Sausage maker Cranswick has climbed nearly 5% after a positive update, helped by falling pig prices.
The company reported half year profits of £25.8m, up 11.4%, on flat sales of £481.5m. The increase came despite growing pressures on food producers from the changes in consumer shopping habits - smaller but more frequent trips - and the rise of the discounters. It has lifted its dividend by 6%p, helping to push the share price up 66p to £14.01.
Cranswick recently bought Hull poultry producer Benson Park for up to £21.7m (net of £2.3m cash held by Benson to broaden its range and customer base, and analysts believe further deals may be on the cards. The company said:
With experienced management at all levels of the group, a strong and continually evolving range of products along with a robust financial position, the board remains confident in the continued long term success and development of the business.
Investec analysts Nicola Mallard issued a buy note, saying:
A good first half from Cranswick, with a solid revenue line and improved margins driving pretax profit. We expect a stronger second half revenue performance, with the group set for a good Christmas quarter. The Benson Park acquisition looks a good move to diversify the protein focus and channel mix, and it is expected to be earnings enhancing. We reflect this in our numbers today, upgrading 2016 pretax profit by 4%. Applying current peer multiples to our upgraded earnings, our target price increases to 1615p.
Oriel was also positive:
Cranswick’s 6% half year dividend increase is consistent with medium to long term expectations of organically generated mid to high single digit bottom line growth. In addition, the company should remain active with selective M&A. Add.
However Charles Hall at Peel Hunt kept his hold recommendation:
Profits improved by 11% in the first half due to lower pig prices and a stronger mix. Pig prices have continued to fall, which will depress sales, but improve margins. We see the shares as up with events, given that the scale of the business means that earnings growth of 5-10% per annum is the realistic target.
