Cranswick’s ‘near perfect’ record to tempt investors

18-Aug-2015 - Last updated on 19-Aug-2015 at 14:34 GMT

Cranswick's 'near perfect' record should tempt investors, said Investec

Pork and pastry firm Cranswick’s “near perfect” 25-year growth record for profit and dividends plus potentially lucrative new opportunities should tempt investors, predicts City analyst Investec.

The business had grown significantly in recent years to achieve £1bn of revenue but still had ample opportunities for growth, said Investec analyst Nicola Mallard.

Particularly attractive opportunities for the firm were moving into new categories, such as pastry and chicken, and its aspirations in foodservice and international markets.

‘Enviable track record’

“Cranswick has an enviable track record,” said Mallard. “Having made its first food processing acquisition in 1991, it surpassed £1bn of revenue this year, generating a near perfect record on profit and dividend growth over the 25-year period.”

The firm’s key attributes were: a strong management team implementing a clear strategy, world class facilities, technical innovation/consumer insight and supply chain integrity, including high welfare standards, she added.

While the food market was undergoing changes both in the way consumers shopped as well as their choice of products, Cranswick continued to evolve its business to meet those needs, said Investec.

Expand food-to-go and foodservice

In particular, the business was planning to expand its food-to-go and foodservice business, where its representation was low and build on some of its solid international relationships, said Mallard.

‘Near perfect record’

“The group’s near perfect 25-year growth track record for profit and dividends should, alone, be enough to make any investor take a look at this business in our view.”

Source: Nicola Mallard, Investec

“These should supplement the opportunities the group still sees in the UK retail space – selling more products to more customers as well as entering new categories, such as pastry and chicken. With a very strong balance sheet, we should not rule out acquisitions to help supplement the organic strategy.”

Investec raised its target price for Cranswick stock from 1,790p to 1,825p, to reflect its earnings value, earnings before interest, tax, depreciation and amortisation, price earnings ratio and discontinued cash flow. A total return of about 12% was forecast.

Mallard repeated her ‘buy’ recommendation on Cranwick’s stock at an upgraded target price of 1,825p.

Meanwhile, last month Cranswick revealed that revenue was 8% ahead in the three months to June 30 compared with the same period last year, sparked by strong volume growth across most of its product categories, according to its first quarter statement (Q1).

The business was likely to invest £28M into key projects in the future, including a £5M upgrade to the Benson Park facility, which would be completed later this year, predicted Shore Capital last month.

A similar upgrade to its Norfolk and former Kingston Food processing sites were also likely.