Company Secretary
19 May 2014
The Group has considerable financial resources together with strong
Company number: 1074383
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.
Auditors
A resolution to reappoint Ernst & Young LLP as independent external
auditors will be proposed at the Annual General Meeting.
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61
STATEMENT OF DIRECtORS’ RESPONSIBILITIES
IN RELATION TO THE ANNUAL REPORT AND FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable United Kingdom
law and regulations. Company law requires the Directors to prepare Group financial statements for each financial year. Under that law, the
Directors are required to prepare Group financial statements under IFRSs as adopted by the European Union.
Under company law the Directors must not approve the Group financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing the Group financial statements the Directors
are required to:
•
•
•
•
•
present fairly the financial position, financial performance and cash flows of the Group;
select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and then apply
them consistently;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
make judgements that are reasonable;
provide additional disclosures when compliance with the specific requirements in IFRSs as adopted by the European Union is insufficient to
enable users to understand the impact of particular transactions, other events and conditions on the Group‘s financial position and financial
performance; and
•
state whether the Group financial statements have been prepared in accordance with IFRSs as adopted by the European Union, subject to
any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group‘s transactions and
disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Group financial statements
comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are also responsible for preparing the Strategic Report, 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.
On behalf of the Board
Martin Davey
Chairman
19 May 2014
Mark Bottomley
Finance Director
62
Cranswick plc Report & Accounts 2014
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Report & Accounts 2014 Cranswick plc
63
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 2014 which comprise the Group income statement,
the Group and Company statements of comprehensive income,
•
•
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
the Group and Company balance sheets, the Group and Company
prepared in accordance with IFRSs as adopted by the European
statements of cash flows, the Group and Company statements of
Union and as applied in accordance with the provisions of the
changes in equity and the related notes 1 to 29. The financial reporting
Companies Act 2006; and
framework that has been applied in their preparation is applicable law
•
the financial statements have been prepared in accordance with
and International Financial Reporting Standards (IFRSs) as adopted
the requirements of the Companies Act 2006 and, as regards the
by the European Union and, as regards the parent company financial
group financial statements, Article 4 of the IAS Regulation.
statements, as applied in accordance with the provisions of the
Companies Act 2006.
Our assessment of risks of material misstatement
We identified the following risks that have had the greatest effect on
This report is made solely to the Company’s members, as a body, in
the overall audit strategy; the allocation of resources in the audit; and
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
directing the efforts of the engagement team:
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
•
•
•
revenue recognition, including the timing of revenue recognition
and the risk of management override;
accounting for rebates and similar arrangements; and
accounting for acquisitions, including purchase price allocation,
our audit work, for this report, or for the opinions we have formed.
recognition of intangible assets and goodwill, and the treatment of
contingent consideration and earn-out arrangements.
Respective responsibilities of Directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set
out on page 62, the Directors are responsible for the preparation of
Our application of materiality
We determined materiality for the Group to be £2.7 million
the financial statements and for being satisfied that they give a true
(2013: £2.4 million) which is approximately 5 per cent of pre-tax profit.
and fair view. Our responsibility is to audit and express an opinion
This provided a basis for determining the nature, timing and extent
on the financial statements in accordance with applicable law and
of risk assessment procedures, identifying and assessing the risk of
International Standards on Auditing (UK and Ireland). Those standards
material misstatement and determining the nature, timing and extent
require us to comply with the Auditing Practices Board’s Ethical
of further audit procedures.
Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
On the basis of our risk assessments, together with our assessment
of the Group’s overall control environment, our judgement was that
overall performance materiality (i.e. our tolerance for misstatement in
disclosures in the financial statements sufficient to give reasonable
an individual account or balance) for the Group should be 75 per cent
assurance that the financial statements are free from material
of materiality, namely £2.1 million (2013: £1.8 million). Our objective
misstatement, whether caused by fraud or error. This includes an
in adopting this approach was to ensure that total uncorrected and
assessment of: whether the accounting policies are appropriate to
undetected and audit differences in all accounts did not exceed our
the Group’s and the parent company’s circumstances and have been
materiality level.
consistently applied and adequately disclosed; the reasonableness of
significant accounting estimates made by the Directors; and the overall
We agreed with the Audit Committee that we would report to the
presentation of the financial statements. In addition, we read all the
Committee all audit differences in excess of £139,000, as well as
financial and non-financial information in the Report & Accounts to
differences below that threshold that, in our view warranted reporting
identify material inconsistencies with the audited financial statements
on qualitative grounds.
and to identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired by
us in the course of performing the audit. If we become aware of any
An overview of the scope of our audit
Following our assessment of the risk of material misstatement to
apparent material misstatements or inconsistencies we consider the
the Group financial statements, we selected 13 components which
implications for our report.
Opinion on financial statements
In our opinion the financial statements:
represent the principal business units within the Group and account
for 98 per cent of the Group’s revenue and 98 per cent of the Group’s
profit before tax. These 13 were subject to a full audit, whilst we also
selected a further one component that was subject to audits of specific
account balances. A further two components were subject to review
•
give a true and fair view of the state of the Group’s and of the
procedures.
parent company’s affairs as at 31 March 2014 and of the Group’s
profit for the year then ended;
64
Cranswick plc Report & Accounts 2014
For the remaining components, we performed other procedures to
confirm there were no significant risks of material misstatement in the
Group financial statements.
Matters on which we are required to report
by exception
We have nothing to report in respect of the following:
The audit work at the 13 locations subject to a full scope audit and the
Under the ISAs (UK and Ireland), we are required to report to you if, in
one location subject to a specific scope audit were executed at levels of
our opinion, information in the Annual Report is:
materiality applicable to each individual entity which were much lower
than the Group materiality.
Our response to the risks identified above was as follows:
•
•
materially inconsistent with the information in the audited
financial statements; or
apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group acquired in the
•
We performed walkthroughs of revenue processes and carried
course of performing our audit; or
out a combination of controls testing, substantive cut-off testing,
•
is otherwise misleading.
journal entry testing and substantive analytical review procedures
to assess the appropriateness of revenue recognition.
•
We performed walkthroughs of the processes for rebates
In particular, we are required to consider whether we have identified
any inconsistencies between our knowledge acquired during the audit
and similar arrangements. We performed substantive audit
and the Directors’ statement that they consider the Annual Report
of year end over-rider accruals with reference to underlying
documentation, and we assessed the completeness of amounts
is fair, balanced and understandable and whether the annual report
appropriately discloses those matters that we communicated to the
accrued with reference to the Group’s customer base. We also
Audit Committee which we consider should have been disclosed.
vouched significant payments to supporting evidence of payment.
•
For acquisitions in the period we obtained and understood sales
Under the Companies Act 2006 we are required to report to you if, in
and purchase agreements to ensure the appropriateness of the
our opinion:
allocation of the purchase price and the recognition of intangible
assets. For acquisitions that arose in prior periods we tested the
•
adequate accounting records have not been kept by the parent
subsequent measurement of contingent consideration liabilities
and challenged the accounting treatment to ensure that it was
appropriate.
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
Opinion on other matter 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
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
•
•
•
2006; and
Company.
•
the information given in the Strategic Report and the Directors’
Report for the financial year for which the Group financial
Under the Listing Rules we are required to review:
statements are prepared is consistent with the Group financial
statements; and
•
the information given in the Corporate Governance Statement
set out on pages 34 to 37 with respect to internal control and risk
management systems in relation to financial reporting processes
and about share capital structures is consistent with the financial
•
•
statements.
the Directors’ statement, set out on page 61, in relation to going
concern; and
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.
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Alistair Denton (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Hull
19 May 2014
Report & Accounts 2014 Cranswick plc
65
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2014
Revenue
3
994,905
875,171
Notes
2014
£’000
2013
£’000
(Restated)
Adjusted Group operating profit
Impairment of property, plant and equipment
Release of contingent consideration
Net IAS 41 valuation movement on biological assets
Group operating profit
Finance revenue
Finance costs
Profit before tax
Taxation
Profit for the year
Earnings per share (pence)
On profit for the year:
Basic
Diluted
On adjusted profit for the year:
Basic
Diluted
53,255
50,041
-
1,086
1,441
(1,836)
-
-
55,782
48,205
32
(1,057)
62
(963)
54,757
47,304
(11,550)
(11,165)
43,207
36,139
88.7p
88.3p
84.1p
83.7p
74.9p
74.7p
78.7p
78.5p
12
14
15
4
6
6
7
10
10
10
10
The restatement of the comparative reflects an amendment to IAS 19 Employee Benefits; further details can be found in notes 2 and 25.
66
Cranswick plc Report & Accounts 2014
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2014
Profit for the year
43,207
36,139
Notes
2014
£’000
2013
£’000
(Restated)
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Cash flow hedges
Losses arising in the year
Reclassification adjustments for losses included in the income statement
Income tax effect
Net other comprehensive income to be reclassified to profit
or loss in subsequent periods
Items not to be reclassified to profit or loss in subsequent periods:
Actuarial (losses)/ gains on defined benefit pension scheme
Income tax effect
Net other comprehensive income not being reclassified to profit
or loss in subsequent periods
Other comprehensive income, net of tax
20
20
25
(18)
4
3
(11)
(4,177)
735
(3,442)
(3,453)
(4)
69
(15)
50
1,077
(293)
784
834
Total comprehensive income, net of tax
39,754
36,973
COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2014
Company profit for the year of £17,344,000 (2013: £16,826,000) was equal to total comprehensive income for the year attributable to owners of
the parent in both years.
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67
GROUP BALANCE SHEET
AT 31 MARCH 2014
Non-current assets
Intangible assets
Property, plant and equipment
Biological assets
Financial assets
Total non-current assets
Current assets
Biological assets
Inventories
Trade and other receivables
Financial assets
Cash and short-term deposits
Total current assets
Total assets
Current liabilities
Trade and other payables
Financial liabilities
Income tax payable
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
Notes
2014
£’000
2013
£’000
11
12
15
18
15
16
17
18
26
19
20
19
20
7
21
25
23
130,535
156,578
1,174
-
288,287
13,543
47,426
97,775
-
12,223
170,967
129,003
147,386
-
702
277,091
-
48,463
93,097
696
7,633
149,889
459,254
426,980
(108,806)
(327)
(6,495)
(115,628)
(409)
(28,898)
(4,737)
(343)
(6,528)
(40,915)
(106,109)
(608)
(7,123)
(113,840)
(410)
(29,572)
(5,947)
(190)
(3,357)
(39,476)
(156,543)
(153,316)
302,711
273,664
4,896
64,173
7,779
(15)
225,878
4,853
61,603
6,765
(4)
200,447
Equity attributable to owners of the parent
302,711
273,664
On behalf of the Board
Martin Davey
Chairman
19 May 2014
68
Cranswick plc Report & Accounts 2014
Mark Bottomley
Finance Director
COMPANY BALANCE SHEET
AT 31 MARCH 2014
Non-current assets
Property, plant and equipment
Investments in subsidiary undertakings
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Cash and short-term deposits
Total current assets
Total assets
Current liabilities
Trade and other payables
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
19 May 2014
Mark Bottomley
Finance Director
Notes
2014
£’000
2013
£’000
12
13
7
17
26
19
548
159,970
540
161,058
26,531
8,251
34,782
575
159,212
565
160,352
15,369
5,169
20,538
195,840
180,890
(51,086)
(983)
(52,069)
(42,446)
(1,270)
(43,716)
20
(28,898)
(28,498)
23
(80,967)
(72,214)
114,873
108,676
4,896
64,173
4,000
1,806
7,779
32,219
4,853
61,603
4,000
1,806
6,765
29,649
114,873
108,676
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69
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2014
Operating activities
Profit for the year
Adjustments to reconcile Group profit for the year to net cash inflows from operating activities:
Income tax expense
Net finance costs
Gain on sale of property, plant and equipment
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Amortisation of intangible assets
Share-based payments
Difference between pension contributions paid and amounts recognised in
the income statement
Release of government grants
Release of contingent consideration
Net IAS 41 valuation movement on biological assets
Increase in biological assets
Decrease/ (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 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
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Repayment of capital element of finance leases and hire purchase contracts
Net cash used in financing activities
Net increase/ (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
2014
£’000
2013
£’000
(Restated)
43,207
36,139
7
12
12
11
14
26
26
26
11,550
1,025
(100)
17,831
-
159
1,014
(1,006)
(85)
(1,086)
(1,441)
(176)
1,497
(3,910)
4,702
73,181
(13,050)
60,131
28
1,002
(14,402)
(27,684)
100
197
-
(40,759)
(1,094)
410
30,000
(30,500)
(12,700)
(349)
(14,233)
5,139
7,084
11,165
901
(237)
15,486
1,786
119
1,162
(908)
(61)
-
-
-
(9,514)
(5,568)
10,561
61,031
(11,219)
49,812
62
696
(5,986)
(30,809)
-
318
221
(35,498)
(862)
491
-
(14,000)
(11,404)
(243)
(26,018)
(11,704)
18,788
12,223
7,084
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Cranswick plc Report & Accounts 2014
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2014
Operating activities
Profit for the year
Adjustments to reconcile Company profit for the year to net cash inflows from operating activities:
Dividends received
Income tax expense
Net finance cost
Depreciation of property, plant and equipment
12
Share-based payments
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
Dividends received
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
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
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net increase/ (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
26
26
26
Notes
2014
£’000
2013
£’000
17,344
16,826
(12,700)
2,121
3,654
31
256
(11,762)
8,615
7,559
(2,254)
5,305
6
12,700
(17)
13
-
12,702
(3,635)
410
30,000
(29,000)
(12,700)
(14,925)
3,082
5,169
(11,404)
2,687
2,868
44
288
(6,283)
810
5,836
(2,617)
3,219
-
11,404
(22)
-
221
11,603
(2,877)
491
-
(14,000)
(11,404)
(27,790)
(12,968)
18,137
8,251
5,169
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GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2014
Share
Share
Share-
Hedging
Retained
capital
premium
based
reserve
earnings
Total
equity
Note (a)
Note (b)
Note (e)
Note (f)
payments
£’000
£’000
£’000
£’000
£’000
£’000
(Restated)
At 31 March 2012
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
4,803
58,642
5,603
(69)
176,953
245,932
-
-
-
-
31
19
-
-
-
-
-
-
-
2,489
472
-
-
-
-
-
-
1,162
-
-
-
-
-
-
65
65
-
-
-
-
-
-
36,139
769
36,908
-
-
-
(13,924)
370
140
36,139
834
36,973
1,162
2,520
491
(13,924)
370
140
At 31 March 2013
4,853
61,603
6,765
(4)
200,447
273,664
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
-
-
-
-
19
24
-
-
-
-
-
-
-
2,184
386
-
-
-
-
-
-
1,014
-
-
-
-
-
-
(11)
(11)
43,207
(3,442)
39,765
43,207
(3,453)
39,754
1,014
2,203
410
-
-
-
(14,903)
(14,903)
246
323
246
323
-
-
-
-
-
-
At 31 March 2014
4,896
64,173
7,779
(15)
225,878
302,711
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2014
Share
Share
General
Merger
Share-
Retained
capital
premium
reserve
reserve
based
earnings
Total
equity
payments
Note (a)
Note (b)
Note (c)
Note (d)
Note (e)
£’000
£’000
£’000
£’000
£’000
£’000
£’000
At 31 March 2012
4,803
58,642
4,000
1,806
5,603
26,656
101,510
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
-
-
31
19
-
-
-
-
2,489
472
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,826
16,826
1,162
-
-
-
-
-
-
-
1,162
2,520
491
(13,924)
(13,924)
91
91
At 31 March 2013
4,853
61,603
4,000
1,806
6,765
29,649
108,676
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
-
-
19
24
-
-
-
-
2,184
386
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,344
17,344
1,014
-
-
-
-
-
-
-
1,014
2,203
410
(14,903)
(14,903)
129
129
At 31 March 2014
4,896
64,173
4,000
1,806
7,779
32,219
114,873
Notes:
a)
Share capital
The balance classified as share capital represents the nominal value of ordinary 10 pence 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
10 pence ordinary shares.
c)
General reserve
This reserve arose in 1993 when the High Court of Justice granted permission to reduce the Company’s share premium account by £4,000,000 which was credited to
a separate reserve named the general reserve.
d) Merger reserve
Where shares have been issued as consideration for acquisitions, the value of shares issued in excess of nominal value has been credited to the merger reserve
rather than to the share premium account.
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 24).
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.
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NOTES TO THE ACCOUNTS
1. Authorisation of financial statements and statement of compliance with IFRS
The Group and Company financial statements of Cranswick plc (the “Company”) for the year ended 31 March 2014 were authorised for issue
by the Board of Directors on 19 May 2014 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 – 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)
IFRS 7
Financial Instruments: Disclosures
Fair Value Measurement
Presentation of Items of Other Comprehensive Income (Amendment)
1 July 2012
Employee Benefits
Separate Financial Statements
Investments in Associates and Joint Ventures
May 2012 Annual Improvements
1 January 2013
1 January 2013
1 January 2013
1 January 2013
Effective date
1 January 2013
1 January 2013
IFRS 13
IAS 1
IAS 19 (revised)
IAS 27 (revised)
IAS 28 (revised)
IFRS
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Cranswick plc Report & Accounts 2014
IAS 1 Presentation of Items of Other Comprehensive Income (Amendment)
The amendments to IAS 1 introduce a grouping of items presented in other comprehensive income. Items that could be reclassified
(or recycled) to profit or loss at a future point in time now have to be presented separately from items that will never be reclassified.
The amendment affected presentation only and had no impact on the Group’s financial position or performance.
IAS 19 (revised) Employee Benefits
IAS 19 (revised) includes a number of amendments to the accounting for defined benefit pension schemes. The principal impact on the Group
of the application of this standard is that interest on pension scheme assets is now calculated by reference to the liability discount rate rather
than the expected long-term yield on the assets, as was the case previously. The impact of the amendment on profit before tax for the prior
year ended 31 March 2013 was to increase finance costs by £135,000, with a resulting reduction of 0.2 pence in both earnings per share and
adjusted earnings per share. The amendment also led to a £33,000 reduction in the prior year tax charge, offset by an increase in income tax
charged through other comprehensive income. There was no impact on the reported pension liability as the impact on the income statement
was mitigated by an offsetting adjustment in the calculation of actuarial gains and losses in the statement of comprehensive income.
IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair
value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations
under IFRS 13 affected the principles that the Group uses to assess the fair value, but the assessment of fair value under IFRS 13 has not
materially changed the fair values recognised or disclosed. IFRS 13 mainly impacts the disclosures of the Group. It requires specific disclosures
about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards.
The application of the other standards has not had a material effect on the net assets, results and disclosures of the Group.
New standards and interpretations not applied
The IASB and IFRIC have issued a number of new standards and interpretations with an effective date after the date of these financial
statements. The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group’s
and Company’s financial statements in the period of initial application. The standards not applied are as follows:
International Accounting Standards (IAS/IFRSs)
IAS 32 (revised)
Financial Instruments: Presentation on Offsetting Financial Assets and Financial Liabilities
IFRS 7
IFRS 9
IFRS 10
IFRS 11
IFRS 12
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
Effective date*
1 January 2014
1 January 2015
1 January 2018
1 January 2014
1 January 2014
1 January 2014
* 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.
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NOTES TO THE ACCOUNTS (CONTINUED)
2. Accounting policies (continued)
Non-GAAP measures – adjusted Group operating profit, adjusted profit before tax and adjusted earnings per share
Adjusted Group operating profit, adjusted profit before tax and adjusted earnings per share are defined as being before net IAS 41 valuation
movement on biological assets, impairment charges and other significant non-trading items (being release of contingent consideration in
the current period). These additional non-GAAP measures of performance are included as the Directors believe that they provide a useful
alternative measure for Shareholders of the trading performance of the Group. The reconciliation between Group operating profit and
adjusted Group operating profit is shown on the face of the Group income statement.
Income statement presentation
During the period, the Group has amended its income statement presentation to present cost of sales, selling and distribution costs,
administrative expenses and gross profit within the notes to the financial statements (note 4) rather than on the face of the income statement
as was the case previously. The Directors consider it appropriate to amend the income statement presentation in this way to facilitate a more
meaningful comparison with prior and future periods following the acquisitions in the current period which introduce valuation movements on
biological assets into the income statement.
Taxation
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax
rates and laws that are enacted or substantively enacted by the balance sheet date. Deferred tax is provided on temporary differences at the
balance sheet date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
i)
except where the deferred income tax liability arises from the initial recognition of goodwill or the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor
taxable profit or loss; and
ii)
in respect of taxable temporary differences associated with investments in subsidiaries, except where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax
losses, to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profits will be
available against which the temporary differences can be utilised:
i)
except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an
asset or a liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; and
ii)
in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised
to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be
available against which the temporary differences can be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that apply to the period when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to
items recognised in other comprehensive income or directly in equity are also recognised in other comprehensive income or directly in equity
and not in the income statement. Otherwise income tax is recognised in the income statement.
Dividends
Dividends receivable by the Company are recognised in the income statement if they are declared, appropriately authorised and no longer
at the discretion of the entity paying the dividend, prior to the balance sheet date. Dividends payable by the Company are recognised when
declared and therefore final dividends proposed after the balance sheet date are not recognised as a liability at the balance sheet date.
Dividends paid to Shareholders are shown as a movement in equity rather than on the face of the income statement.
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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 five 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.
Useful economic lives are principally as follows:
Freehold buildings
Short leasehold improvements
Plant and equipment
Motor vehicles
50 years
Remainder of lease
5 – 11 years
4 years
The carrying value of property, plant and equipment is reviewed for impairment individually or at the cash generating unit level when events
or changes in circumstances indicate that the carrying value may not be recoverable.
Capitalised borrowing costs
Borrowing costs incurred in financing the construction of qualifying assets such as property, plant and equipment are capitalised up to the
date at which the relevant asset is substantially complete. Borrowing costs are calculated using the Group’s weighted average cost of
borrowing during the period of capitalisation. All other borrowing costs are expensed as incurred.
Investments
Investments in subsidiaries are shown at cost less any provision for impairment.
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NOTES TO THE ACCOUNTS (CONTINUED)
2. Accounting policies (continued)
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.
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
The Group’s biological assets consist of pigs in the form of breeding sows (classified as non-current assets) and their progeny for processing
within the Group and externally (classified as current assets). On initial recognition and at the balance sheet date biological assets have been
measured at their fair value less costs to sell, in line with IAS 41. Gains and losses in relation to the fair value of biological assets are recognised
in the income statement, within “cost of sales”, in the period in which they arise.
Cash and cash equivalents
Cash equivalents are defined as cash at bank and in hand including short-term deposits with original maturity within three 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.
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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.
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.
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.
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79
NOTES TO THE ACCOUNTS (CONTINUED)
2. Accounting policies (continued)
Employee benefits (continued)
i)
Pensions (continued)
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.
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.
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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
2014
£’000
973,697
16,519
4,689
2013
£’000
849,836
20,222
5,113
994,905
875,171
In addition to the non-UK sales disclosed above the Group also made sales to export markets through UK-based meat trading agents totalling
£30,078,000 (2013: £20,122,000). Including these sales, total sales to export markets were £51,286,000 for the year (2013: £45,457,000).
Customer concentration
The Group has three customers which individually account for more than 10 per cent of the Group’s total net revenue. These customers
account for 26 per cent, 24 per cent and 11 per cent respectively. In the prior year these same three customers accounted for 28 per cent,
23 per cent and 10 per cent respectively.
The Group’s non-current assets were all located within the UK for both 2014 and 2013.
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81
NOTES TO THE ACCOUNTS (CONTINUED)
4. Group operating profit
Group operating costs comprise:
Cost of sales excluding net IAS 41 valuation movement on biological assets
Net IAS 41 valuation movement on biological assets*
Cost of sales
Gross profit
Selling and distribution costs
Administrative expenses excluding impairment and release of contingent consideration
Impairment of property, plant and equipment
Release of contingent consideration
Administrative expenses
Total operating costs
2014
£’000
877,012
(1,441)
875,571
2013
£’000
768,633
-
768,633
119,334
106,538
35,995
34,627
28,643
-
(1,086)
27,557
21,870
1,836
-
23,706
939,123
826,966
* This represents the difference between operating profit prepared under IAS 41 and operating profit prepared under historical cost
accounting, which forms part of the reconciliation to adjusted operating profit.
Group operating profit is stated after charging/ (crediting):
Depreciation of property, plant and equipment
Amortisation of customer relationship intangible assets
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 in provision for inventories
Auditors’ remuneration
Fees payable to the Company’s auditors in respect of the audit
Audit of these financial statements
Local statutory audits of subsidiaries
Total audit remuneration
Fees payable to the Company’s auditors in respect of non-audit related services
Tax compliance services
Tax advisory services
Other services
Total non-audit related remuneration
2014
£’000
17,831
159
-
(85)
5,126
(42)
637,807
326
30
145
175
75
46
158
279
2013
£’000
15,486
119
1,836
(61)
4,155
(42)
559,190
321
25
136
161
57
57
148
262
Of the “Other” non-audit related services £156,000 (2013: £131,000) 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.
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Cranswick plc Report & Accounts 2014
5. Employees
Group
Staff costs:
Wages and salaries
Social security costs
Other pension costs
2014
£’000
107,090
9,668
1,460
2013
£’000
98,284
8,790
1,137
118,218
108,211
Included within wages and salaries is a total expense for share-based payments of £1,014,000 (2013: £1,162,000) all of which arises from
transactions accounted for as equity-settled share-based payment transactions.
The average monthly number of employees during the year was:
Group
Production
Selling and distribution
Administration
2014
Number
2013
Number
4,110
280
237
4,627
3,933
249
220
4,402
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 Remuneration Committee Report on pages 46 to 57. The employee costs shown above
include the following remuneration in respect of Directors of the Company:
Group and Company
Directors’ remuneration
Pension contribution
Aggregate gains made by Directors on exercise of share options
Number of Directors receiving pension contributions under money purchase schemes
2014
£’000
3,720
138
3,858
1,270
5
2013
£’000
6,050
150
6,200
504
5
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83
NOTES TO THE ACCOUNTS (CONTINUED)
6. Finance revenue and costs
Finance revenue
Finance revenue from loans receivable
Other interest receivable
Total finance revenue
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
Other interest payable
Total finance costs
The interest relates to financial assets and liabilities carried at amortised cost.
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
2014
£’000
2013
£’000
(Restated)
26
6
32
899
899
122
17
15
4
1,057
62
-
62
714
714
220
8
21
-
963
2014
£’000
2013
£’000
(Restated)
12,854
(257)
12,597
315
(994)
(368)
(1,047)
12,245
204
12,449
(834)
(327)
(123)
(1,284)
Tax on profit on ordinary activities
11,550
11,165
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Cranswick plc Report & Accounts 2014
Tax relating to items charged or credited to other comprehensive income or directly to equity:
Group
Recognised in Group statement of comprehensive income
Deferred tax on revaluation of cash flow hedges
Deferred tax on actuarial (loss)/ gain on defined benefit pension scheme
Recognised in Group statement of changes in equity
Deferred tax on share-based payments
Corporation tax credit on share options exercised
Total tax credit recognised directly in equity
Company
Recognised in Company statement of changes in equity
Deferred tax credit on share-based payments
Total tax credit recognised directly in equity
2014
£’000
2013
£’000
(Restated)
(3)
(735)
(738)
(246)
(323)
(569)
(1,307)
15
293
308
(370)
(140)
(510)
(202)
2014
£’000
2013
£’000
(129)
(129)
(91)
(91)
b) Factors affecting tax charge for the year
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences are explained below:
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by standard rate
of corporation tax in the UK of 23 per cent (2013: 24 per cent)
Effect of:
Disallowed expenses
Deferred tax rate change
Share-based payment deduction
Adjustments in respect of prior years
Total tax charge for the year
2014
£’000
54,757
12,594
374
(994)
201
(625)
2013
£’000
(Restated)
47,304
11,353
190
(327)
(132)
81
11,550
11,165
Report & Accounts 2014 Cranswick plc
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NOTES TO THE ACCOUNTS (CONTINUED)
7. Taxation (continued)
c) Deferred tax
The deferred tax included in the Group balance sheet is as follows:
Group
Deferred tax liability in the balance sheet
Accelerated capital allowances
Biological assets
Rollover and holdover relief
Other temporary differences
Share-based payments
Deferred tax on defined benefit pension scheme
2014
£’000
6,438
1,037
65
(209)
(1,288)
(1,306)
2013
£’000
8,179
-
78
44
(1,582)
(772)
Deferred tax liability
4,737
5,947
The deferred tax included in the income statement is as follows:
Deferred tax in the income statement
Accelerated capital allowances
Biological assets
Other temporary differences
Share-based payments
Deferred tax on defined benefit pension scheme
Deferred tax credit
The deferred tax included in the Company balance sheet is as follows:
Company
Deferred tax asset in the balance sheet
Accelerated capital allowances
Other temporary differences
Share-based payments
Deferred tax asset
2014
£’000
2013
£’000
(Restated)
(1,946)
288
(132)
542
201
(1,011)
-
(136)
(354)
217
(1,047)
(1,284)
2014
£’000
(26)
(17)
(497)
(540)
2013
£’000
(23)
(118)
(424)
(565)
d) Temporary differences associated with Group investments
At 31 March 2014 a £nil tax liability has been recognised (2013: £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 24 per cent to 23 per cent from 1 April 2013. Further reductions in the corporation
tax rate to 21 per cent from 1 April 2014 and 20 per cent from 1 April 2015 were enacted before the balance sheet date. Deferred tax is
therefore provided at 20 per cent.
8. Profit attributable to members
Of the profit attributable to members, the sum of £17,344,000 (2013: £16,826,000) has been dealt with in the accounts of Cranswick plc.
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Cranswick plc Report & Accounts 2014
9. Equity dividends
Declared and paid during the year:
Final dividend for 2013 – 20.6p per share (2012: 19.5p)
Interim dividend for 2014 – 10.0p per share (2013: 9.4p)
2014
£’000
10,025
4,878
2013
£’000
9,381
4,543
Dividends paid
14,903
13,924
Proposed for approval of Shareholders at the Annual General Meeting on 28 July 2014:
Final dividend for 2014 – 22.0p (2013: 20.6p)
10,772
9,997
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
£43,207,000 (2013: £36,139,000 as restated) 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
2014
Thousands
2013
Thousands
48,734
191
48,257
137
48,925
48,394
Adjusted earnings per share
During the year the Group released the contingent consideration liability in relation to the acquisition of Kingston Foods Limited (note 14). In
addition, the Group made the Wayland and Wold Farms acquisitions described in note 14, and subsequently recognised a profit on the IAS 41
valuation movement on biological assets acquired. In the prior year the Group impaired freehold property, plant and equipment to their fair
value at its mothballed production facility in East Lancashire. The property has subsequently been demolished and the land is in the process
of being sold.
As the release of contingent consideration and the impairment of property, plant and equipment do not form part of the ongoing business
of the Group and due to the volatility of the valuation of biological assets the Directors consider it appropriate to present an adjusted measure
of earnings per share on the face of the income statement which excludes the effects of these items to provide a more meaningful measure
of the underlying performance of the business. Adjusted earnings per share are calculated using the weighted average number of shares for
both basic and diluted amounts as detailed above.
Adjusted profit for the year is derived as follows:
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Profit for the year
Impairment of property, plant and equipment
Release of contingent consideration
Net IAS 41 valuation movement on biological assets
Tax on net IAS 41 valuation movement on biological assets
2014
£’000
43,207
-
(1,086)
(1,441)
288
2013
£’000
(Restated)
36,139
1,836
-
-
-
Adjusted profit for the year
40,968
37,975
Report & Accounts 2014 Cranswick plc
87
NOTES TO THE ACCOUNTS (CONTINUED)
11. Intangible assets
Group
Cost
At 31 March 2012
On acquisition of subsidiary (note 14)
At 31 March 2013
On acquisition of subsidiary (note 14)
At 31 March 2014
Amortisation and impairment
At 31 March 2012
Amortisation
At 31 March 2013
Amortisation
At 31 March 2014
Net book value
At 31 March 2012
At 31 March 2013
At 31 March 2014
Goodwill
£’000
Customer
relationships
£’000
127,763
5,488
133,251
1,691
134,942
4,924
-
4,924
-
4,924
-
795
795
-
795
-
119
119
159
278
Total
£’000
127,763
6,283
134,046
1,691
135,737
4,924
119
5,043
159
5,202
122,839
-
122,839
128,327
676
129,003
130,018
517
130,535
Impairment testing
Goodwill is subject to annual impairment testing. Goodwill acquired through business combinations has been allocated for impairment testing
purposes to the following principal cash-generating units:
2014
£’000
12,231
1,691
90,167
11,602
10,968
3,359
2013
£’000
12,231
-
90,167
11,602
10,968
3,359
130,018
128,327
Cash generating unit
Fresh pork
Livestock
Cooked meats
Sandwiches
Continental Fine Foods
Other
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Cranswick plc Report & Accounts 2014
Assumptions used
The recoverable amount for each cash generating unit has been determined based on value in use calculations using annual budgets for each
business for the following year, approved by the Board of Directors, and cash flow projections for the next four years. Forecast replacement
capital expenditure is included from budgets and thereafter capital is assumed to represent 100 per cent of depreciation.
Subsequent cash flows are forecast to grow in line with an assumed long-term industry growth rate of between 3 and 5 per cent derived from
third party market information, including Kantar Worldpanel data.
A pre-tax discount rate of 7.4 per cent has been used (2013: 8.3 per cent) being management’s estimate of the weighted average cost of capital.
The calculation is most sensitive to the following assumptions:
Sales volumes
Sales volumes are influenced by the growth of the underlying food segment, the market shares of our customers, selling prices, and the quality
of our products and service. Historical volumes are used as the base and adjusted over the projection period in line with current growth rates.
Gross margin
Gross margin depends upon average selling prices, the cost of raw materials and changes in the cost of production overheads. Historical
margins are used as the base, adjusted for management’s expectations derived from experience and with reference to budget forecasts.
Discount rates
All calculations of this nature are sensitive to the discount rate used. Management’s estimate of the weighted average cost of capital has been
used for each cash generating unit.
Sensitivity
Following the impairment of goodwill attributable to the Sandwiches cash generating unit in 2011–12, 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.
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NOTES TO THE ACCOUNTS (CONTINUED)
12. Property, plant and equipment
Leasehold
Plant,
Assests in the
Total
improve-
equipment
course of
and vehicles
construction
£’000
£’000
£’000
Freehold
land and
buildings
£’000
67,861
4,658
-
7,536
(19)
80,036
5,287
2,633
4,459
(2,242)
90,173
5,328
1,597
3,428
1,548
-
11,901
1,766
(2,242)
11,425
ments
£’000
9,012
77
91
(6,070)
-
3,110
61
-
-
-
139,099
22,512
591
(1,466)
(570)
160,166
12,416
1,630
653
(2,841)
3,171
172,024
4,915
223
(3,428)
-
-
1,710
187
-
1,897
74,876
13,666
-
238
(508)
88,272
15,878
(2,742)
101,408
-
5,957
-
-
-
5,957
5,095
-
(5,112)
-
5,940
-
-
-
-
-
-
-
-
-
215,972
33,204
682
-
(589)
249,269
22,859
4,263
-
(5,083)
271,308
85,119
15,486
-
1,786
(508)
101,883
17,831
(4,984)
114,730
Group
Cost
At 31 March 2012
Additions
On acquisition
Transfers between categories
Disposals
At 31 March 2013
Additions
On acquisition
Transfers between categories
Disposals
At 31 March 2014
Depreciation
At 31 March 2012
Charge for the year
Transfers between categories
Impairment loss
Relating to disposals
At 31 March 2013
Charge for the year
Relating to disposals
At 31 March 2014
Net book amounts
At 31 March 2012
62,533
4,097
64,223
-
130,853
At 31 March 2013
68,135
1,400
71,894
5,957
147,386
At 31 March 2014
78,748
1,274
70,616
5,940
156,578
Included in freehold land and buildings is land with a cost of £7,927,000 (2013: £6,640,000) which is not depreciated relating to the Group
and £509,000 (2013: £509,000) relating to the Company.
Cost includes £1,082,000 (2013: £1,026,000) in respect of capitalised interest. £56,000 of interest, which was the whole amount eligible,
was capitalised during the year (2013: £25,000). The rate used to determine the amount of borrowing costs eligible for capitalisation was
1.75 per cent (2013: 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 prior 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 was accrued for demolition of the property giving a total income
statement impairment charge of £1,836,000.
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Cranswick plc Report & Accounts 2014
Company
Cost
At 31 March 2012
Additions
At 31 March 2013
Additions
Disposals
At 31 March 2014
Depreciation
At 31 March 2012
Charge for the year
At 31 March 2013
Charge for the year
Relating to disposals
At 31 March 2014
Net book amounts
At 31 March 2012
At 31 March 2013
At 31 March 2014
13. Investments
Company
Shares at cost:
At 31 March 2012
Freehold
land and
buildings
£’000
Plant,
equipment
and vehicles
£’000
509
-
509
-
-
509
-
-
-
-
-
-
509
509
509
406
21
427
17
(22)
422
317
44
361
31
(9)
383
89
66
39
Total
£’000
915
21
936
17
(22)
931
317
44
361
31
(9)
383
598
575
548
Subsidary undertakings
£’000
158,338
874
159,212
758
159,970
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Capital contribution relating to share options
At 31 March 2013
Capital contribution relating to share options
At 31 March 2014
The principal subsidiary undertakings during the year were:
Cranswick Country Foods plc
Cranswick Gourmet Pastry Company Limited (100 per cent owned by Cranswick Country Foods plc)
Wayland Farms Limited (100 per cent owned by Cranswick Country Foods plc)
Wold Farms Limited (100 per cent owned by Cranswick Country Foods plc)
Cranswick Convenience Foods Limited
Kingston Foods Limited (100 per cent owned by Cranswick Convenience Foods Limited)
The Sandwich Factory Group Limited (registered in Scotland)
The Sandwich Factory Holdings Limited (100 per cent owned by The Sandwich Factory Group 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 Cranswick plc sold its 5.5 per cent investment in the pet products business on 5 April 2012 for a consideration of £221,000.
The consideration for the sale was received in cash in the prior year. The transaction resulted in the Group retaining its 5.5 per cent interest
in the Aquatics business; this interest was later reduced to a 3.3 per cent holding of Tropical Marine Centre (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.
Report & Accounts 2014 Cranswick plc
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NOTES TO THE ACCOUNTS (CONTINUED)
14. Acquisitions
2014 – Wayland Farms Limited and Wold Farms Limited
On 29 April 2013, the Group acquired 100 per cent of the issued share capital of East Anglian Pigs Limited (renamed Wayland Farms Limited)
for a total consideration of £13.5 million.
On 20 August 2013, the Group incorporated a new company: Wold Farms Limited. On 13 September 2013, Wold Farms Limited acquired
certain trade and assets of Dent Limited for a total consideration of £2.0 million and subsequently, on 19 December 2013, acquired further
Dent Limited trade and assets from the administrator for a total consideration of £1.5 million. The principal activities of both Wayland Farms
Limited and Wold Farms Limited are pig breeding, rearing and finishing. The acquisitions give 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
Finance lease obligations
Corporation tax liability
Deferred tax liability
Goodwill arising on acquisition
Total consideration
Satisfied by:
Cash
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
Wayland Farms
Limited
£’000
3,828
10,550
398
1,368
2,540
(3,258)
(150)
(1,500)
(603)
(148)
(905)
12,120
1,355
13,475
Fair values
Wold Farms
Limited
(provisional)
£’000
435
2,550
62
-
-
-
-
-
-
-
84
3,131
336
3,467
Total
£’000
4,263
13,100
460
1,368
2,540
(3,258)
(150)
(1,500)
(603)
(148)
(821)
15,251
1,691
16,942
13,475
3,467
16,942
13,475
(2,540)
10,935
211
11,146
3,467
-
3,467
121
3,588
16,942
(2,540)
14,402
332
14,734
The fair values on the Wold Farms transactions remain provisional due to their timing and will be finalised within twelve months of the
respective transaction dates.
From the date of acquisition, the external revenues of Wayland Farms Limited were £10.8 million and the company contributed a net profit after
tax (excluding the IAS 41 valuation movement on biological assets) of £2.5 million to the Group. If the Wayland Farms Limited combination had
taken place at the beginning of the year, the Group’s profit after tax for the year would have been unchanged at £43.2 million and revenues
would have been £995.6 million.
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In the period since acquisition, the external revenues of Wold Farms Limited were £nil and the Company contributed a net loss after tax of
£0.2 million to the Group. Due to the nature of the two transactions, with only a proportion of the trade and assets of Dent Limited being
acquired, the Directors consider it impracticable to assess the impact of Wold Farms Limited on the revenues and profit after tax of the
Group had the combination taken place at the beginning of the period.
Included in the £1,691,000 of goodwill recognised are certain intangible assets that cannot be individually separated from the acquirees and
reliably measured due to their nature. These items include the expected value of synergies, the assembled workforces and the strategic benefits
of vertical integration including security of supply.
Transaction costs of £211,000 and £121,000 have been expensed in relation to Wayland Farms Limited and Wold Farms Limited respectively,
and are included in administrative expenses.
All of the trade receivables acquired were, or are expected to be, collected in full.
2013 – Kingston Foods Limited
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 to 31 March 2013, the acquired business 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 prior year, the Group’s profit after tax for the prior year
would have been £36.6 million and revenues would have been £879.2 million.
Report & Accounts 2014 Cranswick plc
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NOTES TO THE ACCOUNTS (CONTINUED)
14. Acquisitions (continued)
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 were expensed and included in administration expenses in the prior year.
Contingent consideration
The agreement included contingent consideration payable in cash to the previous owners of Kingston Foods Limited based on the performance
of the business over a three year period from acquisition. The amount payable was between £nil and £2.5 million dependent on the average
EBITDA of the business during the three 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 on page 93.
Subsequently, during the year, £1,086,000 of contingent consideration was released to the income statement, being the full amount accrued,
which reflects the Directors’ current expectations of the anticipated performance of the business over the three year period from acquisition.
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Cranswick plc Report & Accounts 2014
15. Biological assets
The Group’s biological assets consist of pigs in the form of breeding sows (classified as non-current assets) and their progeny for processing
within the Group and externally (classified as current assets).
Reconciliation of carrying amounts of livestock:
Group
At 31 March 2012 and 31 March 2013
On acquisition
Increases due to purchases
Decrease attributable to harvest
Decreases attributable to sales
Changes in fair value less estimated costs to sell
At 31 March 2014
Group
Non-current biological assets
Current biological assets
Group
Net IAS 41 valuation movement on biological assets*
Changes in fair value of biological assets
Biological assets transferred to cost of sales
Total
£’000
-
13,100
8,426
(34,743)
(10,772)
38,706
14,717
2013
£’000
-
-
-
2014
£’000
1,174
13,543
14,717
2014
£’000
2013
£’000
38,706
(37,265)
1,441
-
-
-
* This represents the difference between operating profit prepared under IAS 41 and operating profit prepared under historical cost
accounting, which forms part of the reconciliation to adjusted operating profit.
The Group’s valuation model for biological assets utilises quoted (unadjusted) prices in an active market for the valuation of finished pigs,
sucklers and weaners (Level 1 in the fair value hierarchy as detailed in note 22). The valuation of sows and boars is based on recent transactions
for similar assets (Level 2 in the fair value hierarchy).
Additional information:
Group
Quantities at year end:
Breeding sows (bearer biological assets)
Boars
Pigs (consumable biological assets)
Number of pigs produced in the year
2014
No.
2013
No.
16,875
433
172,526
320,133
-
-
-
-
Report & Accounts 2014 Cranswick plc
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NOTES TO THE ACCOUNTS (CONTINUED)
16. Inventories
Group
Raw materials
Finished goods and goods for resale
17. Trade and other receivables
Financial assets:
Trade receivables
Amounts owed by Group undertakings
Other receivables
Non-financial assets:
Prepayments and accrued income
2014
£’000
34,967
12,459
47,426
Group
Company
2014
£’000
84,292
-
5,375
89,667
8,108
97,775
2013
£’000
82,556
-
4,814
87,370
5,727
93,097
2014
£’000
-
26,256
23
26,279
252
26,531
2013
£’000
34,688
13,775
48,463
2013
£’000
-
14,870
236
15,106
263
15,369
Financial assets are carried at amortised cost. As at 31 March, the analysis of trade receivables that were past due but not impaired was
as follows:
Group
2014
2013
Trade receivables
Of which:
Not due
Past due date in the following periods:
Less than 30
Between 30
More than
£’000
£’000
days
£’000
and 60 days
£’000
84,292
74,695
7,475
82,556
72,738
7,830
929
960
60 days
£’000
1,193
1,028
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 2014, trade receivables at nominal value of £583,000 (2013: £631,000) 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 2012
Provided in year
Written off
At 31 March 2013
Provided in year
Utilised
Released
At 31 March 2014
There are no bad debt provisions against other receivables.
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Cranswick plc Report & Accounts 2014
£’000
1,162
199
(730)
631
8
(6)
(50)
583
18. Financial assets
Group
Current
Loans receivable
Impairment provision
Non-current
Loans receivable
2014
£’000
396
(396)
-
2013
£’000
696
-
696
-
702
Loans of £396,000 (2013: £1,398,000) are receivable from Dent Limited, a supplier to the Group. Dent Limited went into administration on
2 December 2013; as a result the loans receivable from Dent Limited have been fully provided. Repayment of the loan, which was held at
amortised cost, was receivable in 43 equal monthly instalments which commenced on 30 September 2011. Interest was 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
Deferred income – government grants
Group
Company
2014
£’000
80,315
-
28,420
71
2013
£’000
71,340
-
34,714
55
2014
£’000
274
46,621
4,191
-
2013
£’000
149
36,118
6,179
-
108,806
106,109
51,086
42,446
409
409
410
410
-
-
-
-
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97
NOTES TO THE ACCOUNTS (CONTINUED)
20. Financial liabilities
Current
Bank overdrafts
Finance leases and hire purchase contracts
Forward currency contracts
Non-current
Amounts outstanding under revolving credit facility
Contingent consideration (note 14)
Group
2014
£’000
-
309
18
327
2013
£’000
549
55
4
608
Company
2014
£’000
2013
£’000
-
-
-
-
-
-
-
-
28,898
-
28,498
1,074
28,898
-
28,498
-
28,898
29,572
28,898
28,498
Movement on hedged items:
Losses arising in the year
Reclassification adjustment for losses included in the income statement
Group
2014
£’000
2013
£’000
(18)
4
(14)
(4)
69
65
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 negotiated an amendment and extension to its banking facilities during the year. The new facilities were agreed on 27 March 2014,
with arrangement fees of £0.9 million being paid subsequent to the year end. The arrangement fees will be amortised over the period of the
facilities.
A committed bank overdraft facility of £20 million (2013: £20 million) is in place until July 2018, of which £nil (2013: £549,000) was utilised at
31 March 2014. Interest is payable at a margin over base rate.
A revolving credit facility of £120 million (including the £20 million committed overdraft facility) is in place of which £30 million was utilised as at
31 March 2014 (2013: a revolving credit facility of £100 million of which £29 million was utilised). This facility expires in July 2018. Interest is
payable on the revolving credit facility at a margin over LIBOR.
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Cranswick plc Report & Accounts 2014
The maturity profile of bank loans is as follows:
In one year or less
Between one year and two years
Between two years and five years
Unamortised issue costs
Group
Company
2014
£’000
-
-
30,000
30,000
(1,102)
2013
£’000
-
-
29,000
29,000
(502)
2014
£’000
-
-
30,000
30,000
(1,102)
2013
£’000
-
-
29,000
29,000
(502)
28,898
28,498
28,898
28,498
The bank facilities for both years are unsecured and subject to normal bank covenant arrangements.
21. Provisions
Group
At 31 March 2013
Arising on acquisition
Movement on discount
At 31 March 2014
Analysed as:
Group
Current liabilities
Non-current liabilities
Lease
provisions
£’000
190
150
3
343
2013
£’000
-
190
190
2014
£’000
-
343
343
Lease provisions are held against dilapidation obligations on leased properties. These provisions are expected to be utilised over the next
five years. There are no provisions held by the Company.
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Report & Accounts 2014 Cranswick plc
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NOTES TO THE ACCOUNTS (CONTINUED)
22. Financial instruments
An explanation of the Company and Group’s financial instruments risk management strategy is set out on page 60 in the Directors’ Report.
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 2014 and their
weighted average interest rates is set out below:
As at 31 March 2014
Group
Financial liabilities:
Revolving credit facility
Finance leases and hire purchase contracts
Financial assets:
Cash at bank
As at 31 March 2013
Weighted
Total
At
1 year
1–2 years
2–3 years
Fixed interest
average
effective
interest
rate
%
floating
interest
rates
or
less
£’000
£’000
£’000
£’000
£’000
1.29%
5.13%
(30,000)
(309)
(30,309)
(30,000)
-
(30,000)
-
(309)
(309)
0.00%
12,223
12,223
-
(18,086)
(17,777)
(309)
-
-
-
-
-
-
-
-
-
-
Weighted
Total
At
1 year
1–2 years
2–3 years
Fixed interest
Group
Financial liabilities:
Bank overdrafts
Revolving credit facility
Finance leases and hire purchase contracts
average
effective
interest
rate
%
2.00%
1.50%
6.32%
floating
interest
rates
or
less
£’000
£’000
£’000
£’000
£’000
(549)
(549)
(29,000)
(29,000)
(55)
-
(29,604)
(29,549)
-
-
(55)
(55)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Financial assets:
Cash at bank
Loans receivable
0.00%
3.50%
7,633
1,398
7,633
1,398
The maturity profile of bank loans is set out in note 20.
(20,573)
(20,518)
(55)
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Cranswick plc Report & Accounts 2014
The interest rate profile of the interest earning financial assets and interest bearing liabilities of the Company as at 31 March 2014 and their
weighted average interest rates is set out below:
As at 31 March 2014
Company
Financial liabilities:
Amounts owed to Group undertakings
Revolving credit facility
Financial assets:
Cash at bank
As at 31 March 2013
Company
Financial liabilities:
Amounts owed to Group undertakings
Revolving credit facility
Financial assets:
Cash at bank
Weighted
Total
At
1 year
1–2 years
2–3 years
Fixed interest
average
effective
interest
rate
%
floating
interest
rates
or
less
£’000
£’000
£’000
£’000
£’000
2.00%
1.29%
(153,400)
(30,000)
(183,400)
(153,400)
(30,000)
(183,400)
0.00%
8,251
8,251
(175,149)
(175,149)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Weighted
Total
At
1 year
1–2 years
2–3 years
Fixed interest
average
effective
interest
rate
%
floating
interest
rates
or
less
£’000
£’000
£’000
£’000
£’000
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)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Currency profile
The Group’s financial assets at 31 March 2014 include sterling denominated cash balances of £11,363,000 (2013: £7,320,000), euro £117,000
(2013: £119,000) and US dollar £743,000 (2013: £186,000), all of which are held in the UK. The Group’s financial liabilities include sterling
denominated overdraft balances of £nil (2013: £66,000) and euro £nil (2013: £483,000), all of which are held in the UK.
The proportion of the Group’s net assets denominated in foreign currencies is immaterial.
The Group’s other financial assets and liabilities are denominated in sterling.
Credit risk
The Group makes a significant proportion of its sales to the major UK supermarket groups, which correspondingly represent a significant
proportion of the Group’s trade receivables at any one time. Based on the financial strength of these customers, the Directors do not consider
that the Group faces a significant credit risk in this regard. Debts with other customers, which represent a smaller proportion of the Group’s
trade receivables, are considered to provide greater risk, particularly in the current economic climate. These debts are reviewed on a regular
basis by credit controllers and senior management and prudent provision is made when there is objective evidence that the Group will not be
able to recover balances in full.
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NOTES TO THE ACCOUNTS (CONTINUED)
22. Financial instruments (continued)
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.
Transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period.
The Group’s forward currency contracts are measured using Level 2 of the fair value hierarchy. The valuations are provided by the Group’s
bankers from the proprietary valuations models and are based on mid-market levels as at close of business on the Group’s year end reporting
date.
The Group’s 3.3 per cent retained shareholding in the aquatics business Tropical Marine Centre (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
2014
2013
Book
value
£’000
Fair
value
£’000
Book
value
£’000
Fair
value
£’000
Forward currency contracts
(18)
(18)
(4)
(4)
The book value of trade and other receivables, trade and other payables cash balances, loans receivable, overdrafts, amounts outstanding
under revolving credit facilities and finance leases and hire purchase contracts equates to fair value for the Group and Company.
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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
Euros
Sterling
Amount
10,150,000
2,481,000
Maturities
1 April 2014 – 2 October 2014
11 April 2014 – 30 May 2014
Exchange rates
€1.20 – €1.23
£0.82 – £0.83
Fair value
£’000
(18)
-
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.
2014
Sterling
2013
Sterling
Increase/
Effect on
decrease in
profit before
basis points
+100
-100
+100
-100
tax
£’000
(529)
529
(413)
413
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NOTES TO THE ACCOUNTS (CONTINUED)
22. Financial instruments (continued)
Liquidity risk
The tables below summarise the maturity profile of the Group’s financial liabilities at 31 March 2014 and 2013 based on contractual
undiscounted payments:
At 31 March 2014
Group
Revolving credit facility
Finance leases and hire purchase contracts
Trade and other payables
At 31 March 2013
Group
Bank overdraft
Revolving credit facility
Finance leases and hire purchase contracts
Trade and other payables
At 31 March 2014
Company
Revolving credit facility
Trade and other payables
At 31 March 2013
Company
Revolving credit facility
Trade and other payables
Cross guarantees (note 27)
Less than
1 year
£’000
386
310
108,735
109,431
Less than
1 year
£’000
549
434
56
106,054
107,093
Less than
1 year
£’000
386
51,086
51,472
Less than
1 year
£’000
434
42,446
549
43,429
1 to 2
years
£’000
386
-
-
386
1 to 2
years
£’000
-
434
-
-
434
1 to 2
years
£’000
386
-
386
1 to 2
years
£’000
434
-
-
434
2 to 5
years
£’000
29,901
-
-
29,901
2 to 5
years
£’000
-
29,145
-
-
29,145
2 to 5
years
£’000
29,901
-
29,901
2 to 5
years
£’000
29,145
-
-
29,145
Total
£’000
30,673
310
108,735
139,718
Total
£’000
549
30,013
56
106,054
136,672
Total
£’000
30,673
51,086
81,759
Total
£’000
30,013
42,446
549
73,008
The impact of liquidity risk on the Group is discussed in detail in the Directors’ Report on page 60.
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23. Called-up share capital
Allotted, called-up and fully paid – Ordinary shares of 10 pence each
Group and Company
At 1 April
On exercise of share options
Scrip dividends
2014
Number
48,527,532
243,021
191,336
2013
Number
48,034,791
182,958
309,783
At 31 March
48,961,889
48,527,532
2014
£’000
4,853
24
19
4,896
2013
£’000
4,803
19
31
4,853
On 6 September 2013, 111,212 ordinary shares were issued at 1,152.0 pence as a result of Shareholders exercising the scrip dividend
option in lieu of the cash payment for the 2013 final dividend.
On 24 January 2014, 80,124 ordinary shares were issued at 1,151.0 pence as a result of Shareholders exercising the scrip dividend option in lieu
of the cash payment for the 2014 interim dividend.
During the course of the year, 243,021 ordinary shares were issued to employees exercising SAYE and LTIP options at prices between nil
and 692.0 pence.
Ordinary share capital of £88,382 is reserved for allotment under the Savings Related Share Options Schemes and Long Term Incentive Plans
(LTIP). The options are exercisable as follows:
Number
Exercise price
Exercise period
Savings related
Savings related
Savings related
Savings related
Savings related
Savings related
Savings related
Savings related
LTIP
1,553
3,911
13,705
31,771
24,647
171,792
113,849
85,179
1,064,888
679p
665p
474p
594p
692p
579p
629p
916p
Nil
March 2010 – October 2014
March 2011 – October 2015
March 2012 – October 2016
March 2013 – October 2017
March 2014 – October 2018
March 2015 – October 2019
March 2016 – October 2018
March 2017 – October 2019
June 2014 – June 2023
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.
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NOTES TO THE ACCOUNTS (CONTINUED)
24. Share-based payments
The Group operates two share option schemes, a HMRC approved “Save As You Earn” scheme (SAYE) and a Long Term Incentive Plan (LTIP),
both of which are equity settled. The total expense charged to the income statement during the year in relation to share-based payments
was £1,014,000 (2013: £1,162,000).
Long Term Incentive Plan (LTIP)
During the course of the year 317,100 options at nil cost were granted to Directors and senior executives, the share price at that time was
1,127.0 pence. Details of the performance criteria relating to the LTIP scheme can be found in the Directors’ Remuneration report on
page 50. The maximum term of LTIP options is ten years.
Group
Outstanding as at 1 April
Granted during the year (i)
Lapsed during the year
Exercised during the year (ii)
Outstanding as at 31 March (iii)
Exercisable at 31 March
Company
Outstanding as at 1 April
Granted during the year (i)
Lapsed during the year
Exercised during the year (ii)
Outstanding as at 31 March (iii)
Exercisable at 31 March
2014
Number
1,071,891
317,100
(152,313)
(171,790)
1,064,888
-
2014
Number
721,539
201,100
(87,495)
(114,644)
720,500
-
2014
WAEP (£)
2013
Number
2013
WAEP (£)
-
-
-
-
-
-
2014
WAEP (£)
-
-
-
-
-
-
786,900
394,500
(12,789)
(96,720)
1,071,891
73,191
2013
Number
525,700
264,500
(8,211)
(60,450)
721,539
48,639
-
-
-
-
-
-
2013
WAEP (£)
-
-
-
-
-
-
i)
The weighted average fair value of options granted during the year was £10.29 (2013: £7.03). The share options granted during the
year were at £nil per share. The share price at the date of grant was £11.27 (2013: £8.01).
ii) The weighted average share price at the date of exercise for the options exercised was £11.26 (2013: £8.20).
iii)
For the share options outstanding as at 31 March 2014, the weighted average remaining contractual life is 8.11 years
(2013: 8.21 years).
The exercise price for all options outstanding at the end of the year was £nil.
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Cranswick plc Report & Accounts 2014
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 three, five or seven 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)
Exercisable at 31 March
Company
Outstanding as at 1 April
Granted during the year (i)
Lapsed during the year
Exercised during the year (ii)
Outstanding as at 31 March (iii)
Exercisable at 31 March
2014
Number
2014
WAEP (£)
468,286
87,372
(38,020)
(71,231)
446,407
3,243
5.98
9.16
6.29
5.75
6.61
6.86
2013
Number
460,998
129,084
(35,558)
(86,238)
468,286
4,091
2013
WAEP (£)
5.84
6.29
6.01
5.69
5.98
6.12
2014
Number
2014
WAEP (£)
2013
Number
2013
WAEP (£)
19,600
2,690
(1,504)
(1,137)
19,649
260
5.94
9.16
5.98
6.66
6.33
6.92
18,567
3,232
(825)
(1,374)
19,600
305
5.90
6.29
6.56
5.94
5.94
5.94
i)
The share options granted during the year were at £9.16 (2013: £6.29), representing a 20 per cent discount on the price at the relevant
date. The share price at the date of grant was £11.86 (2013: £8.49).
ii) The weighted average share price at the date of exercise for the options exercised was £12.72 (2013: £9.71).
iii) For the share options outstanding as at 31 March 2014, the weighted average remaining contractual life is 3.59 years
(2013: 2.99 years).
The weighted average fair value of options granted during the year was £3.31 (2013: £2.19). The range of exercise prices for options
outstanding at the end of the year was £4.74 – £9.16 (2013: £4.74 – £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 2014 and 31 March 2013:
Group and Company
Dividend yield
Expected share price volatility
Risk free interest rate
Expected life of option
Exercise prices
2014
LTIP
3.03%
31.0%
0.51%
3 years
£nil
2014
SAYE
2.88%
31.0%
0.92% – 1.87%
3, 5 years
£9.16
2013
LTIP
4.35%
31.0%
2013
SAYE
4.11%
31.0%
0.40%
0.37% – 1.21%
3 years
3, 5, 7 years
£nil
£6.29
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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NOTES TO THE ACCOUNTS (CONTINUED)
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 2013. 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.
Restatement of comparatives
IAS 19 (revised) includes a number of amendments to the accounting for defined benefit pension schemes. The principal impact on the Group
of the application of this standard is that interest on pension scheme assets is now calculated by reference to the liability discount rate rather
than the expected long-term yield on the assets, as was the case previously. The impact of the amendment on profit before tax for the prior
year ended 31 March 2013 was to increase finance costs by £135,000, with a resulting reduction of 0.2 pence in both earnings per share and
adjusted earnings per share. There was no impact on the reported pension liability as the impact on the income statement is mitigated by an
offsetting adjustment in the calculation of actuarial gains and losses in the statement of comprehensive income.
a) Change in benefit obligation
Benefit obligation at the beginning of the year
Interest cost
Remeasurement (gains)/ losses:
Actuarial (gains)/ losses arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Other experience items
Additional liability recognised due to minimum funding requirement
Benefits paid from plan
2014
£’000
21,535
935
(764)
(251)
728
3,457
(419)
2013
£’000
(Restated)
21,161
948
519
-
-
-
(1,093)
Benefit obligation at the end of the year
25,221
21,535
b) Change in plan assets
Fair value of plan assets at the beginning of the year
Interest income
Return on plan assets
Employer contributions
Benefits paid from plan
2014
£’000
18,178
813
(1,007)
1,128
(419)
2013
£’000
(Restated)
15,819
728
1,596
1,128
(1,093)
Fair value of plan assets at the end of the year
18,693
18,178
c) Amounts recognised in the balance sheet
Present value of funded obligations
Fair value of plan assets
Net liability recorded in the balance sheet
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Cranswick plc Report & Accounts 2014
2014
£’000
(25,221)
18,693
2013
£’000
(21,535)
18,178
(6,528)
(3,357)
d) Components of pension cost
Amounts recognised in the income statement:
Interest cost
Expected return on plan assets
Total pension cost recognised in the income statement
Actual return on assets
Actual return on plan assets
Amounts recognised in the Group statement of comprehensive income
Actuarial (losses)/ gains immediately recognised
2014
£’000
2013
£’000
(Restated)
935
(813)
122
(194)
(4,177)
948
(728)
220
2,324
1,077
Cumulative amount of actuarial losses recognised
(6,067)
(1,890)
The weighted average actuarial assumptions used in the valuation of the scheme were as follows:
e) Principal actuarial assumptions
Discount rate
Rate of price inflation
Revaluation of deferred pensions:
Benefits accrued prior to 1 January 1998
Benefits accrued after 1 January 1998
Rate of compensation increase:
Benefits accrued prior to 1 January 1997
Benefits accrued after 1 January 1997
Future expected lifetime of pensioner at age 65:
Current pensioners
Male
Female
Future pensioners
Male
Female
2014
2013
4.50%
3.15%
5.00%
3.15%
3.00%
3.15%
22.9
25.2
25.1
27.5
4.40%
3.25%
5.00%
3.25%
3.00%
3.25%
23.1
25.7
25.1
27.6
The mortality rates used have been taken from base tables S1PA (CMI 2012 improvements 1.5 per cent long-term rate of improvement)
(2013: S1PA (LC 1 per cent floor)).
At 31 March 2014, the average duration of the scheme liabilities was 23 years (2013: 23 years). For deferred pensions the average duration was
24 years (2013: 24 years) and for pensions in payment the average duration was twelve years (2013: twelve years).
The Group’s deficit as measured under IFRIC 14 is £6,528,000 as a result of the Group’s commitment to future contributions to the scheme.
This compares to an underlying IAS 19 deficit of £3,071,000. As a result, the liabilities in the scheme are only sensitive to a reasonable change
in the discount rate assumption. A 0.5 per cent increase/ decrease in the discount rate would give rise to a £83,000 decrease/ £85,000 increase
in the deficit at 31 March 2014.
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.
Report & Accounts 2014 Cranswick plc
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NOTES TO THE ACCOUNTS (CONTINUED)
25. Pension schemes (continued)
f) Plan assets
Return seeking:
UK equities
Overseas equities
Diversified growth funds
Debt instruments:
Corporate bonds
Gilts
Index linked bonds
Other:
Property
Cash
Total
2014
Fair value of
plan assets
£’000
2013
Fair value of
plan assets
£’000
-
-
11,056
11,056
1,293
1,238
3,369
5,900
-
1,737
2,546
6,046
-
8,592
2,282
-
6,225
8,507
975
104
18,693
18,178
All of the plan assets have a quoted price in an active market except for cash, and property in the prior year.
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.
The Group expects to contribute approximately £1,320,000 to the scheme during the year ending 31 March 2015 in respect of regular
contributions and intends to contribute the same amount annually through to November 2019.
The risks to which the plan exposes the entity have been minimised by investing the assets of the scheme across a broad range of return
seeking funds and debt instruments.
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 £238,000 (2013: £134,000). Contributions during the
year totalled £1,460,000 (2013: £1,137,000).
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26. Additional cash flow information
Analysis of changes in net debt:
Group
Cash and cash equivalents
Overdrafts
Other financial assets
Revolving credit
Finance leases and hire purchase contracts
At
31 March
2013
£’000
7,633
(549)
7,084
1,398
8,482
(28,498)
(55)
Cash
flow
£’000
4,590
549
5,139
(1,002)
4,137
500
349
Other
non-cash
changes
£’000
At
31 March
2014
£’000
-
-
-
(396)
(396)
(900)
(603)
12,223
-
12,223
-
12,223
(28,898)
(309)
Net debt
(20,071)
4,986
(1,899)
(16,984)
Net debt is defined as cash and cash equivalents and loans receivable less interest bearing liabilities (net of unamortised issue costs).
Group
Cash and cash equivalents
Overdrafts
Other financial assets
Revolving credit
Finance leases and hire purchase contracts
At
31 March
2012
£’000
20,100
(1,312)
18,788
2,094
20,882
(42,246)
(298)
Cash
flow
£’000
(12,467)
763
(11,704)
(696)
(12,400)
14,000
243
Other
non-cash
changes
£’000
-
-
-
-
-
At
31 March
2013
£’000
7,633
(549)
7,084
1,398
8,482
(252)
-
(28,498)
(55)
Net debt
(21,662)
1,843
(252)
(20,071)
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Report & Accounts 2014 Cranswick plc
111
NOTES TO THE ACCOUNTS (CONTINUED)
26. Additional cash flow information (continued)
Analysis of changes in net debt:
Company
Cash and cash equivalents
Revolving credit
At
31 March
2013
£’000
5,169
(28,498)
Cash
flow
£’000
3,082
(1,000)
Other
non-cash
changes
£’000
At
31 March
2014
£’000
-
600
8,251
(28,898)
Net debt
(23,329)
2,082
600
(20,647)
Company
Cash and cash equivalents
Revolving credit
At
31 March
2012
£’000
18,137
(42,246)
Cash
flow
£’000
(12,968)
14,000
Other
non-cash
changes
£’000
At
31 March
2013
£’000
-
(252)
5,169
(28,498)
Net debt
(24,109)
1,032
(252)
(23,329)
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 and Clydesdale Bank PLC (trading as Yorkshire Bank) (2013: 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 £30,000,000 as at 31 March 2014 (2013: £29,549,000).
For the Company, the amounts drawn down by other Group companies which were guaranteed by the Company at the year end totalled £nil
(2013: £549,000).
28. Commitments
(a) The Directors have contracted for future capital expenditure for property, plant and equipment totalling £6,259,000
(2013: £5,206,000).
(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.
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Cranswick plc Report & Accounts 2014
2014
£’000
4,136
5,204
3,267
2013
£’000
3,620
7,892
3,282
12,607
14,794
29. Related party transactions
During the year the Group and Company entered into transactions, in the ordinary course of business, with related parties, including
transactions between the Company and its subsidiary undertakings. In the Group accounts transactions between the Company and its
subsidiaries are eliminated on consolidation but these transactions are reported for the Company below:
Company
Related party – subsidiaries
2014
2013
Services rendered
Interest paid to
Dividends received
to related party
related party
from related party
£’000
£’000
£’000
17,560
19,000
2,724
2,066
12,700
11,404
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:
Group
Short-term employee benefits
Post-employment benefits
Share-based payment
2014
£’000
4,257
138
492
4,887
2013
£’000
6,698
150
621
7,469
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Report & Accounts 2014 Cranswick plc
113
SHAREHOLDER INFORMATION
FIVE YEAR STATEMENT
2014
£’m
2013
£’m
(Restated)
2012
£’m
2011
£’m
2010
£’m
Turnover
994.9
875.2
820.8
758.4
740.3
Profit before tax
54.8
47.3
48.4
Adjusted profit before tax*
52.2
49.1
45.6
47.1
47.3
43.8
43.8
Earnings per share
88.7p
74.9p
78.6p
74.5p
69.7p
Adjusted earnings per share*
84.1p
78.7p
72.9p
72.8p
69.7p
Dividends per share
32.0p
30.0p
28.5p
27.5p
25.0p
Capital expenditure
22.9
33.2
21.7
35.9
20.5
Net debt
Net assets
(17.0)
(20.1)
(21.7)
(48.3)
(54.7)
302.7
273.7
245.9
220.9
193.6
* Adjusted profit before tax and earnings per share exclude the effects of release of contingent consideration and net IAS 41 valuation
movement on biological assets in 2014, impairment of property, plant and equipment in 2013 and impairment of goodwill and the effect of
associate in 2012. These are the measures used by the Board to assess the Group’s underlying performance.
The comparative for 2013 has been restated to reflect an amendment to IAS 19 Employee Benefits. Further details can be found in notes
2 and 25.
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 2014
SHAREHOLDER ANALYSIS
AT 9 MAY 2014
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 2013
Share price at 31 March 2014
High in the year
Low in the year
Number of
Number of
holdings
shares
1,134
681
5,128,999
43,835,524
1,815
48,964,523
952
511
110
136
39
67
378,567
1,171,025
783,373
3,161,798
2,775,384
40,694,376
1,815
48,964,523
986p
1,223p
1,321p
986p
Share price movement
Cranswick’s share price movement over the ten year period to May 2014 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 Cranswick’s share price
at 5 May 2004 (360p), is shown below:
Share price movement p (rebased to Cranswick)
Cranswick
FTSE All Share
FTSE 350 Food Producers
1,400
1,200
1,000
800
600
400
200
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Investec
Report & Accounts 2014 Cranswick plc
115
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ADVISERS
Secretary
Malcolm Windeatt FCA
Company number
1074383
Registered Office
Stockbrokers
Registrars
Auditors
Tax advisers
Solicitors
Bankers
74 Helsinki Road
Sutton Fields
Hull
HU7 0YW
Investec Investment Banking – London
Shore Capital Stockbrokers – Liverpool
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0871 664 0300 (calls cost 10 pence 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: shareholderenquiries@capita.co.uk
www.capitaassetservices.com
Ernst & Young LLP – Hull
PricewaterhouseCoopers – Leeds
Rollits LLP – Hull
Lloyds TSB Bank plc
The Royal Bank of Scotland plc
Clydesdale Bank PLC (trading as Yorkshire Bank)
Merchant bankers
N M Rothschild & Sons – Leeds
116
Cranswick plc Report & Accounts 2014
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REGISTERED OFFICE
Cranswick plc, Helsinki Road, Sutton Fields, Hull HU7 0YW
www.cranswick.co.uk