Greater cost efficiencies and resilient demand for UK pork, especially in the first quarter, helped Cranswick (CWK) boost half-year operating profits by 17 per cent to £22.8m. The operating margin, at 5.5 per cent, eclipses last year's 5 per cent.
But margin pressures are tightening. In a trading update last month, Cranswick warned of rising animal feed costs and UK pig prices at a three-year high. The cost of implementing new EU regulations is pushing herd numbers down and prices up. Mark Bottomley, Cranswick's finance director, says discussions are ongoing with retailers about passing on the higher costs. "Talks are going well," he says.
With tougher trading conditions looming, the capacity-enhancing modifications made at the company's Norfolk and Hull facilities will become even more important. Moreover, both operations have now gained full approval for China exports. "By having a direct export licence we can avoid agents and increase margins," says Mr Bottomley. "We've already started shipments."
Excluding the contribution of cooked meat producer Kingston Foods, which Cranswick acquired in June, sales increased 5 per cent in the period. Kingston contributed £0.3m to Cranswick's net profits in the second quarter. Mr Bottomley anticipates a more balanced trading performance between the first and the second half (compared with last year's strong second-half bias).
Broker Investec Securities forecasts full-year adjusted pre-tax profits of £47.2m and EPS of 75.5p, up from £45m and 72p, respectively, last year.
CRANSWICK (CWK) | ||||
---|---|---|---|---|
ORD PRICE: | 810p | MARKET VALUE: | £391m | |
TOUCH: | 807-812p | 12-MONTH HIGH: | 862p | LOW: 691p |
DIVIDEND YIELD: | 3.6% | PE RATIO: | 10 | |
NET ASSET VALUE: | 529p* | NET DEBT: | 13% |
Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2011 | 394 | 18.5 | 29.2 | 9.00 |
2012 | 419 | 22.5 | 35.8 | 9.40 |
% change | +6 | +22 | +23 | +4 |
Ex-div: 5 Dec Payment: 25 Jan *Includes intangible assets of £130m, or 269p a share |