Slide 1: Results for the year ended 31 March 2019
Results FOR THE YEAR ENDED 31 MARCH 2019
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 DISCLAIMER: Certain statements in this presentation are forward looking statements. By their nature, f
Slide 3: Highlights
HIGHLIGHTS • Like-for-like revenue in line with prior year • Record capital expenditure of £79 million to add capacity, extend capability and drive efficiencies • Construction of the new world-class poultry primary processing facility in Eye, Suffolk is continuing to plan • New long-term supply agre
Slide 4: Trading Record 1990–2019
TRADING RECORD 1990 – 2019 ADJUSTED PROFIT BEFORE TAX 1,2 (£M) DIVIDEND PER SHARE (pence) XX 53.7 £1,437m 92.4 92.0 £1,437m 92.0 55.9 90.2 53.7 29 YEARS OF UNBROKEN DIVIDEND GROWTH 75.5 75.5 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 52.2 52.2 32.0 30.0 49.1 49.1 30.0 28.
Slide 5: Financial Highlights
FINANCIAL HIGHLIGHTS REVENUE (£M)2 -0.2% ADJUSTED PROFIT BEFORE TAX (£M)1,2 +2.0% 2019 1,437.1 2019 92.0 2018 1,440.0 2018 90.2 ADJUSTED EARNINGS PER SHARE (P)1,2 +1.9% DIVIDEND PER SHARE (P) +4.1% 2019 144.3 2019 55.9 2018 141.6 2018 53.7 FREE CASH FLOW (£M) -21.8% NET FUNDS -£14.3M 2019 87.3 2019
Slide 6: Financial Summary
FINANCIAL SUMMARY 2019 2018 % CHANGE % CHANGE £M 52 weeks 53 weeks (as reported) (like-for-like)1 Revenue 1,437.1 1,464.5 -1.9% -0.2% Adjusted gross margin 2 13.0% 12.8% +22 bps +23 bps Adjusted operating profit 2, 3 92.3 92.8 -0.5% +1.8% Adjusted operating margin 2, 3 6.4% 6.3% +9 bps +12 bps Adjus
Slide 7: Cash Flow
CASH FLOW £M 2019 2018 NET CAPEX (£M) 2019 2018 Fresh pork 18.7 15.1 Cash generated from operations 106.5 127.7 Convenience 23.2 31.9 Tax paid (18.8) (15.6) Gourmet products 3.9 6.4 Net cash from operating activities 87.7 112.1 Poultry 32.2 4.6 Net capex 78.0 58.0 Net capital expenditure (78.0) (58.
Slide 8: Balance Sheet
BALANCE SHEET £M 2019 2018 Property, plant & equipment 291.2 237.3 Intangible assets 153.5 156.2 Biological assets 21.3 17.8 Inventories 8.2 Receivables 1.6 Working capital 78.9 71.5 Payables (2.4) Net funds 6.3 20.6 Net movement 7.4 Tax, grants, provisions, pensions (16.3) (23.5) Net assets 534.9 4
Slide 9: Key Metrics for Last 5 Years
KEY METRICS FOR LAST 5 YEARS ADJUSTED OPERATING PROFIT1 (£M) ADJUSTED OPERATING MARGIN1 100 CAGR 12.0% CAGR 2.5% 90 90.7 92.3 80 7.0% 70 76.1 60 6.5% 65.1 50 58.7 6.4 6.3 6.4 40 6.0% 6.1 30 5.8 20 5.5% 10 0 5.0% FY15 FY16 FY17 FY181 FY19 FY15 FY16 FY17 FY181 FY19 FREE CASH FLOW (£M) ROCE 120 CAGR 13
Slide 10: Strong Cash Generation
STRONG CASH GENERATION CASH GENERATION 2012–2019 (£M) FREE CASH ACQUISITION / CASH INFLOW / FLOW NET CAPEX (DISPOSAL)2 DIVIDEND PAID (OUTFLOW)1 BANKING FACILITY £160m revolving credit facility 2019 87.3 78.0 3.0 22.1 (15.8) with four major UK banks 2018 111.7 58.0 5.3 18.2 30.2 Includes committed ov
Slide 11: Record Capital Investment to Add Capacity, Drive Efficiency and Enhance Capability
RECORD CAPITAL INVESTMENT TO ADD CAPACITY, DRIVE EFFICIENCY AND ENHANCE CAPABILITY CROWN CHICKEN SUFFOLK FRESH PORK HULL NEW PROCESSING FACILITY HULL EXTENSION EXPANSION OF SITE UPGRADES AGRICULTURAL OPERATIONS CONVENIENCE BARNSLEY & BURY AGRICULTURE NORFOLK COOKED MEATS SITE PIG HERD EXPANSION UPGR
Slide 12: Commercial Update
COMMERCIAL UPDATE MARKET TRENDS CRANSWICK PERFORMANCE OUTLOOK State of the nation Year of consolidation Consolidation Retailer performance Poultry growth Innovation Consumer behaviours Sustainability Poultry strategy 19 75 Year ended 31 March 2019 12
Slide 13: Food Volumes in Retail Static and Consumers Concerned About the Economy
FOOD VOLUMES IN RETAIL STATIC AND CONSUMERS CONCERNED ABOUT THE ECONOMY +1.4% £ GROWTH +1.5% INFLATION +1.0% POPULATION SOURCE: Kantar Worldpanel 12 w/e 24 March 2019 IN 12 MONTHS TIME, HOW DO YOU THINK FOOD PRICE CONCERN THE ECONOMY WILL BE DOING? 70% 60% 59% of shoppers say Food prices Energy bill
Slide 14: Discounter and Convenience Growth Continues
DISCOUNTER AND CONVENIENCE GROWTH CONTINUES TOP 4 PERFORMANCE SUBDUED RETAIL MARKET SHARE (GROCERY) (£) • Total grocery market growth at 2.3% last 52 weeks • Growth in Top 4 retailers remains suppressed due to intense competitive pressure • Aldi and Lidl growth continues as consumer penetration reac
Slide 15: Consumer Drivers Remain Focused on Premium, Convenience and Health
CONSUMER DRIVERS REMAIN FOCUSED ON PREMIUM, CONVENIENCE AND HEALTH PREMIUM AHEAD OF MARKET MAKING MEALS CONVENIENT HEALTH IMPORTANT OWN LABEL TIERS 31% ECONOMY TIER +1.4% OF FOOD SERVINGS ARE NOW CHOSEN FOR HEALTH STANDARD TIER +2.5% MEAL OCCASIONS GROWTH 81% LAST 3 YEARS 48% : 52% PREMIUM TIER +5.6
Slide 16: Out of Home Spend Continues to Grow
OUT OF HOME SPEND CONTINUES TO GROW FAST & FLEXIBLE OUTLETS DRIVING GROWTH KEY CHANNELS FOR CRANSWICK MARKET £3.1bn £5.6bn £4.9bn £2.8bn £1.4bn £16.1bn* SIZE Coffee Quick Service Food-to-go Convenience, Supermarket Branded casual specialists Restaurants specialists forecourt and Food-to-go dining ot
Slide 17: Volume Growth in Chicken and Pork Categories
VOLUME GROWTH IN CHICKEN AND PORK CATEGORIES CATEGORY PERFORMANCE RETAIL CATEGORY VOLUME 000 TONNES Growth YOY SHARE 25 22.6 ACTUAL VOLUME GROWTH / DECLINE FRESH PRIMARY CHICKEN 468 4.8% 26.2% 20 COOKED CHICKEN 93 0.3% 5.2% ADDED VALUE FRESH CHICKEN 77 -1.2% 4.3% 15 FURTHER PROCESSED CHICKEN & 68 2.
Slide 18: Cranswick Performance
CRANSWICK PERFORMANCE SALES PERFORMANCE BY CATEGORY CRANSWICK SALES (i) MARKET* ANNUAL SALES 2018-19 ANNUAL SALES 2018-19 CHANGE CHANGE CATEGORY VALUE VOLUME VALUE VOLUME (ii) Fresh Pork Retail -0.2% +0.7% -0.6% +0.5% (iii) Convenience -1.2% -0.8% +2.4% +0.8% (iv) Gourmet Products -3.3% -1.7% +2.6%
Slide 19: Putting Sustainability at the Heart of the Business
PUTTING SUSTAINABILITY AT THE HEART OF THE BUSINESS USE LESS WASTE LESS ENGAGE EMPLOYEES WORK WITH OUR DO THE RIGHT THING COMMUNITIES TIER 1 ENERGY, WATER, >650 TONNES 2016, 2017 & 2018 FOOD & PACKAGING PLASTIC REMOVED PROJECTS 100% RENEWABLE TOP 5 EMPLOYEE AND GRID SUPPLIED UK PROCESSOR COMMUNITY E
Slide 20: Commercial Outlook
COMMERCIAL OUTLOOK CONSOLIDATION INNOVATION POULTRY STRATEGY Global demand for pork Premium Commissioning Eye Long-term contracts Convenience Major contract win New business wins Health Growth category 19 75 Year ended 31 March 2019 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: Driving the Core Business
CONSOLIDATION DRIVING THE CORE BUSINESS SALES GROWTH HIGH QUALITY PRODUCTS OPERATING EXCELLENCE SUSTAINABILITY Strong sales growth Record capital expenditure Focus on premium Second Nature initiative to discount retailers to enhance capability Long-term Business wins Investment in agricultural Recyc
Slide 23: Consolidation: Investing in Agriculture
CONSOLIDATION INVESTING IN AGRICULTURE • £7.6 million invested in farming infrastructure to expand pig herd • £2.2 million invested in White Rose Farms joint venture to secure efficient pig supply • New lease acquired to secure further milling capacity • State-of-the-art housing and feeding faciliti
Slide 24: Diversification: Poultry Strategy
DIVERSIFICATION SIGNIFICANT GROWTH POTENTIAL THROUGH POULTRY STRATEGY SALES GROWTH HIGH QUALITY PRODUCTS OPERATING EXCELLENCE SUSTAINABILITY Increased throughput drives Strong growth category Focus on premium tier Integrated supply chain operating efficiencies New, class-leading Fresh, marinated and
Slide 25: Diversification: Investing in Poultry
DIVERSIFICATION INVESTING IN POULTRY • Construction of new industry leading facility in Eye, Suffolk, continuing to plan • Investment in new facility increased to £75m incorporating additional cutting line • Latest technology and advanced equipment lifts capacity from 0.5m to 1.2m birds per week • F
Slide 26: International: Expanding Our Footprint
INTERNATIONAL EXPANDING OUR FOOTPRINT SALES GROWTH HIGH QUALITY PRODUCTS OPERATING EXCELLENCE SUSTAINABILITY Strong Far East Reputation of British Efficient production Higher welfare a key volume growth outdoor bred pork of 5th quarter differentiator Impact of Pre packed, higher welfare Multiple acc
Slide 27: International: African Swine Fever
INTERNATIONAL AFRICAN SWINE FEVER • African Swine Fever first reported in China in August 2018 • Disease spread across China, affecting both large scale and backyard farms • Neighbouring countries now impacted with disease spread to Vietnam • Production losses are expected to be 10-35% in 2019. A 20
Slide 28: Global Pig Meat Forces
GLOBAL PIG MEAT FORCES ANNUAL PROCESSING NUMBERS BY REGION 11M 42M 180M 57M 684M* 54% 36M U.K. GERMANY EAST PACIFIC NORTH AMERICA THE UK IS 54% CHINA SELF-SUFFICIENT IN PIG EAST ASIA MEAT PRODUCTION PIG CROP *ASF OUTBREAK IN CHINA REDUCED HERD BY EST. 10-35% SOURCE: USDA/AHDB 2018 19 75 Year ended 3
Slide 29: Market Overview
MARKET OVERVIEW AVERAGE 200 WEEKLY EU SPEC PRICES WHEAT PRICE 2016-2019 180 200 AV. EU 180 SPP 170 160 DAPP 180 160 140 160 150 Price per Kg 120 140 140 130 100 120 120 80 100 110 n- 16 -16 -16 ul-16 p-1 6 -16 n-17 r-17 y -17 l-1 7 p- 17 -17 n-18 r-18 y -18 l-1 8 p- 18 -18 n-19 r-19 Ja ar ay J Se ov
Slide 30: Sustainable Protein
SUSTAINABLE PROTEIN 45 • Pork and chicken carbon footprint much lower Post-production emissions (includes processing, transport, retail, cooking than lamb and beef 40 39.2 and waste disposal) 35 Production emissions (includes emissions before product leaves the farm plus • Carbon footprint assessmen
Slide 31: Summary and Outlook
SUMMARY AND OUTLOOK Strong Ongoing Positive Performance Investment Outlook Results in line in a Investment in class-leading Investing for future challenging environment poultry facility growth Strong balance sheet Expansion of vertical Pork and chicken and cash generation supply chain competitively
Slide 32: 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 33: Appendix: Our Locations
APPENDIX 2 OUR LOCATIONS HULL • c10,300 employees across Fresh Pork, Preston 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 Bak
Slide 34: Appendix: Adjusted & Reported Earnings; Tax & EPS
APPENDIX 3 ADJUSTED & REPORTED EARNINGS; TAX & EARNINGS PER SHARE ADJUSTED & REPORTED EARNINGS TAX £M 2019 2018 % 2019 2018 Adjusted operating profit 92.3 92.8 Headline tax rate 19.0 19.0 Net IAS 41 movement (2.8) (2.2) Disallowed expenses 0.6 1.4 Acquisition related amortisation (2.7) (2.2) Deferre
Slide 35: Appendix: IFRS Impact on Financial Statements
APPENDIX 4 IFRS 16 IMPACT ON FINANCIAL STATEMENTS £M Operating lease cost decrease 7.8 No material impact to PBT or Net Assets of current leases Effect on EBITDA 7.8 • Right of use asset and lease liability will be recognised in the balance sheet Depreciation increase (7.0) • Lease liability is the
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