Revenues were “slightly ahead” of board expectations, as Cranswick attributed the growth to strong volume growth across most product categories and a positive contribution from Benson Park – the poultry business acquired a year ago.
Underlying sales were 7% higher than the same period last year.
Cranswick said a £6M investment at its Norfolk processing facility will begin soon. The project is designed to boost capacity and help the business win accreditation from the US Department of Agriculture for the site.
£6M investment in Norfolk
The investment programme at Benson Park remained on track and will be commissioned ahead of the 2015 peak Christmas trading period, said the firm.
Net borrowings were said to be below the previous quarter end and significantly lower than a year ago.
In a statement accompanying the results, Cranswick pledged to focus on service, quality and innovation to deliver “exciting, competitively priced products” in market conditions that were expected to remain competitive during the second half.
“This approach, allied to a broadening product portfolio and an anticipated strong Christmas trading period, means the business remains very well-placed to deliver further growth this financial year,” claimed the statement.
The board was confident of long-term business growth due to: experienced management, a strong product range, a well-invested asset base and a robust financial position, it claimed.
N+1 Singer’s view
“Fundamentally, Cranswick is a good business with a 25-year track record of creating shareholder value.”
Cranwick’s trading statement impressed city analyst N+1 Singer, which praised its “impressive” sales growth. “There remains ample scope to grow its core porcine revenue stream, whilst recent diversification into poultry, foodservice and international markets provides new and meaningful growth opportunities,” said the analyst.
‘Growth opportunities’
Investec repeated its ‘buy’ recommendation on the firm’s stock, highlighting results ahead of expectations, triggering a modest upgrade of 2.5% in predicted earnings per share in financial year 2016.
Analyst Nicola Mallard predicted profit before tax in the first half of the next financial year to rise to about £30.5M. Revenue was forecast to rise by about £10M to £1,060M, with operating profits up by about £1.5M.
Shore Capital concluded the business was in “a very comfortable financial position …” Fresh pork was exhibiting very strong growth, reflecting the return of temporarily lost volumes, while management was indicating a higher than expected level of capital investment, said Shore Capital analysts Clive Black and Darren Shirley.
“We also expect investment across the group, notably in Sutton Fields and Valley Park, to future proof the group in anticipation of further robust and sustained volume growth across all categories.”
Cranswick is due to publish its next set of interim results on November 30.
What the analysts said about Cranswick
N+1 Singer: “A good first-half performance from Cranswick … with top-line growth accelerating in the second quarter and like-for-likes an impressive 7%, albeit against a flat comparative. Fundamentally, Cranswick is a good business with a 25-year track record of creating shareholder value.
“There remains ample scope to grow its core porcine revenue stream, whilst recent diversification into poultry, foodservice and international markets provides new and meaningful growth opportunities.”
Investec: “Progress was broadly spread, but includes an especially strong fresh pork performance, as Cranswick regained a contract in the third quarter last year. Other categories such as pastry, bacon and continental also performed well.”
Shore Capital: “Whilst there is no commentary in the update, we believe management remains comfortable with the performance of Cranswick’s pig rearing activities, which currently represent 20–25% of total pigs processed. We believe that such activities, which provide full visibility down the supply chain for the core element of Cranswick’s out-door reared pork requirements, are crucial to the longer term relationships that have been established in recent years with leading customers.”