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Cranswick broadens its horizons

Pork producer Cranswick enjoyed a good start to the year, and more recently snapped up an earnings-enhancing purveyor of cooked poultry
November 24, 2014

Strong sales of premium sausages, bacon, cooked meat, pastry, charcuterie and sandwiches helped offset a hefty 13 per cent first-half decline in fresh pork revenue at Cranswick (CWK).

IC TIP: Hold at 1400p

The reduction can be largely attributed to lost business from a major retail customer. But that business was subsequently recouped after the customer realised that the service, quality and innovation offered by Cranswick outweighed the benefit of lower prices from other parties. Meanwhile, export sales (excluding Europe) surged by nearly a quarter, as demand in China continued to grow and Cranswick gained new customers in West Africa and Australia.

Pig prices have fallen dramatically in recent months. Coupled with operational efficiencies and a favourable product mix, this boosted the adjusted operating margin from 4.9 to 5.4 per cent. Adjusted pre-tax profit, which excludes a biological accountancy adjustment on the pig herd, consequently rose 11 per cent to £25.8m.

After the period-end, Cranswick acquired cooked poultry producer Benson Park, which serves the fast-growing food-to-go and restaurant sectors. Beyond giving an immediate boost to earnings, the deal will broaden both Cranswick's protein range and its customer base, which is predominantly made up of food retailers.

Investec expects pre-tax profit of £56.3m for the full-year, giving EPS of 90p, up from £52.2m and 84p.

CRANSWICK (CWK)
ORD PRICE:1,400pMARKET VALUE:£687m
TOUCH:1,398-1,401p12-MONTH HIGH:1,461pLOW: 1,117p
DIVIDEND YIELD:2.3%PE RATIO:17
NET ASSET VALUE:637p*NET DEBT:7%

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201348426.143.510
201448224.639.210.6
% change--5-10+6

Ex-div: 4 Dec

Payment: 23 Jan

*Includes intangible assets of £130.7m, or 266p a share