Cranswick results reveal ‘another strong year’: City
The firm reported 12% revenue growth, despite record-high pig prices and start-up costs incurred by its new pastry facility.
Profit before tax was £52.2M, up by 6%, reflecting strong growth in fresh pork, cooked meats bacon and pastry.
Pig prices fell in the fourth quarter but have become more stable, at about 164p/kg, said Investec.
Also, Cranswick’s new pastry facility had completed its start-up phase.
Investec predicted a small margin recovery in 2015.
‘Margins recover’
“Revenue progress may be less marked in financial year 2015, without major contract wins,” said Investec analyst Nicola Mallard. “But we should see margins recover, supporting our current forecasts.”
Investec predicted 2015 profit before tax would reach £55.3M, after 3% growth in revenue to £1,018M. Earnings per share were forecast at 88.2p, while risks included the loss of a major contract or unrecovered increases in raw material costs, said Mallard.
Net debt fell by £3M to £17M, despite £14M spent on pig rearing units and £28M on capital expenditure.
Cranswick was said to be making a substantial investment in a new rapid chiller at its Norfolk plant, which will increase capacity and improve yields.
Investec retained its ‘buy’ advice on Cranswick’s shares.
Shore Capital described the Cranswick result as “outstanding”.
Its analysts Clive Black and Darren Shirley said: “For Cranswick to deliver such robust sales and profit growth, through a period when the UK consumer remained under pressure, UK grocery volumes were flat to negative and the group’s primary input cost (UK pigs) reached and sustained record prices is, in our view, an outstanding achievement.”
Strong revenue growth
Strong revenue growth was the main driver of Cranswick’s performance, with sales growth of about 14%, reported to £995M, with growth excluding acquisitions of 12%, they said.
“Cranswick’s sales growth was broad based, with growth reported across all categories except sandwiches, where a conscious decision to exit low margin contracts has led to improved profitability,” said Black and Shirley.
Shore Capital forecast a further strong reduction in net debt of £15M, leaving the group virtually ungeared with net debt just about £2M. “With new banking facilities of £120M, Cranswick has ample resource to support short, medium and long term corporate ambitions,” said the analysts.
Black and Shirley concluded: “We reiterate our view that Cranswick stock, supported by an excellent management team, well-invested industry-leading infrastructure, strong cash flows and balance sheet and considerable medium term corporate opportunities represents a core holding in any UK focused small-mid cap [capitalisation] fund.”
Shore Capital made no recommendation on Cranswick’s stock.
