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Despite a weakening economy, higher raw material costs and a stronger euro, sausage-maker Cranswick reported a meaty 10 per cent hike in like-for-like sales during the period. Management also believes that cost pressures are now showing signs of having peaked.
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In the food business, underlying sales grew 9 per cent as higher costs - essentially pig prices - were successfully passed on through price increases. Pork sales rose 10 per cent, bacon and sandwich sales each grew an impressive 24 per cent, and cooked meat and sausages both managed 8 per cent sales growth. Cranswick continues to invest in new product development, too, and reported a good uptick in sales from its air-dried bacon product following substantial investment at its new bacon factory. Meanwhile, profits in the pet business doubled to £1.15m on sales of £22.5m, up 26 per cent in the period.
Strip out the impact of a one-off tax charge and adjusted EPS rose by 8 per cent year-on-year to 28.9p. Investec Securities is sticking with its existing forecasts and expects full-year adjusted pre-tax profits of £35.1m and EPS of 54.7p (£33.7m and 51.7p, respectively, in 2007).
CRANSWICK (CWK) |
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|---|---|---|---|---|
| ORD PRICE: | 580p | MARKET VALUE: | £269m | |
| TOUCH: | 580-604p | 12-MONTH HIGH: | 870p | LOW: 491p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 336p* | NET DEBT: | 48% | |
| Half-year to 30 Sep |
Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 294 | 18.0 | 27.7 | 6.5 |
| 2008 | 321 | 18.5 | 14.0 | 7.0 |
| % change | +9 | +3 | -49 | +8 |
Ex-div: 26 Nov Payment: 23 Jan *Includes intangible assets of £118m, or 254p a share |
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Cranswick is growing at a time when peers, such as Northern Foods, are suffering volume declines. But consumers could yet begin trading down from Cranswick's pricier premium products as the recession bites. On a forward PE of 11 - a premium rating for a mid-cap UK food producer - Cranswick's superior performance looks factored in. Fairly priced.
Last IC view: Fairly priced, 727p, 19 May 2008
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