Cranswick Plc · LSE:CWK
Cranswick — H1 FY2020 Earnings Presentation
35 slides from Cranswick's earnings presentation, November 2019
Slide 1: Interim Results for the six months ended 30 September 2019
Interim Results FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2019
Slide 2: Agenda
AGENDA INTRODUCTION & HIGHLIGHTS Adam Couch, CEO FINANCIAL REVIEW Mark Bottomley, Finance Director COMMERCIAL UPDATE Jim Brisby, Commercial Director OPERATING & STRATEGIC REVIEW Adam Couch, CEO Q&A DISCLAIMER: Certain statements in this presentation are forward looking statements. By their nature, f
Slide 3: H1 Highlights
H1 HIGHLIGHTS • Positive start to the year • Reported revenue ahead by 7.1% • Total export revenue up 65%, including Far East export revenue 94% ahead • Commissioning of world-class £75 million primary poultry processing facility in Eye, Suffolk now under way • Record H1 capital expenditure of £56 m
Slide 4: Trading Record 1990–2019
TRADING RECORD 1990 – 2019 ADJUSTED PROFIT BEFORE TAX 1,2 (£M) DIVIDEND PER SHARE (pence) XX 53.7 £1,437m 92.4 92.0 £1,437m 92.0 55.9 90.2 53.7 29 YEARS OF UNBROKEN DIVIDEND GROWTH 75.5 75.5 44.1 44.1 64.4 64.4 37.5 37.5 £1,005m 57.8 £1,005m 57.8 34.0 34.0 32.0 52.2 52.2 32.0 30.0 49.1 49.1 30.0 28.
Slide 5: Financial Review
Financial Review MARK BOTTOMLEY FINANCE DIRECTOR
Slide 6: H1 P&L Summary
H1 P&L SUMMARY £M H1 FY20 H1 FY19 % CHANGE Revenue 770.0 719.2 +7.1% Like-for-like revenue growth1 +5.4% Adjusted gross margin2 13.0% 12.4% +60bps Adjusted operating profit2,3 47.4 44.9 +5.6% Adjusted operating margin2,3 6.2% 6.2% – Adjusted profit before tax2,3 46.4 44.8 +3.6% Effective tax rate 20
Slide 7: H1 Revenue
H1 REVENUE REVENUE BRIDGE (£M) • Acquisition of Katsouris Brothers Limited adds £12.3 million to revenue +1.7% +0.6% +4.8% • Number of pigs processed during the period increased 9% year-on-year 34.2 • Strong wholesale and export pricing alongside an increase in added-value products drove price/mix b
Slide 8: H1 Profit & Margin Performance
H1 PROFIT & MARGIN PERFORMANCE PROFIT PERFORMANCE 1,2 (£M) MARGIN PERFORMANCE 1,2 (%) H1 FY19 80 +14.1% 10 +50bps H1 FY20 H1 FY19 H1 FY20 70 8 60 +5.6% IN LINE 50 6 40 58.7 67.0 44.9 47.4 8.2% 8.7% 6.2% 6.2% 4 30 20 2 10 0 0 EBITDA OPERATING PROFIT EBITDA MARGIN OPERATING MARGIN 1. Includes first ti
Slide 9: H1 Net Debt Bridge
H1 NET DEBT BRIDGE 80 60 67.0 11.9 15.9 40 52.0 20 6.3 0 15.6 (67.2) (113.7) £M (20) 41.3 (40) (60) 3.8 46.5 (80) (100) (120) March Adjusted Working Taxation Net capex Dividends Acquisition Other Like-for-like IFRS 16 September 2019 EBITDA capital net debt 2019 19 75 Interim results – 6 months ended
Slide 10: H1 Capital Expenditure
H1 CAPITAL EXPENDITURE NET CAPEX (£M) H1 FY20 H1 FY19 Fresh Pork 5.1 13.0 • £4.2 million invested across three pork primary processing facilities including £0.8 million on refrigeration at Hull facility Convenience 21.8 14.4 • £0.9 million invested in pig farming operations Gourmet Products 1.8 0.9
Slide 11: H1 Balance Sheet
H1 BALANCE SHEET BALANCE SHEET (£M) H1 FY20 H1 FY19 WORKING CAPITAL MOVEMENT (£M) Property, plant & equipment 1 383.2 263.5 Inventories 8.0 Intangible assets 190.6 155.1 Receivables 32.1 Biological assets 26.2 19.6 Payables (28.3) Working capital 92.4 80.6 Net movement 11.8 Net (debt)/funds1 (113.7)
Slide 12: IFRS 16 Impact
IFRS 16 IMPACT H1 IFRS 16 IMPACT ON £M FINANCIAL STATEMENTS No material impact to PBT or Net Assets Impact on total assets 46.4 • Right-of-use assets and lease liabilities have been recognised on the balance sheet Impact on total liabilities (46.5) Overall effect on net assets (0.1) • Lease liabilit
Slide 13: Commercial Update
Commercial Update JIM BRISBY GROUP COMMERCIAL DIRECTOR
Slide 14: Grocery Market Overview
GROCERY MARKET OVERVIEW 24++139753214A 24 TOTAL GROCERY MARKET SHARE (%) • Total grocery market growth at 1.4% (worth £1.6BN) • Top 4 performance remains subdued 2% OTHER 3% 14% 24% • Discounter growth continues through penetration gains and store openings 5% • Consumer drivers remain focused around
Slide 15: Sustainability: A Key Consumer Issue for the Industry
SUSTAINABILITY: A KEY CONSUMER ISSUE FOR THE INDUSTRY • Growing focus on the issue of sustainability in the THE IMPORTANCE OF ETHICS TO THE CONSUMER food industry NOT AT ALL IMPORTANT NOT VERY IMPORTANT FAIRLY IMPORTANT VERY IMPORTANT EXTREMELY IMPORTANT • CO2 emissions, soil health, animal welfare,
Slide 16: Retail Market Volume Growth Driven by Poultry
RETAIL MARKET VOLUME GROWTH DRIVEN BY POULTRY 25 CATEGORY PERFORMANCE CATEGORIES 52 W/E 06 OCT 19 YOY %SHARE 20 ACTUAL VOLUME GROWTH / DECLINE PRIMARY FRESH VOLUME 480 4.0% 26.82% COOKED CHICKEN TOTAL VOLUME 80 -5.2% 4.47% 15 12 AV FRESH VOLUME 75 -4.6% 4.19% 10 FURTHER PROCESSED & BURGERS VOLUME 69
Slide 17: Sales by Category and Channel
SALES BY CATEGORY AND CHANNEL CRANSWICK SALES H1 2019-20 • Significant fresh pork growth due to Far East demand CHANGE as well as retail growth in the UK CATEGORY VALUE VOLUME • Convenience sales include acquisition of Katsouris (i) – Like-for-like sales in year +0.5% for Continental Fresh Pork +15.
Slide 18: Commercial Outlook
COMMERCIAL OUTLOOK INFLATION NEW BUSINESS POSITIVE SALES MOMENTUM RISING PIG PRICES AND FURTHER NEW BUSINESS WINS POSITIVE CHRISTMAS OUTLOOK INFLATION EXPECTED POULTRY GROWTH H2 SALES ACCELERATING FAR EAST DEMAND 19 75 Interim results – 6 months ended 30 September 2019 18
Slide 19: Operating & Strategic Review
Operating & Strategic Review ADAM COUCH CHIEF EXECUTIVE OFFICER
Slide 20: Strategy
STRATEGY PURPOSE FEEDING THE NATION WITH AUTHENTICALLY MADE, SUSTAINABLY PRODUCED FOOD; CREATED WITH PASSION CONSOLIDATION DIVERSIFICATION INTERNATIONAL DEVELOPING NEW DRIVING THE CORE EXPANDING OUR OFFER OPPORTUNITIES STRONG SALES GROWTH POULTRY IS A STRONG STRONG FAR EAST TO DISCOUNT RETAILERS GRO
Slide 21: Consolidation: Driving the Core
CONSOLIDATION DRIVING THE CORE CONVENIENCE SUTTON FIELDS CONVENIENCE MILTON KEYNES OTHER PORK CATEGORIES NEW BUSINESS WIN ADDITIONAL VOLUMES SECURED STRONG SALES GROWTH COMPLETION OF £14 MILLION INVESTMENT IN COOKERS, FURTHER INVESTMENT EXTENSION TO SUTTON FIELDS CHILLERS AND ADDITIONAL TO UNDERPIN
Slide 22: Diversification: Investing in Poultry
DIVERSIFICATION INVESTING IN POULTRY • New industry leading facility in Eye, Suffolk, began commissioning phase in early November • Build phase was completed on time and to budget • Latest technology and advanced equipment lifts capacity from 0.5m to 1.2m birds per week • Facility incorporates highe
Slide 23: Diversification: Acquisition of Katsouris Brothers
DIVERSIFICATION ACQUISITION OF KATSOURIS BROTHERS • Premium supplier of predominantly plant-based Mediterranean food products • Enlarged Continental category with a significant non-meat product offering • A strategic fit which aligns with our passion for quality and integrity of supply chain • Attra
Slide 24: International: African Swine Fever and Chinese Pig Herd
INTERNATIONAL AFRICAN SWINE FEVER CHINESE PIG HERD FORECAST RECOVERY¹ • ASF described as the largest animal disease outbreak It will take years for the herd to recover the world has ever seen 600 POST ASF 60 RAPID PHASE RESTOCKING INITIAL • Chinese national pig herd is expected to be 50% lower RESTO
Slide 25: International: African Swine Fever
INTERNATIONAL AFRICAN SWINE FEVER • ASF was first reported in China in August 2018 with new cases still reported in the country in November 2019 • ASF still not under control – Spread to other Asian countries including Vietnam, Cambodia, Laos, South Korea and the Philippines MYANMAR • Restocking sta
Slide 26: Summary and Outlook
SUMMARY AND OUTLOOK Strong Ongoing Positive Performance Investment Outlook Strong Far East Investment in class-leading poultry Investing for export growth facility & non-meat activities future growth Robust performance in Expansion of vertical Pork and chicken competitive domestic market supply chai
Slide 27: Our History
APPENDIX 1 OUR HISTORY 1970s 1980s 1992 1995 2001 2003 2004 2005 2009 Established Move FT Sutton Simply Continental Sandwich Jack Scaife Perkins Bowes of Agri-Food into food – deli Sausages Fine Foods Factory – dry cured Chilled Norfolk business production cooked – Gourmet air dried Foods – – primar
Slide 28: Our Locations
APPENDIX 2 OUR LOCATIONS HULL • >11,000 employees across Fresh Pork, Preston Group Fresh Pork, Riverside Cooked Meats, Sutton Fields • 1 6 food manufacturing Gourmet Sausages, Lazenby’s facilities Added Value Poultry, CCFP New poultry site at Eye MALTON in Suffolk Gourmet Pastry, Yorkshire Baker • 2
Slide 29: Adjusted & Reported Earnings; Tax & EPS
APPENDIX 3 ADJUSTED & REPORTED EARNINGS; TAX & EARNINGS PER SHARE ADJUSTED & REPORTED EARNINGS TAX £M H1 FY20 H1 FY19 % H1 FY20 H1 FY19 Adjusted operating profit 47.4 44.9 Headline tax rate 19.0 19.0 Net IAS 41 movement 2.6 (1.1) Disallowed expenses 0.9 1.1 Acquisition related amortisation (1.6) (1.
Slide 30: Cash Flow
APPENDIX 4 CASH FLOW £M CASH FLOW 2019 2018 Cash generated from operations 56.8 48.7 Tax paid (15.9) (9.7) Net cash from operating activities 40.9 39.0 Net capital expenditure (52.0) (40.5) Receipt of government grants – 0.4 Acquisitions (41.3) (0.8) Loan to joint venture (0.9) (2.3) Interest paid (
Slide 31: Strong Cash Generation
APPENDIX 5 STRONG CASH GENERATION CASH ALLOCATION 2013-2020 (£M) FREE CASH ACQUISITION / CASH INFLOW / NET CAPEX DIVIDEND PAID FLOW (DISPOSAL)2 (OUTFLOW)1 BANKING FACILITY £160m revolving credit facility H1 2020 40.7 52.0 42.2 15.6 (69.1) with four major UK banks FY 2019 87.3 78.0 3.0 22.1 (15.8) In
Slide 32: Corporate Activity: Acquisition of Katsouris Brothers
APPENDIX 6 CORPORATE ACTIVITY ACQUISITION OF KATSOURIS BROTHERS • Acquired 26 July 2019 • 2 sites based in Wembley, North London • Leading processor and multi-channel supplier of Continental and Mediterranean food products • Management team remains with the business • Revenue of £68m and adjusted EB
Slide 33: Global Pig Meat Forces
APPENDIX 7 GLOBAL PIG MEAT FORCES ANNUAL PROCESSING NUMBERS BY REGION 11M 51M 185M 55M 490M* WAS 684M U.K. GERMANY 57% 37M RUSSIA NORTH AMERICA CHINA EAST ASIA THE UK IS 57% PIG CROP SELF-SUFFICIENT IN PIG *USDA’S ESTIMATE FOLLOWING MEAT PRODUCTION VAST REDUCTION OF CHINA PIG HERD DUE TO ASF OUTBREA
Slide 34: Market Overview
APPENDIX 8 200 MARKET OVERVIEW 180 AVERAGE WEEKLY EU SPEC PRICES WHEAT PRICE 2016-2019 160 EU REF PRICE (P/KG) 180 200 SPP (P/KG) 140 170 DAPP (P/KG) 180 160 120 150 160 Price per Kg 100 140 80 140 130 -16 -16 -16 -17 -17 17 18 -18 18 -19 -19 19 n ay p- n- ay p- n p- Ja n ay p Ja Se Ja Se Ja ay Se 1
Slide 35: Cranswick
= CRANSWICK Great British Taste SECOND J } FORESTS" NATURE FSC FOREVER