Meat producer Cranswick buys Kingston Foods
Kingston Foods is a premium cooked and roast meat producer based in Milton Keynes.
A statement from Cranswick said the acquisition would “strengthen its cooked meat production capabilities, further diversify its product range in a growing market and broaden the group's customer base".
The vendors, Tony Turner and Paul Williams, will continue in their current positions as md and operations director respectively.
Shore Capital’s City analysts Darren Shirley and Clive Black said: “The deal sits well with Cranswick’s existing cooked meat capabilities. Kingston is primarily servicing ‘quick service restaurants’ and hence the deal is also consistent with Cranswick’s intention to drive foodservice turnover from £60M to £160M in forthcoming years.”
Shirley and Black predicted that Cranwick’s acquisition of all Kingston’s shares, announced today (July 2), would open up new customers for Cranswick and offer the opportunity for cross selling from the existing product portfolio.
The two vendors
“Importantly, in our view, the two vendors, currently managing and operating directors, will remain in their current positions, providing continuity to the business,” they said.
Shore Capital also highlighted Cranswick’s “strong track record of effective integration of acquisitions”.
They noted that Kingston was said to have gross assets of £3.7M in January this year. In the firm’s most recent accounts published in January 2011, it reported group sales of £11.6M. Earnings before interest and tax was £0.5M (EBIT), which would imply an EBIT margin of 4.3%.
“We believe recent growth has been strong, both from a sales and profits perspective, and the deal is expected to be modestly earnings enhancing in year One,” said Shirley and Black.
Pre tax profit
After the deal Shore Capital increased it current pre tax profit (CPTP) forecast for Cranwick by £0.2M to £48M for March 2013. For March 2014 it forecast a CPTP of £50.9M compared with £50.5M before the acquisition.
Shore Capital concluded: “With a longstanding track record of sales, profit and dividend growth, a well invested, industry leading manufacturing infrastructure, strong cash generation and healthy balance sheet … we reiterate our view that Cranswick represents a core holding in a small/mid cap consumer portfolio.”
Shore pointed out that it was a joint broker to Cranswick and does not issue a recommendation on ‘house stocks’.
Kingston Foods began trading from new purpose-built premises in Milton Keynes 12 years ago. “The 1,858m2 factory is equipped with full high and low care separation including positive airflow and through ovens, according to a company statement.
“As a result, the site is accredited to BRC [British Retail Consortium] Grade A and Soil Association Organic standards,” said the firm.
In May, Cranswick reported that exports to China and the US had driven underlying revenue growth of 10%. For the full story, click here.
