Shares in pork-to-poultry processor Cranswick (CWK) fattened up 6.2% to £40.61 on Monday as a first quarter trading update confirmed a sizzling start to the year and stoked earnings upgrades.
Lockdown beneficiary Cranswick, whose exports are being underpinned by the African Swine Fever (ASF) situation in China, now expects results for the year to next March to beat its earlier expectations.
However, management also cautioned that following the exceptional demand seen in the first quarter, retail volumes will begin to normalise through the rest of the year as consumers gradually return to eating out of home.
FEEDING THE NATION
Cash-generative Cranswick, a running Great Ideas selection whose shares are up almost 12% since we highlighted their attractions in April, has operated well within its banking covenants and without any recourse to government assistance during the Covid-19 pandemic.
The quality food producer also paid a £500 bonus to its site-based employees to reflect their essential key worker status in a move that enhances its reputation.
Cranswick served up a tasty trading performance over the 13 weeks to 27 June, with total revenue up 24.8%. Stripping out the contribution from the acquired Katsouris business, Cranswick cooked up like-for-like growth of 19.2%.
Due to the shift towards greater in-home consumption during the pandemic, Cranswick has seen ‘exceptionally robust’ demand from retailers.
This demand, together with increased poultry sales from Cranswick’s new Eye facility in Suffolk and the benefit from new contract wins with Tesco (TSCO) and Marks & Spencer (MKS), comfortably offset lower food service revenue.
Encouragingly, Cranswick insisted this positive performance has continued during the second quarter of the financial year.
MEATY UPGRADES
Chief executive Adam Couch remains cautious about the longer-term economic impact of Covid-19 and the uncertainty surrounding the ongoing Brexit negotiations.
Yet he believes Cranswick is ‘well positioned to address these challenges. Our positive momentum reflects the continued investment we make across our asset base and the quality and capability of our colleagues across the business’.
With the outlook for the year to 27 March 2021 set to be ahead of previous expectations, Shore Capital upgraded its full year pre-tax profit forecast by 10.4% to £116 million and nudged up its 2022 estimate to £122.2 million.
