Interactive Investor

Insider: this FTSE 250 company is a high-class act

6th June 2022 07:16

Graeme Evans from interactive investor

Ten months after making a record high, shares in this mid-cap company are at multi-year lows. The chairman thinks it's time to back a recovery following 'outstanding' results. There's buying at estate agent Foxtons too. 

Cranswick (LSE:CWK) chairman Tim Smith has followed a milestone year for the pork, poultry and convenience foods supplier by spending £41,000 on the FTSE 250-listed shares.

The East Yorkshire-based firm, which supplies major supermarkets from 20 UK facilities employing 13,300 people, racked up £2 billion sales for the first time in the year to 26 March.

Its house broker called the recent annual results as “outstanding”, noting that Cranswick overcame labour and supply chain challenges and tough comparatives with lockdown conditions the previous year to grow profits by 5.6% to £136.9 million.

The company’s record of unbroken dividend growth was also extended into a 32nd year after the latest award was increased by 8.4% to 55.6p for payment on 2 September.

Shore Capital went on to describe Cranswick as a “high-class act with an outstanding management team”. Analyst Darren Shirley added: “Current valuations look a compelling entry point for a top-quality medium-term growth business.”

Shares were 3,820p in February but fell below 3,000p in early May amid fears about  inflationary pressures. However, these were allayed when Cranswick reported an unchanged margin of 7% and said cost inflation was being proactively managed and recovered.

Smith made his investment at 3,056p on Tuesday, his second purchase since being made chairman in July last year. The former Tesco director joined the board as a non-executive director in 2018.

Cranswick closed last week at 3,104p but Investec analyst Nicola Mallard has a price target of 4,100p as she regards the company “one of the best investment opportunities in the sector.”

Despite an impressive track record and history of navigating volatile conditions, she said Cranswick’s valuation-to-earnings multiple was now at a 45% discount to its peak during the Covid period and at a level last seen in 2014.

She forecast that profits will grow to £140 million in 2023 and £146.3 million the year after, driven by new business streams such as this year’s entry into pet food and breaded poultry.

These new operations form part of an ongoing drive to make Cranswick a more resilient and broader based business than the one that entered the Covid pandemic two years ago.

Poultry now represents a fifth of group revenues, having achieved growth of 30.8% in the most recent financial year. A recently-opened £32 million breaded poultry facility in Hull will add to the momentum and consolidate Cranswick transformation into a 'dual protein' provider of pork and poultry.

Other new facilities as part of annual investment worth £93.7 million included £26 million spent on a new cooked bacon facility in Hull. Shore Capital regards high and sustained levels of investment as the “cornerstone of Cranswick’s success” and is looking for capital expenditure of around £100 million in the current financial year.

Cranswick is also investing in farming operations so that it maintains 100% vertical integration in poultry and keeps its self-sufficiency in British pig production at over 30% of total requirements.

Growth is also being driven by acquisitions after the company expanded its range of Mediterranean products with deals for Ramona's Kitchen and Atlantica UK. In January, it entered the fast-growing pet foods market with the addition of Grove Pet Foods.

A big bet on property demand 

Two senior directors at Foxtons Group (LSE:FOXT) have marked the estate agency chain’s appointment of a new chief executive by spending a combined £107,000 on shares.

The investments were made after the recruitment of current Chestertons boss Guy Gittins and the FTSE All-Share company reporting a good start to the new financial year.

Shares finished the shortened trading week 14% higher at 41.1p, which compares with 31p in mid-March and 61p last summer.

Gittins, who spent the early part of his career at Foxtons before leaving in 2007, steps into the role held for eight years by Nic Budden.

Peter Rollings will run the business until Gittins’ arrival in September and was one of the directors to buy shares last week. He joined the board as a non-executive in December and has extensive estate agency experience having started his career at Foxtons in 1985.

His acquisition of shares worth £53,200 was made on Wednesday at a price of 38p, while chairman Nigel Rich spent £54,000 at a similar price on Monday.

Since Rich took on the role in October, initiatives overseen by the former Hamptons International chairman have included  an increase in the number of branch sales negotiators.

Rich added: “I am delighted to welcome Guy back to the business. His experience and success at Chestertons should be invaluable to Foxtons as the company continues its drive to improve profitability.”

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