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Feeding the Nation
Cranswick plc Annual Report & Accounts
52 Weeks Ended 28 March 2020
What we do
Our purpose is to feed the nation with
authentically made, sustainably produced
food that is created with passion.
Our vertically integrated supply chain model provides our customers with assurance
over the integrity and traceability of our high quality, UK farm-assured pigs and chickens.
We farm
We produce
We have significant control over our supply chain through
ownership of our pig breeding and rearing activities. Our chicken
operation is fully integrated including feed mills, hatchery and
broiler farms,
£36.1 million was invested during the year as we continue to
strengthen our agricultural operations and reinforce our vertically
integrated structure.
Our supply chain model
Cranswick owned
British Farms
We produce a range of high quality,
predominantly fresh food including
fresh pork, poultry, convenience
and gourmet products. We focus
on premium products, technical
integrity and the highest standards
of animal welfare. Through our
four primary processing and twelve
added value processing facilities
we develop innovative, great tasting
food products to the highest
standards of food safety whilst
prioritising traceability.
Contracts with
Other UK Farms
Cranswick Primary
Processing
European Meat
Imports
Other High Quality
Ingredients from Sustainable
& Trusted Suppliers
We supply
We supply into most of the UK grocery retailers and have
a strong presence in the ‘food-to-go’ sector and other
food service outlets, as well as a growing export business.
Fresh Pork
34%
Revenue by Customer Type
% of Group revenue
Export
11%
Convenience†
Manufacturing
36%
12%
Food Service
5%
UK Retail
72%
Revenue by Product Category
% of Group revenue
Poultry
13%
Gourmet Products*
17%
† Cooked Meats, Continental Products and Ingredients.
Pastry, Sausages and Burgers, Bacon and Gammon.
*
Fresh Pork
Retail
Wholesale
Convenience
Cooked Meats
Continental and Mediterranean Products
Gourmet Products
Sausages
Bacon
Pastry
Poultry
Fresh Chicken
Premium Cooked Poultry
Retail
Convenience & Online
Food Service
Food-To-Go
Export
Manufacturing
About us
Cranswick is a leading UK food producer with revenue
approaching £1.7 billion. We produce and supply premium
food to UK grocery retailers, the food service sector and other
UK and global food producers.
Chairman’s statement
p2
Our strategy
in action
p6-13
A performance
update
CEO Review
p4
Our strategy
How we create value
Second nature
p20
Business Model
p14
Our Sustainability Strategy
p26
Strategic Report
Corporate Governance
Financial Statements
1
Highlights
2
Chairman’s Statement
4
Chief Executive’s Review
6
Strategy In Action
14
Business Model
16
Our Markets
20 Our Strategy
24
Key Performance Indicators
26 Our Sustainability Strategy
30 Our Stakeholders
44 Operating and Financial Review
48
55
Risk Report
Non-Financial Information Statement
Chairman’s Governance Overview
Board of Directors
Governance
56
58
60
63 Meeting Attendance and Key Activities
66
72
75
78
80
87
93
Audit Committee Report
Nomination Committee Report
Remuneration Committee Report
Remuneration at a Glance
Remuneration Policy
Annual Report on Directors’ Remuneration
Directors’ Report
Statement of Directors’ Responsibilities
Independent Auditors’ Report
97
98
104 Group Income Statement
105 Statement of Comprehensive Income
106 Balance Sheets
108 Statements of Cash Flow
110 Statements of Changes in Equity
112 Notes to the Accounts
Shareholder Information
146 Five Year Statement
146 Financial Calendar
147 Shareholder Analysis
148 Advisers
Highlights
Strong financial
and strategic progress
Like-for-like revenue
£’m*
+13.0%
Adjusted profit before tax
£’m†
+11.2%
Adjusted earnings per share
p†
+8.4%
£1,623.8m
£102.3m
156.4p
2020
2019
2018
1,623.8
2020
1,437.1
1,440.0
2019
2018
102.3
2020
92.0
92.4
2019
2018
156.4
144.3
145.0
Revenue
Profit before tax
£1,667.2m
(FY19: £1,437.1m)
£104.0m
(FY19: £86.5m)
Earnings per share
159.1p
(FY19: 135.5p)
Dividend per share
p
60.4p
2020
2019
2018
Free cash flow
£’m†
£115.8m
Net (debt)/funds ◊
£’m
-£146.9m
60.4
2020
55.9
53.7
2019
2018
115.8
(146.9) (65.9)
(81.0)
2020
87.3
111.7
2019
6.3
2018
20.6
Record capital expenditure
Spend on acquisitions
£101m
£69m
IFRS 16 Leases
Underlying
Far East export revenue
+122%
References to like-for-like throughout the Report & Accounts exclude the impact of acquisitions during the year.
*
† Adjusted references throughout the Report & Accounts refer to non-IFRS measures or Alternative Performance Measures (APMs). Definitions and reconciliations of the APMs
to IFRS measures are provided in Note 32.
◊ Net (debt)/funds includes first-time recognition of IFRS 16 Leases. Prior year comparatives have not been restated.
1
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Chairman’s Statement
Further strategic
and commercial
progress
In November, alongside our half year results, we reported
that the Company had delivered a robust performance in
the competitive domestic market along with the further
development of key export markets. This continued through
the second half which also saw further expansion of the Group’s
livestock herd and the successful commissioning of the new
poultry facility at Eye in Suffolk.
This period though will be remembered more
for the COVID-19 pandemic and the worldwide
disruptive and tragic consequences it has
brought. We have very sadly lost three of our
valued colleagues to this virus and to their
families we extend our deepest sympathy.
COVID-19
The health and economic implications of the
COVID-19 outbreak and its impact at individual,
family, cultural, commercial and financial levels
were unimaginable just a few months ago.
From a business perspective the wellbeing of
our colleagues has been paramount throughout.
They have performed incredibly in keeping
operations flowing at all sites whilst observing
appropriate health and safety guidance. This is
being acknowledged with a ‘thank you’ bonus for
their unstinting and selfless endeavours. The
sites in turn have been very supportive in their
local communities towards the most vulnerable,
care workers and NHS staff on whom we all rely.
We have worked in close partnership with
our supermarket customers to enable the
optimisation of production and in maximising
output to meet the surges in demand from
consumers. The ‘food-to-go’ sector has
been badly hit which has impacted production
at a small number of sites. Any colleagues
affected have relocated to our other local
facilities avoiding any need to make use
of the Government’s Coronavirus Job
Retention Scheme.
With all livestock sourced from within the UK,
including our own pig herds and poultry flocks,
supply to the primary processing sites has
operated relatively smoothly and enabled raw
material flow into further processing to continue
uninterrupted. The investment in expanding
the Company’s pig herds and increasing our
self-sufficiency in this and recent years has
proved invaluable.
Business planning and forecasting continues
to be rigorously tested to ensure the adequacy
of financing facilities from pre-existing
arrangements. Our balance sheet and cash
flow remain strong and therefore we have
had no need for recourse to Government-
backed assistance.
We will continue to do all we can to safeguard
the health and safety of our colleagues whilst
meeting the requirements of our customers
and consumers.
Results
Total revenue for the year of £1.7 billion
represented an increase of 16.0 per cent
on the previous year. Excluding turnover from
Katsouris Brothers, acquired during the first
half of the year, and that from the more recent
livestock acquisitions, Packington Pork and
White Rose Farms, revenue on a like-for-like
basis was 13.0 per cent higher.
Adjusted profit before tax was £102.3 million,
an increase of 11.2 per cent and adjusted
earnings per share of 156.4 pence were up
by 8.4 per cent year-on-year.
Cash flow and financial position
A net £69.4 million was spent on the
acquisitions of Katsouris Brothers, Packington
Pork and White Rose Farms during the year.
In addition, a record level of investment was
made in the Group’s asset base. This year saw
the commissioning of the new poultry facility
at Eye in Suffolk as well as the expansion of the
Group’s cooked meats facility in Hull. Other
projects were undertaken elsewhere in the
business to improve efficiency, expand capacity
and enhance the resources available for
product development.
The Group’s balance sheet remains in robust
shape. Cranswick has significant unsecured
banking facilities which were increased by
£40 million, to a total of £200 million, during
the year. At the year end, after a year of record
investment and significant corporate activity,
the Group’s net debt stood at £146.9 million,
including the first time recognition of
£65.9 million of IFRS 16 lease liabilities.
Dividend
The Board is proposing a final dividend of
43.7 pence per share, an increase of 9.3 per cent
on the 40.0 pence paid previously. Together
with the interim dividend of 16.7 pence per share
this is a total dividend for the year of 60.4 pence
per share and compares to 55.9 pence per share
previously. This is the 30th consecutive year
of dividend growth.
The final dividend, if approved by Shareholders,
will be paid on 4 September 2020 to Shareholders
on the register at the close of business on
24 July 2020. Shares will go ex-dividend on
23 July 2020. Shareholders will again have
the option to receive the dividend by way of
scrip issue.
Sustainability
The Company’s ‘Second Nature’ sustainability
strategy reflects the ambition to be the leading
sustainable meat business and is focused on
key areas including food waste, plastic usage,
2
Cranswick plc | Annual Report & Accounts 2020Strategic Report energy efficiency, water usage and carbon
footprint. Our industry leading animal welfare
standards are reflected in the award of the
highest performance ranking of ‘Tier One’
in the global ‘Business Benchmark on Farm
Animal Welfare’ for the fourth consecutive year,
underlining Cranswick’s position as a global
leader in the sector.
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 Corporate
Governance Report on page 61.
Culture
Cranswick’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 a
training and development plan that delivers
workforce capabilities, skills and competencies
through apprenticeship schemes, development
programmes and training courses. Internal
promotions to meet the needs of the growing
business prove its value.
The Board is committed to this and recognises
that Cranswick’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 especially at this
difficult time.
Outlook
There has been a positive start to the current
year. Whilst the impact of COVID-19 will be
ongoing for some time, we are confident we will
continue to meet the challenges it presents.
The successful commissioning of the major
poultry investment at Eye and the broadening
customer base provides a solid platform from
which to continue Cranswick’s successful
long-term development.
Martin Davey
Chairman
23 June 2020
Brexit negotiations are still to be finalised and
trade deals with other countries concluded.
Until we see the details it is difficult to assess
how well the food industry will be positioned.
That said, we are hopeful that the COVID-19
experience underlines and reinforces the
importance of having a resilient and successful
domestic food sector and that this is at the
forefront of negotiators thoughts
during discussions.
Notwithstanding this, the business has a strong
balance sheet, comfortable financial headroom
and has made tremendous strategic and
commercial progress over the past year.
30 consecutive years of growth
dividend per share (p)
60.4
55.9
53.7
44.1
37.5
34
32
30
28.5
27.5
25
21.7
19.9
18.1
16.5
14.5
13.2
12
10.8
2.8
3.3
3.8
4
4.1
4.3
4.6
5.1
5.8
6.8
7.5
8.3
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 2019 2020
3
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report
Chief Executive’s Review
Delivering
for all our
stakeholders
We continue to experience and operate in the most
challenging of periods. Our business is founded on our
people and I would like to thank all our colleagues for their
professionalism, commitment, dedication and passion.
Our teams across the business have responded
brilliantly during the COVID-19 crisis and
I would like to thank them for their incredible
support and hard work, which has enabled us
to continue to deliver premium food products
with outstanding service to our customers and,
ultimately, the UK consumer.
The health and safety of all our people is
our number one priority and we are doing
everything we can to protect our workforce.
Sadly, three of our colleagues have passed
away from COVID-19. Our thoughts are with
their families and we continue to support all
Cranswick colleagues and their families affected
by COVID-19.
From the outset of the pandemic and in line
with Government guidance, we implemented
additional measures to protect both the
physical and mental wellbeing of our people,
including social distancing measures across
all of our sites, recommended PPE (Personal
Protective Equipment) for all employees in
line with PHE (Public Health England) and
WHO (World Health Organisation) guidelines,
including the use of optional visors to
provide reassurance to colleagues. We also
implemented additional cleaning and hygiene
measures to those stringent procedures already
in place. We have provided counselling and
occupational health services for all colleagues
who may be concerned about their health,
either whilst they are at work, or from home.
Throughout the pandemic we have remained
in constant dialogue with the relevant regulatory
authorities and we will continue to adapt
our protective measures as required.
Cranswick employees are designated key
workers and are at the forefront of maintaining
vital supplies of fresh food into the supermarkets.
We are doing everything we can to protect
them while they carry out this critical role.
To recognise the outstanding contribution
of our people we announced in April that we
will pay a £500 bonus to each of our site-based
colleagues at the end of June. We have also
supported local communities through a number
of initiatives including making and delivering
sandwiches and sausage rolls to front line NHS
staff, giving food hampers to the elderly and the
vulnerable in our communities and care homes,
as well as supporting local charities.
second half of the year as planned and the ramp
up phase has also been successfully navigated
with the facility now processing in excess
of 1 million birds each week. Start-up and
commissioning costs were as anticipated.
We also invested £14 million in our Hull cooked
meats facility to accommodate a substantial
new contract win with one of our leading retail
customers which started during the year.
We also continue to invest heavily across
our broader asset base including our upstream
pig and poultry farming operations. We will
continue to lift capacity, improve efficiencies
and add capability to ensure that we serve
our customers from high quality, efficient,
safe and technically compliant facilities.
We have had an incredibly busy and productive
12 months, during which we have successfully
commissioned our Eye poultry facility,
completed three acquisitions and invested
a record amount across our asset base whilst
continuing to support our customers and
consumers. Adjusted profit before tax increased
by 11.2% to £102.3 million with reported
revenue up 16.0 per cent to £1,667.2 million and
up 13.0 per cent on a like-for-like basis. None
of this would have been possible without the
support and hard work of our colleagues and
our supply chain partners. The strength of these
relationships, allied to the firm foundations on
which the business is built, have enabled us to
meet head-on the incredible challenge posed
by the COVID-19 outbreak.
During the year we spent a record £101 million
across our asset base. This brings the total
investment in our infrastructure over the
last eight years to over £400 million. We
commissioned our new £78 million poultry
processing facility in Eye, Suffolk, during the
We purchased three businesses during the year.
In July 2019 we acquired Katsouris Brothers,
a supplier of Continental and Mediterranean
food products which further broadened our
non-meat activities. In December 2019 we
acquired Packington Pork which specialises
in producing free range and outdoor bred pigs.
Finally, in February 2020 we acquired the Buckle
family’s pig farming and rearing operations
together with their 50 per cent share of the
White Rose Farms joint venture we set up
together in 2018. These latter two acquisitions
have lifted our self-sufficiency in British
pig production to over 30 per cent of our
total requirements.
We also work closely with our producers
and suppliers to ensure that the raw materials
and ingredients for our products are ethically
sourced through tight and transparent
supply chains. These close relationships have
been invaluable in recent weeks and again
I thank our supply chain partners for their
outstanding support.
4
Cranswick plc | Annual Report & Accounts 2020Strategic Report Animal welfare is of paramount importance to
us and we continue to strengthen our leading
position in this area. We retained our Tier One
status in the Business Benchmark on Farm
Animal Welfare for the fourth consecutive year.
We are one of only six companies globally to be
awarded this rating. We continue to invest in our
pig and poultry operations to ensure that we
meet and try to exceed the exacting standards
we set ourselves.
We continue to build upon our groupwide
sustainability programme. Earlier this year
we launched our Second Nature microsite
(www.thisissecondnature.co.uk). As one of
the world’s most responsible meat producers
we want to inspire positive change, influence
wider system change and promote the vital role
meat can play in feeding the world sustainably
and healthily.
The UK formally left the European Union (EU)
on 31 January 2020 and we continue to make
preparations during the transition period.
We are less exposed than many UK business
to the economic repercussions of the UK
leaving the EU, but we remain concerned about
labour availability and we continue to cultivate
employee engagement, focus on attracting
and retaining talent and improve the general
working environment. We have also actively
supported EU national colleagues to mitigate
any effect that Brexit might have.
The strong growth and strategic progress
we have made over the last 12 months has been
made possible by the platform we have built
and the pipeline we have laid down in recent
years. Our positive momentum is a reflection
of the continued investment we make in our
infrastructure and the quality and capability
of all our colleagues across the business.
There has been a positive start to trading in the
new financial year, though we remain mindful of
the uncertainty around the longer-term effects
of the COVID-19 crisis and Brexit negotiations.
Nonetheless, our outlook for the current year
is unchanged.
As we move forward into the new financial year,
notwithstanding the challenges we are currently
facing into, I am confident that the strength of
our business, with its long-standing customer
relationships, breadth and quality of products,
robust financial position and industry leading
infrastructure, will support the further
successful development of Cranswick over
the longer term.
I would like to
thank all our
colleagues for their
incredible support
and hard work,
which has enabled
us to continue to
deliver outstanding
service to our
customers.
Adam Couch
Chief Executive
23 June 2020
5
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Strategy in Action
Leading on
farm-to-fork
poultry
Strategic pillars
Operating
Excellence
High Quality
Products
Sustainability
6
Cranswick plc | Annual Report & Accounts 2020Strategic Report The beauty of the facility at
Eye is that it is an integral part
of Cranswick’s poultry business;
fully integrated and the most
efficient producer of chicken
in the UK.
Barry Lock
Managing Director, Cranswick Poultry
Our new £78 million fresh chicken facility
at Eye, Suffolk, is the most modern
primary processing model for poultry in
the UK. With this facility we can deliver
a fully integrated process. Starting with
milling our own feed, we have complete
control over the hatching and rearing
of our own chickens through to final
processing, packing and supply. A high
level of automation throughout the
process leads to an increase in efficiency
and a lower cost of manufacturing.
We are able to process more efficiently,
with birds arriving at the factory and the
associated finished product despatched in
the same day. We are able to process up to
15,000 birds an hour on our lines, faster than
any of our UK competitors. A combination
of robotics, automated deboning, X-ray
bone detection and fifth quarter harvesting
through our unique offal chilling system
means we can maintain the highest levels
of product quality while ensuring nothing
goes to waste.
Eye has been built around our Second
Nature ethos and incorporates state-of-
the-art technology to ensure the highest
welfare, sustainability, safety and efficiency
standards. The site is located in the heart
of Cranswick’s chicken rearing operations
to minimise travel times. When the
birds arrive at the facility, they enter a
temperature-controlled environment with
modified lighting to help keep them calm
and reduce stress levels before processing.
Food safety and odour control are assured
with the installation of bio-oxygen air
sterilisation systems across the facility’s
processing and storage areas. All operational
environmental impacts are kept to a
minimum – the site houses water recycling
capabilities as well as a Combined Heat
and Power (CHP) plant for on-site
energy generation.
Much of the throughput of the new facility
is underpinned by a long-term supply
agreement with Wm Morrison
Supermarkets plc.
Eye represents the largest project
the Group has ever undertaken, both in
terms of vertical integration and capital
investment. It has increased our poultry
capacity by 140 per cent with the potential
to expand the site further as demand for
affordable, low impact protein grows.
Birds processed per hour
15,000
Increase in processing capacity
140%
7
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Strategy in Action
Expanding
our offer
Strategic pillars
Operating
Excellence
High Quality
Products
8
Cranswick plc | Annual Report & Accounts 2020Strategic Report The acquisition of Katsouris
Brothers strengthens our existing
Continental Products business
and broadens our offering
in a number of fast-growing,
plant-based, non-meat categories.
Adam Couch,
Chief Executive Officer
The acquisition of Katsouris Brothers
this year perfectly complements our
Continental Foods offering while giving
us a world of opportunity to diversify
further into the growing Continental
categories.
Headed up by two brothers, Louis and
Costa Constantinou, Katsouris’ 250-strong
workforce operates out of North London,
but has built a strong heritage working with
long-standing Mediterranean suppliers. The
team sources high quality Greek produce for
its premium Cypressa brand and own-label
ranges, which are supplied into the major
supermarkets.
Katsouris’ focus on tradition and ‘from
the tree to the pot’ authenticity is very
much in keeping with the values of our
Second Nature strategy. The Company
prides itself on sourcing superior ingredients
and products such as pulses, nuts, olives,
feta and halloumi cheeses that are
produced by traditional Mediterranean
farming operations.
As well as producing bespoke marinades for
its olives, the Katsouris development chefs
maintain an artisanal edge when it comes to
creativity. This includes replicating recipes
from old Greek cookbooks handed down
through family generations, occasionally
with a modern twist.
Katsouris’ ability to work with retail
customers and adapt established products
to evolving trends was recently recognised
by the business receiving the award of
‘Brand partner of the year 2019’ from their
anchor customer. This is a tremendous
achievement for the business.
Integrating Katsouris into the Group
will bring new synergies, particularly for
our Continental and antipasti product
development teams. This allows us to
capitalise on the trend for Mediterranean
diets as consumers seek out more
climate-friendly, healthier meal options.
We are delighted that both Constantinou
brothers have agreed to stay on as Directors
of Katsouris. This will ensure the business
will continue to benefit from their knowledge
and experience as we look to invest in the
team and the facilities going forward.
Number of product lines at Katsouris
541
9
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Strategy in Action
Unprecedented
change
Strategic pillar
Operating
Excellence
10
Cranswick plc | Annual Report & Accounts 2020Strategic Report Against a backdrop of African
Swine Fever we’ve more than
doubled our Far East export
revenue this year, and it’s our
dedication and experience that
has helped us do this.
Ed Wright,
Export Director
African Swine Fever (ASF) has caused
considerable disruption in the global
pork market. It has been described as
the largest animal disease outbreak
the world has ever seen.
The disease was first reported in China
in August 2018, and quickly spread across
the country, and to neighbouring regions,
impacting both large scale and backyard
farming operations. By Autumn 2019 losses
were estimated to be 50 per cent* of the
Chinese pig herd as the infection continued
to spread. This represents a significant
decline in the global herd since China had
a 60 per cent* share of the worldwide pork
market. The resulting impact is that China
has become even more dependent on
imported pork.
All three of the Group’s primary pork
processing facilities are fully approved for
exporting to China, with our Norfolk facility
receiving approval to export trotters during
the year. The Company has a dedicated
export team with many years of experience,
and this sets Cranswick apart from other
companies in the industry. The Shanghai
office is well established and has been
looking after direct relationships with
customers for six years.
Cranswick has been exceptionally well
positioned to increase export sales in
order to meet the unprecedented levels
of demand. Far East export revenue has
risen 122 per cent in the year. Production
has been scaled up including additional
processing at weekends, and there have
been new recruits into the export team.
We have seen demand for prime cuts and
whole carcasses of pork increase as well as
the more traditional fifth quarter products
that have previously been exported, and
we have been able to capitalise on this to
drive further growth in our export sales.
Strong export demand and pricing is
expected to continue while the Chinese
pig herd recovers. In the UK, we remain
vigilant to the risk that ASF could continue
to spread globally. Heightened bio-security
measures are in place at all our farms.
For further information see ‘Principal Risks
and Uncertainties’ on page 48.
* Source: Rabobank
Far East export revenue growth
122%
Estimated loss of Chinese pig herd
due to ASF
50%
Source: Rabobank
11
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Strategy in Action
Winning
on welfare
with pork
Strategic pillars
Operating
Excellence
High Quality
Products
Sustainability
12
Cranswick plc | Annual Report & Accounts 2020Strategic Report Our investment has reinforced our
vertically integrated supply structure.
We have enhanced our farming
techniques to increase efficiency,
modernise our farms and reduce
our environmental impact.
Chris Aldersley,
Chief Operating Officer
We are now the second largest outdoor
pig farmer in the UK following our
acquisitions in the year.
In December the Group acquired Packington
Pork, a premium pig farming business that
specialises in the production of British free
range and outdoor bred pigs. The business,
formally owned by fourth-generation pig
farmers, the Mercer family, operates from
a number of sites across Staffordshire,
Nottinghamshire and Lincolnshire.
Having worked closely with both Packington
Pork and the Mercer family for over 14 years,
we have seen first-hand their commitment
to sustainable farming, particularly the
health and wellbeing of their animals.
The pigs are bred and live outdoors
on RSPCA accredited farms where they
can roam freely.
The farms are engaged in numerous
sustainability initiatives to improve
biodiversity, soil health and water
conservation. These include placing grass
margins around fields to protect hedges,
planting field corners with flora and fauna,
and spreading wild bird seed, and pollen
and nectar mixes, to encourage wildlife
to thrive. We intend to build on this work,
which is very much in keeping with our
Second Nature philosophy.
In February the Group acquired the Buckle
family’s Red Tractor assured pig farming
and rearing operations as well as the family’s
50 per cent share of White Rose Farms, the
joint venture set up by Cranswick in
partnership with the Buckle family. We have
worked closely with the Buckle family for
over 25 years and are delighted to welcome
Rick Buckle to the Cranswick team.
These acquisitions not only strengthen
the Group’s position as a high welfare
pork supplier, but reinforces the vertically
integrated structure. This ensures we can
continue to deliver high quality, climate-
friendly products to our customers that
promote the best values of British farming,
provenance and sustainability.
The Group’s acquisitions also increase our
self-sufficiency in UK pigs processed to over
30 per cent. This is significant as it will leave
us less exposed to potentially disruptive
forces such as the economic repercussions
of Brexit and African Swine Fever.
Invested in agricultural operations
£36.1m
Self-sufficiency in pigs
>30%
13
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Business Model
Business Model
Our purpose is to feed the nation with authentically made, sustainably produced
food that is created with passion. Our business model is the framework for delivering
our purpose and strategy, enabling us to create value for our stakeholders.
Our Resources
Guiding Principles
Our guiding principles set out the values that unite and
inspire our people to deliver our purpose.
Quality
We are passionate about making
great tasting food and we want to be
recognised for the high quality of our
products. Our aim is to keep the heritage
and integrity of our food by using
authentic, artisan methods wherever
possible to create premium
quality products.
Value
We recognise the importance
of investing in our agricultural
operations and in our operating facilities
so we can continue to offer innovative,
high quality, great value food to our
customers from some of the
most efficient food production
facilities in the UK.
Innovation
We have dedicated teams
researching consumer trends and
food innovation opportunities. We are
constantly designing tasty new recipes
and culinary ideas, allowing us to
deliver creative food concepts that
are healthy and convenient for
today’s modern consumer.
People
We know it’s our passionate and
dedicated colleagues who drive our
business. We create a supportive
but entrepreneurial environment which
aims to give individuals the opportunity
to thrive and ensures the business
continues to grow.
People
Colleagues
>11,800
It’s our people who make Cranswick
successful. We have stable, experienced
and talented operational management
teams supported by a highly skilled
workforce.
Natural Resources
Increase in size of pig herd
+95%
Increase in size of chicken flock
+61%
During the year we have invested
£36.1 million in our farming operations
to expand the pig herd and chicken flock
and to support the future growth of
the business.
Operating Network
Production facilities
16
The Group’s production facilities are
some of the best invested and most
efficient in the UK food sector.
14
Cranswick plc | Annual Report & Accounts 2020Strategic Report Strategic Pillars
Long-term Growth
Strategy
The value we create
for stakeholders
Our Strategic Pillars underpin our strategy for
long-term growth.
Read more: Our Strategy
see page 20
High Quality
Produce
We focus on premium quality products,
innovation, technical integrity, food
safety and animal welfare. Provenance is
a key priority and we care greatly about
where ingredients come from. We
create great tasting food that sets us
apart from our competitors from our
vertically integrated processing facilities.
Operating
Excellence
Record capital investment shows our desire to
produce food from the most well-invested facilities
which helps us deliver our strategy and purpose. This
also drives a competitive advantage over a generally
under invested infrastructure in the UK food industry.
The Group demonstrates technical excellence
through compliance with the highest food standards
and through excellent external audit scores.
Sustainability
Our vision is to become the most
sustainable meat business in the world.
As an industry leader, Cranswick embraces
many opportunities to make a difference
and business decisions are made with
a clear focus on our commitment to both
environmental and social responsibility.
Our Second Nature sustainability initiative
launched many projects that have delivered
significant progress against our objectives.
Read more on pages 26-29
1 Consolidation
Driving the Core
We are committed to growing revenue from
our core pork products by consolidating
existing market positions. Investment in
our infrastructure supports future growth.
2 Diversification
Expanding our offer
As part of our long-term growth strategy
we continue to expand our product range
by diversifying and innovating. We aim to
enter new markets and channels in our core
UK market.
3 International
Developing new
opportunities
We aim to grow our international operations
and customer base. We continue to develop
our export business to maximise the value
of our products.
Our People
People in leadership or
management training
275
Training
Development
Mentoring
Customers and
consumers
New product launches
583
Quality
Provenance
Choice
Producers and suppliers
Supplier audits
242
Assurance
Traceability
Compliance
Shareholders
Years of dividend growth
30
Dividend Growth
EPS Accretion
Value Creation
Communities
% of our colleagues who live within
a 10 mile radius of their workplace
71% Support
Engagement
Employment
NGOs
Reduction in edible food waste since
2018
58%
Policy Shaping
Awareness
Commitment
15
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Our Markets
Macro &
retail trends
Growth of chicken market (tonnes)*
+31,000
Growth of discount retailers*
9.9%
* Source: Kantar Worldpanel 52 weeks ending 22 March 2020.
A Global Perspective
COVID-19
The impact of COVID-19 has been felt across
the globe. The first cases were reported in the
UK in January 2020 but it wasn’t until March that
we saw a surge in retail demand as shoppers
needed to create an extra 500 million meals a
week at home as the lockdown took effect and
eating out of home was no longer an option.
There was a shift to scratch cooking and strong
demand for staple meals; sausage, bacon and
chicken volumes especially have increased
as a result of this behaviour. We were able to
meet this spike in demand and our teams did a
fantastic job of quickly increasing the volumes
we could supply at short notice.
The food service industry remains impacted
with the closure of many restaurants, hotels
and food-to-go outlets. Sales in this category
account for 5 per cent of Group sales but
volume growth in retail has offset the losses
we have seen as a result of these changes.
We look forward to growing relationships with
customers in this channel as the market begins
to reopen.
African Swine Fever
African Swine Fever (ASF) is having a profound
impact on the global pork market. Estimates
suggest ASF has wiped out up to 50 per cent
of the Chinese pig herd making China heavily
reliant on pork imports. As a result, Far East
export revenue has risen 122 per cent and
Cranswick accounts for over 50 per cent of
all British pork sold to the region. We are
well-placed to capitalise on this growth going
forward due to continued investment at our
primary processing facilities, providing the
necessary capacity to meet increases in
demand from the region.
year the Group has more than doubled its
poultry capacity for retail customers with the
opening of our £78 million poultry processing
facility in Suffolk.
A Balanced Diet
The definition of health has become more
complex and consumers have more access
to information which is often conflicting with
regards to what constitutes a healthy diet. We
have based our guidance and plans around the
concept of the Eatwell plate as created by Public
Health England. The concept ensures a balanced
diet and promotes the consumption of meat and
protein. Chicken is naturally low in fat and offers
a versatile and good value for money source of
protein, whilst pork can be low in fat and high in
vitamins and nutrients, both of which provides us
with a good platform for growth.
Diet is primarily a matter of individual choice, and
we believe people will continue to enjoy eating
real meat for generations to come. There is a
need for better education and transparency
concerning the food we eat, especially around
how it is produced, its impact, and where it
comes from. As part of our radical transparency
commitment, we believe we are leading the
way on this with Second Nature.
As the threat of ASF progressively expands into
Europe, Cranswick and the UK pork industry
remain vigilant. The upturn in pig prices, due
to strong export demand from China, may
strengthen further should ASF start to impact
domestic pig supply in European countries.
We remain optimistic over future post-Brexit
EU export opportunities as we develop
products with which to access both new and
existing channels. This includes exploring new
export markets for poultry.
Closer to Home
Discounter Growth
In the UK, we continue to consolidate our
existing market positions with retail sales
accounting for 72 per cent of Group revenue.
Whilst the growth of the discounters continued
throughout the year, the relative growth versus
the rest of the market has slowed as the Top 4
retailers have benefitted from the move back
to visiting fewer stores and the return of the
“big weekly shop”.
Poultry Market Growth
The poultry segment represents a huge growth
area with chicken seen as a healthy, convenient
and competitively priced protein. Sales in this
category are growing at eight times the volume
of plant protein*, which still needs to overcome
barriers of taste and affordability. Over the past
Sales of chicken products are growing at
eight times the volume of plant protein*.
16
Cranswick plc | Annual Report & Accounts 2020Strategic Report 17
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Our Markets continued
18
Cranswick plc | Annual Report & Accounts 2020Strategic Report Consumer
trends
Consumer Trends
As consumer tastes and behaviours continue
to change rapidly, we have identified four
evolving trends that we need to address in
order to underpin our growth, ensuring our
products remain relevant and differentiated.
The trends focus on healthy eating, premium
products, convenient solutions and an
increased focus on the sustainability and
provenance of food which continues to be
a hot topic for consumers.
Healthy Eating
Many consumers are increasingly basing their
food choices around leading a healthier lifestyle
and adapting their diets accordingly. Over the
next 5-10 years, 63% of consumers say that
eating healthily will be more important to them
(IGD Nov 2019).
We continue to add value to our chicken
and expand the usage of this meat across our
other processes, for example, the ongoing
development of chicken sausages, meatballs
and burgers to provide some healthier
alternatives within the portfolio.
In categories where we are also adding value,
we continue to look at options to reduce the
level of salt and sugar that we use to develop
recipes, for example, in sauces and marinades
used in pork and chicken dishes as well as our
wider slow cook product offer. We are also
working on a technical solution to remove
added nitrites from our bacon and cooked
meat ranges.
We actively work with the Agricultural and
Horticultural Development Board (AHDB)
who have set up a cross industry, consumer
facing project to communicate the benefits
of eating meat as part of a healthy, balanced
and sustainable diet. They point to the nutrient
deficiencies that can be highlighted if meat
is removed from the diet.
There is incredible focus of the role of food
in the mainstream media, and across all social
media channels and it is imperative that the
industry continues to promote the health
benefits of naturally sourced meat. The AHDB
campaign also highlights the highly processed
nature of some of the emerging meat
substitutes, which are often higher in fat,
salt and preservatives than the equivalent
natural meat product.
Premium Products
As the premium categories continue to drive
strong market growth across the retailers,
including the discounter channel, we need
to ensure our products strike the right balance
between quality, taste, and nutrition whilst
remaining affordable. The role of promotions
continues to be an important driver; actively
encouraging consumers to trade up to the
premium tier and experience the difference
in product quality. Our investment in
infrastructure means we continue to generate
operational efficiencies with market leading
quality whilst spearheading new product
development to keep pace with such demands.
Our premium products continue to perform
strongly and we have won new business with
premium retailers during the year. We have
also launched several new premium products,
including maple cured bacon, pork fillets
wrapped in prosciutto and charcuterie and
antipasti selections. Our premium Cumberland
sausages won the ‘Best Supermarket Sausage:
Traditional Category’ at the UK sausage awards.
Convenience
The role of convenience food continues to
evolve. It is no longer just about being quick;
the products must deliver food inspiration,
be healthy and be easy to prepare if they are
going to fulfil the needs of time pressured
consumers.
As consumers are often looking for quick,
midweek meal inspiration, our range of added
value pork products continue to grow. The
addition of marinades or stir fry vegetables
to our range meets this demand.
Growth continues in ‘slow cook’ and ‘sous vide’
products as they offer consumers restaurant
style food with minimal preparation at home.
The products are well suited to pork and
chicken dishes and continue to be one of the
fastest growing categories in which we operate.
43%
of shoppers claim to always or mostly
eat healthy food
*Source: IGD, February 2020
In addition, we have continued to develop our
business with the emerging meal kit providers,
creating a new sales channel for the group in
an area of increasing interest to consumers.
As well as our core pork offer, we supply a
range of sausages and charcuterie products
as integral ingredients in the finished meal offer.
Eating out of home, or purchasing food on the
go, offered the ultimate in convenience before
the outbreak of the COVID-19 pandemic. We
had gained business in this channel within our
new and existing customer base and expect to
work with these customers as the out of home
market restarts.
Sustainability
Consumers are more interested than ever
to understand where their food comes from,
and what the impact of their food choices
has on the planet. For the Group, addressing
the sustainability challenges is now ‘Second
Nature’; an integral part of the consumer offer
we develop from farm-to-fork.
There is continued pressure on the role of
meat as a key contributor to climate change,
and we are working across the industry
to address the balance of this through
demonstrating the role of chicken and pork
as part of a healthy, sustainable and climate
friendly diet.
Our approach to sustainability remains one
of our key differentiators, both in the UK and
export markets which we serve. Our new
poultry processing plant at Eye in Suffolk,
is a prime example of this. The facility can
process up to 1.2 million chickens a week,
sourced from our own local farms and allows
us to tap into British values of buying local whilst
serving demand for low impact, cost effective
protein. More details about our new facility can
be found on page 7.
19
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report
Our Strategy
Our Purpose
Our purpose is to feed the nation with authentically made,
sustainably produced food that is created with passion.
Long-term growth strategy
1
Consolidation
Driving
the core
2
Diversification
Expanding
our offer
3
International
Developing new
opportunities
Read more: see page 21
Read more: see page 22
Read more: see page 23
Our Strategic Pillars
Our long-term growth strategy is underpinned by three strategic pillars
High Quality
Produce
Read more:
Operating
Excellence
Read more:
Sustainability
Read more:
Our business model see page 15
Our business model see page 15
Our business model see page 15
Our Guiding Principles
Our guiding principles set out the values that unite and inspire
our people to deliver our purpose.
Quality
Value
Innovation
People
Read more: Our business model see page 14
We measure the success of our strategy against our
key performance indicators which can be found on pages 24 and 25.
The key risks to our strategy can be found on pages 52 to 54.
20
Cranswick plc | Annual Report & Accounts 2020Strategic Report 1
Consolidation
Driving the core
Like-for-like growth in Fresh Pork sales
22.3%
Our strategy
The Company’s core pork portfolio consists
of fresh and value added pork products, a
gourmet category including bacon, sausages,
burgers and pastry, and a convenience range
comprising cooked meats and continental
products.
Across our portfolio we focus on the premium
end of the markets in which we operate, where
the Group is renowned for quality.
Our aim is to grow revenue from these core
products by working closely with customers
to understand their requirements, build
long-term relationships and deliver added value
through relevant innovation. Our growth
strategy is underpinned by continual
investment in our infrastructure, helping us to
deliver premium products at reasonable prices.
Performance in the year
Fresh Pork retail sales have increased year-
on-year driven by a stronger mix of products
sold. Higher EU pig prices resulted in growing
demand for British products and we saw sales
increase as our discount retail customers
continued to expand their premium offerings.
We have expanded our “Ready to Cook” range
with new convenient meal solutions and
undertaken development work on products
that are quick and easy to prepare, such as
marinated stir fry kits.
business also won a new contract in the food
service sector – pork and pancetta sausage
rolls quickly became their best-selling product.
Cooked Meats sales performed well ahead
of the market. We won new business with a
premium retail customer in the first half of
the year and gained trade following a key retail
customer streamlining their supply base. We
invested £31 million across our three Cooked
Meats facilities including the commissioning
of an extension to the Sutton Fields site in
Hull to accommodate the additional business.
The team also secured listings for a new range
of ‘Slow Cook’ products with one of the Group’s
key customers.
Over the Christmas period some sites
experienced record sales, with Continental
meat platters and Pastry products in high
demand. We launched a new range of seasonal
products, such as ‘chicks in blankets’ and a
Brie En Croute developed at the Gourmet
Pastry site.
The premium category continued to drive
strong growth at our pastry site. Building on
the success of last year there have been many
successful product launches with a premium
retail customer during the year. Our Pastry
There were other food service wins within
Bacon as new business started during the
first half of the year, and we will be well-placed
to support the re-opening of the out of
home market.
For further information on our category
performance and projects delivered
throughout the year see the Operating and
Financial Review on pages 44 to 47.
Future opportunities
We plan to invest further in our infrastructure
to increase operational efficiencies.
Ensuring we strike the right balance between
quality, premium products and affordability
remains a priority as Cranswick continues
to drive efficiencies while expanding our
capabilities. Our continued focus on innovation
means we can keep pace with, and respond to,
changing consumer trends.
21
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Our Strategy continued
2
Diversification
Expanding our offer
Revenue from new product launches
8.7%
‘Ready to Cook’ and ‘Cook in the bag’ product
ranges are also undergoing development.
As the fresh poultry market continues to
show growth we plan to explore new formats
such as chicken mince and chicken meatballs
in order to capitalise on this healthy and
sustainable protein.
New categories
Our strategy
As part of the Group’s long-term growth
strategy we continue to expand product ranges
by diversifying and innovating away from our
core business.
Strategic acquisition
The Group’s acquisition of Katsouris Brothers
during the year gives us a world of opportunity
to diversify into the growing flexitarian and
fast-growing Mediterranean categories. The
Company prides itself on sourcing high quality
ingredients while the development chefs
maintain an artisanal edge using traditional
recipes with a modern twist.
This perfectly complements our principles of
high quality, keeping the heritage and integrity
of food, whilst innovating and delivering
creative food concepts. Further information
on the acquisition can be found on page 9.
During the year we have expanded our products
in the non-meat category. We launched a
range of vegan products from our Pastry site
including vegan sausage rolls and a vegan root
vegetable tarte tatin.
Cranswick’s product development teams
continue to devise innovative and creative
concepts. This year 583 new products were
launched, with 8.7 per cent of Group revenue
derived from new product development. At the
UK Sausage Awards we won the award for ‘Best
Supermarket Sausage: Innovative Category’
for our honey and mustard flavoured sausage,
which demonstrates the recognition we receive
for our innovative product launches.
Future opportunities
Convenience and healthy-eating consumer
trends will continue to dominate meal choices.
In both pork and poultry we plan to expand
our portfolio with value added products while
investing in new technologies to deliver a more
authentic taste and flavour experience using
natural products.
Our product development teams will continue
to work on plant-based alternatives following
the success of product launches in the year.
We believe many plant-based products still have
some way to go to match their meat equivalents
on taste and affordability.
Chicken
Our strategy
During the past five years we have expanded our
product range and customer base by entering
the premium, fresh and cooked poultry market.
This fast-growing market represents a huge
growth opportunity as we look to develop new
products and channels in this area. Our key
business differentiator for customers is our
vertically integrated poultry supply chain which
we continue to heavily invest in.
Major Investment
This year, our new £78 million chicken processing
facility in Eye, Suffolk, came on stream and is the
largest project the Group has ever undertaken.
The facility is the most modern end-to-end
processing model for poultry in the UK. For more
information on the new facility see page 7.
Production from the new facility commenced
in November 2019, with volumes increasing
in each of the following months. This enabled
us to produce chicken fillets in a wider range
of pack sizes and weights. Our retail pack range
has been expanded and now includes mini
fillets, bone-in and boneless thighs, drumsticks
and wings.
In cooked poultry the Company reinforced it’s
retail proposition, gaining new business with
a third retail customer and launching a new
product range with an existing retail customer.
Sales also benefitted from the annualisation
of product launches in the previous year. Retail
sales represent an increasing proportion of
total cooked poultry sales, and promotional
activity remained high across key retail
customers. Cooked turkey volumes exceeded
expectations over the Christmas period with
festive food-to-go sales performing strongly.
Future opportunities
In the short-term, barbecue products will
be launched from the Eye Fresh Poultry facility
including seasonally marinated drumsticks,
thighs, wings, steaks and mini fillets. We
also plan to introduce new flavours to expand
the range.
22
Cranswick plc | Annual Report & Accounts 2020Strategic Report 3
International
Developing new opportunities
Far East export revenue growth
122%
Our strategy
Our ambition is to become a zero-waste food
producer. Under our Second Nature initiative
we want to maximise the value of our meat cuts
and make sure all parts of the pig and chicken
are sold so nothing goes to waste. International
markets represent the opportunity to sell
fifth quarter products that would generally
not be consumed locally and may otherwise
be wasted.
Export demand has been increasing for
our higher welfare, premium cuts as well as
the more traditional fifth quarter products.
Our long-term growth strategy incorporates
this trend as we aim to develop relationships
and expand our reach in international markets.
Performance in the year
African Swine Fever (ASF) is having an
unprecedented impact on the global pork
market, see page 11 for more details. As
a result, demand and prices for prime cuts,
whole carcasses and fifth quarter products
grew considerably and our Far East export
revenue rose by 122 per cent year-on-year.
Cranswick was well-placed to capitalise on
this as all three of our primary pork processing
facilities are fully approved to export to China,
with our Norfolk facility receiving approval
to export trotters during the year. As a result
of ASF, we increased pork production with
additional processing at weekends. We have
also recruited new members to our export team.
Future opportunities
Strong export demand and pricing is expected
to continue while the Chinese pig herd recovers
from ASF. The Group remains vigilant to the risk
that ASF poses in terms of its potential spread
and this has been upgraded in the risk register
during the year, see ‘Principal Risks and
Uncertainties’ on pages 52 to 54.
In the coming year we aim to pursue
relationships with customers in emerging
markets. Towards the end of this financial year
we visited Mexico City to develop potential
opportunities. The Group continues to explore
other avenues to expand our offering where
demand exists including new markets
for poultry products.
Higher tariffs were placed on pork meat
exported to the US during the year, but we
were able to sell higher volumes of loins and
ribs to Canada to compensate for this. This
was achieved as a direct result of our work
undertaken in previous years to strengthen
our customer relationships in Canada, and we
continue to explore opportunities to establish
a stronger base in North America.
Growing demand for outdoor bred pork in Japan
has enabled us to build on our relationships with
customers in the region. We continue to host
customers from across the world , including
Japan, to show the level of investment we are
making in our operations and processes.
23
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Key Performance Indicators
Measuring our performance
Long-term growth strategy
1 Driving the core
2 Expanding our offer
3 Seeking new opportunities
Like-for-like revenue growth
Revenue from new products
Non-EU Export revenue growth
(%)
13.0%
2020
2019
-0.2
-0.2
2018
(%)
8.7%
(%)
110.0%
13.0
12.7
2020
2019
2018
8.7
2020
110.0
7.0
7.2
2019
12.8
2018
2.4
Like-for-like revenue increased 13.0 per cent compared
to prior year reflecting significantly higher wholesale
and export demand for Fresh Pork driving a rise in export
volumes and prices. Substantial business wins with key
retail customers, particularly across Cooked Meats and
Poultry, have driven further increases in revenue.
The Group’s ongoing commitment to innovation
continues as we expand product ranges and develop
new products to strengthen relationships with
customers. Sales from new products during the
first six months following their launch accounted for
£145.7 million of revenue in the current year.
Non-EU export sales include sales made to non-EU
markets through UK-based meat trading agents.
These sales have shown unprecedented growth in
the year reflecting the impact of African Swine Fever
on the global pork market.
High Quality Products
Number of BRC Grade As
Number of supplier audits
Complaints per million units sold
15
2020
2019
2018
242
15
15
2020
242
2020
15
14
13
2019
2018
330
2019
227
2018
20
18
The number of Grade A ratings awarded by the British
Retail Consortium (BRC) against Global Standards for
Food Safety increased reflecting the acquisition of
Katsouris Brothers. The new poultry site at Eye also
received an ‘AA’ rating.
The raw materials used in the Group’s production
process are assured by the Group Technical Services
team who undertake audits of suppliers. The decrease
reflects fewer incidents requiring follow up visits.
COVID-19 impacted the number of visits we could make
which were substituted with the use of technology.
Cranswick’s long-term commitment to producing food
to the highest quality results in a very low number of
complaints per million units sold. The decrease in the
year reflects the Group’s values and a passion for quality.
24
Cranswick plc | Annual Report & Accounts 2020Strategic Report We recognise that consistency of information
is important to our stakeholders, particularly
our investors. The Group’s key performance
indicators have remained consistent year-on-
year to allow comparability, with the exception
of the sustainability category which has been
updated this year.
We have updated our sustainability KPIs to
include food waste. We want to eliminate
avoidable food waste through site-led
intervention programmes and our
redistribution work with food charities.
Eliminating food waste is a key KPI for the
Group as we continue to work with Champions
12.3 and Courtauld 2025.
Our Health and Safety team has been focused
on the Reporting of Injuries, Diseases and
Dangerous Occurences Regulations (RIDDOR)
frequency rate per 100,000 hours worked
rather than per 100 employees. This has
allowed for better comparison between
sites, particularly at busy times of the year.
Our internal reviews and reporting have
changed and now emphasise this KPI.
We have therefore reflected this update below.
Operating Excellence
Adjusted operating margin
(%)
6.3%
Free cash flow
(£’m)
£115.8m
Return on capital employed*
(%)
16.2%
2020
2019
2018
6.3
2020
6.4
2019
6.3
2018
115.8
2020
16.2
87.3
2019
111.7
2018
18.4
20.3
Adjusted operating margin reduced 12 basis points
compared to the prior year to 6.3 per cent despite
absorbing start-up costs during the commissioning
phase of the new Eye poultry facility, and additional
provisioning in response to COVID-19.
Sustainability
The increase in free cash flow reflects higher
year-on-year EBITDA and a lower working capital
outflow with the Group managing cash flows tightly.
This was partially offset by higher interest paid due to
increased borrowings to fund acquisitions and capital
projects and higher tax paid, with six corporation tax
payments made in the year (2019: four) as a result of
the change to the timing of collection by HMRC
The Group’s ongoing commitment to investing in its
asset base ensures that facilities are industry leading
and continue to drive efficiencies. Return on capital
employed reduced reflecting the record levels of
investment in the year, acquisitions and the impact
of first-time recognition of IFRS 16 leases. Prior year
comparatives have not been restated for IFRS 16.
The impact on the current year reduces ROCE by 0.7%.
* Adjusted operating profit divided by the sum of average
opening and closing net assets, net debt/(funds), pension
liability and deferred tax.
Relative carbon footprint
tonnes of CO2e per tonne sales
0.11
Edible food waste
(% of tonnes sold)
0.5%
RIDDOR frequency rate
per 100,000 hours worked
0.37
2020
2019
2018
0.11
0.12
2020
2019
0.5
0.7
2020
2019
0.37
0.36
0.17
2018
1.2
2018
0.55
The Group’s relative carbon footprint continues to
decrease reflecting our Second Nature pledges as
we aim to minimise our impact on the environment.
Cranswick has committed to eliminating edible food
waste by 2030. The Group has invested in innovative
processing techniques and staff training and has already
seen results.
The accident rate reportable to the Health & Safety
Executive increased slightly reflecting the expansion
work across some sites as uninterrupted supply
continued despite construction work. The Group
continues to follow the enhanced five year Health
& Safety strategy and the Total Accident Frequency
Rate continues to reduce.
25
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Strategic Report
Our Sustainability Strategy
Producing meat
responsibly
Our sustainability strategy drives every decision we
take as a company, helping us deliver on our vision to
become the world’s most sustainable meat business
and bringing this work to life as we seek to reach
and engage new audiences.
26
Cranswick plc | Annual Report & Accounts 2020 Our Second Nature 2030 strategy
Our Group-wide sustainability strategy Second
Nature launched in February 2018. Since then
we have worked hard to embed its ethos into
the heart of decision-making, guided by the
COO-led Second Nature steering committee
and over 1,500 Second Nature Changemaker
volunteers from across the business.
Our Second Nature strategy addresses
five interconnected pillars, which reflect
how Cranswick operates: Thinking, Farming,
Sourcing, Producing and Living. Through these
pillars we can address the key issues across the
whole lifecycle of all products, from farm-to-
fork, while aligning our commitments to global
frameworks such as the UN Sustainable
Development Goals (SDGs), the Science-
Based Targets initiative (SBTi), the World
Resources Institute Champions 12.3 platform,
the UK Plastics Pact and Courtauld 2025.
Read more: Action on the SDGs
see page 29
At a practical level, we have drawn up a Second
Nature blueprint for action that focuses on four
core areas: Climate, Farming, Animal Welfare
and Community. We are using this blueprint
to develop and roll out projects that will help
the Group reach our Second Nature goals on
carbon, renewable energy, plastic, food waste,
water, and animal welfare. We have chosen to
target these areas as they are the ones most
material to us as a business.
Read more: Progress to date see page 28
FAR
M
I
N
K I N G
THIN
L
I
V
I
N
G
PRODUC I N G
Climate Mitigation
This year a new goal was launched under Second Nature to reach
net zero greenhouse gas (GHG) emissions across our operations
by 2040. To help achieve this, we have committed to setting
a Science-Based Target (SBT) in line with efforts to limit global
warming to 1.5°C under the Paris Agreement.
Risks from climate change are incorporated
into the Group’s corporate risk management
strategy. This will allow the Group to consider
and act upon any current and future climate
risks, both within our own operations and
supply chains. Our risk management work also
includes benchmarking our activities against
our peers using indexes like FAIRR (Farm Animal
Investment Risk and Return) that highlight
material risks and opportunities in animal
protein production.
Collectively, these commitments will enable
Cranswick to further activate and accelerate
our climate change efforts. A large part of this
work will focus on scaling up our agriculture
initiatives and investing in nature based
solutions to absorb more carbon while adopting
circular solutions that prioritise clean energy,
water conservation and waste prevention.
Read more: Climate Smart Farming
see page 29
G
G
N
I
C
R
U
SO
27
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Our Sustainability Strategy continued
Progress to date
Eliminating Plastics
Food Waste Prevention
Sourcing Clean Energy
We have reduced plastic packaging use by
1,038 tonnes since 2017. We are making
our food packaging more recyclable,
replacing PVC films with PET and
removing black plastic trays. Through the
UK Plastics Pact we are scaling up work
with retail customers and our suppliers to
trial sustainable and innovative packaging
solutions.
Read more: ‘Phasing out plastic’
on page 43
Tonnes reduced since 2017
1,038
We have measured our food losses
and waste across all sites using the
international Food Loss and Waste
Protocol and our edible food waste
accounts for just 0.5 per cent of all
tonnes sold. Through our work with
Champions 12.3 and Courtauld 2025,
we continue to eliminate avoidable food
waste through site-led intervention
programmes and our redistribution
work with food charities.
Read more: ‘Getting granular
on food waste’ on page 43
Read more: ‘Fighting hunger and
waste with 100,000 meals’ on page 40
All of our sites are now powered by 100
per cent renewable grid electricity, and
we are upscaling our Combined Heat &
Power (CHP) infrastructure to increase
on-site low-carbon energy generation.
Our plan is for more sites to have CHP
and we are also exploring the potential
for solar and wind power on some of our
farms and factories.
Sites powered by renewable
grid electricity
100%
Water Stewardship
Animal Welfare
We have reduced our water intensity by
more than our target for 2020. We are
in the process of setting new targets to
ensure our progress continues with a
number of measures in place to reduce
our water usage.
Read more: ‘‘Environmental
performance’ on pages 42 and 43
Reduction in water intensity since 2008
44%
For the fourth consecutive year the Group has been awarded Tier One in the global Business
Benchmark on Farm Animal Welfare standards (BBFAW). This year we further strengthened
the Group’s position as a high welfare pork supplier with the acquisition of Packington Pork,
for further information see page 13.
Cranswick continues to drive commercial farming welfare standards for the sector through
wider collaboration with retailers, universities and industry bodies. We are undertaking
trials to improve the wellbeing of newly hatched chicks and breeding sows, and to promote
responsible use of antibiotics. The Company is involved in smart tech work to improve
food safety, traceability and meat provenance, and reduce food fraud.
In 2019, Wayland Farms won the National Pig Awards Outdoor Pig Producer of the Year in
recognition of not only high standards of animal welfare but for integrity, professionalism
and a clear commitment to sustainability.
Telling our Story
Benchmarking and Disclosure
This year we launched an online platform to showcase our Second Nature
journey through transparent reporting. The website builds on our 2018
report ‘Radical Transparency: The rise of disruptive consumerism’ and will
be used to engage with the food industry and other stakeholders in an
honest dialogue about the future of meat and its role in the wider context
of climate change, consumer trust and ethical eating. This can be found
at www.thisissecondnature.co.uk.
We continue to benchmark our operational site performance against
our Second Nature operational targets aligned to 21 leading global
sustainability standards and metrics – these include multiple ISOs,
B-Impact, Courtauld 2025, BSI 8001 Circular Economy, LEAF Marque
and Investors in People. This year we were awarded a high C grade from
the CDP (formerly the Carbon Disclosure Project).
Feedback from customers has been highly positive and we believe the
platform will act as a key differentiator for us as the meat transparency
agenda grows. This year we also won recognition for our Second Nature
work with a number of accolades including Manufacturer of the Year at
the Business Green Leader Awards.
We are also developing a Second Nature Supplier Sustainability Pledge,
which will be used to benchmark our suppliers against key goals
and timeframes. Going forward we will be moving towards reporting
our environmental performance against the Meat, Poultry & Dairy
Sustainability Accounting Standard which is a widely recognised
international standard published by the Sustainability Accounting
Standards Board.
28
Cranswick plc | Annual Report & Accounts 2020Strategic Report Case Study
Action on the SDGs
Our sustainability challenges are mapped
against one or more of the UN Sustainable
Development Goals (SDGs) and we have
identified 12 SDGs we can impact through
our Second Nature work. These include
fighting global hunger by redistributing
surplus food and our involvement with the
Champions 12.3 platform (SDG 2), producing
meat in a responsible way and educating
consumers on food waste (SDG 12), working
towards net zero for our operations (SDGs 7
and 13) and engaging in climate friendly
farming (SDGs 9, 14 and 15).
Climate Smart Farming
We believe farming is part of the solution when it comes to
tackling climate change. The goal is for all Cranswick owned
farms to be carbon-neutral by 2030. We aim to achieve this
by adopting regenerative agricultural methods that improve
soil health and organic matter levels, conserve water,
sequester carbon, encourage biodiversity and recycle
farm waste.
Over the past two years we have increased
soil organic matter to support higher levels
of CO2 cycling as well as future crop yields
and irrigation efficiency. We are investigating
how we can reprocess manure from our
finishing sheds, removing and cleaning the
water to leave a more valuable organic
fertiliser, ultimately helping our partner
farms to reduce their reliance on
artificial products.
We are increasing the meat that is sourced
through our own farms. This means we can
ensure our livestock get the best care while
lowering our overall animal protein carbon
footprint. We are scaling up work to measure
the carbon footprint of our farms and livestock
as well as shifting towards certified sources of
soya for our animal feed. We are also exploring
alternative protein sources such as UK grown
peas, beans and soya to further improve our
land use and carbon impacts.
We have planted wildflower grass margins
around our outdoor pig units to encourage
biodiversity. These margins also act as a
buffer strip to slow water run-off, prevent
soil erosion and leaching of field nutrients.
29
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Our Stakeholders
Section 172 (1) Statement
Section 172(1) Statement
As a Board we continue to uphold the
highest standards of conduct and make
decisions for the long-term success
of the business.
We understand that our long-term
growth and success are dependent
on engagement with stakeholders.
We value regular interaction to ensure
we can consider their views and interests
when making decisions. We continually
explore how to make our decision-making
process more inclusive in order to involve
our key stakeholders.
Our decision making process through
the recent pandemic is one of many
examples where we consider all
stakeholders. The impact of COVID-19
has been widespread and we consider all
our stakeholders and have consulted with
them as we continue to feed the nation.
Sustainability is a key priority for us; our
Second Nature strategy is at the forefront
of every decision we make as we care
about the impact of our business on
the community and environment.
Engagement with our main stakeholder
groups is summarised on this page.
We explore further how we engage with
our main stakeholders on pages 32 to 43.
Board Activities
The key activities of our Board are
set out in the Corporate Governance
Report which includes a summary of the
key decisions made and the stakeholders
considered.
Read more on pages 64 and 65.
Sustainability
The key activities we have undertaken
to reduce our impact on the environment
can be found on pages 42 and 43.
Stakeholder
Why we engage
How we engage
What matters most to our stakeholders
How we are responding
COVID-19 specific considerations
Our People
Read more:
see page 32
Our dedicated colleagues drive
our business so it’s important
to understand what matters
to them.
We want our colleagues to feel
valued so we can achieve our
purpose together.
• Staff survey
•
“Flavour” intranet site
and newsletter
• Appraisal process
• Works councils
• Dedicated Non-Executive
Director
Customers
& Consumers
We need to understand
consumer demands in order
to create innovative products
and respond to new trends.
Read more:
see page 36
We can assess consumer
satisfaction through regular
engagement and ensure
our products are of the
highest quality.
By engaging and sharing ideas
with customers we can identify
new ways of working together.
• Key teams such as product
development, technical,
agricultural and sales will
all engage with customers
to ensure communications
are all encompassing
• Site tours and visits
• Online surveys
•
• Focus groups
• Digital platforms
and social media
In store interviews
Producers
& Suppliers
By working closely with
suppliers who share our values
and beliefs, we can focus on
food safety, technical integrity,
provenance and ultimately
produce high quality products.
Industry events and forums
•
• Sedex
• Audits and visits
• Supplier surveys
• Supplier policies
Employee wellbeing matters most, encompassing
More employees are enrolled on management
• Relocating employees
mental and physical health, happiness and
and leadership courses each year to ensure career
job satisfaction.
and personal development.
Opportunities for career and personal development
Our employee engagement scores on the staff
are very important along with the chance to learn
survey increased by three per cent this year, with
new skills.
Our colleagues appreciate the opportunity to have
their say and share ideas. They also care about
working in an inclusive and diverse environment.
particular areas of note being employee wellbeing
and Second Nature awareness.
‘You Said, We Did’ boards have been installed at all
sites to share the actions following the staff survey.
to avoid furlough
• Employee bonuses
• Working from home
• Social distancing
• Additional PPE
Consumer trends research highlights that choices
During the year we launched our ‘Your Plate,
continue to be dominated by health-conscious
options, convenience and premium products.
Sustainability is also an important consideration as
consumers focus on the overall impact of their food
Your Choice’ campaign on social media, highlighting
the nutritional benefits of eating meat. We aim
to de-polarise the plant versus meat debate and
present a balanced perspective.
choices on the environment including minimising
The Group continues to focus on new product
waste, food integrity and recycling packaging.
development to address emerging consumer trends.
• Working closely with retail
customers to meet surges
in demand
We aim to meet sustainability expectations through
our Second Nature efforts. We launched the microsite,
thisissecondnature.co.uk to increase communication
in this area.
Suppliers want continual improvement with
opportunities to innovate, grow their business
and develop our relationship.
Cranswick’s drive for continual improvement has seen
• Optimising production
our teams develop new risk assessments of suppliers
for allergens, gluten-free and product specification.
to maximise output
• Support where needed
• Rationalisation of ranges
We need to ensure raw materials, ingredients and
All our direct suppliers are registered on Sedex.
packaging are supplied at the right time to the
right place and that the supply chain is transparent
and sustainable.
We continue to undertake supplier audits to ensure
the safety, traceability, quality and provenance of the
raw materials and ingredients we use.
AHDB encourages pork consumption and helps
During the year we have contributed towards setting
• Remote support to avoid
face-to-face meetings
shape policies for pig farming. BPC sets policies for
policies that help to direct the future of the pork
the poultry industry. WRAP is focused on sustainability
and poultry industries. This included for example
and manages initiatives such as The Plastics Pact.
introducing new in shed hatching at our poultry farms
Red Tractor provides assurance that products are
where we then brought about a change in standards
traceable, safe and farmed with care and the RSPCA
to allow the process to be adopted by others in
certifies higher welfare farming systems.
the industry.
Local communities have a justifiable expectation
We have partnered with a number of organisations
• Additional food donations
such as Fareshare, through which we can feed people
• Meals for NHS workers
in need and tackle food poverty.
that businesses operate safely and sustainably.
This is especially the case with food producers;
there is a need to reduce edible food waste to
increase the amount of food that can be shared
through the community.
We have also involved ourselves in a number of projects
to provide sponsorship, education, mentoring and
employment to those who need it in our communities.
Shareholders are increasingly concerned with
We have increased our engagement on ESG matters
• Conservative cash management
environmental, social and corporate governance
and ensure we respond to enquiries we receive on
• Maintain dividend policy
• Regular dialogue
(ESG) matters and we continue to receive more
this area.
enquiries relating to sustainability.
Financial performance and commercial success
are also key considerations for our shareholders.
We provide results announcements and press releases
to ensure all Shareholders remain up to date with our
performance and results.
We work with various non-
governmental organisations
(NGOs) including Agricultural
and Horticultural Development
Board (AHDB), British Poultry
Council (BPC), WRAP (Waste and
Resource Action Programme),
Red Tractor and RSPCA. This
allows us to help set policies
and improve industry standards.
• Cranswick Directors and
Managers sit on steering
committees, groups
and boards
• Trial new standards
•
Industry events
• Digital platforms and social
media to share important
information
We produce from 16 facilities
across the UK covering multiple
towns and cities. We want to be
responsible neighbours and give
back where possible.
• Foodbank donations
• Working with local
•
schools and Universities
Involvement in local
projects
Read more:
see page 38
NGOs
Read more:
see page 39
Communities
Read more:
see page 40
• Farm open days and Norfolk
Pork Stock festival
• Charity fundraising
• Presentations
• One-to-one meetings
• Annual report
• Regular announcements
and press releases
• Visits to facilities
• AGM
• Website
Progress on our Second Nature initiatives
can be found on pages 26 to 29.
Shareholders
Our reporting should be fair,
balanced and understandable.
Read more:
see page 41
We want shareholders to
understand and believe in
our purpose and strategy so
we can demonstrate how we
create value.
30
Cranswick plc | Annual Report & Accounts 2020Strategic Report
Stakeholder
Why we engage
How we engage
What matters most to our stakeholders
How we are responding
COVID-19 specific considerations
Our People
Read more:
see page 32
Our dedicated colleagues drive
• Staff survey
our business so it’s important
to understand what matters
to them.
We want our colleagues to feel
valued so we can achieve our
purpose together.
•
“Flavour” intranet site
and newsletter
• Appraisal process
• Works councils
• Dedicated Non-Executive
Director
Customers
& Consumers
We need to understand
consumer demands in order
to create innovative products
and respond to new trends.
• Key teams such as product
development, technical,
agricultural and sales will
all engage with customers
to ensure communications
Read more:
see page 36
We can assess consumer
satisfaction through regular
engagement and ensure
our products are of the
highest quality.
By engaging and sharing ideas
with customers we can identify
new ways of working together.
are all encompassing
• Site tours and visits
• Online surveys
•
In store interviews
• Focus groups
• Digital platforms
and social media
Producers
& Suppliers
By working closely with
•
Industry events and forums
suppliers who share our values
and beliefs, we can focus on
food safety, technical integrity,
provenance and ultimately
produce high quality products.
• Sedex
• Audits and visits
• Supplier surveys
• Supplier policies
Read more:
see page 38
NGOs
Read more:
see page 39
Read more:
see page 40
Read more:
see page 41
We work with various non-
governmental organisations
(NGOs) including Agricultural
and Horticultural Development
Board (AHDB), British Poultry
Council (BPC), WRAP (Waste and
Resource Action Programme),
Red Tractor and RSPCA. This
allows us to help set policies
and improve industry standards.
• Cranswick Directors and
Managers sit on steering
committees, groups
and boards
• Trial new standards
•
Industry events
• Digital platforms and social
media to share important
information
Communities
We produce from 16 facilities
• Foodbank donations
across the UK covering multiple
towns and cities. We want to be
responsible neighbours and give
back where possible.
• Working with local
schools and Universities
•
Involvement in local
projects
• Farm open days and Norfolk
Pork Stock festival
• Charity fundraising
Shareholders
Our reporting should be fair,
balanced and understandable.
• Presentations
• One-to-one meetings
We want shareholders to
understand and believe in
our purpose and strategy so
we can demonstrate how we
create value.
• Annual report
• Regular announcements
and press releases
• Visits to facilities
• AGM
• Website
Employee wellbeing matters most, encompassing
mental and physical health, happiness and
job satisfaction.
More employees are enrolled on management
and leadership courses each year to ensure career
and personal development.
Opportunities for career and personal development
are very important along with the chance to learn
new skills.
Our colleagues appreciate the opportunity to have
their say and share ideas. They also care about
working in an inclusive and diverse environment.
Our employee engagement scores on the staff
survey increased by three per cent this year, with
particular areas of note being employee wellbeing
and Second Nature awareness.
‘You Said, We Did’ boards have been installed at all
sites to share the actions following the staff survey.
• Relocating employees
to avoid furlough
• Employee bonuses
• Working from home
• Social distancing
• Additional PPE
Consumer trends research highlights that choices
continue to be dominated by health-conscious
options, convenience and premium products.
Sustainability is also an important consideration as
consumers focus on the overall impact of their food
choices on the environment including minimising
waste, food integrity and recycling packaging.
During the year we launched our ‘Your Plate,
Your Choice’ campaign on social media, highlighting
the nutritional benefits of eating meat. We aim
to de-polarise the plant versus meat debate and
present a balanced perspective.
The Group continues to focus on new product
development to address emerging consumer trends.
• Working closely with retail
customers to meet surges
in demand
We aim to meet sustainability expectations through
our Second Nature efforts. We launched the microsite,
thisissecondnature.co.uk to increase communication
in this area.
Suppliers want continual improvement with
opportunities to innovate, grow their business
and develop our relationship.
Cranswick’s drive for continual improvement has seen
our teams develop new risk assessments of suppliers
for allergens, gluten-free and product specification.
We need to ensure raw materials, ingredients and
packaging are supplied at the right time to the
right place and that the supply chain is transparent
and sustainable.
All our direct suppliers are registered on Sedex.
We continue to undertake supplier audits to ensure
the safety, traceability, quality and provenance of the
raw materials and ingredients we use.
• Optimising production
to maximise output
• Support where needed
• Rationalisation of ranges
AHDB encourages pork consumption and helps
shape policies for pig farming. BPC sets policies for
the poultry industry. WRAP is focused on sustainability
and manages initiatives such as The Plastics Pact.
Red Tractor provides assurance that products are
traceable, safe and farmed with care and the RSPCA
certifies higher welfare farming systems.
During the year we have contributed towards setting
policies that help to direct the future of the pork
and poultry industries. This included for example
introducing new in shed hatching at our poultry farms
where we then brought about a change in standards
to allow the process to be adopted by others in
the industry.
• Remote support to avoid
face-to-face meetings
Local communities have a justifiable expectation
that businesses operate safely and sustainably.
This is especially the case with food producers;
there is a need to reduce edible food waste to
increase the amount of food that can be shared
through the community.
We have partnered with a number of organisations
such as Fareshare, through which we can feed people
in need and tackle food poverty.
• Additional food donations
• Meals for NHS workers
We have also involved ourselves in a number of projects
to provide sponsorship, education, mentoring and
employment to those who need it in our communities.
Shareholders are increasingly concerned with
environmental, social and corporate governance
(ESG) matters and we continue to receive more
enquiries relating to sustainability.
Financial performance and commercial success
are also key considerations for our shareholders.
We have increased our engagement on ESG matters
and ensure we respond to enquiries we receive on
this area.
• Conservative cash management
• Maintain dividend policy
• Regular dialogue
We provide results announcements and press releases
to ensure all Shareholders remain up to date with our
performance and results.
31
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Our Stakeholders continued
Our people
At Cranswick, we have always been proud of the people that
we employ. They are the ones who have made the Company a
success, and who continue to do so as we pursue our strategic
aims and objectives.
COVID-19
The wellbeing of our colleagues has been
our main priority throughout the pandemic.
As food manufacturers, our people have been
designated as key workers and have kept our
sites operational in an effort to continue to
feed the nation.
Communication and engagement are
fundamental throughout these unprecedented
times and we have regular update meetings
across all levels to address any concerns our
people have, and to ensure that any COVID-19
related information is communicated to them
in a comprehensive manner. We recognise
the physical health effects of contracting
COVID-19, but we also understand the negative
impact the pandemic could have on our
employees’ mental health and wellbeing and
therefore we have made available the support
of on-site third party counsellors to our staff,
alongside our own Mental Health First Aiders.
We are also supporting our office staff,
many of whom are working from home in line
with government guidelines, through regular
updates and communications to ensure
that they do not feel isolated. The Group’s
well-developed IT and communications
infrastructure has been fundamental in allowing
our colleagues to continue to perform their
roles efficiently and effectively from home.
We have performed risk assessments across
all of our sites in order to ensure that we
are taking the necessary precautions and
preventative actions to protect our staff.
We have implemented additional measures
including increased cleaning and hygiene
procedures, protective screens, social
distancing where possible and the availability
of visors. We also continue to work with the
relevant regulatory bodies to ensure our
responses are appropriate and timely.
People strategy
Continuous learning and development are
central to our values and we have a career and
talent pipeline that offers both lateral moves
as well as fulfilling a comprehensive succession
plan. We value and care about each of our
employees in the same way that we did when
the Company was started in the 1970s and
32
despite our numbers growing we will continue
to maintain this ethos which sets us apart from
our competitors.
Across the Group we have nearly 12,000
colleagues – each and every one of them
is critical to helping our business thrive.
We recognise the importance of giving our
colleagues a greater voice, especially as
we look to build more inclusivity into our
strategic decision-making. All employees are
encouraged to express their views via works
councils, union membership and site-specific
committee groups, but beyond this, initiatives
like our Changemaker programme aim to tap
into their aptitude for breakthrough ideas
and creative problem-solving.
Employee Engagement
Each year we undertake a Group-wide staff
survey and the latest survey in October
2019 achieved an 83 per cent response rate.
Highlights included corporate citizenship and
leadership as well as our mental health and
wellbeing initiatives. Survey findings are used
to shape our ongoing staff engagement drives,
which are communicated through various tools
such as ‘You Said, We Did’ boards installed at
each of our sites and via our monthly staff
newsletter and intranet portal ‘Flavour’.
We are in the process of rolling out a new rewards
and benefits package which among other things,
includes paid leave for voluntary work, employee
discounts and Christmas vouchers.
During the year, in accordance with the 2018
Corporate Governance Code, Tim Smith was
also appointed as the Group’s designated
Non-Executive Director to enhance employee
engagement.
Securing our Workforce
Recruitment and retention has been a priority
for us this year as we look to secure our
colleagues against a backdrop of national
shortages in people and skills. Our Group
average employee turnover rate has decreased
from 2.09 per cent in the previous year to
2.01 per cent. We have had to address the
ongoing uncertainties presented by Brexit –
especially for our EU workers.
Our EU Settlement Scheme has now been
rolled out across every site to ensure we are
in a position to support all eligible staff who
wish to continue to work in the UK. We are
also working with the Migration Advisory
Committee to address any challenges that
future immigration curbs may bring to the
UK meat processing industry.
Professional Development
Our training and development strategy forms
the backbone of our recruitment and retention
drive, enabling us to deliver what’s required
in terms of workforce capabilities, skills,
competencies and succession planning.
We remain focused on creating leaders of the
future and this year 275 people went through
some form of leadership and/or management
training. As a result, our internal succession
rates continue to increase with several
individuals moving into more senior positions
and directorships.
We are also investing in and developing
young people through our apprenticeship and
graduate schemes to support our long-term
succession planning. We have over 100
apprentices from Level 2 (GCSE) to Level 7
(Degree) working across several disciplines,
with a strong focus on butchery and engineering.
In 2019 our Hull primary processing site won
Best Butchery Apprenticeship Scheme from the
Institute of Meat (IOM). Two of our apprentices
also picked up IOM awards, including Best
New Apprentice.
Our graduate programmes continue to be
highly effective, with nine new graduates placed
this year across Group locations. Since 2013
we have recruited 30 graduates and found
permanent roles for them all – some of our
earlier recruits are now in Senior Management
positions. We have also established an
additional commercial graduate scheme,
geared towards our sales and marketing
functions, as we look to take the business
forward through succession planning within
our commercial teams.
In addition to this, we are working with Harper
Adams University to offer agriculture and food
marketing scholarships to students wanting
to kickstart their career in the agri-food sector.
This year we have committed to fund two
students throughout their studies at University,
as well as a guaranteed 12 month placement
within our Marketing and Agriculture teams.
Diversity and inclusion
Our workplace culture strives to be a diverse
and inclusive one, in which we generate equal
opportunities for everyone regardless of gender,
age, race, disability or sexual orientation. There
are no differences in the pay structure for males
and females performing the same or similar
roles. Our 2019 Gender Pay Gap report can be
found on the Group’s website www.cranswick.
plc.uk. Our gender breakdown can be found
on page 73.
Cranswick plc | Annual Report & Accounts 2020Strategic Report 33
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Our Stakeholders continued
We continue to champion diversity in the
workplace, reflected by our workforce which
encompasses 52 nationalities. We remain
vigilant when it comes to eliminating modern
slavery and human trafficking from our supply
chains and business, and our anti-slavery
policy can be found on the Group’s website:
www.cranswick.plc.uk. We also use the
Sedex database to help us manage supplier
performance on business ethics, see
“Supplier Performance and Risk’ on page 38.
Employee wellbeing
The mental and physical wellbeing of our staff
is key to our understanding of how we manage
our workforce. We continue to be sector-leading
on mental health issues; this year we became
a signatory of the Time to Change employer
pledge, joining over 1,400 organisations working
to change the way people think about and act
on mental health issues.
We have trained Mental Health First Aiders
at each of our sites and to date have recruited
109 employees to become mental health
champions. Our champions will help us drive
positive change internally within the business
as we look to tackle the stigma of mental illness.
Mental health and physical wellbeing are often
interconnected, and all of our sites are now
affiliated with gyms to encourage a healthy
work-life balance.
Health & Safety
We are halfway into our five-year Health &
Safety (H&S) strategy and continue to make
excellent progress in reducing risk and accident
rates. Over the past 12 months we have been
working hard to embed our H&S strategy at
farm-level and have conducted H&S verification
audits at new sites to bring them in line with
our strategy.
Our Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations (RIDDOR)
increased slightly year-on-year driven by
acquisitions and expansion work across our
sites. Our RIDDOR frequency rate per 100,000
hours worked increased marginally to 0.37 from
0.36 in 2019, but has fallen 32.7 per cent since
2018. Our Total Accident Frequency Rate per
100,000 hours worked continues to decrease
and fell by 5.8 per cent compared to the
previous year.
Performance is tracked through our business
analytics platform, enabling hotspot targeting
and comparison of site-by-site data. Increasing
the granularity of this information means
we can link reduction targets, share best
practice and engage in standardised reporting.
Annual H&S audits are undertaken at each
site, followed up by a 12-month action plan.
We continue to upskill our H&S staff. Our Group
H&S Manager is now a Chartered Member
of the Institution of Occupational Safety and
Health (IOSH), which is industry-leading for
our sector.
34
This year the Group engaged Deloitte LLP to
review the robustness of key Health & Safety
processes. Overall, the review concluded
that no significant issues were noted, rather
opportunities existed to further enhance
existing ways of working; the most important
of which was ensuring a consistent approach
is adopted across the Group.
Under Second Nature, our target is for all sites
to be accredited to the ISO45001 Health and
Safety management system by March 2021.
Our Valley Park site in Barnsley has become
the first to achieve this.
Innovative thinking
We have partnered with leading Universities
to work collaboratively with students on current
challenges we face and how they can assist
us to deliver solutions.
The Food Innovation Consultancy challenge
is a project with Sheffield Hallam University,
whereby we have asked Food Science students
to think of new concepts to expand our retail
‘out-of-home’ lunch product range. Through
a mixture of site visits, colleague engagement
and study sessions, the students will present
their ideas to members of the business.
A group of students from Leeds Beckett
University are currently undertaking a thorough
sustainability study at our largest cooked meats
facility, focusing on water waste, energy waste,
food waste and recycling. The students will
have an opportunity to present their findings
and voice their opinions on how current
practices can be enhanced, ultimately making
recommendations as to how we can improve
our waste management practises.
We want to encourage students to apply their
skills and thinking in a real working environment,
while also benefiting the business through new
ideas and concepts from those in academia.
Targeting zero harm
Second Nature will drive our H&S
performance further as we look to
introduce a ‘Target Zero’ culture. As well
as targeting zero accidents, all sites will
have accident reduction programmes in
place supported by effective leadership
so they can take a proactive approach
when it comes to managing risk.
The benchmark gap
Benchmarking our H&S performance
against our peers remains challenging
due to a lack of comparable data. We are
working with the British Meat Processors
Association and other industry bodies
to try and encourage more transparent
accident data reporting between
members.
Cranswick plc | Annual Report & Accounts 2020Strategic Report Georgina Corbett, Butchery Academy Area Leader
Inspiring the next Generation
Georgina joined the business as a Marketing
graduate in 2017 through the Graduate
Scheme and throughout her journey
expressed a strong interest in working
within our Operations function. Georgina
now manages the Butchery Apprenticeship
Academy at our largest processing facility,
managing cohorts of Butchery Apprentices.
Her desire and passion to achieve was easily
recognised, which has enabled Georgina
to progress quickly at such an early stage
in her career.
across every aspect of the business so they
can learn about different roles and decide
which one suits them best. Here are just
a few of the things our young people are
saying about working at Cranswick:
“ The graduate scheme is people-focused
and tailored to help you achieve your
full potential.”
“ People are really willing to give you their
time. After being at Cranswick for only three
months, I was proud of the opportunity
to present to the Directors.”
“ It’s the type of company that if you work
hard and put the time in, doors will open.”
More and more young people want to work
for us, attracted by our values and vision.
With sustainability embedded in every job
function, the opportunity for them to make
a difference is clear. Those who enrol on
our two-year graduate scheme get to work
The graduate scheme is people-
focused and tailored to help you
achieve your full potential.
35
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Our Stakeholders continued
Customers and
Consumers
Our Second Nature platform gives us the perfect opportunity
to showcase the work we are doing to meet demands around
food integrity and product innovation in a more transparent and
engaging way. This will strengthen our customer relationships
and ensure we can meet the changing needs of consumers.
Who we serve
Around 72 per cent of our revenue is generated
from our retail customers, primarily through
their own-label products in premium and
super-premium tiers. We have a broad retail
customer base, selling products into each of
the top four UK multiple grocers as well as the
premium grocery and discounter channels.
We continue to consolidate our presence in
the food-to-go sector and in the food service
sector. Many of our products are listed by
UK hotel, pub and other food service outlet
chains. However, only 5 per cent of our revenue
is generated from this sector, limiting our
exposure to the impact of COVID-19 in this area.
With a significant increase in overseas sales,
particularly to the Far East, our export sales
have contributed to a larger proportion of
our total revenue and we continue to build
relationships with our export customers.
We work collaboratively with our customers to
develop products that address current trends.
A number of different teams are responsible
for engaging with customers on different
topics including our new product development,
technical, agricultural and marketing teams.
This ensures the best product is created,
meeting exacting standards.
We also engage frequently with consumers
through regular focus groups, in-store
interviews and online surveys. This year we
have launched more content on social media.
Our campaign ‘Your Plate, Your Choice’
highlights the nutritional benefits of meat,
particularly pork and chicken.
Future fit farming
The expansion of our agricultural operations
is enabling us to work more strategically with
customers by investing in cutting-edge research,
paving the way for future collaborations in
the retail food market. For example, our
Second Nature work to measure the carbon
footprint of our animals and farms is attracting
interest among retailers keen to apply better
sustainability metrics to the food they sell.
As customer and consumer expectations
on meat provenance continue to rise, we
are working with universities and other
establishments to pilot breakthrough
technologies that could improve carcass
traceability and rapid blood diagnostics
for infectious disease control.
One of our Agriculture Managers is a member
of Tesco’s supplier R&D committee and also
sits on the judging panel of Tesco’s Agri T-Jam,
an annual competition that recognises and
rewards agrifood ideas for improving supply
chain efficiency, sustainability, health
and welfare.
Product innovation
Our proactive approach to product development
means we can respond swiftly to market trends
as they emerge. This Christmas we launched
a ‘chicks in blankets’ lower calorie alternative
to the traditional ‘pigs in blankets’ product,
and expanded our ‘Best Ever’ range with a
premium retailer.
We continue to work closely with customers
to improve the taste, texture, flavour and
appearance of our products.
Leading on pork
provenance
We are working with Queen’s University,
Belfast to test a new technology in our
Ballymena site that can analyse each
pig we process to determine specific
measurements relating to meat quality,
such as species type, genetics and
method of rearing. The samples we
collect during this trial will be used to
build a database to help combat fraud
in the pork sector.
Safeguarding integrity
We have strengthened our supplier audit
and compliance work to assure the safety,
traceability, quality and provenance of our raw
materials. This year we established a formal
platform that will enable us to work more
closely with key suppliers to mitigate risks
relating to food safety, fraud and animal welfare.
More detail on our technical compliance and
auditing process can be found in the producers
and suppliers section on page 38.
As food safety requirements become more
stringent we have put in place comprehensive
risk mitigation measures, many of which go
beyond the requirements of the latest BRC
Food Safety global standard. We risk rate
suppliers on a points-based system and
continue to raise awareness of the importance
of food integrity to customers and consumers
through our Second Nature platform and
‘What Makes my Products Safe’ campaigns.
We are pleased to report that we had no
product recalls or market bans during the year
which further demonstrates our commitment
to food safety.
36
Cranswick plc | Annual Report & Accounts 2020Strategic Report 37
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Our Stakeholders continued
Producers and
Suppliers
We care deeply about where our ingredients come from and
how our products are made. By working closely with suppliers
who share our beliefs, we can build a fairer and more transparent
food system that benefits everyone.
Responsible sourcing
As demand for food integrity and provenance
grows, it is important that our suppliers apply
the same principles of value, transparency
and respect as we do. From the ingredients
we source, through the meat we produce to
the packaging we use in making our products,
we are constantly looking for new ways of
working with suppliers to innovate and add
value whilst demonstrating full compliance.
We approve and control 775 raw material
suppliers, and 7,577 products and associated
specifications through our Group Technical
Services (GTS) team. Suppliers are approved
through audits carried out by GTS or through
independent third party audits such as the
Supplier Ethical Data Exchange (Sedex) and
BRC Global Standard for Food Safety.
Supplier performance and risk
We monitor supplier performance through
Foods Connected, our supplier management
system, undertaking vulnerability risk
assessments for every supplier and ingredient.
All of our suppliers remain fully compliant with
our Foods Connected requirements.
We have formatted our Foods Connected
system to help automate risk assessments
relating to food fraud as we look to increase
vigilance in this area. We are also using Mintec
food commodity price data and insights to
track prices, trends and market movements to
support this work. This type of horizon scanning,
combined with our supply chain mapping work, is
enabling our GTS team to gather more granular
data and intelligence using software tools.
We risk rate suppliers on a points-based
system using seven criteria based on food
safety. This year we have developed new risk
assessments for allergens, gluten-free and
speciation. We have also established a formal
platform that will enable us to work more
closely with key suppliers to mitigate risks
relating to food safety, fraud and animal welfare.
38
Supply chain
risk management
The rise in climate and animal activism is
presenting new risks to agricultural supply
chains. Over the past 12 months, we have
established a platform to engage more
deeply with our suppliers on issues
relating to food safety, fraud and animal
welfare. We have issued supplier guidance
notes highlighting key areas to focus upon
and continue to engage with stakeholders
to influence industry standards and policy
to mitigate these risks.
We have a code of practice in place
outlining guidelines for best practice and
site security across farms. This will be
supported by staff training, and we have
set up a whistleblowing number for our
in-house farming operations.
During the past 12 months, 242 supply chain
audits were carried out to assure the safety,
traceability, quality and provenance of the raw
materials we use. We continue to prioritise and
drive ethical standards within our supply chains.
Currently 707 (91 per cent) of our 775 total
suppliers are registered on Sedex, including all
529 direct suppliers and more than half (72 per
cent) of indirect suppliers. This represents an
improvement on the prior year as we continue
to work closely with our suppliers.
We also undertake our own ethical verification
audits. Our expectations of our suppliers are
laid out in our Technical Conditions of Supply
and can be found at www.cranswick.plc.uk.
Supply chain audits
242
Suppliers approved
775
Site compliance
During the past year, a total of 738 audits were
carried out across the Group. These comprised
GTS, third party and customer audits. GTS
audits are carried out internally across our sites
and demonstrate our commitment to high
standards and compliance.
Fifteen production facilities were audited
against Issue 8 of the BRC Global Standard for
Food Safety during the year. Eight of our sites
achieved the highest AA+ rating, up from six
the previous year. Four sites were awarded A+,
up from three the previous year. Two sites
achieved an AA rating, including our new
poultry facility at Eye, Suffolk, and one site was
awarded an A rating.
We are especially proud that three of our sites
– Pastry, Fresh Pork Hull and Cooked Poultry –
have been rated a Gold status supplier by M&S
this year. Multiple sustainability indicators are
factored into the overall rating, making Gold
status extremely hard to achieve.
The GTS team continues to invest in upskilling
staff across our sites to ensure we maintain the
highest standards of site compliance, reporting
and analysis. Representatives from the team
also sit on various meat industry technical
committees to help inform sector thinking
on standards, legislation and welfare issues.
Cranswick plc | Annual Report & Accounts 2020Strategic Report NGOs
Animal Welfare
Our work on animal welfare is industry-leading
and sets us apart from our peers. We are one
of two Business Benchmark on Farm Animal
Welfare (BBFAW) Tier One recognised
meat processors, just one of six companies
worldwide to have achieved this rating. We are
extremely proud to have received this accolade
for the fourth year running. More information
can be found at: www.bbfaw.com.
Many of the pigs supplied to us are reared to
the higher welfare standards associated with
outdoor breeding methods. Our acquisition this
year of Packington Pork will further strengthen
our position as a high welfare pork supplier.
For more details see page 13. Approximately
30 per cent of 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 assured
welfare standard.
The balance of pigs processed are reared
indoors in compliance with Red Tractor/BMPA
Quality Assured Pork welfare standards. All of
our chickens are reared indoors in compliance
with Red Tractor welfare standards.
We continue to work with these assurance
schemes to improve welfare outcomes
wherever possible.
All of our poultry sheds have fresh bales,
perches with toys and windows to allow in
natural light. LED blue lighting is installed as
standard in both our poultry sheds and pig
lairages to reduce stress levels. Dietary
supplements are given to our animals to
improve nutrition and we emphasise the
importance of farm hygiene such as water
cleanliness at all our sites to optimise livestock
health and wellbeing.
We continue to promote best available
techniques in commercial farming welfare
practice and antibiotic use, working in
partnership with NGOs, retailers and
universities. We are progressing in-shed
hatching trials across half of our chicken
farms to improve the wellbeing of newly
hatched chicks and we are implementing
free farrowing systems to allow more space
for breeding sows. We are also working with
our European pork supply base to improve
overall welfare standards.
One of our long-term objectives is to reduce
and avoid antibiotics for prophylactic use.
We are developing best practice guidance
on antibiotic use and adopting a range of
alternative management and health control
strategies. Our own pig farms have reduced
antibiotic usage by over 60 per cent since 2015.
Our poultry business has reduced usage by
ten per cent in the last year. Antibiotic usage in
our herds and flocks is well below the industry
target for 2020 set by Responsible Use of
Medicines in Agriculture.
We are also working with FIIA (Food Industry
Initiative on Antimicrobials) which brings
together retailers, manufacturers, processors
and food service companies to promote
and support responsible antimicrobial use.
Their policy is formulated to reduce antibiotic
use without compromising standards of
animal welfare.
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
EYE
100% within 25 miles
Sourcing
sustainable soya
We are looking to move towards certified
sources of soya for our animal feed and
are a member of the UK Roundtable on
Sustainable Soya. Our goal is to source
from verified zero deforestation areas by
2025. More information on our soya policy
can be found at: www.cranswick.plc.uk.
Our vertically integrated model helps to reduce
the distance travelled from farm to processing
facility for our animals, resulting in welfare
and food mile reduction benefits. Our livestock
transportation distances from farms to
processing sites are shown at the bottom
of this page.
Farming with integrity
We are running several farming initiatives
to help improve our disclosure and reporting
efforts as we seek to provide ever greater
clarity on the provenance of our meat. These
are primarily communicated through our new
online Second Nature platform, which is
accessible to everyone.
One of our aims is to deliver a lower carbon
footprint rotation while maintaining the highest
standards of quality. At Wayland Farms we are
working with other food producers to improve
soil health. Our outdoor pig breeding units have
increased soil organic matter by an average
of 10 per cent over two years, enabling us
to sequester carbon and cycle CO2 by an
additional eight tonnes per hectare.
Wayland is also applying science-based
management plans to pig breeding units to
better manage water quality and promote
biodiversity. We have been proactive in sharing
this practice to other outdoor pig producers
and land users via industry events.
We were one of the first outdoor pig producers
to map our carbon footprint back in 2017.
We are now developing a web portal to enable
other producers to understand their carbon
impacts, providing them with guidance and
advice. In time, this will give us greater visibility
of our supply chain impacts.
We are working to end deforestation in our
supply chain by becoming more self-sufficient
with our animal feed and less reliant on
imported Soya. We have two feed mills, one
for poultry and one for pigs. This allows us to
formulate our own feed products to optimise
diet and protein levels, reducing the build-up
of ammonia and other excessive nutrients in
the stomachs of our animals. This keeps them
healthier while reducing their emissions.
39
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Our Stakeholders continued
Communities
We want to create a better life for those communities that are
touched by our business. We are amplifying our engagement
and support, particularly for the most vulnerable in society,
using Second Nature as a springboard for further action.
COVID-19
The impact of the COVID-19 outbreak is
unparalleled and we continue to supply the
nation with food to meet the unprecedented
levels of retail demand.
At times of great need our sites continue to
support local charities with funding and food
donations. This work has never been more
crucial and it’s essential that we continue to
support those in need.
Teams from across our sites came together
to help make 800 sandwiches per day for NHS
workers at two hospitals in Hull. Butter was
donated from our Pastry site, sandwich fillings
were provided from our Cooked Meats site
and we collaborated with Jackson’s Bakery
who provided bread. We are very proud of
our colleagues who came together to support
the NHS at such a critical time. Meat hampers
were delivered to those over the age of 70
who struggled to get hold of food.
Community Engagement
Across all our locations throughout the year
we work with various organisations to provide
sponsorship, education and mentoring whilst
raising awareness of the food industry. In Hull,
we have partnered with local colleges and
universities to offer students career advice
through our World of Work course. We have
recently partnered with Hull College where
we can provide opportunities for students
who are looking to undertake Industry
Placements within IT, HR and Business
Administration functions.
It is important that our engagement efforts
remain inclusive. We have sponsored a young
mothers unit at Bell Academy: a group of
schools that work with young people who have
been excluded from mainstream education.
The unit provides childcare facilities for young
mothers so they can attend classes.
While uncertainty remains as to when
large-scale outdoor events will safely be able
to take place again, we continue to partner
with the Freedom Festival, the UK’s leading
International Arts Festival. The event has
40
become a prime opportunity for us to educate
festival goers on food poverty and food waste,
two priority commitments under Second
Nature and on which we are leading as
a meat producer.
Charity Work
Across the Group we support a number of
charities, many of which are nominated by
our employees. These include the Bluebell
Children’s Hospice, Yorkshire Air Ambulance
and Macmillan Cancer Support. We place a
strong emphasis on staff volunteering to help
raise money for good causes, with several
of our sites running local initiatives.
In Milton Keynes we continue to work with food
donation platform Plan Zheroes. In Hull we work
with food and fuel poverty charity EMS and
also Fareshare. Our Gourmet Pastry site is also
involved in a local community fridge initiative.
This year we provided food for army veterans
at Middleton Barracks in Hull, which was
donated to veteran charities.
We continue to support GroceryAid, donating
food for its annual event which in 2019 raised
a record £113,000 for the charity. Cranswick
has two members of the management team
on the GroceryAid committee, helping to
steer the charity and increase awareness of
its work. As a result of our focused input we
have recently been awarded the GroceryAid
supporters Gold Award.
A positive force for change
We have recruited over 1,500 Second Nature
Changemaker volunteers from across our sites
to help inform our thinking on how we can make
an even deeper contribution.
Each Changemaker is personally connected to
the issues they want to resolve, whether that’s
fighting hunger, ending food waste or winning
the war on plastic. This year we hosted a
Changemakers volunteer day in which we
planted 500 trees to help regenerate green
spaces across Hull as part of the ‘One Hull of
a Forest’ initiative.
Fighting hunger
and waste with
100,000 meals
Improving access to healthy, nutritious
food is a key aim under Second Nature.
Since 2017, we have provided 100,000
meals to feed people in need through
our partnership with FareShare.
Any surplus meat products we generate
are redistributed via FareShare’s regional
centres in Hull & Humber and Yorkshire.
The products are then delivered to
various food charities including homeless
hostels, school breakfast clubs, domestic
violence refuges, and older people’s
lunch clubs.
This work is also helping our factories
identify new ways to drive food waste up
the hierarchy. We used to send sausage
meat left at the end of a production run
to anaerobic digestion, but we realised
we could turn this residual meat into
sausages to help feed hungry mouths.
We accessed FareShare’s Surplus
with Purpose fund to help cover the
operational and labour costs of piping
the residual meat into casings before
packaging, labelling and freezing it.
This action alone enabled FareShare
to scale up its impact by sending enough
sausages to help create over 80,000
additional meals.
As a food producer, we are constantly looking
for ways to align our people, products and
partnerships to help eliminate hunger whilst
eradicating food waste. On a national level we
work with the Trussell Trust, FareShare and other
redistribution charities to ensure our surplus
food products reach those most in need.
In 2018 we launched the Hull Food Save Project
to tackle food poverty in Hull. We teamed
up with a number of charities including EMS
Yorkshire, OLIO, FareShare and Hull Food
Partnership to create a major food
sharing network.
In the first year, we provided 22,308 meals and
prevented 9,369kg of food from going to waste.
Inspired by the success of this project, one
of our Changemakers – a divisional managing
director – has since become a trustee with EMS.
We continue to support these charities in other
ways to scale up the impact of their work. Our
sites provide meat to the EMS Freedom Foods
ready meals project, helping to deliver around
160 fresh meals each week via community
fridges across Hull. Each meal contains enough
food to feed a family of four.
Cranswick plc | Annual Report & Accounts 2020Strategic Report 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.
Individual shareholders
The Group has a significant number of
individual Shareholders many of whom
have been Shareholders for many years.
The Group engages with individual
Shareholders through our website and at the
Annual General Meeting when a presentation,
similar to the presentation made to institutional
Shareholders, is made to those attending.
The Company Secretary also coordinates
communications with individual Shareholders
to make sure we respond appropriately to
individual matters raised in conjunction with
our registrars, Link Asset Services, where this
relates to matters regarding shareholdings.
Institutional shareholders
The Group engages with institutional
Shareholders through regular meetings.
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. The
Chairman, Chief Executive and Finance
Director also discuss governance and strategy
with major Shareholders from time to time. The
Senior Independent Director and Committee
Chairs are also available for direct meetings
with Shareholders where required. Significant
matters relating to the trading or development
of the business are disseminated to the market
by way of Stock Exchange Announcements.
WAYS WE ENGAGE WITH SHAREHOLDERS
AGM
Annual Report
Press Releases
Results Announcements
Website
The AGM will take place on Monday 17 August 2020 at the Company’s registered office, Crane Court,
Hesslewood Country Office Park, Ferriby Road, Hessle HU13 0PA at 10.30 am. Unfortunately, due to restrictions
imposed in connection with the COVID-19 pandemic this year’s AGM will simply be functional, attended only by
the minimum number of shareholders required to form a quorum. In accordance with the UK’s social distancing
measures shareholders are prohibited from attending in person. However, we will be making presentations
available through our website and an online Q&A to keep shareholders informed about the Group and to
enable them to ask questions. We encourage shareholders to vote by proxy on all resolutions proposed.
We publish our Annual Report & Accounts each year which contains a strategic report, corporate governance
section, financial statements and shareholder information. The report is available in paper format and online.
We encourage Shareholders to opt for our online format to help reduce the amount of paper we use.
We issue press releases for all substantive news relating to the Group’s financial and operational performance,
which can be found on our website at www.cranswick.plc.uk
We ordinarily release full financial and operational results at the interim and full year stage in November and
May respectively. (This year as a result of restrictions imposed in consequence of the COVID-19 outbreak
we required additional time to complete our audit which resulted in our full financial year results being released
in June). The Group also releases a trading update at the first and third quarter with reduced disclosure.
The interim and full year results are accompanied by presentations by the Executive Directors, which are
also available on our website.
Our website (www.cranswick.plc.uk) is regularly updated and contains a wide range of information relating to
the Group. The Investor Section includes our investor calendar, financial results, presentations, Stock Exchange
Announcements and contact details. Shareholders can make enquires through our website which the Company
responds to promptly.
41
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Environmental performance
Reducing our
environmental
impact
We continue to reduce our environmental impacts by using
natural resources as efficiently as possible. Our long-term aim is
to put more back into the environment than we take out and this
year we have established a new set of ambitious goals.
Net Zero
Through Second Nature we are taking a leading
position on climate for our sector. We have
set a goal of reaching net zero greenhouse
gas (GHG) emissions across the whole of our
operations by 2040. This is aligned with the
National Farmers Union’s net zero 2040 target
for British agriculture, and will ensure we play
our part in contributing to the UK’s ambition
of net zero by 2050.
Achieving net zero will mean our activities
result in no net impact on the climate from
greenhouse gas emissions. To drive the level
of action needed we have committed to setting
a Science-Based Target (SBT). Our SBT will
be in line with efforts to limit global warming
to 1.5°C.
We are also aware of the increasing importance
of sustainability reporting. Going forward we
will move towards reporting against the Meat,
Poultry & Dairy Sustainability Accounting
Standard published by the Sustainability
Accounting Standards Board.
Carbon
We measure our overall environmental
performance by our carbon footprint profile
which includes Scope 1 and Scope 2 GHG
emissions. This year we achieved our goal
to reduce our relative carbon footprint by
30 per cent by 2020 (against a 2010 baseline)
and have set a new target to halve our energy,
waste and water related emissions by 2030.
We have reduced our carbon footprint by
switching to 100 per cent renewable grid
electricity for all our sites in 2018. Our latest
certification of the origin of our electricity
supply shows our renewable standard fuel mix
consists of 69.1 per cent solar, 21.3 per cent
hydro, 7.3 per cent thermal, 1.5 per cent
anaerobic digestion and 0.8 per cent wind.
We continue to improve our refrigeration
systems to use ammonia or CO2 rather than
F-Gas in order to reduce our carbon footprint.
£3.0 million has been spent in upgrading our
refrigeration at our Hull Fresh Pork site to create
further efficiency savings.
We plan to install Combined Heat & Power
(CHP) plants across more of our sites based
on successful CHP installations at our Milton
Keynes and Hull Fresh Pork facilities. Feasibility
studies are underway to determine the
Environmental performance data
2019/20
2018/19#
Scope 1 emissions (tonnes CO2e)
Scope 2 emissions (tonnes CO2e)
Total scope 1 and scope 2 emissions (tonnes CO2e)
Green Tariff (tonnes CO2e)
Total annual net emissions (tonnes CO2e)
Relative carbon footprint (tonnes CO2e/sales tonnes*)
Absolute energy use (kWh million)
Energy intensity (kWh/sales tonnes*)
Absolute water use (m3 millions)
Water intensity (m3/sales tonnes*)
66,204
38,241
104,445
(31,482)
72,963
0.11
299
316.57
1.67
1.77
59,757
39,011
98,768
(30,383)
68,385
0.12
286
340.85
1.45
1.73
Sales tonnes includes intercompany sales.
*
# Prior year figures have been restated to reflect the revised basis on which data has been recorded in the current year.
42
Reduction in energy intensity
(kWh/sales tonnes)
2019/20
2018/19
316.57
340.85
practicality of a CHP plant at each site. For
a typical site, CHP represents a 50 per cent
saving on our current energy spend and hence
lowers our carbon emissions.
The majority of our measured GHG emissions
come from electricity and gas, but our livestock
also account for a significant amount and we
are working to further quantify those impacts
as part of our Second Nature climate mitigation
work. This includes scaling up carbon footprint
assessments of all our farms and livestock.
We have undertaken a new carbon footprint
assessment of our Wayland Farms operation
to update our estimate of the carbon footprint
of our pigs at each stage of their development.
We achieved a B-rating for carbon performance
per finished pig (3.31 kg CO2e/Kg LW), better
than the average B-rating (3.34 kg CO2e/Kg LW)
for our industry.
Energy
Increasing the energy efficiency of our
operations and products remains a priority,
and to help us do this twelve sites are now
accredited to ISO50001. Our overall energy
intensity decreased during the year by 7.1%.
We have installed sub-metering on all new
builds and significant site extensions to
improve our buildings management systems.
We have switched to LED lighting for 75 per
cent of our operations and will reach 100 per
cent by the end of the next financial year in
order to reduce our electricity use for lighting.
As well as reclaiming heat generated from our
operations through CHP plants to reduce
heating and cooling demands, we are exploring
the potential to install solar panels and wind
turbines at some of our sites.
Reduction in energy intensity
7.1%
Cranswick plc | Annual Report & Accounts 2020Strategic Report Waste
Our Second Nature pledges demonstrate our
commitment to making absolute reductions in
food waste and plastics across our value chain.
Read more in ‘Phasing out plastic’ and ‘Getting
granular on food waste’ on this page.
We have already halved food waste across the
business, well ahead of our target of doing so
by 2030. In the current financial year, our food
losses and waste accounted for 0.5 per cent
of total tonnes sold, down from 1.2 per cent
in 2017/2018.
We have also removed 1,038 tonnes of plastic
across our operations since 2017 in line with
our plastic commitments.
Water
Our water usage has increased year-on-year
reflecting additional hygiene measures in
response to exacting technical standards.
We targeted a 20 per cent reduction in water
intensity by 2020 (against a 2008 baseline) and
we exceeded this target as our water intensity
has actually reduced by 44 per cent. We are
looking to conserve and reuse water
where possible.
Our new poultry site in Suffolk has been
designed to be more efficient in terms of
water usage. The site also features a rainwater
harvesting system and an effluent treatment
plant for waste water recycling.
On a wider level, we are a signatory of the
Courtauld 2025 Water Ambition partnership,
working to improve water efficiency in key
sourcing areas to help reduce water stresses and
return water back to communities and nature.
Getting granular on food waste
We were the first meat manufacturer
to publish baseline food loss and waste
figures in the public domain. Our edible
food waste accounts for just 0.5 per cent
of tonnes sold and we remain on track
to become a zero edible food waste
producer by 2030.
We have mapped out our food loss and
waste hotspots to understand where
and why we are wasting food. We have
identified that our edible food loss and
waste comprises raw and cooked meat,
salt and cure, flour, pastry and vegetables.
Most of this waste occurs during production
due to human error such as spillages,
process issues and equipment failures.
We are taking action to resolve these
issues through a combination of investing
in innovative processing techniques to
reduce wastage and increasing staff training.
Our Waste Warriors programme is central
to this, enabling us to drive action on the
shop floor. Tesco recently recognised us as
a supplier taking significant action on food
waste – something we are very proud of.
Phasing out plastic
Since 2017 we have removed more than 1,038 tonnes of plastic from our
business and are on track to halve our plastic usage by 2025. This year we
eliminated PVC films from all of our food packaging, switching to more
sustainable alternatives such as PET.
We have invested in new machinery to manage the transition from non-recycled
to recyclable materials. We have phased out the use of black plastic and all of our
preformed food trays now contain a minimum of 65 per cent recycled content.
Going forward, in line with our Plastics Pact commitment, we are working
towards all of our plastic packaging being fully recyclable by 2025 and are
working with our customers and suppliers to achieve this. We are also
undertaking trials on substitute packaging materials using barrier technologies
that can increase shelf life to reduce food waste. Another area we are exploring
is the potential to return food packaging to stores for recycling where packaging
can’t be easily recycled at home.
Tones of plastic removed
1,038
43
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Operating and financial review
Strong financial
and strategic
progress
Revenue and Adjusted Operating Profit
Revenue
Adjusted Group Operating Profit*
Adjusted Group Operating Margin*
£1,667.2m £1,437.1m
£92.3m
6.4%
£105.1m
6.3%
+16.0%
+13.9%
-12bps
+13.0%
2020
2019
Change
(Reported)
Change
(Like-for-like*)
*See Note 32.
Operating review
Impact of COVID-19
Given the timing of the virus outbreak in the UK,
the Group’s results to 28 March 2020 have not
been significantly impacted by COVID-19.
Revenue
Reported revenue increased by 16.0 per cent
to £1,667.2 million. Like-for-like revenue of
£1,623.8 million, excluding the contribution
from acquisitions in the year, increased by
13.0 per cent, with corresponding volumes
up by 3.4 per cent. A combination of new
contract wins, strong export demand, an uplift
in poultry revenue following the successful
commissioning of the new Eye facility and pass
through of higher pig prices contributed to
robust revenue growth across all categories.
Total export revenue increased by 91.9 per cent
year-on-year with Far East export revenue
122.0 per cent ahead. Total export revenue
represented 11 per cent of total Group revenue,
up from 7 per cent a year earlier.
Adjusted Group operating profit
Reported adjusted Group operating profit
increased by 13.9 per cent to £105.1 million, with
adjusted Group operating margin just 12 basis
points lower at 6.3 per cent despite absorbing
start-up costs during the commissioning phase
of the new Eye poultry facility and modest
COVID-19 costs in quarter 4.
Category review
Fresh Pork
Fresh Pork includes the three primary processing
facilities and associated farming operations and
represented 34 per cent of Group revenue.
Like-for-like Fresh Pork revenue increased by
22.3 per cent reflecting strong wholesale and
export volumes. The average numbers of pigs
processed each week during the year increased
by 7.9 per cent to 60,000 and reached record
levels in March due to ongoing export demand
and increased retail demand during the early
stages of the COVID-19 outbreak in the UK.
Fresh Pork retail volumes across the year were
ahead of the prior year.
African Swine Fever (ASF) had a material impact
on the price of, and demand for, exports to the
Far East in the year. By year end, the widespread
outbreak in China had resulted in a reduction
of nearly 50 per cent in the Chinese herd and an
increase of almost 150 per cent in the country’s
pig price from January 2019. We were well
positioned to capitalise on the increased
demand from China with our in-depth local
knowledge of the Chinese market and our
operational expertise enabling us to increase
the supply of a wide range of products including
prime cuts and full carcasses into the region.
This capability was further enhanced by the
Norfolk facility being awarded approval to
export trotters to China from October. All three
pork primary processing facilities now have
full export approval. We process approximately
one third of all British pigs but accounted
for in excess of 50 per cent of UK exports to
the region during the year. Restocking of the
Chinese herd has started but it is expected
that it will take several years to return to pre
ASF levels with the COVID-19 pandemic
putting further pressure on this recovery.
ASF outbreaks continue in both the wild boar
and commercial pig populations in Eastern
Europe. Strict controls have been put in place
in both Poland and Germany to try to limit the
spread of the virus. We are acutely aware of the
impact an outbreak of ASF would have on the
UK pig industry including its ability to continue
to export. The UK industry remains on high
alert with intensive biosecurity protocols in
place. We have introduced a raft of preventative
measures to minimise our exposure to the
disease. We will continue to reach out to our
industry bodies and government agencies to
ensure that the risk posed by ASF to the UK
farming sector is fully understood and brought
to the attention of the wider public.
During the year we invested heavily in our
farming infrastructure, increasing our
self-sufficiency in both British free range
and outdoor pigs through the acquisition of
Packington Pork in December and British Red
Tractor assured pigs through the acquisition
of the Buckle family’s pig farming and rearing
operations and the remaining 50 per cent of
our White Rose Farms joint venture in February.
Whilst neither acquisition will have a material
impact on revenue, given the majority of their
sales are now Inter-Group, these acquisitions
reinforce our commitment to build a
sustainable and traceable farm-to-fork
operation in line with our Second Nature
strategy and they have increased our self-
sufficiency in UK pigs to over 30 per cent.
We also invested £9 million across the three
pork primary processing facilities during the
year including investment in robotics,
automation and the refrigeration system
upgrade at our Hull facility. We also continued
to invest in our farming infrastructure across
both our Wayland and Wold farming operations.
44
Cranswick plc | Annual Report & Accounts 2020Strategic Report The average UK pig price (EU-spec SPP) was
7 per cent higher year-on-year. By the end
of March, the UK pig price had increased by
19 per cent compared to a year earlier, reaching
a two-year high. The EU reference pig price
increased by 33 per cent during the year, with
the average price up 29 per cent year on year
reflecting strong demand from China.
Convenience
Convenience, which comprises Cooked
Meats and Continental Products, represented
36 per cent of Group revenue. Like-for-like
Convenience revenue, excluding the impact of
the Katsouris Brothers acquisition in July 2019,
increased by 10.5 per cent reflecting strong
growth in both Cooked Meats and Continental
Products. Including the contribution from
Katsouris Brothers, Convenience revenue
was 18.8 per cent ahead of the prior year.
Cooked Meats revenue increased strongly,
underpinned by contract wins with two of the
Group’s key retail customers. A £13.9 million
extension to the Sutton Fields site was
completed during the early part of the year
to accommodate a new premium retail contract.
The extension was built and commissioned
incredibly quickly to take on the new business.
This proved operationally challenging in the
pre-Christmas period, but by year end these
difficulties had been addressed with the site
performing more in line with expectations.
Further investment of £17.0 million across
the three Cooked Meats facilities will enable us
to continue to develop key retail partnerships
and cement long-term supply agreements.
These supply agreements now extend to
over 90 per cent of the Cooked Meats business.
Growth has also been strong in our ‘Sous Vide’
products, within the growing ‘Slow Cook’
category, which delivered double-digit growth
during the year.
The Continental Products business was
augmented, in July 2019, by the acquisition
of Katsouris Brothers, a leading processor
and multi-channel supplier of Continental and
Mediterranean food products. The acquisition
broadened our offering in several fast-growing
non-meat categories. Like-for-like Continental
Products revenue improved year-on year,
underpinned by growth in corned beef,
olive and pre-pack ranges. Christmas trading
was particularly strong following the launch of
multi-component platters into the premium
tiers of three of our key retail customers and
into one of the discounters. These platters
included a range of olives, antipasti, cheeses,
biscuits, dips and charcuterie. Ongoing
investment in the new Bury facility, alongside
a reinforced management team helped drive
labour and yield efficiencies as well as
environmental benefits. Further investment
in the automation of olive packing has
increased throughput and created capacity to
accommodate future volume growth. During
the year the freehold site at Trafford Park,
Manchester, which was vacated when the
Continental business moved to its new location
in Bury, was sold for £3.2 million, generating
a profit on disposal of £0.4 million.
The financial
results reflect
a year of
outstanding
growth and
development.
45
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Operating and financial review continued
Katsouris Brothers has performed in line with
expectations since acquisition. Strong growth
has been achieved across several niche product
ranges, and we have worked closely with the
site’s retail customers to adapt established
products to evolving retail trends. This work
was recognised by the business receiving the
award of ‘Brand Partner of the year 2019’ from
the site’s anchor customer, a tremendous
achievement for the business and indicative of
the close and successful working relationship
the two businesses have.
Gourmet Products
Gourmet Products, which comprise Sausage,
Bacon and Pastry, represented 17 per cent
of Group revenue. Gourmet Products revenue
increased 6.5 per cent on the prior year
with strong growth in pastry products
complemented by more modest growth
in bacon and sausage products.
Modest Sausage revenue growth was due in
part to a very strong barbecue season in the
prior year and the loss of a retail contract part
way through the current financial year. This
offset growth achieved through continued
success in retail led new product development,
growth in the food service channel and
a strong Christmas trading period.
Positive volume and revenue growth in
Bacon reflected new food service business
coming on stream during the period and
increased promotional activity with a key retail
customer. Product mix also had a positive
impact with strong sales of ‘Ready to Cook’
gammon products.
Strong growth in Pastry was driven by new
contract wins and sales of the ‘Best Ever’ and
‘En-Croute’ ranges, which are supplied to the
site’s anchor retail customer, performing ahead
of expectations. Food Service contract wins in
the year included the successful launch of the
pork and pancetta sausage roll with a leading
coffee shop chain which became its best-
selling product. Other highlights included
growth of vegan ranges for both retail and
food service channels including sausage rolls
and a tarte tatin. Further investment in the
Malton site during the year helped support
product innovation and led to improved
operational efficiency.
Poultry
Poultry, which includes Fresh and Cooked
Poultry represented 13 per cent of Group
revenue. Poultry revenue increased by
8.6 per cent in the year.
Commissioning of the new £78 million poultry
primary processing facility in Eye, Suffolk,
started in November and was completed prior
to the year end. The completion of one of
Europe’s most advanced poultry primary
processing facilities also marked the closure
of the old Weybread facility, with the customer
base being realigned prior to transfer of
production to Eye. Following the rapid
46
commissioning period in the third quarter
and subsequent ramp-up phase in the fourth
quarter, birds processed have now reached
1.1 million per week. The Eye facility is the most
technologically advanced and efficient poultry
processing plant in the UK. In addition to this,
significant environmental benefits will be
generated with the facility being industry
leading in terms of water and power usage
per bird. An integrated Combined Heat and
Power plant and effluent plant, which allows
up to 60 per cent of the daily water requirement
for the site to be recycled, is on track to be
fully commissioned shortly.
Further investment continues to be made in
the upstream agricultural operations, including
the commissioning of a second feed mill in
Hoxne, Suffolk and the successful trial of
‘in shed’ hatching to ensure increased primary
processing volumes can be met from our
fully vertically integrated supply chain. In
establishing a supply chain of 1.1 million birds
per week prior to the new Eye facility fully
coming on stream, we needed to sell some
of these birds out into the open market and
so were exposed to subdued bird pricing.
Also, above average summer temperatures
adversely affected bird growing performance
albeit the impact of this was not as severe as
in the previous financial year. The supply chain
has now rebalanced to reflect the ongoing
uplift in demand from the Eye facility.
Sales of premium Cooked poultry grew
modestly during the year with a new retail
contract win and continued growth across
the business’ other retail customers as well
as a strong Christmas period offsetting soft
manufacturing and food service demand.
Finance review
Revenue
Reported revenue at £1,667.2 million (2019:
£1,437.1 million) increased by 16.0 per cent
compared to the previous year, with growth
across all categories. On a like-for-like basis,
excluding the contribution from acquisitions,
revenues were 13.0 per cent higher.
Adjusted gross profit and adjusted EBITDA
Adjusted gross profit of £221.3 million (2019:
£186.5 million) increased by 18.7 per cent
with adjusted gross profit margin increasing
to 13.3 per cent (2019: 13.0 per cent). Adjusted
EBITDA increased by 28.1 per cent to £155.3
million (2019: £121.2 million ) and adjusted
EBITDA margin increased to 9.3 per cent
(2019: 8.4 per cent).
Adjusted Group operating profit
Adjusted Group operating profit of
£105.1 million (2019: £92.3 million) increased
by 13.9 per cent and adjusted Group operating
margin was 6.3 per cent of sales compared to
6.4 per cent last year. The first time application
of IFRS 16 Leases increased adjusted Group
operating profit by £1.2 million in the current
year. See page 114.
Share of loss of joint venture
Share of loss of joint venture of £0.1 million
(2019: £0.1 million) represents the start-up
losses of White Rose Farms. The remaining
50 per cent share of the business was acquired
during the year as part of the Group’s longer-
term strategy to secure commercial pig supply.
Finance costs and additional funding
Net financing costs of £2.8 million included
£1.6 million of IFRS 16 Lease interest,
recognised within finance costs for the first
time in the year. Underlying net finance costs
were £1.0 million higher than the prior year,
with higher average borrowings used to fund
record capital expenditure and the acquisition
of Katsouris Brothers, Packington Pork and
White Rose Farms.
The Group’s core banking facility is unsecured,
runs to November 2023 and comprises a
revolving credit facility of £160 million (falling
to £120 million from November 2022), 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.
During the year the Group arranged an
additional £40 million of short-term, unsecured
funding, split evenly across two of its incumbent
banking partners, which runs to December
2020. This increases the Group’s overall facilities
to £200 million, providing the business with over
£100 million of headroom at 28 March 2020.
The adequacy of this facility has been considered
as part of robust scenario testing performed
over the 3 year viability period for the Group.
Adjusted profit before tax
Adjusted profit before tax was 11.2 per cent
higher at £102.3 million (2019: £92.0 million).
Taxation
The tax charge of £21.3 million (2019: £16.9
million) was 20.5 per cent of profit before tax
(2019: 19.5 per cent). The standard rate of
UK corporation tax was 19.0 per cent (2019:
19.0 per cent). The effective corporation tax
rate in both years was higher than the standard
rate due to non-qualifying depreciation and
disallowable expenses, and, in the current year,
due to a change in the rate of deferred tax
from 17 per cent to 19 per cent.
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.
Cranswick plc | Annual Report & Accounts 2020Strategic Report
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 30 years (see page 3). Our
dividend policy can be found on our website:
www.cranswick.plc.uk.
Adjusted earnings per share
Adjusted earnings per share increased by
8.4 per cent to 156.4 pence (2019: 144.3 pence).
The average number of shares in issue was
51,966,000 (2019: 51,385,000).
Statutory profit measures
Statutory profit before tax was £104.0 million
(2019: £86.5 million), with statutory Group
operating profit at £106.8 million (2019:
£86.8 million) and statutory earnings per
share of 159.1 pence (2019: 135.5 pence).
Statutory gross profit was £226.7 million
(2019: £183.7 million). Full reconciliations of
these results to the adjusted measures can
be found in Note 32.
Acquisition of Katsouris Brothers
On 26 July 2019, we acquired the whole
of the issued share capital of Katsouris
Brothers Limited, a leading Continental and
Mediterranean food products supplier, which
further broadened our non-meat activities.
The initial cash consideration was £41.3 million
net of cash acquired with a further fixed
payment of £0.7 million paid in October 2019.
Contingent consideration of up to £7.0 million
is due during the new financial year. Further
details of the transaction are set out in Note 16.
Acquisitions of farming operations
On 16 December 2019, the Group acquired the
whole of the issued share capital of Packington
Pork Limited, which comprises pig farming
and rearing operations and specialises in the
production of British free range and outdoor
bred pigs. On 10 February 2020, the Group
acquired the Buckle family’s pig farming
and rearing operations as well as the family’s
50 per cent share of the White Rose Farms
Limited pig production joint venture set up
by Cranswick and the Buckle family in 2018.
The enlarged White Rose Farms pig enterprise
specialises in the production of Red Tractor
assured pigs. The initial cash consideration
for both farming operations combined was
£27.4 million net of cash acquired, with deferred
consideration of £3.9 million paid in April.
Further details of the transactions are set out
in Note 16.
Cash flow and net debt
The net cash inflow from operating activities in
the year was £117.0 million (2019: £87.7 million)
reflecting the increase in Group operating
£’m
Other
(2.6)
Decrease in
net funds
(77.5)
Acquisitions/
loan to joint
venture & loans
repaid
76.2
profit and a lower working capital outflow of
£13.2 million (2019: £17.8 million). Net debt at
the end of the year was £146.9 million (2019:
net funds of £6.3 million) with the inflow from
operating activities offset by £65.9 million of
IFRS 16 lease liabilities recognised for the first
time (Note 13), a net £69.4 million cash outflow
on acquisitions (Note 16), £97.1 million invested
in our asset base, net of disposal proceeds
and £22.6 million of dividends paid to the
Group’s Shareholders.
Allocation of resources
Free cash flow: £115.8 million
COVID-19
Towards the year end the Group incurred
certain costs relating to the COVID-19
pandemic. These costs primarily consist of
inventory write-downs and an increase in the
provision for bad debts relating, respectively,
to products destined for and receivables due
from certain customers. See Notes 18 and 19.
UK Referendum on EU Membership
The continued uncertainty over the outcome
of trade and other negotiations in respect
of the UK’s exit from the EU drives 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 with the key issues facing
the Group being; access to and cost of labour;
import tariffs on EU pork and continental food
products; and the valuation of Sterling versus
the Euro and other world currencies.
Net capital
expenditure
97.1
Dividend
paid
22.6
The Group’s Brexit taskforce, made up of
key internal stakeholders and supported by
external advisers, continues to meet regularly
to review Brexit related risks and develop and
deliver mitigating plans.
As political negotiations continue, the Board will
monitor outcomes, seek to assess the possible
impact on its stakeholders and implement
appropriate responses.
Summary
The financial results reflect a year of
outstanding growth and development
underpinned by earnings enhancing and
strategically important acquisitions, as well
as a record level of capital investment to drive
continued growth, particularly within our
poultry category. Whilst the current COVID-19
outbreak presents significant challenges for
all businesses, we have continued to perform
strongly through the crisis. Our robust financial
position, conservatively managed balance
sheet and class leading asset base leave us
well placed to deliver operationally during this
difficult time and will support our continued
growth and development going forward.
Mark Bottomley
Finance Director
23 June 2020
IFRS 16: ‘Leases’
The Group has adopted IFRS 16 ‘Leases’ during
the year, recognising an initial £40.2 million
of right-of-use assets and lease liabilities
on the transition date of 31 March 2019. Lease
liabilities were £65.9 million at the end of the
year. Right-of-use assets include £8.5 million
recognised as a result of acquisitions and
£25.0 million of leases taken out in the year.
The income statement impact was modest
with a £1.2 million increase in adjusted Group
Operating Profit being offset by £1.6 million
of additional interest costs driving an overall
£0.4 million reduction in adjusted profit before
tax. Further details of the impact of IFRS 16
are given in Note 2 and 13.
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
surplus on this scheme at 28 March 2020
was £7.2 million, compared to a deficit of
£6.5 million at 30 March 2019, reflecting,
in part, a long-term commitment to increased
funding for the scheme. Cash contributions
to the scheme during the year, as part of the
programme to fully fund the scheme, were
£1.8 million. The present value of funded
obligations was £33.4 million, and the fair
value of plan assets was £40.6 million.
47
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report
Risk Report
Risk management
As a leading UK food manufacturer in a competitive environment
it is important that the Group identifies, assesses and prioritises
its risks to help manage and mitigate the probability and impact
of these risks occurring.
Our approach to risk management
In common with other businesses we face
a variety of risks and uncertainties. It is through
a structured approach to risk management
that we are able to mitigate these risks, which
supports the successful delivery of our strategic
objectives and also enables us to pursue new
business opportunities as and when they arise.
The Group has an established risk management
framework in place to; identify, evaluate, mitigate
and monitor the risks the business faces, which
incorporates both a “top-down approach” to
identifying our principal risks and a “bottom-up
approach” to identify our operational risks.
The Board has the overall responsibility for
the risk management framework however,
the Board delegates the ongoing review of this
to the Group Risk Committee, which is chaired
by the Group Finance Director and consisting
of key Senior Managers, has met four times
over the course of the year.
The outputs from the Group Risk Committee
are reviewed by the Audit Committee with
regular updates being provided to the Board.
This includes understanding the movement
in risks, the status of mitigating actions and
importantly highlighting emerging risks. The
Group also has a well-established and effective
in house Internal Audit team which reports to
the Audit Committee and provides further
independent assurance that the Group’s
risk management framework, governance
and internal control procedures are
operating effectively.
During the course of the year a review of the
maturity and effectiveness of the Group’s risk
management framework was completed by
Aon plc. This concluded that overall the Group’s
risk management framework was embedded
and robust, with supporting risk management
processes also being appropriate.
48
An overview of the Group’s risk management framework is shown below.
Top Down
Approach
R I N G
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MANAGEMENT
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PRIORITIS AT I O N
Bottom Up
Approach
Board of Directors
Responsible for the Group’s risk management framework, Internal Controls and for setting
the Group’s overall risk appetite.
Audit Committee
Reviews the system of Internal Controls that are in place and provides assurance to the
Board that the risk management framework and Internal Controls are operating effectively.
Group Risk Committee
Provides oversight and advice to the Audit Committee and Board in relation to current and
potential future risk exposures and mitigation strategies.
Internal Audit
Provides assurance to the Audit Committee and Board that Internal Controls are adequate
and risk management processes are effective.
Operational Management
Deploy site level risk management processes to ensure risks are adequately identified
and controlled.
Key areas of focus this year
During the course of the year there has been
focus on a range of risks such as competitor
activity, the continued threat of cyber-attacks,
labour availability and the risks associated
with Brexit, African Swine Fever and COVID-19.
Brexit
As commented upon in prior years, there are a
number of risks associated with the UK leaving
the EU. The Group continues to plan, during the
current “transition period”, for the UK’s exit from
the EU with new arrangements and regulations
Cranswick plc | Annual Report & Accounts 2020Strategic Report
currently planned to take effect from 1 January
2021. The Group has a Brexit Taskforce in place
which is led by the Group Finance Director and
consisting of Senior Managers and key internal
stakeholders, has regularly met over the course
of the year to review the risks associated with
Brexit and develop mitigating plans. Specific
areas of focus have included; labour availability,
raw material sourcing, the financial implications
of adopting World Trade Organisation tariffs in
the event of Free Trade Agreements not being
agreed and assessing the issues facing the
Group’s Ballymena site in Northern Ireland.
Regarding labour, the Group over the course
of the year has experienced pressure on
the availability of specialist labour skills from
a reduction of labour migration from EU
countries. However, the Group is continually
reviewing and improving its recruitment
processes and relationships with third party
agency providers to reflect changing market
conditions. In addition, over the short to
medium term the announcement by the UK
Government that EU citizens are allowed to
remain within the UK, even in the absence of
Free Trade Agreements, also helps to mitigate
this risk.
In terms of raw material sourcing, an analysis
has been completed of key import product
flows specifically in relation to the Group’s
Continental Fine Foods and Katsouris Brothers
businesses, which require high volumes of
product from EU countries such as Spain and
Greece. To date no significant issues have been
identified however, as the UK moves further
through the “transition period” the Group
will work with key EU suppliers to ensure
that the necessary arrangements to trade
with the UK, after the UK has left the EU, have
been made therefore ensuring continuity
of supply is in place to meet the demands
of the Group.
Finally the Group has calculated the cost of
adopting World Trade Organisation tariffs
in the event of Free Trade Agreements not
being agreed to be significant, but this is not
uncommon within the food sector due to the
high duty costs associated with food products.
However, to lessen the associated potential
financial impact, the Group is progressing
a range of mitigation strategies to include;
ensuring HMRC tariff product codes are
correctly applied across the business, reviewing
the routes and countries the EU raw materials
are sourced from, utilising a range of available
custom reliefs and quantifying the likely residual
level of tariff costs to be recovered through
existing customer pricing models.
African Swine Fever
The Group continues to monitor the
risk of African Swine Fever spreading from
China and Eastern Europe, which if it arrived in
the UK could significantly impact the Group’s
operations. During the year the Group
refreshed existing farm unit bio-security
protocols to include; procedures for visitors
accessing farm units, rolled out guidance
across the Group on the need for all employees
to be constantly aware of the threat of African
Swine Fever and proactively engaging with
industry bodies on this matter such as the
National Pig Association and the World
Organisation for Animal Health.
of risk that the business is willing to accept in
order to achieve its strategic and operational
objectives. Over the course of the year, the
Board initiated work to formalise our approach
to developing and reporting our risk appetite
statements for our five principal risk categories
and importantly to validate ongoing activities
required to manage our reported risks. The
Group considers a risk that can significantly
affect the performance, future prospects
or reputation of the business is deemed to be
a principal risk.
Overall the Board’s approach is to minimise
risks which are significant and may impact on
the Group’s reputation in operational areas
such as product quality, health & safety or
compliance with laws and regulations. However,
the Board recognises that in the pursuit of
the Group’s strategic objectives there is an
appropriate “risk/reward trade-off” which
allows for specific decisions, such as business
acquisitions or capital expenditure, to be
progressed where a higher level of risk may
be accepted.
COVID – 19 Risk
In late January 2020, the COVID-19 outbreak
arrived in the UK and emerged as a significant
issue to not only the Group but businesses
around the world and presented a number
of unprecedented challenges. Throughout
the COVID-19 outbreak the situation has been
extremely fluid and as such the Group put in
place a number of actions to mitigate the
associated potential impacts to the business.
Risk appetite
The UK Corporate Governance Code requires
companies to determine their risk appetite,
which is an expression of the amount and type
Unlike other businesses which have been
severely impacted by the COVID-19 outbreak
such as the aviation, hospitality and tourism
sectors, the Group and more broadly the food
49
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Risk Report continued
sector, remains resilient and fundamental
to consumers and ultimately the health and
wellbeing of the country.
Following the emergence of COVID-19 in
the UK, the Group immediately established
a coronavirus crisis team which is led by
the Chief Operating Officer and Commercial
Director and includes a number of other
Directors, Senior Managers and key internal
stakeholders. Utilising existing Group crisis
management procedures and business
continuity plans, the coronavirus crisis team
ensures all emerging risks and issues are
effectively addressed to include; focusing
on the health and general wellbeing of all our
employees, ensuring all our sites remained
operational through this challenging time
thus enabling the Group to continue to meet
customer demand, effectively managing
fluctuating staff absenteeism levels, working
with our key suppliers to maintain a continued
supply of raw materials and importantly
developing a suite of guidance to ensure
consistent and timely communication with
employees across the Group.
The impact of COVID-19 has been modelled
in the Viability Statement which was based on
an assessment of various severe but plausible
scenarios including; current Government
national lockdown being further extended,
future Government national lockdowns due
to spikes in COVID-19 infection rates, future
regional hot spots arising leading to specific
site operational challenges and through the
extension of social distancing rules. Currently
the level of uncertainty relating to the potential
short to medium term impact of COVID-19
remains high, however, the Group is in a strong
financial, strategic and operational position
to address the uncertainties of the outbreak
as and when they arise.
It is evident that COVID-19 impacts upon many
of the Group’s principal risks firstly “Growth &
Change”, whereby the outbreak has impacted
on the Group’s activities specifically within
the food service sector, where demand has
declined with the introduction of Government
lockdown measures, although this has been
offset by compensating increases in retail
volume. Secondly regarding “IT Systems & Cyber
Security”, the COVID-19 outbreak has impacted
on the Group’s operations specifically with an
unprecedented UK and global increase in the
levels of phishing attempts and cyber-attacks.
In addition, changing working practices with an
unprecedented number of employees working
from home presents new risks and challenges.
Finally regarding “Interest rates, foreign
exchange and liquidity”, in common with other
businesses in the UK the Group is mindful
of the increased risk for customer bad debts,
specifically within the food service sector,
and the general tightening of liquidity within
the banking sector.
50
As a result of the COVID-19 outbreak there
are several key areas where the Group has
put in place a number of immediate actions to
mitigate emerging risks to the business which
are summarised below.
People Management
Should the business suffer a significant
loss of core staff or Senior Management
through infection of COVID-19 or the need for
employees to self-isolate, there is the potential
for production at sites to be impacted. As people
have been clearly affected the most by the
COVID-19 outbreak, the Group has ensured
that employee safety has been at the forefront
of all decisions made which include; new
hygiene protocols being introduced, additional
handwashing stations and sanitisation of
communal areas. The Group has also introduced
a number of new social distancing measures
to include; staggered shift patterns, additional
breaks, new communal areas, restrictions when
operating machinery and importantly ensuring
that there is constant communication with
employees during this challenging time through
the use of the Group’s intranet site, coupled
with increased site visits from the Group’s
occupational nurse for those employees who
have medical issues or wellbeing concerns.
Consumer Demand
Through the forced closure of the food
service sector, the COVID-19 outbreak saw
an unprecedented change to consumer buying
habits, with the Group seeing an increase in
retail sales and a decline in food service sector
sales. The Group has a number of customers in
the food service sector and there is a risk that
demand for our products in this area could fall
if consumers change their buying preferences
over the short to medium term. Although,
market data over recent weeks is suggesting
that there are signs that consumer habits
are beginning to stabilise. Going forward the
Group will be working with both customers
and consumers to establish “the new normal”.
Supply Chain
There is a risk to the business that delays or
shortfalls of key supplies such as PPE (personal
protective equipment) for factory staff could
adversely impact upon the ability of our sites
to produce and meet consumer demands.
Following the COVID-19 outbreak, the Group
has taken a number of mitigating actions and
has worked closely with key suppliers to ensure
continuity of supply. Specifically, where stock
holding levels were required to be increased,
future orders were brought forward and
contingency arrangements with alternative
suppliers were sought which is controlled by
frequent reviews of areas of supply chain risk
by the Group Purchasing Team.
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 both the principal risks
outlined on pages 52 to 54 of the Annual Report
and a prolonged outbreak of COVID-19.
The Board have determined that a three-year
period to March 2023 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. In making this
assessment of viability, the Board carried out
a robust assessment of the principal risks
and uncertainties facing the Group as well
as considering both the current and potential
future impact of COVID-19 on the business.
Principal risks which were assessed to have the
highest likelihood of occurrence or the severest
impact, crystallising both individually and in
combination, as well as a subset of risks
associated specifically with COVID-19, were
considered. These risks included: a significant
decline in consumer demand; Brexit disruption;
labour availability and cost; an outbreak of
African Swine Fever (ASF) in the UK and Europe;
and the further potential impact of COVID-19.
Having considered the magnitude of the risks,
the linkage between them and potential
mitigation, as well as the level of uncertainty
surrounding the risk, extensive modelling
was performed focussing on both the impact
of COVID-19 and the risk of an outbreak of
ASF in the UK and Europe.
In addition, the Board acknowledges that
there are a number of uncertainties and
risks associated with Brexit. These risks have
been considered in making this assessment
of viability including; labour availability, raw
material sourcing, the unique issues of the
Northern Ireland Protocol and importantly
the financial implications of adopting World
Trade Organisation tariffs in the event of Free
Trade Agreements not being agreed. However,
to lessen the potential financial impact of
Brexit, and reduce the risk to an acceptable
level, the Group is already progressing a range
of mitigation strategies to include; ensuring
HMRC tariff product codes are correctly
applied across the business, reviewing the
trade routes and the countries that EU raw
materials are sourced from, utilising a range
of available customs reliefs and quantifying
the likely residual level of tariff costs to be
recovered through existing arrangements
with customers.
In establishing relevant severe but plausible
downside scenarios, the Board has explored
a number of possible outcomes consulting
extensively with internal experts and has
continued to closely monitor Government
guidance.
Cranswick plc | Annual Report & Accounts 2020Strategic Report Modelled COVID-19 scenarios include:
• A prolonged closure of food service outlets
in 2020 leading to reduced food service
sales, mitigated by increased retail demand
• Repeated but less severe closures of food
service outlets in future years, leading
to reduced food service sales mitigated
by increased retail demand
• The impact of potential future localised
lockdowns on our ability to operate
individual factories
Increased labour inefficiency as a result of
additional measures to increase employee
safety in the workplace
•
In respect of the specific COVID-19 scenarios,
the Board has been able to utilise the benefit
of the experience of the business over the
past three months, which has demonstrated
significant resilience due to its retail focus,
as well as the detailed guidance issued to date
by the Government to be able to model these
scenarios with sufficient certainty to draw
a reasonable conclusion.
In respect of ASF the most severe but plausible
downside scenario identified was the inability
to sell pork products in the UK for a sustained
period of time. This scenario also included the
loss of our export licence and the resulting
temporary closures of our fresh pork and
farming operations whilst also considering the
mitigation expected as a result of increased
sales of other proteins and actions which would
be taken to manage discretionary expenditure.
The sensitivity analysis carried out utilised
the Group’s robust three year budget and
forecasting process to quantify the financial
impact on the strategic plan and on the Group’s
viability against specific measures including
liquidity, credit rating and bank covenants.
Given the strong liquidity of the Group and
the committed banking facilities in place;
the diversity of operations; and the limited
exposure to food service customers, 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 discretionary expenditure, with strong
headroom against available facilities and full
covenant compliance in all modelled scenarios.
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 March 2023.
Our principal risks and uncertainties
The Group Risk Committee have carried
out a robust assessment of the principal
risks together with emerging risks facing the
Group, which has been validated by the Board,
including those that would threaten its business
model, future performance, solvency and
liquidity. The Group is exposed to a variety
of risks, but we report those which are likely
to have the greatest current or near-term
impact on our strategic and operational
objectives. A risk assessment map is shown
below illustrating the Group’s principal
risk profile.
More detail on the Group’s principal risks
is shown on pages 52 to 54, which link
to the Group’s strategic pillars and highlight
key mitigating actions and a risk rating.
Going forward, given the unprecedented
challenges caused by the COVID-19 outbreak
and the fact that it is not currently known when
the outbreak will recede, there is the potential
for further movement within existing reported
risks, together with the opportunity for new
emerging risks to arise, which will be closely
monitored by the Group Risk Committee and
Board. An update on the Group’s risk profile
will be provided within the interim report
in November 2020.
Risk Assessment Map
)
n
o
i
t
a
g
i
t
i
m
r
e
t
f
a
(
t
c
a
p
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14
9
10
15
11
13
8
4
2
5
6
12
1
Likelihood (after mitigation)
Principal Risks
Risk Trend
7
3
1.
Competitor Activity
2. Growth & Change
3.
4.
5.
6.
7.
8.
9.
Consumer Demand
Pig Meat Availability & Price
Reliance on Key Customer
& Exports
Interest Rate, Currency,
Liquidity & Credit Risk
Labour Availability & Cost
IT Systems & Cyber Security
Food Scares & Product
Contamination
10. Disease & Infection
within livestock
11. Climate Change
12. Health & Safety
13. Recruitment & Retention of
Key Personnel
14. Disruption to Group Operations
15. Brexit Disruption
51
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report
Risk Report continued
Principal risks
and uncertainties
The principal risks and uncertainties facing the Group are
summarised below. Given that we cannot currently predict the
ultimate impact that COVID-19 will have on the UK economy,
these risks may change over the short to medium term.
STRATEGIC PILLAR
RISK LEVEL
High
Medium
Low
High Quality
Products
Operating
Excellence
Sustainability
The low, medium and high risk levels are the Group’s
estimate of the net risk after mitigation.
RISK TREND
Risk increased
Risk unchanged
Risk decreased
RISK AREA
DESCRIPTION OF RISK
MITIGATION
NET RISK
DIRECTION
COMMERCIAL
Consumer
demand
A significant deterioration in the UK
economy or a change in food consumption
patterns could lead to a fall in demand for
the Group’s products.
The Group works closely with its key customers to adapt
to changing consumer requirements and constantly
reviews emerging trends in consumer eating habits.
The Group offers a range of products across premium,
standard and value tiers which it is able to flex accordingly.
Pork and poultry remain extremely competitively priced
and sought-after products which are manufactured in
an environmentally friendly manner.
Pig meat –
availability
& price
The Group is 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 the
Group’s operations and the ability to supply
our key customers.
The Group has a trusted long-standing farming
supply base which is complemented by supply from
the Group’s own farms, and has been increased following
the recent acquisition of Packington Pork Farms and
White Rose Farms. These arrangements help to mitigate
the risks associated with pig price volatility and the
availability of supply.
Whilst the risk in this area has
not changed, following the
COVID-19 outbreak, the Group
is experiencing a change in
the mix of sales from eating
out-of-home to retail sales, which
going forward will be monitored.
The risk has stayed the same.
Reliance on
key customers
& exports
A significant proportion of the Group’s
results are 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 the Group’s operations.
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 in this area has not
changed. However, the Group
is mindful of the specific issues
associated with exports to China
such as the implications of the
loss of the UK’s export licence
or potential changes in Chinese
Government policy following
the COVID-19 outbreak.
52
Cranswick plc | Annual Report & Accounts 2020Strategic Report RISK AREA
DESCRIPTION OF RISK
MITIGATION
NET RISK
DIRECTION
OPERATIONAL
Health
& safety
A significant breach of Health & Safety
legislation could lead to reputational
damage and regulatory penalties, including
restrictions on operations, fines or personal
litigation claims.
The Group has robust Health & Safety processes and
procedures in place which have been independently
reviewed during the course of the year and which conform
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.
Brexit
disruption
Failure to prepare for the UK’s departure from
the EU and future trading relationships could
result in disruption to Group operations, and
potentially affect financial performance and
impact on our ability to supply our customers.
The Group has a longstanding Brexit Taskforce in place
which ensures Brexit risks and issues are effectively
identified and addressed. Working with a leading
third-party specialist, a detailed analysis of the potential
implications and costs of leaving the EU without Free
Trade Agreements together with appropriate mitigating
actions is being developed.
Whilst the risk in this area has not
changed, following the COVID-19
outbreak the Group is mindful of
the need to continue to ensure
the operational safety of our
production staff and all other
employees, e.g. through the
introduction of social distancing
measures.
This is a new risk. Elements of
Brexit were previously embedded
within other principal risks.
IT systems &
cyber security
The Group relies heavily on information
technology and key systems to support the
business. In common with other businesses
the Group is susceptible to cyber-attacks
resulting in 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 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
procedures are also in place to reduce the potential risk
of fraudulent payment requests being processed,
together with cyber insurance which provides specialist
technical and legal support in the event of a significant
cyber incident.
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.
The Group ensures that all raw materials are traceable
to original source and site manufacturing, storage and
distribution systems and our suppliers are continually
monitored by experienced and appropriately trained
internal teams. In addition, the Group has in place
established crisis management procedures to reduce
potential impacts and improve communication
to key stakeholders.
Whilst the risk in this area has not
changed following the COVID-19
outbreak the Group is mindful
of the risks in this area due to the
global unprecedented level of
phishing attempts and cyber-
attacks. In addition the changing
working environment such as
employees working from home,
presents new risks and issues.
The risk has stayed the same.
Disease
& infection
within
livestock
Climate
change
Disruption
to Group
operations
A significant infection or disease outbreak
such as African Swine Fever or Avian
Influenza could result in the loss of supply
of pig or poultry meat or affect the free
movement of livestock which could impact
the supply of key raw materials into the
Group’s sites.
The Group’s pig farming activities, and other farms
from which third party pig meat is sourced, have a
broad geographical spread to avoid reliance on a single
production area. The Group’s own poultry flock is housed
indoors therefore reducing the risk of disease. In addition,
robust vaccination and bio-security procedures mitigate
the risk of disease and infections within pig and
poultry farms.
The risk in this area has
increased due to the spread
of African Swine Fever from China
across Eastern Europe.
The Group operates within the context
of having to evaluate the effects that
both climate change/sustainability
issues from its operations and regulatory
requirements will have on both its financial
performance and operational activities
to include; supply chain, operations both
farming and manufacturing, communities
and customers.
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. Such issues could result in
the prolonged disruption to site processes.
The Group has enhanced its Second Nature programme
with a focus on improving production efficiency, reducing
carbon footprint, reducing weight of packaging, investing
in the development of alternative proteins to respond to
growing demands for plant-based diets and identifying
alternative options to decrease reliance on imported
soya for feed.
This is a new risk. Elements of
climate change / sustainability
were previously embedded within
other principal risks.
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. Following
the commissioning of the Eye poultry processing facility,
a business continuity plan has been developed given
the importance of the site to the Group’s poultry
processing capabilities.
The risk has stayed the same.
53
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report
Risk Report continued
RISK AREA
DESCRIPTION OF RISK
MITIGATION
NET RISK
DIRECTION
PEOPLE
Recruitment
& retention
of key
personnel
As the Group continues to pursue its
growth strategy, the success of the Group
is dependent on attracting and retaining
quality, skilled and experienced staff
particularly in Senior Management roles.
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 risk has stayed the same.
Labour
availability
& cost
Due to political and economic pressures,
there is a risk that the Group’s operations
could be adversely impacted by either the
lack of availability of labour or the associated
increased cost.
The Group is continually reviewing and improving its
recruitment processes and relationships with third party
agency providers to reflect changing market conditions.
In addition, the Group is actively progressing options
to employ more permanent members of staff and
to consider alternative methods of production which
embraces emerging technological developments.
Whilst the risk in this area has not
changed, the Group over the
course of the year has continued
to experience pressures on the
availability of labour and specific
skills shortages at various sites.
In common with other businesses, 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, future growth and acquisitions.
The Group uses 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 Treasury. All bank debt is arranged centrally,
and appropriate headroom is always maintained.
The risk in this area has increased
due to the increased potential
for customer bad debts and the
general tightening of liquidity
within the banking sector.
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 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.
Emerging trends and risks associated with competitor
activity are regularly discussed by the Board with
appropriate actions being developed.
The risk has stayed the same.
The Group continues to pursue growth
strategies through securing contracts
with new customers, obtaining additional
contracts with existing customers and through
reviewing acquisition opportunities. In addition,
the Group also has to navigate both internal
and external change such as changes in
regulation which present operational and
compliance challenges and issues.
The Board receives regular updates on the contractual
position of all key customers and where required
implements necessary actions. Regarding business
acquisitions, rigorous pre-acquisition due diligence
reviews are carried out. Internal and external change
are appropriately considered to ensure operational
excellence and compliance with performance is
monitored by Senior Management and operational staff.
The risk in this area has not
changed. However, following the
COVID-19 outbreak the Board
is reviewing both the Group’s
medium term strategy through
monitoring changes to customer
behaviour and potential strategic
acquisition opportunities.
FINANCIAL
Interest rate,
currency,
liquidity &
credit risk
STRATEGIC
Competitor
activity
Growth
& change
54
Cranswick plc | Annual Report & Accounts 2020Strategic Report
Non-financial information statement
The table below is intended to help stakeholders understand the Group’s development, performance, and impact of its activities, information relating
to the environment, employee, social, respect for human rights, anti-corruption and anti-bribery matters in accordance with the Non-Financial
Reporting requirements contained in sections 414CA and 414CB of the Companies Act 2006.
Reporting requirement
Environmental matters
Employees
Human Rights
Social Matters
Policies
References
Group Corporate Responsibility Policy
Group Equal Opportunities, Harassment
and Dignity at Work Health & Safety Policy
A description of the Group’s work on our sustainability
strategy Second Nature can be found on pages 26 to 29.
Disclosures required on environmental performance
can be found on pages 42 and 43.
A description of the Group’s activities in relation to
employees, including our Health & Safety activities can
be found on pages 32 to 35.
Anti-slavery and Human Trafficking Policy
Group Equal Opportunities, Harassment
and Dignity at Work
We remain vigilant when it comes to excluding modern
slavery and human trafficking from our supply chains.
For further information see pages 32 to 35.
Group Ethical Trading Policy
Group Corporate Responsibility Policy
Anti-corruption and anti-bribery
Anti-Bribery Policy
Group Ethical Trading Policy
Description of principal risks and impact
of business activity
Description of the business model
Non-financial key performance indicators
Cranswick is committed to doing business in an ethical
way and our policies apply to all operations. For more
details see pages 30 to 43.
The Group’s policies set out the high standards expected
when it comes to doing business fairly and interacting with
stakeholders. See pages 66 to 71 for further information.
See pages 48 to 54
See pages 14 and 15
See pages 24 and 25
Our Strategic Report for the 52 weeks ending 28 March 2020, from the inside front cover to page 55, has been reviewed and approved by the Board.
Steven Glover
Company Secretary
23 June 2020
55
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Chairman’s Governance Overview
Rising to the Challenge
The Board is committed to reflecting the
interests of the Group’s stakeholders and
delivering its long-term success and strategy
whilst applying high standards of corporate
governance.
In July 2018 the Financial Reporting Council published a new UK
Corporate Governance Code (“Code”) which applied to the Group for the
first time during the 2019/20 financial year currently being reported on.
The new Code raised standards of corporate governance for the benefit
of all of the Company’s stakeholders and requires the Board to focus on
the long-term success of the Group and delivery of its strategy. Many
of the requirements of the Code reflected principles already adopted by
the Company and consequently, where possible, we presented last year’s
Annual Report and Accounts based on the new Code.
The Board is responsible for corporate governance and this report
describes how we have built upon the approach adopted last year and
applied the principles of the new Code. On behalf of the Board, I am
pleased to confirm that the Group has complied with the requirements
of the 2018 UK Corporate Governance Code throughout the year, with
the exception of the requirement that the Chairman should not remain
in post beyond nine years from appointment. However, the Board is
of the view that my continuing as Chairman remains appropriate given
my knowledge of the Group and experience of the sector. The Board
is mindful that its composition needs to support the Company’s
long-term strategic objectives and the interests of its stakeholders and,
consequently, reviews annually all directors, succession planning for
key roles and the need to refresh the Board (which includes consultation
with our institutional shareholders where appropriate).
During the year, the Remuneration Committee also considered the
alignment of Executive Director pension contributions with the rest of
the workforce and Executive Director post-employment shareholding
requirements in accordance with the requirements of the new Code.
Further details of the planned approach in relation to these matters
are set out in the Remuneration Committee Report on page 77.
The Board understands the need to properly consider the interests of
its workforce and wider stakeholders in Board discussions and decision
making and its responsibility and duties to them under section 172 of
the Companies Act 2006. This has been brought into sharp focus by the
recent COVID-19 outbreak where the Board has been acutely aware of
its responsibilities in relation to keeping the country supplied with food
during the crisis, whilst ensuring the safety of its workers and supporting
them and their families. The Group has also supported the wider
communities in which we operate in numerous ways including donating
PPE to hospice facilities, providing food to NHS staff at our local hospitals
and donating significant amounts of food to charities focused on helping
the vulnerable in our society. Further details of the challenges presented
by the COVID-19 outbreak and ways in which the Group has responded
to these are set out on page 31. Details of our strategy, stakeholder
alignment and engagement and how these relate to our duties under
section 172 of the Companies Act and influenced our decisions
throughout the year are also set out on pages 30 and 31.
We are also very conscious of their need to promote sustainability
in the Group’s businesses and to limit their impact on the environment,
which is reflected in Second Nature – our Group wide sustainability
strategy described in more detail on pages 26 to 29. However, the Board
is aware that the investment community is keen to see companies
reporting in relation to their environmental impact against a consistent
standard. We have therefore decided that, going forward, the Group will
move towards reporting against the Meat, Poultry & Dairy Sustainability
Accounting Standard published by the Sustainability Accounting
Standards Board, which is a widely recognised international standard
adopted by many global companies. We already report on environmental
performance (see pages 42 to 43) and will be taking actions to ensure
more comprehensive reporting against the standard in future years.
The Board is also responsible for assessing and monitoring the culture of
the Group to ensure this is aligned with our purpose, values and strategy.
Last year we appointed Tim Smith as our designated Non-Executive
Director to further engage with our workforce to share ideas with
management and contribute to the long-term success of the Group
and delivery of our strategy, in compliance with the Code. During the
year Tim held a number of workshops at various sites with workers
drawn from across the business, without management present. I am
pleased to report that our employees engaged with Tim openly and
constructively and that a number of management actions have resulted
from suggestions made. We consider the approach adopted to have
been an effective way of engaging and intend to build on this approach
56
Cranswick plc | Annual Report & Accounts 2020Corporate Governance over the coming year. A more detailed report on Tim’s workforce
engagement is set out in “Board Effectiveness” on page 65. In addition,
during the year we have also undertaken our Group-wide employee
survey, Directors’ site visits, strategy days and have regularly reviewed
HR and H&S reports, more details of which are set out on pages 32 to 34.
The Board and its Committees undertake a performance review every
year and this year in accordance with the Code an independent external
review was conducted by Clare Chalmers, who is a very experienced
provider of Board evaluations, with no connections to the Group.
The review involved individual interviews with Board members, the
Chief Operating Officer, the Company Secretary and various advisers.
Clare also attended Board and Committee meetings as an observer and
reviewed the preparation of Board packs and minutes. Clare’s evaluation
was robust and thorough and provided a number of recommendations
to be considered by the Board. Further details of the review undertaken
and actions to be taken are set out in the Nomination Committee Report
on pages 73 and 74.
Unfortunately, due to restrictions imposed in connection with the
COVID-19 outbreak we have had to change the format of our AGM,
which is explained in more detail in the notice of AGM accompanying
the Report & Accounts. This means the Board will not be able to engage
with our shareholders this year in our traditional format of a shareholders
meeting, however, we will be making presentations available through
our website and an online Q&A to keep shareholders informed about
the Group and enable them to ask questions. Whilst this change in format
is regrettable, I hope you will appreciate the safety of shareholders and
staff are our primary concern and that we hope to be able to return to
our usual approach in 2021.
Your Board is committed to continuing to maintain a high standard of
governance and adopting best practice as this develops. 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
23 June 2020
57
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Board of Directors
Executive Directors
Martin Davey
Chairman
Term of Office
Adam Couch
Chief Executive
Mark Bottomley
Finance Director
Jim Brisby
Commercial Director
Mark Reckitt
Senior Independent
Non-Executive Director
Kate Allum
Pam Powell
Tim Smith
Non-Executive Director
Non-Executive Director
Non-Executive Director
Martin was appointed to the Board
in 1985 as Finance Director,
appointed Chief Executive in 1988
and became Chairman in 2004.
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.
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
in 2014.
in 2013.
in 2018.
in 2018.
Committee Membership
Chair
Independent
Not applicable
Skills and Experience
Martin joined Cranswick in 1985.
As Finance Director 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
35 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.
Not applicable
Not applicable
Not applicable
Yes
Yes
Yes
Yes
Chair
Chair
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.
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.
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
the growth of the Group
and the development of its
commercial strategy.
External Appointments and Commitments
None
None
None
None
Board by tenure
Board by age
0-3
years
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
66-70
years
58
Mark has experience across a
Kate has experience of the
Pam has international experience
Tim has experience in the
number of sectors. He was Group
food sector both within the UK
in strategy, marketing and
UK food sector having worked
Strategy Director of Smiths Group
and Europe. Previous roles have
innovation in fast moving
in food manufacturing,
plc between 2011 and 2014. Prior
included Chief Executive of CeDo
consumer goods, including food
government regulation and
to joining Smiths, Mark was interim
Limited and First Milk Limited
and beverages. Pam spent nine
supermarket retail. Tim was the
Managing Director of Green &
and prior to that Head of the
years at SABMiller plc, holding
Group Quality Director at Tesco
Black’s Chocolate and before that
European supply chain for
the position of Group Director of
plc between 2012 and 2017. Prior
held a number of finance and
strategy roles at Cadbury plc.
Mark is a Chartered Accountant.
McDonalds.
Strategy and Innovation, and prior
to joining Tesco plc, Tim was
to this, worked at Coty Europe in
the Chief Executive of the Food
France, Unilever plc in London,
Standards Agency (FSA) during
and Lever Brothers in New York.
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
Hill & Smith Holdings plc.
Non-Executive Director of Origin
Non-Executive Director of
Non-Executive Director of Pret
Enterprises plc, Stock Spirits
Premier Foods plc and
a Manger (Europe) Limited.
Non-Executive Director of JD
Group PLC and SIG plc.
A.G. Barr plc.
Wetherspoon plc between 2012
and 2016 and Mitie Group plc
between 2015 and 2018.
Cranswick plc | Annual Report & Accounts 2020Corporate Governance
Non-Executive Directors
Adam Couch
Chief Executive
Mark Bottomley
Finance Director
Jim Brisby
Commercial Director
Mark Reckitt
Senior Independent
Non-Executive Director
Kate Allum
Non-Executive Director
Pam Powell
Non-Executive Director
Tim Smith
Non-Executive Director
Martin was appointed to the Board
Adam was appointed to the Board
Mark was appointed to the Board
Jim was appointed to the Board in
in 1985 as Finance Director,
in 2003 as Managing Director of
in 2009 as Finance Director.
2010 as Sales and Marketing
appointed Chief Executive in 1988
Fresh Pork and became Chief
and became Chairman in 2004.
Executive in 2012.
Director and became Commercial
Director in 2014.
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.
Not applicable
Not applicable
Not applicable
Yes
Yes
Yes
Yes
Chair
Chair
Martin Davey
Chairman
Term of Office
Committee Membership
Chair
Independent
Not applicable
Skills and Experience
Martin joined Cranswick in 1985.
Adam joined Cranswick’s Fresh
Mark joined Cranswick in 2008
Jim joined Cranswick in 1995.
As Finance Director he led the
Pork Business in 1991 and was
as Group Financial Controller and
He was appointed Sales and
Company’s listing on the London
appointed to the Board in 2003 as
was appointed to the Board as
Marketing Director in 2010 and
Stock Exchange and was
Managing Director of Fresh Pork.
Finance Director in 2009. Before
Commercial Director in 2014
subsequently appointed Chief
He was appointed as Chief
joining the Company, Mark held
and has been a key member
Executive in 1988. Through
Operating Officer in 2011 and
a number of senior finance
of the team responsible for
Martin’s guidance over the last
then Chief Executive in 2012.
roles in the food sector. Mark is
the growth of the Group
35 years the Group has expanded
Under his leadership Cranswick
responsible for overseeing the
and the development of its
both organically and through
acquisition and entered the
has continued to expand and
become a major player in the
FTSE 250 in 2008. He became
food processing industry.
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.
financial operation of the Group
commercial strategy.
and setting financial strategy.
Mark is a Chartered Accountant.
External Appointments and Commitments
None
None
None
None
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. Previous roles have
included Chief Executive of CeDo
Limited and First Milk Limited
and prior to that 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 Origin
Enterprises plc, Stock Spirits
Group PLC and SIG plc.
Non-Executive Director of
Premier Foods plc and
A.G. Barr plc.
Non-Executive Director of Pret
a Manger (Europe) Limited.
Non-Executive Director of
Hill & Smith Holdings plc.
Non-Executive Director of JD
Wetherspoon plc between 2012
and 2016 and Mitie Group plc
between 2015 and 2018.
Board by gender
Male
Female
COMMITTEE MEMBERSHIP
Audit Committee
Nomination Committee
Remuneration Committee
59
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report
Corporate Governance
How we are governed
Cranswick plc Board
Board Committees
Remuneration
Committee
Nomination
Committee
Audit & Risk
Committee
Chief Executive
Operating Boards
Gourmet
Products
John Armstrong
John Fletcher
Marcus Hoggarth
Andy Mayer
Drew Weir
Adrian Wilson
Poultry
Food Central
David Brown
Richard Buck
Andrew Gleadow
Jason Key
Barry Lock
Mike Perkins
Matthew Ward
Chris Aldersley
Jackie Carter
Jez Lake
Kate Maxwell
Andy Napthine
Miranda Spencer
Graeme Watson
Fresh Pork
Convenience
Darren Andrew
Magda Arrowsmith
Charles Bowes
Rick Buckle
John Clappison
Neil Clappison
Nick Mitchell
James Pontone
Neil Willis
Edward Wright
Matt Briggs
Alan Chapman
Costas Constantinou
Louis Constantinou
Andy Jenkins
Carl Meade
Mike Palmer
Sam Pearl
Simon Ravenscroft
Peter Richards
Norman Smith
Steve Westhead
Diversity
Group Directors by tenure
Group Directors by age
Group Directors by gender
0-3 years
60-69 years
10%
57%
50-59 years
40%
30-39 years
17%
Female
10%
40-49 years
33%
Male
90%
10 years+
14%
7-9 years
12%
4-6 years
17%
60
Cranswick plc | Annual Report & Accounts 2020Corporate Governance 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 66 to 71, the Nomination Committee Report on pages 72 and 74, and the
Remuneration Committee Report on pages 75 to 92, describes how the Board applies the principles of good governance and best practice as set
out in the 2018 UK Corporate Governance Code (the ‘Code’) which can be found on the Financial Reporting Council’s website: www.frc.org.uk
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.
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, prior to the
COVID-19 outbreak, Board
meetings were held at the Group’s
sites allowing the Directors to
review the operations and meet
the management teams of those
particular sites.
Compliance Statement
The Board is pleased to report that it has complied with the requirements of the 2018
UK Corporate Governance Code during the 52 weeks ended 28 March 2020 with the
exception of the requirement that the Chairman should not remain in post beyond 9 years
from appointment.
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 considers the
Chairman remaining in post is appropriate given his knowledge of the
Group and experience of the sector. A further explanation of Board’s
view is set out on page 56.
The Remuneration Committee considered the alignment of
Executive Director pension contributions with the workforce
and post-employment shareholding requirements, further details
of which are set out on page 77.
The Board has reviewed the financial statements and, taken as
a whole, considers 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 it in reaching this conclusion.
61
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Corporate Governance continued
Roles and Responsibilities
Chairman
Martin Davey
Chief Executive (CEO)
Adam Couch
Executive Directors
Mark Bottomley and Jim Brisby
Senior Independent Director (SID)
Mark Reckitt
Non-Executive Directors
Kate Allum, Pam Powell
and Tim Smith
Company Secretary
Steven Glover
• 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, treasury, tax and finance
functions across the Group.
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 Audit Committee.
• Heads up the Non-Executive Directors on the Board.
• Reviews the Chairman’s annual performance appraisal along with the other Non-Executive Directors.
• Bring complementary skills and experience to the Board.
• Constructively challenge the Executive Directors on matters affecting the Group.
• Chairs the Remuneration Committee (Kate Allum).
• 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.
• Engage with employees through designated Non-Executive Director (Tim Smith).
• 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.
62
Cranswick plc | Annual Report & Accounts 2020Corporate Governance Board Effectiveness
Board operation and attendance
There were nine 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
Executive Directors
Martin Davey
Adam Couch
Mark Bottomley
Jim Brisby
Non-Executive Directors
Mark Reckitt
Kate Allum
Pam Powell
Tim Smith
Board
9
Audit
Committee
Nomination
Committee
Remuneration
Committee
4
2
4
Meetings
attended
Meetings
attended
Meetings
attended
Meetings
attended
9/9
9/9
9/9
9/9
9/9
9/9
9/9
9/9
N/A
N/A
N/A
N/A
4/4
4/4
4/4
4/4
2/2
N/A
N/A
N/A
2/2
2/2
2/2
2/2
N/A
N/A
N/A
N/A
4/4
4/4
4/4
4/4
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
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.
In the past year the Board received updates on a number of topics including African Swine Fever, Health & Safety, Animal Welfare and COVID-19 and
other market perspectives from both management and external advisers. The Company Secretary also provides briefings during the year on material
developments in legal, governance and compliance matters.
During the year Non-Executive Directors attended a number of Group Risk Committee meetings and also met with management to increase their
understanding of the business through various informal visits and briefing sessions.
Conflicts of interest
The Board has completed its annual review of the register relating to potential conflicts of interest with its Directors and has approved Tim Smith’s
potential conflict of interest arising as a result of his directorship of Pret a Manger (Europe) Limited (which is a customer of the Group) and has agreed
appropriate controls with Tim to manage any conflict which arises. The Board confirms that otherwise no such conflicts exist.
63
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Board Effectiveness continued
Strategic Leadership
Governance and Risk
• Regularly discussing strategy at Board meetings throughout the year.
• Receiving presentations from operational management on future
strategic opportunities.
• Reviewing the acquisition of Katsouris Brothers, Packington Pork
and the Buckle pig farming business.
• Reviewing the three year forecasts and other factors in
support of the Viability Statement. (Viability is considered
in detail on pages 50 and 51).
• Considering the Group’s Risk Appetite Statement.
• Reviewing Board and Committees’ effectiveness and Directors’
• Reviewing the acquisition of joint venture partner’s 50% interest
conflicts of interest.
in White Rose Farms.
• Considering other potential acquisition opportunities and other
strategic initiatives.
• Reviewing the commissioning of the Group’s new £78 million primary
poultry processing facility at Eye, Suffolk.
• Reviewing the Group’s substantial investment programme in
upstream agricultural operations in both pork and poultry.
• Considering the Group’s sustainability strategy, Second Nature.
• Considering the UK’s exit from the EU and related contingency planning.
• Considering the Group’s response to the COVID-19 outbreak.
• Reviewing terms of reference for all Committees.
• Reviewing quarterly Health & Safety, Risk and Technical updates.
• Reviewing the principal financial and non-financial risks,
including COVID-19, Brexit and African Swine Fever, to which
the Group is exposed (supported by the Audit Committee).
• Oversight of the Group’s whistleblowing arrangements
and reports.
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 need
to develop the managers and executives of the future.
• Reviewing the structure, size, composition and diversity
of both the Board and its Committees (supported by the
Nomination Committee).
• Reviewing reports from the designated Non-Executive Director
• Approving the Group’s tax strategy.
• Approving the Company’s dividend strategy.
• Recommending the 2018/19 final dividend and the 2019/20
interim dividend.
• Reviewing and approving the Group’s annual budget, interim
results and Annual Report.
• Considering whether the Annual Report and Accounts are fair,
balanced and understandable.
• Considering monthly operational reports from the Chief
Executive, Finance Director, Commercial Director and
Chief Operating Officer.
(Tim Smith) relating to workforce engagement.
• Reviewing reports from the Chairs of the Audit, Nomination
and Remuneration Committees.
• Reviewing behaviours to ensure these are in line with the
Group’s culture.
• Approving capital expenditure proposals in excess of £1 million
(increased to £2 million from January 2020).
Views of stakeholder groups considered
Strategic Leadership
Governance and Risk
People and Succession
Performance Monitoring
• Shareholders
• Customers & Consumers
• Communities
• NGOs
• Producers & Suppliers
• Our People
• Shareholders
• Customers & Consumers
• Communities
• NGOs
• Producers & Suppliers
• Our People
• Shareholders
• Communities
• Our People
• Shareholders
• Our People
64
Cranswick plc | Annual Report & Accounts 2020Corporate Governance Employee engagement
The Board appointed Tim Smith as the Group’s designated Non-
Executive Director to enhance existing legacy engagement through
works committees, employee surveys and other site specific methods
and to comply with the requirements of the 2018 Corporate Governance
Code. The principal purpose of the designated Non-Executive Director
is to ensure that the voice of the workforce is heard and considered by
the Board in its deliberations enabling the workforce to contribute to the
long-term success of the Group and delivery of its strategy.
During 2019, Tim had discussions with members of the workforce
from across the Group. Workshops were held at five of our sites with
workers from 16 sites across a range of levels and functions, without
management present. The workshops were structured around
employees understanding of the Group’s strategy, investments, growth
and Second Nature strategy and ways in which workers can engage with
these. The meetings did not cover matters covered by existing collective
bargaining arrangements or workers’ pay and conditions. Following the
workshops participants were also invited to comment on a summary
reflecting observations, criticisms and other comments made.
Employees participating in the workshops engaged openly and
constructively. Whilst employee feedback was generally positive
about the Group, in particular in relation to its Second Nature strategy,
understanding of the Group’s strategy beyond the immediate experience
and role of employees was more varied. A number of participants also
suggested that the Group should be more proactive in its use of social
media in its communications. The feedback from the workshops has
been provided to the Board and the Group will be reviewing its internal
communications strategy and use of social media to address the
comments made.
Having reviewed the approach taken, the Board considers that the
appointment of Tim and format adopted has been an effective way of
enhancing employee engagement. The Board intends to develop the role
of the designated Non-Executive Director and format further to enable
workforce engagement to continue having regard to restrictions in place
in relation to the COVID-19 outbreak.
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 66 to 71 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 schemes 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 2018. Details of the policy are included in the
Remuneration Committee Report on pages 80 to 86 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 41.
Details of the Company’s major Shareholders are set out on page 93.
By order of the Board
Steven Glover
Company Secretary
23 June 2020
Board consideration of stakeholder interests: Case study
During the year the Board approved the acquisition of Katsouris
Brothers (see page 9) and the expansion of our integrated supply
chain through the acquisition of Packington Pork, the Buckle family
pig farming and rearing business and the family’s 50 per cent share
of the White Rose joint venture (see page 13). As well as the interests
of shareholders, the Board considered other stakeholders including
Customers and Consumers and, in particular, the trend towards
health-conscious options, premium products and food integrity,
which were supported by the acquisitions. The Board also considered
the impact on our People and the Communities in which the acquired
businesses operate and concluded that they would benefit from the
additional investment, support and enhanced career opportunities
provided by the enlarged Group. Taking all factors into account
and following extensive due diligence the Board concluded that
the acquisitions were in the best interests of the Company.
65
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Audit Committee Report
The Audit Committee
The Audit Committee assists the Board in
discharging its responsibilities for the integrity of
the financial statements and narrative reporting,
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:
Committee Members
Mark Reckitt – Chair
Kate Allum
Tim Smith
Pam Powell
Meetings attended
4/4
4/4
4/4
4/4
Other regular attendees
The Chairman, Chief Executive, Group Finance Director, Group Financial
Controller, Group Head of Internal Audit & Risk, External Audit Partner
and External Audit Director attend 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.
The Committee also meets privately with the Group Head of Internal
Audit & Risk and the External Auditor.
Independence
All Members of the Committee are independent.
Key Activities in 2019/20
Integrity of Financial Statements
• Reviewed and challenged the key financial reporting judgements
and estimates and concluded that accounting treatments
were appropriate.
• Reviewed and concluded that the Financial Statements and
narrative reporting are fair, balanced and understandable.
External audit
• Reviewed and was satisfied with the effectiveness of the external
audit process.
• Approved the terms of engagement and remuneration of the
external auditor.
• Monitored the independence of the external auditor and concluded
that PricewaterhouseCoopers LLP (‘PwC’) is independent.
• Reviewed and concluded that the Group is both a going concern
over a one year period and viable over the three-year review period,
including consideration of the impact of COVID-19 and Brexit,
and that the relevant disclosures are appropriate.
Whistleblowing and anti-bribery
• Reviewed and approved the Group’s anti-bribery policy.
• Reviewed and approved the Group’s whistleblowing policy.
• Reviewed, on behalf of the Board, whistleblowing reports and
their resolution.
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 the new accounting standard in the current
year, IFRS 16 ‘Leases’ 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.
Internal controls and risk management
• Reviewed the Group’s internal controls and risk management systems
including those for assessing emerging risks and concluded that
they are operating effectively.
• Reviewed and assessed the appropriateness of finance department
resource across the Group.
• Reviewed and challenged the work, and associated reporting,
of the Group Risk Committee including its response to COVID-19.
• Supported the Board in their assessment of risk appetite and
development of a Group Risk Appetite Statement
• Reviewed and challenged the Group’s Brexit readiness planning
and COVID-19 response.
• Reviewed and updated, where necessary, the Committee’s terms
• Reviewed and approved the Internal Audit Charter.
• Reviewed and approved the Internal Audit plan for the coming year.
of reference.
66
Cranswick plc | Annual Report & Accounts 2020Corporate Governance Group viability and related disclosures
• Reviewed and concluded that a three-year time horizon for the
Group’s Viability Statement remained appropriate.
of African Swine Fever in the UK pig herd, and concluded that the
Group is viable over the three-year time horizon.
• Reviewed the Group’s budget, forecasts and downside sensitivity
• Reviewed and approved the Viability Statement disclosures in the
analysis, including the impact of COVID-19 and a potential outbreak
Financial Statements.
I am pleased to report on the activities of the Audit Committee during the 52 weeks ended 28 March 2020.
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. This year has been unusual
with a particular focus on a few key risks, including the impact of a ‘disorderly Brexit’ and of an outbreak of African Swine Fever in the UK. Finally,
towards the end of the financial year, the Committee focused its attention on challenging and supporting management’s response to the COVID-19
pandemic by ensuring that the on-going risk and impact of mitigating actions have been appropriately modelled. In addition, the Committee has
continued to focus on ensuring the integrity, quality and compliance of the Group’s external financial reporting.
the role, composition, activities and responsibilities of the Audit Committee;
This report sets out:
•
• 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; and
•
the Committee’s annual review of external auditor independence.
•
The Committee reviewed the appropriateness of the financial results and narrative reporting for the full year and half year and the first and third
quarter trading statements, including applicable accounting policies, key judgements and estimations, 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 provisions against doubtful accounts receivable and commercial accruals;
the accounting treatment and disclosure of the transactions to acquire Katsouris Brothers Limited, Packington Pork Limited and White Rose
Farms Limited; and
the accounting treatment and disclosure of biological assets.
•
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. During the year the Committee reviewed and strongly challenged the external auditor PwC on their proposed
increase in the annual fee for their work from £267,000 to £419,000. PwC believes that there have been significant increases in the costs that
they incur, partly driven by changes in the audit regulatory environment, and that these should be reflected in an increase in the fee for their work.
The Committee believed it was imperative that the external audit continued to be effective and agreed to accept the majority of the increase
sought by PwC. The Committee was satisfied with the performance of the Group’s internal audit function and the external auditor.
The impact of COVID-19 has placed an immense additional burden on all those involved in financial processes and management at Cranswick as well
as those carrying out internal and external audit functions. On behalf of the Committee I would like to thank them for their work and commitment
during this difficult period.
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.
Mark Reckitt
Chair of the Audit Committee
23 June 2020
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Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Audit Committee Report continued
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 and related
narrative 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 additional meetings
in September and January in preparation for the half year and year-end
processes. In the current year, the Group’s results announcement, and
hence the year end Audit Committee meeting, were delayed until June
as a result of the on-going COVID-19 outbreak in order to allow additional
time for the preparation of financial information and for the Group’s
auditors to carry out the necessary audit process in light of travel and
social distancing restrictions.
Fair, balanced and understandable
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
necessary 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;
• ensuring the impact of COVID-19 has been fully considered and
disclosed where necessary;
• holding discussions with both the Group Head of Internal Audit & Risk
•
and the external auditor; 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.
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 59.
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, Group
Head of Internal Audit & Risk 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 Group Head of Internal Audit & Risk 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 the Group Head of Internal Audit & Risk 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 and related
narrative reporting;
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 appropriateness of finance department resource across
the Group, particularly at those sites experiencing rapid growth;
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.
68
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.
Viability Statement
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.
reviewing risk reporting disclosures in detail;
In order to give this report, the Audit Committee carried out a number
of additional procedures including:
•
• considering the appropriateness of the three-year time horizon
selected for testing the Group’s viability, including consideration
of the uncertainty resulting from the COVID-19 pandemic and UK’s
exit from the European Union;
reviewing the Group’s 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 (in the current year focusing on
the impact of COVID-19, Brexit and the potential impact of an African
Swine Fever outbreak in the UK pig herd); 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 50 and 51).
Performance evaluation of the Audit Committee
During the year, an independent, external evaluation of the effectiveness
of the Committee was carried out by Clare Chalmers Limited. The
evaluation indicated that the Committee was working well. Further
details of the evaluation are included under ‘Board performance
evaluation’ on pages 73 and 74.
Cranswick plc | Annual Report & Accounts 2020Corporate Governance 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
Financial reporting area
Judgement and assurance considered
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 2020 are set out below.
Commercial
accruals
Trade receivables
and inventories
Acquisitions
Biological assets
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 71 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. Following the adoption of IFRS 15 in the
prior year, the Group reviewed its accounting practice in respect of aged commercial accruals and introduced a maximum
holding period for aged balances, under normal circumstances, of three years. After reviewing and challenging 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 21).
At the year end the inventory and credit risk in relation to non-retail customers and specifically those in the food-to-go
and food service sectors had increased significantly as a result of the COVID-19 pandemic, with a number of our customer’s
businesses being closed or materially curtailed as a result of the lockdown, putting significant pressure on their liquidity.
This increased uncertainty has been incorporated into the Group’s expected future loss rates when calculating its IFRS 9
trade receivables provision. The provision is calculated by reviewing lifetime expected credit losses using both historic and
forward-looking data. Expected future loss rates of between 0.0% – 3.5% at 31 March 2020 generated a future credit loss
provision of £3.6 million (2019: <£0.1 million). Including specifically provided debts, as at 31 March 2020, trade receivables
with a nominal value of £4.3 million (2019: £0.7 million) were impaired and fully provided. In addition, management reviewed
the Group’s provision for slow moving and obsolete inventory in relation to those same customers. As at 28 March 2020,
the provision against inventory was £8.4m (2019: £3.9m), of which £3.6m resulted from COVID-19 considerations. The
Committee reviewed both the historic and forward-looking information supporting the expected future loss rates and the
supporting information for the inventory provision and after robustly challenging the available evidence concluded that the
level of provision was appropriate in the current circumstances. (See Notes 18 and 19).
During the year, the Group acquired Katsouris Brothers Limited, a leading Mediterranean food products business, for initial
net cash consideration of £41.3 million, pig farming and rearing business Packington Pork Limited and the remaining 50 per
cent of its joint venture pig farming and rearing operation White Rose Farms Limited, as well as the other pig rearing activities
previously performed by the JV partner, for a combined net cash consideration of £27.4 million. In each case, the Committee
reviewed management’s proposed accounting treatment and the valuation methodology applied to the acquired assets and
liabilities which was based on internal due diligence work and reports by external advisers and consultants. The allocation
of the provisional purchase price between tangible assets, intangible assets and goodwill was subject to particular scrutiny.
The external auditors also challenged the key assumptions used in the allocation methodology. The Committee specifically
reviewed the judgements and assumptions management had made on the valuation of customer relationship intangible
assets acquired as part of the Katsouris Brothers acquisition, and after a thorough review of all the information, agreed with
management’s approach to the allocation of the purchase price and the Committee will continue to consider this during the
measurement period prior to the allocations ceasing to be provisional. (See Note 16).
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 17).
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 on behalf of the Board.
The Audit Committee also considered the impact of remote working
during the COVID-19 crisis, the guidance provided to colleagues around
financial and other controls and concluded that the Group’s internal
control environment has remained adequate during this period.
A Risk Committee chaired by the Group Finance Director and including
representatives from all areas of the business meets quarterly,
reporting its outputs directly to the Audit Committee and updating
the Board accordingly. Members of the Audit Committee are invited
to attend Risk Committee meetings to gain an understanding of how
the Risk Committee operates and to assess its performance, with the
Audit Committee Chair and one other member of the Committee taking
up the opportunity to attend a meeting during the year.
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. The recommendations of this
review were subsequently incorporated into the Group’s Risk
Management Framework.
69
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Audit Committee Report continued
During the year, the Committee supported the Board in their assessment
of risk appetite and development of the disclosures provided in the
Group Risk Appetite Statement (see page 49). The structured approach
to the assessment, which is facilitated by the Group Risk Committee,
documents the level of risk the Group is willing to tolerate in order to
achieve its strategic objectives, which in turn determines the depth and
extent of actions and resources required to mitigate risks to the agreed
acceptable level. The results are mapped to each of the Group’s strategic
pillars in order to determine how each group risk is operating in relation
to risk appetite, with action plans being put in place to bring risk scores
in line with the accepted level.
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. Particular
emphasis was placed on reviewing and challenging the work of the Risk
Committee in respect of Brexit readiness planning and the attendant HR
and Commercial Risks, plus the Group’s response to the COVID-19 crisis.
The Committee was satisfied that all principal risks, including emerging
risks, had been identified (see pages 48 to 54) and that the risk
management framework, including processes for assessing and
reporting emerging risks, 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 largely achieved,
with a small element of the plan towards the end of the year being
postponed to the next financial year as a result of the COVID-19
pandemic. 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 but 2 of the Group’s sites (with the exceptions being
due to the COVID-19 crisis) 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 Audit Committee concluded that, in spite
of the curtailment of the Internal Audit plan as a result of COVID-19 travel
restrictions, a high proportion of the plan had been completed in order
to provide the necessary assurance it required in relation to the Group’s
internal control framework.
site audit reviews, use of video conference, screen and workspace
sharing technologies and, importantly, further progressing the use
of analytical tools to deliver audit reviews. The Internal Audit team will
also plan to work more closely with other assurance providers such as
External Audit and internal compliance functions to reduce disruption
to the business whilst ensuring that key risks and issues continue to be
appropriately addressed. It is also anticipated that the 2020/21 Internal
Audit plan will be frequently refreshed over the course of the year, to
direct available resource to emerging risks and issues, as the implications
of COVID-19 evolve over the coming months. The Committee has
reviewed all changes to the plan for 2020/21 and will review all
further changes.
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.
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. Overall, in
common with prior years, in all material areas the Internal Audit function
is compliant with Institute of Internal Audit (IIA) standards and in the view
of the Committee is appropriately resourced, 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. The Internal Audit team continues to implement
the recommendations from the independent assessment of the
function carried out by Deloitte LLP in 2018 and reports on progress
to the Committee.
Over the course of the coming year following the publication of the
revised Internal Audit Code of Practice, which provides guidance on
effective internal audit and aims to raise standards across the profession,
a self-assessment exercise of areas of compliance and potential gaps
will be completed by the Group Head of Internal Audit & Risk and the
outcome reported to the Audit Committee.
Effectiveness of the External Audit Process
PricewaterhouseCoopers LLP (‘PwC’) has been the Group’s auditor
since 2017. The Audit Committee assesses annually the qualifications,
expertise, resources and independence of the auditor as well as the
quality and effectiveness of the audit process. In assessing audit quality,
the Committee evaluates four key areas, being; the mindset and culture
of the auditor, the auditor’s approach to quality control, the skills,
character and knowledge of audit staff and the judgments they make
during the audit process.
In addition to the year-end audit, PwC carried out a review on the Group’s
interim reporting during the year. The Committee considers that such
a review gives the Board additional assurance over the half year process
and reporting.
During the year, the Committee assessed the external auditor’s
performance and effectiveness through a questionnaire completed
by Audit Committee members and the Group’s senior finance team.
The output from the process was reviewed and discussed by the
Audit Committee and with the external auditors.
In light of the on-going COVID-19 outbreak, the Internal Audit team is
facing unique challenges due to Government imposed and Group
specific travel restrictions. To address this issue and ensure the 2020/21
Internal Audit Plan can be fully delivered, new ways of working will be
adopted where necessary. These will include; remote working to perform
For the 52 weeks ended 28 March 2020, as a result of the COVID-19
outbreak, PwC were limited to carrying out their audit procedures
remotely, rather than in-person. The Committee reviewed these
limitations on the work of the external auditor and challenged the
external audit partner on the effectiveness of the additional steps
70
Cranswick plc | Annual Report & Accounts 2020Corporate Governance taken as a result. The Committee was satisfied that the scope of
the audit and the work carried out remained adequate in spite of the
difficult circumstances.
The Committee also 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 having noted the observations
made in the auditor’s reporting, the Committee was satisfied with
the effectiveness of the external audit process.
In assessing the auditor’s professional scepticism, the Committee noted
in the current year that PwC had robustly challenged management’s
viability assumptions and conclusions, their judgements on trade
receivable and inventory provisions as well as their acquisition accounting
and biological asset valuation assumptions. The Committee also
challenged management in these key areas and concluded that the
relevant accounting treatments were appropriate.
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.
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. The Committee does not encourage the external auditor
to carry out any non-audit work, with the exception of their review of the
interim financial statements. 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 and in practice all non-audit
services are reviewed and agreed by the Audit Committee. Any such
work will be on an exceptional basis only and additionally subject to
PwC’s own rules on ethical standards.
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) and the current Audit Director were selected by PwC
to lead the audit of the Group from the year ended 31 March 2018.
• 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 the lower
of £500,000 and 50 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
16
–
16
419
0.04:1
* The average ratio of non-audit fees to audit fees over the last three years is 0.05:1.
The ratio of non-audit fees to audit fees on average over the last
three years has been 5 per cent, well below the 50 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 which
the Audit Committee does not consider would provide a threat to
PwC’s independence.
A copy of the Committee terms of reference is available on the
Company’s website at www.cranswick.plc.uk.
Following consideration of the performance and independence of
the external auditor at its meeting in June 2020, 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 2020 Annual General Meeting.
Mark Reckitt
Chair of the Audit Committee
23 June 2020
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Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Nomination Committee Report
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. As Chair of the Nomination
Committee I am pleased to introduce its
report for the year ended 28 March 2020.
Composition of the Nomination Committee
Committee Members
Martin Davey – Chair
Kate Allum
Mark Reckitt
Pam Powell
Tim Smith
Key Activities in 2019/20
Meetings attended
2/2
2/2
2/2
2/2
2/2
Other regular attendees
• The Chief Executive and Finance Director attend by invitation
as required.
• 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
Except for the Chair, all Members of the Committee are independent.
Board composition
• Reviewed Board composition.
• Reviewed ongoing training requirements for Non-Executive
Diversity
• Reviewed the Group’s diversity policy.
• Reviewed compliance with the 2018 UK Corporate Governance Code
Directors and development of industry knowledge.
for the Group.
Succession planning
• Reviewed and updated succession plans for the Board
and Senior Management.
• Reviewed the management contingency plan in light of the
COVID-19 outbreak.
• 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 2020 Annual Report and
recommended it to the Board for approval.
• Reviewed the Committee’s terms of reference.
• Appointment of consultants to undertake external Board evaluation.
• Review of external Board Evaluation Report and consideration
of recommendations.
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Cranswick plc | Annual Report & Accounts 2020Corporate Governance Board appointments
I can confirm that in compliance with the requirements of the 2018 UK
Corporate Governance Code at least half of the Board are independent
Non-Executive Directors.
CeDo Limited and, consequently, the Board was satisfied that, taking
into account Kate’s other commitments, she will continue to have
sufficient capacity to properly fulfil her role as a Non-Executive Director
of the Company.
During the year Kate Allum came to the end of her current 3-year term
of appointment as a Non-Executive Director of the Company, which
the Board decided to renew for a further 3-year term. In deciding to
reappoint Kate, the Board were satisfied that Kate remained independent
and continues to provide challenge within the Board and possesses the
skill, experience and knowledge to continue to add value to the Board’s
decision making. At the end of her new 3-year term, Kate will have served
for 9 years as a Non-Executive Director and will then retire in accordance
with the principles of corporate governance.
Last year, the Board decided to further engage with the Group’s
workforce and appointed Tim Smith as the Group’s Designated
Non-Executive Director to undertake this role. Tim has been holding
meetings with the workforce throughout the year, a more detailed review
of which is set out in Board Effectiveness on page 65.
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 58 and 59 demonstrate the range of experience
and skills which each brings to the benefit of the Company.
Succession
The Committee reviewed the Group’s succession plan which relates
to executive members of the Board and key management throughout
the Group. The Committee’s review included arrangements relating to
contingency planning for sudden and unforeseen departures together
with longer term planning focused on identifying potential candidates
within the Group for progression and areas where external recruitment
may be required. Members of the Committee have met with the wider
executive management team, who gain exposure to the Board through
site visits, Board presentations and ad hoc informal dinners held
throughout the year.
A number of senior executives retired from the Group during the year,
following long service, and the Committee has overseen the successful
promotion of candidates from within the Group and the recruitment of
external candidates to ensure an orderly succession. The Committee has
also overseen transitional arrangements with retiring executives to ensure
that their expertise and experience remains available to the Group.
In relation to the appointment of any new Non-Executive Directors or
Chairman, the Group’s policy is to engage independent external search
consultants to assist with appointments, who are required to have
adopted the Voluntary Code of Conduct for Executive Search Firms
on gender diversity and best practice. The Group does not advertise
Non-Executive positions, but keeps developments in market practice
in relation to this under review.
Non-Executive Directors
Consideration was 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. During the year Kate Allum
was appointed to the Board of SIG plc as a Non-Executive Director,
however, Kate has also relinquished her executive responsibilities at
Gender breakdown
Male
Female
5,324
64%
2,952
36%
6
75%
402
74%
118
78%
2
25%
141
26%
34
22%
Total
Employees
Board
Senior Managers
and Executives
Graduates and
Apprentices
Diversity policy
Cranswick recognises the potential benefits of bringing together a wide
variety of backgrounds and experiences and is pursuing the development
of a diverse workforce that is 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 considers that diversity can strengthen the
Board and that it is important that the Board is not made up exclusively
of like-minded individuals with similar backgrounds. Whilst management
appointments will continue to be made on the basis of merit, without the
adoption of specific diversity targets, the Group recognises the potential
benefits of a more diverse management and has a policy of increasing
diversity at all levels. The Board is mindful of the Hampton-Alexander and
Parker Reviews when considering future appointments and, in particular,
the Hampton-Alexander target that by 2020, at least 33 per cent of board
members and wider senior management teams in FTSE 350 companies
are women.
Successful delivery of the Group’s strategy and planned growth depends
on the recruitment and retention of a motivated and skilled workforce
in an increasingly competitive and mobile labour market. The Board
recognises that broadening diversity to ensure that our workforce
is more reflective of society maximises our available talent pool and
the attractiveness of a career with the Group both at a senior level
and more generally.
The gender breakdown of the workforce is set out above. In relation to
both senior managers and executives and graduates and apprentices
the proportion of females has increased from last year.
Board performance evaluation
During Autumn 2019, the Board conducted its triennial external
evaluation of its own performance and that of its Committees and
individual Directors in accordance with the requirements of the 2018
Corporate Governance Code and recommendations of the Financial
Reporting Council’s Guidance on Board Effectiveness.
The Company conducted a tender process led by the Chairman and
the Company Secretary to appoint consultants to conduct the Board
Performance Evaluation, with support from the Non-Executive
Directors. The Company appointed Clare Chalmers, who is a highly
experienced and independent provider of board evaluations and who
has not previously provided any services to the Company or otherwise
has any other connections to the Group.
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Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Nomination Committee Report continued
The evaluation exercise undertaken by Clare was agreed with the Chairman and involved individual meetings with all members of the Board,
the Chief Operating Officer and Company Secretary. Clare also interviewed the Company’s auditors and remuneration consultants, attended
Board and Committee meetings and reviewed board packs and minutes of meetings.
Clare Chalmers’ evaluation report was robust and informative and provided a valuable independent external perspective on the Group’s governance.
In connection with the presentation of the evaluation report Clare made a number of recommendations which the Board considered and intends
to implement once practical to do so in light of COVID-19 related restrictions, including the following:
Recommendation
Actions
Greater focus by the Board as a whole on succession planning
and broader talent management.
Further Committee discussion will be undertaken during the year on succession
and likely retirements to formalise the Company’s succession planning.
Consideration of enhancing governance best practice by
reviewing board structure and operation.
Board to conduct a review of Board skills.
Greater focus by the Board as a whole on strategic matters
and avoiding unnecessary operational detail.
Talent management programmes to be reviewed by Group HR Director
supported by external consultants.
Further Committee discussion will be undertaken in relation to the structure
and operation of the Board, which will involve greater participation by the
Company Secretary.
Review to be undertaken during the year culminating in a Board skills matrix
which will be reviewed annually.
The format and duration of Board meetings has been reviewed with a greater
use of Board presentations and dinners proposed to enable more discussion
of strategic matters.
The Company will also undertake a dedicated annual strategy review day with
Non-Executive Directors.
Further consideration of stakeholder engagement framework
and dialogue with pressure groups.
The Board proposes undertaking a full review of its engagement with
stakeholders and pressure groups later this year.
Improvements to the content and presentation of Board packs.
Format of Board Reports and management of agenda reviewed and an enhanced
online board portal has been adopted to facilitate improved board reporting.
The Company expects to update shareholders on the progress made in relation to the matters identified above in its 2021 Annual Report.
The summary of the Board Performance Evaluation set out above has been reviewed and approved by Clare Chalmers.
The Board also reviewed performance against the areas identified in the 2019 evaluation which recognised the need for continued focus on
succession planning and strategy given the complexity of the Group and dynamic markets it operates in. It was recognised that progress had been
made in relation to succession planning although this required additional focus and that a number of Board briefing sessions had been held on
key areas including Brexit and ASF at which relevant parts of the Group’s strategy had been reviewed.
Governance
The Committee’s terms of reference were reviewed by the Committee and updated during the year. A copy of the Committee’s terms of reference
is available on the Company’s website at www.cranswick.plc.uk.
On behalf of the Committee
Martin Davey
Chairman
23 June 2020
74
Cranswick plc | Annual Report & Accounts 2020Corporate Governance Remuneration
The Remuneration
Committee
The Remuneration Committee establishes the
remuneration policy for Executive Directors’
remuneration and determines the appropriate
performance conditions for the annual cash
bonus and long-term incentive awards.
The Remuneration Committee also sets
remuneration for the Chair, Executive Directors
and Senior Management (including the
Company Secretary).
Committee meetings during the year
The attendance of members at the meetings was as follows:
Committee Members
Kate Allum – Chair
Mark Reckitt
Pam Powell
Tim Smith
Meetings attended
4/4
4/4
4/4
4/4
Other regular attendees
• The Chairman, Chief Executive, Finance Director and Group HR
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.
Key Activities in 2019/20
Review of 2018 Corporate Governance Code
• Further review of the requirements of the new Corporate
LTIP awards
• Reviewed the outcome of performance conditions for the LTIP awards
Governance Code.
which were granted in 2017.
• Approved LTIP awards granted in 2019.
Executive Director and Senior Executive remuneration
• Reviewed Executive Directors’ and other Senior Executives’ base salaries.
Approval of bonuses
• Set objectives for the annual bonus arrangements for 2020 for
Executive Directors and Senior Executives.
• Reviewed 2019 bonus targets following the acquisition of Katsouris
Brothers, Packington Pork and the Buckle pig farming business.
• Reviewed the achievement of the Executive Directors’ bonus
arrangements against upward adjusted 2019 targets.
Shareholder engagement
• Engaged with major Shareholders in relation to remuneration.
Other activities
• Reviewed the Annual Remuneration Report for 2019.
• Reviewed employee benefit structures and approved the issue
of the SAYE share scheme for 2019.
• Approved the Committee’s terms of reference.
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Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Remuneration continued
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
28 March 2020.
As with prior years, Shareholders will be asked to pass an advisory vote
on the Annual Report on Remuneration at the forthcoming Annual
General Meeting (AGM).
Company performance
Cranswick has experienced impressive long-term growth in both revenue
and profits which has been reflected in the remuneration received by
the Group’s Executive Directors in relation to both bonus and LTIP
awards over the years. However, in 2018/19 the Group faced challenging
conditions which resulted in a marginal decline in revenue and a decline
in the Company’s share price which was reflected in the Executive
Directors’ reduced remuneration. Over the course of 2019/20 the
Group’s strong performance has resumed with revenue increasing
(on a like-for-like basis) by 13.0 per cent and the Company’s share price
increasing by 27.8 per cent. The Remuneration Committee believes it
is important that the Executive Directors’ interests are aligned with the
Company’s strategic vision and the interests of Shareholders and that
the incentive outcomes reported are appropriate given the performance
of the Group.
The Remuneration Committee has carefully considered the impact
of the COVID-19 outbreak when reviewing remuneration outcomes.
The Group has continued to perform well notwithstanding the
challenges faced and has not furloughed any employees or accessed
any other Government financial assistance. In addition, the Company
is proposing an increased dividend payment to shareholders and will
pay a bonus of £500 to all colleagues in operational roles who have
worked during the four-month period to the end of June. The total
amount payable is expected to exceed £4 million. The Committee also
considered movements in the share price over the period noting that
the Company has not suffered the significant share price depreciation
suffered by many companies over the period. In the circumstances, the
Remuneration Committee did not consider it necessary to exercise its
discretion in relation to such outcomes and believes that the measures
used to judge performance which are explained in our remuneration
policy on pages 80 to 86 remain appropriate and reflect the performance
of the Group throughout the period under review.
This report contains the following separate sections;
• Part 1 – The Chair’s annual statement on pages 76 and 77.
• Part 2 – Remuneration at a glance on pages 78 and 79.
• Part 3 – Full details of our remuneration policy approved at the 2018
AGM on pages 80 to 86.
• Part 4 – The Annual Report on Remuneration on pages 87 to 92
which discloses how the existing policy has been applied during the
year. Those elements of part 4 subject to external audit are clearly
identified.
2020 bonuses
Bonus awards for 2020 reflect the performance delivered in the year
outlined below*. A bonus of 100 per cent of maximum (i.e. 150 per cent
of base salary) has been awarded to each of the Executive Directors.
The bonus targets were adjusted upwards during the year to reflect
the impact of the acquisition of Katsouris Brothers, Packington Pork
and the Buckle pig farming business. The Committee is satisfied that
the recalibrated targets are appropriate, having regard to changes in the
Group, and are no less stretching than the original targets. In comparison,
bonus awards for 2019 were 38 per cent of base salary for each of
the Executive Directors. Further details are shown on page 87. The
Committee considers the level of payout is reflective of the overall
performance of the Group in the year and is appropriate.
LTIP awards vesting in respect of the year ended 28 March 2020
The LTIP Awards granted in 2017 were based on the three-year
performance period from April 2017 to March 2020 and were subject to
adjusted EPS (50 per cent) and TSR (50 per cent) targets. Performance
over the three-year period as measured against adjusted EPS has been
strong with performance 6.9 per cent over the average increase in RPI
and vesting at 98 per cent of the maximum. Performance in relation to
TSR has also been strong with the Company being ranked in the 75th
percentile of its comparator group and, consequently, 100 per cent
of the TSR element of the award vesting. Overall 99 per cent of the
maximum award will vest in June 2020 (i.e. 148.5 per cent of salary) for
each Executive Director, versus 80.5 per cent of the maximum award
which vested in June 2019 (i.e. 121 per cent of salary). This is reflected
in the table on page 88. The Committee considers the level of payout
is reflective of the overall performance of the Group over the three-year
performance period ended 28 March 2020 and is appropriate.
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 200 per cent of base salary based on the
market value of the Company’s shares at the date of award (1 June 2019).
These awards are reflected in the table on page 88.
Remuneration in respect of the year ending 27 March 2021
Executive Directors (other than Martin Davey who waived his contractual
entitlement to an increase this year) were awarded a pay increase of
2.8 per cent effective from 1 May 2020 in line with the Senior Executives
and the wider workforce. Bonus opportunities and LTIP awards will
remain unchanged at 150 per cent of salary and 200 per cent of salary
respectively for the year ending 27 March 2021. 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.
As part of the planned transition of Martin Davey’s executive
responsibilities he did not participate in any new LTIP awards in 2019
or in the Group’s 2020 bonus awards and will not be receiving a bonus
or LTIP award in the current year.
76
Cranswick plc | Annual Report & Accounts 2020Corporate Governance Remuneration Policy
Last year, the Committee agreed a number of changes to its terms of
reference and the way in which the Company’s Remuneration Policy
would be applied going forward to reflect the requirements of the 2018
Corporate Governance Code, which were explained in detail in our 2019
Remuneration Report. These were also applied to the financial year
now being reported on and will continue to be applied going forward.
Subject to Shareholder approval, these will be formally adopted into
the Company’s Remuneration Policy when this is next approved by
Shareholders (anticipated to be in 2021). The Committee gave further
consideration during the year to the following matters:
Directors pension contributions: Last year the Committee agreed
that the maximum employer pension contribution and/or cash payment
in lieu for new Executive Directors would be aligned to those applicable to
other employees of the Group. The Committee considered whether any
further changes were required in relation to current Executive Directors
existing contractual entitlements, noting external guidance, and agreed
that it would keep emerging practice under review ahead of the formal
review of the Company’s Remuneration Policy in 2021.
Post-employment shareholding requirements: The Committee
reviewed existing “good leaver provisions” in relation to the Group’s
incentive arrangements which do not result in accelerated vesting and
considers that these provide continuing alignment with Shareholders
interests’ post employment. Under the Group’s LTIP, Executive Directors
are required to retain vested shares for a period of two years which
would continue to apply on an Executive Director’s departure. As at
28 March 2020 a total of 128,640 ordinary shares of the Company
(valued at £4,474,099 using the share price of 3,478p per ordinary share
at 28 March 2020) were subject to such retention arrangements in
relation to Executive Directors. The Committee will keep emerging
practice under review and will reconsider developing a post-employment
shareholding policy, which encompasses vested and unvested shares, as
part of the formal review of the Company’s Remuneration Policy in 2021.
When determining the application of the remuneration policy, the
Committee considered clarity, simplicity, risk, predictability and
proportionality, and alignment to culture as set out in the 2018 Corporate
Governance Code. We operate simple variable pay arrangements,
which are subject to clear performance measures aligned with the
Group’s strategy and the interests of all stakeholders. The application
of recovery provisions (malus and clawback) enables the Committee
to have appropriate regard to risk considerations. In addition, the large
shareholdings of the Executive Directors and “good leaver provisions”
in the Group’s incentive arrangements further align the interests of our
Executive Directors to serve the long-term interests of the Company and
Shareholders. As part of our culture, in determining the remuneration
policy, the Committee was clear that it should drive the right behaviours,
reflect the Group’s values and support its purpose and strategy.
Executive Director pay and the broader workforce
The Committee recognises that an understanding of broader workforce
pay and conditions can be helpful in relation to considering executive pay
along with other relevant factors. The Committee receives information
on the annual salary review across the Group, gender pay and CEO
pay ratios together with the principles that are applied in relation to
broader incentive schemes operated in the Group. The Committee also
considers outcomes in relation to the wider senior management team
when considering outcomes for the Executive Directors. The Group also
operates works committees and employee surveys to obtain employee
feedback on all areas of the Group’s business and has appointed Tim
Smith as its designated Non-Executive Director to enhance existing
engagement methods.
CEO pay ratios
The Company aims to provide a competitive remuneration package
which is appropriate to promote the long-term success of the Company
and applies this policy fairly and consistently to attract and motivate
staff. The Company considers the CEO median pay ratio is consistent
with the Company’s wider policies on employee pay, reward and
progression and is reflective of the sector that the Company operates in.
Further information is given on page 90.
Shareholder approval and engagement
Our Remuneration Report was approved by Shareholders at the 2019
AGM with over 98 per cent of the votes cast in favour of it, further
information is given on page 92.
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.
The Committee’s terms of reference were reviewed by the Committee
and updated during the year. A copy of the Committee’s terms of
reference is available on the Company’s website at
www.cranswick.plc.uk.
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 kate.allum@cranswick.co.uk.
Kate Allum
Chair of the Remuneration Committee
23 June 2020
*2020 bonuses
Measure
Adjusted Group profit before tax
Bonus payable (% of salary)
Threshold
£90.9m
20%
Maximum
£102.9m
150%
Actual
£106.7m
150%
Note: Adjusted Group profit before tax targets are stated before deduction of bonuses paid to Executive Directors and the Chief Operating Officer, associated employers NI and non-trading items.
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Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Remuneration continued
Remuneration at a Glance
Our performance during the year
+13.0%
Like-for-like revenue increase
to £1,623.8m.
+27.8%
Share price increase to 3,478p
at 28 March 2020.
Adjusted profit before tax
(£’m)
£102.3m
Adjusted earnings per share
(p)
156.4p
2020
2019
2018
£102.3m
2020
£92.0m
£92.4m
2019
2018
156.4p
144.3p
145.0p
Total shareholder return
700
600
500
400
300
200
100
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Cranswick
FTSE All Share
FTSE 350 Food Producers
Remuneration in 2020
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).
Salary
Benefits
Pension
Bonus
LTIP
SAYE
Total
Martin Davey
Adam Couch Mark Bottomley
Jim Brisby
314
33
63
–
552
–
962
651
34
130
979
1,082
49
2,925
430
33
86
646
717
27
430
32
86
646
717
–
1,939
1,911
Outcomes
Achieved Adjusted Group profit before tax of £102.3 million – 100 per cent of the maximum
bonus opportunity achieved (150 per cent of salary). Performance measured over the three-year
period ended 28 March 2020, EPS growth was RPI +6.9 per cent, and TSR was ranked in the 75th
percentile of its comparator group. LTIP awards made in June 2017 will therefore vest in June 2020
in full in respect of the TSR element and at 98 per cent of the maximum in respect of the EPS
element, in aggregate 99 per cent of the maximum (148.5 per cent of salary).
Targets
Bonus
100%
Adjusted profit before tax
LTIP
50%
EPS
50%
Relative TSR
Read more: see page 87 for more details.
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Cranswick plc | Annual Report & Accounts 2020Corporate Governance Remuneration for 2021
Salary
Bonus
LTIP awards
2.8% increase to Directors’ salaries (other than Martin Davey) in line
with Senior Executives and the wider workforce.
Opportunities unchanged at 150% of salary for 2020/21.
Stretching target – unchanged from previous years at 100% on
Adjusted Group profit before tax.
Opportunities unchanged at 200% of salary for 2020/21.
Stretching target – unchanged from previous years at 50% on EPS
and 50% on relative TSR.
98%
of total votes cast in favour of the
Remuneration Committee’s Report
at last year’s AGM.
Illustration of Application of Remuneration Policy for 2020/21
The following chart illustrates the potential pay opportunities for the Executive Directors under three different performance scenarios for the year
ending 27 March 2021. The chart has also been amended to illustrate potential pay opportunities reflecting an assumed 50 per cent increase in the
share price across the performance period.
4,000
3,500
3,000
2,500
0
0
0
£
2,000
1,500
1,000
3,798
17%
3,145
34%
41%
27%
32%
1,990
33%
25%
2,521
17%
2,089
34%
41%
27%
32%
836
22%
27%
42%
100%
2,521
17%
2,089
34%
41%
27%
32%
1,326
33%
25%
563
1,326
33%
25%
563
500
410
410
410
410
100%
100%
100%
100%
22%
27%
42%
100%
22%
27%
42%
100%
0
+50% SP
Maximum
On Target
Fixed
+50% SP
Maximum
On Target
Fixed
+50% SP
Maximum
On Target
Fixed
+50% SP
Maximum
On Target
Fixed
Martin Davey
Adam Couch
Mark Bottomley
Jim Brisby
Fixed Pay
Bonus
LTIP (no share price growth)
LTIP (+50% share price growth)
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 2020, employer pension
contributions of 20% of that
salary, and benefits disclosed
in the single figure table for the
year ended 28 March 2020.
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 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Remuneration continued
Remuneration policy
This part of the Directors’ Remuneration Report sets out the Directors’ Remuneration Policy (the ’Policy’).
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 goal 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
Operation
Performance metrics
Maximum entitlement
Base salary
To provide a market
competitive base
salary to attract and
retain executives.
While no formal
performance
conditions apply,
an individual’s
performance in role
is taken into account
in determining any
salary increase.
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.
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 per cent 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.
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Cranswick plc | Annual Report & Accounts 2020Corporate Governance Purpose and link to strategy
Operation
Performance metrics
Maximum entitlement
Benefits
To provide market
competitive benefits
as part of the
remuneration
package.
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
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.
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.
Additional benefits might be provided from time
to time if the Committee decides payment of
such benefits is appropriate.
Benefits are not pensionable.
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 per cent 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 per cent 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 per cent
to the share price when the option is offered.
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 per cent
of base salary.
The bonus for achieving threshold
performance is 20 per cent of salary
(13 per cent of the maximum opportunity).
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 per cent.
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Purpose and link to strategy
Operation
Performance metrics
Maximum entitlement
The normal maximum award level under
the LTIP in respect of any financial year is
200 per cent of base salary. In exceptional
circumstances this can be increased to
250 per cent 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.
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.
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 per cent 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.
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Cranswick plc | Annual Report & Accounts 2020Corporate Governance Purpose and link to strategy
Operation
Performance metrics
Maximum entitlement
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.
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.
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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; and
– 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.
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.
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Cranswick plc | Annual Report & Accounts 2020Corporate Governance 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
Salary/fees, benefits and pension contributions/salary supplement will be paid to the date of termination.
Annual Bonus
LTIP
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 lapse 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.
Other payments
In appropriate circumstances, payments may also be made in respect of accrued holiday pay, and outplacement and legal fees.
Change of control
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.
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.
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Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Remuneration continued
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 – Kate Allum for three years from 1 July 2019, Mark Reckitt for three years from 1 May 2020,
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 the Policy set out in the 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 (ii) 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:
•
• 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
the Group operates within the UK food sector and has many employees who carry out demanding tasks within the business;
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 eligible workforce participate in the SAYE scheme).
•
Consideration of Shareholders’ views
The Committee believes that ongoing dialogue with major Shareholders, who have been updated on progress and performance during the year,
is of key importance.
86
Cranswick plc | Annual Report & Accounts 2020Corporate Governance 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
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Salary and fees
Benefits
Bonus
LTIP*
Pension
SAYE
Total
Executive Directors
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Non-Executive Directors
Kate Allum
Mark Reckitt
Pam Powell
Tim Smith
430
430
651
314
420
420
635
314
33
32
34
33
33
31
33
33
646
646
979
–
159
159
240
50
717
717
1,082
552
555
555
840
428
1,825
1,789
132
130
2,271
608 3,068
2,378
59
59
51
58
53
58
51
51
227
213
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
86
86
130
63
365
–
–
–
–
–
84
84
127
63
358
–
–
–
–
–
27
–
49
–
76
–
–
–
–
–
–
–
–
7
7
–
–
–
–
–
1,939
1,911
2,925
962
1,251
1,249
1,875
895
7,737
5,270
59
59
51
58
53
58
51
51
227
213
Total
2,052 2,002
132
130 2,271
608 3,068 2,378
365
358
76
7 7,964 5,483
* The values of the LTIP awards which vested in June 2019 have been updated for the actual share price on the date of vesting. In line with the regulations the values for 2020 are based
on the average share price over the three month period to 28 March 2020 as these awards will not vest until June 2020 (see tables on page 88).
As reported last year the Executive Directors had pay awards in the year effective from 1 May 2019 of:
Adam Couch
Jim Brisby
Mark Bottomley
Martin Davey
From 1 May 2019
£652,450
£431,300
£431,300
£314,250
2.5%
2.5%
2.5%
0%
In line with wider workforce
In line with wider workforce
In line with wider workforce
No change
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 (2019: two).
Non-Executive Directors are paid a basic fee with additional fees paid for chairing committees and for the role of Senior Independent Director, which
are reviewed triennially. The basic fee for Non-Executive Directors is £51,000. Additional fees of £8,000 are paid for chairing committees, for the
role of Senior Independent Director and Non-Executive Director designated to undertake workforce engagement. Where a Non-Executive Director
undertakes more than one additional role a single fee of £8,000 is paid in respect of such roles.
Annual bonus arrangement (audited)
The bonus scheme in operation is based on the achievement of Adjusted Group profit before tax 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.
Bonus targets were adjusted upwards during the year to reflect the impact of the acquisition of Katsouris Brothers, Packington Pork and the
Buckle family pig farming business. The Committee is satisfied that the recalibrated targets are appropriate, having regard to changes in the Group,
and are no less stretching than the original targets.
The performance in the year, before charging bonus awards made to the Executive Directors and the Chief Operating Officer, was £106.7 million.
This resulted in a bonus award of 150 per cent of salary as shown below. The Committee considers the level of payout is reflective of the overall
performance of the Group in the year and is appropriate.
Adjusted Group profit targets
Bonus payable
This award is reflected in the table above.
Threshold
On Target
Maximum
Actual
£90.9m
20%
£95.5m
50%
£99.9m £102.9m £106.7m
150%
150%
100%
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Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report
Remuneration continued
LTIP award vesting in respect of the year ended 28 March 2020 (audited)
The Remuneration Committee makes awards under the LTIP in order to ensure that Executive Directors and Senior Management are involved in the
longer term success of the Group. Options awarded can only be exercised if certain performance criteria are achieved by the Group. The performance
criteria for the 2017 LTIP awards that will vest in June 2020 are 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, 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 decides whether performance conditions have been met and 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 28 March 2020 relates to awards made in June 2017 with a performance criteria based on the three years
ended 28 March 2020 that will vest in June 2020 calculated at the average price for the three months ended on 28 March 2020 of 3,482 pence. Over
the three-year performance period the EPS element of the award, based on the criteria set above, gave an outperformance of 6.9 per cent over the
average increase in RPI so achieving a 98 per cent award. For the TSR element of the award, measured against a comparable group of companies,
the business achieved an increase of 100 per cent and put the Company second in its comparative group which was at the 75th percentile achieving
an award of 100 per cent. The total award of 99 per cent of maximum (148.5 per cent of salary) is reflected in the table on page 87, and below.
The Committee considers the level of payout is reflective of the overall performance of the Group over the three-year performance period ended
28 March 2020 and is appropriate.
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Date of grant
Options granted
Vesting
performance
Shares awarded
1 June 2017
1 June 2017
1 June 2017
1 June 2017
20,800
20,800
31,400
16,000
99%
99%
99%
99%
20,592
20,592
31,086
15,840
Average
share price
3,482p
3,482p
3,482p
3,482p
Value of shares
£717,013
£717,013
£1,082,415
£551,549
The 2017 LTIP awards with performance period ended 28 March 2020, was granted on 1 June 2017 when the share price was 2,960p. The three month average
share price ended on 28 March 2020 was 3,482p. This equated to an increase in value of 522 pence per share due to vest in June 2020. The proportion of the
value attributable to share price growth is therefore 15%. The Committee did not exercise discretion in respect of the share price appreciation.
True-up of awards vested in respect of the year ended 30 March 2019 for share price on vesting date (audited)
The value of the LTIP for the year ended 30 March 2019 relates to awards, made in 2016, with a performance criteria based on the three years ended
30 March 2019 that vested in June 2019, updated for the actual vesting share price of 2,684p. The EPS element of the award achieved 100 per cent
of its performance target and 61 per cent was achieved under the TSR measure giving an overall award of 80.5 per cent (121 per cent of salary)
and this is reflected in the 2019 column of the table on page 87 and in the table below.
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Date of grant
Options awarded
Value of award as at 30 March 2019
based on an average price of 2,678p
Value of award when vested in
June 2019 at the market price of 2,684p
1 June 2016
1 June 2016
1 June 2016
1 June 2016
20,688
20,688
31,314
15,939
£554.025
£554,025
£838,589
£426,846
£555,266
£555,266
£840,468
£427,803
LTIP awards granted during the year ended 28 March 2020 (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
Date of grant
1 June 2019
1 June 2019
1 June 2019
Basis
of award
200% of salary
200% of salary
200% of salary
Number
of shares
31,800
31,800
48,100
Share price
at grant*
2,728p
2,728p
2,728p
Face value
of shares
£867,504
£867,504
£1,312,168
Vesting at
minimum
performance
End of
performance
period
20.6%
20.6%
20.6%
26 March 2022
26 March 2022
26 March 2022
* Based on the average of the mean high/low share price for the three days preceding the grant date of the options
Details of the performance targets for the LTIP granted during the year ended 2020 are as follows:
Average annual percentage growth in EPS
RPI + 3% p.a.
Growth between RPI + 3% p.a. and RPI + 9% p.a.
RPI + 9% p.a.
TSR performance
Median
Between median and upper decile
Upper decile
88
Vesting percentage
18.75%
Straight-line vesting
100%
Vesting percentage
22.5%
Straight-line vesting
100%
Cranswick plc | Annual Report & Accounts 2020Corporate Governance The Committee has discretion to reduce the extent of vesting in the event that it considers that performance against either measure is inconsistent
with the overall financial or non-financial performance of the Group over the performance period.
SAYE (audited)
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 Director
and have been exercised in the year. The awards exercised in 2019 and 2020 by Adam Couch had exercise prices of 579 pence and 1,187 pence
respectively and a market value of 2,644 pence and 3,534 pence respectively. The awards exercised by Mark Bottomley in 2020 had an exercise
price of 1,187 pence and a market value of 3,330 pence. The notional gains are shown in the 2020 column of the table on page 91.
Payments to past Directors (audited)
There have been no payments made to past Directors or payments made for loss of office in the year.
Performance graph – Total Shareholder Return (unaudited)
The graph below shows the percentage change (from a base of 100 in March 2010) in the Total Shareholder Return (with dividends reinvested) for
each of the last ten years on a holding of the Company’s shares against the corresponding change in a hypothetical holding in the shares of the FTSE
350 Food Producers and Processors Price Index (FTSE FPP) and the FTSE All Share Index (FTSE All Share). The FTSE FPP and the FTSE All Share
were chosen as representative benchmarks of the sector and the market as a whole for the business.
Total shareholder return
700
600
500
400
300
200
100
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Cranswick
FTSE All Share
FTSE 350 Food Producers
The table below illustrates the change in the total CEO remuneration over a period of ten years, with the bonus awards in those years and the LTIP
vesting awards set against a percentage of the maximum available.
£’000
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Base salary
Benefits
Pension
Bonus
LTIP
SAYE
CEO total remuneration
Bonus award against maximum opportunity
LTIP vesting against maximum opportunity
483
25
97
107
207
–
919
14%
100%
508
28
102
453
243
6
1,340
56%
93%
505
28
86
639
171
7
1,436
80%
43%
542
31
108
252
149
–
1,082
31%
25%
562
29
112
843
825
–
2,371
100%
87%
588
29
118
882
1,148
38
2,803
100%
100%
599
31
120
898
1,341
–
2,989
100%
100%
616
32
123
925
1,793
–
3,489
100%
100%
635
33
127
240
840
–
1,875
25%
80.5%
651
34
130
979
1,082
49
2,925
100%
99%
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 2019 to 2020 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.
Salary
+2.5%
+10.1%
Benefits
+3.0%
+3.8%
Bonus
+307.1%
+239.0%
89
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report
Remuneration continued
Chief Executive pay ratio (unaudited)
The table below shows the pay ratio based on total remuneration and salary of the Chief Executive to the 25th, 50th and 75th percentile of all
permanent UK employees of the business.
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
Year
2019
2020
2019
Salary
Total Remuneration
2020
Salary
Total Remuneration
Method*
Option A
Option A
91:1
120:1
Chief Executive
25th percentile
635
1,875
18
21
Chief Executive
25th percentile
651
2,923
19
24
79:1
101:1
Median
21
24
Median
23
29
63:1
79:1
75th percentile
28
30
75th percentile
32
37
* The Company used Option A as defined in The Companies (Miscellaneous Reporting) Regulations 2018, as the calculation methodology for the ratios was considered to be the most accurate
method. The 25th, median and 75th percentile pay ratios were calculated using the full-time equivalent remuneration for all UK employees as at the financial year end and incorporated all
components of employee remuneration. Employees’ involvement in the Group’s performance is encouraged, with all employees employed on the relevant offer date eligible to participate
in the SAYE schemes. Certain employees also participate in discretionary bonus schemes.
The Chief Executive remuneration for the year ended 30 March 2019 is the total single figure remuneration figure as disclosed on page 87,
which has been adjusted to reflect the actual LTIP vesting (further information on page 88). This adjustment has not affected the CEO pay ratios
for the year ended 30 March 2019 in respect of the 25th, 50th and 75th percentile.
The workforce comparison is based on the payroll data for the financial year for all employees (including the Chief Executive but excluding
Non-Executive Directors). The workforce comparison has not excluded any component of total pay and benefits.
2020 has been an excellent year for Cranswick resulting in an increase for ‘pay for performance’ remuneration for employees, including the
Executive Directors. A substantial proportion of the Chief Executive’s total remuneration is performance related. The ratios will therefore depend
significantly on the Chief Executive’s annual bonus and LTIP outcome, and may fluctuate year-to-year, because of this, the CEO pay comparator
for 2020 has increased. In respect of the median employee (50th percentile) total remuneration has increased from £24k to £29k.
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 and share buybacks in respect of 2020
and the preceding financial year. There have been no share buybacks during 2020 and 2019.
Pay against distributions
Remuneration paid to all employees*
Total dividends paid and share buybacks in the year
*
Includes the impact of pay awards, growth in employee numbers and corporate activity.
Outstanding share awards (audited)
The interests of the Executive Directors in the LTIP and SAYE schemes were as follows:
Long Term Incentive Plan (audited)
2020
£’m
208.7
29.4
2019
£’m
183.3
28.0
Change
%
+13.8%
+5.0%
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Year of
award
2016
2017
*2018
2019
2016
2017
*2018
2019
2016
2017
*2018
2019
2016
2017
*2018
At 31 March
2019
Number
Granted in
the year
Number
25,700
20,800
25,500
–
25,700
20,800
25,500
–
38,900
31,400
38,600
–
19,800
16,000
19,100
–
–
–
31,800
–
–
–
31,800
–
–
–
48,100
–
–
–
Exercised
in the year
Number
(20,688)
–
–
–
(20,688)
–
–
–
(31,314)
–
–
–
(15,939)
–
–
Lapsed in
the year
Number
At 28 March
2020
Number
Exercise
price
p
Market price
at grant
p
(5,012)
–
–
–
(5,012)
–
–
–
(7,586)
–
–
–
(3,861)
–
–
–
20,800
25,500
31,800
–
20,800
25,500
31,800
–
31,400
38,600
48,100
–
16,000
19,100
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
2,333
2,960
3,308
2,674
2,333
2,960
3,308
2,674
2,333
2,960
3,308
2,674
2,333
2,960
3,308
* Each of the Executive Directors, was also granted a tax qualifying option over 910 ordinary shares at an exercise price of £32.93 per ordinary share which is linked to the LTIP awards such that,
at the time of exercise, to the extent that there is a gain in the tax qualifying option, the LTIP will be scaled back to the value of that gain.
90
Cranswick plc | Annual Report & Accounts 2020Corporate Governance The performance periods run for three years from the commencement of each financial year and conclude at the end of the financial year three years
later and are exercisable on the attainment of certain performance criteria detailed on page 88. The range of exercise dates are 1 June 2020 to
1 June 2029.
The LTIP, issued in 2017, which vests in June 2020, will achieve 98 per cent of the EPS target and 100 per cent of the TSR target giving a share award
of 99 per cent of the maximum award.
The following Directors exercised LTIP share options during the year:
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Number
20,688
20,688
31,314
15,939
Date exercised
Exercise price p
Market price p
Gain on exercise £’000
28 June 2019
28 June 2019
28 June 2019
28 June 2019
nil
nil
nil
nil
2,565
2,565
2,565
2,565
531
531
803
409
Savings related share option scheme (audited)
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
Year of
award
2014
2018
2014
2018
2011
2014
2015
2017
2019
2017
2018
At 31 March
2019
Number
Granted in
the year
Number
Exercised in
the year
Number
Lapsed in
the year
Number
At 28 March
2020
Number
Exercise
price
p
1,276
401
1,276
669
936
1,276
667
205
–
350
401
–
–
–
–
–
–
–
–
591
–
–
1,276
–
–
–
936
1,276
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
401
1,276
669
–
–
667
205
591
350
401
1,187
2,239
1,187
2,239
579
1,187
1,456
2,565
2,534
2,565
2,239
Range of
exercise dates
1 Mar 2020–1 Sep 2020
1 Mar 2022–1 Sep 2022
1 Mar 2020–1 Sep 2020
1 Mar 2022–1 Sept 2022
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 2025–1 Sep 2025
1 Mar 2021–1 Sep 2021
1 Mar 2022–1 Sep 2022
The Executive Directors are eligible, as are other employees of the Group, to participate in the SAYE scheme, which by its nature does not have
performance conditions.
The following Executive Directors exercised savings related share options during the year:
Adam Couch
Mark Bottomley
Number
936
1,276
1,276
Date
exercised
6 June 2019
5 March 2020
1 March 2020
Exercise
price
p
579
1,187
1,187
Market
price
p
2,644
3,534
3,330
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. 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
Mark Reckitt
Tim Smith
Pam Powell
LTIP (Unvested,
subject to
performance)*
LTIP (Vested
unexercised)**
SAYE (Non-
performance
related)
Number of shares
held as at
28 March 2020
Value of shares
held as a %
of base salary
57,300
57,300
86,700
45,400
–
–
–
20,592
20,592
31,086
15,840
–
–
–
1,677
1,945
3,084
751
–
–
–
89,830
96,258
162,482
169,611
1,300
1,500
1,000
724
776
866
1,877
–
–
–
Gain on
exercise
£’000
19.3
30.0
27.3
Target %
200
200
200
200
–
–
–
* Not including tax qualifying options granted to each of the Executive Directors.
** LTIP awards are due to vest in June 2020 with the performance criteria now completed.
The share price at 28 March 2020 of 3,478p 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 29 March 2020 to 23 June 2020.
91
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report
Remuneration continued
Remuneration for the year ending 27 March 2021
The Executive Directors (other than Martin Davey who waived his contractual entitlement to an increase) were awarded an increase of 2.8 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 2020, the Executive Directors’ base salaries will be:
Director
Mark Bottomley
Jim Brisby
Adam Couch
Martin Davey
New salary
£443,400
£443,400
£670,750
£314,250
Rationale
Increase in line with workforce
Increase in line with workforce
Increase in line with workforce
No change
The 2021 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 2021 targets are not disclosed as they are considered to be commercially
sensitive. The targets will be declared retrospectively in the 2021 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.
LTIP awards, equivalent to 200 per cent of basic salary, will be made in August 2021 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 88.
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 has continued to advise the Committee during 2020 and has provided general remuneration
advice and share scheme advice to the Company. Deloitte’s fees for providing remuneration advice to the Committee were £6,120 for the year ended
28 March 2020. 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. The Committee have also been provided advice during the year in relation to
its consideration of matters relating to Directors’ remuneration by the Chief Executive Officer, Chief Financial Officer and Company Secretary.
Statement of Shareholders voting (unaudited)
The resolution to approve 2019 Remuneration Committee Report was passed on a poll at the Company’s last AGM held on 29 July 2019. The votes
cast in respect of the resolution were:
Remuneration Committee Report
For
Against
Withheld
Number
40,795,320
685,449
238,789
%
98.35
1.65
–
The resolution to approve the 2020 remuneration policy was passed on a show of hands at the Company’s 2018 AGM held on 30 July 2018. The votes
cast in respect of the resolution were:
Remuneration policy
For
Against
Withheld
Number
37,739,458
743,793
19,966
%
98.07
1.93
–
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 Companies (Miscellaneous Reporting) Regulations 2018, the principles of the 2018 UK Corporate Governance
Code and the Listing Rules of the Financial Conduct Authority.
Kate Allum
Chair of the Remuneration Committee
23 June 2020
92
Cranswick plc | Annual Report & Accounts 2020Corporate Governance Directors’ Report
The Directors present their Annual Report and the audited financial
statements of the Company and the Group for the year ended
28 March 2020. The Directors’ Report consists of pages 93 to 96 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.
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 £83.4 million and is analysed as follows:
Directors interests and indemnities
The membership of the Board and biographical details of the Directors
are given on pages 58 and 59 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 75 to 92.
In accordance with the recommendations of the UK Corporate
Governance Code, all Directors will stand for re-election at the
forthcoming Annual General Meeting.
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 £82.7 million (2019: £69.6 million). The Directors
have declared dividends as follows:
Interim dividend per share paid on 24 January 2019
Final dividend per share proposed
Total dividend
16.7p
43.7p
£31.5m
15.9p
40.0p
£28.9m
2020
2019
Subject to approval at the Annual General Meeting, the final dividend
will be paid in cash or scrip form on 4 September 2020 to members on
the register at the close of business on 24 July 2020. The shares will
go ex-dividend on 23 July 2020. The proposed final dividend for 2020
together with the interim paid in January 2020 amount to 60.4 pence
per share which is 8.1 per cent higher than the previous year.
Direct Tax
App levy
£0.9m
Business rates
£1.9m
Employer’s National
Insurance
£16.8m
Indirect Tax
Employee’s National
Insurance
£13.1m
Corporation tax
£26.8m
Income tax
£23.9m
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 25 on page 138. During the year the share capital increased
by 592,079 shares. The increase comprised 337,267 of shares issued
relating to share options exercised during the year and 254,812 of
shares issued in respect of scrip dividends.
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:
Fidelity Management & Research
Invesco Perpetual
Standard Life Aberdeen
Wellington Management
Black Rock Inc
The Vanguard Group Inc
Franklin Resources
Legal & General Group
At 28 March 2020
Number
of shares
% of issued
share capital
4,399,262
3,947,726
3,171,316
2,911,678
2,262,241
2,204,054
2,085,198
1,769,563
8.42
7.55
6.07
5.57
4.33
4.22
3.99
3.39
Nature of holding
Direct & Indirect
Direct & Indirect
Direct & Indirect
Direct & Indirect
Direct & Indirect
Direct & Indirect
Direct & Indirect
Direct & Indirect
On 21 May 2020, Invesco Perpetual notified the Company that it had reduced its shareholding to 2,386,412 shares (representing 4.56% of the share capital).
There have been no other notifications of any significant changes, a different whole percentage movement, to these shareholdings as at 23 June 2020.
93
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Directors’ Report continued
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 17 August 2020 to renew these powers.
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 Crane Court,
Hesslewood Country Office Park, Ferriby Road Hessle HU13 0PA on
Monday 17 August 2020. A notice convening the Annual General Meeting
can be found in the separate Notice of Annual General Meeting
accompanying this Report & Accounts.
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 17 August 2020, is limited to £1,723,400 which represented
approximately 33 per cent of the issued share capital as at 7 June 2019.
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 17 August 2020.
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 £258,500 representing 5 per cent of
the Company’s issued share capital as at 7 June 2019 and up to an additional
aggregate nominal amount of £258,500 representing 5 per cent of the
Company’s issued share capital as at 7 June 2019 for the purposes of
financing (or refinancing) a transaction which is an acquisition or other
capital investment. This authority will expire at the end of the Annual General
Meeting to be held on 17 August 2020.
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 17 August 2020. The Directors would consider holding any
of the Company’s 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.
94
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.
Independent 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 66 to 71.
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
30 March 2019 and 28 March 2020.
The Group’s capital structure is as follows:
Net debt/(funds) (Note 28)
Cranswick plc Shareholders’ equity
Capital employed
2020
£’m
146.9
614.5
761.4
2019
£’m
(6.3)
534.9
528.6
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;
the Company is party to an agreement with WM Morrison
Supermarkets plc (‘WM Morrison’) for the supply of poultry products
from its facility at Eye, Suffolk which upon a change of control of the
Company is terminable by WM Morrison upon the provision of 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 85,
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.
•
•
•
Cranswick plc | Annual Report & Accounts 2020Corporate Governance Political donations
The Group has made no political donations during the year ended
28 March 2020.
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 increased its borrowings over the past 12 months to fund
capital expenditure and acquisitions, although this remains modest
relative to the Group, and at 28 March 2020 gearing was 23.9% (2019: nil).
Given this conservative debt structure and low market interest rates 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 historical 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 increased to £2 million
from January 2020 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 has a core bank
facility made up of a revolving credit facility of £160.0 million including
a committed overdraft facility of £20.0 million until November 2022.
The facility also includes an accordion feature which allows an additional
£40 million to be drawn down on the same terms at any point during the
term of the facility This was extended during 2018/19 to November 2023
by way of a reduced credit facility of £120.0 million including a committed
overdraft facility of £20.0 million and in December 2019 by two additional
short term 1-year facilities of £20 million each. 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 provides the Group with reduced
liquidity risk and medium-term funding to meet its objectives. The
unutilised element of the facilities at 28 March 2020 was £95.2 million
(2019: £134.4 million).
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 in the Operating
and Financial review. 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 above.
The UK Corporate Governance Code 2018 requires the Directors
to assess and report on the prospects of the Group and whether the
Group is a going concern. Management has produced forecasts that
have been sensitised to reflect severe yet plausible downside scenarios
which considers the principal risks faced by the Group, including but not
limited to COVID-19, as well the Group’s considerable financial resources
and strong trading relationships with its key customers and suppliers.
These forecasts, which have been reviewed by the Directors, lead the
Directors to believe that the Group is well placed to manage its business
risk successfully. The assumptions supporting these sensitivities have
been set out in more detail in the viability statement on page 50. After
reviewing the available information, including business plans and
downside scenario modelling 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 for preparing
these financial statements.
Other statutory disclosures
The Corporate Governance Report on pages 60 to 65, the Statement of
Directors’ Responsibilities on page 97 of the Annual Report and Note 24
(Financial Instruments) 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
Pages 2 to 55
Viability Statement
Greenhouse Gas Emissions
Employment Policies
Directors in office during the year and up to the
date of signing the financial statement
Page 50
Page 42
Pages 32 to 35
Pages 58 and 59
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 75 to 92.
95
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Directors’ Report continued
Section 172 (1) Considerations
Under section 172 (1) of the Companies Act 2006, the Directors must act in a way they consider in good faith would be most likely to promote
the success of the Company for the benefit of its members as a whole and in doing so must have regard for a range of other matters. The Directors
have regard to the interests of the Company’s employees and other stakeholders including its impact on the community and the environment and
its reputation when making decisions. The Directors consider what is likely to promote the success of the Company and its members in the long term
in all their decision making. For further information on section 172 (1) see pages 30 and 31, and for an example case study on Board considerations
of stakeholders see page 65.
The Directors’ Report was approved by a duly authorised committee of the Board on 23 June 2020 and signed on its behalf by:
Steven Glover
Company Secretary
23 June 2020
Company number: 1074383
96
Cranswick plc | Annual Report & Accounts 2020Corporate Governance 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 on pages 58
and 59 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 profit 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
23 June 2020
Mark Bottomley
Finance Director
97
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationFinancial StatementsCorporate GovernanceStrategic Report Independent auditors’ report 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 Company financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s and of the Company’s affairs as at 28 March 2020 and of the Group’s profit and the Group’s
and the Company’s cash flows for the 52 week period then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and,
as regards the 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 28 March 2020; the Group income statement and Group statement of comprehensive income, the Group and
Company statements of cash flows, and the Group and Company statements of changes in equity for the 52 week period then ended; and the
notes to the financial statements, which include a description of the significant accounting policies.
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 Company.
Other than those disclosed in the Directors’ Report, we have provided no non-audit services to the Group or the Company in the period from
31 March 2019 to 28 March 2020.
Our audit approach
Overview
Materiality
Audit scope
Areas of
focus
• Overall Group materiality: £5.1 million (2019: £4.5 Million), based on 5% of Adjusted profit before tax.
• Overall Company materiality: £2.4 million (2019: £2.4 million), based on 1% of total assets capped due
to group materiality allocation.
• The Group is organised into 22 reporting units, all within the UK. The Group financial statements are
a consolidation of these reporting units.
• Of the 22 reporting units, we identified 15 which, in our view, required an audit of their complete financial
information, either due to their size or risk characteristics.
• This covered £1,660.1m (99 per cent) of the Group’s external revenues and £98.7m (96 per cent) of the
Group’s Adjusted profit before tax.
• Specific audit procedures over biological assets were performed for a further 4 reporting units due to their
contribution towards the overall biological assets financial statement line item.
IAS 41 – Biological assets (Group)
• Complex customer arrangements (Group)
•
• Acquisition accounting (Group)
•
Impact of COVID-19 (Group and Company)
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.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to
breaches of health and safety regulations, under the Health and Safety at work etc Act 1974, and we considered the extent to which non-compliance
might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation
of the financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation
of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting manual journal
entries to manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates and
significant one-off or unusual transactions. The Group engagement team shared this risk assessment with the component auditors so that they
could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the Group engagement team
and/or component auditors included:
98
Cranswick plc | Annual Report & Accounts 2020Financial Statements • Discussions with management and those charged with governance including consideration of known or suspected instances of non-compliance
with laws and regulation and fraud;
• Understanding and evaluation of the operating effectiveness of management’s entity level controls designed to prevent and detect irregularities;
• Testing over period end adjustments;
• Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to complex
customer accruals and biological assets (see related key audit matters below); and
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.
•
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. Also, 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.
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 arrangements – Group
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 also include advertising and marketing contributions.
At 28 March 2020 commercial accruals in relation to these arrangements
total £6.5 million (2019: £7.9 million).
Due to the varying terms of these agreements and given that activity
may span a period 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 accruals that have been
recognised at the period end as these are material and can be complex
and judgemental.
IAS 41 – Biological assets – Group
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 period is a benefit of £5.4 million (2019:
cost of £2.8 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.
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
component 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 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 sales volume data where relevant;
• Agreement of the amounts raised and settled with customers, for
claims which have arisen within the current or next financial period,
to date;
• Look back at the accuracy of the prior period (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 accruals recorded
and disclosures made in the financial statements were consistent with
the supporting evidence obtained.
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
to assess the accuracy of the calculation and audited the underlying data
inputs to the model.
We evaluated management’s key 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
assumption 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.
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Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Independent auditors’ report to the members of Cranswick plc continued
Key audit matter
How our audit addressed the key audit matter
Acquisition accounting – Group
During the period the Group acquired Katsouris Brothers Limited,
Packington Pork Limited and White Rose Farms Limited for a total
consideration of £93.1m, including deferred consideration of £3.9m and
contingent consideration of £6.8m.
The allocation of consideration over net assets recognised intangibles
to the value of £13.1m for customer lists, £2.5m for trademarks and
£41.9m for goodwill.
We focused on this area because there is a level of judgement involved
in identifying the intangibles upon acquisition and given the material
values involved.
Our audit work over the acquisitions comprised of a review of the
signed Share Purchase Agreements (SPAs) to ensure all terms were
fully understood and appropriately accounted for and the point at which
control was achieved has been identified correctly. We utilised our
internal valuation experts to assess the reasonableness of the valuation
methodology and other key assumptions driving the valuation, including
the discount rate applied.
We evaluated management’s assessment of the assumptions used in
the valuation of the intangible assets as follows:
• The discount rate has been tested for mathematical accuracy,
calculation inputs agreed to Company forecast data and benchmarked
against comparable companies.
• Royalty rate used in determining the trademark valuation has been
assessed for reasonableness through comparison to market data.
• Growth rates and customer attrition have been tested through analysis
against historical and forecast Company data.
• The intangibles useful economic lives have been evaluated based on
our understanding of the business and similar historical acquisitions.
We also assessed the fair value adjustments made on acquisition in the
completion balance sheet and tested the deferred tax arising on such
adjustments and the intangibles acquired.
We found, based on our audit work, that the key assumptions and
calculations used by management were supportable and appropriate.
Impact of COVID-19 (Group and Company)
As a result of the emergence of the COVID-19 pandemic in early 2020,
and the significant impact this has had on the UK and global economies,
management, including the Board and Audit Committee, have invested
a significant amount of time to fully consider the implications on
Cranswick plc.
We have re-evaluated our risk assessment, including the going concern
risk of the Group. Based on the Directors’ assessment and our audit
procedures thereon as described below, we consider our original risk
assessment to remain appropriate and therefore consider going concern
and asset impairment to be normal risks for both the Group and
the Company.
Given the timing of the outbreak which occurred prior to the financial
period end, management have considered the implications across
the business, including the going concern assessment, the impact
on asset impairment assessments, and appropriate disclosures in the
Annual Report.
In respect of the going concern assessment, management have
prepared detailed analyses to assess the potential impact on revenue,
profit and cash flows of a number of downside risk scenarios as
described on page 50.
These analyses have also included consideration of the Group’s liquidity
and loan covenants, which are based on the ratio of net debt to adjusted
EBITDA and interest cover. In doing so, management have made
assumptions that are critical to the outcome of these considerations.
In relation to the carrying value of assets, management have considered
the impact of COVID-19 in their impairment assessments of each
category of assets, and made any adjustments that they considered
to be required.
As a result of the impact of COVID-19 on the wider financial markets,
we have determined that management’s consideration of the potential
impact of COVID-19 (including their associated assumptions) to be
a key audit matter.
In assessing management’s consideration of the potential impact of
COVID-19, we have undertaken the following audit procedures:
• We obtained from management their latest assessments that support
the Board’s conclusions with respect to the going concern basis of
preparation of the financial statements.
• We evaluated management’s base case forecast and downside
scenarios, and challenged the adequacy and appropriateness of the
underlying assumptions, including impact on revenue of an extended
period of restrictions in the food services sector, the potential for
site closures as a result of the outbreak, and the cost implications of
introducing further social distancing measures. Our evaluation also
included incorporating further sensitivities to management’s
downside scenarios.
In conjunction with the above we have also reviewed management’s
analysis of both liquidity and covenant compliance to satisfy ourselves
that no breaches are anticipated over the period of assessment.
• We reviewed management accounts for the financial period to date
and checked that these were consistent with the starting point of
management’s forecasts, and supported the key assumptions included
in the assessment.
•
Our conclusion in respect of going concern is included in the “Going concern”
section on page 101.
We have reviewed management’s assessment of the impact of COVID-19
on the carrying value of each category of assets and any adjustments
made. We evaluated and challenged management on how they reflected
the impact on future cash flows, of COVID-19, in their impairment analyses
and the consistency of their assumptions with the forecasts used in their
going concern assessment.
We have reviewed management’s disclosures in the financial statements
in relation to COVID-19 and are satisfied that they are consistent with the
risks affecting the Group, their impact assessment and the procedures
that we have performed.
100
Cranswick plc | Annual Report & Accounts 2020Financial Statements 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 Company, the accounting processes and controls, and the industry in which they operate.
The Group is organised into 22 reporting units all within the UK. The Group’s 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.
Specific audit procedures over biological assets were performed for a further 4 reporting units due to their contribution towards the overall biological
assets financial statement line item.
The components where we performed an audit of their complete financial information accounted for 96 per cent of the Group’s Adjusted profit
before tax and 99 per cent of the Group’s revenue.
The work was performed by a component audit team on 6 of the 15 components. All other work was completed by the Group audit team.
On the remaining 3 components we performed analytical procedures to respond to any potential risks of material misstatement to the Group
financial statements.
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
How we determined it
Rationale for benchmark applied
Group financial statements
Company financial statements
£5.1 million (2019: £4.5 million).
£2.4 million (2019: £2.4 million).
1% of total assets 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.
5% of Adjusted profit before tax.
Adjusted profit before tax excludes the net
IAS 41 valuation movement on biological assets
and amortisation of customer relationship
intangible assets. We have chosen this as our
benchmark as it is a key performance measure
disclosed to users of the financial statements.
This figure takes prominence in the Annual
Report, as well as the communications to
both the shareholders and the market, and
an element of management remuneration
is linked to this performance. Based on this it
is considered appropriate to use the Adjusted
profit before tax figure for the period as an
appropriate 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 £0.4 million and £4.8 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 £0.3 million (Group audit)
(2019: £0.2 million) and £0.2 million (Company audit) (2019: £0.2 million) 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 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 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 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 Company’s ability
to continue as a going concern.
We have nothing to report.
101
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Independent auditors’ report to the members of Cranswick plc continued
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 52 week period ended 28 March 2020 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 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)
Corporate Governance Statement
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement (on pages
56 to 65) about internal controls and risk management systems in relation to financial reporting processes and about share capital structures in
compliance with rules 7.2.5 and 7.2.6 of the Disclosure Guidance and Transparency Rules sourcebook of the FCA (“DTR”) 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 Company and their environment obtained in the course of the audit, we did not identify
any material misstatements in this information. (CA06)
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement (on pages
56 to 65) with respect to the Company’s corporate governance code and practices and about its administrative, management and supervisory bodies
and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the DTR. (CA06)
We have nothing to report arising from our responsibility to report if a corporate governance statement has not been prepared by the Company. (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 48 to 55 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 48 to 55 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 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 97, 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 Company’s position and performance, business model
and strategy is materially inconsistent with our knowledge of the Group and Company obtained in the course of performing our audit.
• The section of the Annual Report on pages 66 to 71 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 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)
102
Cranswick plc | Annual Report & Accounts 2020Financial Statements Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement, 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 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 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/auditors
responsibilities. 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 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 Company, or returns adequate for our audit have not been received from branches
to visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
•
the 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 directors on 24 July 2017 to audit the financial statements for
the 53 week period ended 31 March 2018 and subsequent financial periods. The period of total uninterrupted engagement is 3 years, covering the
53 week period ended 31 March 2018 to the 52 week period ended 28 March 2020.
Ian Morrison (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
23 June 2020
103
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Group Income Statement
For the 52 weeks ended 28 March 2020
Revenue
Adjusted Group operating profit
Net IAS 41 valuation movement on biological assets
Amortisation of intangible assets
Group operating profit
Share of loss of joint venture
Profit on disposal of joint venture
Finance costs
Profit before tax
Taxation
Profit for the year
Earnings per share
Basic
Diluted
An analysis of costs within Group operating profit is presented in Note 4.
Notes
3
17
11
4
15
15
6
7
10
10
2020
£’m
2019
£’m
1,667.2
1,437.1
105.1
5.4
(3.7)
106.8
(0.1)
0.1
(2.8)
104.0
(21.3)
82.7
92.3
(2.8)
(2.7)
86.8
(0.1)
–
(0.2)
86.5
(16.9)
69.6
159.1p
158.6p
135.5p
134.9p
104
Cranswick plc | Annual Report & Accounts 2020Financial Statements Group Statement of Comprehensive Income
For the 52 weeks ended 28 March 2020
Profit for the year
Other comprehensive income/(expense)
Other comprehensive income/(expense) to be reclassified to profit or loss in subsequent periods:
Cash flow hedges
Gains arising in the year
Reclassification adjustments for losses/(gains) included in the income statement
Income tax effect
Net other comprehensive income/(expense) to be reclassified to profit or loss in subsequent periods
Items not to be reclassified to profit or loss in subsequent periods:
Actuarial gains on defined benefit pension scheme
Income tax effect
Net other comprehensive income not to be reclassified to profit or loss in subsequent periods
Notes
22
22
7
27
7
Other comprehensive income, net of tax
Total comprehensive income, net of tax
2020
£’m
82.7
0.4
0.2
(0.1)
0.5
11.9
(2.2)
9.7
10.2
92.9
2019
£’m
69.6
–
(0.5)
0.1
(0.4)
0.3
0.4
0.7
0.3
69.9
Company profit for the 52 weeks ended 28 March 2020 of £29.2 million (2019: £24.6 million) was equal to total comprehensive income for the year
attributable to owners of the parent in both years.
105
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes
11
27
12
13
17
17
18
19
20
28
21
22
13
23
21
22
13
7
23
15
27
25
2020
£’m
207.3
7.2
357.7
64.8
3.8
640.8
41.9
75.5
213.6
0.7
1.5
21.5
354.7
995.5
(191.4)
(12.0)
(10.3)
(0.1)
–
(213.8)
(0.8)
(102.5)
(55.6)
(7.2)
(1.1)
–
–
(167.2)
(381.0)
614.5
5.2
98.5
31.6
0.1
479.1
614.5
2019
£’m
153.5
–
291.2
–
0.7
445.4
20.6
67.4
161.7
–
2.3
20.5
272.5
717.9
(150.2)
(0.6)
–
(0.2)
(7.7)
(158.7)
(0.7)
(14.2)
–
(0.8)
(2.0)
(0.1)
(6.5)
(24.3)
(183.0)
534.9
5.2
89.1
25.8
(0.4)
415.2
534.9
Group Balance Sheet
At 28 March 2020
Non-current assets
Intangible assets
Defined benefit pension scheme surplus
Property, plant and equipment
Right-of-use assets
Biological assets
Total non-current assets
Current assets
Biological assets
Inventories
Trade and other receivables
Income tax receivable
Financial assets
Cash and short-term deposits
Total current assets
Total assets
Current liabilities
Trade and other payables
Financial liabilities
Lease liabilities
Provisions
Income tax payable
Total current liabilities
Non-current liabilities
Other payables
Financial liabilities
Lease liabilities
Deferred tax liabilities
Provisions
Share of joint venture
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
Mark Bottomley
Finance Director
Martin Davey
Chairman
23 June 2020
106
Cranswick plc | Annual Report & Accounts 2020Financial Statements
Company Balance Sheet
At 28 March 2020
Non-current assets
Property, plant and equipment
Investments in subsidiary undertakings
Right-of-use assets
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Cash and short-term deposits
Total current assets
Total assets
Current liabilities
Trade and other payables
Financial liabilities
Lease liabilities
Provisions
Income tax payable
Total current liabilities
Non-current liabilities
Financial liabilities
Lease 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 52 weeks ended 28 March 2020 was £29.2 million (2019: £24.6 million).
On behalf of the Board
Martin Davey
Chairman
23 June 2020
Mark Bottomley
Finance Director
Notes
12
14
13
7
19
28
21
22
13
23
22
13
23
25
2020
£’m
0.7
170.0
0.7
1.0
172.4
137.9
3.1
141.0
313.4
(35.9)
–
(0.1)
(0.1)
(2.0)
(38.1)
(102.5)
(0.6)
(0.7)
(103.8)
(141.9)
171.5
5.2
98.5
4.0
1.8
31.6
30.4
2019
£’m
0.8
166.1
–
0.9
167.8
77.9
–
77.9
245.7
(68.1)
(5.4)
–
(0.1)
(1.0)
(74.6)
(14.2)
–
(0.6)
(14.8)
(89.4)
156.3
5.2
89.1
4.0
1.8
25.8
30.4
171.5
156.3
107
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements
Notes
7
6
12
13
11
17
16
28
28
28
2020
£’m
82.7
0.1
21.3
2.8
(0.1)
(1.1)
42.0
8.2
3.7
5.8
(1.8)
(0.3)
(5.4)
(3.9)
(2.6)
(39.5)
32.8
144.7
(27.7)
117.0
(69.4)
2.2
(101.2)
4.1
–
(164.3)
(1.2)
2.6
(0.1)
88.0
(9.0)
(22.6)
(7.8)
(1.6)
48.3
1.0
20.5
21.5
2019
£’m
69.6
0.1
16.9
0.2
–
(0.2)
28.9
–
2.7
4.8
(1.3)
(0.2)
2.8
(6.3)
(8.2)
(1.1)
(2.2)
106.5
(18.8)
87.7
(0.8)
(2.2)
(79.2)
0.8
0.4
(81.0)
(0.4)
1.8
(0.1)
14.0
–
(22.1)
–
–
(6.8)
(0.1)
20.6
20.5
Group Statement of Cash Flows
For the 52 weeks ended 28 March 2020
Operating activities
Profit for the year
Adjustments to reconcile Group profit for the year to net cash inflows from operating activities:
Share of loss of joint venture
Income tax expense
Net finance costs
Gain on disposal of joint venture
Gain on sale of property, plant and equipment
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
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 in biological assets
Increase in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from operations
Tax paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Loan to joint venture
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Receipt of government grants
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
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Payment of lease capital
Payment of lease interest
Net cash received from/(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
108
Cranswick plc | Annual Report & Accounts 2020Financial Statements Company Statement of Cash Flows
For the 52 weeks ended 28 March 2020
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
Depreciation of right-of-use assets
Share-based payments
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Cash used in operations
Tax paid
Net cash used in operating activities
Cash flows from investing activities
Dividends received
Purchase of property, plant and equipment
Net cash received from investing activities
Cash flows from financing activities
Interest paid
Proceeds from issue of share capital
Issue costs of long-term borrowings
Proceeds from borrowings
Dividends paid
Payment of lease liabilities
Net cash received from/(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
12
13
28
28
28
2020
£’m
29.2
(22.6)
1.8
6.7
0.1
0.1
1.9
(59.7)
(32.1)
(74.6)
(0.6)
(75.2)
22.6
–
22.6
(6.7)
2.6
(0.1)
88.0
(22.6)
(0.1)
61.1
8.5
(5.4)
3.1
2019
£’m
24.6
(22.1)
1.8
5.8
–
–
1.5
(37.6)
7.1
(18.9)
(1.3)
(20.2)
22.1
(0.2)
21.9
(5.8)
1.8
(0.1)
14.0
(22.1)
–
(12.2)
(10.5)
5.1
(5.4)
109
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Group Statement of Changes in Equity
For the 52 weeks ended 28 March 2020
Share capital
Note (a)
£’m
Share premium
Note (b)
£’m
Share-based
payments
Note (e)
£’m
Hedging reserve
Note (f)
£’m
81.5
21.0
At 31 March 2018
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments
Scrip dividend
Share options exercised
Dividends
Deferred tax related to changes in equity
Current tax related to changes in equity
At 30 March 2019
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments
Scrip dividend
Share options exercised
Dividends
Deferred tax related to changes in equity
Current tax related to changes in equity
5.1
–
–
–
–
–
0.1
–
–
–
5.2
–
–
–
–
–
–
–
–
–
–
–
–
–
5.9
1.7
–
–
–
89.1
–
–
–
–
6.8
2.6
–
–
–
–
–
–
4.8
–
–
–
–
–
25.8
–
–
–
5.8
–
–
–
–
–
31.6
Retained
earnings
£’m
372.3
Total equity
£’m
479.9
69.6
0.7
70.3
–
–
–
(28.0)
(0.7)
1.3
415.2
82.7
9.7
92.4
–
–
–
(29.4)
0.3
0.6
479.1
69.6
0.3
69.9
4.8
5.9
1.8
(28.0)
(0.7)
1.3
534.9
82.7
10.2
92.9
5.8
6.8
2.6
(29.4)
0.3
0.6
614.5
–
–
(0.4)
(0.4)
–
–
–
–
–
–
(0.4)
–
0.5
0.5
–
–
–
–
–
–
0.1
At 28 March 2020
5.2
98.5
110
Cranswick plc | Annual Report & Accounts 2020Financial Statements Company Statement of Changes in Equity
For the 52 weeks ended 28 March 2020
At 31 March 2018
Profit for the year, being total comprehensive income
Share-based payments
Scrip dividend
Share options exercised
Dividends
Deferred tax related to changes in equity
Current tax related to changes in equity
At 30 March 2019
Profit for the year, being total comprehensive income
Share-based payments
Scrip dividend
Share options exercised
Dividends
Deferred tax related to changes in equity
Current tax related to changes in equity
At 28 March 2020
Notes:
a) Share capital
Share capital
Note (a)
£’m
5.1
–
–
–
0.1
–
–
–
5.2
–
–
–
–
–
–
–
Share
premium
Note (b)
£’m
81.5
General
reserve
Note (c)
£’m
4.0
Merger
reserve
Note (d)
£’m
Share-based
payments
Note (e)
£’m
1.8
21.0
–
–
5.9
1.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.8
–
–
–
–
–
89.1
4.0
1.8
25.8
–
–
6.8
2.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5.8
–
–
–
–
–
5.2
98.5
4.0
1.8
31.6
Retained
earnings
£’m
Total equity
£’m
33.2
24.6
–
–
–
(28.0)
(0.2)
0.8
30.4
146.6
24.6
4.8
5.9
1.8
(28.0)
(0.2)
0.8
156.3
29.2
29.2
–
–
–
(29.4)
0.1
0.1
30.4
5.8
6.8
2.6
(29.4)
0.1
0.1
171.5
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 26).
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.
111
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements
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 52 weeks ended 28 March 2020 were authorised for
issue by the Board of Directors on 23 June 2020 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, United Kingdom (Company number: 1074383, registered office:
Crane Court, Hesslewood Country Office Park, Ferriby Road, Hessle, East Yorkshire, HU13 0PA). 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 the historical cost convention, in accordance
with IFRS as adopted by the European Union and in accordance with the Companies Act 2006.
The UK Corporate Governance Code 2018 requires the Directors to assess and report on the prospects of the Group and whether the Group is a
going concern. Management has produced forecasts that have been sensitised to reflect severe yet plausible downside scenarios which considers
the principal risks faced by the Group, including but not limited to COVID-19, as well the Group’s considerable financial resources and strong trading
relationships with its key customers and suppliers. These forecasts, which have been reviewed by the Directors, lead the Directors to believe that
the Group is well placed to manage its business risk successfully. The assumptions supporting these sensitivities have been set out in more detail
in the longer-term viability statement on pages 50 to 51. After reviewing the available information, including business plans and downside scenario
modelling 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 for preparing these financial statements.
The Financial Statements of the Group are prepared to the Saturday nearest to 31 March. Accordingly, these Financial Statements are prepared for
the 52 week period ended 28 March 2020. Comparatives are for the 52 week period ended 30 March 2019. The Balance Sheets for 2020 and 2019
have been prepared as at 28 March 2020 and 30 March 2019 respectively.
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 28 March 2020. 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 will most likely have a significant
effect on the amounts recognised in the financial statements in the next twelve months:
112
Cranswick plc | Annual Report & Accounts 2020Financial Statements 2. Accounting Policies continued
Significant estimates and assumptions:
Share-based payments
Pensions
Acquisitions
Biological assets
Commercial accruals
(Advertising and marketing contributions)
Impact of COVID-19
Significant judgements:
Share-based payments
Alternative measures
Note 26 – 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.
This estimate is not expected to have a material impact on the next twelve months.
Note 27 – pension scheme actuarial assumptions.
The valuation of the defined benefit pension scheme is determined using assumptions including
mortality, discount rates and inflation. The assumptions are not expected to have a material impact
on the next twelve months.
Note 16 – fair value adjustments on acquisition include the valuation of intangible assets with inputs
based on discount rate, sales growth and customer churn assumptions. The assumptions are not
expected to have a material impact on the next twelve months.
Note 17 – valuation includes assumptions in relation to mortality and growth rate. The assumptions
are not expected to have a material impact on the next twelve months.
Note 21 – trade and other payables.
The level of commercial accruals is viewed by management as an area sensitive to a level of
estimation in determining the timing and quantum of liabilities to be recognised. This estimate
is not expected to have a material impact on the next twelve months.
Note 11 – intangible assets, Note 18 – inventories & Note 19 – trade and other receivables. In light
of the COVID-19 outbreak, a number of additional considerations have been made. These include
considering the impact of COVID-19 when preparing updated forecast information to use within
impairment testing, reviewing the level of inventory provision required and updating the forward-
looking rate within the expected credit loss model used for the provision for impairment of
trade receivables. These considerations are not expected to have a material impact on the next
twelve months.
Note 26 – 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 a Black-Scholes option pricing
model or a stochastic option pricing model. This judgement is not expected to have a material
impact on the next twelve months.
Note 32 – 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.
Other estimates and judgements have been applied by management in producing the Annual Report & Accounts including, but not limited to,
depreciation and amortisation rates. 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)
IFRS 16 Leases
IFRIC 23 Uncertainty over Income Tax Treatments
IFRS 9 Prepayment Features with Negative Compensation (amendment)
IAS 28 Long-term Interests in Associates and Joint Ventures (amendment)
Annual Improvements to IFRSs 2015-17 cycle
IAS 19 Plan Amendment, Curtailment or Settlement (amendment)
Effective date
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
The application of these standards has not had a material effect on the net assets, results and disclosures of the Group, with the exception of IFRS 16
which is considered on page 114.
113
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes to the Accounts continued
2. Accounting Policies continued
IFRS 16 – Leases
The Group has adopted IFRS 16 retrospectively from 31 March 2019 but has not restated comparatives for the 52 weeks to 30 March 2019, as
permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules
are therefore recognised in the opening balance sheet on 31 March 2019.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under
the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the Group’s
weighted average incremental borrowing rate as of 31 March 2019 of 3.0 per cent.
Balance sheet Impact
Operating lease commitments disclosed as at 30 March 2019
Discounted using the Group’s weighted average incremental borrowing rate at the date of initial application
Less short-term and low value leases recognised on a straight-line basis as an expense
Lease liability recognised as at 31 March 2019
Total lease liability
Of which:
Current lease liability
Non-current lease liability
The recognised right-of-use assets relate to the following asset classes:
Properties
Plant, equipment and vehicles
Total right-of-use assets
Income statement impact
Reduction in lease rental charges
Increase in right-of-use asset depreciation
Impact on Group operating profit/Adjusted Group operating profit
Increase in lease related interest cost
Overall impact on Group profit before tax/Adjusted profit before tax
£’m
45.8
40.5
(0.3)
40.2
28 March 2020
£’m
31 March 2019
£’m
65.9
10.3
55.6
40.2
7.7
32.5
28 March 2020
£’m
31 March 2019
£’m
60.4
4.4
64.8
36.1
4.1
40.2
52 weeks ended
28 March 2020
£’m
9.4
(8.2)
1.2
(1.6)
(0.4)
Impact on earnings per share
Earnings per share decreased by 0.7 pence per share for the 52 weeks ended 28 March 2020 as a result of the adoption of IFRS 16.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
•
•
•
•
•
the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
reliance on previous assessments on whether leases are onerous;
the accounting for operating leases with a remaining lease term of less than 12 months as at 31 March 2019 as short-term leases;
the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Group’s leasing activities and how these are accounted for
The Group leases various offices, farming units, equipment and motor vehicles. Rental contracts are typically made for fixed periods of 2 to 15 years
but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Until the 30 March 2019 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under
operating leases (net of any incentives received from the lessor) were charged to the income statement on a straight-line basis over the period of the lease.
From 31 March 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use
by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
114
Cranswick plc | Annual Report & Accounts 2020Financial Statements 2. Accounting Policies continued
IFRS 16 – Leases continued
The Group’s leasing activities and how these are accounted for continued
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following
lease payments:
•
• variable lease payments that are based on an index or a rate;
• amounts expected to be payable by the Group under residual value guarantees;
•
• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Group’s weighted average
incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value
in a similar economic environment with similar terms and conditions.
the amount of the initial measurement of lease liability;
Right-of-use assets are measured at cost comprising the following:
•
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
•
restoration costs.
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of Assets and any impairment is provided for by
writing down the asset value.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the income
statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets primarily comprise IT-equipment.
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:
International Accounting Standards (IAS/IFRSs)
IFRS 3 Business Combinations (amendment)
IAS 1 & IAS 8 Definition of Material (amendment)
IFRS 9 Financial Instruments (amendment)
IFRS 17 Insurance Contracts
IFRS 3 Reference to the Conceptual Framework in IFRS Standards
Effective date
1 January 2020
1 January 2020
1 January 2020
1 January 2021
1 January 2022
None of these are expected to have a significant effect on the Financial Statements of the Group.
Revenue
Revenue is recognised as the performance obligation to deliver goods to customers is satisfied and is recorded based on the amount of consideration
expected to be received in exchange for satisfying the performance obligation. Revenue on the sale of goods is recognised when control of the goods
has 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 estimates above, and Note 21).
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 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 benefit
of acquisitions 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 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 32).
115
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes to the Accounts continued
2. Accounting Policies continued
Taxation
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates
and laws that are enacted or substantively enacted by the balance sheet date. Deferred tax is provided on temporary differences at the balance sheet
date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
i) except where the deferred income tax liability arises from the initial recognition of goodwill or the initial recognition of an asset or liability in
ii)
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
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
ii)
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
in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised to the extent
that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that apply to the period when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to items
recognised in other comprehensive income or directly in equity are also recognised in other comprehensive income or directly in equity and not
in the income statement. Otherwise income tax is recognised in the income statement.
Dividends
Dividends receivable by the Company are recognised in the income statement if they are declared, appropriately authorised and no longer at
the discretion of the entity paying the dividend, prior to the balance sheet date. Dividends payable by the Company are recognised when declared
and therefore final dividends proposed after the balance sheet date are not recognised as a liability at the balance sheet date. Dividends paid
to Shareholders are shown as a movement in equity rather than on the face of the income statement.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration
transferred, measured at acquisition date fair value. Acquisition costs incurred are expensed and included in administrative expenses.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to
the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in profit or loss.
For each business acquired during the year separate disclosure will be made detailing the name of each business, the market sector served, the date
of acquisition and the percentage of share capital acquired. Further disclosures will be detailed separately for those acquisitions that are considered
to be material, and disclosures will be given in aggregate for any individually immaterial acquisitions. An acquisition would generally be considered
individually material if the acquisition has been treated as a class 2 or class 1 transaction under the Listing Rules.
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 and trademarks
are amortised evenly over their expected useful lives of five years, with amortisation charged through administration expenses in the income
statement.
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Cranswick plc | Annual Report & Accounts 2020Financial Statements 2. Accounting Policies continued
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
As explained above the Group has changed its accounting policy for leases where the Group is the lessee. The new policy and the impact of the
change is explained above.
Until 30 March 2019 the policy was:
i) Finance leases
Assets which are financed by leasing agreements that transfer substantially all the risks and rewards of ownership to the lessee (finance leases)
are capitalised at the inception of the lease at fair value or, if lower, the present value of the minimum lease payments, in ‘Property, plant and
equipment’ and the corresponding capital cost is shown as an obligation to the lessor in ‘Borrowings’. Depreciation is charged to the income
statement over the shorter of the estimated useful life of the asset and the term of the lease. The interest element of the rental obligations is
allocated to accounting periods during the lease term to reflect a constant rate of interest on the remainder of the capital amount outstanding.
ii) Operating leases
Leases, which are not finance leases, are classified as operating leases. Lease payments are charged to the income statement on a straight line
basis over the term of the lease.
Government grants and contributions
UK Regional Development Grants and grants receivable from the European Union and DEFRA in respect of property, plant and equipment are
credited to deferred income and released to the income statement over the relevant depreciation period.
Inventories
Inventories are stated at the lower of cost (on a first in, first out basis) and net realisable value after making allowance for any obsolete or slow-moving
items. In the case of finished goods, cost comprises direct materials, direct labour and an appropriate proportion of manufacturing fixed and variable
overheads, 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 progeny
for processing within the Group and externally (classified as current assets). On initial recognition and at the balance sheet date biological assets have
been measured at their fair value less costs to sell, in line with IAS 41. Gains and losses in relation to the fair value of biological assets are recognised in
the income statement, within ‘cost of sales’, in the period in which they arise.
Cash and cash equivalents
Cash 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.
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Notes to the Accounts continued
2. Accounting Policies continued
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 IFRS 9 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 IFRS 9, 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 asset recognised in the balance sheet in respect of the defined benefit pension scheme is the present value of the defined benefit obligation
at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised past-service costs. The defined benefit
obligation is calculated annually by independent actuaries using the projected unit method. The present value of the defined benefit obligation
is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated
in Sterling, and that have terms to maturity approximating to the terms of the related pension liability.
The amounts charged to operating profit are any gains and losses on settlements and curtailments, and these are included as part of staff costs.
Past-service costs are recognised immediately in income, unless the changes to the pension scheme are conditional on the employees remaining
in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight line basis over the
vesting period.
The difference between the interest cost on plan liabilities and the expected return on plan assets is recognised in the income statement as other
finance revenue or costs.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the statement
of comprehensive income in the period in which they arise.
The Group also operates 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.
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2. Accounting Policies continued
Employee benefits continued
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 Black-Scholes or stochastic option pricing models. In valuing equity-settled transactions, no account is taken of any
service and performance (vesting conditions), other than performance conditions linked to the price of the shares of the Company (market conditions).
Any other conditions which are required to be met in order for an employee to become fully entitled to an award are considered to be non-vesting
conditions. Like market performance conditions, non-vesting conditions are taken into account in determining the grant date fair value.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market or non-vesting
condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other
performance or service conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired
and management’s best estimate of the number of equity instruments that will ultimately vest. The movement in cumulative expense since the
previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on
the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of
the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and
the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled (including when a non-vesting condition within the control of the entity or employee is not met),
it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is expensed
immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any
excess over fair value being treated as an expense in the income statement.
On transition to IFRS, the Group did not apply the measurement rules of IFRS 2 to equity-settled awards granted before 7 November 2002 or
granted after that date and vested before 1 January 2005. However, later modifications of such equity instruments are measured under IFRS 2.
3. Business and Geographical Segments
IFRS 8 requires operating segments to be identified on the basis of the internal financial information reported to the Chief Operating Decision Maker
(CODM). The Group’s CODM is deemed to be the Executive Directors on the Board, who are primarily responsible for the allocation of resources
to segments and the assessment of performance of the segments.
The CODM assesses profit performance 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.
Geographical segments
The following table sets out revenues by destination, regardless of where the goods were produced:
UK
Continental Europe
Rest of world
2020
£’m
1,556.8
47.4
63.0
1,667.2
2019
£’m
1,395.8
22.6
18.7
1,437.1
In addition to the non-UK sales disclosed above the Group also made sales to export markets through UK-based meat trading agents totalling
£77.0 million (2019: £56.3 million). Including these sales, total sales to export markets were £187.4 million for the year (2019: £97.6 million).
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Notes to the Accounts continued
3. Business and Geographical Segments continued
Customer concentration
The Group has two customers (2019: two) which individually account for more than 10 per cent of the Group’s total revenue. These customers
account for 23 per cent and 18 per cent respectively. In the prior year these same two customers accounted for 23 per cent and 21 per cent
respectively.
The Group’s non-current assets were all located within the UK during both 2020 and 2019.
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 intangible assets
Amortisation of intangible assets
Administrative expenses
Total operating costs
Total
2020
£’m
1,445.9
(5.4)
1,440.5
226.7
65.8
50.4
3.7
54.1
2019
£’m
1,250.6
2.8
1,253.4
183.7
55.4
38.8
2.7
41.5
1,560.4
1,350.3
* This represents the difference between operating profit prepared under IAS 41 and operating profit prepared under historical cost accounting, which forms part of the reconciliation to
adjusted operating profit.
Group operating profit is stated after charging/(crediting):
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Release of government grants
Operating lease payments – minimum lease payments
Net foreign currency differences
Cost of inventories recognised as an expense
Increase in provision for inventories
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
Other services
Total non-audit related remuneration
Further details of audit and non-audit fees can be found on page 71.
Total
2020
£’m
42.0
8.2
3.7
(0.3)
–
(0.4)
929.5
4.5
2.5
0.2
0.2
0.4
–
–
2019
£’m
28.9
–
2.7
(0.2)
7.0
(0.2)
821.2
2.0
0.7
0.1
0.2
0.3
–
–
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.
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5. Employees
Staff costs:
Wages and salaries
Social security costs
Other pension costs
Group
2020
£’m
208.7
20.2
5.8
234.7
2019
£’m
183.3
18.7
4.9
206.9
Company
2020
£’m
8.7
1.5
0.1
10.3
2019
£’m
6.2
1.4
0.1
7.7
Included within wages and salaries is a total expense for share-based payments of £5.8 million (2019: £4.8 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
2020
Number
6,670
392
402
7,464
2019
Number
6,281
362
345
6,988
2020
Number
2019
Number
–
–
57
57
–
–
47
47
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 75 to 92. 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
2020
£’m
4.8
–
4.8
2.3
2
2019
£’m
3.1
–
3.1
5.0
2
Details of Directors’ remuneration can be found in the Remuneration Committee Report on page 87. The total Directors’ remuneration of £4.8 million
(2019: £3.1 million) comprises salary and fees £2.0 million (2019: £2.0 million), benefits £0.1 million (2019: £0.1 million), bonus £2.3 million (2019:
£0.6 million) and pension £0.4 million (2019: £0.4 million). The difference between pension contributions noted above and pension contributions
on page 87 is cash paid in lieu of pension.
6. Finance Costs
Finance costs
Bank interest paid and similar charges
Interest capitalised
Total interest expense for financial liabilities not at fair value through profit or loss
Net finance cost on defined benefit pension surplus/(deficit) (Note 27)
Lease interest
Total finance costs
The interest relates to financial assets and liabilities carried at amortised cost.
Total
2020
£’m
1.5
(0.3)
1.2
–
1.6
2.8
2019
£’m
0.3
(0.2)
0.1
0.1
–
0.2
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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
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 gains on defined benefit pension scheme
Corporation tax credit on actuarial gains on defined benefit pension scheme
Recognised in Group statement of changes in equity
Deferred tax (credit)/charge on share-based payments
Corporation tax credit on share options exercised
Total tax charge/(credit) recognised directly in equity
Company
Recognised in Company statement of changes in equity
Deferred tax (credit)/charge on share-based payments
Corporation tax credit on share options exercised
Total tax credit recognised directly in equity
2020
£’m
20.9
(0.5)
20.4
0.5
0.7
(0.3)
0.9
21.3
2020
£’m
0.1
2.2
–
2.3
(0.3)
(0.6)
(0.9)
1.4
2020
£’m
(0.1)
(0.1)
(0.2)
b) Factors affecting tax charge for the year
The tax assessed for the year is higher (2019: higher) than the standard rate of corporation tax in the UK. The differences are explained below:
Profit before tax
Profit multiplied by standard rate of corporation tax in the UK of 19 per cent (2019: 19 per cent)
Effect of:
Disallowed expenses
Consortium relief
Deferred tax rate change
Non-taxable income
Adjustments in respect of prior years
Share based payments
Total tax charge for the year
2020
£’m
104.0
19.8
1.8
(0.1)
0.7
(0.2)
(0.8)
0.1
21.3
2019
£’m
18.1
(0.1)
18.0
(1.0)
0.1
(0.2)
(1.1)
16.9
2019
£’m
(0.1)
0.3
(0.7)
(0.5)
0.7
(1.3)
(0.6)
(1.1)
2019
£’m
0.2
(0.8)
(0.6)
2019
£’m
86.5
16.4
0.7
–
0.1
–
(0.3)
–
16.9
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Cranswick plc | Annual Report & Accounts 2020Financial Statements 7. Taxation continued
c) Deferred tax
The deferred tax included in the Group balance sheet is as follows:
Group
Deferred tax liability in the balance sheet
Accelerated capital allowances
Business combinations
Losses
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
Business combinations
Biological assets
Other temporary differences
Share-based payments
Deferred tax on defined benefit pension scheme
Customer relationships intangibles
Deferred tax charge/(credit)
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
2020
£’m
2.7
3.2
(0.1)
0.4
0.1
(0.2)
(3.0)
1.4
2.7
7.2
2020
£’m
–
0.2
1.1
–
(0.4)
0.3
(0.3)
0.9
2020
£’m
(0.1)
(0.9)
(1.0)
2019
£’m
1.9
3.0
–
(0.9)
0.1
(0.4)
(2.1)
(1.1)
0.3
0.8
2019
£’m
0.3
(0.4)
(0.5)
–
–
–
(0.5)
(1.1)
2019
£’m
(0.2)
(0.7)
(0.9)
d) Change in corporation tax rate
The prevailing UK corporation tax rate of 19 per cent was substantively enacted as part of the Finance Act 2019 on 12 March 2019. This rate was due
to reduce to 17 per cent from April 2020, however, in the budget on 12 March 2020 it was announced that the main rate of UK corporation tax will be
held at 19 per cent. Deferred tax is therefore provided at 19 per cent (2019: 17 per cent).
8. Profit Attributable to Members
Of the profit attributable to members, the sum of £29.2 million (2019: £24.6 million) has been dealt with in the accounts of Cranswick plc.
9. Equity Dividends
Declared and paid during the year:
Final dividend for 2019 – 40.0p per share (2018: 38.6p)
Interim dividend for 2020 – 16.7p per share (2019: 15.9p)
Dividends paid
Proposed for approval of Shareholders at the Annual General Meeting on 17 August 2020:
Final dividend for 2020 – 43.7p per share (2019: 40.0p)
2020
£’m
20.7
8.7
29.4
2019
£’m
19.8
8.2
28.0
22.8
20.7
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10. Earnings per Share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to members of the parent company of £82.7 million
(2019: £69.6 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
2020
Thousands
2019
Thousands
51,966
162
52,128
51,385
222
51,607
Adjusted earnings per share
Adjusted earnings per share are calculated using the above weighted average number of shares for both basic and diluted amounts (see Note 32).
11.
Intangible Assets
Group
Cost
At 31 March 2018 and 30 March 2019
Additions
At 28 March 2020
Amortisation
At 31 March 2018
Amortisation
At 30 March 2019
Amortisation
At 28 March 2020
Net book value
At 31 March 2018
At 30 March 2019
At 28 March 2020
Goodwill
£’m
Trademark
£’m
Customer
relationships
£’m
151.3
41.9
193.2
–
–
–
–
–
151.3
151.3
193.2
–
2.5
2.5
–
–
–
0.3
0.3
–
–
2.2
11.6
13.1
24.7
6.7
2.7
9.4
3.4
12.8
4.9
2.2
11.9
Total
£’m
162.9
57.5
220.4
6.7
2.7
9.4
3.7
13.1
156.2
153.5
207.3
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:
2020
£’m
21.8
20.2
90.2
34.4
9.2
13.7
3.7
2019
£’m
21.8
1.7
90.2
11.0
9.2
13.7
3.7
193.2
151.3
Cash-generating unit
Fresh Pork
Livestock
Cooked Meats
Continental Fine Foods
Premium Cooked Poultry
Fresh Chicken
Other
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Cranswick plc | Annual Report & Accounts 2020Financial Statements Intangible Assets continued
11.
Impairment testing continued
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. The budgets have been updated in light of COVID-19. Forecast replacement capital expenditure is
included from budgets and thereafter capital expenditure 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 2 per cent.
A pre-tax discount rate of 8.1 per cent has been used (2019: 9.4 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.
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 budgets and 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.
12. Property, Plant and Equipment
Group
Cost
At 31 March 2018
Additions
Transfers between categories
Disposals
At 30 March 2019
Additions
On acquisition
Transfers between categories
Disposals
At 28 March 2020
Depreciation
At 31 March 2018
Charge for the year
Relating to disposals
At 30 March 2019
Charge for the year
Relating to disposals
At 28 March 2020
Net book amounts
At 31 March 2018
At 30 March 2019
At 28 March 2020
Freehold land and
buildings
£’m
Leasehold
improvements
£’m
Plant, equipment
and vehicles
£’m
Assets in the
course of
construction
£’m
125.6
6.8
17.9
–
150.3
6.1
8.0
46.7
(4.2)
206.9
26.6
3.2
–
29.8
4.8
(1.5)
33.1
99.0
120.5
173.8
1.0
–
–
(1.0)
–
–
–
–
–
–
1.0
–
(1.0)
–
–
–
–
–
–
–
287.8
39.4
8.6
(28.2)
307.6
40.0
3.8
31.3
(28.3)
354.4
172.8
25.7
(27.5)
171.0
37.2
(28.0)
180.2
115.0
136.6
174.2
23.3
37.3
(26.5)
–
34.1
51.4
2.2
(78.0)
–
9.7
–
–
–
–
–
–
–
23.3
34.1
9.7
Total
£’m
437.7
83.5
–
(29.2)
492.0
97.5
14.0
–
(32.5)
571.0
200.4
28.9
(28.5)
200.8
42.0
(29.5)
213.3
237.3
291.2
357.7
125
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes to the Accounts continued
12. Property, Plant and Equipment continued
Included in freehold land and buildings is land with a cost of £22.7 million (2019: £14.6 million), which is not depreciated, relating to the Group,
and £0.5 million (2019: £0.5 million) relating to the Company.
Cost includes £1.6 million (2019: £1.3 million) in respect of capitalised interest. Interest of £0.3 million was capitalised during the year (2019:
£0.2 million). The rate used to determine the amount of borrowing costs eligible for capitalisation was 1.1 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.
Freehold land and
buildings
£’m
Plant, equipment
and vehicles
£’m
0.5
–
0.5
–
0.5
–
–
–
–
–
–
0.5
0.5
0.5
0.5
0.3
0.8
(0.4)
0.4
0.5
–
0.5
(0.4)
0.1
0.2
–
0.3
0.2
Land and
buildings
£’m
Plant, equipment
and vehicles
£’m
36.1
23.2
8.4
67.7
–
6.6
0.7
7.3
36.1
60.4
4.1
1.8
0.1
6.0
–
1.6
–
1.6
4.1
4.4
Total
£’m
1.0
0.3
1.3
(0.4)
0.9
0.5
–
0.5
(0.4)
0.1
0.2
0.5
0.8
0.7
Total
£’m
40.2
25.0
8.5
73.7
–
8.2
0.7
8.9
40.2
64.8
Company
Cost
At 31 March 2018
Additions
At 30 March 2019
Disposals
At 28 March 2020
Depreciation
At 31 March 2018
Charge for the year
At 30 March 2019
Disposal
Charge for the year
At 28 March 2020
Net book amounts
At 31 March 2018
At 30 March 2019
At 28 March 2020
13. Right-of-use Assets
Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
Group
Cost
At 31 March 2019*
Additions
On acquisition
At 28 March 2020
Depreciation
At 31 March 2019*
Charge for the year
Impairment (onerous lease provision)
At 28 March 2020
Net book amounts
At 31 March 2019*
At 28 March 2020
126
Cranswick plc | Annual Report & Accounts 2020Financial Statements 13. Right-of-use Assets continued
Amounts recognised in the balance sheet continued
Company
Cost
At 31 March 2019* and 28 March 2020
Depreciation
At 31 March 2019*
Charge for the year
At 28 March 2020
Net book amounts
At 31 March 2019*
At 28 March 2020
Lease liabilities
Current
Non-current
Land and
buildings
£’m
Plant, equipment
and vehicles
£’m
0.7
–
0.1
0.1
0.7
0.6
2019*
£’m
7.7
32.5
40.2
0.1
–
–
–
0.1
0.1
Company
2020
£’m
0.1
0.6
0.7
Total
£’m
0.8
–
0.1
0.1
0.8
0.7
2019*
£’m
0.1
0.6
0.7
Group
2020
£’m
10.3
55.6
65.9
*
In the prior year, the Group and Company only recognised lease assets and lease liabilities in relation to leases that were classified as ‘finance leases’ under IAS 17 Leases. The assets were
presented in property, plant and equipment and the liabilities as part of the Group’s borrowings. For adjustments recognised on adoption of IFRS 16 on 31 March 2019, please see to Note 2.
Amounts recognised in the income statement
The income statement shows the following amounts relating to leases
Depreciation charge on right-of-use assets
Land buildings
Plant, equipment and vehicles
Interest expense (included in finance cost)
14.
Investments
Company
Shares at cost:
At 31 March 2018
Capital contribution relating to share options
Entities dissolved
At 30 March 2019
Capital contribution relating to share options
At 28 March 2020
2020
£’m
6.6
1.6
8.2
1.6
2019
£’m
–
–
–
–
Subsidiary
undertakings
£’m
164.5
3.3
(1.7)
166.1
3.9
170.0
127
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements
Notes to the Accounts continued
Investments continued
14.
The subsidiary undertakings as at 28 March 2020 were:
• Cranswick Country Foods plc
• Cranswick Gourmet Pastry Company Limited (100 per cent owned by Cranswick Country Foods plc)
• Wayland Farms Limited (100 per cent owned by Cranswick Country Foods plc)
• Wold Farms Limited (100 per cent owned by Cranswick Country Foods plc)
• Cranswick Convenience Foods Limited
• Kingston Foods Limited (100 per cent owned by Cranswick Convenience Foods Limited)
• 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
• Brookfield Foods Limited
• Continental Fine Foods Limited
• North Wales Foods Limited
• Cranswick Country Foods (Norfolk) 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
• 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)
• White Rose Farms Limited (100 per cent owned by Cranswick Country Foods plc) (2019: 50 per cent owned by Cranswick Country Foods plc)
• CHL Pigs Limited (100 per cent owned by White Rose Farms Limited)
• Packington Pork Limited (100 per cent owned by Cranswick Country Foods plc)
• Katsouris Brothers Limited (100 per cent owned by Cranswick Country Foods plc)
• Katsouris Bros Limited (Registered in Cyprus, registered office 28 October Street, 313, Limassol, 3105, Cyprus) (100 per cent owned by Cranswick
Country Foods plc)
• Cypresa Products Limited (100 per cent owned by Katsouris Brothers Limited)
Except where otherwise stated, each of the companies is registered in England and Wales, with registered office Crane Court, Hesslewood Country
Office Park, Ferriby Road, Hessle, East Yorkshire, HU13 0PA and Cranswick plc holds directly 100 per cent of the shares and voting rights of each
subsidiary undertaking.
Investment in Joint Venture
15.
On 10 February 2020, the Group disposed of its 50 per cent interest in White Rose Farms Limited, a joint venture involved in the production of pigs.
On the same date the Group acquired 100 per cent of White Rose Farms Limited enlarged pig enterprise, see Note 16.
The Group’s interest in White Rose Farms in the prior year and up to the point of disposal was accounted for using the equity method in the
consolidated financial statements.
Details of the assets disposed, and the consideration received are as follows:
Group
Book value of associate
Group’s share – 50%
Consideration – £1
Profit on disposal
128
£’m
(0.2)
(0.1)
–
0.1
Cranswick plc | Annual Report & Accounts 2020Financial Statements 16. Acquisitions
During the year, the following acquisitions were completed:
i) On 10 February 2020, the Group acquired 100 per cent of the issued share capital of the Buckle family’s pig farming and rearing operations
as well as the family’s 50 per cent share of the White Rose Farms Limited pig production joint venture set up by Cranswick and the Buckle family
in 2018. The enlarged pig enterprise, to be known as White Rose Farms, specialises in the production of Red Tractor assured pigs in Yorkshire.
On 16 December 2019, the Group acquired 100 per cent of the issued share capital of Packington Pork Limited. Packington Pork Limited
comprises pig farming and rearing operations and specialises in the production of British free range and outdoor bred pigs. The business operates
predominantly from a range of sites across Staffordshire, Nottinghamshire and Lincolnshire. The two farming businesses were acquired for
a combined initial net cash consideration of £27.4 million.
ii) On 26 July 2019, the Group acquired 100 per cent of the issued share capital of Katsouris Brothers Limited for an initial net cash consideration
of £41.3 million. Katsouris Brothers Limited is a leading processor and multi-channel supplier of Continental and Mediterranean non-meat food
products.
Packington Pork Limited and White Rose Farms Limited
The following table sets out the fair values of the identifiable assets and liabilities acquired by the Group in relation to White Rose Farms and
Packington Pork. The fair values have been provisionally determined at the balance sheet date.
Net assets acquired:
Goodwill
Right-of-use assets
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
Other borrowings
Bank loan
Lease liabilities
Goodwill arising on acquisition
Total consideration
Satisfied by:
Initial cash consideration
Deferred consideration
Net cash outflow arising on acquisition:
Cash consideration paid
Cash and cash equivalents acquired
Provisional
fair value
£’m
3.9
3.6
7.7
15.1
0.9
1.8
(0.2)
(4.0)
0.2
(0.6)
(7.0)
(1.3)
(3.6)
16.5
14.6
31.1
27.2
3.9
31.1
27.2
0.2
27.4
In respect of White Rose Farms, the consideration for the acquisition was £4.8 million higher than presented above, due to the settlement of a
pre-existing relationship liability of £4.8 million which was effectively treated as settled on acquisition. Note that the numbers included in the table
above include the consideration net of this settlement, and the liability of £4.8m is included in “other borrowings”. This presentation is to reflect
the cash paid and included within the cash flow statement.
The fair values on acquisition are provisional due to the timing of the transaction and will be finalised within twelve months of the acquisition date.
All of the trade receivables acquired are expected to be collected in full.
Included in the £14.6 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.
Transaction costs in relation to the acquisitions of £0.3 million have been expensed within administrative expenses.
From the date of acquisition to 28 March 2020, the combined external revenues of Packington Pork Limited and White Rose Farms Limited were
£1.0 million and the businesses contributed net profit after tax of £1.4 million to the Group. Had the acquisitions taken place at the beginning of the
financial year revenue would have been £6.1 million with profit after tax of £3.4 million.
129
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes to the Accounts continued
16. Acquisitions continued
Katsouris Brothers Limited
Fair values of the net assets at the date of acquisition were as follows:
Net assets acquired:
Customer relationships
Trademark
Right-of-use assets
Property, plant and equipment
Inventories
Trade and other receivables
Bank and cash balances
Trade and other payables
Corporation tax liability
Deferred tax liability
Bank loan
Lease liabilities
Goodwill arising on acquisition
Total consideration
Satisfied by:
Initial cash consideration
Deferred consideration
Deferred contingent consideration
Net cash outflow arising on acquisition:
Cash consideration paid
Cash and cash equivalents acquired
Provisional
fair value
£’m
13.1
2.5
4.9
6.3
4.6
10.5
13.2
(7.4)
(0.4)
(3.1)
(0.7)
(4.9)
38.6
23.4
62.0
54.5
0.7
6.8
62.0
55.2
(13.2)
42.0
The fair values on acquisition are provisional due to the timing of the transaction and will be finalised within twelve months of the acquisition date.
All of the trade receivables acquired are expected to be collected in full.
Included in the £23.4 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.
Transaction costs in relation to the acquisition of £0.3 million have been expensed within administrative expenses.
From the date of acquisition to 28 March 2020, the external revenues of Katsouris Brothers were £42.4 million and the business contributed net profit
after tax of £2.9 million to the Group. Had the acquisition taken place at the beginning of the financial year revenue would have been £65.7 million
with profit after tax of £4.4 million.
Contingent Consideration
The agreement includes contingent consideration payable in cash to the previous owners of Katsouris Brothers Limited based on the performance
of the business in the 12 month period ending 30 September 2020. The amount payable will be between £nil and £7 million.
The fair value of the contingent consideration on acquisition was estimated at £6.8 million.
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.
There was 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.
Total contingent consideration of £0.8 million was paid in the prior year in relation to the option.
130
Cranswick plc | Annual Report & Accounts 2020Financial Statements 17. 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 2018
Increases due to purchases
Decrease attributable to harvest
Decreases attributable to sales
Changes in fair value less estimated costs to sell
At 30 March 2019
Increases due to purchases
Increase due to acquisition
Decrease attributable to harvest
Decreases attributable to sales
Changes in fair value less estimated costs to sell
At 28 March 2020
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
Pigs
£’m
13.2
19.7
(68.5)
(0.5)
52.7
16.6
21.3
15.1
(98.0)
(2.7)
87.3
39.6
Chickens
£’m
4.6
1.6
(45.7)
(9.5)
53.7
4.7
5.3
–
(80.5)
(13.3)
89.9
6.1
2020
£’m
3.5
0.3
3.8
36.1
5.8
41.9
2020
£’m
Total
£’m
17.8
21.3
(114.2)
(10.0)
106.4
21.3
26.6
15.1
(178.5)
(16.0)
177.2
45.7
2019
£’m
0.6
0.1
0.7
16.0
4.6
20.6
2019
£’m
177.2
(171.8)
5.4
106.4
(109.2)
(2.8)
* 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 24). 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
2020
Number
2019
Number
41,346
928
468,567
317,736
5,353,558
12,763
255
248,781
267,389
3,255,208
1,358,513
32,858,862
496,006
26,116,813
131
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes to the Accounts continued
18.
Inventories
Group
Raw materials and work in progress
Finished goods and goods for resale
2020
£’m
52.1
23.4
75.5
2019
£’m
47.3
20.1
67.4
Inventories are shown net of any provision for slow-moving or obsolete inventory. As at 28 March 2020 the provision against inventory was £8.4 million
(2019: £3.9 million), of which £3.6 million resulted from COVID-19 considerations.
19. Trade and Other Receivables
Financial assets:
Trade receivables
Amounts owed by Group undertakings
Other receivables
Non-financial assets:
Prepayments and accrued income
Group
2020
£’m
200.1
–
6.8
206.9
6.7
213.6
2019
£’m
147.3
–
8.7
156.0
5.7
161.7
Company
2020
£’m
–
136.9
0.3
137.2
0.7
137.9
2019
£’m
–
76.7
0.7
77.4
0.5
77.9
The above financial assets are carried at amortised cost. As at 28 March 2020 and 30 March 2019, the analysis of trade receivables that were past due
but not impaired was as follows:
Group
2020
2019
Trade receivables
Of which: Not due
Past due date in the following periods:
£’m
200.1
147.3
£’m
178.5
131.2
Less than
30 days
£’m
Between
30 and 60 days
£’m
17.4
13.3
3.1
1.6
More than
60 days
£’m
1.1
1.2
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 28 March
2020, trade receivables at nominal value of £4.3 million (2019: £0.7 million) were impaired and fully provided for. The provision is calculated by reviewing
the lifetime expected credit losses using both historic and forward looking data. Balances are written off when the probability of recovery is assessed
as being remote.
The uncertainty around the ability of non-retail customers to pay has been impacted by COVID-19 and this uncertainty has been incorporated into
the expected future loss rates. The provision held at 28 March 2020 and 30 March 2019 uses expected future loss rates of 0.0% – 3.5% generating
a future credit loss provision of £3.6 million (30 March 2019 <£0.1 million).
Movements in the provision for impairment of receivables were as follows:
Group
Bad debt provision
At 31 March 2018
Provided in year
Utilised
Released
At 30 March 2019
Provided in year
Utilised
At 28 March 2020
There are no bad debt provisions against other receivables.
20. Financial Assets
Group
Current
Forward currency contracts
Loan to joint venture
132
£’m
2.2
0.2
(1.2)
(0.5)
0.7
3.9
(0.3)
4.3
2019
£’m
0.1
2.2
2.3
2020
£’m
1.5
–
1.5
Cranswick plc | Annual Report & Accounts 2020Financial Statements 21. 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
* See breakdown below.
Group
2020
£’m
122.6
–
6.8
12.5
6.5
42.8
0.2
191.4
2019
£’m
107.6
–
4.8
6.0
7.9
23.3
0.6
150.2
Company
2020
£’m
0.8
21.2
3.1
8.0
–
2.8
–
35.9
2019
£’m
0.6
61.8
1.8
2.5
–
1.4
–
68.1
0.8
0.7
–
–
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 24 of £396.0 million (2019:
£276.6 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
At 31 March 2018
Charged to income statement
Paid
At 30 March 2019
Charged to income statement
Paid
At 28 March 2020
22. Financial Liabilities
Current
Forward currency contracts
Contingent consideration (Note 16)
Bank overdraft
Non-current
Amounts outstanding under revolving credit facility
Unamortised issue costs
Movement on hedging instruments:
Gains arising in the year
Reclassification adjustment for losses/(gains) included in the income statement
6.8
8.9
(9.8)
5.9
6.4
(7.6)
4.7
2019
£’m
0.6
–
–
0.6
15.0
(0.8)
14.2
Group
2020
£’m
1.3
10.7
–
12.0
103.0
(0.5)
102.5
2.1
3.5
(3.6)
2.0
2.8
(3.0)
1.8
Company
2020
£’m
–
–
–
–
103.0
(0.5)
102.5
Group
2020
£’m
0.4
0.2
0.6
Total
£’m
8.9
12.4
(13.4)
7.9
9.2
(10.6)
6.5
2019
£’m
–
–
5.4
5.4
15.0
(0.8)
14.2
2019
£’m
–
(0.5)
(0.5)
All financial liabilities are carried at amortised cost, except for forward currency contracts and contingent consideration, which are carried at fair value.
133
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes to the Accounts continued
22. Financial Liabilities continued
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 24.
Movements on hedged foreign currency contracts are subsequently reclassified through cost of sales.
Banking facility
During the year, the Group took out an additional bi-lateral facility running for a period of 12 months from 11 December 2019. The facility is a revolving
credit facility of £40 million and was unutilised at 28 March 2020. The main Group banking facility, which runs to November 2023, currently comprises
a revolving credit facility of £160 million (reducing to £120 million in November 2022), including a committed overdraft facility of £20 million. £nil
million (2019: £5.4 million) of the overdraft facility was utilised at 28 March 2020. Interest is payable at a margin over base rate. £103.0 million (2019:
£15.0 million) of the revolving credit facility was utilised as at 28 March 2020. Interest is payable at a margin over LIBOR.
The arrangement fees of £1.5 million (2019: £1.4 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
2020
£’m
–
–
103.0
103.0
(0.5)
102.5
2019
£’m
–
–
15.0
15.0
(0.8)
14.2
2020
£’m
–
–
103.0
103.0
(0.5)
102.5
2019
£’m
–
–
15.0
15.0
(0.8)
14.2
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 2023. £103.0 million (2019: £15.0 million) was drawn down
under the facility at the year end.
23. Provisions
At 30 March 2019
Created in the year
Utilised in the year
Utilisation in right-of-use asset impairment
Movement on discount
At 28 March 2020
Analysed as:
Current liabilities
Non-current liabilities
Group
Company
Lease provisions
£’m
Lease provisions
£’m
2.2
0.1
(0.5)
(0.7)
0.1
1.2
Group
Company
2020
£’m
0.1
1.1
1.2
2019
£’m
0.2
2.0
2.2
2020
£’m
0.1
0.7
0.8
0.7
–
–
–
0.1
0.8
2019
£’m
0.1
0.6
0.7
Lease provisions are held against dilapidation obligations on leased properties. These provisions are expected to be utilised over the next ten years.
In the prior year, provisions were also held against onerous lease obligations. These have been utilised in the period to reduce the carrying value of the
right of use assets recognised under IFRS 16 (see Note 13).
134
Cranswick plc | Annual Report & Accounts 2020Financial Statements 24. Financial Instruments
An explanation of the Company and Group’s financial instruments risk management strategy is set out on page 95 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 28 March 2020 and their weighted
average interest rates is set out below.
As at 28 March 2020
Group
Financial liabilities:
Revolving credit facility
Financial assets:
Cash at bank
As at 30 March 2019
Group
Financial liabilities:
Revolving credit facility
Financial assets:
Cash at bank
Weighted average
effective
interest rate
%
1.3%
0.0%
Weighted average
effective
interest rate
%
1.3%
0.0%
Total
£’m
At floating
interest rates
£’m
(103.0)
(103.0)
21.5
(81.5)
21.5
(81.5)
Total
£’m
At floating
interest rates
£’m
(15.0)
(15.0)
20.5
5.5
20.5
5.5
Fixed interest
1 year or less
£’m
1-2 years
£’m
2-3 years
£’m
–
–
–
–
–
–
Fixed interest
–
–
–
1 year or less
£’m
1-2 years
£’m
2-3 years
£’m
–
–
–
–
–
–
–
–
–
The maturity profile of bank loans is set out in Note 22.
The interest rate profile of the interest-earning financial assets and interest-bearing liabilities of the Company as at 28 March 2020 and their weighted
average interest rates is set out below:
As at 28 March 2020
Company
Financial liabilities:
Amounts owed to Group undertakings
Revolving credit facility
Financial assets:
Cash at bank
As at 30 March 2019
Company
Financial liabilities:
Amounts owed to Group undertakings
Revolving credit facility
Overdraft
Weighted average
effective
interest rate
%
1.9%
1.3%
0.0%
Weighted average
effective
interest rate
%
1.9%
1.3%
1.9%
Total
£’m
(396.0)
(103.0)
(499.0)
3.1
(495.9)
Total
£’m
(276.6)
(15.0)
(5.4)
(297.0)
Fixed interest
At floating
interest rates
£’m
1 year or less
£’m
1-2 years
£’m
2-3 years
£’m
(396.0)
(103.0)
(499.0)
3.1
(495.9)
At floating
interest rates
£’m
(276.6)
(15.0)
(5.4)
(297.0)
–
–
–
–
–
–
–
–
–
–
Fixed interest
–
–
–
–
–
1 year or less
£’m
1-2 years
£’m
2-3 years
£’m
–
–
–
–
–
–
–
–
–
–
–
–
135
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes to the Accounts continued
24. Financial Instruments continued
Currency profile
The Group’s financial assets at 28 March 2020 include Sterling denominated cash balances of £11.5 million (2019: £4.8 million), Euro £9.1 million
(2019: £15.7 million), and US Dollar £0.9 million (2019: £nil) all of which are held in the UK.
The proportion of the Group’s net assets denominated in foreign currencies is immaterial.
The Group’s other financial assets and liabilities are denominated in Sterling.
Credit risk
The Group makes a significant proportion of its sales to the major UK supermarket groups, which correspondingly represent a significant proportion
of the Group’s trade receivables at any one time. Based on the financial strength of these customers, the Directors do not consider that the Group
faces a significant credit risk in this regard. Debts with other customers, which represent a smaller proportion of the Group’s trade receivables,
are considered to provide greater risk, particularly in the current economic climate. These debts are reviewed on a regular basis by credit controllers
and Senior Management and prudent provision is made when there is objective evidence that the Group will not be able to recover balances in full.
All cash financial assets are held by UK financial institutions. The maximum credit exposure relating to financial assets is represented by their carrying
values as at the balance sheet date.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
Transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period.
The Group’s forward currency contracts are measured using Level 2 of the fair value hierarchy. The valuations are provided by the Group’s bankers
from their 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 (asset)/liability (Note 20 and Note 22)
2020
Book value
£’m
(0.2)
Fair value
£’m
(0.2)
Contingent consideration (Note 16 and Note 22)
10.7
10.7
2019
Book value
£’m
0.5
–
Fair value
£’m
0.5
–
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 IFRS 9, 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
US Dollars
136
Amount
34.7m
0.4m
Maturities
Exchange rates
1 April 2020-
21 December 2020
€1.10-€1.20
1 April 2020-
29 May 2020
$1.29-$1.31
Fair value
£’m
1.5
–
Cranswick plc | Annual Report & Accounts 2020Financial Statements 24. Financial Instruments continued
Hedges continued
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 IFRS 9, 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
Canadian Dollars
Amount
28.0m
11.0m
5.6m
Maturities
Exchange rates
16 April 2020–17 September 2020
£0.75–£0.85
17 April 2020–16 December 2020
£0.86–£0.88
27 April 2020-2 July 2020
£0.58
Fair value
£’m
(0.9)
(0.4)
–
These contracts were effective cash flow hedges under the criteria set out in IFRS 9 and therefore fair value gains and losses related to the contracts
were recognised directly in other comprehensive income.
The Company does not hold any forward contracts.
Interest rate risk
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the
Group’s profit before tax (through the impact on floating rate borrowings). There is no material impact on the Group’s equity.
Currency derivatives have not been included in the sensitivity analysis below as they are not considered to be exposed to interest rate risk.
2020
Sterling
2019
Sterling
Increase/decrease
in basis points
Effect on profit
before tax
£’m
+100
–100
+100
–100
(1.0)
1.0
(0.1)
0.1
Liquidity risk
The tables below summarise the maturity profile of the Group’s financial liabilities at 28 March 2020 and 30 March 2019 based on contractual undiscounted
payments:
At 28 March 2020
Group
Revolving credit facility
Contingent consideration
Trade and other payables
Derivative financial instruments
Lease liabilities
At 30 March 2019
Group
Revolving credit facility
Trade and other payables
Derivative financial instruments
At 28 March 2020
Company
Revolving credit facility
Trade and other payables
Lease liabilities
Less than
1 year £’m
1 to 2 years
£’m
2 to 5 years
£’m
Over 5 years
£’m
–
10.7
191.2
1.3
10.3
213.5
–
–
–
–
9.0
9.0
103.0
–
–
–
23.4
126.4
–
–
–
–
23.2
23.2
Less than
1 year £’m
1 to 2 years
£’m
2 to 5 years
£’m
–
149.6
0.6
150.2
–
–
–
–
15.0
–
–
15.0
Less than
1 year £’m
1 to 2 years
£’m
2 to 5 years
£’m
Over 5 years
£’m
–
35.9
0.1
36.0
–
–
0.1
0.1
103.0
–
0.3
103.3
–
–
0.2
0.2
Total
£’m
103.0
10.7
191.2
1.3
65.9
372.1
Total
£’m
15.0
149.6
0.6
165.2
Total
£’m
103.0
35.9
0.7
139.6
137
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes to the Accounts continued
24. Financial Instruments continued
Liquidity risk continued
At 30 March 2019
Company
Revolving credit facility
Trade and other payables
The impact of liquidity risk on the Group is discussed in detail in the Directors’ Report on page 95.
25. Called-up Share Capital
Allotted, called-up and fully paid – Ordinary shares of 10 pence each:
Group and Company
At beginning of year
On exercise of share options
Scrip dividends
At end of year
2020
Number
2019
Number
51,679,925
337,267
254,812
51,078,201
417,117
184,607
52,272,004
51,679,925
Less than 1 year
£’m
1 to 2 years
£’m
2 to 5 years
£’m
–
68.1
68.1
–
–
–
15.0
–
15.0
2020
£’m
5.2
–
–
5.2
Total
£’m
15.0
68.1
83.1
2019
£’m
5.1
0.1
–
5.2
On 6 September 2019, 203,335 ordinary shares were issued at 2,514.0 pence as a result of Shareholders exercising the scrip dividend option in lieu
of the cash payment for the 2019 final dividend.
On 24 January 2020, 51,477 ordinary shares were issued at 3,277.6 pence as a result of Shareholders exercising the scrip dividend option in lieu
of the cash payment for the 2020 interim dividend.
During the course of the year, 337,267 ordinary shares were issued to employees exercising SAYE and LTIP options at prices between nil and
2239.0 pence.
On 9 September 2018, 163,250 ordinary shares were issued at 3,276.8 pence as a result of Shareholders exercising the scrip dividend option in lieu
of the cash payment for the 2018 final dividend.
On 25 January 2019, 21,357 ordinary shares were issued at 2,787.2 pence as a result of Shareholders exercising the scrip dividend option in lieu
of the cash payment for the 2019 interim dividend.
During the course of the prior year, 417,117 ordinary shares were issued to employees exercising SAYE and LTIP options at prices between nil
and 2,565.0 pence.
Ordinary share capital of £45,411 is reserved for allotment under the Savings Related Share Options Schemes and Long Term Incentive Plans (LTIP).
The options are exercisable as follows:
Number
Exercise price
Exercise period
11,305
16,538
58,087
146,192
226,612
246,027
633,800
1,187p
1,456p
1,788p
2,565p
2,239p
2,534p
Nil
March 2018–October 2020
March 2019–October 2021
March 2020–October 2022
March 2021–October 2023
March 2022–October 2024
March 2023–October 2025
August 2020–August 2029
Savings related
Savings related
Savings related
Savings related
Savings related
Savings related
LTIP
138
Cranswick plc | Annual Report & Accounts 2020Financial Statements 26. 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 £5.8 million
(2019: £4.8 million).
Long Term Incentive Plan (LTIP)
During the course of the year 258,700 options at nil cost were granted to Directors and Senior Executives, the share price at that time was
2,684.00 pence. Details of the performance criteria relating to the LTIP scheme can be found in the Remuneration Committee report on page 82.
The maximum term of LTIP options is ten years.
Group
Outstanding as at beginning of year
Granted during the year (i)
Lapsed during the year
Exercised during the year (ii)
Outstanding as at end of year (iii)
Exercisable at end of year
Company
Outstanding as at beginning of year
Granted during the year (i)
Lapsed during the year
Exercised during the year (ii)
Outstanding as at end of year (iii)
Exercisable at end of year
2020
Number
578,800
258,700
(38,360)
(165,340)
633,800
6,210
2020
Number
321,358
114,500
–
(112,273)
323,585
–
2020
WAEP (£)
–
–
–
–
–
–
2020
WAEP (£)
–
–
–
–
–
–
2019
Number
685,144
211,800
(27,996)
(290,148)
578,800
5,450
2019
Number
368,825
111,000
(3,767)
(154,700)
321,358
–
2019
WAEP (£)
–
–
–
–
–
–
2019
WAEP (£)
–
–
–
–
–
–
i)
The weighted average fair value of options granted during the year was £24.38 (2019: £31.51). The share options granted during the year were at £nil per share. The share price at the date
of grant was £26.84 (2019: £33.08).
ii) The weighted average share price at the date of exercise for the options exercised was £26.29 (2019: £32.32).
iii) For the share options outstanding as at 28 March 2020, the weighted average remaining contractual life is 8.34 years (2019: 8.22 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 eligible to participate in the SAYE scheme if they are in employment with the Group on the relevant invitation date. The exercise
price is equal to the market price of the shares less 20 per cent on the relevant date. The contractual life of the options is three or five years.
The maximum term of SAYE options is 3.5 or 5.5 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 beginning of year
Granted during the year (i)
Lapsed during the year
Exercised during the year (ii)
Outstanding as at end of year (iii)
2020
Number
707,201
247,499
(78,012)
(171,927)
704,761
2020
WAEP (£)
20.55
25.34
22.23
15.28
23.37
2019
Number
645,815
266,289
(77,934)
(126,969)
707,201
2019
WAEP (£)
18.67
22.39
23.08
13.34
20.55
Exercisable at end of year
25,434
15.57
33,319
13.57
Company
Outstanding as at beginning of year
Granted during the year (i)
Lapsed during the year
Exercised during the year (ii)
Outstanding as at end of year (iii)
2020
Number
19,220
10,555
(140)
(5,645)
23,990
2020
WAEP (£)
19.15
25.34
12.83
14.76
23.76
2019
Number
22,078
7,301
(4,666)
(5,493)
19,220
Exercisable at end of year
1,056
17.88
1,615
2019
WAEP (£)
16.18
22.39
25.35
13.78
19.15
9.48
i)
The share options granted during the year were at £25.34 (2019: £22.39), representing a 20 per cent discount on the price at the relevant date. The share price at the date of grant was £33.26
(2019: £27.96).
ii) The weighted average share price at the date of exercise for the options exercised was £33.58 (2019: £26.95).
iii) For the share options outstanding as at 28 March 2020, the weighted average remaining contractual life is 2.69 years (2019: 2.65 years).
139
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes to the Accounts continued
26. Share-based Payments continued
All Employee Share Option Scheme (SAYE) continued
The weighted average fair value of options granted during the year was £8.52 (2019: £4.69). The range of exercise prices for options outstanding at
the end of the year was £11.87-£25.65 (2019: £5.79-£25.65).
The fair value of the SAYE options has been 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 LTIP equity settled options have been calculated using a Stochastic option pricing
model. The following table lists the inputs to the model used for the years ended 28 March 2020 and 30 March 2019:
Group and Company
Dividend yield
Expected share price volatility
Risk-free interest rate
Expected life of option
Exercise prices
2020
LTIP
2020
SAYE
2019
LTIP
2019
SAYE
2.08%
1.70%
21.23%-22.11% 22.02%-22.62%
0.51%-0.57%
3.25, 5.25 years
£25.34
0.59%-0.63%
3 years
£nil
1.62%
18.07%-21.45%
0.84%-1.11%
3 years
£nil
2.16%
21.84%-23.24%
0.83%-0.97%
3.25, 5.25 years
£22.39
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.
27. 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 2018. 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
Movement on additional liability recognised due to minimum funding requirement
Past service cost
Benefits paid from plan
Benefit obligation at the end of the year
b) Change in plan assets
Fair value of plan assets at the beginning of the year
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 asset/(liability) recorded in the balance sheet
140
2020
£’m
39.7
0.8
(5.4)
(0.6)
–
(1.1)
33.4
2020
£’m
33.2
0.8
5.9
1.8
(1.1)
40.6
2020
£’m
(33.4)
40.6
7.2
2019
£’m
37.5
0.8
1.3
0.2
0.4
(0.5)
39.7
2019
£’m
29.4
0.7
1.8
1.8
(0.5)
33.2
2019
£’m
(39.7)
33.2
(6.5)
Cranswick plc | Annual Report & Accounts 2020Financial Statements 27. Pension Schemes continued
Defined benefit pension scheme continued
d) Components of pension cost
Amounts recognised in the income statement:
Interest cost
Expected return on plan assets
Past service cost
Total pension cost recognised in the income statement
Actual return on assets
Actual return on plan assets
Amounts recognised in the Group statement of comprehensive income
Actuarial gains 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
Future expected lifetime of pensioner at age 65:
Current pensioners
Male
Female
Future pensioners
Male
Female
2020
£’m
0.8
(0.8)
–
–
6.7
11.9
(0.7)
2020
2.30%
2.60%
5.00%
2.60%
3.00%
2.60%
2020
21.2
23.8
22.3
25.1
2019
£’m
0.8
(0.7)
0.4
0.5
2.5
0.3
(12.6)
2019
2.40%
3.20%
5.00%
3.20%
3.00%
3.20%
2019
22.7
24.8
24.9
27.1
The mortality rates used have been taken from Base tables S2PA (CMI 2017 improvements 1.0 per cent long-term rate of improvement)
(2019: S2PA (CMI 2015 improvements 1.5 per cent long-term rate of improvement)).
At 28 March 2020, the average duration of the scheme liabilities was 23 years (2019: 23 years). For deferred pensions the average duration was
26 years (2019: 26 years) and for pensions in payment the average duration was 12 years (2019: 12 years).
The Group’s pension scheme asset as measured under IFRIC 14 is £7.2 million (2019: £6.5 million liability) as a result of the Group’s commitment
to future contributions to the scheme. This compares to an underlying IAS 19 pension scheme asset of £12.0 million (2019: £1.1 million liability).
A 0.1 per cent increase/decrease in the discount rate would give rise to a £646,000 decrease/£661,000 increase (2019: £11,000 decrease/
£12,000 increase) in the surplus at 28 March 2020.
A 0.1 per cent increase/decrease in the inflation assumption would give rise to a £262,000 increase/£260,000 decrease (2019: £nil increase/
£nil decrease) in the surplus at 28 March 2020.
A one year increase/decrease in the life expectancy assumption would give rise to a £1,071,000 increase/£1,100,000 decrease (2019:
£nil increase/£nil decrease) in the surplus at 28 March 2020.
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.
141
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes to the Accounts continued
27. Pension Schemes continued
Defined benefit pension scheme continued
f) Plan assets
Return seeking:
Diversified growth funds
Debt instruments:
Corporate bonds
Other:
Cash
LDI strategies
Total
2020 Fair value
of plan assets
£’m
2019 Fair value
of plan assets
£’m
–
5.8
16.3
18.5
40.6
7.4
5.3
0.3
20.2
33.2
All of the plan assets have a quoted price in an active market except for cash.
The underlying liabilities of the scheme increased by £0.4m during the prior year due to an adjustment to equalise Guaranteed Minimum Pensions
(GMP) between males and females. The £0.4m charge was recognised in the income statement in the prior year. The adjustment had no effect
on the reported pension liability as the liability reported under IFRIC 14 was significantly higher than the underlying IAS 19 deficit. There has been
no adjustment required in the current year.
The plan has not invested in any of the Group’s own financial instruments nor in any properties or other assets used by the Group.
The Group expects to contribute approximately £1.8 million to the scheme during the year ending 31 March 2021 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 £1.0 million (2019: £0.6 million). Contributions during the year totalled
£5.8 million (2019: £4.9 million).
28. Additional Cash Flow Information
Analysis of changes in net (debt)/funds:
Group
Cash and cash equivalents
Revolving credit
Lease liabilities
Net funds/(debt)
At 30 March
2019
£’m
20.5
(14.2)
–
6.3
Cash flow
£’m
1.0
(87.9)
9.4
(77.5)
Other
non-cash
changes
£’m
–
(0.4)
(75.3)
(75.7)
At 28 March
2020
£’m
21.5
(102.5)
(65.9)
(146.9)
Net (debt)/funds is defined as cash and cash equivalents and loans receivable less interest-bearing liabilities net of unamortised issue costs.
At 31 March
2018
£’m
20.6
–
20.6
Cash flow
£’m
(0.1)
(13.9)
(14.0)
Other
non-cash
changes
£’m
–
(0.3)
(0.3)
At 30 March
2019
£’m
20.5
(14.2)
6.3
Group
Cash and cash equivalents
Revolving credit
Net funds
142
Cranswick plc | Annual Report & Accounts 2020Financial Statements 28. Additional Cash Flow Information continued
Analysis of changes in net (debt)/funds:
Company
Cash and cash equivalents
Overdraft
Revolving credit
Lease liability
Net debt
Company
Cash and cash equivalents
Overdraft
Revolving credit
Net funds/(debt)
At 30 March
2019
£’m
–
(5.4)
(5.4)
(14.2)
–
(19.6)
At 31 March
2018
£’m
5.1
–
5.1
–
5.1
Cash flow
£’m
3.1
5.4
8.5
(87.9)
0.1
(79.3)
Cash flow
£’m
(5.1)
(5.4)
(10.5)
(13.9)
(24.4)
Other
non-cash
changes
£’m
At 28 March
2020
£’m
–
–
–
(0.4)
(0.8)
(1.2)
Other
non-cash
changes
£’m
–
–
–
(0.3)
(0.3)
3.1
–
3.1
(102.5)
(0.7)
(100.1)
At 30 March
2019
£’m
–
(5.4)
(5.4)
(14.2)
(19.6)
29. 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 £103.0 million
as at 28 March 2020 (2019: £15.0 million).
During the prior year the Group entered into a Letter of Credit agreement with HSBC UK plc in favour of Marel Stork Poultry Processing B.V. (‘Marel’)
for supply of equipment in relation to the new poultry processing facility in Eye, Suffolk. The €20.2 million facility expires on 5 April 2020, with a balance
outstanding to Marel under the letter of credit at 28 March 2020 of €2.0 million (2019: €12.3 million).
For the Company, the amounts drawn down by other Group companies which were guaranteed by the Company at the year end totalled £nil
(2019: £nil).
30. Commitments
(a) The Directors have contracted for future capital expenditure for property, plant and equipment totalling £14.2 million (2019: £47.5 million).
(b) The Group’s lease arrangements mainly consist of agricultural properties. From 31 March 2019 the Group adopted IFRS 16 but has not restated
comparatives for the year to 30 March 2019, as permitted under the specific transitional provisions in the standard. On adoption of IFRS 16 the
Group has recognised right-of-use assets and lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under
the principals of IAS 17, see Note 13. The future minimum rentals payable under non-cancellable operating leases that do not meet the criteria
for IFRS 16 (e.g. low value leases) are as follows:
Group
Not later than one year
After one year but not more than five years
After five years
Company
Not later than one year
After one year but not more than five years
After five years
2020
£’m
1.0
1.4
–
2.4
2020
£’m
–
–
–
–
2019
£’m
7.8
22.1
15.9
45.8
2019
£’m
0.1
0.4
0.4
0.9
143
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Notes to the Accounts continued
31. 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
2020
2019
Services rendered
to related party
£’m
Interest paid to
related party
£’m
Dividends received
from related party
£’m
29.5
22.4
4.5
4.7
22.6
22.1
Amounts owed by or to subsidiary undertakings are disclosed in Notes 19 and 21. 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
2020
£’m
5.8
–
2.3
8.1
2019
£’m
4.5
–
1.9
6.4
32. 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 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 benefit of acquisitions 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 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
Katsouris
Packington Pork and White Rose Farms
Like-for-like revenue
Adjusted gross profit
Gross profit
Net IAS 41 valuation movement
Adjusted gross profit
Adjusted Group operating profit and adjusted EBITDA
Group operating profit
Net IAS 41 valuation movement
Amortisation of intangible assets
Adjusted Group operating profit
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Adjusted EBITDA
144
2020
£’m
1,667.2
(42.4)
(1.0)
1,623.8
2020
£’m
226.7
(5.4)
221.3
2020
£’m
106.8
(5.4)
3.7
105.1
42.0
8.2
155.3
2019
£’m
1,437.1
Change
+16.0%
1,437.1
+13.0%
2019
£’m
183.7
2.8
186.5
2019
£’m
86.8
2.8
2.7
92.3
28.9
–
Change
+23.4%
+18.7%
Change
+23.0%
+13.9%
121.2
+28.1%
Cranswick plc | Annual Report & Accounts 2020Financial Statements 32. Alternative Performance Measures continued
Adjusted profit before tax
Profit before tax
Net IAS 41 valuation movement
Amortisation of intangible assets
Adjusted profit before tax
Adjusted earnings per share
On profit for the year
Amortisation of intangible assets
Tax on amortisation of intangible assets
Net IAS 41 valuation movement
Tax on net IAS 41 valuation movement
On adjusted profit for the year
Free cash flow
Net cash from operating activities
Net interest paid
Free cash flow
2020
£’m
82.7
3.7
(0.7)
(5.4)
1.0
81.3
2020
Basic
pence
159.1
7.2
(1.4)
(10.5)
2.0
156.4
2020
Diluted
pence
158.6
7.2
(1.4)
(10.5)
2.0
155.9
2020
£’m
104.0
(5.4)
3.7
102.3
2019
£’m
69.6
2.7
(0.5)
2.8
(0.5)
74.1
2020
£’m
117.0
(1.2)
115.8
2019
£’m
86.5
2.8
2.7
92.0
2019
Basic
pence
135.5
5.4
(1.0)
5.4
(1.0)
144.3
2019
£’m
87.7
(0.4)
87.3
Change
+20.2%
+11.2%
2019
Diluted
pence
134.9
5.4
(1.0)
5.4
(1.0)
143.7
Change
+33.4%
+32.6%
145
Cranswick plc | Annual Report & Accounts 2020Shareholder InformationCorporate GovernanceStrategic ReportFinancial Statements Five Year Statement
Revenue^
Profit before tax^
Adjusted profit before tax*^
Earnings per share^
Adjusted earnings per share*^
Dividends per share
Capital expenditure
Net (debt)/funds
Net assets
2020
£’m
1,667.2
104.0
102.3
159.1p
156.4p
60.4p
97.5
(146.9)
614.5
2019
£’m
1,437.1
86.5
92.0
135.5p
144.3p
55.9p
83.5
6.3
534.9
2018
£’m
1,464.5
88.0
92.4
137.8p
145.0p
53.7p
59.2
20.6
479.9
2017
£’m
1,245.1
77.5
75.5
124.2p
120.9p
44.1p
48.6
(11.0)
421.4
2016
£’m
1,016.3
62.1
64.4
98.9p
102.8p
37.5p
34.1
17.8
368.0
* Adjusted profit before tax and earnings per share exclude the effects of net IAS 41 valuation movement and acquisition related amortisation in 2020, 2019, 2018 and 2017 and the effects of
net IAS 41 valuation movement, acquisition related amortisation and impairment of goodwill in 2016. 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 28 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
June
July
August
September
November
January
146
Cranswick plc | Annual Report & Accounts 2020Shareholder Information Shareholder Analysis at 5 June 2020
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 30 March 2019
Share price at 28 March 2020
High in the year
Low in the year
Number of
holdings
Number of
shares
1,242
755
1,997
1,179
417
108
150
49
94
1,997
4,123,915
48,164,526
52,288,441
404,500
964,307
764,864
3,636,854
3,507,890
43,010,026
52,288,441
2,722p
3,478p
4,000p
2,488p
SHARE PRICE MOVEMENT
Cranswick’s share price movement over the six year period to May 2020 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 June 2014 (1,263p),
is shown below:
3,800
3,300
2,800
2,300
1,800
1,300
800
2014
2015
2016
2017
2018
2019
2020
Cranswick
FTSE All Share
FTSE 350 Food Producers
147
Cranswick plc | Annual Report & Accounts 2020Strategic ReportShareholder InformationCorporate GovernanceFinancial Statements Advisers
Secretary
Company number
Registered office
Stockbrokers
Registrars
Auditors
Tax advisers
Solicitors
Bankers
Steven Glover LLB
1074383
Crane Court
Hesslewood Country Office Park
Ferriby Road
Hessle
East Yorkshire
HU13 0PA
HSBC Bank plc – London
Investec Investment Banking – London
Shore Capital Stockbrokers – Liverpool
Link Asset Services
The Registry
34 Beckenham Road
Kent
BR3 4TU
Tel: +44(0)371 664 0300 (Calls are charged at the standard geographic rate and will vary by provider.
Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open
between 09:00–17:30, Monday to Friday excluding public holidays in England and Wales).
email: shareholderenquiries@linkgroup.co.uk
www.linkassetservices.com
PricewaterhouseCoopers LLP – Leeds
KPMG – Leeds
Rollits LLP – Hull
Eversheds Sutherland (International) LLP – Leeds
Lloyds Banking Group plc
The Royal Bank of Scotland plc
HSBC Bank plc
Santander UK plc
Merchant bankers
N M Rothschild & Sons – Leeds
148
Cranswick plc | Annual Report & Accounts 2020Shareholder Information C
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Cranswick plc
Crane Court, Hesslewood Country Office Park,
Ferriby Road, Hessle, East Yorkshire, HU13 0PA
01482 275 000
www.cranswick.plc.uk