Cranswick (CWK)

[AsleepInYorkshire]

Each morning as I waited for the school bus I looked at the progress of the new industrial building. Three years later as part of my geography homework I asked to be shown round the "mill". That was over forty years ago. It remains active today.

If I recall correctly the construction of the mill was part of a rear guard action being fought by local pig farmers objecting to the costs of feeds for their pigs. Lead by Jim Bloom about 23 of them supported the new feed mill - https://cranswick.plc.uk/about-us/history-cranswick-2 . It was state of the art. The level of mechanisation would not be out of place in todays world. It took 3 operatives to run the site.

Since then the business has progressed a little.The initial founders have either passed away or retired.

I've been watching this stock on and off for about 19 years now. For the most I've not been in a place to be able to buy. That has recently changed, albeit I am in no rush to charge in just yet.

The Mill which started it all and ultimately gave its name to the business was sold in 2007 and is no longer part of Cranswick PLC.

Wikipedia - https://en.wikipedia.org/wiki/Cranswick_plc

This share chart will look back to 1988 if you change the settings - https://www.hl.co.uk/shares/shares-sear ... are-charts

Final Results 2004- https://www.investegate.co.uk/cranswick ... 00107741Y/

Cranswick PLC Website - https://cranswick.plc.uk/

The Fundamentals - https://www.londonstockexchange.com/exc ... 8GBGBXSTMM

Headlines

T/O 2018 1,464.5
Margin 88.4
Profit after tax 70.0
Net assets 479.9
Debt 000.0 (**)

** Please check this. I'm not a great balance sheet reader

This seems to be a business that's revolved and ultimately evolved around simply surviving. When Cranswick Mill was initially conceived it was simply to feed the pigs of local farmers who were fighting to preserve their way of life. At some point the business moved into the production of pet foods. However, they appear to have moved back to their roots and now have a business model that incorporates a high degree of vertical integration.

The dividend has increased each year for the last 28 years and dividend cover remains very healthy at well over 2.5x. I did a quick work back. A purchase of 1,250 shares 28 years ago would have paid back about 5.5x the initial investment just from dividends. Share accretion would have been approximately 34x the initial purchase price. I haven't worked out how that translates if there was dividend reinvestment.

The company appears to have an impressive track record of managing growth and paying dividends.

2017/18 Results in Full - https://cranswick.plc.uk/sites/default/ ... 20view.pdf

2018/19 Third Quarter Results - https://cranswick.plc.uk/sites/default/ ... 202018.pdf

Our new £27 million Continental Products facility in Bury, Lancashire was commissioned during the period. We have also invested heavily in the Group’s agricultural operations and construction of a £60 million class-leading, primary poultry processing facility in Eye, Suffolk, which is due for completion towards the end of the next financial year, is now well underway.

AiY

Caveat - I am struggling to ascertain the debt level of this business. I'd welcome a bit of guidance please. Thank you.

[Lootman]

I tend to buy and sell based on technical considerations. CWK has been a wonderful holding for me for a number of years now. It was up about 400%.

But I didn't like the chart once we passed year end and so this became one of the casualties in this year's culling for CGT purposes. I repurchased a 25% position in my ISA so that I retain a position because I still like the story. I just think it's expensive and had grown to be too large a position in my small and mid cap portfolio.

[AsleepInYorkshire]

There appears to be a good reason why Cranswick are exporting more pork to China.

Is China losing the battle against an incurable pig virus?
https://www.bbc.co.uk/news/business-47956960

China's National Bureau of Statistics says the country's pig population has fallen by nearly 40 million to 375.3 million from a year earlier, because of the swine fever outbreak.
However some analysts believe that China has been under-reporting the situation, partly due to local farmers withholding information about outbreaks.
Looking ahead, the epidemic could decimate around 200 million pigs in China, according to a grim report by Rabobank.
It forecasts that China's pork output will fall by 30% this year, creating implications for global commodity markets.
…

To give you some context, the decline here in China is now almost as much as the total amount of pork produced in the EU as a whole," says Rabobank global strategist Justin Sherrard.
He says that China cannot import enough pigs to make up the shortfall.

I'd suggest that this could be perceived as both a risk and an opportunity to Cranswick.

AiY

[slartybartfast]

the epidemic could decimate around 200 million pigs in China

Sorry OT but I know that the use of the word 'decimate' has changed over time but not to the way Beeb try to use it!

[AsleepInYorkshire]

Cranswick PLC - Stock Price at 2nd August 2019 = £26.54
Contents

1. 1. Year End Results 2019
2. Projection of Future Earnings
3. Newsflow

1. Year End Results 2019

1. Turnover £bn 1,437.1
2. Profit after tax £m 69.6
3. EPS p 134.9
4. Div p 54.5
5. Nav p 1,034.64
6. Net debt £m 162.5

2. Projection of Future Earnings

Description    2020      2021      2022      2023      2024      2032
T/O	      1,717     2,052     2,216     2,393     2,585     5,167
Profit           83       100       107       116       125       251
EPS            1.61	 1.92	   2.08      2.25      2.43      4.85
Div £          0.67      0.79      0.86      0.93      1.00      2.00
Growth       -13.03%     9.26%    22.74%    37.40%    53.28%   309.09%

Notes/Assumptions

1. Dividend reinvestment over full term
2. Growth year 1 & 2 = 19.5% - see Newsflow item 1
3. Growth thereafter = 8%
4. Growth year 1 & 2 may occur mostly in year 2
5. Projected p/e ratio = 14
6. Purchase price =£26.00
7. Profit is after tax

Turnover Analysis

1. Fresh Pork 32% - Cranswick process 33% of UK pigs
2. Convenience 35%
3. Gourmet 19%
4. Poultry 14% - Cranswick process 2% of UK chickens

3. Newsflow

1. Cranswick have a new chicken processing plant coming to readiness. It will process 1.2m birds per week. Cranswick have a deal with Morrisons as a major retailer for chickens processed from this plant. The amount Morrisons are taking isn't available
2. At 100% efficiency the plant will increase poultry production by 240%. Cranswick's year end report states this will be 140%. However, other parts of the report indicate the plant will produce 1.2m birds a week which is on top of current production of 500K elsewhere within the group
3. This firm looks after its livestock
4. The 2019 results declare £79m was spent in investing for the companies sustainable future
5. https://cranswick.plc.uk/sites/default/files/Annual%20report%20FY19%20-%20view%20online.pdf

AiY