Cranswick has “most, if not all, of the ingredients to succeed”, concluded Shore Capital City analysts Clive Black and Darren Shirley.
The group – which supplies meats under brands including Jamie Oliver, the Black Farmer and Reggae Reggae – “was experienced and sound, so well managed and well positioned”, Black told FoodManufacture.co.uk.
Its strengths include a strong balance sheet, an experienced and capable management team, a presence in good growth food markets in the UK, leading positions in most of its categories, well-invested facilities and its willingness to seize new opportunities in areas such as pastry and new territories – such as Australia.
The group is also set to benefit from potentially tighter EU supplies and capacity reduction in Scotland. Last week its rival Vion UK announced plans to close its Broxburn plant, which handles about 8,000 pigs a week.
Shore Capital visited the Milton Keynes plants of Delico and the recently acquired 1,858m2 Kingston Foods factories.
The Kingston Foods deal takes the group beyond supermarkets into the quick service restaurant segment of the foodservice market, bringing new customers and new products, Shore said.
Cranswick wants to grow sales to the foodservice channel from about £60M to £160M. Shore Capital estimated that Kingston had sales to January 2012 of about £15M.
The analysts said capacity and capability have materially developed at Cranswick's 9,290m2 freehold Delico plant in recent years. It had also improved efficiency at each stage of the production process.
The Delico cooked meats plant supplies a spectrum of cooked meat, primarily in the standard and standard plus segments of a leading UK retailer.
This factory, alongside Cranswick's Valley Park factory in South Yorkshire and Sutton Fields on Humberside, makes Cranswick a leading player in the UK cooked meats. It has capacity in excess of 50,000t of cooked meat production a year between the three sites.
Shore Capital also noted Cranswick’s progress in exporting ribs to the USA, distributing the 'fifth quarter' to South east Asia, where direct selling is set to replace agents, and steps to gain Australian accreditation.
£12M pastry plant
Cranswick has also committed to a £12M pastry plant at Malton, North Yorkshire, to focus on the premium sausage roll, pie and quiche markets in which it already sells to two leading UK retailers.
It had emphasised the high quality and distinctiveness of its pastry as a key selling point. This process of ‘premiumisation’ had served the group well in the sausage and bacon categories, Shore said.
“Pastry will not be an overnight sensation in the quantum of sales at a group level, in our view, but it does provide a complementary basis to provide for meaningful and sustainable additional growth for the group.”
There had been progress elsewhere at The Sandwich Factory, which contributes about 6% of sales, with retail listings recently achieved, supporting its longstanding presence in the foodservice market.
Cranswick's new ceo, Adam Couch is taking over from Bernard Hoggarth on August 1 with Hoggarth becoming commercial director and “remaining a source of valuable experience and insight”, said Shore Capital.
“We expect Cranswick to deliver sound and steady EPS [earnings per share] growth for the foreseeable future ... we see its stock as a core holding in the small and mid-cap equity arena,” it concluded.