Cranswick Plc Annual Report & Accounts Year Ended 31 March .

Strategic ReportThe final dividend, if approved byShareholders, will be paid on 2 September2016 to Shareholders on the register at theclose of business on 1 July 2016. Shares willgo ex-dividend on 30 June 2016. Shareholderswill again have the option to receive thedividend by way of scrip issue.CORPORATE GOVERNANCEThe Board is mindful of the UK CorporateGovernance Code and embraces this as part ofits culture. A statement relating to compliancewith the Code is included within the CorporateGovernance Statement on page 48.The Human Resource function is especiallyimportant when operating such a formatand its strategy has been enhanced in recentyears and incorporated into the overallstrategic plan. All colleagues are viewedas critical stakeholders in the business andthere is commitment to implementing atraining and development strategy thatdelivers workforce capabilities, skills andcompetencies through the Company’sapprenticeship scheme, developmentprogrammes and training courses.There are strong customer relationships,a broadening product portfolio and growingexport channels. Aligned with well-investedand efficient production facilities, skilledmanagement teams and a strong balancesheet this gives the Board confidence thatCranswick is well positioned to meet thechallenges that may arise and to continueits successful long-term development.The Board appreciates the progress thatis being made and acknowledges that theCompany’s continued success would notbe possible without talented and motivatedmanagement teams supported by skilfuland enthusiastic colleagues at each site. Onbehalf of the Board I thank all our colleaguesfor their commitment and contribution.Martin DaveyChairman24 May 2016INCREASE IN DIVIDENDPER SHARE10.3GOVERNANCE HIGHLIGHTSLEADERSHIPThe Board directs, develops and overseesimplementation of the Group’s strategyand monitors its operating performance. Itis collectively responsible to Shareholdersfor the long-term success of the Company.ACCOUNTABILITYThe Board has overall responsibility for theGroup’s system of internal control whichsafeguards the Shareholders’ investmentand the Group’s assets, and for reviewingits effectiveness.EFFECTIVENESSThe Board maintains a twelve-monthrolling programme of agenda items toensure that all matters reserved for theBoard and other key issues are consideredat the appropriate time.REMUNERATIONExecutive remuneration policy ismonitored to ensure it is correctlyaligned with the Group’s strategy,targets and L INITIATIVESManaging and reducing the impact that thebusiness has on the environment is an integralpart of the Company’s activities and has beenthe focus of attention for some years undera dedicated project team. Areas coveredinclude waste, water, energy, packaging andcarbon footprint. The Group has been therecipient of the industry’s ‘EnvironmentalInitiative of The Year’ award.OUTLOOKThe business has made significant progressboth commercially and strategically over thepast year.SHAREHOLDERSThe Board attaches great importanceto maintaining relationships with allShareholders who are kept informedof significant Company developments.For more information ongovernance see pages 45 to 75yDIVIDENDThe Board is proposing to increase the finaldividend by 10.7 per cent to 25.9 pence pershare. Together with the interim dividend,which was raised by 9.4 per cent to 11.6 penceper share, this makes a total dividend forthe year of 37.5 pence per share. This is anincrease of 10.3 per cent on the 34.0 penceper share paid last year.COLLEAGUESCranswick operates on a decentralised basisacross product categories supported bygroup-wide collaboration in key areas.ilitCASH FLOWCranswick’s borrowings are conservativelystructured. The Company’s 120 millionunsecured banking facility provides generousheadroom and is in place through to July 2018.Strong cash generation from operatingactivities resulted in a net funds position at theend of the year of 17.8 million compared toborrowings of 17.3 million a year earlier.Subsequent to the year end the Companymoved from a net funds position into net debtwith the acquisition of Crown. Further details areprovided in the Financial Review on page 26.Shareholder InformationabThe strategy for the development of Cranswickto date has been to complement organicgrowth with appropriate acquisitions. Theacquisition of Crown fits with this model andwe welcome Nigel Armes and Matthew Ward,Mill and Agriculture Directors respectively,and their colleagues to Cranswick. We lookforward to working with them to develop thebusiness further.Financial Statementsunntas the Board seeks to increase capacity andenhance the quality and efficiency of theGroup’s production facilities.Corporate GovernanceShareholdersHighlightseratio nAccouRead more about corporate socialresponsibility on pages 36 to 43Annual Report & Accounts 2016 Cranswick plc7

STRATEGIC REPORTCOMMITTEDTO TASTEFROM THE FARM TO THE FACTORY TOTHE SUPERMARKET SHELF, OUR PEOPLE ARECOMMITTED TO DELIVERING OUTSTANDINGFOOD EXPERIENCES EVERY TIMECOLIN WOODALL IS AN EIGHTHGENERATION CURER AND CHARCUTERIEEXPERT WHO WORKS WITH CRANSWICKTO GUIDE AND OVERSEE THE PRODUCTRANGE THAT BEARS HIS FAMILY NAME,WOODALL’S.COLIN WOODALLCURER AND CHARCUTERIEEXPERT AT CRANSWICK“My family business, Woodall’s, was establishedin 1828 in Waberthwaite, Cumbria by HannahWoodall, my five times great grandmother.I have now been working with Cranswick fornearly eight years and we are building a brandthat represents the best in traditional, Britishcharcuterie. We continue to use recipes whichhave been passed through eight generationsof my family, including Cumberland Sausage,Air-Dried Bacon, Salami and Fully Air-DriedHams. The products continue to be preparedin the traditional artisan way, delivering thesame great British taste as they have done fornearly two centuries.”During the year we completed a purpose built,state-of-the-art facility at our Manchester site toexpand our Woodall’s British charcuterie range.8Cranswick plc Annual Report & Accounts 2016WOODALL’S PREMIUM BRITISHCHARCUTERIE PLATTERCumbrian Royale and BlackCombe Hams, Smoked Pancettaand Cumberland Salami

HighlightsStrategic ReportCorporate GovernanceFinancial StatementsNEW PRODUCTSLAUNCHED DURINGTHE YEAR1,790Shareholder InformationGREAT TASTE AWARDSWON BY WOODALL’SBRITISH CHARCUTERIEAIR-DRIED HAMS IN 201503Annual Report & Accounts 2016 Cranswick plc9

STRATEGIC REPORTCHIEF EXECUTIVE’S INTRODUCTIONTO OUR STRATEGYOUR PURPOSE IS TO DELIVERGREAT TASTING FOOD FOR OURCUSTOMERS AND CONSUMERS,AND IN SO DOING CREATELONG-TERM VALUE FOR ALLOUR STAKEHOLDERSAdam CouchChief Executive24 May 2016We will do this by focusing primarily on thegrowing quality end of the markets in whichwe operate and by establishing meaningfuland long-lasting relationships with all ourcustomers. This will be supported by acombination of product development andhigh service levels. We will continue to investin quality facilities and the latest equipmentso that we can operate as efficiently aspossible and to provide a safe and secureworking environment for our employees.OUR GROWTH STRATEGYOur long-term growth strategy is toconsolidate existing market positions,develop new products and channels in ourcore UK market and grow our internationaloperations and customer base. I am pleasedto report that we have made good progressagainst each of these strands of our growthstrategy during the year under review.Our organic growth drivers continue to becomplemented by targeted acquisitions.The acquisition of Benson Park in October2014 and our more recent purchase of CrownChicken both serve to highlight the progresswe are making against our strategic objectiveof developing a meaningful and sustainablepresence in the UK poultry sector.OUR VALUESOur growth strategy and business modelare underpinned by our four guidingprinciples: Quality, Value, Innovation andPeople. Our vision is to provide high qualityfood, which is sustainably and ethicallyproduced. We remain focused on developinginnovative, great tasting food for ourcustomers. Producing high quality foodwhich is great value for the consumer hasbeen central to our success so far and willcontinue to be at the core of our futuredevelopment. Substantial ongoinginvestment in our production facilities, inethical and sustainable supply chains andin our people at all levels of the businessprovides the foundation for our successfullong-term growth and development.Over the following pages we provide furtherdetails of our strategy and the strategicpillars which support it, the key performanceindicators we use to monitor our performanceand the principal risks and uncertaintieswe face in delivering our strategy. We thenprovide a market overview, and the plans thatare in place to develop our business goingforward. Finally we provide an evaluation ofthe Group’s progress and performance inthe Operating and Financial Reviews.10Cranswick plc Annual Report & Accounts 2016

HighlightsStrategic ReportCorporate GovernanceFinancial StatementsShareholder InformationSTRATEGIC OVERVIEWOUR PURPOSEEveryday great food experiences,authentically made, for today’s consumerOUR DIFFERENTIATORSCommittedTo TasteBritishHeritageSee page 8See page 17AuthenticallyMadeSee page 23EntrepreneurialSpiritSee page 34OUR GUIDING PRINCIPLESRead more on page 12QUALITYVALUEINNOVATIONPEOPLEOUR STRATEGIC PILLARSRead more on page ustainabilityWHAT WE DELIVERGreat British TasteAnnual Report & Accounts 2016 Cranswick plc11

STRATEGIC REPORTOUR STRATEGYOUR BUSINESS MODELThe markets in which we operate arecompetitive both in terms of pricing fromfellow suppliers and the retail environmentin general. Despite this, we have a longtrack record of increasing sales and profitsthrough a combination of investing inmodern efficient factories, developinga range of quality products and makingvalue-added acquisitions.We also supply artisan pastry productsinto both retail and ‘food to go’ channelsfrom our purpose-built facility in Malton,North Yorkshire.Our operations are focused on theproduction and supply of premium foodproducts. We operate primarily in the UK,with a small, but increasing proportion ofsales being exported.The recent acquisition of Benson Parkhas added premium cooked poultry toour product portfolio and also supportsour focus on the fast growing ‘food to go’sector. In April 2016 we acquired CrownChicken, a leading integrated poultryproducer. These acquisitions representimportant progress in developing ameaningful presence in the poultrysector over the longer term.We produce a range of high quality,predominantly fresh products including freshpork, sausages, bacon and cooked meats forsale to high street food retailers. We supply arange of pre-sliced, pre-packaged charcuterieproducts for sale to these same customers,together with pre-packed sandwichespredominantly for food service outlets.We operate from fifteen highly efficient,well-invested food production facilitiesacross the UK. Continued investment ensuresthat these facilities have sufficient capacityheadroom to meet our growth aspirations,that they operate as efficiently as possibleand provide a safe and secure workingenvironment for our workforce.Supply chain security and integrity is a crucialcomponent of our business model. Robusttechnical audit and traceability systemsensure that our products are responsiblyand sustainably sourced from supplierswhose values are aligned to our own.We also own our own pig breedingand rearing operations which supplyapproximately 20 per cent of our British pigrequirements. This gives us even greatersupply chain transparency, security andefficiency. For further information on oursupply chain model, see pages 18 and 19.The business is under the control of stable,experienced and talented operationalmanagement teams supported by a skilledworkforce. We offer training and specialistsupport where needed to ensure that ourpeople feel empowered, dedicated andenthusiastic with a shared vision for thelong-term success and development ofour business.OUR GUIDING PRINCIPLESQUALITYVALUEINNOVATIONPEOPLEWith a clear focus on premiumquality products andcategories, we use authentic,artisan processes whereverpossible to maintain theheritage and integrity ofour food.Targeted acquisitions andcontinued investment inour operating facilitieshave enabled us to provideinnovative, high quality, goodvalue food solutions to ourcustomers from some ofthe most efficient foodproduction facilities in the UK,driving growth in profitabilityand Shareholder value.Innovation lies at the heart ofour business, with dedicatedteams exploring consumertrends and food innovationopportunities across theglobe. We constantly researchand test new recipes andideas, allowing us to deliverunique product offerings toour customers. Innovationwithin the supply chain is alsoa key differentiator, withsignificant investment madein breeding systems, and feedand genetic research toimprove product quality andbreeding efficiency.Our success is built on ourpeople, who form an integralpart of our business. Wepride ourselves in creating asupportive but entrepreneurialenvironment, which allowsboth individuals and thebusiness to prosper. Ourability to work closely withour customers allows us toconstantly develop newproducts for the changingretail environment.12Cranswick plc Annual Report & Accounts 2016

HighlightsStrategic ReportCorporate GovernanceFinancial StatementsShareholder InformationOUR STRATEGIC OWTHThe production of high qualityproducts, which are safelyproduced in technically andlegally compliant facilities,underpins everything we do.Continued investment ensuresthat our factories are someof the most efficient foodproduction facilities in the UK.Our long-term sales growthstrategy is to consolidateexisting market positions,develop new products andchannels, and grow ourinternational operations andcustomer base. Organicgrowth initiatives arecomplemented by targetedacquisitions.See Corporate SocialResponsibility onpages 36 to 43See Operating Reviewon pages 24 and 25See belowSUSTAINABILITYWe invest heavily to secureour supply chains and providecareer opportunities to ouremployees, and theseinvestments provideconfidence that we havea sustainable business inthe longer term.See our Supply Chain Modelon pages 18 and 19 and CSRon pages 36 to 43OUR SALES GROWTH STRATEGYDRIVING THE COREConsolidation of existing market positionsAround three quarters of our revenues comefrom our retail customers. In recent years,provenance and food quality have becomeincreasingly important for the retail sector.For many years we have invested heavily inour production facilities to ensure that theyare some of the most efficient and safe inthe UK food manufacturing sector, andthis, together with increased focus on oursupply chains, underpins our core categorygrowth and supports the development ofsustainable long-term contracts with ourkey retail customers.EXPANDING OUR OFFERDeveloping new products andchannels in our core UK marketsWe continue to differentiate through our focuson developing innovative premium products.6.1 per cent of revenues in the current yearare attributable to new product launches.The hugely successful Agriculture andHorticulture Development Board (AHDB)pulled pork campaigns in the last year alsohighlight the way in which innovative andfocused marketing can deliver positive results.The recent acquisition of Benson Park hasfurther diversified our product and customerrange and also supported the development ofour growth in the ‘food to go’ sector. BensonPark has made an important contributionto our growth since acquisition, and wesee further significant growth opportunitiesfollowing the capital expenditure whichdoubled the site’s capacity during the currentyear. Building on this, the Crown Chickenacquisition in April 2016 has further diversifiedour offering as well as securing our chickensupply chain.SEEKING NEW OPPORTUNITIESGrowing our international operationsand customer baseWe continue to develop our export businessto maximise the value of our products.The Far East is a particularly importantmarket for us. We have a dedicated businessdevelopment manager based in Shanghai,and over the last year volumes shipped tothe Far East have increased by 32 per cent.Overall around 27 per cent of the tonnageproduced by the Group’s two primaryprocessing facilities is exported.The majority of ribs processed are exportedto the US, where prices for this cut of meat arehighest. We have US Department of Agriculture(USDA) accreditation to ship ribs from our Hullprimary processing facility and are investingheavily in our Norfolk facility with a view toachieving the same accreditation for that site.We will continue to expand our internationalfootprint by developing our products andoffering a broader product range.Annual Report & Accounts 2016 Cranswick plc13

STRATEGIC REPORTOUR STRATEGYSTRATEGIC PROGRESSStrategic PillarsSee page 13 forOur Strategic PillarsQUALITY PRODUCTSProgress During The YearSee pages 24 to 27 for Operating andFinancial Reviews Our facilities have continuedto undergo exacting technicalaudits carried out by independentauditing bodies, customers,government authorities andour own compliance teams toensure great quality food. We have also increased thenumber of supply chain auditscarried out by our technical teamsto assure the safety, traceability,quality and provenance of ourraw materials. During the year the Group hasinvested 34 million in capitalequipment to support futuregrowth and increase efficiency. We have also invested inoperational staff training andthe roll out of ‘Lean’ initiativesto further improve operationalefficiencies within our facilities.See Corporate Social Responsibilityon pages 36 to 43OPERATIONALEFFICIENCYSee Operating Review on pages 24 and 25SALES GROWTH The Benson Park extension, whichdoubles capacity and improvesefficiencies was completed on timeand to budget during the year. Total revenue was 6.6 per centahead of the prior year, driven bystrong volume growth across mostproduct categories. U nderlying sales were 4.7 percent higher than prior year, withcorresponding volumes up 9.5 percent as the Group’s customersand UK consumers continue tosee the benefit of the Group’slower input prices. We have continued to invest indedicated supply chains, whichcreates a point of differencefor retailers and has enabledus to secure long-term supplyagreements. We have boosted our graduaterecruitment and apprenticeshipschemes and have fundedextensive training anddevelopment programmes atall levels across the business.See Sales Growth Strategy on page 13SUSTAINABILITYSee our Supply Chain Model and CorporateSocial Responsibility on pages 18 and 19and pages 36 to 4314Cranswick plc Annual Report & Accounts 2016

HighlightsStrategic ReportKey Performance IndicatorsCorporate GovernanceFuture PlansSee pages 28 and 29 forOur KPIsNumber of BRC grade As 14 ( 7.7%)Number of supplier audits 191 ( 20.1%)Complaints per million units 24 (-29.4%)Financial StatementsShareholder InformationPrincipal RisksSee pages 30 to 33 forPrincipal Risks and Uncertainties Our Research and Developmentprogramme aims to enhanceflavours, improve animal welfareincrease efficiency and improvefood safety.Food scares and product contaminationDisease and infection within pigherd/poultry flock We are one of the foundingmembers of the Centre for Excellencein Livestock, a new 70 millioninnovation centre, which aims totransform the productivity of theUK livestock industry.Adjusted operating margin 6.2%( 34 bps) Upgrade of our Norfolk primaryprocessing facility is in progress, witha focus on maximising efficiencies andachieving USDA accreditation.Business continuityReturn on capital employed 18.5%( 150 bps) Major upgrades of our Cooked Meatssites at Hull, Barnsley and MiltonKeynes are also in progress.Business acquisitionsUnderlying revenue 1,032.3m ( 4.7%) We are continuing to develop productsthat appeal to online and convenienceshoppers, such as ‘grab and go’ andmodern single meal solutions.Consumer demandFree

cranswick plc is a leading and innovative british supplier of premium, fresh and added value food products with annual revenues in excess of 1 billion