Cranswick Plc · LSE:CWK
Cranswick — H1 FY22 Earnings Presentation
37 slides from Cranswick's earnings presentation, November 2021
Slide 1: Interim Results 26 weeks ended 25 September 2021
Interim Results 26 WEEKS ENDED 25 SEPTEMBER 2021
Slide 2: Agenda
AGENDA INTRODUCTION AND H1 FY22 HIGHLIGHTS Adam Couch, CEO FINANCIAL REVIEW Mark Bottomley, CFO COMMERCIAL UPDATE Jim Brisby, CCO OPERATING & STRATEGIC REVIEW Adam Couch, CEO Q&A DISCLAIMER: Certain statements in this presentation are forward looking statements. By their nature, forward looking stat
Slide 3: Trading Record 1990–2021
TRADING RECORD 1990 – 2021 ADJUSTED PROFIT BEFORE TAX 1 (£M) DIVIDEND PER SHARE (pence) £1,898m £1,898m [128.6] 129.7 70.0 70.0 60.4 60.4 102.3 102.3 £1,667m £1,667m 92.0 90.2 90.2 92.0 31 YEARS OF UNBROKEN DIVIDEND GROWTH 55.9 55.9 53.7 53.7 75.5 75.5 44.1 44.1 64.4 64.4 37.5 37.5 £1,005m £1,005m 5
Slide 4: H1 FY22 Highlights
H1 FY22 Highlights ADAM COUCH CHIEF EXECUTIVE OFFICER 26 weeks ended 25 September 2021 4
Slide 5: H1 Highlights
H1 HIGHLIGHTS 5 YEAR CAGR Compound annual growth rates to 27 March 2021 • Strong like-for-like1 revenue growth of 6.4% driving an 11.5% increase in adjusted EPS REVENUE • Significant uplift in Poultry sales following the successful +13.3% capacity expansion at Eye • Two complementary bolt-on acquisi
Slide 6: Major Commitments
MAJOR COMMITMENTS CARBON NEUTRAL SITES SCIENCE BASED TARGETS VALIDATED NET ZERO TARGET FOR 2040 DEFORESTATION FREE SOYA REGENERATIVE AGRICULTURE CARBON NEUTRAL FARMS BY 2030 PLASTIC REDUCTION CONTINUES FOOD WASTE TARGETS MET SUPPORTING OUR COMMUNITIES 26 weeks ended 25 September 2021 6
Slide 7: Financial Review
Financial Review MARK BOTTOMLEY CHIEF FINANCIAL OFFICER 26 weeks ended 25 September 2021 7
Slide 8: H1 Financial Highlights
H1 FINANCIAL HIGHLIGHTS REVENUE (£M) +6.6% ADJUSTED PROFIT BEFORE TAX (£M)1 +12.5% H1 FY22 993.1 H1 FY22 68.3 H1 FY21 931.6 H1 FY21 60.7 H1 FY20 770.0 H1 FY20 46.4 ADJUSTED EARNINGS PER SHARE (P)1 +11.5% INTERIM DIVIDEND PER SHARE (P) +7.0% H1 FY22 103.5 H1 FY22 20.0 H1 FY21 92.8 H1 FY21 18.7 H1 FY2
Slide 9: H1 P&L Summary
H1 P&L SUMMARY £M H1 FY22 H1 FY21 CHANGE Revenue 993.1 931.6 +6.6% Like-for-like revenue growth1 +6.4% Adjusted gross margin2 13.8% 13.4% +36bps Adjusted operating profit2,3 69.6 62.0 +12.3% Adjusted operating margin2,3 7.0% 6.7% +35bps Adjusted profit before tax2,3 68.3 60.7 +12.5% Effective tax ra
Slide 10: Strong H1 Revenue Growth
STRONG H1 REVENUE GROWTH 1050.0 REVENUE BRIDGE (£M) +2.8% -1.1% 1000.0 +1.9% (10.6) +3.0% 26.0 17.5 950.0 28.6 +6.6% 900.0 993.07 993.1 977.62 960.12 931.6 931.60 850.0 800.0 H1 FY21 Retail* Food Service Wholesale Export H1 FY22 CATEGORY PROFILE • Underlying revenue growth is driven by: % OF GROUP R
Slide 11: Positive H1 Margin Performance
POSITIVE H1 MARGIN PERFORMANCE MARGIN PERFORMANCE (%) H1 FY20 H1 FY21 H1 FY22 13.8% 13.4% 13.0% 6.7% 7.0% 6.2% ADJUSTED GROSS MARGIN1,2 ADJUSTED OPERATING MARGIN1,2,3 H1 FY22 margin improvement primarily reflects: • Volume driven operational efficiencies, especially at Convenience and Poultry • Lowe
Slide 12: Strong Operating Cash Performance
STRONG OPERATING CASH PERFORMANCE… 3.6 3.1 (2.7) (10.7)* 9.2 0.7 (12.2) 6.7 90.9 88.6 79.4 £M September Adjusted Stock Biological Debtors Creditors Taxation Other September Timing of Comparable 2020 EBITDA assets 2021 VAT receipts September 2021 *5 months of VAT receipts in H1 FY22, 6 months of VAT
Slide 13: Drives Reduction in Net Debt
…DRIVES REDUCTION IN NET DEBT £M (18.3) (92.4) (87.2) (4.0) 99.3 (39.8) (25.0) (5.6) 3.0 (4.4) ns es DA 20 g ds er x 1 l n ta 02 21 ch in pe io io be ng th as en pi IT ar en at r2 ist ca O Le ca em si EB id x M Op qu pt Clo Ta v et ng Di ed Ac N ki st or ju W Se Ad • Opening and closing net debt inc
Slide 14: Capex Programme Continues
CAPEX PROGRAMME CONTINUES £M H1 FY22 H1 FY21 • Fresh Pork – significant investment in automation and sustainable initiatives with £5m spent on a new automated Deboflex leg boning line and £1m on a new effluent plant Fresh Pork 13.1 7.3 • Convenience – small number of projects to improve efficiency a
Slide 15: New £250m Sustainability Linked Banking Facility
NEW £250M SUSTAINABILITY LINKED BANKING FACILITY BANKING FACILITY REVOLVING CREDIT FACILITY (£M) • Sustainability linked financing 50 • £250m revolving credit facility with five major banks • Includes committed overdraft of £20m 40 ACCORDION • Option to access further £50m on same terms 200 COMMITTE
Slide 16: Commercial Update
Commercial Update JIM BRISBY CHIEF COMMERCIAL OFFICER
Slide 17: Retail Sales Continue to Perform Significantly Ahead of 2019
RETAIL SALES CONTINUE TO PERFORM SIGNIFICANTLY AHEAD OF 2019 FRESH & CHILLED CATEGORY SALES BY RETAILER (SALES £m) • All retailers significantly ahead of 2019 sales 6,000 in fresh and chilled categories 5,000 • Tesco performance strongest of the Top 4 with focus on value and successful loyalty 4,000
Slide 18: Out of Home Market Almost Back to Pre-Pandemic Levels
OUT OF HOME MARKET ALMOST BACK TO PRE-PANDEMIC LEVELS FOODSERVICE CHANNEL PERFORMANCE • Consumers returning to eating out of home as restrictions eased since April 2021 vs 2020 vs 2019 • QSR sector continues to demonstrate considerable growth vs pre-pandemic Total Foodservice Sales £12.4BN* 50.6% -3
Slide 19: Sales of Chilled Meat Remain Above 2019 Levels
SALES OF CHILLED MEAT REMAIN ABOVE 2019 LEVELS PROTEIN VOLUME IN RETAIL SINCE 2019 350 336 337328 RETAIL VOLUME 326 (‘000 TONNES) 2019 2020 2021 303 300 Total fresh protein 797 877 826 280 % vs 2019 10.0% 3.6% 250 ‘ooo Tonnes 200 157 150 133 140 100 50 25 27 25 17 19 18 7 10 12 - TOTAL PIGMEAT TOTAL
Slide 20: Strong Sales by Category & Channel
STRONG SALES BY CATEGORY & CHANNEL CRANSWICK SALES H1 2021 • Fresh Pork – reduced exports to China, whilst retail demand remains buoyant CHANGE CATEGORY VS 2020 VS 2019 • Convenience products – market growth, share gains and innovation driving sales in all of the ranges; notably Mediterranean Fresh
Slide 21: Cost Price Inflation Evident
COST PRICE INFLATION EVIDENT FEED WHEAT PRICES 2000-2021 (EX FARM, SPOT) • Key commodity cost inflation in market, and near high prices for wheat, affecting animal feed costs 250 200 • Pig price inflation at start of period, although falling back sharply, and expected to continue in short term 150 £
Slide 22: Cost of Food in UK Remains One of the Lowest in the World
COST OF FOOD IN UK REMAINS ONE OF THE LOWEST IN THE WORLD SHARE OF CONSUMER COUNTRY EXPENDITURE ON FOOD • Consumer spend on food in the UK represents 8% of expenditure; the third lowest proportion globally United States 6% • The map highlights cost per day ($) to eat a healthy diet; Singapore 7% the
Slide 23: Commercial Priorities
COMMERCIAL PRIORITIES EXPANDING POULTRY CAPABILITY ENHANCED MEDITERRANEAN FOODS OFFER Ramonas acquisition provides new Maximise output through Eye capability to produce houmous and dips New Breaded Poultry site Fast growing category and opportunity operational in FY23 to improve quality and drive in
Slide 24: Operating & Strategic Review
Operating & Strategic Review ADAM COUCH CHIEF EXECUTIVE OFFICER
Slide 25: A Resilient and Sustainable Business Model
A RESILIENT AND SUSTAINABLE 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 COMPLETION OF COOKED FURTHER INVESTMENT IN NON-
Slide 26: Consolidation
CONSOLIDATION INVESTMENT IN VERTICAL INTEGRATION • Continued investment in expanding and enhancing our agricultural supply chain • £6.4 million invested to strengthen vertical integration • Further expansion of the pig herd with herd size increasing 15% compared to September 2020 • Self-sufficiency
Slide 27: Consolidation: Cooked Bacon Facility
CONSOLIDATION COOKED BACON FACILITY • Commissioning of the Gourmet Kitchen facility completed in April 2021 • Sales of Cooked Bacon to anchor Quick Service Restaurant customer commenced in the period • Progress is in line with expectations • Further opportunities for growth have been identified • Fu
Slide 28: Diversification: Premium Breaded Poultry
DIVERSIFICATION PREMIUM BREADED POULTRY • Construction of the premium breaded poultry facility on track • Completion and commissioning expected in early FY23 • Strong demand from retail and food service customers • Additional capacity and capability added into the design • Total planned investment i
Slide 29: Diversification: Ramona & Atlantica
DIVERSIFICATION RAMONA & ATLANTICA • Growth in Convenience accelerated by two complementary bolt-on acquisitions, Ramona’s Kitchen and Atlantica UK • Both acquisitions further strengthen our non-meat offering • Ramona’s Kitchen offers a range of plant-based Mediterranean foods to several retailers u
Slide 30: International: African Swine Fever
INTERNATIONAL AFRICAN SWINE FEVER FAR EAST • Pig prices in China remain close to record lows • Rising costs and the continued threat of ASF outbreaks have reduced the herd further as producers exit the market • Demand remains weak as a result of pandemic dining restrictions • China continues to limi
Slide 31: Summary and Outlook
SUMMARY AND OUTLOOK STRONG PERFORMANCE ONGOING INVESTMENT POSITIVE OUTLOOK Strong revenue growth Expansion of Eye Poultry facility Current year outlook unchanged Positive earnings momentum Investment in Breaded Poultry facility Growth strategy on track Robust financial position Benefits of vertical
Slide 32: Appendix: Our History
APPENDIX 1 OUR HISTORY 1970s 1980s 1992 1995 2001 2003 2004 2005 2009 2010 2013 Established Move FT Sutton Simply Continental Sandwich Jack Scaife Perkins Bowes of Yorkshire Pig rearing Agri-Food into food – deli Sausages Fine Foods Factory – dry cured Chilled Norfolk Baker business business product
Slide 33: Appendix: Our Locations
APPENDIX 2 OUR LOCATIONS Fresh pork Gourmet Products Preston, Hull Sausage, Hull BALLYMENA Riverside, Hull Cooked Bacon, Hull Ballymena, Northern Ireland Bacon, Sherburn-in-Elmet, Leeds MALTON Watton, Norfolk Pastry, Malton SHERBURN HULL Convenience Poultry BARNSLEY Cooked Meats, Suttons Fields, Hul
Slide 34: Appendix: Adjusted and Reported Earnings and EPS
APPENDIX 3 ADJUSTED AND REPORTED EARNINGS AND EARNINGS PER SHARE ADJUSTED & REPORTED EARNINGS EARNINGS PER SHARE £M H1 FY22 H1 FY21 PENCE H1 FY22 H1 FY21 Adjusted operating profit 69.6 62.0 Adjusted 103.5 92.8 Net IAS 41 movement (3.2) (5.3) Net IAS 41 movement (6.0) (10.1) Acquisition related amort
Slide 35: Appendix: Tax
APPENDIX 4 TAX TAX Effective tax rate 19.9% (FY21 20.1%) % H1 FY22 H1 FY21 Effective rate higher than the statutory rate Headline tax rate 19.0 19.0 (19.0%) due to disallowable expenditure, Disallowed expenses 1.2 1.0 including non-qualifying depreciation Other 0.2 0.1 Super deduction (3.9) – Adjust
Slide 36: Appendix: Balance Sheet & Cash Flow
APPENDIX 5 BALANCE SHEET & CASH FLOW BALANCE SHEET (£M) H1 FY22 H1 FY21 CASH FLOW (£M) H1 FY22 H1 FY21 Property, plant & equipment 395.2 364.5 Cash generated from operations 83.4 101.6 Intangible assets 210.4 205.6 Tax paid (4.0) (10.7) Right-of-use assets 65.4 65.1 Net cash from operating activitie
Slide 37: Appendix: Cash Allocation
APPENDIX 6 CASH ALLOCATION (£M) FREE CASH ACQUISITION / CASH INFLOW / NET CAPEX DIVIDEND PAID FLOW (DISPOSAL)2 (OUTFLOW)1 BANKING FACILITY H1 FY22 79.1 39.8 5.6 25.0 8.7 Sustainability linked financing FY21 180.9 71.1 10.7 27.9 71.2 £250m revolving credit facility with five major banks FY20 115.8 97