Report & Accounts Year Ended 31 March 2013 Financial Highlights Revenue Adjusted Profit Before Tax* £875.2m £49.3m 2013 875.2m 2013 49.3m 2012 820.8m 2012 45.6m 2011 758.4m 2011 47.3m Adjusted Earnings Per Share* Dividends Per Share 78.9p 30.0p 2013 78.9p 2013 30.0p 2012 72.9p 2012 28.5p 2011 72.8p 2011 27.5p 2013 2012 Movement Reported revenue £875.2m £820.8m +7% Underlying revenue † £864.6m £820.8m +5% Operating profit before impairment £50.0m £46.7m +7% Adjusted profit before tax* £49.3m £45.6m +8% Adjusted earnings per share * 78.9p 72.9p +8% Dividends per share 30.0p 28.5p +5% Notes: Comparative figures are for the 53 weeks to 31 March 2012 * excluding impairment charges and the effects of associate † excluding contribution from Kingston Foods acquired on 29 June 2012 Company Profile Cranswick was formed by farmers in the early 1970’s to produce This development has been achieved through a combination of pig feed. In 1988 the Board embarked on a strategy to broaden acquisitions and subsequent organic growth, with Cranswick now the base of the Company’s activities and to seek opportunities to supplying a range of fresh pork, gourmet sausages, premium develop into related areas offering greater scope to add value to the cooked meats, traditional air-dried bacon, charcuterie, pastry Company’s processes. Activities have since been extended from this products and sandwiches to its customers from a number of agricultural base into the food sector. production facilities in the UK. The business is focused predominantly on the supply of fresh and The high quality of food supplied by the company is borne out processed food to the UK food retail, food manufacturing and food by the awards which continue to be received across all product service categories. categories. Contents Operational Highlights Business Review Business Review Chairman’s Statement 2 Review of Activities 4 • New £12m gourmet pastry facility Awards 6 • £4m extension to Hull cooked meats operation Group Operating & Financial Review 8 • £5m investment in additional fresh pork retail packing capacity Business Locations & Group Directors 18 • Launch of new products including gourmet burgers, premium air-dried cooked meats and breaded pork ranges • £31m of capital expenditure across the Group, with £125m invested in total Corporate Responsibility over last 5 years Corporate Responsibility • Chinese export accreditation awarded to Hull and Norfolk fresh pork Corporate Social Responsibility 20 facilities • Export sales volumes up 9% • Acquisition of Kingston Foods and East Anglian Pigs Governance Directors 24 Corporate Directors’ Report 25 Corporate Governance Statement 28 Governance Audit Committee Report 32 Remuneration Committee Report 36 Responsibility Highlights Statement of Directors’ Responsibilities 46 • Total reportable accidents down by 6% Financial Statements • Reportable accident incident ratio improved by 15% • Tonnage of waste to landfill reduced by 47%, over 2,500 tonnes Report of the Auditors 47 • Awarded 69th consecutive Grade A rating for British Retail Consortium Group Income Statement 48 Global Standard for Food Safety Group Statement of Comprehensive Income 49 Company Statement of Comprehensive Income 49 Financial Statements Group Balance Sheet 50 Company Balance Sheet 51 Group Statement of Cash Flows 52 Company Statement of Cash Flows 53 Group Statement of Changes in Equity 54 Company Statement of Changes in Equity 55 Notes to the Accounts 56 Shareholder Information Shareholder Information Shareholder Information 95 Shareholder Analysis 96 Advisers 97 Visit us online Our website contains a full investor section with the latest news and company information www.cranswick.plc.uk Cranswick plc Report & Accounts 2013 | 1 Chairman’s Statement Martin Davey - Chairman This has been a positive year for Cranswick. Further progress was achieved in trading and investment was made for this progress to continue over the longer term. Pig meat consumption in the UK continues to grow. There was a 2 per cent increase in UK per capita consumption during 2012 compared to a fractional increase in poultry and reductions in beef/veal and lamb/mutton (source: BPEX). In food service pig meat performed well and accounted for 28 per cent of all protein servings, making it the most popular protein out of the home (source: BPEX). The business is totally focused on working closely with both its customer base and supply chain to ensure that the consumer has competitively priced food that is nutritious, tasty and a wholesome constituent of a balanced diet. Results acquired and integrated into the Company’s cooked meats business. Kingston, which At a glance The performance in the year was has broadened the Group’s customer base, particularly pleasing considering the has performed well since acquisition and I previous year was a 53 week period welcome Tony Turner, managing director, compared to the usual 52 week period this and his colleagues to Cranswick. Revenue past year. Subsequent to the year end the Company £875.2m Underlying sales, which exclude the acquired East Anglian Pigs. This is a 7% contribution from Kingston Foods, rose successful business involved in the 2012: £820.8m 5 per cent during the year and reflected breeding, rearing and finishing of British growth across most product sectors. pigs and a key supplier to the Group’s Operating Margin Particularly strong growth was seen in sales Norfolk activities. It operates in the British of bacon and sausage. Underlying sales premium outdoor pig-rearing sector and Before Impairment were 7 per cent higher on an equivalent 52 has accreditation under the RSPCA Freedom week basis. Total revenue for the year was Foods and the Red Tractor schemes. This 5.7% 7 per cent higher at £875 million and 9 per strategic acquisition enhances Cranswick’s commitment to, and greater control over, a cent higher than previously after adjusting 2012: 5.7% for the extra week. robust and integrated supply chain with a clear focus on premium British ingredients. With an unchanged operating margin before I welcome Adrian Dowling, managing Adjusted Profit Before Tax impairment, and after net finance costs of director, and his colleagues to Cranswick. £0.8 million, adjusted profit before tax was £49.3m £49.3 million compared to £45.6 million last Significant organic developments included the purchase of and investment in the 8% year which included the benefit of the extra 2012: £45.6m week, an increase of 8 per cent. Earnings Riverside fresh pork facility in Hull and the per share on the same basis were 8 per construction of the pastry plant in Malton, cent higher at 78.9 pence. Reported profit North Yorkshire. These two sites, which Adjusted Earnings Per Share before tax was £47.4 million and earnings have only recently been commissioned, will per share were 75.1 pence compared to contribute to the long term growth of the 78.9p £48.4 million and 78.6 pence respectively a Company. 8% year ago. 2012: 72.9p Investment elsewhere in the business Net finance costs were covered 63 times contributed additional capacity and by profit before net finance costs and tax, operating efficiencies which in turn have Dividends Per Share compared to 49 times in the previous year. enabled the Company to absorb some Operating cash flow in the year was strong of the inflationary pressures within the 30.0p and after significant investment in the supply chain. This, along with substantial asset base and the acquisition of cooked new business from customers later in the 5% 2012: 28.5p meats supplier Kingston Foods, year end year, were significant features of the year’s net debt stood at £20.1 million compared trading. to £21.7 million a year earlier. This amount Net Cash From is comfortably within the Company’s Resources were committed to secure Operating Activities borrowing facility and with a very small approval for fresh pork exports to China pension scheme exposure puts the balance and authorisation has also been obtained to sheet in good shape. supply the Australian market. Along with the £49.8m approval obtained previously for supplies to the USA this increases the potential 9% There are full reviews of trading and 2012: £45.5m finances in the reviews by the Chief international opportunities for the business. Executive and Finance Director which follow. Dividend Investments The Board is proposing to increase the During the year Kingston Foods was final dividend to 20.6 pence per share, 2 | Cranswick plc Report & Accounts 2013 an increase of 5.6 per cent on last year. Together with the interim dividend, which Kate Allum, CEO of First Milk Limited and Outlook was raised 4.4 per cent to 9.4 pence per former head of European supply chain for share and paid in January 2013, this makes McDonald’s, joins the Board as a Non- Cranswick is very much focused on working a total dividend for the year of 30.0 pence Executive Director in July 2013. Kate brings closely with its customers in providing per share. This represents an increase of 5.3 operational experience of international food a range of products that continues per cent on the 28.5 pence per share paid markets and broadens the expertise and to prove popular with the consumer. last year. The final dividend, if approved by experience within the Board. Encouragement is taken from the increase Shareholders, will be paid on 6 September in pork consumption within the UK and this, 2013 to Shareholders on the register at the Hector Fraser coupled with new product development, close of business on 5 July 2013. Shares will positions the business favourably. Business Review go ex-dividend on 3 July 2013. Shareholders Hector, one of the 23 local farmers who will again have the option to receive the founded Cranswick in the early 1970’s Recent issues in the integrity of the dividend by way of scrip issue.