Slide 1: Interim results for the six months ended 30 September 2017
Interim results FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017
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 2017 2
Slide 3: Highlights
HIGHLIGHTS REVENUE (£M) +23.0% ADJUSTED PROFIT BEFORE TAX (£M) 1 +17.2% 2017 714.6 2017 44.4 2016 580.8 2016 37.9 ADJUSTED EARNINGS PER SHARE (P) 1 +20.1% INTERIM DIVIDEND PER SHARE (P) +15.3% 2017 70.0 2017 15.1 2016 58.3 2016 13.1 FREE CASH FLOW (£M) +3.4% NET DEBT (£M) +£13.8M 2017 39.5 2017 16.7
Slide 4: Trading record 1990–2017
TRADING RECORD 1990 – 2017 ADJUSTED PROFIT BEFORE TAX 1 (£M) DIVIDEND PER SHARE (pence) 75.5 44.1 44.1 £1,245m 75.5 37.5 27 YEARS OF UNBROKEN £1,245m 64.4 37.5 64.4 DIVIDEND GROWTH 34.0 32.0 34.0 £1,005m 57.8 32.0 30.0 £1,005m 57.8 52.2 30.0 28.5 52.2 27.5 28.5 49.1 49.1 27.5 25.0 47.3 25.0 45.6 47.
Slide 5: Highlights
HIGHLIGHTS • Total revenue ahead by 23% • Record H1 capital expenditure of £29m to add capacity, extend capability and drive efficiencies • Board approval for class-leading £54m primary poultry facility with further £13m associated investment to upscale existing milling and hatchery facilities • New
Slide 6: Financial summary
FINANCIAL SUMMARY £M 2017 2016 % CHANGE Revenue 714.6 580.8 23.0% Like-for-like revenue 1 685.1 580.8 18.0% Adjusted gross margin 2 12.9% 13.4% 45bps Adjusted operating profit 2, 3 44.6 38.2 16.8% Adjusted operating margin 2, 3 6.2% 6.6% 34bps Adjusted profit before tax 2, 3 44.4 37.9 17.2% Adjusted
Slide 7: Cash flow
CASH FLOW £M 2017 2016 Cash generated from operations 46.6 45.2 NET CAPEX (£M) 2017 2016 Tax paid (7.0) (6.8) Fresh pork 5.7 6.1 Convenience 17.4 13.2 Net cash from operating activities 39.6 38.4 Gourmet products 4.2 3.3 Net capital expenditure (29.3) (24.3) Poultry 2.0 1.5 Acquisitions (4.0) (39.3)
Slide 8: Balance sheet
BALANCE SHEET £M 2017 2016 Acquired goodwill 10.2 Acquired customer relationships 1.7 Property, plant & equipment 229.1 204.4 Acquisition related amortisation (2.2) Intangible assets 157.3 147.6 Net movement 9.7 Biological assets 21.2 18.3 Working capital 83.0 53.4 Acquisitions 5.9 Net debt (16.7) (
Slide 9: Strong performance across all metrics
STRONG PERFORMANCE ACROSS ALL METRICS ADJUSTED GROSS MARGIN ADJUSTED EBITDA (£M) 120 14% H2 100 52.3 13% 13.4 H1 80 12.8 12.9 45.7 12.4 60 42.2 12% 61.5 40 51.4 11% 20 34.8 40.2 10% 0 FY15 FY16 FY17 H1 FY18 FY15 FY16 FY17 H1 FY18 ADJUSTED OPERATING MARGIN ROCE 7.0% 19% 19.0 18.7 6.5% 6.4 18% 18.2 6.
Slide 10: Cash generation and banking facility
CASH GENERATION AND BANKING FACILITY CASH GENERATION 2011–2018 (£M) FREE CASH ACQUISITION / CASH INFLOW / FLOW NET CAPEX (DISPOSAL) DIVIDEND PAID (OUTFLOW)* BANKING FACILITY £160m revolving credit facility H1 2018 39.5 29.3 4.0 11.9 (5.7) with four major UK banks Includes committed FY 2017 72.4 46.5
Slide 11: Commercial update
COMMERCIAL UPDATE TRENDS CRANSWICK PERFORMANCE OUTLOOK Retail recovery Core category growth Strategic partnerships Health and convenience Poultry development Poultry strategy Out of home Out of home & wholesale growth Innovation 19 75 Interim Results – 6 months ended 30 September 2017 11
Slide 12: Retailer trends
RETAILER TRENDS GROWTH % GROCERY MARKET SHARE TESCO 3.0 Overall grocery market SAINSBURY’S 1.9 growth @ 3.6% ASDA 1.6 MORRISONS 1.4 Top 4 retailers returned ALDI 17.3 WAITROSE 2.1 to growth THE CO-OPERATIVE -1.5 LIDL 15.7 Discounter growth continues MARKS & SPENCER 4.2 ICELAND 3.0 OTHER MULTIPLES 4.
Slide 13: Changing tastes
CHANGING TASTES Premium growth Convenience Premium tiers ahead of total categories Consumers seeking quick and easy solutions 44+34+22 Provenance key for consumers Average meal preparation time under 30 minutes Allows retailers to differentiate Demand for high quality, modern meal solutions PREMIUM
Slide 14: Out of home
OUT OF HOME CHANNEL GROWTH BREAKDOWN OF SPEND £49bn +4% Quick Service Restaurant +£698m (+7%) 29% 38% n Main Meal Coffee Shop +£501m (+9%) 12% n Quick Meal 21% n Snack n Drinks Pubs & Bars +£439m (+7%) Growth continues in out of home eating Full Service Restaurant +£366m (+6%) Average consumer visit
Slide 15: Cranswick performance
CRANSWICK PERFORMANCE CORE CATEGORIES POULTRY GROWTH FOODSERVICE & WHOLESALE +23% +27% +37% 71+23+6 GROWTH 30% 6% GROWTH 19% 23% GROWTH 71% 37% n Retail Share n Food Service & Wholesale Share n Export Share Fresh pork growth Internal supply increased to 20% Increasing share of business Gourmet categ
Slide 16: Commercial data
COMMERCIAL DATA CRANSWICK SALES MARKET* H1 2017-18 ANNUAL SALES 2016-17 CHANGE CHANGE CATEGORY VALUE VOLUME VALUE VOLUME Fresh Pork (i) +12.8% +0.6% +1.3% -1.3% Convenience (ii) +17.2% +9.7% +0.9% +0.5% +9.0% Super premium Gourmet Products (iii) +27.7% +24.0% +1.9% +1.3% Poultry (iv) +21.3% +16.5% +
Slide 17: Positive outlook
POSITIVE OUTLOOK STRATEGIC PARTNERSHIPS POULTRY STRATEGY INNOVATION Long-term agreements Significant growth plans Relevant products Aligned supply chains New investment Packaging and process Dedicated facilities and teams Added value opportunities Agricultural R&D 19 75 Interim Results – 6 months en
Slide 18: Strategy & business model
STRATEGY & BUSINESS MODEL CONSOLIDATION DIVERSIFICATION INTERNATIONAL DRIVING THE CORE EXPANDING OUR OFFER DEVELOPING NEW OPPORTUNITIES STRATEGIC PILLARS GUIDING PRINCIPLES QUALITY VALUE SALES HIGH QUALITY OPERATING SUSTAINABILITY GROWTH PRODUCTS EXCELLENCE PEOPLE INNOVATION 19 75 Interim Results –
Slide 19: Consolidation
CONSOLIDATION DRIVING THE CORE BUSINESS SALES GROWTH HIGH QUALITY PRODUCTS OPERATING EXCELLENCE SUSTAINABILITY Record capital expenditure Market share gains Focus on premium Ballymena investment to enhance capability Long-term Business wins based New £28m facility for Investment in UK relationships
Slide 20: Diversification
DIVERSIFICATION SIGNIFICANT GROWTH POTENTIAL THROUGH POULTRY STRATEGY SALES GROWTH HIGH QUALITY PRODUCTS OPERATING EXCELLENCE SUSTAINABILITY Drive efficiency through Integrated Strong growth category Focus on premium tier farm to fork model supply chain From fresh to cooked Optimise value of Low foo
Slide 21: Diversification: investing in poultry
DIVERSIFICATION INVESTING IN POULTRY • Approval for £54m investment in new, state-of-the-art, poultry facility • 18,000 square metre processing factory to be built on 40 acre site in Eye, Suffolk • Approval for £13m expansion of existing milling, hatchery and rearing operations • Double processing c
Slide 22: 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 23: 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 Weaker sterling makes Pre packed, higher welfare Mul
Slide 24: Record capital investment to add capacity, drive efficiency
RECORD CAPITAL INVESTMENT TO ADD CAPACITY, DRIVE EFFICIENCY AND ENHANCE CAPABILITY CROWN CHICKEN CONTINENTAL FOODS FRESH PORK AGRICULTURE SUFFOLK MANCHESTER HULL AND BALLYMENA NORFOLK New processing site New site £28m Site upgrades £9m Pig herd expansion £4m £54m Expansion of hatchery and mill £13m
Slide 25: Pig prices & market
PIG PRICES & MARKET PIG PRICE – UK & EU p/kg UK RETAIL AVERAGE PRICE (£/kg) 180 EU FRESH £4.15 October 2017 170 SPP CHICKEN £4.28 October 2016 160 DAPP 150 FRESH £4.66 PORK 140 £4.53 130 FRESH £7.86 120 BEEF £7.81 110 100 FRESH £8.38 LAMB £8.12 90 80 2013 2014 2015 2016 2017 0.00 2.00 4.00 6.00 8.00
Slide 26: Summary – strong H1 performance
SUMMARY – STRONG H1 PERFORMANCE Strong Ongoing Positive Performance Investment Outlook Strong revenue & Board approval for £67m Pork & chicken earnings growth investment in poultry facilities competitively priced Strong balance sheet New £28m facility for Gaining & cash generation Continental Foods
Slide 27: 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 28: Appendix: Adjusted & reported earnings
APPENDIX 1 ADJUSTED & REPORTED EARNINGS £M 2017 2016 Adjusted operating profit 44.6 38.2 Net IAS 41 movement 1.2 3.6 Acquisition related amortisation (1.1) (1.0) Operating profit 44.7 40.8 Profit before tax 44.5 40.5 Profit after tax 35.6 31.3 19 75 Interim Results – 6 months ended 30 September 2017
Slide 29: Appendix: Tax & earnings per share
APPENDIX 2 TAX & EARNINGS PER SHARE TAX EARNINGS PER SHARE % 2017 2016 PENCE 2017 2016 Headline tax rate 19.0 20.0 On adjusted profit for the period 70.0 58.3 Disallowed expenses 0.9 1.2 Acquisition related amortisation (2.2) (2.0) Other 0.2 1.5 Net IAS 41 movement 2.4 7.1 Effective rate (continuing