“The outlook for the current financial year ending 27 March 2021 is now expected to be ahead of its previous expectations.” That’s what meat-focused products producer Cranswick (LSE: CWK) said in today’s first-quarter update. And it underlines the FTSE 250 company’s credentials as a quality UK share.
Strong trading
The directors said that trading in the first quarter of the financial year to 27 June was “strong”. Revenue rose by almost 25% compared to the equivalent period last year. And excluding the contribution from recent acquisitions, like-for-like revenue lifted by just over 19%.
The market likes it, and the share price is buoyant today. Indeed, the stock is in higher ground after a long period of consolidation. And that move continues a long up-trend fuelled by the underlying progress in the business.
According to the directors, “the current shift towards greater in-home consumption” is benefitting the company. They said that retail demand has been “exceptionally robust.” And the firm’s new poultry facility has been winning contracts and delivering sales. Indeed, the progress offset lower foodservice revenue. And the positive performance is so far continuing in the second quarter of the firm’s financial year. Cranswick even managed to reduce its net debt because of strong cash generation. I think that situation contrasts with the short-term outcomes for many other businesses through the coronavirus crisis.
But looking ahead the company expects the exceptional demand to normalise through the rest of the year as consumers return to eating out. Indeed, we’ve seen a big uptake in the government’s Eat Out to Help Out scheme and the release of pent-up demand. Many operators in the casual dining sector have been reporting robust business.
Positive outlook
Despite the effects of Covid-19 and the ongoing Brexit negotiations regarding trade deals, the directors are “confident” about the longer-term development of the business. Fundamentals supporting that confidence include the company’s long-standing customer relationships, the breadth and quality of products, a “robust” financial position and “industry-leading” asset infrastructure.
Based on the firm’s long record of growth and execution, I’m also enthusiastic about the company’s prospects. Right now, with the share price near 4,037p, the forward-looking earnings multiple is around 23 for the trading year to March 2022. And the anticipated dividend yield is a little over 1.6%. Cranswick isn’t in the bargain bin, but it’s not damaged goods either. I reckon it’s earned its full valuation and I’d aim to accumulate some of the shares to hold for the long term.
But the stock isn’t the only quality UK share I’d consider buying now. Fast-moving consumer goods operator PZ Cussons could be on the cusp of a turnaround under new leadership. And Premier Foods is a little further along the turnaround trail seeing increased business from revitalised brands.
