ii view: Cranswick hikes the dividend

This pork and poultry producer is diversifying, and export sales have jumped significantly. 

Full-year results to 28 March 

• Revenue up 16% to £1.67 billion 
• Adjusted pre-tax profit up 11% to £102.3 million
• Net debt of £147 million, up from net funds of £6.3 million
• Dividend payment up 8.1% to 60.4p per share

Chief executive Adam Couch said:

"We continue to experience and operate in the most challenging of periods. To recognise the outstanding contribution of our people we announced in April that we will pay a £500 bonus to each of our site-based colleagues at the end of June.   

"The last 12 months has seen us deliver key steps in our diversification strategy with the successful commissioning of our Eye poultry facility and the acquisition of Katsouris Brothers which expands our non-meat activities.  We also completed two further acquisitions to increase our vertical integration in pork.

"There has been a positive start to trading in the new financial year, though we remain mindful of the uncertainty around the longer-term effects of the Covid-19 crisis and Brexit negotiations.  Nonetheless, our outlook for the current year is unchanged and we have a solid platform from which to continue Cranswick's successful long-term development. "

ii round-up:

Pork and poultry producer and supplier Cranswick (LSE:CWK) today raised its full-year dividend by 8.1%, aided by a 90% plus jump in export sales. 

Total sales, partly helped by a business diversification strategy, jumped by 16% to £1.67 billion. When excluding the purchase of non-meat business Katsouris Brothers and livestock acquisitions, sales rose by 13%. Nearly £70 million was spent on acquisitions in the year.  

Exports to the Far East rose by 122%, buoyed by the outbreak of African Swine fever in China and a near halving in its herd numbers. Total export sales climbed from 7% of the group total the year previous to 11%.

Like-for-like fresh pork sales grew by more than 20%. Convenience food sales rose by 19%, pushed higher by its purchase of Katsouris Brothers, a processor and multi-channel supplier of Continental & Mediterranean food products. 

Poultry sales rose by 8.6%, aided by the commissioning of a new £78 million processing facility in Eye Suffolk. Poultry accounts for 13% of total group sales. 

Cranswick shares rose by more than 1% in afternoon UK trading and are up by more than 8% year-to-date. Rival food producers Associated British Foods (LSE:ABF) and Tate & Lyle (LSE:TATE) have seen their shares fall by 24% and 11% respectively during 2020. 

ii view:

Founded by farmers in East Yorkshire to produce animal feed, today Cranswick employs over 11,000 people and operates from 16 production facilities in the UK. It supplies the major grocery chains as well as enjoying a strong presence in the 'food-to-go' sector. 

For investors, cautionary management outlook comments highlighting both Covid-19 and Brexit need to be considered. A forward price/earnings (PE) ratio above the three-year average may also suggest the shares are not obviously cheap. But the relative safety of a food producer in the current uncertain economic climate cannot be overlooked, along with a consistent record of growing the dividend.  

Positives: 

• Diversifying businesses types and geographical product markets
• Track record of dividend growth

Negatives:

• Animal diseases could impact
• Net debt position due to accounting lease changes

The average rating of stock market analysts:

Buy