Slide 1: Interim Results for the Six Months Ended 30 September 2016
Interim Results FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016 19 75 Interim Results - 30 September 2016 1
Slide 2: Agenda
AGENDA INTRODUCTION Martin Davey, Chairman 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 - 30 September 2016 2
Slide 3: Over the Last 5 Years We Have Increased
OVER THE LAST 5 YEARS WE HAVE INCREASED INCREASED PROFIT INCREASED DIVIDEND ENHANCED OUR FIXED REVENUE BEFORE TAX PER SHARE ASSETS BASE From £758m to From £47.1m to From 27.5p to Over £130m £1,016m £64.4m 37.5p of capital expenditure +34% +37% +36% INCREASED NUMBER INCREASED FAR EAST INCREASED NUMBE
Slide 4: Trading Record 1990-2016
TRADING RECORD 1990 - 2016 ADJUSTED PROFIT BEFORE TAX 1,2 (£m) DIVIDEND PER SHARE (pence) 64.4 64.4 37.5 37.5 £1,016m £1,016m 34.0 34.0 57.8 57.8 32.0 32.0 26 YEARS OF UNBROKEN 52.2 52.2 DIVIDEND GROWTH 30.0 30.0 49.1 49.1 28.5 28.5 27.5 27.5 47.3 47.3 25.0 25.0 45.6 45.6 43.8 43.8 21.7 21.7 £740m £
Slide 5: Highlights
HIGHLIGHTS • Strong revenue and earnings growth • Positive contribution from Crown Chicken • Post period end acquisition of Dunbia Ballymena • Far East export sales up 83% • Record H1 capital expenditure to support strong growth pipeline • Sale of sandwich business • Interim dividend up 12.9% to 13.
Slide 6: Financial Summary
FINANCIAL SUMMARY £M 2016 2015 % CHANGE Revenue 580.8 501.0 15.9% Underlying revenue 1 541.2 501.0 8.0% Adjusted gross margin 2 13.4% 13.3% 7bps Adjusted operating profit 2,3 38.2 30.9 23.6% Adjusted operating margin 2,3 6.6% 6.2% 40bps Adjusted profit before tax 2,3 37.9 30.6 23.9% Adjusted earning
Slide 7: Cash Flow
CASH FLOW £M 2016 2015 NET CAPEX (£M) 2016 2015 Cash generated from operations 45.2 42.5 Fresh pork 5.8 4.5 Tax paid (6.8) (7.0) Cooked meats 12.7 2.8 Net cash from operating activities 38.4 35.5 Cooked poultry 0.3 3.2 Sausage/bacon 3.2 1.0 Net capital expenditure (24.3) (13.2) Other 2.3 1.7 Governm
Slide 8: Balance Sheet
BALANCE SHEET £M 2016 2015 Crown Chicken acquisition 15.9 Acquisition related amortisation (1.7) Property, plant & equipment 204.4 168.8 Sale of sandwich business (7.0) Intangible assets 147.6 140.4 Net movement 7.2 Biological assets 18.3 13.6 Working capital 53.4 47.4 Crown Chicken acquisition 4.7
Slide 9: Strong Improvement Across All Metrics
STRONG IMPROVEMENT ACROSS ALL METRICS ADJUSTED GROSS MARGIN ADJUSTED EBITDA (£M) 100 14% H2 80 13.4 13.4 45.7 H1 13% 60 42.2 40.9 12% 40 51.4 11.8 11% 20 30.4 34.8 40.2 10.8 10% 0 FY14 FY15 FY16 H1 FY17 FY14 FY15 FY16 H1 FY17 ADJUSTED OPERATING MARGIN ROCE 7.0% 19% 18.9 6.5% 6.6 18% 6.4 18.2 6.0% 5.
Slide 10: Cash Generation 2010-2017
CASH GENERATION 2010-2017 (£M) FREE CASH ACQUISITION / CASH INFLOW / NET CAPEX DIVIDEND PAID FLOW (DISPOSAL) (OUTFLOW)* H1 2017 38.2 24.3 24.8 9.5 (20.4) FY 2016 83.4 33.5 – 14.6 35.3 2015 52.7 20.4 17.7 15.3 (0.7) Record H1 2014 59.1 27.4 14.4 12.7 4.6 free cash flow Record H1 capital 2013 49.0 30.
Slide 11: Successful Refinancing of Banking Facility on Improved Terms
SUCCESSFUL REFINANCING OF BANKING FACILITY ON IMPROVED TERMS REVOLVING CREDIT FACILITY (£M) REFINANCING 40 Completed 17th November 2016 30 ACCORDION COMMITTED New £160m revolving credit 120 160 facility with 4 major UK banks OLD FACILITY NEW FACILITY Includes committed overdraft of £20m H1 NET DEBT
Slide 12: Commercial Update
COMMERCIAL UPDATE TRENDS CRANSWICK PERFORMANCE OUTLOOK Retail environment Sustainable growth Growth Consumer needs Commercial data Innovation Promotional strategy Innovation Stability 19 75 Interim Results - 30 September 2016 12
Slide 13: Retail Environment Stabilising
RETAIL ENVIRONMENT STABILISING Tesco volume Discounter Recovery in recovery - growth Top 4 “Farms” brand slowing introduction Reduced Online growth Inflationary promotional slowing pressures activity 19 75 Interim Results - 30 September 2016 13
Slide 14: Consumer Needs - Quick, Healthy, Tasty, Easy
CONSUMER NEEDS - QUICK, HEALTHY, TASTY, EASY HEALTH TRENDS CONVENIENCE INSPIRATION & FOOD EXPECTATIONS Focus on protein Balance health & convenience Adapting out-of-home trends Poultry volume growth Meals for now & meals for tonight Global food trends More breakfast occasions Smaller households & mo
Slide 15: Long-Term Sustainable Growth
LONG-TERM SUSTAINABLE GROWTH LONG-TERM STRATEGIC NEW BUSINESS DEVELOPMENT STRONG VOLUME GROWTH PARTNERSHIPS & INNOVATION Market share gains Inflation recovery Sous vide Offset by deflation Long-term deals Front of store Significant business wins Structural cost saving Ingredients & business in core
Slide 16: Commercial Data
COMMERCIAL DATA CRANSWICK SALES MARKET* H1 2016-17 ANNUAL SALES 2015-16 CHANGE CHANGE CATEGORY VALUE VOLUME VALUE VOLUME Fresh pork +2.5% (ii) +10.2% -9.5% -3.1% +6.1% Super premium sausage Sausage +15.7% +40.4% -6.7% (iii) -2.8% Bacon & gammon -4.0% +7.9% -9.3% (iv) -2.4% +7.0% Super premium Cooked
Slide 17: Innovation - Keeping It Relevant
INNOVATION - KEEPING IT RELEVANT Modern Pork Modern Lunch Modern Delicatessen Slow Cook & Health Food on the Go Sous Vide 19 75 Interim Results - 30 September 2016 17
Slide 18: Positive Outlook
POSITIVE OUTLOOK GROWTH STRATEGY INNOVATION STABILITY Strong Christmas Consumer focused Long-term deals New business wins New product areas Supply chains Poultry growth Slow cook / sous vide Capital investment 19 75 Interim Results - 30 September 2016 18
Slide 19: Strategy & Business Model
STRATEGY & BUSINESS MODEL CONSOLIDATION DIVERSIFICATION INTERNATIONAL DRIVING THE CORE EXPANDING OUR OFFER SEEKING NEW OPPORTUNITIES STRATEGIC PILLARS GUIDING PRINCIPLES QUALITY VALUE SALES QUALITY OPERATIONAL SUSTAINABILITY GROWTH PRODUCTS EFFICIENCY PEOPLE INNOVATION 19 75 Interim Results - 30 Sep
Slide 20: Consolidation
CONSOLIDATION DRIVING THE CORE BUSINESS SALES GROWTH QUALITY PRODUCTS OPERATIONAL EFFICIENCY SUSTAINABILITY Entering new tiers Focus on premium Record capital expenditure Acquisition of Dunbia to enhance capability Ballymena Market share gains Business wins based on quality New £25m facility for Str
Slide 21: Diversification
DIVERSIFICATION SIGNIFICANT GROWTH POTENTIAL THROUGH POULTRY STRATEGY SALES GROWTH QUALITY PRODUCTS OPERATIONAL EFFICIENCY SUSTAINABILITY Strong growth category Focus on premium tier Drive efficiency through Integrated farm to fork model supply chain Focus on customer From fresh to cooked requiremen
Slide 22: International
INTERNATIONAL EXPANDING OUR FOOTPRINT SALES GROWTH QUALITY PRODUCTS OPERATIONAL EFFICIENCY SUSTAINABILITY Strong export Price premium on Export 5th quarter Higher welfare is sales growth quality products a differentiator Maximise value of cuts Weaker sterling makes Investment in Norfolk Develop inte
Slide 23: International: Strong Far East Revenue Growth
INTERNATIONAL STRONG FAR EAST REVENUE GROWTH FAR EAST EXPORT REVENUE CHINA WHOLESALE PIG PRICE (£/Kg) £M 35 H1 H2 3.00 30 19.4 25 2.50 14.0 20 25.0 11.7 15 2.00 10 5 9.0 11.7 13.7 0 1.50 FY14 FY15 FY16 H1 FY17 15 16 14 15 14 16 14 15 16 14 5 6 4 -15 -16 -14 r-1 r-1 r-1 g- g- g- c- c- b- b- n- n- n-
Slide 24: Continued Capital Investment to Drive Efficiency & Enhance Capability
CONTINUED CAPITAL INVESTMENT TO DRIVE EFFICIENCY & ENHANCE CAPABILITY DELIVERED ONGOING PROJECT BENEFIT PROJECT BENEFIT Improved efficiency FRESH PORK - NORFOLK FRESH PORK - HULL Increased capacity Additional capacity Abattoir upgrade (£6m) Extension (£4m) Improved efficiency New capability COOKED M
Slide 25: Record Capital Expenditure to Support Future Growth Pipeline
RECORD CAPITAL EXPENDITURE TO SUPPORT FUTURE GROWTH PIPELINE £M 50 50.0 40 34.1 30 25.6 22.9 23.3 20 21.2 17.8 18.3 10 0 2014A 2015A 2016A 2017F CAPITAL EXPENDITURE DEPRECIATION 19 75 Interim Results - 30 September 2016 25
Slide 26: Pig Prices & Market
PIG PRICES & MARKET PIG PRICE - UK & EU p/kg UK RETAIL AVERAGE PRICE (£/kg) 180 EU FRESH £4.08 October 2016 170 SPP CHICKEN £4.29 October 2015 160 DAPP 150 FRESH £4.48 PORK 140 £4.78 130 FRESH £7.80 120 BEEF £7.96 110 100 FRESH £8.12 LAMB 90 £7.98 80 2012 2013 2014 2015 2016 0.00 2.00 4.00 6.00 8.00
Slide 27: Summary - Strong H1 Performance
SUMMARY - STRONG H1 PERFORMANCE Strong Ongoing Positive Performance Investment Outlook Strong revenue & Acquisition of Pork & chicken earnings growth Crown Chicken competitively priced Strong balance sheet Acquisition of Gaining & cash generation Dunbia Ballymena market share Strong growth in Record
Slide 28: 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 29: Appendix: Corporate Activity
APPENDIX 1 CORPORATE ACTIVITY ACQUISITION OF SALE OF ACQUISITION OF CROWN CHICKEN SANDWICH BUSINESS DUNBIA BALLYMENA • Acquired 8th April 2016 • Sold to Greencore plc on • Acquired 16th November 2016 23rd July 2016 • Leading Northern Irish pork • Based in East Anglia processing business • Net cash c
Slide 30: Appendix: Restatement of Income Statement
APPENDIX 2 RESTATEMENT OF INCOME STATEMENT H1 2016 H1 2015 FY 2016 £M Continuing Total Continuing Total Continuing Total Revenue 580.8 599.5 501.0 529.1 1,016.3 1,069.6 Adjusted gross margin1 13.4% 13.3% 13.3% 13.4% 13.4% 13.4% Adjusted operating profit1,2 38.2 38.6 30.9 31.8 65.1 66.2 Adjusted oper
Slide 31: Appendix: Adjusted & Reported Earnings
APPENDIX 3 ADJUSTED & REPORTED EARNINGS £M 2016 2015 Adjusted operating profit 38.2 30.9 Net IAS 41 movement 3.6 (0.6) Acquisition related amortisation (1.0) (0.7) Operating profit 40.8 29.6 Profit before tax 40.4 29.2 Profit after tax 31.3 23.7 Discontinued operations 4.8 (3.9) Profit for the perio
Slide 32: Appendix: Tax & Earnings Per Share
APPENDIX 4 TAX & EARNINGS PER SHARE TAX EARNINGS PER SHARE % 2016 2015 PENCE 2016 2015 Headline tax rate 20.0 20.0 Adjusted (continuing) 58.3 50.0 Pension 0.2 0.4 Acquisition related amortisation (2.0) (1.4) Disallowables/other 0.5 0.8 Net IAS 41 movement 7.1 (1.3) Underlying rate 20.7 21.2 Tax impa