Cranswick Delivers Consistent Dividend Growth
Cranswick plc (LON:CWK), one of the UK’s leading food production groups, has today announced its 33rd consecutive year of dividend growth, after releasing ahead-of-forecast results for the year ended March 31st 2023.
Cranswick saw revenues rise almost 16%, of which 14.4% was organic growth. The group faced substantially increased input costs in the year, reflecting the recent high pace of food cost inflation.
This impacted profit margins, which declined from 7.0% to 6.3%, but the group’s cost control efforts led to margins in the second half of the year recovering to 6.5%. Operating profits rose by 4.2% to £146.5m and profit before tax rose 2.3% to £140.1m.
Cranswick invested some £85m into new capacity in the year, taking its three-year running total to over £250m as the group increased its farming, poultry and processing capacity. Despite this investment, net debts, leases aside, remained modest at £20.2m giving the group substantial financial capacity with a £250m borrowing facility available.
Cranswick raised its dividend by 5% to 79.4p, the 33rd consecutive year of dividend growth. The payment is almost 2.65x covered by adjusted earnings per share of 210p for the year. The shares reacted positively, rising almost 2% in early trading.
Cranswick’s Dividend Growth
“We hold Cranswick in our HL Select UK funds because, even when times are tough, it can deliver dependable growth like this. Few businesses offer such consistency of dividend growth through thick and thin. The yield of 2.5% might not be the highest out there, but it has been accompanied by substantial capital growth over the long term.
The group have been innovative in managing their costs at a time of sustained pressure, not least by bringing in teams of trained butchers from the Philippines to offset skill shortages in the UK industry.
Cranswick are a farm to fork operator and the group’s investment into farming capacity now sees them rearing almost 50% of the pigs they process into pork, ham and bacon. Because the group maintain a high level of dividend cover, they have ample free cash flow to reinvest into the business without incurring significant borrowings.
This all reinforces the financial sustainability of the business, which in turn invests into the sustainability of its facilities. Fifteen Cranswick plants are certified carbon neutral already, with the remainder expected by 2030.
With capacity in UK agriculture being withdrawn post-Brexit, Cranswick faces growing opportunities to be the supplier of choice to the UK’s major supermarket and food service operators. We see good scope for margins to rebuild as inflationary pressures ease, leaving the group well placed to grow from its modern, well invested production facilities.”
Article by Steve Clayton, head of equity funds at Hargreaves Lansdown
Source valuewalk
