Slide 1: Interim Results
Interim Results FOR THE SIX MONTHS ENDED 30 SEPTEMBER 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 Interim results – 6 months ended 30 September 2018 2
Slide 3: Highlights
HIGHLIGHTS • H1 results in line, in a challenging environment • Record H1 capital expenditure to provide a platform for future growth • Construction of a new world-class £60m poultry primary processing facility now underway • Substantial investment in upstream agricultural operations • New £27m Cont
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 and Operational Highlights
FINANCIAL AND OPERATIONAL HIGHLIGHTS REVENUE (£M) +0.6% ADJUSTED PROFIT BEFORE TAX (£M) 1,2 +0.9% 2018 719.2 2018 44.8 2017 714.6 2017 44.4 ADJUSTED GROSS MARGIN1 -0.5% ADJUSTED OPERATING MARGIN1,2 IN LINE 2018 12.4% 2018 6.2% 2017 12.9% 2017 6.2% ADJUSTED EARNINGS PER SHARE (P) 1,2 IN LINE DIVIDEND
Slide 6: Cash Flow
CASH FLOW £M 2018 2017 Cash generated from operations 48.7 46.6 NET CAPEX (£M) 2018 2017 Tax paid (9.7) (7.0) Fresh Pork 12.9 5.7 Net cash from operating activities 39.0 39.6 Convenience 14.4 17.4 Net capital expenditure (40.5) (29.3) Gourmet Products 0.7 4.2 Receipt of government grants 0.4 – Poult
Slide 7: Balance Sheet
BALANCE SHEET £M 2018 2017 Property, plant & equipment 263.5 229.1 Intangible assets 155.1 157.3 Biological assets 19.6 21.2 Inventories 3.7 Receivables (8.7) Working capital 80.6 83.0 Payables 2.6 Net funds / (debt) 2.2 (16.7) Net movement (2.4) Other (17.6) (26.0) Net assets 503.4 447.9 KEY METRIC
Slide 8: Solid Performance Across All Metrics
SOLID PERFORMANCE ACROSS ALL METRICS ADJUSTED GROSS MARGIN ADJUSTED EBITDA (£M) 14% 70 60 13.4 61.5 13% 13.3 58.7 50 12.9 51.4 12.4 40 40.2 12% 30 34.9 11.6 20 11% 10 10% 0 H1 FY15 H1 FY16 H1 FY17 H1 FY18 H1 FY19 H1 FY15 H1 FY16 H1 FY17 H1 FY18 H1 FY19 ADJUSTED OPERATING MARGIN ROCE 7.0% 20% 6.5% 6.
Slide 9: Strong Cash Generation
STRONG CASH GENERATION CASH GENERATION 2012–2019 (£M) FREE CASH ACQUISITION / CASH INFLOW / FLOW NET CAPEX*** (DISPOSAL)** DIVIDEND PAID (OUTFLOW)* BANKING FACILITY £160m revolving credit facility H1 2019 39.0 40.1 3.1 14.4 (18.6) with four major UK banks Includes committed FY 2018 111.7 58.0 5.3 18
Slide 10: Record Capital Expenditure to Support Future Growth Pipeline
RECORD CAPITAL EXPENDITURE TO SUPPORT FUTURE GROWTH PIPELINE CAPITAL EXPENDITURE 80 70 60 58.7 50 47.0 40 40.8 34.3 30 20 21.1 10 0 2015 2016 2017 2018 2019F 2020F 19 75 Interim results – 6 months ended 30 September 2018 10
Slide 11: Commercial Update
COMMERCIAL UPDATE MARKET TRENDS CRANSWICK PERFORMANCE OUTLOOK State of the Nation Core categories Consolidation Retailer performance Poultry performance Innovation Sector overview Channel performance Poultry strategy 19 75 Interim results – 6 months ended 30 September 2018 11
Slide 12: Volumes Static and Consumers Concerned About Inflation
VOLUMES STATIC AND CONSUMERS CONCERNED ABOUT INFLATION RETAIL MARKET GROWTH AND INFLATION +3.2% £ GROWTH 2.2% INFLATION +1.0% POPULATION SOURCE: Kantar 12 w/e 7 October 2018 WAGE GROWTH HIGHEST IN NEARLY A DECADE SHOPPERS ARE PRE-OCCUPIED BY FOOD PRICE INFLATION Top economic concerns – next 12 month
Slide 13: Dynamic Retailer Environment
DYNAMIC RETAILER ENVIRONMENT GROCERY MARKET SHARE (% OF SPEND) TESCO SAINSBURY’S Overall grocery market growth ASDA at 3.2% (last 52 weeks) MORRISONS ALDI CO-OP Top 4 losing share WAITROSE LIDL M&S Discounters continue ICELAND to outperform market 0 5 10 15 20 25 SOURCE: Kantar 52 w/e 7 October 2018
Slide 14: Evolving Consumer Drivers
EVOLVING CONSUMER DRIVERS PREMIUM CONVENIENCE AND HEALTH PREMIUM PROTEIN GROWTH EASE IS THE NEW CONVENIENCE Premium market at +5.8% vs +3.2% for total market FOCUS ON EFFORT LEVEL RATHER THAN TIME MARINATED/KIT PRODUCT GROWTH IN RETAIL Higher animal welfare important to consumers GROWTH OF DELIVERY
Slide 15: Out of Home Growth Continues
OUT OF HOME GROWTH CONTINUES WORTH £90.8BN AND GROWING AT 3.7%* KEY CHANNELS FOR CRANSWICK £3.1bn £5.6bn £4.9bn £2.8bn £1.4bn £16.1bn* Coffee Quick Service Food-to-go Convenience, Supermarkets Branded Casual specialists Restaurants specialists forecourt & other Food-to-go and Dining retailers Café F
Slide 16: Market Overview
MARKET OVERVIEW WHEAT PRICE 2016-2018 AVERAGE WEEKLY EU SPEC PRICES 200 AV. EU 180 SPP 180 170 DAPP APP 160 160 Price per tonne 150 Price per Kg 140 140 130 120 120 100 110 100 80 90 JAN 16 FEB 16 MAR 16 APR 16 MAY 16 JUN 16 JUL 16 AUG 16 SEP 16 OCT 16 NOV 16 DEC 16 JAN 17 FEB 17 MAR 17 APR 17 MAY 1
Slide 17: Cranswick Performance
CRANSWICK PERFORMANCE SALES PERFORMANCE BY CATEGORY CRANSWICK SALES MARKET* H1 2018-19 ANNUAL SALES 2017-18 CHANGE CHANGE CATEGORY VALUE VOLUME VALUE VOLUME (i) Fresh Pork Retail +4.7% +4.6% +0.7% -1.6% (ii) Convenience +0.6% +1.9% +2.7% +0.9% (iii) Gourmet Products +0.1% +1.1% +2.7% +1.3% Poultry (
Slide 18: Cranswick Performance: Group Sales by Channel
CRANSWICK PERFORMANCE GROUP SALES BY CHANNEL RETAIL SHARE AND GROWTH 72+6+16 Poultry and fresh pork growth ahead of the market EXPORT RETAIL Discounter growth -3% +3% 6% Customer focused innovation 16% MANUFACTURING FOODSERVICE AND MANUFACTURING -9% 6% Strategic relationships 72% FOODSERVICE B2B rel
Slide 19: Commercial Outlook
COMMERCIAL OUTLOOK DRIVING THE CORE INNOVATION POULTRY STRATEGY Discounter growth Premium New site Retailer consolidation Convenience Internal supply Efficiency Health Retail growth 19 75 Interim results – 6 months ended 30 September 2018 19
Slide 20: 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 21: Consolidation
CONSOLIDATION DRIVING THE CORE BUSINESS SALES GROWTH HIGH QUALITY PRODUCTS OPERATING EXCELLENCE SUSTAINABILITY Market share gains Record capital expenditure Focus on premium Second Nature initiative to enhance capability Building additional capacity Quality culture New Continental Packaging Foods fa
Slide 22: 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 23: Investing in Poultry
DIVERSIFICATION INVESTING IN POULTRY • Construction of new, state-of-the-art, poultry processing facility in Eye, Suffolk underway • Associated investment in expansion of agricultural operations to secure vertical supply chain also in progress • Processing capacity lifted from 0.5m to 1.2m birds per
Slide 24: Poultry Supply Chain
DIVERSIFICATION POULTRY SUPPLY CHAIN MILLING HATCHERY FARMS Weekly tonnage from 4.5k to 7k More than double capacity at hatchery Increase from 27 farms to 45 farms 100% self sufficient for All chicks to be managed through Ability to allocate dedicated farms poultry feed internal supply chain and she
Slide 25: International
INTERNATIONAL EXPANDING OUR FOOTPRINT SALES GROWTH HIGH QUALITY PRODUCTS OPERATING EXCELLENCE SUSTAINABILITY Strong Far East and Reputation of British Efficient production Higher welfare a key US volume growth outdoor bred pork of 5th quarter differentiator Pre packed, higher welfare Benefit of Chin
Slide 26: Record H1 Capital Spend of £41m
RECORD H1 CAPITAL SPEND OF £41M TO PROVIDE PLATFORM FOR FUTURE GROWTH FRESH PORK CONVENIENCE HULL EXTENSION NEW BURY FACILITY CHILLING AND NEW COOKERS AND LAIRAGE CAPACITY SLICING LINES POULTRY PIG FARMING BREEDING HERD NEW EYE PROCESSING EXPANSION FACILITY WHITE ROSE JV EXPANSION OF AGRICULTURAL OP
Slide 27: Putting Sustainability at the Heart of the Business
PUTTING SUSTAINABILITY AT THE HEART OF THE BUSINESS Second Nature initiative launched in February 2018 Group wide approach BBFAW Courtauld 2025 UK PLASTIC PACT to sustainability across Animal welfare and Target 20% reduction Reduce, Reuse, environment impact key focus areas of agriculture in resourc
Slide 28: Second Nature Achievements Since February 2018
SECOND NATURE ACHIEVEMENTS SINCE FEBRUARY 2018 • All grid supplied electricity from renewable sources • BBFAW Tier 1 maintained and environmental projects underway • Over 600 tonnes of plastic removed • Collaborative & innovative projects with key suppliers • Food loss and waste mapping at all sites
Slide 29: Summary and Outlook
SUMMARY AND OUTLOOK Encouraging Ongoing Positive Performance Investment Outlook H1 results in line, in a Investment in class-leading Investing for future challenging environment poultry facility growth Strong balance sheet Expansion of vertical Pork & chicken & cash generation supply chain competiti
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 Established Move FT Sutton’s Simply Continental Sandwich Jack Perkins Bowes of Agri-Food into food Deli Cooked Sausages Fine Foods Factory Scaife’s – Chilled Norfolk business production Meats – Gourmet dry cured air Foods – – prim
Slide 32: Appendix: Our Locations
APPENDIX 2 OUR LOCATIONS HULL • Over 10,000 employees Fresh Pork, Preston across group Fresh Pork, Riverside Cooked Meats, Sutton Fields • 15 food manufacturing Gourmet Sausages, Lazenby’s facilities Added Value Poultry, Benson Park New poultry site at Eye MALTON in Suffolk Gourmet Pastry, Yorkshire
Slide 33: Appendix: Adjusted & Reported Earnings
APPENDIX 3 ADJUSTED & REPORTED EARNINGS £M 2018 2017 Adjusted operating profit 44.9 44.6 Net IAS 41 movement (1.1) 1.2 Acquisition related amortisation (1.1) (1.1) Operating profit 42.7 44.7 Profit before tax 42.6 44.5 Profit after tax 34.0 35.6 19 75 Interim results – 6 months ended 30 September 20
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 19.0 Adjusted 70.0 70.0 Disallowed expenses 1.1 0.9 Acquisition related amortisation (2.2) (2.2) Other 0.1 0.2 Net IAS 41 movement (2.2) 2.4 Effective tax rate 20.2 20.1 Tax impact 0.8 – On