Good morning, everybody. Welcome to our full year results for 2023 presentation. We're delighted to welcome you all here today to the newly refurbished Butchers' Hall . Hopefully this will be a regular venue. Alongside myself is Mark and Jim presenting. We're joined by our Chairman, Tim Smith. We'll also have several members of our senior team here, Chris Aldersley, Catherine Bradshaw, and Mark Hawley. They will be available to assist with any queries following the Q&A session at the end. If I can just turn your attention to page one on the agenda. I'm just going to spend a bit of time here. I'll briefly comment on the progress we've made during the year. Mark will cover the financials as usual. Jim on the commercial progress before handing back to me for a few words on our strategy and operational performance.
We'll then open up to Q&A toward the end. This year, we slightly modified the format of the presentation to place greater emphasis on the value creation we have delivered for our shareholders amidst the challenges over the last few years. Before we start turning the pages on the slide deck, I just want to recap on what has been an incredibly eventful year. Our strong results and resolute performance should be viewed in the context not just over the last 12 months, but indeed over the last three years. We've managed the impact of the war in Ukraine in terms of disruption to global supply chains and the upward pressure on commodity and energy prices. With the support of our customers, we provided financial assistance to our third-party pig producers, enabling them to manage the rapid escalation in their cost base.
Despite this support and the pig price reaching an all-time high in recent months, the U.K. pig herd has continued to contract, with many independent producers choosing to cut back or cease production entirely. We recognize that food security is of paramount importance. So we've increased our internal supply with self-sufficiency now approaching 50%. We will continue to expand on our own herd to make sure we meet the customers' needs. I'll comment more on this as we run through the presentation. In what is a post-Brexit world, labor availability remains tight. We continue to invest at pace with GBP 85 million spent across the asset base to drive efficiency and add automation. We've also recruited 400 skilled butchers from the Philippines to address the shortfall that we find here in the U.K.
The UK poultry industry has experienced the most virulent avian influenza season on record. A very small proportion of our farms were affected, the financial implications to us, although modest, was really an accolade to how the teams managed the crisis, and the importance of our best-in-class biosecurity protocols. We have now successfully navigated three years of unprecedented disruption and uncertainty, now have a much larger, more diverse and better-equipped business, which is primed to deliver the next phase of growth. On to page three, the long-term trading record. I mean, this is a slide we always like to dwell on because we're now into our 33 years of unbroken dividend growth.
If you consider the numbers of crises that we have faced over those, that period from BSE to foot and mouth to the horsemeat scandal to Brexit, the pandemic, and more recently, the Ukraine conflict, I think it really is a testimony to the management and the skill that we have within our business from top to bottom. On the following page and on the financial performance, I just want to briefly reflect on some of the many financial highlights of this last year. Our revenue has increased by almost 16%, showcasing our ability to pass on inflation in the key areas of our business. We have grown revenue by over 60% over the last four years. The operating profit and return on capital employed reflect the stable long-term margins and the robust cash conversion.
These results highlight the sustainable, resilient, and well-managed nature of the business model. Additionally, the 5% increase in dividends brings the full year amount to GBP 0.794 per share. Turning to page five, and moving from the challenges posed by the pandemic, the outbreak of war had a profound effect on material input prices, leading to a notable inflation spike across all areas of the business. However, we acted swiftly, collaborating with producers and customers to mitigate that pressure. Left unchecked, this inflation could have had a devastating effect on our supply chain. Our team demonstrated excellent management of the wider inflationary pressures across the group, we will continue to maintain strong control as we navigate the ongoing volatility.
It is worth noting that despite those, the numerous crises that I mentioned before, over the past year in particular, we have consistently invested in our asset base, setting us apart from the competitor set. This last year was no exception as we expanded our breaded facility in Hull, enabling us to offer a comprehensive range of poultry products to both retail and food service customers alike. Furthermore, we've added additional lines to our cooked bacon facility, enhancing our volume capabilities and allowing us to offer cooked sausages and other value-added products. In line with our commitment to significant investment, we are pleased to announce our partnership with Pets at Home in our relatively new pet food business.
This collaboration will enable us to supply their premium own label products. We plan to expand this partnership to include additional pet food offerings alongside the existing kibble range. Despite the pig pricing intervention we implemented last year, I touched on before that we've witnessed a 15% decline in pig numbers compared to the previous year. This reinforces the significance of our investment in the farming operation. You can expect that to continue. The five-year compounded growth metrics on the right-hand side of the page validate our value creation model, with revenue, PBT, and earnings per share all achieving close to double-digit growth over this period. Just onto that value creation model on page six, I just want to briefly discuss this model.
The core purpose of our business has been to drive our business to expand in premium food categories, ranging from pork and poultry to pastries, olives, and the mezze offering. Our products are distinguished by their exceptional taste, their affordability, and sustainable production practices along with their authenticity. We've achieved this through substantial long-term investment in our supply chains, both in poultry and pig, as well as through advances in our processing capabilities. We also possess a deep understanding of our customers' and consumers' needs, constantly ensuring that these products remain not only relevant, but also innovative. Aligned with our pillars of consolidation, expansion, and diversification, we aim to grow our market share while enhancing our ability to deliver an improved customer proposition. The medium-term metrics and targets on the right-hand side of the page are the expected output from our value creation model.
Additionally, it is essential to highlight our extremely low levels of debt, absence of pension liability, and consistent mid-teens return on capital employed. I'll now hand over to Mark, who'll cover the financial performance prior to Jim covering the commercials.
Good morning, everyone. Good to see you all. I'm just gonna spend the next few minutes running through the highlights of FY23. As I always say, just a bit of context. Unless I state otherwise, I'll be referring to adjusted numbers. They exclude the impact of IAS 41 biological assets, amortization and impairment of intangibles. Also, both FY23 and FY22, include the impact of IFRS 16 leases unless I comment otherwise. You'll see in the back of the pack, as always, the full reconciliations between the adjusted and statutory measures. Just building on the comments that Adam, the brief comments that Adam made on the financials, we've clearly made extremely strong progress over the last year. Over that period, revenue's up 15.7%.
Adjusted PBT, 2.3% higher. EPS and DPS are 2.2 and 5% ahead respectively. If we look back to FY 2020, revenue across that period is up 39%. PBT is 37% ahead. EPS and DPS are 34% and 31% higher respectively. When you consider the challenges we faced over the last three years, this is no mean achievement. Our cash conversion has also been excellent with our free cash flow increasing by over 29% and our pre-IFRS 16 net debt reducing by over GBP 45 million over that same period as well. Now, just turning over the page and looking at the FY23, our FY23 performance in a little bit more detail.
As I said, revenue is up 15.7% at just over GBP 2.3 billion, with like-for-like revenue, which excludes the impact of acquisitions, increasing by 14.4%. Like-for-like volumes were just over 1% lower, reflecting primarily lower export volumes and lower cooked poultry volumes following the product recall at this about this time last year actually. If you look at our core UK pork volumes, core UK volumes in fresh pork, convenience, and gourmet, they were all ahead year-on-year. If we look back to this time last year in Q4 in particular, so the three months to March, we're still very much in the grip of the Omicron crisis, and everybody was eating at home, if you remember.
To have maintained volumes across the year, you know, a tremendous achievement, and we're certainly well ahead of pre-pandemic volumes. Adjusted gross margin was down at 13% and as we've talked about and we'll talk about more in the, in the presentation, reflected the anticipated short-term lag in recovering broad-based cost inflation. Pleasingly, adjusted operating profit increased by 4.2% to GBP 146.5 million. Operating margin at 6.3% was 69 basis points lower. We saw a step-up in performance during H2 with operating margin improving from 6.1% in H1 to 6.5%.
Operating profit up from GBP 68.4 million to GBP 78.1 million, clearly a strong acceleration, not just in terms of revenue, but also in terms of bottom line performance during H2. Adjusted profit before tax at GBP 140.1 million was 2.3%. Just a quick word on the effective tax rate, which it was 20.1% compared to 20.3% in FY 2022. We always see the effective rate slightly higher than the standard rate due to disallowable expenses. We also saw this year the deferred tax charge resulting from the future enacted increase in the U.K. corporation tax rate to 25%, which will be a feature clearly of our tax numbers going forward.
Those incremental impacts are partly offset by the Super-deduction, the last year of the Super-deduction on eligible capital investments. Adjusted EPS increased by 2.2% to GBP 2.10, reflecting the increase in pre-tax earnings, partly offset, modestly offset by an increase in the number of shares in issue. As Adam mentioned, on the dividend, we're proposing to increase the final dividend by GBP 0.032 or 5.8% to GBP 0.588 per share from GBP 0.556 per share last time. This combined with the interim dividend of GBP 0.206, gives a total dividend for the year of GBP 0.794 per share, compared to GBP 0.756 last time, an increase of 5%.
Look, we will, we'll keep mentioning it, an extensive period of consecutive dividend growth to 33 years. I think we do want, and I'll come on to return on capital employed in a little bit more detail in a moment. At 15.8%, slightly down on last year's 16.9%. That reflects the investment in startup phase fixed assets and the acquisition of the pet food business in January last year, all of which are yet to deliver meaningful returns for the group. If we just then now turn over and look at revenue in a little bit more detail. Slide. Check the slides are flicking over.
I talked about reported revenue growth being up 15.7%, that does include a full year contribution from pet products, albeit it's still a modest one. Whilst total volume growth in the year was only modest, as I said, prior year comparatives reflect pandemic-related elevated in-home consumption. All four categories were well ahead of the corresponding period last year in revenue terms, like-for-like volumes remain well ahead of pre-pandemic levels. Underlying revenue growth of 14.4% reflects successful control and recovery of widespread cost inflation. Revenue growth accelerated in the second half of the year with a record December trading period for the group in the mix there. Total export sales did increase year-on-year, although we did mention China. China sales were slightly lower, with strong pricing offsetting lower volumes.
Far East exports were modestly lower than the prior year with higher prices again, to a large extent, offset by lower demand as China remained in strict lockdown for much of the year. Turning on to page 11. We talked about margins being slightly down year-on-year, this slide just shows the stability of our margin performance over that, over the last number of challenging years that we've talked about. If you look at the last five years, the, you know, our margins for FY 2023 are very much in line with our longer-term average in a year when we face a significant and sustained inflation recovery challenge. Now, moving on to cash and the balance sheet. It's a feature of our business that we remain extremely cash generative.
Net debt fell by GBP 4.6 million to GBP 101.4 million. The year-end position included GBP 81.2 million of lease liabilities. Net debt, excluding IFRS 16, decreased by GBP 60 million to GBP 20.2 million, compared to GBP 36.2 million at March 2022. In terms of briefly explaining that movement, clearly very strong EBITDA performance. Working capital, including biological assets, increased by GBP 41.5 million. As we've already called out, the increase in biological assets reflects the ongoing investment in growing our pig herd, both organically and acquiring new herds where the opportunity presents itself. Tax paid in the period of GBP 20.4 million was GBP 10.6 million higher than the GBP 9.8 million paid last year.
Really, that was the big super deduction benefit we saw in FY 2022. CapEx, net of asset disposals of GBP 83.9 million was incurred in the year, I'll look at that in a little bit more detail a couple of slides on. The dividend paid in the year totaled GBP 36.3 million, GBP 3.5 million upon last year, reflecting the increase in the FY 2022 and FY 2023 interim dividends. Just turning over onto the next page. This slide has been languishing in the back of the appendices. I used to present this slide at up front, I think it's well worth doing so again. I think it really draws out a strong message.
Our cash generation over the last eight years, and indeed going back much further, has been consistently strong. Over the last eight years, we've generated almost GBP 1 billion of free cash flow. If you look at how we've accounted for that cash, we spent over GBP 560 million on CapEx, approaching GBP 175 million on M&A, and we've returned nearly GBP 190 million to shareholders by way of our cash dividend. We've done all this without asking support from our shareholders. In fact, you need to look back all the way to 2004, 2005 and the time of the Perkins acquisition for the last time we raised equity, and that was just a 5% placing at that time. On the right-hand side of the page, you can see our banking facility.
We extended the facility for another year back in November, Our GBP 250 million sustainability-linked facility now runs through to November 2026. We have got the option to access a further GBP 50 million on the same terms. Clearly, with net debt as low as it is, that gives us very generous headroom to continue our growth strategy. Turning on to page 14, and just on the theme that again, building on Adam's comments at the beginning of the presentation. I want to comment briefly on our track record of value creation. We've a proven track record of generating an attractive level of return on capital employed, whilst continuing to deploy capital at pace by our strong investment pipeline.
We spent GBP 120 million in acquisitions and GBP 430 million on CapEx over the past five years, including building four new state-of-the-art facilities. As you can see, from the red line on that page, on the slide, our return on capital employed has consistently remained above our 15% target. And when you look at the amount of immature CapEx that is sitting, you know, that is in, either in construction or very much in its early phase of development, delivering at that rate is very pleasing. If we just look over the page now at slide 15. As I mentioned at the interims, at the time of the interims, over the last four or five years. Sorry, let me just turn the page. There we go.
As I mentioned at the time of the interims, over the last four or five years, we've been able to point to a flagship new build project. As I've also mentioned previously, we've commissioned four new facilities in the last five years with a combined investment approaching GBP 200 million. This slide shows that whilst we don't have one single large flagship project this year, we still have a heck of a lot going on. We continue to invest at pace, investing a further GBP 85.1 million across our asset base to consolidate, expand, and diversify our operations. Some of the key ongoing projects are covered on this slide. There's a lot on that slide. I'm not gonna run through them all in detail, but I'll be very happy to take questions later.
Just for the record, I'm reconfirming FY 2024 CapEx guidance of GBP 100 million, albeit with the same caveat as the last two years, that lead times, which remain stretched, do not extend even further. It's certainly not for lack of trying that we haven't hit the GBP 100 million this year, and there's a heck of a lot of our projects already approved and in that pipeline. As you can see down in the bottom right-hand corner, I think we've got GBP 27 million of CapEx spent on assets in the course of construction and GBP 60 million spent on projects which are still very much in the start-up phase. So there's a lot there that is still to come to maturity.
We looked at this slide last year as well, in terms of our capital allocation framework, a very sustainable and long-established. We'll continue to invest in the business to support our growth strategy. As I mentioned, the CapEx guidance of circa GBP 100 million to add capacity, capability and automation. We'll maintain an investment-grade balance sheet with targeted leverage of less than 2x net debt to EBITDA. We'll maintain that progressive dividend policy with cover of at least 2.5x EPS DPS. We'll continue to explore complementary targeted bolt-on M&A with returns ahead of our group WACC. In summary, in summary from me, before I hand over to Jim, we've grown revenue by 15.7% with all categories ahead of FY 2022.
Adjusted PBT is up by 2.3% and adjusted earnings up by 2.2%. Lower but improving group margins reflect the anticipated short-term lag in recovering raw base cost inflation, but we continue to make good progress in managing and recovering these incremental costs. Our cash generation is strong, and our balance sheet remains in very robust shape. We continue to invest across our asset base at pace to add capacity, capability, and to drive those efficiency improvements. Again, we're increasing our full-year dividend by 5%. On that note, I'll now hand over to Jim, who's gonna give you an update on our commercial progress.
Morning, all. Thank you, Mark. Following the theme of a slightly different format to previous years, I'm only gonna briefly cover off the key events of the year, after which I'd like to focus on some of the underlying strategic progress the group's continued to make, and particularly how we've strengthened our competitive advantage through increased investment and innovation across pig meat, poultry, increasing Mediterranean Foods offering, and more recently, our developing pet business, with, as normal, an update on the progress under Second Nature. If I just start by guiding you to page 18. I think it's fair to say with a backdrop of a hugely challenging consumer environment, rampant inflation, the cost of living crisis, continued pressure on the supply chain, the group has delivered a really pleasing commercial outcome.
This, I think, is a real credit to the commercial and operational teams at Cranswick over the very challenging period. From a market point of view, Sainsbury's and Tesco, the group's two largest customers, were the best performers out of the large assortment retailers, with M&S also delivering on a differentiated and well-executed quality food strategy. We also have a growing share of the discounter trade with long-term partnerships agreed with both Lidl and Aldi in different parts of the group. Flicking onto page 19 and the out of home channel. As it's turned out, this market has actually proven itself to be far more resilient than many people may have thought over this period, and the value operators and the national brands actually pretty well holding on to sales and their share of the consumers' plate as well.
The more value orientated and more convenient operators, particularly in the QSR space, continue to perform well ahead of the market, particularly the likes of Whitbread with Premier Inn, McDonald's and Nando's all operating now well ahead of 2019 levels. We've also seen good recovery from the London-centric brands such as Pret, itsu and LEON. I think it's fair to say over both out-of-home and the retail trade, we are aligned to the best performing customers in their relative sectors. Moving over the page onto page 20.
Just to reiterate some of the points on inflation, clearly we've had inflation impacting every single part of the cost model over the last 18-24 months, starting with the labor squeeze in the summer of 2021, followed by utilities and basic commodities as we emerged from the pandemic, then obviously taken to another level by the war in Ukraine. I think the key point here is clearly we have the cost models in place with customers that work very well from a base commodity, pig price and meat prices. On some of the other non-meat inflation, we had to go to the retailers and negotiate increases out of the usual review cycles, which are less frequent than pig and feed prices.
I think the other key point here as well is, we had to support the farmers initially, obviously as wheat and prices were well ahead of the pig price recovery. The pig price was around GBP 1.40 a kilo, with the cost of production near a GBP 2.40 a kilo. We really had to do something hand-in-hand with the retailers to support the industry and avoid an utter collapse and perhaps the other kind of scenario that's happening in the egg markets at the minute as well.
We're now seeing a softening of core commodities and with the pig price where it is now rising on its own accord, we're seeing profitability at least returning to the agricultural sector as well, which should at least support current levels of pig production here in the U.K. Just moving over the page and looking how this has affected retail prices, and I think it's fair to say that the retail price has considerably lagged the input. There was certainly a squeeze on the supermarket margins, which the level of increases you can see in a poultry up 16% on one year, up 18% on a three-year read, really showed these are not the levels of inflation that can be absorbed. More recently, we have seen those kind of increases flow into retail.
It happened first in poultry because poultry prices are absolutely directly related to the cost of feed, whereas on pig it's an indirect relationship which eventually fed through as per our previous commentary. I think the key point here is what we're seeing with volumes and, you know, volumes by and large are holding up in all this and certainly Cranswick's volumes remain in good shape here. I think a pretty pleasing outcome given inflation even at retail level now that's literally never seen before. Moving over onto page 22. Just a brief word really on our category sales. I think it's really pleasing that we've managed to grow our volumes, never mind the value, across literally every aspect of the group. Again, a real credit to the team.
Perhaps finally worthy of note, actually, our food service volumes, particularly with new customer acquisitions in this space, are actually now the fastest growing area of the group. Obviously, part of that is also the recovery of certain sectors, but certainly new relationships with the likes of McDonald's has really helped drive that sector of our portfolio even harder. Moving over onto page 23. Really what I'm now wanting to highlight is how Cranswick's place to continue this growth in our key market segments, of obviously pig meat, poultry and continental foods, as well as the recent diversification into pet food. Starting with the consolidation, here I'm referring to mainly the key pig meat operations.
Our core fresh pork market, we're continuing to invest at pace in our operational efficiency with semi-automated butchery development, automatic scoring, for example, for improved quality and guaranteeing good crackling every time, and marinade automation as well that improves efficiency and capability in the fastest-growing aspects of where we're going, because that certainly marinade aspect of fresh pork is a much increasing part of the portfolio. Moving on to cooked bacon and cooked sausage, which initially was a gap in our pig meat portfolio two years ago, where production commenced in 2021.
Since that time, we've brought on new retail and food service customers, alongside growing share of those customers as well, which within less than a year led to us investing in a third line at the site, which really shows the rate at which we can, once we enter these markets, drive our scale, drive our penetration with the customers. Finally, a big emerging market within pig meat and meat generally. There's a lot of examples over there for you to look at on the table, but we have a really differentiated offering in our sous vide slow cook operations. It's led by a guy called Kevin Morel, who has over 40 years experience in the industry.
He originally started work with Albert Roux, creating sous vide dishes for his premium Michelin-star restaurants. He has now moved that expertise into having his own business for many years, and then finally working for us. It really sets us completely apart in terms of our capabilities in this precision cooking using water bath technology. We had a hugely successful Christmas offer, where we offered M&S a slow-cooked turkey operation that guaranteed real quality results for consumers, as well as halving the cooking time. That has been a real success, and was up exponentially on the previous year when we launched it. Again, because of this and bringing new customers on board, we're now operating with five of the top retailers there.
We're investing GBP 8 million to double our capacity on sous vide, because that current plant is operating at absolute capacity now, and that will be on stream by the autumn of this year. Moving over the page onto poultry. The Eye facility , looking forward, will be running very soon at peak capacity of 1.4 million birds a week. We've been working between 1.3 million and 1.35 million per week. This year, we've brought new customers on board in the year, predominantly in both the out-of-home and business-to-business sector. That's led to an investment in a specific line to deal with business-to-business and all the grading and requirements to service these customers.
We've invested further in deboning of more thigh meat, which adds value, and customers increasingly obviously want boneless product, as well as brand-new capability that's unique in the U.K. of being able to debone chicken drumsticks, which are generally a very low-value item, and add value to that product for particularly sausage and burger manufacture there. All this allows us to add more value to the carcass as a whole. Our breaded facility obviously was commissioned during the early part of this year. That was initially running with the key anchor customer from the site at Eye, Morrisons, for the first half of the year. Serve since the second half, we were able to leverage our ongoing relationships with a food service operator, with the launch of the McCrispy, which is one of their first permanent menu additions for many, many years.
Finally, this all builds on our most up-to-date assets in the industry. All three sites, both the fresh site, the cooked site, and the breaded, gives us the market-leading quality and the best invested assets in the industry, which considerably sets us apart. Moving over the page onto our continental meats business, we continue to see significant growth here. It's among the fastest growing sectors over the last five years and will form a significant part of our growth strategy going forward. Investment continues at the Bury facility, which was only invested in just over four years ago, with first-in-the-world automated lines for the production of selection packs with increasing speed, capacity, and removing labor from the process, which is, to reference Adam's point, is an increasingly scarce commodity.
The acquisition of the Ramona's brand expanded our continental range into hummus and dips, another fast-growing category, and increasingly relevant to consumer shopping habits. This is operating currently from a fairly small footprint, and initially was in fairly modest distribution. Leveraging our relationships with the major retailers, we are now represented in all of the major assortment retailers. It's hugely available, and that has grown that business to such a degree, we will be outgrowing that facility. As a result, we are planning on opening a brand-new facility towards the end of this year, close to the Bury facility in Manchester, to increase our ongoing capability in dips and hummus, and gives us huge differentiated capability there, again, with market world-beating kit there.
Finally, in terms of broadening the portfolio, our food service business, in London also produces a great deal of ambient products that we often don't talk about. We've rebranded the Cypressa range of ambient foods over there, and we also have made a small bolt-on facility, with an acquisition of a company called Mediterranean Foods, aren't we so? Which is a producer of falafel and other fried savory products and currently gives us a bit of overspill capacity for hummus as well, until such a point as we move into the new facility near Manchester. Over the page, in a very similar theme, on page 26, in February, we purchased the Grove Pet Foods business, which was a small family-owned business in Lincolnshire.
Since acquisition, we've been in close dialogue with Pets at Home, the U.K.'s leading pet care business, and have now agreed heads of terms for a new long-term partnership to support their growth ambitions, customer and availability, and their innovation pipeline. This will place Pets at Home clearly as the lead customer from the sites, with supply beginning in the second half of the year, with production and stock building taking place over the summer of this year. To support this, we're currently involved in the first phase of investment at the plant. This will increase capacity initially by around 40%.
Innovation clearly is a key pillar of the Cranswick strategy, and this deal provides us with the best platform to build a differentiated business model, bringing new products to customers with the market leader in this exciting and growing category. Obviously, again, this builds on our supply chain integration. We will support their value chain as over 20% of the weight of our primary processing plants ends up in pet food, and that will certainly help to deliver supply chain resilience, price stability, and opportunities to improve sustainability of the products as well. Cranswick has a track record of own label development, and this will deliver competitive advantage to Cranswick while giving Pets at Home a more direct focus on their needs as well.
Yeah, to give this some context, the pet food market's worth around GBP 3.7 billion and grew at 14% over the course of last year. This gives us a lot of runway to develop our pet business over the coming years. Moving over the page onto our Second Nature update. We have now established a new board-level ESG committee led by the chairman. This was assembled during the year to oversee progress and to support the existing agriculture and manufacturing committees, which are driving the progress on the grounds. These existing committees will now report through the ESG committee, and we've also bolstered the team with the appointment of a new head of ESG during the year. Moving on to Scope 1 and 2 emissions.
We've managed to reduce our impact in Scope 1 and 2 by 7% during the year, which is a very pleasing performance, very much around reductions in F-gas leaks and lower diesel use on farms. We have 11 projects currently approved, with six already in build or commissioned in terms of solar installations. One of the big issues in livestock and meat production is, of course, the feed and particularly soya used. We have reduced our pig soya inclusion in the diets from around 16% down to sub 10%, and we are now doing quite a lot of work around replacements such as sunflower meal and beans and pulses and other options to really reduce the soya use within the pig diets.
Animal feed contributes to around 80% of Scope 3 emissions to put this into perspective, so it's a pretty key topic for us. To support this, we're also a founding signatory of the Soy Transparency Coalition, and we are accrediting all our soya on a full mass balance certified deforestation-free basis. The company donated over 500,000 meals a year, and that takes the running total to well over one million meals donated. We've had further recognition for our progress on sustainability from a number of customers, both the Whitbread 'Force for Good' and a Tesco Supplier Achievement Award for Sustainability. It shows this is resonating with the customers as well, and clearly our Scope 1 and 2 are their Scope 3s as well.
Really to try and pull all this together, these examples hopefully demonstrate our differentiated business models, where we can consistently over time deliver above average market performance through that market-leading quality. Value is driven by well-invested and efficient factories. Innovation in relevant products and solutions tailored to modern eating occasions. All of this is made possible with a strong and loyal management and workforce and a very well-developed and inclusive people plan. To the point Mark mentioned, you know, we either build brand-new assets, which I'd say is relatively unique in our space. There's very few companies putting up brand new builds in the way we do. Alternatively, we acquire smaller businesses like the Ramona's or the Grove examples and then grow them exponentially, leveraging our broader customer relationships and taking those products to a wider audience.
The integrated agriculture and our supply chain obviously supports this. This allows us also to find solutions to the most, you know, sustainability challenges we see there, as well as cross-control and stepping to one side of the vagaries of agri-commodities and livestock trading. Iconic, one-of-a-kind products, you know, such as Gourmet Bacon or our Yorkshire Baker, sets us well apart from our competitive set as well. That's really it from me. In summary, you know, really good control of widespread inflation, pricing models, you know, ways of working, allow us to deliver that strong and regular financial delivery, investment and further strategic progress continues. We're really looking at driving competitive advantage in everything we do. On that basis, I will hand us back to Adam.
Thanks, Jim. Just on the strategy and growth agenda on page 30, we have, as you have seen, heard throughout the presentation, we've made further progress in strengthening our three strategic pillars. We're consolidating, expanding and diversification. By doing so, delivering on the long-term sustainable growth strategy. We're continuing to drive further consolidation as we gain market share in the core primary categories and value added, including convenience categories as well. Ongoing capital investment and expansion of the pig herd underpins the momentum. Through a combination of new greenfield site developments and targeted complementary bolt-on acquisitions, we've expanded our presence in the fast-growing poultry and the Mediterranean food categories. Under diversification, this includes moving into new markets as we've done so successfully in China and developing new product categories closer to home.
Our new pet food business is a great example of this approach. Since acquiring this in January 2022, we've strengthened the management team and embarked on GBP 9 million capital investment program and gained BRC Grade A status to boot at that same site in Lincoln. We're also focused on realigning the customer base, as Jim has highlighted. Although our pet food is relatively modest contributor to the group revenue and earnings, we're extremely excited at the opportunity this opens up. As Jim said, it's a nigh on GBP 4 billion category in any event, and it's in a large, fast-growing market. Just on the summary and outlook on the last page before Q&As.
Over the last 10- 12 months, hopefully you've seen we've demonstrated resilience, determination in abundance, which enables us to deliver a strong set of results and make further meaningful progress in delivering our strategic objectives. We've made a positive start to the year. The strengths of the business, which include our diverse and long-standing customer base, breadth and quality of products, along with channels, the robust financial position, and industry-leading infrastructure, will hopefully support the further development of Cranswick over the longer term. On that point, I will open the floor to Q&As. Thank you. Charles.
Can we get a mic then, Cathy?
We have a microphone.
We have a microphone, but you can shout if you like, Charles. It's, depends how angry you are, doesn't it?
Charles Hall from Peel Hunt. Can you talk a little bit about where you are on inflation? Obviously, a huge amount last year. How much more is there to be done, or are we largely through it? Also on volumes, obviously very difficult to move volumes up in a year when you're driving pricing. Are we now looking at different ways of trying to drive volumes? Obviously, you're getting business wins, but anything over and above that?
Yeah. I mean, I'll let Jim cover maybe some of the inflationary pressures off. I think it's fair to say, though, and we've reiterated this point many times in the past, Charles, but both pig meat and poultry sit very well in that value category. You know, they're extremely versatile, and we are extremely good at putting facilities down that expand upon that capability. We still remain quite a competitive set in the proteins that we offer.
Yeah. I think, from a pig price point of view, I think there's still some room to go. Obviously with the pigs are short now, and meat is short. That's allowing us to drive, you know, decent price into our manufacturing meats and the like. I think some of the big kind of out there, you know, big spikes in labor, big energy things we think are behind us, but who knows, you know? If you'd asked us prior to last year, we wouldn't have told you that was gonna happen, would we? No, it feels like it's settling to back to a more normalized kind of pig price-related conversation, which again, you know, we know is dealt with through the models.
From a driving volume growth, I think, you know, we've touched on it quite a bit with the innovation, and I think particularly in pig meat and poultry, where they are such value proteins relative to everything else. You very much, I often say the master of your own destiny. As long as we innovate, provide flavors and solutions to customers that meet their needs, then we're very confident we can continue to grow volumes in this sector. I think we'll see a shift in the kind of products we sell, but it'll still be derived from pig meat. You know, the sous vide example I've highlighted here today shows how people are now consuming these products. That doesn't mean they're not eating pork or chicken anymore by any stretch, as we've been saying for a good long while.
Just thinking about China, obviously a pretty strange year last year and sales down, now the market is reopening, how do you see volume performance? Clearly prices in China have been pretty weak for the last few months. How do you see that affecting the price you're getting, and do you have any view as to where it might go?
Yeah, I mean, all indicators are suggesting that there's quite a glut of meat at present that is supposed to ease by the third quarter of this year. I think we'll find a tightening in the market in China as well. We are still encumbered, of course, with the issue of not having China license out of our Norfolk facility, much to our frustration. It is very difficult to get much traction at the governmental level. Unfortunately, we get the warm words and platitudes, but not much real traction there, so. Elsewhere within our business, we are very active in that region. We're also active in many other regions as well.
Of course, Dominican Republic is the favored destination of product out of that Norfolk facility, because they're the next best market for us. The Philippines is also a key market. One area that we're looking at in particular at the moment is California. California, under Proposition 12, now requires far wider requirements for housing of livestock. The U.K. is the only country in the world that actually offers that at this moment in time. California is 15% of the whole of the U.S. market, and they can't supply themselves. That's a key area that we're looking to develop now. We're already shipping product out to that region. We do look at other regions as well.
Yes, the China situation is somewhat frustrating, but we anticipate prices to tighten and demand to increase toward the latter end of this year.
Good morning. Jay Simmons from Goodbody. Just in terms of the poultry business, you mentioned fresh cooked and the breaded. Where are you now in terms of capacity, and do you see yourselves becoming stretched in 2-3 years' time on that? Second question is in terms of pig supply in the U.K., obviously, there's been challenges at a farm level. How do you expect that to unfold in the coming 12 months? What is your ideal level of self-sufficiency that you wanna run the business at? Final question, if you don't mind, just around the pet food business and the agreement that you've put in place now with Pets at Home.
Where will that bring you in terms of the, I guess, the opportunity with Pets at Home for on a sort of stage 1 implementation with that product set? Thank you.
I'll cover the poultry and pig, if you cover the pet food. On the poultry side, with the additional business that Jim alluded to before, additional customers in there, we are at capacity now. A second facility is one that we've talked about for some period of time, and that is being scoped as we speak. It probably will be in a similar area, geographical area as such from that point of view. That's what we're scoping out at the moment. In terms of pig supply, Jason, well, we're 15% down year-on-year now. I don't see that recovering even though it's far more advantageous for producers where they are today.
Their input prices, the soft commodity prices that again, Jim touched on before, have dropped, they still have a lot of losses to recover from previous. The aging demographics of the farming community as well means that I don't anticipate there'd be a swift recovery in the third-party supply. That almost determines that we continue our investment in our own herds as well and expanding that area, which we've done with a significant increase over the last 12 months, and we will continue to invest in that facility, in that sector, should I say.
Expecting more growth from an internal point. As regarding a hurdle rate, I wouldn't really like to put an amount on it. We're obviously 100% self-sufficient in poultry and 50 in pig meat, and that will increase slightly. At the same time, we have ambitions to increase our processing capability as well. I really wouldn't like to put a percentage on that. Certainly we will be looking to expand it. Jim, on the...
Yes, in terms of the Pets at Home, we've been awarded two key segments. One is their Wainwright's brand, which from a customer facing point of view is a brand, but it's wholly owned by Pets at Home, so we'll be producing the dry dog kibble for that range and another range called Step Up to Naturals as well. It's their two premium brand stroke, you know, owned brand we should call it, rather than own label. It's a very good start, and that'll leave us pretty full until the GBP 9 million investment comes on stream that we mentioned, which will be in the kind of towards the end of the financial year.
There's certainly room to grow from there and a lot of innovation and different things we're talking about that, we're able to come onto later. Yes, I think it sets us up incredibly well with the, you know, the national leader to go from a small, family-owned business to that within a year is pretty phenomenal really.
Damian.
Hey, morning everybody. Damian McNeela from Numis. Perhaps the first question maybe for you, Mark, on your medium term guidance around ROCE. I think you acknowledged that there's quite a lot of immature assets in the sort of portfolio at the minute. I was just wondering if you could sort of help us think about maybe the downside to that sort of, you're already at 16%, the target's 16%. What things weigh on your mind as why that target shouldn't be high teens, for instance?
I think in terms of a target, it's really the pace at which we continue to invest, Damian. If we just let the assets that we've invested in already reach maturity, then there's obviously no reason why it shouldn't sort of head back up to the high teens levels. If you look back historically, we've certainly been there. I think it's the pace at which we continue to invest, are you gonna get that continued pipeline of immature investment? If we talk about Eye 2 , for example, that will be a significantly bigger investment than Eye 1 was because it's not just the inflation in the actual site build itself, but it's all the infrastructure that goes behind it.
I think the important thing is that we're deploying capital at pace, and we are delivering above mid-teens returns even with all that ongoing investment, which is yet to reach maturity. I think it's a blend. If you look at our core asset base that's fully functioning, it will be delivering returns well above that 15%. When you're investing at GBP 100 million a year, clearly there's always a lot of your asset base that's still got to get up to that full capacity and really deliver those high returns. I guess it's, you know, that equation. Do you stop investing and improve your ROCE? Do you keep investing and grow your returns in absolute in a, in absolute terms, and that's exactly what we're doing.
Okay, thanks. Just second one on the pet food business. You've invested GBP 9 million. Can you give us a sense of how much investment may need to be put into that business over the, maybe the next five years to get it to where you want it to be?
Yeah. It could be out.
It's funny to say,
Well, at the moment, we're just in kibble of course, and there's a number of different formats from treats through to wet food as well that we're looking to explore. It'd be a bit premature of us to start putting a number on that, but it would be significant.
I think the important thing is that there's a big runway there. It's. We're occupying what, about five acres of the 28 acre site currently. There's a big footprint for us to expand on.
Yeah.
But-
I think following that is that's the theme. We did that on poultry, we've done that on pet, there's form to what we do here. We get into a market relatively modest, understand that market, put the investment and the expansion in at the same time as Jim and the team are working with the customer to develop the proposition, these take time. I've said this many times before now. When you're building a greenfield operation, it's two years to build something and then it's two years before you really get established within it. It's a four-year project, we're ahead of the curve, I think, on this one as we were on poultry. Those are the kind of timelines that we look at it.
Okay. Thank you.
Hi, guys. Ashton Olds here from Redburn. First question, I suppose, just trying to understand, you know, the, maybe the shortage of volumes that may arise in the U.K. market with regards to pig meat. I suppose, like, when you are talking to prospective farmers that you might buy at the moment,
Are they looking to get back into the market? You know, are they earning sufficient net margins at the moment that it's becoming, I guess, economic again? If that's the case, does that mean that there's only gonna be a shortage of pork for like, a small amount of time? I suppose that's my first question and, you know, any comments that you may have just around how you're feeling about security of supply. The second question, just quickly. How does your level of self-sufficiency compare to your major peers in the pork market? Thirdly, just on sort of the longer term ambitions in pet food, what type of customers are you looking for? Is own-label pet food something that your grocer customer's looking to get into?
That's all from me. Cheers.
Again, I'll let Jim answer the last one. On regarding volumes of Pig producers, independent pig producers as well as organizations such as ourselves, have had a very difficult last two years, and the last year in particular with the spike in wheat prices and input prices generally. You saw wheat go from GBP 200- GBP 350 a ton, people had a short order book even at that time. The losses were quite colossal. I don't anticipate there being a significant growth in pig numbers from certainly independent producers and even corporations such as ourselves won't be expanding to the extent that you would possibly imagine because the pain was so significant.
The aging demographics of many farmers mean that they don't necessarily want to come back in in any event, but the losses were fairly significant, so it's unlikely that they would dive back in before the profitability is there for a sustained period of time. That's what, I suppose, what gives us comfort about having to put more pigs down. We have to do out of necessity, and thank goodness we did to the level that we did. Our self-sufficiency is about 50% now. We wouldn't be the number one pig producer in the country, though. That would probably be Pilgrim's. We have a slightly differentiated model. We've got indoor pigs as well as outdoor pigs as well, so we have a commercial arrangement as well as an extensive arrangement.
As I mentioned before on, with Jason, I'm not sure I'd wanna put a figure on exactly where we want to go, but we will continue to invest as much out of necessity. We do want to expand our processing capabilities as well at our sites as well, of course.
Yeah. In terms of the pet food, I mean, certainly in the, in the short term, the Pets at Home work keeps us very busy, as I alluded to. Clearly, we've got very close relationships though with the major retailers, they're very aware of what we're doing, and there is dialogue there. As, as I say, the short to medium term will be very Pets at Home centric. It, it keeps us incredibly busy in terms of both current capabilities and what's coming on stream in the, in the kind of spring of next year.
Clive.
Clive Black from Shore Capital. Following on from a lot of the questions around farming, how does your agricultural strategy link into your Second Nature work, particularly around sustainable farming, regenerative farming? Interested in your thoughts around that and also the link between what you produce in primary and pet ingredients. Secondly, young and thrusting analysts used to ask lots of questions about the non-meat sector, and just be wondering whether you wanna remind them the realities of that and where it stands in your strategy. It's the first time we've heard Cranswick really talk about hummus, and maybe give us a feel for your supply chain there, where that comes from and how competitive you are in that market.
Thank you.
I'll let Jim kick off on the Second Nature, if I may, Clive, and we'll come back. Yeah. Do you wanna go ahead, Jim?
Yeah. I mean, you may notice we didn't even mention the meat substitutes this year, so I think that's the answer to that question. Quite by design. In terms of the Second Nature, I probably gave it, you know, in the, in the interest of time, fairly short thrift in the Second Nature update. The footprint of the animal and essentially meat is all about the feed, and soy is the most important, but actually wheat follows next, hence your question on regenerative agriculture. Having that livestock under your control is possibly the only way of actually achieving some of these Second Nature targets. Certainly far easier when it's under your control than convincing third-party farmers to do it. Not to say that second bit isn't impossible, it's just more difficult. You've, you've gotta obviously take them on the journey.
Yeah, I think the work we're doing on soy is incredible. You know, I think the first step will possibly give us something like a 20% reduction in the footprint, which when you think 80% of your footprint is wheat and 98% of our group footprint is Scope 3, which is either livestock or feed, which is a proxy for feed anyway. The next opportunity is to get into using obviously the manure from the animals and, you know, sharing that with local feed producers on the wheat side. You know, most of the wheat grown in the U.K. remains in the U.K., so there's a good opportunity to control that supply chain and quite a few of our third-party suppliers, particularly some of the outdoor finishers, will actually be also growers of wheat.
There are ways of joining the dots, and we're also looking at some in-setting schemes as well, around the farms that are supporting our internal production as well, where we're using third-party finishers and the like. It's a hugely important part of it, and that regenerative and cyclical kinda way of thinking about it is absolutely how we'll do that.
As regarding the chickpea production, Clive, it used to be Russia. Now it's more commonplace in Turkey anyway, would be the major supplier of our chickpea. India's the largest producer of chickpea, but ours is mainly from Turkey.
If you can wait, you know, if you can hang on to your hat for long enough, Clive, when the annual report's published in a few weeks' time, it will give you a huge amount of background in terms of what we're doing from a Second Nature perspective on ours, I would say. For good or bad, it's probably the largest section of our annual report, our Second Nature and sustainability section. There's a lot in there for you to read at your leisure.
I mean, when you speak about the meat alternatives as well, Clive, you know we've always had a healthy cynicism of the products that are there, the faux meats as such. We much prefer to get into that mezze, the proper plants, if that makes sense, and proper non-faux meats elements of it. I think that's proven to be the right choice with the growth elements that we see in that sector.
Thank you.
Any further questions?
Yeah. Anything from anybody who's online?
Got a question from Gary Martin from Davy. Please go ahead.
Good morning, all. Congratulations on a really strong set of results and a really, really good synopsis there just on the slide deck. Just a few questions from my side. I think we've covered a lot. Just double-clicking into the current competitive environment seems to be quite flattering for Cranswick. Just on the deck, you'd note that you'd had some new business wins from budget retailers like Aldi and Lidl. Is the best way to think about the current competitive environment as just expanding market share for Cranswick? Is that just the easiest way to think about it? Then just a second question just on something you noted on the bacon promotional activity.
I think you said that, volumes were back due to co-promotional activity in H1, which kind of implies an uptick in H2, in terms of promotional activity. Has that translated to a recovery in volumes? Thanks.
I'll let Jim cover the promotional item on the bacon front, Gary. I think the key area for us on the competitor landscape is we, you know, we remain constantly paranoid about the competitors set. You know, whilst we believe and know we have a strong proposition in the investments that we put into the infrastructure that we have and have great customer relations, that doesn't stop others acting in a disorganized manner. It is something that we are very acutely aware of and have a constant paranoia, which I think is healthy to deal with. That doesn't matter whether it's at the pig meat end, the poultry end, or even the pet food side of our business.
We've just gotta keep doing our job really and making sure that we we're delivering the proposition correctly.
Thank you. Then in terms of the promotions, I mean, as you rightly point out, the first lever I guess the retailers can pull in terms of inflation is reducing the promotional activity ahead of actually moving their prices on, you know, the well-publicized Aldi Price Match type activity around many retailers become self-limiting on, you know, the need for inflation. It was the first lever they can pull. You then have to almost reestablish your base prices when the retailers do eventually feed the inflation through which, you know, clearly with the numbers we were looking at, was absolutely necessary. Then you need to reset a promotional plan based on the new base price effectively. That's kind of the cycle that's played out during the course of the year.
Thanks. That's a really good call. Nothing else.
Can you hear me? Yeah. We've got a couple of questions from the webcast now. Roland French from Panmure Gordon . A couple of questions from him. Can you talk to product mix trends from a consumer's perspective as well as demand? For example, are you seeing material trading down from premium tiers?
Shall I take that one then?
Yeah.
I think in terms of the mix trend, there's certainly a trade out of brands into own label. Within meat categories, we are seeing a little bit of trading around the cuts. You know, particularly in beef, actually, you're seeing a trade down from steaks into mince. It's less evident in pig meat because the broader portfolio is kind of a flatter price per kilo. Despite all that, we're seeing more and more growth in value-added sector. Convenience is still absolutely key. Again, pointing once again to the slow cooked sous vide type innovation, you know, that's growing incredibly fast. Also premium own label is trading very well as well, 'cause it still represents, particularly in pork and chicken, good value.
It can be a bit of a trade-down of sorts from eating out of home as well. Certainly our premium volumes still look pretty robust. A little bit of a squeeze in the middle, I would say if anything, we're probably seeing less than that than perhaps we did in the 2008 cycle. I think as customers have got used to the prices and, you know, let's not forget that food is less than 10% of our kind of income that we spend. You know, it's very low. It's actually one of the lowest, you know, proportions of income in the world actually. It is kind of affordable. A lot of the low prices have been driven by intense competition between the retailers rather than-
Consumers actually not being able to afford the products.
Thanks. Second question from him, can you talk to your FY 2024 CapEx plans and current thoughts on expanding fresh poultry capacity?
Lizzy, I think we've talked about all that as we've gone through the presentation. The slide deck highlights all the big projects that we've got on currently. Adam talked at length about our plans and thoughts about I2. I don't think there's really a huge amount of benefit in recapping over that again.
Third question. Sorry, third question. You referenced less than 2 times leverage as a midterm target. You've consistently run below this. Are you signaling capacity to take the historical range higher?
I think we've always, you know, we've got a sizable debt facility, and we also, you know, are always acutely conscious of the fact that there are potentially larger deals to be, you know, out there. We haven't done them historically, but we do want that flexibility, and I think it just gives us a lot of headroom for us to continue our growth strategy.
Last question is from Elliot Boothright at Charles Stanley. I think this might have been covered, but feed wheat prices look to have started to come down. Is there an expectation where this can land, and will this start to bring down pig and chicken price?
Yeah, I think you're right. I think we've covered that extensively as we've gone through the presentation.
Yeah. Yeah. The, the feed price and input prices generally have come down. I think there's a significant pressure downside as well, but there is obviously a time lag to this, and it doesn't necessarily mean we will see an increase in pig numbers available or volume availability either.
Thanks. That's everything online.
Is that everything? On that note, thank you, everybody. Thank you for coming today, please, hang around for a coffee and a catch-up, after this. It'll be great. Thank you.