Cranswick’s FY20 results demonstrate its strength and agility and current trading confirms the company is well positioned despite the uncertainty posed by the COVID-19 pandemic and Brexit. Revenues were up 13.0% on a like-for-like basis, mainly driven by better price/mix, but with underlying volumes up 3.4%. Adjusted PBT was up 11.2% on the prior year and EPS up 8.4%. Net debt was £146.9m at year end, including IFRS 16 liabilities of £65.9m. The start to FY21 has been positive and hence the outlook remains unchanged.
The COVID-19 pandemic hit towards the end of FY20, with panic buying in the final week. Among Cranswick’s customers, the long-term trend of strong discounter growth continued in FY20 while the top four retailers again underperformed the market. New contract wins, new product launches and strong growth in export channels all underpinned Cranswick’s growth. On-the-go consumption was hit by lockdown measures, but management was able to reallocate employees to other sites and avoided the need to use the UK government’s Job Retention Scheme.
Retail remains the main channel for Cranswick and growth continues to be driven by a combination of new contract wins and secure long-term contracts. In FY20 foodservice only accounted for 5% of sales, but the company is working with its customers for a gradual reopening as lockdown restrictions are eased. The export channel witnessed strong growth, driven by demand in the Far East, primarily as a result of African Swine Fever. The new poultry facility in Eye, Suffolk, was commissioned as planned in Q3, with the ramp up in Q4 ahead of expectations.
Trading on a consensus FY21e P/E of 20.1x, Cranswick is valued broadly in line with its meat processing and food manufacturing peer group. Volatility is likely to remain a feature due to the agricultural nature of Cranswick’s raw materials, and both COVID-19 and Brexit continue to cause uncertainty. Brexit negotiations are ongoing and it is hard to assess the impact of any new rules until full details are known. As lockdown restrictions are eased, consumer patterns may take a while to return to normal, hence requiring companies to remain agile. Cranswick remains well placed, as over the years its management has demonstrated its ability to remain relevant and offer superior products at a lower cost.