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Cranswick plc Annual Report & Accounts
Year Ended 31 March 2018
ABOUT US
Cranswick plc is a leading and innovative British supplier
of premium, fresh and added value food products with
annual revenues in excess of £1.4 billion. We employ over
10,000 people across 16 UK manufacturing facilities.
CONTENTS
Strategic Report
Corporate Governance
Financial Statements
2
4
6
8
10
12
Our Business
Our Operations
46 Leadership
46 Chairman’s Governance Overview
87
88
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Chairman’s Statement
48 Board of Directors
94 Group Income Statement
Our Culture
Chief Executive’s Review
Business Model
50 Governance
53 Effectiveness
53 Meeting Attendance and Key Activities
95
96
98
Statements of Comprehensive Income
Balance Sheets
Statements of Cash Flow
14 Our Supply Chain Model
54
Board Performance Evaluation
100 Statements of Changes in Equity
16 Market Overview
18
20
Strategy and KPIs
Strategy in Action
56 Accountability
56
57
Board Committees
Audit Committee Report
38 Operating and Financial Review
63 Nomination Committee Report
42
Risk Report
66 Remuneration
66 Remuneration Committee Report
71
77
Remuneration Policy
Annual Report on Directors’ Remuneration
83 Engagement with Shareholders
84 Directors’ Report
102 Notes to the Accounts
Shareholder Information
138 Five Year Statement
138 Financial Calendar
139 Shareholder Analysis
140 Advisers
HIGHLIGHTS
A YEAR OF RECORD
CAPITAL INVESTMENT
£59 MILLION INVESTED IN OUR ASSET BASE FOR FUTURE GROWTH.
REVENUE £’M
+17.6%
2018
2017
2016
1,464.5
1,245.1
1,016.3
+22.4%
2018
2017
2016
ADJUSTED EARNINGS PER SHARE P*
145.0P
DIVIDEND PER SHARE P
+19.9%
2018
2017
2016
145.0
120.9
102.8
+21.8%
2018
2017
2016
92.4
75.5
64.4
53.7P
53.7
44.1
37.5
£1,464.5M
ADJUSTED PROFIT BEFORE TAX £’M*
£92.4M
FREE CASH FLOW £’M*
£111.7M
NET FUNDS/(DEBT) £’M
£20.6M
+54.3%
2018
2017
2016
111.7
+£31.6M
(11.0)
72.4
83.4
2018
2017
2016
20.6
17.8
+13%
Total volume growth
3.1m
Record pig numbers processed
+30%
Export sales
£70m
Approved investment in new primary
poultry facility and supply chain
16
UK manufacturing locations
>10,000
Size of workforce
* Adjusted and like-for-like references throughout the Report and Accounts refer to non-IFRS measures or Alternative Performance Measures (APMs). Definitions and
reconciliations of the APMs to IFRS measures are provided in Note 31.
Cranswick plc Annual Report & Accounts 2018
1
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report OUR BUSINESS
OUR PURPOSE IS TO FEED THE
NATION WITH AUTHENTICALLY MADE,
SUSTAINABLY PRODUCED FOOD THAT
IS CREATED WITH PASSION
OUR PRODUCTS
WE PRODUCE A RANGE OF HIGH QUALITY, PREDOMINANTLY
FRESH FOOD INCLUDING FRESH PORK, POULTRY, CONVENIENCE
AND GOURMET PRODUCTS.
New retail business and product launches
have driven strong growth in the poultry
category during the year.
A meaningful proportion of our revenue
growth is generated by creating, developing
and launching new food products to meet
the constantly changing demands of our
customers and consumers, with over 800
new products launched in the year.
Read more on pages 30 and 31.
Product profile % of Group revenue
£1,464.5M
£1,245.1M
11%
19%
38%
32%
12%
19%
36%
33%
2017
2018
Fresh Pork
Convenience †
Gourmet Products*
Poultry
† Cooked Meats, Continental Products and Ingredients.
* Pastry, Sausages and Burgers, Bacon and Gammon.
FRESH & ADDED
VALUE PORK
TRADITIONAL
AIR-DRIED BACON
& GAMMON
SAUSAGES &
BURGERS
HANDMADE
PASTRY
2
Cranswick plc Annual Report & Accounts 2018
SUPPLY CHAIN
LEAN PROCESSING
Our vertically integrated supply chain model
ensures that we can maintain the production
and processing of high quality UK farm-assured
pigs and chickens, which is a crucial component
of our business model.
Our commitment to ongoing capital
investment over many years is reflected in the
quality of our production facilities which are
some of the most efficient and well invested
in the sectors in which we operate.
Read more on pages 14 and 15.
Read more on page 26.
OUR CUSTOMERS
AROUND 70 PER CENT OF OUR REVENUE IS GENERATED FROM OUR RETAIL
CUSTOMERS, PRIMARILY THROUGH THEIR OWN-LABEL PRODUCTS AND
PARTICULARLY IN THEIR PREMIUM AND SUPER-PREMIUM TIERS.
We have a broad retail customer base selling
our products into each of the top four UK
multiple grocers as well as the growing
premium grocery and discounter channels.
We have a strong presence in the ‘food-to-go’
sector and we have a clear, targeted strategy
to build long-term relationships in this fast
developing market.
Food service continues to be a growth sector for
us with many of our products now listed by UK
hotel, pub and other food service outlet chains.
We also have a rapidly growing export
business with Far Eastern markets being
particularly important.
Read more in our Market Review on pages 16 and 17.
Customer profile % of Group revenue
£1,464.5M
£1,245.1M
6%
21%
73%
7%
22%
71%
2017
UK Retail
UK Food Service
and Manufacturing
2018
Export
COOKED
MEATS
CONTINENTAL
PRODUCTS
FRESH
CHICKEN
PREMIUM COOKED
POULTRY
Cranswick plc Annual Report & Accounts 2018
3
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report OUR OPERATIONS
WE ARE ONE OF THE LARGEST FOOD
PRODUCERS IN THE UK OPERATING FROM
HIGHLY EFFICIENT AND WELL INVESTED
PRODUCTION FACILITIES
SINCE BEING FORMED BY FARMERS IN THE EARLY 1970s, WE HAVE GROWN ORGANICALLY AND
THROUGH TARGETED ACQUISITIONS TO BE A LEADING AND INNOVATIVE BRITISH SUPPLIER OF
PREMIUM, FRESH AND ADDED VALUE FOOD PRODUCTS.
WORKFORCE
REVENUE
We have a workforce of over
Our annual revenues are in excess of
DIVIDEND PER SHARE GROWTH
Number of consecutive years we
have increased dividend per share
10,000
£1.4bn
28
STRATEGIC CAPITAL INVESTMENT
CROWN CHICKEN
We have received planning permission to build
a new poultry primary processing facility in Eye,
Suffolk. This is scheduled to be completed in
late 2019, and will double our existing capacity.
We also plan to upscale our supply chain.
CONTINENTAL FOODS
The new £28 million facility, based at Bury
in Lancashire, is now complete and being
commissioned. The site will consolidate
production from the two existing facilities
and lift capacity by approximately 70 per cent.
AGRICULTURE
We are investing £4 million in our Wayland
Farms operation to increase breeding and
finishing capacity of premium, outdoor-bred
pigs to meet customer demand.
OUR HISTORY
ENTRY TO THE
STOCK MARKET
COOKED MEATS, PRIMARY PORK
PROCESSING, GOURMET SAUSAGES
CONTINENTAL PRODUCTS,
HAND-CURED, AIR-DRIED BACON
1985
1990s
2000s
4
Cranswick plc Annual Report & Accounts 2018
LOCATION OF PRODUCTION
FACILITIES
1 Handmade Pastry
2 3 Fresh Pork
4 Cooked Meats
5 Gourmet Sausages & Burgers
6 Premium Cooked Poultry
7 Traditional Bacon and Gammon
8 9 10 Continental Products
11 Cooked Meats
12 Fresh Pork & Sausages
13 Feed Milling
14 Fresh Chicken
15 Cooked Meats
16 Fresh Pork
Agriculture
16 BALLYMENA
PRODUCTION FACILITIES
We operate from sixteen well
invested, highly efficient production
facilities in the UK
16
1 MALTON
2 3 4 5 6 HULL
7 SHERBURN
8 BURY
9 10 MANCHESTER
11 BARNSLEY
12 13 NORFOLK
14 SUFFOLK
15 MILTON KEYNES
HANDMADE PASTRY, PIG BREEDING AND REARING,
PREMIUM COOKED POULTRY
CHICKEN BREEDING, REARING,
PROCESSING AND ANIMAL FEED
2010-2015
2016
Cranswick plc Annual Report & Accounts 2018
5
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report CHAIRMAN’S STATEMENT
A YEAR OF COMMERCIAL
AND STRATEGIC PROGRESS
This has been a particularly positive year for
the business, even allowing for the additional
week, in what was a 53 week year. Key features
have been the strong organic growth and
the continued significant investment in the
Company’s infrastructure.
CAPITAL INVESTMENT
Investment in the asset base amounted
to £59 million, a level higher than in any
previous year. The expenditure on the new
site for Continental Products was the main
individual item and this is now complete
and being commissioned, as planned.
The final dividend, if approved by
Shareholders, will be paid on 7 September 2018
to Shareholders on the register at the close
of business on 20 July 2018. Shares will go
ex-dividend on 19 July 2018. Shareholders will
again have the option to receive the dividend
by way of scrip issue.
BOARD
As announced on 5 March, the Board has been
strengthened with the appointment, in April,
of Pam Powell and Tim Smith as Non-Executive
Directors. They bring significant additional
expertise and sector experience which the
Group will benefit from as it continues to move
forward and develop. Steven Esom will have
served as a Non-Executive Director for 9 years
in November 2018 when he intends to retire
from the Board, in accordance with the
principles of good corporate governance.
CORPORATE GOVERNANCE
The Board embraces the UK Corporate
Governance Code as part of its culture and
a statement relating to compliance with
the Code is included within the Governance
Report on page 47.
Revenue reached record levels as did capital
expenditure. Further investment is planned
to support future organic growth, deliver
efficiencies and to maintain the quality of
the fixed asset base.
The balance sheet is in great shape reflecting
the strong cash generative nature of
the business.
Management around the Group has been
strengthened with recent additions to the
Board and a number of appointments
to the operational teams around the business.
RESULTS
Total revenue in the year was £1,464.5 million.
This was 18 per cent ahead of the previous year
and was driven by robust growth across all
product categories including further increases
in exports. Like-for-like revenue increased 13 per
cent over the prior year with corresponding
volumes 8 per cent ahead.
Alongside record sales it is pleasing to report
that adjusted profit before tax for the year
increased 22 per cent to £92.4 million from
£75.5 million previously. Adjusted earnings per
share rose 20 per cent to 145.0 pence compared
to 120.9 pence in the prior year.
The major investment going forward is in
the Poultry business. This will comprise a new
processing facility, for which planning consent
has recently been received, and expansion of
the associated activities.
CASH FLOW AND FINANCIAL POSITION
Cranswick’s borrowings are conservatively
structured. The Company’s £160 million
unsecured banking facility provides generous
headroom and is in place through to November
2022. Strong cash generation from operating
activities resulted in a net funds position at
the end of the year of £20.6 million compared
to borrowings of £11.0 million a year earlier.
DIVIDEND
The Board is proposing to increase the final
dividend to 38.6 pence per share from 31.0
pence previously, an increase of 24.5 per cent.
Together with the interim dividend, which
was raised by 15.3 per cent to 15.1 pence per
share, this gives a total dividend for the year
of 53.7 pence per share, an increase of 21.8
per cent on the 44.1 pence per share paid
last year. This is the 28th consecutive year
of dividend growth.
DIVIDEND PER SHARE (P)
This is the 28th consecutive year of dividend growth.
53.7
44.1
37.5
34.0
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
6.8 7.5
8.3
2.8 3.3 3.8 4.0 4.1 4.3 4.6 5.1 5.8
1990
1991
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
6
Cranswick plc Annual Report & Accounts 2018
Corporate Governance
Financial Statements
Shareholder Information
SUSTAINABILITY
Cranswick takes its responsibility to colleagues,
customers, Shareholders, suppliers, producers
and the environment seriously. The Company
recognises that a balanced and committed
approach to all aspects of sustainability will
bring benefits to each of its stakeholders and
strengthen its business position and credentials
to facilitate sustainable growth and development.
CULTURE
The Group’s activities are decentralised across
product categories within the food sector and
supported through collaboration in key areas.
The human resource function is particularly
important within this format and is a key
element of the overall strategic plan.
All colleagues are viewed as critical stakeholders.
There is commitment to implementing a training
and development plan that delivers workforce
capabilities, skills and competencies through
apprenticeship schemes, development
programmes and training courses. The success
of this is evidenced by the number of internal
promotions to meet the needs of Cranswick’s
growing business.
The Board is committed to this and recognises
that the Company’s continued success would
not be possible without talented and motivated
management teams supported by skilled and
enthusiastic colleagues at each site. On behalf
of the Board I thank all our colleagues for their
commitment and contribution.
OUTLOOK
The business has continued to make commercial
and strategic progress over the past year and the
Board believes there is a solid platform in place
from which to progress further within the pork,
poultry and associated categories of the food
sector. The strengths of the Company include its
long-standing customer relationships, breadth
and quality of products, growing export channels
and well invested asset infrastructure.
Trading in the current financial year, which will
be weighted more towards the second half, has
started in line with management’s expectations.
The Board believes that the Company is well
positioned to continue its successful development
in the current year and going forward.
Martin Davey
Chairman
22 May 2018
OUR GUIDING PRINCIPLES
QUALITY
VALUE
INNOVATION
PEOPLE
Read more on page 8.
Cranswick plc Annual Report & Accounts 2018
7
Strategic Report OUR CULTURE
A BUSINESS BUILT ON OUR
GUIDING PRINCIPLES
QUALITY
VALUE
INNOVATION
PEOPLE
We are passionate about
high quality, great tasting
food. We focus on
premium quality products
and categories, using
authentic, artisan
processes wherever
possible to maintain the
heritage and integrity
of our food.
We continue to make value
adding acquisitions and to
invest heavily in operating
facilities enabling us to
offer innovative, high
quality, great value food
to our customers from
some of the most efficient
food production facilities
in the UK.
We have dedicated teams
researching consumer
trends and food innovation
opportunities across the
globe. We constantly
research and test new
recipes and ideas, allowing
us to deliver creative food
concepts to our customers.
We create a supportive
but entrepreneurial
environment, which allows
both individuals and the
business to prosper. We
work closely with our
customers to develop new
products for the rapidly
changing retail
environment.
DEVELOPING TALENT
Our passionate and dedicated
employees have driven the growth
of our business and have helped
to create a unique culture across
the Group.
Our commitment to the recruitment,
training and development of our
workforce is demonstrated by our
new apprenticeship programme,
with over 90 apprentices currently
being trained within our business.
Our apprentices, many of whom
are recruited from local schools
and colleges, learn new skills whilst
working within our production
facilities. At our Fresh Pork primary
processing facility in Hull, we currently
have over 40 apprentice butchers
learning traditional knife skills in a
dedicated area of the butchery hall.
During the two year programme this
practical, hands on experience is
combined with studying at college.
On completion of the course, our
apprentices will move into permanent
full-time roles with the potential to
progress into management positions.
Due to the success of the
programme, we are planning to
extend the scheme to double the
number of apprenticeship places
in order to support the continued
growth plans of the business.
8
Cranswick plc Annual Report & Accounts 2018
STAKEHOLDER ALIGNMENT AND ENGAGEMENT
TO SUCCEED IN OUR VISION OF BEING THE WORLD’S MOST SUSTAINABLE MEAT BUSINESS,
WE WORK WITH A WIDE RANGE OF STAKEHOLDERS. OUR GUIDING PRINCIPLES, SET OUT
OPPOSITE, ALIGN CLOSELY WITH THEIR REQUIREMENTS.
We recognise the importance of regular engagement with our stakeholders to ensure we capture and embrace feedback
and emerging trends.
Our key stakeholders and the ways in which we engage with them are detailed below:
REGULATORS
Requirements
– Adherence to food safety standards
– Traceability of products
– Meet environmental regulations
Engagement
– Regular audits and inspections
– Proactive engagement with regulatory
bodies
– Collaboration to create a robust
regulatory landscape
Read more on pages 22 and 23.
CUSTOMERS AND CONSUMERS
Requirements
– Innovative and tasty food
– High quality products
– Dedicated, sustainable supply chains
Engagement
– Management of customer relationships
– New product development partnering
– Collaboration on sustainability objectives
Read more on pages 16 and 17.
SHAREHOLDERS
Requirements
– Return on investment
– Strong governance
– Sustainability
Engagement
– Results presentations and post-results
meetings
– Annual report and accounts and AGM
– Corporate website
Read more on page 83.
PEOPLE
Requirements
– Learning and development
– Career opportunities
– Health and safety
Engagement
– Works Committees
– Appraisal and training processes
– Staff surveys
Read more on pages 26 and 27.
PRODUCERS AND SUPPLIERS
Requirements
– Responsible, sustainable procurement
– Long-term relationships
– Focus on ethical standards and animal
welfare
Engagement
– Collaboration with pig producer groups
– Supplier audits
– Sharing of ethical data through SEDEX
Read more on pages 22 and 23.
COMMUNITIES
Requirements
– Positive local impact of operations
– Sustainable use of resources
– Job opportunities
Engagement
– Support for local charities
– Engagement with local schools, colleges and
university
– Employee volunteering
Read more on page 37.
EMPLOYEE ENGAGEMENT
During the year we performed a comprehensive internal materiality
study to identify the most important sustainability topics for our
employees. The survey was performed by an external consultant
to ensure impartiality and secure the anonymity of the respondents.
Each key operating site was visited with both online and offline surveys
completed by our employees.
Read more about our new sustainability
initiative on pages 34 and 35.
The overriding goal of this process was to intensify employee dialogue,
to gather opinions, expectations and ideas, and to consider these
in relation to our business operations. We also wanted to better
understand the impact of current and future global sustainability
challenges on our employees, and to help manage these by finding
and developing effective solutions. We also identified those employees
who actively want to support and participate in our new sustainability
programme ‘Second Nature’. We were overwhelmed by the response
with over 600 employees stepping forward to be our ‘Change Makers’.
Cranswick plc Annual Report & Accounts 2018
9
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report CHIEF EXECUTIVE’S REVIEW
INVESTING FOR
THE FUTURE
We strive to improve our core offer, recognising
that consumers’ tastes and expectations
continue to evolve. Innovation is an essential
strand of this process and we successfully
developed and launched new ‘Ready to Cook’
and ‘Slow Cook’ ranges for one of our lead
customers. We also work tirelessly throughout
the year to ensure we can offer our customers
and consumers innovative and authentic
products over the peak Christmas trading
period.
INVESTING IN A SUSTAINABLE
BUSINESS MODEL
We have always ensured that our business
model reflects our commitment to corporate,
social and environmental responsibility.
During the year, following extensive internal
and external stakeholder engagement,
we launched our ‘Second Nature’ initiative.
I am delighted at the level of engagement we
encountered both from our own colleagues
and our external partners.
INVESTING IN OUR SUPPLY CHAIN
Our vertical supply chains in both pork
and chicken are essential components
of our business model. We own our own pig
breeding and rearing operations and fully
integrated chicken supply chain including
milling, hatchery and growing operations. 17
per cent of the British pigs and 100 per cent
of the chickens we process are from our own
farms. We will continue to invest in both supply
chains to ensure that we are able to give our
customers and consumers the confidence that
our pork and chicken products are sourced
from animals that have been sustainably
and ethically reared.
INVESTING IN VALUE ADDING
CORPORATE ACTIVITY
A key component of our strategy is to
complement our organic growth drivers with
value adding acquisitions. Whilst this remains
a key objective, the last financial year was a
period of consolidation after a very busy period
of corporate activity in the year to March 2017.
We made good progress in assimilating and
developing both our Crown Chicken and
Ballymena businesses which were acquired in
April and November 2016 respectively. Both
businesses have made pleasing progress. We
have lifted output from our Ballymena facility
by 50 per cent and we have ambitious growth
plans for our Crown Chicken business.
INVESTING IN NEW MARKETS
We remain firmly focused on developing our
export trade. We saw some of the heat come
out of the Chinese market after a very buoyant
period a year earlier but our like-for-like volume
performance improved quarter by quarter and
returned to growth in the second half of the
year. We received the positive confirmation,
last autumn, that Northern Ireland had been
granted approval for direct exports to China
and, at the same time, that our Hull facility
had also been given approval to ship more
products to China directly. These approvals
had little impact on the period under review
but leave us well placed to continue to develop
our Far Eastern export trade going forward.
We continue to explore new markets, both in
the Far East and globally and have developed
trade routes into Japan, Australia, New
Zealand and Canada.
We have delivered a strong financial
performance for the year and made further
progress in delivering our strategy. We grew
like-for-like revenue by 13 per cent and
increased adjusted profit before tax by
22 per cent.
INVESTING IN OUR ASSET BASE
During the year we spent a record £59 million
across our already well invested asset base.
This brings the total investment in our
infrastructure over the last eight years
to over £270 million.
Our new £28 million Continental Products
facility in Bury, Lancashire is currently being
commissioned. This has been our largest
capital project to date and gives us an asset
which underscores our commitment to
developing this fast-growing sector.
In November we announced our plans to
build a new chicken processing facility in Eye,
Suffolk. We will spend over £50 million on
the plant and we have committed to further
substantial investment in our upstream
agricultural operations to ensure that we have
a sustainable supply chain to serve the new
processing facility. We received confirmation in
April of this year that our planning application
had been approved and we are now preparing
the site in readiness for the build project. This
investment will give us an industry leading
asset and will more than double our current
capacity as well as extending our capability
to offer a broad range of added value fresh
chicken products.
We also continue to invest heavily across our
broader asset base to ensure that our facilities
and operations remain fit for the future.
INVESTING IN OUR CORE BUSINESS
We continue to support our strategic retail
partners in our core categories. Business
secured under long term supply agreements
enables us to focus on delivering high quality
products and to drive category innovation
which are both precursors to successfully
growing our core business.
We processed record pig numbers through our
three primary processing facilities with much
of the output being transferred to our added
value businesses for conversion into premium
products for our customers.
10
Cranswick plc Annual Report & Accounts 2018
Our commitment to animal welfare was
recognised by us retaining our Tier 1 ranking in
the 2017 global Business Benchmark on Farm
Animal Welfare (BBFAW). The BBFAW report
recognised Cranswick as one of only five
companies globally to have achieved the
highest Tier 1 level.
INVESTING IN OUR PEOPLE
We have made further strong progress
in developing and enhancing our talent
programme. We need to ensure that we
have the capability and depth of resource to
support the growth and development of the
business. We continue to invest heavily in our
apprenticeship programme and now have over
90 apprentices in roles across the Group. Our
graduate programme continues to attract
high calibre applicants. Our well-established
training and development programmes have,
this year, been augmented by establishing
a mentoring programme to support career
progression and personal development. Our
people are our greatest asset and I would like
to thank our highly skilled and committed
colleagues for their enthusiasm and support
in driving our business forward so successfully.
INVESTING IN OUR COMMUNITIES
As a large employer we recognise that we
are a focal point for the communities in which
our operations are based. In East Yorkshire,
East Anglia and the other regions where our
facilities are situated, we take a proactive
approach to supporting local initiatives.
In 2017 we were a City Partner to Hull, UK
City of Culture. We also engage extensively
with local schools and colleges by providing
mentoring programmes, offering interview
workshops and through raising awareness
of the food industry.
Over the last 12 months we have strengthened
our asset base, enhanced market positions and
developed new customer relationships. We
continue to make good progress against each of
our strategic objectives and we are well placed
to continue our successful development in the
current financial year and over the longer term.
Adam Couch
Chief Executive
22 May 2018
OUR STRATEGIC PILLARS
HIGH QUALITY
PRODUCTS
OPERATING
EXCELLENCE
We produce high quality
food, safely, in technically
and legally compliant
facilities.
Continued investment
ensures that our factories
are some of the most
efficient food production
facilities in the UK.
Read more on pages 20 to 23.
Read more on pages 24 to 27.
SALES GROWTH
SUSTAINABILITY
Our long-term sales
growth strategy is to
consolidate existing
market positions, develop
new products and
channels, and grow our
international operations
and customer base.
Organic growth initiatives
are complemented by
targeted acquisitions.
We invest heavily to secure
our supply chains and
provide career
opportunities to our
employees, and these
investments provide
confidence that we
have a long-term
sustainable business.
Read more on pages 28 to 31.
Read more on pages 32 to 37.
Cranswick plc Annual Report & Accounts 2018
11
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report BUSINESS MODEL
A RESPONSIBLE AND
SUSTAINABLE APPROACH
TO VALUE CREATION
CRANSWICK IS ONE OF THE LARGEST FOOD PRODUCERS IN THE UK. WE PRODUCE AND
SUPPLY PREMIUM FOOD TO UK GROCERY RETAILERS, THE FOOD SERVICE SECTOR AND
OTHER UK AND GLOBAL FOOD PRODUCERS. OUR BUSINESS MODEL IS UNDERPINNED
BY OUR FOUR GUIDING PRINCIPLES OF QUALITY, VALUE, INNOVATION AND PEOPLE.
WHAT WE DO
WE FARM
WE PRODUCE
We own our own pig breeding and rearing
operations, and a fully integrated chicken
supply chain including a feed mill, hatchery
and broiler farms.
From our mill to our four primary processing
and eleven secondary processing facilities we
develop innovative, great tasting food products
to the highest standards of food safety whilst
prioritising provenance.
WHAT MAKES US DIFFERENT
VERTICALLY INTEGRATED
SUPPLY CHAINS
Supply chain security and integrity is a crucial
component of our business model. Owning
our own farms gives us full traceability from
‘farm-to-fork’.
17%
WORLD CLASS MANUFACTURING
FACILITIES
Our commitment to ongoing investment over
many years is reflected in the quality of our
production facilities, which are some of the best
invested and most efficient in the UK food sector.
£59m
of the British pigs we process are from our
own farms.
invested across our asset base during
the year.
100%
of the chickens we process are from our
own farms.
12
Cranswick plc Annual Report & Accounts 2018
TECHNICAL EXCELLENCE
We have a strong track record of excellence
in food science and food sector technology,
supported by rolling programmes of external
compliance audits and technical inspections.
13
number of BRC grade ‘A’ ratings during
the year.
OUR BUSINESS MODEL IS SUPPORTED
BY OUR STRATEGIC PILLARS
HIGH QUALITY
PRODUCTS
OPERATING
EXCELLENCE
SALES GROWTH
SUSTAINABILITY
Read more on page 20 to 23.
Read more on pages 24 to 27.
Read more on pages 28 to 31.
Read more on pages 32 to 37.
WE SUPPLY
HOW WE CREATE VALUE
We deliver great tasting, high quality
food products with integrity to our
customers through retail, food service
and other channels.
Our track record of increasing sales and profits generates returns for our
stakeholders and for ongoing reinvestment.
FOR OUR EMPLOYEES
Engagement
Training
Development opportunities
93
apprentices.
Read more about our supply chain on pages 14 and 15.
INNOVATION
Our dedicated team of development chefs deliver
innovative premium meal solutions for today’s
modern consumer.
FOR OUR INVESTORS
Dividend growth
EPS accretion
Value creation
£18.2m
paid to Shareholders.
7.2%
of total revenue came from new product launches.
FOR OUR CUSTOMERS
SKILLED MANAGEMENT & WORKFORCE
We have stable, experienced and talented operational
management teams supported by a skilled workforce.
Value for money
Provenance
Choice
824
new product launches.
>10,000
size of workforce.
FOR OUR COMMUNITIES
Support for local charities
Investment in local initiatives
Employment
75%
of our workforce live within a 10
mile radius of their workplace.
Cranswick plc Annual Report & Accounts 2018
13
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report
OUR SUPPLY CHAIN MODEL
A FOCUSED APPROACH
TO SUSTAINABILITY
AND TRACEABILITY
OUR VERTICALLY INTEGRATED SUPPLY CHAINS ENSURE THAT WE CAN MAINTAIN
THE PRODUCTION AND PROCESSING OF HIGH QUALITY, UK FARM-ASSURED PIGS
AND CHICKENS TO MEET OUR CUSTOMERS’ NEEDS.
WE FARM
WE PRODUCE
CRANSWICK
OWNED
BRITISH
FARMS
PIG
CONTRACTS
WITH OTHER
UK FARMS
FEED MILLING
EUROPEAN
PIG MEAT
IMPORTS
14
Cranswick plc Annual Report & Accounts 2018
CRANSWICK
PRIMARY
PROCESSING
OTHER HIGH
QUALITY
INGREDIENTS FROM
SUSTAINABLE &
TRUSTED SUPPLIERS
Read more about our new
sustainability initiative on
pages 34 and 35
227
Supply chain audits carried
out in the year
100%
Proportion of chickens processed
travelling less than 25 miles
from farms
RETAIL & WHOLESALE FRESH PORK & CHICKEN
COOKED
MEATS
SAUSAGES
BACON
FRESH PORK
& CHICKEN
PORK
FURTHER
PROCESSING
OTHER
PRODUCT
CATEGORIES
WE SUPPLY
RETAIL
CONVENIENCE
& ONLINE
FOOD SERVICE
FOOD-TO-GO
EXPORT
PREMIUM
COOKED
POULTRY
CONTINENTAL
PRODUCTS
PASTRY
MANUFACTURING
Cranswick plc Annual Report & Accounts 2018
15
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report MARKET OVERVIEW
OUR
MARKETS
THE UK FOOD MARKET IS CONTINUOUSLY EVOLVING. OUR DIVERSE PRODUCT PORTFOLIO,
WIDE RANGING CUSTOMER BASE AND EXCELLENT PRODUCT INNOVATION SKILLS ENSURE WE
ARE ABLE TO RESPOND TO THESE CHANGES AND DELIVER GREAT TASTING, HIGH QUALITY
PRODUCTS, WITH INTEGRITY, TO MEET OUR CUSTOMERS’ NEEDS.
RETAIL, CONVENIENCE AND ONLINE
TRENDS
• Growth achieved by Big Four supermarkets,
but their market share continues to fall
• Continued expansion of the discount
retailers
• Premium categories continue to perform
strongly, but with premium retailers
now under pressure from the Big Four
supermarkets
• Consumers are demanding quick, easy,
healthy and tasty meal solutions
OPPORTUNITIES
• Pork and poultry remain competitively
priced proteins
• Longer term contracts with agreed pricing
structures to secure the supply chain and
differentiate through specific pig genetics
• Growing demand for poultry products
• Consumers looking for inspiration from
added-value ranges for convenience meals
RESPONSE
• Continued focus on super-premium
•
and premium within our product range
Investment in UK pig herd to further
secure supply chains
• Crown Chicken investment to extend
our presence in the poultry sector and
maintain our fully integrated supply
chain model
EATING OUT OF HOME
TRENDS
•
‘Food-to-go’ sector continues to expand
• Growth of ‘dining out’ occasions across
breakfast, lunch and dinner
• Focus on health and modern meal solutions
OPPORTUNITIES
• Global food trends are driving a growing
number of operators and formats
Increasing demand for innovative products
•
• Healthy, modern and quick meal solutions
demanded by consumers
• Developing products that appeal to health
conscious convenience shoppers, including
‘grab and go’ lunchtime products and
modern ‘mid-week’ meal solutions
RESPONSE
•
Investment in our poultry businesses
is increasing our market share within
the ‘food-to-go’ sector
Innovative product solutions delivered by
our dedicated team of development chefs,
including ‘Slow Cook’ and ‘Sous Vide’ ranges
• Growing range of healthy eating and ‘food-
•
to-go’ options within our categories
EXPORT
TRENDS
• Strong demand for pork products from
OPPORTUNITIES
• Favourable exchange rates making
Far East and European markets
exports more competitive
• Continued price premium on UK products
• Demand/supply imbalance across
• Higher welfare UK product is a key
differentiator
RESPONSE
• Developing direct relationships in China
•
Investment in Ballymena to drive further
export growth, including Chinese approval
• Approval received by our Hull facility to
developed markets
• Maximising the value of cuts through
export more products into China
global markets
16
Cranswick plc Annual Report & Accounts 2018
“Food safety is the most
important priority for Chinese
consumers buying meat,
ahead of price and quality.”
Source: AHDB.
Fresh and chilled expenditure change yoy %
15.9
13.4
2017
2018
3.5
1.5
1.9
-1.1
3.7
1.3
Discount
retailers
Total
market
Big Four
supermarkets
Premium
retailers
Source: Kantar Worldpanel, 52 w/e 26 March 2017 and 27 March 2018.
35%
growth forecast of ’food-to-go’
market between 2017 and 2022
Source: IGD.
61%
of Chinese consumers would pay
a premium for British food
Source: AHDB.
Cranswick plc Annual Report & Accounts 2018
17
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report STRATEGY AND KPIs
OUR STRATEGIC
PROGRESS
STRATEGIC PILLARS
PROGRESS & FUTURE PLANS
KEY PERFORMANCE INDICATORS
Our facilities continue to undergo exacting technical audits
carried out by independent bodies, customers, government
authorities and our own compliance teams.
NUMBER OF BRC GRADE As
(-13.3%)
HIGH QUALITY
PRODUCTS
We have also increased the number of supply chain audits
carried out by our technical teams to assure the safety,
traceability, quality and provenance of our raw materials.
14
15
13
We are working closely with our customers to develop
innovative premium food products to meet the rapidly
changing demands of the UK consumer.
We are one of only 5 food companies globally to be awarded
a Tier 1 rating in the Business Benchmark on Farm Animal
Welfare (BBFAW) 2017 report.
The number of Grade A
ratings awarded during
the year by the British Retail
Consortium (BRC) against
Global Standards for Food
Safety has decreased
following the closure of our
Kingston operations and the
downgrading of one site to
Grade B.
Read more on pages 22 and 23.
2016
2017
2018
During the year we invested £59 million in our infrastructure to
support future growth, add capability and increase efficiency.
ADJUSTED OPERATING MARGIN (%)
(+22 bps)
OPERATING
EXCELLENCE
We have boosted our apprenticeship and graduate
recruitment schemes and have funded extensive training and
development programmes at all levels across the business.
We have received planning permission to build a new state-
of-the-art poultry primary processing facility in Eye, Suffolk,
which is scheduled for completion in late 2019. This will double
our existing capacity.
Read more on pages 26 and 27.
SALES
GROWTH
Like-for-like revenue was 12.7 per cent higher than prior
year, with corresponding volumes up 7.7 per cent as higher
year-on-year prices in the first half of the year more than
offset falling prices in the second half.
Total export sales were 30.2 per cent higher than prior year,
reflecting strong demand from the US and Europe and
increased output from the Group’s pork primary processing
facilities.
6.4
6.1
6.3
Adjusted operating margin
increased by 22 basis points
to 6.3 per cent reflecting
operational efficiencies and
volume growth more than
offsetting raw material
price inflation.
2016
2017
2018
LIKE-FOR-LIKE REVENUE GROWTH (%)
(+12.7%)
12.7
12.7
SUSTAINABILITY
The approvals received during the year both to export product
to China from our Ballymena facility and to export additional
product from our Hull facility create the potential to drive
further export revenue growth.
4.7
Read more on pages 30 and 31.
2016
2017
2018
Revenue growth reflects
significant business wins
driving strong like-for-like
volume growth of 7.7 per
cent.
During the year we announced the launch of ‘Second
Nature’, our Group-wide sustainability initiative. This
new project contains several major environmental and
community pledges.
We are investing £4 million in our Wayland farming business
to increase breeding and finishing capacity of premium pigs,
which will secure our supply chain.
We also plan to invest heavily to upscale our agricultural
operations to maintain our fully integrated poultry supply
chain model.
Read more on pages 34 to 37.
RELATIVE CARBON FOOTPRINT
– TONNES OF CO2e PER TONNE SALES
(-13.9%)
0.219
0.202
0.174
Strong production
efficiencies continue to
drive a reduction in our
carbon footprint.
2016
2017
2018
18
Cranswick plc Annual Report & Accounts 2018
RISKS
Food scares and
product contamination
Disease and infection
within livestock
Disruption to
Group operations
Interest rate, currency,
liquidity and credit risk
IT systems and
cyber security
Consumer demand
Reliance on key
customers and exports
Competitor activity
Growth and change
Recruitment and
retention of workforce
Pig meat – availability
and price
Health & Safety
STRATEGIC PILLARS
PROGRESS & FUTURE PLANS
KEY PERFORMANCE INDICATORS
Our facilities continue to undergo exacting technical audits
carried out by independent bodies, customers, government
authorities and our own compliance teams.
HIGH QUALITY
PRODUCTS
We have also increased the number of supply chain audits
carried out by our technical teams to assure the safety,
traceability, quality and provenance of our raw materials.
OPERATING
EXCELLENCE
SALES
GROWTH
We are working closely with our customers to develop
innovative premium food products to meet the rapidly
changing demands of the UK consumer.
We are one of only 5 food companies globally to be awarded
a Tier 1 rating in the Business Benchmark on Farm Animal
Welfare (BBFAW) 2017 report.
Read more on pages 22 and 23.
During the year we invested £59 million in our infrastructure to
support future growth, add capability and increase efficiency.
We have boosted our apprenticeship and graduate
recruitment schemes and have funded extensive training and
development programmes at all levels across the business.
We have received planning permission to build a new state-
of-the-art poultry primary processing facility in Eye, Suffolk,
which is scheduled for completion in late 2019. This will double
our existing capacity.
Read more on pages 26 and 27.
Like-for-like revenue was 12.7 per cent higher than prior
year, with corresponding volumes up 7.7 per cent as higher
year-on-year prices in the first half of the year more than
offset falling prices in the second half.
Total export sales were 30.2 per cent higher than prior year,
reflecting strong demand from the US and Europe and
increased output from the Group’s pork primary processing
facilities.
The approvals received during the year both to export product
to China from our Ballymena facility and to export additional
product from our Hull facility create the potential to drive
further export revenue growth.
Read more on pages 30 and 31.
During the year we announced the launch of ‘Second
Nature’, our Group-wide sustainability initiative. This
new project contains several major environmental and
We are investing £4 million in our Wayland farming business
to increase breeding and finishing capacity of premium pigs,
which will secure our supply chain.
We also plan to invest heavily to upscale our agricultural
operations to maintain our fully integrated poultry supply
chain model.
Read more on pages 34 to 37.
SUSTAINABILITY
community pledges.
NUMBER OF SUPPLIER AUDITS
(-1.3%)
COMPLAINTS PER MILLION UNITS SOLD
(-5.3%)
230
227
191
24
19
18
Our focus on supply chain
integrity has continued in
the current year with a
similar number of supply
chain audits carried out by
the Cranswick Technical
Services team.
Our long-term
commitment to quality
has resulted in a further
reduction in the number
of customer complaints
in the current year.
2016
2017
2018
2016
2017
2018
FREE CASH FLOW (£’M)
(+54.3%)
111.7
83.4
72.4
RETURN ON CAPITAL EMPLOYED* (%)
(+133 bps)
Higher operating profit
and strong working
capital management
have driven an increase
in free cash flow.
18.2
19.0
20.3
Return on capital employed
improved as we continued
to see the benefit of the
ongoing investment in
our asset base to provide
additional capacity and
drive efficiencies.
2016
2017
2018
2016
2017
2018
* Adjusted operating profit divided by the sum of average opening and
closing net assets, net (debt)/funds, pension liabilities and deferred tax.
NON-EU EXPORT SALES GROWTH (%)
(+2.4%)
SALES FROM NEW PRODUCTS (%)
(7.2% of total Group revenue)
37.5
22.1
Non-EU export sales,
including sales made to
non-EU markets through
UK-based meat trading
agents, have continued
to grow despite increased
local supply in Far Eastern
markets and global
competition driving
lower prices.
2.4
11.5
6.1
7.2
Our ongoing commitment
to innovation to support
strong relationships with our
major retail customers saw
sales from new products
during their first six months
following launch account for
over £106 million of revenue
in the current year.
2016
2017
2018
2016
2017
2018
WASTE TO LANDFILL – TONNES
(-22.1%)
RIDDOR ACCIDENTS PER 100 EMPLOYEES
(+55.6%)
639
222
173
Landfill diversion remains
a core priority. We still carry
a small landfill burden due
to our more rural farm
locations, but this continues
to be challenged.
0.98
0.66
0.63
The accident rate reportable
to the Health & Safety
Executive rose at the start
of the year but the
implementation of a new
and enhanced five year
Health & Safety strategy
during the year saw the rate
fall in the final quarter.
2016
2017
2018
2016
2017
2018
Read more on our
Principal Risks and
Uncertainties on
pages 44 and 45.
RISKS
Food scares and
product contamination
Disease and infection
within livestock
Disruption to
Group operations
Interest rate, currency,
liquidity and credit risk
IT systems and
cyber security
Consumer demand
Reliance on key
customers and exports
Competitor activity
Growth and change
Recruitment and
retention of workforce
Pig meat – availability
and price
Health & Safety
Cranswick plc Annual Report & Accounts 2018
19
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report
STRATEGY IN ACTION
High Quality Products
20
Cranswick plc Annual Report & Accounts 2018
OUR REPUTATION FOR
DELIVERING OUTSTANDING
QUALITY PRODUCTS MAKES US
A SUPPLIER OF CHOICE FOR OUR
CUSTOMERS. WE CONTINUALLY
DEVELOP AND ENHANCE OUR
RECIPES AND INGREDIENTS TO
PROVIDE EXCEPTIONAL FOOD
TO THE CONSUMER.
During the year we launched a new range
of premium pork with one of our major
retail customers, delivering a significant
improvement in taste and texture. A cross
functional team reviewed all the potential
areas where quality improvements could be
delivered. This started with the breed and
genetics of the pigs, and included a review
of feed and farming methods. We also
introduced a new production process in our
primary processing facility to improve the
succulence of the meat.
Once product development was complete,
our in-house team of chefs focused on creating
clear and simple cooking instructions to ensure
that consumers can replicate the same great
tasting food at home. The result is a range of
premium pork that consistently delivers on taste
and texture.
13
Number of BRC grade ‘A‘ ratings
during the year
227
Number of supplier audits during
the year
Cranswick plc Annual Report & Accounts 2018
21
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report STRATEGY IN ACTION CONTINUED
HIGH QUALITY
PRODUCTS
THE SUCCESS OF OUR BUSINESS REFLECTS OUR ONGOING COMMITMENT
TO PRODUCT QUALITY AND INNOVATION, TECHNICAL INTEGRITY,
COMPLIANCE, FOOD SAFETY AND ANIMAL WELFARE.
The combination of our people, facilities, policies
and customer focus enables us to remain the
key supplier and ‘category champion’ to our
strategic partners. For many of our core
customers we are a preferred partner on
technical initiatives and projects.
PRODUCT QUALITY AND INNOVATION
Our clear strategic focus on premium and
super-premium product categories continues
to underpin the success of the business.
By working closely with our customers we
develop premium products to meet the
changing demands of the UK consumer.
Consumer trends and food innovation
opportunities from all over the world are
sourced and developed by our dedicated
teams. Constantly researching and testing
new recipes and ideas allows us to deliver
exciting new food concepts to our customers
with enhanced flavour and improved
eating quality.
Read more on page 21.
ENSURING TECHNICAL COMPLIANCE
Our facilities undergo exacting technical
audits carried out by independent auditing
bodies, customers, government authorities
and our own technical compliance teams.
During the year we hosted 404 separate
external compliance audits and associated
technical inspections, many of which were
unannounced, and we are pleased to report
that over 95 per cent of those audits were
completed to the full satisfaction of our
customers and other business stakeholders.
All non-conformances have been closed
out through corrective actions within
agreed timescales.
We have elected to have our BRC Food Safety
audits carried out unannounced and currently
of our 14 manufacturing sites 6 have achieved
AA*, 6 have achieved A*, 1 has achieved AA and
1 site has achieved B*. In addition, all our fresh
meat processing sites are participants of the
BRC Voluntary Meat Module which provides
additional assurance on meat traceability
and supply chain management.
22
Cranswick plc Annual Report & Accounts 2018
All our British pork products fully comply with
the Red Tractor Assurance Scheme and the
British Meat Processors Association (BMPA)
Pork and Pork Meat Product standards. This
compliance gives consumers the confidence
that our products are produced within an
assured supply chain to recognised best
practice standards and are traceable all the
way back to British Red Tractor assured farms.
suppliers are clearly laid out in our Technical
Conditions of Supply and our audit frequency
is based on risk assessment, supply chain
threat analysis, horizon scanning for known
or emerging risks and previous supply record.
In the last twelve months we carried out 227
supply chain audits to assure the safety,
traceability, quality and provenance of the
raw materials we use within our business.
Compliance integrity is challenged by third
party announced and unannounced audits
which incorporate traceability, mass balance
and isotope provenance testing to confirm
origin. We also produce organic products that
are subject to an in-depth annual traceability
review carried out by independent auditors
working on behalf of The Soil Association
which is our preferred organic assurance
partner.
In the year under review our Group
Compliance team completed 716 separate
internal compliance audits against the BRC
standard, retailer policy, Hazard and Critical
Control Point (HACCP), hygiene inspections,
and ethical standards. This compliance
programme not only identifies non-
compliance but also proactively highlights
best practice and allows shared learnings
across the Group. This is a fundamental
building block of the continuous improvement
programme and food safety culture that
underpins our robust technical and ethical
performance.
SUPPLY CHAIN INTEGRITY
AND TRACEABILITY
Ensuring responsible purchasing
We are committed to ensuring the integrity
and traceability of raw materials, including
the meat, ingredients and packaging we use
in the manufacture of our products. 775 raw
material suppliers and 5,558 products and
associated specifications are approved and
controlled centrally by our Group Technical
Services (GTS) team. Suppliers are approved
either by an independent third party audit,
such as the BRC Global Standard for Food
Safety, or by audits carried out by members
of our GTS team. Our expectations of our
In recent months the meat industry has
come under increasing scrutiny, highlighted
by the well documented issues at a number of
UK meat processing companies. A common
theme has been the alleged mislabelling and
date coding of meat. We have fully reviewed
our labelling and date coding protocols.
Alongside this, our policy of transparent open
book relationships with our customers, audit
bodies and the FSA, and our commitment to
food safety, provenance and integrity, gives
us confidence in our standards and the way
we run our business.
Maintaining the highest ethical standards
We monitor ethical standards with our sites
undergoing unannounced SEDEX (Supplier
Ethical Data Exchange) Members Ethical Trade
Audits (SMETA) every other year supported
by our own ethical verification audits. We
are AB (buyer/supplier) members of SEDEX
and currently 97 per cent of our suppliers are
registered with SEDEX so their ethical data
is visible to us, enabling us to drive ethical
standards within our supply chain.
We take a leadership role within the wider
industry with our Gourmet Products Technical
Controller being an active member of the
BMPA Council and Chair of the technical
committee responsible for the development
of the BMPA Pork Schemes which are the
assurance, traceability and product quality
standards that sit behind the Red Tractor logo
displayed on pork and pork meat products.
Our Group Technical Compliance Controller
represents the BMPA on the BRC working
group responsible for the development of
the BRC Global Food Standard.
We have built excellent relationships with
a number of key research providers and were
invited by Professor Chris Elliott, Director
of the Institute of Global Food Security,
to be one of a select number of industry
partners to participate in the EU-China-Safe
collaboration. This project will mobilise
resources in Europe and China to develop a
cohesive partnership that will deliver a shared
vision for food safety and authenticity and
work towards ‘mutual recognition’. Comprising
16 participants from the EU and 17 from
China, EU-China-Safe supports key research
organisations working together to develop and
jointly implement major advances in improving
food safety and combating food fraud in the
two trading blocks.
Animal welfare
Many of the pigs supplied to us are reared
to higher welfare standards associated with
outdoor bred or outdoor reared production
methods. Approximately 30 per cent of those
pigs processed by our Hull primary processing
facility and 70 per cent at our Norfolk facility
are reared to the exacting requirements of
the RSPCA Freedom Foods welfare standard.
The balance of pigs processed are reared
indoors in full compliance with the Red
Tractor/BMPA Quality Assured Pork (BQAP)
welfare standards. All of our chickens are
reared indoors in full compliance with the
Red Tractor welfare standards.
The 2017 Business Benchmark on Farm Animal
Welfare (BBFAW) report provides an account
of how animal welfare is being managed by
leading food companies around the world.
The development of the Benchmark is funded
by Compassion in World Farming and World
Animal Protection and is a global measure
of food businesses’ commitment to animal
welfare. Now in its fourth year, the benchmark
has continued to evolve and challenge the
industry’s commitment to animal welfare.
We are therefore proud to be one of only five
companies worldwide to have maintained
the highest Tier 1 status, which endorses
our commitment to animal welfare. More
information can be found on the website:
www.bbfaw.com.
Performance measures
Complaints per million units sold
Number of direct suppliers linked to SEDEX
Benchmark on Farm Animal Welfare
2015/16
24
294
Tier 2
2016/17
19
407
Tier 1
2017/18
18
480
Tier 1
During the year, Crown’s Weybread poultry
site processed an average of 500,000 birds
per week. The site is a key supplier of chicken
to our Hull cooked poultry site and third
party retail and wholesale customers. Animal
transportation times from farm to processing
facility are minimised, with all broiler farms
within 25 miles of the processing facility.
All of the chickens we process come from
our own Red Tractor approved farms.
The map below provides an overview
of farm locations and distances travelled
by pigs and chickens from those farms
to our processing sites:
During the year, our Hull and Norfolk primary
processing sites collectively processed an
average of 49,000 pigs per week. In addition,
our Ballymena site has processed 10,000
pigs per week, a 25 per cent increase since
acquisition. These facilities are principal
suppliers of pork to a number of our further
processing businesses as well as third party
food manufacturers.
All three sites are strategically placed in three
of the UK’s largest pig breeding and rearing
regions. Close supply chain proximity ensures
that animal transportation times from farm to
processing facility are minimised with resulting
welfare and food mile reduction benefits.
Our agricultural team is working with several
retailer specific pig producer groups on rearing
systems, breed development, welfare,
sustainability, environmental and ethical
standards. Projects included:
• collaborating with Bishop Burton
Agricultural College on animal
behaviour and welfare;
• researching links between animal
feed and pork eating quality; and
• developing industry best practice
guidance on the use of antibiotics.
Preston, near Hull
35% within 25 miles
55% within 40 miles
66% within 50 miles
73% within 60 miles
Norfolk
46% within 25 miles
86% within 40 miles
90% within 50 miles
95% within 60 miles
Ballymena
19% within 25 miles
43% within 40 miles
51% within 50 miles
76% within 60 miles
Weybread
100% within 25 miles
Cranswick plc Annual Report & Accounts 2018
23
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report STRATEGY IN ACTION CONTINUED
OUR COMMITMENT TO OPERATING
EXCELLENCE IS UNDERPINNED BY
OUR CONTINUED LONG-TERM
INVESTMENT IN OUR
INFRASTRUCTURE, OUR
PRODUCTION PROCESSES
AND OUR PEOPLE.
Our Continental Foods business has grown
substantially over recent years, sourcing new
products from premium suppliers across the
globe that deliver on taste and provide exciting
new eating experiences. We also produce
British premium cured meats, prepared in
the traditional artisan way using the finest
ingredients, under both the Woodall’s brand
and retail customer own label. This success,
together with a growing market for convenient
meal solutions with inspiring tastes, has
resulted in our two Manchester facilities
operating at full capacity.
To support future growth we have invested
£28 million in a new purpose-built facility
based in Bury, Lancashire. This will consolidate
production from the two existing sites, increase
current capacity by approximately 70 per cent
and will add new capability and drive efficiency
improvements on existing product ranges.
The new facility will be fully operational by
summer 2018.
£59m
Total capital investment during the year
20.3%
Return on capital employed
24
Cranswick plc Annual Report & Accounts 2018
Operating Excellence
Cranswick plc Annual Report & Accounts 2018
25
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report STRATEGY IN ACTION CONTINUED
OPERATING
EXCELLENCE
INVESTMENT IN OUR INFRASTRUCTURE, OUR PRODUCTION PROCESSES
AND OUR PEOPLE CONTINUES TO DRIVE THE LONG-TERM SUCCESS OF
OUR BUSINESS.
INVESTING IN OUR ASSET BASE
We have invested a record £59 million across
our asset base during the year to support
long-term growth, introduce new capabilities
and drive further operating efficiency gains.
Our production facilities have benefitted from
this commitment to ongoing investment over
many years and they are some of the most
efficient and well invested in the sectors in
which we operate.
Investment ensures that we have sufficient
capacity headroom to meet our growth
aspirations, we provide facilities which
meet our customers’ exacting specifications
and that we provide a safe and secure
environment for our workforce.
Expenditure in the year, whilst focused on
our Continental Foods business, was spread
across our production facilities as we continue
to successfully grow and develop. We have
now invested in excess of £270 million in our
infrastructure over the last eight years. For
further information about capital projects
delivered during the year, see the Operating
and Financial Review on pages 38 to 40.
DEVELOPING OUR PEOPLE
We are committed to inspiring and developing
a multi-skilled and motivated workforce.
Our Human Resources (HR) strategy is
embedded in our Sustainability policy and
overall strategic plan and underpins our vision
and purpose. The HR strategy includes
sustainability initiatives to attract and retain
talented individuals with the necessary skills
to deliver our long-term business goals and
objectives. We encourage our employees
to express their views via Works Councils
or through Union membership. Employees
have a worker representative, who may be
a union representative, to air their views on
internal committees. We want our employees
to feel valued and we see them as critical
stakeholders in our business. We have a
training and development strategy to deliver
workforce capabilities, skills and competencies
through apprenticeship and graduate
development schemes, a mentoring
programme and management training
courses. Succession planning is proactively
managed and employees are offered career
opportunities which support staff retention
and ultimately a sustainable and stable
business.
Attracting and managing talent
Apprenticeships
Following the introduction of the new
Apprenticeship Levy, we now have over
90 apprentices across several disciplines,
with a particularly strong focus on Butchery
and Engineering. The programme enables
apprentices to gain cross-functional skills
which are positively recognised across the
industry. We are working closely with local
colleges and universities both to promote
opportunities within our business and to
support our apprentices’ ongoing education
needs. With college leavers looking for
alternative routes into education we will
harness this trend by further developing
our apprenticeship programmes to attract
and retain the best students to support our
long-term succession planning. Further details
can be found on page 8.
Graduate development
Our graduate recruitment scheme continues
to be highly effective, with graduates placed
across even more Group locations this year.
We attended 14 university recruitment fairs
across the UK, and positive responses to
our programme over recent years mean we
continue to attract exceptional applicants.
Over the last four years we have recruited
27 graduates, finding permanent roles for 13,
whilst 9 remain on the programme.
Mentoring
This year we have established a mentoring
programme to support the career progression
of some of our key people. We have trained
18 mentors to assist colleagues in high quality
decision making by acting as a confidential
sounding board, providing support in working
through crucial and often difficult and
complex decisions. We see mentoring as
another important component of our talent
support and succession planning initiatives.
Our new Continental Foods facility in Bury, Lancashire.
26
Cranswick plc Annual Report & Accounts 2018
Learning and development
We continue to focus on our appraisal
process and development plans to ensure
that we have the necessary skill sets in place
to facilitate future succession planning. This
process feeds into development dashboards
across the business, which are used to identify
learning and succession gaps and how these
will be filled in the future.
In 2017 we trained 275 colleagues in soft
skills or management development either
through Group-wide learning programmes
or site level programmes specifically targeting
key requirements for local teams and
managers of the future. We also continue
to use personal coaching to support the
targeted development needs of our middle
and senior management colleagues, and
executive coaching to support our Directors
in developing their existing skills. We will be
running two further programmes in 2018 to
support middle and senior managers as we
continue to build our leadership skills base.
Providing appropriate training to all employees
is vital for the successful delivery of our Group
Health & Safety standards. All new employees
undertake a Health & Safety induction course
including fire safety, manual handling, task
and machinery training in their working
environment. We also provide ongoing Health
& Safety training throughout employment.
All our employees and agency staff are task
trained to safe working procedures for any
equipment or task they work on. We have
suitable systems for communicating Health
& Safety training for our non-English speaking
workforce.
An integrated and diverse workforce
Encouraging the principles of equality and
diversity underpins our successful and inclusive
business culture. All employment decisions,
including recruitment and internal promotions,
are based on merit, qualification and abilities,
and are not influenced or affected by race,
colour, nationality, religion or belief, sex,
marital status or civil partnership, family
status, pregnancy or maternity, sexual
orientation, gender reassignment, disability or
age. We have recruited over 2,000 individuals
over the last year and we will continue
to develop our business model to recruit
more permanent employees as part of
our commitment to ensuring stability for all
our workforce regardless of nationality. We
currently employ more than 10,400 staff
of whom more than 6,800 are permanent
workers, encompassing over 50 nationalities.
We recognise the benefits of diversity and our
diversity policy provides equality and fairness.
There are no differences in the pay structure
for males and females performing the same
or similar roles. Our 2017 Gender Pay Gap
report can be found on the Group’s website:
www.cranswick.plc.uk
We are committed to ensuring that modern
slavery or human trafficking are excluded
from our supply chains and our business. Our
anti-slavery policy reflects our commitment
to acting ethically and with integrity in all our
business relationships and to implementing
and enforcing effective systems and controls
to ensure slavery and human trafficking do
not take place throughout our supply chains.
Further details can be found on the Group’s
website: www.cranswick.plc.uk.
We conduct business in an open and honest
way, without the use of corrupt practices or
acts of bribery. We expect all our customers,
suppliers and business associates to support
this policy. This code of conduct is reflected
in our anti-bribery policy which all employees
are made aware of and commit to when
joining the Group. The policy sets out clear
requirements and procedures on matters such
as giving and receiving gifts and hospitality,
and periodic training is undertaken to reinforce
this. Employees are encouraged to report any
concerns directly to management or through
an independent whistleblowing line.
Further details of our diversity policy are
shown in the Nomination Committee report
on pages 63 to 65.
Keeping our people safe and healthy
We strive as a business to comply with all
applicable Health & Safety standards and
regulations, and adopt industry best practice
across all our sites. Our Group Health & Safety
team implements and monitors new initiatives
to maintain excellent standards. The Board
reviews quarterly accident and claims
statistics and management review monthly
accident statistics using an industry leading
web-based recording system which allows
analysis of each accident and monitors control
measures introduced to prevent recurrence.
The system includes a tracker to ensure all
required actions are completed within the
specified time period.
Our Group Health & Safety team is led by
the Group Health & Safety Manager with
the assistance of two Group Health & Safety
Coordinators who work under the guidance
of our Group Compliance Controller. All our
sites have a dedicated Health & Safety
Manager to provide the highest standards of
Health & Safety management. All our Health
& Safety Managers and Coordinators hold the
appropriate National Examination Board in
Occupational Safety and Health (NEBOSH)
qualification. We are also providing our
management team with Health & Safety
training from the Institute of Safety and
Health (IOSH).
During the year we have developed a five-year
strategy for Health & Safety which gives us
a platform to continue to manage Health &
Safety proactively and ensure our standards of
excellence in compliance are maintained across
all sites as well as controlling new and emerging
risks to a reasonably practicable level.
With the increasing complexity of equipment
and legislation surrounding its design and use,
our engineering teams have been trained in
machinery safety and any new machinery will
not be used unless it complies with the latest
Certificate of Conformity (CEE) regulations
and has undertaken an assessment in line
with the Provision & Use of Work Equipment
Regulations (PUWER).
Annual internal Health & Safety audits are
carried out to measure the Health & Safety
standards at each of our sites to confirm they
achieve the required standard and provide an
action plan for the following twelve months.
During the year we continued to develop
Health & Safety standards across our business.
The safety of employees is key and we are
continuing to investigate new behavioural
safety programmes which will further improve
the culture of our business.
Our plan is to ensure all our sites are accredited
to the ISO45001 Health & Safety Management
Systems by 2020.
The Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations
(RIDDORS) rate was higher than the previous
year. The RIDDORS incident ratio (accident
against number of employees) increased by 56
per cent compared to 2017. The total number
of recorded accidents per 100 employees in
2018 was 13 per cent higher than in 2017.
The increase in accident rates at the start of
the financial year has driven additional focus
and we have seen these rates falling back in
the last quarter.
Accidents per 100 Employees
6.7
6.7
7.6
0.66
0.63
0.98
2016
2017
2018
Total
RIDDORS
Cranswick plc Annual Report & Accounts 2018
27
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report STRATEGY IN ACTION CONTINUED
Sales Growth
28
Cranswick plc Annual Report & Accounts 2018
OUR LONG-TERM GROWTH
STRATEGY IS TO CONSOLIDATE
EXISTING MARKET POSITIONS,
DEVELOP NEW PRODUCTS AND
CHANNELS IN OUR CORE UK
MARKET AND GROW OUR
INTERNATIONAL OPERATIONS
AND CUSTOMER BASE.
In 2014 we entered the UK poultry sector
with the acquisition of our Cooked Poultry
business in Hull. This was followed in 2016 by
the acquisition of Crown Chicken, which is
based in East Anglia. This provided us with a
fully integrated poultry supply chain model,
and aligned with our strategic objective
of diversification into the rapidly growing
poultry market.
Recent consumer trends for healthier and more
convenient meals have driven sustained growth
in the poultry market, with chicken seen as a
versatile protein that is also competitively
priced. We are developing innovative, great
tasting poultry products with a focus on
premium ’Ready to Cook‘ and added
value chicken.
We have made significant investment in
our Cooked Poultry facility since acquisition,
which has led to the successful launch of
contracts with two of the Group’s principal
retail customers during the year. We have
now committed to building a new world class
poultry primary processing facility in Eye,
Suffolk, which is scheduled for completion in
late 2019. This will double our existing primary
processing capacity with further room for
expansion. We also plan to upscale our farming,
feed mill and hatchery operations to maintain
our fully integrated supply chain model.
824
new products launched during
the year
7.2%
of total revenue from new products
Cranswick plc Annual Report & Accounts 2018
29
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report STRATEGY IN ACTION CONTINUED
STRATEGY IN ACTION
SALES
GROWTH
OUR LONG-TERM GROWTH STRATEGY IS TO CONSOLIDATE EXISTING MARKET
POSITIONS, DEVELOP NEW PRODUCTS AND CHANNELS IN OUR CORE UK
MARKET AND GROW OUR INTERNATIONAL OPERATIONS AND CUSTOMER BASE.
DRIVING THE CORE
EXPANDING OUR OFFER
SEEKING NEW OPPORTUNITIES
DELIVERING ON OUR GROWTH STRATEGY
By establishing meaningful and long-lasting
relationships with our customers and focusing
primarily on the growing premium end of the markets
in which we operate, we have made good progress
on delivering our growth strategy during the year.
CONSOLIDATION OF EXISTING MARKET POSITIONS
Our retail customers account for over 70 per cent of our revenues and we
continue to gain market share. Provenance, food quality and animal welfare
have become increasingly important for our customers and consumers in
recent years, and our strong reputation and ongoing commitment in these
areas continues to drive growth.
Outstanding product quality and customer service
levels combined with a drive to innovate has
underpinned this growth.
For many years we have invested heavily in our infrastructure and this year
we spent a record £59 million across our asset base to support future growth.
This expenditure ensures that our facilities remain some of the most efficient
and safe in the UK food manufacturing sector and, along with continued
investment in our vertically integrated supply chains, underpins our core
category growth strategy and supports the development of sustainable
long-term contracts with our key retail customers.
Our focus on developing innovative, premium products which remain
relevant to our customers and consumers enables us to sustain meaningful
top-line growth.
DEVELOPING NEW PRODUCTS AND CHANNELS
We have diversified our product range and customer base in recent years by
entering the fast growing premium fresh and cooked poultry market.
The acquisition of the premium cooked poultry business, Benson Park, in 2014
followed by our acquisition of the fresh poultry business, Crown Chicken, in 2016,
means we can now offer our customers a fully integrated British chicken supply
chain for both fresh and cooked products.
We have now secured listings for premium cooked poultry, sourced from our
own internal supply chain, with two of our principal retail customers. Our fully
integrated supply chain from feed mill, to hatchery, through our own farms
and processing facilities to our customers offers a clear point of difference.
We have expanded our range of products for the rapidly developing ‘Ready to
Cook’ and convenience market, with continued investment in ‘Sous Vide’ cooking
technology across our Convenience business.
GROWING OUR INTERNATIONAL
OPERATIONS AND CUSTOMER BASE
We have made further progress during the year
in developing our export trade. China, the world’s
largest pork producer and consumer, remains our
most important market, and during the year we
received approval to export product from our
Ballymena facility directly into China. We also
received Chinese approval to export further
products from our Hull facility.
We also supply baby back ribs from our Hull facility,
which is United States Department of Agriculture
(USDA) approved, into the US market.
We have developed new export markets for our
premium outdoor bred pork products, including
Australia and Japan.
PERFORMANCE DURING THE YEAR
We delivered like-for-like revenue growth of 12.7 per
cent reflecting strong progress in our core markets.
We secured new premium cooked poultry business
with two of our Group’s principal retail customers.
Sales to European markets grew strongly, and reflected
increased volumes and higher prices resulting from
favourable Sterling : Euro exchange rates.
FUTURE OPPORTUNITIES
We will explore further growth opportunities by:
continuing to leverage our strong customer
relationships; identifying new routes to market;
developing new products; expanding into adjacent
tiers in our existing category portfolio; and
broadening our reach in international markets.
30
Cranswick plc Annual Report & Accounts 2018
We made further progress during the year in consolidating our existing market
positions by securing new business with our key retail customers. This business
was spread across our product categories, and included volume growth at
Ballymena following the completion of the butchery hall extension which
increased capacity.
Our premium cooked poultry business grew strongly, driven by new listings with
Total export revenue grew by 30.2 per cent during
two of our principal retail customers.
the year.
Growth in our Convenience business has been underpinned by new product
Like-for-like export revenue grew by 20.7 per cent.
launches in the fast growing ‘Slow Cook’ and ‘Ready to Cook’ ranges.
Growth was underpinned by sales to our more
New product development enables us to deliver innovative premium products
which are relevant to the rapidly changing markets in which we operate.
New business launched at the start of the year with a large national ‘food-to-
traditional EU markets, driven by stronger European
go’ customer has driven strong volume growth in our premium pastry business.
prices and favourable exchange rates.
7.2 per cent of revenue in the year was attributable to new product launches.
We are growing our e-commerce business in China, for
both premium and standard pork products.
We will continue to grow by gaining market share in existing tiers, moving
into adjacent tiers and though building capacity in our facilities and our
supply chains.
We are investing £4 million in our Wayland farming operation to increase breeding
and finishing capacity of premium pigs in response to customer demand.
Our new Continental Products facility in Bury, Lancashire, which will be fully
operational by the summer of 2018, will add substantial capacity for this part
of our business.
We will continue to leverage our existing retail relationships to grow our
New products continue to be developed with which
premium cooked poultry business.
to access both new and existing export markets.
On completion of the new poultry facility at Eye, Suffolk at the end of 2019,
Continued investment at our primary processing
we will also have the capacity and capability to offer more fresh poultry to
facilities provides increased capacity which not only
our principal retail customers, with Crown having already secured a contract
adds scale to our UK pork business but also provides
to supply fresh whole birds to one of the Group’s strategic retail customers
more product for our international export trade.
shortly after the year end.
Substantial investment in research and development and product innovation
Chinese and other international customers, and this
will also continue to drive growth in new channels and product categories.
provides additional growth opportunities.
We are continuing to develop direct relationships with
12.7%
Like-for-like revenue increase
20.7%
Increase in like-for-like
export revenue
DELIVERING ON OUR GROWTH STRATEGY
CONSOLIDATION OF EXISTING MARKET POSITIONS
By establishing meaningful and long-lasting
relationships with our customers and focusing
Our retail customers account for over 70 per cent of our revenues and we
continue to gain market share. Provenance, food quality and animal welfare
primarily on the growing premium end of the markets
have become increasingly important for our customers and consumers in
in which we operate, we have made good progress
recent years, and our strong reputation and ongoing commitment in these
on delivering our growth strategy during the year.
areas continues to drive growth.
Outstanding product quality and customer service
For many years we have invested heavily in our infrastructure and this year
levels combined with a drive to innovate has
we spent a record £59 million across our asset base to support future growth.
underpinned this growth.
This expenditure ensures that our facilities remain some of the most efficient
and safe in the UK food manufacturing sector and, along with continued
investment in our vertically integrated supply chains, underpins our core
category growth strategy and supports the development of sustainable
long-term contracts with our key retail customers.
Our focus on developing innovative, premium products which remain
relevant to our customers and consumers enables us to sustain meaningful
top-line growth.
We made further progress during the year in consolidating our existing market
positions by securing new business with our key retail customers. This business
was spread across our product categories, and included volume growth at
Ballymena following the completion of the butchery hall extension which
PERFORMANCE DURING THE YEAR
We delivered like-for-like revenue growth of 12.7 per
cent reflecting strong progress in our core markets.
Sales to European markets grew strongly, and reflected
increased volumes and higher prices resulting from
favourable Sterling : Euro exchange rates.
FUTURE OPPORTUNITIES
We will explore further growth opportunities by:
continuing to leverage our strong customer
relationships; identifying new routes to market;
developing new products; expanding into adjacent
tiers in our existing category portfolio; and
broadening our reach in international markets.
DRIVING THE CORE
EXPANDING OUR OFFER
SEEKING NEW OPPORTUNITIES
DEVELOPING NEW PRODUCTS AND CHANNELS
We have diversified our product range and customer base in recent years by
entering the fast growing premium fresh and cooked poultry market.
The acquisition of the premium cooked poultry business, Benson Park, in 2014
followed by our acquisition of the fresh poultry business, Crown Chicken, in 2016,
means we can now offer our customers a fully integrated British chicken supply
chain for both fresh and cooked products.
We have now secured listings for premium cooked poultry, sourced from our
own internal supply chain, with two of our principal retail customers. Our fully
integrated supply chain from feed mill, to hatchery, through our own farms
and processing facilities to our customers offers a clear point of difference.
We have expanded our range of products for the rapidly developing ‘Ready to
Cook’ and convenience market, with continued investment in ‘Sous Vide’ cooking
technology across our Convenience business.
GROWING OUR INTERNATIONAL
OPERATIONS AND CUSTOMER BASE
We have made further progress during the year
in developing our export trade. China, the world’s
largest pork producer and consumer, remains our
most important market, and during the year we
received approval to export product from our
Ballymena facility directly into China. We also
received Chinese approval to export further
products from our Hull facility.
We also supply baby back ribs from our Hull facility,
which is United States Department of Agriculture
(USDA) approved, into the US market.
We have developed new export markets for our
premium outdoor bred pork products, including
Australia and Japan.
Our premium cooked poultry business grew strongly, driven by new listings with
two of our principal retail customers.
Total export revenue grew by 30.2 per cent during
the year.
We secured new premium cooked poultry business
with two of our Group’s principal retail customers.
increased capacity.
Growth in our Convenience business has been underpinned by new product
launches in the fast growing ‘Slow Cook’ and ‘Ready to Cook’ ranges.
New product development enables us to deliver innovative premium products
which are relevant to the rapidly changing markets in which we operate.
New business launched at the start of the year with a large national ‘food-to-
go’ customer has driven strong volume growth in our premium pastry business.
7.2 per cent of revenue in the year was attributable to new product launches.
Like-for-like export revenue grew by 20.7 per cent.
Growth was underpinned by sales to our more
traditional EU markets, driven by stronger European
prices and favourable exchange rates.
We are growing our e-commerce business in China, for
both premium and standard pork products.
We will continue to grow by gaining market share in existing tiers, moving
into adjacent tiers and though building capacity in our facilities and our
We will continue to leverage our existing retail relationships to grow our
premium cooked poultry business.
New products continue to be developed with which
to access both new and existing export markets.
supply chains.
We are investing £4 million in our Wayland farming operation to increase breeding
and finishing capacity of premium pigs in response to customer demand.
Our new Continental Products facility in Bury, Lancashire, which will be fully
operational by the summer of 2018, will add substantial capacity for this part
of our business.
On completion of the new poultry facility at Eye, Suffolk at the end of 2019,
we will also have the capacity and capability to offer more fresh poultry to
our principal retail customers, with Crown having already secured a contract
to supply fresh whole birds to one of the Group’s strategic retail customers
shortly after the year end.
Substantial investment in research and development and product innovation
will also continue to drive growth in new channels and product categories.
Continued investment at our primary processing
facilities provides increased capacity which not only
adds scale to our UK pork business but also provides
more product for our international export trade.
We are continuing to develop direct relationships with
Chinese and other international customers, and this
provides additional growth opportunities.
Cranswick plc Annual Report & Accounts 2018
31
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report STRATEGY IN ACTION CONTINUED
A PILOT SUSTAINABILITY
IMPROVEMENT PROJECT AT
OUR GOURMET PASTRY SITE
HAS ENHANCED EMPLOYEE
ENGAGEMENT AND COMMUNITY
OUTREACH AND CREATED
MOMENTUM FOR OUR NEW
GROUP SUSTAINABILITY
STRATEGY, ‘SECOND NATURE’.
During the year an internal assessment
reviewed current sustainability performance
and improvement opportunities, and a
stakeholder survey and leadership round-table
session brought the Sustainable Development
Goals (SDGs) to life for employees.
A key objective of the programme was to
reduce waste and increase reuse opportunities
throughout our supply chain. A detailed
analysis was carried out, which enabled
the site to develop a clear strategy on how
to achieve zero waste status and create
a system to achieve waste reduction by
product through improved efficiencies.
M&S Environment Week was used as
an opportunity to initiate the employee
engagement campaign, raising awareness
of key environmental issues and encouraging
employees to think about how they can
proactively reduce waste, water and energy
use. Out of 50 suppliers who took part in
the Environment Week initiative, Cranswick
Gourmet Pastry was awarded the ‘Best
Individual Site Campaign’ by M&S.
Alongside the behavioural change activity,
the site has also been externally recognised
during the year for its resource efficiency and
waste reduction achievements, winning the
‘Best Prevention Project Award (Food)’ at the
Waste2Zero awards.
Following the successful results at Gourmet
Pastry, the programme is now being rolled
out across the Group.
Read more on pages 34 and 35.
32
Cranswick plc Annual Report & Accounts 2018
100%
We are committed to achieving
100% recyclable packaging by 2025.
78%
of Cranswick employees want to be
involved in sustainability projects.
Sustainability
Cranswick plc Annual Report & Accounts 2018
33
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report STRATEGY IN ACTION CONTINUED
SUSTAINABILITY
AS AN INDUSTRY LEADER, WE EMBRACE MANY OPPORTUNITIES TO MAKE A
DIFFERENCE AND OUR BUSINESS DECISIONS ARE MADE WITH A CLEAR FOCUS
ON OUR COMMITMENT TO BOTH ENVIRONMENTAL AND SOCIAL RESPONSIBILITY.
As part of the Second Nature initiative, we have made some immediate commitments:
WE WILL ELIMINATE AVOIDABLE FOOD
WASTE BY 2030
and have become an official Friend of Champions 12.3
WE WILL WORK IN PARTNERSHIP
WITH COURTAULD 2025
to deliver an ambitious ten year voluntary agreement that
brings together leading organisations committed to reducing the
environmental impact of food and drink across the supply chain.
WE ARE COMMITTED TO ACHIEVING 100 PER CENT
RECYCLABLE PACKAGING BY 2025
and to reduce plastic packaging use by 50 per cent by 2025,
alongside a call to action for industry stakeholders to collaborate
to take responsibility for the environmental impact of plastics as
a matter of urgency.
WE WILL WORK WITH OTHER ORGANISATIONS
TO DELIVER THE UK PLASTICS PACT
driving industry innovation and working towards a wider circular
plastic system.
WE WILL PURCHASE 100 PER CENT RENEWABLE
ELECTRICITY FROM 1 MARCH 2018
The results of our internal sustainability review in 2017 illustrated how important
sustainability is to our employees and major stakeholders, and it is with great pride
that the Second Nature initiative will be driven by our workforce – all 10,000 of them.
We recognise that our sustainability reporting
needs to be much more than mere disclosure
as it is a true insight into how we do business.
Most importantly, we approach sustainability
as a long-term, collaborative effort. No single
company or industry can tackle these
challenges alone. Working together, however,
we can create sustainable solutions for the
world’s future generations.
In February 2018, we announced the launch of
‘Second Nature’, our Group-wide sustainability
initiative. This new project, which is being
rolled out immediately, contains several major
environmental and community pledges.
Our new sustainability approach has been
informed by our own stakeholder materiality
assessment and globally agreed upon agendas
and accords like the 2030 Development
Agenda of the United Nations and its 17
Sustainable Development Goals (SDGs) and
the UN Global Compact, among others.
During the year we performed a
comprehensive materiality study to identify
the most important sustainability topics for
the Group and its stakeholders. We identified
the SDGs that are particularly relevant to our
business and our internal stakeholders, our
10,000 employees.
“ We need more organisations
to step up like Cranswick in
order to achieve the Sustainable
Development Goals.”
Dr Liz Goodwin OBE
Senior Fellow and Director of Food Loss
and Waste, World Resources Institute
TOP 5 SDGs WE CAN IMPACT, AS
VOTED FOR BY OUR WORKFORCE:
34
Cranswick plc Annual Report & Accounts 2018
We wish to set a precedent on how businesses
tackle issues around sustainability – taking
responsibility and using our scale to drive
systemic change. We recognise that as a
leading food business we need to look beyond
our own internal operational efficiencies
and have designed Second Nature to deliver
against four key principles:
• Materiality – focusing on what matters most
• Regenerative – creating long-term,
sustained and absolute impact
• Systemic – influencing change across
entire systems
• Transparency – sharing progress openly
and honestly
Sustainability is now firmly embedded in our
core business strategy, operations and
products as evidenced by our continued
progress against our goals and commitments
and alignment with the United Nations
Sustainable Development Goals. We will
continue to develop best-in-class innovations
and demonstrate our commitment to
sustainability through our products, processes
and partnerships that advance sustainable
agriculture and manufacturing.
We have seen measurable progress this year
with a renewed commitment to our goals, and
we look forward to continuing to provide
sustainable solutions that lead our industry.
BENCHMARKING PERFORMANCE
AND CONTINUOUS IMPROVEMENT
By August 2018 all of our operating sites will
have been benchmarked against multiple
leading global sustainability standards
and performance metrics using specialist
sustainability software. This is to enable
us to understand our current performance
position against best-in-class certifications
and identify opportunities to close gaps
and align to global performance standards.
Specific performance standards we will be
working to that will enable us to identify
and activate projects to meet our targets
include multiple ISOs, B-Impact, Courtauld
Commitment 2025, BSI 8001 Circular
Economy, LEAF Marque, All Key Customer
and Supplier Standards, Investors in People
and ETI Base Code.
“ We want to be agents of change, addressing key
environmental and social issues from farm-to-fork.
Second Nature is not just a project; it is a movement
whereby we fully intend to change the world we
operate in.”
Jim Brisby, Group Commercial Director
This will empower each site to translate
Second Nature into a realistic operating
roadmap that is user-friendly to ensure
the strategy connects with the day job
of the people it will impact, joining the
dots from strategy to action.
Our new sustainability strategy will give us a
competitive advantage through innovation,
efficiency, responsiveness and building strong
partnerships. Creating shared value and
a profitable business are instrumental in
delivering a balanced sustainability strategy
and long-term positive legacies in which we
work and live.
Second Nature will activate projects to deliver
significant progress against the following core
objectives:
1. Reduce our environmental impact
from farm-to-fork
2. Drive agricultural innovation
3. Shift from a linear to a circular
business model
4. Create a great place to work
5. Positively impact our community
and society
6. Act ethically and responsibly
7. Embrace collaboration and
radical transparency
This has been a pivotal year in our
sustainability journey. As we continue to
embed sustainability into our business, we
are working with collaborators and partners
to drive meaningful change. We’ve taken
decisive action on climate change and
with our clarity of ambition we aim to lead
sustainability across agriculture and food
production on a global scale by integrating
sustainability as Second Nature to what we
do, how we work, and why we do it.
PLASTIC REDUCTION
ROADMAP
• All our packaging will be
100 per cent recyclable and
sustainably sourced.
• Where dual materials are required
to maintain product quality and
minimise food waste, these will
only be from materials that are
also 100 per cent recyclable and
sustainably sourced.
• All our packaging will be
designed to be intuitively
recycled by the consumer
and easily recovered through
household recycling collections.
• We are forming a new industry
stakeholder group to openly
collaborate on developing
circularity in the UK to ensure
we have a workable closed-loop
system. This is not simply about
collecting materials for recycling
but using our waste packaging
to replace virgin materials for
manufacturing our new products.
• We will test new initiatives to
help drive positive consumer
behaviour around recycling
food packaging to make this
as simple as possible and
publicly share our findings.
• We will be open and transparent
on our progress and communicate
updates regularly.
Engaging our employees during M&S Environment
Week at our Gourmet Pastry site.
Cranswick plc Annual Report & Accounts 2018
35
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report STRATEGY IN ACTION CONTINUED
SUSTAINABILITY
CARBON FOOTPRINT AND GREENHOUSE
GAS (GHG) EMISSIONS
We measure our carbon footprint (all Scope 1,
Scope 2 and our significant Scope 3 emissions)
and use this as the overall measurement of our
environmental performance.
We continue to perform strongly against our
long-term target of reducing our relative carbon
footprint by 30 per cent by 2020 (against our
2010 baseline), by having a reduction of 44.5 per
cent against baseline. Success continues to be
driven by production efficiencies.
We acknowledge the requirement to disclose
greenhouse gas emissions separately in the
following categories:
Emissions in tonnes of carbon dioxide from:
i) combustion of fuel and operation of
facilities; and
ii) purchase of electricity, heat, steam
and cooling.
It is impracticable for us to distinguish between
the two categories due to the nature of our
operations. However, the majority of emissions
come from electricity and gas, which are
monitored.
We also recognise the significance of GHG
emissions from animals. We are working with
industry peers and the scientific community
to identify a means of reliably quantifying
and further understanding the impact. Our
partnership with Courtauld 2025 will also help
accelerate our understanding and performance
in this key area.
ENERGY
Our energy use and the reduction of the energy
footprint of our products remains a high priority.
We recognise that reductions in energy intensity
bring significant financial and environmental
benefits and continue to be accredited to the
ISO50001 Energy Management standard.
We have continued to invest in our energy
infrastructure, including 2 new CHP plants
coming on line during the next financial year.
Our energy footprint has increased by 1 per
cent during the year driven by machinery and
product changes across several of our sites.
We expect that the forthcoming year will
show a return to efficiency savings.
WASTE
Our partnerships with Champions 12.3,
WRAP’s Plastic Pledge and Courtauld 2025
demonstrate our commitment to making
real reductions in food waste and plastics
throughout our value chain.
36
Cranswick plc Annual Report & Accounts 2018
ENVIRONMENTAL METRICS
All of our significant facilities are accredited to the ISO14001 Environmental
Management Standard.
Waste disposal routes (%)
Absolute carbon footprint
(Tonnes CO2e)
Landfill
1.1
0.4
4.6
Recycling
8.4
Waste
to Energy
29.3
33.9
120,000
100,000
80,000
69.6
61.5
91.2
2017/18
2016/17
2015/16
2014
2015/16
2016/17
2017/18
Absolute energy use
(kWh million)
Absolute water use (m3)
2017/18
2016/17
2015/16
2014
285
272
2017/18
2016/17
2015/16
2014
198
199
1,421,710
1,420,809
963,311
824,942
Performance Measures
2016/17
2017/18
Target 2018-19
Performance in
Relative carbon footprint – Tonnes CO2e/Tonnes sales
Energy intensity – Kwh/Tonnes sales
Waste to landfill – Tonnes
0.202
477
222
0.174
482
173
Water intensity – cubic metres/Tonnes sales
2.49
2.41
reduce by 5%
reduce by 5%
reduce to zero
by 2020
reduce by 5%
Landfill diversion remains a core priority. We still
carry a small landfill burden due to our more
rural farm locations, but this will continue to
be challenged.
WATER
Water use in food manufacturing will always
be high, driven primarily by the need to provide
production facilities with the highest standards
of hygiene and its importance in many of
our processes. The need for sound water
management and control of emissions
continues to rise. We recognise that water
is a resource with high strategic importance and
so continue to use it efficiently and responsibly.
Our sites use technology to monitor usage
closely and ensure our emissions do not place a
disproportionate burden on local infrastructure.
In line with our resource usage principles, we
seek out and employ efficient technologies, as
well as running staff engagement programmes
to ensure our performance remains in line
with best-in-class benchmarks. Our water
performance has been significantly influenced
by the poultry acquisitions, but we are pleased
that despite this profile change we are still
exceeding our water target (20 per cent
reduction in intensity by 2020 against our
2008 baseline) by a further 3.2 per cent.
We are also a key partner of ’For Entrepreneurs
Only’, a community interest company which
helps entrepreneurs of all ages to start and
grow their businesses with the aim of creating
wealth and jobs in the Hull and Humber region.
Across the Group, we support a number of
charities which have particular relevance to site
employees and have been nominated through
a local voting system. Charities include a mix of
local and national organisations such as Bluebell
Children’s Hospice, the Yorkshire Air Ambulance,
Macmillan Cancer Support and Life for a Kid.
As part of the Second Nature initiative,
we have recently increased our commitments
to reduce the amount of surplus product that
is generated by the business. Much of this is
often driven by external factors, so we have
been working on a number of initiatives to
redistribute food to our local communities.
Some of our recent initiatives include purchasing
freezers for the Hull Food Bank and working
with organisations such as Fareshare and
Community Shop to support community
organisations.
“ The girls loved visiting Cranswick
and being able to see the whole
sausage making process and, of
course, tasting their creations!”
Miss Whall
Science Teacher, Wolfreton High School
In 2018, we will once again join ‘More Together’,
a charity project which will encourage the
entire Group to raise money for site nominated
charities, along with several other businesses
based in the East Yorkshire region. The project
will encourage employees to participate in
various physical challenges such as a ‘Bounce
to Berlin’ trampoline challenge, the Total
Warrior obstacle course and the B20 walk
from Beverley Minster to the Humber Bridge.
This is an opportunity for employees across
various functions and sites to raise money for
charitable causes together and in 2017 over
£13,000 was raised.
COMMUNITY ENGAGEMENT
As part of our ongoing commitments to
sustainability, we continue to support the
communities where we operate across the
UK. As one of the largest employers in the East
Riding of Yorkshire, we have taken a proactive
approach to support local initiatives. Last year,
we were a City Partner to Hull UK City of
Culture 2017 and we are also in the third year of
a partnership with the Freedom Festival, hosted
annually in Hull. These events reach out to the
wider communities and provide opportunities
to engage the local population in cultural and
social events which raise the profile of the
region. Our association with these events
also provides opportunities for our employees
to take part in the events whether through
ticket competitions, volunteering opportunities
or serving Cranswick produced street food from
the Hog and Beyond stall.
In Norfolk, we sponsor the Porkstock Festival
which is designed to promote the importance
of local produce to East Anglia. As part of the
event, we create an area where we showcase
the work of our business and share employment
opportunities, both within the area and also the
wider Group.
An important element of the events has been
to engage with local schools, highlighting
the breadth of opportunities within the food
industry and educating young people on
where their food comes from. In 2017, a series
of educational workshops were completed in
six Academy schools in the area, providing a
business case study of how food development
and manufacture takes place as well as giving
pupils the opportunity to have their own
products produced. This culminated in the
winning entries being served at the Freedom
Festival in the designated Cranswick display
at the show.
In addition, we work with local schools, colleges
and universities across all business areas and
this includes industry mentoring, attendance
at interview workshops and raising awareness
of the food industry at events such as the
Flavours Food Festival and university seminars.
Cranswick plc Annual Report & Accounts 2018
37
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report OPERATING AND FINANCIAL REVIEW
STRONG ORGANIC
GROWTH AND RECORD
CAPITAL INVESTMENT
The Wayland and Wold farming businesses
currently supply approximately 17 per cent of
our British pig requirements. We are the third
largest pig producer in the UK and represent
4 per cent of the total UK pig herd. More than
90 per cent of the pigs produced from the
two herds are bred outdoors, allowing us to
provide a complete farm-to-fork solution for
the premium pork ranges of our two largest
retail customers. We are investing £4 million
in our Wayland farming operation to increase
breeding and finishing capacity of premium
pigs in response to customer demand.
Productivity improvements in our outdoor
herd lifted output by more than 10 per cent
compared to the previous year.
The UK pig price (EU-spec SPP) rose steadily
during the early part of the year, exceeding
164 pence in July before falling back through
the second half of the year to just over 145
pence by year end. The average UK pig price
REPORTED REVENUE GREW BY 18 PER CENT AND ADJUSTED PROFIT
BEFORE TAX GREW BY 22 PER CENT.
OPERATING REVIEW
REVENUE AND ADJUSTED OPERATING PROFIT
Revenue
Adjusted Group Operating Profit
Adjusted Group Operating Margin
* See Note 31 of the financial statements.
2018
53 weeks
£1,464.5m
£92.8m
6.3%
2017
52 weeks
Change
(Reported)
Change
(Like-for-like*)
£1,245.1m
£76.1m
6.1%
+17.6%
+21.9%
+22 bps
+12.7%
REVENUE
Reported revenue from continuing operations
increased by 17.6 per cent to £1,464.5 million.
Like-for-like revenue, which excludes
the benefit of the 53rd week and the
contributions from Crown Chicken and the
Ballymena pork processing business prior
to the anniversary of their acquisition, was
12.7 per cent higher, with corresponding
volumes ahead by 7.7 per cent. Each of
our categories delivered positive volume
growth, ahead of overall category market
performance. Stronger pricing during the first
half reflected partial recovery of higher input
costs compared to those experienced in the
same period last year. Input costs eased
in the second half of the year, with this
downward trend reflected in selling prices.
ADJUSTED GROUP OPERATING PROFIT
Adjusted Group operating profit increased by
21.9 per cent to £92.8 million. Adjusted Group
operating margin at 6.3 per cent was 22 basis
points higher than in the same period last
year, due to a combination of easing input
prices during the second half of the year,
further operational efficiency improvements,
better capacity utilisation and tight cost
control.
CATEGORY REVIEW
Fresh Pork
Fresh Pork includes our three primary
processing facilities and associated farming
operations and represented 33 per cent of
Group revenue. Total Fresh Pork revenue
increased by 20.1 per cent. Excluding the
contribution from Ballymena prior to the
anniversary of its acquisition and the 53rd
week, like-for-like revenue growth was
10.0 per cent. Performance was comfortably
38
Cranswick plc Annual Report & Accounts 2018
ahead of the overall UK fresh pork market
which saw volumes decline by just under
1 per cent. During the year we launched new
added value summer ranges and developed
new processing techniques which have
delivered improved texture and succulence.
The Ballymena butchery hall extension
was completed resulting in capacity being
increased from 8,000 to 12,000 pigs per week.
Just over 59,000 pigs per week were processed
through our three facilities. A new Deboflex
shoulder deboning line was commissioned at
the Hull facility during the year and this line,
which is the first of its type to be installed in
the UK, is performing well. Further investment
is being made at the Hull facility to lift pig
chill capacity and to upgrade the rapid chill
system to improve yields. The lairage is also
being expanded and improved. Both projects
are due to complete in the second quarter of
the current financial year.
Total export revenue grew by 30.2 per cent,
with a modest decline in sales to Far Eastern
markets of 6.1 per cent comfortably offset
by a 104.0 per cent increase in sales to other
export markets which, most notably, include
the US and Europe. Growth in these two
markets reflected stronger volumes and higher
prices in Europe resulting from a favourable
Sterling : Euro exchange rate. Far East volumes
improved quarter by quarter and returned
to growth in the second half of the year.
Like-for-like export sales, excluding the benefit
from Ballymena prior to the anniversary of
its acquisition and the 53rd week, grew by
20.7 per cent. The Ballymena facility is now
approved to export directly to China and the
first direct shipments were made in quarter
four. We are growing our e-commerce business
in China and exports to Japan are growing
strongly with a focus on supplying premium
outdoor bred pork to the food service sector.
22.4%
Increase in adjusted profit before tax
£112.1m
Net cash generated from operations
for the year to 31 March 2018 was 13 per cent
higher year-on-year reflecting a 17-month
period of rising prices from March 2016
through to July 2017. The average EU 28
reference pig price during the period was
also up 9 per cent year-on-year.
Convenience
Convenience, which comprises Cooked Meats
and Continental Products, represented 36
per cent of Group revenue. Total Convenience
revenue increased by 12.1 per cent, with
like-for-like revenue, excluding the benefit of
the 53rd week, up 10.1 per cent. This positive
performance reflected the full contribution
of new business wins in the previous financial
year. Growth was comfortably ahead of the
overall market where volumes were flat
year-on-year.
Cooked Meats sales were very strong
reflecting the benefit of the new business
wins referred to above. New product
launches in the fast growing ‘Ready to Cook‘
and ‘Slow Cook‘ ranges also helped underpin
the strong growth in this category. A further
£11 million of capital investment was made
across the three Cooked Meats facilities
during the year. Working closely with our
key retail customers, we continue to develop
our ingredients ranges. We are also growing
sales through business to business and
manufacturing channels, particularly
with ready meals, pizza and sandwich
manufacturers.
Sales of Continental Products were 4.1 per
cent up on the same period last year with
higher prices, resulting from the devaluation
of Sterling against the Euro, offsetting lower
volumes following the loss of pizza toppings
business with one retail customer. New
business wins with other retail customers,
including new platter range launches and
pre-pack corned beef, boosted sales. After
a challenging first half the sub-category
returned to volume growth in the second half
of the year. The business continues to explore
opportunities in the food service sector with
sales through this channel growing strongly
underpinned by new business with one of
the Group’s leading Quick Service Restaurant
customers. The Woodall’s range of British
charcuterie products continues to perform
well, with a new listing now secured with
a key retail customer.
The new £28 million facility, based at Bury
in Lancashire, is now being commissioned.
The site will consolidate production from
the two existing facilities, lift capacity
by approximately 70 per cent, add new
capability and drive efficiency improvements
on existing product ranges. Transfer of all
production from the current facilities is
expected to be completed by the end of
quarter one of the new financial year.
Gourmet Products
Gourmet Products, which comprise Sausage,
Bacon and Pastry, represented 19 per cent
of Group revenue. Total revenue increased
by 22.2 per cent in the year, with like-for-like
revenue, excluding the benefit of the 53rd
week, ahead by 20.2 per cent. All categories
delivered strong double-digit volume growth
reflecting strong underlying, high single-digit,
market growth of the super-premium tier of
each category and market share gains due
to business wins and new product launches.
Strong Sausage sales growth reflected the
contribution from the new ‘Butcher’s Choice‘
business launched with one of our largest
retail customers mid-way through the
previous financial year together with other
new business wins launched in summer
2017. The peak Christmas trading period
was especially busy for the Hull and Norfolk
facilities, with two additional production
lines installed at the Hull Fresh Pork facility
to accommodate the strong seasonal spike
in demand.
Strong Bacon sales growth reflected the
significant business win in quarter four of the
previous financial year for gammon and wet
cure bacon with one of the site’s principal
retail customers. Consumers continue to
switch from standard tier products into
the premium and super-premium ranges,
encouraged by a combination of new product
launches, multi-buy mechanics and every day
low pricing.
Pastry sales grew strongly reflecting the
contribution from new business with a
‘food-to-go‘ customer launched at the start
of the year. The business has also successfully
developed a range of frozen products for one
of the Group’s retail customers. These new
business wins augmented continued growth
with the site’s anchor retail customer.
New product listings over the Christmas
period also contributed to a strong full year
performance from the pastry business.
Poultry
Poultry, which includes Fresh and Cooked
Poultry, represented 12 per cent of Group
revenue. Including the 53rd week and a
full year contribution from Crown, revenue
increased by 21.6 per cent, with like-for-like
sales growing 16.8 per cent.
The Crown Chicken business continues to
make progress. The management team has
been strengthened and investment has been
made at the Weybread primary processing
facility in Norfolk to drive efficiencies and lift
throughput. More birds are being portioned
due to new contracts secured and closer
ties continue to be developed with the Hull
Cooked Poultry facility. Shortly after the year
end Crown secured a contract to supply fresh
whole birds to one of the Group’s strategic
retail customers. Although the volume of
business is initially modest it represents an
important milestone in Crown’s evolution
and complements the chicken which Crown
supplies to our Cooked Poultry business to
service the same customer.
Plans for the new primary processing facility
at Eye in Suffolk are being rapidly developed.
Planning approval for the site was confirmed
shortly after the year end and work at the site
is due to start shortly. This world class facility,
which is scheduled for completion in late
2019, will double our existing capacity with
further room for expansion. The facility
will incorporate the highest animal welfare
standards and latest generation production
techniques and equipment to drive operational
efficiency gains.
Sales of premium Cooked Poultry grew
strongly during the year, reflecting underlying
market growth and the successful launch of
contracts with two of the Group’s principal
retail customers. Further lines have been
added since these contracts were launched
and looking forward there is a strong new
product development pipeline to drive further
growth both with retail customers and in the
business’s core food service and Quick Service
Restaurant categories.
Cranswick plc Annual Report & Accounts 2018
39
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report PENSIONS
The Group operates defined contribution
pension schemes whereby contributions are
made to schemes administered by major
insurance companies. Contributions to these
schemes are 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 2018 was £8.1
million, compared to £9.5 million at 31 March
2017, reflecting our commitment to increased
funding for the scheme. Cash contributions
to the scheme during the year, as part of
the programme to reduce the deficit, were
£1.8 million. The present value of funded
obligations was £37.5 million, and the fair
value of plan assets was £29.4 million.
UK REFERENDUM ON EU MEMBERSHIP
The outcome of the UK referendum on EU
membership and the subsequent uncertainty
over the nature of the UK’s exit from the EU
continue to drive volatility in currency markets
and uncertainty within the European labour
market. The Group therefore continues to
monitor and manage its business risks in
these areas.
SUMMARY
We have delivered another outstanding year
of growth. We have also made significant
investment in our asset base during the year
with more planned in the year ahead to
support our strategic objectives. This leaves us
in a strong position to drive continued growth.
Mark Bottomley
Finance Director
22 May 2018
OPERATING AND FINANCIAL REVIEW CONTINUED
FINANCE REVIEW
REVENUE
Reported revenue from continuing operations
at £1,464.5 million (2017: £1,245.1 million)
increased by 17.6 per cent compared to the
previous year.
ADJUSTED GROUP OPERATING PROFIT
Adjusted Group operating profit of £92.8
million (2017: £76.1 million), including a full
year contribution from acquisitions made in
the previous year, increased by 21.9 per cent.
Adjusted Group operating margin was 6.3
per cent of sales compared to 6.1 per cent
last year.
FINANCE COSTS
Net financing costs at £0.4 million were £0.2
million lower than the prior year, reflecting
lower average borrowings and improved
terms on the Group’s banking facility
following refinancing in November 2016.
The Group’s banking facility is unsecured
and runs to November 2022 with the option
to extend by a further year and comprises
a revolving credit facility of £160 million,
including a committed overdraft of £20
million. It also includes the option to access
a further £40 million on the same terms at
any point during the term of the agreement.
The facility provides the business with
generous headroom for the future.
ADJUSTED PROFIT BEFORE TAX
Adjusted profit before tax was 22.4 per cent
higher at £92.4 million (2017: £75.5 million).
TAXATION
The tax charge of £18.0 million was 20.5 per
cent of profit before tax (2017: 19.5 per cent).
The standard rate of UK corporation tax
was 19.0 per cent (2017: 20.0 per cent). The
effective corporation tax rate was higher
than the standard rate due to disallowable
expenses. The lower than standard rate
charge in the previous year reflected prior
year adjustments, primarily relating to a
capital allowance review during that year,
partially offset by disallowable expenses.
TAX STRATEGY
Our tax strategy is aligned with our vision
and core values and fits within our overall
Corporate Governance structure. Our
strategy ensures that we comply with all tax
laws wherever we do business and that we
pay all taxes that we are legally required to
pay when they fall due. To safeguard our
reputation as a responsible taxpayer we
do not participate in any tax planning
arrangements that do not comply with
either the legal interpretation or the spirit
of tax laws. Our tax strategy can be found
on our website: www.cranswick.plc.uk.
40
Cranswick plc Annual Report & Accounts 2018
DIVIDEND POLICY
We believe in paying a sustainable dividend
which delivers a strong return to investors
but is balanced against the need to invest in
the future of the business. Our policy ensures
that shareholder income streams are strongly
aligned to profitability and the sustained
growth in the Group’s profits has been
matched by the Group’s dividend per share
growth which is unbroken for 28 years (see
page 6). Our dividend policy can be found
on our website: www.cranswick.plc.uk.
ADJUSTED EARNINGS PER SHARE
Adjusted earnings per share from continuing
operations rose by 19.9 per cent to 145.0 pence
(2017: 120.9 pence). The average number of
shares in issue was 50,787,000 (2017: 50,191,000).
STATUTORY PROFIT MEASURES
The statutory results of the business show
a 13.5 per cent increase in profit before tax
to £88.0 million (2017: £77.5 million), a 13.2
per cent increase in Group operating profit
to £88.4 million (2017: £78.1 million), and an
11.0 per cent increase in earnings per share
from continuing operations to 137.8 pence
(2017: 124.2 pence). Full reconciliations of
these results to the adjusted measures can
be found in Note 31.
CASH FLOW AND NET DEBT
The net cash inflow from operating activities
in the year was £112.1 million (2017: £72.9
million) reflecting higher Group operating
profit offset by a working capital outflow
of just £4.0 million (2017: £18.5 million)
despite significant growth in the scale of the
business. Net funds at the end of the year
were £20.6 million compared to net debt of
£11.0 million for the prior year with the inflow
from operating activities partially offset
by the payment of £5.3 million of deferred
consideration on acquisitions, a net £58.0
million invested in our asset base and £18.2
million of dividends paid to our Shareholders.
ALLOCATION OF RESOURCES
31.6
(1.4)
18.2
Free cash flow
£111.7m
58.0
5.3
• Net capital expenditure
• Acquisitions
• Dividend paid
• Other
• Increase in
net funds
Strategic Report
Cranswick plc Annual Report & Accounts 2018
41
Financial StatementsShareholder InformationCorporate Governance RISK REPORT
PRINCIPAL RISKS
AND UNCERTAINTIES
AS A LEADING UK FOOD MANUFACTURER IT IS IMPORTANT THAT THE
GROUP IDENTIFIES, MONITORS AND PRIORITISES ITS RISKS AND ENSURES
THAT APPROPRIATE MITIGATING ACTIONS ARE DEPLOYED TO REDUCE THE
PROBABILITY AND IMPACT OF THESE RISKS OCCURRING.
RISK MANAGEMENT FRAMEWORK
As shown on the opposite page, the Group
has a robust Risk Management Framework
in place which leads to the identification and
management of risks across the business.
The Board has overall responsibility for the
establishment and oversight of the Group’s
Risk Management Framework and Internal
Control procedures which are summarised
below and discussed further within the
Governance Report on pages 51 to 55.
Overall the Board recognises, in accordance
with the principles of the UK Corporate
Governance Code, the need for a robust
system of Internal Control procedures and an
effective Risk Management Framework to be
in place, which supports the Group’s ability to
manage risk and continue as a viable entity.
Further details are provided within the Viability
Statement paragraphs.
The Group Risk Committee, which consists
of Senior Managers, and which is chaired by
the Group Finance Director, meets four times
a year. The Group also has a well-established,
effective Internal Audit function which reports
directly to the Audit Committee and provides
independent assurance that the Group’s
Risk Management Framework, governance
and key Internal Control procedures are
operating effectively.
The Group is continually seeking to strengthen
its Risk Management processes. During the
year an independent external review of the
Group’s Risk Management Framework was
commissioned by the Board. Overall this
concluded that the Group has formalised and
effective Risk Management arrangements in
place. Recommendations raised to enhance
existing processes are being implemented.
IDENTIFYING AND MONITORING
PRINCIPAL RISKS
The Group’s Risk Management Framework
enables the business to identify, prioritise
and mitigate risks. A Group risk register is
in place which captures overarching business
risks together with detailed individual site risk
registers owned by operational management.
The Group undertakes reviews for new
and emerging risks on a regular basis and
implements appropriate mitigating actions
as required.
The Group Risk Committee monitors these
processes, reviews the risk registers and
reports significant risks to the Audit
Committee. The Board receives a quarterly
update report on the risk profile facing the
Group and formally reviews the key risks facing
the business at least once a year. Through
this formalised process the principal risks are
determined and subsequently agreed by
the Board.
The risks facing the Group are broadly
consistent with the previous year, with no
significant changes identified. However,
in common with other businesses, Brexit
continues to be an area of focus for the
Group. There are specific areas where
over the short to medium-term Brexit could
potentially impact upon the Group to include;
the availability and cost of labour, volatility in
Sterling and a downturn in overall consumer
demand. Senior management and the
Board will continue to closely monitor Brexit
negotiations and make adjustments to the
Group’s strategic plan as necessary.
The principal risks and uncertainties facing the
Group are summarised on pages 44 and 45.
These have been considered during the
preparation of the Viability Statement.
It should be noted, however, that it is not
possible to identify or anticipate every risk
that may affect the Group.
42
Cranswick plc Annual Report & Accounts 2018
RISK APPETITE
Risk is assessed across four categories
namely; strategic, commercial, financial
and operational. As a leading UK food
manufacturer, the Board has a low risk
appetite for risks which may impact
the Group’s reputation or compliance in
operational areas such as product quality
and Health & Safety. However, the Board
recognises that, in pursuit of its strategic
objectives, there is, on occasion, a risk and
reward trade-off in making certain decisions
such as business acquisitions and capital
investment where a higher level of risk
may be accepted. All strategic decisions
are underpinned by a robust business case,
appropriate level of due diligence and are
carefully considered to ensure each proposal
is understood prior to Board approval.
VIABILITY STATEMENT
In accordance with the provisions of the UK
Corporate Governance Code, the Board has
assessed the viability of the Group over an
appropriate period, taking into account the
current position, future prospects and the
potential impact of the principal risks outlined
on pages 44 and 45 of the Annual Report.
The Board has determined that a three year
period to March 2021 is an appropriate period
over which to provide its Viability Statement.
This timeframe has been specifically chosen
due to the current financial and operational
planning cycles of the Group.
Strategic Report
In making this assessment of viability, the
Board carried out a robust assessment of
the principal risks and uncertainties facing
the Group. Risks assessed to have the highest
likelihood of occurrence or the severest
impact, crystallising both individually and in
combination, underwent detailed sensitivity
analysis. These risks were: a loss of a key
customer; a significant decline in consumer
demand; and a reduction in overseas exports.
The sensitivity analysis quantified the financial
impact on the strategic plan and on the Group’s
viability against specific measures including
liquidity, credit rating and bank covenants.
The results of the sensitivity analysis highlighted
that the Group would, over the three year
period, be able to withstand the impact of the
most severe combination of the risks modelled
by making adjustments to its strategic plan
and capital expenditure programme.
Based on the results of this analysis, the Board
has a reasonable expectation that the Group
will be able to continue in operation and meet
its liabilities as they fall due over the period to
31 March 2021.
R I N G
O
IDENTIFIC
A
T
I
O
N
O NIT
M
M
I
T
I
G
A
T
I
O
N
Board
Audit Committee
Group Risk Committee
Operational Management
PRIORITIS AT I O N
T
N
E
M
S
S
E
S
AS
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 effectively.
Group Risk Committee
Provides oversight and advice to the Audit Committee
and Board in relation to current and future risk
exposures and risk mitigation strategies.
Operational Management
Deploy site level Risk Management processes
to ensure that risks are adequately identified
and controlled.
Cranswick plc Annual Report & Accounts 2018
43
Financial StatementsShareholder InformationCorporate Governance
RISK REPORT CONTINUED
PRINCIPAL RISKS
AND UNCERTAINTIES
THE PRINCIPAL RISKS AND UNCERTAINTIES FACING THE GROUP ARE SUMMARISED BELOW:
MITIGATION AND NET RISK RATING
RISK TREND
The Group operates in highly competitive
markets. Product innovation and changing
consumer trends provide a constant challenge
to the future success of the Group and its ability
to compete effectively with its competitors.
The Group continues to pursue growth strategies
through securing contracts with new customers,
obtaining additional contracts with existing
customers and through the acquisition of
appropriate businesses. The Group also has to
navigate both internal and external change,
such as changes in regulation. These present
operational and compliance challenges
and issues.
The Group maintains and develops strong
working relationships with its customers which
are underpinned by delivering high levels of
service, quality products and by continued
focus on product development and innovation.
•••••
The Board routinely receives updates on the
contractual position of all key customers and
where required implements necessary actions.
Regarding business acquisitions, rigorous due
diligence reviews are carried out. Internal and
external change is appropriately resourced to
ensure operational excellence and compliance,
with performance monitored by operational
and senior management.
•••••
The risk has stayed the same.
The risk has stayed the same.
RISK AREA
STRATEGIC
COMPETITOR
ACTIVITY
GROWTH &
CHANGE
COMMERCIAL
CONSUMER
DEMAND
In common with other food industry
manufacturers, a deterioration in the UK
economy or a significant change in food
consumption patterns could lead to a fall
in demand for the Group’s products and
a fall in Group revenue.
RELIANCE ON
KEY CUSTOMERS
& EXPORTS
A significant proportion of the Group’s results
is generated from a small number of major
customers and export sales. Loss of all or part of
the Group’s business with one or more of these
customers or loss of an export licence could
adversely impact on the Group’s operations.
The Group works closely with its key customers
to adapt to changing consumer trends and also
offers a range of products across premium,
standard and value tiers which it is able to flex
accordingly. Pork and chicken remain extremely
competitively priced and sought after products.
•••••
The Group continually pursues opportunities
to expand its customer base across all product
categories and works closely with UK and export
customers to ensure service, quality, food safety
and new product developments are of the
highest standard.
•••••
The risk has stayed the same.
The risk has stayed the same.
PIG MEAT –
AVAILABILITY
& PRICE
FINANCIAL
INTEREST RATE,
CURRENCY,
LIQUIDITY &
CREDIT RISK
The Group is specifically exposed to issues
associated with the pricing and availability of
pig meat. An increase in pig prices or a lack of
availability of pig meat could adversely impact
on the Group’s operations and the ability to
supply manufacturing sites and key customers.
The Group has a trusted long standing
farming supply base which is complemented
by supply from the Group’s own farms.
These arrangements help to mitigate the risks
associated with pig price volatility and supply.
•••••
The risk has stayed the same.
The Group is exposed to interest rate risk
on borrowings and, in specific areas, foreign
currency fluctuations. In addition the Group
needs continued access to funding for both
current business and future growth.
The Group deploys effective currency hedging
arrangements to mitigate risks associated
with foreign currency movements. Sites have
access to the Group’s overdraft facility and
bank balances are monitored on a daily basis
by Group Finance. All bank debt is arranged
centrally and appropriate headroom is
maintained.
•••••
The risk has stayed the same
although the potential implications
of Brexit are being closely monitored.
44
Cranswick plc Annual Report & Accounts 2018
STRATEGIC PILLAR
High Quality Products
Operating Excellence
Sales Growth
Sustainability
Considered in detail within Viability Statement
RISK AREA
OPERATIONAL
DISRUPTION
TO GROUP
OPERATIONS
NET RISK
AFTER MITIGATION
••••• Low risk
••••• Medium risk
••••• High risk
RISK TREND
Risk increased
Risk unchanged
Risk decreased
MITIGATION AND NET RISK RATING
RISK TREND
The Group faces the risk of significant incidents
such as fire, flood or loss of key utilities together
with the risk of disruption to day to day
operations from issues such as poor operational
management or the breakdown of key
equipment. Overall such issues could result in
the prolonged disruption to site processes.
Robust business continuity plans are in place
across the Group and appropriate insurance
arrangements exist to mitigate financial loss.
Potential business disruption is minimised
through multi-site operations across many
of the Group’s core product lines.
•••••
The risk has stayed the same.
RECRUITMENT &
RETENTION OF
WORKFORCE
As the Group continues to pursue its growth
strategy, the success of the Group is dependent
on attracting and retaining quality, skilled and
experienced people.
HEALTH & SAFETY
A significant breach of Health & Safety
legislation could lead to reputational damage
and regulatory penalties, including restrictions
on operations, damages or fines.
DISEASE &
INFECTION WITHIN
LIVESTOCK
A significant infection or disease outbreak
could result in the loss of supply of pig or poultry
meat or the inability to move livestock freely,
impacting on the supply of key raw materials
into the Group’s sites.
FOOD SCARES
& PRODUCT
CONTAMINATION
In common with other food manufacturers the
Group is subject to the risks of product and/or
raw material contamination and potential
health related industry-wide food scares. Such
incidents could lead to product recall costs,
reputational damage and regulatory penalties.
IT SYSTEMS &
CYBER SECURITY
The Group relies heavily on information
technology and key systems to support the
business. In common with other organisations
the Group is susceptible to cyber-attacks with
the risk of a financial loss and threat to the
overall confidentiality and availability of data
in systems. Whilst no material cyber security
breaches have occurred over the course of the
year, the Board is mindful of the ongoing risks
in this area given the increasing sophistication
and evolving nature of this threat.
The risk has stayed the same
although the potential implications
of Brexit are being closely monitored.
The risk has stayed the same.
The risk has stayed the same.
The risk has stayed the same.
The risk has increased due to
the general number of reported
cyber-attacks in the wider economy.
Across the Group robust recruitment processes,
competitive remuneration packages and
ongoing training and development plans are
in place. Specifically, for senior management,
formalised succession planning is also in place.
•••••
The Group has strong Health & Safety processes
and procedures in place and conforms to all
relevant standards and regulations as well as
pursuing industry best practice across its sites.
All sites are subject to frequent audits by internal
teams, customers and regulatory authorities to
ensure standards are being adhered to.
•••••
The Group’s pig farming activities, and other
farms from which third party pig meat is
ultimately sourced, have a broad geographical
spread to avoid reliance on a single production
area. The Group’s own poultry flock is
predominately housed indoors. In addition,
robust vaccination and bio-security procedures
mitigate the risk of disease and infections.
•••••
The Group ensures that all raw materials are
traceable to original source and that site
manufacturing, storage and distribution
systems and those of our suppliers are
continually monitored by experienced and
appropriately trained internal teams.
•••••
The Group has a robust IT control framework
in place, which is reviewed and tested on
a frequent basis by internal teams and
specialist third parties. Detailed internal
control procedures are also in place to reduce
the potential risk of fraudulent payment
requests being processed. During the year,
to further mitigate the risks associated with
cyber-attacks, the Board approved the purchase
of cyber insurance which provides specialist
technical and legal support in the event of
a cyber incident.
•••••
Cranswick plc Annual Report & Accounts 2018
45
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report LEADERSHIP
CHAIRMAN’S GOVERNANCE OVERVIEW
PROVIDING EFFECTIVE
BOARD LEADERSHIP
IT IS IMPORTANT TO THE BOARD AND TO THE SHAREHOLDERS AND OTHER STAKEHOLDERS
THAT THE GROUP MAINTAINS A HIGH STANDARD OF CORPORATE GOVERNANCE TO
SAFEGUARD ITS REPUTATION AND TO SUPPORT ITS LONG-TERM SUCCESS.
consultants to introduce additional expertise
and an external perspective. In this context,
a number of females have been appointed to
senior roles and now 24 per cent of our senior
managers and executives are female. We will
continue to focus on diversity within the Group
and an explanation of our policy is included in
the report of the Nomination Committee.
The Remuneration Committee reviewed
the Group’s remuneration policy during the
year with the assistance of independent
consultants and its recommendations, which
will be presented for approval by Shareholders
at the Company’s forthcoming AGM, are set
out in the Remuneration Committee Report
on pages 66 to 82. The Committee has been
Your Board is committed to ensuring
that the Group’s corporate governance
arrangements are effective and continue to
evolve with best practice and I am pleased
to report that the Group has continued to
comply with the requirements of the 2016
UK Corporate Governance Code throughout
the year. Further details of how the Board
supports the executive team and the role and
activities of the various Board committees are
set out in the following pages of this report.
Over the course of the last 12 months there
have been numerous developments in relation
to corporate governance many of which will
result in listed companies having to meet
enhanced governance requirements. Notably,
the Parker Review and second Hampton-
Alexander Review were published which include
a number of recommendations relating,
respectively, to improving ethnic diversity
and gender balance in the leadership of FTSE
companies. A new Corporate Governance
Code will also be published in the summer.
At the Company’s last Annual General
Meeting in July 2017, a significant number
of votes were cast against, or abstained on,
the resolution proposed to re-elect me as
a Director. This was because of a perceived
lack of diversity and independence on our
Board and this also accounted for a number
of votes against the re-election of other
executive directors. I am therefore pleased
to have the opportunity to explain the
Group’s approach to corporate governance
and recent developments.
As I have previously indicated, the Board
and Nomination Committee supports diversity
in relation to both external and internal
appointments without having specific targets.
The Group’s principal concern has and will
continue to be that the best person gets
the job. Appointing more female and ethnically
diverse candidates is entirely consistent with
our aim of ensuring our Directors and senior
management represent the people with
the most appropriate skills, knowledge and
experience to fulfil their roles. As part of our
long-term succession planning, I was therefore
delighted to welcome Pam Powell and Tim
Smith to our Board in April, following a rigorous
appointment process conducted with the
assistance of external consultants during
which a wide range of candidates were
considered. Their appointment will enhance
the diversity and independence of our Board.
Further details of the appointment process
are set out in the report of the Nomination
Committee on pages 63 to 65.
Our succession planning also depends on
the development of the future leaders of the
business and ensuring that we have a cohort
of experienced executives with the skills and
drive to continue to take our business forward.
The Hampton-Alexander review recognises
this and makes recommendations relating to
publishing details of gender balance amongst
senior managers. Whilst this is not yet a
requirement, we have adopted this approach
and have included greater details of the age,
tenure and gender of our Group Directors on
page 50 so that Shareholders are in a better
position to assess our wider management team.
Certain areas of the food sector have faced
challenges in recruiting talented female and
ethnically diverse candidates and suffer from
historic low levels of participation. We will
continue to address this positively through
focusing on our recruitment, training and
mentoring programmes so that we can meet
developing expectations in this area. This is
undertaken both within the business and using
46
Cranswick plc Annual Report & Accounts 2018
Strategic Report
Financial Statements
Shareholder Information
mindful to ensure that its recommendations
reflect best market practice and also align
the interests of Executive Directors with the
Group’s strategy and long-term interests
of Shareholders and other stakeholders to
promote the continued success of the Group.
During the year we have undertaken
a significant project developing a new
£28 million site for our Continental Products
business at Bury and also announced the
development of a new poultry processing
facility at Eye in Suffolk. These have significant
implications for the Group, but also for our
wider group of stakeholders including our
employees and local communities and we
have consulted widely in relation to these
to address stakeholder concerns.
Your Board is committed to continuing
to maintain a high standard of governance.
We recognise this is not static and is an
evolving process which requires continual
review and development. This report explains
how we have applied the principles of good
governance and have aligned these during
the year to our strategic plans and the
interests of Shareholders.
Martin Davey
Chairman
22 May 2018
COMPLIANCE STATEMENT
The Board is pleased to report that it has complied with the
requirements of the 2016 UK Corporate Governance Code
during the year ended 31 March 2018. The Board believes that
it has the appropriate blend of skills, experience, independence
and knowledge to support the business and will continue to
ensure an optimal level of relevant skills, experience and diversity
amongst its members, appropriate to support the future needs
of the business.
The Board has reviewed the financial statements and, taken as
a whole, consider them to be fair, balanced and understandable,
providing sufficient and appropriate information for Shareholders
to assess the Company’s position and performance, business
model and strategy. The Audit Committee provided guidance
to the Board to assist them in reaching this conclusion.
Cranswick plc Annual Report & Accounts 2018
47
Corporate GovernanceStrategic Report LEADERSHIP
BOARD OF DIRECTORS
EXECUTIVE DIRECTORS
MARTIN DAVEY
Chairman
ADAM COUCH
Chief Executive
MARK BOTTOMLEY
Finance Director
JIM BRISBY
Commercial Director
STEVEN ESOM
MARK RECKITT
KATE ALLUM
PAM POWELL
TIM SMITH
Senior Independent
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Adam was appointed
to the Board in 2003 as
Managing Director of
Fresh Pork and became
Chief Executive in 2012.
Mark was appointed
to the Board in 2009
as Finance Director.
Jim was appointed to the
Board in 2010 as Sales and
Marketing Director and
became Commercial
Director in 2014.
Steven was appointed
as an independent
Mark was appointed
as an independent
Kate was appointed
as an independent
Pam was appointed
as an independent
Tim was appointed
as an independent
non-executive director
non-executive director
non-executive director
non-executive director
non-executive director
in 2009.
in 2014.
in 2013.
in 2018.
in 2018.
Term of Office
Martin was appointed
to the Board in 1985
as Finance Director,
appointed Chief Executive
in 1988 and became
Chairman in 2004.
Committee Membership
N Chair
Independent
Not applicable
Not applicable
Not applicable
Not applicable
Yes
Yes
Yes
Yes
Yes
Skills and Experience
Martin joined Cranswick
as Finance Director in
1985 when he led the
Company’s listing on the
London Stock Exchange
and was subsequently
appointed Chief Executive
in 1988. Through Martin’s
guidance over the last
33 years the Group has
expanded both organically
and through acquisition
and entered the FTSE 250
in 2008. He became
Executive Chairman in
2004 and since 2013 has
fulfilled the role on a
part-time basis. Martin is
a chartered accountant.
Adam joined Cranswick’s
Fresh Pork Business in 1991
and was appointed to the
Board in 2003 as Managing
Director of Fresh Pork. He
was appointed as Chief
Operating Officer in 2011
and then Chief Executive in
2012. Under his leadership
Cranswick has continued
to expand and become a
major player in the food
processing industry.
Adam was a committee
member of the British
Pig Executive between
2005 and 2013.
External Appointments and Commitments
Jim joined Cranswick in
1995. He was appointed
Sales and Marketing
Director in 2010 and
Commercial Director
in 2014 and has been a
key member of the team
responsible for growth
of the Group and the
development of its
commercial strategy.
Mark joined Cranswick in
2008 as Group Financial
Controller and was
appointed to the Board
as Finance Director in
2009. Before joining the
Company, Mark held a
number of senior finance
roles in the food sector.
Mark is responsible for
overseeing the financial
operation of the Group
and setting financial
strategy. Mark is a
chartered accountant.
None
None
None
None
Non-Executive director
Non-Executive Director
Chief Executive of CeDo
Non-Executive Director
None
Board by tenure
Board by age
0-3
years
48
3-6
years
6-9
years
9 years
or more
41-45
years
46-50
years
51-55
years
56-60
years
61-65
years
Cranswick plc Annual Report & Accounts 2018
R Chair A N
A Chair N R
A N R
A N R
A N R
Steven has experience of
Mark has experience
Kate has experience of
Pam has international
Tim has experience in
the food sector having
across a number of
the food sector both
experience in strategy,
the UK food sector
held a number of senior
sectors. He was Group
within the UK and Europe.
marketing and innovation
having worked in
positions including
Strategy Director of
Kate was Chief Executive
in fast moving consumer
food manufacturing,
Executive Director of Food
Smiths Group plc between
of First Milk Limited from
goods, including food and
government regulation and
at Marks & Spencer plc
2011 and 2014. Prior to
2010 to 2015 and prior
beverages. Pam spent
supermarket retail. Tim was
which followed 12 years
joining Smiths, Mark
to that was head of the
nine years at SABMiller plc,
the Group Quality Director
at Waitrose, the last five
was interim Managing
European supply chain
holding the position of
at Tesco plc between 2012
years of which he was
Director of Green & Black’s
for McDonalds.
Group Director of Strategy
and 2017. Prior to joining
Managing Director.
Chocolate and before that
held a number of finance
and strategy roles at
Cadbury plc. Mark is a
chartered accountant.
and Innovation, and prior
Tesco plc, Tim was the
to this, worked at Coty
Chief Executive of the Food
Europe in France, Unilever
Standards Agency (FSA)
plc in London, and Lever
during which time he led
Brothers in New York.
a strategic review of the
agency. Before joining
the FSA Tim led a number
of businesses including
Express Dairies plc and
Arla Foods plc.
of The Rank Group Plc.
of Mitie Group plc and
Limited. Non-Executive
of Premier Foods plc
Non-Executive Chairman
Hill & Smith Holdings plc.
Director of Origin
and A.G.Barr plc.
of the BRC Global
Non-Executive Director
Enterprises plc.
Standards Board and
of JD Wetherspoon plc
Advantage Travel Centres.
between 2012 and 2016.
MARTIN DAVEY
Chairman
ADAM COUCH
Chief Executive
MARK BOTTOMLEY
Finance Director
JIM BRISBY
Commercial Director
Term of Office
Martin was appointed
to the Board in 1985
as Finance Director,
Adam was appointed
to the Board in 2003 as
Managing Director of
Mark was appointed
to the Board in 2009
as Finance Director.
appointed Chief Executive
Fresh Pork and became
Chief Executive in 2012.
in 1988 and became
Chairman in 2004.
Committee Membership
Jim was appointed to the
Board in 2010 as Sales and
Marketing Director and
became Commercial
Director in 2014.
N Chair
Independent
Skills and Experience
Martin joined Cranswick
Adam joined Cranswick’s
Mark joined Cranswick in
Jim joined Cranswick in
as Finance Director in
1985 when he led the
Fresh Pork Business in 1991
2008 as Group Financial
1995. He was appointed
and was appointed to the
Controller and was
Sales and Marketing
Company’s listing on the
Board in 2003 as Managing
appointed to the Board
Director in 2010 and
London Stock Exchange
Director of Fresh Pork. He
as Finance Director in
Commercial Director
and was subsequently
was appointed as Chief
2009. Before joining the
in 2014 and has been a
appointed Chief Executive
Operating Officer in 2011
Company, Mark held a
key member of the team
in 1988. Through Martin’s
and then Chief Executive in
number of senior finance
responsible for growth
guidance over the last
2012. Under his leadership
roles in the food sector.
of the Group and the
33 years the Group has
Cranswick has continued
Mark is responsible for
development of its
expanded both organically
to expand and become a
overseeing the financial
commercial strategy.
and through acquisition
major player in the food
operation of the Group
and entered the FTSE 250
processing industry.
and setting financial
strategy. Mark is a
chartered accountant.
in 2008. He became
Executive Chairman in
2004 and since 2013 has
fulfilled the role on a
part-time basis. Martin is
a chartered accountant.
Adam was a committee
member of the British
Pig Executive between
2005 and 2013.
External Appointments and Commitments
None
None
None
None
NON-EXECUTIVE DIRECTORS
STEVEN ESOM
Senior Independent
Non-Executive Director
MARK RECKITT
Non-Executive Director
KATE ALLUM
Non-Executive Director
PAM POWELL
Non-Executive Director
TIM SMITH
Non-Executive Director
Steven was appointed
as an independent
non-executive director
in 2009.
Mark was appointed
as an independent
non-executive director
in 2014.
Kate was appointed
as an independent
non-executive director
in 2013.
Pam was appointed
as an independent
non-executive director
in 2018.
Tim was appointed
as an independent
non-executive director
in 2018.
R Chair A N
A Chair N R
A N R
A N R
A N R
Not applicable
Not applicable
Not applicable
Not applicable
Yes
Yes
Yes
Yes
Yes
Steven has experience of
the food sector having
held a number of senior
positions including
Executive Director of Food
at Marks & Spencer plc
which followed 12 years
at Waitrose, the last five
years of which he was
Managing Director.
Mark has experience
across a number of
sectors. He was Group
Strategy Director of
Smiths Group plc between
2011 and 2014. Prior to
joining Smiths, Mark
was interim Managing
Director of Green & Black’s
Chocolate and before that
held a number of finance
and strategy roles at
Cadbury plc. Mark is a
chartered accountant.
Kate has experience of
the food sector both
within the UK and Europe.
Kate was Chief Executive
of First Milk Limited from
2010 to 2015 and prior
to that was head of the
European supply chain
for McDonalds.
Pam has international
experience in strategy,
marketing and innovation
in fast moving consumer
goods, including food and
beverages. Pam spent
nine years at SABMiller plc,
holding the position of
Group Director of Strategy
and Innovation, and prior
to this, worked at Coty
Europe in France, Unilever
plc in London, and Lever
Brothers in New York.
Tim has experience in
the UK food sector
having worked in
food manufacturing,
government regulation and
supermarket retail. Tim was
the Group Quality Director
at Tesco plc between 2012
and 2017. Prior to joining
Tesco plc, Tim was the
Chief Executive of the Food
Standards Agency (FSA)
during which time he led
a strategic review of the
agency. Before joining
the FSA Tim led a number
of businesses including
Express Dairies plc and
Arla Foods plc.
Non-Executive director
of The Rank Group Plc.
Non-Executive Chairman
of the BRC Global
Standards Board and
Advantage Travel Centres.
Non-Executive Director
of Mitie Group plc and
Hill & Smith Holdings plc.
Non-Executive Director
of JD Wetherspoon plc
between 2012 and 2016.
Board by gender
Male
Female
Chief Executive of CeDo
Limited. Non-Executive
Director of Origin
Enterprises plc.
Non-Executive Director
of Premier Foods plc
and A.G.Barr plc.
None
COMMITTEE MEMBERSHIP
A Audit Committee
N Nomination Committee
R Remuneration Committee
Cranswick plc Annual Report & Accounts 2018
49
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report LEADERSHIP
HOW WE ARE
GOVERNED
Cranswick plc Board
BOARD
COMMITTEES
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
AUDIT & RISK
COMMITTEE
CHIEF EXECUTIVE
OPERATING
BOARDS
GOURMET
PRODUCTS
John Fletcher
Marcus Hoggarth
Andy Mayer
Drew Weir
POULTRY
FOOD CENTRAL
Nigel Armes
John Armstrong
David Brown
Andrew Gleadow
Jason Key
David Park
Matthew Ward
Chris Aldersley
Jackie Carter
Rebecca Dearsly
Kate Maxwell
Miranda Walker
Graeme Watson
FRESH PORK
CONVENIENCE
Darren Andrew
Charles Bowes
Neil Clappison
Barry Lock
Nick Mitchell
James Pontone
Neil Willis
Edward Wright
Ian Fisher
Andy Jenkins
Gary Landsborough
Sam Pearl
Simon Ravenscroft
Norman Smith
Rollo Thompson
Steve Westhead
DIVERSITY
Group Directors by tenure
Group Directors by age
Group Directors by gender
• 0-3 years 37%
• 3-6 years 33%
• 6-9 years 21%
• 9 years or more 9%
• Under 40 years 21%
• 41-45 years 12%
• 46-50 years 34%
• 51-55 years 24%
• 56-60 years 6%
• 61-65 years 3%
Male
88%
Female
12%
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Cranswick plc Annual Report & Accounts 2018
PRINCIPLES OF GOOD
GOVERNANCE
The Board is responsible for the long-term success and stewardship of the Company, overseeing its conduct and affairs to create sustainable
value for the benefit of its Shareholders and other stakeholders including customers, suppliers, employees and the communities in which the
business operates.
The Board delegates certain roles and responsibilities to its various committees and to senior management. The committees assist the Board by
fulfilling their obligations and reporting back to the Board on the outcomes from their respective activities.
This report, together with the Audit Committee Report on pages 57 to 62, the Nomination Committee Report on pages 63 to 65, and the
Remuneration Committee Report on pages 66 to 82, describes how the Board applies the principles of good governance and best practice as
set out in the UK Corporate Governance Code (the ‘Code’) which can be found on the Financial Reporting Council’s website: www.frc.org.uk.
Our approach to governance is in accordance with best practice as outlined by the key principles of the five sections of the Code: leadership;
effectiveness; accountability; remuneration; and relations with Shareholders.
CHIEF EXECUTIVE
AND EXECUTIVE
COMMITTEE
An Executive Committee,
consisting of the Executive
Directors and senior executives
from the business, meets
occasionally to discuss strategy,
operational and commercial
matters affecting the business.
The feedback from this
committee is shared
with the Board.
OPERATING
BOARDS
Operating boards (or sub-
boards) consisting of senior
executives from each of the
relevant businesses meet
regularly to discuss operational
and commercial matters
affecting such businesses.
Operating boards are also
attended by the Executive
Directors and relevant members
of the Food Central operating
board as appropriate. The
feedback from the operating
boards is shared with the Board.
THE BOARD
The Board consists of senior
Executive management
alongside a strong team of
sector experienced Non-
Executive Directors. All
Non-Executive Directors are
deemed to be independent.
The Board is ultimately
responsible for the business
strategy and the financial
robustness of the Group, for
monitoring performance and
for establishing a governance
structure and practice which
facilitates effective decision
making and good governance.
To enable the members of the
Board to discharge these
responsibilities, they have full
and timely access to all relevant
information and Board meetings
are held at the Group’s
production facilities allowing
the Directors to review the
operations and meet the
management teams of those
particular sites.
BOARD
COMMITTEES
The Board delegates certain
roles and responsibilities to its
various committees and to
senior management. The
committees assist the Board by
fulfilling their obligations and
reporting back to the Board
on the outcomes from their
respective activities.
To assist the Board in carrying
out its functions and to ensure
that there is independent
oversight of internal controls and
risk management, the Board
delegates certain responsibilities
to its principal committees.
Read more on page 56.
Cranswick plc Annual Report & Accounts 2018
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PRINCIPLES OF GOOD GOVERNANCE CONTINUED
ROLES AND RESPONSIBILITIES
CHAIRMAN
Martin Davey
CHIEF EXECUTIVE (CEO)
Adam Couch
EXECUTIVE DIRECTORS
Mark Bottomley and Jim Brisby
• Primarily responsible for the leadership of the Board, ensuring that it is effective and promoting
critical discussion.
• Chairs the Nomination Committee and the Annual General Meeting.
• Sets the Board meeting agendas in consultation with the Chief Executive and Company Secretary,
ensuring they are aligned to the business strategy.
• Leads the performance evaluation of the Board and ensures its effectiveness in all aspects of its role.
• Sponsors and promotes the highest corporate governance and ethical standards.
• Facilitates contribution from all Directors to the discussions of the Board.
• Provides a sounding board for the Chief Executive on key business decisions and challenges proposals
where appropriate.
• Ensures effective communication with our Shareholders and other stakeholders.
• Develops and implements the Group’s strategy with input from the rest of the Board and its advisers.
• Responsible for the overall operational activity of the Group.
• Manages the day-to-day business of the Group, leads its direction and promotes its culture and values.
• Brings matters of particular significance or risk to the Chairman for discussion and consideration by the
Board where appropriate.
• Responsible for overseeing the delivery of the sustainability agenda within the Group.
• Provide specialist knowledge and experience to the Board.
• Support the CEO in the implementation of the Group’s strategic policies.
• Responsible for the budgeting process and reporting of the financial performance of the Group.
• Responsible for the commercial affairs of the Group.
• Responsible for the successful leadership and management of commercial, risk and finance functions
across the Group.
SENIOR INDEPENDENT DIRECTOR (SID)
Steven Esom
Is available if Shareholders want to raise concerns which normal channels have failed to resolve.
• Provides a sounding board for the Chairman and supports him in his leadership of the Board.
•
• Chairs the Remuneration Committee.
• Heads up the Non-Executive Directors on the Board.
• Reviews the Chairman’s annual performance appraisal along with the other Non-Executive Directors.
NON-EXECUTIVE DIRECTORS
Kate Allum, Pam Powell,
Mark Reckitt and Tim Smith
COMPANY SECRETARY
Steven Glover
• Bring complementary skills and experience to the Board.
• Constructively challenge the Executive Directors on matters affecting the Group.
• Chairs the Audit Committee (Mark Reckitt).
• Satisfy themselves as to the accuracy of the financial performance of the Group and the robustness
and effectiveness of financial controls and risk management processes.
• Help develop strategy with an independent outlook.
• Together with the SID review management’s performance.
• Responsible to the Board.
• Acts as secretary to the Board and each of its Committees ensuring compliance with procedures.
• Responsible, under the direction of the Chairman, for ensuring the Board receives timely and
accurate information.
• Provides support to the Non-Executive Directors.
• Responsible for advising the Board on all governance matters.
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Cranswick plc Annual Report & Accounts 2018
EFFECTIVENESS
BOARD
EFFECTIVENESS
BOARD OPERATION AND ATTENDANCE
There were eight scheduled Board meetings held during the year and a number of other meetings and conference calls were convened for specific
business matters. Board agendas are set by the Chairman in consultation with the Chief Executive and with the assistance of the Company
Secretary. All Directors are expected to attend the scheduled Board meetings and relevant Committee meetings in addition to the Annual
General Meeting unless they are prevented from doing so by prior work or extenuating personal commitments. Where a Director is unable to
attend a meeting they have the opportunity to review relevant papers and discuss any issues with the Chairman in advance of the meeting.
Following the meeting the Chairman, or Committee Chair as appropriate, also briefs any Director not present to update them on key matters
discussed and decisions taken.
Details of Board membership and attendance at scheduled Board meetings are set out below:
Meetings held during the year
Board
8
Audit Committee
Nomination Committee
Remuneration Committee
3
2
4
Meetings attended
Meetings attended
Meetings attended
Meetings attended
Executive Directors
Martin Davey
Adam Couch
Mark Bottomley
Jim Brisby
Non-Executive Directors
Steven Esom
Mark Reckitt
Kate Allum
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a – not applicable (where Director is not a member of the Committee). Executive Directors do attend the various Committee meetings by invitation as required.
PROFESSIONAL DEVELOPMENT
In the past, the appointment of an Executive Director has usually been an internal promotion and their knowledge of the business has been
well established. Our new Non-Executive Directors have received a comprehensive introduction to the Group’s activities and a tailored induction
programme including a number of site visits. All Directors are provided with the opportunity for ongoing training to keep up to date with relevant
legislative changes, including covering their duties and responsibilities as Directors and the general business environment. Directors can obtain
independent advice at the expense of the Company.
Cranswick plc Annual Report & Accounts 2018
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EFFECTIVENESS
BOARD EFFECTIVENESS CONTINUED
KEY ACTIVITIES
STRATEGIC LEADERSHIP
GOVERNANCE AND RISK
• Regularly discussing strategy at Board meetings throughout
• Reviewing the three year forecasts and other factors in
the year.
• Receiving presentations from operational management on
future strategic opportunities.
support of the Viability Statement. (Viability is considered
in detail on pages 42 and 43).
• Reviewing Board and Committees’ effectiveness and
• Considering potential acquisition opportunities and other
Directors’ conflicts of interest.
strategic initiatives.
• Reviewing the development of the Group’s new £28 million
• Reviewing terms of reference for all Committees.
• Reviewing quarterly Health & Safety, Risk and
Continental Foods facility at Bury.
Technical updates.
• Considering the proposal to develop a new poultry processing
• Reviewing the principal financial and non-financial risks,
facility at Eye, Suffolk.
• Discussing the continuing ramifications of the UK vote in June
2016 to exit the EU.
including cyber, to which the Group is exposed (supported by
the Audit Committee).
• Considering proposed governance reforms.
PEOPLE AND SUCCESSION
PERFORMANCE MONITORING
• Considering proposals on succession planning, when
required, for the Board.
• Approving promotion of new senior executives to the
subsidiary boards.
• Reviewing proposals on senior executive succession planning.
• Considering the talent management programme and the
• Approving the Group’s tax strategy.
• Approving the Company’s dividend strategy.
• Recommending the 2016/17 final dividend and the 2017/18
interim dividend.
• Reviewing and approving the Group’s annual budget, interim
results and Annual Report.
need to develop the managers and executives of the future.
• Considering whether the Annual Report and Accounts are fair,
• Reviewing the structure, size, composition and diversity of
both the Board and its Committees (supported by the
Nomination Committee).
balanced and understandable.
• Considering monthly operational reports from the Chief
Executive, Finance Director and Commercial Director.
• Approving a further one year term as a Non-Executive
• Reviewing reports from the Chairs of the Audit, Nomination
Director for Steven Esom.
and Remuneration Committees.
• Approving the appointment of Pam Powell and Tim Smith
• Approving capital expenditure proposals in excess of £1 million.
as new Non-Executive Directors.
CONFLICT OF INTEREST
The Board has completed its annual review of the register relating to potential conflicts of interest with its Directors and confirms that no such
conflicts exist.
BOARD PERFORMANCE EVALUATION
The performance evaluation process was undertaken in early 2018 based on a questionnaire which included questions about Board administration,
the role of the Chairman, strategy, risk oversight, succession planning and the Board committee structure. The questionnaire was completed by all
Board members. A report on the outcome of the evaluation exercise was prepared by the Company Secretary and was presented to the Board at its
March 2018 meeting.
The report concluded from the feedback to their questionnaire that we operated an extremely unified, highly functional Board. The evaluation
recognised the need to continue the progress made to date in certain key areas such as people development and strategy.
The Chairman has evaluated the performance of individual Directors through informal discussions and observations. The Senior Independent
Non-Executive Director and the other Non-Executive Directors have met, without the Chairman present, to appraise his performance.
Overall the Board considered the performance of each Director to be effective and concluded that both the Board and its committees continue to
provide effective leadership and exert the required levels of governance and control. The Board will continue to review its procedures, effectiveness
and development in the year ahead.
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Cranswick plc Annual Report & Accounts 2018
RISK MANAGEMENT AND INTERNAL CONTROL
It is the Board’s role to protect the business from operational and financial risks and it has established a system of internal control which safeguards
the Shareholders’ investment and the Group’s assets. Such a system provides reasonable but not absolute assurance against material misstatement
or loss, as it is designed to manage rather than eliminate the risk of failure to achieve business objectives. The Board is responsible for reviewing the
effectiveness of internal controls. The Audit Committee supports the Board in this process by reviewing the principal risks and the report on pages 57
to 62 outlines further this process.
The Group operates within a clearly defined organisational structure with established responsibilities, authorities and reporting lines to the Board.
The organisational structure has been designed in order to develop, plan, execute, monitor and control the Group’s objectives effectively and to
ensure that internal control is embedded within the operations.
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 approval of the Annual Report.
FINANCIAL REPORTING
The culture of the business extends to the provision of financial information. Operational management provide weekly forecasts, monthly
trading reports, and annual budgets and these are forwarded to Group management and are discussed at monthly site operating board
meetings. Group Executive Directors attend most of these meetings and the information is consolidated and reported at Group Board meetings.
The Group prepares an annual budget and half year re-forecast that are agreed by the Board, with the budget including a three year forecast
for consideration to support the Viability Statement. The use of standard reporting software by all Group entities ensures that information is
presented in a consistent manner which facilitates the preparation of the consolidated financial statements. Site directors and finance heads
are required to sign a monthly confirmation that their business has complied with the Group’s accounting policies and procedures, with a more
detailed confirmation provided for half year and year end reporting.
REMUNERATION
The Remuneration Committee monitors the executive remuneration packages and incentive scheme and believes the incentives provide a strong
alignment between Shareholders, the Executive Directors and the wider senior executive management team. The remuneration policy was agreed
at the AGM in 2015 and is due to be renewed at the Company’s forthcoming AGM in July. Details of the proposed new policy are included in the
Remuneration Committee Report on pages 66 to 82 which provides further details on Directors’ remuneration, together with the activities of the
Remuneration Committee during the year.
RELATIONS WITH SHAREHOLDERS
Regular engagement with investors provides the Group with the opportunity to discuss certain areas of interest and to ascertain any areas of
concern they may have. Further details of steps taken by the Group to engage with its Shareholders are set out on page 83 along with details
of the Company’s major Shareholders.
By order of the Board
Steven Glover
Company Secretary
22 May 2018
Cranswick plc Annual Report & Accounts 2018
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BOARD
COMMITTEES
THE BOARD DELEGATES CERTAIN ROLES AND RESPONSIBILITIES TO ITS COMMITTEES
WHICH ASSIST THE BOARD BY FULFILLING THEIR OBLIGATIONS AND REPORTING
BACK TO THE BOARD ON THEIR ACTIVITIES.
THE AUDIT COMMITTEE
Chair: Mark Reckitt
• Steven Esom
• Kate Allum
Integrity of financial statements
KEY RESPONSIBILITIES
•
• Accounting policies
•
• External audit
• Whistleblowing and anti-bribery
• Group viability and related disclosure
Internal controls and risk management
THE NOMINATION COMMITTEE
Chair: Martin Davey
• Steven Esom
• Mark Reckitt
• Kate Allum
KEY RESPONSIBILITIES
• Board composition
• Succession planning
• Non-Executive Directors
• Diversity
• Governance and evaluation
THE REMUNERATION COMMITTEE
Chair: Steven Esom
• Mark Reckitt
• Kate Allum
KEY RESPONSIBILITIES
• Review of Remuneration Policy
• Executive Director and senior executive
remuneration
• Approval of bonuses
• LTIP awards
• Shareholder engagement
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Cranswick plc Annual Report & Accounts 2018
THE AUDIT
COMMITTEE
THE AUDIT COMMITTEE ASSISTS THE BOARD IN DISCHARGING
ITS RESPONSIBILITIES FOR THE INTEGRITY OF THE FINANCIAL
STATEMENTS, THE EFFECTIVENESS OF INTERNAL REPORTING
PROCESSES AND SYSTEMS OF INTERNAL CONTROLS,
IDENTIFICATION AND MANAGEMENT OF RISKS AND
THE EXTERNAL AND INTERNAL AUDIT PROCESSES.
COMPOSITION OF THE AUDIT COMMITTEE
The Audit Committee comprises the following Non-Executive Directors:
OTHER REGULAR ATTENDEES
• The Chairman, Chief Executive, Group Finance Director, Group
Committee Members
Mark Reckitt – Chair
Steven Esom
Kate Allum
Meetings attended
Financial Controller, Group Head of Internal Audit, External Audit
Partner and External Audit Senior Manager attended by
invitation as required.
• The Group Company Secretary also attended meetings as
secretary to the Committee.
FREQUENCY OF MEETINGS
The Committee meets as necessary and at least three times a year.
INDEPENDENCE
All Members of the Committee are independent.
KEY ACTIVITIES IN 2017-18
Integrity of Financial Statements
External audit
• Reviewed the key financial reporting judgements and concluded
• Reviewed and was satisfied with the effectiveness of the external
that accounting treatments were appropriate.
audit process.
• Reviewed and concluded that the Financial Statements are fair,
• Approved the terms of engagement and remuneration of the
balanced and understandable.
external auditor.
• Reviewed and concluded that the Group is viable over the three-
year review period and that the Viability Statement disclosures
are appropriate.
• Monitored the independence of the external auditor and concluded
that PricewaterhouseCoopers LLP (‘PwC’) are independent.
Accounting policies
• Reviewed the Group’s accounting policies to ensure they remain
appropriate and have been consistently applied.
• Reviewed the disclosure of Alternative Performance Measures
(APMs) and concluded that they are appropriate for monitoring
the Group’s underlying performance.
• Reviewed the impact of forthcoming new accounting standards
and concluded that disclosures in this year’s Financial Statements
are appropriate.
Internal audit
• Reviewed and challenged the work of the Group’s Internal Audit
function and concluded that it is operating effectively and is
appropriately resourced.
• Engaged Deloitte LLP to carry out an independent external review
of the effectiveness of the Internal Audit function and reviewed
their findings.
• Reviewed and approved the Internal Audit Charter and Internal
Audit plan for the year.
Whistleblowing and anti-bribery
• Reviewed and approved the Group’s anti-bribery policy.
• Reviewed and approved the Group’s whistleblowing policy.
• Reviewed whistleblowing reports and their resolution.
Internal controls and risk management
• Reviewed the Group’s internal controls and risk management
systems and concluded that they are operating effectively.
• Reviewed and challenged the work, and associated reporting,
of the Group Risk Committee.
• Engaged Aon plc to carry out an independent external review
of the effectiveness of the Group’s Risk Management Framework
and reviewed their findings.
Group viability and related disclosures
• Reviewed and concluded that a three-year time horizon for the
Group’s Viability Statement was appropriate.
• Reviewed the Group’s budget, forecasts and downside sensitivity analysis
and concluded that the Group is viable over the 3-year time horizon.
• Reviewed and approved the Viability Statement disclosures in the
Financial Statements.
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ACCOUNTABILITY
AUDIT COMMITTEE
REPORT
IT HAS BEEN ANOTHER BUSY YEAR FOR THE COMMITTEE WITH THE TRANSITION OF EXTERNAL AUDITOR
FOLLOWING LAST YEAR’S AUDIT TENDER PROCESS AND EXTERNAL REVIEWS OF THE GROUP’S RISK MANAGEMENT
FRAMEWORK AND INTERNAL AUDIT FUNCTION ADDING TO THE USUAL FULL COMMITTEE AGENDA.
I am pleased to report on the activities of the Audit Committee during the year ended 31 March 2018.
As in previous years, the Committee has focused on its core responsibilities of supporting the Board and protecting the interests of Shareholders
in relation to financial reporting and internal control. This has been achieved by ensuring that the Group has in place a robust risk management
process and an effective internal control framework to manage its risks, in support of going concern and viability confirmations. In addition,
the Committee has continued to focus on ensuring the integrity, quality and compliance of the Group’s external financial reporting.
This report sets out:
• the role, composition, activities and responsibilities of the Audit Committee;
• a summary of the meetings of the Audit Committee during the year;
• the significant financial reporting issues debated by the Committee;
• the Committee’s oversight of the Group’s Risk Management and internal control systems in support of the Board;
• the respective roles and effectiveness of the internal and external auditors;
• details of the transition of external auditor during the year; and
• the Committee’s annual review of external auditor independence.
The Committee met three times during the year and invited the Company’s Chairman, Chief Executive, Group Finance Director, Group Financial
Controller and Head of Internal Audit to attend the meetings along with the external Audit Partner and Senior Manager. The Committee also held
separate private meetings with internal and external audit.
The Committee reviewed the appropriateness of the financial results for the full year and half year and the first and third quarter trading
statements, including applicable accounting policies, key judgement areas, going concern and viability assumptions. The Committee also
reviewed the Annual Report & Accounts taken as a whole to ensure they are fair, balanced and understandable and provide the necessary
information for Shareholders to assess the Company’s performance, business model and strategy.
Specific areas of financial reporting focus during the year included:
• the quantum and appropriateness of commercial accruals;
• the accounting treatment and disclosure of biological assets; and
• revenue recognition.
The Committee reviewed Internal Audit’s terms of reference and work plans and oversaw the Group’s relationship with the external auditor
including scope, fees and work performed. The Committee was satisfied with the performance of the Group’s internal audit function and the
external auditor.
In the coming year, the Committee will continue to focus on the Group’s risk management processes, internal control frameworks and external
financial reporting to ensure that they remain effective and robust to support the future successful growth and development of the business.
On behalf of the Board
Mark Reckitt
Chair of the Audit Committee
22 May 2018
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Cranswick plc Annual Report & Accounts 2018
ROLE OF THE COMMITTEE
The Committee’s primary role is to assist the Board in providing effective governance over the appropriateness of the Group’s financial reporting,
Risk Management and internal control systems. It is responsible for monitoring the integrity of the financial statements and other communications
and announcements to the market, and for considering whether accounting policies are appropriate. It reviews the Company’s internal controls and
risk management frameworks, and reviews and approves the activities, plans and effectiveness of both the Group’s internal and external auditors.
The Audit Committee terms of reference, which are reviewed and approved by the Board annually, are available on the Company’s website and at
the Annual General Meeting.
The timing of meetings is designed to fit in with the Group’s financial calendar, with meetings in advance of half year and year-end financial
reporting in November and May respectively, and an additional meeting in January in preparation for the year end process.
All members of the Committee have extensive managerial experience in large, complex, food sector organisations and have a wide range of financial,
commercial and operational expertise. It is a requirement of the UK Corporate Governance Code that at least one Committee member has recent
and relevant financial experience. Mark Reckitt, the Committee Chairman, meets this requirement. Full biographical details of the Audit Committee
members can be found on page 49.
ACTIVITIES OF THE COMMITTEE
The Committee is required to meet at least three times a year and its agenda is linked to the Group financial calendar. The Company Chairman, Chief
Executive, Finance Director, Group Financial Controller, Head of Internal Audit and representatives of the external auditor are invited to attend each
meeting. The Company Secretary also attends the meetings as secretary to the Committee. Both the external auditor and the Head of 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 auditor and internal audit independently, at least once a year.
PRINCIPAL RESPONSIBILITIES OF THE AUDIT COMMITTEE
The Committee’s principal responsibilities include reviewing and monitoring:
• the integrity of the Group’s financial statements;
• the Group’s accounting policies and the impact of new and amended accounting standards;
• the effectiveness of the Group’s financial reporting, internal control and risk management systems in support of the Board;
• the effectiveness of the internal audit function in the context of the Company’s overall risk management framework;
• the effectiveness, scope, cost and independence of the Group’s external auditor;
• the Company’s whistleblowing and anti-bribery policies; and
• the Group’s viability, and its disclosure within the Annual Report.
The Committee makes recommendations to the Board on the removal, appointment or reappointment of the Group’s external auditor.
The Committee also reviews its terms of reference annually and makes recommendations to the Board for any appropriate changes.
FAIR, BALANCED AND UNDERSTANDABLE
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
position and performance, business model and strategy.
In order to give this report, the Audit Committee carried out a number of additional procedures including:
• 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;
• consideration of the Annual Report and Accounts in the context of the Audit Committee’s knowledge and experience of the business;
• reviewing the disclosure of Alternative Performance Measures (APMs) and considering their appropriateness for monitoring the Group’s
underlying performance;
• holding discussions with both internal and external audit; 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 with both
positive and negative messages being portrayed and ‘understandable’ should mean simple, clear and free from jargon or unnecessary clutter.
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AUDIT COMMITTEE REPORT CONTINUED
VIABILITY STATEMENT
Also at the request of the Board, and reflecting the requirement of the UK Corporate Governance Code, the Audit Committee has reviewed
and reported to the Board that it is satisfied with the risk disclosures and Viability Statement which have been presented.
In order to give this report, the Audit Committee carried out a number of additional procedures including:
• reviewing risk reporting disclosures in detail;
• considering the appropriateness of the three-year time horizon selected for testing the Group’s viability, including consideration of the
uncertainty resulting from the UK’s exit from the European Union;
• reviewing the Group annual budget and extended three-year forecast and the assumptions therein for reasonableness;
• agreeing appropriate downside sensitivities to be applied to the forecasts for stress testing, based on the Group’s principal risks and the work
of the Risk Committee; and
• reviewing the availability of debt funding for the Group across the three-year forecast period.
The Board and the Committee concluded that, based on the results of the analysis provided, they have a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities as they fall due over a three-year time horizon (see pages 42 and 43).
PERFORMANCE EVALUATION OF THE AUDIT COMMITTEE
In the prior year, an independent evaluation of the effectiveness of the Committee was carried out externally by EquityCommunications Limited.
The evaluation was very positive with comments indicating that the Committee was working well. Recommended actions to further improve the
performance of the Committee were incorporated into the Committee’s processes and activities for the year ended 31 March 2018.
In the current year an internal evaluation of the performance of the Board and its Committees was carried out which concluded that the Audit
Committee continues to provide effective leadership and exerts the required levels of governance and control. Further details of the evaluation
are detailed in ‘Board Effectiveness’ on page 54.
FINANCIAL REPORTING
During the year, the Audit Committee reviewed accounting papers prepared by management and considered, with input from the external
auditor, the appropriateness of the main accounting policies, estimates and judgements made in preparing the financial statements. The key
matters that the Committee considered in reviewing the financial statements for the year ended 31 March 2018 are set out below.
Financial reporting area
Judgement and assurance considered
Commercial accruals
Biological assets
Revenue recognition
The Committee reviewed the level of commercial accruals for rebates, discounts and promotional activity at
the balance sheet date. The level of commercial accruals is viewed by the Committee, management and the
external auditor as an area sensitive to a moderate degree of commercial judgement, albeit 76 per cent of the
year end accrual related to volume rebates and similar allowances which require a lower level of judgement
and estimation due to their mechanical calculation. The Committee also noted the FRC’s guidance on complex
supplier arrangements. After reviewing the level of accruals and the intra-year movement, including the
profit effect and considering the work of internal and external audit in verifying the underlying contractual
arrangements, the Committee supported management’s assumptions and accounting treatment including
the disclosures provided in the report and accounts. (See Note 20).
As a result of the additional focus which the Group’s new external auditors placed on the audit of biological
assets the Committee revisited the key assumptions used in the Group’s valuation models and the accounting
treatment adopted in this area. In accordance with IAS 41, biological assets (pigs and chickens) are valued
at fair value in the Group balance sheet, with the net valuation movement disclosed separately on the face
of the income statement. The valuation requires a significant level of judgement and is sensitive to the key
assumptions used in the models which include mortality rates, growth rates and the fair value of livestock at
the various stages of development. The Audit Committee reviewed the assumptions used within the models
and management’s proposed accounting treatment and was satisfied that the standard had been fairly and
consistently applied and the required disclosures made in the financial statements. (See Note 16).
The Committee reviewed the Group policy on revenue recognition, to which there were no changes during
the year, and concluded that it was appropriate for the business activities carried out by the Group. As a food
production business, the Committee does not consider revenue recognition for the Group to be complex, but
acknowledges that it is a key area of audit focus due to the risk of misstatement of revenues as a result of
management override. The Committee thoroughly reviewed the work of both internal and external audit in
this area and concluded that revenues had been appropriately recognised and that there was no evidence of
management bias. In addition, the Committee has reviewed the impact of the forthcoming new International
Financial Reporting Standard on revenue (IFRS 15 – Revenue from Contracts with Customers) and agreed with
management’s conclusion that the new standard does not have a material impact on the Group’s recognition
of revenue. (See Notes 2 and 3).
RISK MANAGEMENT AND INTERNAL CONTROL
The Committee conducted its annual review of the effectiveness of the Company’s internal control and Risk Management Framework through
the work of Internal Audit, the external auditor’s control recommendations on the Group’s financial control environment following their audit and
thorough review and challenge of monthly Board reports. The Committee also reviewed the Group’s whistleblowing and bribery prevention policies
and whistleblowing reports.
A Risk Committee chaired by the Finance Director and including representatives from all areas of the business meets quarterly, reporting its
outputs directly to the Committee and updating the Board accordingly.
60
Cranswick plc Annual Report & Accounts 2018
During the year, to provide additional assurance that the Group’s Risk Management Framework is operating effectively, the Audit Committee
engaged Aon plc to provide an independent review of the Framework, including the activities of the Risk Committee. The review confirmed that,
overall, arrangements were appropriate for the size of the Group and operating effectively, as well as highlighting several areas for the further
development of the Framework. A plan has been put in place to incorporate these recommendations over the short term.
The Committee reviewed the key conclusions from work performed by the Group Risk Committee during the year to gain assurance over the Risk
Management Framework in place across the Group which is designed to identify, evaluate, monitor and mitigate risk. The Committee was satisfied
that all principal risks had been identified (see pages 42 to 45) and that the risk management framework is operating effectively and is appropriate
to support the Group’s strategy for continued growth.
INTERNAL AUDIT
The Audit Committee is responsible for monitoring the performance and effectiveness of the Company’s Internal Audit activities. The Audit
Committee reviewed and approved the annual Internal Audit plan, ensuring that it was aligned to the principal risks of the business and received
regular progress updates on delivery of the plan objectives at each of its meetings during the year. On an annual basis, the Committee reviews
and approves the Group’s Internal Audit Charter which sets out the role and mandate of the Internal Audit function.
The Internal Audit approach takes into account the overall Group risk framework as well as risks specific to individual operations and is regularly
updated to take into account changes to the risk profile of the Group. 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 was satisfied that
the Internal Audit function is operating effectively and that the level of experience and expertise within the department is appropriate to meet the
Group’s needs.
During the year, Internal Audit performed a core financial controls review at all sites and also reviewed specific Group non-financial risk areas. Overall
no control failings or weaknesses were identified that would have a significant impact on the Group; however, recommendations were raised where
necessary at specific sites to strengthen existing processes and controls and follow-up audit visits were carried out at the majority of sites to ensure
that agreed corrective actions were being taken.
The Committee keeps the performance and effectiveness of the Internal Audit function under review and in doing so it also assesses the quality,
experience and expertise within the department. As outlined in last year’s report, to provide additional assurance that the Internal Audit department
is operating effectively, the Committee engaged Deloitte LLP during the year to provide an independent assessment of the function.
The review concluded that audits were ‘in all material aspects’ compliant with Institute of Internal Audit (IIA) standards and also noted that the
function has clarity of purpose, has a good understanding of the business, is taken seriously and respected across the Group, and benefits from
strong engagement with the Board and Audit Committee. A number of recommendations for the further development of the function were
proposed and a plan has been put in place to address these.
The Group operates a decentralised structure where significant accountability is devolved to site operational and financial management. Control
weaknesses identified at site level are taken seriously and management and the Committee seek to ensure that their cause is understood and
mitigating actions are taken to limit the potential for recurrence. In view of the work of internal audit, external audit and Group management,
it is considered unlikely that a weakness at an individual site would have a significant impact on the Group.
EFFECTIVENESS OF THE EXTERNAL AUDIT PROCESS
Following last year’s external audit tender process, PricewaterhouseCoopers LLP (‘PwC’) were formally appointed as the Group’s external auditor
at the AGM, on 24 July 2017. The Audit Committee assessed the qualifications, expertise, resources and independence of the auditor as part of
the audit tender process. These criteria along with the quality and effectiveness of the audit process are reassessed by the Committee on an
annual basis.
In addition to the year-end audit, PwC carried out a review on the Group’s interim reporting during the year, with delivery of the review being in line
with the plan set out during the tender process. The Committee considers that such a review gives the Board additional assurance over the half year
process and reporting.
The Committee considered the following factors in assessing the effectiveness of the external audit process:
• the experience and expertise of the Audit Partner and the audit team;
• the level of professional scepticism displayed throughout the audit process;
• the extent to which the audit plan was met and the quality of its delivery and execution;
• the robustness and perceptiveness of work performed on key accounting and audit judgements; and
• the content of reports on audit findings and other communications.
Having considered these factors, and noted the observations made in the auditor’s reporting, the Committee was satisfied with the effectiveness
of the external audit process.
The Committee will assess the external auditor’s performance and effectiveness for the current year through a questionnaire to be completed
by Audit Committee members and the Group’s senior finance team. The output from the process will be reviewed and discussed by the Audit
Committee and with the external auditor at the Committee’s November 2018 meeting.
The Audit Committee also approves the terms of engagement and remuneration of the external auditor and monitors their independence.
The Committee confirms that it has complied with the requirements of the CMA Order 2014 as regards audit tendering, auditor appointment,
negotiation and agreement of audit fees and approval of non-audit services.
Cranswick plc Annual Report & Accounts 2018
61
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report ACCOUNTABILITY
AUDIT COMMITTEE REPORT CONTINUED
EXTERNAL AUDIT TRANSITION
As reported previously, PwC were formally appointed as the Group’s external auditor at the 2017 AGM. To ensure the firm’s independence
and avoid any conflict of interest for the year ended 31 March 2018, PwC stepped down as tax advisers to the Group prior to the start of the
financial year.
To ensure that PwC were well prepared for their engagement as external auditor, transition meetings were held with Group management and the
firm shadowed aspects of Ernst & Young’s 2017 audit process including attendance at the Group audit clearance meeting and the year-end Audit
Committee meeting to fully understand the audit approach taken and conclusions reached on significant audit issues and judgements.
Subsequently, PwC have continued to build their knowledge of the business through further visits to production sites, meetings with Group
management and reporting on the Group’s half year interim statement.
AUDITOR INDEPENDENCE
The Group meets its obligations for maintaining an appropriate relationship with the external auditor through the Audit Committee, whose terms of
reference include a requirement to oversee the commissioning, and monitor the level, of non-audit work performed by the external auditor, to ensure
objectivity and independence is safeguarded. There is an established policy concerning the types of non-audit services the external auditor should
not carry out to avoid compromising their independence and these include internal accounting or other financial reporting services, internal audit,
tax advice, legal, actuarial or valuation services, executive or management roles or functions and remuneration consultancy. The Audit Committee
Chair’s approval is required prior to awarding to the external auditor any reporting accountant, or corporate transaction work or any other non-audit
services in excess of £30,000.
During the year, the Audit Committee reviewed and considered the following factors to assess the objectivity and independence of PwC:
• The auditor’s 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 degree of challenge to management and the level of professional scepticism shown by the audit partner and the audit team throughout
the process.
• The auditor’s policies for rotation of the audit partner every five years, and regular rotation of key audit personnel. The current Audit Partner
(Ian Morrison) was selected by PwC to lead the tender process and their first audit of the Group for the year ended 31 March 2018 with the
current Audit Senior Manager joining the audit team shortly after the tender process was completed.
• The nature of non-audit work undertaken during the year and its approval in accordance with the Audit Committee’s guidelines for ensuring
independence.
• Adherence to the Group’s internal policy that, other than in exceptional circumstances, the fees paid to the external auditor for non-audit work
in any one year should not exceed 70 per cent of the external audit fee on average over the last three years.
• A report from PwC confirming that they have adequate policies and safeguards in place to ensure that auditor objectivity and independence
is maintained.
Details of the non-audit work and fees paid during the year are set out below:
Non-audit fees
Interim review
Other services
Total Non-Audit Fees
Total Audit Fees
Ratio of Non-Audit Fees to Audit Fees
£’000
15
2
17
231
0.07:1
The ratio of non-audit fees to audit fees for the year was well below the 70 per cent limit set out in the Group’s policy.
The non-audit work undertaken by the external auditor during the year was limited to the review of the Group’s interim results and a grant claim
review which the Audit Committee does not consider would provide a threat to PwC’s independence.
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 the Group realising cost-effective benefits from the accumulated
knowledge and experience of PwC, whilst also making sure that their audit independence and objectivity is maintained.
Following consideration of the performance and independence of the external auditor at its meeting in May 2018, the Audit Committee
recommended to the Board that the reappointment of PwC as the Company’s external auditor should be proposed to Shareholders at the
2018 Annual General Meeting.
Mark Reckitt
Chair of the Audit Committee
22 May 2018
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Cranswick plc Annual Report & Accounts 2018
ACCOUNTABILITY
THE NOMINATION
COMMITTEE
THE NOMINATION COMMITTEE 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.
COMPOSITION OF THE NOMINATION COMMITTEE
OTHER REGULAR ATTENDEES
• The Chief Executive and Finance Director attend by
Committee Members
Martin Davey – Chair
Meetings attended
invitation as required.
• The Company Secretary also attends meetings as
secretary to the Committee.
Steven Esom
Kate Allum
Mark Reckitt
FREQUENCY OF MEETINGS
The Committee meets as necessary and at
least twice a year.
INDEPENDENCE
Except for the Chair, all Members of the
Committee are independent.
KEY ACTIVITIES IN 2017-18
Board Composition
Diversity
• Recommended the appointment of independent Non-Executive
Directors, Pam Powell and Tim Smith.
• Reviewed the Group’s diversity policy.
• Considered implications of the Parker Review and second
• Recommended the reappointment of Steven Esom as a
Hampton-Alexander Review for the Group.
Non-Executive Director.
• Supervised Board induction training.
Succession planning
• Reviewed and updated succession plans for the Board and
senior management.
• Reviewed Group talent management programme.
Non-executive directors
• Reviewed the continued independence of the Non-
Executive Directors.
• Reviewed Non-Executive Director time commitments
and overboarding.
Governance and evaluation
• Reviewed the Governance Section of the 2018 Annual Report and
recommended it to the Board for approval.
• Reviewed the Committee’s terms of reference.
• Considered FRC consultation on changes to the UK Corporate
Governance Code.
Internal evaluation of Committee’s effectiveness undertaken.
•
Cranswick plc Annual Report & Accounts 2018
63
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report
ACCOUNTABILITY
NOMINATION
COMMITTEE REPORT
As Chair of the Nomination Committee I am pleased to introduce its report for the year ended 31 March 2018.
BOARD APPOINTMENTS
During 2017, the Company commenced a search for additional Non-Executive Directors which resulted in the appointment of Pam Powell and Tim
Smith. The Committee, in consultation with other Board members, agreed the key experience and skills required in November 2017 and engaged
The Zygos Partnership (an independent external adviser with no other connection to the Company) to assist with the search, which involved the
preparation of a long and short list for consideration.
A number of candidates were interviewed by the Chair, the Chief Executive and members of the Committee following which Pam and Tim were
recommended to the Board as the Committee’s preferred candidates. During the process Pam and Tim met individually with other members of
the Board following which the proposed appointment was unanimously approved by the Board. Pam and Tim were appointed to the Board with
effect from 1 April 2018 and have also become members of the Nomination, Audit and Remuneration Committees.
During the year, the Board and Nomination Committee also agreed to reappoint Steven Esom as a Non-Executive Director for a further year. In
reaching this decision the Board considered Steven’s considerable accumulated knowledge of the Group, experience as a non-executive director
of listed companies and extensive food sector experience, which the Group wished to retain. However, Steven will have served as a Director for
9 years at the end of his renewed term in November 2018, when he will retire as a Director in accordance with the principles of good corporate
governance. On behalf of the Board and Shareholders I would like to thank Steven for his continued support and guidance to the Company
during his time as a Director.
All directors will be standing for re-election at the Annual General Meeting. The Board has set out in the Notice of the Meeting its reasons for
supporting the re-election of the Directors and their biographical details on pages 48 and 49 demonstrate the range of experience and skills
which each brings to the benefit of the Company.
SUCCESSION
The Committee will keep the composition of the Board under review. The Committee will carefully consider the balance of skills, experience and
independence on the Board when considering any appointment and will make any appointment against objective criteria on the basis of merit.
As part of the planned transition of executive responsibilities in the Group, I will reduce my part time executive responsibilities from September 2018.
Consequently, from September, I will cease to participate in the Group’s bonus scheme and any new LTIP awards.
NON-EXECUTIVE DIRECTORS
Consideration was also given by the Committee to the continued independence of the Non-Executive Directors, including their term in office, the
time commitment required from each of them taking into account the number of meetings and preparation and attendance at those meetings.
It was concluded that all Non-Executive Directors remained independent and devoted an appropriate amount of time to fulfil their responsibilities.
The Committee has considered director ‘overboarding’ and it is pleased to note that there are no issues at the current time. It believes that the
Non-Executive Directors have sufficient time and energy to be effective representatives of Shareholders’ interests.
64
Cranswick plc Annual Report & Accounts 2018
Diversity of workforce
4,589
67%
2,264
33%
7
78%
368
76%
88
86%
2
22%
118
24%
14
14%
Total
Employees
Board
Senior Managers
and Executives
Graduates and
Apprentices
Male
Female
DIVERSITY POLICY
Cranswick recognises the benefits of bringing together a wide variety
of backgrounds and experiences and is therefore firmly committed
to developing a diverse workforce that is truly representative of all
sections of society. All appointments, including recruitments and
internal promotions, are based on merit, qualification and abilities,
and are not influenced or affected by race, colour, nationality, religion
or belief, gender, marital status or civil partnership, family status,
pregnancy or maternity, sexual orientation, gender reassignment,
disability or age.
The Nomination Committee believes that diversity strengthens
the Board and that it is important that the Board is not made up
exclusively of like-minded individuals with similar backgrounds. Whilst
continuing to appoint on merit, the Nomination Committee will
actively consider opportunities to increase the diversity of the Board
and senior management, with a view to moving towards meeting the
recommendations of the Hampton-Alexander and Parker Reviews.
The gender breakdown of the workforce is set out alongside.
GOVERNANCE AND EVALUATION
The Committee considered its terms of reference to ensure they reflect
the Committee’s remit, and concluded that they remain appropriate.
The Committee is also considering the Financial Reporting Council’s
review of the UK Corporate Governance Code and the implications
this is likely to have for the Company.
I will be attending the Annual General Meeting to respond
to any Shareholder questions that might be raised on the
Committee’s activities.
On behalf of the Committee
Martin Davey
Chairman
22 May 2018
Cranswick plc Annual Report & Accounts 2018
65
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report REMUNERATION
THE REMUNERATION
COMMITTEE
THE REMUNERATION COMMITTEE ESTABLISHES THE
POLICY FOR EXECUTIVE DIRECTORS’ REMUNERATION
AND DETERMINES THE APPROPRIATE PERFORMANCE
CONDITIONS FOR THE ANNUAL CASH BONUS AND
LONG-TERM INCENTIVE AWARDS.
COMMITTEE MEETINGS DURING THE YEAR
There were four meetings held during the year. The attendance
of members at the meetings was as follows:
Meetings attended
Committee Members
Steven Esom – Chair
Kate Allum
Mark Reckitt
KEY ACTIVITIES IN 2017-18
OTHER REGULAR ATTENDEES
• The Chairman, Chief Executive and Finance Director attend
by invitation as required (no individual is involved in decisions
relating to their own remuneration).
• The Company Secretary also attends meetings as secretary
to the Committee.
FREQUENCY OF MEETINGS
The Committee meets as necessary and at least twice a year.
INDEPENDENCE
All Members of the Committee are independent.
Review of Remuneration Policy
LTIP awards
• Appointed independent remuneration consultants to advise
• Reviewed the outcome of performance conditions for the LTIP
the Committee.
• Reviewed the existing Remuneration Policy and proposed
awards which were granted in 2014.
• Approved LTIP awards granted in 2017.
amendments.
Executive Director and senior executive remuneration
Shareholder engagement
• Reviewed Executive Directors’ and other senior executives’
• Engaged with major Shareholders in relation to proposed new
base salaries.
Approval of bonuses
remuneration policy.
Other Activities
• Set objectives for the annual bonus arrangements for 2018 for
Executive Directors and senior executives.
• Reviewed the achievement of the Executive Directors’ bonus
• Reviewed the Committee’s terms of reference.
• Reviewed the Annual Remuneration Report for 2017.
• Reviewed employee benefit structures and approved the issue
arrangements against 2017 targets.
of the SAYE share scheme for 2017.
• Reviewed interim bonuses for Executive Directors against 2018 target.
66
Cranswick plc Annual Report & Accounts 2018
REMUNERATION
COMMITTEE REPORT
STATEMENT BY THE CHAIR OF THE REMUNERATION COMMITTEE
On behalf of the Remuneration Committee
and the Board, I am pleased to present the
Remuneration Committee Report for the
year ended 31 March 2018.
This report sets out our Directors’ Remuneration
Report for 2018. This year we continued to apply
the remuneration policy that was adopted
in 2015, but which is due to expire in July.
Consequently, we have also reviewed our
existing policy with the help of independent
executive remuneration consultants, Deloitte
LLP, and will be asking Shareholders to approve
a revised remuneration policy at the Company’s
Annual General Meeting on 30 July 2018.
We will also be asking Shareholders to
approve amendments to the Company’s
Long Term Incentive Plan (’LTIP‘), in order
to reflect the proposed changes to the
Remuneration Policy.
If the new Remuneration Policy is approved
by Shareholders, it will become effective
immediately for three years until the
Company’s Annual General Meeting in 2021.
As with prior years, Shareholders will also be
asked to pass an advisory vote on the Annual
Report on Remuneration at the forthcoming
Annual General Meeting.
A summary of the key changes proposed
is set out below with the full new remuneration
policy set out in Part 3.
Pay element
Current 2015 Policy
New 2018 Policy
Base Salary
Movement in line with RPI.
Future increases will usually be in line with increases applied to the
wider workforce.
Deferral of Bonuses
No deferral.
Bonus Performance
Measures
Based on Adjusted PBT.
For new Executive Director appointments there will be a two-year deferral for
any bonus earned in excess of 100% of salary until the individual meets their
minimum shareholding requirement of 200% of salary.
Flexibility has been introduced to allow the mix and weighting of bonus
performance measures to reflect the most appropriate strategic priorities
for the year. However, there is no intention to move away from adjusted PBT as
the annual bonus measure.
Interim Bonus Payments
Fixed element of bonus is payable
based on the first half of the year.
No interim bonuses will be payable. Flexibility has also been introduced to
amend formulaic outcomes if this does not appropriately reflect the overall
business performance for the year.
Maximum LTIP Awards
Normal maximum of 150%
of salary and an exceptional
maximum of 200%. Under the
current policy 25% of the EPS
element and 30% of the TSR
element vest at threshold
performance which equates
to 41.25% of salary for a maximum
award of 150%.
Normal maximum to be increased to 200% and the exceptional maximum to
250% of salary to ensure the new Remuneration Policy has sufficient headroom
to offer competitive incentive levels that reflect recent and expected future
growth in the scale and complexity of the business.
While the policy gives us flexibility to determine appropriate performance
measures to reflect our strategic priorities, awards for the year ending 31 March
2019 will be subject to EPS and TSR conditions consistent with the old policy,
and there is no current intention to change that for future years. Performance
targets for the year ending 31 March 2019 have been increased to ensure the
level of stretch is commensurate with the increased award opportunity. Awards
for the year ending 31 March 2019 will vest as to 18.75% of the EPS element and
22.5% of the TSR element at threshold performance, which equates to 41.25%
of salary for a maximum award of 200% of salary (this is the same value that
would vest at threshold performance as under the old policy). In the new policy,
we have expressed threshold vesting as “not more than 41.25% of salary”.
Flexibility has been added to grant part of the LTIP award as a tax qualifying
Company Share Option Plan (‘CSOP’) option to give tax advantages to
the Company and the participant, without increasing the pre-tax value
of the award.
Cranswick plc Annual Report & Accounts 2018
67
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report REMUNERATION FOR 2019
Executive Directors (other than Martin Davey
who waived his contractual entitlement to
an increase this year) were awarded a pay
increase of 3 per cent effective from 1 May
2018 in line with the senior executives and
the wider workforce. Bonus opportunities will
remain unchanged at 150 per cent of salary
for 2019 and, subject to approval of the new
remuneration policy by Shareholders, LTIP
awards will be increased from 150 per cent
of salary to 200 per cent of salary for 2019.
The bonus and LTIP awards will continue to
be subject to stretching targets on the same
basis as previous years, namely 100 per cent
on Adjusted Group profit before tax for the
annual bonus, and 50 per cent on EPS and 50
per cent on Relative TSR for LTIP awards.
SHAREHOLDER ENGAGEMENT
Ongoing engagement by the Chairman,
Chief Executive and Finance Director
has ensured that key Shareholders have
been regularly updated on progress and
performance throughout the year. In addition,
the Committee conducted a separate
consultation exercise on the proposed changes
to the Company’s Remuneration Policy.
The Committee is pleased to report that 97
per cent of those voting voted in favour of
the Remuneration Committee’s Report at
last year’s AGM and the full breakdown of
the votes is reported on page 82.
On behalf of the Board, I would like to thank
Shareholders for their continued support.
Should you have any questions on, or would
like to discuss any further aspect of, our
remuneration strategy I can be contacted
at steven.esom@cranswick.co.uk.
Steven Esom
Chair of the Remuneration Committee
22 May 2018
REMUNERATION
REMUNERATION COMMITTEE REPORT CONTINUED
This report contains the following separate
sections;
• Part 1 – The Chair’s annual statement
on pages 67 to 68.
• Part 2 – Remuneration at a glance on
pages 69 to 70.
• Part 3 – Full details of the new
remuneration policy and, subject to
Shareholder approval, how this will be
applied in the next financial year on pages
71 to 76.
• Part 4 – The Annual Report on
Remuneration on pages 77 to 82 which
discloses how the existing policy has been
applied during the year. Those elements of
part 4 subject to external audit are clearly
identified.
NEW REMUNERATION POLICY
The Committee’s view on our existing
remuneration policy (reflected during our
consultation with major Shareholders) is
that it is easily understood and has delivered
appropriate rewards to our Executive Directors
for an impressive performance, both in the
Company’s underlying performance and
growth in Shareholder value.
The aim of the review has therefore been to
build upon and enhance our existing policy
rather than to redesign the whole basis upon
which the Executive Directors are compensated.
Our focus during the review has been to ensure
that the new policy supports the Company’s
strategy and, in particular incentivises the
Executive Directors to deliver an enhanced
performance over the long-term for the
benefit of Shareholders. We have also sought
to keep our remuneration structures simple
and to update our policies so that they reflect
developing best practice.
Our new remuneration policy places a greater
emphasis on rewarding long-term success
through the proposed changes to the maximum
awards under the Company’s LTIP, whilst
allowing sufficient flexibility to adapt to any
changes to the business during the three
year life of the remuneration policy. This is
combined with stretched targets to achieve
such maximum award levels. Consequently,
the restated remuneration policy will increase
the proportion of the overall remuneration
package for Executive Directors that will be
linked to long-term performance and the
strategic development of the Company’s
business, which we believe increases the level
of alignment with the Company’s long-term
performance.
Additionally, minor changes are proposed
to reflect latest corporate governance and
market developments.
As part of our review, the Committee
consulted with the Company’s major
Shareholders and various investor bodies to
obtain their views on the proposed changes.
The Committee received general support for
its proposals and various suggestions made
by those consulted were adopted and are
reflected in the new remuneration policy
being proposed to Shareholders.
2018 BONUSES
Bonus awards for 2018 reflect the impressive
performance delivered in the year outlined
below*. The maximum bonus of 150 per cent
of base salary has been awarded to each of
the Executive Directors.
Further details are shown on page 77.
2018 LTIP AWARDS
The LTIP Awards granted in 2015 were based
on the three-year performance period from
April 2015 to March 2018 and were subject to
adjusted EPS (50 per cent) and TSR (50 per
cent) targets. Performance over the three-
year period as measured against each of
these metrics has been very strong, with the
maximum target threshold met in both cases.
Consequently, 100 per cent of the award will
vest in August 2018. This is reflected in the
table on page 78.
The Committee also awarded nil-cost share
options under the existing LTIP scheme to
senior executives, including the Executive
Directors, during the year. The number of
shares awarded to each Executive Director
was equivalent to 150 per cent of base salary
based on the market value of the Company’s
shares at the date of award. These awards
are reflected in the table on page 80.
*2018 BONUSES
Measure
Adjusted profit before tax
Bonus payable
Threshold
£82.1m
20%
Maximum
£90.3m
150%
Actual
£96.4m
150%
Note: Adjusted profit before tax targets are stated before deduction of bonuses paid to
Executive Directors and the Chief Operating Officer.
68
Cranswick plc Annual Report & Accounts 2018
REMUNERATION AT A GLANCE
OUR PERFORMANCE DURING THE YEAR
Cranswick has made further strong strategic,
commercial and financial progress during
the year.
Adjusted profit before tax £’m
+22.4%
Adjusted earnings per share
+19.9%
+17.6%
Revenue increase to £1,465m.
+11%
Share price increase to 2,844p
at 31 March 2018.
2016
2017
2018
64.4
75.5
92.4
2016
2017
2018
102.8
120.9
145.0
Performance graph Total Shareholder Return
700
600
500
400
300
200
100
0
See pages 18 and 19 for Strategic progress and KPIs.
Cranswick
FTSE All Share
FTSE 350 Food Producers
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
REMUNERATION IN 2018
The Committee ensures that executive remuneration targets are stretching, aligned to business strategy to drive long-term Shareholder value
and reflect the performance of the business during the period under review. Executive Directors’ rewards (excluding base salary and benefits)
are two-fold: short term by way of a cash bonus; and longer term by way of share awards under the Company’s Long Term Incentive Plan (LTIP).
TARGETS
Bonus
100%
Adjusted profit before tax
LTIP
50%
EPS
50%
Relative TSR
OUTCOMES
Achieved Adjusted Group profit before tax
of £92.4 million – maximum bonus achieved
(150% of salary). Performance measured
over the three year period ending 31 March
2018, EPS growth was RPI + 16.40%, and TSR
achieved the 100th percentile. LTIP awards
made in August 2015 will therefore vest in
full in August 2018 in respect of both the
EPS and TSR elements.
Salary
Benefits
Pension
Bonus
LTIP
SAYE
Total
Martin Davey
Adam Couch Mark Bottomley
Jim Brisby
313
31
63
470
861
13
1,751
616
32
123
925
1,654
–
3,350
407
31
81
611
1,096
–
2,226
407
30
81
611
1,086
–
2,215
See page 77 for more details.
REMUNERATION FOR 2019
Salary
Bonus
LTIP awards
3% increase to Directors’ salaries (other than Martin Davey) in line with
senior executives and the wider workforce.
Opportunities unchanged at 150% of salary for 2018-19.
Stretching target – unchanged from previous years at 100% on Adjusted
Group profit before tax.
Subject to Shareholder approval, award levels to be increased
to 200% of salary for 2018-19.
Stretching target – unchanged from previous years at 50% on EPS
and 50% on relative TSR.
97%
of Shareholders’ voting voted
in favour of the Remuneration
Committee’s Report at last
year’s AGM.
Cranswick plc Annual Report & Accounts 2018
69
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report REMUNERATION
REMUNERATION AT A GLANCE CONTINUED
ILLUSTRATIONS OF APPLICATION OF REMUNERATION POLICY FOR 2018-19
The following charts illustrate the potential pay opportunities for the Executive Directors under three different performance scenarios for the year
ending 31 March 2019.
3,000
2,500
2,000
0
0
0
£
1,500
1,000
500
0
2,983
41%
32%
1,888
32%
25%
27%
43%
794
100%
1,234
51%
16%
33%
822
38%
12%
50%
409
100%
1,983
41%
32%
1,260
32%
25%
1,983
41%
32%
1,260
32%
25%
27%
43%
536
100%
27%
43%
536
100%
Maximum On Target
Fixed
Maximum On Target
Fixed
Maximum On Target
Fixed
Maximum On Target
Fixed
Martin Davey
Adam Couch
Mark Bottomley
Jim Brisby
Fixed pay
Bonus
LTIP
In illustrating the potential reward, the following assumptions have been made:
Minimum performance
Performance in line with
expectations
Maximum performance
Fixed Pay
Base salary effective at
1 May 2018, employer pension
contributions of 20% of that
salary, and benefits disclosed
in the single figure table for the
year ending 31 March 2018.
Annual Bonus
No bonus
LTIP
No LTIP vesting
Bonus equal to 50% of
the opportunity is earned
(i.e. 75% of salary).
Bonus equal to 150% of salary
is earned.
LTIP vests as to 50% of the
maximum award (100% of salary).
LTIP vests in full (200% of salary).
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Cranswick plc Annual Report & Accounts 2018
REMUNERATION
POLICY
This part of the Directors’ Remuneration Report sets out the Directors’ Remuneration Policy (the ’Policy’) which, subject to Shareholder approval at
the 2018 Annual General Meeting (AGM), shall take binding effect from the close of that meeting.
LINK BETWEEN POLICY, STRATEGY AND STRUCTURE
Our remuneration policy is principally designed to align the interests of Executive Directors and senior executives with the Company’s strategic
vision and the creation of sustainable long-term value for our stakeholders without encouraging excessive levels of risk taking. The Policy is
intended to remunerate our Executive Directors competitively and appropriately for effective delivery of this and allows them to share in this
success and the value delivered to Shareholders. 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, to provide competitive total remuneration:
• a non-performance part represented by fixed remuneration (basic salary, pension and benefits); and
• a significant performance related element in the form of an annual bonus and long-term share-based awards.
The details of individual components of the remuneration package are set out below:
Purpose and
link to strategy
Base salary
Operation
To provide a market
competitive base
salary to attract and
retain executives.
Periodic reviews of market rates.
Base salaries are ordinarily reviewed
annually taking into account a number
of factors including (but not limited to):
• the individual’s skills, experience and
responsibilities;
• pay increases within the Group more
generally; and
• performance, group profitability and
prevailing market conditions.
Any changes will usually take effect
from 1 May.
Martin Davey is entitled to an annual increase
of not less than RPI under his service agreement
agreed in 2006.
Performance
metrics
Maximum
entitlement
While no formal
performance
conditions apply,
an individual’s
performance in role
is taken into account
in determining any
salary increase.
Whilst there is no maximum salary, increases
will normally be within the range of salary
increases awarded (in percentage of salary
terms) to other employees in the Group.
However, higher increases may be awarded
in appropriate circumstances, such as:
• an increase in scope of the role or the
individual’s responsibilities;
• where an individual has been appointed
to the Board at a lower than typical
market salary to allow for growth in the
role, in which case larger increases may
be awarded to move salary positioning
to a typical market level as the individual
gains experience;
• change in size and complexity of the
Group; and/or
• significant market movement.
Such increases may be implemented
over such time period as the Committee
deems appropriate.
Pension
To provide a
framework to save
for retirement.
Executive Directors are entitled to non-
contributory membership of the Group’s
defined contribution pension scheme.
N/A
Maximum employer pension contribution
and/or cash payment in lieu, up to 20% of
base salary.
Alternatively, at their option, Executive Directors
may receive a cash payment in lieu of pension
contribution, subject to the normal statutory
deductions.
Pension contributions may also be made in lieu
of salary.
Cranswick plc Annual Report & Accounts 2018
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Financial StatementsShareholder InformationCorporate GovernanceStrategic Report REMUNERATION
REMUNERATION POLICY CONTINUED
Purpose and
link to strategy
Benefits
To provide market
competitive benefits
as part of the
remuneration
package.
Annual bonus
To incentivise and
reward Executive
Directors and senior
executives for
performance in the
year against targets
linked to the delivery
of the Company’s
strategic priorities.
Operation
Performance
metrics
Maximum
entitlement
Market competitive benefits principally comprise
health insurance (which may include coverage
for the director’s spouse and dependent children),
personal tax advice, pension advice and Company
car allowance or the provision of a Company car
and running costs.
N/A
Additional benefits might be provided from time
to time if the Committee decides payment of
such benefits is appropriate.
Benefits are not pensionable.
Whilst the Committee has not set an
absolute maximum on the level of benefits
Executive Directors may receive, the value
is set at a level which the Committee
considers to be appropriately positioned,
taking into account relevant market levels
based on the nature and location of the
role and individual circumstances.
The maximum opportunity is 150% of
base salary.
The bonus for achieving threshold
performance is 20% of the maximum
opportunity.
The bonus will
be based on the
achievement of
targets with stretching
performance
measures and
respective weightings
(where more than one
measure is used) set
each year dependent
on the Group’s
strategic priorities.
Measures and targets are reviewed annually and
any pay-out is determined by the Committee
after the year end, based on performance against
targets set for the financial period.
The Committee has discretion to amend the
pay-out should any formulaic outcome not
reflect the Committee’s assessment of overall
business performance.
Where a bonus opportunity is offered in excess of
100% of salary to an Executive Director appointed
on or after the date on which this policy becomes
effective, any bonus earned in excess of 100% of
salary will be deferred into shares for up to two
years until the Executive Director has satisfied the
shareholding guidelines. Deferral of any bonus is
subject to a de minimis limit of £10,000.
The Committee may make an additional payment
(in cash or shares) in respect of deferred shares
to reflect the value of dividends which would have
been paid on those shares during the period from
grant to release (this payment may assume that
dividends had been reinvested in shares on a
cumulative basis).
Bonuses are non-pensionable.
There is a clawback and malus arrangement in
place should the need arise, for misstatement,
performance error and misconduct by a
participant. Clawback may be applied for up
to two years following the payment of the cash
element of the bonus, and may be effected in
relation to any deferred share award by the
cancellation of that award before it vests.
Share-based awards
A Save As You Earn
(SAYE) share scheme
is available to all
eligible employees.
N/A
Subject to approval by the Board, SAYE options
are made available to eligible staff, including
Executive Directors, in accordance with the
scheme rules which reflect the applicable
legislation with an option exercise price which
may be set at a discount of up to 20% to the
share price when the option is offered.
The limit on monthly savings and maximum
discount that may be applied in setting
the exercise price will be determined
in accordance with the applicable tax
legislation from time to time and will be
the same for the Executive Directors as
for other eligible employees. At the date
of approval of this Policy the maximum
saving is £500 per month and the
maximum discount is 20%.
72
Cranswick plc Annual Report & Accounts 2018
Purpose and
link to strategy
LTIP
Long Term incentive
(LTIP) awards provide
a clear link between
the remuneration of
Executive Directors
and the creation of
value for Shareholders
by rewarding the
achievement of
longer term strategic
priorities aligned to
Shareholder interests.
Operation
Performance
metrics
Maximum
entitlement
The normal maximum award level under the
LTIP in respect of any financial year is 200%
of base salary. In exceptional circumstances
this can be increased to 250% of base salary.
If a qualifying LTIP award is granted, the
value of shares subject to the CSOP option
will not count towards the limits referred
to above, reflecting the provisions for scale
back of the ordinary LTIP award.
Performance
measures for LTIP
awards are typically
assessed over a period
of three years and will
be based on financial
measures, which may
include but are not
limited to EPS growth
and relative TSR.
Where more than
one measure is used,
the weightings will be
determined by the
Committee taking
into account the
Company’s key
strategic priorities.
Threshold vesting will
not be at more than
41.25% of salary used
to determine the value
of the award at grant.
The award vests in
full for maximum
performance.
The LTIP awards may take the form of
nil (or nominal) cost share options or
conditional awards.
The Committee may at its discretion structure
awards as qualifying LTIP awards, consisting of
a tax qualifying CSOP option with an exercise
price equal to the market value of a share at
the date of grant and an ordinary nil-cost LTIP
award, with the ordinary award scaled back at
exercise to take account of any gain made on
exercise of the CSOP option.
Awards will usually vest following assessment of the
achievement of demanding targets relating to total
Shareholder return (TSR) and earnings per share
(EPS). Awards held by Executive Directors are then
subject to a two year holding period which may be
structured as either: (1) the Executive Director being
entitled to acquire the shares once vested, but,
other than as regards sales to cover tax, being
prevented from selling shares until the end of
the holding period; or (2) the Executive Director
being prevented from acquiring shares until the
end of the holding period. If a holding period is
structured on the latter basis, the participant may
be entitled to an additional payment (in cash or
shares) in respect of vested shares to reflect the
value of dividends paid on shares from the start
of the holding period until the date on which the
Executive Director is entitled to acquire shares.
There is a clawback and malus arrangement in
place should the need arise, for misstatement,
performance error and misconduct by a
participant. Clawback may be applied for up to
two years following vesting, and may be effected
in relation to any award during a holding period
by the cancellation of that award before the
participant becomes entitled to acquire shares.
Clawback and malus may be applied to any CSOP
option granted under the LTIP to the extent
permitted by the applicable tax legislation.
Fees and benefits payable to Non-Executive Directors
To pay fees at a level
that reflects market
conditions and are
sufficient to attract
and retain individuals
of the appropriate
calibre.
The fees of the Non-Executive Directors
are determined by the Board and
reviewed periodically.
N/A
Fees are set taking into account the
responsibilities of the role and the
expected time commitment.
On appointment a non-executive Chairman’s,
fees would be determined by the Committee.
Non-Executive Directors are paid a basic fee with
additional fees paid for chairing Committees and
for the role of Senior Independent Director.
Non-Executive Directors are not eligible to
participate in any of the Group’s share schemes,
incentive schemes or pension schemes.
Non-Executive Directors may be eligible to
receive benefits such as travel costs and other
reasonable expenses.
Cranswick plc Annual Report & Accounts 2018
73
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report REMUNERATION
REMUNERATION POLICY CONTINUED
DIFFERENCES IN POLICY ON REMUNERATION OF EXECUTIVE DIRECTORS FROM POLICY ON REMUNERATION OF EMPLOYEES GENERALLY
The Company aims to provide a remuneration package that is market competitive and which reflects responsibility and role scope. Accordingly
Executive Directors have a greater weighting towards long-term and performance based remuneration.
SHAREHOLDING GUIDELINES
To promote alignment between Executive Directors’ and Shareholders’ interests, the Committee has adopted formal shareholding guidelines for
Executive Directors. Each Executive Director is required to hold shares acquired through the LTIP and any deferred bonus award (after sales to
cover tax and costs) until the value of their total shareholding is equal to 200 per cent of their annual base salary.
Where an LTIP or deferred bonus award is subject to a holding period on the basis that the Executive Director is prevented from acquiring shares
until the end of the holding period, the vested shares count towards the shareholding guidelines, on a net of assumed tax basis.
Shares subject to a deferred bonus award count towards the shareholding guidelines, on a net of assumed tax basis.
ANNUAL BONUS PERFORMANCE TARGETS
The structure of the performance targets applicable to annual bonus awards to be made in a particular year will be set out in the implementation
section of the Annual Report on Remuneration which precedes that year rather than in this remuneration policy report. The actual targets will
not be disclosed in advance as they are considered to be commercially sensitive information; however, the details will be disclosed retrospectively,
provided they are not considered commercially sensitive at that time.
Historically, Group profit before tax, as adjusted for acquisitions, disposals and other non-trading items, was the sole metric against which
the annual bonus award was assessed. Although there is currently no intention to move away from PBT, the policy has been amended to allow
flexibility for the Committee to introduce other financial and/or strategic measures, if deemed necessary, to provide an appropriately balanced
and stretching incentive. Again, such metrics will be disclosed in the implementation section.
The Committee may vary or substitute any performance measure if an event occurs which causes it to determine that it would be appropriate to
do so, provided that any such variation is fair and reasonable and, in the opinion of the Committee, would not make the measure materially less
demanding. If the Committee was to make such a variation or substitution, an explanation would be given in the next Directors’ Remuneration Report.
LTIP PERFORMANCE TARGETS
Performance measures for LTIP awards will be based on financial measures, with the chosen measures determined by the Committee taking into
account strategic priorities. Our current use of EPS and relative TSR, weighted equally, ensures an appropriate link to our financial KPIs along with
a link to our performance relative to that of peer companies.
The Committee may vary or substitute any performance measure if an event occurs which causes it to determine that it would be appropriate to
do so, provided that any such variation is fair and reasonable and, in the opinion of the Committee, would not make the measure materially less
demanding. If the Committee was to make such a variation or substitution, an explanation would be given in the next Directors’ Remuneration Report.
OPERATION OF SHARE PLANS
The Committee retains discretion to operate the Company’s share plans in accordance with the plan rules, including the ability to adjust the
number of shares subject to awards in the event of a variation in share capital, or other relevant event and to settle awards in cash or to grant
awards as rights to cash payments calculated by reference to a notional number of shares.
RECRUITMENT REMUNERATION POLICY
When appointing a new Executive Director, the Committee will typically align the remuneration package with the above Policy.
When determining appropriate remuneration arrangements, the Committee may include other elements of pay which it considers are
appropriate. However, this discretion is capped and is subject to the limits referred to below.
• Base salary will be set at a level appropriate to the role and the experience of the Executive Director being appointed. This may include
agreement on future increases up to a market rate, in line with increased experience and/or responsibilities, subject to good performance,
where it is considered appropriate.
• Pension will only be provided in line with the above Policy.
• The Committee will not offer non-performance related incentive payments (for example a ‘guaranteed sign-on bonus’).
• Other elements may be included in the following circumstances:
– an interim appointment being made to fill an Executive Director role on a short-term basis;
–
–
if exceptional circumstances require that the Chairman or a Non-Executive Director takes on an executive function on a short-term basis;
if an Executive Director is recruited at a time in the year when it would be inappropriate to provide a bonus or long-term incentive award
for that year as there would not be sufficient time to assess performance. Subject to the limit on variable remuneration set out below,
the quantum in respect of the months employed during the year may be transferred to the subsequent year so that reward is provided
on a fair and appropriate basis;
if the Director will be required to relocate in order to take up the position, it is the Company’s policy to allow reasonable relocation,
travel and subsistence payments. Any such payments will be at the discretion of the Committee.
–
• The Committee may also alter the performance measures, performance period, vesting period, deferral period and holding period of the
bonus or LTIP, subject to the plan rules, if the Committee determines that the circumstances of the recruitment merit such alteration. The
rationale will be clearly explained in the next Directors’ Remuneration Report.
• The maximum level of variable remuneration which may be granted (excluding ‘buyout’ awards as referred to below) is 400 per cent of salary.
74
Cranswick plc Annual Report & Accounts 2018
The Committee may make payments or awards in respect of appointing an Executive Director to ‘buyout’ remuneration arrangements forfeited
on leaving their previous employer. In doing so, the Committee will take into account relevant factors including any performance conditions
attached to the forfeited arrangements and the time over which they would have vested. The Committee will generally seek to structure ‘buyout’
awards or payments on a comparable basis to the remuneration arrangements forfeited. Any such payments or awards are excluded from
the maximum level of variable remuneration referred to above. ‘Buyout’ awards will ordinarily be granted on the basis that they are subject
to forfeiture or ‘clawback’ in the event of departure within 12 months of joining Cranswick, although the Committee will retain discretion not
to apply forfeiture or clawback in appropriate circumstances.
Any share awards referred to in this section will be granted as far as possible under Cranswick’s existing share plans. If necessary and subject to
the limits referred to above, recruitment awards may be granted outside of these plans as permitted under the Listing Rules which will allow for
the grant of awards to facilitate, in unusual circumstances, the recruitment of an Executive Director.
Where a position is filled internally, any ongoing remuneration obligations or outstanding variable pay elements shall be allowed to continue in
accordance with their terms.
Fees payable to a newly appointed Chairman or Non-Executive Director will be in line with the policy in place at the time of appointment.
POLICY ON PAYMENT FOR LOSS OF OFFICE
Individual Directors’ eligibility for the various elements of remuneration is set out below:
Provision
Treatment upon loss of office
Fixed remuneration
Annual Bonus
LTIP
Other payments
Change of control
Salary/fees, benefits and pension contributions/salary supplement will be paid to the date of termination.
The Company may make a payment in lieu of notice at any time after notice has been given by either the Company or the
Director. This payment would include basic salary for the unexpired period of notice and may also include benefits (including
pension contributions or applicable salary supplement or contribution in lieu of salary) for that period.
Under the terms of his service agreement, if Martin Davey’s employment is terminated by the Company without giving 12
months’ notice (other than for circumstances justifying summary dismissal) liquidated damages are payable calculated
based on Martin Davey’s annual salary, benefits and pro rata bonus entitlement.
This will be reviewed on an individual basis and the decision whether or not to award a bonus in full or in part will be
dependent upon a number of factors including the circumstances of their departure and their contribution to the
business during the bonus period in question. Any bonus payment would typically be pro-rated from time in service
to termination and paid at the usual time (although the Committee retains discretion to pay the bonus earlier in
appropriate circumstances) and to vary the application of (or disapply) time based prorating.
If bonus deferral would otherwise apply to any bonus for the year of termination or prior year, the Remuneration Committee
may pay the full bonus earned in cash.
Any outstanding deferred bonus awards would typically continue (other than in the event of summary dismissal where
the entitlement would lapse) and vest at the originally anticipated date, although the Remuneration Committee retains
discretion to release any such award at the date of cessation or at an alternative date before the originally anticipated date.
Unvested LTIP awards will vest on cessation of employment, unless cessation is as a result of death, injury, ill health,
disability, redundancy, retirement with the agreement of the Company or other circumstances at the discretion of the
Committee. In these ‘good leaver’ scenarios, awards will usually vest at the normal vesting date subject to the satisfaction
of the performance conditions and, unless the Committee determines otherwise, a pro-rata reduction to reflect the
proportion of the vesting period that has elapsed at the date of cessation. The Committee retains discretion to vest awards
early (and to assess performance conditions early where relevant) and to waive the time based pro-rating reduction. The
holding period would typically apply for the two year period following vesting, although the Committee has discretion to
vary the application of the holding period.
If an Executive Director ceases employment during the holding period relating to an LTIP award, the holding period will
ordinarily continue to apply, unless cessation is due to the death of the Executive Director, although the Committee has
discretion to bring it to an end earlier. In the event of death, the holding period would come to an end.
In appropriate circumstances, payments may also be made in respect of accrued holiday pay, and outplacement
and legal fees.
Options under the SAYE scheme will vest on cessation in accordance with the plan rules, which do not allow for
discretionary treatment.
In the event of a change of control, unvested awards under the LTIP will be released to the extent determined by the
Committee taking into account the relevant performance conditions and, unless the Committee determines otherwise,
the extent of vesting so determined shall be reduced to reflect the proportion of the vesting period that has elapsed. In
the event of a change of control during the holding period relating to an award under the LTIP, that holding period shall
come to an end.
Deferred bonus awards will vest in full on a change of control.
Options under the SAYE scheme will vest on a change of control.
Where appropriate the Committee would have regard to the departing Executive Director’s duty to mitigate loss. Other than as described above,
there are no express provisions within the Director’s service contracts for the payment of compensation or liquidated damages on termination
of employment.
Cranswick plc Annual Report & Accounts 2018
75
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report REMUNERATION
REMUNERATION POLICY CONTINUED
Where a ‘buyout’ or other award is made, the leaver provisions would be determined at the time of the award.
The Committee reserves the right to make additional exit payments where such payments are made in good faith in discharge of an existing legal
obligation (or by way of damages for breach of such an obligation) or by way of settlement or compromise of any claim arising in connection with
the termination of a Director’s office or employment.
The Non-Executive Directors are not entitled to compensation on termination of their appointment in excess of their outstanding fee entitlement.
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.
The service contract for Martin Davey includes a one year notice period from 1 May 2006 except in the case of a change in control of the Company
when the notice period is two years from the employer and three months’ from the employee for the first six months following the change of
control, thereafter it reverts back to a one year notice period from either party. The contract also has special provisions relating to liquidated
damages requiring that the notice period stipulated in the contract will be paid in full, which has been described above in the policy on termination.
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 with this individual in 2006.
NON-EXECUTIVE DIRECTORS
Each Non-Executive Director has an appointment letter – Steven Esom for one year from 12 November 2017, Kate Allum for three years from 1 July
2016, Mark Reckitt for three years from 1 May 2017, and Pam Powell and Tim Smith for three years from 1 April 2018. The continuing appointments
are subject to annual re-election at the Company’s Annual General Meeting.
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.
LEGACY REMUNERATION ARRANGEMENTS
The Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any discretions
available to it in connection with such payments) notwithstanding that they are not in line with the policy set out above where the terms of
the payment were agreed: (i) before 27 July 2015 (the date the Company’s existing remuneration policy came into effect); (ii) before the Policy set
out in this 2018 Annual Report came into effect, provided that the terms of payment were consistent with the Shareholder approved Directors’
Remuneration Policy in force at the time they were agreed, or (iii) at a time when the relevant individual was not a director of the Company
and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a director of the Company. For these
purposes ‘payments’ includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of
the payment are ‘agreed’ at the time the award is granted.
These legacy remuneration arrangements include the arrangements for Martin Davey referred to above in relation to the terms of his service
agreement agreed in 2006.
PAY AND CONDITIONS ELSEWHERE IN THE GROUP
The Committee does not directly consult with employees regarding the remuneration of the Executive Directors. However, when considering
remuneration levels to apply, the Committee will take into account base pay increases, bonus payments and share awards made to the
Company’s employees generally.
The following are the key aspects of how pay and employment conditions across the Group are taken into account when setting the remuneration
of employees, including the Executive Directors:
• the Group operates within the UK food sector and has many employees who carry out demanding tasks within the business;
• all employees, including Directors, are paid by reference to the market rate;
• performance is measured and rewarded through a number of performance related bonus schemes across the Group including LTIP share
options for Executive Directors and senior executives;
• performance measures are cascaded down through the organisation to individual businesses;
• the Group offers employment conditions that are commensurate with a medium-sized quoted company, including high standards of health
and safety and equal opportunities; and
• the Group operates Save As You Earn share schemes which are open to all eligible employees including Executive Directors. (Approximately 20
per cent of the workforce participate in the SAYE scheme.)
CONSIDERATION OF SHAREHOLDERS’ VIEWS
The Committee believes that ongoing dialogue with major Shareholders is of key importance. During the 2017/18 financial year, the Committee
consulted with Shareholders in relation to the new Policy, and our proposals have been finalised having regard to feedback received.
76
Cranswick plc Annual Report & Accounts 2018
ANNUAL REPORT ON
DIRECTORS’ REMUNERATION
DIRECTORS’ REMUNERATION (AUDITED)
The table below sets out the single figure remuneration details of the Directors for the reporting year:
£’000
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Salary and fees
Benefits
Bonus
LTIP*
Pension
SAYE
Total
Executive Directors
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Non-Executive Directors
Kate Allum
Steven Esom
Mark Reckitt
407
407
616
313
396
396
599
304
1,743
1,695
48
56
56
48
56
56
160
160
31
30
32
31
124
–
–
–
–
30
32
31
34
611
611
925
470
594
594
898
457
1,096
1,086
1,654
861
906
814
1,341
900
81
81
123
63
79
79
120
61
127
2,617
2,543
4,697
3,961
348
339
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13
13
–
–
–
–
51
14
–
–
2,226
2,215
3,350
1,751
2,056
1,929
2,989
1,756
65
9,542
8,730
–
–
–
–
48
56
56
48
56
56
160
160
Total
1,903
1,855
124
127
2,617
2,543
4,697
3,961
348
339
13
65
9,702 8,890
* The values of the LTIP awards which vested in June 2017 have been updated for the actual share price on the date of vesting. In line with the regulations the values for 2018 are
based on the average share price over the three month period to 31 March 2018 as these awards will not vest until August 2018 (see tables on page 78).
As reported last year the Executive Directors had pay awards in the year effective from 1 May 2017 of:
Adam Couch
Jim Brisby
Mark Bottomley
Martin Davey
3.1%
3.1%
3.1%
3.1%
In line with change in RPI
In line with change in RPI
In line with change in RPI
In line with change in RPI
Benefits principally comprise health insurance, personal tax advice, pension advice and Company car allowance.
Pension consists of contributions of up to 20 per cent of base salary which are either paid into a defined contribution pension scheme or are received
as a cash allowance in lieu of the pension contribution, or, as a combination of both. No Director has any entitlement or prospective entitlement
under any defined benefit pension scheme.
The number of Directors who were active members of the money purchase pension scheme in the year was two (2017: two).
ANNUAL BONUS ARRANGEMENT (AUDITED)
The bonus scheme in operation is based on the achievement of Group profit targets which are set with regard to the Company’s budget, historical
performance and market outlook for the year. There are four bonus profit targets triggering awards of 20 per cent, 50 per cent, 100 per cent and
150 per cent of base salary with a straight line, pro-rata award for profits falling between the targets. There is a modest fixed sum paid out at the
half year stage based on the achievement of the half year target.
The performance in the year, before charging bonus awards made to the Executive Directors and the Chief Operating Officer, was £96.4 million.
This exceeded the maximum profit target resulting in a bonus award of 150 per cent of salary as shown below.
Adjusted profit targets
Bonus payable
This award is reflected in the table above.
Threshold
£82.1m
20%
On Target
£85.3m
50%
£88.3m
100%
Maximum
£90.3m
150%
Actual
£96.4m
150%
Cranswick plc Annual Report & Accounts 2018
77
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report REMUNERATION
ANNUAL REPORT ON DIRECTORS’ REMUNERATION CONTINUED
LONG TERM INCENTIVE PLAN (AUDITED)
The Remuneration Committee awards nil-cost options under the LTIP scheme in order to ensure that Executive Directors and senior management are
involved in the longer term success of the Group. Options can only be exercised if certain performance criteria are achieved by the Group as follows:
• 50 per cent of each award is subject to an earnings per share (EPS) target measured against average annual increases in the Retail Price Index
(RPI) over a three year period. The EPS target allows 25 per cent of the shares subject to the target to vest at an average annual outperformance
above RPI of 3 per cent and 100 per cent of the shares to vest at an average annual outperformance of 7 per cent with outperformance between
3 and 7 per cent rewarded pro-rata.
• 50 per cent is aligned to a total Shareholder return (TSR) target measured against a comparable group of companies over a three year period.
The TSR target allows 30 per cent of the shares subject to the target to vest 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 are: Associated British Foods plc, AG Barr plc, Britvic plc, Carrs Milling Industries plc, Dairy Crest Group plc, Devro
plc, Greencore Group plc, Hilton Food Group plc, Kerry Group plc, McBride plc, Premier Foods plc, and Tate and Lyle plc.
The Remuneration Committee, which decides whether performance conditions have been met, considers EPS and TSR to be the most appropriate
measures of the long-term performance of the Group.
The value of the LTIP for the year ended 31 March 2018 relates to awards made in 2015 with a performance criteria based on the three years ended
31 March 2018 that will vest in August 2018 calculated at the average price for the three months ending on 31 March 2018 of 3,052 pence. Over the
three year performance period the EPS element of the award, based on the criteria set above, gave an outperformance of 16.4 per cent over the
average increase in RPI so achieving a 100 per cent award. For the TSR element of the award, measured against a comparable group of companies,
the business achieved an increase of 120.4 per cent and put the Company at the top of its comparative group which was at the 100th percentile so
again an award of 100 per cent was achieved. The total award of 100 per cent is reflected in the table on page 77, and below.
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Date of grant
Options granted
Vesting
performance
Shares awarded
Average share
price
Value of shares
1 August 2015
1 August 2015
1 August 2015
1 August 2015
35,900
35,600
54,200
28,200
100%
100%
100%
100%
35,900
35,600
54,200
28,200
3,052
3,052
3,052
3,052
1,095,522
1,086,367
1,653,963
860,549
The value of the LTIP for the year ended 31 March 2017 relates to awards, made in 2014, with a performance criteria based on the three years ended
31 March 2017 that vested in June 2017, calculated at a vesting share price of 2,960 pence. The EPS element of the award achieved 100 per cent of its
performance target and 100 per cent was achieved under the TSR measure giving an overall award of 100 per cent and this is reflected in the 2017
column of the table on page 77 and in the table below.
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Date of grant
1 June 2014
1 June 2014
1 June 2014
1 June 2014
Options awarded
Value of award as at 31 March
2017 based on an average
price of 2,379p
Value of award when vested
in June 2017 at the market
price of 2,960p
30,600
27,500
45,300
30,400
727,974
654,225
1,077,687
723,216
905,760
814,000
1,340,880
899,840
The value of the SAYE options relates to awards granted 3, 5 or 7 years ago that have had their full contribution paid by the Executive and have been
exercised in the year. The awards in 2018 exercised by Martin Davey had an exercise price of 1,187 pence and a market value of 2,960 pence. The
notional gains are shown in the 2018 column of the table on page 77.
PAYMENTS TO PAST DIRECTORS (AUDITED)
There have been no payments made to past Directors or payments made for loss of office in the year.
78
Cranswick plc Annual Report & Accounts 2018
PERFORMANCE GRAPH – TOTAL SHAREHOLDER RETURN (UNAUDITED)
The graph below shows the percentage change (from a base of 100 in March 2009) in the Total Shareholder Return (with dividends reinvested) for
each of the last nine 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.
700
600
500
400
300
200
100
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Cranswick
FTSE All Share
FTSE 350 Food Producers
The table below illustrates the change in the total CEO remuneration over a period of nine 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
SAYE
CEO total remuneration
Bonus award against maximum opportunity
LTIP vesting against maximum opportunity
2010
464
24
93
705
172
–
1,458
97%
85%
2011
483
25
97
107
207
–
919
14%
100%
2012
508
28
102
453
243
6
1,340
56%
93%
2013
505
28
86
639
171
7
1,436
80%
43%
2014
542
31
108
252
149
–
1,082
31%
25%
2015
562
29
112
843
825
–
2,371
100%
87%
2016
588
29
118
882
1,148
38
2,803
100%
100%
2017
599
31
120
898
1,341
–
2,989
100%
100%
2018
616
32
123
925
1,654
–
3,350
100%
100%
Bernard Hoggarth was the Chief Executive up to August 2012 and from that date Adam Couch has fulfilled that role. The 2013 figures are the sum of
the remuneration received by both Directors in that year.
CHANGE IN TOTAL REMUNERATION OF THE CHIEF EXECUTIVE COMPARED TO EMPLOYEES (UNAUDITED)
The table below shows the percentage change from 2017 to 2018 in the Chief Executive’s salary compared to the change for all permanent employees
of the business (excluding all Board Directors).
Chief executive
All other employees* (excluding all Board Directors)
* Includes the impact of pay awards, growth in employee numbers and corporate activity.
Total pay
12%
15%
Salary
3%
14%
Benefits
3%
2%
Bonus
3%
41%
RELATIVE IMPORTANCE OF THE SPEND ON PAY (UNAUDITED)
The table below shows the total remuneration paid across the Group together with the total dividend paid in respect of 2018 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, growth in employee numbers and corporate activity.
2018
£’m
177.6
23.4
2017
£’m
153.4
19.6
Change
%
15.8%
19.4%
Cranswick plc Annual Report & Accounts 2018
79
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report REMUNERATION
ANNUAL REPORT ON DIRECTORS’ REMUNERATION CONTINUED
SHARE OPTIONS (AUDITED)
Details of the nil-cost LTIP options granted in the year under the LTIP are set out below:
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Date
of grant
Basis
of award
1 June 2017 150% of salary
1 June 2017 150% of salary
1 June 2017 150% of salary
1 June 2017 150% of salary
Number
of shares
20,800
20,800
31,400
16,000
Share
price
at grant*
2,952
2,952
2,952
2,952
Face
value of
shares
£614,016
£614,016
£926,928
£472,320
Vesting at
minimum
performance
End of
performance
period
27.5% 31 March 2020
27.5% 31 March 2020
27.5% 31 March 2020
27.5% 31 March 2020
* Based on the average of the mean high/low share price for the three days preceding the grant date of the options.
The awards are exercisable between 1 June 2020 and 1 June 2027, subject to performance. 50 per cent of the award depends on the performance of
EPS and 50 per cent on TSR for the period from 1 April 2017 to 31 March 2020. 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 vest.
OUTSTANDING SHARE AWARDS (AUDITED)
The interests of the Executive Directors in the LTIP and SAYE schemes were as follows:
Long Term Incentive Plan (audited)
Year of award
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
2014
2015
2016
2017
2014
2015
2016
2017
2014
2015
2016
2017
2014
2015
2016
2017
At 1 April
2017
Number
30,600
35,900
25,700
–
27,500
35,600
25,700
–
45,300
54,200
38,900
–
30,400
28,200
19,800
–
Granted in
the year
Number
Exercised
in the year
Number
Lapsed in
the year
Number
At 31 March
2018
Number
Exercise
price
p
Market price
at grant
p
–
–
–
20,800
–
–
–
20,800
–
–
–
31,400
–
–
–
16,000
(30,600)
–
–
–
(27,500)
–
–
–
(45,300)
–
–
–
(30,400)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
35,900
25,700
20,800
–
35,600
25,700
20,800
–
54,200
38,900
31,400
–
28,200
19,800
16,000
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
1,266
1,628
2,333
2,960
1,266
1,628
2,333
2,960
1,266
1,628
2,333
2,960
1,266
1,628
2,333
2,960
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 78. The range of exercise dates are 1 August 2018 to 1 June 2027.
The LTIP, issued in 2015, which vests in August 2018, will achieve 100 per cent of both the EPS target and the TSR measure giving a
maximum share award.
The following Directors exercised LTIP share options during the year:
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Number
Date exercised
30,600
27,500
45,300
30,400
7 July 2017
7 July 2017
7 July 2017
7 July 2017
Exercise price
p
Market price
p
Gain on exercise
£’000
nil
nil
nil
nil
2,832
2,832
2,832
2,832
867
779
1,283
861
80
Cranswick plc Annual Report & Accounts 2018
Savings related share option scheme (audited)
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Year of award
At 1 April 2017
Number
Granted in
the year
Number
Exercised in
the year
Number
Lapsed in
the year
Number
At 31 March
2018
Number
Exercise
price
p
Range of exercise dates
2014
2017
2014
2011
2014
2015
2017
2014
2015
2017
1,276
–
1,276
936
1,276
667
–
758
618
–
–
350
–
–
–
–
205
–
–
350
–
–
–
–
–
–
–
(758)
–
–
–
–
–
–
–
–
–
–
–
–
1,276
350
1,276
936
1,276
667
205
–
618
350
1,187
2,565
1 Mar 2020–1 Sep 2020
1 Mar 2021–1 Sep 2021
1,187
1 Mar 2020–1 Sep 2020
579
1,187
1,456
2,565
1,187
1,456
2,565
1 Mar 2019–1 Sep 2019
1 Mar 2020–1 Sep 2020
1 Mar 2021–1 Sep 2021
1 Mar 2023–1 Sep 2023
1 Mar 2018–1 Sep 2018
1 Mar 2019–1 Sep 2019
1 Mar 2021–1 Sep 2021
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:
Martin Davey
Number
Date exercised
Exercise price
p
Market price
p
Notional gain
£’000
758
9 March 2018
1,187
2,960
13
MINIMUM SHAREHOLDING
The Remuneration Committee has recommended that the Executive Directors hold shares in the Company worth at least 200 per cent of base
salary, with the holding to be built up over a five year period. The Directors’ current holdings and value are now all in excess of the 200 per cent target
and are shown below.
DIRECTORS’ INTERESTS (AUDITED)
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Steve Esom
Mark Reckitt
LTIP (Unvested,
subject to
performance)
LTIP
(Vested*,
unexercised)
SAYE (Non-
performance
related)
Number of shares
held as at 31 March
2018
Value of shares
held as a % of base
salary
46,500
46,500
70,300
35,800
–
–
35,900
35,600
54,200
28,200
–
–
1,626
1,276
3,084
968
–
–
79,021
91,949
138,009
231,069
1,441
1,300
550
640
635
2,091
–
–
Target %
200
200
200
200
–
–
* LTIP awards are due to vest in August 2018 with the performance criteria now completed.
The share price at 31 March 2018 of 2,844p was used in calculating the percentage figures shown above.
Kate Allum has no interests in the Company at the present time.
There have been no further changes to the above interests in the period from 1 April 2018 to 22 May 2018. Pam Powell and Tim Smith were appointed
Directors on 1 April 2018 and have no interests in the Company at the present time.
REMUNERATION FOR THE YEAR ENDING 31 MARCH 2019
The Executive Directors (other than Martin Davey who waived his contractual entitlement to an increase) were awarded an increase of 3 per cent
which is consistent with the average increase awarded to senior executives and to other employees in the Group taking into account local practices
and regional variations in pay and conditions.
Following the increase in pay, which will be applicable from 1 May 2018, the Executive Directors’ base salaries will be:
Director
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
New salary
£420,750
£420,750
£636,500
£314,250
Rationale
Increase in line with workforce
Increase in line with workforce
Increase in line with workforce
No change
The 2019 bonus scheme in operation will be 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 actual 2019 targets are not disclosed as they are considered to be commercially sensitive.
The targets will be declared retrospectively in the 2019 Annual Report, provided they are not considered commercially sensitive at that time. There are
four bonus profit targets triggering awards of 20 per cent, 50 per cent, 100 per cent and 150 per cent of base salaries with a straight line pro-rata
award for profits falling between the targets.
Cranswick plc Annual Report & Accounts 2018
81
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report REMUNERATION
ANNUAL REPORT ON DIRECTORS’ REMUNERATION CONTINUED
REMUNERATION FOR THE YEAR ENDING 31 MARCH 2019 CONTINUED
Subject to Shareholder approval of the remuneration policy, LTIP awards, equivalent to 200 per cent of basic salary, will be made in August 2018 and
vesting will be after a three year performance period for both TSR and EPS. 50 per cent of the award will be based on the target for TSR and 50 per
cent on the target for EPS as detailed on page 78.
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
external advisers where appropriate. Deloitte LLP were appointed in 2017 by the Remuneration Committee to advise on the review of the
Company’s remuneration policy and were paid £21,000 for their services. Deloitte also provides consultancy services to the Group. However,
the Committee have reviewed any potential conflicts of interest and judged that Deloitte’s advice is both objective and independent.
STATEMENT OF SHAREHOLDERS VOTING (UNAUDITED)
The resolutions to approve the 2017 Remuneration Committee Report were passed on a show of hands at the Company’s last AGM held on 24 July 2017.
The votes cast by proxy in respect of those resolutions were:
Remuneration Committee report
For
Against
Withheld
Number
38,029,120
1,151,626
259,758
%
97.1
2.9
–
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 2016 UK Corporate Governance Code and the Listing Rules of the Financial Conduct Authority.
Steven Esom
Chair of the Remuneration Committee
22 May 2018
82
Cranswick plc Annual Report & Accounts 2018
ENGAGEMENT WITH
SHAREHOLDERS
WE RECOGNISE THE IMPORTANCE OF ENGAGING WITH ALL OUR
SHAREHOLDERS ON A REGULAR BASIS, AND THIS ENSURES WE CAPTURE
AND EMBRACE FEEDBACK AND EMERGING TRENDS.
Regular engagement with investors provides the Group with the opportunity to discuss certain areas of interest and to ascertain any areas
of concern Shareholders may have. During the year, the Non-Executive Directors also engaged with a number of major Shareholders in
relation to its new remuneration policy as explained in more detail in the Remuneration Report on pages 66 to 82. The Group also engages with
Shareholders through regular meetings and at the Annual General Meeting. Presentations are made by the Chief Executive, the Finance Director
and the Commercial Director to analysts and institutional Shareholders on the half year and full year results and on Company strategy. A similar
presentation is made to Shareholders attending the Annual General Meeting. The Senior Independent Director and Committee Chairs are also
available for direct meetings with institutional Shareholders where required and attend the Annual General Meeting. Significant matters relating
to the trading or development of the business are disseminated to the market by way of Stock Exchange announcements.
The Company responds promptly to Shareholder queries and the Group’s website (www.cranswick.plc.uk) contains a wide range of information
on the Group including the Annual and Interim Reports, related presentations and Stock Exchange announcements.
The views of Shareholders, expressed during meetings, are communicated, as appropriate, to the Board as a whole. The Chairman, Chief
Executive or the Finance Director discuss governance and strategy with major Shareholders from time to time. The Board also welcomes the
attendance and questions of Shareholders at the Annual General Meeting which is also attended by the Chairs of the Audit, Remuneration and
Nomination Committees.
MAJOR SHAREHOLDERS
The Company has been notified of the following interests of 3 per cent or more in the issued share capital of the Company:
Invesco Perpetual
Fidelity Management & Research
Standard Life Aberdeen
Wellington Management
Legal & General Investment Management
At 31 March 2018
Number of shares
% of issued share capital
Nature of holding
9,967,757
4,876,855
3,018,585
2,714,401
1,726,916
19.51
9.55
5.91
5.31
3.38
Direct & Indirect
Direct & Indirect
Direct & Indirect
Direct & Indirect
Direct
There have been no notifications of any significant changes, a different whole percentage movement, to these shareholdings as at 22 May 2018.
Cranswick plc Annual Report & Accounts 2018
83
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report DIRECTORS’
REPORT
The Directors present their Annual Report and the audited financial
statements of the Company and the Group for the year ended 31 March
2018. The Directors’ Report consists of pages 84 to 86 and has been
drawn up and presented in accordance with and in reliance upon
applicable English company law. The liabilities of the Directors in
connection with that report shall be subject to the limitations and
restrictions provided by such law.
Direct tax
DIRECTORS INTERESTS AND INDEMNITIES
The membership of the Board and biographical details of the Directors
are given on pages 48 and 49. 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 66 to 82.
Indirect tax
• Corporation tax £16m
• Employers' National Insurance £16m
• Business rates £2m
• Apprenticeship levy £1m
In accordance with the recommendations of the UK Corporate
Governance Code, all Directors will stand for re-election at the
forthcoming Annual General Meeting.
• Income tax £27m
• Employees’ National Insurance £12m
The Company has in place directors’ and officers’ liability insurance
which gives appropriate cover against the costs of defending
themselves in civil proceedings taken against them in their capacity
as a director or officer of the Company and in respect of damages
resulting from any unsuccessful defence of any proceedings.
CONFLICTS OF INTEREST
The Company has a register in place for managing conflicts of interest
with the Directors which is reviewed and updated annually. The
Directors have a continuing duty throughout the year to update any
changes to these conflicts.
PROFIT AND DIVIDENDS
The profit from continuing operations for the financial year, after
taxation amounts to £70.0 million (2017: £62.4 million). The Directors
have declared dividends as follows:
Interim dividend per share paid
on 26 January 2018
Final dividend per share proposed
Total dividend
2018
2017
15.1p
38.6p
£27.4m
13.1p
31.0p
£22.2m
Subject to approval at the Annual General Meeting, the final dividend
will be paid in cash or scrip form on 7 September 2018 to members
on the register at the close of business on 20 July 2018. The shares will
go ex-dividend on 19 July 2018. The proposed final dividend for 2018
together with the interim paid in January 2018 amount to 53.7 pence
per share which is 21.8 per cent higher than the previous year.
TAX CONTRIBUTION
Within the UK our tax contribution to the UK treasury takes two forms:
direct contributions, being a cost to the Company which includes
corporation tax on profits, employer’s National Insurance on wages
paid, business rates and apprenticeship levy; and indirect contributions,
being income tax and employee’s National Insurance on wages paid.
The total paid in the year amounts to £74 million and is analysed
as follows:
84
Cranswick plc Annual Report & Accounts 2018
SHARE CAPITAL
The Company has one class of shares, being ordinary shares of 10
pence each. There are no special rights pertaining to any of the shares
in issue; each share carries the right to one vote at general meetings
of the Company. The allotted and fully paid up share capital is shown
in Note 24 on page 130. During the year the share capital increased by
612,657 shares. The increase comprised 432,405 of shares issued relating
to share options exercised during the year and 180,252 of shares issued
in respect of scrip dividends.
MAJOR SHAREHOLDERS
Notifiable share interests of which the Company has been made aware
are set out on page 83.
CAPITAL RAISING AND SHARE REPURCHASES
The Directors of Cranswick plc have received limited authority to
disapply Shareholders’ pre-emption rights in certain circumstances,
to authorise the Company to buy back a proportion of the Company’s
share capital and to allow the Directors to allot shares. Further resolutions
will be placed before the Annual General Meeting to be held on 30 July
2018 to renew these powers.
At the last Annual General Meeting the Directors received authority
from the Shareholders to:
Allot Shares
This gives Directors the authority to allot authorised but unissued
shares and maintains the flexibility in respect of the Company’s
financing arrangements. The nominal value of ordinary shares which the
Directors may allot in the period up to the next Annual General Meeting,
to be held on 30 July 2018, is limited to £1,682,576 which represented
approximately 33 per cent of the issued share capital as at 31 May 2017.
The Directors do not have any present intention of exercising this
authority other than in connection with the issue of ordinary shares
in respect of the scrip dividend offer and the Company’s share option
plans. This authority will expire at the end of the Annual General
Meeting to be held on 30 July 2018.
Disapplication of pre-emption rights
This dis-applies rights of pre-emption on the allotment of shares by
the Company, or to grant rights to subscribe for, or to convert securities
into ordinary shares or sell treasury shares for cash. The authority will
allow the Directors to allot equity securities for cash pursuant to the
authority to allot shares mentioned above, to grant rights for ordinary
shares and to sell treasury shares for cash without a pre-emptive
offer to existing Shareholders, up to an aggregate nominal amount
of £504,773, representing 10 per cent of the Company’s issued share
capital as at 31 May 2017. This authority will expire at the end of the
Annual General Meeting to be held on 30 July 2018.
To buy own shares
This authority allows the Company to buy its own shares in the market,
as permitted under the Articles of Association of the Company, up to
a limit of 10 per cent of the Company’s issued share capital. The price
to be paid for any share must not be less than 10 pence, being the
nominal value of a share, and must not exceed 105 per cent of the
average middle market quotations for the ordinary shares of the
Company as derived from the London Stock Exchange Daily Official
List for the five business days immediately preceding the day on which
the ordinary shares are purchased. The Directors have no immediate
plans to exercise the powers of the Company to purchase its own
shares and undertake that the authority would only be exercised if the
Directors were satisfied that a purchase would result in an increase
in expected earnings per share and was in the best interests of the
Company at the time. This authority will expire at the end of the
Annual General Meeting to be held on 30 July 2018. The Directors
would consider holding any of its own shares that it purchases
pursuant to this authority as treasury shares.
The Company did not repurchase any shares during the year and
at the year end the Group held no treasury shares.
The Company is not aware of any agreements between Shareholders
that may result in restrictions on the transfer of securities and for
voting rights.
There are no restrictions on the transfer of ordinary shares in the
Company other than where certain restrictions may apply from time
to time, on the Board of Directors and other senior executive staff,
which are imposed by laws and regulations relating to insider trading
laws and market requirements relating to close periods.
ANNUAL GENERAL MEETING AND SPECIAL BUSINESS TO
BE TRANSACTED AT THE ANNUAL GENERAL MEETING
The Annual General Meeting of Cranswick plc will be held at the
Mercure Hull Grange hotel on Monday 30 July 2018. A notice convening
the Annual General Meeting can be found in the separate Notice of
Annual General Meeting accompanying this Report & Accounts.
Details of the Special Business to be transacted at the Annual General
Meeting are contained in the separate letter from the Chairman which
also accompanies this Report & Accounts, and covers the Directors’
authority to allot shares, the partial disapplication of pre-emption
rights and the authority for the Company to buy its own shares.
AUDITORS
A resolution to reappoint PricewaterhouseCoopers LLP as independent
external auditor will be proposed at the Annual General Meeting,
together with the authority for the Audit Committee to determine
their remuneration. A statement on the independence of the external
auditors is included in the report of the Audit Committee on pages
58 to 62.
ARTICLES OF ASSOCIATION
The Company’s Articles of Association may only be amended by
a special resolution at a general meeting of the Shareholders.
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 2017 and 31 March 2018.
The Group’s capital structure is as follows:
Net (funds)/debt (Note 27)
Cranswick plc Shareholders’ equity
Capital employed
2018
£’m
(20.6)
479.9
459.3
2017
£’m
11.0
421.4
432.4
CHANGE OF CONTROL
There are no agreements that the Company considers significant
and to which the Company is party that would take effect, alter or
terminate upon change of control of the Company following a takeover
bid other than the following:
• the Company is party to a number of banking agreements which
upon a change of control of the Company are terminable by the
bank upon the provision of 30 working days’ notice;
• there are no agreements between the Company and its Directors
or employees providing for compensation for loss of office or
employment (whether through resignation, purported redundancy
or otherwise) that occur because of a takeover bid other than as
stated in the Remuneration Committee Report, on page 76, relating
to Martin Davey; and
• there are certain provisions in the Company’s Save As You Earn
share option plan and the Long Term Incentive Plan that may cause
options and awards granted to vest on a takeover. The proportion
of the awards that are capable of exercise will depend on the time
in the scheme and as far as the LTIP is concerned the extent to
which the performance targets (as adjusted or amended) have
been satisfied.
POLITICAL DONATIONS
The Group has made no political donations during the year ended
31 March 2018.
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Financial StatementsShareholder InformationCorporate GovernanceStrategic Report DIRECTORS’ REPORT CONTINUED
FINANCIAL INSTRUMENTS
Functional currency
The functional currency of all Group undertakings is Sterling.
Foreign currency risk
The main foreign exchange risk facing the Group is in the purchasing
of charcuterie products and fresh pork cuts from continental Europe
in Euros and the sale of fresh pork to the USA and China denominated
in US Dollars. 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.
Interest rate risk
The Group’s current policy is to manage its cost of borrowing using a
mix of fixed and variable rate debt. Whilst fixed rate interest-bearing
debt is not exposed to cash flow interest rate risk, there is no
opportunity for the Group to enjoy a reduction in borrowing costs in
markets where rates are falling. In addition, the fair value risk inherent
in fixed rate borrowing means that the Group is exposed to unplanned
costs should debt be restructured or repaid early as part of the liquidity
management process. In contrast, whilst floating rate borrowings are
not exposed to changes in fair value, the Group is exposed to cash flow
risk as costs increase if market rates rise. The Group has reduced its
borrowings significantly in recent years and at 31 March 2018 gearing
was at nil (2017: 2.6 per cent). Given this conservative debt structure
the Group has not fixed the interest rate on any part of its current
facility. The Board will keep this situation under constant review and will
fix the interest rate on a proportion of the Group’s borrowings at such
time as it becomes appropriate to do so. The monitoring of interest
rate risk is handled entirely at head office, based on the monthly
consolidation of cash flow projections and the daily borrowings
position.
Credit risk
Practically all sales are made on credit terms, the majority of which
are to the major UK food retailers. Overdue accounts are reviewed at
monthly management meetings. The incidence of bad debts is low.
For all major customers, credit terms are agreed by negotiation and
for all other customers, credit terms are set by reference to external
credit agencies and/or commercial awareness. Every attempt is made
to resist advance payments to suppliers for goods and services; where
this proves commercially unworkable, arrangements are put in place,
where practical, to guarantee the repayment of the monies in the
event of default.
Liquidity risk
The Group has historically been very cash-generative. The bank position
for each site is monitored on a daily basis and capital expenditure
is approved at local management meetings at which members of the
main Board are present and reported at the subsequent monthly main
Board meeting. Major projects, in excess of £1 million, are approved
by the main Board. Each part of the Group has access to the Group’s
overdraft facility and all term debt is arranged centrally. The Group
renewed its bank facility in November 2016 and extended it for a
further year during the current period. The arrangement is made up
of a revolving credit facility of £160.0 million including a committed
overdraft facility of £20.0 million. The Group manages the utilisation
of the revolving credit facility through the monitoring of monthly
consolidated cash flow projections and the daily borrowings position.
The current arrangement extends the maturity of the Group’s available
financing to November 2022 with the option to extend by a further
year, providing it with reduced liquidity risk and medium-term funding
to meet its objectives. The unutilised element of the facility at 31 March
2018 was £159.0 million (2017: £144.0 million).
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RESEARCH AND DEVELOPMENT
The Group remains at the forefront of new product development
offering consumers a wide range of products. Through innovative
use of existing and emerging technologies, there will continue to be
successful development of new products and processes for the Group.
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 facility are described above.
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 are referred to below.
The Group has considerable financial resources together with strong
trading relationships with its key customers and suppliers. As a
consequence, the Directors believe that the Group is well placed
to manage its business risk successfully.
After reviewing the available information, including business plans and
making enquiries, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational existence
for the foreseeable future. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
OTHER STATUTORY DISCLOSURES
The Corporate Governance Report on pages 50 to 55, the Statement of
Directors’ Responsibilities on page 87 of the Annual Report and Note 23
(Financial Instruments and Liquidity Risk) to the financial statements
are incorporated into the Directors’ Report by reference.
Other information can be found in the following sections of the
Strategic Report:
Future developments in the business of the Group
Viability Statement
Greenhouse Gas Emissions
Employment Policies
Pages 2 to 45
Pages 42 and 43
Page 36
Pages 26 and 27
The only information required to be disclosed pursuant to Listing
Rule 9.8.4R are the details of the Company’s Long Term Incentive Plan
which can be found in the Remuneration Committee Report on pages
66 to 82.
The Directors’ Report was approved by a duly authorised committee
of the Board on 22 May 2018 and signed on its behalf by:
Steven Glover
Company Secretary
22 May 2018
Company number: 1074383
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RESPECT OF THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the
Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and
Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under
Company Law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the Group and Company for that period. In preparing the financial statements, the
Directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable IFRSs as adopted by the European Union have been followed for the Group financial statements and IFRSs as adopted
by the European Union have been followed for the Company financial statements, subject to any material departures disclosed and explained
in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure
that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information
necessary for Shareholders to assess the Group and Company’s performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Leadership report confirm that, to the best of their knowledge:
• the Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and loss of the Company;
• the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position and profit of the Group; and
• the Directors’ Report includes a fair review of the development and performance of the business and the position of the Group and Company,
together with a description of the principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Directors’ Report is approved:
• so far as the Director is aware, there is no relevant audit information of which the Group and Company’s auditors are unaware; and
• they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information
and to establish that the Group and Company’s auditors are aware of that information.
On behalf of the Board
Martin Davey
Chairman
22 May 2018
Mark Bottomley
Finance Director
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TO THE MEMBERS OF CRANSWICK PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion, Cranswick plc’s Group financial statements and parent company financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 March 2018 and of the Group’s profit and
the Group’s and the parent company’s cash flows for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union and, as regards the parent company’s financial
statements, as applied in accordance with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4
of the IAS Regulation.
We have audited the financial statements, included within the Annual Report & Accounts (the “Annual Report”), which comprise: the Group and
Company balance sheets as at 31 March 2018; the Group income statement and Group and Company statements of comprehensive income, the
Group and Company statements of cash flows, and the Group and Company statements of changes in equity for the year then ended; and the
notes to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided to the
Group or the parent company.
Other than those disclosed in the Audit Committee Report on page 62, we have provided no non-audit services to the Group or the parent
company in the period from 1 April 2017 to 31 March 2018.
OUR AUDIT APPROACH
Overview
• Overall Group materiality: £4.6 million, based on 5% of Adjusted profit before tax.
• Overall parent company materiality: £3.4 million, initially based on 1% of total assets and capped at £3.4 million due to
Group materiality allocation.
• We, as the Group engagement team, audited all of the components – with the exception of Ravenscroft & Thackeray
and Cranswick Bio – covering £1,459.2 million (99%) of the Group’s external revenues and £87.5 million (99%) of the
Group’s Adjusted profit before tax.
• Complex customer accruals.
IAS 41 – Biological assets.
•
Materiality
Audit scope
Areas of
focus
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Cranswick plc Annual Report & Accounts 2018
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In
particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain.
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, and considered
the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud. We designed audit procedures at Group and
significant component level to respond to the risk, recognising that the risk of not detecting a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or through collusion. We focused on laws and regulations that could give rise to a material misstatement in the Group and parent company financial
statements, including, but not limited to, the risk of non-compliance related to the Group’s financial conduct, the Companies Act 2006, the Listing
Rules, Pensions legislation, UK tax legislation, and ongoing requirements as a result of the Group’s manufacture of food products. Our tests included,
but were not limited to, review of legal correspondence and discussions with the Group management and management’s experts. There are inherent
limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely we would become aware of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all of our audits we also addressed the risk of management
override of internal controls, including testing journals and evaluating whether there was evidence of bias by the Directors that represented a risk of
material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Complex customer accruals
As is industry practice, the Group has numerous types of complex
commercial arrangements with retailers and other customers
that have a range of terms (for example promotions, rebates and
discounts). These commercial accruals also include advertising and
marketing contributions and total £8.9 million (2017: £10.2 million).
Due to the varying terms of these arrangements, and given these
agreements and activity may span a year end, a degree of judgment
is exercised in determining the valuation of the liability and the timing
of when this liability should be recognised.
We consider there to be a specific risk associated with the
completeness, accuracy and valuation of the commercial accrual
that has been recognised at the year end as this is material and can
be complex and judgemental.
Our audit procedures included understanding and evaluating the
controls and systems related to the commercial accruals process,
and obtaining audit evidence through substantive audit procedures.
The substantive audit procedures performed for each individual
division varied depending upon the nature and level of commercial
accruals and type of agreement but included the following tests,
on a sample basis:
•
Inquiries of management and the account managers to
understand how the calculations are performed;
• Testing of the calculations performed in arriving at the accrual,
by agreeing the calculations to agreements in place with the
customers, and the relevant sales volume data;
• Agreement, on a sample basis, of the amounts raised and settled
with customers, for claims which have arisen within the current or
next financial year;
• Look back at the accuracy of the prior year (and older) provisions,
to determine customer patterns and assess management’s ability
to make accurate estimates of the required provisions; and
• Reviewed historical payments made on aged balances and
reviewed underlying agreements to assess the appropriateness
of the aged accruals in place across the Group.
We found, based on the results of our testing, that the accrual
recorded and disclosures made in the financial statements were
consistent with the supporting evidence obtained.
Cranswick plc Annual Report & Accounts 2018
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TO THE MEMBERS OF CRANSWICK PLC
Key audit matter
How our audit addressed the key audit matter
IAS 41 – Biological assets
Due to the nature of the Group’s operations, biological assets
consisting of pigs and chickens are recognised. On initial recognition
and at the balance sheet date, these biological assets have been
measured at their fair value less costs to sell, in line with IAS 41. The
net IAS 41 valuation movement recognised in the year is a cost of
£2.2 million (2017: credit of £4.1 million).
The valuation of these biological assets requires significant levels of
judgement and industry-specific expertise in applying appropriate
assumptions. Changes in a number of the key assumptions (including
mortality rates, growth rates, and the fair value at various stages
of development) can have a material impact on the valuation.
We gained an understanding of, and evaluated the key processes used
to calculate the fair value of the biological assets.
We performed a recalculation of both the pig and chicken valuation
models used to assess the accuracy of the calculation and audited the
underlying data inputs to the model.
We evaluated the Directors’ assessment of the assumptions used in
relation to the valuation of the biological assets as follows:
• We have compared the mortality assumptions within the models
to the operational data obtained from the farms;
• We have reviewed the growth rate of the chickens to third party
source data and have assessed the reasonableness of the straight
line growth model used for pigs; and
• We have agreed the fair value price of the assets at the various
stages of their life cycle to supporting third party data.
We have performed a sensitivity analysis over all of the above
assumptions and confirmed significant movements would be required
to result in a material misstatement.
We found, based on the results of our testing, that the calculation and
disclosures made in the financial statements in relation to the IAS 41
valuation of biological assets were consistent with the supporting
evidence obtained.
We determined that there were no key audit matters applicable to the parent company to communicate in our report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the parent company, the accounting processes and controls, and the industry in
which they operate.
The Group is organised in to 17 reporting units all within the UK. The Group Financial Statements are a consolidation of these reporting units and the
centralised functions. The reporting units vary in size and we identified 15 components that required an audit of their complete financial information
due to their individual size or risk characteristics. The components where we performed an audit of their complete financial information accounted
for 99% of the Group’s Adjusted profit before income tax and 99% of the Group’s revenue. All of these components were audited by the Group
engagement team.
Of the remaining 2 components that together represent 1% of the Group’s Adjusted profit before tax, we performed analytical procedures to
respond to any potential risks of material misstatement to the Group financial statements.
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Cranswick plc Annual Report & Accounts 2018
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£4.6 million.
£3.4 million.
Group financial statements
Parent company financial statements
How we determined it
5% of Adjusted profit before tax.
Rationale for benchmark applied
Adjusted profit before tax excludes the impact
of fair value adjustments (IAS 41 fair value
movements) and non-cash transactions not
directly linked to operating performance
(amortisation of customer relationship intangible
assets). Based on the benchmarks used in the
Annual Report, Adjusted profit before tax is the
primary measure used by the shareholders in
assessing the performance of the Group, and
is a generally accepted auditing benchmark.
1% of Total assets and subsequently capped due
to Group materiality allocation.
We believe that total assets is the primary
measure used by the shareholders in assessing
the performance of a holding company, and
is a generally accepted auditing benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £0.2 million and £3.9 million. Certain components were audited to a local statutory audit
materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.2 million (Group audit) and
£0.2 million (Parent company audit) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or
draw attention to in respect of the Directors’ statement in the
financial statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting in
preparing the financial statements and the Directors’ identification
of any material uncertainties to the Group’s and the parent company’s
ability to continue as a going concern over a period of at least twelve
months from the date of approval of the financial statements.
We have nothing material to add or to draw attention to. However,
because not all future events or conditions can be predicted, this
statement is not a guarantee as to the Group’s and parent company’s
ability to continue as a going concern.
We are required to report if the Directors’ statement relating to
Going Concern in accordance with Listing Rule 9.8.6R(3) is materially
inconsistent with our knowledge obtained in the audit.
We have nothing to report.
Cranswick plc Annual Report & Accounts 2018
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TO THE MEMBERS OF CRANSWICK PLC
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report based on these responsibilities.
With respect to the Strategic Report, Directors’ Report and Corporate Governance Statement, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06), ISAs (UK) and
the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below (required by
ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 31 March 2018 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements. (CA06)
In light of the knowledge and understanding of the Group and parent company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity
of the Group
We have nothing material to add or draw attention to regarding:
• The Directors’ confirmation on pages 42 and 43 of the Annual Report that they have carried out a robust assessment of the principal risks
facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The Directors’ explanation on pages 42 and 43 of the Annual Report as to how they have assessed the prospects of the Group, over what
period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the Directors’ statement that they have carried out a robust assessment of the principal
risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope than an audit
and only consisted of making inquiries and considering the Directors’ process supporting their statements; checking that the statements are in
alignment with the relevant provisions of the UK Corporate Governance Code (the “Code”); and considering whether the statements are consistent
with the knowledge and understanding of the Group and parent company and their environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the Directors, on page 87, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and parent company’s position and
performance, business model and strategy is materially inconsistent with our knowledge of the Group and parent company obtained
in the course of performing our audit.
• The section of the Annual Report on page 57 describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
• The Directors’ statement relating to the parent company’s compliance with the Code does not properly disclose a departure from a relevant
provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006. (CA06)
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RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 87, the Directors are responsible for the preparation of the
financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are
also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent company’s ability to continue as a
going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the parent company’s members as a body in accordance with Chapter 3 of Part
16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or
to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 24 July 2017 to audit the financial statements for
the year ended 31 March 2018 and subsequent financial periods. This is therefore our first year of uninterrupted engagement.
Ian Morrison (Senior Statutory Auditor)
For and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
22 May 2018
Cranswick plc Annual Report & Accounts 2018
93
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report GROUP INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2018
Revenue
Adjusted Group operating profit
Net IAS 41 valuation movement on biological assets
Amortisation of customer relationship intangible assets
Group operating profit
Finance costs
Profit before tax
Taxation
Profit for the year from continuing operations
Discontinued operations:
Profit for the year from discontinued operations
Profit for the year
Earnings per share (pence)
On profit for the year from continuing operations:
Basic
Diluted
On profit for the year:
Basic
Diluted
An analysis of costs within Group operating profit is presented in Note 4.
Notes
3
16
12
4
6
7
8
11
11
11
11
2018
£’m
1,464.5
2017
£’m
1,245.1
92.8
(2.2)
(2.2)
88.4
(0.4)
88.0
(18.0)
70.0
–
70.0
137.8p
137.1p
137.8p
137.1p
76.1
4.1
(2.1)
78.1
(0.6)
77.5
(15.1)
62.4
4.8
67.2
124.2p
123.7p
133.8p
133.3p
94
Cranswick plc Annual Report & Accounts 2018
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2018
Profit for the year
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Cash flow hedges
Gains arising in the year
Reclassification adjustments for gains 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 on defined benefit pension scheme
Income tax effect
Net other comprehensive income not to be reclassified to profit or loss in
subsequent periods
Other comprehensive income, net of tax
Total comprehensive income, net of tax
Notes
21
21
7
26
7
2018
£’m
70.0
0.1
(0.3)
–
(0.2)
(0.2)
0.1
(0.1)
(0.3)
69.7
2017
£’m
67.2
0.3
(0.1)
(0.1)
0.1
(6.3)
1.3
(5.0)
(4.9)
62.3
COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2018
Company profit for the year of £21.9 million (2017: £25.3 million) was equal to total comprehensive income for the year attributable to owners of
the parent in both years.
Cranswick plc Annual Report & Accounts 2018
95
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report GROUP BALANCE SHEET
AT 31 MARCH 2018
Non-current assets
Intangible assets
Property, plant and equipment
Biological 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
Provisions
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
Equity attributable to owners of the parent
On behalf of the Board
Martin Davey
Chairman
22 May 2018
Mark Bottomley
Finance Director
96
Cranswick plc Annual Report & Accounts 2018
Notes
12
13
16
16
17
18
19
27
20
21
22
20
21
7
22
26
24
2018
£’m
156.2
237.3
0.8
394.3
17.0
59.2
160.1
0.1
20.6
257.0
651.3
2017
£’m
158.4
215.7
1.0
375.1
18.6
62.2
150.6
0.3
4.1
235.8
610.9
(147.8)
(144.5)
(0.9)
(0.2)
(10.2)
(159.1)
(0.9)
–
(1.0)
(2.3)
(8.1)
(12.3)
(171.4)
479.9
5.1
81.5
21.0
–
372.3
479.9
(5.4)
(0.1)
(7.2)
(157.2)
(1.1)
(16.0)
(2.9)
(2.8)
(9.5)
(32.3)
(189.5)
421.4
5.0
74.8
16.7
0.2
324.7
421.4
COMPANY BALANCE SHEET
AT 31 MARCH 2018
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
Provisions
Income tax payable
Total current liabilities
Non-current liabilities
Financial liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Called-up share capital
Share premium account
General reserve
Merger reserve
Share-based payments
Retained earnings
The Company’s profit for the year was £21.9 million (2017: £25.3 million).
On behalf of the Board
Martin Davey
Chairman
22 May 2018
Mark Bottomley
Finance Director
Notes
13
14
7
18
27
20
22
21
22
24
2018
£’m
0.5
164.5
1.0
166.0
38.3
5.1
43.4
209.4
(61.0)
(0.1)
(1.1)
(62.2)
–
(0.6)
(0.6)
(62.8)
146.6
5.1
81.5
4.0
1.8
21.0
33.2
146.6
2017
£’m
0.6
161.5
1.1
163.2
39.4
2.0
41.4
204.6
(51.3)
(0.1)
(0.8)
(52.2)
(15.0)
(0.6)
(15.6)
(67.8)
136.8
5.0
74.8
4.0
1.8
16.7
34.5
136.8
Cranswick plc Annual Report & Accounts 2018
97
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2018
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
Loss/(gain) on sale of property, plant and equipment
Depreciation of property, plant and equipment
Amortisation of intangible assets
Profit on sale of business
Share-based payments
Difference between pension contributions paid and amounts recognised in the
income statement
Release of government grants
Net IAS 41 valuation movement on biological assets
(Increase)/decrease 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
Acquisition of subsidiaries, net of cash acquired
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of discontinued operations, net of cash surrendered
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Proceeds from issue of share capital
Issue costs of long-term borrowings
Repayment of borrowings
Proceeds from borrowings
Dividends paid
Repayment of capital element of finance leases and hire purchase contracts
Net cash (used in)/from 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
98
Cranswick plc Annual Report & Accounts 2018
Notes
7
13
12
8
15
8
27
27
27
2018
£’m
70.0
18.0
0.4
0.8
35.7
2.2
–
4.3
(1.7)
(0.2)
2.2
(0.4)
3.0
(9.0)
2.4
127.7
(15.6)
112.1
(5.3)
(58.7)
0.7
–
(63.3)
(0.4)
1.6
(0.2)
(15.0)
–
(18.2)
(0.1)
(32.3)
16.5
4.1
20.6
2017
£’m
67.2
15.2
0.6
(0.1)
27.7
2.1
(4.5)
3.6
(1.3)
(0.2)
(4.1)
0.4
(14.6)
(24.9)
20.6
87.7
(14.8)
72.9
(56.0)
(47.0)
0.5
15.5
(87.0)
(0.5)
0.8
(1.1)
–
16.0
(14.6)
(0.2)
0.4
(13.7)
17.8
4.1
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2018
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
Reduction in carrying value of investment
Share-based payments
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from/(used in) operations
Tax paid
Net cash from/(used in) operating activities
Cash flows from investing activities
Dividends received
Net cash from investing activities
Cash flows from financing activities
Interest paid
Proceeds from issue of share capital
Issue costs of long-term borrowings
Repayment of borrowings
Proceeds from 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
Notes
13
14
27
27
27
2018
£’m
21.9
2017
£’m
25.3
(18.2)
(24.9)
1.6
4.7
0.1
–
1.3
1.3
9.7
22.4
(1.0)
21.4
18.2
18.2
(4.7)
1.6
(0.2)
(15.0)
–
(18.2)
(36.5)
3.1
2.0
5.1
1.9
4.8
–
3.9
1.5
(3.1)
(29.5)
(20.1)
(1.3)
(21.4)
24.9
24.9
(4.8)
0.8
(1.1)
–
16.0
(14.6)
(3.7)
(0.2)
2.2
2.0
Cranswick plc Annual Report & Accounts 2018
99
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2018
Share
capital
Note (a)
£’m
5.0
Share
premium
Note (b)
£’m
69.0
Share-based
payments
Note (e)
£’m
Hedging
reserve
Note (f)
£’m
13.1
–
–
–
3.6
–
–
–
–
–
16.7
–
–
–
4.3
–
–
–
–
–
Retained
earnings
£’m
280.9
67.2
(5.0)
62.2
–
–
–
(19.6)
0.1
1.1
324.7
70.0
(0.1)
69.9
–
–
–
(23.4)
(0.3)
1.4
372.3
Total
equity
£’m
368.1
67.2
(4.9)
62.3
3.6
5.0
0.8
(19.6)
0.1
1.1
421.4
70.0
(0.3)
69.7
4.3
5.2
1.6
(23.4)
(0.3)
1.4
479.9
0.1
–
0.1
0.1
–
–
–
–
–
–
0.2
–
(0.2)
(0.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5.0
–
–
–
–
–
0.1
–
–
–
5.1
–
–
–
–
5.0
0.8
–
–
–
74.8
–
–
–
–
5.2
1.5
–
–
–
81.5
21.0
At 31 March 2016
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
Current tax related to changes in equity
At 31 March 2017
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
Current tax related to changes in equity
At 31 March 2018
100
Cranswick plc Annual Report & Accounts 2018
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2018
At 31 March 2016
5.0
69.0
4.0
1.8
13.1
28.3
Share
capital
Note (a)
£’m
Share
premium
Note (b)
£’m
General
reserve
Note (c)
£’m
Merger
reserve
Note (d)
£’m
Share-based
payments
Note (e)
£’m
Retained
earnings
£’m
Total
equity
£’m
121.2
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
Current tax related to changes in equity
–
–
–
–
–
–
–
–
–
5.0
0.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.6
–
–
–
–
–
At 31 March 2017
5.0
74.8
4.0
1.8
16.7
–
25.3
25.3
–
–
–
3.6
5.0
0.8
(19.6)
(19.6)
0.1
0.4
34.5
0.1
0.4
136.8
21.9
21.9
–
–
–
4.3
5.2
1.6
(23.4)
(23.4)
(0.1)
0.3
(0.1)
0.3
–
–
–
0.1
–
–
–
–
–
5.2
1.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.3
–
–
–
–
–
5.1
81.5
4.0
1.8
21.0
33.2
146.6
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
Current tax related to changes in equity
At 31 March 2018
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 £4.0 million 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 25).
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.
Cranswick plc Annual Report & Accounts 2018
101
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report
NOTES TO THE ACCOUNTS
1. AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRSs
The Group and Company financial statements of Cranswick plc (the ‘Company’) for the year ended 31 March 2018 were authorised for issue by the
Board of Directors on 22 May 2018 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 (Company number: 1074383, registered office: 74 Helsinki Road,
Hull, HU7 0YW). 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 below.
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 acquisition
method of accounting.
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 March 2018. Control is achieved
when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns
through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
• power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
• exposure, or right, to variable returns from its involvement with the investee; and
• the ability to use its power over the investee to affect its returns.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the
three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group
loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the
statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s
accounting policies. All intra-Group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members
of the Group are eliminated in full on consolidation.
Judgements and key sources of estimation uncertainty
The preparation of the Group 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.
In the process of applying the Group’s accounting policies, management has made the following estimations, which have the most significant
effect on the amounts recognised in the financial statements:
Significant estimates and assumptions:
Share-based payments
Note 25 – measurement of share-based payments.
The fair value of share-based payments is estimated using inputs including expected share price volatility,
the expected life of the options and the number of awards that will ultimately vest.
Pensions
Acquisitions
Note 26 – pension scheme actuarial assumptions.
The valuation of the defined benefit pension scheme is determined using assumptions including mortality,
discount rates and inflation.
Note 15 – fair value adjustments on acquisition include the valuation of intangible assets with inputs based
on discount rate, sales growth and customer churn assumptions.
Biological assets
Note 16 – valuation includes assumptions in relation to mortality and growth rate.
102
Cranswick plc Annual Report & Accounts 2018
Significant judgements:
Share-based payments
Alternative measures
Note 25 – measurement of share-based payments.
The selection of valuation models requires the use of management’s judgement. The fair value of share-
based payments is estimated as at the date of grant using the Black-Scholes option pricing model.
Note 31 – alternative performance measures.
Management apply judgement to identify the significant non-cash items to exclude when calculating
adjusted performance measures. The Board believe alternative measures are useful as they exclude volatile,
one-off and non-cash items.
Commercial accruals
Note 20 – trade and other payables.
(Advertising and marketing
contributions)
The level of commercial accruals is viewed by management as an area sensitive to a level of judgement in
determining the timing and quantum of liabilities to be recognised.
Other estimates and judgements have been applied by management in producing the Annual Report and Accounts including, but not limited to,
depreciation and amortisation rates, and provision for impairment of trade receivables. However, these are not considered to have a significant
risk of material adjustment.
New standards and interpretations applied
The following accounting standards and interpretations became effective for the current reporting period:
International Accounting Standards (IAS/IFRSs)
Annual Improvements to IFRSs 2014-2016 Cycle
IAS 7
IAS 12
Statement of Cash Flows (amendment)
Income Taxes (amendment)
Effective date
1 January 2017
1 January 2017
1 January 2017
The application of these standards has not had a material effect on the net assets, results and disclosures of the Group.
New and revised standards and interpretations not applied
In these Financial Statements, the Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:
•
•
•
‘IFRS 15: Revenue from Contracts with Customers’ will be effective for annual periods beginning on or after 1 January 2018. The standard
deals with revenue recognition and establishes principles for reporting useful information about the nature, amount, timing and uncertainty
of revenues and cash flows arising from the Group’s contracts with its customers. The standard provides clarification about when control of
goods is passed to customers and contains more guidance about the measurement of revenue contracts which have discounts, rebates and
other payments to customers. During 2017, the Group completed a review of the requirements of IFRS 15 against current accounting policies.
The areas the Group considered included payments to customers and the timing of revenue recognition based on control of goods. The Group
has concluded that there will be no material impact of adopting IFRS 15.
‘IFRS 9: Financial Instruments’ will be effective for annual periods beginning on or after 1 January 2018. The standard includes requirements
for classification and measurement, impairment and hedge accounting. The Group has evaluated the impact of IFRS 9 and concluded that
it does not expect a material impact on the recognition and measurement of income and costs in the Income Statement or of assets and
liabilities in the Balance Sheet. The Group has assessed the classification and measurement of certain financial assets on the Balance Sheet
and concluded that there will be no significant change as a result of this. Further, the nature of the Group’s current hedging activities and the
quantum of its bad debt risk means that the impact of IFRS 9 will be immaterial in respect of these items. IFRS 9 mandates certain additional
disclosures, which the Group will make in the future.
‘IFRS 16: Leases’ will be effective for annual periods beginning on or after 1 January 2019. The standard changes the principles for the recognition,
measurement, presentation and disclosure of leases. It eliminates the classification of leases as either operating leases or finance leases and
introduces a single lessee accounting model where the lessee is required to recognise lease liabilities and ‘right of use’ assets on the Balance
Sheet, with exemptions for low value and short-term leases. The Group is in the process of evaluating the impact of IFRS 16 on its current lease
arrangements, which mainly consists of agricultural properties.
A number of other new standards, amendments and interpretations are effective for annual periods beginning on or after 1 January 2018 and
have not yet been applied in preparing these Financial Statements. None of these are expected to have a significant effect on the Financial
Statements of the Group.
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.
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2. ACCOUNTING POLICIES CONTINUED
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.
Sales related discounts and similar allowances comprise (commercial accruals):
• Volume rebates and similar allowances – which are sales incentives to customers to encourage them to purchase increased volumes and are
related to total volumes purchased and sales growth.
• Advertising and marketing contributions – which are directly related to promotions run by customers.
For commercial accruals that must be earned, management make estimates related to customer performance, sales volume and agreed terms,
to determine total amounts earned and to be recorded in deductions from revenue. (See significant judgments above, and Note 20).
Alternative performance measures
The Board monitors performance principally through the adjusted performance measures. Adjusted profit and earnings per share measures
exclude certain non-cash items including the net IAS 41 valuation movement on biological assets, amortisation of acquired intangible assets,
profit on sale of a business and goodwill impairment charges. Free cash flow is defined as net cash from operating activities less interest paid and
like-for-like revenue excludes the contribution from Crown Chicken and Ballymena prior to the anniversary of their acquisition and also the impact
of the 53rd week in the current year.
The Board believes that such alternative measures are useful as they exclude volatile (net IAS 41 valuation movement on biological assets), one-off
(impairment of goodwill and profit on sale of a business) and non-cash (amortisation of intangible assets) items which are normally disregarded
by investors, analysts and brokers in gaining a clearer understanding of the underlying performance of the Group when making investment and
other decisions. Equally, like-for-like revenue provides these same stakeholders with a clearer understanding of the organic sales growth of the
business. (Reconciliations of alternative performance measures can be found in Note 31).
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 profit or loss.
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
30-50 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.
Accounting for leases
i) Finance leases
Assets which are financed by leasing agreements that transfer substantially all the risks and rewards of ownership to the lessee (finance leases)
are capitalised at the inception of the lease at fair value or, if lower, the present value of the minimum lease payments, in ‘Property, plant and
equipment’ and the corresponding capital cost is shown as an obligation to the lessor in ‘Borrowings’. Depreciation is charged to the income
statement over the shorter of the estimated useful life of the asset and the term of the lease. The interest element of the rental obligations is
allocated to accounting periods during the lease term to reflect a constant rate of interest on the remainder of the capital amount outstanding.
ii) Operating leases
Leases, which are not finance leases, are classified as operating leases. Lease payments are charged to the income statement on a straight
line basis over the term of the lease.
Government grants and contributions
UK Regional Development Grants and grants receivable from the European Union and DEFRA in respect of property, plant and equipment are
credited to deferred income and released to the income statement over the relevant depreciation period.
Cranswick plc Annual Report & Accounts 2018
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NOTES TO THE ACCOUNTS CONTINUED
2. ACCOUNTING POLICIES CONTINUED
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, where applicable, 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) and chickens in the form of breeder stocks (classified as non-current assets) and
their progency 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 and 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.
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.
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Cranswick plc Annual Report & Accounts 2018
The amounts charged to operating profit are any gains and losses on settlements and curtailments, and these are included as part of staff costs.
Past-service costs are recognised immediately in income, unless the changes to the pension scheme are conditional on the employees remaining
in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight line basis over the
vesting period.
The difference between the interest cost on plan liabilities and the expected return on plan assets is recognised in the income statement as
other finance revenue or costs.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the
statement of comprehensive income in the period in which they arise.
The Group also operates 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 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.
Cranswick plc Annual Report & Accounts 2018
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NOTES TO THE ACCOUNTS CONTINUED
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 principally through adjusted profit measures consistent with those disclosed in the Annual Report
and Accounts.
For the purposes of managing the business, the Group is organised into one reportable segment, being Food: manufacture and supply of food
products to UK grocery retailers, the food service sector and other UK and global food producers.
The reportable segment ‘Food’ represents the aggregation of four operating segments which are aligned to the product categories of the Group;
Fresh Pork, Convenience, Gourmet Products and Poultry, all of which manufacture and supply food products through the channels described
above. These operating segments have been aggregated into one reportable segment as they share similar economic characteristics. The
economic indicators which have been assessed in concluding that these operating segments should be aggregated include the similarity of
long-term average margins; expected future financial performance; and operating and competitive risks. In addition, the operating segments
are similar with regard to the nature of the products and production process, the type and class of customer, the method of distribution and
the regulatory environment.
Continuing operations – sale of goods
Discontinued operations – sale of goods
Geographical segments
The following table sets out revenues by destination, regardless of where the goods were produced:
UK
Continental Europe
Rest of world
2018
£’m
1,464.5
–
1,464.5
2017
£’m
1,245.1
18.8
1,263.9
2018
£’m
2017
£’m
1,419.3
1,238.7
30.2
15.0
13.3
11.9
1,464.5
1,263.9
In addition to the non-UK sales disclosed above the Group also made sales to export markets through UK-based meat trading agents totalling
£51.0 million (2017: £48.7 million). Including these sales, total sales to export markets were £96.2 million for the year (2017: £73.9 million).
Revenue from discontinued operations in the prior year relates wholly to the UK.
Customer concentration
The Group has two customers (2017: two) which individually account for more than 10 per cent of the Group’s total revenue. These customers account
for 23 per cent and 21 per cent respectively. In the prior year these same two customers accounted for 24 per cent and 20 per cent respectively.
The Group’s non-current assets were all located within the UK for both 2018 and 2017.
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Cranswick plc Annual Report & Accounts 2018
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 amortisation of customer relationship
intangible assets
Amortisation of customer relationship intangible assets
Administrative expenses
Total operating costs
Continuing operations
Discontinued operations
Total
2018
£’m
2017
£’m
2018
£’m
2017
£’m
2018
£’m
2017
£’m
1,277.7
1,086.2
2.2
(4.1)
1,279.9
1,082.1
184.6
163.0
55.7
50.9
38.3
2.2
40.5
31.9
2.1
34.0
1,376.1
1,167.0
–
–
–
–
–
–
–
–
–
16.6
1,277.7
1,102.8
–
16.6
2.2
2.2
(4.1)
1,279.9
1,098.7
184.6
165.2
1.2
55.7
52.1
0.6
–
0.6
18.4
38.3
2.2
40.5
32.5
2.1
34.6
1,376.1
1,185.4
* 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):
Continuing operations
Discontinued operations
Total
Depreciation of property, plant and equipment
Amortisation of customer relationship intangible assets
Release of government grants
Operating lease payments – minimum lease payments
Net foreign currency differences
2018
£’m
35.7
2.2
(0.2)
7.7
(0.1)
2017
£’m
27.6
2.1
(0.2)
7.9
0.2
Cost of inventories recognised as an expense
844.7
706.7
Increase in provision for inventories
Research and development expenditure
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
Other services
Total non-audit related remuneration
2.7
1.0
0.1
0.2
0.3
–
–
1.2
2.6
0.1
0.2
0.3
0.1
0.1
2018
£’m
–
–
–
–
–
–
–
–
–
–
–
–
–
2017
£’m
0.1
–
–
0.1
–
7.1
–
–
–
–
–
–
–
2018
£’m
35.7
2.2
(0.2)
7.7
(0.1)
2017
£’m
27.7
2.1
(0.2)
8.0
0.2
844.7
713.8
2.7
1.0
0.1
0.2
0.3
–
–
1.2
2.6
0.1
0.2
0.3
0.1
0.1
Auditors’ remuneration in the prior year was paid to the Group’s previous auditors, Ernst & Young LLP.
‘Other’ non-audit related services of £0.1 million in the prior year were in respect of corporate finance services in relation to acquisition related
activities.
Further details of audit and non-audit fees can be found on page 62.
Fees paid to auditors for non-audit services by the Company itself are not disclosed in the individual accounts of Cranswick plc because Group
financial statements are prepared which are required to disclose such fees on a consolidated basis.
Cranswick plc Annual Report & Accounts 2018
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5. EMPLOYEES
Staff costs:
Wages and salaries
Social security costs
Other pension costs
Group
Company
2018
£’m
177.6
17.4
2.9
197.9
2017
£’m
153.4
15.2
3.0
171.6
2018
£’m
8.1
1.6
0.1
9.8
2017
£’m
7.4
1.8
0.1
9.3
Included within wages and salaries is a total expense for share-based payments of £4.3 million (2017: £3.6 million) 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:
Production
Selling and distribution
Administration
Group
Company
2018
Number
5,686
330
322
6,338
2017
Number
5,092
286
236
5,614
2018
Number
2017
Number
–
–
40
40
–
–
36
36
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 66 to 82. 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
2018
£’m
5.0
–
5.0
3.8
2
2017
£’m
4.9
–
4.9
3.6
2
Details of Directors’ remuneration can be found in the Remuneration Committee Report on page 77. The total Directors’ remuneration of
£5.0 million (2017: £4.9 million) comprises salary and fees £1.9 million (2017: £1.9 million), benefits £0.1 million (2017: £0.1 million), bonus £2.6 million
(2017: £2.5 million) and pension £0.4 million (2017: £0.4 million). The difference between pension contributions noted above and pension
contributions on page 77 is cash paid in lieu of pension.
6. FINANCE COSTS
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 26)
Movement in discount on provisions and financial liabilities
Total finance costs
Continuing operations
Discontinued operations
Total
2018
£’m
0.2
0.2
0.1
0.1
0.4
2017
£’m
0.4
0.4
0.1
0.1
0.6
2018
£’m
2017
£’m
–
–
–
–
–
–
–
–
–
–
2018
£’m
0.2
0.2
0.1
0.1
0.4
2017
£’m
0.4
0.4
0.1
0.1
0.6
The interest relates to financial assets and liabilities carried at amortised cost.
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Cranswick plc Annual Report & Accounts 2018
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 profit for the year
Adjustments in respect of prior years
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Deferred tax rate change
Adjustments in respect of prior years
Total deferred tax
Tax on profit on ordinary activities
Continuing and discontinued activities:
Income tax expense from continuing operations
Income tax expense from discontinued operations
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 losses on defined benefit pension scheme
Corporation tax credit on actuarial losses on defined benefit pension scheme
Recognised in Group statement of changes in equity
Deferred tax charge/(credit) 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 charge/(credit) on share-based payments
Corporation tax credit on share options exercised
Total tax credit recognised directly in equity
2018
£’m
20.0
0.4
20.4
(2.4)
0.3
(0.3)
(2.4)
18.0
2018
£’m
18.0
–
18.0
2018
£’m
–
0.2
(0.3)
(0.1)
0.3
(1.4)
(1.1)
(1.2)
2018
£’m
0.1
(0.3)
(0.2)
2017
£’m
16.6
(0.8)
15.8
(0.1)
(0.2)
(0.3)
(0.6)
15.2
2017
£’m
15.1
0.1
15.2
2017
£’m
0.1
(1.1)
(0.2)
(1.2)
(0.1)
(1.1)
(1.2)
(2.4)
2017
£’m
(0.1)
(0.4)
(0.5)
Cranswick plc Annual Report & Accounts 2018
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7. TAXATION CONTINUED
b) Factors affecting tax charge for the year
The tax assessed for the year is higher (2017: lower) than the standard rate of corporation tax in the UK. The differences are explained below:
Profit on ordinary activities before tax (including discontinued operations)
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19 per cent (2017: 20 per cent)
Effect of:
Disallowed expenses
Deferred tax rate change
Non-taxable income
Adjustments in respect of prior years
Total tax charge for the year
Analysed as:
Continuing operations
Discontinued operations
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
Customer relationships intangibles
Deferred tax liability
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
Customer relationships intangibles
Deferred tax credit
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Cranswick plc Annual Report & Accounts 2018
2018
£’m
88.0
16.7
1.2
0.3
(0.3)
0.1
18.0
2018
£’m
18.0
–
18.0
2018
£’m
5.0
(0.4)
0.1
(0.3)
(2.8)
(1.4)
0.8
1.0
2018
£’m
(1.2)
(0.4)
(0.1)
(0.4)
–
(0.4)
(2.5)
2017
£’m
82.4
16.5
0.7
–
(0.9)
(1.1)
15.2
2017
£’m
15.1
0.1
15.2
2017
£’m
6.0
0.1
0.1
(0.3)
(2.6)
(1.5)
1.1
2.9
2017
£’m
(1.5)
0.9
0.1
–
0.3
(0.4)
(0.6)
The deferred tax included in the Company balance sheet is as follows:
Company
Deferred tax asset in the balance sheet
Other temporary differences
Share-based payments
Deferred tax asset
2018
£’m
–
(1.0)
(1.0)
2017
£’m
(0.1)
(1.0)
(1.1)
d) Change in corporation tax rate
A reduction in the main rate of corporation tax in the UK from 19 per cent to 17 per cent from 1 April 2020 was enacted before the balance sheet
date. Deferred tax is therefore provided at 17 per cent.
8. DISCONTINUED OPERATIONS
On 23 July 2016, the Group sold its shareholding in The Sandwich Factory Holdings Limited (The Sandwich Factory). The sale allowed the Group to
focus on its portfolio of high growth, premium product categories.
The results of discontinued operations in the prior year, which have been separately disclosed as a single line item at the foot of the Group income
statement, were as follows:
Results of discontinued operations
Revenue
Expenses
Operating profit and profit before tax from discontinued operations
Income tax expense on ordinary activities of the discontinued operations
Profit on sale of business
Profit after tax from discontinued operations
Earnings per share from discontinued operations
Basic earnings per share
Diluted earnings per share
Statement of cash flows
The statement of cash flows includes the following amounts relating to discontinued operations:
Operating activities
Investing activities
Net cash from discontinued operations
2018
£’m
–
–
–
–
–
–
–
–
–
–
–
2017
£’m
18.8
(18.4)
0.4
(0.1)
4.5
4.8
9.6
9.6
(1.2)
(0.4)
(1.6)
A profit of £4.5 million arose on the sale of The Sandwich Factory, being the difference between cash proceeds and the carrying value of net
assets plus attributable goodwill.
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Financial StatementsShareholder InformationCorporate GovernanceStrategic Report NOTES TO THE ACCOUNTS CONTINUED
8. DISCONTINUED OPERATIONS CONTINUED
The net assets which were sold in the prior year were as follows:
Intangible assets – Goodwill
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Cash proceeds received
Cash and cash equivalents surrendered
Legal costs incurred, settled in cash
Profit on sale of business
9. PROFIT ATTRIBUTABLE TO MEMBERS
Of the profit attributable to members, the sum of £21.9 million (2017: £25.3 million) has been dealt with in the accounts of Cranswick plc.
10. EQUITY DIVIDENDS
Declared and paid during the year:
Final dividend for 2017 – 31.0p per share (2016: 25.9p)
Interim dividend for 2018 – 15.1p per share (2017: 13.1p)
Dividends paid
2018
£’m
15.7
7.7
23.4
£’m
7.0
2.6
1.1
9.3
(9.0)
11.0
16.2
(0.5)
(0.2)
15.5
4.5
2017
£’m
13.0
6.6
19.6
Proposed for approval of Shareholders at the Annual General Meeting on 30 July 2018:
Final dividend for 2018 – 38.6p per share (2017: 31.0p)
19.7
15.6
11. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to members of the parent company of
£70.0 million (2017: £67.2 million) 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
2018
Thousands
2017
Thousands
50,787
238
51,025
50,191
195
50,386
Adjusted earnings per share
Adjusted earnings per share are calculated using the weighted average number of shares for both basic and diluted amounts as detailed above
(see Note 31).
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Cranswick plc Annual Report & Accounts 2018
12. INTANGIBLE ASSETS
Group
Cost
At 31 March 2016
On acquisition (Note 15)
On sale of business
At 31 March 2017 and 31 March 2018
Amortisation
At 31 March 2016
Amortisation
On sale of business
At 31 March 2017
Amortisation
At 31 March 2018
Net book value
At 31 March 2016
At 31 March 2017
At 31 March 2018
Goodwill
£’m
Customer
relationships
£’m
144.6
23.2
(16.5)
151.3
9.5
–
(9.5)
–
–
–
135.1
151.3
151.3
7.0
4.6
–
11.6
2.4
2.1
–
4.5
2.2
6.7
4.6
7.1
4.9
Total
£’m
151.6
27.8
(16.5)
162.9
11.9
2.1
(9.5)
4.5
2.2
6.7
139.7
158.4
156.2
Impairment testing
Goodwill is subject to annual impairment testing. Goodwill acquired through business combinations has been allocated for impairment testing
purposes to the following principal cash-generating units:
Cash-generating unit
Fresh Pork
Livestock
Cooked Meats
Continental Fine Foods
Premium Cooked Poultry
Fresh Chicken
Other
2018
£’m
21.8
1.7
90.2
11.0
9.2
13.7
3.7
151.3
2017
£’m
21.8
1.7
90.2
11.0
9.2
13.7
3.7
151.3
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 two years calculated for the Viability
Statement, extended for a further two years. Forecast replacement capital expenditure is included from budgets and thereafter capital is assumed
to represent 100 per cent of depreciation, except where specific expansion plans are in place.
Subsequent cash flows are forecast to grow in line with the long-term rate of inflation of 3 per cent.
A pre-tax discount rate of 7.2 per cent has been used (2017: 6.2 per cent) being management’s estimate of the weighted average cost of capital
adjusted for risks specific to the CGUs. An adjustment has also been made in arriving at the pre-tax discount rate to reflect the fact that the
weighted average cost of capital is a post-tax rate.
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.
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12. INTANGIBLE ASSETS CONTINUED
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
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.
13. PROPERTY, PLANT AND EQUIPMENT
Freehold land
and buildings
£’m
Leasehold
improve-
ments
£’m
Plant,
equipment and
vehicles
£’m
Assets in the
course of
construction
£’m
104.8
6.1
12.8
1.3
(0.2)
–
124.8
1.9
0.1
(1.2)
125.6
15.6
3.0
–
–
18.6
8.1
(0.1)
26.6
89.2
106.2
99.0
3.0
0.2
–
–
(0.1)
(2.1)
1.0
–
–
–
1.0
1.9
0.4
(0.1)
(1.2)
1.0
–
–
1.0
1.1
–
–
217.2
31.1
6.5
6.5
(2.2)
(7.5)
251.6
31.8
8.4
(4.0)
287.8
131.9
24.3
(2.0)
(5.8)
148.4
27.6
(3.2)
172.8
85.3
103.2
115.0
2.9
11.2
–
(7.8)
–
–
6.3
25.5
(8.5)
–
23.3
–
–
–
–
–
–
–
–
2.9
6.3
23.3
Total
£’m
327.9
48.6
19.3
–
(2.5)
(9.6)
383.7
59.2
–
(5.2)
437.7
149.4
27.7
(2.1)
(7.0)
168.0
35.7
(3.3)
200.4
178.5
215.7
237.3
Group
Cost
At 31 March 2016
Additions
On acquisition
Transfers between categories
Disposals
On sale of business
At 31 March 2017
Additions
Transfers between categories
Disposals
At 31 March 2018
Depreciation
At 31 March 2016
Charge for the year
Relating to disposals
On sale of business
At 31 March 2017
Charge for the year
Relating to disposals
At 31 March 2018
Net book amounts
At 31 March 2016
At 31 March 2017
At 31 March 2018
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Cranswick plc Annual Report & Accounts 2018
Included in freehold land and buildings is land with a cost of £9.2 million (2017: £9.2 million), which is not depreciated, relating to the Group, and
£0.5 million (2017: £0.5 million) relating to the Company.
Cost includes £1.1 million (2017: £1.1 million) in respect of capitalised interest. No interest was capitalised during the year (2017: £nil). The rate used
to determine the amount of borrowing costs eligible for capitalisation was 1.75 per cent, which was 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.
Company
Cost
At 31 March 2016, 31 March 2017 and 31 March 2018
Depreciation
At 31 March 2016
Charge for the year
At 31 March 2017
Charge for the year
At 31 March 2018
Net book amounts
At 31 March 2016
At 31 March 2017
At 31 March 2018
Freehold
land and
buildings
£’m
Plant,
equipment
and vehicles
£’m
Total
£’m
0.5
–
–
–
–
–
0.5
0.5
0.5
0.5
0.4
–
0.4
0.1
0.5
0.1
0.1
–
1.0
0.4
–
0.4
0.1
0.5
0.6
0.6
0.5
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14. INVESTMENTS
Company
Shares at cost:
At 31 March 2016
Capital contribution relating to share options
Reduction in carrying value on sale of business
At 31 March 2017
Capital contribution relating to share options
At 31 March 2018
Subsidiary
undertakings
£’m
163.2
2.2
(3.9)
161.5
3.0
164.5
The subsidiary undertakings as at 31 March 2018 were:
• Cranswick Country Foods plc
• Cranswick Gourmet Pastry Company Limited (90 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)
• Warwick One Limited (registered in Scotland, registered office 21 Jenny Moores Road, St. Boswells, Melrose, Roxburghshire, TD6 0AN)
• Benson Park Limited (100 per cent owned by Cranswick Country Foods plc)
• Cranswick Bio Limited (100 per cent owned by Cranswick Country Foods plc)
• Mulberry House Foods Limited (100 per cent owned by Cranswick Country Foods plc)
• Weeton Foods Limited (100 per cent owned by Cranswick Country Foods plc)
• Potterdale Foods Limited (100 per cent owned by Cranswick Country Foods plc)
• CCL Holdings Limited (100 per cent owned by Cranswick Country Foods plc)
• Crown Chicken Limited (100 per cent owned by CCL Holdings Limited)
• Cranswick Country Foods Ballymena (registered in Northern Ireland, registered office 146 Fenaghy Road, Cullybackey, County Antrim, Northern
Ireland, BT42 1EA, 100 per cent owned by The Harts Corner Natural Sausage Company Limited)
• Cranswick Country Foods (Norfolk) Pension Trustees Limited (100 per cent owned by Cranswick Country Foods (Norfolk) Limited)
• Roma (No.1) plc
• Roma (No.2) Limited*
• Roma (No.3) Limited (100 per cent owned by Roma (No.1) plc)*
• Arrow 1 Limited (100 per cent owned by Cranswick Country Foods (Norfolk) Limited)*
• Brookfield Foods Limited
• Cambury Limited (100 per cent owned by Cranswick Country Foods plc)*
• Charter Pork Cuts Limited
• Continental Fine Foods Limited
• North Wales Foods Limited
• Warwick Two Limited (100 per cent owned by Warwick One Limited)*
• Cranswick Country Foods (Norfolk) Limited (100 per cent owned by Cranswick Country Foods plc)
• Cranswick Country Foods (Sutton Fields) Limited (100 per cent owned by Cranswick Country Foods plc)*
• Cranswick Gourmet Bacon Company Limited (100 per cent owned by Cranswick Country Foods plc)
• Cranswick Gourmet Sausage Company Limited (100 per cent owned by Cranswick Country Foods plc)
• Cranswick Mill Limited
• Cranswick Trustees Limited
• Cranswick Tuck Marketing Limited
• Delico Limited
• F T Sutton and Son (Rossendale) Limited*
• Friars 587 Limited (100 per cent owned by Cranswick Country Foods plc)
• The Harts Corner Natural Sausage Company Limited (100 per cent owned by Cranswick Country Foods plc)
• Cranswick Buckle Farming Limited (50 per cent owned by Cranswick Country Foods plc)
Except where otherwise stated, each of the companies is registered in England and Wales, with registered office 74 Helsinki Road, Hull, HU7 0YW
and Cranswick plc holds directly 100 per cent of the shares and voting rights of each subsidiary undertaking.
Following the sale of The Sandwich Factory Holdings Limited by Warwick One Limited during the prior year, the Company reduced the carrying
value of its investments in Warwick One Limited to bring it in line with the net assets of the remaining investment.
* These companies were dissolved on 3 April 2018. This had no effect on the net assets of the Group.
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Cranswick plc Annual Report & Accounts 2018
15. ACQUISITIONS
Cranswick Country Foods Ballymena
On 16 November 2016, the Group acquired 100 per cent of the issued share capital of Dunbia Ballymena (renamed Cranswick Country Foods
Ballymena) for a total consideration of £18.1 million including £3.4 million settlement of intercompany creditors due to the previous owner and
a deferred consideration of £1.3 million. The principal activity of Cranswick Country Foods Ballymena is primary pig processing. The acquisition
enhances Cranswick’s pig processing capabililty and establishes a significant presence in Northern Ireland.
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 and other receivables
Bank and cash balances
Trade and other payables
Corporation tax liability
Deferred tax liability
Provisions
Goodwill arising on acquisition
Cost of acquisition
Satisfied by:
Cash
Contingent consideration
Net cash outflow arising on acquisition:
Cash consideration paid
Creditors repaid
Cash and cash equivalents acquired
Fair value
£’m
1.7
1.8
0.6
8.2
0.2
(6.4)
(0.4)
(0.2)
(0.3)
5.2
9.5
14.7
13.4
1.3
13.4
3.4
(0.2)
16.6
Intercompany loans were repaid on completion giving a total consideration for the acquisition of £18.1 million.
All of the trade receivables acquired were collected in full.
Included in the £9.5 million of goodwill recognised 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 in relation to the acquisition of £0.3 million were expensed within administrative expenses in the prior year.
In the prior year, from the date of acquisition to 31 March 2017, the external revenue of Ballymena was £17.3 million and the business contributed a
net profit after tax of £1.0 million to the Group. Had the acquisition taken place at the beginning of the prior year, revenue in the prior year would
have been £27.4 million higher and profit in the prior year would have been £1.8 million higher.
Contingent consideration
The agreement included contingent consideration payable in cash to the previous owners of Cranswick Country Foods Ballymena based on
obtaining a licence to export to China. The amount paid during the year was £1.3 million.
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15. ACQUISITIONS CONTINUED
Crown Chicken
On 8 April 2016, the Group acquired 100 per cent of the issued share capital of CCL Holdings Limited and its wholly owned subsidiary Crown
Chicken Limited (Crown) for net cash consideration of £39.4 million. The principal activities of Crown Chicken Limited are the breeding, rearing
and processing of fresh chicken, as well as the milling of grain for the production of animal feed. The acquisition provides the Group with a fully
integrated supply chain for its growing poultry business.
Fair values of the net assets at the date of acquisition were as follows:
Net assets acquired:
Customer relationships
Property, plant and equipment
Biological assets
Inventories
Trade and other receivables
Bank and cash balances
Trade and other payables
Corporation tax liability
Deferred tax liability
Finance lease obligations
Goodwill arising on acquisition
Total consideration
Satisfied by:
Cash
Net cash outflow arising on acquisition:
Cash consideration paid
Cash and cash equivalents acquired
Fair value
£’m
2.9
17.5
4.8
1.9
10.0
3.9
(7.9)
(0.6)
(2.5)
(0.4)
29.6
13.7
43.3
43.3
43.3
(3.9)
39.4
All of the trade receivables acquired have been collected in full.
Included in the £13.7 million 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 and the strategic
benefits of vertical integration including security of supply.
Transaction costs in relation to the acquisition of £0.4 million were expensed within administrative expenses in the prior year.
In the prior year, from the date of acquisition to 31 March 2017, the external revenue of Crown was £82.6 million and the business contributed a net
profit after tax of £4.5 million to the Group. There was no material difference between the revenue and profit contributed to the Group had the
acquisition taken place at the beginning of the prior year and those presented.
120
Cranswick plc Annual Report & Accounts 2018
2015 – Benson Park
Contingent consideration
On 22 October 2014, the Group acquired 100 per cent of the issued share capital of Benson Park Limited for a total consideration of £23.8 million.
The agreement included contingent consideration payable in cash to the previous owners of Benson Park Limited based on the performance of
the business over a 2.5 year period. The amount payable was to be between £nil and £4.0 million dependant on the average profit before interest
and tax of the business during the 2.5 year period versus an agreed target level.
During the year the full £4.0 million contingent consideration was paid.
2015 – Yorkshire Baker
On 2 April 2014, the Group acquired the goodwill associated with the Yorkshire Baker business in exchange for certain property, plant and
equipment and 10 per cent of the issued share capital of Cranswick Gourmet Pastry Company Limited. Goodwill of £0.4 million was recognised
on acquisition representing 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 the assembled workforce. Transaction costs were £nil. There is a put and call
option in place over the 10 per cent shareholding, exercisable at fixed points over a three year period to 31 October 2018, based on the results
of Cranswick Gourmet Pastry Company Limited for the preceding financial year. The value has been reassessed at the end of the reporting period,
with £0.2 million credited to administrative expenses in the income statement. Total contingent consideration of £0.8 million (2017: £1.0 million)
has been recognised in relation to the option.
16. 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) and chickens in the form of breeder stocks (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 2016
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 2017
Increases due to purchases
Decrease attributable to harvest
Decreases attributable to sales
Changes in fair value less estimated costs to sell
At 31 March 2018
Pigs
£’m
11.1
–
12.4
(53.6)
(1.8)
46.3
14.4
15.8
(63.6)
(0.8)
47.4
13.2
Chickens
£’m
–
4.8
0.9
(37.8)
(4.6)
41.9
5.2
1.0
(44.2)
(4.4)
47.0
4.6
Total
£’m
11.1
4.8
13.3
(91.4)
(6.4)
88.2
19.6
16.8
(107.8)
(5.2)
94.4
17.8
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16. BIOLOGICAL ASSETS CONTINUED
Group
Non-current biological assets:
Pigs
Chickens
Current biological assets:
Pigs
Chickens
Group
Net IAS 41 valuation movement on biological assets*
Changes in fair value of biological assets
Biological assets transferred to cost of sales
2018
£’m
0.5
0.3
0.8
12.7
4.3
17.0
2018
£’m
94.4
(96.6)
(2.2)
2017
£’m
0.8
0.2
1.0
13.6
5.0
18.6
2017
£’m
88.2
(84.1)
4.1
* 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,
weaners and broilers (Level 1 in the fair value hierarchy as detailed in Note 23). The valuation of sows, boars and breeder chickens is based on
recent transactions for similar assets (Level 2 in the fair value hierarchy).
The main assumption used in relation to the valuation is mortality which has been based on historical data for each category of pig and chicken.
Additional information:
Group
Quantities at year end:
Breeding sows (Bearer biological assets)
Boars
Pigs (Consumable biological assets)
Breeder chickens (Bearer biological assets)
Broiler chickens (Consumable biological assets)
Number of pigs produced in the year
Number of chickens produced in the year
17. INVENTORIES
Group
Raw materials
Finished goods and goods for resale
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Cranswick plc Annual Report & Accounts 2018
2018
Number
2017
Number
12,826
235
190,921
268,334
12,140
236
185,175
253,613
2,957,415
3,353,845
448,740
432,491
29,204,400
28,555,684
2018
£’m
39.9
19.3
59.2
2017
£’m
47.3
14.9
62.2
18. TRADE AND OTHER RECEIVABLES
Financial assets:
Trade receivables
Amounts owed by Group undertakings
Other receivables
Non-financial assets:
Prepayments and accrued income
Group
2018
£’m
146.8
–
5.5
152.3
7.8
160.1
2017
£’m
138.7
–
4.9
143.6
7.0
150.6
Company
2018
£’m
–
37.4
0.5
37.9
0.4
38.3
2017
£’m
0.1
38.7
0.1
38.9
0.5
39.4
The above 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
2018
2017
Trade receivables Of which: Not due
Past due date in the following periods:
£’m
146.8
138.7
£’m
129.4
125.2
Less than
30 days
£’m
Between
30 and 60 days
£’m
More than
60 days
£’m
14.3
10.6
1.6
1.4
1.5
1.5
Trade receivables are non-interest-bearing and are generally on 30 to 60 day terms and are shown net of any provision for impairment. As at
31 March 2018, trade receivables at nominal value of £2.2 million (2017: £1.0 million) 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 2016
Provided in year
Utilised
At 31 March 2017
Provided in year
Utilised
At 31 March 2018
There are no bad debt provisions against other receivables.
19. FINANCIAL ASSETS
Group
Current
Forward currency contracts
£’m
0.7
0.5
(0.2)
1.0
1.7
(0.5)
2.2
2017
£’m
0.3
2018
£’m
0.1
Cranswick plc Annual Report & Accounts 2018
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Financial StatementsShareholder InformationCorporate GovernanceStrategic Report NOTES TO THE ACCOUNTS CONTINUED
20. TRADE AND OTHER PAYABLES
Current
Trade payables
Amounts owed to Group undertakings
Tax and social security
Other creditors
Commercial accruals*
Other accruals
Deferred income – Government grants
Non-current
Deferred income – Government grants
Group
Company
2018
£’m
98.1
–
5.4
9.9
8.9
25.3
0.2
147.8
2017
£’m
91.3
–
2.7
9.1
10.2
31.0
0.2
144.5
2018
£’m
0.2
49.8
2.6
6.8
–
1.6
–
61.0
2017
£’m
0.3
43.5
0.7
4.8
–
2.0
–
51.3
0.9
1.1
–
–
Government grants received relate to Regional Growth Fund, Rural Development Programme for England and Business Investment Scheme
payments. The amounts received have been used to fund fixed asset investment with the objective of creating and safeguarding jobs at the
Group’s facilities.
For the Company, amounts owed to Group undertakings reflect the net of the financial liabilities disclosed in Note 23 of £261.1 million
(2017: £236.1 million) and non-interest bearing amounts owed by the same entities to the Company.
* For the Group, commercial accruals consist of:
Volume rebates
and similar
allowances
£’m
Advertising and
marketing
contributions
£’m
5.9
0.1
(9.3)
10.6
(0.2)
7.1
(10.9)
10.6
6.8
2.3
–
(4.2)
5.3
(0.3)
3.1
(4.8)
3.8
2.1
Total
£’m
8.2
0.1
(13.5)
15.9
(0.5)
10.2
(15.7)
14.4
8.9
At 31 March 2016
On acquisition
Paid
Charged to income statement
On sale of business
At 31 March 2017
Paid
Charged to income statement
At 31 March 2018
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Cranswick plc Annual Report & Accounts 2018
21. FINANCIAL LIABILITIES
Current
Forward currency contracts
Contingent consideration (Note 15)
Finance lease and hire purchase contracts
Non-current
Amounts outstanding under revolving credit facility
Contingent consideration (Note 15)
Movement on hedged items:
Gains arising in the year
Reclassification adjustment for gains included in the income statement
Group
2018
£’m
0.1
0.8
–
0.9
–
–
–
2017
£’m
–
5.3
0.1
5.4
15.0
1.0
16.0
Company
2018
£’m
–
–
–
–
–
–
–
Group
2018
£’m
0.1
(0.3)
(0.2)
2017
£’m
–
–
–
–
15.0
–
15.0
2017
£’m
0.3
(0.1)
0.2
All financial liabilities are carried at amortised cost, except for forward currency contracts and contingent consideration, which are carried at
fair value.
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 23.
Movements on hedged foreign currency contracts are subsequently reclassified through cost of sales.
Banking facility
During the year, the Group extended the period of its banking facility by one year. The facility, which now runs to November 2022 with the
potential to extend for a further year, comprises a revolving credit facility of £160 million, including a committed overdraft facility of £20 million.
£nil (2017: £nil) of the overdraft facility was utilised at 31 March 2018. Interest is payable at a margin over base rate. £1.0 million (2017: £16.0 million)
of the revolving credit facility was utilised as at 31 March 2018. Interest is payable at a margin over LIBOR.
The arrangement fees of £1.3 million (2017: £1.1 million) are being amortised over the period of the facility.
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
2018
£’m
–
–
1.0
1.0
(1.0)
–
2017
£’m
–
–
16.0
16.0
(1.0)
15.0
2018
£’m
–
–
1.0
1.0
(1.0)
–
2017
£’m
–
–
16.0
16.0
(1.0)
15.0
The bank facility for both years was unsecured and subject to interest cover and debt leverage covenants.
Unamortised issue costs relate to the revolving credit facility which expires in November 2022. £1.0 million (2017: £16.0 million) was drawn down
under the facility at the year end.
Cranswick plc Annual Report & Accounts 2018
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22. PROVISIONS
At 31 March 2017
Created in the year
Utilised in the year
Released in the year
Movement on discount
At 31 March 2018
Analysed as:
Current liabilities
Non-current liabilities
Group
Company
Lease
provisions
£’m
2.9
–
(0.2)
(0.3)
0.1
2.5
Group
Company
2018
£’m
0.2
2.3
2.5
2017
£’m
0.1
2.8
2.9
2018
£’m
0.1
0.6
0.7
Lease
provisions
£’m
0.7
–
–
–
–
0.7
2017
£’m
0.1
0.6
0.7
Lease provisions are held against dilapidation obligations on leased properties and onerous leases. These provisions are expected to be utilised over
the next ten years.
23. FINANCIAL INSTRUMENTS
An explanation of the Company and Group’s financial instruments risk management strategy is set out on page 86 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 2018 and their weighted
average interest rates is set out below:
As at 31 March 2018
Group
Financial liabilities:
Revolving credit facility
Financial assets:
Cash at bank
As at 31 March 2017
Group
Financial liabilities:
Revolving credit facility
Financial assets:
Cash at bank
Weighted average
effective interest
rate
%
Total
£’m
At floating
interest rates
£’m
1 year or less
£’m
1-2 years
£’m
2-3 years
£’m
Fixed interest
1.00%
(1.0)
(1.0)
0.00%
20.6
19.6
20.6
19.6
–
–
–
–
–
–
–
–
–
Weighted average
effective interest
rate
%
Total
£’m
At floating
interest rates
£’m
1 year or less
£’m
1-2 years
£’m
2-3 years
£’m
Fixed interest
1.00%
(16.0)
(16.0)
0.00%
4.1
(11.9)
4.1
(11.9)
–
–
–
–
–
–
–
–
–
The maturity profile of bank loans is set out in Note 21.
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Cranswick plc Annual Report & Accounts 2018
The interest rate profile of the interest-earning financial assets and interest-bearing liabilities of the Company as at 31 March 2018 and their
weighted average interest rates is set out below:
As at 31 March 2018
Company
Financial liabilities:
Weighted average
effective interest
rate %
Total
£’m
At floating
interest rates
£’m
Fixed interest
1 year or less
£’m
1-2 years
£’m
2-3 years
£’m
Amounts owed to Group undertakings
Revolving credit facility
1.55%
1.00%
(261.1)
(1.0)
(262.1)
(261.1)
(1.0)
(262.1)
0.00%
5.1
5.1
(257.0)
(257.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Financial assets:
Cash at bank
As at 31 March 2017
Company
Financial liabilities:
Amounts owed to Group undertakings
Revolving credit facility
Financial assets:
Cash at bank
Weighted average
effective interest
rate
%
Total
£’m
At floating
interest rates
£’m
1 year or less
£’m
1-2 years
£’m
2-3 years
£’m
Fixed interest
1.50%
1.00%
0.00%
(236.1)
(16.0)
(252.1)
2.0
(250.1)
(236.1)
(16.0)
(252.1)
2.0
(250.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Currency profile
The Group’s financial assets at 31 March 2018 include Sterling denominated cash balances of £20.4 million (2017: (£0.1 million)), Euro £0.5 million
(2017: £4.5 million), US Dollar (£0.3 million) (2017: (£0.1 million)) and AUD £nil (2017: (£0.2 million)), all of which are held in the UK.
The proportion of the Group’s net assets denominated in foreign currencies is immaterial.
The Group’s other financial assets and liabilities are denominated in Sterling.
Credit risk
The Group makes a significant proportion of its sales to the major UK supermarket groups, which correspondingly represent a significant
proportion of the Group’s trade receivables at any one time. Based on the financial strength of these customers, the Directors do not consider
that the Group faces a significant credit risk in this regard. Debts with other customers, which represent a smaller proportion of the Group’s trade
receivables, are considered to provide greater risk, particularly in the current economic climate. These debts are reviewed on a regular basis by
credit controllers and senior management and prudent provision is made when there is objective evidence that the Group will not be able to
recover balances in full.
All cash financial assets are held by UK financial institutions. The maximum credit exposure relating to financial assets is represented by their
carrying values as at the balance sheet date.
Cranswick plc Annual Report & Accounts 2018
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23. FINANCIAL INSTRUMENTS CONTINUED
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 valuation models and are based on mid-market levels as at close of business on the Group’s year end reporting date.
Contingent consideration is measured using Level 3 of the fair value hierarchy and relates to future amounts payable on acquisitions. Amounts
payable are based on agreements within purchase contracts, management’s expectations of the future profitability of the acquired entity and
the timings of payments.
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
Forward currency contracts (Note 19 and Note 21)
2018
2017
Book value
£’m
Fair value
£’m
Book value
£’m
–
–
0.3
Fair value
£’m
0.3
Contingent consideration (Note 15 and Note 21)
(0.8)
(0.8)
(6.3)
(6.3)
The book value of trade and other receivables, trade and other payables, cash balances, loans receivable, overdrafts, amounts outstanding under
revolving credit facility and finance leases and hire purchase contracts equates to fair value for the Group and Company.
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
Amount
Maturities
Exchange
rates
24.4m
3 April 2018–2 January 2019
€1.10–€1.16
Fair value
£’m
(0.1)
ii) Forward contracts to hedge expected future sales
The Group hedges a proportion of its near-term expected sales 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
US Dollars
Euros
Amount
2.5m
3.5m
Maturities
Exchange rates
5 April 2018–26 April 2018
£0.71–£0.72
5 April 2018–6 August 2018
£0.88–£0.90
Fair value
£’m
0.1
–
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.
128
Cranswick plc Annual Report & Accounts 2018
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.
2018
Sterling
2017
Sterling
Increase/
decrease in basis
points
Effect on
profit before
tax
£’m
+100
–100
+100
–100
(0.2)
0.2
(0.2)
0.2
Liquidity risk
The tables below summarise the maturity profile of the Group’s financial liabilities at 31 March 2018 and 2017 based on contractual undiscounted
payments:
At 31 March 2018
Group
Revolving credit facility
Contingent consideration (Note 21)
Trade and other payables
Derivative financial instruments
At 31 March 2017
Group
Revolving credit facility
Contingent consideration (Note 21)
Trade and other payables
At 31 March 2018
Company
Revolving credit facility
Trade and other payables
At 31 March 2017
Company
Revolving credit facility
Trade and other payables
Less than 1 year
£’m
1 to 2 years
£’m
2 to 5 years
£’m
–
0.8
147.6
0.1
148.5
–
–
–
–
–
1.0
–
–
–
1.0
Less than 1 year
£’m
1 to 2 years
£’m
2 to 5 years
£’m
0.2
5.3
144.3
149.8
0.2
1.0
–
1.2
16.6
–
–
16.6
Less than 1 year
£’m
1 to 2 years
£’m
2 to 5 years
£’m
–
61.0
61.0
–
–
–
1.0
–
1.0
Less than 1 year
£’m
1 to 2 years
£’m
2 to 5 years
£’m
0.2
51.3
51.5
0.2
–
0.2
16.6
–
16.6
Total
£’m
1.0
0.8
147.6
0.1
149.5
Total
£’m
17.0
6.3
144.3
167.6
Total
£’m
1.0
61.0
62.0
Total
£’m
17.0
51.3
68.3
The impact of liquidity risk on the Group is discussed in detail in the Directors’ Report on page 86.
Cranswick plc Annual Report & Accounts 2018
129
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24. 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
At 31 March
2018
Number
2017
Number
50,465,544
49,844,854
432,405
180,252
390,082
230,608
51,078,201
50,465,544
2018
£’m
5.0
0.1
–
5.1
2017
£’m
5.0
–
–
5.0
On 1 September 2017, 134,742 ordinary shares were issued at 2,787.4 pence as a result of Shareholders exercising the scrip dividend option in lieu of
the cash payment for the 2017 final dividend.
On 26 January 2018, 45,510 ordinary shares were issued at 3,100.2 pence as a result of Shareholders exercising the scrip dividend option in lieu of
the cash payment for the 2018 interim dividend.
During the course of the year, 432,405 ordinary shares were issued to employees exercising SAYE and LTIP options at prices between nil and 1,788.0 pence.
Ordinary share capital of £84,480 is reserved for allotment under the Savings Related Share Options Schemes and Long Term Incentive Plans
(LTIP). The options are exercisable as follows:
Savings related
Savings related
Savings related
Savings related
Savings related
Savings related
Savings related
Savings related
LTIP
Number
Exercise price
Exercise period
638
3,114
2,765
12,621
95,564
141,827
163,018
226,268
685,144
692p
579p
629p
916p
1,187p
1,456p
1,788p
2,565p
Nil
March 2014–October 2018
March 2015–October 2019
March 2016–October 2018
March 2017–October 2019
March 2018–October 2020
March 2019–October 2021
March 2020–October 2022
March 2021–October 2023
August 2018–June 2027
On 2 September 2016, 162,823 ordinary shares were issued at 2,151.6 pence as a result of Shareholders exercising the scrip dividend option in lieu
of the cash payment for the 2016 final dividend.
On 27 January 2017, 67,785 ordinary shares were issued at 2,226.4 pence as a result of Shareholders exercising the scrip dividend option in lieu of
the cash payment for the 2017 interim dividend.
During the course of the year, 390,082 ordinary shares were issued to employees exercising SAYE and LTIP options at prices between nil and
1,456.0 pence.
130
Cranswick plc Annual Report & Accounts 2018
25. SHARE-BASED PAYMENTS
The Group operates two share option schemes, a Revenue approved 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 £4.3 million
(2017: £3.6 million).
Long Term Incentive Plan (LTIP)
During the course of the year 176,260 options at nil cost were granted to Directors and senior executives, the share price at that time was
2,960.0 pence. Details of the performance criteria relating to the LTIP scheme can be found in the Remuneration Committee report on page 73.
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
2018
Number
790,656
176,260
–
(281,772)
685,144
8,000
2018
Number
421,113
94,175
–
(146,463)
368,825
–
2018
WAEP (£)
–
–
–
–
–
–
2018
WAEP (£)
–
–
–
–
–
–
2017
Number
867,363
215,696
(5,082)
(287,321)
790,656
4,000
2017
Number
487,939
115,600
–
(182,426)
421,113
–
2017
WAEP (£)
–
–
–
–
–
–
2017
WAEP (£)
–
–
–
–
–
–
i) The weighted average fair value of options granted during the year was £27.96 (2017: £22.04). The share options granted during the year were at £nil per share. The share price
at the date of grant was £29.60 (2017: £23.33).
ii) The weighted average share price at the date of exercise for the options exercised was £27.84 (2017: £21.57).
iii) For the share options outstanding as at 31 March 2018, the weighted average remaining contractual life is 8.05 years (2017: 8.13 years).
The exercise price for all options outstanding at the end of the year was £nil.
All Employee Share Option Scheme (SAYE)
All employees are entitled to a grant of options once they have been in service for one year 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)
2018
Number
606,012
229,595
(39,159)
(150,633)
645,815
2018
WAEP (£)
13.97
25.65
16.73
10.90
18.67
2017
Number
577,515
185,043
(53,785)
(102,761)
606,012
Exercisable at 31 March
26,989
11.30
14,346
2017
WAEP (£)
11.50
17.88
12.93
7.60
13.97
7.45
Cranswick plc Annual Report & Accounts 2018
131
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25. SHARE-BASED PAYMENTS CONTINUED
Company
Outstanding as at 1 April
Granted during the year (i)
Lapsed during the year
Exercised during the year (ii)
Outstanding as at 31 March (iii)
2018
Number
26,735
4,717
(263)
(9,111)
22,078
2018
WAEP (£)
12.09
25.65
6.15
10.00
16.18
2017
Number
29,556
3,017
–
(5,838)
26,735
Exercisable at 31 March
2,196
11.87
3,119
2017
WAEP (£)
10.52
17.88
–
7.13
12.09
6.36
i) The share options granted during the year were at £25.65 (2017: £17.88), representing a 20 per cent discount on the price at the relevant date. The share price at the date of
grant was £33.37 (2017: £23.43).
ii) The weighted average share price at the date of exercise for the options exercised was £28.08 (2017: £23.81).
iii) For the share options outstanding as at 31 March 2018, the weighted average remaining contractual life is 2.72 years (2017: 2.75 years).
The weighted average fair value of options granted during the year was £9.94 (2017: £6.87). The range of exercise prices for options outstanding
at the end of the year was £5.79-£25.65 (2017: £5.79-£17.88).
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 2018 and 31 March 2017:
Group and Company
Dividend yield
Expected share price volatility
Risk-free interest rate
Expected life of option
Exercise prices
2018
LTIP
1.68%
31.0%
2018
SAYE
1.68%
31.0%
2017
LTIP
1.89%
31.0%
2017
SAYE
1.88%
31.0%
0.49% 0.49%-0.73%
0.59% 0.11%-0.48%
3 years
3, 5 years
3 years
3, 5 years
£nil
£25.65
£nil
£17.88
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected
volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome.
The initial fair value of LTIP options is adjusted to take into account market-based performance conditions.
26. PENSION SCHEMES
Defined benefit pension scheme
The Group acquired a defined benefit final salary pension scheme during 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 31 December 2015. This valuation was updated
to the year end. Plan assets are stated at fair value at the respective balance sheet dates and overall expected rates of return are established by
applying published brokers’ forecasts to each category of scheme assets.
a) Change in benefit obligation
Benefit obligation at the beginning of the year
Interest cost
Remeasurement (gains)/losses:
Actuarial (gains)/losses arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Movement on additional liability recognised due to minimum funding requirement
Benefits paid from plan
Benefit obligation at the end of the year
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Cranswick plc Annual Report & Accounts 2018
2018
£’m
36.1
0.8
(0.9)
–
1.9
(0.4)
37.5
2017
£’m
26.7
0.9
7.5
(0.5)
2.0
(0.5)
36.1
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
Fair value of plan assets at the end of the year
c) Amounts recognised in the balance sheet
Present value of funded obligations
Fair value of plan assets
Net liability recorded in the balance sheet
d) Components of pension cost
Amounts recognised in the income statement:
Interest cost
Expected return on plan assets
Total pension cost recognised in the income statement
Actual return on assets
Actual return on plan assets
Amounts recognised in the Group statement of comprehensive income
Actuarial losses immediately recognised
Cumulative amount of actuarial losses recognised
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
2018
£’m
26.6
0.7
0.7
1.8
(0.4)
29.4
2018
£’m
(37.5)
29.4
(8.1)
2018
£’m
0.8
(0.7)
0.1
2017
£’m
22.3
0.8
2.7
1.3
(0.5)
26.6
2017
£’m
(36.1)
26.6
(9.5)
2017
£’m
0.9
(0.8)
0.1
1.4
3.5
(0.2)
(12.9)
(6.3)
(12.7)
2018
2.50%
3.10%
5.00%
3.10%
3.00%
3.10%
2017
2.55%
3.40%
5.00%
3.40%
3.00%
3.40%
Future expected lifetime of pensioner at age 65:
2018
2017
Current pensioners
Male
Female
Future pensioners
Male
Female
22.6
24.7
24.8
27.0
22.5
24.6
24.7
26.9
Cranswick plc Annual Report & Accounts 2018
133
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report NOTES TO THE ACCOUNTS CONTINUED
26. PENSION SCHEMES CONTINUED
The mortality rates used have been taken from Base tables S2PA (CMI 2015 improvements 1.5 per cent long-term rate of improvement) (2017: S1PA
(CMI 2015 improvements 1.5 per cent long-term rate of improvement)).
At 31 March 2018, the average duration of the scheme liabilities was 24 years (2017: 24 years). For deferred pensions the average duration was
27 years (2017: 28 years) and for pensions in payment the average duration was 13 years (2017: 13 years).
The Group’s deficit as measured under IFRIC 14 is £8.1 million (2017: £9.5 million) as a result of the Group’s commitment to future contributions
to the scheme. This compares to an underlying IAS 19 deficit of £2.9 million (2017: £6.2 million).
A 0.1 per cent increase/decrease in the discount rate would give rise to a £19,000 decrease/£18,000 increase (2017: £26,000 decrease/£27,000
increase) in the deficit at 31 March 2018.
A 0.1 per cent increase/decrease in the inflation assumption would give rise to a £nil increase/£nil decrease (2017: £nil increase/£nil decrease) in the
deficit at 31 March 2018.
A one year increase/decrease in the life expectancy assumption would give rise to a £nil increase/£nil decrease (2017: £nil increase/£nil decrease)
in the deficit at 31 March 2018.
The scheme rules require the pension benefits to be uplifted by Retail Price Index (RPI), so there was no financial effect from the statutory
requirement to uplift pension benefits by Consumer Price Index (CPI) rather than RPI.
f) Plan assets
Return seeking:
Diversified growth funds
Debt instruments:
Corporate bonds
Gilts
Index linked bonds
Other:
Cash
Derivatives
LDI strategies
Total
2018
Fair value of
plan assets
£’m
2017
Fair value of
plan assets
£’m
8.7
8.7
5.1
–
–
5.1
1.0
2.7
11.9
29.4
14.2
14.2
3.6
2.9
5.8
12.3
0.1
–
–
26.6
All of the plan assets have a quoted price in an active market except for cash.
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 £1.8 million to the scheme during the year ending 31 March 2019 in respect of regular contributions,
and intends to contribute the same amount annually through to September 2022.
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 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 £0.3 million (2017: £0.2 million). Contributions during the year
totalled £2.9 million (2017: £3.0 million).
134
Cranswick plc Annual Report & Accounts 2018
27. ADDITIONAL CASH FLOW INFORMATION
Analysis of changes in net (debt)/funds:
Group
Cash and cash equivalents
Revolving credit
Finance lease and hire purchase contracts
Net (debt)/funds
At
31 March
2017
£’m
4.1
(15.0)
(0.1)
(11.0)
Cash
flow
£’m
16.5
15.2
0.1
31.8
Other
non-cash
changes
£’m
–
(0.2)
–
(0.2)
At
31 March
2018
£’m
20.6
–
–
20.6
Net (debt)/funds is defined as cash and cash equivalents and loans receivable less interest-bearing liabilities net of unamortised issue costs.
Group
Cash and cash equivalents
Revolving credit
Finance lease and hire purchase contracts
Net (debt)/funds
Analysis of changes in net (debt)/funds:
Company
Cash and cash equivalents
Revolving credit
Net (debt)/funds
Company
Cash and cash equivalents
Revolving credit
Net (debt)/funds
At
31 March
2016
£’m
17.8
–
–
17.8
At
31 March
2017
£’m
2.0
(15.0)
(13.0)
At
31 March
2016
£’m
2.2
–
2.2
Cash
flow
£’m
(13.7)
(14.9)
0.2
(28.4)
Cash
flow
£’m
3.1
15.2
18.3
Cash
flow
£’m
(0.2)
(14.9)
(15.1)
Other
non-cash
changes
£’m
–
(0.1)
(0.3)
(0.4)
Other
non-cash
changes
£’m
–
(0.2)
(0.2)
Other
non-cash
changes
£’m
–
(0.1)
(0.1)
At
31 March
2017
£’m
4.1
(15.0)
(0.1)
(11.0)
At
31 March
2018
£’m
5.1
–
5.1
At
31 March
2017
£’m
2.0
(15.0)
(13.0)
28. CONTINGENT LIABILITIES
The Company, together with its subsidiary undertakings, has entered into a cross guarantee with Lloyds Banking Group plc, The Royal Bank of
Scotland plc, HSBC UK plc and Santander UK plc in respect of the Group’s facility with those banks. Drawn down amounts totalled £1.0 million
as at 31 March 2018 (2017: £16.0 million).
For the Company, the amounts drawn down by other Group companies which were guaranteed by the Company at the year end totalled £nil (2017: £nil).
29. COMMITMENTS
(a) The Directors have contracted for future capital expenditure for property, plant and equipment totalling £12.1 million (2017: £15.9 million).
(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.
2018
£’m
6.1
13.7
7.0
26.8
2017
£’m
5.9
11.6
4.6
22.1
Cranswick plc Annual Report & Accounts 2018
135
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report NOTES TO THE ACCOUNTS CONTINUED
30. 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
2018
2017
Services
rendered to
related party
£’m
Interest paid to
related party
£’m
Dividends
received from
related party
£’m
25.7
24.7
3.9
3.9
18.2
24.9
Amounts owed by or to subsidiary undertakings are disclosed in Notes 18 and 20. Any such amounts are unsecured and repayable on demand.
Remuneration of key management personnel:
Group
Short-term employee benefits
Post-employment benefits
Share-based payments
2018
£’m
6.2
–
1.8
8.0
2017
£’m
6.0
–
1.6
7.6
31. ALTERNATIVE PERFORMANCE MEASURES
The Board monitors performance principally through adjusted and like-for-like performance measures. Adjusted profit and earnings per share
measures exclude certain non-cash items including the net IAS 41 valuation movement on biological assets, amortisation of acquired intangible
assets, profit on sale of a business and goodwill impairment charges. Free cash flow is defined as net cash from operating activities less net
interest paid and like-for-like revenue excludes the contribution from Crown Chicken and Ballymena prior to the anniversary of their acquisition
and also the impact of the 53rd week in the current year.
The Board believes that such alternative measures are useful as they exclude volatile (net IAS 41 valuation movement on biological assets), one-off
(impairment of goodwill and profit on sale of a business) and non-cash (amortisation of intangible assets) items which are normally disregarded
by investors, analysts and brokers in gaining a clearer understanding of the underlying performance of the Group when making investment
and other decisions. Equally, like-for-like revenue provides these same stakeholders with a clearer understanding of the organic sales growth
of the business.
Like-for-like revenue
Revenue
Crown Chicken
Ballymena
Impact of 53rd week
Like-for-like revenue
2018
£’m
1,464.5
(3.5)
(33.2)
(24.5)
2017
£’m
1,245.1
–
–
–
Change
+17.6%
1,403.3
1,245.1
+12.7%
136
Cranswick plc Annual Report & Accounts 2018
Adjusted Group operating profit
Group operating profit
Net IAS 41 valuation movement
Amortisation of customer relationship intangible assets
Adjusted Group operating profit
Adjusted profit before tax
Profit before tax
Net IAS 41 valuation movement
Amortisation of customer relationship intangible assets
Adjusted profit before tax
Adjusted earnings per share
On profit for the year from continuing operations
Amortisation of customer relationship intangible assets
Tax on amortisation of customer relationship intangible assets
Net IAS 41 valuation movement
Tax on net IAS 41 valuation movement
On adjusted profit for the year from continuing operations
On profit for the year
Amortisation of customer relationship intangible assets
Tax on amortisation of customer relationship intangible assets
Net IAS 41 valuation movement
Tax on net IAS 41 valuation movement
Profit on sale of business
On adjusted profit for the year
Free cash flow
Net cash from operating activities
Net interest paid
Free cash flow
2018
£’m
88.4
2.2
2.2
92.8
2018
£’m
88.0
2.2
2.2
92.4
2017
£’m
78.1
(4.1)
2.1
76.1
2017
£’m
77.5
(4.1)
2.1
75.5
Change
+13.2%
+21.9%
Change
+13.5%
+22.4%
2018
£’m
70.0
2.2
(0.4)
2.2
(0.4)
73.6
70.0
2.2
(0.4)
2.2
(0.4)
–
2018
Basic
pence
137.8
4.3
(0.7)
4.3
(0.7)
2018
Diluted
pence
137.1
4.3
(0.7)
4.3
(0.7)
145.0
144.3
137.8
4.3
(0.7)
4.3
(0.7)
–
137.1
4.3
(0.7)
4.3
(0.7)
–
73.6
145.0
144.3
2017
£’m
62.4
2.1
(0.4)
(4.1)
0.7
60.7
67.2
2.1
(0.4)
(4.1)
0.7
(4.5)
61.0
2017
Basic
pence
124.2
4.2
(0.7)
(8.2)
1.4
2017
Diluted
pence
123.7
4.2
(0.7)
(8.2)
1.4
120.9
120.4
133.8
133.3
4.2
(0.7)
(8.2)
1.4
(9.0)
4.2
(0.7)
(8.2)
1.4
(9.0)
121.5
121.0
2018
£’m
112.1
(0.4)
111.7
2017
£’m
72.9
(0.5)
72.4
Change
+53.8%
+54.3%
Cranswick plc Annual Report & Accounts 2018
137
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report FIVE YEAR STATEMENT
Turnover^
Profit before tax^
Adjusted profit before tax*^
Earnings per share^
Adjusted earnings per share*^
Dividends per share
Capital expenditure
Net funds/(debt)
Net assets
2018
£’m
2017
£’m
2016
£’m
2015
£’m
1,464.5
1,245.1
1,016.3
1,003.3
88.0
92.4
137.8p
145.0p
53.7p
59.2
20.6
479.9
77.5
75.5
124.2p
120.9p
44.1p
48.6
(11.0)
421.4
62.1
64.4
98.9p
102.8p
37.5p
34.1
17.8
368.0
52.8
57.8
84.1p
92.1p
34.0p
23.3
(17.3)
332.4
2014
£’m
994.9
54.8
52.2
88.7p
84.1p
32.0p
22.9
(17.0)
302.7
* Adjusted profit before tax and earnings per share exclude the effects of net IAS 41 valuation movement and acquisition related amortisation in 2018 and 2017; the effects of
net IAS 41 valuation movement, acquisition related amortisation and impairment of goodwill in 2016; net IAS 41 valuation movement and acquisition related amortisation in
2015 and release of contingent consideration and net IAS 41 valuation movement on biological assets in 2014. These are the measures used by the Board to assess the Group’s
underlying performance.
^ 2017 and 2016 reflect continuing operations only.
Dividends per share relate to dividends declared in respect of that year.
Net funds/(debt) is defined as per Note 27 to the accounts.
FINANCIAL CALENDAR
Preliminary announcement of full year results
Publication of Annual Report
Annual General Meeting
Payment of final dividend
Announcement of interim results
Payment of interim dividend
May
June
July
September
November
January
138
Cranswick plc Annual Report & Accounts 2018
SHAREHOLDER ANALYSIS
AT 8 MAY 2018
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 2017
Share price at 31 March 2018
High in the year
Low in the year
Number of
holdings
Number of
shares
1,243
746
1,989
1,155
446
106
142
56
84
4,493,918
46,593,281
51,087,199
399,853
1,003,425
764,191
3,437,527
4,031,329
41,450,874
1,989
51,087,199
2,559p
2,844p
3,337p
2,531p
Share price movement
Cranswick’s share price movement over the six year period to May 2018 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 4 May 2012 (809p),
is shown below:
3,000
2,500
2,000
1,500
1,000
500
2012
2013
2014
2015
2016
2017
2018
Cranswick
FTSE All Share
FTSE 350 Food Producers
Cranswick plc Annual Report & Accounts 2018
139
Financial StatementsShareholder InformationCorporate GovernanceStrategic Report ADVISERS
Secretary
Steven Glover LLB
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
Link Asset Services
The Registry
34 Beckenham Road
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@linkgroup.co.uk
www.linkassetservices.com
PricewaterhouseCoopers LLP – Leeds
KPMG – Leeds
Rollits LLP – Hull
Lloyds Banking Group plc
The Royal Bank of Scotland plc
HSBC Bank plc
Santander UK plc
Merchant bankers
N M Rothschild & Sons – Leeds
140
Cranswick plc Annual Report & Accounts 2018
C
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1
8
Cranswick plc
74 Helsinki Road, Sutton Fields, Hull, HU7 0YW
Tel: 01482 372000
www.cranswick.plc.uk