Interim results FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017
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
HIGHLIGHTS +23.0% +17.2% REVENUE (£M) ADJUSTED PROFIT BEFORE TAX (£M) 1 2017 44.4 2017 714.6 2016 37.9 580.8 2016 +20.1% +15.3% ADJUSTED EARNINGS PER SHARE (P) 1 INTERIM DIVIDEND PER SHARE (P) 2017 70.0 2017 15.1 2016 2016 58.3 13.1 +3.4% +£13.8M NET DEBT (£M) FREE CASH FLOW (£M) 2017 39.5 2017 16.7 2016 38.2 2016 2.9 +15% 1.5M +30% £29M TOTAL SALES RECORD PIG NUMBERS TOTAL EXPORT INVESTMENT IN ASSET BASE VOLUME GROWTH PROCESSED SALES GROWTH FOR FUTURE GROWTH 1. Excludes IAS41 movements on biological assets and acquisition related amortisation in 2017 and 2016 19 75 Interim Results – 6 months ended 30 September 2017 3
TRADING RECORD 1990 – 2017 ADJUSTED PROFIT BEFORE TAX 1 (£M) DIVIDEND PER SHARE (pence) 75.5 44.1 £1,245m 27 YEARS OF UNBROKEN 37.5 64.4 DIVIDEND GROWTH 34.0 £1,005m 57.8 32.0 30.0 52.2 28.5 49.1 27.5 47.3 25.0 45.6 43.8 21.7 £740m 19.9 18.1 34.7 32.733.0 31.1 16.5 14.5 13.2 REVENUE 12.0 21.2 21.6 10.8 19.8 £313m 8.3 17.5 7.5 6.8 5.8 11.7 3.3 3.8 4.0 4.1 4.3 4.6 5.1 £157m £116m 9.3 7.1 2.8 £64m 4.0 5.0 2.2 2.3 3.0 3.1 1.7 1.4 0.9 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 1. Excludes IAS41 movements on biological assets and acquisition related amortisation in 2017 and 2016. 19 75 Interim Results – 6 months ended 30 September 2017 4
HIGHLIGHTS • Total revenue ahead by 23% • Record H1 capital expenditure of £29m to add capacity, extend capability and drive effjciencies • Board approval for class-leading £54m primary poultry facility with further £13m associated investment to upscale existing milling and hatchery facilities • New £28m Continental Foods facility progressing to plan • Strong growth in poultry category following new product launches and retail listings • Interim dividend up 15.3% to 15.1p per share 10 YEAR RECORD Compound annual growth rates to 31 March 2017 REVENUE ADJUSTED PROFIT ADJUSTED EARNINGS DIVIDEND BEFORE TAX PER SHARE PER SHARE +9.3% +8.7% +9.2% +9.3% 19 75 Interim Results – 6 months ended 30 September 2017 5
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 profjt 2, 3 44.6 38.2 16.8% Adjusted operating margin 2, 3 6.2% 6.6% 34bps Adjusted profjt before tax 2, 3 44.4 37.9 17.2% Adjusted earnings per share 2, 3 70.0p 58.3p 20.1% Dividend per share 15.1p 13.1p 15.3% 1. Like-for-like revenue excludes the contribution from Crown Chicken prior to 8 April and from Ballymena in the current period 2. Excludes IAS 41 movement on biological assets in both periods 3. Excludes acquisition related amortisation in both periods 19 75 Interim Results – 6 months ended 30 September 2017 6
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 Other – 0.2 Acquisitions (4.0) (39.3) Net capex 29.3 24.3 Disposals – 14.5 Interest paid (0.1) (0.2) NET DEBT BRIDGE (£M) Share issues 0.1 0.1 120 Dividend paid (11.9) (9.5) 100 26.8 15.0 80 Net cash outfmow (5.6) (20.3) 113.8 19.7 60 40 51.5 Net debt (16.7) (2.9) 20 (2.9) (16.7) 0 2.4 17.0 -20 s r 6 A l n x s e 7 a l e d 1 D o a h 1 0 t p n 0 i i s t 2 T p t a e O 2 a o B I a x c d t p t p c a i p E s t v e g T i e e d D i S d n N S / e i s t k s n r u o o j W t i d i s A i u q c A 19 75 Interim Results – 6 months ended 30 September 2017 7
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) (2.9) Inventories 8.9 Tax, grants, provisions, pensions (26.0) (27.8) Receivables 18.8 Net assets 447.9 393.0 Payables (4.0) Net movement 29.6 KEY METRICS 2017 2016 ROCE 1 18.7% 18.9% Gearing 3.7% 0.7% Interest cover 200x 126x Net debt/adjusted EBITDA 0.15x 0.03x 1. Adjusted operating profit divided by sum of average net assets, net debt, pension liabilities & deferred tax. 19 75 Interim Results – 6 months ended 30 September 2017 8
STRONG PERFORMANCE ACROSS ALL METRICS ADJUSTED GROSS MARGIN ADJUSTED EBITDA (£M) 120 14% H2 100 52.3 13.4 H1 13% 80 12.9 12.8 45.7 42.2 12.4 60 12% 61.5 51.4 40 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% 18% 18.2 6.4 6.2 6.0% 6.1 5.8 17% 5.5% 17.0 5.0% 16% FY15 FY16 FY17 H1 FY18 FY15 FY16 FY17 H1 FY18 19 75 Interim Results – 6 months ended 30 September 2017 9
CASH GENERATION AND BANKING FACILITY CASH GENERATION 2011–2018 (£M) FREE CASH ACQUISITION / CASH INFLOW / BANKING FACILITY NET CAPEX DIVIDEND PAID FLOW (DISPOSAL) (OUTFLOW)* £160m revolving credit facility with four major UK banks H1 2018 39.5 29.3 4.0 11.9 (5.7) Includes committed FY 2017 72.4 46.5 40.5 14.6 (29.2) overdraft of £20m Option to access further 2016 83.4 33.5 – 14.6 35.3 £40m on same terms 2015 52.7 20.4 17.7 15.3 (0.7) To November 2022 with opportunity to extend for a further year 2014 59.1 27.4 14.4 12.7 4.6 Unsecured 2013 49.0 30.5 5.8 11.4 1.3 2012 43.4 19.9 (14.5) 11.8 26.2 H1 NET DEBT PROFILE 2011 50.0 33.9 – 10.5 5.6 16.7 4.8 2.9 449.5 241.4 67.9 102.8 37.4 2015 2016 2017 * Excludes the proceeds from the issue of share options. 19 75 Interim Results – 6 months ended 30 September 2017 10
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
RETAILER TRENDS GROCERY MARKET SHARE GROWTH % 3.0 Overall grocery market TESCO 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 4.9 Impact of infmation evident SYMBOLS & 1.9 INDEPENDENTS 0 5 10 15 20 25 30 SOURCE: Kantar, 12 w/e 5 November 2017 Corporate activity % SHARE NOVEMBER 2017 % SHARE NOVEMBER 2016 RETAILER PERFORMANCE – TOTAL TILL ROLL GROWTH, LAST 3 MONTHS ON SAME 6 3 MONTHS A YEAR AGO (%) 4 2 0 -2 JAN 15 APR 15 JUL 15 OCT 15 JAN 16 APR 16 JUL 16 OCT 16 JAN 17 APR 17 JUL 17 SALES VALUE SALES VOLUME SOURCE: Kantar, September 2017 19 75 Interim Results – 6 months ended 30 September 2017 12
CHANGING TASTES Premium growth Convenience or eat out” 45+35+23 Premium tiers ahead of total categories Consumers seeking quick and easy solutions Provenance key for consumers Average meal preparation time under 30 minutes Allows retailers to difgerentiate Demand for high quality, modern meal solutions PREMIUM CATEGORY GROWTH (%) FOR MIDWEEK MEALS… n “ 22% I use a combination of ready BACON RASHERS prepared and fresh ingredients” 44% n “ I cook from scratch” n “ SAUSAGE I have ready meals, take-aways 34% GAMMON Health COOKED Increasingly important for consumers MEAT Pressure on food industry to address challenges An opportunity for the category PASTRY 0 10 20 VERY/FAIRLY PROPORTION OF MEALS Total Premium 70% 38% CONCERNED ABOUT CHOSEN FOR HEALTH MY/FAMILY HEALTH REASONS SOURCE: Kantar, 52 w/e 8 October 2017 / IGD ShopperVista 2017 19 75 Interim Results – 6 months ended 30 September 2017 13
OUT OF HOME CHANNEL GROWTH BREAKDOWN OF SPEND £49bn +4% Quick Service Restaurant +£698m (+7%) 29% 38% n Main Meal Cofgee Shop +£501m (+9%) n Quick Meal 12% n Snack 21% Pubs & Bars +£439m (+7%) n Drinks Growth continues in out of home eating Full Service Restaurant +£366m (+6%) Average consumer visits Multiple Retailers +£114m (+2%) outlets 5x per week (inc. Café & Forecourt) Increased choice and proliferation Bakery & Sandwich +£20m (0%) of outlets continues High Street +£16m (+2%) £1.5bn growth via ‘food to go’ channels And ‘dining out’ occasion Hotels -£25m (-2%) drives £1bn increase SOURCE: Kantar, October 2017 19 75 Interim Results – 6 months ended 30 September 2017 14
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