Slide 1: Results for the year ended 31 March 2018
Results FOR THE YEAR ENDED 31 MARCH 2018
Slide 2: Agenda
AGENDA INTRODUCTION & HIGHLIGHTS Adam Couch, CEO FINANCIAL REVIEW Mark Bottomley, Finance Director COMMERCIAL REVIEW Jim Brisby, Commercial Director OPERATING & STRATEGIC REVIEW Adam Couch, CEO Q&A 19 75 Year ended 31 March 2018 2
Slide 3: Highlights
HIGHLIGHTS • Strong revenue growth • Record capital expenditure to add capacity, extend capability and drive efficiencies • Planning approval granted for new world class poultry primary processing facility with further associated investment to upscale existing agricultural operations • New Continent
Slide 4: Trading Record 1990–2018
TRADING RECORD 1990 – 2018 ADJUSTED PROFIT BEFORE TAX 1 (£M) DIVIDEND PER SHARE (pence) 92.4 92.4 53.7 53.7 £1,465m £1,465m 28 YEARS OF UNBROKEN 75.5 75.5 DIVIDEND GROWTH 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 32.0 52.2 52.2 30.0 30.0 49.1 49.1 28.5 28.5 47.3 47.3 27.
Slide 5: Financial Highlights
FINANCIAL HIGHLIGHTS REVENUE (£M) +17.6% ADJUSTED PROFIT BEFORE TAX (£M) 1 +22.4% 2018 1,464.5 2018 92.4 2017 1,245.1 2017 75.5 ADJUSTED EARNINGS PER SHARE (P) 1 +19.9% DIVIDEND PER SHARE (P) +21.8% 2018 145.0 2018 53.7 2017 120.9 2017 44.1 FREE CASH FLOW (£M) +54.3% NET FUNDS / (DEBT) +£31.6M 2018
Slide 6: Financial Summary
FINANCIAL SUMMARY £M 2018 2017 % CHANGE Revenue 1,464.5 1,245.1 17.6% Like-for-like revenue 1 1,403.3 1,245.1 12.7% Adjusted gross margin 2 12.8% 12.8% – Adjusted operating profit 2, 3 92.8 76.1 21.9% Adjusted operating margin 2, 3 6.3% 6.1% 22bps Adjusted profit before tax 2, 3 92.4 75.5 22.4% Adju
Slide 7: Cash Flow
CASH FLOW £M 2018 2017 Cash generated from operations 127.7 87.7 NET CAPEX (£M) 2018 2017 Tax paid (15.6) (14.8) Fresh pork 15.1 11.1 Convenience 31.9 23.9 Net cash from operating activities 112.1 72.9 Gourmet products 6.4 7.4 Net capital expenditure (58.0) (46.5) Poultry 4.6 3.9 Acquisitions (5.3)
Slide 8: Balance Sheet
BALANCE SHEET £M 2018 2017 Property, plant & equipment 237.3 215.7 Intangible assets 156.2 158.4 Biological assets 17.8 19.6 Inventories (3.0) Receivables 9.5 Working capital 71.5 68.3 Payables (3.3) Net funds / (debt) 20.6 (11.0) Net movement 3.2 Tax, grants, provisions, pensions (23.5) (29.6) Net
Slide 9: Positive 5 Year CAGR Across Key Metrics
POSITIVE 5 YEAR CAGR ACROSS KEY METRICS ADJUSTED EBITDA (£M) ADJUSTED OPERATING MARGIN 140 CAGR 15.9% 120 128.5 7.0% CAGR 3.9% 100 103.7 6.5% 80 85.9 6.4 6.3 60 77.0 6.0% 6.1 71.3 5.8 5.5% 40 5.4 0 5.0% FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 FREE CASH FLOW (£M) ROCE 120 CAGR 17.3% 20% CAG
Slide 10: Record Cash Generation
RECORD CASH GENERATION CASH GENERATION 2011–2018 (£M) FREE CASH ACQUISITION / CASH INFLOW / FLOW NET CAPEX (DISPOSAL) DIVIDEND PAID (OUTFLOW)* BANKING FACILITY £160m revolving credit facility 2018 111.7 58.0 5.3 18.2 30.2 with four major UK banks Includes committed 2017 72.4 46.5 40.5 14.6 (29.2) ov
Slide 11: Record Capital Expenditure to Support Future Growth Pipeline
RECORD CAPITAL EXPENDITURE TO SUPPORT FUTURE GROWTH PIPELINE 80 70 60 58.7 50 47.0 40 34.3 35.7 30 27.7 20 21.1 21.2 18.3 10 0 2015 2016 2017 2018 2019F CAPITAL EXPENDITURE DEPRECIATION 19 75 Year ended 31 March 2018 11
Slide 12: Commercial Update
COMMERCIAL UPDATE CRANSWICK PERFORMANCE CONSUMER TRENDS OUTLOOK Core category growth Spending habits Consolidation Poultry performance Retail and foodservice Innovation New markets Premium, convenient and healthy Poultry strategy 19 75 Year ended 31 March 2018 12
Slide 13: Market Overview
MARKET OVERVIEW PIG PRICE – UK & EU p/kg(i) EU Inflationary pressure on pig price easing 180 SPP 170 160 DAPP UK and EU gap widening 150 140 Retail price inflation 130 120 110 Chicken and pork competitively priced 100 90 80 2010 2011 2012 2013 2014 2015 2016 2017 2018 UK RETAIL AVERAGE PRICE (£/kg)(
Slide 14: Cranswick Performance
CRANSWICK PERFORMANCE SALES PERFORMANCE BY CATEGORY CRANSWICK SALES (i) MARKET* ANNUAL SALES 2017-18 ANNUAL SALES 2017-18 CHANGE CHANGE CATEGORY VALUE VOLUME VALUE VOLUME (ii) Fresh Pork +10.0% +5.6% +5.0% -0.7% (iii) Convenience +10.1% +4.7% +1.9% -0.1% (iv) Gourmet Products +20.2% +15.0% +3.3% +1.
Slide 15: Cranswick Performance: Group Sales by Channel
CRANSWICK PERFORMANCE GROUP SALES BY CHANNEL 71+23+6 RETAIL Growth ahead of the market EXPORT GROWTH Major business wins 7% RETAIL 30% GROWTH Customer focused innovation 22% 16% FOODSERVICE AND WHOLESALE FOOD SERVICE & 71% Strategic relationships WHOLESALE GROWTH B2B relationships with retailer supp
Slide 16: Consumer Trends
CONSUMER TRENDS TOTAL VOLUME STATIC INDIVIDUAL HOUSEHOLDS BUYING REDUCED VOLUME £ GROWTH INFLATION POPULATION +2.5% +2.5% +1.0% CONSUMER SPENDING SUPPRESSED… …LEADING TO CHANGING BEHAVIOURS WAGES GROWTH BEHIND INFLATION BUY LESS SWITCH TO CHEAPER STORES AND CONFIDENCE REMAINS LOW % — Inflation rate
Slide 17: Retailer Trends
RETAILER TRENDS GROWTH % GROCERY MARKET SHARE Overall growth @ 2.5% TESCO 3.1 SAINSBURY’S 0.3 Top 4 growth behind ASDA 1.9 market (average 1.8%) MORRISONS 1.9 Discounter CO-OP 0.3 growth slowing WAITROSE 0.2 ALDI 12.4 LIDL 11.0 M&S 2.8 ICELAND -1.3 0 5 10 15 20 25 % SHARE MARCH 2017 % SHARE MARCH 20
Slide 18: Consumer Trends – Premium Growth
CONSUMER TRENDS – PREMIUM GROWTH STRONG GROWTH IN PREMIUM OWN LABEL Provenance key for consumers 120% £ INDEX 100% Premium own label 76% driving growth 45% Allows retailers to differentiate VALUE STANDARD PREMIUM OWN LABEL OWN LABEL BRANDS OWN LABEL +5% +6% +2% +13% SOURCE: Kantar Usage Panel April
Slide 19: Consumer Trends – Convenience and Health
CONSUMER TRENDS – CONVENIENCE AND HEALTH TRADITIONAL MEALS VS MODERN MEALS Consumers trading up for convenience Ease, not just speed Combination of scratch and pre-prepared solutions Recipe dish growth 41% 59% 31+28+151214 CONSUMERS INCREASINGLY POSITIVE HEALTH MESSAGES INCREASINGLY IMPORTANT FOCUSE
Slide 20: Commercial Outlook
COMMERCIAL OUTLOOK CONSOLIDATION INNOVATION POULTRY STRATEGY Deflation Premium New site Consolidation Convenience Internal supply Efficiency Healthy Retail growth 19 75 Year ended 31 March 2018 20
Slide 21: Strategy & Business Model
STRATEGY & BUSINESS MODEL 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 STRATEGIC PILLARS GUIDING PRINCIPLES QUALITY VALUE SALES HIGH QU
Slide 22: Consolidation
CONSOLIDATION DRIVING THE CORE BUSINESS SALES GROWTH HIGH QUALITY PRODUCTS OPERATING EXCELLENCE SUSTAINABILITY Record capital expenditure Market share gains Focus on premium Second Nature initiative to enhance capability Long-term Business wins New Continental Packaging relationships based on qualit
Slide 23: Diversification
DIVERSIFICATION SIGNIFICANT GROWTH POTENTIAL THROUGH POULTRY STRATEGY SALES GROWTH HIGH QUALITY PRODUCTS OPERATING EXCELLENCE SUSTAINABILITY Drive efficiency through Strong growth category Focus on premium tier Integrated supply chain farm to fork model From fresh to cooked Optimise value of Low foo
Slide 24: Diversification: Investing in Poultry
DIVERSIFICATION INVESTING IN POULTRY • Investment in new, state-of-the-art, poultry processing facility in Eye, Suffolk • Associated investment in expansion of agricultural operations to secure vertical supply chain • Double processing capacity with further room for expansion • Facility adds retail
Slide 25: Diversification: Poultry Supply Chain
DIVERSIFICATION POULTRY SUPPLY CHAIN MILLING HATCHERY FARMS Weekly tonnage from 4.5k to 7k Double capacity at hatchery Increase from 26 farms to 45 farms 100% self sufficient for All chicks to be managed through Allocate dedicated farms and poultry feed internal supply chain sheds to key retailers C
Slide 26: International
INTERNATIONAL EXPANDING OUR FOOTPRINT SALES GROWTH HIGH QUALITY PRODUCTS OPERATING EXCELLENCE SUSTAINABILITY Strong export Reputation of British Efficient production Higher welfare a key sales growth outdoor bred pork of 5th quarter differentiator China approval for Pre packed, higher welfare Multip
Slide 27: Record Capital Investment to Add Capacity, Drive Efficiency
RECORD CAPITAL INVESTMENT TO ADD CAPACITY, DRIVE EFFICIENCY AND ENHANCE CAPABILITY CROWN CHICKEN SUFFOLK CONTINENTAL FOODS BURY NEW PROCESSING FACILITY NEW FACILITY EXPANSION OF AGRICULTURAL OPERATIONS FRESH PORK HULL AND BALLYMENA AGRICULTURE NORFOLK SITE UPGRADES PIG HERD EXPANSION 19 75 Year ende
Slide 28: Embracing Sustainability
EMBRACING SUSTAINABILITY SUSTAINABLE AGRICULTURE FOOD WASTE EMPLOYEE ENGAGEMENT USE OF RESOURCES PACKAGING AND PLASTIC COMMUNITY ENGAGEMENT 19 75 Year ended 31 March 2018 28
Slide 29: Summary and Outlook
SUMMARY AND OUTLOOK Strong Ongoing Positive Performance Investment Outlook Strong revenue & Investment in class-leading Pork & chicken earnings growth poultry facility competitively priced Strong balance sheet New Continental Gaining & cash generation Foods facility market share Strong poultry Recor
Slide 30: Disclaimer
DISCLAIMER Certain statements in this presentation are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements. F
Slide 31: Appendix: Our History
APPENDIX 1 OUR HISTORY 1970s 1980s 1992 1995 2001 2003 2004 2005 2009 2010 2013 2014 2016 2016 2016 Established Move FT Sutton’s Simply Continental Sandwich Jack Perkins Bowes of Yorkshire Pig rearing Benson Crown Sale of Ballymena Agri-Food into Food Deli Cooked Sausages Fine Foods Factory Scaife’s
Slide 32: Appendix: Our Locations
APPENDIX 2 OUR LOCATIONS 32+38+1911 HULL CATEGORY PROFILE Fresh Pork, Preston % OF GROUP REVENUE Fresh Pork, Riverside Cooked Meats, Sutton Fields Gourmet Sausages, Lazenby’s Added Value Poultry, Benson Park 12% MALTON Gourmet Pastry, Yorkshire Baker 33% SHERBURN Gourmet Bacon, Sherburn-in-Elmet 19%
Slide 33: Appendix: Adjusted & Reported Earnings
APPENDIX 3 ADJUSTED & REPORTED EARNINGS £M 2018 2017 Adjusted operating profit 92.8 76.1 Net IAS 41 movement (2.2) 4.1 Acquisition related amortisation (2.2) (2.1) Operating profit 88.4 78.1 Profit before tax 88.0 77.5 Profit after tax 70.0 62.4 19 75 Year ended 31 March 2018 33
Slide 34: Appendix: Tax & Earnings Per Share
APPENDIX 4 TAX & EARNINGS PER SHARE TAX EARNINGS PER SHARE % 2018 2017 PENCE 2018 2017 Headline tax rate 19.0 20.0 Adjusted (continuing) 145.0 120.9 Disallowed expenses 1.4 0.9 Acquisition related amortisation (4.3) (4.2) Deferred tax rate change 0.3 – Net IAS 41 movement (4.3) 8.2 Prior year adjust