Food producer Cranswick is in “a strong UK position” after reporting revenue up by 7% to £875M for the year to March 31, according to City analysts.
Damian McNeela, analyst with Panmure Gordon, said: “We believe the business is in a strong position in the UK with key competitors such as Vion and Danish Crown arguably more introspective, given the recent ownership and management changes.”
The Hull-based food manufacturer was performing well, while UK pork prices were still rising but less of a concern, he said. The UK pig price had risen by 5% to 162.8p/kg from its recent low of 155p/kg in early March. McNeela noted the current UK price was at a premium to the European price and there seemed to be less upward pressure on prices than previously expected.
“Provided that UK prices do not surge past 165p/kg, we would expect Cranswick to at least maintain operating margins in the financial year 2014,” he said.
Based on Cranswick’s latest results and moderating pig prices, Panmure Gordon lifted its profit before tax forecast by £0.7M to £53M, which represented a new earnings per share of 83.7p.
Pre-tax profit
The results released today (May 20) confirmed underlying sales ahead by 5% and pre-tax profit down 2% to £47.4M.
Net debt fell to £20.1M, compared with £21.7M in the previous financial year.
Earnings per share fell by 4% to 75.1p compared with the 2012 full-year report.
McNeela said the modest premium displayed by the firm’s shares, compared with the rest of the sector, were deserved given its track record. “Cranswick retains its strong balance sheet and we expect it to make further progress following recent new business acquisitions and start-ups”, he said.
Panmure Gordon retained its ‘hold’ recommendation on Cranswick’s stock.
Nicola Mallard, analyst with Investec, agreed the firm had delivered good growth in a challenging grocery market and absorbed higher pig prices during the year.
“It has continued to invest in its assets, to drive efficiencies and produce capacity for future growth,” said Mallard. “It has started FY14 with an early acquisition and good underlying revenue momentum, which looks set to underpin a further year of progress. The balance sheet remains strong.”
The Kingston Foods acquisition added a further 2% to growth, noted Mallard. “There was a roughly equal split between volume and price, although volumes did accelerate into the second half. Most categories contributed, but the stronger performances came from sausages, cooked meats and bacon.”
Investec offered a ‘buy’ recommendation on Cranswick’s stock.
Supply chain for meat products
Cranswick chairman Martin Davey said the horsemeat crisis had strengthened the market for pork. “Recent issues in the integrity of the supply chain for meat products and the introduction in 2013 of higher welfare standards for pig production in the EU enhance the competitive position of UK-based pork processors,” he said.
Davey added: “The company’s well-invested asset base, providing efficient means of production and headroom for future growth, along with an experienced management team and a robust balance sheet should enable it to capitalise on opportunities that arise.”
Meanwhile, Cranswick has announced the appointment of Kate Allum as a non executive director. Allum is currently chief executive of First Milk and former head of European supply chain for McDonalds.
She will join Cranswick on July 1.
